AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement"), is executed as of
the 9th day of June, 1997, by and among PMT Services, Inc., a Tennessee
corporation ("PMT"), PMT LADCO Acquisition Corporation, a newly formed Tennessee
corporation and wholly owned subsidiary of PMT ("Merger Sub"), LADCO Financial
Group, a California corporation ("LADCO") and the Ladd Family Trust, the sole
stockholder of LADCO (hereinafter referred to as the "Controlling LADCO
Stockholder").
RECITALS
A. The Boards of Directors of PMT and LADCO each have determined that a
business combination between PMT and LADCO is in the best interests of their
respective companies and shareholders and presents a opportunity for their
respective companies to enhance the service provided to consumers and achieve
long-term strategic and financial benefits, and, accordingly, have agreed to
effect the merger provided for herein upon the terms and subject to the
conditions set forth herein.
B. For federal income tax purposes, it is intended that the merger
provided for herein shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and for financial accounting purposes shall be accounted for as a "pooling of
interests."
C. PMT, Merger Sub and LADCO desire to make certain representations,
warranties and agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with
and into LADCO in accordance with this Agreement and the separate corporate
existence of Merger Sub shall thereupon cease (the "Merger"). LADCO shall be
the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation") and shall be a wholly owned subsidiary of PMT. The
Merger shall have the effects specified in Section 1107 of the California
General Corporation Law ("CGCL") and Section 48-21-109 of the Tennessee Business
Corporation Act ("TBCA").
1.2 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place (a) at the principal
offices of Waller Lansden Dortch & Davis, A Professional Limited Liability
Company ("Waller Lansden"), 511 Union Street, Suite 2100, Nashville, Tennessee
at 10:00 a.m., local time, on the first business day immediately following the
day on which the last to be fulfilled or waived of the conditions set forth in
Article 7 shall be fulfilled or waived in accordance herewith or (b) at such
other time, date or place as PMT and LADCO may agree. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date."
1.3 Effective Time. If all the conditions to the Merger set forth in
Article 7 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 8, the parties
hereto shall cause (i) a copy of an Agreement of Merger and an Officer's
Certificate of Approval of each of LADCO and Merger Sub meeting the requirements
of Sections 1101 and 1103 of the CGCL and (ii) a copy of Articles of Merger
meeting the requirements of Section 48-21-107 of the TBCA to be properly
executed and filed in accordance with the CGCL and TBCA on the Closing Date.
The Merger shall become effective at the time of filing of the Articles of
Merger with the California and Tennessee Secretaries of State or at such later
time which the parties hereto shall have agreed upon and designated in such
filing as the effective time of the Merger, provided that such later time shall
be within 90 days of the filing of the Articles of Merger (the "Effective
Time").
ARTICLE 2
ARTICLES OF INCORPORATION AND BYLAWS
AND OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
2.1 Articles of Incorporation. The Articles of Incorporation of LADCO in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation, until duly amended in accordance
with applicable law.
2.2 Bylaws. The Bylaws of LADCO in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
2.3 Directors. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time.
2.4 Officers. The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time.
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ARTICLE 3
CONVERSION OF LADCO STOCK
3.1 Conversion of Shares. At the Effective Time, each of the outstanding
LADCO Shares (as defined below) shall be converted into the number of shares of
Common Stock, $.01 par value per share, of PMT (the "PMT Common Stock")
determined by dividing the Aggregate Issuable PMT Shares by the Outstanding
LADCO Shares. For purposes of this section, the capitalized terms shall have
the definitions set forth:
(a) "Aggregate Issuable PMT Shares" shall mean the PMT Base Shares
multiplied by a fraction, the numerator of which is the Outstanding LADCO
Shares and the denominator of which is the Outstanding LADCO Shares.
(b) "PMT Base Shares" shall mean that number of shares determined by
dividing $22,500,000 by the last reported sale price of the PMT Common
Stock on The Nasdaq Stock Market's National Market on June 6, 1997.
(c) "Outstanding LADCO Shares" shall mean all of the issued and
outstanding shares of each series of LADCO Common Stock immediately prior
to the Effective Time (including any shares which may have been issued upon
exercise of currently outstanding options or warrants).
(d) The "Average Price" of PMT Common Stock shall mean the average of the
daily highest and lowest sale price of PMT Common Stock as traded on the
Nasdaq National Market ("NASDAQ") for the twenty (20) trading days which
end ten (10) days prior to the Closing Date.
3.2 Fractional Shares. In lieu of the issuance of fractional shares of
PMT Common Stock, the Controlling LADCO Stockholder, upon surrender of a
certificate which immediately prior to the Effective Time represented LADCO
Common Stock, shall be entitled to receive a cash payment (without interest)
equal to the fair market value of any fraction of a share of PMT Common Stock to
which such holder would be entitled but for this provision. For purposes of
calculating such payment, the fair market value of a fraction of a share of PMT
Common Stock shall be such fraction multiplied by the Average Price, as
determined in Section 3.1(d).
3.3 Exchange of Certificates. After the Effective Time, each holder of an
outstanding certificate or certificates theretofore representing Outstanding
LADCO Shares upon surrender thereof, together with a completed letter of
transmittal, to Waller Lansden (the "Exchange Agent"), as exchange agent for
PMT, shall be entitled to receive in exchange therefor any payment due in lieu
of fractional shares and a certificate or certificates representing the number
of whole shares of PMT Common Stock into which such holders' Outstanding LADCO
Shares were converted in a manner reasonably satisfactory to LADCO. Until so
surrendered, each outstanding certificate representing Outstanding LADCO Shares
shall be deemed for all purposes
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to represent the number of whole shares of PMT Common Stock into which the
Outstanding LADCO Shares theretofore represented shall have been converted. PMT
may, at its option, refuse to pay any dividend or other distribution, if any,
payable to the holders of shares of PMT Common Stock to the holders of
certificates representing Outstanding LADCO Shares until such certificates are
surrendered for exchange, provided, however, that, subject to the rights of PMT
under its charter, upon surrender and exchange of such LADCO certificates there
shall be paid to the record holders of the PMT stock certificate or certificates
issued in exchange therefor the amount, without interest, of dividends and other
distributions, if any, which have become payable with respect to the number of
whole shares of PMT Common Stock into which the Outstanding LADCO Shares
theretofore represented thereby shall have been converted and which have not
previously been paid. Under the terms of its credit agreements, PMT has agreed
not to pay any cash dividends.
3.4 Stock Splits, Etc. of PMT Common Stock. In the event PMT changes the
number of shares of PMT Common Stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, recapitalization,
reorganization or any other transaction in which any security of PMT or any
other entity or cash is issued or paid in respect of the outstanding shares of
PMT Common Stock and the record date therefor is after the date of this
Agreement and prior to the Effective Time, the conversion ratio shall be
proportionately adjusted so as to maintain the equivalent dollar value as is
represented by the stock described in Section 3.1(b) on the date this Agreement
is signed.
3.5 Conversion of Merger Sub Stock. At and as of the Effective Time, each
share of common stock, $.01 par value per share, of Merger Sub shall be
converted into one share of common stock, $.01 par value per share, of LADCO.
3.6 Outstanding Options or Warrants. Immediately prior to the Closing,
all outstanding options or warrants to purchase LADCO Common Stock will be
exercised to the extent exercisable and cancelled to the extent not exercisable.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF LADCO
Except as set forth in the disclosure schedule, which will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Article 4 (thereby containing each schedule referenced herein) and
delivered to PMT prior to the execution hereof and attached hereto as Exhibit A
(the "LADCO Disclosure Schedule"), LADCO represents and warrants to PMT as of
the date of this Agreement as follows:
4.1 Existence; Good Standing; Corporate Authority; Compliance With Law.
LADCO is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of California. LADCO is duly licensed or qualified
to do business as a foreign corporation
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and is in good standing under the laws of any other state of the United States
in which the character of the properties owned or leased by it therein or in
which the transaction of its business makes such qualification necessary, except
where the failure to be so qualified would not have a material adverse effect on
the business, results of operations or financial condition of LADCO (a "LADCO
Material Adverse Effect"). LADCO has all requisite corporate power and authority
to own, operate and lease its properties and carry on its business as now
conducted. LADCO is not in violation of any order of any court, governmental
authority or arbitration board or tribunal, or any law, ordinance, governmental
rule or regulation to which LADCO or any of its properties or assets is subject,
where such violation would have a LADCO Material Adverse Effect. LADCO has
obtained all licenses, permits and other authorizations and has taken all
actions required by applicable law or governmental regulations in connection
with its business as now conducted, except where the failure to obtain any such
item or take any such action would not have a LADCO Material Adverse Effect.
4.2 LADCO Subsidiaries. For the purposes of this Agreement, the term
"LADCO Subsidiary" shall mean any corporation, association, subsidiary, or other
entity of which LADCO owns or controls, directly or indirectly, more than 5% of
the outstanding equity securities. Section 4.2 of the LADCO Disclosure sets
forth a correct and complete list of all LADCO Subsidiaries as of the date of
this Agreement and the duly authorized, issued and outstanding shares of the
common stock of each LADCO Subsidiary. No equity securities of any LADCO
Subsidiary are or may become required to be issued (other than to LADCO) by
reason of any options, warrants, script, rights to subscribe to, calls, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of any LADCO
Subsidiary; and there are no contracts, commitments, understandings, or
arrangements by which any LADCO Subsidiary is bound to issue (other than to
LADCO) additional shares of its capital stock or options, warrants, or rights to
purchase or acquire any additional shares of its capital stock. All of the
shares of capital stock of each LADCO Subsidiary are fully paid and
nonassessable and, to the extent owned by LADCO, are owned free and clear of any
claim, lien, encumbrance, or agreement of any kind with respect thereto. Each
LADCO Subsidiary is duly organized, validly existing, and in good standing in
the states where each LADCO Subsidiary was incorporated and is in good standing
in each of the United States and foreign jurisdictions where its ownership or
leasing of material amounts of property or the conduct of a material portion of
its business requires it to be so qualified, except where the failure to be so
qualified would not have a LADCO Material Adverse Effect. Each LADCO Subsidiary
has the corporate power and authority necessary for it to own or lease its
properties and assets and to carry on its business as it is now being conducted
and has in effect all material federal, state, local, and foreign governmental
authorizations necessary for its own or lease its properties and assets to carry
on its business as it is now being conducted, except where the failure to obtain
any such item or take any such action would not have a LADCO Material Adverse
Effect. Neither LADCO nor any LADCO Subsidiary controls directly or indirectly
or has any direct or indirect equity participation in any corporation,
partnership, trust or other business associations other than those set forth in
Section 4.2 of the LADCO Disclosure Schedule.
