UNITED STATES
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: June 29, 2005
(Date of earliest event reported)
Transaction Systems Architects, Inc.
(Exact name of registrant as specified in its charter)
Delaware
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0-25346
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47-0772104
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(State or other jurisdiction
of incorporation)
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(Commission File Number)
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(IRS Employer
Identification No.)
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224 South 108th Avenue
Omaha, Nebraska 68154
(Address of principal executive offices, including zip code)
(402) 334-5101
(Registrants telephone number, including area code)
Check the appropriate box
below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425
under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12
under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A
MATERIAL DEFINITIVE AGREEMENT
Assets Purchase
Agreement
On June 29,
2005, Transaction Systems Architects, Inc. (the Company) entered into an
Asset Purchase Agreement (the Agreement) with S2 Systems, Inc. (Seller). Under the terms of the Agreement, the Company
will purchase substantially all of the assets of Seller and its subsidiaries
for a purchase price of $35 million, as adjusted based on closing working
capital, plus specifically assumed liabilities.
In addition, the Company will pay Seller an earn out amount over three
years based on collected license fee revenues for three specified projects.
The
Company and Seller each made customary representations, warranties and
covenants in the Agreement, including, among others, covenants by Seller to
use, and cause its subsidiaries to use, commercially reasonable efforts to
preserve intact the business and to take, and cause its subsidiaries to take,
certain actions relating to taxes and the consents and permits required to
consummate the transaction, to maintain the third-party relationships of the
business and to refrain from non-ordinary course transactions during the period
before consummation of the transaction.
Consummation
of the transaction is subject to customary conditions, including that all
certain identified consents have been obtained, that no material adverse effect
has occurred and that new leases covering certain of Sellers properties
have been executed. In addition, certain
directors and executives of Seller will be required to enter into
non-competition agreements. The parties
have agreed to enter into a transition services agreement under which Seller
will provide selected services to the Company for a limited period after
closing. Finally, the parties have also
agreed to enter into a customer services agreement under which certain customer
contracts will continue to be held by Seller for a limited time period,
although the Company will receive the economic benefits and perform Sellers
obligations under such contracts.
The
parties have also agreed to establish an escrow arrangement pursuant to which
$8 million of the purchase price will be held as security for Sellers
indemnity obligations under the Agreement.
Up to $3 million of the escrow funds also provide security for Sellers
obligation to reimburse the Company for excess completion costs, if any,
associated with a number of customer projects.
Any escrow funds not paid out to the Company to satisfy indemnity claims
or cost reimbursement will ultimately be released to Seller. Portions of the escrow funds, less pending
claims, are to be released to Seller at various intervals over a three year
period. Finally, payments under the earn
out may also be set off by the Company to the extent that any indemnification
claim exceeds the amount of escrow funds then available.
The
Agreement contains termination rights for both the Company and Seller including
a provision allowing either party to terminate the Agreement if the transaction
has not been consummated by September 30, 2005.
2
The
description of the Agreement above does not purport to be complete and is
qualified in its entirety by reference to the Agreement, a copy of which is
attached hereto as Exhibit 2.1 and incorporated herein by reference.
ITEM 9.01 FINANCIAL
STATEMENTS AND EXHIBITS
(a)
Not applicable.
(b)
Not applicable.
(c)
Exhibits.
Exhibit Number
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2.1
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Asset Purchase
Agreement by and between S2 Systems, Inc. and Transaction Systems
Architects, Inc. dated as of June 29, 2005 (excluding exhibits and
schedules, which the Company agrees to furnish supplementally to the
Commission upon request).
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99.1
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Copy of Press
Release, dated June 29, 2005.
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3
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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TRANSACTION SYSTEMS ARCHITECTS, INC.
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Date: July 1,
2005
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By:
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/s/ Dennis
Byrnes
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Dennis Byrnes
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Senior Vice President
and General Counsel
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4
EXHIBIT INDEX
Exhibit Number
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2.1
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Asset Purchase Agreement by and between S2 Systems, Inc.
and Transaction Systems Architects, Inc. dated as of June 29, 2005
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99.1
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Copy of Press Release, dated June 29, 2005.
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5
Exhibit 2.1
EXECUTION VERSION
ASSET PURCHASE AGREEMENT
by and between
S2 SYSTEMS, INC.
and
TRANSACTION SYSTEMS ARCHITECTS, INC.
Dated as of June 29, 2005
Exhibits
Exhibit A -
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Assignment and
Assumption Agreement
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Exhibit B -
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Assignment and Bill of
Sale
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Exhibit C -
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Assumption Agreement
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Exhibit D -
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Business Products
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Exhibit E -
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Management Non-Compete
Agreement
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Exhibit F -
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Director Non-Compete
Agreement
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Exhibit G -
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Customer Services
Agreement
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Exhibit H -
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Escrow Agreement
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Exhibit I -
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Heathrow License
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Exhibits J-1 through
J-3 - Local Agreements
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Exhibit K -
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Specified Projects
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Exhibit L -
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Transition Services
Agreement
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Seller Disclosure Schedule
Section 1.1 (a) -
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Cobra Project
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Section 1.1(b) -
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Hawaii Project
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Section 1.1(c) -
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Pre-Closing
Environmental Liabilities
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Section 1.1(d) -
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Thailand Project
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Section 1.3(j) -
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Sellers Knowledge
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Section 1.3(k) -
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Buyers Knowledge
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Section 2.1(c) -
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Assumed Leased Property
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Section 2.1(e) -
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Assumed Contracts
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Section 2.1(n) -
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Other Assets to Be
Acquired
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Section 2.2(a) -
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Excluded Contracts
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Section 2.2(h) -
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Net Cash Recoveries for
Pre-Paid Expenses
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Section 2.3(a) -
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Other Liabilities to Be
Assumed
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Section 2.6(a) -
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Accounting Methodologies
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Section 2.11(g) -
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Executives to Execute
Management Non-Compete Agreement
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Section 2.11(h) -
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Directors to Execute
Director Non-Compete Agreement
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Section 3.2 -
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Capitalization and
Structure
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Section 3.3(c)(ii) -
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Authority; Non-Contravention;
Approvals - Violations
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Section 3.3(d) -
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Authority;
Non-Contravention; Approvals - Required Consents
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Section 3.4 -
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Financial Statements
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Section 3.7(a) -
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Tax Matters - Tax
Returns
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Section 3.7(d) -
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Tax Matters -
Governmental Authority Closing Agreements and Tax Rulings
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Section 3.8(a) -
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ERISA and Employee
Benefits - Seller Plans
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Section 3.9(a) -
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Employment Matters -
Employees and Compensation
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1
Section 3.9(c) -
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Employment Matters -
Employment Actions
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Section 3.9(e) -
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Employment Matters -
Employment Termination Payments
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Section 3.9(f) -
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Employment Matters -
IRCA Matters
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Section 3.10 -
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Labor Relations -
Proceedings and Non-Compliance
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Section 3.11 -
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Litigation
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Section 3.12(b) -
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Business Permits
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Section 3.13 -
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Title to Assets;
Encumbrances
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Section 3.15 -
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Transactions with
Affiliates
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Section 3.16 -
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Insurance
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Section 3.17 -
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Contracts - List of
Contracts
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Section 3.17(b) -
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Contracts -
Renegotiations of Assumed Contracts
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Section 3.18 -
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Tangible Property
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Section 3.19(a) -
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Intellectual Property -
Registered Intellectual Property Rights
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Section 3.19(b) -
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Intellectual Property -
Proceedings
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Section 3.19(f) -
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Intellectual Property -
Products/Services Containing Open Source Software
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Section 3.19(k) -
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Intellectual Property -
Copy of Sellers Proprietary Information, Confidentiality and Assignment
Agreement
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Section 3.20(a) -
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Real Property - Leased
Real Property
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Section 3.20(b) -
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Real Property -
Enforceability and Consent
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Section 3.23 -
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Product and Service
Warranties; Defects; Returns; Recalls
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Section 3.24 -
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Customers
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Section 3.25 -
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Suppliers
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Section 5.1 -
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Conduct of Business
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Section 5.1(i) -
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Conduct of Business - Employee
Terminations
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Section 5.4(g) -
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Individuals to Sign
Sellers Standard Intellectual Property Assignment and Confidentiality
Agreement
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Section 5.8 -
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Use of Name and
Trademarks
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Section 5.13 -
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Business Employees
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Section 5.18 -
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New Leased Properties
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Section 6.2(d) -
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Required Consents
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Section 6.2(g) -
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Individuals Required to
Deliver Employment and Non-Competition Agreement
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3
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this Agreement) is made and entered into
as of June 29, 2005 by and between S2 SYSTEMS, INC., a Delaware
corporation (Seller), and TRANSACTION
SYSTEMS ARCHITECTS, INC., a Delaware corporation (Buyer).
BACKGROUND
A. Seller
and the Seller Subsidiaries (as defined herein) are engaged in the Business (as
defined herein).
B. The
Business is composed of certain assets and liabilities that are currently owned
or leased by Seller and the Seller Subsidiaries or in respect of which Seller
and the Seller Subsidiaries are currently obligated, as the case may be.
C. Seller
and certain of the Seller Subsidiaries desire to sell, transfer and assign to
Buyer or one or more certain designated Subsidiaries (as defined herein) of
Buyer, and Buyer desires to purchase (or cause one or more certain designated
Subsidiaries of Buyer to purchase) from Seller and such Seller Subsidiaries,
the Acquired Assets (as defined herein), and Buyer is willing to assume (or
cause one or more certain designated Subsidiaries of Buyer to assume) the
Assumed Liabilities (as defined herein), in each case as more fully described
and upon the terms and subject to the conditions set forth herein.
D. Seller
and/or the Selling Subsidiaries (as defined herein), on one hand, and Buyer, on
the other hand, desire to enter into each Assignment and Bill of Sale, each
Assignment and Assumption Agreement, the Assumption Agreement, the Assignments
of Trademarks, each Lease Assignment and Assumption Agreement, the Heathrow
License, the Escrow Agreement, each Local Agreement, the Customer Services
Agreement and the Transition Services Agreement (each as hereinafter defined
and collectively, the Collateral Agreements).
STATEMENT OF AGREEMENT
The parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions.
(a) As
used in this Agreement, the following terms shall have the following meanings:
Acquired Business
means the Business conducted by Seller and the Selling Subsidiaries.
Action means
any civil, criminal or administrative actions, suits, demands, claims, charges,
citations, complaints, reexaminations, oppositions, interferences, decrees,
injunctions, arbitrations, mediations, hearings, notices of violation,
investigations, proceedings or demand letters.
Active Customer Contracts
means customer Contracts under which Seller or any Seller Subsidiary has
recognized revenue in the 12 months prior to the date hereof.
1
Affiliate
means, with respect to any Person, any other Person that directly, or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with the Person specified; provided,
however, that Baker Communications Fund,
L.P. and its Affiliates (other than Seller and the Seller Subsidiaries),
including their general partner and limited partners and any other portfolio
company in which they may have an investment, shall be deemed not to be
Affiliates of Seller or the Seller Subsidiaries. The term control (including the terms controlling,
controlled by and under common control with) means, other than with respect
to the Assigned Intellectual Property or the Registered Intellectual Property
Rights, possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
Assigned Intellectual
Property means the Owned IP and the Controlled IP.
Assignment and Assumption
Agreement means each agreement substantially in the form
attached hereto as Exhibit A.
Assignment and Bill of
Sale means each agreement in substantially the form attached
hereto as Exhibit B.
Assignment of Trademarks
means one or more assignments of trademarks in a form reasonably acceptable to
Buyer.
Assumption Agreement
means the agreement substantially in the form attached hereto as Exhibit C.
Balance Sheet
means the most recent balance sheet included in the Financial Statements.
Business
means the business conducted by Seller and the Seller Subsidiaries as of the
date hereof and as of the Closing Date, including the research, design,
development, manufacture, distribution, license and sale of the Business
Products (including any enhancements, derivatives, modifications, evolutions or
combinations of or with a Business Product) and other software, firmware and/or
hardware usable in connection therewith, and the Business Services.
Business Day
means any day other than a Saturday, Sunday or a statutory or civic holiday in
the State of New York.
Business Material Adverse
Effect means any material adverse effect on (i) the
business, assets, condition (financial or otherwise) or results of operations
of the Acquired Business, Acquired Assets or Assumed Liabilities or (ii) the
ability of the parties to perform their obligations under this Agreement or any
Collateral Agreement in a timely manner or to consummate the transactions
contemplated by this Agreement or the Collateral Agreements without material
delay, but excluding, in the case of clause (i) above, any material
adverse effect resulting from general economic conditions or economic
conditions affecting the software industry generally. In determining whether there has been a
Business Material Adverse Effect, any event, circumstance, change or effect
shall be considered both individually and together with all other events,
circumstances, changes or effects, and any event, circumstance, change or
effect that reasonably could be expected to result in a Business Material
Adverse Effect (individually or together with one or more other events,
circumstances, changes or effects) shall be considered a Business Material
Adverse Effect.
2
Business Products
means all of the products manufactured, distributed, licensed or sold by or on
behalf of the Business, which are identified on Exhibit D.
Business Records
means all files, documents, ledgers, instruments, papers, books and records and
similar information (whether in paper, digital or other tangible or intangible
form) that are used or held for use in, or necessary for the conduct of, the
Acquired Business, the Acquired Assets or the Assumed Liabilities, including
all technical information, operating and production records, quality control
records, blueprints, research and development notebooks and files, customer
credit data, mailing lists, warranty information, catalogs, advertising
materials, brochures, standard forms of documents, product testing reports,
manuals, engineering and scientific data, sales and promotional literature,
drawings, technical plans, business plans, budgets, price lists, customer lists
and lists of suppliers, but excluding any financial records and any Tax
records.
Business Services
means all of the services sold by or on behalf of the Business, in connection
with the distribution, license or sale of the Business Products or otherwise.
Buyer Material Adverse
Effect means a material adverse effect on the enforceability of
Buyers obligations under this Agreement or the Collateral Agreements or Buyers
ability to perform its obligations under this Agreement or the Collateral
Agreements in a timely manner or to consummate the transactions contemplated by
this Agreement or the Collateral Agreements without material delay.
CERCLA
means the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, and the rules and regulations promulgated thereunder.
Cleanup
means all actions to: (i) clean up, remove, treat or remediate Hazardous
Substances in the indoor or outdoor environment; (ii) prevent the Release
of Hazardous Substances so that they do not migrate, endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment; (iii) perform
pre-remedial studies and investigations and post-remedial monitoring and care;
or (iv) respond to any government requests for information or documents in
any way relating to cleanup, removal, treatment or remediation or potential
cleanup, removal, treatment or remediation of Hazardous Substances in the
indoor or outdoor environment, that in any such case are reasonably determined
by the Person taking the actions to be required under any applicable Environmental
Law or reasonably determined to be desirable in order to mitigate or avoid
liability under any such Law.
Closing
means the closing of the transactions contemplated by this Agreement.
Closing Date
means the date on which the Closing actually occurs.
Cobra Project
means the project described on Section 1.1(a) of the Seller
Disclosure Schedule.
Code means
the United States Internal Revenue Code of 1986, as amended, and the Treasury
Regulations promulgated thereunder.
Completed Project
means any Specified Project that is completed by Buyer or its Affiliates
and finally accepted by the applicable customer.
Contingent Payment
Contracts means the Cobra Project, the Hawaii Project and the Thailand
Project.
3
Contracts
means all contracts, agreements, leases, subleases, licenses, supply contracts,
purchase orders, sales orders, and other instruments, commitments, obligations,
arrangements or understandings, whether written or oral.
Controlled IP
means all Intellectual Property and Intellectual Property Rights for which
Seller or any Seller Subsidiary has the right to grant licenses or sublicenses
without violating the terms of any agreement or other arrangement with, or the
rights of, any third party.
Customer Services
Agreement means the agreement substantially in the form
attached hereto as Exhibit G.
Director Non-Compete
Agreement means each agreement substantially in the form
attached hereto as Exhibit F.
Dormant Customer Contracts
means customer Contracts, other than Active Customer Contracts, that have not
expired or been terminated.
Dubai Lease
means that certain Standard Lease No. 739 dated July 5, 2001 by and
between Dubai Internet City and S2 Systems International Ltd. for the property
described in item 6 on Section 3.20(a) of the Seller Disclosure
Schedule.
Employee Information
means the data relating to the Business Employees and any records (including
performance reviews) that are reasonably necessary to manage the Transferred
Employees after the Closing; provided, however,
that Seller shall not be required to produce such records where doing so could
reasonably be expected to result in liability to Seller or the applicable
Selling Subsidiary or in a violation of any Law.
Encumbrances
means any and all liens, claims, charges, security interests, mortgages,
easements, covenants, pledges, options, preemptive rights, rights of first
refusal or first offer, proxies, levies, voting trusts or agreements, or other
adverse claims or restrictions on title or transfer of any nature whatsoever.
Environment
means soil, surface waters, groundwater, land, stream sediments, surface or
subsurface strata, ambient air, indoor air or indoor air quality, including any
material or substance used in the physical structure of any building or
improvement and any environmental medium.
Environmental Claim
means any claim, action, cause of action, investigation, demand, letter,
request for information or notice (written or oral) by any Person alleging
potential liability (including potential liability for investigatory costs,
Cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on or resulting
from (i) the presence, Release or threatened Release of any Hazardous
Substance or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.
Environmental Law
means any international, supranational, national, provincial, regional,
federal, state, municipal or local Law, regulation, order, judgment, decree,
authorization, opinion or other legally binding requirement relating to the
protection, investigation or restoration of the environment (including natural
resources) or the health or safety of human or other living organisms,
including the manufacture, introduction into commerce, export, import,
processing, distribution, use, generation, treatment, storage, handling,
presence, disposal, transportation, Release or management of, or other
activities with respect to, Hazardous Substances, including CERCLA, the
Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C.
4
§ 6901 et seq., the Clean Water Act, 33 U.S.C.
§ 1251 et seq.,
the Clean Air Act, 33 U.S.C. § 2601 et seq., the Toxic Substances Control
Act, 15 U.S.C. § 2601 et seq., the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. § 136 et
seq., the Oil Pollution Act of 1990,
33 U.S.C. § 2701 et seq. and the Occupational Safety and
Health Act, 29 U.S.C. § 651 et seq., in each case as in effect from
time to time prior to, on and after the Closing.
Environmental Permit
means any Permit under or issued pursuant to any Environmental Law.
Equipment
means hardware (including computers), office equipment and telecommunications
equipment and the peripherals and cables thereto.
ERISA
means the Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder.
ERISA Affiliate
means any Person required at any particular time to be aggregated with any of
Seller or any Seller Subsidiary under Sections 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA.
Escrow Agreement
means the agreement substantially in the form attached hereto as Exhibit H.
Escrow Amount
means the sum of the Project Completion Escrow Amount and the Indemnity Escrow
Amount.
Escrow Funds
means the Escrow Amount, together with all products and proceeds thereof,
including all interest, dividends, gains and other income accrued thereon.
Financial Statements
means the consolidated audited balance sheet of Seller for each of the three
fiscal years of Seller ended as of March 31, 2004, 2003 and 2002 and the
related audited statements of income, cash flows and stockholders equity for
the periods then ended, together with the notes thereto, and the unaudited
consolidated balance sheet of Seller for the fiscal year of Seller ended as of March 31,
2005 and the related unaudited consolidated statements of income, cash flows
and stockholders equity for the period then ended.
