-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V7ryP+Tq3lvTK+ZJxCb088A6EkJ9GCkaVpA7ArZSDm/V6N7EDuqjCVBDWHYU8bwk KuEWZRvIcV+dSYr4Qok76g== /in/edgar/work/0000950134-00-009754/0000950134-00-009754.txt : 20001115 0000950134-00-009754.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950134-00-009754 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TYLER TECHNOLOGIES INC CENTRAL INDEX KEY: 0000860731 STANDARD INDUSTRIAL CLASSIFICATION: [3310 ] IRS NUMBER: 752303920 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10485 FILM NUMBER: 766264 BUSINESS ADDRESS: STREET 1: 2800 W MOCKINGBIRD LANE STREET 2: STE 3200 SAN JACINTO TOWER CITY: DALLAS STATE: TX ZIP: 75235 BUSINESS PHONE: 2147547800 MAIL ADDRESS: STREET 1: 2121 SAN JACINTO STREET STREET 2: SUITE 3200 CITY: DALLAS STATE: TX ZIP: 75201 FORMER COMPANY: FORMER CONFORMED NAME: TYLER CORP /NEW/ DATE OF NAME CHANGE: 19930328 FORMER COMPANY: FORMER CONFORMED NAME: TYLER THREE INC DATE OF NAME CHANGE: 19600201 10-Q 1 d81555e10-q.txt FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 2000 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission File Number 1-10485 TYLER TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 75-2303920 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 2800 WEST MOCKINGBIRD LANE DALLAS, TEXAS 75235 (Address of principal executive offices) (Zip code) (214) 902-5086 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Number of shares of common stock of registrant outstanding at November 7, 2000: 46,679,447 2 TYLER TECHNOLOGIES, INC. INDEX
PAGE NO. -------- Part I - Financial Information (Unaudited) Item 1. Financial Statements Condensed Consolidated Balance Sheets................... 3 Condensed Consolidated Statements of Operations......... 4 Condensed Consolidated Statements of Cash Flows......... 5 Notes to Condensed Consolidated Financial Statements.... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 14 Part II - Other Information Item 1. Legal Proceedings....................................... 20 Item 6. Exhibits and Reports on Form 8-K........................ 20 Signatures..................................................................... 20
3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements TYLER TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value and number of shares)
(Unaudited) September 30, December 31, 2000 1999 -------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 555 $ 2,424 Accounts receivable (less allowance for losses of $1,350 in 2000 and $1,257 in 1999) 41,571 39,464 Income taxes receivable 1,912 3,392 Prepaid expenses and other current assets 2,806 3,301 Deferred income taxes 2,402 2,438 -------------- -------------- Total current assets 49,246 51,019 Property and equipment, net 13,250 21,789 Other assets: Investment securities available-for-sale 7,375 33,713 Goodwill and other intangibles, net 160,352 160,665 Other receivables 3,960 3,358 Sundry 1,647 1,991 -------------- -------------- $ 235,830 $ 272,535 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,998 $ 5,163 Accrued liabilities 10,486 13,786 Current portion of long-term obligations 22,615 3,747 Deferred revenue 21,808 24,303 -------------- -------------- Total current liabilities 58,907 46,999 Long-term obligations, less current portion 47,313 67,446 Deferred income taxes 12,734 13,869 Other liabilities 4,974 5,317 Commitments and contingencies Shareholders' equity: Preferred stock, $10.00 par value; 1,000,000 shares authorized, none issued -- -- Common stock, $.01 par value; 100,000,000 shares authorized; 48,042,969 and 44,709,169 shares issued at 9/30/00 and 12/31/99, respectively 481 447 Additional paid-in capital 160,595 151,298 Accumulated deficit (34,871) (24,615) Accumulated other comprehensive income - unrealized (loss) gain on securities available-for-sale (8,408) 17,931 Treasury stock, at cost: 1,363,522 and 1,418,482 shares at 9/30/00 and 12/31/99, respectively (5,895) (6,157) -------------- -------------- Total shareholders' equity 111,902 138,904 -------------- -------------- $ 235,830 $ 272,535 ============== ==============
See accompanying notes. Page 3 4 TYLER TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
Three months ended Nine months ended September 30, September 30, -------------------- -------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Revenues: Software licenses $ 5,676 $ 6,418 $ 14,246 $ 16,366 Professional services 17,002 11,144 51,733 30,476 Maintenance 9,467 6,638 27,785 17,072 Hardware and other 2,231 3,338 5,244 9,706 -------- -------- -------- -------- Total revenues 34,376 27,538 99,008 73,620 Cost of revenues: Software licenses 597 977 2,031 2,419 Professional services and maintenance 17,952 11,497 54,166 29,846 Hardware and other 1,668 1,915 3,710 6,138 -------- -------- -------- -------- Total cost of revenues 20,217 14,389 59,907 38,403 -------- -------- -------- -------- Gross profit 14,159 13,149 39,101 35,217 Selling, general and administrative expenses 11,295 9,054 34,944 22,977 Litigation defense costs -- -- 1,264 -- Amortization of intangibles 2,205 2,419 7,550 5,067 -------- -------- -------- -------- Operating income (loss) 659 1,676 (4,657) 7,173 Other income 251 -- 251 -- Interest expense 3,546 1,038 7,442 2,794 -------- -------- -------- -------- Income (loss) from continuing operations before income tax provision (benefit) (2,636) 638 (11,848) 4,379 Income tax provision (benefit) (160) 441 (2,161) 2,867 -------- -------- -------- -------- Income (loss) from continuing operations (2,476) 197 (9,687) 1,512 Loss from disposal of discontinued operations, net of income taxes (82) (602) (569) (1,947) -------- -------- -------- -------- Net loss $ (2,558) $ (405) $(10,256) $ (435) ======== ======== ======== ======== Basic and diluted earnings (loss) per common share: Continuing operations $ (0.05) $ 0.00 $ (0.22) $ 0.04 Discontinued operations (0.00) (0.01) (0.01) (0.05) -------- -------- -------- -------- Net loss per common share $ (0.05) $ (0.01) $ (0.23) $ (0.01) ======== ======== ======== ======== Weighted average common shares outstanding: Basic 46,654 40,541 44,953 37,960 Diluted 46,654 42,074 44,953 39,336
See accompanying notes. Page 4 5 TYLER TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine months ended September 30, ------------------------------- 2000 1999 -------------- ------------- Cash flows from operating activities: Net loss $ (10,256) $ (435) Adjustments to reconcile net loss from operations to net cash (used) provided by operations: Depreciation and amortization 12,514 7,599 Deferred income taxes (1,192) (973) Gain on sale (251) -- Amortization of issue costs due to debt modifications 1,161 -- Discontinued operations - noncash charges and changes in operating assets and liabilities -- (1,778) Changes in operating assets and liabilities, exclusive of effects of acquired and disposed companies and discontinued operations (6,227) (3,163) ------------ ------------ Net cash (used) provided by operating activities (4,251) 1,250 ------------ ------------ Cash flows from investing activities: Additions to property and equipment (2,787) (2,518) Investment in database and other software development costs (7,400) (3,791) Cost of acquisitions, net of cash acquired (3,073) (22,491) Capital expenditures of discontinued operations -- (534) Proceeds from disposal of assets, net of transaction costs 14,019 15,116 Issuance of notes receivable -- (1,200) Other (1,043) (189) ------------ ------------ Net cash used by investing activities (284) (15,607) ------------ ------------ Cash flows from financing activities: Net (payments) borrowings on revolving credit facility (1,958) 17,314 Payments on notes payable (2,412) (1,892) Payments of principal on capital lease obligations (953) (864) Proceeds from sale of common stock, net of issuance costs 9,270 -- Sale of treasury shares to employee benefit plan 19 19 Debt issuance cost (1,300) (100) ------------ ------------ Net cash provided by financing activities 2,666 14,477 ------------ ------------ Net (decrease) increase in cash and cash equivalents (1,869) 120 Cash and cash equivalents at beginning of period 2,424 1,558 ------------ ------------ Cash and cash equivalents at end of period $ 555 $ 1,678 ============ ============
See accompanying notes Page 5 6 Tyler Technologies, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) (1) Basis of Presentation The accompanying unaudited information for Tyler Technologies, Inc. ("Tyler" or the "Company") includes all adjustments which are, in the opinion of the Company's management, of a normal or recurring nature and necessary for a fair summarized presentation of the condensed consolidated balance sheet at September 30, 2000, and the condensed consolidated results of operations and cash flows for the periods presented. Such financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. The consolidated results of operations for interim periods may not necessarily be indicative of the results of operations for any other interim period or for the full year and should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1999. As a result of the implementation of a new management information system, the Company has been able to more accurately allocate certain costs between costs of revenue and selling, general and administrative expenses. Accordingly, certain amounts in prior financial statements have been reclassified to conform to current period presentation. (2) Sale of Assets On September 29, 2000, the Company sold for cash certain non-core assets for an aggregate sale price of $14.4 million. The assets sold consisted of certain net assets of two operating subsidiaries, the Company's interest in a certain intangible work product, and the sale and leaseback of a building and related building improvements. The building that was sold is the headquarters for the Company's corporate employees and those of an operating company, and it has been leased back by the Company for a period of ten years at an annual rental amount of $720,000. The net proceeds of the sale were used to repay an existing obligation of one of the companies sold and to reduce the Company's borrowings under its senior credit facility. The assets were sold to investment entities beneficially owned by Mr. William D. Oates, a principal shareholder, Director and Chairman of the Executive Committee of the Company. The sale is subject to certain post closing adjustments dependent upon the changes in net assets sold as compared to an earlier period. Certain transaction costs, estimated by the Company to be approximately $400,000, were incurred to effect the transactions. In connection with the sale, the Company recorded an aggregate gain of $251,000, after estimating the effects of the post closing adjustments and estimated transaction costs. Because of the Company's existing capital loss carryforwards, the related income tax effects of these transactions are estimated to be insignificant. (3) Acquisitions On January 3, 2000, the Company acquired all of the outstanding common stock of Capitol Commerce Reporter, Inc. ("CCR") of Austin, Texas for approximately $3.0 million in cash, $1.2 million in assumed debt and $2.8 million in five-year, 10% subordinated notes and financed the cash portion of the acquisition utilizing funds available under its bank credit agreement. The Company accounted for the acquisition of CCR using the purchase method of accounting and its results of operations are included in the Company's condensed consolidated financial statements since the date of acquisition. The purchase price has been preliminarily allocated to the assets and liabilities based on their estimated respective fair values. The purchase price exceeded the estimated fair value of CCR's identifiable net assets by approximately $6.8 million. Goodwill is being amortized over ten years. Since January 1, 1999, the Company has also acquired the entities described below in transactions which were accounted for by the purchase method of accounting and the cash portion of the consideration was financed utilizing funds available under its bank credit agreement. Results of operations of the acquired entities are included in the Company's condensed consolidated financial statements from their respective dates of acquisition.
DATE COMPANY ACQUIRED ACQUIRED ---------------- -------- Eagle Computer Systems, Inc. ("Eagle") March 1, 1999 Micro Arizala Systems, Inc. April 1, 1999 ("FundBalance") Process Incorporated ("MUNIS") April 21, 1999 Gemini Systems, Inc. ("Gemini") May 1, 1999 Pacific Data Technologies, Inc. July 16, 1999 ("Pacific Data") Cole-Layer-Trumble Company ("CLT") November 4, 1999
Page 6 7 The following unaudited pro forma information (in thousands, except per share data) presents the consolidated results of operations as if all of the Company's acquisitions and dispositions of certain non-core assets and real estate occurred on January 1, 1999, after giving effect to certain adjustments, including amortization of intangibles, interest and income tax effects. The pro forma information does not purport to represent what the Company's results of operations actually would have been had such transactions or events occurred on the dates specified, or to project the Company's results of operations for any future period.
NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- 2000 1999 -------------- -------------- Revenues $ 92,240 $ 101,392 Income (loss) from continuing operations $ (9,182) $ 1,734 Net loss $ (9,669) $ (213) Net loss per diluted share $ (0.22) $ (0.00)
(4) Commitments and Contingencies Two of the Company's non-operating subsidiaries are involved in various claims for work related injuries and physical conditions and for environmental claims relating to a formerly owned subsidiary that was sold in 1995. Between 1968 and 1995, TPI of Texas, Inc. ("TPI") owned and operated a foundry in Swan, Texas. Since 1997, more than 300 former employees of TPI have filed a series of lawsuits against TPI, Swan Transportation Company, the parent corporation of TPI until 1992 ("Swan"), and in some instances, the Company, alleging various personal injuries resulting from exposure to silica, asbestos, and/or other related industrial dusts during their employment with TPI. As non-operating subsidiaries, Swan and TPI's assets consist primarily of various insurance policies issued during the relevant time periods. In December 1999, the Company, Swan, and TPI initiated litigation against Swan and TPI's former insurance carriers in Harris County, Texas, demanding that such carriers undertake the defense of these claims, fulfill all indemnity obligations with respect to these claims, and reimburse the Company for settlement and defense costs previously paid by the Company. In March 2000, the Company entered into a Standstill Agreement with all known plaintiffs asserting injuries described above, including all known plaintiffs who have alleged injury but have not yet filed suit against Swan and/or TPI (collectively, the "Plaintiffs"). Under the Standstill Agreement, the Plaintiffs agreed to dismiss all pending claims against the Company and agreed to not sue the Company until two years after the date that the first jury verdict is rendered against Swan. Under the Standstill Agreement, the Company agreed to withdraw its outside counsel of record in the pending lawsuits, re-tender the defense and indemnity obligations related to these claims to the insurance carriers of Swan and TPI, and continue to prosecute its insurance coverage suit in Harris County, Texas, in which the Plaintiffs, if and when they receive a judgment, may intervene in such litigation and prosecute their claims directly against the insurance carriers. Further, the Standstill Agreement provides that any Plaintiff that settles or receives a judgment on any of its claims, and such settlement or judgment is fully paid or compromised, then such Plaintiff will execute a release in favor of the Company, its subsidiaries and affiliates from such claims. In March 2000, Swan's insurance carriers agreed to assume the ongoing and future defense of these claims, subject to a reservation of rights. During the quarter ended September 30, 2000, Swan's insurance carriers entered into settlement agreements with over 200 Plaintiffs, each of which agreed to release Swan, the Company, and its subsidiaries and affiliates in exchange for payments to be made by the insurance carriers. The New Jersey Department of Environmental Protection and Energy (the "NJDEPE") has alleged that a site where Jersey-Tyler Company ("Jersey-Tyler"), a former affiliate of TPI, once operated a foundry contains lead and possible other priority pollutant metals and may need on-site and off-site remediation. In January 1995, TPI agreed with the NJDEPE to undertake certain investigatory actions relating to the alleged contamination in and around the site, which investigation will be completed sometime in the fourth quarter of 2000. Notwithstanding the foregoing, TPI has in the past denied, and continues to deny, any liability for alleged environmental contamination at the site. The NJDEPE has not asserted that the Company is a potentially responsible party for the site. On October 31, 2000, TPI executed an agreement with a third party contractor for a complete transfer of environmental liabilities and obligations relating to the site. Under the agreement, the third party contractor will execute an enforceable agreement with the Page 7 8 NJDEPE whereby such contractor will assume all liability related to the site and will be identified as the responsible party for all clean up activities of the site as required by the NJDEPE. The remedial activities conducted by the third party contractor will be funded by a trust and will be secured by clean-up cost containment insurance and environmental response, compensation, and liability insurance, of which the Company and TPI will be a named insured. The funds placed in the trust will be governed by a trust agreement that will only permit distribution for remediation of the site. The trust will be funded from various sources, including other alleged potentially responsible parties, TPI's insurance carriers, and TPI. The transaction is expected to close in the fourth quarter of 2000, and the net effects of these anticipated settlements and reimbursements are not expected to exceed the amount accrued in the Company's financial statements for this liability. Because of the inherent uncertainties discussed above, it is reasonably possible that the amounts recorded as liabilities for TPI and Swan related matters could change in the near term by amounts that would be material to the consolidated financial statements. (5) Revenue Recognition The Company's software systems and services segment derives revenue from software licenses, postcontract customer support ("PCS"), and services. PCS includes telephone support, bug fixes, and rights to upgrade on a when-and-if available basis. Services range from installation, training, and basic consulting to software modification and customization to meet specific customer needs. In software arrangements that include rights to multiple software products, specified upgrades, PCS, and/or other services, the Company allocates the total arrangement fee among each deliverable based on the relative fair value of each of the deliverables as determined based on vendor specific objective evidence. The Company recognizes revenue from software transactions in accordance with Statement of Position 97-2, "Software Revenue Recognition", as amended as follows: Software Licenses - The Company recognizes the revenue allocable to software licenses and specified upgrades upon delivery and installation of the software product or upgrade to the end user, unless the fee is not fixed or determinable or collectibility is not probable. If the fee is not fixed or determinable, revenue is recognized as payments become due from the customer. If collectibility is not considered probable, revenue is recognized when the fee is collected. Arrangements that include software services, such as training or installation, are evaluated to determine whether those services are essential to the functionality of other elements of the arrangement. A majority of the Company's software arrangements involve "off-the-shelf" software, and the other elements are not considered essential to the functionality of the software. For those software arrangements in which services are not considered essential, the software license fee is recognized as revenue after delivery and installation have occurred, customer acceptance is reasonably assured, the fee represents an enforceable claim and the remaining services other than training are considered nominal. Software Services - When software services are considered essential, revenue under the entire arrangement is recognized as the services are performed using the percentage-of-completion contract accounting method. When software services are not considered essential, the fee allocable to the service element is recognized as revenue as the services are performed. Computer Hardware Equipment - Revenue allocable to equipment based on vendor specific evidence of fair value is recognized when the equipment is delivered and collection is probable. Postcontract Customer Support - PCS agreements are generally entered into in connection with initial license sales and subsequent renewals. Revenue allocated to PCS is recognized on a straight-line basis over the period the PCS is provided. All significant costs and expenses associated with PCS are expensed as incurred. Contract Accounting - For arrangements that include customization or modification of the software, or where software services are otherwise considered essential, or for real estate mass appraisal projects, revenue is recognized using contract accounting. Revenue from these arrangements is recognized on a percentage-of-completion method with progress-to-completion measured based primarily upon labor hours incurred or units completed. Deferred revenue consists primarily of payments received in advance of revenue being earned under software licensing, software and hardware installation, support and maintenance contracts. Page 8 9 Through its information and property records services segment, the Company provides computerized indexing and imaging of real property records, records management and micrographic reproduction, as well as information management outsourcing and professional services required by county and local government units and agencies. The Company provides title plant update services to title companies and sales of copies of title plants. The Company recognizes service revenue when services are performed and equipment sales when the products are shipped. Title Plants - Sales of copies of title plants are usually made under long-term installment contracts. The contract with the customer is generally bundled with a long-term title plant update service arrangement. The bundled fees are payable on a monthly basis over the respective contract period and revenue is recognized on an as-billable basis over the terms of the arrangement. The Company also receives royalty revenue relating to the current activities of two former subsidiaries. Royalty revenue is recognized as earned upon receipt of royalty payments. (6) Litigation Defense Costs In December 1999, a competitor of one of the Company's operating subsidiaries filed a lawsuit against the subsidiary, an employee of the subsidiary, and the Company alleging that the employee, who had previously been an employee of the competitor, had taken confidential and proprietary trade secrets upon leaving the employment of the competitor. The lawsuit proceeded on an accelerated court schedule and was tried before a judge in March 2000. After a trial on the merits, the trial court issued a favorable ruling on behalf of the Company and its subsidiary and awarded no monetary damages to the competitor. Incremental direct legal costs relating to the defense of these matters were $1.3 million, which are included in litigation defense costs in the accompanying consolidated condensed financial statements for the nine months ended September 30, 2000. (7) Discontinued Operations Two of the Company's non-operating subsidiaries are involved in various claims for work related injuries and physical conditions and for environmental claims relating to a formerly-owned subsidiary that was sold in 1995. For the three and nine months ended September 30, 2000, the Company expensed $82,000 (net of taxes of $44,000) and $569,000 (net of taxes of $307,000), respectively, for trial and related costs. For the three and nine months ended September 30, 1999, the Company expensed $602,000 (net of taxes of $303,000) and $1.4 million (net of taxes of $744,000), respectively, for trial and related costs. (See Note (5) Commitments and Contingencies.) In December 1998, the Company entered into a letter of intent to sell its non-core automotive parts retailer, Forest City Auto Parts Company ("Forest City"). Accordingly, this segment has been accounted for as a discontinued operation. The measurement date for recording the estimated loss on disposition of the segment was in December 1998. The Company estimated the loss on the disposal of Forest City to be $8.9 million, which was reported in its 1998 financial statements. The estimated loss included anticipated operating losses from the measurement date of December 31, 1998 to the date of disposal and associated transaction costs. The Company recorded an additional loss during the three months ended March 31, 1999 of $565,000 (net of taxes of $364,000) to reflect higher than expected transaction costs and operating losses. (8) Sale of Copies of Title Plants During the three months ended September 30, 1999, the Company reported and recognized $2.1 million of revenue and $82,000 of interest income in connection with sales of copies of title plants. For the nine months ended September 30, 1999, the Company reported and recognized $5.7 million of revenue and $180,000 of interest income in connection with sales of copies of title plants. Each of the contracts included the sale of copies of title plants combined with five and ten year title plant update service agreements to provide monthly update services. The Company previously sold update services separately to these customers. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 entitled, "Revenue Recognition in Financial Statements" ("SAB 101"), in which the SEC staff clarified certain revenue recognition matters. The Company previously unbundled the incremental value ascribed to the delivery and sale of the ownership privilege, while SAB 101 requires transactions of this nature to remain bundled and the associated revenues to be recognized ratably over the service period. As disclosed in Note 16 to the Consolidated Financial Statements included in the Company's 1999 Form 10-K, the Company changed its accounting in the fourth quarter of 1999 effective to the beginning of the year. The effect of the accounting change was to reduce revenue by $2.0 million and to reduce net income by $1.3 million ($0.03 per diluted share) from amounts previously reported for the three months ended September 30, 1999. For the nine months ended September 30, 1999, the effect of the Page 9 10 accounting change on amounts previously reported was to reduce revenue by $5.3 million and to reduce net income by $3.6 million ($0.09 per diluted share). The accompanying consolidated condensed financial statements as of and for the three and nine months ended September 30, 1999 have been restated to reflect the change. (9) Earnings Per Share Basic earnings (loss) per share of common stock is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated in the same manner as basic earnings (loss) per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding assuming the exercise of all employee stock options and warrants that would have had a dilutive effect on earnings (loss) per share. The Company incurred losses from continuing operations for the three months and nine months ended September 30, 2000. As a result, the denominator was not adjusted for dilutive securities in 2000, as the effect would be antidilutive. The following table reconciles the numerators and denominators used in the calculation of basic and diluted earnings (loss) per share for each of the periods presented (in thousands, except per share data):
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------ ------------------------ 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Numerators for basic and diluted earnings per share: Income (loss) from continuing operations .......... $ (2,476) $ 197 $ (9,687) $ 1,512 ========== ========== ========== ========== Denominator: Denominator for basic earnings per share- Weighted-average common shares outstanding ........ 46,654 40,541 44,953 37,960 Effect of dilutive securities: Employee stock options ............................ -- 390 -- 282 Warrants .......................................... -- 1,143 -- 1,094 ---------- ---------- ---------- ---------- Dilutive potential common shares ...................... -- 1,533 -- 1,376 ---------- ---------- ---------- ---------- Denominator for diluted earnings per share- Adjusted weighted-average shares and assumed conversion .................... 46,654 42,074 44,953 39,336 ========== ========== ========== ========== Basic and diluted earnings (loss) per share from continuing operations ............................. $ (0.05) $ 0.00 $ (0.22) $ 0.04 ========== ========== ========== ==========