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4.3 Authorization, Validity and Effect of Agreements. LADCO has the full
corporate power and authority to execute and deliver this Agreement and all
agreements and documents contemplated hereby. The consummation by LADCO of the
transactions contemplated hereby has been duly authorized by all requisite
corporate action, including the required approvals by the Board of Directors of
LADCO and the holders of the outstanding shares of LADCO Common Stock. This
Agreement constitutes, and all agreements and documents contemplated hereby
(when executed and delivered pursuant hereto for value received) will
constitute, the valid and legally binding obligations of LADCO, enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
4.4 Capitalization. The authorized capital stock of LADCO consists of
500,000 shares of common stock, no par value (the "LADCO Common Stock"). As of
the date hereof, there are issued and outstanding 90,000 shares of LADCO Common
Stock. LADCO has no outstanding bonds, debentures, notes or other obligations
the holders of which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the shareholders of
LADCO on any matter. All issued and outstanding shares of LADCO Common Stock
are duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. There are no options, warrants, calls subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate LADCO or any LADCO Subsidiary to issue, transfer or sell any shares of
capital stock of LADCO or any LADCO Subsidiary.
4.5 Prior Sales of Securities. All offers and sales of LADCO Common Stock
prior to the date hereof were at all relevant times exempt from the registration
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and
were duly registered or the subject of an available exemption from the
registration requirements of the applicable state securities or Blue Sky laws,
or the relevant statutes of limitations have expired, or civil liability
therefor has been eliminated by an offer to rescind.
4.6 Other Interests. Except as set forth in Section 4.6 of the LADCO
Disclosure Schedule, LADCO does not own directly or indirectly any interest or
investment in any corporation, partnership, joint venture, business, trust or
other entity.
4.7 No Violation. After approval by requisite shareholder vote, neither
the execution and delivery by LADCO of this Agreement nor the consummation by
LADCO of the transactions contemplated hereby in accordance with the terms
hereof, will: (i) conflict with or result in a breach of any provisions of the
Articles of Incorporation or Bylaws of LADCO; (ii) conflict with, result in a
breach of any provision of or the modification or termination of, constitute a
default under, or result in the creation of imposition of any lien, security
interest, charge or encumbrance upon any of the assets of LADCO or any LADCO
Subsidiary pursuant to any material commitment, lease, contract, or other
material agreement or instrument to which LADCO or any LADCO Subsidiary is a
party except where applicable consents or waivers are being obtained as
described in Section 4.7(ii) of the LADCO Disclosure Schedule; or (iii) violate
any order, arbitration award, judgment, writ, injunction, decree, statute, rule
or regulation
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applicable to LADCO or any LADCO Subsidiary, the violation of which would have a
LADCO Material Adverse Effect.
4.8 Financial Statements. LADCO has delivered its audited financial
statements for the years ended December 31, 1996 and 1995 and its unaudited
financial statements for the three month period ended March 31, 1997 and will
deliver promptly unaudited interim financial statements for each month and
quarter subsequent thereto if prepared prior to the Closing Date. Each of the
balance sheets provided to PMT (including any related notes and schedules)
fairly presents in all material respects the financial position of LADCO and the
LADCO Subsidiaries as of its date and each of the statements of income, retained
earnings and cash flows provided to PMT (including any related notes and
schedules) fairly presents in all material respects the results of operations,
retained earnings or cash flows of LADCO and the LADCO Subsidiaries for the
periods set forth therein (subject, in the case of unaudited statements, to the
omission of footnotes and to normal year end audit adjustments which would not
be material in amount or effect) in each case in accordance with generally
accepted accounting principles ("GAAP") consistently applied during the periods
involved, except as may be noted therein. Such financial statements have been
prepared from the books and records of LADCO and the LADCO Subsidiaries which
accurately and fairly reflect in all material respects the transactions and
dispositions of the assets of LADCO and the LADCO Subsidiaries. As of December
31, 1996 or any subsequent date for which a balance sheet is provided, LADCO and
the LADCO Subsidiaries did not have material liabilities, contingent or
otherwise, whether due or to become due, known or unknown, other than as
indicated on the balance sheet of such date or the notes thereto except for
those incurred in the ordinary course of business since the date of such balance
sheet. LADCO and the LADCO Subsidiaries have adequately funded all accrued
employee benefit costs and such funding (to the date thereof) is reflected in
the most recent balance sheet provided to PMT.
4.9 Contracts. Section 4.9 of the LADCO Disclosure Schedule lists all
material contracts and other agreements to which each of LADCO and the LADCO
Subsidiaries is a party. With respect to each contract listed in Section 4.9 of
the LADCO Disclosure Schedule: (i) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (ii) the agreement will continue to
be legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (iii)
no party is in breach or default, and assuming the consents described in Section
4.7 (ii) of the LADCO Disclosure Schedule are obtained, no event has occurred
which with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration, under the agreement; and (iv)
no party has repudiated any provision of the agreement.
4.10 No Material Adverse Changes. Since December 31, 1996, there has not
been (i) any material adverse change in the financial condition, results of
operations, business, prospects, assets or liabilities (contingent or otherwise,
whether due or to become due, known or unknown), of LADCO (on a consolidated
basis), except for changes in the ordinary course of business consistent with
historical experience resulting from the seasonal nature of LADCO's business:
(ii) any extraordinary dividend declared or paid or distribution made on the
capital stock of
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LADCO, or any capital stock thereof redeemed or repurchased; (iii) except for
financings in the ordinary course of business, including securitizations, any
incurrence of long term debt in excess of $50,000; (iv) any salary, bonus or
compensation increases to any officers, employees or agents of LADCO or any
LADCO Subsidiary, other than customary increases; (v) any pending or threatened
labor disputes or other labor problems against or potentially affecting LADCO or
any LADCO Subsidiary; or (vi) any other transaction entered into by LADCO or any
LADCO Subsidiary, except in the ordinary course of business and consistent with
past practice.
4.11 Tax Matters. Except as set forth in Section 4.11 of the LADCO
Disclosure Schedule, each of LADCO and the LADCO Subsidiaries has duly paid all
Taxes and other charges (whether or not shown on any Tax return) due or claimed
to be due from it by federal, foreign, state or local taxing authorities; and
true and correct copies of all Tax reports and returns relating to such Taxes
and other charges for the fiscal years from 1994 through 1995 have been
heretofore delivered to PMT (other than LADCO's 1996 federal income tax return
for which an extension has been filed). The reserves for Taxes contained in the
financial statements and carried on the books of each of LADCO and the LADCO
Subsidiaries (other than any reserve for deferred taxes established to reflect
timing differences between book and tax income) are adequate to cover all Tax
liabilities as of the date of this Agreement. Since December 31, 1996, neither
LADCO nor any of the LADCO Subsidiaries has incurred any Tax liabilities other
than in the ordinary course of business; there are no Tax liens (other than
liens for current Taxes not yet due) upon any properties or assets of LADCO or
the LADCO Subsidiaries (whether real, personal or mixed, tangible or
intangible), and, except as reflected in the financial statements, there are no
pending or threatened questions or examinations relating to, or claims asserted
for, Taxes or assessments against LADCO or the LADCO Subsidiaries. Neither
LADCO nor any of the LADCO Subsidiaries has granted or been requested to grant
any extension of the limitation period applicable to any claim for Taxes or
assessments with respect to Taxes. Neither LADCO nor any of the LADCO
Subsidiaries is a party to any Tax allocation or sharing agreement. Except as
set forth in Section 4.11 of the LADCO Disclosure Schedule, LADCO has been the
parent corporation of an affiliated group within the meaning of Section 1504 of
the Code filing a consolidated federal income tax return (an "Affiliated
Group"), LADCO and such Affiliated Group have filed all Tax returns that were
required to be filed for each such taxable period, and have paid all taxes owed
by the Affiliated Group (whether or not shown on the Tax return) for each such
taxable period. LADCO has no liability for the Taxes of any other Affiliated
Group under Treasury Regulation 1.1502-6 (or any similar provision of state,
local or foreign law). Each of LADCO and the LADCO Subsidiaries has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor or
shareholder. For purposes of this Agreement, "Tax" means any federal, state,
local, or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or addition minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
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4.12 Employees and Fringe Benefit Plans.
(a) The LADCO Disclosure Schedule sets forth the names, ages and titles
of all members of the Board of Directors and officers of LADCO and the
LADCO Subsidiaries and all employees of LADCO and the LADCO Subsidiaries
earning in excess of $50,000 per annum, and the annual rate of compensation
(including bonuses) being paid to each such member of the Board of
Directors, officer and employee as of the most recent practicable date.
(b) The LADCO Disclosure Schedule lists each employment, bonus, deferred
compensation, pension, stock option, stock appreciation right, profit-
sharing or retirement plan, arrangement or practice, each medical,
vacation, retiree medical, severance pay plan, and each other agreement or
fringe benefit plan, arrangement or practice, of LADCO or any LADCO
Subsidiary, whether legally binding or not, which affects one or more of
its employees, including all "employee benefit plans" as defined by Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (collectively, the "Plans"). All Plans which are subject to
Title IV of ERISA or the minimum funding standards of Section 412 of the
Code shall be referred to as the "Pension Plans."
(c) For each Plan which is an "employee benefit plan" under Section 3(3)
of ERISA, LADCO has delivered to the Buyer correct and complete copies of
the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report, and all related trust agreements, insurance
contracts and funding agreements which implement each such Plan.
