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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported) June 3, 1996
TRANSACTION SYSTEMS ARCHITECTS, INC.
(Exact name of registrant specified in its charter)
Delaware 0-25346 47-0772104
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
330 South 108th Avenue
Omaha, Nebraska 68154
(Address of principal executive offices, including zip code)
(402) 390-7600
(Registrant's telephone number, including area code)
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TRANSACTION SYSTEMS ARCHITECTS, INC.
FORM 8-K
Item 2. Acquisition or Disposition of Assets
On June 3, 1996, 1176484 Ontario Inc., a wholly-owned subsidiary of Transaction
Systems Architects, Inc. (TSA or the Company), organized under federal law of
Canada, acquired substantially all of the net assets of TXN Solution Integrators
(TXN), a Canadian partnership. TSA is in the process of changing the name of
1176484 Ontario Inc. to Applied Communications Canada, Inc. TXN's ultimate
parent company is Tandem Computers Incorporated (Tandem). The purchase price
was approximately $3.6 million in cash and the assumption of certain liabilities
of TXN. The purchase price will be adjusted based upon the change in certain of
TXN's net assets from April 30, 1996 to May 31, 1996. The cash purchase price
was paid out of existing TSA corporate funds. The acquired assets consisted
primarily of accounts receivable, fixed assets, software, contract rights and
goodwill.
TXN distributes and supports computer software, acts as a solution integrator
and provides facilities management services. TXN was the exclusive distributor
of BASE24 products in Canada for Applied Communications, Inc., a wholly-owned
subsidiary of TSA.
The Company's primary product line, BASE24, operates on Tandem computers. The
Company has a number of agreements with Tandem that cover such items as
commissions on the sale of certain Tandem products, certain limited resales
by the Company of Tandem products and the distribution of the Company's
products by Tandem affiliates in a limited number of countries.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial statements of businesses acquired.
Audited financial statements of TXN for the year ended September
30, 1995 will be filed as soon as practical, but no later than 60
days from the date of this filing.
(b) Pro forma financial information
Pro forma financial information for TSA and TXN will be filed as soon
as practical, but no later than 60 days from the date of this filing.
(c) Exhibits
The exhibits filed as part of the Form 8-K are:
2.08 Asset Purchase Agreement Between 1176484 Ontario Inc. and TXN
Solution Integrators Dated June 3, 1996.
10.29 Second Amendment to Software House Agreement between Tandem
Computers Incorporated and Applied Communications, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: June 17, 1996
TRANSACTION SYSTEMS ARCHITECTS, INC.
(Registrant)
/s/ Gregory J. Duman
---------------------------------------------
Gregory J. Duman
Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 2.08
ASSET PURCHASE AGREEMENT
BETWEEN
1176484 ONTARIO INC.
AND
TXN SOLUTIONS INTEGRATORS
JUNE 3, 1996
TABLE OF CONTENTS
1. Definitions...............................................................1
2. Basic Transaction.........................................................6
(a) Purchase and Sale of Assets..........................................6
(b) Assumption of Liabilities............................................6
(c) Purchase Price.......................................................6
(d) Adjustment to Purchase Price as of the Closing Date ..............6
(e) Post-Closing Adjustment..............................................7
(f) Use of Target Bank Accounts..........................................7
(g) The Closing..........................................................8
(h) Deliveries at the Closing............................................8
(i) Allocation of Purchase Price.........................................8
(j) Section 22 Election re Accounts Receivable...........................8
(k) Goods and Services Tax Exemption at Canada...........................9
(l) Quebec Sales Tax.....................................................9
3. Representations and Warranties of the Target..............................9
(a) Organization of the Target..........................................10
(b) Authorization of Transaction........................................10
(c) Noncontravention....................................................10
(d) Brokers' Fees.......................................................10
(e) Title to Assets.....................................................10
(f) Financial Statements................................................11
(g) Events Subsequent to Most Recent Financial Statements ..............11
(h) Undisclosed Liabilities.............................................13
(i) Legal Compliance....................................................14
(j) Tax Matters.........................................................14
(k) Real Estate Lease...................................................15
(l) Intellectual Property and Software..................................16
(m) Tangible Assets.....................................................18
(n) Contracts...........................................................18
(o) Notes and Accounts Receivable.......................................19
(p) Powers of Attorney..................................................20
(q) Insurance...........................................................20
(r) Litigation..........................................................20
(s) Product Warranty....................................................21
(t) Product Liability...................................................21
(u) Employees...........................................................21
(v) Employee Benefit Plans and Arrangements.............................22
1
(w) Guaranties..........................................................22
(x) Environmental Matters...............................................22
(y) Customers...........................................................23
(z) Warranties and Discounts............................................24
(aa) Target's Residency..................................................24
(bb) Competition Act.....................................................25
(cc) Disclosure..........................................................25
4. Representations and Warranties of the Buyer..............................25
(a) Organization of the Buyer...........................................25
(b) Authorization of Transaction........................................25
(c) Noncontravention....................................................25
(d) Brokers' Fees.......................................................26
5. Pre-Closing Covenants....................................................26
(a) General.............................................................26
(b) Notices and Consents................................................26
(c) Operation of Business...............................................26
(d) Preservation of Business............................................26
(e) Full Access.........................................................26
(f) Notice of Developments..............................................26
(g) Exclusivity.........................................................27
6. Conditions to Obligation to Close........................................27
(a) Conditions to Obligation of the Buyer...............................27
(b) Conditions to Obligation of the Target..............................29
7. Termination of Agreement.................................................31
8. Post-Closing Covenants...................................................31
(a) General.............................................................31
(b) Litigation Support..................................................31
(c) Transition..........................................................32
(d) Confidentiality.....................................................32
(e) Name................................................................32
(f) Access to Books and Records.........................................32
(g) Post-Closing Documentation..........................................33
9. Remedies for Breaches of this Agreement..................................33
(a) Survival of Representations and Warranties..........................33
(b) Indemnification Provisions for Benefit of the Buyer.................33
(c) Indemnification Provisions for Benefit of Tandem....................34
(d) Matters Involving Third Parties.....................................35
(e) Determination of Adverse Consequences...............................36
(f) Other Indemnification Provisions....................................36
10. Miscellaneous............................................................37
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(a) Press Releases and Public Announcements.............................37
(b) No Third Party Beneficiaries........................................37
(c) Entire Agreement....................................................37
(d) Succession and Assignment...........................................37
(e) Counterparts........................................................37
(f) Headings............................................................37
(g) Notices.............................................................37
(h) Governing Law.......................................................39
(i) Amendments and Waivers..............................................39
(j) Severability........................................................39
(k) Expenses............................................................39
(l) Construction........................................................39
(m) Incorporation of Exhibits and Schedules.............................40
(n) Specific Performance................................................40
(o) Bulk Transfer Laws..................................................40
3
ASSET PURCHASE AGREEMENT
Agreement entered into on the 3rd day of June, 1996, by and between 1176484
ONTARIO INC., an Ontario corporation (the "BUYER"), APPLIED COMMUNICATIONS,
INC., a Nebraska corporation ("ACI"), and ATCP PARTNERSHIP, d/b/a TXN SOLUTIONS
INTEGRATORS, a Canadian partnership (the "TARGET"), TANDEM COMPUTERS CANADA
LIMITED, a Canadian corporation, and ACI CANADA EFTS LIMITED, a Nebraska
corporation ("Target Owners"), and TANDEM COMPUTERS INCORPORATED, a Delaware
corporation, ("Tandem"). The Buyer, ACI, Target, Target Owner and Tandem are
referred to collectively hereinafter as the "PARTY" or "PARTIES."
This Agreement contemplates a transaction in which the Buyer will purchase
certain of the assets and assume certain of the liabilities of the Target in
return for cash.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACQUIRED ASSETS" means all of Target's right, title, and interest in and
to all of the assets except as set forth herein, INCLUDING its (a) leaseholds
and subleaseholds therein, improvements thereon, and easements, rights-of-way,
and other appurtenants thereto (except as hereinafter excluded), (b) tangible
personal property (such as furniture, fixtures, equipment, supplies, purchased
parts, goods and services in process and finished goods), (c) Software Assets,
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions, (d) leases, subleases, and rights
thereunder, (e) agreements, contracts, indentures, mortgages, instruments,
Security Interests, guarantees, other similar arrangements, and rights
thereunder, (f) accounts, notes, and other receivables and related reserves, (g)
securities, (h) claims, deposits, prepayments, refunds, causes of action, choses
in action, rights of recovery, rights of set off, and rights of recoupment, (i)
franchises, approvals, permits, licenses, orders, registrations, certificates,
variances, and similar rights obtained from governments and governmental
agencies, (j) books, records, ledgers, files, documents, correspondence, lists,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials, and (k) the Target name TXN Solutions
Integrators PROVIDED, HOWEVER, that the Acquired Assets shall not include (i)
the partnership charter, qualifications to conduct business in the Canadian
provinces, taxpayer
1
and other identification numbers, and all other documents relating to the
organization, maintenance and existence of the Target as a partnership, (ii)
bank accounts, including cash balances of the Target, (iii) all intercompany
receivables between Target and Tandem and any of its subsidiary companies, (iv)
advances by Target to Tandem in the amount of $1,431,690.00 Cdn, and (v) lease
and all leasehold improvements located at 155 University Avenue, Toronto,
Canada.