(10) Income Tax Provision For the three and nine months ended September 30, 2000, the Company had a loss from continuing operations before income taxes of $2.6 million and $11.8 million, respectively, and an income tax benefit of $160,000 and $2.2 million, respectively. The resulting effective tax rates for the three and nine-month periods were 6% and 18%, respectively. For the three and nine months ended September 30, 1999, the Company had income from continuing operations before income taxes of $638,000 and $4.4 million, respectively, and an income tax provision of $441,000 and $2.9 million, respectively. The effective tax rates for the three and nine months were 69% and 65%, respectively. The effective tax rates are due to non-deductible items such as goodwill amortization as compared to the relative amount of pretax earnings or loss. (11) Investment Securities Available-for-Sale Pursuant to an agreement in August 1999 with two major shareholders of H.T.E., Inc. ("HTE"), the Company exchanged its common stock in a series of transactions, which had a fair value of $15.8 million for 5.6 million shares of HTE common stock. This investment is classified as a non-current asset since it was made for a continuing business purpose. Although the Company owns approximately 32% of HTE's outstanding common stock, HTE management has taken the position that, under Florida law, all of the shares acquired by the Company constitute "control shares" and therefore do not have voting rights until such time as a majority of the shareholders of HTE, other than the Company, restore voting rights to those shares. Management of the Company believes that only the shares acquired in excess of 20% of the outstanding shares of HTE constitute "control shares" and therefore believes it currently has the right to vote all HTE shares it owns up to at least 20% of the outstanding shares of HTE. Page 10 11 The Company accounts for its investment in HTE pursuant to the provisions of Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities". These securities are classified as available-for-sale and are recorded at fair value as determined by quoted market prices. Unrealized holding gains and losses, net of the related tax effect, on securities available-for-sale are excluded from earnings and are reported as a separate component of shareholders' equity until realized. At September 30, 2000, the cost, fair value and gross unrealized holding loss amounted to $15.8 million, $7.4 million and $8.4 million respectively, based on a quoted market price of $1.31 per share. At November 7, 2000, the fair value of the investment securities available-for-sale was $7.6 million based on a quoted market price of $1.34 per share. A decline in the market value of any available-for-sale security below cost that is deemed to be other than temporary results in a reduction in the carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. At this time, management of the Company does not believe the decline in the market value is other than temporary. If the uncertainty regarding the voting shares is resolved in the Company's favor, the Company will retroactively adopt the equity method of accounting for this investment. Therefore, the Company's results of operations and retained earnings for periods beginning with the first 1999 acquisition will be retroactively restated to reflect the Company's investment in HTE for all periods in which it held an investment in the voting stock of HTE. Had the Company's investment in HTE been accounted for under the equity method, the Company's investment at September 30, 2000 would have been $12.2 million and the equity in loss of HTE for the three and nine months ended September 30, 2000 would have been $392,000 and $2.2 million, respectively. Also, during the three months ended September 30, 1999, the Company previously used the equity method and recorded an equity in loss of HTE of $378,000 ($0.01 per diluted share). This charge has been retroactively restated and eliminated in the accompanying condensed consolidated financial statements for the three and nine months ended September 30, 1999 to reflect the aforementioned factors. (12) Long-term Obligations The Company has a credit facility with a syndicated group of banks which had an original maturity date of October 1, 2002 and an original credit line of $80 million. The credit facility contains covenants that limit, among other items, the level of the Company's funded debt and require certain earnings before interest, taxes, depreciation and amortization and debt ratio levels. At September 30, 2000, the Company was fully in compliance with the covenants under the amended credit facility. As of September 30, 2000, the available credit under the Company's credit facility was $64.0 million, of which $60.3 million was outstanding. In connection with an amendment to the credit facility dated August 14, 2000, the Company paid additional bank fees of $300,000 in August 2000, and will pay $300,000 on January 1, 2001 and $400,000 on July 1, 2001. The amended credit facility provides for interest at the lead bank's prime rate plus a margin of 2% as of August 1, 2000, increasing to 3% as of January 1, 2001, 3 1/2% as of April 1, 2001 and 4% as of July 1, 2001. As a result of the August amendment to the credit facility, the repayment of borrowings were accelerated. Accordingly, a $1.2 million charge was recorded in the third quarter of 2000 pursuant to Emerging Issues Task Force ("EITF") 98-14 "Accounting for Changes in Line-of-Credit or Revolving-Debt Arrangements" to accelerate the amortization of previously capitalized loan costs. Subsequent to September 30, 2000, the terms of the credit facility were further amended to revise the timing of certain scheduled reductions to the available credit line. The available credit will be reduced to $62.5 million on December 31, 2000 and to $53.5 million on January 15, 2001. The available credit will be reduced by $1.5 million on the last day of each month thereafter, until the entire credit facility matures on October 2, 2001. Accordingly, the Company classified $18.3 million of the outstanding debt as a current liability in the accompanying condensed consolidated balance sheet at September 30, 2000. In consideration of the Company's current projected earnings and cash flow, management believes the Company will meet or exceed the requirements under the bank covenants for the one-year period as of and subsequent to September 30, 2000. Management plans to reduce the outstanding balance of the debt through a combination of cash generated from operations and from sales of non-core assets. On September 29, 2000, the Company completed the sale of certain non-core assets, including the sale and leaseback of a building and related building improvements. Management of the Company has identified for sale certain other non-core operating assets that are not strategic to its future operations and has had a number of conversations with potentially interested buyers. In addition, the Company is exploring opportunities to raise additional capital through the sale of senior subordinated notes with warrants. Although management believes it will be successful in repaying the amounts due under the revised credit facility as they become due, there can be no assurance that the Company will be successful in its efforts to consummate any of the aforementioned strategic alternatives. Page 11 12 (13) Comprehensive Income (Loss) Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income" establishes standards for reporting and displaying comprehensive income and its components in an annual financial statement that is displayed with the same prominence as other annual financial statements. The statement also requires the accumulated balance of other comprehensive income to be displayed separately from retained earnings and additional paid-in capital in the equity section of the condensed consolidated balance sheet. For the three and nine months ended September 30, 2000, the Company had comprehensive loss of $2.6 million and $36.6 million, respectively, including a change in the unrealized loss of $26.3 million for the nine months ended September 30, 2000, associated with unrealized loss on securities classified as available-for-sale. For the three months ended September 30, 2000, there was no change in market value from June 30, 2000 to September 30, 2000, therefore there was no change in the unrealized loss on securities classified as available-for-sale. Total comprehensive loss for the three months ended September 30, 1999 was $4.8 million, including an unrealized loss of $4.4 million associated with securities classified as available-for-sale. Total comprehensive loss for the nine months ended September 30, 1999 was $4.9 million, including an unrealized loss of $4.4 million associated with securities classified as available-for-sale. (14) Segment and Related Information The Company has two reportable segments: software systems and services and information and property records services. The software systems and services segment provides municipal and county governments with software systems and related services to meet their information technology and automation needs, including real estate appraisal services. The largest component of the information and property records services business is the computerized indexing and imaging of real property records maintained by county clerks and recorders, in addition to the provision of other information management outsourcing services, records management, micrographic reproduction and title plant update services and sales of copies of title plants to title companies. The Company evaluates performance based on several factors, of which the primary financial measure is business segment operating profit (loss). The Company defines segment operating profit (loss) as income before noncash amortization of intangible assets associated with their acquisition by Tyler, interest expense, non-recurring items and income taxes. The accounting policies of the reportable segments are the same as those described in Note 1 of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. There were no intersegment transactions, thus no eliminations are necessary. The Company's reportable segments are strategic business units that offer different products and services. They are separately managed, as each business requires different marketing and distribution strategies. The Company derives a majority of its revenue from domestic customers. Prior to the sale of assets as discussed in Note 2, the information and property records services segment conducted minor operations in Germany, which are not significant and are not separately disclosed. Summarized financial information concerning the Company's reportable segments is set forth below based on the nature of the products and services offered (in thousands):
INFORMATION SOFTWARE & PROPERTY SYSTEMS RECORDS CONTINUING 2000 & SERVICES SERVICES OTHER OPERATIONS - --------------------------------------------- ------------ ------------ ------------ ------------ Revenues for the periods ended September 30: Three months ...................................... $ 23,253 $ 11,123 $ -- $ 34,376 Nine months ....................................... $ 65,863 $ 33,145 $ -- $ 99,008 Segment operating profit (loss) for the periods ended September 30: Three months ...................................... $ 3,342 $ 1,494 $ (1,972) $ 2,864 Nine months ....................................... $ 5,503 $ 4,886 $ (6,232) $ 4,157
Page 12 13
INFORMATION SOFTWARE & PROPERTY SYSTEMS RECORDS CONTINUING 1999 & SERVICES SERVICES OTHER OPERATIONS - -------------------------------------------- ------------ ------------ ------------ ------------ Revenues for the periods ended September 30: Three months ...................................... $ 18,584 $ 8,954 $ -- $ 27,538 Nine months ....................................... $ 46,617 $ 27,003 $ -- $ 73,620 Segment operating profit (loss) for the periods ended September 30: Three months ...................................... $ 3,648 $ 2,067 $ (1,620) $ 4,095 Nine months ....................................... $ 10,253 $ 7,116 $ (5,129) $ 12,240
FOR THE PERIODS ENDED SEPTEMBER 30 THREE MONTHS NINE MONTHS ---------------------------- ---------------------------- RECONCILIATION OF REPORTABLE SEGMENT OPERATING PROFIT TO THE COMPANY'S CONSOLIDATED TOTALS 2000 1999 2000 1999 - ---------------------------------------------- ------------ ------------ ------------ ------------ Total segment operating profit for reportable segments ......................... $ 2,864 $ 4,095 $ 4,157 $ 12,240 Other income ..................................... 251 -- 251 -- Interest expense ................................. (3,546) (1,038) (7,442) (2,794) Litigation defense costs ......................... -- -- (1,264) -- Goodwill and intangibles amortization ............ (2,205) (2,419) (7,550) (5,067) ------------ ------------ ------------ ------------ (Loss) income from continuing operations before income tax (benefit) provision .............. $ (2,636) $ 638 $ (11,848) $ 4,379 ============ ============ ============ ============
(15) Equity Private Placement In May 2000, the Company sold 3.3 million shares of common stock and 333,380 warrants pursuant to a private placement agreement with Sanders Morris Harris Inc. for approximately $10.0 million in gross cash proceeds, before deducting commissions and offering expenses of approximately $730,000. Each warrant is convertible into one share of common stock at an exercise price of $3.60 per share. The warrants expire in May 2005. The common stock sold in this transaction is not registered and may only be sold pursuant to Rule 144 of the Securities Act of 1933, generally after being held for at least one year. The Company used the proceeds from the offering for the development of its previously announced e-government initiatives and for the development of its national data repository and Internet portal for public information, NationsData.com. (16) New Accounting Pronouncements Not Yet Adopted In June 1999, SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of Effective Date of FASB Statement No. 133" was issued by the Financial Accounting Standards Board ("FASB"). The Statement defers for one year the effective date of FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities". The rule now will apply to all fiscal years beginning after June 15, 2000. FASB Statement No. 133 will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The adoption of SFAS No. 133 is not expected to have a material impact on the Company's consolidated financial statements and related disclosures. Page 13 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than historical or current facts, including, without limitation, statements about the business, financial condition, business strategy, plans and objectives of management, and prospects of the Company are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from these expectations. Such risks and uncertainties include, without limitation, the ability of the Company to successfully integrate the operations of acquired companies, technological risks associated with the development of new products and the enhancement of existing products, changes in the budgets and regulating environments of the Company's government customers, the ability to attract and retain qualified personnel, changes in product demand, the availability of products, changes in competition, economic conditions, changes in tax risks, availability of capital and the Company's ability to reduce its debt through a combination of cash generated from operations and sales of non-core assets, and other risks indicated in the Company's filings with the Securities and Exchange Commission. These risks and uncertainties are beyond the ability of the Company to control, and in many cases, the Company cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this Quarterly Report, the words "believes," "plans," "estimates," "expects," "anticipates," "intends," "continue," "may," "will," "should", "projects", "forecast", "might", "could" or the negative of such terms and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements. RECENT DEVELOPMENTS On September 29, 2000, the Company sold for cash certain non-core assets for an aggregate sale price of $14.4 million. The assets sold consisted of certain net assets of two operating subsidiaries, the Company's interest in a certain intangible work product, and the sale and leaseback of a building and related building improvements. The building that was sold is the headquarters for the Company's corporate employees and those of an operating company, and it has been leased back by the Company for a period of ten years at an annual rental amount of $720,000. GENERAL The Company is a provider of technology, software, data warehousing, web hosting services, electronic document management systems, information management outsourcing services, title plant and property record database information, and real estate appraisal services for local governments. In mid 1997, the Company embarked on a multi-phase strategy and growth plan focused on the specialized information management needs of local government. Since that time, the Company has experienced growth both internally and as a result of a number of acquisitions. By the close of 1999, the Company considered itself an important provider of information management solutions in the local government marketplace, providing a broad array of products for city and county government operations from law enforcement, to courts, financial systems, appraisal and taxation, records management, and utility billing. From 1998 through January 2000, the Company has made a significant number of acquisitions. All of the Company's acquisitions have been accounted for using the purchase method of accounting for business combinations, and the results of operations of the acquired entities are included in the Company's historical consolidated financial statements from their respective dates of acquisition. Because of the significance of these acquisitions and the disposition of certain non-core assets referred to in "Recent Developments", the Company has also provided pro forma amounts in the following analysis of results of operations as if all of the Company's acquisitions and the disposition of certain non-core assets had occurred as of the beginning of 1999. Page 14 15 ANALYSIS OF RESULTS OF OPERATIONS REVENUES For the three and nine months ended September 30, 2000, the Company had revenues from continuing operations of $34.4 million and $99.0 million, respectively, compared to $27.5 million and $73.6 million for the three and nine months ended September 30, 1999, respectively. On a pro forma basis, total revenues for the three and nine months ended September 30, 1999 were $33.4 million, and $101.4 million, respectively, compared to $32.1 million and $92.2 million for the three and nine months ended September 30, 2000. Management believes the decline in revenues on a pro forma basis was primarily because of Year 2000 ("Y2K") related factors. Local governments appear to have reduced spending for software applications and systems for a variety of reasons, including anticipation of Y2K problems and delaying new systems projects while they recover from their intensive efforts to become Y2K compliant in the prior year. Many customers and potential customers appeared to have instituted Y2K "lockdowns" and did not install new systems in the first half of 2000. Additionally, the 1999 pro forma revenues benefited somewhat from accelerated Y2K compliance related sales. Sales volume for the three months ended September 30, 2000 appears to be rebounding somewhat although not back to 1999's record levels. Pro forma software license revenue for the three months ended September 30, 2000 declined $1.3 million from $6.7 million in the prior year period. For the nine months ended September 30, 2000, pro forma revenues from software licenses decreased $6.1 million from $19.4 million in the comparable prior year. Pro forma software license revenue comparisons were negatively impacted by the Y2K factors described above. For the three months ended September 30, 2000, professional service revenue on a pro forma basis was $16.1 million compared to $16.4 million in the prior year period. Pro forma professional services revenue for the nine months ended September 30, 2000 declined $1.9 million from $51.3 compared to the prior year period. Professional services are often sold in tandem with software license products and are therefore negatively impacted by declining software license sales volume. Professional service revenue for the nine months ended September 30, 2000 includes approximately $5.9 million relating to the following three large contracts: (1) Cook County, Recorder of Deeds in Chicago ("Cook County"), (2) the Department of the Illinois Secretary of State's office ("State of Illinois") and (3) Nassau County, New York Board of Assessors ("Nassau County"). Professional service revenue included in the three months ended September 30, 2000 relating to these three contracts was approximately $2.8 million. The Cook County contract, which was valued at approximately $4.5 million, was substantially complete as of June 2000. The State of Illinois contract to install and manage a new digital imaging system and perform related services, including technology updates, back records conversion, digital microfilm productions and process workflow implementation, for all divisions of the Business Services Department, is valued at approximately $5.3 million. Installation of the State of Illinois contract began in May 2000 and the majority of this revenue is expected to be earned by early 2001. The Nassau County contract to reassess all residential and commercial properties in Nassau County and provide assessment administration software and training to help maintain equity and manage the property tax process is valued at $34 million. Implementation of the Nassau County contract began in September 2000 and is expected to be completed late 2002. For the three months ended September 30, 2000, pro forma maintenance revenue increased 18%, or $1.3 million, compared to $7.1 million for the same period in 1999. Year-to-date pro forma maintenance revenue has increased 17%, or $3.5 million, compared to $20.9 million for the nine months ended September 30, 1999. Maintenance revenue increases are due to a larger customer base of installed software and services products. Maintenance services are provided for the Company's software products, including real estate appraisal products, and third party software and hardware. The renewal rates for real estate appraisal system maintenance agreements is not as high as other software and hardware maintenance agreements and will vary somewhat from period to period. Excluding real estate maintenance agreements, pro forma maintenance revenue increased approximately 20% and 28% for the three and nine months ended September 30, 2000, respectively, compared to the comparable prior year periods. As a percent of revenue, total maintenance revenue on a pro forma basis was approximately 26% for the three and nine months ended September 30, 2000, compared to approximately 21% for both the three and nine months ended September 30, 1999. For the three and nine months ended September 30, 2000, pro forma hardware and other revenues declined $1.0 million and $4.7 million, respectively, from $3.2 million and $9.8 million for the three and nine months ended September 30, 1999, respectively. Pro forma hardware revenue is down from prior year periods mainly due to the Y2K related factors described above and Company efforts to focus sales on higher margin products and services. Page 15 16 For the remainder of 2000, the Company anticipates slower revenue growth compared to 1999 as a result of the Y2K-related slowdown in new orders and as the Company pursues long-term development of its e-commerce growth strategy. In 2000, the Company plans to emphasize its long-term growth opportunities in e-commerce by developing Internet accessible solutions for its current installed customer base, as well as the broader local government market. COST OF REVENUES For the three and nine months ended September 30, 2000, cost of revenues from continuing operations were $20.2 million and $59.9 million, respectively, compared to $14.4 million and $38.4 million for the three and nine months ended September 30, 1999, respectively. On a pro forma basis, total cost of revenues for the three months ended September 30, 1999 was $18.9 million compared to $19.1 million for the three months ended September 30, 2000. For the nine months ended September 30, 1999, pro forma cost of revenues was $58.8 million compared to $56.5 million for the nine months ended September 30, 2000. The cost of revenues decline is primarily due to lower revenues. Cost of revenues in 2000 includes subcontracting expenses for the Cook County contract, higher head count as a result of prior year sales volume increases and salary adjustments. Personnel cost, which in the short term is somewhat fixed in nature, is the largest component of cost of revenues, and contributed to a lower gross margin for the three and nine months ended September 30, 2000. A product mix that included less software license revenue in 2000 compared to 1999 was another negative factor impacting the gross margin. The gross margin decline was offset slightly by more capitalized labor costs in 2000 for internally developed software projects. On a pro forma basis, the overall gross margin was 41% and 39% for the three and nine months ended September 30, 2000, compared to 43% and 42% for the three and nine months ended September 30, 1999, respectively. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses for the three and nine months ended September 30, 2000, were $11.3 million and $34.9 million, respectively, compared to $9.1 million and $23.0 million in the comparable prior year periods. On a pro forma basis, selling, general and administrative expenses as a percent of revenues was 33% and 30% for the three months ended September 30, 2000 and 1999, respectively. For the nine months ended September 30, 2000, pro forma selling, general and administrative expense as a percent of revenue was 36% compared to 30% for the nine months ended September 30, 1999. Lower sales volume combined with increased travel expense, costs associated with consolidating certain finance and administrative functions and higher personnel costs negatively impacted selling, general and administrative expense comparisons. For the three and nine months ended September 30, 2000, selling, general and administrative expenses included approximately $1.7 million and $4.4 million, respectively, of additional expenses associated with the Company's national data repository ("Database") activities and its preliminary sales efforts. LITIGATION DEFENSE COSTS In December 1999, a competitor of one of the Company's operating subsidiaries filed a lawsuit against the subsidiary, an employee of the subsidiary, and the Company alleging that the employee, who had previously been an employee of the competitor, had taken confidential and proprietary trade secrets upon leaving the employment of the competitor. The lawsuit proceeded on an accelerated court schedule and was tried before a judge in March 2000. After a trial on the merits, the trial court issued a favorable ruling on behalf of the Company and its subsidiary and awarded no monetary damages to the competitor. Incremental direct legal costs relating to the defense of these matters were approximately $1.3 million for the nine months ended September 30, 2000, respectively, which is included in litigation defense costs in the accompanying consolidated condensed financial statements. In addition, the Company devoted significant internal resources to the litigation defense, the costs of which are included in selling, general and administrative expenses. AMORTIZATION OF INTANGIBLES The Company has accounted for all acquisitions using the purchase method of accounting for business combinations. Unallocated purchase price over the fair value of net identifiable assets of the acquired companies ("goodwill") and intangibles associated with acquisition is amortized using the straight-line method of amortization over their respective useful lives beginning when a company is first acquired. Amortization expense increased for the three and nine months ended September 30, 2000 compared to the same periods of 1999 due to inclusion of goodwill and other intangible amortization for companies acquired after September 30, 1999. Amortization expense periodically includes adjustments resulting from finalization of preliminary purchase price allocations relating to such acquisitions. Page 16 17 INTEREST EXPENSE Interest expense increased substantially for the three and nine months ended September 30, 2000 compared to the same periods in 1999. The senior credit facility was amended in August 2000 and included accelerating repayment of borrowings under the facility. Accordingly, a $1.2 million charge was recorded in the third quarter of 2000 pursuant to EITF 98-14 "Accounting for Changes in Line-of-Credit or Revolving-Debt Arrangements" to accelerate the amortization of previously capitalized loan costs. Higher debt levels to finance acquisitions and their related transaction costs and capital expenditures including construction of the Database have also resulted in higher interest expense. In connection with construction of the Database and certain internally developed software projects, the Company capitalized $190,000 and $518,000 of interest costs in the three and nine months ended September 30, 2000. In addition to higher debt levels, the average effective interest rate for the three and nine months ended September 30, 2000, was 10.8% and 9.8%, respectively, compared to 7.6% and 7.3% for the same periods in 1999. INCOME TAX PROVISION In the three months ended September 30, 2000, the Company had a loss from continuing operations before income taxes of $2.6 million and an income tax benefit of $160,000 resulting in an effective tax rate of 6%. For the nine months ending September 30, 2000, the Company had a loss from continuing operations before income taxes of $11.8 million and an income tax benefit of $2.2 million, resulting in an effective tax rate of 18%. These effective tax rates are due to non-deductible items such as goodwill amortization as compared to the relative amount of pretax earnings or loss. DISCONTINUED OPERATIONS The Company recorded a net loss from disposal of discontinued operations of $82,000 and $569,000 for the three and nine months ended September 30, 2000, respectively compared to net losses of $602,000 and $1.9 million for the three and nine months ended September 30, 1999. Discontinued operations in 2000 consist of Swan Transportation ("Swan"), whose operations were discontinued in 1995, and TPI of Texas, Inc. ("TPI"), which sold substantially all of its assets and liabilities in 1995. The 1999 loss from discontinued operations includes Forest City, which was disposed of in March 1999. In the three months ended September 30, 2000, TPI and Swan together recorded a charge of $82,000 for trial and related costs, net of taxes of $44,000. For the nine months ended September 30, 2000, these charges totaled $569,000, net of taxes of $307,000. The Company estimated the loss on the disposal of Forest City to be $8.9 million, which was reported in its 1998 Form 10-K. The estimated loss included anticipated operating losses from the measurement date of December 31, 1998 to the date of disposal and associated transaction costs. The Company recorded an additional loss during the three months ended March 31, 1999 of $565,000 (net of taxes of $364,000) to reflect higher than expected transaction costs and operating losses. NET INCOME (LOSS) AND OTHER MEASURES Net loss was $2.6 million and $10.3 million for the three and nine months ended September 30, 2000, respectively, compared to net loss of $405,000 and $435,000 for the three and nine months ended September 30, 1999. Net loss from continuing operations was $2.5 million and $9.7 million for the three and nine months ended September 30, 2000 compared to net income of $197,000 and $1.5 million for the three and nine months ended September 30, 1999, respectively. For the three and nine months ended September 30, 2000, diluted loss per share from continuing operations was $0.05 and $0.22, respectively, compared to diluted earnings per share from continuing operations of $0.00 and $0.04 for the three and nine months ended September 30, 1999, respectively. Earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations for the three and nine months ended September 30, 2000, respectively, was $4.7 million and $9.4 million compared to $5.0 million and $14.8 million for the comparable prior year periods. EBITDA consists of income from continuing operations before interest, litigation defense costs, income taxes, depreciation and amortization. Although EBITDA is not calculated in accordance with generally accepted accounting principles, the Company believes that EBITDA is widely used as a measure of operating performance. Nevertheless, the measure should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. EBITDA is not necessarily indicative of amounts that may be available for reinvestment in the Company's business or other discretionary uses. In addition, since all companies do not calculate EBITDA in the same Page 17 18 manner, this measure may not be comparable to similarly titled measures reported by other companies. Cash flows used by operating activities for the nine months ended September 30, 2000 were $4.3 million, compared to cash flows provided by operating activities of $1.3 million for the nine months ended September 30, 1999. FINANCIAL CONDITION AND LIQUIDITY The Company has a credit facility with a syndicated group of banks which had an original maturity date of October 1, 2002 and an original credit line of $80 million. The credit facility contains covenants that limit, among other items, the level of the Company's funded debt and require certain earnings before interest, taxes, depreciation and amortization and debt ratio levels. At September 30, 2000, the Company was fully in compliance with the covenants under the amended credit facility. As of September 30, 2000, the available credit under the Company's credit facility was $64.0 million, of which $60.3 million was outstanding. In connection with an amendment to the credit facility dated August 14, 2000, the Company paid additional bank fees of $300,000 in August 2000, and will pay $300,000 on January 1, 2001 and $400,000 on July 1, 2001. The amended credit facility provides for interest at the lead bank's prime rate plus a margin of 2% as of August 1, 2000, increasing to 3% as of January 1, 2001, 3 1/2% as of April 1, 2001 and 4% as of July 1, 2001. Subsequent to September 30, 2000, the terms of the credit facility were further amended to revise the timing of certain scheduled reductions to the available credit line. The available credit will be reduced to $62.5 million on December 31, 2000 and to $53.5 million on January 15, 2001. The available credit will be reduced by $1.5 million on the last day of each month thereafter, until the entire credit facility matures on October 2, 2001. Accordingly, the Company classified $18.3 million of the outstanding debt as a current liability in the accompanying condensed consolidated balance sheet at September 30, 2000. For the three and nine months ended September 30, 2000, the effective average interest rate for the borrowings was approximately 10.8% and 9.8%, respectively. The credit facility is secured by substantially all of the Company's real and personal property and by a pledge of the common stock of present and future significant operating subsidiaries. The credit facility is also guaranteed by such subsidiaries. In consideration of the Company's current projected earnings and cash flow, management believes the Company will meet or exceed the restrictive covenants for the one-year period as of and subsequent to September 30, 2000. Management plans to reduce the outstanding balance of the debt through a combination of cash generated from operations and sales of non-core assets. Management of the Company has identified certain non-core operating assets, which are not strategic to its future operations for sale and have had a number of conversations with potentially interested buyers. In addition, the Company is exploring opportunities to raise additional capital through the sale of subordinated senior notes with warrants. Although management believes it will be successful in repaying the amounts payable under the revised credit facility when those amounts come due, there can be no assurance that the Company will be successful in its attempt to consummate any of the aforementioned strategic alternatives. On September 29, 2000, the Company sold for cash certain non-core assets for an aggregate sale price of $14.4 million. The assets sold consisted of certain net assets of two operating subsidiaries, the Company's interest in a certain intangible work product, and the sale and leaseback of a building and related building improvements. The building that was sold is the headquarters for the Company's corporate employees and those of an operating company, and it has been leased back by the Company for a period of ten years at an annual rental amount of $720,000. The net proceeds of the sale were used to repay an existing obligation of one of the companies sold and to reduce the Company's borrowings under its senior credit facility. For the nine months ended September 30, 2000, the Company made capital expenditures of $10.3 million. These expenditures included $7.6 million relating to the construction of the Database and other software development. The remaining expenditures were primarily for computer equipment and building expansions required for internal growth. In connection with the construction of the Database and other software development, the Company capitalized interest costs of $190,000 and $518,000 for the three and nine months ended September 30, 2000. In January 2000, the Company acquired all of the outstanding common stock of Capitol Commerce Reporter, Inc. ("CCR") for approximately $3.0 million cash, $1.2 million in assumed debt and $2.8 million in five-year, 10% subordinated notes in a business combination accounted for as a purchase. CCR is based in Austin, Texas and provides public records research, documents retrieval, filing and information services. Page 18 19 These expenditures were primarily funded by borrowings under the Company's revolving credit facility. In May 2000, the Company sold 3.3 million shares of common stock and 333,380 warrants pursuant to a private placement agreement with Sanders Morris Harris Inc. for approximately $10.0 million in gross cash proceeds before deducting commissions and offering expenses of approximately $730,000. Each warrant is convertible into one share of common stock at an exercise price of $3.60 per share. The warrants expire in May 2005. The common stock sold in this transaction is not registered and may only be sold pursuant to Rule 144 of the Securities Act of 1933, generally after being held for at least one year. Tyler used the proceeds from the offering for new product development, including the development of its previously announced e-government initiatives and for the development of its national data repository and Internet portal for public information, NationsData.com. On November 4, 1999 the Company acquired selected assets and assumed selected liabilities of Cole-Layer-Trumble Company, a division of a privately held company. A portion of the consideration consisted of restricted shares of Tyler common stock and included a price protection on the sale of the Company's common stock, which expires no later than November 4, 2001. The price protection is equal to the difference between the actual sale proceeds of the Tyler common stock and $6.25 on a per share basis, but is limited to $2.8 million. The subsequent payment, if any, of the contingent consideration will not change the recorded cost of the acquisition. Page 19 20 Part II. OTHER INFORMATION Item 1. Legal Proceedings For a discussion of legal proceedings see Part I, Item 1. "Financial Statements - Notes to Condensed Consolidated Financial Statements - Commitments and Contingencies" on page 7 of this document. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit NUMBER EXHIBIT 4.7 Asset Purchase Agreement dated September 29, 2000, by and among Tyler Technologies, Inc., Kofile, Inc., Spectrum Data, Inc., eiSolutions, Inc., Kofile Acquisition Corporation and Spectrum Data Acquisition Corporation 4.8 Real Estate Purchase and Sale Agreement dated September 29, 2000, by and among Business Resources Corporation, Spectrum Data, Inc. and William D. and Marilyn Oates 4.9 Lease Agreement between William D. Oates and Marilyn Oates as Landlord and Government Record Services, Inc. as Tenant 27 Financial Data Schedule (b) There were no reports filed on Form 8-K during the third quarter of 2000. Item 3 of Part I and Items 2, 3, 4, and 5 of Part II were not applicable and have been omitted. Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TYLER TECHNOLOGIES, INC. By: /s/ Theodore L. Bathurst -------------------------------------- Theodore L. Bathurst Vice President and Chief Financial Officer (principal financial officer and an authorized signatory) By: /s/ Terri L. Alford -------------------------------------- Terri L. Alford Controller (principal accounting officer and an authorized signatory) Date: November 14, 2000 Page 20 21 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------ ----------- 4.7 Asset Purchase Agreement dated September 29, 2000, by and among Tyler Technologies, Inc., Kofile, Inc., Spectrum Data, Inc., eiSolutions, Inc., Kofile Acquisition Corporation and Spectrum Data Acquisition Corporation 4.8 Real Estate Purchase and Sale Agreement dated September 29, 2000, by and among Business Resources Corporation, Spectrum Data, Inc. and William D. and Marilyn Oates 4.9 Lease Agreement between William D. Oates and Marilyn Oates as Landlord and Government Record Services, Inc. as Tenant 27 Financial Data Schedule