(d) Neither LADCO nor any LADCO Subsidiary has any commitment, whether
formal or informal and whether legally binding or not, (i) to create any
additional such Plan; (ii) to modify or change any such Plan; or (iii) to
maintain for any period of time any such Plan. The LADCO Disclosure
Schedule contains an accurate and complete description of the funding
policies (and commitments, if any) of LADCO or the applicable LADCO
Subsidiary with respect to each such existing Plan.
(e) Except as set forth in the LADCO Disclosure Schedule, neither LADCO
nor any LADCO Subsidiary has any unfunded past service liability in respect
of any of its Plans; the actually computed value of vested benefits under
any Pension Plan of LADCO (determined in accordance with methods and
assumptions utilized by the Pension Benefit Guaranty Corporation ("PBGC")
applicable to a plan terminating on the date of determination) does not
exceed the fair market value of the fund assets relating to such Pension
Plan; neither LADCO (nor any LADCO Subsidiary) nor any Plan has nor, to the
knowledge of LADCO, has any other person who is a trustee, administrator,
fiduciary or sponsor of any Plan engaged in any prohibited transactions as
defined in Section 406 of ERISA or Section 4975 of the Code for which there
is no statutory exemption in Section 408
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of ERISA or Section 4975 of the Code; all filings, reports and descriptions
as to such Plans (including Form 5500 Annual Reports, Summary Plan
Descriptions, PBCG-1's and Summary Annual Reports) required to have been
made or distributed to participants, the Internal Revenue Service, the
United States Department of Labor and other governmental agencies have been
made in a timely manner or will be made on or prior to the Closing Date;
there is no material litigation, disputed claim, governmental proceeding or
investigation pending or threatened with respect to any of such Plans, the
related trusts, or any fiduciary, trustee, sponsor or, to the best of
LADCO's knowledge, any administrator of such Plans; such Plans have been
established, maintained and administered in all material respects in
accordance with their governing documents and applicable provisions of
ERISA and the Code and Treasury Regulations promulgated thereunder; there
has been no "Reportable Event" as defined in Section 4043 of ERISA with
respect to any Pension Plan that has not been waived by the PBGC; and each
Pension Plan and each Plan which is intended to be a qualified plan under
Section 401(a) of the Code has received, within the last three years, a
favorable determination letter from the Internal Revenue Service.
(f) Except as noted in the LADCO Disclosure Schedule, LADCO and each
LADCO Subsidiary has complied in all material respects with all applicable
federal, state and local laws, rules and regulations relating to employees'
employment and/or employment relationships, including, without limitation,
wage related laws, anti-discrimination laws, employee safety laws and COBRA
(defined herein to mean the requirements of Code Section 4980B, Proposed
Treasury Regulation Section 1.162-26 and Part 6 of Subtitle B of Title I of
ERISA).
(g) The consummation of the transactions contemplated by this Agreement
will not (i) result in the payment or series of payments by LADCO (or any
LADCO Subsidiary) to any employee or other person of an "excess parachute
payment" within the meaning of Section 280G of the Code, (ii) entitle any
employee or former employee of LADCO (or any LADCO Subsidiary) to severance
pay, unemployment compensation or any other payment, and (iii) accelerate
the time of payment or vesting of any stock option, stock appreciation
right, deferred compensation or other employee benefits under any Plan
(including vacation and sick pay).
(h) None of the Plans which are "welfare benefit plans," within the
meaning of Section 3(1) of ERISA, provide for continuing benefits or
coverage after termination or retirement from employment, except for COBRA
rights under a "group health plan" as defined in Code Section 4980B(g) and
ERISA Section 607.
(i) Neither LADCO nor any "affiliate" of LADCO (as defined in ERISA) has
ever participated in or withdrawn from a multi-employer plan as defined in
Section 4001 (a)(3) of Title IV of ERISA, and LADCO has not incurred and
does not owe any liability as a result of any partial or complete
withdrawal by any employer from such a multi-employer plan as described
under Sections 4201,4203, or 4205 of ERISA.
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(j) No Pension Plan has been completely or partially terminated, nor has
any plan been instituted by the PBGC to terminate any such Pension Plan;
neither LADCO nor any LADCO Subsidiary has incurred, and does not presently
owe, any liability to the PBGC or the Internal Revenue Service with respect
to any Pension Plan including, but not by way of limitation, any liability
for PBGC premiums or excise taxes under Code Section 4971.
4.13 Assets; Leaseholds.
(a) LADCO or a LADCO Subsidiary owns the assets reflected on December 31,
1996 balance sheet (including any patents, copyrights, trade names, service
marks and other names and marks used in connection with its business), with
good and marketable title, free and clear of any and all claims, liens,
mortgages, options, charges, conditional sale or title retention
agreements, security interests, restrictions, easements, or encumbrances
whatsoever and free and clear of any rights or privileges capable of
becoming claims, liens, mortgages, options, charges, security interests,
restrictions, easements or encumbrances, except (i) for certain of the
assets which are encumbered by liens that LADCO has the means to remove
prior to the Effective Time, (ii) as shown on the title insurance policies
previously furnished to PMT, (iii) real property taxes not yet due and
payable, (iv) utility easements for utilities serving the LADCO Property,
(v) minor imperfections of title which do not materially affect the value
and use of such assets, (vi) for inchoate materialmen's, mechanic's,
workmen's, repairman's, employee's or other like liens arising in the
ordinary course of business; (vii) claims or liens for taxes, assessments,
or charges due and payable and subject to interest or penalty,
materialmen's, mechanic's, workmen's, repairman's, employee's or other like
liens that have arisen in the ordinary course of business if the validity
or amount thereof is being contested in good faith by appropriate and
lawful proceedings, so long as levy and execution thereon have been stayed
and continue to be stayed and they will not, in the aggregate have a LADCO
Material Adverse Effect, and (viii) assets financed pursuant to
securitization transactions or credit agreements.
(b) Except as set forth in the LADCO Disclosure Schedule, LADCO or the
LADCO Subsidiaries owns good and marketable leasehold title to the premises
leased by LADCO or the LADCO Subsidiaries, free and clear of any and all
claims, liens, mortgages, options, charges, conditional sale or title
retention agreements, security interests, restrictions, easements, or
encumbrances whatsoever and free and clear of any rights or privileges
capable of becoming claims, liens, mortgages, options, charges, security
interests, restrictions, easements or encumbrances, except to the extent
expressly set forth in the leases. Following the Merger, LADCO will
continue to have all its rights under such leases for the premises now
leased by LADCO or the LADCO Subsidiaries free and clear of any claims,
liens, mortgages, options, charges, security interests, restrictions,
easements, rights, privileges and encumbrances, except to the extent
expressly set forth in the leases, and the Merger will not result in any
increase in rents or charges under any lease.
11
4.14 Lawfully Operating. To the best knowledge of LADCO, each of
LADCO and the LADCO Subsidiaries has been and currently is conducting and each
of the premises leased or owned by it or them have been and now are being used
and operated, in compliance in all material respects with all statutes,
regulations, bylaws, orders, covenants, restrictions or plans of federal, state,
regional, county or municipal authorities, agencies or board applicable to the
same.
4.15 No Subleases or Licenses. There are no subleases or licenses to use
all or any portion of the premises leased by LADCO, except as set forth in the
leases. The leases are valid, binding and enforceable in accordance with the
terms of each, and are in good standing. LADCO is not in default in payment of
rent, or in the performance of any of its material obligations under the leases
and, to the best of LADCO's knowledge after reasonable investigation, no ground
lessor to any such landlord or lessors is in default of any ground lease. To
the best knowledge of LADCO, the landlords or lessors under the leases are not
in breach of any of their obligations under the leases and no ground lessor to
any such landlord or lessor is in default of any ground lease. No state of
facts exists which, after notice or lapse of time or both, would result in a
breach or default under the leases by LADCO. The copies of the leases which
LADCO has delivered to PMT are true, correct and complete copies of the leases
and LADCO has delivered to PMT all amendments, modifications, letter agreements
and instruments of whatever form which relate to such leases (except
correspondence sent or received in the ordinary course of business, including
percentage rent reports, which do not alter the terms of the leases).
4.16 Power of Attorney. Except in connection with financing transactions,
including securitizations, or as set forth in Section 4.16 of the LADCO
Disclosure, there are no outstanding powers of attorney executed on behalf of
LADCO or any LADCO Subsidiaries.
4.17 Notes and Accounts Receivable. All notes and accounts receivable of
LADCO and the LADCO Subsidiaries are reflected properly on their books and
records, are valid receivables subject to no setoffs or counterclaims, are
current and collectible, and, to the knowledge of LADCO and the LADCO
Subsidiaries will be collected in accordance with their terms at their recorded
amounts, subject only to the reserve for bad debts set forth in the most recent
balance sheet (including in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
LADCO and the LADCO Subsidiaries and causes beyond the control of LADCO and the
LADCO Subsidiaries.
4.18 No Litigation. Except as set forth in the LADCO Disclosure Schedule,
there are currently no pending, and to the best knowledge of the executive
officers of LADCO threatened, lawsuits or administrative proceedings or
investigations against LADCO or any LADCO Subsidiary or to which its assets are
subject, which, if adversely determined, could have a LADCO Material Adverse
Effect. Neither LADCO nor any LADCO Subsidiary is subject to any currently
existing order, writ, injunction, or decree relating to its operations.
12
4.19 Corporate Records. True and correct copies of the Articles of
Incorporation and bylaws of LADCO have been delivered to PMT. The corporate
minute books of LADCO submitted to PMT for review correctly reflect all
corporate action taken at all the meetings (or by written consent in lieu
thereof) of its directors and shareholders and correctly record all resolutions
thereof.
4.20 No Defaults. Each of LADCO and the LADCO Subsidiaries has in all
material respects performed all material obligations to be performed by it under
all contracts, agreements, and commitments to which it is a party, and there is
not under any such contracts, agreements, or commitments any existing default or
event of default or event which with notice or lapse of time or both would
constitute a default, which default would have a LADCO Material Adverse Effect.