"ACI PRODUCTS" mean the software products listed on Exhibit O as delivered
by ACI or any of its subsidiary companies to the Target.
"ADVERSE CONSEQUENCES" means all hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders, decrees, rulings,
damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees in any judicial or
administrative action, suit or proceeding, including court costs and reasonable
attorneys' fees and expenses.
"AFFILIATE" means a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
another specified Person.
"ASSUMED LIABILITIES" means (a) all Liabilities of the Target set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto),
(b) all Liabilities of the Target which have arisen after the Most Recent Fiscal
Month End in the Ordinary Course of Business (other than any Liability resulting
from, arising out of, relating to, in the nature of, or caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law), (c) all
obligations of the Target under the agreements, contracts, leases, licenses, and
other arrangements referred to in the definition of Acquired Assets, (d) all
other Liabilities and obligations of the Target set forth in an appendix to the
Disclosure Schedule under an express statement (that the Buyer has initialed) to
the effect that the definition of Assumed Liabilities will include the
Liabilities and obligations so disclosed, and (e) all transfer, sales, use and
other Taxes arising in connection with the consummation of the transaction
contemplated hereby; PROVIDED, HOWEVER, that the Assumed Liabilities shall NOT
INCLUDE (i) any Liability of the Target for income, sales, use, and other Taxes
arising out of the on-going business of Target prior to Closing or any income
tax attributable to Target Owners resulting from the consummation of this
transaction, (ii) any Liability of the Target for the unpaid Taxes of any Person
(other than the Target), as a transferee or successor, by contract, or
otherwise, (iii) any obligation of the Target to indemnify any Person (including
any of Tandem or the Target Owners, but excluding Gregory J. Duman and Edward E.
Mangold, unless covered by any applicable insurance of Target) by reason of the
fact that such Person
2
was a partner, officer, employee, or agent of the Target or was serving at the
request of any such entity as a partner, officer, employee, or agent of another
entity (whether such indemnification is for judgments, damages, penalties,
fines, costs, amounts paid in settlement, losses, expenses, or otherwise and
whether such indemnification is pursuant to any statute, charter document,
bylaw, agreement, or otherwise), (iv) any action, suit or proceeding pending at
the Closing Date or any subsequent action, suit or proceeding arising out of or
relating to such litigation or arising out of or relating to any event occurring
on or prior to the Closing Date, (v) any liability whatsoever with regard to any
Employee Benefit Plan, policy or arrangement or trust maintained for the benefit
of the Target's employees, except for the Target Profit Sharing Plan, (vi) any
Liability of the Target for costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, except Taxes, (vii) all
intercompany payables between Target and Tandem and any of its subsidiary
companies, (viii) any reserves for lease disposal relating to the lease of the
premises located at 155 University Avenue, Toronto, Canada, or (ix) deferred
rental credits relating to the lease of the premises located at 155 University
Avenue, Toronto, Canada.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"BUYER" has the meaning set forth in the preface above.
"CLOSING" has the meaning set forth in Section 2(g) below.
"CLOSING DATE" has the meaning set forth in Section 2(g) below.
"CONFIDENTIAL INFORMATION" means any information considered to be
confidential or proprietary concerning the businesses and affairs of the Target
excluding any information which (i) was in the receiving party's lawful
possession prior to the submission thereof by the disclosing party, (ii) is
later lawfully obtained by the receiving party from a third party under no
obligation of secrecy, (iii) is independently developed by the receiving party,
or (iv) is, or later becomes, available to the public through no act or failure
to act by the receiving party.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3 below.
"EMPLOYEE" means all employees of the Target as set forth on Exhibit J.
3
"EMPLOYEE BENEFIT PLAN" means all plans, funds, programs, policies,
arrangements, practices, customs and understandings providing benefits of
economic value to any employee, or present or former beneficiary, dependent or
assignee of any such employee other than regular salary, wages, commissions,
bonuses, vacation pay, holiday pay, termination pay, severance pay, profit
sharing plan payments, income tax, Canada Pension Plan Payments, Employee PC
Purchase Plan, and unemployment insurance payments paid substantially
concurrently with the performance of the services for which paid.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 3(f) below.
"INTELLECTUAL PROPERTY" means all of Target's right, title and interest in
and to (a) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(e) all computer software whether owned or licensed from a third party
(including data and related documentation), (f) all other proprietary rights,
and (g) all copies and tangible embodiments thereof (in whatever form or
medium).
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LIABILITY" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"MODIFIED BALANCE SHEET" is each Modified Balance Sheet that sets forth (i)
in column (A), Target's net assets in amounts reflected on the relevant balance
sheet included in the Financial Statements; (ii) in column (B), the related net
assets to be retained by Target; and (iii) in column (C), the Modified Net
Assets.
4
"MOST RECENT BALANCE SHEET" means the balance sheet of Target as of
April 30, 1996.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section
3(f) below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in Section 3(f)
below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section 3(f)
below.
"MODIFIED NET ASSETS" shall mean the total assets under column (C) on the
referenced Modified Balance Sheet less the total liabilities under column (C) on
the referenced Modified Balance Sheet.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"PURCHASE PRICE" has the meaning set forth in Section 2(c) and Section 2(d)
below.
"SOFTWARE ASSETS" means the software and intellectual property embodied
therein set forth on Exhibit K, including all versions thereof in source and
object code format, and related documentation.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, OTHER THAN (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable , (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"TANDEM" shall have the meaning set forth in the preface to this Agreement.
"TARGET" has the meaning set forth in the preface above.
5
"TARGET OWNERS" shall have the meaning set forth in the preface to this
Agreement.
"TARGET PROFIT SHARING PLAN" shall mean the profit sharing plan established
pursuant to Section 5.4 of the Partnership Agreement among ACI Canada EFTS
Limited, Tandem Computers Canada Limited, SJH Holdings, Inc. and MPR Holdings,
Inc. relating to the formation of a partnership known as ATCP Partnership.
"TAXES AND TAX RETURNS" shall have the meaning specified in 3(j).
2. BASIC TRANSACTION.
(a) PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Target, and
the Target agrees to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
Section 2.
(b) ASSUMPTION OF LIABILITIES. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Target not included within the definition of Assumed Liabilities.
(c) PURCHASE PRICE. The Buyer agrees to pay to Tandem Computers Canada
Limited for and on behalf of the Target at the Closing the sum of $4,100,000.00
U.S. subject to the adjustments set forth in Section 2(d) and Section 2(e) in
cash payable by wire transfer or delivery of other immediately available funds
and to assume the Assumed Liabilities. A portion of the purchase price in the
amount $347,893.00 U.S. shall be paid to an escrow account under the terms and
conditions set forth in additional agreement F-3, Purchase Price Escrow
Agreement.
(d) ADJUSTMENT TO PURCHASE PRICE AS OF THE CLOSING DATE. Attached hereto
as Exhibit E are the Modified Balance Sheet as of December 31, 1995 and the
Modified Balance Sheet as of April 30, 1996. On the Closing Date the Purchase
Price will be increased or decreased by an amount equal to the difference
between (i) the Modified Net Assets as of December 31, 1995, and (ii) the
Modified Net Assets as of April 30, 1996 as reflected on the Modified Balance
Sheet(s) of Target as of said dates. In the event the Modified Net Assets as of
April 30, 1996 exceed the Modified Net Assets as of December 31, 1995, the
Purchase Price will be increased by such amount. In event the Modified Net
Assets as of April 30, 1996 are less than the Modified Net Assets as of
6
December 31, 1995, the Purchase Price will be decreased by such amount. The
foregoing increase or decrease shall be converted to U.S. Dollars based on the
exchange rate of .7329 U.S. Dollars per $1.00 Canadian dollar.
(e) POST-CLOSING ADJUSTMENT. After the Closing, but no later than June
15, 1996, Target shall deliver to Buyer a Modified Balance Sheet of Target as of
May 31, 1996. Within twenty-eight (28) days after the Closing, the Parties will
determine the change in Modified Net Assets between April 30, 1996 and May 31,
1996. During this twenty-eight (28) day period, Buyer will be allowed to audit
the financial and business records of Target which support the Modified Net
Assets as of May 31, 1996. In the event the Modified Net Assets as of May 31,
1996 exceed the Modified Net Assets as of April 30, 1996, Buyer will pay to
Target such excess amount. In the event the Modified Net Assets as of May 31,
1996 are less than the Modified Net Assets as of April 30, 1996, Target will pay
Buyer such amount. The foregoing increase or decrease shall be converted to
U.S. Dollars based on the exchange rate of .7329 U.S. Dollars per $1.0000
Canadian dollar. Any amount payable by Target to Buyer or from Buyer to Target
for the Post-Closing Adjustment will be paid to the other party no later than
thirty-five (35) days after the Closing.