GAAP means
generally accepted accounting principles in the United States of America set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by significant
segments of the accounting profession, which are applicable to the
circumstances as of the date of determination.
Governmental Authority
means any international, supranational, national, provincial, regional, federal,
state, municipal or local government, any instrumentality, subdivision, court,
administrative or regulatory agency or commission or other authority thereof,
or any quasi-governmental or private body exercising any regulatory, taxing,
importing or other governmental or quasi-governmental authority.
Governmental Order
means any decision, ruling, order, charge, writ, judgment, injunction, decree,
stipulation, determination, award or binding agreement issued, promulgated or
entered by or with any Governmental Authority.
5
GST means
the goods and services tax or similar value added tax levied or imposed in
Australia under A New Tax System (Goods and Services Tax) Act 1999 (Cth) or any
replacement or subsequent similar tax.
Hawaii Project
means the project described in Section 1.1(b) of the Seller
Disclosure Schedule.
Hazardous Substance
means (i) any petroleum or petroleum products, flammable explosives,
radioactive materials, medical waste, radon, toxic mold and other harmful
biological agents, asbestos or asbestos-containing products or materials,
chloroflourocarbon, hydroflourocarbon, urea formaldehyde foam insulation,
polychlorinated biphenyls (PCBs) or lead-containing paint or plumbing and (ii) any
element, compound, substance, waste or other material that is regulated under
any Environmental Law or is defined as, or included in the definition of, or
deemed by or pursuant to any Environmental Law or by any Governmental Authority
to be hazardous, toxic, a contaminant, waste, a pollutant, hazardous
substance, hazardous waste, restricted hazardous waste, hazardous
material, extremely hazardous waste, a toxic substance, a toxic pollutant
or words with similar meaning.
Heathrow Lease
means that certain Lease dated as of January 31, 2001 by and among Orbit
Developments (Southern) Limited, S2 Systems International Limited and S2
Systems, Inc. for the property described as item 2 on Section 3.20(a) of
the Seller Disclosure Schedule.
Heathrow License
means the agreement substantially in the form attached hereto as Exhibit I.
Indemnified Party
means any Person claiming indemnification under any provision of ARTICLE 7.
Indemnifying Party
means any Person against whom a claim for indemnification is being asserted
under any provision of ARTICLE 7.
Indemnity Escrow Amount
means Five Million U.S. Dollars (US$5,000,000).
Intellectual Property
means any or all of the following: (i) works
of authorship, including computer programs, source code and executable code,
whether embodied in software, firmware or otherwise, designs, documentations,
records, data and maskworks; (ii) inventions (whether or not patentable
and whether or not reduced to practice), improvements and technology; (iii) proprietary
and confidential information, trade secrets and know how; (iv) databases,
data compilations and collections and technical data; (v) logos, trade
names, trade dress, trademarks and service marks; (vi) domain names, web
addresses and sites; (vii) tools, methods and processes; and (viii) all
instantiations of the foregoing in any form and embodied in any medium.
Intellectual Property
Rights means worldwide common law and statutory rights
associated with (i) domestic and foreign patents, patent applications,
patent rights and patent disclosures; (ii) copyrights, copyright
registrations and copyright applications and moral rights; (iii) rights
in maskworks and applications therefor; (iv) the protection of trade and
industrial secrets and confidential information; (v) registered and
unregistered trademarks, trade names and service marks, applications therefor,
and all goodwill associated therewith; (vi) analogous rights to those set
forth above; (vii) divisionals, continuations, continuation-in-part,
renewals, reissuances, reexaminations, revisions and extensions of the
foregoing (as applicable); and (viii) all other proprietary rights
relating to Intellectual Property throughout the world.
6
Interim Project Settlement
Date means the date that is 15 months after the Closing Date.
IRS means
the United States Internal Revenue Service.
Law means
any applicable U.S. or foreign, supranational, national, federal, state,
provincial, local or common law, act, statute, ordinance, regulation, rule or
code promulgated by a Governmental Authority and any Governmental Order.
Lease Assignment and
Assumption Agreement means a lease assignment and assumption
agreement in a form reasonably acceptable to each of Seller and Buyer.
Liabilities
means any and all debts, liabilities and obligations of any kind, whether
accrued or fixed, absolute or contingent, matured or unmatured, determined or
undeterminable, on-or off-balance sheet, including those arising under any Law
or Action and those arising under any Contract or undertaking or otherwise.
Local Agreements
means the agreements necessary to give
effect to the transactions hereunder in certain of the foreign jurisdictions in
which the Acquired Business is conducted, materially in the form and substance
set forth on Exhibits J-1 through J-3, with such changes as are
reasonably agreed to by Buyer and Seller.
Losses
means any and all damages, fines, fees, penalties, deficiencies, liabilities,
claims, losses (including loss of value), demands, judgments, awards,
settlements, taxes, actions, obligations, costs and expenses (including
interest, court costs and fees and costs of attorneys, accountants and other
experts or other expenses of litigation or other Actions or of any default or
assessment).
Management Non-Compete
Agreement means the agreement substantially in the form
attached hereto as Exhibit E.
Owned IP
means all Intellectual Property and Intellectual Property Rights that are owned
by Seller or any Seller Subsidiary.
Permit
means any permit, license, franchise, approval, consent, registration,
clearance, variance, exemption, identification number, certificate or
authorization by or of any Governmental Authority.
Person
means any natural person, corporation, general partnership, limited
partnership, limited or unlimited liability company, proprietorship, joint
venture, other business organization, trust, union, association or Governmental
Authority.
Plan means
any employment, consulting, bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, equity (or
equity-based), leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, medical, dental, vision, welfare, accident,
disability, workmens compensation or other insurance, severance, separation,
termination, change of control, collective bargaining or other benefit plan,
understanding, agreement, practice, policy or arrangement of any kind (whether
written or oral, qualified or nonqualified, funded or unfunded, foreign or
domestic, currently effective or terminated), and whether or not subject to
ERISA, including any employee benefit plan within the meaning of Section 3(3) of
ERISA.
7
Pre-Closing Environmental
Liabilities means all Losses asserted against, resulting to,
imposed on or incurred by Buyer or its Affiliates in connection with: (i) any actual or alleged Release,
threatened Release or presence of any Hazardous Substance prior to the Closing
on or from or affecting any of the Leased Real Property; (ii) any actual
or alleged violation of any Environmental Law prior to the Closing by Seller or
any Seller Subsidiary or in connection with the Business by any other Person; (iii) any
Environmental Claim made by any Person that relates to or is based upon the
operation of the Business prior to the Closing, to any act or omission of
Seller or any Seller Subsidiary prior to the Closing, or to any condition of
the Leased Real Property that existed prior to the Closing, including
Environmental Claims based on indemnities or other contractual undertakings;
and (iv) the matters listed in Section 1.1(c) of the Seller
Disclosure Schedule.
Project Completion Costs
mean Buyers or its Affiliates aggregate costs (equal to hourly rates, which
hourly rates shall be determined in a manner consistent with Buyers and its
Subsidiaries practices in determining the hourly rates for their other
material customers at the time, multiplied by time incurred) incurred to obtain
the customers final acceptance under any Completed Project.
Project Completion Escrow
Amount means Three Million U.S. Dollars (US$3,000,000).
Project Completion Losses
means the aggregate amount, if any, by which Project Completion Costs exceed
Project Completion Revenues as finally determined in accordance with Section 2.13,
Section 9.8 or both.
Project Completion
Revenues means Buyers or its Affiliates aggregate cash
collected under any Completed Project.
Project Completion
Settlement Date means the date on which every Specified Project
has become a Completed Project or has otherwise been terminated.
Project Period
means the period between the Closing Date and the Interim Project Settlement
Date, if any; the period between the Interim Project Settlement Date and the
Project Completion Settlement Date, if there is an Interim Project Settlement
Date; and the date between the Closing Date and the Project Completion
Settlement Date, if there is no Interim Project Settlement Date.
Registered Intellectual
Property Rights means any Assigned Intellectual Property that
is the subject of an application, certificate, filing, registration or other
document issued, filed with, or recorded by any Governmental Authority,
including any of the following: (a) issued patents and patent
applications; (b) trademark registrations and applications; and (c) copyright
registrations and applications.
Release
means any releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, migrating, disposing or dumping of
a Hazardous Substance into the Environment (including the abandonment or
discarding of barrels, containers and other closed receptacles containing any
Hazardous Substance) and any condition that results in the exposure of a Person
to a Hazardous Substance.
Representatives
means, with respect to any Person, such Persons officers, directors,
employees, agents, counsel, accountants, financial advisors, lenders,
consultants and other representatives.
8
Seller Material Adverse
Effect means a material adverse effect on the enforceability of
Sellers obligations under this Agreement or Sellers or the Selling
Subsidiaries obligations under the Collateral Agreements or Sellers ability
to perform its obligations under this Agreement or Sellers or the Selling
Subsidiaries ability to perform their respective obligations under the
Collateral Agreements in a timely manner or to consummate the transactions
contemplated by this Agreement or the Collateral Agreements without material
delay.
Seller Plan
means a Plan that Seller or any Seller Subsidiary, or any ERISA Affiliate,
sponsors, maintains, has any obligation to contribute to, has or may have
Liability under or is otherwise a party to, or that otherwise provides benefits
for current or former employees, directors, officers, stockholders, consultants
or independent contractors (or their dependents and beneficiaries) of Seller or
any Selling Subsidiary providing service in the conduct of the Acquired
Business, on the date hereof or at any time subsequent thereto and on or prior
to the Closing Date and, in the case of a Plan that is subject to Part 3
of Subtitle B of Title I of ERISA, Section 412 of the Code or
Title IV of ERISA, at any time during the five-year period preceding the
date of this Agreement.
Seller Subsidiaries
means each direct and indirect Subsidiary of Seller.
Selling Subsidiaries
means each Seller Subsidiary that owns, licenses or otherwise possesses any
rights with respect to any of the Acquired Assets or any of the Assumed
Liabilities.
Specified Projects
means those projects identified on Exhibit K, as defined by any
statements of work under such projects as of the Closing Date and any
reasonably foreseeable amendments to such statements of work or reasonably
foreseeable additional statements of work, in each case, as reasonably required
to complete any Specified Project.
Subsidiary
means, with respect to any Person, any other Person (i) of which the first
Person owns directly or indirectly 50% or more of the equity interest in the
other Person, (ii) of which the first Person or any other Subsidiary of
the first Person is a general partner, or (iii) of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions with
respect to the other Person are at the time owned by the first Person and/or
one or more of the first Persons Subsidiaries
Tangible Property
means all machinery, tools, Equipment, fixtures, vehicles, spare parts, storage
devices, office supplies, computers, servers and other tangible personal
property (other than Corporate Calling Cards), in each case whether owned or
leased, that is used or held for use in, or necessary for the conduct of, the
Business.
Tax and Taxes means any federal, state,
local or foreign income, gross receipts, employment, payroll, license, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, VAT, GST, alternative or add-on minimum, estimated or
other tax of any kind whatsoever (whether computed on a separate or
consolidated, unitary or combined basis or in any other manner), and any
liability under Treas. Reg. § 1.1502-6 or a similar provision of state,
local or foreign law, in each case, including any interest, penalty or addition
thereto.
Tax Return
means any return, declaration, report, claim for refund or information return
or statement that relates to Taxes and is required to be filed with any
Governmental Authority, including any schedule or attachment thereto, and
including any amendment thereof.
9
Tax Settlement Escrow
means an escrow account to be established to hold that portion of the Tax
Settlement Amount subject to a Dispute, if any.
Thailand Project
means the project described on Section 1.1(d) of the Seller
Disclosure Schedule.
Transition Services
Agreement means the agreement substantially in the form
attached hereto as Exhibit L.
U.S. Dollars
or US $ means the lawful currency of
the United States of America.
VAT means
any value added Tax, goods and services Tax or similar Tax, including such Tax
as may be levied in accordance with (but subject to derogation from) EEC
Directive 77/388/EEC.
Working Capital
means accounts receivable; minus accounts payable due as of a date less than 60
days after the Closing Date; minus accrued compensation, benefits and payroll
taxes; and minus other current liabilities (other than Excluded Liabilities).
1.2 Additional
Defined Terms. Other terms defined
are in the other parts of this Agreement indicated below:
AAA.................................................................................................9.8(a)
|
Acquired
Assets...................................................................................2.1
|
Acquisition
Proposal...........................................................................5.5
|
Agreement..................................................................................Preamble
|
Allocation
Schedule........................................................................5.7(f)
|
Arbitration
Panel............................................................................9.8(a)
|
Assumed
Contracts.........................................................................2.1(e)
|
Assumed
Leased Property...............................................................2.1(c)
|
Assumed
Liabilities.........................................................................2.3(a)
|
Business
Employees......................................................................5.13(a)
|
Business
Permits...........................................................................3.12(b)
|
Buyer..........................................................................................Preamble
|
Buyer
Benefit Plans......................................................................5.13(d)
|
Buyer
Indemnified Parties..................................................................7.2
|
Closing
Date Working Capital.......................................................2.6(b)
|
Closing
Date Working Capital Statement......................................2.6(b)
|
Closing
Payment.............................................................................2.5(a)
|
Collateral
Agreements..........................................................Background
|
Collected
Revenues.........................................................................2.7(a)
|
Competing
Portion..........................................................................5.9(b)
|
Competitive
Activities......................................................................5.9(a)
|
Competitive
Products......................................................................5.9(a)
|
Confidentiality
Agreement.............................................................5.3(a)
|
Contingent
Payment.......................................................................2.7(d)
|
Customers..........................................................................................3.24
|
Deductible
Amount.............................................................................7.5
|
Dispute.............................................................................................9.8(a)
|
Dispute
Notice.................................................................................2.6(c)
|
Employees.......................................................................................3.9(a)
|
10
Excluded
Assets...................................................................................2.2
|
Excluded
Contracts.........................................................................2.2(a)
|
Excluded
Liabilities.............................................................................2.4
|
Excluded
Representations..............................................................7.1(a)
|
Final
Closing Date Working Capital.............................................2.6(e)
|
Indemnity
Amount..............................................................................7.5
|
Interim
Project Settlement Date...................................................2.13(b)
|
IP
Contracts..................................................................................3.17(a)
|
IRCA................................................................................................3.9(f)
|
Leased
Real Property....................................................................3.20(a)
|
Name....................................................................................................5.8
|
New
Leased Property.........................................................................5.18
|
Nonassignable
Assets....................................................................5.10(a)
|
Pre-Closing
Employment Related Liabilities...............................5.13(b)
|
Preliminary
Closing Date Working Capital Statement.................2.6(a)
|
Project
Completion Losses Dispute Notice..................................2.13(c)
|
Project
Completion Schedule.......................................................2.13(b)
|
Project
Completion Settlement Date............................................2.13(b)
|
Purchase
Price................................................................................2.5(a)
|
Registration
Offices......................................................................3.19(b)
|
Required
Consents..........................................................................3.3(d)
|
Revenue
Dispute Notice..................................................................2.7(b)
|
Reviewing
Accountant....................................................................2.6(d)
|
Seller..........................................................................................Preamble
|
Seller
Disclosure Schedule..................................................ARTICLE 3
|
Seller
Indemnified Parties..................................................................7.3
|
Set-Off
Amount...............................................................................2.7(h)
|
Suppliers............................................................................................3.25
|
Statement
of Revenues....................................................................2.7(a)
|
Terminal
Payment...........................................................................2.7(e)
|
Transfer
Taxes................................................................................5.7(b)
|
Transferred
Employees.................................................................5.13(a)
|
UK
Subsidiary....................................................................................5.20
|
WARN
Act.......................................................................................3.9(d)
|
1.3 Other
Definitional and Interpretive Matters.
As used in this Agreement, except to the extent that the context
otherwise requires:
(a) when
a reference is made in this Agreement to an Article, Section, Exhibit or
Schedule, such reference is to an Article or Section of, or an Exhibit or
Schedule to, this Agreement unless otherwise indicated;
(b) the
table of contents and headings for this Agreement are for reference purposes
only and do not affect in any way the meaning or interpretation of this
Agreement;
(c) whenever
the words include, includes or including (or similar terms) are used in
this Agreement, they are deemed to be followed by the words without limitation;
(d) the
words hereof, herein and hereunder and words of similar import, when used
in this Agreement, refer to this Agreement as a whole and not to any particular
provision of this Agreement;
11
(e) any
reference in this Agreement to gender shall include all genders, and the
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms;
(f) if
any action is to be taken by any party hereto pursuant to this Agreement on a
day that is not a Business Day, such action shall be taken on the next Business
Day following such day;
(g) references
to a Person are also to its permitted successors and assigns;
(h) ordinary
course of business (or similar terms) shall be deemed followed by consistent
with past practice (in quantity and frequency);
(i) all
acts and proceedings to be taken and all documents to be executed and delivered
by the parties at the Closing shall be deemed to have been taken and executed
simultaneously, and, except as permitted hereunder, no acts or proceedings
shall be deemed taken nor any documents executed or delivered until all have
taken, executed and delivered;
(j) references
to Sellers knowledge (and words of similar import) mean the actual
knowledge, after due inquiry and reasonable investigation, of the individuals
listed on Section 1.3(j) of the Seller Disclosure Schedule; and
(k) references
to Buyers knowledge (and words of similar import) mean the actual knowledge
of the individuals listed on Section 1.3(k) of the Seller Disclosure
Schedule.
ARTICLE 2
PURCHASE AND SALE OF ASSETS AND CLOSING
2.1 Purchase
and Sale. At the Closing, upon the
terms and subject to the conditions of this Agreement, Seller shall, or shall
cause one or more of the Selling Subsidiaries to, sell, transfer, assign,
convey and deliver, or cause to be sold, transferred, assigned and delivered,
to Buyer (or one or more certain designated Subsidiaries of Buyer), and Buyer
shall (or shall cause one or more certain designated Subsidiaries of Buyer to)
purchase, acquire, assume and accept from Seller or the applicable Selling
Subsidiary or Selling Subsidiaries, all of the right, title and interest in, to
and under all of the assets, properties and rights used or held for use by
Seller or the applicable Selling Subsidiary or Selling Subsidiaries that are
used or held for use in, or necessary for the conduct of, the Business, whether
tangible or intangible, real, personal or mixed (collectively, the Acquired Assets), in each case
other than the Excluded Assets described in Section 2.2. The Acquired Assets shall include:
(a) all
Assigned Intellectual Property of Seller and the Selling Subsidiaries;
(b) all
Business Products of Seller and the Selling Subsidiaries;
(c) all
Leased Real Property listed on Section 2.1(c) of the Seller
Disclosure Schedule (the Assumed Leased Property);
(d) all
Tangible Property of Seller and the Selling Subsidiaries (including all rights
of Seller and the Selling Subsidiaries in any leases of Tangible Property);
12
(e) all
rights and incidents of Seller and the Selling Subsidiaries under the Contracts
listed in Section 2.1(e) of the Seller Disclosure Schedule (together
with all open purchase orders) (the Assumed Contracts);
(f) all
accounts receivable, unbilled revenues, reimbursable costs and expenses and
other claims for money due to Seller or any Selling Subsidiary, other than
claims for money due to Seller or any Selling Subsidiary under Excluded
Contracts so long as such claims are not included in the calculation of Working
Capital;
(g) all
Business Permits of Seller and the Selling Subsidiaries listed in Section 3.12(b) of
the Seller Disclosure Schedule;
(h) all
Business Records of Seller and the Selling Subsidiaries (subject to Sellers
right to retain copies of such information as required by applicable Law);
(i) all
Employee Information (subject to Sellers right to retain copies of such
information as required by applicable Law);
(j) all
rights, claims and causes of action that are related to the Acquired Business,
any of the Assumed Liabilities or any of the Acquired Assets, but excluding
rights, claims and causes of action that are related to Excluded Liabilities;
(k) all
rights, claims and credits of Seller or any Selling Subsidiary under or
pursuant to all warranties, representations and guarantees made by suppliers,
manufacturers and contractors in connection with products sold or services
provided to Seller or any Selling Subsidiary for or in connection with the
Business, or in respect of any Acquired Asset or any Assumed Liability (but
excluding any such items arising under insurance policies);
(l) all
deferred charges, advance payments and prepaid items, other than those that
relate to any Excluded Asset;
(m) all
goodwill associated with the Acquired Business or the Acquired Assets, together
with the right to represent to third parties that Buyer is the successor to the
Acquired Business; and
(n) all
assets described on Section 2.1(n) of the Seller Disclosure Schedule.