4.21 Inventory. All equipment acquired by LADCO for purposes of leasing
was, when acquired, merchantable and fit for the purpose for which it was
procured, and the obligations of each lessee to make payments required under the
related lease throughout the term thereof is unconditional, without any right of
set-off by such lessee and without regard to any event affecting the equipment
or any obsolescence thereof.
4.22 Hazardous Substances. For purposes of this Agreement, the following
terms shall have the following meanings:
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. (S)(S) 9601 et seq.;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations or proceedings relating in any way to
any Environmental Law (for purposes of (i) and (ii) below, "Claims") or any
permit issued under any such Environmental Law, including without limitation:
(i) any and all Claims by governmental or regulatory authorities for
investigation, oversight, enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law;
and
(ii) any and all Claims by any third party seeking damages, response,
costs, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the environment;
"Environmental Law" means any federal, state or local statute, law, rule,
regulation, ordinance, code, policy or rule of common law now in effect and as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent, decree or judgment, relating to
the environment, health, or safety of hazardous, toxic or
13
dangerous materials, substances or wastes, including without limitation CERCLA;
the Toxic Substances Control Act, as amended, 15 U.S.C. (S)(S) 2601 et seq.; the
Clean Air Act, as amended, 42 U.S.C. (S)(S) 7401 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. (S)(S) 1251 et seq.; the Federal
Insecticide, Fungicide, and Rodenticide Act, as amended, 7 U.S.C. (S)(S) 136, et
seq.; the Hazardous Materials Transportation Act, as amended, 49 U.S.C. (S)(S)
1801 et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
(S)(S) 6901 et seq.; the Safe Drinking Water Act, 42 U.S.C. (S)(S) 300f et seq.;
the Clean Water Act, as amended, 33 U.S.C. (S)(S) 1251, Ct seq.; and any similar
state or local law;
"Hazardous Materials" shall mean those materials listed in Section 101(14)
of CERCLA, as hereinafter defined, and any other substance defined as toxic or
hazardous under any federal, state or local law, rules, regulation, ordinance
code or policy, including, but not limited to:
(i) any petroleum or petroleum products, flammable explosives,
radioactive materials, asbestos, asbestos products, urea formaldehyde foam
insulation, polychlorinated biphenyls, including transformers or other
equipment that contain dielectric fluid containing detectible levels of
polychlorinated biphenyls, and radon gas;
(ii) any hazardous, toxic or dangerous waste, substance or material
defined as such in (or for purposes of) any current Environmental Law or
currently listed as such pursuant to any Environmental Law; and
(iii) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority:
"Improperly" means done in any manner that poses a threat to human health,
safety or the environment;
"LADCO Property" shall mean (i) any real property and improvements
presently owned, leased, used, operated or occupied by LADCO, and (ii) any other
real property and improvements at any previous time owned, leased, used,
operated or occupied by LADCO, but only as to the time owned, leased, used,
operated or occupied by LADCO;
"Release" means disposing, depositing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and
the like, into or upon any land or water or air, or otherwise entering into the
environment.
To the best knowledge of LADCO:
(a) Hazardous Materials have not at any time been illegally or Improperly
generated, used, treated or stored on, or transported to or from, any LADCO
Property by LADCO or its employees;
14
(b) No asbestos containing materials or other Hazardous Materials have
been installed in or affixed to structures on any LADCO Property by LADCO
or its employees;
(c) Hazardous Materials have not at any time been disposed of or
otherwise Released on any LADCO Property by LADCO or its employees;
(d) LADCO is currently, and has at all times in the past been, in
compliance with all applicable Environmental Laws and the requirements of
any permits issued under such Environmental Laws with respect to any LADCO
Property;
(e) There are no past, pending or, to the knowledge of LADCO, threatened
Environmental Claims against LADCO or any LADCO Property;
(f) There are no facts or circumstances, conditions or occurrences on any
LADCO Property or otherwise that could reasonably be anticipated by LADCO:
(i) to form the basis of an Environmental Claim against LADCO or any
LADCO Property; or
(ii) to cause such LADCO Property to be subject to any restrictions
on the ownership, occupancy, use or transferability of such LADCO
Property under any Environmental Law; and
(g) There are not now, nor have there been at any time, any aboveground
or underground storage tanks located on any of the LADCO Property.
4.23 Labor Matters. Neither LADCO nor any LADCO Subsidiary is a party to
any collective bargaining agreement and has not been the subject of any union
activity or labor dispute, and there have not been any strike of any kind called
or threatened to be called against LADCO or any of the LADCO Subsidiaries. To
the best knowledge of LADCO, neither LADCO nor any LADCO Subsidiary has violated
any applicable federal or state law or regulation relating to labor or labor
practices. Neither LADCO nor any LADCO Subsidiary has liability to any of its
employees, agents, or consultants in connection with grievances by, or the
termination of, such employees, agents, or consultants.
4.24 Pooling of Interests. The representations, warranties and covenants
of LADCO and the Controlling LADCO Stockholder set forth in the draft letter of
even date herewith from LADCO and the Controlling LADCO Stockholder to Ernst &
Young LLP are true and correct in all material respects and will be true and
correct in all material respects as of the Closing Date (except as such matters
may be subject to the control of PMT or its affiliates). LADCO and the
Controlling LADCO Stockholder shall execute such letter at the Closing.
15
4.25 No Brokers. LADCO has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
LADCO or PMT to pay any Finder's fees, brokerage or agent's commissions or other
like payments in connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby. LADCO is not aware of
any claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
4.26 PMT Stock Ownership. Neither LADCO nor the Controlling LADCO
Stockholder owns any shares of PMT Common Stock or other securities convertible
into PMT Common Stock.
4.27 Investment. The Controlling LADCO Stockholder (a) understands that
the shares of PMT Common Stock have not been, and will not be, except as
contemplated herein, registered under the 1933 Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering, (b) is
acquiring the shares of PMT Common Stock solely for his own account for
investment purposes, and not with a view to the distribution thereof, (c) is a
sophisticated investor with knowledge and experience in business and financial
matters, (d) has received certain information concerning PMT and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the shares of PMT Common Stock, (e) is
able to bear the economic risk and lack of liquidity inherent in holding the
shares of PMT Common Stock, and (f) is an Accredited Investor (as such term is
defined under Rule 501(a) promulgated under the 1933 Act).
4.28 Franchise Issues. To LADCO's knowledge LADCO and the LADCO
Subsidiaries are in material compliance with all applicable federal and state
statutes, rules, regulations and guidelines, if applicable, regarding the offer
of franchises or business opportunities. To LADCO's knowledge, LADCO and the
LADCO Subsidiaries have made all necessary disclosures to agents at appropriate
times, no investigations of LADCO or any LADCO Subsidiary by governmental
authorities are pending or threatened, and no agents have instituted civil
actions relating to these issues. LADCO and the LADCO Subsidiaries have
properly perfected any applicable exemptions.
4.29 Full Disclosure. All of the information provided by LADCO and its
representatives herein or in the LADCO Disclosure Schedule is true, correct, and
complete in all material respects and no representation, warranty, or statement
made by LADCO in or pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary to make such representation, warranty, or statement not
misleading to PMT. None of the executive officers of LADCO has withheld from
PMT or its representatives disclosure of any event, condition, or fact that such
officer knows, could materially adversely affect the financial condition,
results of operations, business, prospects, assets, or liabilities of LADCO,
other than business conditions affecting the credit card services or equipment
leasing business generally.
16
4.30 Materiality. For purposes of this Article 4, the term "material,"
whether used alone or in the context of a LADCO Material Adverse Effect shall
mean an amount in excess of $100,000, either individually or in the aggregate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PMT AND MERGER SUB
Except as set forth in the disclosure schedule, which will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Article 5 (thereby containing each schedule referenced herein) and
delivered to LADCO and the Controlling Shareholder at or prior to the execution
hereof and attached hereto as Exhibit B (the "PMT Disclosure Schedule"), PMT and
Merger Sub represent and warrant to LADCO and the Controlling Shareholder as of
the date of this Agreement as follows:
5.1 Existence; Good Standing; Corporate Authority; Compliance With Law.
Each of PMT and Merger Sub is a corporation duly incorporated and validly
existing under the laws of the state of its incorporation. PMT is duly licensed
or qualified to do business as a foreign corporation and is in good standing
under the laws of any other state of the United States in which the character of
the properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified would not have a material adverse effect on the business, results of
operations or financial condition of PMT (a "PMT Material Adverse Effect"). PMT
has all requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now conducted. PMT nor any of its
properties or assets is in violation of any order of any court, governmental
authority or arbitration board or tribunal, or any law, ordinance, governmental
rule or regulation to which PMT is subject, where such violation would have a
PMT Material Adverse Effect. PMT has all licenses, permits and other
authorizations and has taken all actions required by applicable law or
governmental regulations in connection with its business as now conducted,
except where the failure to obtain any such item or to take any such action
would not have a PMT Material Adverse Effect.
5.2 Authorization, Validity and Effect of Agreements. Each of PMT and
Merger Sub has the requisite corporate power and authority to execute and
deliver this Agreement and all agreements and documents contemplated hereby.
The consummation by PMT and Merger Sub of the transactions contemplated hereby
has been duly authorized by all requisite corporate action. This Agreement
constitutes, and all agreements and documents contemplated hereby (when executed
and delivered pursuant hereto for value received) will constitute, the valid and
legally binding obligations of PMT and Merger Sub, enforceable in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity.
17
5.3 Capitalization. The authorized capital stock of PMT consists of
100,000,000 shares of PMT Common Stock and 10,000,000 shares of preferred stock,
$.01 par value (the "PMT Preferred Stock"). As of June 5, 1997, there were
38,085,795 shares of PMT Common Stock issued and outstanding, and no shares of
PMT Preferred Stock issued and outstanding. PMT has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the shareholders of PMT on any matter. All issued and
outstanding shares of PMT Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Other than as provided
for in the PMT Disclosure Schedule, there are no options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments other than letters of intent which obligate PMT to issue, transfer
or sell any shares of capital stock of PMT .