EX-4.7 2 d81555ex4-7.txt ASSET PURCHASE AGREEMENT DATED 9/29/00 1 EXHIBIT 4.7 ASSET PURCHASE AGREEMENT BY AND AMONG TYLER TECHNOLOGIES, INC., KOFILE, INC., SPECTRUM DATA, INC., ei SOLUTIONS, INC., KOFILE ACQUISITION CORPORATION AND SPECTRUM DATA ACQUISITION CORPORATION DATED AS OF SEPTEMBER 29, 2000 Asset Purchase Agreement 2 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of September 29, 2000, by and among Tyler Technologies, Inc., a Delaware corporation ("Tyler"),Kofile, Inc., a Texas corporation ("Old Kofile"), Spectrum Data, Inc., a Texas corporation ("Old Spectrum" and, together with Tyler and Old Kofile, the "Sellers"), ei Solutions, Inc., a Delaware corporation ("ei Solutions"), Kofile Acquisition Corporation, a Delaware corporation ("New Kofile"), Spectrum Data Acquisition Corporation, a Texas corporation ("New Spectrum" and, together with ei Solutions and New Kofile, the "Purchasers"). RECITALS A. Old Kofile and Old Spectrum are wholly owned subsidiaries of BRC and indirect wholly owned subsidiaries of Tyler. B. Old Kofile is in the business of providing document management solutions and software, including, without limitation, document storage and retrieval and OCR and ICR products, and related sales and support (the "Kofile Business"). C. Old Spectrum is in the business of providing system analysis and design, custom programming, network design, implementation and maintenance, document imaging and management integration (the "Spectrum Business"). D. Old Kofile desires to sell to New Kofile the Kofile Business as a going concern and in connection therewith substantially all of the assets of Old Kofile, and New Kofile desires to purchase such business and assets and assume substantially all the liabilities of Old Kofile relating thereto, upon the terms and conditions set forth in this Agreement (the "Kofile Purchase"). E. Old Spectrum desires to sell to New Spectrum the Spectrum Business as a going concern and in connection therewith substantially all of the assets of Old Spectrum, and New Spectrum desires to purchase such business and assets and assume substantially all the liabilities of Old Spectrum relating thereto, upon the terms and conditions set forth in this Agreement (the "Spectrum Purchase"). F. BRC and Old Spectrum are selling certain real property to Real Property Purchaser upon the terms and conditions set forth in the Real Property Purchase Agreement (the "Real Property Purchases"). G. Tyler desires to sell certain intangible property to ei Solutions, and ei Solutions desires to purchase such intangible property from Tyler, upon the terms and conditions set forth in this Agreement (the "Intangibles Purchase"). NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants contained herein, the parties hereto, intending to be legally bound, agree as follows: Asset Purchase Agreement 1 3 ARTICLE I DEFINITIONS 1.1. DEFINITIONS. Capitalized terms used in this Agreement shall have the following meanings: "AAA" shall have the meaning set forth in Section 12.9(b). "Affiliate" of, or "Affiliated" with, a specified person or entity means a person or entity that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the specified person or entity. "Agreed Kofile Net Asset Value" has the meaning set forth in Section 5.6(a). "Agreed Net Asset Value" has the meaning set forth in Section 5.6(a). "Agreed Spectrum Net Asset Value" has the meaning set forth in Section 5.6(a). "Agreement" has the meaning set forth in the first paragraph of this Agreement. "Asset Purchases" means the Kofile Purchase, the Spectrum Purchase, the Real Property Purchases and the Intangibles Purchase. "Assets" means the Kofile Assets, the Spectrum Assets, the Real Property and the Intangibles. "Assumed Contracts" means the Assumed Kofile Contracts and the Assumed Spectrum Contracts. "Assumed Kofile Contracts" has the meaning set forth in Section 2.3. "Assumed Kofile Liabilities" means the liabilities and obligations of Old Kofile to be assumed by New Kofile at the Closing in accordance with Section 2.4. "Assumed Liabilities" means the Assumed Kofile Liabilities and the Assumed Spectrum Liabilities. "Assumed Spectrum Contracts" has the meaning set forth in Section 3.3. "Assumed Spectrum Liabilities" means the liabilities and obligations of Old Spectrum to be assumed by New Spectrum at the Closing in accordance with Section 3.4. "BRC" means Business Resources Corporation, a Texas corporation. "Businesses" means the Kofile Business and the Spectrum Business. "Closing" has the meaning set forth in Section 5.3. "Closing Cash Balance" has the meaning set forth in Section 5.5(a). Asset Purchase Agreement 2 4 "Closing Date" has the meaning set forth in Section 5.3. "Closing Kofile Net Asset Value" has the meaning set forth in Section 5.6(a). "Closing Spectrum Net Asset Value" has the meaning set forth in Section 5.6(a). "Code" means the Internal Revenue Code of 1986, as amended. "Designated Parties" has the meaning set forth in Section 12.9(a). "ei Solutions" has the meaning set forth in the first paragraph of this Agreement. "Encumbrances" means all liens, mortgages, pledges, security interests, conditional sales agreements, charges, claims, options, liabilities, obligations, preemptive rights, rights of first refusal, reservations, restrictions or other defects in title or other encumbrances of any kind. "ESI Acquisition" has the meaning set forth in Section 4.2(a). "Excluded Contracts" means the Excluded Kofile Contracts and the Excluded Spectrum Contracts. "Excluded Kofile Assets" has the meaning set forth in Section 2.2 . "Excluded Kofile Contracts" has the meaning set forth in Section 2.3. "Excluded Kofile Liabilities" has the meaning set forth in Section 2.5. "Excluded Spectrum Assets" has the meaning set forth in Section 3.2 . "Excluded Spectrum Contracts" has the meaning set forth in Section 3.3. "Excluded Spectrum Liabilities" has the meaning set forth in Section 3.5. "Expiration Date" has the meaning set forth in Section 12.5. "GAAP" means the generally accepted accounting principles in the United States as currently applied by the respective party on a basis consistent with preceding years and throughout the periods involved. "Governmental Authority" means any federal, state, local or foreign government, political subdivision or governmental or regulatory authority, agency, board, bureau, commission, instrumentality or court or quasi-governmental authority. "Indemnified Party" has the meaning set forth in Section 9.3. "Indemnifying Party" has the meaning set forth in Section 9.3. "Intangibles" has the meaning set forth in Section 4.2. Asset Purchase Agreement 3 5 "Intangibles Purchase" has the meaning set forth in Recital G. "Kodak" means Eastman Kodak Company, a New Jersey corporation. "Kofile Assets" has the meaning set forth in Section 2.1. "Kofile Bank Accounts" has the meaning set forth in Section 2.1(l). "Kofile Business" has the meaning set forth in the Recital B. "Kofile GmbH" means Kofile Germany GmbH, a limited liability company organized under the laws of the Federal Republic of Germany. "Kofile Net Asset Value Adjustment" has the meaning set forth in Section 5.6(a). "Kofile Purchase" has the meaning set forth in the Recital D. "Law" or "Laws" means any and all federal, state, local or foreign statutes, laws, ordinances, proclamations, codes, regulations, licenses, permits, authorizations, approvals, consents, legal doctrines, published requirements, orders, decrees, judgments, injunctions and rules of any Governmental Authority, including, without limitation, those covering environmental, Tax, energy, safety, health, transportation, bribery, recordkeeping, zoning, discrimination, antitrust and wage and hour matters, in each case as amended and in effect from time to time. "Listed Assets and Liabilities" has the meaning set forth in Section 5.6(a). "Loss" or "Losses" means all liabilities, losses, claims, damages, actions, suits, proceedings, demands, assessments, adjustments, fees, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and costs and expenses of investigation), net of (i) income Tax effects with respect thereto (including, without limitation, income Tax benefits recognized in connection therewith and income Taxes upon any indemnification recovery thereof) and (ii) any insurance proceeds or recoveries in respect of such losses. "Mockingbird Property" means that certain real property and improvements thereon located at 2800 West Mockingbird Lane, Dallas, Texas, as more particularly described in the Real Property Purchase Agreement. "Net Asset Value Adjustment" has the meaning set forth in Section 5.6(a). "Net Cash Adjustment" has the meaning set forth in Section 5.6(b). "New Kofile" has the meaning set forth in the first paragraph of this Agreement. "New Spectrum" has the meaning set forth in the first paragraph of this Agreement. "Oates" means William D. Oates. Asset Purchase Agreement 4 6 "Old Kofile" has the meaning set forth in the first paragraph of this Agreement. "Old Spectrum" has the meaning set forth in the first paragraph of this Agreement. "Permits" means all licenses, franchises, permits, transportation authorities and other governmental authorizations, operating authorizations, titles (including motor vehicle titles and current registrations), fuel permits, and certificates. "Permitted Encumbrances" means (a) any Encumbrances that constitute an Assumed Liability, (b) Encumbrances for property or ad valorem Taxes not yet due and payable or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the Company's accounting records in accordance with GAAP, (c) mechanics', carriers', workers', repairmen's, statutory or common law liens being contested in good faith by appropriate proceedings and (d) rights of the customers of the respective Business with respect to inventory under orders or contracts entered into by the respective Business in the ordinary course of business. "Post-Closing Adjustment" has the meaning set forth in Section 5.6. "Purchase Price" has the meaning set forth in Section 5.1. "Purchasers" has the meaning set forth in the first paragraph of this Agreement. "Real Property" means the Mockingbird Property and the San Antonio Property. "Real Property Purchase Agreement" has the meaning set forth in Section 4.1. "Real Property Purchaser" means, collectively, Oates and his wife, Marilyn Oates. "Real Property Purchases" has the meaning set forth in Recital F. "San Antonio Property" means that certain real property and improvements thereon located at 10537 Gulfdale, San Antonio, Texas 78216, as more particularly described in the Real Property Purchase Agreement. "Sellers" has the meaning set forth in the first paragraph of this Agreement. "Spectrum Assets" has the meaning set forth in Section 3.1. "Spectrum Bank Accounts" has the meaning set forth in Section 3.1(k). "Spectrum Business" has the meaning set forth in Recital C. "Spectrum Net Asset Value Adjustment" has the meaning set forth in Section 5.6(a). "Spectrum Purchase" has the meaning set forth in Recital E. Asset Purchase Agreement 5 7 "Taxes" means all taxes, charges, fees, levies or other assessments including, without limitation, income, gross receipts, excise, property, sales, withholding, social security, unemployment, occupation, use, service, service use, license, payroll, franchise, transfer and recording taxes, fees and charges, imposed by the United States or any state, local or foreign government or subdivision or agency thereof, whether computed on a separate, consolidated, unitary, combined or any other basis; and such term shall include any interest, fines, penalties or additional amounts attributable to or imposed with respect to any such taxes, charges, fees, levies or other assessments. "Transferred Kofile Cash" has the meaning set forth in Section 2.1(a). "Transferred Spectrum Cash" has the meaning set forth in Section 3.1(a). "Tyler" has the meaning set forth in the first paragraph of this Agreement. "Third Person" has the meaning set forth in Section 9.3. 1.2. INTERPRETATION. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in Section 1.1 and elsewhere in this Agreement include the plural as well as the singular; (b) all accounting terms not otherwise defined herein have the meanings ascribed to them in accordance with GAAP; (c) the words "herein," "hereof," and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; and (d) this Agreement is the joint drafting product of Sellers and Purchasers and each provision has been subject to negotiation and agreement and shall not be construed for or against any party as drafter thereof. ARTICLE II THE KOFILE PURCHASE 2.1. ACQUISITION OF THE KOFILE ASSETS. Upon the terms and subject to the conditions of this Agreement, at the Closing, Old Kofile agrees to sell, convey, transfer, assign and deliver to New Kofile, and New Kofile agrees to purchase from Old Kofile, on an "AS IS, WHERE IS" basis, all of its assets, properties, businesses, franchises, goodwill and rights of every kind and character, tangible or intangible, real or personal, whether owned or leased, other than the Excluded Kofile Assets, free and clear of all Encumbrances other than Permitted Encumbrances and any created by New Kofile (collectively, the "Kofile Assets"). Without limiting the generality of the foregoing, the Kofile Assets shall consist of all such assets of Old Kofile as of the Closing, including, without limitation, the following: Asset Purchase Agreement 6 8 (a) cash and cash equivalents as of the close of business on the Closing Date up to an aggregate amount, when taken together with the cash and cash equivalents transferred to New Spectrum pursuant to Section 3.1(a), of $200,000 (the "Transferred Kofile Cash"). (b) all accounts and notes receivable of Old Kofile, except for intercompany receivables; (c) all inventory, work-in-progress and spare parts of Old Kofile; (d) all customer lists, sales records, credit data and other information relating to customers of Old Kofile; (e) all right, title and interest of Old Kofile in, to and under the Assumed Kofile Contracts, as provided in Section 2.3; (f) all right, title and interest of Old Kofile in, to and under all source codes, object codes, design documentation and procedures for product generation and testing of the computer software related to the Business, including the trade secrets, know-how, inventions, designs, technical processes, works of authorship and technical data comprising the same; (g) all right, title and interest of Old Kofile in, to and under all patents, patent applications, trademarks, service marks, technology, licenses, trade names, copyrights and other intellectual property or proprietary property rights owned or used by Old Kofile, the goodwill associated therewith and the rights and privileges used in the conduct of the Kofile Business and the right to recover for past, present and future infringement thereon; (h) all right, title and interest of Old Kofile in computer equipment and hardware, including, without limitation, all central processing units, terminals, disk drives, tape drives, electronic memory units, printers, keyboards, screens, peripherals (and other input/output devices), modems and other communication controllers, networking equipment, and any and all parts and appurtenances thereto, together with all proprietary and third-party software and intellectual property licensed by Old Kofile with such computer equipment and hardware; (i) all of the furniture, fixtures, equipment, vehicles, machinery, tools, appliances, telephone systems, copy machines, fax machines, implements, spare parts, supplies and all other tangible personal property of every kind and description owned by Old Kofile or Old Kofile's leasehold interests therein; (j) all right, title and interest of Old Kofile in, to and under all Permits owned or possessed by Old Kofile and relating to the Kofile Business or all or any of the Kofile Assets; (k) all right, title and interest of Old Kofile in, to and under the outstanding share capital of Kofile GmbH; (l) all accounts held with financial institutions in the name of Old Kofile (the "Kofile Bank Accounts"), subject to the limitation on the amount of cash and cash equivalents transferred to New Kofile pursuant to Section 2.1(a). Asset Purchase Agreement 7 9 (m) copies of Old Kofile's books, records, papers and instruments of whatever nature and wherever located (including, without limitation, all employee and personnel records) that relate to the Kofile Business or the Kofile Assets or which are required or necessary in order for New Kofile to conduct the Kofile Business from and after the Closing in the manner in which it is being conducted before the Closing; (n) all insurance proceeds and insurance claims of Old Kofile relating to the Kofile Business or all or any part of the Kofile Assets, and to the extent transferable, the benefit of and the right to enforce the covenants and warranties, if any, that Old Kofile is entitled to enforce with respect to the Kofile Assets against its predecessors in title to the Kofile Assets, if any; (o) all right, title and interest of Old Kofile in, to and under all rights, privileges, claims, causes of action and options relating to or pertaining to the Kofile Business or the foregoing Kofile Assets; (p) all right, title and interest of Old Kofile in and to all prepaid expenses, advances and deposits relating to any of the Kofile Assets or the Kofile Business; (q) the name "Kofile"; (r) all right, title and interest of Old Kofile or any Seller in and to the goodwill and going concern value related to the Kofile Business, including, but not limited to, telephone numbers, and any other intangible assets; and (s) all other or additional privileges, rights, interest, properties and assets of Old Kofile of every kind and description and wherever located that are used or intended for use in connection with, or that are necessary to the continued conduct of, the Kofile Business as presently being conducted. 2.2. EXCLUDED KOFILE ASSETS. Old Kofile shall retain, and the Kofile Assets shall not include the following assets and other rights of Old Kofile (collectively, the "Excluded Kofile Assets"): (a) cash and cash equivalents of Old Kofile in excess of the Transferred Kofile Cash; (b) intercompany receivables of Old Kofile; (c) the Excluded Kofile Contracts; (d) any software or intellectual property owned by or licensed to Tyler or any of its Affiliates, other than Old Kofile; and (e) any refunds or receivables due to Old Kofile from any Governmental Authority relating to Taxes previously paid by Old Kofile. Asset Purchase Agreement 8 10 2.3. ASSIGNMENT AND ASSUMPTION OF CONTRACTS. At Closing, and subject to the further terms and conditions of this Agreement, Old Kofile will assign all of its right, title and interest in and to, and New Kofile will assume, perform and discharge all of Old Kofile's remaining obligations under, all existing contracts and agreements, written and verbal to which Old Kofile is a party (collectively, the "Assumed Kofile Contracts"). Notwithstanding the foregoing, the Assumed Kofile Contracts do not include, and nothing in this Agreement will be deemed to constitute an assignment or attempted assignment of, any contract, agreement or license to which Old Kofile is a party if the attempted assignment without the consent of the other party thereto would constitute a breach or affect in any way the rights of Old Kofile thereunder and for which consent has not been obtained (collectively, the "Excluded Kofile Contracts"). If the consent of any such other party is not obtained on or prior to the Closing Date, or an attempted assignment on the Closing Date would be ineffective and would affect the rights of Old Kofile, or New Kofile as assignee, thereunder, Old Kofile will cooperate with New Kofile in a reasonable arrangement designed to provide for New Kofile the economic benefits, to the extent of New Kofile's performance of Old Kofile's obligations, under each Excluded Kofile Contract and will continue pursuant to Section 8.5 to cooperate and use its reasonable best efforts to obtain such assignment. 2.4. ASSUMED LIABILITIES. As further consideration for the purchase of the Kofile Assets, New Kofile shall assume and discharge all liabilities, obligations or contingencies of Old Kofile, except the Excluded Kofile Liabilities. 2.5. LIABILITIES NOT ASSUMED. New Kofile shall not assume or become liable or otherwise obligated to pay, perform or discharge any of the following debts, liabilities or obligations of Old Kofile (the "Excluded Kofile Liabilities"): (a) any debt, liability or obligation of Old Kofile resulting from, arising out of or relating to any debt, liability or obligation to or of Tyler or any Affiliate of Tyler other than Old Kofile, including, without limitation, any guaranty of Old Kofile therefor; (b) any debt, liability or obligation of Old Kofile resulting from, arising out of or relating to any employee benefit plan or employee plan of any kind or nature maintained, operated or administered by Tyler or Affiliate of Tyler other than Old Kofile; (c) any debt, liability or obligation of Old Kofile resulting from, arising as a result of or relating to the termination of any employee of Old Kofile prior to the Closing; (d) any liabilities or obligations arising under any Excluded Kofile Contracts; and (e) liabilities or obligations arising on or before the Closing Date for income, sales, use, franchise, excise or transfer Taxes or duties, or other property or ad valorem Taxes or duties, based upon the value of the Kofile Assets, including, without limitation, any Taxes that accrue or become payable by Old Kofile as a result of the sale of the Kofile Assets to New Kofile, and liabilities or obligations arising at any time for income, sales, use, franchise, excise or transfer Taxes or duties, or other property or ad valorem Taxes or duties, based upon the income or operations of Old Kofile. Asset Purchase Agreement 9 11 ARTICLE III THE SPECTRUM PURCHASE 3.1. ACQUISITION OF THE SPECTRUM ASSETS. Upon the terms and subject to the conditions of this Agreement, at the Closing, Old Spectrum agrees to sell, convey, transfer, assign and deliver to New Spectrum, and New Spectrum agrees to purchase from Old Spectrum, on an "AS IS, WHERE IS" basis, all of its assets, properties, businesses, franchises, goodwill and rights of every kind and character, tangible or intangible, real or personal, whether owned or leased, other than the Excluded Spectrum Assets, free and clear of all Encumbrances other than Permitted Encumbrances and any created by New Spectrum (collectively, the "Spectrum Assets"). Without limiting the generality of the foregoing, the Spectrum Assets shall consist of all such assets of Old Spectrum as of the Closing, including, without limitation, the following: (a) cash and cash equivalents as of the close of business on the Closing Date up to an aggregate amount, when taken together with the Transferred Kofile Cash, of $200,000 (the "Transferred Spectrum Cash"). (b) all accounts and notes receivable of Old Spectrum, except for intercompany receivables; (c) all inventory, work-in-progress and spare parts of Old Spectrum; (d) all customer lists, sales records, credit data and other information relating to customers of Old Spectrum; (e) all right, title and interest of Old Spectrum in, to and under the Assumed Spectrum Contracts, as provided in Section 3.3; (f) all right, title and interest of Old Spectrum in, to and under all source codes, object codes, design documentation and procedures for product generation and testing of the computer software related to the Business, including the trade secrets, know-how, inventions, designs, technical processes, works of authorship and technical data comprising the same; (g) all right, title and interest of Old Spectrum in, to and under all patents, patent applications, trademarks, service marks, technology, licenses, trade names, copyrights and other intellectual property or proprietary property rights owned or used by Old Spectrum, the goodwill associated therewith and the rights and privileges used in the conduct of the Spectrum Business and the right to recover for past, present and future infringement thereon; (h) all right, title and interest of Old Spectrum in computer equipment and hardware, including, without limitation, all central processing units, terminals, disk drives, tape drives, electronic memory units, printers, keyboards, screens, peripherals (and other input/output devices), modems and other communication controllers, networking equipment, and any and all parts and appurtenances thereto, together with all proprietary and third-party software and intellectual property licensed by Old Spectrum with such computer equipment and hardware; Asset Purchase Agreement 10 12 (i) all of the furniture, fixtures, equipment, vehicles, machinery, tools, appliances, telephone systems, copy machines, fax machines, implements, spare parts, supplies and all other tangible personal property of every kind and description owned by Old Spectrum or Old Spectrum's leasehold interests therein; (j) all right, title and interest of Old Spectrum in, to and under all Permits owned or possessed by Old Spectrum and relating to the Spectrum Business or all or any of the Spectrum Assets; (k) all accounts held with financial institutions in the name of Old Spectrum (the "Spectrum Bank Accounts"), subject to the limitation on the amount of cash and cash equivalents transferred to New Spectrum pursuant to Section 3.1(a). (l) copies of Old Spectrum's books, records, papers and instruments of whatever nature and wherever located (including, without limitation, all employee and personnel records) that relate to the Spectrum Business or the Spectrum Assets or which are required or necessary in order for New Spectrum to conduct the Spectrum Business from and after the Closing in the manner in which it is being conducted before the Closing; (m) all insurance proceeds and insurance claims of Old Spectrum relating to the Spectrum Business or all or any part of the Spectrum Assets, and to the extent transferable, the benefit of and the right to enforce the covenants and warranties, if any, that Old Spectrum is entitled to enforce with respect to the Spectrum Assets against its predecessors in title to the Spectrum Assets, if any; (n) all right, title and interest of Old Spectrum in, to and under all rights, privileges, claims, causes of action and options relating to or pertaining to the Spectrum Business or the foregoing Spectrum Assets; (o) all right, title and interest of Old Spectrum in and to all prepaid expenses, advances and deposits relating to any of the Spectrum Assets or the Spectrum Business; (p) the name "Spectrum Data"; (q) all right, title and interest of Old Spectrum or any Seller in and to the goodwill and going concern value related to the Spectrum Business, including, but not limited to, telephone numbers, and any other intangible assets; and (r) all other or additional privileges, rights, interest, properties and assets of Old Spectrum of every kind and description and wherever located that are used or intended for use in connection with, or that are necessary to the continued conduct of, the Spectrum Business as presently being conducted. 3.2. EXCLUDED SPECTRUM ASSETS. Old Spectrum shall retain, and the Spectrum Assets shall not include the following assets and other rights of Old Spectrum (collectively, the "Excluded Spectrum Assets"): Asset Purchase Agreement 11 13 (a) cash and cash equivalents of Old Spectrum in excess of the Transferred Spectrum Cash; (b) intercompany receivables of Old Spectrum; (c) the Excluded Spectrum Contracts; (d) any software or intellectual property owned by or licensed to Tyler or any of its Affiliates, other than Old Spectrum; (e) any refunds or receivables due to Old Spectrum from any Governmental Authority relating to Taxes previously paid by Old Spectrum; and (f) the San Antonio Property. 3.3. ASSIGNMENT AND ASSUMPTION OF CONTRACTS. At Closing, and subject to the further terms and conditions of this Agreement, Old Spectrum will assign all of its right, title and interest in and to, and New Spectrum will assume, perform and discharge all of Old Spectrum's remaining obligations under, all existing contracts and agreements, written and verbal to which Old Spectrum is a party (collectively, the "Assumed Spectrum Contracts"). Notwithstanding the foregoing, the Assumed Spectrum Contracts do not include, and nothing in this Agreement will be deemed to constitute an assignment or attempted assignment of, any contract, agreement or license to which Old Spectrum is a party if the attempted assignment without the consent of the other party thereto would constitute a breach or affect in any way the rights of Old Spectrum thereunder for which consent has not been obtained (collectively, the "Excluded Spectrum Contracts"). If the consent of any such other party is not obtained on or prior to the Closing Date, or an attempted assignment on the Closing Date would be ineffective and would affect the rights of Old Spectrum, or New Spectrum as assignee, thereunder, Old Spectrum will cooperate with New Spectrum in a reasonable arrangement designed to provide for New Spectrum the economic benefits, to the extent of New Spectrum's performance of Old Spectrum's obligations, under each Excluded Spectrum Contract and will continue pursuant to Section 8.5 to cooperate and use its reasonable best efforts to obtain such assignment. 3.4. ASSUMED LIABILITIES. As further consideration for the purchase of the Spectrum Assets, New Spectrum shall assume and discharge all liabilities, obligations or contingencies of Old Spectrum, except the Excluded Spectrum Liabilities. 