2.2 Excluded
Assets. Notwithstanding any
provision of this Agreement to the contrary, neither Buyer nor any of its
Subsidiaries shall acquire, and there shall be excluded from the Acquired
Assets, the following (the Excluded Assets):
(a) all
rights and incidents of Seller and the Seller Subsidiaries under the Contracts
listed in Section 2.2(a) of the Seller Disclosure Schedule (the
Excluded Contracts);
(b) all
rights of Seller and the Seller Subsidiaries under this Agreement and the
Collateral Agreements;
(c) all
cash, cash equivalents, bank deposits, investment accounts, lockboxes,
certificates of deposit, marketable securities, bank accounts, Corporate Credit
Cards or similar cash items, of Seller or any Seller Subsidiary;
13
(d) any
and all insurance policies, binders and claims and rights thereunder and the
proceeds thereof;
(e) the
minute books, records, stock ledgers, Tax records and other materials that
Seller or each of the Seller Subsidiaries is required by Law to retain;
(f) rights
in any leased real property, other than the Assumed Leased Property;
(g) all
stock or equity interests in any Person, including all stock or equity
interests in the Seller Subsidiaries;
(h) net
cash recoveries for expenses pre-paid by Seller or any Seller Subsidiary prior
to Closing and described in Section 2.2(h) of the Seller
Disclosure Schedule;
(i) [intentionally
deleted];
(j) all
refunds or credits of or relating to any Taxes attributable to the Acquired
Assets or Business to the extent such Taxes arise from or relate to any period
or portion thereof ending prior to the Closing Date; and
(k) all
of the assets, properties and rights, whether tangible or intangible, real,
Personal or mixed, used or held for use by any Seller Subsidiary that is not a
Selling Subsidiary.
2.3 Assumed
Liabilities.
(a) At
the Closing, Buyer shall (or shall cause one or more certain designated
Subsidiaries of Buyer to) execute and deliver to Seller one or more Assumption
Agreements pursuant to which Buyer (or a designated Subsidiary of Buyer) shall
accept, assume and agree to pay, perform or otherwise discharge, as the case
may be, except to the extent being contested in good faith, in accordance with
the respective terms and subject to the respective conditions thereof, the
following (collectively, the Assumed Liabilities):
(i) all
Liabilities of Seller or a Selling Subsidiary under the Assumed Contracts from
and after the Closing Date; provided, however,
that, except as set forth in Section 5.10(a), Buyer shall not have any
obligations pursuant to any Assumed Contract that by its terms or under
applicable Law requires, prior to assignment, a consent to assignment, unless a
written consent thereto has been obtained on or prior to the Closing Date;
(ii) all
Liabilities of Seller or a Seller Subsidiary under the leases for the Assumed
Leased Property from and after the Closing Date;
(iii) the
Liabilities to be prorated pursuant to Section 2.8;
(iv) all
Liabilities relating to, or arising out of the employment of, the Transferred
Employees from and after the Closing Date, including all salary and severance
obligations;
14
(v) all
accounts payable due as of a date less than 60 days after the Closing Date as set
forth on the Preliminary Closing Date Working Capital Statement;
(vi) all
Liabilities that arise from the ownership, use, possession or operation of the
Acquired Assets from and after the Closing Date;
(vii) the
Liabilities of Seller or a Selling Subsidiary set forth in Section 2.3(a) of
the Seller Disclosure Schedule; and
(viii) all
Liabilities for or relating to any Taxes attributable to the Acquired Assets to
the extent such Taxes arise from or relate to any period or portion thereof
beginning after the Closing Date.
(b) In
the event of any claim against Buyer or any of its Subsidiaries with respect to
any of the Assumed Liabilities, Buyer and each of its Subsidiaries shall have,
and Seller and each Selling Subsidiary hereby assigns to Buyer and its
Subsidiaries, any defense, counterclaim or right of setoff that would have been
available to Seller, such Selling Subsidiary or the Business if such claim had
been asserted against Seller, such Selling Subsidiary or the Business. The assumption by Buyer or any of its
Subsidiaries of the Assumed Liabilities and the transfer of the Assumed
Liabilities by Seller and each Selling Subsidiary shall in no way expand the
rights or remedies of any Person against Buyer, Seller or any Selling
Subsidiary or their respective officers, directors, employees, stockholders and
advisors as compared to the rights and remedies that such Person would have had
against such parties had Buyer not assumed the Assumed Liabilities. Without limiting the generality of the
foregoing, the assumption by Buyer or any of its Subsidiaries of the Assumed
Liabilities shall not create any third-party beneficiary rights.
2.4 Excluded
Liabilities. Notwithstanding any
provision of this Agreement to the contrary (and without implication that Buyer
is assuming any Liability of Seller, any Seller Subsidiary or the Business or
any Liability related to any of the Acquired Assets not expressly excluded),
neither Buyer nor any of its Subsidiaries is assuming, and neither shall be
required to pay, perform or discharge, any Liabilities, including any
Liabilities associated with the operation of the Business on or prior to the
Closing Date, that are not specifically included in the Assumed Liabilities
(the Excluded Liabilities),
whether or not, in any particular instance, any such Liability has a value for
accounting purposes or is carried or reflected on or specifically referred to
in either Sellers or the applicable Seller Subsidiarys financial
statements. Seller shall (or shall cause
one of the Seller Subsidiaries to) pay, perform or discharge when due or
required to be performed or discharged, or contest in good faith, the Excluded
Liabilities. The Excluded Liabilities
shall include the following:
(a) all
Liabilities relating to or incurred in connection with the Excluded Assets
(except to the extent that such Liabilities are included in Section 2.3(a)(iv) above);
(b) all
Liabilities based on any actual or alleged defect in the design, manufacture,
quality, conformity to specification or fitness for purpose of any product
manufactured or sold by the Business (including any Business Products), or any
service provided by the Business (including the Business Services), before the
Closing Date, including all product liability, product warranty obligations and
liabilities and all obligations and liabilities in respect of product recalls
or product warnings (including voluntary recalls and warnings reasonably
intended to avoid or mitigate liability);
(c) all
Pre-Closing Environmental Liabilities;
15
(d) all
Pre-Closing Employment Related Liabilities;
(e) all
Liabilities for or relating to any Taxes of Seller or any Seller Subsidiary,
including the Taxes described in Section 5.7(c);
(f) all
Liabilities related to, associated with or arising out of any breach or
default, failure to perform and overcharges or underpayments, in each case
arising from events or actions prior to the Closing under the Assumed
Contracts;
(g) all
legal, accounting, brokerage, investment banking and finders fees or other
fees and expenses incurred by or on behalf of Seller or any Seller Subsidiary
in connection with this Agreement and/or the transactions contemplated hereby;
(h) all
Liabilities of Seller, any Seller Subsidiary or any of their Affiliates
relating to indebtedness for borrowed money (including accounts payable due as
of a date more than 60 days after the Closing Date, accrued liabilities
relating to sales and use tax payments, payroll tax payments, VAT payments, income
tax payments or any other Tax payments or to a year prior to Sellers current
fiscal year and capital lease obligations) and guarantees by Seller, any Seller
Subsidiary or any of their Affiliates of indebtedness for borrowed money;
(i) all
Liabilities of Seller or any Seller Subsidiary to any stockholder or Affiliate
of Seller or any Seller Subsidiary;
(j) all
Liabilities related to, associated with or arising out of any Action with
respect to the operation of the Business or the Acquired Assets prior to the
Closing, whether such Action is brought prior to, on or after the Closing; and
(k) all
Liabilities pertaining to the Business and arising out of or resulting from
noncompliance on or prior to the Closing Date with any Laws (including any
Environmental Laws).
2.5 Purchase
Price.
(a) Subject
to any adjustments required pursuant to Section 2.6, the aggregate
purchase price (the Purchase Price)
for the Acquired Assets is (i) Thirty-Five Million U.S. Dollars (US
$35,000,000) (the Closing Payment), plus (ii) the
amount, if any, by which the Working Capital estimate in the Preliminary
Closing Date Working Capital Statement exceeds zero, minus (iii) the
amount, if any, by which the Working Capital estimate in the Preliminary
Closing Date Working Capital Statement is less than zero, plus (iv) the
assumption by Buyer or any of its Subsidiaries of the Assumed Liabilities, plus
(v) the Contingent Payments, if any, plus (vi) the Terminal Payment,
if any.
(b) On
the Closing Date, Buyer shall pay, or cause to be paid, (i) the Closing
Payment, minus the Escrow Amount and the Tax Settlement Amount, if any, to
Seller, (ii) an aggregate amount equal to the Escrow Amount into an escrow
account in accordance with the Escrow Agreement and (iii) an aggregate
amount equal to the Tax Settlement Amount, if any, to the applicable
Governmental Authorities in Sellers or the applicable Seller Subsidiarys
name, provided that Seller and Buyer
acknowledge and agree that any portion of the Tax Settlement Amount which is
the subject of a Dispute will be deposited into the Tax Settlement Escrow; each
by wire transfer in immediately available funds to the respective account
pursuant to written instructions that will be provided to Buyer at least three
Business Days prior to Closing. The Tax
Settlement Escrow, if any, will be held and disbursed to Seller,
16
Buyer or any applicable Governmental Authority, as the case may be, in
accordance with its terms upon the resolution of any Dispute in accordance with
Section 9.8.
(c) The
Escrow Amount shall be disbursed in accordance with the Escrow Agreement.
2.6 Purchase
Price Adjustment.
(a) At
least two Business Days prior to the Closing Date, Seller shall deliver or
cause to be delivered to Buyer a statement setting forth the components of
Working Capital of the Acquired Business as of the close of business on the day
immediately prior to the Closing Date (the Preliminary
Closing Date Working Capital Statement) and an estimate of the
Working Capital of the Acquired Business as of the close of business on the day
immediately prior to the Closing Date.
The Preliminary Closing Date Working Capital Statement shall be prepared
in accordance with GAAP, applied on a basis consistent with the preparation of
the Balance Sheet, and in accordance with the methodologies set forth in Section 2.6(a) of
the Seller Disclosure Schedule.
(b) Within
60 days following the Closing Date, Buyer shall deliver or cause to be
delivered to Seller a statement setting forth the components of Working Capital
of the Acquired Business as of the close of business on the day immediately
prior to the Closing Date (the Closing Date Working
Capital Statement) and a determination of the Working Capital
of the Business as of the close of business on the day immediately prior to the
Closing Date (the Closing Date Working Capital). The Closing Date Working Capital Statement
shall be prepared in accordance with GAAP, applied on a basis consistent with
the preparation of the Balance Sheet, and in accordance with the methodologies
set forth in Section 2.6(a) of the Seller Disclosure Schedule.
(c) Unless,
within 30 days after delivery of the Closing Date Working Capital Statement to
Seller pursuant to Section 2.6(b), Seller shall deliver to Buyer a notice
setting forth, in reasonable detail, any good faith dispute as to the Closing
Date Working Capital and the basis for such dispute (a Dispute
Notice), the Closing Date Working Capital shall be deemed
accepted by Seller and shall be final and binding.
(d) For
15 days after Buyers receipt of a Dispute Notice, the parties hereto shall
endeavor in good faith to resolve by mutual agreement all matters in the
Dispute Notice. If the parties are
unable to resolve any matter in the Dispute Notice within such 15-day period,
Buyer and Seller shall engage Deloitte & Touche LLP as the Reviewing Accountant (if such
accounting firm is unable or unwilling to serve as the Reviewing Accountant,
the parties shall, within 15 days after the end of such 15-day period, agree on
an alternate Big Four independent accounting firm or have such selection made
pursuant to the rules of the American Arbitration Association to resolve
the remaining disputes). All fees and
expenses relating to this work of the Reviewing Accountant shall be borne
equally by Seller and Buyer, provided that,
if the Reviewing Accountant determines that one partys position is completely
correct, then such party shall pay none of the fees, costs and expenses of the
Reviewing Accountant and the other party shall pay all such fees, costs and
expenses.
(e) Buyer
and Seller shall instruct the Reviewing Accountant to resolve the disputed
matters as promptly as practicable. The
parties hereto shall cooperate with each other and the Reviewing Accountant in
connection with the matters set forth in this Section 2.6, including by
furnishing such information as may be reasonably requested. Each party hereto shall afford the other
party the opportunity to participate in all communications with the Reviewing
Accountant. The determination of the
Reviewing Accountant shall be final and binding and no party shall seek
recourse to other tribunals, other than to collect any amounts due under this Section 2.6. The Working Capital accepted by Seller in
17
accordance with Section 2.6(c), agreed to by the parties hereto in
accordance with Section 2.6(d) or determined by the Reviewing
Accountant in accordance with this Section 2.6(e) shall be referred
to herein as the Final Closing Date Working Capital.
(f) Within
10 Business Days after the Final Closing Date Working Capital has been
determined pursuant to this Section 2.6, (i) Buyer shall pay to
Seller the amount, if any, by which the Final Closing Date Working Capital is
greater than the Preliminary Closing Date Working Capital, and (ii) Seller
shall pay to Buyer the amount, if any, by which the Final Closing Date Working
Capital is less than the Preliminary Closing Date Working Capital. All payments under this Section 2.6
shall be made by wire transfer of immediately available funds in U.S. Dollars
to an account designated by Seller or Buyer, as the case may be, in writing to
the other for such purpose. The parties
agree that any amount paid pursuant to this Section 2.6(f) shall be
treated as an adjustment to the Closing Payment and shall adjust the amounts
allocated under Section 5.7(f).
2.7 Contingent
Payments.
(a) Buyer
shall, within 30 days after the end of each of Buyers fiscal quarters,
commencing with the first fiscal quarter ended after the Closing Date and
ending with the fiscal quarter ended September 30, 2008, deliver to Seller
a statement (each, a Statement of Revenues)
setting forth (i) for all fiscal quarters other than the fiscal quarters
ended June 30, 2008 and September 30, 2008, the amount of the
transaction-based license fee revenues that have been collected under each of
the Cobra Project, the Hawaii Project and the Thailand Project for the
applicable fiscal quarter, and (ii) for the fiscal quarters ended June 30,
2008 and September 30, 2008, the amount of transaction-based license fee
revenues recognized in accordance with GAAP under each of the Cobra Project,
the Hawaii Project and the Thailand Project for the applicable fiscal quarter
(the Collected Revenues). Buyer shall at all times during the period
beginning on the Closing Date and ending on March 31, 2008, collect, or
cause the collection of, revenues for the Contingent Payment Contracts in a
commercially reasonable manner consistent with Buyers and its Subsidiaries
practices in collecting revenues under its other material customer contracts at
the time.
(b) Seller
shall be given the opportunity to undertake a reasonable review of the books
and records relating to the calculation of the Collected Revenues at mutually
agreeable times during normal business hours after delivery of the Statement of
Revenues. Unless, within 30 days after
delivery of the Statement of Revenues to Seller pursuant to Section 2.7(a),
Seller shall deliver to Buyer a notice setting forth, in reasonable detail, any
good faith dispute as to the amount of the Collected Revenues and the basis for
such dispute (a Revenue Dispute Notice), the
amount of the Collected Revenues shall be deemed accepted by Seller and shall
be final and binding.
(c) For
15 days after Buyers receipt of a Revenue Dispute Notice, the parties hereto
shall endeavor in good faith to resolve by mutual agreement all matters in the
Revenue Dispute Notice. If the parties are
unable to resolve any matter in the Revenue Dispute Notice within such 15-day
period, Buyer and Seller shall engage the Reviewing Accountant to resolve the
dispute in accordance with Sections 2.6(d) and (e).
(d) Within
10 Business Days after the amount of the Collected Revenues has been finally
determined pursuant to this Section 2.7, Buyer shall pay to Seller an
amount in cash equal to one third of the Collected Revenues for the relevant
period (as finally determined in accordance with this Section 2.7) (the Contingent Payment).
(e) In
addition to the amount to be paid to Seller in accordance with Section 2.7(d) for
the period ended September 30, 2008, within 10 Business Days after the
amount of the Collected
18
Revenues has been finally determined pursuant to this Section 2.7
for the fiscal quarter ended September 30, 2008, Buyer shall pay to Seller
an amount in cash equal to 12 times the amount of the Collected Revenues for
such period (as finally determined in accordance with this Section 2.7)
(the Terminal Payment), minus the
amount equal to the product of (i) the fraction obtained by dividing the
amount of the Collected Revenues for the fiscal quarter ended September 30,
2008 (as finally determined in accordance with this Section 2.7) by the
amount of the Collected Revenues for the fiscal quarter ended June 30,
2008 (as finally determined in accordance with this Section 2.7), and (ii) the
amount of the Terminal Payment for the fiscal quarter ended September 30,
2008 (as finally determined in accordance with this Section 2.7); provided that such amount shall only be subtracted from the
Terminal Payment if the fraction obtained in (i) is a number less than
one; and provided further
that if any customer from which the Collected Revenues are generated has
indicated to Buyer that it intends to terminate its contract with Buyer,
then the amount of the revenues collected under such contract shall be excluded
from Collected Revenues for the purpose of determining the amount to be paid
to Seller under this Section 2.7(e).
(f) All
payments under this Section 2.7 shall be made by wire transfer of
immediately available funds in U.S. Dollars to an account designated by Seller
in writing to Buyer for such purpose.
The parties agree that any amount paid pursuant to Sections 2.7(d) or
2.7(e) shall be treated as an adjustment to the Purchase Price and shall
adjust the amounts allocated under Section 5.7(f).
(g) Buyer
shall at all times during the period beginning on the Closing Date and ending
on September 30, 2008 devote, or cause its Affiliates to devote, the
resources, including Transferred Employees, reasonably necessary to service the
Contingent Payment Contracts in a commercially reasonable manner consistent
with Buyers and its Subsidiaries practices in servicing their other material
customer contracts at the time. Buyer
and its Subsidiaries shall use their respective commercially reasonable efforts
to keep each Contingent Payment Contract in effect from the Closing Date until September 30,
2008. If Buyer or any of its
Subsidiaries terminates or materially amends any Contingent Payment Contract,
Buyer shall provide notice of such termination or amendment to Seller within 10
Business Days. Notwithstanding any other
provision of this Agreement, Seller acknowledges and agrees that one or more of
the Contingent Payment Contracts are with current customers of Buyer and that
no provision of this Agreement will be construed to limit in any manner Buyers
ability to continue to service those customers with products and services other
than the products and services acquired pursuant to this Agreement.