5.4 Subsidiaries. PMT has no subsidiaries except as listed on Schedule
5.4 of the PMT Disclosure Schedule. Merger Sub has been formed to effect the
transactions contemplated by this Agreement. The authorized capital stock of
Merger Sub consists of 1,000 shares of common stock, $.01 par value. Each of
the outstanding shares of capital stock of Merger Sub is duly authorized,
validly issued, fully paid and nonassessable, and is owned by PMT free and clear
of all liens, pledges, security interests, claims or other encumbrances. Merger
Sub has not engaged in any activities other than in connection with the
transactions contemplated by this Agreement.
5.5 Other Interests. Neither PMT nor Merger Sub owns directly or
indirectly any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust or entity except as
described in Section 5.4.
5.6 No Violation. Neither the execution and delivery by PMT and Merger
Sub of this Agreement, nor the consummation by PMT and Merger Sub of the
transactions contemplated hereby in accordance with the terms hereof, will: (i)
conflict with or result in a breach of any provisions of the Charter or Bylaws
of PMT or Merger Sub; (ii) conflict with, result in a breach of any provision of
or the modification or termination of, constitute a default under, or result in
the creation or imposition of any lien, security interest, charge, or
encumbrance upon any of the assets of PMT or Merger Sub pursuant to any material
commitment, lease, contract, or other material agreement or instrument to which
PMT or Merger Sub is a party; or (iii) violate any order, arbitration award,
judgment, writ, injunction, decree, statute, rule, or regulation applicable to
PMT or Merger Sub.
5.7 SEC Documents. Prior to the date hereof, PMT has delivered to each of
LADCO and the Controlling LADCO Stockholder copies of all of PMT's Annual
Reports on Forms 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K, as filed with the Securities and Exchange Commission ("SEC") since
March 17, 1997, and its proxy statement dated November 15, 1996 (the "PMT
Reports"). The PMT Reports (i) were prepared in all material respects in
accordance with the applicable requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act") and the rules and regulations promulgated
thereunder, and (ii) as
18
of their respective dates, did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in the light of the circumstances under
which they were made, not misleading. Each of the consolidated balance sheets
included in or incorporated by reference into the PMT Reports (including the
related notes and schedules) fairly presents the consolidated financial position
of PMT as of its date and each of the consolidated statements of income,
retained earnings and cash flows included in or incorporated by reference into
the PMT Reports (including any related notes and schedules) fairly presents the
results of operations, retained earnings or cash flows of PMT for the periods
set forth therein (subject, in the case of unaudited statements, to normal year-
end audit adjustments which would not be material in amount or effect) in each
case in accordance with generally accepted accounting principles consistently
applied during the periods involved, except as may be noted therein. These
representations shall be deemed to be made with respect to PMT Reports filed
subsequent to the date hereof at the time of their filing. PMT has made all
filings required to be filed by PMT under the 1934 Act.
5.8 Litigation. There are no actions, suits or proceedings pending
against PMT or, to the actual knowledge of the executive officers of PMT,
overtly threatened in writing against PMT, at law or in equity, or before or by
any federal or state commission, board, bureau, agency or instrumentality, that
are reasonably likely to have a PMT Material Adverse Effect except as set forth
in the PMT Disclosure Schedule.
5.9 Taxes. The provisions for taxes shown on the PMT financial statements
for the year ended July 31, 1996 are adequate to cover the liability of PMT for
all taxes (including employer income tax withholding, social security and
unemployment taxes) to the date thereof and no extraordinary liability for taxes
has been incurred since such date.
5.10 Absence of Certain Changes. Since March 17, 1997, there has not been
any material adverse change in the financial condition, results of operations,
business, prospects, assets or liabilities (contingent or otherwise, whether due
or to become due, known or unknown), of PMT, except for changes in the ordinary
course of business consistent with historical experience resulting from the
seasonal nature of PMT's business.
5.11 No Brokers. PMT has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
LADCO or PMT to pay any finder's fees, brokerage or agent's commissions or other
like payments in connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby. PMT is not aware of
any claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments m connection with the negotiations leading to this Agreement
or the consummation of the transactions contemplated hereby.
5.12 LADCO Stock Ownership. Neither PMT nor Merger Sub owns any shares of
capital stock of LADCO or other securities convertible into capital stock of
LADCO.
19
5.13 PMT Common Stock. The issuance and delivery by PMT of shares of PMT
Common Stock in connection with the Merger and this Agreement have been duly and
validly authorized by all necessary corporate action on the part of PMT. The
shares of PMT Common Stock to be issued in connection with the Merger and this
Agreement, when issued in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable.
5.14 Pooling of Interests. The representations, warranties and covenants
of PMT, set forth in the draft letter of even date herewith from PMT to Price
Waterhouse LLP, are true and correct in all material respects and will be true
and correct in all material respects as of the Closing Date (except as such
matters may be subject to the control of LADCO, LADCO's affiliates, or the
Controlling LADCO Stockholder. PMT shall execute such letter at the Closing.
5.15 Lawfully Operating. To the best knowledge of PMT, PMT has been and
currently is conducting, and each of the wholly-owned subsidiaries of PMT and
premises leased or owned by it or them have been and now are being used and
operated, in compliance in all material respects with all statutes, regulations,
bylaws, orders, covenants, restrictions or plans of federal, state, regional,
county or municipal authorities, agencies or boards applicable to the same.
5.16 Full Disclosure. All of the information provided by PMT and its
representatives herein or in the PMT Disclosure Schedule are true, correct and
complete in all material respects and no representation, warranty, or statement
made by PMT in or pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make such representation, warranty, or statement not misleading to
either LADCO or the Controlling LADCO Stockholder. None of the executive
officers of PMT has withheld from either LADCO or the Controlling LADCO
Stockholder or their representatives disclosure of any event, condition, or fact
that such officer knows could materially adversely affect the financial
condition, results of operations, business, prospects, assets, or liabilities of
PMT, other than business conditions affecting the credit card services business
generally.
5.17 Materiality. For purposes of this Article 5, the term "material,"
whether used alone or in the context of a PMT Material Adverse Effect shall mean
an amount in excess of $100,000.00, either individually or in the aggregate.
ARTICLE 6
COVENANTS
6.1 Covenants of PMT, LADCO and the Controlling LADCO Stockholder. During
the period from the date hereof and continuing until the Effective Time (except
as expressly contemplated or permitted hereby, or to the extent that the other
parties shall otherwise consent in writing), each of PMT, LADCO and the
Controlling LADCO Stockholder covenants with the other that, insofar as the
obligations relate to it:
20
(a) Each of PMT and LADCO shall carry on their respective businesses in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and shall use all reasonable efforts to preserve
intact their present business organizations, maintain their rights and
franchises and preserve their relationships with customers, suppliers and
others having business dealings with them to the end that their good will
and ongoing businesses shall not be impaired in any material respect at the
Effective Time.
(b) From the date hereof to the Effective Time, each of LADCO and PMT
shall allow all designated officers, attorneys, accountants and other
representatives of the other access at all reasonable times during regular
business hours to the records and files, correspondence, audits and
properties, as well as to all information relating to commitments,
contracts, titles and financial position, or otherwise pertaining to the
business and affairs, of LADCO and PMT.
(c) Except as and to the extent required by law, PMT and LADCO hereby
agree not to disclose or use, and each shall cause its representatives not
to disclose or use, any confidential information with respect to the other
party hereto furnished, or to be furnished, by such other party or their
representatives in connection herewith at any time or in any manner other
than in connection with its evaluation of the Merger. Except as required by
law, and as set forth in this subparagraph (d), neither LADCO nor its
representatives shall make any public statements regarding the Merger or
this Agreement without the prior approval of PMT. After reasonable prior
notice to and discussion with LADCO, PMT may make such statements,
disclosures and filings as it is advised by its counsel are necessary or
appropriate for a public company. In the event the Merger is not effective
for any reason, the confidentiality letter agreement between PMT and LADCO
shall remain in full force and effect.
(d) PMT, LADCO and the Controlling LADCO Stockholder shall use their best
efforts to (i) obtain Hart Scott Rodino clearance for the transactions
contemplated hereby, (ii) implement employee option arrangements of the
type described in the letter from PMT to LADCO dated May 13, 1997, and
(iii) enter into satisfactory arrangements with Leon D. Ladd providing for
his release from, or indemnification with respect to, personal guarantees
by him of any LADCO obligations.
(e) PMT and the Controlling LADCO Stockholder shall cooperate and PMT
shall promptly prepare and, at PMT's expense, file with the SEC, as soon as
practicable after the Closing Date (but in no event prior to October 1,
1997), a Registration Statement on Form S-3 (the "Registration Statement")
under the 1933 Act, with respect to the resale of up to 25% of the PMT
Common Stock issuable in the Merger. PMT and the Controlling LADCO
Stockholder will cause the Registration Statement to comply as to form in
all material respects with the applicable provisions of the 1933 Act, and
the rules and regulations thereunder. PMT shall use its best efforts, and
the Controlling LADCO Stockholder will cooperate with PMT, to have the
Registration Statement
21
declared effective by the SEC by October 15, 1997, or as promptly as
practicable thereafter. PMT agrees to use its best efforts to keep the
Registration Statement effective through July 2, 1998, and to promptly file
amendments to the Registration Statement or promptly file such reports
and/or statements required by the 1934 Act, as amended, to the extent
necessary so that such Registration Statement, including the 1934 Act
reports and/or statement incorporated therein, will not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. PMT shall use
its best efforts to obtain prior to the effect date of Registration
Statement all necessary state securities law or "Blue Sky" permits or
approvals required to carry out the transactions contemplated by this
Agreement. PMT agrees that the Registration Statement and each amendment or
supplement thereto, at the time it is filed or becomes effective, will not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to
state a material fact was made by PMT in reliance upon and in conformity
with information concerning LADCO furnished to PMT by the Controlling LADCO
Stockholder for use in the Registration Statement. The Controlling LADCO
Stockholder agrees that the information provided by it for inclusion in the
Registration Statement and each amendment or supplement thereto, at the
time it is filed or becomes effective, will not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. No amendment or
supplement to the Registration Statement will be made by PMT or the
Controlling LADCO Stockholder without the approval of the other party. PMT
will advise the Controlling LADCO Stockholder, promptly after it receives
notices thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of the PMT Common Stock
issued in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Registration
Statement or comments thereon and responses thereto or requests by the SEC
for additional information.