(f) USE OF TARGET BANK ACCOUNTS. Upon Closing and for the subsequent
period ending not later than July 31, 1996, Target will allow Buyer to use the
following bank accounts of Target in the ordinary course of business to (i) make
payroll payments to employees, (ii) pay vendors and others, and (iii) receive
deposits from customers and others:
Checking Account - Cdn $ Denominated
Canadian Imperial Bank of Commerce
A/C #90-13415
Checking Account - U.S. $ Denominated
Canadian Imperial Bank of Commerce
A/C 02-42314
With respect to the month of June, 1996 and to each month subsequent to the
Closing where Buyer uses Target's bank accounts, within fifteen (15) days after
each such month end Buyer will complete the Form of Cash Settlement in the form
attached as Exhibit I, and will pay to Target an amount equal to the excess of
(i) all disbursements and withdrawals for that month on such bank accounts over
(ii) all deposits into such bank accounts for that month. In the event deposits
into such bank accounts for that month exceed disbursements and withdrawals for
that month, Target will pay to buyer the net amount within twenty (20) days
subsequent to that month end. For purposes of the foregoing, disbursements,
withdrawals and deposits
7
shall exclude (i) payments received by Target pursuant to paragraphs 2(c), 2(d)
and 2(e) above, (ii) payments to or by Target pursuant to this paragraph 2.(f),
and (iii) transactions between Target and either Target Owners or Tandem. For a
period of thirty (30) days following the last payment hereunder, the Parties
retain the right to audit the books and activity of Target and Buyer relating to
such bank accounts.
(g) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Transaction Systems
Architects, Inc. in Omaha, Nebraska commencing at 9:00 a.m. local time on the
second business day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as the Parties may mutually
determine (the "CLOSING DATE"); PROVIDED, HOWEVER, that the Closing Date shall
be not later than June 1, 1996.
(h) DELIVERIES AT THE CLOSING. At the Closing, (i) the Target will deliver
to the Buyer the various certificates, instruments, and documents referred to in
Section 6(a) below; (ii) the Buyer will deliver to the Target the various
certificates, instruments, and documents referred to in Section 6(b) below;
(iii) the Target will execute, acknowledge (if appropriate), and deliver to the
Buyer (A) assignments (including real property and Intellectual Property
transfer documents) in the forms attached hereto as Exhibits A-1 through -A__
and (B) such other instruments of sale, transfer, conveyance, and assignment as
the Buyer and its counsel reasonably may request; (iv) the Buyer will execute,
acknowledge (if appropriate), and deliver to the Target (A) an assumption in the
forms attached hereto as Exhibit B and (B) such other instruments of assumption
as the Target and its counsel reasonably may request; (v) the Buyer will deliver
to the Target the consideration specified in Section 2(c) above; and (vi) in the
event Target is unable to deliver any of the documents required by (i) -- (iv)
at Closing, it agrees to use its best efforts to deliver said documents as soon
as practical after Closing.
(i) ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Acquired Assets and Assumed Liabilities in the form of Exhibit L.
Said exhibit shall be revised within thirty (30) days of Closing and shall be
utilized by the parties as the final allocation of purchase price. The Target
and the Buyer shall file their respective tax returns prepared in accordance
with such allocation.
(j) SECTION 22 ELECTION RE ACCOUNTS RECEIVABLE. The Target and the Buyer
will jointly execute, and each of them will file promptly following the Closing
Date, an election under Section 22 of the INCOME TAX ACT (Canada) with respect
to the accounts receivable
8
included in the Acquired Assets. Such election will designate the portion of
the Purchase Price allocated to the accounts receivable pursuant to Section 3(i)
as the consideration paid therefor by the Buyer.
(k) GOODS AND SERVICES TAX EXEMPTION CANADA.
(1) For purposes of the Goods and Services Tax exemption, the Buyer
hereby represents and warrants to the Target that the Buyer is
registered for purposes of Part IX of the EXCISE TAX ACT, R.S.C.
1985, c. E-15 as amended (Canada) (the "GST Legislation").
(2) The Target and the Buyer will jointly execute in prescribed form,
and the Buyer will file within the required time, an election
under s.167(1) of the EXCISE TAX ACT (Canada) that no tax be
payable pursuant to the GST Legislation with respect to the
purchase and sale of the Acquired Assets hereunder. If such
election is held invalid, the Buyer will be responsible for all
Goods and Service Tax due, including interest and penalties.
(l) QUEBEC SALES TAX.
(1) For purposes of the Quebec Sales Tax exemption, the Buyer hereby
represents and warrants to the target that the Buyer is applying
for registration under the ACT REPRESENTING THE QUEBEC SALES TAX
R.S.Q. c.T-0.1, as amended (Quebec) (the "QST Legislation")
effective the Closing Date.
(2) The Target and the Buyer will jointly execute in prescribed form,
and the Buyer will file within the required time, an election
under section 75 of the ACT RESPECTING THE QUEBEC SALES TAX
(Quebec) that no tax be payable pursuant to the GST Legislation
with respect to the purchase and sale of the Acquired Assets
hereunder. If such election is held invalid, the buyer will be
responsible for all Quebec Sales Tax due, including interest and
penalties.
3. REPRESENTATIONS AND WARRANTIES OF THE TARGET. The Target, Target
Owners (only as to their undertakings set forth in the following subsections in
this Section 3) and Tandem jointly and severally represent and warrant to the
Buyer that the statements contained in this Section 3 are correct and complete
as of the date of this Agreement and will be correct and
9
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the disclosure schedule accompanying this Agreement and
initialed by the Parties (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Section 3.
(a) ORGANIZATION OF THE TARGET. The Target is a Canadian partnership duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization.
(b) AUTHORIZATION OF TRANSACTION. The Target has full power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
Without limiting the generality of the foregoing, the Target Owners have duly
authorized the execution, delivery, and performance of this Agreement by the
Target. This Agreement constitutes the valid and legally binding obligation of
the Target, enforceable in accordance with its terms and conditions.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Target is subject or any provision of
the charter of the Target in any material respect, or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which the Target is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets) in any material respect. The Target need not
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 2 above).
(d) BROKERS' FEES. The Target has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(e) TITLE TO ASSETS. The Target has good and marketable title to, a valid
right to use or a valid leasehold interest in, the properties and assets used by
it, located on its premises, or shown on the Most Recent Balance Sheet or
acquired after the date thereof, free
10
and clear of all Security Interests, except for properties and assets disposed
of in the Ordinary Course of Business since the date of the Most Recent Balance
Sheet. Without limiting the generality of the foregoing, the Target has good and
marketable title or a valid right to use all of the Acquired Assets, free and
clear of any Security Interest or restriction on transfer.
(f) FINANCIAL STATEMENTS. Attached hereto as Exhibit D are the following
financial statements (collectively the "FINANCIAL STATEMENTS"): (i) audited
balance sheets and statements of income, changes in Target Owners' equity, and
cash flow as of and for the fiscal year ended September 30, 1995 (the "MOST
RECENT FISCAL YEAR END") for the Target; and (ii) unaudited balance sheets and
statements of income as of and for the three (3) months ended December 31, 1995
(the "MOST RECENT FINANCIAL STATEMENTS") and as of and for the four (4) months
ended April 30, 1996 (the "MOST RECENT FISCAL MONTH END") for the Target. There
should be added to Exhibit D the referenced Financial Statements as of and for
the one (1) month ending May 31, 1996. Tandem has periodically performed
limited analytical reviews of Target's Financial Statements based on materiality
considerations in the context of Tandem's consolidated financial statements. In
the course of these reviews, nothing has come to the attention of Tandem that
would lead Tandem to believe that Target's Financial Statements have not been
prepared using Tandem's accounting policies and procedures applied for the
purpose of preparing Tandem's consolidated financial statements.