3.5. LIABILITIES NOT ASSUMED. New Spectrum shall not assume or become liable or otherwise obligated to pay, perform or discharge any of the following debts, liabilities or obligations of Old Spectrum (the "Excluded Spectrum Liabilities"): (a) any purchase money indebtedness secured by a mortgage or deed of trust on the San Antonio Property, except as expressly provided under the terms and conditions of the Real Property Purchase Agreement; (b) any debt, liability or obligation of Old Spectrum resulting from, arising out of or relating to any debt, liability or obligation to or of Tyler or any Affiliate of Tyler other than Old Spectrum, including, without limitation, any guaranty of Old Spectrum therefor; Asset Purchase Agreement 12 14 (c) any debt, liability or obligation of Old Spectrum resulting from, arising out of or relating to any employee benefit plan or employee plan of any kind or nature maintained, operated or administered by Tyler or Affiliate of Tyler other than Old Spectrum; (d) any debt, liability or obligation of Old Spectrum resulting from, arising as a result of or relating to the termination of any employee of Old Spectrum prior to the Closing; (e) any liabilities or obligations arising under any Excluded Spectrum Contracts; and (f) liabilities or obligations arising on or before the Closing Date for income, sales, use, franchise, excise or transfer Taxes or duties, or other property or ad valorem Taxes or duties, based upon the value of the Spectrum Assets, including, without limitation, any Taxes that accrue or become payable by Old Spectrum as a result of the sale of the Spectrum Assets to New Spectrum, and liabilities or obligations arising at any time for income, sales, use, franchise, excise or transfer Taxes or duties, or other property or ad valorem Taxes or duties, based upon the income or operations of Old Spectrum. ARTICLE IV OTHER PURCHASES 4.1. ACQUISITION OF THE REAL PROPERTY. The sale to Real Property Purchaser by (a) BRC of the Mockingbird Property and (b) Old Spectrum of the San Antonio Property is upon the terms and subject to the conditions of that certain Purchase and Sale Agreement dated as of the date hereof by and among BRC, Old Spectrum and Real Property Purchaser in the form attached to this Agreement as Exhibit A (the "Real Property Purchase Agreement"). 4.2. ACQUISITION OF THE INTANGIBLES. Upon the terms and subject to the conditions of this Agreement, at the Closing, Tyler agrees to sell, convey, transfer, assign and deliver to ei Solutions, and ei Solutions agrees to purchase from Tyler, on an "AS IS, WHERE IS" basis, free and clear of all Encumbrances other than any created by ei Solutions, the following (collectively, the "Intangibles"): (a) all right, title and interest of Tyler in, to and under any work product or other intangible assets created or acquired by Tyler or its employees in connection with, arising from or related to Tyler's investment in its proposed acquisition of the business and assets of Eastman Software, Inc., and certain other Affiliates of Kodak (the "ESI Acquisition"); and (b) all right, title and interest of Tyler in, to and under that certain nonrefundable deposit in the amount of $100,000 paid by Tyler to Kodak on July 26, 2000, in connection with the ESI Acquisition. Asset Purchase Agreement 13 15 ARTICLE V PURCHASE PRICE; CLOSING 5.1. PURCHASE PRICE. The aggregate purchase price for the Asset Purchases other than the Real Property Purchases shall be an amount equal to $8,200,000 (the "Purchase Price"). 5.2. PAYMENT OF PURCHASE PRICE. At the Closing, New Kofile, New Spectrum and ei Solutions shall pay the Purchase Price to Old Kofile, Old Spectrum and Tyler, or their designees, by wire transfer of immediately available funds, as set forth in Schedule 5.2. 5.3. CLOSING. The consummation of the Asset Purchases and the other transactions described in this Agreement (the "Closing") shall take place at 10:00 a.m. Dallas, Texas time at the offices of Gardere & Wynne, L.L.P., 1601 Elm Street, Dallas, Texas, on September 29, 2000, or at such other time and date as Sellers and Purchasers may mutually agree, which date shall be referred to as the "Closing Date." 5.4. EFFECTIVE TIME. The effective time of the Kofile Purchase, the Spectrum Purchase and the Real Property Purchases shall be at 12:01 a.m. local time on October 1, 2000, unless Sellers and Purchasers shall otherwise mutually agree in writing. The effective time of the Intangibles Purchase shall be as of 12:01 a.m. Dallas, Texas time on August 10, 2000. 5.5. TRANSFER OF CASH AND CASH EQUIVALENTS. (a) Following the Closing, Sellers shall cooperate with New Kofile and New Spectrum, as may be requested thereby, (i) to transfer to New Kofile all cash and cash equivalents of Old Kofile that are on hand as of the Closing and (ii) to transfer to New Spectrum all cash and cash equivalents of Old Spectrum that are on hand as of the Closing. Cash and cash equivalents of Kofile GmbH that are on hand as of the Closing shall remain in the existing accounts of Kofile GmbH with financial institutions (the "Kofile GmbH Bank Accounts") or otherwise on hand. Cash and cash equivalents on hand as of the Closing includes (w) amounts reported by the financial institutions holding the Kofile Bank Accounts, the Spectrum Bank Accounts or the Kofile GmbH Bank Accounts, as the case may be, plus (x) deposits in transit as of the Closing to the Kofile Bank Accounts, the Spectrum Bank Accounts or the Kofile GmbH Bank Accounts, as the case may be, less (y) checks issued on the Kofile Bank Accounts, the Spectrum Bank Accounts or the Kofile GmbH Bank Accounts, as the case may be, on or before the Closing but not yet honored by the financial institutions holding such accounts, which will be honored post-Closing by New Kofile, New Spectrum or Kofile GmbH, respectively, plus (z) cash on hand that is held as petty cash or otherwise (for either New Kofile, New Spectrum or Kofile GmbH, the "Closing Cash Balance"). (b) Following the Closing, Tyler, Old Kofile and Old Spectrum shall promptly forward and transfer to New Kofile or New Spectrum, as the case may be, any amounts received by Tyler, Old Kofile or Old Spectrum after the Closing Date with respect to an account receivable of Old Kofile or Old Spectrum. 5.6. POST-CLOSING ADJUSTMENT TO PURCHASE PRICE. Within 45 days after the Closing Date, the Purchase Price will be adjusted upward or downward in cash in an amount equal to the sum of the Net Asset Value Adjustment and the Net Cash Adjustment (the "Post-Closing Adjustment"). If the Post-Closing Asset Purchase Agreement 14 16 Adjustment is a positive number, then the Purchase Price shall be adjusted upward and Purchasers shall promptly pay such amount to Sellers or their designees by wire transfer of immediately available funds pursuant to written instructions received from Sellers. If the Post-Closing Adjustment is a negative number, the Purchase Price shall be adjusted downward and Sellers shall promptly pay such amount (expressed as a positive number) to Purchasers or their designees by wire transfer of immediately available funds pursuant to written instructions received from Purchasers. (a) The calculation of the Net Asset Value Adjustment shall be set forth on Supplemental Schedule 5.6, which shall be agreed upon by Sellers and Purchasers and attached to this Agreement within 45 days after the Closing. (i) The "Net Asset Value Adjustment" means the sum of the Kofile Net Asset Value Adjustment and the Spectrum Net Asset Value Adjustment. (ii) The "Kofile Net Asset Value Adjustment" means the Closing Kofile Net Asset Value less the Agreed Kofile Net Asset Value. (iii) The "Agreed Kofile Net Asset Value," which is set forth on Schedule 5.6, means the net historical carrying value of certain assets to be acquired less certain liabilities assumed, as listed on Schedule 5.6 (the "Listed Assets and Liabilities"), of the Kofile Business (including Kofile GmbH) as of June 30, 2000, as determined on a basis consistent with Sellers' past practice in preparing internal financial statements and in accordance with GAAP and this Section 5.6(a). (iv) The "Closing Kofile Net Asset Value" means the net historical carrying value of the Listed Assets and Liabilities of the Kofile Business (including Kofile GmbH). The Closing Kofile Net Asset Value shall be determined by Sellers and Purchasers as of the Closing Date and will be determined on a basis consistent with Sellers' past practice in preparing internal financial statements and in accordance with GAAP and this Section 5.6(a). The Closing Kofile Net Asset Value shall be set forth on Supplemental Schedule 5.6. (v) The "Spectrum Net Asset Value Adjustment" means the Closing Spectrum Net Asset Value less the Agreed Spectrum Net Asset Value. (vi) The "Agreed Spectrum Net Asset Value," which is set forth on Schedule 5.6, means the net historical carrying value of the Listed Assets and Liabilities of the Spectrum Business as of June 30, 2000, as determined on a basis consistent with Sellers' past practice in preparing internal financial statements and in accordance with GAAP and this Section 5.6(a). (vii) The "Closing Spectrum Net Asset Value" means the net historical carrying value of the Listed Assets and Liabilities of the Spectrum Business. The Closing Spectrum Net Asset Value shall be determined by Sellers and Asset Purchase Agreement 15 17 Purchasers as of the Closing Date and will be determined on a basis consistent with Sellers' past practice in preparing internal financial statements and in accordance with GAAP and this Section 5.6(a). The Closing Spectrum Net Asset Value shall be set forth on Supplemental Schedule 5.6. (viii) For purposes of this Section 5.6(a), the financial statements for Old Kofile (including Kofile GmbH) and Old Spectrum will present an aggregate balance of $200,000 for cash and cash equivalents and zero balances for goodwill and related intangibles, current and deferred federal and state income taxes, certain accrued taxes, intercompany balances and any other Excluded Kofile Liabilities and Excluded Spectrum Liabilities. (b) The calculation of the Net Cash Adjustment shall be set forth on Supplemental Schedule 5.6, which shall be agreed upon by Sellers and Purchasers and attached to this Agreement within 45 days after the Closing. The "Net Cash Adjustment" means (i) the sum of (A) the Closing Cash Balance for New Kofile, (B) the Closing Cash Balance for New Spectrum and (C) the Closing Cash Balance for Kofile GmbH, less (ii) $200,000. 5.7. ALLOCATION OF PURCHASE PRICE. Within 90 days of the Closing Date, the parties shall agree upon the allocation of the Purchase Price among the Kofile Assets, the Spectrum Assets, and the Intangibles. Such allocation shall be set forth in Schedule 5.7 and attached to this Agreement. Such allocation will be used by the parties for all Tax purposes and filings, including, without limitation, IRS Form 8594. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLERS Each Seller represents and warrants, jointly and severally, to Purchasers, as of the date of this Agreement and as of the Closing Date, the following: 6.1. DUE ORGANIZATION AND QUALIFICATION. Tyler is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. Each of Old Kofile and Old Spectrum is a corporation duly organized, validly existing and in good standing under the Laws of the State of Texas. Each Seller is duly authorized and qualified to do business under all applicable Laws and to carry on its business in the places and in the manner as now conducted. Each Seller has the requisite power and authority to own, lease and operate its assets and properties and to carry on its business as such business is currently being conducted. 6.2. AUTHORIZATION; NON-CONTRAVENTION; APPROVALS. (a) Each Seller has the requisite power and authority to enter into this Agreement and to effect the transactions described herein. The execution, delivery and performance of this Agreement have been approved by the board of directors of each Seller and, with respect to Old Kofile and Old Spectrum, by BRC as each such Seller's sole shareholder. No additional corporate proceedings on the part of any Seller are necessary to authorize the execution and delivery of this Agreement and Asset Purchase Agreement 16 18 the consummation by any Seller of the transactions described herein. This Agreement has been duly and validly executed and delivered by each Seller, and, assuming the due authorization, execution and delivery hereof by each Purchaser, constitutes a valid and binding agreement of each Seller, enforceable against each Seller in accordance with its terms, subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to the enforcement of creditors' rights generally and (ii) general equitable principles. (b) The execution and delivery of this Agreement by each Seller do not, and the consummation by each Seller of the transactions described herein will not, violate or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any Encumbrances upon any of the properties or assets of such Seller under any of the terms, conditions or provisions of, (i) the Articles or Certificate of Incorporation or Bylaws of such Seller, (ii) any Laws applicable to such Seller or any of its properties or assets or (iii) any contract, agreement, lease, mortgage, deed of trust, commitment, license, franchise, Permit, authorization or any other instrument or obligation to which such Seller is a party or to which any of the Assets are bound. 6.3. TITLE TO ASSETS. (a) Old Kofile has good, indefeasible and marketable title to the Kofile Assets, free and clear of all Encumbrances, other than (i) the Permitted Encumbrances, or (ii) Encumbrances which will be released or discharged at or prior to the Closing Date. (b) Old Spectrum has good, indefeasible and marketable title to the Spectrum Assets, free and clear of all Encumbrances, other than (i) the Permitted Encumbrances, or (ii) Encumbrances which will be released or discharged at or prior to the Closing Date. (c) Tyler has good, indefeasible and marketable title to the Intangibles, free and clear of all Encumbrances, other than (i) the Permitted Encumbrances, or (ii) Encumbrances which will be released or discharged at or prior to the Closing Date. 6.4. TAXES. Consummation of the transactions described in this Agreement will not result in the imposition or creation of any Tax obligation on the Assets, except for (a) Tax obligations that remain the liability of the respective Sellers under Sections 2.4 and 3.4 hereof or (b) Tax obligations resulting from any Tax election made by Purchasers after the Closing Date. 6.5. BROKERS AND FINDERS. Sellers have not engaged any broker, advisor or finder as to which any Purchaser would have any liability whatsoever for any brokerage fees, commission or finder's fees in connection with the transactions described herein. 6.6. NO IMPLIED REPRESENTATIONS. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, IT IS THE EXPRESS UNDERSTANDING OF PURCHASERS THAT SELLERS ARE NOT MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, OTHER THAN THOSE REPRESENTATIONS AND WARRANTIES OF Asset Purchase Agreement 17 19 SELLERS EXPRESSLY SET FORTH IN THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF PURCHASERS Each Purchaser represents and warrants, severally and not jointly, to Sellers, as of the date of this Agreement and as of the Closing Date, to the extent in respect to such Purchaser: 7.1. DUE ORGANIZATION AND QUALIFICATION. Each of ei Solutions and New Kofile is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. New Spectrum is a corporation duly organized, validly existing and in good standing under the Laws of the State of Texas. Each Purchaser is duly authorized and qualified, or will be duly authorized and qualified within 10 days after the Closing Date, to do business under all applicable Laws and to carry on its business in the places and in the manner as now conducted. Each Purchaser has the requisite power and authority to own, lease and operate its assets and properties and to carry on its business as such business is currently being conducted. 7.2. AUTHORIZATION; NON-CONTRAVENTION; APPROVALS. (a) Each Purchaser has the full legal right, power and authority to enter into this Agreement and to consummate the transactions described herein. The execution, delivery and performance of this Agreement has been approved by the board of directors of each Purchaser. No additional corporate proceedings on the part of any Purchaser are necessary to authorize the execution and delivery of this Agreement and the consummation by any Purchaser of the transactions described herein. This Agreement has been duly and validly executed and delivered by each Purchaser, and, assuming the due authorization, execution and delivery by each Seller, constitutes valid and binding agreements of each Purchaser, enforceable against each Purchaser in accordance with its terms, subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to the enforcement of creditors' rights generally and (ii) general equitable principles. (b) The execution and delivery of this Agreement by each Purchaser do not, and the consummation by each Purchaser of the transactions described herein will not, violate or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under any of the terms, conditions or provisions of (i) the Certificate or Articles of Incorporation or Bylaws of such Purchaser, (ii) any Law applicable to such Purchaser or any of its properties or assets or (iii) any contract, agreement, lease, mortgage, deed of trust, commitment, license, franchise, Permit, authorization or any other instrument or obligation to which such Purchaser is a party. Asset Purchase Agreement 18 20 7.3. BROKERS AND FINDERS. Purchasers have not engaged any broker, advisor or finder as to which any Seller would have any liability whatsoever for any brokerage fees, commission or finder's fees in connection with the transactions described herein. 7.4. NO IMPLIED REPRESENTATIONS. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, IT IS THE EXPRESS UNDERSTANDING OF SELLERS THAT PURCHASERS ARE NOT MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, OTHER THAN THOSE REPRESENTATIONS AND WARRANTIES OF PURCHASERS EXPRESSLY SET FORTH IN THIS AGREEMENT. ARTICLE VIII CERTAIN COVENANTS 8.1. CONDUCT OF BUSINESS. Pending the Closing, (a) Old Kofile and Old Spectrum will each conduct its respective Business in the normal and usual manner consistent with the continued operation thereof and (b) without the prior approval of Purchasers (which approval will not be unreasonably withheld or delayed), neither Old Kofile nor Old Spectrum will make any material change in the policies affecting the operation and conduct of its respective Business. Each of Old Kofile and Old Spectrum shall pay or otherwise satisfy in the ordinary course of business its respective trade payables between the date of this Agreement and the Closing Date. 8.2. FUTURE COOPERATION; TAX MATTERS. Sellers and Purchasers shall each deliver or cause to be delivered to the other following the Closing such additional instruments as the other may reasonably request for the purpose of fully carrying out this Agreement. Sellers will cooperate and use its commercially reasonable best efforts to have the present officers, directors and employees of Sellers cooperate with Purchasers at and after the Closing in furnishing information, evidence, testimony and other assistance in connection with any actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing. Following the Closing, Sellers shall give to Purchasers free and unrestricted access to (and the right to make copies at the expense of Purchasers) the books, files, records and Tax returns and supporting schedules and work papers of Sellers to the extent that such relate to the Businesses, the Kofile Assets, the Spectrum Assets or to the operations, income, expenses and assets of Old Kofile or Old Spectrum existing on, accruing or arising prior to or occurring prior to the Closing Date; provided, however, that any access pursuant to this Section 8.2 shall be conducted in such a manner as not to interfere unreasonably with the operations of the business of the Sellers following the Closing Date. Purchasers will provide Sellers with access to such of their books and records as may be reasonably requested by Purchasers in connection with federal, state and local Tax matters relating to periods prior to the Closing. The party requesting cooperation, information or actions under this Section 8.2 shall reimburse the other party for all reasonable out-of-pocket costs and expenses paid or incurred in connection therewith, which costs and expenses shall not, however, include per diem charges for employees or allocations of overhead charges. 8.3. TAX STATUS AND EFFECT. It is understood and agreed that neither Sellers nor Purchasers have made any representations to the other as to the Tax status or Tax effect of the transactions described in this Agreement, and each of the parties is therefore separately taking advice and counsel as to such matters, and Asset Purchase Agreement 19 21 each is assuming, subject only to the express and specific provisions of this Agreement, the Tax, if any, which may be incurred by reason of the carrying out of the terms and provisions hereof. 8.4. EXPENSES. Each party to this Agreement will pay the fees, expenses and disbursements of such party and its agents, representatives, accountants and counsel incurred in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions described herein. 8.5. CONSENTS TO ASSIGNMENT. Tyler, Old Kofile and Old Spectrum, respectively, will use reasonable business efforts to cooperate with New Kofile and New Spectrum in securing all necessary consents of third parties to the assignment, respectively, of the Assumed Kofile Contracts and the Assumed Spectrum Contracts. 8.6. SUBCONTRACTS. Following Closing, Old Kofile and Old Spectrum, respectively, will subcontract or sublicense to New Kofile and New Spectrum, in the form attached to this Agreement as Exhibit B, dated as of the Closing Date the Excluded Kofile Contracts and the Excluded Spectrum Contracts. 8.7. NAME CHANGE; CORPORATE EXISTENCE. Not later than the next business day after the Closing, each of Old Kofile and Old Spectrum shall cause Articles of Amendment to its Articles of Incorporation to be filed with the Secretary of State of the State of Texas to change its name to "Tyler K, Inc." and "Tyler SD, Inc.," respectively. Tyler agrees to maintain the corporate existence of Old Kofile and Old Spectrum as long as there are any Excluded Contracts. 8.8. BULK SALES. To the extent, if any, that the same are applicable to the Asset Purchases, the parties hereby waive compliance with Article 6 of the Uniform Commercial Code as adopted in each jurisdiction in which any of the Assets are located, as well as Section 1141(c) of the New York Tax Law and any similar Laws in other jurisdictions. 8.9. RELATED TRANSACTIONS. The parties acknowledge and agree that following related transactions are intended to be consummated contemporaneously with the Asset Purchases on the Closing Date to be effective as set forth in Section 5.4: (a) the execution and delivery by BRC, Old Spectrum and Real Property Purchaser of the Real Property Purchase Agreement. (b) the execution and delivery by Real Property Purchaser as landlord and Government Records Services, Inc., a Texas corporation, wholly owned subsidiary of BRC and indirect wholly owned subsidiary of Tyler, as tenant, and Tyler as guarantor, of a lease agreement with respect to the Mockingbird Property in the form attached to this Agreement as Exhibit C. (c) the execution and delivery by Tyler, BRC as employer and Oates as employee of an amendment, in the form attached to this Agreement as Exhibit D, to that certain Employment and Noncompetition Agreement dated as of October 8, 1997, by and between Tyler, BRC and Oates. 8.10. PAYMENT OF LIABILITIES. Each of Old Kofile and Old Spectrum shall fully pay or otherwise satisfy all other claims or liabilities relating to its respective Assets or Business incurred through the Closing Date other than the Assumed Liabilities. Asset Purchase Agreement 20 22 8.11. TRANSITION SERVICES. For a period of up to one year after the Closing, Tyler agrees that Tyler and/or BRC will provide to New Kofile and New Spectrum such transition services as may be reasonably requested by New Kofile or New Spectrum, including, without limitation, human resources, payroll, accounting, data processing and other administrative services, provided that such services are reasonably comparable to the services provided to Old Kofile and Old Spectrum, respectively, prior to the Closing. Tyler or BRC, as the case may be, shall bill, not more than once per month, the respective Purchaser for its actual costs of providing such services, and New Kofile and New Spectrum agree to promptly pay Tyler or BRC for such services as billed; provided, however, that with respect to any disbursements of payroll or payroll taxes by Tyler or BRC on behalf of New Kofile or New Spectrum, New Kofile or New Spectrum, as the case may be, shall, prior to or concurrently with any such disbursement, transfer to Tyler or BRC, as the case may be, immediately available funds in an amount equal to any such disbursement. ARTICLE IX INDEMNIFICATION Tyler, Old Kofile, Old Spectrum, ei Solutions, New Kofile and New Spectrum each make the following covenants: 9.1. INDEMNIFICATION BY OLD KOFILE AND OLD SPECTRUM. Subject to Sections 9.5 and 9.6, Sellers covenant and agree that they will, jointly and severally, indemnify, defend, protect and hold harmless Purchasers and their respective officers, directors, employees, stockholders, agents, representatives and Affiliates, at all times from and after the date of this Agreement from and against all Losses incurred by any of such indemnified persons as a result of or arising from (a) until the Expiration Date, any breach of the representations and warranties of any Seller set forth herein or in the Schedules or certificates delivered in connection herewith, (b) any breach or nonfulfillment of any covenant or agreement on the part of any Seller under this Agreement, (c) the Excluded Kofile Liabilities or (d) the Excluded Spectrum Liabilities. 9.2. INDEMNIFICATION BY NEW KOFILE AND NEW SPECTRUM. Subject to Sections 9.5 and 9.6, each Purchaser covenants and agrees that it will, severally and not jointly, indemnify, defend, protect and hold harmless Sellers and their respective officers, directors, employees, stockholders, agents, representatives and Affiliates, at all times from and after the date of this Agreement from and against all Losses incurred by any of such indemnified persons as a result of or arising from (a) until the Expiration Date, any breach of the representations and warranties of such Purchaser set forth herein or in the Schedules or certificates attached hereto, (b) any breach or nonfulfillment of any covenant or agreement on the part of such Purchaser under this Agreement, (c) any Assumed Kofile Liabilities or any debt, obligation or liability of New Kofile arising after the Closing Date with respect to New Kofile's operation of the Kofile Business (as to Old Kofile) and (d) any Assumed Spectrum Liabilities or any debt, obligation or liability of New Spectrum arising after the Closing Date with respect to New Spectrum's operation of the Spectrum Business (as to Old Spectrum). 9.3. THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), of the commencement of any action or proceeding by a Third Person that the Indemnified Party believes in good faith is an indemnifiable claim under this Agreement, the Indemnified Party shall give to the party obligated to provide indemnification pursuant to Section 9.1 or 9.2 hereof (hereinafter the Asset Purchase Agreement 21 23 "Indemnifying Party") written notice of such claim or the commencement of such action or proceeding, provided, however, that failure to give such notice shall not preclude the Indemnified Party from making any claim thereon if the failure or delay in giving such notice did not prejudice the Indemnifying Party. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle, at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same diligently and in good faith. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in all commercially reasonable respects in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records and other information reasonably requested by the Indemnifying Party and in the Indemnified Party's possession or control. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability; provided, however, that the Indemnified Party shall be entitled, at its expense, to participate in the defense of such asserted liability and the negotiations of the settlement thereof. The Indemnifying Party shall not settle any such Third Person claim without the consent of the Indemnified Party, unless the settlement thereof imposes no liability or obligation on, and includes a complete release from liability of, the Indemnified Party. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement by said Third Person; provided, however, that notwithstanding the foregoing, the Indemnified Party shall be entitled to refuse to consent to any such proposed settlement and the Indemnifying Party's liability hereunder shall not be limited by the amount of the proposed settlement if such settlement does not provide for the complete release of the Indemnified Party. If, upon receiving notice, the Indemnifying Party does not timely undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails to pursue such defense in a reasonably diligent manner, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnified Party may settle such matter, in its discretion, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith. 9.4. NON-THIRD PERSON CLAIMS. In the event that any Indemnified Party asserts the existence of a claim under ARTICLE IX giving rise to Losses (but excluding claims resulting from the assertion of liability by Third Persons), such party shall give written notice to the Indemnifying Party. Such written notice shall state that it is being given pursuant to this Section 9.4, specify the nature and amount of the claim asserted, and indicate the date on which such assertion shall be deemed accepted and the amount of the claim deemed a valid claim (such date to be established in accordance with the next sentence). If such Indemnifying Party, within 60 days after the mailing of notice by such Indemnified Party, shall not give written notice to such Indemnified Party announcing such Indemnifying Party's intent to contest such assertion of such Indemnified Party, such assertion shall be deemed accepted and the amount of such claim shall be deemed a valid claim. In the event, however, that such Indemnifying Party contests such assertion of a claim by giving such written notice to the Indemnified Party within said period, then the parties shall negotiate in good faith in an attempt to resolve such claim. In the event that litigation shall arise with respect to any such claim, the prevailing party shall be entitled to reimbursement of costs and expenses incurred in Asset Purchase Agreement 22 24 connection with such litigation including reasonable attorneys' fees, if the parties hereto, acting in good faith, cannot reach agreement with respect to such claim within 60 days after the notice provided by the Indemnified Party. 9.5. INDEMNIFICATION DEDUCTIBLE. Neither Sellers nor Purchasers shall be entitled to indemnification from the other under the provisions of Section 9.1(a) or Section 9.2(a), as the case may be, until such time as, and only to the extent that, the claims subject to indemnification by such other party exceed, in the aggregate, $25,000. Notwithstanding the foregoing, the limitations set forth in this Section 9.5 shall not apply to fraudulent misrepresentations. 