6.2 Blackout Period. PMT shall be entitled to (i) postpone the filing or
effectiveness of the Registration Statement contemplated under Section 6.1(e)
hereof; or (ii) if effective, elect that the Registration Statement not be
useable and require the Controlling LADCO Stockholder to suspend sales pursuant
to the prospectus contained therein, for a reasonable period of time, but not in
excess of ninety (90) days (a "Blackout Period"), (provided that a Blackout
Period may not be implemented more than once in any period of 365 days) if PMT
determines in good faith that the registration and distribution of the shares of
PMT Common Stock (or the use of the registration statement or related
prospectus) would require a premature disclosure of any pending material
acquisition, material corporation reorganization, or would prevent a primary
underwritten offering of PMT securities. PMT shall promptly give the
Controlling LADCO
22
Stockholder written notice of such termination, containing a general statement
of the reasons for such postponement or restriction of use and an approximation
of the anticipated delay.
6.3 Covenants of LADCO. LADCO covenants and agrees that between the date
hereof and continuing until the Effective Time (except as expressly contemplated
or permitted hereby, or to the extent that PMT shall otherwise consent in
writing):
(a) Prior to the Effective Time, LADCO agrees (a) that it shall, and
shall direct and use its best efforts to cause its directors, officers,
employees, shareholders, advisors, accountants and attorneys (the
"Representatives"), including such Representatives of any of LADCO's
affiliated entities or persons, not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of
any proposal or offer (including, without limitation, any proposal or offer
to its shareholders) with respect to a merger, acquisition, consolidation
or similar transaction involving, or any purchase of all or any significant
portion of the assets or any equity securities of LADCO (any such proposal
or offer being hereinafter referred to as a "Acquisition Proposal") or
engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating
to an Acquisition Proposal, or otherwise facilitate any effort or attempt
to make or implement a Acquisition Proposal; (b) that it will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of
the foregoing and will take the necessary steps to inform the individuals
or entities referred to above of the obligations undertaken in this Section
6.4(a).
(b) LADCO will make all normal and customary repairs, replacements, and
improvements to its facilities, will not dispose of any assets (other than
leases and equipment in the ordinary course of business, including
securitizations and other existing financings) other than at fair market
value and with the prior written consent of PMT, and without limiting the
generality of the foregoing or the covenants set forth in 6.1(a), LADCO
will not, without the prior written consent of PMT which consent shall not
be unreasonably withheld with respect to the matters set forth in (ix):
(i) change its Articles of Incorporation or bylaws or merge and
consolidate with or into any entity or obligate itself to do so;
(ii) other than a dividend in the amount of $742,000 payable to the
Controlling LADCO Stockholder prior to Closing, declare, set aside or
pay any cash dividend or other distribution on or in respect of shares
of its capital stock, or any redemption, retirement or purchase with
respect to its capital stock or issue any additional shares of its
capital stock. LADCO may pay reasonable fees and expenses related to
the transaction contemplated herein in accordance with a schedule of
estimated fees and expenses approved by PMT;
23
(iii) other than normal payments on loans for borrowed money,
discharge or satisfy any lien, charge, encumbrance or indebtedness
outside the ordinary course of business, except those required to be
discharged or satisfied;
(iv) authorize, guarantee or incur indebtedness aggregating in
excess of $50,000;
(v) make any capital expenditures or capital additions or
betterments, or commitments therefor, aggregating in excess of
$50,000;
(vi) loan funds to any person except in the ordinary course of
business;
(vii) institute, settle or agree to settle any litigation, action
or proceeding before any court or governmental body except in the
ordinary course of business;
(viii) mortgage, pledge or subject to any other encumbrance any of
its property or assets, tangible or intangible;
(ix) other than ordinary and customary raises for employees
authorize any compensation increases of any kind whatsoever for any
employee, provided LADCO shall pay owing or accrued deferred
compensation;
(x) enter into any material contract including leases and real
estate agreements; or
(xi) other than forgiving the note receivable in the amount of
$600,000 from the Controlling LADCO Stockholder, enter into any
transaction outside the ordinary course of business.
(c) Without the prior written consent of PMT, LADCO shall not take any
action which would cause or tend to cause the conditions upon the
obligations of the parties hereto to effect the transactions contemplated
hereby not to be fulfilled; including without limitation, taking, causing
to be taken, or permitting or suffering to be taken or to exist any action,
condition or thing which would cause the representations and warranties
made by LADCO herein not to be true, correct and accurate as of the Closing
Date.
(d) [Intentionally omitted.]
(e) LADCO, prior to the Closing Date, shall have delivered its audited
financial statements for the years ended December 31, 1996 and 1995 and its
unaudited financial statements for the three month period ended March 31,
1997, in each case in accordance with GAAP consistently applied during the
periods involved, except as may
24
be noted therein. LADCO shall promptly provide to PMT monthly and quarterly
financial statements of LADCO.
(f) LADCO, prior to the Closing Date, shall have arranged for the
cancellation or exercise of any outstanding options or warrants to purchase
LADCO Common Stock.
(g) From and after the date hereof, neither LADCO nor the Controlling
LADCO Stockholder shall (i) knowingly take any action, or knowingly fail to
take any action, that would jeopardize the treatment of the Merger as a
"pooling of interests" for accounting purposes; (ii) knowingly take any
action, or knowingly fail to take any action, that would jeopardize
qualification of the Merger as a reorganization within the meaning of
Section 368(a) of the Code; or (iii) enter into any contract, agreement,
commitment or arrangement with respect to either of the foregoing.
6.4 Covenants of PMT. PMT covenants and agrees that between the date
hereof and continuing until the Effective Time (except as expressly contemplated
or permitted hereby, or to the extent that LADCO shall otherwise consent in
writing):
(a) PMT shall promptly prepare and submit to the Nasdaq National Market
("NASDAQ") a listing application covering the shares of PMT Common Stock
issuable in the Merger, and shall use its best efforts to obtain, prior to
the Effective Time, approval for the listing of such PMT Common Stock,
subject to official notice of issuance.
(b) PMT shall promptly send LADCO copies of all filings with the SEC.
(c) Without the prior written consent of LADCO, PMT shall not take any
action which would cause or tend to cause the conditions upon the
obligations of the parties hereto to effect the transactions contemplated
hereby not to be fulfilled including, without limitation, taking, causing
to be taken, or permitting or suffering to be taken or to exist any
action, condition or thing which would cause the representations and
warranties made by PMT herein not to be true, correct and accurate as of
the Closing Date.
(d) From and after the date hereof and until the Effective Time, PMT
shall not (i) knowingly take any action, or knowingly fail to take any
action, that would jeopardize the treatment of the Merger as a "pooling of
interests" for accounting purposes; (ii) knowingly take any action, or
knowingly fail to take any action, that would jeopardize qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the
Code; or (iii) enter into any contract, agreement, commitment or
arrangement with respect to either of the foregoing.
25
(e) To the extent PMT elects, for whatever reason or no reason, not to
retain any LADCO employees, to comply with the WARN Act and for one year
following the date of such employee's severance, PMT will not oppose such
person's claim for unemployment benefits, and PMT shall complete all
appropriate questionnaires or claim forms required by state or other
governmental officials in this regard.
(f) PMT agrees that after the Effective Time, it will indemnify any
person who has rights to indemnification from LADCO to the same extent and
on the same conditions as such person is entitled to indemnification
pursuant to LADCO's Articles of Incorporation or Bylaws as in effect on the
date of this Agreement.
(g) PMT shall report post-Merger combined results of LADCO and PMT no
later than 60 days after the end of PMT's first fiscal quarter ending after
the date hereof including at least 30 days of post-merger combined results
following the Effective Time if the requirement for publication of 60 days
post-Merger combined results shall not have been satisfied in some other
manner by such time in compliance with applicable rules.
(h) With a view to making the benefit of certain rules and regulations of
the Securities and Exchange available to the Controlling LADCO Stockholder
with respect to its PMT Common Stock received in the Merger, PMT agrees as
follows:
(i) to at all times make and keep public information available,
as those terms are understood and defined in Rule 144 under the 1933 Act;
(ii) PMT agrees to use its best efforts to file with the SEC in a
timely manner all reports and other documents required of PMT under the
1933 Act and the 1934 Act.
(iii) to furnish to the Controlling LADCO Stockholder, upon
request, a written statement as to PMT's compliance with the reporting
requirements of Rule 144 of the 1933 Act and the 1934 Act, a copy of the
most recent annual or quarterly report of PMT and such other reports and
documents of PMT and other information reasonably available to PMT as the
Controlling LADCO Stockholder may reasonably request in availing itself of
the benefits of any rule or regulation of the SEC allowing
the Controlling LADCO Stockholder to sell any such PMT Common Stock without
registration; and
(iv) to facilitate the exchange of any legended, restricted share
certificates of PMT Common Stock for unlegended certificates of the same in
connection with any permitted transfer of such shares by the Controlling
LADCO Stockholder pursuant to an available exemption from the registration
requirements of federal and state securities law.
26
ARTICLE 7
CONDITIONS
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) No action or proceeding shall have been instituted before a court or
other governmental body by any governmental agency or public authority to
restrain or prohibit the transactions contemplated by this Agreement or to
obtain an amount of damages or other material relief in connection with the
execution of the Agreement or the related agreements or the consummation of
the Merger; and no governmental agency shall have given notice to any party
hereto to the effect that consummation of the transactions contemplated by
this Agreement would constitute a violation of any law or that it intends
to commence proceedings to restrain consummation of the Merger.
(b) The PMT Common Stock to be issued in the Merger shall have been
listed on the NASDAQ, and all necessary federal and state securities law
permits or approvals shall have been obtained.