(g) EVENTS SUBSEQUENT TO MOST RECENT FINANCIAL STATEMENTS. Since the Most
Recent Financial Statements, there has not been any material adverse change in
the business, financial condition, operations, results of operations, or, to the
knowledge of Target, the future prospects of the Target. Without limiting the
generality of the foregoing, since that date:
(i) The Target has not sold, leased, transferred, or assigned any of
its assets, tangible or intangible, other than for a fair consideration in
the Ordinary Course of Business;
(ii) The Target has not entered into any agreement, contract, lease,
or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $500,000.00 Cdn or outside the
Ordinary Course of Business;
(iii) The Target has not accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than
$250,000.00 Cdn to which the Target is a party or to which it is bound;
11
(iv) No Security Interest has been imposed upon any of the Target's
assets, tangible or intangible;
(v) The Target has not made any capital expenditure (or series of
related capital expenditures) either involving more than $250,000.00 Cdn or
outside the Ordinary Course of Business;
(vi) The Target has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either
involving more than $250,000.00 Cdn or outside the Ordinary Course of
Business;
(vii) The Target has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$250,000.00 Cdn singly or $500,000.00 Cdn in the aggregate;
(viii) The Target has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) The Target has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) either involving
more than $250,000.00 Cdn or outside the Ordinary Course of Business;
(x) The Target has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property or Software
Assets outside the Ordinary Course of Business;
(xi) There has been no change made or authorized in the partnership
agreement between the Target Owners of the Target;
(xii) The Target has not issued, sold, or otherwise disposed of
any of its partnership interest in the Target, or granted any options, or
other rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its partnership interest;
(xiii) The Target has not declared, set aside, paid, or made any
distribution with respect to its ownership (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its partnership interest;
12
(xiv) The Target has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xv) The Target has not made any loan to, or entered into any other
transaction with Tandem and/or any of the Target Owners, or their officers
and employees outside the Ordinary Course of Business;
(xvi) The Target has not entered into any employment contract or
collective bargaining agreement, written, oral, express or implied, or
modified the terms of any existing such contract or agreement;
(xvii) The Target has not granted any increase in the base
compensation of any of its officers and employees outside the Ordinary
Course of Business;
(xviii) The Target has not adopted, amended, modified or
terminated any bonus, profit-sharing, incentive, termination or severance
or other plan, contract, or commitment for the benefit of any of its
owners, officers and employees;
(xix) The Target has not made any other change in employment terms
for any of its officers and employees outside the Ordinary Course of
Business;
(xx) The Target has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xxi) The Target has not paid any amount to any third party with
respect to any Liability or obligation (including any costs and expenses
the Target has incurred or may incur in connection with this Agreement and
the transactions contemplated hereby) which would not constitute an Assumed
Liability if in existence as of the Closing;
(xxii) There has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Target; and
(xxiii) The Target has not committed to any of the foregoing.
(h) UNDISCLOSED LIABILITIES. To the Knowledge of the Target, the Target
has no Liability (and to the Knowledge of Target, there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of
13
them giving rise to any Liability), except for (i) Liabilities set forth on the
face of the Most Recent Balance Sheet (rather than in any notes thereto) and
(ii) Liabilities which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach or
failure of warranty, tort, infringement, or violation of law).
(i) LEGAL COMPLIANCE. The business has been conducted in a manner which
complies in all material respects with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, province, local, municipal and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against the Target alleging any failure so to comply.
(j) TAX MATTERS. All tax returns, reports, statements and other similar
filings required to be filed by the Target (the "Tax Returns") with respect to
any federal, provincial, municipal, local or foreign taxes, assessments,
interest, penalties, deficiencies, fees and other governmental charges or
impositions (including without limitation all income, unemployment compensation,
social security, payroll, capital, sales and use, excise, customs duties,
privilege, property, ad valorem, goods and services, franchise, license, school
and any other tax or similar governmental charge or imposition under laws of
Canada or any province or political subdivision thereof or any foreign country
or political subdivision thereof) (the "Taxes") have been filed with the
appropriate governmental agencies in all jurisdictions in which such Tax Returns
are required to be filed, and all such Tax Returns properly reflect the
liabilities of the Target for Taxes for the periods, property or events covered
thereby. All Taxes, including those without limitation which are called for by
the Tax Returns, or heretofore claimed to be due by any taxing authority from
the Target, have been properly accrued or paid. The accruals for Taxes
contained in the Most Recent Balance Sheets are adequate to cover the tax
liabilities of the Target with respect to its business operations as of that
date and include adequate provision for all deferred taxes, and nothing has
occurred subsequent to that date to make any of such accruals inadequate. The
Target has not received any notice of assessment or proposed assessment in
connection with any Tax Returns and there are no pending tax examinations of or
tax claims asserted against the Target or any of its assets or properties. The
Target has not extended, or waived the application of, any statute of
limitations of any jurisdiction regarding the assessment or collection of any
Taxes. There are no tax liens (other than any lien for current taxes not yet
due and payable) on any of the assets or properties of the Target. The Target
has no Knowledge of any basis for any additional material assessment of any
Taxes. The Target has made all deposits required by law to be made with respect
to employees' withholding and other employment taxes, including without
limitation the portion of such deposits
14
relating to taxes imposed upon the Target. The Target is not a party to any
tax-sharing or allocation agreement, nor does the Target owe any amount under
any tax-sharing or allocation agreement. The Target has delivered to Buyer true
and correct copies of all Tax Returns for years ended and filed on or before the
Closing. All Tax Returns filed by the Target after the Closing for any periods,
property or events on or before the Closing shall properly reflect the
liabilities of the Target for Taxes for such periods, property or events on or
before the Closing shall properly reflect the liabilities of the Target for
Taxes for such periods, property or events covered thereby and all Taxes called
for by such tax Returns shall be properly paid by the Target, except to the
extent accrued for at the Closing Date.
(k) REAL ESTATE LEASES. Section 3(k) of the Disclosure Schedule lists
all real property leased or subleased to the Target. The Target has delivered
to the Buyer correct and complete copies of the leases and subleases listed in
Section 3(k) of the Disclosure Schedule (as amended to date). With respect to
each lease and sublease listed in Section 3(k) of the Disclosure Schedule:
(i) The lease or sublease is legal, valid, binding, enforceable, and
in full force and effect;
(ii) The lease or sublease will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby (including the
assignments and assumptions referred to in Section 2 above);
(iii) No party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iv) No party to the lease or sublease has repudiated any provision
thereof;
(v) There are no disputes, oral agreements, or forbearance programs
in effect as to the lease or sublease;
(vi) The Target has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(vii) All facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses and permits)
required in connection
15
with the operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations; and
(viii) All facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the current operation of
said facilities.
(l) INTELLECTUAL PROPERTY AND SOFTWARE.
(i) The Target owns the Software Assets and Intellectual Property
utilized in the operation of the business of the Target as presently
conducted.
(ii) The Intellectual Property to which Target owns the underlying
rights and Software Assets of Target do not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with any intellectual
property rights of third parties. To the Knowledge of the Target, no third
party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property to which Target owns the
underlying rights or Software Assets of the Target.
(iii) With respect to each Software Asset:
(A) The Target has no patents, pending patent applications or
applications for registration;
(B) Schedule 3(1)(iii)(B) identifies each license or agreement
which the Target has granted to any third party;
(C) Schedule 3(1)(iii)(C) identifies each trade name or
unregistered trademark used by the Target in connection with its
business;
(D) The Target possess all right, title, and interest in and to
each Software Asset, including, in the case of copyright interests,
the moral rights therein, or has obtained an assignable, irrevocable
waiver thereof, free and clear of any Security Interest, license, or
other restriction;
(E) The Software Asset is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(F) No action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending, or to the Knowledge of the
Target,
16
is threatened which challenges the legality, validity, enforceability,
use, or ownership of each Software Asset; and
(G) Except as set forth in Section 3(l)(iii)B, the Target has
never agreed to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to each
Software Asset.
(iv) Section 3(l)(iv) of the Disclosure Schedule identifies each item
of Intellectual Property that any third party owns and that the Target uses
pursuant to license, sublicense or agreement excluding the ACI Products
except as to subparagraph (G) hereafter. Schedule 3(l)(iv) contains a
correct and complete list of all licenses, sublicenses, and agreements with
respect to each item of Intellectual Property required to be identified in
Section 3(l)(iv) of the Disclosure Schedule:
(A) The license, sublicense or agreement covering the item is
legal, valid, binding, enforceable, and in full force and effect;
(B) The license, sublicense or agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby (including the assignments and assumptions
referred to in Section 2 above);
(C) No party to the license, sublicense or agreement is in
breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) No party to the license, sublicense or agreement has
repudiated any provision thereof;
(E) The license, sublicense or agreement covering each item of
Intellectual Property is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(F) No action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending, or to the Knowledge the Target
is threatened, which challenges the legality, validity, or
enforceability of the license, sublicense or agreement covering any
item of Intellectual Property; and
17
(G) The Target has not granted any sublicense or similar right
with respect to the license, sublicense or agreement except as
expressly authorized by the license, sublicense or agreement covering
the item of Intellectual Property.
(m) TANGIBLE ASSETS. The Target owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted. Each such tangible asset is free from known defects
(patent and latent), has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used.
(n) CONTRACTS. Section 3(n) of the Disclosure Schedule lists the
following contracts and other agreements currently in force to which the Target
is a party:
(i) Any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $100,000.00 Cdn per annum;
(ii) Any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year,
result in a loss to the Target, or involve consideration in excess of
$500,000.00 Cdn;
(iii) Any agreement concerning a partnership or joint venture;
(iv) Any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $250,000.00 Cdn or
under which it has imposed a Security Interest on any of its assets,
tangible or intangible;
(v) Any agreement concerning confidentiality or noncompetition;
(vi) Any agreement involving any of the Target Owners and their
Affiliate (other than the Target);
18
(vii) Any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(viii) Any collective bargaining agreement;
(ix) Any agreement for the employment of any individual on a full-
time, part-time, consulting, or other basis providing annual compensation in
excess of $75,000.00 Cdn or providing termination or severance benefits;
(x) Any agreement under which it has advanced or loaned any amount to
any of its Target Owners, officers, and employees outside the Ordinary
Course of Business;
(xi) Any agreement under which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the
Target by reducing gross revenue of Target by 5% or more based on the 12
month earnings of Target ending March 31, 1996; or
(xii) Any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $500,000.00 Cdn.