9.6. INDEMNIFICATION LIMITATION. Subject to Section 9.5, the aggregate indemnification obligation of Sellers under Section 9.1(a) and of Purchasers under Section 9.2(a) shall be limited to the Purchase Price. Notwithstanding the foregoing, the limitations set forth in this Section 9.6 shall not apply to fraudulent misrepresentations. ARTICLE X CONDITIONS TO CLOSING 10.1. CONDITIONS TO OBLIGATIONS OF PURCHASERS. Except as may be waived by Purchasers, the obligations of Purchasers to consummate the transactions described herein are subject to satisfaction of the following conditions: (a) The Kofile Assets, the Spectrum Assets and the Intangibles shall be free and clear of all Encumbrances, except for Permitted Encumbrances. (b) Purchasers shall have received from Sellers the respective items, and Sellers shall have taken the actions required of each of them, pursuant to ARTICLE XI. (c) All conditions of BRC and Old Spectrum to closing and all closing requirements of Real Property Purchaser set forth in the Real Property Purchase Agreement shall have been satisfied. (d) Sellers shall have delivered to Purchasers on or before the Closing Date certificates of existence and good standing for each Seller issued by the appropriate Governmental Authorities of the state in which such Seller is incorporated and each certificate shall be dated within ten days of the Closing Date. (e) No action, suit or proceeding before any Governmental Authority to enjoin the transactions described in this Agreement or its consummation will have been instituted on or before the Closing Date. (f) The representations of the Sellers under this Agreement and in each agreement, document or instrument delivered pursuant hereto or in connection with the transactions described herein on or before the Closing Date shall have been true and correct in all material respects on and as of the date thereof and shall be true and correct in all material respects as of and on the Closing Date, as though made on and as of the Closing Date. Asset Purchase Agreement 23 25 (g) Sellers shall have performed in all material respects the covenants, agreements and obligations required to be performed by each of them under this Agreement prior to and on the Closing Date. 10.2. CONDITIONS TO OBLIGATIONS OF SELLERS. Except as may be waived by Sellers, the obligation of the Sellers to consummate the transactions described herein is subject to satisfaction of the following conditions: (a) Sellers shall have received from Purchasers the respective items, and Purchasers shall have taken the actions required of each of them, pursuant to ARTICLE XI. (b) All conditions of Real Property Purchaser to closing and all closing requirements of BRC and Old Spectrum set forth in the Real Property Purchase Agreement shall have been satisfied. (c) Purchasers shall have delivered to Sellers on or before the Closing Date certificates of existence and good standing for each Purchaser that is a corporation issued by the appropriate Governmental Authorities of the state in which such Seller is incorporated and each certificate shall be dated within ten days of the Closing Date. (d) Tyler shall have received all necessary consents or approvals from its senior lenders with respect to the transactions described herein. (e) The Board of Directors of Tyler shall have received a written opinion from Stephens Inc. that the Asset Purchases are fair from a financial point of view to the stockholders of Tyler. (f) No action, suit or proceeding before any Governmental Authority to enjoin the transactions described in this Agreement or its consummation will have been instituted on or before the Closing Date. (g) The representations of the Purchasers under this Agreement and in each agreement, document or instrument delivered pursuant hereto or in connection with the transactions described herein on or before the Closing Date shall have been true and correct in all material respects on and as of the date thereof and shall be true and correct in all material respects as of and on the Closing Date, as though made on and as of the Closing Date. (h) Purchasers shall have performed in all material respects the covenants, agreements and obligations required to be performed by each of them under this Agreement prior to and on the Closing Date. Asset Purchase Agreement 24 26 ARTICLE XI ACTIONS AT CLOSING 11.1. TRANSFERS AT CLOSING. At Closing: (a) Old Kofile and New Kofile shall deliver to each other a completed Bill of Sale, Receipt and Assignment and Assumption Agreement, in the form attached as Exhibit E, covering all of the Kofile Assets and Assumed Kofile Liabilities, duly executed by Old Kofile and New Kofile. (b) Old Spectrum and New Spectrum shall deliver to each other a completed Bill of Sale, Receipt and Assignment and Assumption Agreement, in the form attached as Exhibit F, covering all of the Spectrum Assets and Assumed Spectrum Liabilities, duly executed by Old Spectrum and New Spectrum. (c) Tyler shall deliver to ei Solutions a completed Bill of Sale and Receipt, in the form attached as Exhibit G, covering all of the Intangibles, duly executed by Tyler. (d) Sellers shall deliver to Purchasers articles of transfer, assignments, licenses and such other instruments of transfer and conveyance, each duly executed by the appropriate Seller, as shall be reasonably necessary or appropriate to vest in appropriate Purchaser good and indefeasible title to the respective Assets, free and clear of all Encumbrances other than Permitted Encumbrances and to comply with the purposes and intent of this Agreement. (e) Sellers shall deliver to Purchasers releases of all Encumbrances relating to the Assets (except for Permitted Encumbrances), duly executed by each respective lienholder. (f) Sellers shall have delivered to Purchasers a certificate confirming the satisfaction of the conditions set forth in Section 10.1(f) and (g). (g) Purchasers shall have delivered to Sellers a certificate confirming the satisfaction of the conditions set forth in Section 10.2(g) and (h). (h) Purchasers shall deliver to Sellers the Purchase Price, payable as provided in Section 5.2. 11.2. CONSENTS. At Closing, Sellers or Purchasers will deliver all necessary consents of third parties to the assignment of the Assumed Contracts; provided, however, that if the parties have been unable, after reasonable attempts, to obtain one or more of such consents, and either (a) the parties enter into a subcontract or sublicense, as contemplated by Section 8.6, with respect to the contract or agreement to which such consent pertains, or (b) the loss of the contract, agreement or license to which such consent pertains would not, when taken as a whole with all other failures to obtain consents, have a material adverse effect on the operations or the financial condition of the respective Business taken as a whole, then the parties' failure to obtain such consent will not constitute a failure of compliance with the provisions of this Section 11.2. Asset Purchase Agreement 25 27 ARTICLE XII MISCELLANEOUS 12.1. ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties hereunder may not be assigned (except by operation of Law) without the prior written consent of the other party. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their successors and permitted assigns, including, without limitation, the heirs and representatives of any party that is an individual. 12.2. ENTIRE AGREEMENT. This Agreement (including the Schedules) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the parties and supersede any prior agreement and understanding relating to the subject matter of this Agreement. 12.3. AMENDMENT; WAIVER. This Agreement may be modified or amended only by a written instrument executed by the parties hereto, acting, as the case may be, through their respective officers, duly authorized by their respective Boards of Directors. No waiver of compliance with any provision or condition hereof, and no consent provided for herein, will be effective unless evidenced by an instrument in writing duly executed by the party sought to be charged therewith. No failure on the part of any party to exercise, and no delay in exercising, any of its rights hereunder will operate as a waiver thereof, nor will any single or partial exercise by any party of any right preclude any other or future exercise thereof or the exercise of any other right. 12.4. NOTICES. Each notice, demand, waiver, consent and other communication required or permitted to be given hereunder will be in writing and will be sent either by (a) registered or certified first-class mail, postage prepaid and return receipt requested, (b) national commercial courier service or (c) telex or facsimile, in each case addressed as follows: (a) If to any Purchaser, addressed to it at: c/o eiStream, Inc. 2800 W. Mockingbird Lane Dallas, Texas 75235 Attn: John D. Woolf Facsimile: 214-902-0211 (b) If to any Seller, addressed to it at: c/o Tyler Technologies, Inc. 2800 W. Mockingbird Lane Dallas, Texas 75235 Attn: H. Lynn Moore, Jr., Esq. Facsimile: 214-902-5058 Each such notice and other communication given by mail will be deemed to have been given when it is deposited in the United States mail in the manner specified herein, each such notice and other communication given by national commercial courier service will be deemed to have been given when it Asset Purchase Agreement 26 28 is delivered to such service, and each such notice and other communication given by telex or facsimile will be deemed to have been given when it is so transmitted and the appropriate answerback or confirmation of transmittal is received. Any party may change its address for the purpose hereof by giving notice in accordance with the provisions of this Section 12.4. 12.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in ARTICLE VI and ARTICLE VII shall survive the Closing for a period of 18 months from the Closing Date (the "Expiration Date"). 12.6. EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 12.7. REFORMATION AND SEVERABILITY. In case any provision of this Agreement shall be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and unenforceable, but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 12.8. GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Texas (except for its principles governing conflicts of laws). 12.9. DISPUTE RESOLUTION. (a) If any dispute arises between any parties to this regarding this Agreement or the transactions described herein, the persons named or referred to in Section 12.4 for each party will attempt in good faith to resolve the dispute. If those individuals have not agreed to a resolution within 30 days from the date on which the dispute was first presented to them, any party, by written notice to the other parties, may require that the dispute be submitted for resolution to, on behalf of Purchasers, Oates and, on behalf of Sellers, the chief executive officer of Tyler (the "Designated Parties"). The Designated Parties will meet, in person or by other means satisfactory to them, to attempt to resolve the dispute within 30 days after reference of the matter to them. If the Designated Parties reach a decision within such 30-day period, their decision will be final and binding on the parties for all purposes. If the Designated Parties fail to resolve the dispute within such period, the matter may be referred for arbitration as provided by Section 12.9(b). (b) Except as provided by Section 12.9(a), all disputes or controversies (whether of law or fact) of any nature whatsoever arising from or relating to this Agreement and the transactions described herein will be decided by arbitration by the American Arbitration Association (the "AAA") in accordance with the Commercial Arbitration Rules of the Association. The arbitrators will be selected as follows: the Designated Parties will, within 30 days of the date of demand by any Purchaser or Seller for arbitration, each select one independent, qualified arbitrator and the two Asset Purchase Agreement 27 29 arbitrators so selected will select the third arbitrator within 30 days after their appointment as party arbitrators. Each party will bear the expenses of the arbitrator chosen by it, and will bear one-half the expenses of the independent arbitrator. Hearings in the proceeding will commence within 120 days of the selection of the independent arbitrator. Arbitration will take place in Dallas, Texas. Arbitration proceedings will be conducted confidentially; in such case all documents, testimony and records will be received, heard and maintained by the arbitrators in confidence under seal, available for inspection only by AAA and the parties and their respective attorneys and experts, who will agree in advance and in writing to receive all such information confidentially and to maintain such information in confidence. The decree or award rendered by the arbitrators, who will act by majority vote, may be entered as a final and binding judgment in any court having jurisdiction thereof. (c) All negotiations and proceedings pursuant to this Section 12.9 will be confidential and will be treated as compromise and settlement negotiations for purposes of the United States Federal Rules of Evidence and any applicable state rules of evidence, provided that any party may specifically waive these rights of privilege and confidentiality with respect to any communications it makes pursuant to this Section 12.9. 12.10. COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. Facsimile transmission of any signed original document and/or retransmission of any signed facsimile transmission will be deemed the same as delivery of an original. At the request of any party, the parties will confirm facsimile transmission by signing a duplicate original document. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Asset Purchase Agreement 28 30 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. TYLER TECHNOLOGIES, INC. By: --------------------------------------- Name: H. Lynn Moore, Jr. ------------------------------------- Title: Corporate Counsel ------------------------------------ KOFILE, INC. By: --------------------------------------- Name: H. Lynn Moore, Jr. ------------------------------------- Title: Secretary ------------------------------------ SPECTRUM DATA, INC. By: --------------------------------------- Name: H. Lynn Moore, Jr. ------------------------------------- Title: Secretary ------------------------------------ ei SOLUTIONS, INC. By: --------------------------------------- Name: John D. Woolf ------------------------------------- Title: Vice President ------------------------------------ KOFILE ACQUISITION CORPORATION By: --------------------------------------- Name: John D. Woolf ------------------------------------- Title: Vice President ------------------------------------ SPECTRUM DATA ACQUISITION CORPORATION By: --------------------------------------- Name: John D. Woolf ------------------------------------- Title: Vice President ------------------------------------ Asset Purchase Agreement--Signature Page 31 TABLE OF CONTENTS ARTICLE I DEFINITIONS 1.1. DEFINITIONS..............................................................2 1.2. INTERPRETATION...........................................................6 ARTICLE II THE KOFILE PURCHASE 2.1. ACQUISITION OF THE KOFILE ASSETS.........................................6 2.2. EXCLUDED KOFILE ASSETS...................................................8 2.3. ASSIGNMENT AND ASSUMPTION OF CONTRACTS...................................9 2.4. ASSUMED LIABILITIES......................................................9 2.5. LIABILITIES NOT ASSUMED..................................................9 ARTICLE III THE SPECTRUM PURCHASE 3.1. ACQUISITION OF THE SPECTRUM ASSETS......................................10 3.2. EXCLUDED SPECTRUM ASSETS................................................11 3.3. ASSIGNMENT AND ASSUMPTION OF CONTRACTS..................................12 3.4. ASSUMED LIABILITIES.....................................................12 3.5. LIABILITIES NOT ASSUMED.................................................12 ARTICLE IV OTHER PURCHASES 4.1. ACQUISITION OF THE REAL PROPERTY........................................13 4.2. ACQUISITION OF THE INTANGIBLES..........................................13 ARTICLE V PURCHASE PRICE; CLOSING 5.1. PURCHASE PRICE..........................................................14 5.2. PAYMENT OF PURCHASE PRICE...............................................14 5.3. CLOSING.................................................................14 5.4. EFFECTIVE TIME..........................................................14 5.5. TRANSFER OF CASH AND CASH EQUIVALENTS...................................14 5.6. POST-CLOSING ADJUSTMENT TO PURCHASE PRICE...............................14 5.7. ALLOCATION OF PURCHASE PRICE............................................16 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLERS 6.1. DUE ORGANIZATION AND QUALIFICATION......................................16 6.2. AUTHORIZATION; NON-CONTRAVENTION; APPROVALS.............................16 6.3. TITLE TO ASSETS.........................................................17 6.4. TAXES...................................................................17 6.5. BROKERS AND FINDERS.....................................................17
Asset Purchase Agreement 32 6.6. NO IMPLIED REPRESENTATIONS..............................................17 ARTICLE VII REPRESENTATIONS AND WARRANTIES OF PURCHASERS 7.1. DUE ORGANIZATION AND QUALIFICATION......................................18 7.2. AUTHORIZATION; NON-CONTRAVENTION; APPROVALS.............................18 7.3. BROKERS AND FINDERS.....................................................19 7.4. NO IMPLIED REPRESENTATIONS..............................................19 ARTICLE VIII CERTAIN COVENANTS 8.1. CONDUCT OF BUSINESS.....................................................19 8.2. FUTURE COOPERATION; TAX MATTERS.........................................19 8.3. TAX STATUS AND EFFECT...................................................19 8.4. EXPENSES................................................................20 8.5. CONSENTS TO ASSIGNMENT..................................................20 8.6. SUBCONTRACTS............................................................20 8.7. NAME CHANGE; CORPORATE EXISTENCE........................................20 8.8. BULK SALES..............................................................20 8.9. RELATED TRANSACTIONS....................................................20 8.10. PAYMENT OF LIABILITIES.................................................20 8.11. TRANSITION SERVICES....................................................21 ARTICLE IX INDEMNIFICATION 9.1. INDEMNIFICATION BY OLD KOFILE AND OLD SPECTRUM..........................21 9.2. INDEMNIFICATION BY NEW KOFILE AND NEW SPECTRUM..........................21 9.3. THIRD PERSON CLAIMS.....................................................21 9.4. NON-THIRD PERSON CLAIMS.................................................22 9.5. INDEMNIFICATION DEDUCTIBLE..............................................23 9.6. INDEMNIFICATION LIMITATION..............................................23 ARTICLE X CONDITIONS TO CLOSING 10.1. CONDITIONS TO OBLIGATIONS OF PURCHASERS................................23 10.2. CONDITIONS TO OBLIGATIONS OF SELLERS...................................24 ARTICLE XI ACTIONS AT CLOSING 11.1. TRANSFERS AT CLOSING...................................................25 11.2. CONSENTS...............................................................25
Asset Purchase Agreement ii 33 ARTICLE XII MISCELLANEOUS 12.1. ASSIGNMENT; SUCCESSORS AND ASSIGNS.....................................26 12.2. ENTIRE AGREEMENT.......................................................26 12.3. AMENDMENT; WAIVER......................................................26 12.4. NOTICES................................................................26 12.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.............................27 12.6. EXERCISE OF RIGHTS AND REMEDIES........................................27 12.7. REFORMATION AND SEVERABILITY...........................................27 12.8. GOVERNING LAW..........................................................27 12.9. DISPUTE RESOLUTION.....................................................27 12.10. COUNTERPARTS...........................................................28
Asset Purchase Agreement iii 34 EXHIBIT A REAL PROPERTY PURCHASE AGREEMENT Asset Purchase Agreement 35 EXHIBIT B FORM OF SUBCONTRACT Asset Purchase Agreement 36 EXHIBIT C LEASE AGREEMENT Asset Purchase Agreement 37 EXHIBIT D AMENDMENT TO EMPLOYMENT AND NONCOMPETITION AGREEMENT Asset Purchase Agreement 38 EXHIBIT E BILL OF SALE, RECEIPT AND ASSIGNMENT AND ASSUMPTION AGREEMENT (KOFILE PURCHASE) Asset Purchase Agreement 39 EXHIBIT F BILL OF SALE, RECEIPT AND ASSIGNMENT AND ASSUMPTION AGREEMENT (SPECTRUM PURCHASE) Asset Purchase Agreement 40 EXHIBIT G BILL OF SALE AND RECEIPT (INTANGIBLES PURCHASE) Asset Purchase Agreement 41 SCHEDULE 5.2 PAYMENT OF PURCHASE PRICE RECIPIENT(S): Name: Bank of America, N.A. Amount: $8,200,000.00 Wire Instructions: Bank Name: Bank of America, N.A. ABA Routing No.: 111000012 Account No.: 1292000883 Attn: Credit Services, Re: Tyler Technologies
Asset Purchase Agreement 42 SCHEDULE 5.6 ADJUSTMENTS TO PURCHASE PRICE 1. See attached schedule for Agreed Kofile Net Asset Value and Agreed Spectrum Net Asset Value. 2. Schedule of Closing Kofile Net Asset Value and Closing Spectrum Net Asset Value to be mutually agreed upon and attached as part of Supplemental Schedule 5.6 within 45 days after the Closing Date. 3. Calculation of Net Asset Value Adjustment to be mutually agreed upon and attached as part of Supplemental Schedule 5.6 within 45 days after the Closing Date. 4. Calculation of Net Cash Adjustment to be mutually agreed upon and attached as part of Supplemental Schedule 5.6 within 45 days after the Closing Date. Asset Purchase Agreement 43 SCHEDULE 5.7 ALLOCATION OF PURCHASE PRICE To be mutually agreed upon and attached within 90 days after the Closing Date. Asset Purchase Agreement EX-4.8 3 d81555ex4-8.txt REAL ESTATE PURCHASE AND SALE AGREEMENT 1 EXHIBIT 4.8 PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is made by and between Purchaser and Seller as of the Effective Date. In consideration of the mutual covenants and representations herein contained, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as follows: 1. DEFINITIONS 1.1 As used herein, the following terms shall have the meanings set forth below in this SECTION 1.1: "AGREEMENT" has the meaning set forth in the first paragraph of this Agreement. "APPROVAL PERIOD" shall mean the period commencing on the Effective Date and ending at 5:00 P.M., Dallas, Texas time, on the 20th day thereafter; provided, however, in no event shall the Approval Period extend beyond September 29, 2000. "CLOSING" shall mean the act of settlement of the purchase and sale of the Properties in accordance with this Agreement at which, among other matters, title to the Mockingbird Property and the San Antonio Property is conveyed from Seller to Purchaser and the Purchase Price is paid by Purchaser to Seller. "CLOSING DATE" shall mean September 29, 2000. "EFFECTIVE DATE" shall mean the first date the Title Company is in receipt of this Agreement executed by Purchaser and Seller (whether in counterparts or not). "IMPROVEMENTS" shall mean any building, fixtures, fences, plantings and other improvements and installations located on or beneath the Land. "INSPECTION MATERIALS" shall mean the Title Commitment, the Survey, and to the extent in Seller's possession, any environmental reports, engineering studies, warranties, and guaranties. "LAND" shall mean (i) in the case of the Mockingbird Property, that certain tract of land located in the City of Dallas, Dallas County, Texas, being more particularly described on EXHIBIT A-1 attached hereto and made a part hereof, and (ii) in the case of the San Antonio Property, that certain tract of land located in the City of San Antonio, Bexar County, Texas, being more particularly described on EXHIBIT A-2 attached hereto and made a part hereof. PURCHASE AND SALE AGREEMENT - Page 1 2 "MOCKINGBIRD LEASE" shall mean the lease to be executed at Closing between Tyler Technologies, Inc., as tenant, and Purchaser, as landlord, for the Mockingbird Property as set forth on EXHIBIT D attached hereto and made a part hereof. "MOCKINGBIRD PROPERTY" shall mean the Property owned by Seller and more particularly described on EXHIBIT A-1. "OWNER'S POLICY" shall mean, except to the extent modified by SECTION 7.5(A), the Owner's Policy of Title Insurance in the standard form in use in the State, naming Purchaser as insured, insuring that Purchaser owns fee simple title to the Property, subject only to the Permitted Encumbrances. "PROPERTY" shall mean with respect to each of the (i) Mockingbird Property, and (ii) San Antonio Property, to the extent assignable or transferable, all right, title and interest to be conveyed by Seller to Purchaser upon the terms set forth in this Agreement, including the following described property: (a) Land. The Land. (b) Easements. All easements, if any, benefiting the Land or the Improvements. (c) Rights and Appurtenances. All rights and appurtenances pertaining to the Land, including any right, title and interest of the Seller in and to adjacent streets, alleys or rights-of-way. (d) Improvements. The Improvements. (e) Fixtures. All fixtures, if any, owned by Seller and located on or about the Land and the Improvements. Any reference to "PROPERTY" or "PROPERTIES" shall mean individually or collectively as the context may require (i) the Mockingbird Property, and (ii) the San Antonio Property. "PURCHASE PRICE" shall mean Six Million One Hundred and Fifty Thousand and no/100 Dollars ($6,150,000.00). "PURCHASER" shall mean William D. and Marilyn Oates, whose address for notice under this Agreement is 4900 Lakeside Drive, Dallas, Texas 75205. "SAN ANTONIO PROPERTY" shall mean the Property owned by Seller and more particularly described on EXHIBIT A-2. "SELLER" shall mean, collectively or individually as the context may require, (i) with respect to the Mockingbird Property, Business Resources Corporation, a Texas corporation, whose PURCHASE AND SALE AGREEMENT - Page 2 3 address for notice under this Agreement is 2800 West Mockingbird Land, Dallas, Texas 75235, and (ii) with respect to the San Antonio Property, Spectrum Data, Inc., a Texas corporation, whose address for notice under this Agreement is 10537 Gulfdale Road, San Antonio, Texas 78216. "STATE" shall mean the State of Texas. "SURVEY" shall mean a current as-built survey of the Property. "TITLE COMMITMENT" shall mean a Commitment(s) for Owner's Policy of Title Insurance with respect to the Property issued by the Title Company together with legible copies of any restrictive covenants, easements and other items listed as title exceptions in such Commitment(s). "TITLE COMPANY" shall mean American Title Company whose address for notice under this Agreement is as follows: American Title Company 1909 Woodall Rodgers Freeway Suite 4000 Attention: Bo Feagin Tel: 214-754-7000 Fax: 214-303-0935 2. PURCHASE AND SALE 2.1 Purchase and Sale. Subject to the terms and conditions of this Agreement, Seller hereby agrees to sell and convey to Purchaser, and Purchaser hereby agrees to purchase from Seller, all of the Seller's assignable and transferable right, title and interest in and to the Mockingbird Property and the San Antonio Property. 2.2 Independent Consideration. Upon execution of this Agreement, Purchaser has delivered to Seller, and Seller acknowledges receipt of, FIFTY AND NO/100 DOLLARS ($50.00) (the "INDEPENDENT CONSIDERATION"), as consideration for Purchaser's right to purchase the Property and for Seller's execution, delivery and performance of this Agreement. The Independent Consideration is in addition to and independent of any other consideration or payment provided for in this Agreement, is non-refundable and shall be retained by Seller notwithstanding any other provision of this Agreement. PURCHASE AND SALE AGREEMENT - Page 3 4 3. PURCHASE PRICE 3.1 Purchase Price. The Purchase Price shall be paid in cash by Purchaser to Seller at the Closing by wire transfer in accordance with wire transfer instructions to be provided by Seller. If Purchaser terminates this Agreement in accordance with any right to terminate granted to Purchaser by the terms of this Agreement, Purchaser agrees to return to Seller all Inspection Materials previously provided at the time such notice to terminate this Agreement is given, and no party hereto shall have any further obligations under this Agreement except for such obligations which by their terms expressly survive the termination of this Agreement (the "SURVIVING OBLIGATIONS"). The obligations to return the Inspection Materials shall survive the termination of this Agreement. At the Closing, the Seller shall deliver to Purchaser the Deeds described in SECTION 7.7. 4. EARNEST MONEY 4.1 Earnest Money. Intentionally deleted. 5. CONDITIONS TO CLOSING 5.1 Seller's Obligations. Seller shall deliver the Inspection Materials to Purchaser, at Seller's expense, within ten (10) days after the Effective Date. Purchaser's sole remedy for such failure shall be Purchaser's right to terminate this Agreement by delivering written notice thereof to Seller prior to the end of the Approval Period, in which event neither party shall have any obligation hereunder except for the Surviving Obligations. 5.2 Title Commitment and Survey. 5.2.1 In the event (i) the Survey shows any easement, right-of-way, encroachment, conflict, protrusion or other matter affecting the Property that is unacceptable to Purchaser, or (ii) any exceptions appear in the Title Commitment other than the standard printed exceptions set forth in the standard form of Commitment for Title Insurance in use in the State, that are unacceptable to Purchaser, Purchaser shall within five (5) business days after receipt of the Survey and the Title Commitment, notify Seller in writing of such facts and the reasons therefor ("PURCHASER'S OBJECTIONS"). Upon the expiration of said five (5) business day period, except for Purchaser's Objections if same are timely raised, Purchaser shall be deemed to have accepted the form and substance of the Survey and the Title Commitment. Notwithstanding anything to the contrary contained herein and except with respect to liens and security interests in the Property which may be released by the payment of a liquidated PURCHASE AND SALE AGREEMENT - Page 4 5 sum of money not to exceed in the aggregate the total proceeds of Closing, Seller shall have no obligations to take any steps or bring any action or proceeding or otherwise to incur any effort or expense whatsoever to eliminate or modify any of the Purchaser's Objections. Seller may, within five (5) days after receipt of written notice of Purchaser's Objections ("SELLER'S CURE PERIOD"), deliver to Purchaser written notice ("SELLER'S CURE NOTICE") setting forth which of Purchaser's Objections Seller will endeavor to cure prior to the Closing Date and which of Purchaser's Objections Seller cannot or does not intend to cure. If Seller has not given Seller's Cure Notice by the end of Seller's Cure Period, Seller shall be deemed to have given notice that it does not intend to cure any of Purchaser's Objections. If by the end of the Approval Period, Seller has not cured or undertaken to cure all of Purchaser's Objections to the reasonable satisfaction of Purchaser, Purchaser may (as its sole and exclusive remedy) terminate this Agreement by delivering written notice thereof to Seller at or before the expiration of the Approval Period. If by the Closing Date, Seller has not cured to the reasonable satisfaction of Purchaser all of Purchaser's Objections which Seller has in Seller's Cure Notice undertaken to cure, Purchaser may (as its sole and exclusive remedy) terminate this Agreement by written notice to Seller on the Closing Date. In the event of a termination of this Agreement by Purchaser under this SECTION 5.2.1, neither party shall have any further obligations hereunder other than the Surviving Obligations. 5.2.2 The term "PERMITTED ENCUMBRANCES" as used herein includes: (i) any easement, right of way, encroachment, conflict, discrepancy, overlapping of improvements, protrusion, encumbrance, restriction, condition, covenant, exception or other matter with respect to the Property that is reflected or addressed on the Survey or the Title Commitment to which Purchaser fails to timely object pursuant to SECTION 5.2.1 of this Agreement; (ii) except with respect to liens and security interests in the Property which may be released by the payment of a liquidated sum of money not to exceed in the aggregate the total proceeds of Closing, any Purchaser's Objection which in Seller's Cure Notice Seller has undertaken to cure that remains uncured, for whatever reason, at the Closing Date; (iii) except with respect to liens and security interests which may be satisfied by the payment of money, any Purchaser's Objections which by the end of the Approval Period Seller has given, or is deemed to have given, notice that it cannot or does not intend to cure; and (iv) the rights and interests of parties claiming under the Mockingbird Lease. 5.2.3 Limitations of Seller's Obligations. Notwithstanding anything contained herein to the contrary, Seller shall have no obligation to take any steps, bring any action or proceeding or incur any effort or expense whatsoever (except the payment of funds required to release any liens or security interests affecting the Property as set forth in SECTION 5.2.1 and SECTION 5.2.2) to eliminate, modify or cure any objection Purchaser may have pursuant to SECTION 5.2.1 or SECTION 5.2.2. PURCHASE AND SALE AGREEMENT - Page 5 6 5.3 Purchaser's Representations and Warranties. Purchaser represents and warrants to Seller that (a) if Purchaser is a partnership or corporation, it is duly organized and in good standing under the laws of the State of its organization, is qualified to do business in the State and has the power to enter into this Agreement and to execute and deliver this Agreement and to perform all duties and obligations imposed upon it hereunder, and Purchaser has obtained all necessary partnership and corporate authorizations required in connection with the execution, delivery and performance contemplated by this Agreement and has obtained the consent of all entities and parties necessary to bind Purchaser to this Agreement, and (b) neither the execution nor the delivery of this Agreement, nor the consummation of the purchase and sale contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement conflict with or will result in the breach of any of the terms, conditions, or provisions of any agreement or instrument to which Purchaser, or any partner or related entity or affiliate of Purchaser, is a party or by which Purchaser, any partner or related entity or affiliate of Purchaser, or any of Purchaser's assets is bound. The Purchaser's representations and warranties set forth in this SECTION 5.3 shall survive the Closing or termination of this Agreement. Purchaser's representations and warranties contained herein must be true and correct through the Closing Date, and Purchaser's failure to notify Seller prior to the Closing Date of any inaccuracies shall be a default by Purchaser under this Agreement. 