(c) PMT and LADCO shall have received an opinion of their own counsel
satisfactory to them, generally to the effects that (i) the Merger
qualifies as a reorganization under Section 368(a) of the Code, (ii) no
material gain or loss will be recognized by LADCO or PMT as a result of the
Merger, (iii) shareholders of LADCO who receive in the Merger either solely
PMT Common Stock or PMT Common Stock and cash in lieu of fractional shares
will recognize no gain or loss for federal income tax purposes with respect
to the PMT Common Stock received in the Merger, and (iv) the Merger will
not have a material adverse effect on the federal income tax liability of
PMT; provided, that the failure to satisfy the requirements of clauses (ii)
and (iv) of this subsection shall constitute a condition to consummation of
the Merger only if asserted by PMT, and the failure to satisfy the
requirements of clause (iii) of this subsection shall constitute a
condition to consummation of the Merger only if asserted by LADCO.
(d) All consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board or other regulatory
body required in connection with the execution, delivery and performance of
this Agreement, including those required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, shall have been obtained or made,
except for filings in connection with the Merger and any other documents
required to be filed after the Effective Time and except where the failure
to have obtained or made any such consent, authorization, order, approval,
filing or registration would not have a material adverse effect on the
business of PMT and LADCO, taken as a whole, following the Effective Time.
27
(e) PMT shall have received from LADCO copies of all resolutions adopted
by the Board of Directors and shareholders of LADCO in connection with this
Agreement and the transactions contemplated hereby. LADCO shall have
received from PMT and Merger Sub copies of all resolutions adopted by the
Board of Directors of each respective company and the shareholders of
Merger Sub in connection with this Agreement and the transactions
contemplated hereby.
(f) LADCO, PMT and the Controlling LADCO Stockholder shall have executed
written agreements concerning (i) employee options for LADCO key employees,
including Leon D. Ladd, and (ii) the release or indemnification of Leon D.
Ladd with respect to personal guarantees by him of any LADCO obligations.
7.2 Conditions to Obligation of LADCO to Effect the Merger. The
obligation of LADCO to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions:
(a) PMT shall have performed its agreements contained in this Agreement
required to be performed on or prior to the Closing Date and the
representations and warranties of PMT and Merger Sub contained in this
Agreement and in any document delivered in connection herewith shall be
true and correct as of the Closing Date, and LADCO shall have received a
certificate of the President or the Chief Operating Officer, dated the
Closing Date, certifying to such effect.
(b) From the date of this Agreement through the Effective Time, there
shall not have occurred any material change in the financial condition,
business, operations or prospects of PMT, that would have or would be
reasonably likely to have a PMT Material Adverse Effect other than any such
change that affects both LADCO and PMT in a substantially similar manner.
(c) LADCO shall have received a written opinion, dated as of the Closing
Date, from the legal counsel of PMT, in form and substance satisfactory to
it, as to certain matters agreed upon by legal counsel of PMT and LADCO.
(d) Prior to June 30, 1997, LADCO shall not have notified PMT in writing
that LADCO's review of PMT's business, operations, and the matters
disclosed in the PMT Disclosure Schedule has revealed matters (described in
reasonable detail) which in LADCO's reasonable business judgment would
adversely affect the business or operations of PMT.
(e) LADCO shall have received all required consents under all material
contracts as listed in Section 4.7(ii) of the LADCO Disclosure Schedule.
28
7.3 Conditions to Obligation of PMT and Merger Sub to Effect the Merger.
The obligations of PMT and Merger Sub to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) LADCO shall have performed its agreements contained in this Agreement
required to be performed on or prior to the Closing Date and the
representations and warranties of LADCO contained in this Agreement and in
any document delivered in connection herewith shall be true and correct as
of the Closing Date, and PMT shall have received a certificate of the
President of LADCO, dated the Closing Date, certifying to such effect.
(b) PMT shall be satisfied that the Merger will qualify for accounting by
PMT as a pooling of interests under generally accepted accounting
principles and under applicable rules and regulations of the SEC. In
connection therewith, PMT shall have received, on or before the Closing
Date, a letter from Price Waterhouse LLP (or any other accountants of PMT's
choosing) dated as of the Closing Date to the effect that the transactions
contemplated by this Agreement may be treated by PMT as a "pooling of
interests" for accounting purposes.
(c) The Controlling LADCO Stockholder shall not have perfected its rights
to dissent to the transaction contemplated by this Agreement under the
CGCL.
(d) From the date of this Agreement through the Effective Time, there
shall not have occurred any material change in the financial condition,
business, operations or prospects of LADCO that would be reasonably likely
to have a LADCO Material Adverse Effect, other than any such change that
affects both LADCO and PMT in a substantially similar manner.
(e) PMT shall have received reasonably satisfactory evidence that LADCO
has received all required consents and sent all required notices as set
forth in Section 4.7(ii) of the LADCO Disclosure Schedule.
(f) PMT shall have received a written opinion, dated as of the Closing
Date, from the legal counsel of LADCO, in form and substance satisfactory
to it, as to certain matters agreed upon by legal counsel of LADCO and PMT.
(g) Prior to June 30, 1997, PMT shall not have notified LADCO in writing
that PMT's review of LADCO's business, operations, and the matters
disclosed in the LADCO Disclosure Schedule has revealed matters (described
in reasonable detail) which in PMT's reasonable business judgment would
have a LADCO Material Adverse Effect.
29
(h) Prior to June 30, 1997, PMT shall have determined that the
consummation of the Merger meets all applicable requirements of any loan
agreements to which it is a party.
(i) In order to ensure that following the consummation of the Merger,
Leon D. Ladd shall not engage in certain activities as specified in the
noncompetition agreement, Mr. Ladd shall have executed a noncompetition
agreement, in form and substance satisfactory to PMT and its directors.
ARTICLE 8
TERMINATION
8.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the Controlling Stockholder of LADCO,
with the mutual consent of PMT and LADCO.
8.2 Termination by Either PMT or LADCO. This Agreement may be terminated
and the Merger may be abandoned by action of the Board of Directors of either
PMT or LADCO if (a) the Merger shall not have been consummated by August 31,
1997, or (b) a United States federal or state court of competent jurisdiction or
United States federal or state governmental, regulatory or administrative agency
or commission shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided, that the
party seeking to terminate this Agreement pursuant to this clause (b) shall have
used all reasonable efforts to remove such injunction, order or decree.
8.3 Termination by LADCO. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after the
adoption and approval by the shareholders of LADCO, by action of the Board of
Directors of LADCO, if (a) there has been a breach by PMT or Merger Sub of any
representation or warranty contained in this Agreement which would have or would
be reasonably likely to have a PMT Material Adverse Effect, or (b) there has
been a material breach of any of the covenants or agreements set forth in this
Agreement on the part of PMT, which breach is not curable or, if curable, is not
cured within 30 days after written notice of such breach is given by LADCO to
PMT, except that if any party terminates this Agreement without cause, such
party shall reimburse the other party's Hart-Scott-Rodino filing costs;
provided, that this provision and such reimbursement shall not limit any other
rights or remedies such party may have pursuant to this Agreement.
8.4 Termination by PMT. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, by action of the Board
of Directors of
30
PMT, if (a) there has been a breach by LADCO of any representation or warranty
contained in this Agreement which would have or would be reasonably likely to
have an LADCO Material Adverse Effect, (b) there has been a material breach of
any of the covenants or agreements set forth in this Agreement on the part of
LADCO, which breach is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by PMT to LADCO, or (c) the Merger
will not qualify for accounting by PMT as a pooling of interests under generally
accepted accounting principles and under applicable rules and regulations of the
SEC.
8.5 Effect of Termination and Abandonment. Upon termination of this
Agreement pursuant to this Article, this Agreement shall be void and of no other
effect, and there shall be no liability by reason of this Agreement or the
termination thereof on the part of any party hereto, or on the part of the
respective directors, officers, employees, agents or shareholders of any of
them. Each party shall be responsible for its own expenses hereunder.
8.6 Extension; Waiver. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by the Controlling LADCO Stockholder. Upon the terms
and subject to the conditions set forth in Article 9, the Controlling LADCO
Stockholder shall indemnify, save and hold PMT (including LADCO following the
Merger) and its affiliates, successors and permitted assigns (the "PMT
Indemnitees"), harmless against and from, and will reimburse the PMT Indemnitees
on demand for, any liability, demands, claims, actions or causes of action,
assessments, losses, fines, penalties, costs, damages and expenses, including
reasonable attorneys' fees, disbursements and expenses but net of any related
tax or timing benefits related to such losses or expenses (collectively,
"Damages"), sustained or incurred by any of the PMT Indemnitees at any time
after the Closing Date as a result of or arising out of (i) any
misrepresentation, breach of any warranty or representation in any material
respect, or nonfulfillment of any material agreement or covenant on the part of
LADCO or the Controlling LADCO Stockholder in any material respect, whether
contained in this Agreement or any Exhibit or Schedule hereto or thereto or any
certificate furnished or to be furnished to PMT pursuant hereto or in any
closing document delivered by LADCO or the Controlling LADCO Stockholder to PMT
in connection herewith, or (ii) any final resolution, by settlement,
adjudication,
31
arbitration or otherwise, of any litigation or other adversarial proceeding
pending or threatened against LADCO on the Closing Date and not included in the
LADCO Disclosure Schedule.
9.2 Indemnification by PMT. Upon the terms and subject to the conditions
set forth in Article 9, PMT agrees to indemnify, save and hold the Controlling
LADCO Stockholder (the "Stockholder Indemnitee") harmless against and from, and
will reimburse the Stockholder Indemnitee on demand for, any Damages sustained
or incurred by any of the Stockholder Indemnitee at any time after the Closing
Date as a result of, or arising out of any misrepresentation, breach of any
warranty or representation in any material respect, or nonfulfillment of any
material agreement or covenant on the part of PMT in any material respect,
whether contained in this Agreement or any Exhibit or Schedule hereto or
thereto, or any certificate furnished or to be furnished to the Controlling
LADCO Stockholder pursuant hereto or in any closing document delivered by PMT to
LADCO or the Controlling LADCO Stockholder in connection herewith.