With respect to each agreement listed in Section 3(n) of the Disclosure
Schedule: (A) the agreement is legal, valid, binding, enforceable, and in full
force and effect; (B) except as listed in Section 3(n), the agreement will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in Section 2
above); (C) no party is in material breach or default, and no event has occurred
which with notice or lapse of time would constitute a material breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
(o) NOTES AND ACCOUNTS RECEIVABLE. All notes, work-in-process, and
accounts receivable reflected on the Most Recent Balance Sheet and all
subsequently accruing accounts receivable have arisen in the Ordinary Course of
Business and shall be collectible (or, in the case of subsequently accruing
accounts receivable, billable and collectible) in full when due, subject only to
the allowance for doubtful accounts set forth on the face of the
19
Most Recent Balance Sheet (rather than any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Target.
(p) POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of any of the Target.
(q) INSURANCE. Section 3(q) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Target has been a party, a named
insured, or otherwise the beneficiary of coverage at any time since October 1,
1995:
(i) The name, address, and telephone number of the broker;
(ii) The name of the insurer and the name of the policyholder;
(iii) The policy number and the period of coverage; and
(iv) The amount of coverage.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) neither the Target nor
Tandem is in material breach or default , and to the Knowledge of Tandem, no
event has occurred which, with notice or the lapse of time, would constitute a
material breach or default, or permit termination, modification, or
acceleration, under the policy; and (C) neither Target nor Tandem has repudiated
any provision thereof. The Target has been covered since January 1, 1994 by
insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period.
(r) LITIGATION. Section 3(r) of the Disclosure Schedule sets forth each
instance in which the Target (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge, or (ii) is a party or to the
knowledge of the Target is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or quasi-
judicial or administrative agency of any federal, state, municipal, local, or
foreign jurisdiction or before any arbitrator. None of the actions, suits,
proceedings, hearings, and investigations set forth in Section 3(r) of the
Disclosure Schedule could result in any adverse change in the business,
financial condition, operations, results of operations, or future prospects of
any of the Target. None of the Target Owners have any reason to believe that
any action, suit, proceeding, hearing, or investigation may be brought or
threatened against the Target.
20
(s) PRODUCT WARRANTY. Each product developed, licensed, or delivered by
the Target to its customers, except the ACI Products, has been in conformity
with all applicable contractual commitments and all express and implied
warranties. To the Knowledge of the Target, no product developed, licensed or
delivered by the Target is subject to any guarantee, warranty or other indemnity
beyond the terms and conditions of sale, lease or license set forth in each such
agreement.
(t) PRODUCT LIABILITY. To the Knowledge of the Target, the Target has no
Liability (and to the Knowledge of Target there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any Liability) arising out
of any injury to individuals or property as a result of the ownership,
possession, or use of any product developed, licensed or delivered by Target.
(u) EMPLOYEES.
(i) Exhibit J referenced at Section 3(u) of the Disclosure Schedule
sets forth a true and complete list of the names of all Employees of the
Target.
(ii) To the knowledge of the Target Owners or the Target, no Employee
has plan to terminate employment with the Target.
(iii) The Target is not a party to or bound by any collective
bargaining agreement nor has it made any agreements with any labor union or
employee association with respect to any future collective bargaining
agreements, nor has it experienced any strikes, claims of unfair labor
practices, or other collective bargaining disputes or disturbances. The
Target has not committed any unfair labor practice. The Target has no
Knowledge of any organizational efforts presently being made or threatened
by or on behalf of any labor union or employee association with respect to
Employees.
(iv) Except as disclosed in Section 3(u) of the Disclosure Schedule,
to the Knowledge of the Target, no Employee has commenced any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or
notice (hereinafter referred to as "Claim"):
1. arising out of any applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings
and charges thereunder) of federal, provincial, local, municipal
and foreign governments (and all agencies thereof) (hereinafter
referred to as the
21
"Laws") relating to employment, employment or labour standards,
human rights (including without limiting harassment or
discrimination in employment or employment practices)
occupational health and safety, workers' compensation, pay
equity, labour or industrial relations, employer health tax,
Canada Pension Plan, income tax and unemployment insurance; or
2. on account of or for: (a) overtime pay, other than overtime for
the current payroll period; (b) vacation time off, sick time or
pay in lieu of any of the foregoing; or (c) any violation of any
applicable Laws relating to minimum wages or maximum hours of
work;
and the Target further represents and warrants that it is in good
standing under all of the above Laws as at the Date of Closing.
(v) EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Since January 1, 1994, the
Target has not had any Employee Benefit Plan(s). The Target has fulfilled all
requirements under the Income Tax Act (Canada) and the regulations thereof, the
Canada Pension Plan, the Unemployment Insurance Act, and comparable or other
legislation of any other relevant jurisdictions for withholding of amounts from
employees and has remitted all amounts so withheld (together with all amounts
payable as employer levies, premiums or contributions) to the appropriate
authorities within the prescribed times and has filed all information and other
returns required pursuant to any such legislation within the time or times
prescribed in respect thereof which filings were accurate in all material
respects.
(w) GUARANTIES. The Target is not a guarantor or otherwise liable for any
Liability or obligation (including indebtedness) of any other Person.
(x) ENVIRONMENTAL MATTERS.
(i) Except as set forth in the Disclosure Schedule Section 3(x), the
Target has obtained all permits, licenses and other authorizations which
are required in connection with the conduct of its business under
Regulations relating to pollution or protection of the environment,
including Regulations relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment (including
without limitation ambient air, surface water, groundwater, or land), or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal,
22
transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
(ii) Except as set forth in the Disclosure Schedule Section 3(x), the
Target is in compliance in all material respects in the conduct of its
business with all terms and conditions of the required permits, licenses
and authorizations, and are also in compliance in all material respects
with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained
in those Regulations or contained in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder.
(iii) Except as set forth in the Disclosure Schedule Section 3(x),
the Target is not aware of, nor has it received notice of, any past,
present or future events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent compliance
or continued compliance with those laws or any regulations, code, plan,
order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder, or which may give rise to any
common law or legal liability, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study or investigation, based on
or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge,
release or threatened release into the environment, of any pollutant,
contaminant, chemical, or industrial, toxic or hazardous substance or
waste.
(iv) Except as set forth in the Disclosure Schedule Section 3(x),
there are no civil, criminal or administrative action, suit, demand, claim,
hearing, notice or demand letter, notice of violation, investigation, or
proceeding pending or threatened against the Target in connection with the
conduct of its business relating in any way to those laws or any
regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder.
(v) The Target agrees to cooperate with Buyer in connection with
Buyer's application for the transfer, renewal or issuance of any permits,
licenses, approvals or other authorizations or to satisfy any regulatory
requirements involving the Target's business.
(y) CUSTOMERS. Attached as Exhibit N is a list of all customers of the
Target as of April 30, 1996. The Target, the Target Owners and Tandem have no
knowledge of any
23
facts which could reasonably be expected to result in the loss of any customers
or sources of revenue of the Target which, in the aggregate, would be material
to the condition of the business of the Target.
Except as disclosed in Section 3(n) of the Disclosure Schedule, (a) the
Target has no customer contracts other than purchase orders received by the
Target in the Ordinary Course of Business; and (b) the Target has no outstanding
"blanket" purchase orders received from customers.
(z) WARRANTIES AND DISCOUNTS. Except as described in Section 3(z) of the
Disclosure Schedule:
(i) without considering the ACI Products, the Target has not given
any guarantee or warranty with respect to any of the products licensed or
sold or the services provided as part of its business, except warranties
made in the Ordinary Course of Business and except for warranties implied
by law;
(ii) since January 1, 1994, no claims have been made against the
Target for breach of warranty or contract or negligence that has resulted
in a price adjustment or other material concession in respect of any defect
in or failure to perform or deliver any products, services or work in any
material respect;
(iii) except for the ACI Products, there are no repair contracts
or maintenance obligations in favor of the customers or users of products
supplied by the Target except obligations incurred in the Ordinary Course
of Business;
(iv) since January 1, 1994, the Target has not entered into any
agreement with or made any commitment to any customer which would require
the repurchase of any products sold to such customers or adjustments of any
price or the granting of any refund, discount or other concession to such
customer; and
(v) neither the Target nor any other person is required to provide
any letters of credit, bonds or other financial security arrangements in
connection with any transactions with any suppliers or customers.
(aa) TARGET'S RESIDENCY. The Target is not a resident of Canada within the
meaning of the INCOME TAX ACT (Canada).
24
(bb) COMPETITION ACT. The gross assets of the Target and the gross
revenues thereof as calculated in accordance with the COMPETITION ACT (Canada)
are less than $35,000,000.