5.4 Seller's Representations and Warranties. Seller represents and warrants to Purchaser that (a) Seller has the full partnership/corporate right, power, and authority, without the joinder of any other person or entity, to enter into, execute and deliver this Agreement, and to perform all duties and obligations imposed on Seller under this Agreement, and (b) neither the execution nor the delivery of this Agreement, nor the consummation of the purchase and sale contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement conflict with or will result in the breach of any of the terms, conditions, or provisions of any agreement or instrument to which Seller is a party or by which Seller or any of Seller's assets is bound, and (c) except as disclosed to Purchaser in writing, Seller has no actual knowledge that Seller has received from any governmental authority, holder of any mortgage or board of fire underwriters (or other body performing similar functions) any written notices (i) requiring any work, repairs, construction, alterations or installations on or in connection with the Property in order to comply with any applicable law, regulation or other governmental requirement, or (ii) asserting any violation of any applicable law, regulation or other governmental requirement, and (d) to Seller's actual knowledge, Seller has not received any written notices of condemnation proceedings, zoning change or special assessments or uncorrected violations of the applicable housing, building, safety, fire or any other ordinances with respect to the Property. The Seller's representations and warranties set forth in this SECTION 5.4 shall survive the Closing for a period of eighteen (18) months, and any action filed pursuant to a breach of Seller's representations and warranties set forth in this SECTION 5.4 must be commenced, if at all, within twenty-four (24) months of the Closing. 5.5 Defective Condition Extension; Termination. The obligations of Seller hereunder are subject to and contingent upon the following: In the event that subsequent to the execution of this Agreement Seller obtains knowledge of, or Purchaser's inspection of the Property reveals, either (i) the presence of any Hazardous Materials (as defined in SECTION 6.2 hereof) or the violation or potential violation of any PURCHASE AND SALE AGREEMENT - Page 6 7 Environmental Requirements (as defined in SECTION 6.3 hereof) or (ii) any structural or other defect in the Improvements, whether or not in violation of any applicable law, ordinance, code, regulation or decree of any governmental authority having jurisdiction over the Property (collectively, a "DEFECTIVE CONDITION"), which Seller, in its sole judgment, determines could constitute a potential liability to Seller after the Closing or should be remedied prior to the sale of the Property, Seller shall have the right upon written notice to Purchaser on or before the scheduled Closing Date either (i) to extend the Closing Date for the period of time necessary to complete such remediation at Seller's sole cost and expense, or (ii) to terminate this Agreement upon written notice to Purchaser, in which event neither party shall have any further right or obligation hereunder other than the Surviving Obligations. The terms of this SECTION 5.5 are solely for the benefit of Seller, and Purchaser shall have no additional right or remedy hereunder as a result of the exercise by Seller of its rights under this Section. 6. NO REPRESENTATIONS OR WARRANTIES BY SELLER; ACCEPTANCE OF PROPERTY 6.1 Disclaimer. PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES (OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT AND THE SPECIAL WARRANTY OF TITLE AS SET OUT IN THE DEEDS, AS DEFINED BELOW), PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, (B) THE INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER OR ANY TENANT MAY CONDUCT THEREON, (D) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY, (F) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, (G) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY, OR (H) COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING THE EXISTENCE IN OR ON THE PROPERTY OF HAZARDOUS MATERIALS (AS DEFINED BELOW) OR (I) ANY OTHER MATTER WITH RESPECT TO THE PROPERTY. ADDITIONALLY, NO PERSON ACTING ON BEHALF OF SELLER IS AUTHORIZED TO MAKE, AND BY EXECUTION HEREOF PURCHASER ACKNOWLEDGES THAT NO PERSON HAS MADE, ANY REPRESENTATION, AGREEMENT, STATEMENT, WARRANTY, GUARANTY OR PROMISE REGARDING THE PROPERTY OR THE TRANSACTION CONTEMPLATED HEREIN; AND NO SUCH REPRESENTATION, WARRANTY, AGREEMENT, GUARANTY, STATEMENT OR PROMISE PURCHASE AND SALE AGREEMENT - Page 7 8 IF ANY, MADE BY ANY PERSON ACTING ON BEHALF OF SELLER SHALL BE VALID OR BINDING UPON SELLER UNLESS EXPRESSLY SET FORTH HEREIN. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT AND THE SPECIAL WARRANTY OF TITLE AS SET OUT IN THE DEEDS, PURCHASER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER AND AGREES TO ACCEPT THE PROPERTY AT THE CLOSING AND WAIVE ALL OBJECTIONS OR CLAIMS AGAINST SELLER (INCLUDING, BUT NOT LIMITED TO, ANY RIGHT OR CLAIM OF CONTRIBUTION) ARISING FROM OR RELATED TO THE PROPERTY OR TO ANY HAZARDOUS MATERIALS ON THE PROPERTY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY, TRUTHFULNESS OR COMPLETENESS OF SUCH INFORMATION. EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT AND THE SPECIAL WARRANTY OF TITLE AS SET OUT IN THE DEEDS, SELLER IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENT, REPRESENTATION OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, CONTRACTOR, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT (OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT AND THE SPECIAL WARRANTY OF TITLE AS SET OUT IN THE DEEDS) TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS" CONDITION AND BASIS WITH ALL FAULTS. THE PROVISIONS OF THIS SECTION 6 SHALL SURVIVE THE CLOSING OR ANY TERMINATION HEREOF. 6.2 Hazardous Materials. "Hazardous Materials" shall mean any substance which is or contains (i) any "hazardous substance" as now or hereafter defined in Section 101(14) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.) ("CERCLA") or any regulations promulgated under CERCLA; (ii) any "hazardous waste" as now or hereafter defined in the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) ("RCRA") or regulations promulgated under RCRA; (iii) any substance regulated by the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.); (iv) gasoline, diesel fuel, or other petroleum hydrocarbons; (v) asbestos and asbestos containing materials, in any form, whether friable or non-friable; (vi) polychlorinated biphenyls; (vii) radon gas; and (viii) any additional substances or materials which are now or hereafter classified or considered to be hazardous or toxic under Environmental Requirements (as hereinafter defined) or the common law, or any other applicable laws relating to the Property. Hazardous Materials shall include, without limitation, any substance, the presence of which on the Property, (A) requires reporting, investigation or remediation under Environmental Requirements; (B) causes or threatens to cause a nuisance on PURCHASE AND SALE AGREEMENT - Page 8 9 the Property or adjacent property or poses or threatens to pose a hazard to the health or safety of persons on the Property or adjacent property; or (C) which, if it emanated or migrated from the Property, could constitute a trespass. 6.3 Environmental Requirements. "Environmental Requirements" shall mean all laws, ordinances, statutes, codes, rules, regulations, agreements, judgments, orders, and decrees, now or hereafter enacted, promulgated, or amended, of the United States, the states, the counties, the cities, or any other political subdivisions in which the Property is located, and any other political subdivision, agency or instrumentality exercising jurisdiction over the owner of the Property, the Property, or the use of the Property, relating to pollution, the protection or regulation of human health, natural resources, or the environment, or the emission, discharge, release or threatened release of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or waste or Hazardous Materials into the environment (including, without limitation, ambient air, surface water, ground water or land or soil). 7. CLOSING 7.1 Closing. The Closing shall be held at the offices of the Title Company on the Closing Date, unless the parties mutually agree in writing upon another place, time or date. 7.2 Possession. Except as set forth in SECTION 7.8, possession of the Property shall be delivered to Purchaser at the Closing, subject to the Permitted Encumbrances. 7.3 Proration. In that the Mockingbird Lease is a triple-net lease, there will not be any prorations or related cash adjustments effected at Closing with respect to real estate and personal property taxes, utilities and all other operating expenses with respect to the Mockingbird Property. All real estate and personal property taxes, utilities and all other operating expenses with respect to the San Antonio Property shall be prorated as of the Closing Date. 7.4 Closing Costs. Except as otherwise expressly provided herein, Seller shall pay, on the Closing Date, the title insurance premium for the Owner's Policy and one-half (1/2) of the cost to amend the survey exception to read "any shortages in area," the cost of the Survey, and one-half (1/2) of any escrow fees and other customary charges of the Title Company, and Purchaser shall pay, on the Closing Date, all recording costs, the one-half (1/2) of the cost to amend the survey exception to read "any shortages in area," deed transfer taxes or documentary stamps, one-half (1/2) of any escrow fees and other customary charges of the Title Company. Except as otherwise provided herein, each party shall pay its own attorneys' fees. 7.5 Seller's Obligations at the Closing. At the Closing, Seller shall deliver to Purchaser the following: (a) Title Policy. Owner's Policy, which upon payment by Seller and Purchaser of the sum set forth in SECTION 7.4, shall be amended such that the survey exception shall read "any shortages in area." PURCHASE AND SALE AGREEMENT - Page 9 10 (b) Evidence of Authority. Such organizational and authorizing documents of Seller as shall be reasonably required by the Title Company to evidence Seller's authority to consummate the transactions contemplated by this Agreement. (c) Foreign Person. An affidavit of Seller certifying that Seller is not a "foreign person," as defined in the federal Foreign Investment in Real Property Tax Act of 1980, and the 1984 Tax Reform Act, as amended. (d) Warranties and guaranties. The originals of all warranties and guaranties, if any, in the possession of Seller. (e) Keys. A complete set of keys and access devices necessary to enable Purchaser to obtain access to the Property. 7.6 Purchaser's Obligations at the Closing. At the Closing, Purchaser shall deliver to Seller the following: (a) Purchase Price. The Purchase Price by wire transfer of immediately available funds. (b) Evidence of Authority. Such organizational and authorizing documents of Purchaser as shall be reasonably required by Seller and/or the Title Company authorizing Purchaser's acquisition of the Property pursuant to this Agreement and the execution of this Agreement and any documents to be executed by Purchaser at the Closing. (c) The duly executed Mockingbird Lease. 7.7 Documents to be Executed by Seller and Purchaser. At the Closing, Seller and Purchaser shall also execute and deliver the following: (a) Deed. Special Warranty Deeds (the "DEEDS") conveying the Land and the Improvements to Purchaser subject to no exceptions other than the Permitted Encumbrances, in the forms attached to this Agreement as EXHIBIT B-1 AND B-2. (b) Tenant Notices. If applicable, signed statements or notices to all tenants of the Property notifying such tenants that the Property has been transferred to Purchaser and that Purchaser is responsible for security deposits (specifying the amounts of such deposits). (c) Assignment and Assumption of Fixtures, and Warranties. Assignment in the forms attached to this Agreement as EXHIBIT C-1 and EXHIBIT C-2. 7.8 Leaseback of the Mockingbird Property. At Closing, Tyler Technologies, Inc., as tenant, and Purchaser, as landlord, shall enter into the Mockingbird Lease. PURCHASE AND SALE AGREEMENT - Page 10 11 8. RISK OF LOSS 8.1 Condemnation. If, prior to the Closing, action is initiated to take any of the Property by eminent domain proceedings or by deed in lieu thereof, Purchaser may either at or prior to Closing (a) terminate this Agreement, or (b) consummate the Closing, in which latter event all of Seller's assignable right, title and interest in and to the award of the condemning authority shall be assigned to Purchaser at the Closing and there shall be no reduction in the Purchase Price. 8.2 Casualty. Seller assumes all risks and liability for damage to or injury occurring to the Property by fire, storm, accident, or any other casualty or cause until the Closing has been consummated. If the Property, or any part thereof, suffers any damage in excess of thirty percent (30%) of the Purchase Price prior to the Closing from fire or other casualty, which Seller, at its sole option, does not elect to repair, Purchaser may either at or prior to Closing (a) terminate this Agreement, or (b) consummate the Closing, in which latter event all of Seller's right, title and interest in and to the proceeds of any insurance covering such damage (less an amount equal to any expenses and costs incurred by Seller to repair or restore the Property and any portion of such proceeds paid or to be paid pursuant to rental loss insurance on account of the loss of rents or other income from the Property for the period prior to and including the Closing Date, all of which shall be payable to Seller), to the extent the amount of such insurance does not exceed the Purchase Price, shall be assigned to Purchaser at the Closing. If the Property, or any part thereof, suffers any damage less than thirty percent (30%) of the Purchase Price prior to the Closing, Purchaser agrees that it will consummate the Closing and accept the assignment of the proceeds of any insurance covering such damage plus Seller shall pay to Purchaser an amount equal to Seller's deductible under its insurance policy and there shall be no reduction in the Purchase Price. 9. DEFAULT 9.1 Breach by Seller. Except as otherwise provided in SECTION 5.4, in the event that Seller shall default in any of its obligations hereunder to be performed prior to closing, for any reason other than Purchaser's default or a termination of this Agreement by Purchaser or Seller pursuant to a right to do so under the provisions hereof, Purchaser, as its sole and exclusive remedy may terminate this Agreement or sue for specific performance. 9.2 Breach by Purchaser. In the event that Purchaser shall default in any of its obligations hereunder to be performed prior to or after closing (the Surviving Obligations), for any reason other than Seller's default or a termination of this Agreement by Purchaser or Seller pursuant to a right to do so under the provisions hereof, Seller, as its sole and exclusive remedy may terminate this Agreement. The provisions of this SECTION 9.2 shall not limit or affect any of Purchaser's indemnities as provided in other Sections of this Agreement. PURCHASE AND SALE AGREEMENT - Page 11 12 10. FUTURE OPERATIONS 10.1 Future Operations. (a) From the date of this Agreement until the Closing or earlier termination of this Agreement, Seller will keep and maintain the Property in substantially its condition as of the date of this Agreement; (b) From the expiration of the Approval Period until the Closing or earlier termination of this Agreement, Seller will not lease any space in the Improvements without Purchaser's consent. 11. MISCELLANEOUS 11.1 Notices. All notices, demands and requests which may be given or which are required to be given by either party to the other, and any exercise of a right of termination provided by this Agreement, shall be in writing and shall be deemed effective either: (a) on the date personally delivered to the address below, as evidenced by written receipt therefor, whether or not actually received by the person to whom addressed; (b) on the third (3rd) business day after being sent, by certified or registered mail, return receipt requested, addressed to the intended recipient at the address specified below; or (c) on the first (1st) business day after being deposited into the custody of a nationally recognized overnight delivery service such as Federal Express Corporation, Emery or Purolator, addressed to such party at the address specified in SECTION 1.1 above (unless changed by similar notice in writing given by the particular person whose address is to be changed). 11.2 Real Estate Commissions. Neither Seller nor Purchaser has authorized any broker or finder to act on Seller's or Purchaser's behalf in connection with the sale and purchase hereunder and neither Seller nor Purchaser has dealt with any broker or finder purporting to act on behalf of any other party. Purchaser agrees to indemnify and hold harmless Seller from and against any and all claims, losses, damages, costs or expenses of any kind or character arising out of or resulting from any agreement, arrangement or understanding alleged to have been made by Purchaser or on Purchaser's behalf with any broker or finder in connection with this Agreement or the transaction contemplated hereby. Seller agrees to indemnify and hold harmless Purchaser from and against any and all claims, losses, damages, costs or expenses of any kind or character arising out of or resulting from any agreement, arrangement or understanding alleged to have been made by Seller or on Seller's behalf with any broker or finder in connection with this Agreement or the transaction contemplated hereby. Notwithstanding anything to the contrary contained herein, this SECTION 11.2 shall survive the Closing or any earlier termination of this Agreement. 11.3 Entire Agreement. This Agreement embodies the entire agreement between the parties relative to the subject matter hereof, and there are no oral or written agreements between the parties, nor any representations made by either party relative to the subject matter hereof, which are not expressly set forth herein. PURCHASE AND SALE AGREEMENT - Page 12 13 11.4 Amendment. This Agreement may be amended only by a written instrument executed by the party or parties to be bound thereby. 11.5 Headings. The captions and headings used in this Agreement are for convenience only and do not in any way limit, amplify, or otherwise modify the provisions of this Agreement. 11.6 Time of Essence. Time is of the essence of this Agreement; however, if the final date of any period which is set out in any provision of this Agreement falls on a Saturday, Sunday or legal holiday under the laws of the United States, the State of Texas or the State, then, in such event, the time of such period shall be extended to the next day which is not a Saturday, Sunday or legal holiday. 11.7 Governing Law. This Agreement shall be governed by the laws of the State and the laws of the United States pertaining to transactions in the State. 11.8 Successors and Assigns; Assignment. This Agreement shall bind and inure to the benefit of Seller and Purchaser and their respective heirs, executors, administrators, personal and legal representatives, successors and permitted assigns. Purchaser shall not assign Purchaser's rights under this Agreement without the prior written consent of Seller, which consent may be withheld absolutely; provided, however, notwithstanding the foregoing, Purchaser may assign Purchaser's rights under this Agreement to any person, firm, corporation or other entity related to or affiliated with Purchaser or in which Purchaser is a partner or member. Any such assignment shall be expressly contingent upon Seller being provided prior written notice of any such assignment. Any assignment of this Agreement in violation of the foregoing provisions shall be null and void. 11.9 Invalid Provision. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement; and, the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by such illegal, invalid, or unenforceable provision or by its severance from this Agreement. 11.10 Attorneys' Fees. In the event it becomes necessary for either party hereto to file suit to enforce this Agreement or any provision contained herein, the party prevailing in such suit shall be entitled to recover, in addition to all other remedies or damages, as provided herein, reasonable attorneys' fees incurred in such suit. 11.11 Multiple Counterparts. This Agreement may be executed in a number of identical counterparts which, taken together, shall constitute collectively one (1) agreement; in making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart with each party's signature. PURCHASE AND SALE AGREEMENT - Page 13 14 11.12 Exhibits. The following exhibits are attached to this Agreement and are incorporated into this Agreement by this reference and made a part hereof for all purposes: (a) EXHIBIT A, the legal description of the Land. (b) EXHIBIT B, the form of the Deed. (c) EXHIBIT C, the form of the Assignment and Assumption of Warranties. (d) EXHIBIT D, the form of the Mockingbird Lease. 11.13 No Recordation. Seller and Purchaser hereby acknowledge that neither this Agreement nor any memorandum or affidavit thereof shall be recorded of public record. Should Purchaser ever record or attempt to record this Agreement, or a memorandum or affidavit thereof, or any other similar document, then, notwithstanding anything herein to the contrary, said recordation or attempt at recordation shall constitute a default by Purchaser hereunder, and, in addition to the other remedies provided for herein, Seller shall have the express right to terminate this Agreement by filing a notice of said termination in the county in which the Land is located. 11.14 DTPA WAIVER. PURCHASER HEREBY REPRESENTS AND WARRANTS TO SELLER THAT (A) PURCHASER IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION, (B) PURCHASER IS REPRESENTED BY LEGAL COUNSEL, AND (C) PURCHASER IS SEEKING TO ACQUIRE THE PROPERTY, WHICH WILL NOT BE USED AS A FAMILY RESIDENCE, FOR A CONSIDERATION THAT EXCEEDS $500,000, OR (D) (i) PURCHASER IS A BUSINESS ENTITY THAT EITHER HAS ASSETS OF $5,000,000 OR MORE OR IS OWNED OR CONTROLLED BY A CORPORATION OR ENTITY WITH ASSETS OF $5,000,000 OR MORE, OR (ii) PURCHASER IS A SOPHISTICATED REAL ESTATE INVESTOR AND HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS OF THIS TRANSACTION. PURCHASER HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS, REMEDIES AND BENEFITS UNDER THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT (SECTIONS 17.41 AND FOLLOWING OF THE TEXAS BUSINESS AND COMMERCE CODE) (THE "DTPA") AND ANY OTHER SIMILAR CONSUMER PROTECTION LAW, WHETHER FEDERAL, STATE OR LOCAL. PURCHASER COVENANTS NOT TO SUE SELLER UNDER THE DTPA OR ANY SUCH SIMILAR CONSUMER PROTECTION LAW. 11.15 JURY WAIVER. PURCHASER AND SELLER DO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THEIR RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, OR UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE DOCUMENTS DELIVERED BY PURCHASER AT CLOSING OR SELLER AT CLOSING, OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ANY ACTIONS OF EITHER PARTY ARISING OUT OF OR RELATED IN ANY MANNER WITH THIS AGREEMENT OR THE PROPERTY (INCLUDING WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT AND ANY CLAIMS OR DEFENSES ASSERTING THAT THIS PURCHASE AND SALE AGREEMENT - Page 14 15 AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR SELLER TO ENTER INTO AND ACCEPT THIS AGREEMENT AND THE DOCUMENTS DELIVERED BY PURCHASER AT CLOSING AND SHALL SURVIVE THE CLOSING OF TERMINATION OF THIS AGREEMENT. 11.16 1031 Exchange. Purchaser and/or Seller (and/or their assigns) may desire to have their portion of the transaction described in this Agreement qualify as a Like-Kind Exchange of property pursuant to and in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended and the Regulations thereunder. In this regard, Purchaser and/or Seller shall have the option to assign this Agreement to a qualified intermediary. Purchaser and/or Seller represent and warrant that they will use their best efforts to assist the other party in structuring the other party's portion of the contemplated transaction as a Like-Kind Exchange and will use reasonable efforts to cooperate with the other party and/or its intermediary or escrow agent so long as the (i) closing date, (ii) the representations, warranties and parties liable therefor, and (iii) the other material terms and conditions of this Agreement are not modified by any such assignment. Purchaser and/or Seller will indemnify, defend and hold the other party harmless from any costs or liabilities relating to the Like-Kind Exchange in excess of the costs or liabilities required to be paid by the other party as set out elsewhere in this Agreement. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK PURCHASE AND SALE AGREEMENT - Page 15 16 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth below. PURCHASER: Date of Execution by Purchaser: - -------------------------------- - --------------------------------- -------------------------------- Social Security No. WILLIAM D. OATES - --------------------------------- -------------------------------- Social Security No. MARILYN OATES SELLER: BUSINESS RESOURCES CORPORATION, a Texas corporation Date of Execution by Seller: By: - --------------------------------- ---------------------------- Name: -------------------------- Title: ------------------------- SPECTRUM DATA, INC., a Texas corporation Date of Execution by Seller: By: - --------------------------------- ---------------------------- Name: -------------------------- Title: ------------------------- PURCHASE AND SALE AGREEMENT - Page 16 17 The undersigned Title Company hereby acknowledges receipt of a copy of this Agreement. AMERICAN TITLE COMPANY Date of Execution by Title Company: By: - --------------------------------- ---------------------------- Name: -------------------------- Title: Authorized Officer PURCHASE AND SALE AGREEMENT - Page 17 18 EXHIBIT A-1 TO PURCHASE AND SALE AGREEMENT LEGAL DESCRIPTION OF MOCKINGBIRD PROPERTY [SEE ATTACHED] EXHIBIT A-1 LEGAL DESCRIPTION OF MOCKINGBIRD PROPERTY - Page 1 19 EXHIBIT A-2 TO PURCHASE AND SALE AGREEMENT LEGAL DESCRIPTION OF SAN ANTONIO PROPERTY Lot 7, Block 2, New City Block 14892, VIEWPOINT PARK SUBDIVISION, UNIT 2, City of San Antonio, Bexar County, Texas according to plat recorded in Volume 6800, Page(s) 110-111, Deed and Plat Records, Bexar County, Texas. EXHIBIT A-2 LEGAL DESCRIPTION OF SAN ANTONIO PROPERTY - Page 1 20 EXHIBIT B-1 TO PURCHASE AND SALE AGREEMENT MOCKINGBIRD PROPERTY SPECIAL WARRANTY DEED STATE OF TEXAS ) ) COUNTY OF DALLAS ) Business Resources Corporation, a Texas corporation ("GRANTOR"), for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other valuable consideration, the receipt and sufficiency of which consideration are hereby acknowledged, has Granted, Sold, and Conveyed, and by these presents does Grant, Sell, and Convey, unto William D. Oates and Marilyn Oates ("Grantee"), having an address of 4900 Lakeside Drive, Dallas, Texas 75205, (i) all that real property situated in the County of Dallas, State of Texas, and more particularly described on EXHIBIT A attached hereto and made a part hereof for all purposes, and (ii) together with all improvements now or hereafter situated thereon, and the lessor's or landlord's interest in all space leases or occupancy agreements covering all or any portion of such real property and the improvements situated thereon (collectively, the "Property"). This Deed is made and accepted expressly subject to the matters set forth in EXHIBIT B attached hereto and made a part hereof for all purposes. TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances belonging in any way to the Property, unto the said Grantee, its successors and assigns forever, and Grantor binds itself and its successors and assigns to warrant and forever defend all and singular the Property to Grantee, its successors and assigns against every person lawfully claiming or to claim all or any part of the Property, by, through, or under Grantor, but not otherwise. GRANTEE ACKNOWLEDGES AND AGREES THAT GRANTOR HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES (OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS DEED), PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, (B) THE INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH GRANTEE MAY CONDUCT THEREON, (D) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY EXHIBIT B-1 SPECIAL WARRANTY DEED - Page 1 21 LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY, (F) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, (G) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY, OR (H) ANY OTHER MATTER WITH RESPECT TO THE PROPERTY, AND SPECIFICALLY, THAT GRANTOR HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS REGARDING COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING THE EXISTENCE IN OR ON THE PROPERTY OF HAZARDOUS MATERIALS OR SUBSTANCES. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY, OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS DEED, GRANTEE IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY GRANTOR AND ACCEPTS THE PROPERTY AND WAIVES ALL OBJECTIONS OR CLAIMS AGAINST GRANTOR (INCLUDING, BUT NOT LIMITED TO, ANY RIGHT OR CLAIM OF CONTRIBUTION) ARISING FROM OR RELATED TO THE PROPERTY OR TO ANY HAZARDOUS MATERIALS ON THE PROPERTY. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT GRANTOR HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS DEED, GRANTOR IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS DEED TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS" CONDITION AND BASIS WITH ALL FAULTS. IT IS UNDERSTOOD AND AGREED THAT THE PURCHASE PRICE FOR THE PROPERTY HAS BEEN ADJUSTED BY PRIOR NEGOTIATION TO REFLECT THAT ALL OF THE EXHIBIT B-1 SPECIAL WARRANTY DEED - Page 2 22 PROPERTY IS SOLD BY GRANTOR AND PURCHASED BY GRANTEE SUBJECT TO THE FOREGOING. IN WITNESS WHEREOF, Grantor has executed this Deed as of this ______ day of ______________, 2000. GRANTOR: BUSINESS RESOURCES CORPORATION, a Texas corporation By: --------------------------------------- Name: ------------------------------ Title: ----------------------------- STATE OF TEXAS ) ) COUNTY OF DALLAS ) This instrument was acknowledged before me this _____ day of ______________, 2000, by _______________, _____________________ of Business Resources Corporation, a Texas corporation, on behalf of said corporation. (SEAL) --------------------------------------- Notary Public in and for the State of Texas --------------------------------------- Print name of notary My Commission Expires: ---------------- EXHIBIT B-1 SPECIAL WARRANTY DEED - Page 3 23 EXHIBIT B-2 TO PURCHASE AND SALE AGREEMENT SAN ANTONIO PROPERTY SPECIAL WARRANTY DEED STATE OF TEXAS ) ) COUNTY OF DALLAS ) Spectrum Data, Inc., a Texas corporation ("GRANTOR"), for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other valuable consideration, the receipt and sufficiency of which consideration are hereby acknowledged, has Granted, Sold, and Conveyed, and by these presents does Grant, Sell, and Convey, unto William D. Oates and Marilyn Oates ("Grantee"), having an address of 4900 Lakeside Drive, Dallas, Texas 75205, (i) all that real property situated in the County of Bexar, State of Texas, and more particularly described on EXHIBIT A attached hereto and made a part hereof for all purposes, and (ii) together with all improvements now or hereafter situated thereon, and the lessor's or landlord's interest in all space leases or occupancy agreements covering all or any portion of such real property and the improvements situated thereon (collectively, the "Property"). This Deed is made and accepted expressly subject to the matters set forth in EXHIBIT B attached hereto and made a part hereof for all purposes. TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances belonging in any way to the Property, unto the said Grantee, its successors and assigns forever, and Grantor binds itself and its successors and assigns to warrant and forever defend all and singular the Property to Grantee, its successors and assigns against every person lawfully claiming or to claim all or any part of the Property, by, through, or under Grantor, but not otherwise. GRANTEE ACKNOWLEDGES AND AGREES THAT GRANTOR HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES (OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS DEED), PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, (B) THE INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH GRANTEE MAY CONDUCT THEREON, (D) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY EXHIBIT B-2 SPECIAL WARRANTY DEED - Page 1 24 LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY, (F) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, (G) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY, OR (H) ANY OTHER MATTER WITH RESPECT TO THE PROPERTY, AND SPECIFICALLY, THAT GRANTOR HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS REGARDING COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING THE EXISTENCE IN OR ON THE PROPERTY OF HAZARDOUS MATERIALS OR SUBSTANCES. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY, OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS DEED, GRANTEE IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY GRANTOR AND ACCEPTS THE PROPERTY AND WAIVES ALL OBJECTIONS OR CLAIMS AGAINST GRANTOR (INCLUDING, BUT NOT LIMITED TO, ANY RIGHT OR CLAIM OF CONTRIBUTION) ARISING FROM OR RELATED TO THE PROPERTY OR TO ANY HAZARDOUS MATERIALS ON THE PROPERTY. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT GRANTOR HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS DEED, GRANTOR IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS DEED TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS" CONDITION AND BASIS WITH ALL FAULTS. IT IS UNDERSTOOD AND AGREED THAT THE PURCHASE PRICE FOR THE PROPERTY HAS BEEN ADJUSTED BY PRIOR NEGOTIATION TO REFLECT THAT ALL OF THE EXHIBIT B-2 SPECIAL WARRANTY DEED - Page 2 25 PROPERTY IS SOLD BY GRANTOR AND PURCHASED BY GRANTEE SUBJECT TO THE FOREGOING. IN WITNESS WHEREOF, Grantor has executed this Deed as of this ______ day of ______________, 2000. GRANTOR: SPECTRUM DATA, INC., a Texas corporation By: --------------------------------------- Name: ------------------------------ Title: ----------------------------- STATE OF TEXAS ) ) COUNTY OF DALLAS ) This instrument was acknowledged before me this _____ day of ______________, 2000, by _______________, _____________________ of Spectrum Data, Inc., a Texas corporation, on behalf of said corporation. (SEAL) --------------------------------------- Notary Public in and for the State of Texas --------------------------------------- Print name of notary My Commission Expires: ---------------- EXHIBIT B-2 SPECIAL WARRANTY DEED - Page 3 26 EXHIBIT C-1 TO PURCHASE AND SALE AGREEMENT ASSIGNMENT AND ASSUMPTION OF FIXTURES AND WARRANTIES STATE OF TEXAS ) ) COUNTY OF DALLAS ) Business Resources Corporation, a Texas corporation ("GRANTOR"), for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other valuable consideration, to it in hand paid by William D. Oates and Marilyn Oates ("GRANTEE"), having an address of 4900 Lakeside Drive, Dallas, Texas 75205, ("GRANTEE"), the receipt and sufficiency of which are hereby acknowledged, has Granted, Sold, Assigned, Transferred, Conveyed, and Delivered and does by these presents Grant, Sell, Assign, Transfer, Convey and Deliver unto Grantee, all of Grantor's rights, titles, and interests in and to the following described properties located in, affixed to, and/or arising or used in connection with the improved property with parking and other amenities (the "PROJECT") situated on the land in the County of Dallas, State of Texas, more particularly described on EXHIBIT A attached hereto and made a part hereof for all purposes (the "LAND," which together with the Project is sometimes hereinafter called the "PROPERTY"): (a) All fixtures owned by Grantor (the "FIXTURES"), and located on, attached to, or used in connection with the operation and maintenance of the Property; and (b) Any assignable warranties and guaranties relating to the Property or any portion thereof (collectively, the "WARRANTIES"). Grantor and Grantee hereby covenant and agree that neither this Agreement nor any term, provision, or condition hereof may be changed, amended or modified, and no obligation, duty or liability or any party hereby may be released, discharged or waived, except in a writing signed by all parties hereto. GRANTEE ACKNOWLEDGES AND AGREES THAT GRANTOR HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES (OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS ASSIGNMENT), PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE EXHIBIT C-1 ASSIGNMENT OF FIXTURES AND WARRANTIES - Page 1 27 PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, (B) THE INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH GRANTEE MAY CONDUCT THEREON, (D) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY, (F) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, (G) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY, OR (H) ANY OTHER MATTER WITH RESPECT TO THE PROPERTY, AND SPECIFICALLY, THAT GRANTOR HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS REGARDING COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING THE EXISTENCE IN OR ON THE PROPERTY OF HAZARDOUS MATERIALS OR SUBSTANCES. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY, OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS ASSIGNMENT, GRANTEE IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY GRANTOR AND ACCEPTS THE PROPERTY AND WAIVES ALL OBJECTIONS OR CLAIMS AGAINST GRANTOR (INCLUDING, BUT NOT LIMITED TO, ANY RIGHT OR CLAIM OF CONTRIBUTION) ARISING FROM OR RELATED TO THE PROPERTY OR TO ANY HAZARDOUS MATERIALS ON THE PROPERTY. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT GRANTOR HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS ASSIGNMENT, GRANTOR IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS ASSIGNMENT TO THE MAXIMUM EXHIBIT C-1 ASSIGNMENT OF FIXTURES AND WARRANTIES - Page 2 28 EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS" CONDITION AND BASIS WITH ALL FAULTS. IT IS UNDERSTOOD AND AGREED THAT THE PURCHASE PRICE FOR THE PROPERTY HAS BEEN ADJUSTED BY PRIOR NEGOTIATION TO REFLECT THAT ALL OF THE PROPERTY IS SOLD BY GRANTOR AND PURCHASED BY GRANTEE SUBJECT TO THE FOREGOING. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] EXHIBIT C-1 ASSIGNMENT OF FIXTURES AND WARRANTIES - Page 3 29 IN WITNESS WHEREOF, Grantor and Grantee have executed this Assignment of Fixtures and Warranties on _____________, 2000 to be effective as of the _____ day of __________________, 2000. GRANTOR: BUSINESS RESOURCES CORPORATION, a Texas corporation By: --------------------------------------- Name: ------------------------------ Title: ----------------------------- GRANTEE: ------------------------------------------- WILLIAM D. OATES ------------------------------------------- MARILYN OATES EXHIBIT C-1 ASSIGNMENT OF FIXTURES AND WARRANTIES - Page 4 30 STATE OF TEXAS ) ) COUNTY OF DALLAS ) This instrument was acknowledged before me this _____ day of ______________, 2000, by _______________, _____________________ of Business Resources Corporation, a Texas corporation, on behalf of said corporation. (SEAL) --------------------------------------- Notary Public in and for the State of Texas --------------------------------------- Print name of notary My Commission Expires: ---------------- EXHIBIT C-1 ASSIGNMENT OF FIXTURES AND WARRANTIES - Page 5 31 STATE OF TEXAS ) ) COUNTY OF DALLAS ) This instrument was acknowledged before me this _____ day of ______________, 2000, by William D. Oates and Marilyn Oates. (SEAL) --------------------------------------- Notary Public in and for the State of Texas --------------------------------------- Print name of notary My Commission Expires: ---------------- EXHIBIT C-1 ASSIGNMENT OF FIXTURES AND WARRANTIES - Page 6 32 EXHIBIT C-2 TO PURCHASE AND SALE AGREEMENT ASSIGNMENT AND ASSUMPTION OF FIXTURES AND WARRANTIES STATE OF TEXAS ) ) COUNTY OF DALLAS ) Spectrum Data, Inc., a Texas corporation ("GRANTOR"), for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other valuable consideration, to it in hand paid by William D. Oates and Marilyn Oates ("Grantee"), having an address of 4900 Lakeside Drive, Dallas, Texas 75205, ("GRANTEE"), the receipt and sufficiency of which are hereby acknowledged, has Granted, Sold, Assigned, Transferred, Conveyed, and Delivered and does by these presents Grant, Sell, Assign, Transfer, Convey and Deliver unto Grantee, all of Grantor's rights, titles, and interests in and to the following described properties located in, affixed to, and/or arising or used in connection with the improved property with parking and other amenities (the "PROJECT") situated on the land in the County of Dallas, State of Texas, more particularly described on EXHIBIT A attached hereto and made a part hereof for all purposes (the "LAND," which together with the Project is sometimes hereinafter called the "PROPERTY"): (a) All fixtures owned by Grantor (the "FIXTURES"), and located on, attached to, or used in connection with the operation and maintenance of the Property; and (b) Any assignable warranties and guaranties relating to the Property or any portion thereof (collectively, the "WARRANTIES"). Grantor and Grantee hereby covenant and agree that neither this Agreement nor any term, provision, or condition hereof may be changed, amended or modified, and no obligation, duty or liability or any party hereby may be released, discharged or waived, except in a writing signed by all parties hereto. GRANTEE ACKNOWLEDGES AND AGREES THAT GRANTOR HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES (OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS ASSIGNMENT), PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE EXHIBIT C-2 ASSIGNMENT OF FIXTURES AND WARRANTIES - Page 1 33 PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, (B) THE INCOME TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH GRANTEE MAY CONDUCT THEREON, (D) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY, (F) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY, (G) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY, OR (H) ANY OTHER MATTER WITH RESPECT TO THE PROPERTY, AND SPECIFICALLY, THAT GRANTOR HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS REGARDING COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING THE EXISTENCE IN OR ON THE PROPERTY OF HAZARDOUS MATERIALS OR SUBSTANCES. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE PROPERTY, OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS ASSIGNMENT, GRANTEE IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY GRANTOR AND ACCEPTS THE PROPERTY AND WAIVES ALL OBJECTIONS OR CLAIMS AGAINST GRANTOR (INCLUDING, BUT NOT LIMITED TO, ANY RIGHT OR CLAIM OF CONTRIBUTION) ARISING FROM OR RELATED TO THE PROPERTY OR TO ANY HAZARDOUS MATERIALS ON THE PROPERTY. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT GRANTOR HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS ASSIGNMENT, GRANTOR IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THAT CERTAIN PURCHASE AND SALE AGREEMENT BY AND BETWEEN GRANTOR AND GRANTEE DATED SEPTEMBER 29, 2000 AND THE WARRANTY OF TITLE AS SET OUT IN THIS ASSIGNMENT TO THE MAXIMUM EXHIBIT C-2 ASSIGNMENT OF FIXTURES AND WARRANTIES - Page 2 34 EXTENT PERMITTED BY LAW, THE SALE OF THE PROPERTY AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS" CONDITION AND BASIS WITH ALL FAULTS. IT IS UNDERSTOOD AND AGREED THAT THE PURCHASE PRICE FOR THE PROPERTY HAS BEEN ADJUSTED BY PRIOR NEGOTIATION TO REFLECT THAT ALL OF THE PROPERTY IS SOLD BY GRANTOR AND PURCHASED BY GRANTEE SUBJECT TO THE FOREGOING. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] EXHIBIT C-2 ASSIGNMENT OF FIXTURES AND WARRANTIES - Page 3 35 IN WITNESS WHEREOF, Grantor and Grantee have executed this Assignment of Fixtures and Warranties on _____________, 2000 to be effective as of the _____ day of __________________, 2000. GRANTOR: SPECTRUM DATA, INC., a Texas corporation By: --------------------------------------- Name: ------------------------------ Title: ----------------------------- GRANTEE: ------------------------------------------- WILLIAM D. OATES ------------------------------------------- MARILYN OATES EXHIBIT C-2 ASSIGNMENT OF FIXTURES AND WARRANTIES - Page 4 36 STATE OF TEXAS ) ) COUNTY OF DALLAS ) This instrument was acknowledged before me this _____ day of ______________, 2000, by _______________, _____________________ of Spectrum Data, Inc., a Texas corporation, on behalf of said corporation. (SEAL) --------------------------------------- Notary Public in and for the State of Texas --------------------------------------- Print name of notary My Commission Expires: ---------------- EXHIBIT C-2 ASSIGNMENT OF FIXTURES AND WARRANTIES - Page 5 37 STATE OF TEXAS ) ) COUNTY OF DALLAS ) This instrument was acknowledged before me this _____ day of ______________, 2000, by William D. Oates and Marilyn Oates. (SEAL) --------------------------------------- Notary Public in and for the State of Texas --------------------------------------- Print name of notary My Commission Expires: ---------------- EXHIBIT C-2 ASSIGNMENT OF FIXTURES AND WARRANTIES - Page 6 38 EXHIBIT C-2 ASSIGNMENT OF FIXTURES AND WARRANTIES - Page 7 39 EXHIBIT D LEASE AGREEMENT - MOCKINGBIRD PROPERTY BETWEEN WILLIAM D. OATES AND MARILYN OATES AND AND TYLER TECHNOLOGIES, INC. EXHIBIT D LEASE AGREEMENT - MOCKINGBIRD PROPERTY - Page 1 EX-4.9 4 d81555ex4-9.txt LEASE AGREEMENT - WILLIAM OATES & MARILYN OATES 1 EXHIBIT 4.9 LEASE AGREEMENT BETWEEN WILLIAM D. OATES AND MARILYN OATES AS LANDLORD AND GOVERNMENT RECORDS SERVICES, INC. AS TENANT 2 Lease covering premises at 2800 West Mockingbird Lane, Dallas County, Dallas, Texas LEASE ("LEASE"), dated as of ___________, 2000, between WILLIAM D. OATES AND MARILYN OATES, having an address of 4900 Lakeside Drive, Dallas, Texas 75205 ("LANDLORD"), and GOVERNMENT RECORDS SERVICES, INC., a Texas corporation, having an address of 2800 West Mockingbird Lane, Dallas, Texas ("TENANT"). THE PARTIES HERETO DO HEREBY COVENANT AND AGREE AS FOLLOWS: 1. DEFINITIONS. The following terms for purposes of this Lease shall have the meanings hereinafter specified: a. "ADDITIONAL RENT" shall have the meaning given such term in SECTION 3.C. of this Lease. b. "EVENT OF DEFAULT" shall have the meaning given such term in SECTION 19. of this Lease. c. "LEASE YEAR" shall mean a period of time conforming to the following: The first "Lease Year" of the term of this Lease shall mean the period beginning on the Commencement Date and ending 12 months after the first day of the first month following such date of opening unless such opening date is the first day of a month, in which case the first Lease Year shall terminate on the date 12 months after such opening date; the second Lease Year of the term of this Lease shall commence on the day following the last day of the first Lease Year and end 12 months thereafter; and succeeding Lease Years during the term of this Lease shall commence and end on dates corresponding to those on which the second Lease Year begins and ends. d. "PREMISES" shall have the meaning given such term in SECTION 2. of this Lease. e. "TAXES" shall have the meaning given such term in SECTION 6. of this Lease. f. "TOTAL MONTHLY RENT" shall have the meaning given such term in SECTION 3. of this Lease. 2 3 2. PREMISES AND TERM. In consideration of the obligation of Tenant to pay rent as herein provided, and in consideration of the other terms, provisions, and covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant hereby takes from Landlord, certain premises situated within the above-named County and State and more particularly described on EXHIBIT A attached hereto and made a part hereof for all purposes, together with all rights, privileges, easements, appurtenances, and immunities belonging to or in any way pertaining to the said premises, and together with the buildings and other improvements erected upon said premises (the said real property and the buildings and improvements thereon being hereinafter referred to as the "PREMISES") to have and to hold the same for a term of approximately 120 calendar months commencing as of October 1, 2000 and ending at midnight on the last day of September 2010, unless sooner terminated as herein provided, Tenant acknowledges that it has inspected the Premises and accepts the Premises and the buildings and improvements thereon in their present condition as suitable for the purpose for which the Premises are leased and further acknowledges that except as otherwise provided herein, no representations as to the condition or repair of the Premises nor promises, to alter, remodel, or improve the Premises have been made by Landlord. 3. RENT. A. The total consideration for each Lease Year during the term of this Lease (exclusive of Additional Rent, as hereinafter set forth) shall be $720,000.00 per Lease Year. Tenant agrees to pay to Landlord on October 1, 2000, and in advance on the first day of every calendar month thereafter in lawful money of the United States of America, without deduction or offset, prior notice, or demand at Landlord's address for notices hereunder, or at such other address as may be designated in accordance with SECTION 26. hereof, 1/12 of the total consideration for the applicable Lease Year as "TOTAL MONTHLY RENT". B. In the event that Tenant shall fail to pay any installment of Total Monthly Rent by the tenth day of the month in which such installment is due, or Additional Rent within ten days after Tenant's receipt of the bill therefor, Tenant shall pay as Additional Rent a sum equal to five percent (5%) of such unpaid amount. Such charges shall be in addition to, and not in lieu of, Landlord's other rights provided by this Lease or otherwise. C. All sums, liabilities, obligations, and other amounts which Tenant is required to pay or discharge pursuant to the terms of this Lease in addition to Total Monthly Rent or as a result of Landlord's curing an event of default pursuant to SECTION 20. of this Lease, together with any interest, penalty, or other sum which may be added for late payment thereof, shall constitute additional rent hereunder ("ADDITIONAL RENT"). In the event of any failure on the part of Tenant to pay or discharge any of the foregoing, Landlord shall have all rights, powers, and remedies provided for herein or by law or equity or otherwise in the case of nonpayment of Total Monthly Rent. 3 4 4. DISCLAIMER OF WARRANTIES. Except as otherwise set forth or called for herein, Landlord does not make or has not made any warranties or representations of any kind or character, express or implied, with respect to the Premises or any portion thereof, its physical condition, income to be derived therefrom or expenses to be incurred with respect thereto, its fitness or suitability for any particular use, or any other matter or thing relating to or affecting the same, and there are no oral agreements, warranties, or representations collateral to or affecting the Premises or any portion thereof. Tenant acknowledges that it has inspected the Premises and has made an independent determination that the Premises are suitable for Tenant's intended uses and purposes. Accordingly, Landlord and Tenant hereby agree that the Premises will be leased in an "as is" condition. 5. USE. The Premises may be used for any lawful purpose in compliance with the state and local law and ordinances. Tenant shall at its own cost and expense obtain any and all licenses and permits necessary for any such use. Tenant shall comply with all governmental laws, ordinances, and regulations and all private restrictions applicable to the use of the Premises and shall promptly comply with all governmental orders and directives for the correction, prevention, and abatement of nuisances in, upon, or connected with the Premises, all at Tenant's sole expense. Without Landlord's prior written consent, Tenant shall not receive, store, or otherwise handle any product, material, or merchandise which is explosive or highly inflammable or any material which may be corrosive or otherwise damaging to the Premises or any appurtenances thereto, except as currently conducted on the Premises. Tenant will not, without Landlord's approval, permit the Premises to be used for any purpose which would render the insurance thereon void or voidable or the insurance risk more hazardous. Further, Tenant shall not introduce into the Premises, or use therein any equipment or fixtures which might be reasonably expected, due to excess weight, vibration, or any other characteristic, to cause damage to the Premises. 6. TAXES. A. Landlord agrees to pay or cause to be paid before they become delinquent all taxes (both general and special, hereinafter collectively referred to as "TAXES") lawfully levied or assessed against the Premises or any part thereof; provided, however, Landlord may, at its sole cost and expense (in its own name or in the name of both Landlord and Tenant as it may deem appropriate) dispute and contest the same, and in such case such disputed item need not be paid until finally adjudged to be valid. In the event Landlord fails to notify Tenant, within seven (7) business days after receipt of written notice from the Tenant, of its intention to dispute and contest the Taxes, Tenant may, at its sole cost and expense, dispute and contest the same, and in such case such disputed item need not be paid until finally adjudged to be valid. At the conclusion of any such contest, Landlord or Tenant (as the case may be) shall pay the items contested to the extent that they are held valid, together with all items, court costs, interest, and penalties relating thereto. Any refund resulting from such a proceeding brought either by Tenant or Landlord or by them jointly shall be applied and paid first to reimburse the party or parties who brought the proceeding for the reasonable costs and expenses of such proceeding borne by such party or parties and then to reimburse Tenant 4 5 for the difference between the amount it paid for Taxes for each tax year covered in whole or in part by the fiscal tax year or years involved in such proceeding and the amount Tenant would have been required to pay for such tax year if the Taxes for such fiscal tax year or years had been assessed in accordance with the decision rendered in such proceeding, and any remaining balance shall be paid to Landlord. B. Notwithstanding the above, as between Landlord and Tenant, the Tenant shall be responsible for the payment of all such taxes If Landlord is required by any mortgagee to escrow taxes, with the payment of each monthly installment of Total Monthly Rent, Tenant shall pay to Landlord an amount equal to 1/12 of the estimated annual taxes to accrue against the Premises (such estimate to be based upon, and in no event less than, any monthly tax escrow amount which Landlord is required to pay to the holder of any first lien indebtedness on the Premises). As soon as practical after the taxes are actually assessed against the Premises for each year during the term, Landlord will notify Tenant of the amount thereof and Landlord and Tenant will make appropriate adjustments between themselves such that Tenant pays the actual amount of the taxes for the fiscal tax year in question. Any payment to be made pursuant to this subparagraph B with respect to the real estate tax year in which this Lease terminates shall bear the same ratio to the payment which would be required to be made for the full tax year as that part of such tax year covered by the term of this Lease bears to a full tax year. Notwithstanding anything to the contrary contained in this Lease, with respect to the real estate tax year in which this Lease commences, Tenant shall be responsible for the payment of all such taxes with no adjustment between Landlord and Tenant. Landlord's real estate tax statements with respect to the Premises shall be made available for inspection by Tenant at the Premises upon Tenant's request. 7. REPAIRS. Tenant shall, at its own cost and expense, keep and maintain all parts of the Premises including, but not limited to routine maintenance only of the roof, foundation, loadbearing walls, and other structural portions of the Premises, as well as the windows, glass and plate glass, doors (including overhead doors), interior walls, finish work, floors and floor covering, heating and air-conditioning systems, gutters, downspouts and protective posts therefor, curbs, steps and landings, plumbing work and fixtures, parking and roadway areas, and gas, water, and other utility lines in good repair and condition (including any necessary replacements thereto) during the term and shall take good care of the Premises and its fixtures and suffer no waste. Tenant shall, at its own cost and expense, care for the grounds around the buildings on the Premises, including the mowing of grass, care of shrubs, and general landscaping and will keep the parking areas, driveways, and alleys and the whole of the Premises in a clean and sanitary condition. Landlord shall not be responsible for the repair or maintenance of the Premises, or any portion thereof, unless any damage thereto is caused by the willful act or gross negligence of Landlord or any agent of Landlord. 8. ALTERATIONS. Tenant shall not make any alterations, additions, or improvements to the Premises without the prior written consent of Landlord. Tenant may, without the consent of Landlord, but at its own cost and expense and in a good workmanlike manner, make such minor 5 6 alterations, additions, or improvements or erect, remove, or alter such partitions, or erect such shelves, bins, machinery, and trade fixtures as it may deem advisable, and without altering the basic character of the building or improvements, without overloading or damaging such building or improvements, in such case complying with all applicable governmental laws, ordinances, regulations, and other requirements. At the termination of this Lease, Tenant shall, if Tenant so elects and upon receipt of Landlord's consent (not to be unreasonably withheld), at Tenant's sole cost and expense, remove all alterations, additions, improvements, and partitions erected by Tenant and restore the Premises to their original condition; otherwise such improvements shall be delivered to the Landlord with the Premises. All shelves, bins, machinery, and trade fixtures installed by Tenant may be removed by Tenant at the termination of this Lease if Tenant so elects so long as Tenant is not then in default under the terms hereof, and shall be removed if required by Landlord. All such removals and restorations shall be accomplished in a good and workmanlike manner so as not to damage the primary structure or structural qualities of the buildings and other improvements situated on the Premises. Any fixtures installed in the Premises by Tenant other than shelves, bins, machinery, and similar trade fixtures shall be the property of Landlord when installed. 9. SIGNS. Tenant shall have the right to install signs upon the Premises only when first approved in writing by Landlord (which approval may not be unreasonably withheld or delayed) and subject to any applicable governmental laws, ordinances, regulations, and other requirements and subject to applicable restrictive covenants, if any. Tenant shall remove all such signs at the termination of this Lease. Such installations and removals shall be made in such manner as to avoid injury or defacement of the buildings and other improvements situated on the Premises. 10. INSPECTION. Upon not less than twenty-four (24) hours notice to Tenant, Landlord and Landlord's agents and representatives shall have the right to enter and inspect the Premises (provided Landlord's entry does not unreasonably interfere with Tenant's use of the Premises) during reasonable business hours, for the purpose of ascertaining the condition of the Premises. During the period that is six (6) months prior to the end of the term hereof and upon not less than twenty-four (24) hours notice to Tenant, Landlord and Landlord's agents and representatives shall have the right to enter the Premises (provided Landlord's entry does not unreasonably interfere with Tenant's use of the Premises) during reasonable business hours for the purpose of showing the Premises to prospective tenants and shall have the right to erect on the Premises a suitable sign indicating that the Premises are for lease. Further, upon not less than twenty-four (24) hours notice to Tenant, Landlord and its representatives shall have the right to enter the Premises (provided Landlord's entry does not unreasonably interfere with Tenant's use of the Premises) during reasonable business hours for the purpose of showing the Premises to prospective purchasers. 11. UTILITIES. Tenant shall pay all charges incurred for any utility services used on or from the Premises and any maintenance charges for utilities during the term of this Lease. Tenant shall be responsible for any costs associated in any manner with any additional utility connections to the 6 7 Premises which Tenant may require, and shall furnish all electric light bulbs and tubes. Landlord shall in no event be liable for any interruption or failure of utility services on the Premises. 12. ASSIGNMENT AND SUBLETTING. Except that Tenant may assign or sublet this Lease to a subsidiary or a sister corporation if notice is given to Landlord of such action, Tenant shall not have the right to assign this Lease or to sublet the whole or any part of the Premises without the prior written consent of Landlord, which consent may not be unreasonably withheld or delayed; provided, however, that in determining whether or not Landlord will consent to any assignment or subletting hereof, Landlord shall be entitled to consider all factors which may impact the value of the Premises or the payment of rentals hereunder, including but not limited to the financial capacity and business experience of the proposed subtenant or assignee and the planned use of the Premises. Notwithstanding any permitted assignment or subletting, unless otherwise agreed in writing between Landlord and Tenant, Tenant shall, at all times remain fully responsible and liable for the payment of the rentals herein specified and for compliance with all of its other obligations under the terms, provisions, and covenants of this Lease. Upon the occurrence of an Event of Default, if the Premises or any part thereof are then assigned or subletted, Landlord, in addition to any other remedies herein provided, or provided by law, may at its option collect directly from such assignee or subtenant all rents becoming due to Tenant under such assignment or sublease and apply such rent against any sums due to Landlord by Tenant hereunder, and no such collection shall be construed to constitute a novation or a release of Tenant from the further performance of its obligations hereunder. Landlord shall have the right to assign any of its rights under this Lease, and upon such assignment Landlord shall be released of all obligations hereunder. 13. FIRE AND CASUALTY DAMAGE. A. If the buildings situated on the Premises should be damaged or destroyed by fire, tornado, or other casualty, Tenant shall give immediate written notice thereof to Landlord. B. If the buildings situated on the Premises should be totally destroyed by fire, tornado, or other casualty, or if they should be so damaged that, in Landlord's opinion, rebuilding or repairs cannot be completed within 180 days after the date upon which Landlord is notified by Tenant of such damage, this Lease shall terminate, and the rent shall be abated during the unexpired portion of this Lease, effective upon the date of the assurance of such damage. Landlord shall notify Tenant within twenty (20) working days after Landlord is aware of such damage or destruction if Landlord elects to terminate this Lease by reason thereof. C. If the buildings situated on the Premises should be damaged by fire, tornado, or other casualty, but only to such extent that rebuilding or repairs can, in Landlord's opinion, be completed within 180 days after the date upon which Landlord is notified by Tenant of such damage, or, if Landlord does not exercise its option to terminate this Lease upon the occurrence of an event described in, and covered by, subparagraph B above, this Lease shall not terminate, but Landlord 7 8 shall, at its sole cost and expense, proceed with reasonable diligence to rebuild and repair such buildings to substantially the condition in which they existed prior to such damage, except that Landlord shall not be required to rebuild, repair, or replace any part of the partitions, fixtures, and other improvements which may have been placed on the Premises by Tenant, unless such damage was caused by Landlord's willful act or gross negligence. Landlord's obligation with respect to the reconstruction or repair of the Premises set forth in this subparagraph C is contingent upon Landlord's mortgagee making available to Landlord sufficient insurance proceeds to allow Landlord to complete such reconstruction. Landlord shall not be obligated to commence its reconstruction until Landlord has obtained a final adjustment as to the amount of insurance proceeds and has reached agreement with Landlord's mortgagee as to the application of such proceeds; provided, however, that if Landlord has not commenced reconstruction within forty-five (45) days after the occurrence of such damage or destruction Tenant may terminate this Lease by written notice given to Landlord of its election to do so unless, within ten (10) days after Landlord's receipt of such notice, Landlord advises Tenant that it will proceed with reconstruction or repair without regard to the amount or application of insurance proceeds. If the Premises are untenantable in whole or in part following such damage, the rent payable hereunder during the period in which they are untenantable shall be reduced to such extent as may be fair and reasonable under all of the circumstances. In the event that Landlord should fail to complete such repairs and rebuilding within 180 days after the date upon which Landlord is notified by Tenant of such damage (which period shall be extended for any delays caused by strikes, unavailability of materials or labor, inclement weather, or other causes beyond the control of Landlord), Tenant may, at its option, terminate this Lease by delivering written notice of termination to Landlord, whereupon all rights and obligations hereunder shall cease and terminate. D. Notwithstanding anything herein to the contrary, in the event the holder of any indebtedness secured by a mortgage or deed of trust covering the Premises requires that the insurance proceeds be applied to such indebtedness, then Landlord shall have the right, at its sole option, to terminate this Lease by delivering written notice of termination to Tenant, whereupon all rights and obligations hereunder shall cease and terminate. 14. PROPERTY INSURANCE. A. Tenant, at its sole cost and expense, shall keep all insurable portions of the Premises insured or cause it to be insured throughout the term of this Lease against loss or damage by fire and such other risks as may be included, in the customary form of extended coverage insurance form time to time carried by prudent owners of comparable facilities in the area, in amounts sufficient to prevent the application of any co-insurance penalty provisions contained in the applicable policies, and in any event in an amount not less than eighty percent (80%) of the then full insurable value of the Premises or such higher amount as may be otherwise required by the Landlord's mortgage. The term "full insurable value" shall mean the actual replacement cost (exclusive of costs of excavations, foundations, and footings). 