(h) Notwithstanding
any other provision of this Agreement, Buyer may withhold payment of all or any
portion of any Contingent Payment or the Terminal Payment that equals the
aggregate amount by which the amount of any claim for Losses asserted by Buyer
in accordance with ARTICLE 7 exceeds the Escrow Funds then held in
accordance with the Escrow Agreement (a Set-Off Amount). Any Set-Off Amount withheld by Buyer pursuant
to this Section 2.7(h) shall be retained by Buyer or released to
Seller, as the case may be, upon resolution of the asserted claim for Losses in
accordance with ARTICLE 7 or any Dispute with respect to such asserted
claim for Losses in accordance with Section 9.8.
2.8 Proration
of Payments. After the Closing, any
regular periodic charges with respect to the Business or the Acquired Assets,
including amounts payable with respect to leases and utilities and all real
property or personal property Taxes relating to the Acquired Assets, which
become due and payable on or after the Closing Date and relate to periods that
begin before and end after the Closing Date, shall be prorated and adjusted
between Seller and Buyer as of the Closing Date on a per diem basis, and Seller
shall be responsible for and pay to Buyer the portion of such amounts allocable
to the period prior to the Closing Date for which payment is due on or after
the Closing Date within five business days of the receipt of an invoice from
Buyer.
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2.9 Closing. Except as hereinafter provided, the Closing
shall take place at the offices of Jones Day, 2727 North Harwood Street,
Dallas, Texas at 10:00 a.m. (local time) on the third Business Day
following the satisfaction or waiver of the last of the conditions to the
obligations of the parties set forth in ARTICLE 6 (other than conditions
that by their terms are not expected to be satisfied until the Closing Date,
but subject to the fulfillment of those conditions or, in the case of Section 6.1,
waived by Buyer and Seller, or, in the case of Section 6.2, waived by
Buyer, or, in the case of Section 6.3, waived by Seller, at or prior to
the Closing) or at such other time or on such other date or at such other place
as Seller and Buyer may mutually agree upon in writing.
2.10 Closing
Deliveries by Buyer. At the Closing,
Buyer shall deliver or cause to be delivered to Seller:
(a) The
Closing Payment by wire transfer of immediately available funds to such account
as Seller may direct in accordance with Section 2.5(b);
(b) Each
of the Collateral Agreements, duly executed by Buyer;
(c) A
copy of the resolutions of the Board of Directors of Buyer authorizing the
execution, delivery and performance of this Agreement and the Collateral
Agreements, certified by an officer of Buyer;
(d) A
certificate, dated as of the Closing Date, in form and substance reasonably
satisfactory to Seller and duly executed by an executive officer of Buyer,
certifying the fulfillment of the conditions set forth in Sections 6.3(a) and
(b); and
(e) Such
further instruments and documents as may be required to be delivered by Buyer
pursuant to the terms of this Agreement or as may be reasonably requested by
Seller in connection with the closing of the transactions contemplated hereby
or to complete the assumption by Buyer or any of its Subsidiaries of the
Assumed Liabilities.
2.11 Closing
Deliveries by Seller. At the
Closing, Seller shall deliver or cause to be delivered to Buyer:
(a) Possession
of the Acquired Assets, including all original Assumed Contracts and Business
Records of Seller and the Selling Subsidiaries, to the extent in Sellers or a
Selling Subsidiarys possession or control and not previously provided to
Buyer;
(b) A
tax clearance certificate, letter or other receipt indicating no Taxes are due
in the State of Texas and the State of Georgia;
(c) An
executed officers certificate of occasional sale exemption qualification or
similar instrument as required by applicable state law for every state where
any of the tangible Acquired Assets are located and such exemption is
available, and any equivalent document required by a Governmental Authority in
any foreign jurisdiction where any of the tangible Acquired Assets are located
and any equivalent exemption is available;
(d) Copies
of the Certificate of Incorporation (or equivalent organizational document) of
Seller and each Selling Subsidiary, as amended, certified by the applicable
authority of the jurisdiction of organization of Seller and each Selling
Subsidiary, as applicable, and copies of the Bylaws
20
(or equivalent governing document) of Seller and each Selling Subsidiary,
as amended, each certified by an officer of Seller or such Selling Subsidiary,
as applicable;
(e) A
reasonably current certificate of good standing, including tax good standing,
of Seller and each Selling Subsidiary issued by the Secretary of State or
equivalent authority in the jurisdiction of organization of Seller and each
Selling Subsidiary, as applicable;
(f) Each
of the Collateral Agreements, duly executed by Seller and/or the applicable
Selling Subsidiaries, as applicable;
(g) The
Management Non-Compete Agreement, duly executed by each of the executives
identified on Section 2.11(g) of the Seller Disclosure Schedule;
(h) The
Director Non-Compete Agreements, duly executed by each of the directors
identified on Section 2.11(h) of the Seller Disclosure Schedule;
(i) A
copy of each of the resolutions of the Board of Directors and securityholders
of Seller and each Selling Subsidiary authorizing the execution, delivery and
performance of this Agreement and/or any of the Collateral Agreements, as
applicable, to which it is a party, certified by an officer of Seller or such
Selling Subsidiary, as applicable;
(j) A
certificate, dated the Closing Date, in form and substance reasonably
satisfactory to Buyer and duly executed by an executive officer of Seller,
certifying the fulfillment of the conditions set forth in Sections 6.2(a), (b) and
(c);
(k) A
certification in the form contained in Section 1.1445-2(b)(2)(iv) of
the Treasury Regulations to the effect that Seller is not a foreign person and
duly executed by an executive officer of Seller;
(l) Appropriate
termination statements under the Uniform Commercial Code and other instruments
as may be requested by Buyer to extinguish all indebtedness of Seller and the
Selling Subsidiaries and all security interests related thereto to the extent
directed by Buyer; and
(m) Such
further instruments and documents as may be required to be delivered by Seller
pursuant to the terms of this Agreement or as may be reasonably requested by
Buyer in connection with the closing of the transactions contemplated hereby or
to complete the transfer of the Acquired Assets and the Acquired Business to
Buyer (or one or more certain designated subsidiaries of Buyer), including
good, sufficient instruments of assignment with respect to the Assigned
Intellectual Property of Seller and the Selling Subsidiaries in recordable
form, endorsements, consents, assignments and other good and sufficient
instruments of conveyance and assignment necessary or appropriate to vest in Buyer
(or one or more certain designated subsidiaries of Buyer) all right, title and
interest in, to and under the Acquired Assets without Encumbrance of any kind.
2.12 Accounting. From and after the Closing, Buyer shall have
the right and authority to collect for its own account all receivables and
other related items that are included in the Acquired Assets. To the extent that, after the Closing, (i) Buyer
or any of its Affiliates receive any payment that is for the account of Seller
or any Selling Subsidiary according to the terms of this Agreement or the
Collateral Agreements, or Seller or any Selling Subsidiary makes a payment on
behalf of Buyer, Buyer shall deliver such amount to Seller or (ii) Seller,
any Selling Subsidiary or any of their Affiliates receive any payment that is
for the account of Buyer or any of its Affiliates according to the terms of
this Agreement or the Collateral Agreements, or Buyer makes a payment on behalf
of Seller or any Selling
21
Subsidiary, Seller shall deliver such amount to Buyer. All amounts due and payable under this Section 2.12,
if any, shall be due and payable by the applicable party in immediately
available funds, by wire transfer to an account designated in writing by the
other party and shall be delivered to the other party within 30 days of receipt
thereof.
2.13 Project
Completion.
(a) Buyer
shall, within 30 days after the end of each of Buyers fiscal quarters,
commencing with the first fiscal quarter ended after the Closing Date and
ending on the Project Completion Settlement Date, deliver to Seller a statement
setting forth the amount of Project Completion Costs and Project Completion
Revenues for each Specified Project for the applicable fiscal quarter. Buyer shall at all times during the period
beginning on the Closing Date and ending on the Project Completion Settlement
Date devote, or cause its Affiliates to devote, the resources, including the
Transferred Employees, reasonably necessary to service the Specified Projects
in a manner consistent with Buyers and its Subsidiaries practices in
servicing their other material customer contracts at the time.
(b) Within
60 days of (i) the Interim Project Settlement Date and (ii) the
Project Completion Settlement Date, Buyer shall deliver to Seller a detailed schedule (the
Project Completion Schedule) of the
Project Completion Costs incurred by Buyer and the Project Completion Revenue
collected by Buyer with respect to each Completed Project during the applicable
Project Period. The Project Completion Schedule shall
set forth a calculation of aggregate Project Completion Costs and Project
Completion Revenues associated with the Completed Projects for the Project
Period together with a calculation of any Project Completion Losses claimed by
Buyer for the Project Period.
(c) Seller
shall be given the opportunity to undertake a reasonable review of the books
and records relating to the calculation of Project Completion Losses at
mutually agreeable times during normal business hours after delivery of the
Project Completion Schedule. Unless,
within 30 days after delivery of the Project Completion Schedule to Seller
pursuant to Section 2.13(b), Seller shall deliver to Buyer a notice
setting forth, in reasonable detail, any good faith dispute as to the amount of
the Project Completion Losses and the basis for such dispute (a Project Completion Losses Dispute Notice),
the amount of the Project Completion Losses shall be deemed accepted by Seller
and shall be final and binding.
(d) For
15 days after Buyers receipt of a Project Completion Losses Dispute Notice,
the parties hereto shall endeavor in good faith to resolve by mutual agreement
all matters in the Project Completion Losses Dispute Notice. If the parties are unable to resolve any
matter in the Project Completion Losses Dispute Notice within such 15-day
period, the Dispute shall be resolved in accordance with the procedures set
forth in Section 9.8
(e) After
each of the Interim Project Settlement Date and the Project Completion
Settlement Date, Buyer shall be entitled to reimbursement from the Project
Completion Escrow Amount for any Project Completion Losses finally determined
to be due and payable in accordance with this Section 2.13. After each of the Interim Project Settlement
Date and the Project Completion Settlement Date, Seller shall be entitled to
receive the Project Completion Escrow Amount less (i) any Project
Completion Losses finally determined to be due and payable in accordance with
this Section 2.13, and (ii) the aggregate amount by which the amount
of any Losses specified in any then pending claim by any Buyer Indemnified
Party in accordance with ARTICLE 7 exceeds the Indemnity Escrow Amount, provided that in respect of the Interim Project Completion
Date, the aggregate amount of the Project Completion Escrow Amount that may be
released to Seller shall not exceed an aggregate amount equal to Buyers
reasonable estimate of the aggregate amount by which estimated Project
Completion Costs of
22
then-uncompleted Specified Projects exceed estimated Project Completion
Revenues for such Specified Projects for the remaining Project Period. Buyer and Seller agree to execute and deliver
joint written instructions to the Escrow Agent in accordance with Section 1.2
of the Escrow Agreement to give effect to the distribution of the Project
Completion Escrow Amount as finally determined in accordance with this Section 2.13,
and the appropriate amounts will be distributed to Buyer and Seller, as
applicable, in accordance with the Escrow Agreement.
(f) If
any cash is collected after the Project Completion Date that if collected prior
to the Project Completion Date would have constituted Project Completion
Revenues, and if such cash, if collected prior to the Project Completion Date,
would not have otherwise been payable to Buyer as reimbursement for Project
Completion Losses in accordance with this Section 2.13, such cash will be
paid over to Seller by Buyer as soon as practicable after Buyers receipt of
such cash.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller, on behalf of itself and the Selling
Subsidiaries, hereby represents and warrants to Buyer that, except as set forth
in the disclosure schedule delivered by Seller to Buyer prior to the
execution and delivery of this Agreement (the Seller
Disclosure Schedule) (which Seller Disclosure Schedule shall
be arranged in sections corresponding to the sections of this ARTICLE 3,
and any information disclosed in any such section of the Seller Disclosure
Schedule shall be deemed to be disclosed only for purposes of the
corresponding section of this ARTICLE 3, unless it is reasonably
apparent from the face of the disclosure that the disclosure contained in such section of
the Seller Disclosure Schedule applies to other representations and
warranties contained in this ARTICLE 3), as of the date hereof and as of
the Closing Date:
3.1 Organization
and Qualification. Seller is a
corporation duly organized, validly existing and in good standing under the
Laws of the State of Delaware. Each
Selling Subsidiary is duly organized, validly existing and in good standing
under the Laws of the jurisdiction of its organization. Each of Seller and each Selling Subsidiary has
all requisite corporate or similar power and authority to own, license, use,
lease and operate the Acquired Assets owned, leased or operated by it and to
carry on its portion of the Business.
Each of Seller and each Selling Subsidiary is duly qualified, licensed
or admitted to transact business and is in good standing (with respect to
jurisdictions which recognize that concept) in each jurisdiction in which the
Acquired Assets are owned, licensed, used, leased or operated by it in the
conduct of the Business or in which the nature of the Business makes such
qualification necessary, except where the failure to be so qualified could not
reasonably be expected to have a Business Material Adverse Effect.
3.2 Capitalization
and Structure. Section 3.2
of the Seller Disclosure Schedule sets forth a true, correct and
complete list of each Affiliate of Seller that is engaged in the operation or
conduct of the Business or that has fee or leasehold title to any Acquired
Asset or is the obligor under any Assumed Liability. Section 3.2 of the Seller Disclosure Schedule also
includes a true, correct and complete table that lists each Seller Subsidiary,
its jurisdiction of organization, its entity type, its capitalization, the
names of all of its securityholders and the respective ownership interests of
each such securityholder. Neither the
Acquired Assets nor the Assumed Liabilities include any securities or ownership
interests of any Person. Seller does not
own any equity interest in any Person other than the Seller Subsidiaries.
23
3.3 Authority;
Non-Contravention; Approvals.
(a) Seller
has all requisite corporate power and authority to execute and deliver this
Agreement and the Collateral Agreements to which it will be a party and to
effect the transactions contemplated hereby and thereby, and the execution,
delivery and performance of this Agreement and the Collateral Agreements to
which Seller will be a party have been duly authorized by all requisite
corporate action. Each Selling
Subsidiary has all requisite corporate or similar power and authority to
execute and deliver the Collateral Agreements to which it will be a party and
to effect the transactions contemplated thereby, and the execution, delivery
and performance of the Collateral Agreements to which such Selling Subsidiary
will be a party have been duly authorized by all requisite corporate or similar
action.
(b) This
Agreement has been duly executed and delivered by Seller and this Agreement is,
and the Collateral Agreements to which Seller and each Selling Subsidiary will
be a party, when duly executed and delivered by Seller or such Selling
Subsidiary, will be, valid and legally binding obligations of Seller or such
Selling Subsidiary, as applicable, enforceable against Seller or such Selling
Subsidiary, as applicable, in accordance with their respective terms except
that the enforcement hereof or thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar Laws now or hereafter
in effect relating to creditors rights generally, and (ii) general
principles of equity (regardless of whether enforceability is considered in an
Action at law or in equity).
(c) Assuming
that all Required Consents have been obtained, the execution, delivery and
performance of this Agreement by Seller and each Collateral Agreement by Seller
or any Selling Subsidiary that is a party thereto, and the consummation of the
transactions contemplated hereby and thereby, do not and will not: (i) result in a breach or violation of
any provision of Sellers or the applicable Selling Subsidiarys charter,
by-laws or similar organizational documents, (ii) except as set forth on Section 3.3(c)(ii) of
the Seller Disclosure Schedule, violate or conflict with, in any material
respect, or result in a material breach of or constitute (with notice or lapse
of time, or both) an occurrence of material default under any provision of,
result in the acceleration or cancellation of any obligation under, give rise
to any claim, give any Person additional rights or compensation under or give
rise to any right by any party to terminate or amend its obligations under, any
mortgage, deed of trust, conveyance to secure debt, note, loan, indenture,
Encumbrance, Contract, Permit, order, judgment, decree or other arrangement to
which Seller or the applicable Selling Subsidiary is a party or by which it is
bound, or (iii) violate, in any material respect, any Law of any
Governmental Authority having jurisdiction over Seller, any Selling Subsidiary
or the Acquired Assets.
(d) No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Person is required to be obtained by Seller or any Selling
Subsidiary in connection with the execution and delivery of this Agreement or
the Collateral Agreements to which Seller or such Selling Subsidiary will be a
party or for the consummation of the transactions contemplated hereby or
thereby by Seller or such Selling Subsidiary, except for (i) consents or
approvals set forth on Section 3.3(d) of the Seller Disclosure Schedule that
are required to transfer or assign to Buyer any Acquired Assets or assign the
benefits of or delegate performance with regard thereto, and (ii) the
Required Filings (items (i) and (ii) being collectively referred to
herein as the Required Consents).
3.4 Financial
Statements. Section 3.4 of
the Seller Disclosure Schedule sets forth the Financial
Statements. Except as shown or provided
for in the Financial Statements or as otherwise described in Section 3.4
of the Seller Disclosure Schedule, the Financial Statements (i) have
been prepared from the books and records of Seller and the Seller
Subsidiaries. The Financial Statements
were prepared in accordance with GAAP on a basis consistent with prior periods
and fairly present the financial position and results of operations of the
Business as of their respective dates and for the respective periods presented
(subject, in the case of the unaudited portions of the Financial Statements, to
the absence of certain footnote disclosures otherwise required by GAAP).
24
3.5 Absence
of Undisclosed Liabilities. There are no Liabilities relating
to the Business of any nature, whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due, whether known or
unknown, regardless of when asserted, and there is no existing condition,
situation or set of circumstances that reasonably could be expected to result
in such a Liability, except for Liabilities (i) reflected in the Balance
Sheet, (ii) that were incurred since the date of the Balance Sheet and
were normal and recurring expenses incurred in the ordinary course of business
and could not reasonably be expected to have a Business Material Adverse Effect
or (iii) Excluded Liabilities.
3.6 Absence
of Certain Changes or Events. Except
in connection with the transactions contemplated hereby, as expressly
contemplated by this Agreement or consented to in writing by Buyer, since the
date of the Balance Sheet, (i) there has not been any event, circumstance,
change or effect that has had or reasonably could be expected to have a Seller
Material Adverse Effect or a Business Material Adverse Effect and (ii) except
as contemplated on Section 5.1 of the Seller Disclosure Schedule,
the Business has been conducted only in the ordinary course.
3.7 Tax
Matters.
(a) Except
as disclosed on Section 3.7(a) of the Seller Disclosure Schedule,
all Tax Returns required to be filed with respect to Seller or any Seller
Subsidiary with respect to the Business or any of the Acquired Assets have been
timely filed. All such Tax Returns were
correct and complete. All Taxes (whether
or not shown as due on any Tax Return), the nonpayment of which could result in
an Encumbrance on an Acquired Asset, adversely affect the Business or result in
Buyer or any of its Affiliates having any Liability therefor, have been timely
paid. No claim has been made, and
neither Seller nor any Seller Subsidiary has received notice of a proposed
claim, by any authority in any jurisdiction where Seller or any Seller
Subsidiary does not file Tax Returns that Seller or such Seller Subsidiary is
or may be subject to taxation by that jurisdiction with respect to the Business
or any of the Acquired Assets, or otherwise.
Neither Seller nor any Seller Subsidiary has received notice of a
proposed audit by any authority in any jurisdiction where Seller or any Seller
Subsidiary does not file Tax Returns.
(b) Seller
and the Seller Subsidiaries have withheld and timely paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party
relating to the Business or any of the Acquired Assets.
(c) No
proposed adjustment, audit or administrative or judicial proceeding is pending
or threatened or involves any Tax or Tax Return relating to the Business or any
of the Acquired Assets in cases where an adverse outcome with respect to such
adjustment or proceeding could result in an Encumbrance on an Acquired Asset,
adversely affect the Business or result in Buyer or any of its Affiliates
having any Liability therefor.