9.3 Conditions of Indemnification Pursuant to Sections 9.1 and 9.2. (i)
Promptly following the receipt by the PMT Indemnitees (as defined in Section 9.1
hereof) or Stockholder Indemnitee (as defined in Section 9.2 hereof) as the case
may be, of written notice of a demand, claim, action, assessment or proceeding
made or brought by a third party, including a governmental agency (a "Third
Party Claim"), the PMT Indemnitees or Stockholder Indemnitee receiving such
notice of the Third Party Claim shall promptly notify the Controlling LADCO
Stockholder or PMT, as the case may be, of its existence, setting forth the
facts and circumstances of which such PMT Indemnitees or Stockholder Indemnitee
has received notice, and shall specify in such notice the basis hereunder upon
which the Indemnified Party's claim for indemnification is asserted.
(ii) PMT Indemnitees or Stockholder Indemnitee, as the case may be,
shall, upon reasonable notice by the Controlling LADCO Stockholder or PMT, as
the case may be, tender the defense of a Third Party Claim to the Controlling
LADCO Stockholder or PMT, as the case may be (the "Indemnifying Party"). If the
Indemnifying Party accepts indemnification responsibility for the Third Party
Claim hereunder, then the Indemnifying Party shall have the exclusive right to
contest, defend and litigate the Third Party Claim and shall have the exclusive
right, in its discretion exercised in good faith and upon the advice of counsel,
to settle any such matter, either before or after the initiation of litigation,
at such time and upon such terms as it deems fair and reasonable, provided that
at least ten business days prior to any such settlement, it shall give written
notice of its intention to settle to the Indemnified Party. The Indemnified
Party shall have the right to be represented by counsel at its own expense in
any defense conducted by the Indemnifying Party.
(iii) If, in accordance with the foregoing provisions of this
Section 9.3, an Indemnified Party shall be entitled to indemnification against a
Third Party Claim, and if the Indemnifying Party shall fail to accept the
defense of a Third Party Claim that has been tendered in accordance with this
Section 9.3, the Indemnified Party shall have the right, without prejudice to
its right of indemnification hereunder, in its discretion exercised in good
faith and upon the advice of counsel, to contest, defend and litigate such Third
Party Claim, and may settle such
32
Third Party Claim, either before or after the initiation of litigation, at such
time and upon such terms as the Indemnified Party deems fair and reasonable,
provided at least ten business days prior to any such settlement, written notice
of its intention to settle is given to the Indemnifying Party. If, pursuant to
this Section 9.3 the Indemnified Party so defends or settles a Third Party Claim
for which it is entitled to indemnification hereunder, as hereinabove provided,
the Indemnified Party shall be reimbursed by the Indemnifying Party for the
reasonable attorneys' fees and other expenses of defending the Third Party Claim
that is incurred from time to time, immediately following the presentation to
the Indemnifying Party of itemized bills for said attorneys' fees and other
expenses. No failure by the Indemnifying Party to acknowledge in writing its
indemnification obligations under this Section 9 shall relieve it of such
obligations to the extent they exist.
(iv) Notwithstanding the foregoing, in connection with any settlement
negotiated by the Indemnifying Party, no Indemnified Party shall be required to
(A) enter into any settlement (I) that does not include the delivery by the
claimant or plaintiff to the Indemnified Party of a release from all liability
in respect of such claim or litigation, or (II) if the Indemnified Party shall,
in writing to the Indemnifying Party within the ten business day period prior to
such proposed settlement, disapprove of such settlement proposal (which
settlement proposal will not be unreasonably disapproved) and desire to have the
Indemnifying Party tender the defense of such matter back to the Indemnified
Party, or (B) consent to the entry of any judgment that does not include a full
dismissal of the litigation or proceeds against the Indemnified Party with
prejudice; provided, however, that should the Indemnified Party disapprove of a
settlement proposal pursuant to Clause (II) above, the Indemnified Party shall
thereafter have all of the responsibility for defending, contesting and settling
such Third Party Claim but shall not be entitled to indemnification by the
Indemnifying Party to the extent that, upon final resolution of such Third Party
Claim, the Indemnifying Party's liability to the Indemnified Party but for this
proviso exceeds what the Indemnifying Party's liability to the Indemnified Party
would have been if the Indemnifying Party were permitted to settle such Third
Party Claim in the absence of the Indemnified Party exercising its right under
Clause (II) above.
9.4 Release by the Controlling LADCO Stockholder. Effective upon the
Closing, the Controlling LADCO Stockholder hereby releases and discharges PMT
and its subsidiaries and each of its officers and directors from, and agrees and
covenants that in no event will the Controlling LADCO Stockholder commence any
litigation or other legal or administrative proceeding against, PMT, its
subsidiaries or any of their officers or directors, whether in law or equity,
relating to any and all claims and demands, known and unknown, suspected and
unsuspected, disclosed and undisclosed, for damages, suspected or consequential,
past, present and future, arising out of or in any way connected with its
ownership of the LADCO Shares prior to the Effective Time, other than claims or
demands arising out of or in any way connected with this Agreement and the
agreements and other documents contemplated hereby and the transaction
contemplated hereby and thereby; provided, however, that nothing contained
herein shall relieve any obligations of PMT to indemnify the Controlling LADCO
Stockholder pursuant to Section 9 hereof or its rights to indemnity as officers
and directors of LADCO prior to Closing for Third Party Claims.
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9.5 Survival. All of the terms and conditions of this Agreement, together
with the representations, warranties and covenants contained herein or in any
Exhibit, Schedule or certificate delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing Date
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; provided, however, that all representations and warranties,
and the agreements of the Controlling LADCO Stockholder and PMT to indemnify
each other set forth in this Section 9, shall survive and continue for, and all
claims with respect thereto shall be made prior to the end of, three years from
the Closing Date, except for any indemnification claim which shall be pending as
of the end of the applicable period referred to above, in which event such
indemnities shall, as and to the extent asserted, survive with respect to such
claim until the final disposition thereof.
9.6 Reduction for Insurance. The gross amount for which an Indemnifying
Party is liable for on behalf of an Indemnified Party pursuant to this Article 9
(the "Indemnifiable Loss") shall be reduced (including, without limitation,
retroactively) by any insurance proceeds actually recovered by or on behalf of
such Indemnified Party related to such Indemnifiable Loss. If the Indemnified
Party shall have received or shall have been paid on its behalf an indemnity
payment in respect of such Indemnifiable Loss and shall subsequently receive
directly or indirectly insurance proceeds in respect of such Indemnifiable Loss,
then the Indemnified Party shall pay to the Indemnifying Party the net amount of
such insurance proceeds or, if less, the amount of such indemnity payment.
9.7 Limitation. Notwithstanding the foregoing, no Indemnifying Party shall
have any obligation to indemnify an Indemnified Party for any claim or related
series of claims involving, in the aggregate, with respect to the first $250,000
of total liabilities, unless the total aggregate liabilities exceed such amount,
in which case the indemnification obligation of the Indemnifying Party will
include all such liabilities, including the first $250,000 of total liabilities,
and no party shall have an obligation to indemnify an Indemnified Party for
amounts in the aggregate which exceed $22,500,000.
ARTICLE 10
GENERAL PROVISIONS
10.1 Non-survival of Representations and Warranties. The representations
and warranties of the parties and the Controlling LADCO Stockholder as set forth
in this Agreement or in any instrument delivered pursuant to this Agreement
shall survive until the third anniversary of the Closing Date.
10.2 Notices. Any notice required to be given hereunder shall be
sufficient if in writing, by courier service (with proof of service), hand
delivery or certified or registered mail (return receipt requested and first-
class postage prepaid), addressed as follows:
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If to PMT or Merger Sub: If to LADCO or the Controlling LADCO
Stockholder:
Gregory S. Daily Leon D. Ladd
President President
PMT Services, Inc. LADCO Financial Group
Two Maryland Farms, Suite 200 516 Pennsfield Place #205
Brentwood, Tennessee 37027 Thousand Oaks, California 91360-5500
with a copy to: with a copy to:
Howard W. Herndon Melanie J. Gnazzo
Waller Lansden Dortch & Davis, Giancarlo & Gnazzo
A Professional Limited 625 Market Street, Suite 1100
Liability Company San Francisco, CA 94105
511 Union Street, Suite 2100
Nashville, Tennessee 37219-1760
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
10.3 Assignment, Binding Effect; Benefit. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
10.4 Entire Agreement. This Agreement, the Exhibits, the Schedules, the
LADCO Disclosure Schedule, the PMT Disclosure Schedule, the confidentiality
letter and any documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
10.5 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
shareholders of LADCO and PMT, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval of
shareholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
10.6 Governing Law. The validity of this Agreement, the construction of
its terms and the determination of the rights and duties of the parties hereto
shall be governed by and
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construed in accordance with the laws of the United States and those of the
State of Tennessee applicable to contracts made and to be performed wholly
within such state.
10.7 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
10.8 Headings. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
10.9 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
10.10 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
10.11 Incorporation of Exhibits. The LADCO Disclosure Schedule, the PMT
Disclosure Schedule, the Schedules and the Exhibits attached hereto and referred
to herein are hereby incorporated herein and made a part hereof for all purposes
as if fully set forth herein.
10.12 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.13 Press Releases. All press releases issued by PMT or LADCO with
respect to these transactions shall be in form reasonably approved by PMT and
LADCO.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf as of the day and year first written
above.
PMT SERVICES, INC.
ATTEST:
By: /s/ Vickie G. Johnson By:/s/ Gregory S. Daily
----------------------------- -------------------------------
Gregory S. Daily
President
PMT LADCO ACQUISITION
CORPORATION
ATTEST:
By:/s/ Vickie G. Johnson By:/s/ Gregory S. Daily
----------------------------- -------------------------------
Gregory S. Daily
President
LADCO FINANCIAL GROUP
ATTEST:
By: /s/ Steve J. Buirnan By:/s/ Leon D. Ladd
----------------------------- -------------------------------
Leon D. Ladd
President
CONTROLLING LADCO STOCKHOLDER:
THE LADD FAMILY TRUST
By: /s/ Leon D. Ladd
---------------------------------
Title: Trustee
------------------------------
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