8 9 B. All insurance provided for in this Lease shall be effected under enforceable policies issued by insurers of recognized responsibility licensed to do business in the state in which the Premises are located and approved by Landlord and mortgagee. Upon the execution of this Lease, and thereafter not less than thirty (30) days prior to the expiration dates of the expiring policies theretofore furnished pursuant to this paragraph, originals or certified copies of the policies bearing notations evidencing payment of the premiums, or accompanied by other evidence satisfactory to Landlord of such payment, shall be delivered by Tenant to Landlord and Landlord's mortgagee. C. All policies of insurance provided for in this paragraph, shall name Landlord, Tenant, and Landlord's mortgagee as insureds, as their respective interests may appear. As between Landlord and Tenant, Landlord shall be entitled to negotiate in good faith and settle with any insurance carrier in the event of damage to the Premises, and all insurance proceeds shall be payable to Landlord, for the benefit of Landlord and Landlord's mortgagee; provided, however, that if Tenant covers its trade fixtures, other leasehold improvements, equipment, and furnishings under the same policy as is carried on the Premises, nothing herein shall be construed to limit Tenant's right to negotiate and settle with the insurer with respect to damage to Tenant's property, and all such insurance proceeds shall be payable to Tenant. D. Each of Landlord and Tenant hereby releases the other from any and all liability or responsibility to the other or anyone claiming through or under them by way of subrogation or otherwise for any loss or damage to property caused by fire or any of the extended coverage casualties covered by the insurance maintained hereunder to the extent, and only to the extent, of insurance proceeds collected in connection therewith, even if such fire or other casualty shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible; provided, however, that this release and waiver shall be applicable and in force and effect only to the extent that it does not, under applicable law and procedure, cause coverage under any insurance policy to be void or voidable. E. Notwithstanding the foregoing, in the event that at any time during the term, the holder of any lien on the Premises requires the maintenance of an escrow account for the payment of insurance premiums with respect to the Premises, Tenant shall pay to Landlord, concurrently with the payment of Total Monthly Rent hereunder, an additional rental payment equal to 1/12 of the estimated annual insurance premiums, which payment shall be subject to annual readjustment between Landlord and Tenant in the same manner as tax escrow payments are readjusted pursuant to SECTION 6.B. hereof. In such event Landlord, or Landlord's lien holder, shall be responsible for the maintenance of the insurance coverage on the Premises, but Tenant shall be free to obtain its own insurance on its inventory, trade fixtures, and moveable personal property. 15. LIABILITY. Landlord shall not be liable to Tenant or Tenant's employees, agents, patrons, or visitors, or to any other person whomsoever, for any injury to person or damage to property on or about the Premises caused by the negligence or misconduct of Tenant, its agents, servants, or employees, or of any other person entering upon the Premises, or caused by the buildings and 9 10 improvements located on the Premises becoming out of repair, or caused by leakage of gas, oil, water, or steam or by electricity emanating from the Premises, or due to any other cause whatsoever (other than Landlord's negligence or willful acts, to the extent liability therefor is not waived under SECTION 14.D. above), and Tenant agrees to indemnify Landlord and hold it harmless from any loss, expense, or claims, including attorneys' fees, arising out of any such damage or injury, except for any injury to person or damage to property caused by the negligence or willful misconduct of Landlord. Tenant shall not be liable to Landlord or Landlord's employees, agents, patrons, or visitors, or to any other person whomsoever, for any injury to person or damage to property on or about the Premises caused by the negligence or misconduct of Landlord, its agents, servants, or employees, and Landlord agrees to indemnify Tenant and hold it harmless from any loss, expense, or claims, including attorneys' fees, arising out of any such damage or injury. Tenant shall procure and maintain throughout the term of this Lease a policy or policies of insurance, at its sole cost and expense, insuring both Landlord and Tenant (and, at Landlord's request, Landlord's mortgagee) against all claims, demands, or actions arising out of or in connection with Tenant's use or occupancy of the Premises, or by the condition of the Premises, the limits of such policy or policies to be in an amount not less than $1,000,000.00 in respect of any one occurrence and in an amount not less than $100,000.00 in respect of property damaged or destroyed, and to be written by insurance companies licensed to do business in the state in which the Premises are located. Such policies or duly executed certificates of insurance shall be promptly delivered to Landlord and renewals thereof as required shall be delivered to Landlord at least ten (10) days prior to the expiration of the respective policy terms. All such policies shall contain provisions requiring that the insurer give Landlord not less than thirty (30) days' prior written notice of the cancellation of any of such policies. 16. CONDEMNATION. A. If the whole or any substantial part of the Premises should be taken for any public or quasi-public use under governmental law, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof, this Lease shall terminate and the rent shall be abated during the unexpired portion of this Lease, effective when the physical taking of the said Premises shall occur. For the purposes hereof "substantial part of the Premises" shall be deemed to mean the condemnation of any portion of the buildings or more than ten percent (10%) of the parking spaces forming a part of the Premises, or any condemnation which materially impairs access to the Premises. In the event of any such taking of the Premises, any unearned rent shall be refunded to Tenant. B. If less than a substantial part of the Premises shall be taken for any public or quasi-public use under any governmental law, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof, this Lease shall not terminate, but the rent hereunder during the unexpired portion of this Lease shall be reduced to an amount that is fair and reasonable under all of the circumstances. 10 11 C. In the event of any such taking or private purchase in lieu thereof, Landlord shall be entitled to receive and retain all awards which may be made in respect of the taking of or damage to the Premises or any portion thereof. Nothing herein shall be construed as prohibiting Tenant from seeking a separate award for the taking of its trade fixtures and any leasehold improvements it may have installed during the term of this Lease. 17. HOLDING OVER. Should Tenant, or any of its successors in interest, hold over the Premises, or any part thereof, after the expiration of the term of this Lease, unless otherwise agreed in writing, such holding over shall constitute and be construed as creating a tenancy at sufferance, at a rental equal to the Total Monthly Rent payable for the last month of the term hereof. The inclusion of the preceding sentence shall not be construed as Landlord's permission for Tenant to hold over. 18. QUIET ENJOYMENT. Landlord covenants that it now has good title to the Premises in fee simple, sufficient to allow it to enter into this Lease and perform its obligations hereunder, free and clear of liens and encumbrances, excepting only the lien for current taxes not yet due, such mortgage or mortgages as are permitted by the terms of this Lease, zoning ordinances, and other building and fire ordinances and governmental regulations relating to the use of such property, and easements, restrictions, and other conditions of record. Landlord represents and warrants that Tenant shall, during the term hereof, peaceably and quietly have, hold, and enjoy the Premises for the term hereof without hindrance or molestation from landlord or any person claiming the Premises by, through, or under Landlord, subject to the terms and provisions of this Lease. 19. EVENTS OF DEFAULT. The following events shall be deemed to be events of default (each an "EVENT OF DEFAULT") by Tenant under this Lease: A. Tenant shall fail to pay any installment of Total Monthly Rent, Additional Rent, or other amounts, hereby reserved or shall fail to perform or discharge any other obligation or liability hereunder requiring the payment of money when any such payment is due and such failure shall remain uncured ten (10) days after Landlord gives written notice to Tenant of such failure. B. Tenant shall become insolvent, or shall make a transfer in fraud of creditors, or shall make an assignment for the benefit of creditors. C. Tenant shall file a petition under any section or chapter of any bankruptcy, insolvency, or similar law or statute of the United States or any state thereof heretofore or hereinafter enacted; or Tenant shall have such a petition filed against it involuntarily and such petition is not withdrawn or otherwise removed within sixty (60) days of its being filed; or Tenant shall be adjusted bankrupt or insolvent in proceedings filed against Tenant thereunder. 11 12 C. A receiver or trustee shall be appointed for all or substantially all of the assets of Tenant. D. Tenant shall desert or vacate the Premises. E. Tenant shall fail to comply with any material term, provision, or covenant of this Lease (other than the foregoing in this SECTION 19.), or shall fail to discharge any obligation or liability hereunder not involving the payment of money, and shall not cure any such failure within thirty (30) days after written notice thereof to Tenant from Landlord, provided that if such default is not susceptible to cure within thirty (30) days, Tenant shall be deemed to have cured such default for up to an additional 180 days beyond such initial 30-day period if Tenant has commenced efforts to cure such default within such thirty (30) day period and diligently pursues such curative actions until such default is cured. 20. REMEDIES. Upon the occurrence of any of such Events of Default described herein, except as may be otherwise provided herein or by applicable law, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever: A. Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord without any payment therefor, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying such premises or any part thereof, by any lawful means, whether through judicial process or otherwise, and including the lawful use of force, if necessary, without being liable for prosecution or any claim of damages therefor; and Tenant agrees to pay to Landlord on demand the amount of all loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the Premises on satisfactory terms or otherwise. B. Enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying such Premises or any part thereof, by any lawful means, whether through judicial process or otherwise, and including the lawful use of force, if necessary, without being liable for prosecution or any claim for damages thereof, and relet the Premises, in the name of Landlord or otherwise, for such term or terms (which may be greater or lesser than the period which would otherwise have constituted the balance of the term of this Lease) and on such conditions (which may include reasonable concessions or free rent) as Landlord may reasonably determine, and receive the rent therefor. In the event of any such re-entry or dispossession, Tenant shall not thereby be relieved of its liability and obligations under this Lease, which shall survive any such re-entry or dispossession, and in that event (i) the rent and other charges required to be paid by Tenant up to the term of such re-entry or dispossession shall become due and payable, together with such reasonable expenses as Landlord may incur for reasonable attorneys' fees, brokerage commissions, and/or expenses of putting the Premises in such condition as the Tenant under the provisions hereof is required to maintain, or for preparing the same for re-rental and (ii) Tenant or 12 13 the legal representatives of Tenant shall also pay Landlord, as liquidated damages for the failure of Tenant to observe and perform Tenant's covenants herein contained, an amount equal to the sum of (i) the base rental set forth in SECTION 3. hereof and (ii) all Additional Rent payable by Tenant under the provisions hereof, as if this Lease were still in effect, less the net amount, if any, of the rents and all other amounts collected on account of this Lease or other leases of the Premises for each month of the period which would otherwise have constituted the balance of the term of this Lease as the same may theretofore have been extended. In computing the amount of such liquidated damages there shall be included such expenses as Landlord may incur in connection with re-letting, including reasonable attorneys' fees, brokerage commissions, expenses of keeping the Premises in the condition as the Tenant under the provisions of this Lease is required to maintain, or expenses of preparing the same for re-letting. Any such liquidated damages shall be paid in monthly installments by Tenant on the day specified in SECTION 3. hereof for the payment of rental due hereunder, and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Landlord to collect the deficiency for any subsequent month by a similar proceeding. Landlord shall at all times use reasonable efforts to relet the Premises. C. Enter upon the Premises by any lawful means, whether through judicial process or otherwise, and including the lawful use of force, if necessary, without being liable for prosecution or any claim for damages therefor, and do whatever Tenant is obligated to do under the terms of this Lease; and Tenant agrees to reimburse Landlord on demand for any reasonable expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this Lease, and Tenant further agrees that Landlord shall not be liable for any damages resulting to the Tenant from such action, unless caused by the gross negligence or willful misconduct of Landlord or otherwise. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law or in equity, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions, and covenants herein contained. No waiver by Landlord of any violation or breach of any of the terms, provisions, and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions, and covenants herein contained. Landlord's acceptance of the payment of rental or other payments hereunder after the occurrence of an event of default shall not be construed as a waiver of such default, unless Landlord so notifies Tenant in writing. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an Event of Default shall not be deemed or construed to constitute a waiver of such default. No act or thing done by the Landlord or its agents during the term hereby granted shall be deemed an acceptance of the surrender of the Premises and no agreement to accept a surrender of said Premises shall be valid unless in writing signed by Landlord. The receipt by Landlord of rent with knowledge of the breach of any covenant or other provision contained in this Lease shall not be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions, and covenants contained herein. 13 14 21. MORTGAGES. Tenant accepts this Lease subject and subordinate to any mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a lien or charge upon the Premises or the improvements situated thereon. Tenant shall at any time hereafter on demand execute any instruments, releases or other documents which may be required by any mortgagee for the purpose of subjecting and subordinating this Lease to the lien of any such mortgage; provided that such mortgagee agrees in writing to recognize the continuance and validity of this Lease so long as there shall be no Event of Default on the part of Tenant. Landlord agrees to execute and deliver from time to time at Tenant's request such waivers or subordinations of lien, estoppel certificates, or similar instruments which may be required by any person who extends financing to Tenant and desires to obtain a security interest in Tenant's leasehold improvements, inventory, trade fixtures, and/or trade equipment. 22. MECHANIC'S LIENS. Tenant shall have no authority, express or implied, to create or place any lien or encumbrance of any kind or nature whatsoever upon, or in any manner to bind, the interest of Landlord in the Premises or to charge the rentals payable hereunder for any claim in favor of any person dealing with Tenant, including those who may, at Tenant's instance, furnish materials or perform labor for any construction or repairs, and each such claim shall affect and each such lien shall attach, if at all, only to the leasehold interest granted to Tenant by this instrument. Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed by or on behalf of Tenant on the Premises on which any lien is or can be validly and legally asserted against its leasehold interest in the Premises or the improvements thereon and that it will save and hold Landlord harmless form any and all loss, cost, or expense based on or arising out of asserted claims or liens incurred by Tenant against the leasehold estate or against the rights, titles, and interest of the Landlord in the Premises or under the terms of this Lease. If any mechanics', materialmen's or other similar lien shall at any time be filed against any part of the Premises on account of any work, labor or services performed or claimed to have been performed, or on account of any materials furnished or claimed to have been furnished, for or at the direction of Landlord or by any of Landlord's contractors or subcontractors, Landlord shall, within twenty (20) days of receipt of written notice form Tenant and without cost or expense to Tenant, forthwith either cause the same to be (i) discharged of record by payment, bond, order of a court of competent jurisdiction, or otherwise, or (ii) contested, in which event any judgment or other process issued in such contest shall be paid or discharged before execution thereof. If any mechanics', materialmen's or other similar lien shall at any time be filed against any part of the Premises on account of any work, labor or services performed or claimed to have been performed, or on account of any materials furnished or claimed to have been furnished, for or at the direction of Tenant or by any of Tenants's contractors or subcontractors, Tenant shall, within twenty (20) days of receipt of written notice form Landlord and without cost or expense to Landlord, forthwith either cause the same to be (i) discharged of record by payment, bond, order of a court of competent jurisdiction, or otherwise, or (ii) contested, in which event any judgment or other process issued in such contest shall be paid or discharged before execution thereof. 14 15 23. ESTOPPEL CERTIFICATES. Tenant agrees to furnish, from time to time, when requested by Landlord, any prospective purchaser, or the holder of any deed of trust or mortgage covering the Premises, a certificate signed by Tenant to the effect that this Lease is then presently in full force and effect and unmodified, if such be the case; that the term of this Lease has commenced and the full rental is then accruing hereunder; that Tenant has accepted possession of the Premises; that no rent under this Lease has been paid more than thirty (30) days in advance of its due date; that the address for notices to be sent to Tenant is as set forth in this lease (or has been changed by notice duly given and is as set forth in the certificate); that Tenant, as of the date of such certificate, has no charge, lien, or claim of offset under this Lease or otherwise against rents or other charges due or to become due hereunder; and that to the knowledge of Tenant, Landlord is not then in default under this Lease. The certificate shall also contain such other and further information as may be reasonably requested by Landlord, any prospective purchaser, or the holder of any such deed of trust or mortgage and if any of the foregoing information is not correct, a detailed explanation thereof. 24. WAIVER BY TENANT. Tenant hereby waives and surrenders for itself and all claiming by, through, and under it, including creditors of all kinds to the maximum extent permitted by law, (a) any right and privilege which it or any of them may have under any present or future constitution, statute, or rule of law to redeem the Premises or to have a continuance of this Lease for the term after termination of Tenant's right of occupancy by order or judgement of any court or by any legal process or writ, under the terms of this Lease, or after the termination of the term of this Lease as herein provided, (b) the benefits of any present or future constitution, statute, or rule of law which exempts property from liability for debt or for distress for rent, and (c) the provisions of any law relating to notice and/or delay in levy of execution in case of eviction of a tenant for nonpayment of rent. 25. BROKERS. Each party hereto represents and warrants to the other that such party has incurred no liability to any real estate broker or agent with respect to the payment of any commission regarding the negotiation or execution of this Lease. It is agreed that if any claims for commissions or fees, including, without limitation, brokerage fees, finder's fees, or commissions, are ever made against Landlord or Tenant in connection with this Lease, all such claims shall be handled and paid by the party whose actions or alleged commitments form the basis of such claim and such party shall indemnify and hold harmless the other from and against any and all such claims or demands with respect to any brokerage fees, finder's fees, or agents' commissions or other compensation asserted by any person, firm, or corporation in connection with this Lease. 26. NOTICES. Each provision of this Lease or of any applicable governmental laws, ordinances, regulations, and other requirements with reference to the sending, mailing, or delivery of any notice or the making of any payment by Landlord to Tenant or with the reference to the sending, mailing, or delivery of any notice or the making of any payment by Tenant to Landlord shall be deemed to be complied with when and if the following steps are taken: 15 16 A. All rent and other payments required to be made by Tenant to Landlord hereunder shall be payable to Landlord at the address hereinbelow set forth or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith. B. Any notice or document required or permitted to be delivered hereunder (other than a payment, which shall be deemed received only when actually received) shall be deemed to be delivered, whether actually received or not, two (2) days after deposit in the United States Mail, postage prepaid, certified or registered mail, return receipt requested, addressed to the appropriate party hereto at the address set out opposite its name below, or at such other address as it has theretofore specified by written notice delivered in accordance herewith: LANDLORD: TENANT: William D. Oates Government Records Services, Inc. 4900 Lakeside Drive 2800 West Mockingbird Lane Dallas, Texas 75205 Dallas, Texas 75235 with a copy to: Gardere & Wynne, L.L.P. Attn: Randy Ray 1601 Elm Street Dallas, Texas 75201 27. MISCELLANEOUS. A. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural and vice versa, unless the context otherwise requires. B. The terms, provisions, covenants and conditions contained in this Lease shall apply to, inure to the benefit of, and be binding upon, the parties hereto and upon their respective heirs, legal representatives, successors, and permitted assigns, except as otherwise herein expressly provided. C. The captions are inserted in this Lease for convenience only and in no way define, limit, or describe the scope or intent of this Lease, or any provision hereof, nor in any way affect the interpretation of this Lease. D. This Lease may not be altered, changed, or amended except by an instrument in writing signed by Landlord and Tenant. 16 17 E. Each and every covenant and agreement contained in this Lease is, and shall be construed to be, a separate and independent covenant and agreement. If any term or provision of this Lease or the application thereof to any person or circumstances shall to any extent be invalid and unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby. F. This Lease sets forth the entire agreement between the parties as to the subject matter hereof and all prior oral or written agreements with respect thereto are merged herein. G. Except as otherwise expressly stated in SECTION 20. hereof, whenever in this Lease the consent, approval, opinion, satisfaction or other similar act of either party is required, it is agreed that the same shall not be unreasonably withheld or delayed. 28. RETURN OF PREMISES. At the end of the term covered by this Lease, or upon such earlier termination of this Lease as provided herein, Tenant shall surrender the Premises to Landlord in the same good order and condition as the Premises were in prior to the beginning of the term hereof, reasonable wear and tear and damage by fire or other casualty (other than damage caused by Tenant's negligence to which the waiver contained in SECTION 14.D. is inapplicable) only excepted; provided, that in any case the Premises shall be surrendered to Landlord reasonably clean and free of debris. At such time Tenant shall deliver all keys to the Premises to Landlord. Any equipment, leasehold improvements, trade fixtures, or other property of Tenant left in the Premises after the end of this Lease shall be deemed abandoned, unless Landlord and Tenant have otherwise agreed, and title to such property shall automatically pass to and be vested in Landlord. Tenant agrees that it will, upon Landlord's request, execute such bills of sale or other evidences of title to such property as Landlord may request. 29. LIMITATION ON LANDLORD'S LIABILITY. Any liability of Landlord to Tenant for any default by Landlord under the terms of this Lease shall be limited to the interest of Landlord in the Premises and Landlord shall not be personally liable for any deficiency judgment, and none shall be sought or entered. 30. ATTORNEY'S FEES. Should either party employ an attorney or attorneys to enforce any of the provisions hereof or to protect its interest in any manner arising under this Lease, or to recover damages for the breach of this Lease, the nonprevailing party in any action pursued in courts of competent jurisdiction (the finality of which is not legally contested) agrees to pay to the prevailing party all reasonable costs, damages, and expenses, including attorney's fees, expended or incurred in connection therewith (including any costs related to any appeals thereof), to be fixed by the court and not by a jury. 17 18 31. NET LEASE. It is the intention of Landlord and Tenant that rental shall be absolutely net to the Landlord; that all costs, expenses and obligations of every kind (except as expressly set forth in this Lease) relating directly or indirectly in any way, foreseen and unforeseen, to Tenant's use, occupancy and possession of the Premises, which may arise or become due during the term of this Lease shall be paid by Tenant; and that Landlord shall be indemnified by Tenant against all such costs, expenses, and obligations. 32. TAX CREDITS, ABATEMENTS, REDUCTIONS AND OTHER GOVERNMENTAL ENHANCEMENTS. In the event that Tenant, because of public policy, contractual agreement with any taxing jurisdiction, or law, is exempt from payment of Taxes or any portion thereof, or is entitled to an abatement or reduction of Taxes as a result thereof, and such exemption, abatement, or reduction results in an exemption, abatement, or reduction of Taxes for the Premises, then to the full extent of such exemption, abatement or reduction, the amounts paid by Tenant for Taxes shall be equally reduced. In the event the Premises qualifies for other enhancement benefits from any taxing jurisdiction, or any municipal, county, state or federal instrumentality, governmental or quasi-governmental agency, department or authority on account of Tenant's execution of this Lease, construction of improvements in the Premises, or additional jobs resulting from Tenant's operations in the Premises, then such enhancement benefits shall inure to the sole and exclusive benefit of Tenant. Landlord shall upon written notice from Tenant and approval of same (not to be unreasonably withheld) reasonably cooperate with Tenant in Tenant's efforts to qualify for, and receive, any such tax exemptions, tax abatements, tax reductions and enhancement benefits. 33. UNPERFORMED COVENANTS OF LANDLORD MAY BE PERFORMED BY TENANT. If Landlord shall fail to perform any of the terms, provisions, covenants or conditions to be performed or complied with by Landlord pursuant to this Lease, or if Landlord should fail to make any payment which Landlord agrees to make, and any such failure shall if it relates to a matter which is not of an emergency nature, remain uncured for a period of 30 days after Tenant shall have served upon Landlord written notice of such failure, or for a period of 24 hours after service of such written notice if in Tenant's judgment reasonably exercised such failure relates to a matter which is of an emergency nature, then Tenant may at Tenant's option perform any such term, provision, covenant or condition or make any such payment, and the full amount of the cost and expense entailed, or the payment so made, shall immediately be owing by Landlord to Tenant, and Tenant shall have the right to seek reimbursement therefor from Landlord. 34. RIGHT TO ENJOIN. In the event of any violation or threatened violation by Landlord of any term, restriction, condition or covenant of the terms of this Lease, Tenant shall have the right, in addition to any other remedies available to it at law or in equity, to enjoin such violation or threatened violation in a court of competent jurisdiction. In the event of any violation or threatened violation by Tenant of any term, restriction, condition or covenant of the terms of this Lease, 18 19 Landlord shall have the right, in addition to any other remedies available to it at law or in equity, to enjoin such violation or threatened violation in a court of competent jurisdiction. [REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK] 19 20 EXECUTED as of the _________ day of _____________________, 2000. LANDLORD: ---------------------------------------------- William D. Oates ---------------------------------------------- Marilyn Oates 21 EXECUTED as of the _________ day of _____________________, 2000. TENANT: GOVERNMENT RECORDS SERVICES, INC., a Texas corporation ---------------------------------------------- By: ------------------------------------------- Its: ------------------------------------------ 22 EXHIBIT A DESCRIPTION OF PREMISES 23 GUARANTY In order to induce Landlord to execute that certain lease agreement dated as of ___________, 2000, between WILLIAM D. OATES AND MARILYN OATES, having an address of 4900 Lakeside Drive, Dallas, Texas 75205 as ("LANDLORD"), and GOVERNMENT RECORDS SERVICES, INC., a Texas corporation, having an address of 2800 West Mockingbird Lane, Dallas, Texas as ("TENANT") (the "LEASE"), the undersigned, Tyler Technologies, Inc., a Delaware corporation ("TYLER"), hereby guarantees to Landlord, his heirs, successors and assigns, the full and prompt payment by Tenant of all rent and other charges to be paid by Tenant under or pursuant to the terms of the Lease, and the complete and timely performance by Tenant of all the terms, conditions, covenants and agreements to be performed by Tenant under or pursuant to the terms of the Lease. This guaranty by Tyler is absolute and unconditional. Tyler waives notice of acceptance of this agreement of guaranty, and waives diligence or presentment on the part of Landlord in the enforcement of any liability, obligation or duty guaranteed hereby. Tyler agrees that the validity of this agreement of guaranty shall not in any way be terminated, affected or impaired by reason of any waiver of or failure to enforce any of the rights or remedies of Landlord contained in the Lease, or by reason of any extension of time or other forbearance granted to Tenant by Landlord. Tyler agrees that, at the option of Landlord, Tyler may be joined in any action or proceedings commenced against Tenant in connection with and based upon any provisions of the Lease, and that recovery may be had against Tyler in such action or proceedings, or in any independent action or proceedings against Tyler, without requirement that Landlord, and his successors or assigns, first assert, prosecute, or exhaust any remedy or claim against Tenant. In the event of any bankruptcy, reorganization, winding up or similar proceedings with respect to Tenant, no limitation on its liability under the Lease which may now or hereafter be imposed or permitted by any federal, state, or other statute, law, regulation, or judicial or administrative determination applicable to such proceedings, shall in any way limit Tyler's obligations hereunder. TYLER TECHNOLOGIES, INC. By: ------------------------------------------- Its: ------------------------------------------ Date: ----------------------------------------- EX-27 5 d81555ex27.txt FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 555,000 0 42,921,000 1,350,000 582,000 49,246,000 23,064,000 9,814,000 235,830,000 58,907,000 0 0 0 481,000 111,421,000 235,830,000 99,008,000 99,008,000 59,907,000 59,907,000 0 0 7,442,000 (11,848,000) (2,161,000) (9,687,000) (569,000) 0 0 (10,256,000) (0.23) (0.23)
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