(d) Section 3.7(d) of
the Seller Disclosure Schedule sets forth all closing agreements and
Tax rulings requested or received from any Governmental Authority that relate
to the Acquired Assets or the Business.
(e) Except
as disclosed on Section 3.7(d) of the Seller Disclosure Schedule,
neither Seller nor any Seller Subsidiary has waived any statute of limitations
in respect of income taxes or agreed to any extension of time with respect to
an income Tax assessment or deficiency.
(f) Neither
Seller nor any Seller Subsidiary (i) has been a member of an affiliated,
consolidated, combined or unitary group, other than the group of which Seller
is the common parent,
25
filing a consolidated federal income Tax Return or (ii) has any
liability for the Taxes of any Person under Treas. Reg. Section 1.1502-6
(or any similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise.
(g) Neither
Seller nor any Seller Subsidiary has made any material payment, is obligated to
make any material payment or is a party to any agreement that under certain
circumstances could obligate it to make any material payment that will not be
deductible under Section 280(G) of the Code.
3.8 ERISA
and Employee Benefits.
(a) Section 3.8(a) of
the Seller Disclosure Schedule contains a true and complete list of
each Seller Plan. None of Seller, any
Seller Subsidiary or any ERISA Affiliate has any obligation to change or
otherwise modify any existing Seller Plan or program or to establish any new
plan or program.
(b) Copies
of the following materials have been delivered or made available to Buyer: (i) all current and prior plan documents
for each Seller Plan or, in the case of an unwritten Seller Plan, a written
description thereof, (ii) all determination letters from the IRS with
respect to any of the Seller Plans, (iii) all current and prior summary
plan descriptions, summaries of material modifications, annual reports and
summary annual reports, (iv) all current and prior trust agreements,
insurance contracts and other documents relating to the funding or payment of
benefits under any Seller Plan, and (v) any other documents, forms or
other instruments relating to any Seller Plan reasonably requested by Buyer.
(c) Each
Seller Plan has been maintained, operated and administered in material
compliance with its terms and any related documents or agreements and in
material compliance with all applicable Laws.
(d) To
Sellers knowledge, each Seller Plan intended to be qualified under Section 401(a) of
the Code is so qualified and has heretofore been determined by the IRS to be so
qualified, each trust created thereunder has heretofore been determined by the
IRS to be exempt from Tax under the provisions of Section 501(a) of
the Code, and nothing has occurred since the date of any such determination
that could reasonably be expected to give the IRS grounds to revoke such
determination.
(e) Seller
does not currently have and at no time in the past has had an obligation to
contribute to a defined benefit plan as defined in Section 3(35) of
ERISA, a pension plan subject to the funding standards of Section 302 of
ERISA or Section 412 of the Code, a multiemployer plan as defined in Section 3(37)
of ERISA or Section 414(f) of the Code or a multiple employer plan
within the meaning of Section 210(a) of ERISA or Section 413(c) of
the Code.
(f) With
respect to each group health plan benefiting any current or former employee of
Seller, any Seller Subsidiary or any ERISA Affiliate that is subject to Section 4980B
of the Code, Seller, each such Seller Subsidiary and each such ERISA Affiliate
has materially complied with the continuation coverage requirements of Section 4980B
of the Code and Part 6 of Subtitle B of Title I of ERISA.
3.9 Employment
Matters.
(a) Section 3.9(a) of
the Seller Disclosure Schedule sets forth, as of the date hereof: the
name, employment location, employee identification number, date of hire,
current title, current annual salary and any bonus or commitment to pay any
other amount or benefit in connection with a termination of employment or
otherwise (including all remuneration payable, vacation pay balances,
recuperation
26
pay, balances, illness pay balances, fringe benefits, balances in
provident or pension funds, car, telephone, managers insurance, any profit
sharing commission, statutory and non-statutory severance pay, prior notice and
compensation and damages rights regarding employment termination), if
applicable, of all officers, directors and employees of Seller or any Seller
Subsidiary employed in the Business (including any such employee who is on
leave of absence (including short- or long-term sick leave, maternity/paternity
leave, military leave or other administrative leave) from Seller or any Seller
Subsidiary) (collectively, the Employees)
with an indication whether any such Employees are on any type of leave of
absence. To the best knowledge of
Seller, no such Persons referred to in the preceding sentence have made a
threat or otherwise indicated any intent to Seller, to any Seller Subsidiary or
to any of the officers or directors of Seller or any Seller Subsidiary to
cancel or otherwise terminate such Persons relationship with Seller or such
Seller Subsidiary. Other than as set
forth on Section 3.9(a) of the Seller Disclosure Schedule,
there is no Person that may be deemed to be an employee of the Seller or any
Seller Subsidiary employed in the Business.
(b) Other
than the Seller Plans and as set forth in Section 3.9(a) of the
Seller Disclosure Schedule, neither Seller nor any Seller Subsidiary is
subject to, nor do any of the Employees benefit from, any agreement,
arrangement, understanding or custom between or among any of the Employees, on
one hand, and Seller and/or any Seller Subsidiary, on the other hand.
(c) Except
as set forth in Section 3.9(c) of the Seller Disclosure Schedule,
no Action in respect of any Employees is pending or, to the knowledge of
Seller, threatened against Seller or any Seller Subsidiary by or on behalf of
any past, present or prospective employee of the Business, including Actions
related to discrimination, harassment, wrongful termination, workers
compensation or disability. To the
knowledge of the Seller, there is no violation of any employment contract between
or among Seller or any Seller Subsidiary, on one hand, and any Employee, on the
other hand. Neither Seller nor any
Seller Subsidiary is a party to, or otherwise bound by, any Governmental Order
relating to its respective employees or employment practices in respect of the
Business, and Seller and the Seller Subsidiaries are in compliance in all
material respects with all applicable policies and agreements relating to
wages, hours, employment, employment practices and terms and conditions of
employment in respect of the Business.
Seller and the Seller Subsidiaries have withheld and paid to (or are
holding for payment not yet due) the appropriate Governmental Authority all
amounts required by Law or agreement to be withheld from the wages or salaries
due to each of the Employees. Seller and
the Seller Subsidiaries have paid in full to all of the Employees all wages,
salaries, bonuses, benefits, commissions and other compensation due to them or
otherwise arising under any Law, plan, policy, practice, program or agreement
and have not unlawfully withheld any such wages, salaries, bonuses, benefits,
commissions or other compensation. All
amounts that Seller or any Seller Subsidiary is legally or contractually
required to deduct from the Employees salaries or transfer to such employees
pension or provident, life insurance, incapacity insurance, continuing
education fund or otherwise, have been duly paid into the appropriate fund or
funds, and Seller and the Seller Subsidiaries have no outstanding obligation to
make any such transfer or provision.
(d) Seller
and each Seller Subsidiary are in compliance with their respective obligations
pursuant to the Worker Adjustment and Retraining Notification Act of 1988, as
amended (the WARN Act), and any similar
state or local law, in respect of the Business.
Except as set forth in Section 5.1(i) of the Seller
Disclosure Schedule, Seller and each Seller Subsidiary have not had any
layoffs of Employees within 90 days prior to the Closing Date. Buyer will have no liability under the WARN
Act due to actions taken by Seller or any Seller Subsidiary prior to or on the
Closing Date that might trigger an employers obligations under the WARN Act.
(e) Except
as described on Section 3.9(e) of the Seller Disclosure Schedule,
neither the execution and delivery of this Agreement or the Collateral
Agreements, nor the consummation of the transactions contemplated thereby, will
(either alone or in conjunction with any other event, such as
27
termination of employment) (i) result in any material payment
(including severance payments, payments under any other agreements,
unemployment compensation payments, payments subject to Section 280G of
the Code or otherwise) becoming due to any Business Employee under any Seller
Plan or otherwise or (ii) result in any acceleration of the time of
payment or vesting of any material benefits with respect to any Business
Employee.
(f) Except
as described on Section 3.9(f) of the Seller Disclosure Schedule,
all current U.S. employees of the Business are, and all former U.S. employees
of the Business whose employment terminated, voluntarily or involuntarily,
within the three years prior to the date of this Agreement, were legally
authorized to work in the United States.
Except as described on Section 3.9(f) of the Seller
Disclosure Schedule, Seller has completed and retained the necessary
employment verification paperwork under the Immigration Reform and Control Act
of 1986 (IRCA) for the employees hired
prior to the date of this Agreement, and Seller has complied with
anti-discrimination provisions of the IRCA.
Further, at all times prior to the date of this Agreement, Seller was in
material compliance with both the employment verification provisions (including
without limitation the paperwork and documentation requirements) and the
anti-discrimination provisions of IRCA.
3.10 Labor
Relations. Except as described on Section 3.10
of the Seller Disclosure Schedule, there is no unfair labor practice, charge
or complaint or other proceeding pending or, to the knowledge of Seller,
threatened against any of the Acquired Assets, Seller or any Seller Subsidiary
relating to the Business. Except as
described on Section 3.10 of the Seller Disclosure Schedule, Seller
and each Seller Subsidiary is in compliance in all material respects with all
Laws applicable to the Business respecting labor, employment and employment
practices, terms and conditions of employment, and wages and hours, and none of
them have engaged in any unfair labor practices. Neither Seller nor any Seller Subsidiary is a
party to, has any material liability with respect to or is otherwise bound by
any collective bargaining agreement or other labor union contract applicable to
Persons employed by Seller or any Seller Subsidiary in the Business, nor does
Seller know of any activities or proceedings of any labor union or other Person
to organize any such employees. There is
no labor strike, slowdown, work stoppage or lockout pending, or to the knowledge
of Seller, threatened, against or affecting the Business, nor has there been
any such activity within the past three years.
3.11 Litigation. There are no Actions pending or, to the
knowledge of Seller, threatened in writing, that relate to this Agreement, any
Collateral Agreement or any other document entered into in connection herewith
or therewith, the transactions contemplated hereby or any action taken or to be
taken by Seller or any Seller Subsidiary in connection with, or that seeks to
enjoin or obtain monetary damages in respect of, the consummation of the
transactions contemplated hereby or thereby or that would have a material
adverse effect on the ability of Seller to carry out its obligations under this
Agreement, or of Seller or any Seller Subsidiary to carry out its obligations
under the Collateral Agreements or any other document entered into in
connection herewith or therewith. Except
as set forth on Section 3.11 of the Seller Disclosure Schedule,
there are no Actions pending or, to the knowledge of Seller, threatened against
or affecting Seller or any Seller Subsidiary or any of their respective
Affiliates relating to or affecting the Acquired Assets, the Business or the
Assumed Liabilities. There are no
outstanding Governmental Orders or settlements that restrict the Business, the
Acquired Assets or the Assumed Liabilities.
There are no Actions by Seller or any Seller Subsidiary pending, or
which Seller or any Seller Subsidiary intends to initiate, against any other
Person, relating to or affecting the Acquired Assets, the Business or the
Assumed Liabilities.
3.12 No
Violation of Law; Permits.
(a) Neither
Seller nor any Seller Subsidiary is or in the past three years has been in
default under or in violation of, or has been charged with any violation of, in
each case, in any material
28
respect, any Law (including any applicable environmental, labor, export
control or foreign corrupt practices Law, ordinance, decree or regulation of
any Governmental Authority) to which Seller, any Seller Subsidiary, the
Business or any of the Acquired Assets or Assumed Liabilities is or was
subject.
(b) The
Acquired Assets include all material Permits used or held for use in, or
necessary for the conduct of, the Business and the Acquired Assets
(collectively, the Business Permits). All of the Business Permits are listed
in Section 3.12(b) of the Seller Disclosure Schedule. All of the Business Permits have been legally
obtained and maintained and are in full force and effect. None of Seller, the Seller Subsidiaries, the
Business or any of the Acquired Assets is in violation in any material respect
of or is being operated in violation in any material respect of the terms of
any Business Permit, and there is no pending or, to the knowledge of Seller,
threatened termination, expiration or revocation thereof.
(c) Neither
the execution and delivery of this Agreement nor the consummation of any of the
transactions contemplated hereby will: (i) require any assignment,
consent, waiver or other action in respect of any Business Permit; (ii) result
in the termination or modification of any Business Permit; or (iii) result
in a need for additional Permits, except in each case as would not reasonably
be expected to have a Business Material Adverse Effect or a Seller Material
Adverse Effect.
3.13 Title
to Assets; Encumbrances. Except as
set forth in Section 3.13 of the Seller Disclosure Schedule, Seller
or a Selling Subsidiary has, and at the Closing will have, good, valid and
marketable title to, or valid and enforceable leasehold interests in, all of
the Acquired Assets, free and clear of all Encumbrances and, at the Closing,
Seller will convey, or cause to be conveyed, to Buyer good, valid and
marketable title to all of the Acquired Assets, free and clear of all
Encumbrances.
3.14 Entire
Business; Sufficiency of Assets.
Except for properties or assets replaced in the ordinary course of
business by equivalent or superior properties or assets, Business Employees who
are not Transferred Employees, if any, and the Excluded Assets, the Acquired
Assets constitute all of the assets, properties and rights used in, held for
use in, or necessary for the conduct of, the Business as heretofore conducted. Other than tangible assets related solely to
Employees other than Business Employees, all tangible assets used or held for
use in, or necessary for the conduct of, the Business are included in the
Acquired Assets.
3.15 Transactions
with Affiliates. Except as set forth
on Section 3.15 of the Seller Disclosure Schedule, none of the
Affiliates or current or former directors, officers or employees of Seller or
any Seller Subsidiary has since January 1, 2004: (i) borrowed money
from or loaned money to the Business that remains outstanding; (ii) any
contractual or other claim, express or implied, of any kind whatsoever against
or in respect of the Business; or (iii) any interest in any of the
Acquired Assets.
3.16 Insurance. Section 3.16 of the Seller Disclosure
Schedule sets forth a true, correct and complete list of all material
insurance policies held by or on behalf of Seller or any Seller Subsidiary
relating to the Business and a brief description of such insurance policies.
3.17 Contracts.
(a) Section 3.17
of the Seller Disclosure Schedule sets forth a true, correct and
complete list of all of the Contracts to which Seller or any of its Affiliates
is a party or bound, in each case, that are used or held for use in, or
necessary for the conduct of, the Business and that relate, in whole or in
part, to: (i) any of the Acquired Assets; (ii) any of the Assumed
Liabilities; (iii) any Leased Real Property; (iv) employment,
consulting, non-competition or similar agreements; (v) confidentiality or
non-disclosure agreement or any right to protect the confidentiality of
information relating to the Business
29
or to prevent third parties from competing with the Business or
soliciting employees of the Business (other than Sellers standard intellectual
property assignment and confidentiality agreement, a copy of which is attached
to Section 3.19(k) of the Seller Disclosure Schedule, or
non-disclosure agreements entered into in the ordinary course of business); (vi) customer,
supply, manufacturing, supplier, vendor or similar agreements; (vii) distributor,
distribution, sales representative, commission or similar agreements, (viii) the
lease of machinery or office equipment, (ix) containing covenants limiting
the freedom of Seller or any Seller Subsidiary to compete in any line of
business or with any Person or in any geographic area or market;
(x) Active Customer Contracts and Dormant Customer Contracts under which
the liability (other than for fraud, intentional misconduct or similar actions)
of Seller or any Seller Subsidiary is not limited to the amount paid to Seller
or such Seller Subsidiary or to a specific dollar amount, so long as such
specific dollar amount does not exceed two times the contract amount, as
applicable, under the agreement; (xi) with any directors, officers,
employees, stockholders or Affiliates of Seller or any Seller Subsidiary;
(xii) granting to any Person a first-refusal, first-offer or similar
preferential right to purchase or acquire any right, asset or property of
Seller or any Seller Subsidiary; (xiii) providing for any offset,
countertrade or barter arrangement; (xiv) involving a joint venture;
(xv) involving the acquisition of any business enterprise whether via
stock or asset purchase or otherwise since January 1, 2001; (xvi) the
assignment, license, sublicense or other right to use any Intellectual Property
or Intellectual Property Rights of any Person; (xvii) any Seller or Seller
Subsidiary obligation or duty to warrant, indemnify, reimburse, hold harmless,
guaranty or otherwise assume or incur any Liability or provide a right of
rescission with respect to the infringement or misappropriation of the
Intellectual Property Rights of any Person other than Seller or any Seller
Subsidiary; (xviii) rights to indemnify arising out of acquisition or license
of Intellectual Property; (xix) any joint development or joint venture
agreements; (xx) source code escrow agreements (the Contracts described in
clause (xvi), clause (xvii), clause (xviii), clause (xix) and this clause (xx)
being sometimes referred to herein as the IP Contracts);
(xxi) providing for the settlement of any claim and containing ongoing
obligations or future rights; and (xxii) any other material Contract.
(b) Each
Assumed Contract is in full force and effect, is in writing and constitutes a
legal, valid and binding agreement, enforceable against Seller or the
applicable Seller Subsidiary and, to the knowledge of Seller, each other party
thereto, in accordance with its terms.
Neither Seller nor any Seller Subsidiary nor, to the knowledge of
Seller, any other party to any Assumed Contract is in any material respect in
violation or breach of, or in default under, nor has there occurred an event or
condition that with the passage of time or giving of notice (or both) would
constitute a default under, or permit the termination of, any such
Contract. Except as set forth in Section 3.17(b) of
the Seller Disclosure Schedule, no party to any Assumed Contract has
notified Seller or any Seller Subsidiary of the assertion of its right to
renegotiate the terms or conditions of such Assumed Contract, and, to the
knowledge of Seller, no such basis exists.
There are no IP Contracts under which there is any dispute regarding the
validity or scope of such Contract, or performance under such Contract,
including with respect to any payments to be made or received by Seller or any
Seller Subsidiary thereunder.
(c) Seller
has delivered, or made available, to Buyer true, correct and complete copies
(or if none exist, reasonably complete and accurate written descriptions) of
each Contract listed on Section 3.17(a) of the Seller Disclosure
Schedule, together with all amendments and supplements thereto.
3.18 Tangible
Property. Section 3.18 of
the Seller Disclosure Schedule sets forth a true, correct and complete
list of each item of Tangible Property that has a book value of $50,000 or more
as of the date of this Agreement. The
Tangible Property is in good operating condition for the purpose for which it
is currently being used and is free of any defects, except for ordinary wear
and tear, and neither Seller nor any Seller Subsidiary has received notice that
any of the Tangible Property or its operation is in violation of any existing
Law. During the past three years, there
has not been any interruption of the
30
operations of the Business due to the insufficiency of, or the
inadequate maintenance of, the Tangible Property.
3.19 Intellectual
Property.
(a) Section 3.19(a) of
the Seller Disclosure Schedule sets forth a true, correct and complete
list and description of all Owned IP that consists of Registered Intellectual
Property Rights and any common law trademarks, domain names and web addresses
contained in the Owned IP. Each listed
item in Section 3.19(a) of the Seller Disclosure Schedule shall
indicate, as applicable, the owner of such Owned IP, the country(ies) in which
such Owned IP is registered or for which an application for registration is
pending, the application number, the patent or registration number and the
expiration date thereof.
(b) Section 3.19(b) of
the Seller Disclosure Schedule lists all proceedings or actions before
any court or tribunal (including the United States Patent and Trademark Office,
the United States Copyright Office, or equivalent authorities anywhere in the
world (collectively, Registration Offices))
related to any of the Owned IP, except for any ex parte
patent or trademark prosecution proceedings.