(cc) DISCLOSURE. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a material fact or omit to sate
any material fact necessary in order to make the statements and information
contained in this Section 3 not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer and ACI
represent and warrant to the Target and to the Target Owners and Tandem that the
statements contained in this Section 4 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 4), except as set forth in the Disclosure
Schedule. The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this Section 4.
(a) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(b) AUTHORIZATION OF TRANSACTION. The Buyer has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of the Buyer, enforceable in accordance
with its terms and conditions.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets is
subject. The Buyer does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions referred to in Section
2 above).
25
(d) BROKERS' FEES. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Target could become
liable or obligated.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use its best efforts to take all
action and to do all things necessary proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 6 below).
(b) NOTICES AND CONSENTS. The Target will give any notices to third
parties, and the Target will use its best efforts to obtain any third party
consents, that the Buyer may request in connection with the matters referred to
in Section 3(c) above. Each of the Parties will give any notices to, make any
filings with, and use its best efforts to obtain any authorizations, consents,
and approvals of governments and governmental agencies in connection with the
matters referred to in Section 3(c) and Section 4(c) above.
(c) OPERATION OF BUSINESS. The Target will not engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, the Target will not
(i) pay any amount to any third party with respect to any Liability or
obligation (including any costs and expenses the Target has incurred or may
incur in connection with this Agreement and the transactions contemplated
hereby) which would not constitute an Assumed Liability if in existence as of
the Closing, or (ii) otherwise engage in any practice, take any action, or enter
into any transaction of the sort described in Section 3(g) above.
(d) PRESERVATION OF BUSINESS. The Target will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
(e) FULL ACCESS. The Target will permit representatives of the Buyer to
have full access, at reasonable times during normal business hours and with
reasonable prior notice to Tandem, and subject to such reasonable restrictions
as Tandem may impose, to the Target's books, records, and documents.
(f) NOTICE OF DEVELOPMENTS. Each Party will give prompt written notice to
the other Party of any material adverse development causing a breach of any of
its own
26
representations and warranties in Section 3 and Section 4 above. No disclosure
by any Party pursuant to this Section 5(f), however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
(g) EXCLUSIVITY. The Target will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any Person relating to the
acquisition of any capital stock or other voting securities, or any substantial
portion of the assets, or any of the partnership interests of the Target Owners
or any substantial portion of the assets of the Target, or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. The Target will notify
the Buyer immediately if any Person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) The representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii) The Target shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) The Target shall have procured all of the third party
consents specified in Section 5(b) above required by Buyer to be delivered
at Closing;
(iv) No action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
provincial state, local, municipal, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, or
(C) affect adversely the right of the Buyer to own the Acquired Assets or
to operate the business of the Target.
27
(v) The Target shall have delivered to the Buyer a certificate to the
effect that each of the conditions specified above in Section 6(a)(i)-(iv)
is satisfied in all respects;
(vi) The Target, and the Buyer shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3(c) and Section 4(c) above;
(vii) The relevant parties shall have entered into additional
agreements as required under 6(a)(x) and (xi) in form and substance as set
forth in Exhibits F-1 through F-3 attached hereto and the same shall be in
full force and effect;
(viii) The Buyer shall have received from counsel to the Target an
opinion in form and substance as set forth in Exhibit G attached hereto,
addressed to the Buyer, and dated as of the Closing Date;
(ix) All actions to be taken by the Target in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Buyer.
(x) Tandem shall have agreed to an extension of the Software House
Agreement with ACI dated October 1, 1992 and amended on December 31, 1993,
through December 31, 1999 for the country of Canada on the same terms and
conditions as in effect on December 31, 1997.
(xi) Buyer shall have agreed to lease on the same terms as those
presently in effect for Target the space presently occupied by Target on
Floors 19, 20 and 21 of the building located at 155 University Avenue,
Toronto, Canada, through February 28, 1997;
(xii) Buyer shall have received commitments of employment by such
employees of Target as it deems necessary. The Target agrees not to
solicit any of the Employees for employment with the Target or any
successor thereto for a period of two (2) years from the Closing Date;
(xiii) Target shall have delivered to Buyer a clearance certificate
pursuant to Section 6 of the RETAIL SALES TAX (Ontario) and the
corresponding legislation in each other relevant province; and
28
The Buyer may waive any condition specified in this Section 6(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE TARGET. The obligation of the Target
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) The representations and warranties set forth in Section 4 above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii) The Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of
any federal, provincial, state, local, municipal, or foreign jurisdiction
or before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent consummation of any of
the transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(iv) The Buyer shall have delivered to the Target a certificate to the
effect that each of the conditions specified above in Section 6(b)(i)-(iii)
is satisfied in all respects;
(v) The Target, and the Buyer shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3(c) and Section 4(c) above;
(vi) The relevant parties shall have entered into additional
agreements in form and substance as set forth in Exhibits F-1, F-2, and F-3
and the same shall be in full force and effect;
(vii) The Target shall have received from counsel to the Buyer an
opinion in form and substance as set forth in Exhibit H attached hereto,
addressed to the Target, and dated as of the Closing Date;
(viii) All actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments,
29
and other documents required to effect the transactions contemplated hereby
will be reasonably satisfactory in form and substance to the Target;
(ix) Buyer shall have agreed to a lease on the same terms as those
presently in effect for Target the space presently occupied by Target on
Floors 19, 20 and 21 of the building located at 155 University Avenue,
Toronto, Canada, through February 28, 1997; and
(x) Buyer shall have offered employment to all Employees of the
Target of record on the Closing Date on substantially the same terms and
conditions of employment enjoyed by each Employee with the Target except in
the case of Employees who have entered into a written employment agreement
with Buyer.
(i) Buyer shall have offered employment to be effective the day
after the Closing to all Employees of the Target conditional upon the
completion of the Closing on terms satisfactory to Buyer, provided,
however, that nothing herein shall be deemed to require the Buyer to
continue the employment of such Employees for any particular period of
time; and nothing herein shall be deemed to be for the benefit of any
such Employee or give any such Employee the right to be retained in
the employ of the Buyer or to interfere with the right of the Buyer to
terminate the employment of any such Employee at any time.
(ii) The Target acknowledges that it is responsible for and
agrees to indemnify and save harmless the Buyer from all Claims
incurred by the Buyer if, solely as a result of this sale of the
Target's assets, any employee of the Target exercises his legal right
to consider himself terminated by the transaction and seeks from the
Buyer any statutory payments or common law damages as a consequence of
such termination or deemed termination of employment.
(iii) The Target agrees that it shall, as at the Closing Date,
pay all amounts due to or on behalf of all employees, not hired by
Buyer including, without limitation, all accrued wages, salaries,
commissions, bonuses, vacation pay, termination pay, pay in lieu of
notice, severance pay, employment benefit payments, holiday pay,
income tax, Canada Pension Plan payments and unemployment insurance
payments not accrued for on the Most Recent Balance Sheet, and further
the Target agrees to indemnify and hold the Buyer harmless from and
against any and all Claims which may be made or brought or levied
against the Buyer or which the Buyer may suffer or incur,
30
after the Closing Date, that are brought by or in respect of any
employee, or by a government agency on their behalf, and which relate
to the employment or termination of employment of the employees, or to
the remuneration or benefits provided to the employees by the Target
not accrued for on the Most Recent Balance Sheet. Such indemnity
includes, but is not limited to, any and all Claims in respect of
wages, salaries, bonuses, commissions, vacation pay, holiday pay,
severance pay, notice or pay in lieu of notice, termination pay,
pension or other employee benefits, income tax withholdings,
unemployment insurance, Canada Pension Plan, employer health tax,
workers' compensation and any other federal or provincial employment
legislation related to employment matters.
The Target may waive any condition specified in this Section 6(b) if it executes
a writing so stating at or prior to the Closing.
7. TERMINATION OF AGREEMENT. The Buyer and the Target may terminate this
Agreement by mutual written consent at any time prior to the Closing. If any
Party terminates this Agreement, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party.
8. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing:
(a) GENERAL. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 9 below).
The Target Owners and Tandem acknowledge and agree that from and after the
Closing the Buyer will be entitled to possession of all documents, books,
records, agreements, and data relating to the Acquired Assets and Assumed
Liabilities of the Target.
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Target, each of the other Parties will
cooperate with the contesting or defending Party and its counsel in the contest
or defense, make available its personnel, and
31
provide such testimony and access to its books and records as shall be necessary
in connection with the contest or defense, all at the sole cost and expense of
the contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 9 below).
(c) TRANSITION. None of the Target Owners or Tandem will take any action
that is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Target from
maintaining the same business relationships with the Buyer after the Closing as
it maintained with the Target prior to the Closing. Each of the Target, the
Target Owners and Tandem will refer all customer inquiries relating to the
business of the Target to the Buyer from and after the Closing.
(d) CONFIDENTIALITY. Each of the Target Owners and Tandem will treat and
hold as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which are
in its possession. In the event that any of the Target Owners and Tandem is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, that Target Owners
and Tandem will notify the Buyer promptly of the request or requirement so that
the Buyer may seek an appropriate protective order or waive compliance with this
provision. If, in the absence of a protective order or the receipt of a waiver
hereunder, any of the Target Owners and Tandem is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else stand
liable for contempt, that Target Owners and Tandem may disclose the Confidential
Information to the tribunal; PROVIDED, HOWEVER, that the disclosing Target
Owners and Tandem shall use its best efforts to obtain, at the reasonable
request of the Buyer, an order or other assurance that confidential treatment
will be accorded to such portion of the Confidential Information required to be
disclosed as the Buyer shall designate.
(e) NAME. All necessary proceedings shall be taken by Target and Target's
Owners so as to cause the name of ACI Canada EFTS Limited to be changed to a
name which does not include "ACI".
(f) ACCESS TO BOOKS AND RECORDS. For a period of seven (7) years
following the Closing Date (or until the expiration of the applicable statute of
limitations, giving effect to any waiver or extension thereof), the Buyer will
retain the books, records, documents, and other data relating to the Target in
existence at the Closing Date. During such period and on reasonable notice, the
Buyer will afford to Tandem, its counsel and accountants and their
32
agents, during normal business hours, reasonable access to such books, records,
documents and other data. At the expense of Tandem, the Buyer will furnish
copies or if necessary the originals of any books, records, documents or other
data requested by Tandem.
(g) POST-CLOSING DOCUMENTATION. The parties acknowledge that, by
agreement, all necessary assignments and third party consents will not have been
delivered as of the Closing of this Agreement. Target agrees to use all
reasonable efforts to obtain and secure such assignments and consents as are
necessary to transfer to Buyer the Acquired Assets and to complete such
transfers as soon as reasonably possible. In the event Target is unable to
obtain any required consents, Target shall take such actions as are reasonably
necessary to provide Buyer with the benefit of such contracts or agreements and
to be able to perform said contracts or agreements.
9. REMEDIES FOR BREACHES OF THIS AGREEMENT
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Target contained in Section 3(a)-(d)(f)-
(i) and Section 3(k)-(z) of this Agreement shall survive the Closing (even if
the Buyer knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect for a
period of two (2) years thereafter. All of the other representations and
warranties of the Buyer contained in Section 4 and representations and
warranties of the Target, and the Target Owners and Tandem contained in Section
3(e)and Section 3(j) thereof shall survive the Closing (even if the damaged
Party knew or had reason to know of any misrepresentation or breach of warranty
at the time of Closing) and continue in full force and effect forever thereafter
(subject to any applicable statutes of limitations).
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(i) Subject to the limitations set forth in Section 9(b)(iv) and (v)
below, in the event any of the Target, Target Owners and/or Tandem breaches
any of its representations, warranties, and covenants contained in the
Agreement, and, if there is an applicable survival period pursuant to
Section 9(a) above, provided that the Buyer makes a written claim for
indemnification against any of the Target, Target Owners and/or Tandem
pursuant to Section 10(g) below within such survival period, then Tandem
agrees to indemnify the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer through and after the date of the claim
for indemnification (including any Adverse Consequences the Buyer may
suffer after the end of any applicable survival period) resulting from or
caused by the breach (or the alleged breach).
33
(ii) Subject to the limitations set forth in Section 9(b)(iv) and (v)
below, Tandem agrees to indemnify the Buyer from and against any Adverse
Consequences the Buyer may suffer resulting from any Liability of the
Target which is not an Assumed Liability (including any Liability of the
Target that becomes a Liability of the Buyer under any bulk transfer law of
any jurisdiction, under any common law doctrine of de facto merger or
successor liability, or otherwise by operation of law).
(iii) Subject to the limitations set forth in Section 9(b)(iv) and
(v), in order to enable Tandem to mitigate the damages resulting from a
claim or a likely claim of intellectual property infringement by any item,
Tandem will be entitled to (i) procure the right for Buyer to continue
using the item, (ii) modify the item to avoid the infringement, but without
impairing the functionality or performance characteristics of the affected
item, or (iii) replace the item with items of similar, commercially
acceptable functionality and performance characteristics. Further, Buyer
shall have no right to indemnification for any claim alleging any ACI
Product infringes the intellectual property rights of a third party.
(iv) Tandem shall have the total obligation to Buyer for claims under
Section 9(b)(i), (ii) and (iii) that were caused by an event that occurred
during the period January 1, 1994 to the date of Closing. If the event
causing the claim occurred prior to January 1, 1994, Buyer and Tandem shall
cooperate with one another in the selection of counsel and the sharing of
fees and costs of litigation, and agree to share equally the obligation for
the damages incurred by Buyer. In case of a claim from an event that
occurred resulting in continuing damages, the obligation for said claim
will be allocated between Tandem and Buyer beginning with the event and
continuing during the term of its existence as set forth above in this
subsection (iv). If the event causing the claim occurs after the Closing,
Tandem shall have no obligation to Buyer. The foregoing limitation shall
not apply to Tandem's obligations under paragraph 3(j) of this Agreement.
(v) Tandem shall not have any obligation to Buyer under Section
9(b)(i), (ii) and (iii) until Buyer has incurred damages for claims that
exceed $50,000 U.S. in the aggregate in which event Tandem shall be
obligated for all damages claimed under this Section 9, but in no event
shall Tandem's obligation hereunder exceed the sum of $2,500,000 U.S. The
foregoing limitation shall not apply to Tandem's obligations under
paragraph 3(j) of this Agreement.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF TANDEM.
34
(i) In the event the Buyer breaches (or in the event any third party
alleges facts that, if true, would mean the Buyer has breached) any of its
representations, warranties, and covenants contained in this Agreement,
and, if there is an applicable survival period pursuant to Section 9(a)
above, provided that Tandem makes a written claim for indemnification
against the Buyer pursuant to Section 10(g) below within such survival
period, then ACI agrees to indemnify Tandem from and against the entirety
of any Adverse Consequences Tandem may suffer through and after the date of
the claim for indemnification (including any Adverse Consequences Tandem
may suffer after the end of any applicable survival period) resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach).
(ii) ACI agrees to indemnify Tandem from and against the entirety of
any Adverse Consequences Tandem may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any Assumed Liability for an
event occurring subsequent to the date of Closing.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which may give
rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this Section 9, then the Indemnified Party
shall promptly (within the time period set forth in Section 9(a) above),
notify each Indemnifying Party thereof in writing; PROVIDED, HOWEVER, that
no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying Party thereby is
prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within fifteen
(15) days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party from
and against any Adverse Consequences the Indemnified Party may suffer
resulting from the Third Party Claim, (B) the lndemnifying Party provides
the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, and (C) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
35
(iii) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 9(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim at any
time, (B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party (not to be
withheld unreasonably), and (C) the Indemnifying Party will not consent to
the entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 9(d)(ii) above is
or becomes unsatisfied to the Indemnified Party, however, (A) the
Indemnified Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the Third Party
Claim in any manner it reasonably may deem appropriate (and the Indemnified
Party need not consult with, or obtain any consent from, any Indemnifying
Party in connection therewith), (B) the Indemnifying Parties will reimburse
the Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys' fees and
expenses), and (C) the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim to the fullest extent provided in this Section 9.
(e) DETERMINATION OF ADVERSE CONSEQUENCES. If the Indemnifying Party
fails to honor its obligations under this paragraph 9, the Parties shall take
into account the time cost of money (using nine percent (9%) as the discount
rate) in determining Adverse Consequences for purposes of this Section 9.
(f) OTHER INDEMNIFICATION PROVISIONS. Except for any equitable remedies
which may be available, the foregoing indemnification provisions are the sole
remedies available for any breach of a representation or warranty. Each of the
Target Owners hereby agrees that it will not make any claim for indemnification
against the Buyer by reason of the fact that he or it was a director, officer,
employee, or agent of the Target or was serving at the request of any such
entity as a partner, trustee, director, officer, employee, or agent of another
entity (whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses, or otherwise and whether such
claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding, complaint, claim, or
demand brought by the Buyer against such Target Owners and Tandem (whether such
action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
36
10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; PROVIDED, HOWEVER, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure).
(b) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party; PROVIDED, HOWEVER, that the Buyer may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by
37
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
IF TO THE TARGET:
General Counsel
Tandem Computers Incorporated
10435 North Tantau Avenue
Cupertino, California 95014-0727
IF TO TARGET OWNERS:
General Counsel
Tandem Computers Incorporated
10435 North Tantau Avenue
Cupertino, California 94014-0727
IF TO TANDEM:
General Counsel
Tandem Computers Incorporated
10435 North Tantau Avenue
Cupertino, California 95014-0727
IF TO THE BUYER:
General Counsel
Transaction Systems Architects, Inc.
330 South 108th Avenue
Omaha, NE 68154
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or
38
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any Party may change the address
to which notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other Party notice in the manner herein set
forth.