(c) Each
item of Owned IP, including all Registered Intellectual Property Rights, is
free and clear of any Encumbrances.
(d) To
the extent that any Owned IP has been developed or created independently or
jointly by any Person other than Seller or a Seller Subsidiary for which Seller
or such Seller Subsidiary has, directly or indirectly, paid, Seller or such
Seller Subsidiary has a written agreement with such Person with respect
thereto, and Seller or such Seller Subsidiary thereby has obtained ownership
of, and is the exclusive owner of, all such Intellectual Property therein and
associated Intellectual Property Rights by operation of Law or by valid
assignment.
(e) Neither
Seller nor any Seller Subsidiary has transferred ownership of, or granted any
license of or right to use (other than Business Product license grants made to
customers of Seller or a Seller Subsidiary using its standard form of license
agreement in the ordinary course of business), or authorized the retention of
any rights to use or joint ownership of, any Intellectual Property or
Intellectual Property Rights that is or was Owned IP to any other Person. No Person who has licensed Intellectual
Property or Intellectual Property Rights to Seller or any Seller Subsidiary has
ownership rights or license rights to improvements made by Seller or any Seller
Subsidiary in Intellectual Property that has been so licensed to Seller or such
Seller Subsidiary.
(f) Except as set forth on Section 3.19(f) of
the Seller Disclosure Schedule, neither the Business Products nor the
performance of Business Services (including products, technology or services
currently under development) incorporate or contain any open source software,
embedded or otherwise.
(g) The
operation of the Business, including the design, development, use, import, manufacture,
marketing, sale, license, reproduction or distribution of the Business Products
and performance of Business Services (including products, technology or
services currently under development), has not and does not infringe or
misappropriate the Intellectual Property Rights of any Person, violate the
rights of any Person (including rights to privacy or publicity), or constitute
unfair competition or trade practices under the Laws of any jurisdiction. Neither Seller nor any Seller Subsidiary has
received any notice from any Person claiming that such operation or any act,
product, technology or service (including products, technology or services
currently under development) of Seller or such Seller Subsidiary infringes or
misappropriates the Intellectual Property Rights of any Person or
31
constitutes unfair competition or trade practices under the Laws of any
jurisdiction (nor does Seller nor any Seller Subsidiary have knowledge of any
claims or any basis therefor). None of
the Owned IP is subject to any Action, no Action has been instituted or is
pending or, to the knowledge of Seller, threatened, that challenges, affects or
relates to the Owned IP, and Seller has no knowledge of any Action that is unasserted
with respect to any of the Owned IP or any basis on which any Action could
reasonably be asserted by any Person. To
the knowledge of Seller, there has been no unauthorized use by, disclosure to
or by or infringement, misappropriation or other violation of any of the Owned
IP by any third party and/or any current or former officer, employee,
independent contractor, consultant or any other agent of Seller or any Seller
Subsidiary. No Owned IP is subject to
any proceeding or outstanding Governmental Order, settlement agreement or
stipulation that restricts in any manner the use, transfer, assignment or
licensing thereof by Seller or any Seller Subsidiary or may affect the
validity, use or enforceability of such Owned IP. Neither Seller nor any Seller Subsidiary has
received any written opinions of counsel (outside or inside) relating to
infringement, validity, invalidity, enforceability or unenforceability of any
Owned IP.
(h) Seller
and each Seller Subsidiary has any taken all reasonable steps to protect the
Owned IP. In each case in which Seller
or any Seller Subsidiary has acquired any Intellectual Property or Intellectual
Property Rights related to the Owned IP from any Person, Seller or such Seller
Subsidiary has obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in such Intellectual Property and the
associated Intellectual Property Rights to Seller or such Seller Subsidiary
and, to the maximum extent provided for by, and in accordance with, applicable
Laws and regulations, Seller or such Seller Subsidiary has recorded each such
assignment with the relevant governmental authorities, including any applicable
Registration Offices.
(i) All
fees, annuities, royalties, honoraria and other payments that are or were due
from Seller or any Seller Subsidiary on or before the Closing Date for any of
the Owned IP and the IP Contracts have been paid. All necessary documents and certificates in
connection with the Owned IP have been filed with the relevant Registration Authorities
for the purposes of maintaining such Owned IP in full force and effect. There are no actions that must be taken
within 60 days after the Closing Date, including the payment of any
registration, maintenance or renewal fees or the filing of any documents,
applications or certificates for the purposes of maintaining perfecting,
preserving or renewing any Owned IP.
(j) None
of the entering into of this Agreement, the transactions contemplated by this
Agreement or the Closing, including the assignment to Buyer expressly, by
operation of Law or otherwise of any Contracts, will cause, as a result of any
agreements or obligations of the Seller or any Seller Subsidiary, (i) Buyer
or any Affiliate of Buyer to grant to any third party any right to or with respect
to any Owned IP, (ii) Buyer or an Affiliate of Buyer to be bound by, or
subject to, any non-competition or other material restriction on the operation
or scope of its business or the Business, (iii) Buyer or any Affiliate of
Buyer to be obligated to pay any royalties or other material amounts to any
third party in excess of those payable by such Person in the absence of this
Agreement or the transactions contemplated hereby, (iv) the forfeiture or
termination or give rise to a right of forfeiture or termination of any of the
Owned IP or any IP Contract, or (v) the impairment of the right of Buyer
or any Affiliate of Buyer to practice, exploit, sell, license or dispose of, or
to bring any action for the infringement of, any Owned IP; provided, however,
that any pre-existing agreements or obligations of Buyer or any Affiliate of
Buyer do not directly contribute to any of the foregoing results.
(k) Seller
or a Seller Subsidiary, as applicable, has taken all commercially reasonable
measures and precautions necessary to safeguard and maintain its rights in
confidential information and trade secrets or rights provided by any other
Person to Seller or such Seller Subsidiary.
Without limiting the foregoing, Seller and each Seller Subsidiary has,
and enforces, a policy requiring each employee and
32
consultant to execute proprietary information, confidentiality and
assignment agreements substantially in Sellers or such Seller Subsidiarys
standard forms, and all current and former employees and consultants of Seller
or such Subsidiary have executed such an agreement in substantially Sellers or
such Seller Subsidiarys standard form, which forms are attached as Section 3.19(k)
of the Seller Disclosure Schedule.
(l) None
of the Owned IP was developed by or on behalf of, or using grants or any other
subsidies of, any Governmental Authority or any university, and no government
funding, facilities, then-faculty or then-students of a university, college,
other educational institution or research center was used in the development of
the Owned IP, other than solely as a result of the ownership by a university,
or an affiliate of a university, of less than one percent of the equity
securities of Seller on a passive basis.
To the knowledge of Seller, no current or former employee, consultant or
independent contractor of Seller or any Seller Subsidiary, who was involved in,
or who contributed to, the creation or development of any Owned IP, has
performed services for the government, university, college or other educational
institution or research center during a period of time during which such
employee, consultant or independent contractor was also performing services for
Seller or any Seller Subsidiary.
(m) Seller
has made available to Buyer all information relating to any problem or issue of
which Seller has knowledge with respect to any of the Business Products or
Business Services that does, or may reasonably be expected to, materially and
adversely affect the value, functionality or fitness for the intended purposes
of the same. Notwithstanding the
foregoing, there are no defects in any Business Product, and there are no
errors in any technical documentation, specifications, manuals, user guides,
promotional material, drawings, flow charts, diagrams, benchmark test results
and other written materials associated with or used with the Business Products,
which defects or errors would reasonably be expected to have, individually or
in the aggregate, a Business Material Adverse Effect or a Seller Material
Adverse Effect.
(n) Neither
Seller nor any Seller Subsidiary has undertaken or omitted to undertake any
acts, and, to the knowledge of Seller, no circumstances or grounds exist, that
would invalidate, reduce or eliminate, in whole or in part, the enforceability
or scope of any of the Owned IP.
(o) To
the extent that any moral rights or rights of droit moral
are deemed to exist or apply in any jurisdiction to any of the Intellectual
Property Rights transferred hereunder, Seller and the applicable Seller
Subsidiaries have waived, in favor of Buyer, any and all such moral rights or
rights of droit moral.
(p) Other
than the Assigned Intellectual Property, no name, patent, invention, trade
secret, proprietary right, software, trademark, service mark, trade name, logo,
copyright, franchise, license, sublicense or other Intellectual Property Right
is necessary for the operation of the Business in substantially the same manner
as the Business is or was conducted by Seller and each Seller Subsidiary.
3.20 Real
Property.
(a) Section 3.20(a) of
the Seller Disclosure Schedule contains a true, correct and complete
list of each parcel of real property leased or subleased to or by (or otherwise
occupied by) Seller or any Seller Subsidiary (the Leased
Real Property). Neither
Seller nor any Seller Subsidiary owns any real property that is used in the
Business.
(b) Seller
or the applicable Seller Subsidiary has a valid and subsisting leasehold estate
in and the right to quiet enjoyment of the Leased Real Property for the full
term of the lease of such properties, and each such parcel is free and clear of
all Encumbrances. Except as set forth on
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Section 3.20(b) of the Seller Disclosure
Schedule, each lease with respect to any of the Leased Real
Property is a legal, valid and binding agreement, enforceable in accordance
with its terms and there is no, and neither Seller nor any Seller Subsidiary
has received notice of any, default (or any condition or event that, after
notice or lapse of time or both, would constitute a default) thereunder. Neither Seller nor any Seller Subsidiary owes
any brokerage commissions with respect to any such leased space (including any
contingent obligation in respect of future lease extensions). Except as set forth in Section 3.20(b) of
the Sellers Disclosure Schedule, no consent is required from the lessor
under any lease of the Leased Real Property to consummate the transactions
contemplated by this Agreement or the Collateral Agreements. Neither Seller nor any Seller Subsidiary has
leased or sublet, as lessor or sublessor, and no third party is in possession
of, any of the Leased Real Property.
(c) The
plants, buildings, structures and equipment on the Assumed Leased Property and
each New Leased Property are in good operating condition and in a state of good
maintenance and repair, ordinary wear and tear excepted, are adequate and
suitable in all material respects for the purposes for which they are presently
being used and, to the knowledge of Seller, there are no condemnation or
appropriation proceedings pending or threatened against any of such Real
Property or any plants, buildings or other structures thereon.
3.21 Environmental
Matters.
(a) (i) (A) Seller
and each Seller Subsidiary have obtained all material Permits relating to
environmental, health and safety matters necessary for the operation or conduct
of the Business, (B) all such Environmental Permits are in full force and
effect, (C) Seller and each Seller Subsidiary are in compliance with all
terms and conditions of such Environmental Permits, (D) any applications
for renewal of such Environmental Permits have been submitted on a timely
basis, and (E) such Environmental Permits can be transferred without
changes to their terms or conditions; (ii) Seller or a Seller Subsidiary
has filed all material notices and reports required to be filed under any
Environmental Law with respect to the Business or any real property used at any
time in connection with the Business, including notices or reports (A) indicating
past or present treatment, storage or disposal of a Hazardous Substance, (B) reporting
a spill or release of a Hazardous Substance, or (C) reporting a violation
of any Environmental Law or any environmental permit; (iii) Seller, the
Seller Subsidiaries, the Acquired Assets and the Business are in compliance in
all material respects with, and all times have complied with, all applicable
Environmental Laws; (iv) no Hazardous Substances are present at or have
been disposed on or released or discharged from, onto or under any of the
Leased Real Property; (v) none of the Leased Real Property contains an
active or inactive incinerator, lagoon, landfill, septic system, wastewater
treatment system or underground storage tank; (vi) none of the Leased Real
Property is subject to any current or proposed environmental remediation
obligations; and neither Seller nor any Subsidiary has (A) entered into or
been subject to any consent decree, compliance order or administrative order
with respect to the Leased Real Property or any formerly owned, leased or
operated property of the Business or any facilities or operations thereon, (B) received
notice under the citizen suit provisions of any Environmental Law, (C) received
any request for information, notice, demand letter, administrative inquiry or
formal or informal complaint or claim with respect to any Environmental Law, or
(D) been subject to or threatened with any governmental or citizen
enforcement action with respect to the Leased Real Property.
(b) Buyer
has been provided with true, correct and complete copies of all material
environmental investigations, studies, audits, tests, reports, reviews or other
analyses conducted by or on behalf of, or that are in the possession of, the
Business, Seller or any Seller Subsidiary in relation to any of the Leased Real
Property.
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3.22 Products
and Services; Liability. There is
no, and for the past three years there has not been, any Action (or, to the
knowledge of Seller, any threatened Action) against Seller or any Seller
Subsidiary as a result of the ownership, possession or use of a Business
Product or Business Service, including any Action relating to any alleged
hazard or alleged defect in performance, design, manufacture, materials or
workmanship, including any failure to warn or alleged breach of express or
implied warranty or representation, relating to any Business Product or
Business Service, and to Sellers knowledge there is no basis for any such
Action.
3.23 Product
and Service Warranties; Defects; Returns; Recalls. Each of the Business Products and Business
Services provided prior to the Closing Date has complied with and conforms to
all applicable federal, state, local or foreign Laws and regulations,
contractual commitments and all applicable warranties, and neither Seller nor
any Seller Subsidiary has any Liability (and to Sellers Knowledge there is no
basis for any present or future Action giving rise to any Liability) for
replacement or repair thereof or other damages in connection therewith. There are no Liabilities for product returns
other than those arising in the ordinary course of business. Except as set forth on Section 3.23
of the Seller Disclosure Schedule, to the knowledge of Seller, there are no
threatened Actions for (i) Business Product returns, (ii) warranty
obligations, or (iii) Business Services, each, other than in the ordinary
course of business. Seller has no
knowledge of any presently existing circumstances that would constitute a valid
basis for any voluntary or governmental recall of any Business Product. There is no pending or, to the knowledge of
Seller, threatened recall or investigation of any Business Product or Business
Service, and, to the knowledge of Seller, there is no presently existing basis
for any such recall or investigation.
3.24 Customers. Section 3.24 of the Seller Disclosure
Schedule sets forth a true, correct and complete list of all customers
of Seller and the Seller Subsidiaries that are parties to the Active Customer
Contracts (the Customers), showing the
approximate total sales of the Business to each such customer during fiscal
years 2005 and 2004. Except as set forth
in Section 3.24 of the Seller Disclosure Schedule, since March 31,
2005, (i) all Customers continue to be customers of Seller or one of the
Seller Subsidiaries; (ii) none of such Customers has reduced materially
its business with Seller or the Seller Subsidiaries from the levels achieved
during fiscal year 2005; (iii) no Customer has terminated its relationship
with Seller or the Seller Subsidiaries or threatened to do so; (iv) neither
Seller nor any Seller Subsidiary is involved in any Action, dispute or
controversy with any Customer; and (v) there have been no adverse changes
in the business relationship of Seller or any Seller Subsidiary with respect to
the Business with any customer that, in the aggregate, have had or would
reasonably be expected to have a Business Material Adverse Effect.
3.25 Suppliers. Section 3.25 of the Seller Disclosure
Schedule sets forth a true, correct and complete list of the 10
largest suppliers to Seller and the Seller Subsidiaries with respect to the
Business in terms of sales and purchases for fiscal years 2005 and 2004 (the Suppliers), showing the approximate
total sales to the Business from each such supplier during each such fiscal
year. Except as set forth in Section 3.25
of the Seller Disclosure Schedule, (i) none of the Suppliers has
terminated its relationship with Seller or the Seller Subsidiaries or reduced
materially its sales or has threatened to do so; (ii) no Supplier has
indicated to Seller or any Seller Subsidiary such Suppliers inability to
perform any services required to be performed by it under its contract with
Seller or any Seller Subsidiary; (iii) neither Seller nor any Seller
Subsidiary is involved in any Action, dispute or controversy with any Supplier;
and (iv) there have been no adverse changes in the business relationship
of Seller or any Seller Subsidiary with respect to the Business with any
supplier that, in the aggregate, have had or would reasonably be expected to
have a Business Material Adverse Effect.
Section 3.25 of the Seller Disclosure Schedule lists
all suppliers of significant goods or services to Seller and the Seller
Subsidiaries with respect to which alternative sources of supply are not
readily available on comparable terms and conditions (including all suppliers
that are the only reasonably available source).
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3.26 Accounts
Receivable. All accounts and notes
receivable of Seller and the Seller Subsidiaries represent sales actually made
in the ordinary course of business or valid claims as to which full performance
has been rendered by Seller or a Seller Subsidiary. The reserve on the Financial Statements
against the accounts receivable for returns and bad debts has been calculated
in a manner consistent with past practice.
All of the accounts and notes receivable of Seller and the Seller
Subsidiaries are, in the aggregate, collectible in full, net of the reserve
therefor, in the ordinary course of business.
No counter claims, defenses or offsetting claims with respect to the
accounts or notes receivable of Seller or any Seller Subsidiary are pending or,
to the knowledge of Seller, threatened.
All of the accounts and notes receivable of Seller and the Seller
Subsidiaries relate solely to sales of goods or services to customers of Seller
or a Seller Subsidiary, none of which are Affiliates of Seller or a Seller
Subsidiary.
3.27 Absence
of Certain Business Practices. None
of Seller, any Seller Subsidiary, any of their respective directors, officers,
employees or agents or any other Person acting on their behalf, directly or
indirectly, has, with respect to the Business, (i) used any material funds
for unlawful contributions, gifts, entertainment or other unlawful payments
relating to any political activity or (ii) made any material unlawful
payment to any foreign, domestic or supra-national government official or
employee or to any foreign or domestic political party or campaign or violated
in any material respect any provision of the U.S. Foreign Corrupt Practices Act
of 1977, as amended, or the OECD Convention on Combating Bribery of Foreign
Public Officials in Business Transactions.
3.28 Brokers. No agent, broker, investment banker,
financial advisor or other firm or Person is entitled to any brokerage, finders,
financial advisors or other similar fee or commission for which Buyer or any
of its Affiliates could become liable in connection with the transactions
contemplated by this Agreement as a result of any action taken by or on behalf
of Seller, any Seller Subsidiary or any of their Affiliates, other than Portico
Capital Securities LLC, whose fees and expenses will be paid by Seller.
3.29 Preferences;
Solvency. Each of the following
statements are, and, after giving effect to the transactions contemplated by
this Agreement and the Collateral Agreements and upon any distribution of any
contemplated assets of Seller to a liquidating trust or to Sellers creditors
and stockholders, each of the following statements will be true and correct:
(a) The
aggregate value of all assets of Seller, on a consolidated basis, or any such
liquidating trust at their respective then present fair saleable values exceeds
the amount of all of the debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) of Seller, on a
consolidated basis, or such liquidating trust.
For purposes of this Section 3.29, present fair saleable value
means the amount that may be realized within a reasonable time through a sale
within such period by a capable and diligent businessman from an interested
buyer who is willing to purchase under ordinary selling conditions. In determining the present fair saleable
value of Sellers contingent liabilities (such as litigation, guarantees and
pension plan liabilities), on a consolidated basis, Seller has considered such
liabilities that could possibly become actual or matured liabilities.
(b) Seller
or any such liquidating trust is not insolvent as such term is used in Sections
547 and 548 of the United States Bankruptcy Code and all other applicable
preference, fraudulent transfer or fraudulent conveyance laws, statutes, rules or
regulations applicable to the Seller or such liquidating trust, including the
laws of the State of Delaware.
(c) The
consideration received by Seller hereunder constitutes reasonably equivalent
consideration for Sellers entering into the transactions contemplated by this
Agreement.
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3.30 Disclosure. All material facts known to Seller and
relating to the Business, the Acquired Assets or the Assumed Liabilities that
may materially and adversely affect the same have been disclosed to Buyer in or
in connection with this Agreement. No
representation or warranty of Seller contained in this Agreement, and no
statement of Seller or any Seller Subsidiary contained in the Seller Disclosure
Schedule or in any certificate delivered pursuant to this Agreement or any
Collateral Agreement (including the Financial Statements), contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer, on behalf of itself and, if and where
applicable, its Subsidiaries, hereby represents and warrants to Seller that, as
of the date hereof and as of the Closing Date:
4.1 Organization
and Qualification. Each of Buyer and
those of Buyers Subsidiaries that are or will be parties to the Collateral
Agreements is a corporation duly organized, validly existing and in good
standing under the Laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. Each of Buyer and those of Buyers
Subsidiaries that are or will be parties to any of the Collateral Agreements is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary, except to the
extent that the failure to be so licensed or qualified would not reasonably be
expected to have a material adverse effect upon Buyers ability to carry out
its obligations under this Agreement and the Collateral Agreements.
4.2 Authority;
Non-Contravention; Approvals.
(a) Buyer
has all requisite corporate power and authority to execute and deliver this
Agreement and the Collateral Agreements to which it will be a party and to
effect the transactions contemplated hereby and thereby, and the execution,
delivery and performance of this Agreement and the Collateral Agreements to
which it will be a party have been duly authorized by all requisite corporate
action and does not require the approval of Buyers stockholders.
(b) This
Agreement has been duly executed and delivered by Buyer and this Agreement is,
and the Collateral Agreements to which Buyer or any of Buyers Subsidiaries
will be a party, when duly executed and delivered by Buyer and such
Subsidiaries of Buyer, will be, valid and legally binding obligations of Buyer
and such Subsidiaries of Buyer, enforceable against Buyer and such Subsidiaries
in accordance with their respective terms, except that the enforcement hereof
or thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereafter in effect relating to creditors
rights generally and (ii) general principles of equity (regardless of
whether enforceability is considered in an Action at law or in equity).
(c) Assuming
that all Required Consents have been obtained, the execution, delivery and
performance of this Agreement and the Collateral Agreements by Buyer and, if
applicable, Buyers Subsidiaries, and the consummation of the transactions
contemplated hereby and thereby, do not and will not: (i) result in a
breach or violation of any provision of Buyers organizational documents or the
organizational documents of Buyers Subsidiaries that are or will be parties to
any of the Collateral Agreements; (ii) violate or conflict with, in any
material respect, or result in a material breach of or constitute (with notice
or lapse of time, or both) an occurrence of material default under any
provision of, result in the acceleration or cancellation of any obligation
under, give rise to any claim, or give rise to any
37
right by any party to terminate or amend its obligations under, any
mortgage, deed of trust, conveyance to secure debt, note, loan, indenture,
Encumbrance, Contract, order, judgment, decree or other arrangement to which
Buyer or any of Buyers Subsidiaries is a party or by which it is bound; or (iii) violate,
in any material respect, any Law of any Governmental Authority having
jurisdiction over Buyer.
(d) No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Person is required to be obtained by Buyer or any of Buyers
Subsidiaries in connection with the execution and delivery of this Agreement or
the Collateral Agreements or for the consummation of the transactions
contemplated hereby or thereby by Buyer or Buyers Subsidiaries, except for the
Required Consents.
4.3 Financial
Ability. As of the date hereof and
at the Closing, Buyer has, and knows of no circumstance or condition that would
reasonably be expected to prevent the availability at the Closing of, available
sufficient cash or borrowing facilities that together will be sufficient to
enable it to consummate the transactions contemplated by this Agreement, the
Collateral Agreements or any other document entered into in connection herewith
or therewith (including payment by Buyer of the Closing Payment and any
adjustments to the Purchase Price and all associated costs and expenses). Buyer has not incurred any obligation,
commitment, restriction or other Liability of any kind, absolute or contingent,
present or future, which would impair or adversely affect its available
resources and capabilities (financial or otherwise) to perform its obligations
under this Agreement, the Collateral Agreements and any other document entered
into in connection herewith or therewith.
4.4 Litigation. There are no Actions pending or, to the
knowledge of Buyer, threatened in writing that relate to this Agreement, any
Collateral Agreements or any other document entered into in connection herewith
or therewith, the transactions contemplated hereby or any action taken or to be
taken by Buyer or any of its Subsidiaries in connection with, or that seeks to
enjoin or obtain monetary damages in respect of, the consummation of the
transactions contemplated hereby or thereby or that would have a material
adverse effect on the ability of Buyer to carry out its obligations under this
Agreement, the Collateral Agreements or any other document entered into in
connection herewith or therewith.
4.5 Brokers. No agent, broker, investment banker,
financial advisor or other firm or person is entitled to any brokerage, finders,
financial advisors or other similar fee or commission for which Seller or any
of its Affiliates could become liable in connection with the transactions
contemplated by this Agreement as a result of any action taken by or on behalf
of Buyer or any of its Affiliates.
ARTICLE 5
COVENANTS
5.1 Conduct
of the Business. During the period
from the date of this Agreement to the Closing, Seller shall, and shall cause
each of the Seller Subsidiaries to, (i) use its commercially reasonable
efforts to preserve intact the Business and to maintain the relationships of
the Business with third parties having business relationships with it with a
view to preserving for Buyer the Acquired Business, its assets and the goodwill
associated therewith, (ii) except as set forth in Section 5.1 of
the Seller Disclosure Schedule, operate and conduct the Business in the
ordinary course, and (iii) keep available the services of the Business
Employees. Without limiting the
generality or effect of the foregoing, during the period from the date of this
Agreement to the Closing, except as set forth in Section 5.1 of the
Seller Disclosure Schedule, Seller shall not, and shall cause each of the
Seller Subsidiaries not to, to the extent related to the Business:
38
(a) sell,
lease, license, encumber, transfer or dispose of any tangible or intangible
assets or rights or acquire any material tangible or intangible assets or
rights that, in either case, would be included in the Acquired Assets, except
for the sale of products in the ordinary course of business;
(b) engage
in any activity of the type sometimes referred to as trade loading or channel
stuffing or in any other activity that reasonably could be expected to result
in a material reduction, temporary or otherwise, in the demand for the products
offered by the Business following the Closing, including sales of a product (i) with
payment terms longer than terms customarily offered by Seller or any of the
Seller Subsidiaries for such product, (ii) at a greater discount from
listed prices than customarily offered for such product, other than pursuant to
a promotion of a nature previously used in the normal course of business of
Seller and the Seller Subsidiaries for such product, (iii) at a price that
does not give effect to any previously announced general increase in the list
price for such product, (iv) with shipment terms more favorable to the
customer than shipment terms customarily offered by Seller and the Seller
Subsidiaries for such product, (v) in a quantity greater than the
reasonable retail or wholesale (as the case may be) resale requirement of the
particular customer, or (vi) in conjunction with other material benefits
to the customer not previously offered in the ordinary course of business to
such customer;
(c) terminate,
extend or modify any Assumed Contract;
(d) waive
any rights of value or suffer any loss, other than those relating solely to
Excluded Assets or Excluded Liabilities;
(e) take
or omit to take any action that results in a material Encumbrance being imposed
on any asset that may be an Acquired Asset;
(f) increase
in any manner the compensation or benefits of any Business Employee or
consultant or pay or otherwise grant any benefit not required by any Seller
Plan to any Business Employee or consultant or enter into any Contract to do
any of the foregoing;
(g) pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise) or cancel any debts relating
to the Business or the Acquired Assets, other than the payment or satisfaction
of any Excluded Liability;
(h) settle
or compromise any Action, pending or threatened, relating to any of the
Acquired Assets, unless such Action constitutes an Excluded Liability;
(i) layoff
or terminate the employment of any Employee, other than those listed on Section 5.1(i) of
the Seller Disclosure Schedule;
(j) adopt,
enter into or amend any Plan or employment contract with any Business Employee
or enter into, adopt, extend (beyond the Closing Date), renew, enter into or
amend any collective bargaining agreement or other contract with any labor
organization, union or association, except in each case as required by Law or
with respect to any Person that is not, and will not become, a Business
Employee;
(k) fail
to maintain the Acquired Assets in good working condition and repair in all
material respects according to the standards it has maintained up to the date
of this Agreement, subject only to ordinary wear and tear;
39
(l) make
any capital expenditures or commitments therefor;
(m) make
any change in accounting or Tax principles, practices or policies from those
utilized in the preparation of the Financial Statements;
(n) make
any write-off or write-down of or make any determination to write-off or
write-down any of the assets and properties of the Business;
(o) make
any change in the general pricing practices or policies or any change in the
credit or allowance practices or policies of Seller or any Seller Subsidiary;
(p) change
the character or nature of the Business, or commence or terminate any line of
business;
(q) take
any other action or enter into any other transaction (including transactions
with employees, stockholders and Affiliates of Seller or any Seller Subsidiary)
that would have a Business Material Adverse Effect or other than the
transactions contemplated by this Agreement; or
(r) take,
or agree or otherwise commit to take, any of the foregoing actions or any other
action that if taken could reasonably be expected to cause any representation
or warranty of Seller contained in this Agreement to be untrue or incorrect or
that could reasonably be expected to prevent the satisfaction of any condition
set forth in ARTICLE 6.
5.2 Access
to Information.
(a) During
the period from the date of this Agreement to the Closing, upon reasonable
advance notice to Seller and at reasonable times during normal business hours,
so that an uninterrupted and efficient operation and transfer of the Business
may be accomplished, Seller shall, and shall cause the Seller Subsidiaries to, (i) provide
Buyer and its Representatives with full access, upon reasonable prior notice to
all of Sellers and the Seller Subsidiaries personnel, officers, employees,
agents, accountants, properties (including for the purpose of environmental
testing) and facilities related to the Business or the Acquired Assets as well
as books and records (including Contracts) relating to the Business and the
Acquired Assets and (ii) furnish Buyer and its Representatives with all
such information and data (including copies of Contracts, Seller Plans and
other books and records) concerning the Business and operations of the Business
and the Acquired Assets as Buyer or any of such Representatives reasonably may
request in connection with such investigation.
Seller shall, and shall cause the Seller Subsidiaries to, assist Buyer
in making such investigation and shall cause its counsel, accountants,
engineers, consultants and other non-employee representatives to be reasonably
available to Buyer for such purposes.
(b) After
the Closing Date, Seller and Buyer shall, and shall cause their respective
Subsidiaries to, provide to each other and to their respective officers,
employees, counsel and other representatives, upon request, reasonable access
for inspection and copying of all information and documents relating to the Business,
the Acquired Assets or the Assumed Liabilities, and shall make their respective
personnel reasonably available for interviews, depositions and testimony in any
legal matter concerning transactions contemplated by this Agreement, the
operations or activities relating to the Business, the Acquired Assets or the
Assumed Liabilities and as otherwise may be necessary or desirable to enable
the party requesting such assistance to: (i) comply with any reporting,
filing or other requirements imposed by any Governmental Authority, (ii) assert
or defend any Action or allegation in any litigation or arbitration or in any
administrative or legal proceeding, other than Actions or allegations
40
that one party to this Agreement has asserted against the other, or (iii) subject
to clause (ii) above, perform its obligations under this Agreement. The party requesting such information or
assistance shall reimburse the other party for all reasonable and necessary
out-of-pocket costs and expenses incurred by such party in providing such
information and in rendering such assistance.
The access to information and documents contemplated by this Section 5.2(b) shall
be during normal business hours and upon reasonable prior notice and shall be
subject to such reasonable limitations as the party having custody or control
thereof may impose to preserve the confidentiality of information contained
therein. Each party hereto agrees for a
period extending seven years after the Closing Date not to destroy or otherwise
dispose of any such books, records and other data unless such party shall first
offer in writing to surrender such books, records and other data to the other
party and such other party, shall agree in writing to take possession thereof
during the ten-day period after such offer is made.
(c) From
time to time following the Closing, Buyer may (i) receive and open all
mail addressed to Seller, any Seller Subsidiary or any of their respective
Subsidiaries and (ii) deal with the contents thereof in its discretion to
the extent that such mail and the contents thereof relate to the Business. Buyer shall deliver or cause to be delivered
to Seller all mail received by Buyer after the Closing addressed to Seller, any
Seller Subsidiary or any of their respective Affiliates that does not relate to
the Business, including all mail relating to the Excluded Assets and the
Excluded Liabilities.
5.3 Confidentiality.
(a) All
information received by Buyer and/or its Representatives pursuant to Section 5.2
shall be kept confidential by them in accordance with the terms of the letter
agreement, dated as of November 24, 2004, between Seller and Buyer (the Confidentiality Agreement). The provisions of the Confidentiality
Agreement shall remain binding and in full force and effect until the Closing,
except that the Confidentiality Agreement shall not apply to any documents
prepared in connection with any proceeding before or filed with, or other
disclosure made to, a court, arbitration tribunal or mediation service to
enforce the other partys rights arising in connection with the termination of
this Agreement. The information
contained herein, in the Seller Disclosure Schedule and delivered to Buyer
or its authorized representatives pursuant hereto shall be subject to the
Confidentiality Agreement as Confidential Information (as defined and subject
to the exceptions contained therein) until the Closing and, for that purpose
and to that extent, the terms of the Confidentiality Agreement are incorporated
herein by reference. All obligations of
Buyer and Seller under the Confidentiality Agreement shall terminate
simultaneously with the Closing.
(b) From
and after the Closing, Seller shall hold, and shall cause the Seller
Subsidiaries and all Affiliates of Seller and the Seller Subsidiaries and its
and their respective Representatives to hold in confidence from any Person and
to take all reasonable precautions to protect all documents and information
concerning the Business (including any information that is or would have been
Confidential Information under the Confidentiality Agreement), including all
precautions that Seller employs with respect to its own Confidential
Information, except to the limited extent (i) compelled to disclose by
judicial or administrative process (including in connection with obtaining the
necessary approvals of this Agreement and the transactions contemplated hereby
of Governmental Authorities) or by other requirements of Law (and only to the
limited extent compelled or required after notice and right to intervene) or (ii) disclosed
in an action or proceeding brought by a party to this Agreement in pursuit of
its rights or in the exercise of its remedies under this Agreement. From and after the Closing, Buyer shall hold,
and shall cause its Affiliates and its and their respective Representatives to
hold in confidence from any Person and to take all reasonable precautions to
protect all documents and information concerning the Excluded Assets and the
Excluded Liabilities (including any information that is or would have been
Confidential Information under the Confidentiality Agreement), including all
precautions that Buyer employs with respect to its own Confidential
Information, except to the limited extent (i) compelled to
41
disclose by judicial or administrative process (including in connection
with obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental Authorities) or by other requirements of
Law (and only to the limited extent compelled or required after notice and
right to intervene) or (ii) disclosed in an action or proceeding brought
by a party to this Agreement in pursuit of its rights or in the exercise of its
remedies under this Agreement.
(c) The
parties hereto hereby acknowledge and agree that any remedy at Law for any
breach of the provisions of this Section 5.3 would be inadequate, and
Seller and Buyer hereby consent to the granting by any court of an injunction
or other equitable relief, without the necessity of actual monetary loss being
proved or any bond or similar security being posted, in order that the breach
or threatened breach of such provisions may be effectively restrained.
5.4 Commercially
Reasonable Efforts.
(a) During
the period from the date of this Agreement to the Closing, upon the terms and
subject to the conditions of this Agreement, each of the parties hereto shall
use their respective commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws to consummate and make effective the
transactions contemplated by this Agreement.
Seller and Buyer each shall, and Seller shall cause the Seller
Subsidiaries to, comply as promptly as practicable with the Laws of any
Governmental Authority that are applicable to any of the transactions
contemplated hereby or by the Collateral Agreements and pursuant to which any
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Authority or any other Person in connection with
such transactions is necessary. During
the period from the date of this Agreement to the Closing, Seller and Buyer
each shall furnish to the other such necessary information and reasonable
assistance as the other may request in connection with their preparation of any
filing, registration or declaration which is necessary under or any such
Laws. Buyer and Seller shall keep each
other apprised of the status of any communications with, and any inquiries or
requests for additional information from, any Governmental Authority (or other
Person regarding any of the transactions contemplated by this Agreement or the
Collateral Agreements) in respect of any such filing, registration or
declaration, and shall comply promptly with any such inquiry or request (and,
unless precluded by Law, provide the other party hereto copies of any such
communications that are in writing).
Each party shall, subject to applicable Law, permit counsel for the
other party to review in advance, and consider in good faith the views of the
other party in connection with, any proposed written communication to any
Governmental Authority in connection with the transactions contemplated
hereby. The parties agree not to
participate, or to permit their Subsidiaries to participate, in any substantive
meeting or discussion, either in person or by telephone, with any Governmental
Authority in connection with the transactions contemplated hereby unless it
consults with the other party in advance and, to the extent not prohibited by
such Governmental Authority, gives the other party the opportunity to attend
and participate. During the period from
the date of this Agreement to the Closing, the parties hereto shall use their
respective commercially reasonable efforts and take all necessary action to
obtain any clearance under any consent, approval, order or authorization of any
Governmental Authority under any Law, necessary in connection with the
transactions contemplated hereby or to resolve any objections that may be
asserted by any Governmental Authority with respect to the transactions
contemplated hereby. Nothing in this
Agreement shall require Buyer or its Affiliates to divest or hold separate or
agree to any limitations on or other requirements in respect of the operation
of any business, division or operating unit of Buyer or any of its Affiliates,
including the Business and the Acquired Assets from and after the Closing.
(b) Subject
to the terms and conditions of this Agreement, each party hereto shall use its
commercially reasonable efforts to cause the Closing to occur as promptly as
practicable, including by defending against any Actions challenging this
Agreement or the consummation of the transactions
42
contemplated hereby, and seeking to have any preliminary injunction,
temporary restraining order, stay or other legal restraint or prohibition
entered or imposed by any court or other Governmental Authority that is not yet
final and nonappealable vacated or reversed.
(c) Buyer
and Seller each shall, and Seller shall cause each Seller Subsidiary to, use
its commercially reasonable efforts to obtain as promptly as practicable all
Permits required by Law for Buyer to conduct the Acquired Business following
the Closing and to own the Acquired Assets.
(d) Seller
and Buyer shall, and Seller shall cause the Seller Subsidiaries to, cooperate
and use their respective commercially reasonable efforts to obtain as promptly
as practicable all consents, approvals and waivers required by third Persons
(including any consents or approvals contemplated by ARTICLE 6) to
transfer the Acquired Assets to Buyer in a manner that will avoid any
applicable default, conflict, or termination of rights under or in respect of
the Acquired Assets. Nothing in this Section 5.4(d) shall
(i) require Buyer or Seller to expend any sum, make a financial commitment
or grant or agree to any concession to any third Person to obtain any such
consent, approval or waiver or (ii) alter, diminish or otherwise affect
Buyers rights under ARTICLE 6.
(e) From
time to time after the Closing, without additional consideration, each of the
parties hereto shall (or, if appropriate, cause their respective Affiliates to)
execute and deliver such further instruments and take such other action as may
be necessary to make effective the transactions contemplated by this Agreement
and the Collateral Agreements. If any
party hereto (or any of its Affiliates) shall following the Closing have in its
possession any asset or right that under this Agreement should have been
delivered to the other, such party shall promptly deliver or caused to be
delivered such asset or right to the other.