(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with and enforced in accordance with the laws of the Provence of
Ontario and the laws of Canada applicable thereto.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Target. The Target may consent to any such amendment at any time
prior to the Closing with the prior authorization of its owner. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(j) SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) EXPENSES. Each of the Buyer, the Target, and the Target Owners will
bear his or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. The Target also agrees that it has not paid any amount to any third
party, and will not pay any amount to any third party until after the Closing,
with respect to any of the costs and expenses of the Target and the Target
Owners (including any of their legal fees and expenses) in connection with this
Agreement or any of the transactions contemplated hereby.
(l) CONSTRUCTION. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, province, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word
39
"including" shall mean including without limitation. Nothing in the Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein unless the Disclosure Schedule identifies the exception
with reasonable particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself). The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
(m) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(n) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court having jurisdiction over the Parties and the matter, in addition to any
other remedy to which it may be entitled, at law or in equity.
(o) BULK TRANSFER LAWS. The Buyer acknowledges that the Target will not
comply with the provisions of any bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement.
*****
40
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
1176484 ONTARIO INC.,
AN ONTARIO CORPORATION
BY: /s/ Gregory Duman
------------------------------
TITLE: Director and Treasurer
-----------------------------
BUYER
APPLIED COMMUNICATIONS, INC.
A NEBRASKA CORPORATION
BY: /s/ Gregory Duman
------------------------------
TITLE: Vice President and CFO
-----------------------------
ACI
41
ATCP PARTNERSHIP, D/B/A
TXN SOLUTIONS INTEGRATORS,
A CANADIAN PARTNERSHIP
BY: /s/ Peter Richards
------------------------------
TITLE: Chairman, Management Committee
------------------------------
TARGET
42
TANDEM COMPUTERS CANADA
LIMITED, A CANADIAN CORPORATION
BY: /s/ David Jones
------------------------------
TITLE: Vice President and CFO
-----------------------------
TARGET OWNER
43
ACI CANADA EFTS LIMITED, A
NEBRASKA CORPORATION
BY: /s/ D. J. Rynne
------------------------------
TITLE: Director
-----------------------------
TARGET OWNER
44
TANDEM COMPUTERS INCORPORATED,
A DELAWARE CORPORATION
BY: /s/ D. J. Rynne
------------------------------
TITLE: Senior Vice President and CFO
-----------------------------
TANDEM
45
EXHIBIT A--FORMS OF ASSIGNMENTS
EXHIBIT B--FORM OF ASSUMPTION
EXHIBIT C--FORM OF BILL OF SALE
EXHIBIT D--FINANCIAL STATEMENTS
D-1 09/30/95
D-2 12/31/95
D-3 04/30/96
D-4 05/31/96
EXHIBIT E--MODIFIED BALANCE SHEET(S)
E-1 12/31/95
E-2 04/30/96
E-3 05/31/96
EXHIBIT F--FORMS OF ADDITIONAL AGREEMENTS
F-1 SUBLEASE OF 155 UNIVERSITY AVENUE, TORONTO, CANADA
F-2 EXTENSION OF SOFTWARE HOUSE AGREEMENT WITH ACI
F-3 PURCHASE PRICE ESCROW AGREEMENT
EXHIBIT G--FORM OF OPINION OF COUNSEL TO THE TARGET
EXHIBIT H--FORM OF OPINION OF COUNSEL TO THE BUYER
EXHIBIT I--FORM OF CASH SETTLEMENT
EXHIBIT J--LIST OF EMPLOYEES OF TARGET
EXHIBIT K--SOFTWARE ASSETS
EXHIBIT L--ALLOCATION OF PURCHASE PRICE
EXHIBIT M--(INTENTIONALLY OMITTED)
EXHIBIT N--CUSTOMER LIST
EXHIBIT O--ACI PRODUCTS
DISCLOSURE SCHEDULE--EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
46
EXHIBIT E-1
MODIFIED BALANCE SHEET
AS OF DECEMBER 31, 1995
(In Canadian $)
Net Assets
Target Retained By Modified
Net Assets Target Net Assets
(A) (B) (C)=(A)-(B)
----------- --------- -----------
Cash 1,166,295 1,166,295 0
Accounts Receivable-
External Parties, less Allowance
for Doubtful Accounts ($125,000) 2,794,451 2,794,451
Tandem and Subsidiaries 184,691 184,691 0
Prepaids and Advances-
Prepaid Expenses & Other 402,861 402,861
Advances to Tandem 1,431,690 1,431,690 0
----------- --------- -----------
Total Current Assets 5,979,988 2,782,676 3,197,312
Capital Assets-
Equipment, Furniture & Fixtures 3,810,104 3,810,104
Leasehold Improvements 678,174 678,174 0
Accumulated Depreciation-
Equipment, Furniture & Fixtures (2,218,681) (2,218,681)
Leasehold Improvements (259,031) (259,031) 0
----------- --------- -----------
TOTAL ASSETS 7,990,554 3,201,819 4,788,735
----------- --------- -----------
Accounts Payable & Accruals-
External Parties 2,354,020 445,704 1,908,316
Tandem and Subsidiaries 25,327 25,327 0
Deferred Rent Credit 421,778 421,778 0
Deferred Revenue 891,306 891,306
----------- --------- -----------
TOTAL LIABILITIES 3,692,431 892,809 2,799,622
----------- --------- -----------
TOTAL ASSETS LESS
TOTAL LIABILITIES 4,298,123 2,309,010 1,989,113
----------- --------- -----------
----------- --------- -----------
Page 1 of 1
EXHIBIT E-2
MODIFIED BALANCE SHEET
AS OF APRIL 30, 1996
(In Canadian $)
Net Assets
Target Retained By Modified
Net Assets Target Net Assets
(A) (B) (C)=(A)-(B)
----------- --------- -----------
Cash 2,402,144 2,402,144 0
Accounts Receivable-
External Parties, less Allowance
for Doubtful Accounts ($125,000) 1,302,114 1,302,114
Tandem and Subsidiaries 181,865 181,865 0
Prepaids and Advances-
Prepaid Expenses & Other 251,779 251,779
Advances to Tandem 1,431,690 1,431,690 0
----------- --------- -----------
Total Current Assets 5,569,592 4,015,699 1,553,893
Capital Assets-
Equipment, Furniture & Fixtures 3,845,187 3,845,187
Leasehold Improvements 703,719 678,174 25,545
Accumulated Depreciation-
Equipment, Furniture & Fixtures (2,396,728) (2,396,728)
Leasehold Improvements (283,052) (281,632) (1,420)
----------- --------- -----------
TOTAL ASSSETS 7,438,718 4,412,241 3,026,477
----------- --------- -----------
Accounts Payable & Accruals-
External Parties 1,541,781 382,371 1,159,410
Tandem and Susidiaries 37,104 37,104 0
Deferred Rent Credit 417,529 417,529 0
Deferred Revenue 577,385 577,385
----------- --------- -----------
TOTAL LIABILITIES 2,573,799 837,004 1,736,795
----------- --------- -----------
TOTAL ASSETS LESS
TOTAL LIABILITIES 4,864,919 3,575,237 1,289,682
----------- --------- -----------
----------- --------- -----------
Page 1 of 1
Exhibit 10.29
SECOND AMENDMENT TO
SOFTWARE HOUSE AGREEMENT
THIS SECOND AMENDMENT TO SOFTWARE HOUSE AGREEMENT ("Amendment") is made as
of June 3, 1996 ("Effective Date") by and between TANDEM COMPUTERS INCORPORATED
("Tandem"), a Delaware corporation having offices at 19333 Vallco Parkway,
Cupertino, California 95014, and APPLIED COMMUNICATIONS, INC., a Nebraska
corporation having offices at 330 South 108th Avenue, Omaha, Nebraska
("Software House").
RECITALS
Tandem and Software House entered into that certain Software House
Agreement dated October 1, 1992 and amended on December 31, 1993 ("Software
House Agreement") which by its terms expires on December 31, 1997.
Tandem and Software House desire to extend the term of the Software House
Agreement as it applies to the country of Canada, as provided below.
AGREEMENTS
Now, therefore, in consideration of the mutual promises, obligations and
agreements herein, the parties agree as follows:
1. EXTENSION OF TERM.
-----------------
The term of the Software House Agreement as amended hereby shall be
extended to December 31, 1999 solely as it applies to the activities of
Software House and its Canadian subsidiary in the country of Canada.
2. FULL FORCE AND EFFECT.
---------------------
Except as expressly amended hereby, the terms of the Software House
Agreement and any amendments made thereto through and including December
31, 1997, shall remain in full force and effect and shall continue to bind
the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
Effective Date.
TANDEM COMPUTERS INCORPORATED APPLIED COMMUNICATIONS, INC.
(Software House)
By: /s/ Michael Bateman By: /s/ Gregory J. Duman
---------------------------- ------------------------------------
Name: Michael Bateman Name: Gregory J. Duman
------------------------- ---------------------------------
Title: Vice President Title: V.P. and Chief Financial Officer
------------------------ ---------------------------------