(f) Prior
to the Closing Date, Buyer and Seller shall cooperate with one another and use
commercially reasonable efforts to amend, supplement or otherwise renegotiate
the terms of the Excluded Contracts identified in part I of Section 2.2(a) of
the Seller Disclosure Schedule, in order to limit Sellers liabilities
under such Excluded Contracts (other than for fraud, intentional misconduct or
similar conduct) to the amount paid to Seller by the customer under such
Contract.
(g) Prior
to the Closing Date, Seller shall, and shall cause the Seller Subsidiaries to,
use commercially reasonable efforts to obtain the signatures of the individuals
listed on Section 5.4(g) of the Seller Disclosure Schedule to
Sellers standard intellectual property assignment and confidentiality
agreement.
5.5 Exclusivity. During the period from the date of this
Agreement to the Closing, Seller shall not take, and Seller shall not authorize
or permit any Seller Subsidiary or any of their Affiliates or Representatives
to, directly or indirectly, (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to any (A) liquidation,
dissolution, or recapitalization, (B) merger or consolidation, (C) acquisition
or purchase of securities or assets, or (D) similar transaction (including
a licensing transaction) or business combination, in each case involving all or
any portion of the Acquired Assets or the Business (each, an Acquisition Proposal); (ii) enter
into any agreement with any Person (other than Buyer or any of its designees or
assigns pursuant to this Agreement) providing for the acquisition of all or any
portion of the Acquired Assets or Business (whether by merger, purchase of
assets, license, tender offer or otherwise); (iii) participate in any
discussion or negotiations regarding the Business or any of the Acquired
Assets, assist or participate in, or agree to or endorse in any other manner
any effort or attempt by any Person to do or seek to do any of the foregoing;
or (iv) furnish any information to any Person, other than Buyer, regarding
the Business or any of the Acquired Assets.
Seller shall promptly (i) notify Buyer if Seller, any Seller
Subsidiary or any of their Affiliates or Representatives receives any proposal
or written inquiry or written request for information in connection with an
43
Acquisition Proposal or potential Acquisition Proposal and (ii) notify
Buyer of the significant terms and conditions of any such Acquisition Proposal
(including the identity of the party submitting any such proposal, inquiry or
request).
5.6 Notification.
(a) During
the period from the date of this Agreement to the Closing, each party hereto
shall notify the other party in writing promptly after becoming aware of (i) any
matter hereafter arising or any information obtained after the date hereof
that, if existing, occurring or known at or prior to the date of this
Agreement, would have been required to be set forth or described in the Seller
Disclosure Schedule, in the case such notifying party is Buyer, or that is
necessary to complete or correct any information in such schedule, in the case
such notifying party is Buyer, or in any representation and warranty of such
notifying party that has been rendered inaccurate thereby, (ii) the
occurrence or non-occurrence of any event whose occurrence or non-occurrence
would be likely to cause either (A) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
or (B) any condition of the other party set forth in ARTICLE 6 to be
unsatisfied in any material respect, and (iii) any material failure of
such notifying party, any Affiliate of such notifying party or any of their
respective Representatives to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
(b) No
notice given pursuant to this Section 5.6 shall have any effect on the
representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition contained
herein or shall in any way limit any partys right to indemnity under ARTICLE 7.
5.7 Tax
Matters.
(a) Any
amount withheld by Buyer pursuant to Section 1445 of the Code or other
applicable provision of Law shall be treated for all purposes of this Agreement
as if it were paid by Buyer to Seller.
(b) All
transfer, registration, stamp, value added, documentary, recordation, sales,
use and similar fees or taxes (including all applicable real estate transfer
taxes and transfer taxes), including any penalties, interest and additions to
such fees and taxes incurred in connection with this Agreement (the Transfer Taxes) shall be borne
equally by Seller and Buyer. Seller and
Buyer shall cooperate in the timely payment of any Transfer Taxes and in the
timely making of all filings, returns, reports and forms as may be required in
connection therewith, and Seller shall file, or cause to be filed, all such
filings, returns, reports and forms.
(c) Seller
and the Seller Subsidiaries, as applicable, shall be liable for any and all
Taxes of or relating to the Acquired Assets or Business for any period or
portion thereof ending prior to the Closing Date, including all Taxes imposed
on Buyer as a result of the application of Section 6901 of the Code or
similar provision of foreign, state or local law.
(d) Seller
shall be responsible for and will perform all Tax withholding, payment and
reporting duties with respect to any wages and other compensation to any
Employee in connection with the operation or conduct of the Business prior to
or on the Closing Date and (ii) Buyer shall be responsible for and will
perform all Tax withholding, payment and reporting duties with respect to any
wages and other compensation paid to any Transferred Employee in connection
with the operation or conduct of the Acquired Business after the Closing Date.
44
(e) In
connection with the preparation of Tax Returns, audit examinations and any
administrative or judicial proceedings relating to Taxes, and as necessary or
desirable in order to minimize any withholding Taxes imposed on the
transactions contemplated by this Agreement, Seller and the Seller Subsidiaries,
on the one hand, and Buyer, on the other hand, shall cooperate fully with each
other, including the furnishing or making available of records, personnel,
powers of attorney or other materials necessary or helpful for the preparation
of such Tax Returns, the conduct of audit examinations or the defense of claims
by Governmental Authorities as to the imposition of Taxes in accordance with
the provisions of Section 5.2(b).
(f) Seller
and Buyer agree that the sum of the Purchase Price shall be allocated among the
Acquired Assets sold by Seller and the Seller Subsidiaries in accordance with
an allocation schedule (the Allocation Schedule). Each of Seller and Buyer will use
commercially reasonable efforts to agree upon the Allocation Schedule as
soon as practicable after the date hereof but no later than the Closing
Date. Within 60 days following the
determination of the adjustment, if any, pursuant to Section 2.6, Seller
and Buyer shall attempt in good faith to agree upon the allocation of such
adjustment. The allocation of such
adjustment shall take into account the item or items to which it is
attributable and shall, to the extent such allocation is agreed by Seller and
Buyer, be reflected on a revised Allocation Schedule. Buyer shall (and Buyer shall cause each
relevant Subsidiary of Buyer to) and Seller shall (and Seller shall cause each
Seller Subsidiary to) report the federal, state, local and foreign income and
other Tax consequences of the transactions contemplated by this Agreement in a
manner consistent with the Allocation Schedule (as revised pursuant to
this Section, if applicable). Except as
otherwise required pursuant to a determination within the meaning of Section 1313(a) of
the Code (or any comparable provision of state, local or foreign Law), neither
Buyer nor Seller (nor any relevant Subsidiary of Buyer or any Seller
Subsidiary) shall take a position inconsistent with such allocations on any Tax
Return (including any forms required to be filed pursuant to Section 1060
of the Code), or otherwise. Within a
reasonable period before the due date of such statements, each of Seller and
Buyer shall cooperate with the other in preparing IRS Form 8594 or any
equivalent statements required by any Governmental Authority charged with
collection of any Tax.
(g) All
payments under this Agreement will be made without deduction or withholding for
or on account of any Taxes unless such deduction or withholding is required by
any applicable Law then in effect. If
Buyer or its assignee is so required to deduct or withhold, then such party
shall:
(i) promptly
notify Seller of such requirement;
(ii) pay
to the relevant authorities the full amount to be deducted or withheld promptly
upon the earlier of determining that such deduction or withholding is required
or receiving notice that such amount has been assessed against Seller; and
(iii) promptly
forward to Seller an official receipt (or certified copy), or other
documentation, reasonably acceptable to Seller, evidencing such payments to
such authorities.
Buyer or its assignee shall not deduct or withhold on
account of Taxes, even where required by applicable Law, as modified by the
practice of any relevant revenue Governmental Authority, then in effect, if
Seller shall have presented to Buyer, at least two Business Days prior to any
payment required by Buyer or its assignee, a certified copy of a waiver to such
deduction or withholding obligation, issued by the relevant Governmental
Authority.
45
5.8 Use
of Name and Trademarks. Seller
agrees, on behalf of itself and the Seller Subsidiaries, that from and after
the Closing, none of them will use, license or authorize any third party to use
the names set forth in Section 5.8 of the Seller Disclosure Schedule or
any abbreviation of or derivation from such names or any name similar to any
such names in any form whatsoever, including in respect of advertising and
promotional materials. Simultaneously
with the Closing, Seller shall cause each entity listed on Schedule 5.8
of the Seller Disclosure Schedule to amend its respective certificate
or articles of incorporation or similar governing document to change its
respective name to a name that does not contain the words S2 Systems, or
substantially similar words. Seller
agrees, on behalf of itself and the Seller Subsidiaries, that from and after
the Closing, none of them will use, license or authorize any third party to
use, any other name, slogan, logo, tradename or trademark (Name) or any abbreviation of or derivation
from any such Name or any Name similar to any Name used in connection with the
Business as of the Closing Date.
Notwithstanding the foregoing, Seller and the Seller Subsidiaries shall
have the right to continue to use the Names following Closing solely as
necessary to allow Seller to (a) satisfy its obligations with respect to
the Excluded Liabilities and (b) satisfy its obligations under the
Excluded Contracts and the other Excluded Assets.
5.9 Non-Competition;
Non-Solicitation.
(a) Seller,
on behalf of itself and the Seller Subsidiaries, understands that Buyer shall
be entitled to protect and preserve the going concern value of the Business to
the extent permitted by Law and not otherwise provided pursuant to this
Agreement and that Buyer would not have entered into this Agreement absent the
provisions of this Section 5.9
and, therefore, for a period of three years from and after the Closing Date,
Seller shall not, and shall cause each of its Subsidiaries not to, directly or
indirectly, (i) engage in the design, development, marketing, production
(other than as a supplier to Buyer) or sale of any product or service that has
the same or similar specification or functionality as a Business Product or
Business Service, including, enhancements, derivatives, modifications,
evolutions or combinations of or with a Business Product (Competitive
Products), (ii) acquire, own, invest in, manage, operate
or participate in any manner in the ownership, financing, management or
operation of any business that engages or intends to engage in any facet of the
Business anywhere in the world, or (iii) utilize its knowledge of the
Business or its relationships with customers, suppliers or others to engage or
facilitate others to engage in any facet of the Business anywhere in the
world. The foregoing restricted
activities set forth in clauses (i), (ii) and (iii) in the preceding
sentence are sometimes hereinafter referred to collectively as Competitive Activities.
(b) Section 5.9(a) shall be deemed
not breached as a result of: (i) the acquisition of control of Seller or
any Seller Subsidiary (or all or substantially all of their assets) by any
Person, including a Person engaged in any Competitive Activities and such
acquiror or any of its Affiliates may engage in any activity prohibited or
restricted by Section 5.9(a); or (ii) Seller or any Seller Subsidiary
acquiring any business, an incidental or immaterial portion of which (the Competing Portion) engages in the
same industry as the Business, or operating the Competing Portion on a
temporary basis; provided that Seller sells,
divests and transfers the Competing Portion to Buyer or an unaffiliated third
party as soon as reasonably commercially practicable, or ceases to operate the
Competing Portion, in either case not later than three months from the relevant
acquisition. Notwithstanding anything to
the contrary contained in this Section 5.9,
Seller may perform any act or conduct any business contemplated hereby or by
the Collateral Agreements. Without
limiting the generality of the foregoing, Seller may take all actions
reasonably necessary to (i) satisfy its obligations with respect to the
Excluded Liabilities, (ii) satisfy its obligations under the Excluded
Contracts and the other Excluded Assets, and (iii) wind up its business
and affairs without violating the terms of Section 5.9(a).
(c) From
and after the date hereof and for a period of 12 months after the Closing Date,
each of the parties shall not, and shall not suffer or permit any of its
Subsidiaries to, directly or
46
indirectly, solicit, recruit or hire (as an employee or contractor) any
Person who is an officer, director or employee of the other party or any of its
Subsidiaries or induce any Person who is a director, officer or employee of the
other party or any of its Subsidiaries to terminate the employment of or
relationship with the other party or its respective Subsidiary, unless such
Person (i) contacts such party or its respective Subsidiary voluntarily
(without any solicitation from such party or its respective Subsidiary) or (ii) is
terminated by the respective party or Subsidiary. For purposes of this Section 5.9(c),
advertisements of employment opportunities in media available to the general public
does not constitute solicitation and either party shall not be prohibited
from hiring any person who responds to any such advertisements or solicitations. Notwithstanding the foregoing, the foregoing
provisions of this Section 5.9(c) shall not be applicable to Buyer or
any of its Subsidiaries with respect to any of the Business Employees.
(d) Seller
and Buyer recognize that the Laws and public policies of the various states of
the United States may differ as to the validity and enforceability of covenants
similar to those set forth in this Section.
It is the intention of the parties that the provisions of this Section 5.9 be enforced to the fullest extent
permissible under the Laws and policies of each jurisdiction in which
enforcement may be sought, and that the unenforceability (or the modification
to conform to such Laws or policies) of any provisions of this Section 5.9 shall not render unenforceable, or
impair, the remainder of the provisions of this Section 5.9.
Accordingly, if any provision of this Section 5.9 shall be determined to be invalid or
unenforceable, such invalidity or unenforceability shall be deemed to apply
only with respect to the operation of such provision in the particular
jurisdiction in which such determination is made and not with respect to any
other provision or jurisdiction. Seller
hereby acknowledges and agrees that the covenants set forth in this Section 5.9 are reasonable and necessary in terms
of time, area and line of business to protect the legitimate business interests
of Buyer and its Affiliates, which include the interests of Buyer and its
Affiliates to protect (i) valuable confidential business information, (ii) substantial
relationships with customers worldwide, and (iii) customer goodwill
associated with the ongoing business.
Seller, on behalf of itself and its Representatives, expressly
authorizes the enforcement of the covenants set forth in this Section 5.9 by Buyer and its Affiliates, the
permitted assigns of Buyer and its Affiliates and any successors of Buyer or
its Affiliates.
(e) The
parties hereto hereby acknowledge and agree that any remedy at Law for any
breach of the provisions of this Section 5.9 would be inadequate, and Seller and Buyer hereby consent to
the granting by any court of an injunction or other equitable relief, without
the necessity of actual monetary loss being proved or any bond or similar
security being posted, in order that the breach or threatened breach of such
provisions may be effectively restrained.
5.10 Assignment
of Rights.
(a) Nothing
in this Agreement nor the consummation of the transactions contemplated hereby
shall be construed as an attempt or agreement to assign any Acquired Asset,
including any Assumed Contract, if such assignment, without the consent of a
third party, would constitute a breach or other contravention or cancellation
of such Acquired Asset (Nonassignable Assets)
unless and until such consent shall have been obtained. Seller and Buyer shall continue to cooperate
in good faith and to use their respective commercially reasonable efforts,
other than the expenditure of money outside the ordinary course of business, to
obtain the consent of the other parties to the assignment to Buyer of any such
Acquired Asset or any claim, right or any benefit arising thereunder as Buyer
may request as soon as practicable after the Closing Date. If Buyer and Seller determine that any
consent to assignment to Buyer is reasonably necessary to the continued
operation of the Acquired Business either commercially or in accordance with
applicable legal requirements, then, except where such action would be unlawful
or prohibited by the affected Contract or other asset, such Nonassignable Asset
shall be held, as of and from the Closing Date, by Seller or the applicable
Selling Subsidiary in trust for Buyer and the covenants and obligations
thereunder shall be performed by Buyer in Sellers or such
47
Selling Subsidiarys name and all benefits and obligations existing
thereunder shall be for Buyers account.
Seller shall take or cause to be taken at Buyers expense such actions
in its name or otherwise as Buyer may reasonably request so as to provide Buyer
with the benefits of such Nonassignable Asset and to effect collection of money
or other consideration that becomes due and payable under such Nonassignable
Asset, and Seller or the applicable Selling Subsidiary shall promptly pay over
to Buyer all money or other consideration received by it in respect of such
Nonassignable Asset until such Nonassignable Asset is properly assigned to
Buyer or expires at the earliest opportunity in accordance with its terms, provided that Buyer shall perform Sellers obligations
thereunder arising after the Closing. As
of and from the Closing Date, Seller, on behalf of itself, the Selling
Subsidiaries and their Affiliates, authorizes Buyer, except to the extent
prohibited by the terms of the Nonassignable Assets, at Buyers expense, to
perform all the obligations and/or receive all the benefits of Seller or the
Selling Subsidiaries under the Nonassignable Assets, and appoints Buyer its
attorney-in-fact to act in its name on its behalf or in the name of the
applicable Selling Subsidiary and on such Selling Subsidiarys behalf with
respect thereto.
(b) The
provisions of this Section 5.10 shall not limit, modify or otherwise
affect any representation or warranty of Seller under this Agreement. Accordingly, nothing in this Section 5.10
shall affect Buyers other rights under this Agreement and shall not affect the
conditions to Buyers obligation to consummate the transactions contemplated by
this Agreement. Without limiting the
generality or effect of Section 5.4, in the event that it is learned by
either party hereto following the execution and delivery of this Agreement that
Section 3.19(a) of the Seller Disclosure Schedule failed
to include or describe any additional Intellectual Property and/or Intellectual
Property Rights, causing the representations and warranties made by Seller in Section 3.19(a) not
to be true and correct in all respects as of the date hereof and/or at and as
of the Closing Date as if made on that date, then (i) such party shall
promptly thereafter notify the other party and (ii) Seller shall take such
actions as reasonably requested by Buyer in writing to ensure that Buyer is
entitled to the same rights with respect to such additional Intellectual
Property and/or Intellectual Property Rights, as applicable, that Buyer would
have enjoyed if such additional Intellectual Property and/or Intellectual
Property Rights, as applicable, had always been included or described in such
applicable Section(s) of the Seller Disclosure Schedule.
5.11 Insurance
Coverage.
(a) Effective
12:01 a.m. on the Closing Date, the Acquired Business shall cease to be
insured by Sellers and Seller Subsidiaries insurance policies, except as
provided in the last sentence of this Section 5.11(a). With respect to events or circumstances
covered by insurance coverage written on an occurrence basis, Seller and the
Seller Subsidiaries shall have no liability for occurrences related to the
Acquired Business that take place on and after 12:01 a.m. on the Closing
Date. With respect to insurance coverage
written on a claims made basis, Seller and Seller Subsidiaries shall have no
liability under such insurance coverage for claims related to the Acquired
Business made after 12:01 a.m. on the Closing Date. Seller shall maintain a policy of E&O
insurance written on an occurrence basis, to be effective as of 12:01 a.m.
on the Closing Date, for a period of three years after the Closing Date, the
cost of which shall be borne equally by Seller and Buyer.
(b) From
and after the Closing Date, Seller and the Selling Subsidiaries shall not have
any liability for self-insured workers compensation claims with respect to the
Transferred Employees to the extent that such liability relates to claims
arising from accidents or illnesses occurring subsequent to the Closing
Date. Notwithstanding anything to the
contrary contained herein, Seller and the Seller Subsidiaries shall retain
liability for all claims or payments arising from accidents or illnesses
occurring in whole or in part on or prior to the Closing Date (except to the
extent that an event occurring subsequent to the Closing Date results in
additional claims or payments, in which case Buyer shall be responsible only
for such additional claims or payments).
Buyer shall take all steps necessary under any
48
Law to assume the liability for self-insured workers compensation
pursuant to this Section 5.11(b) and shall fully indemnify Seller and
the Selling Subsidiaries with respect to any liability, claim, damage or
expense of any kind whatsoever arising out of or relating to any self-insured
workers compensation claim assumed by Buyer hereunder. Seller and the Seller Subsidiaries shall
fully indemnify Buyer with respect to any Liability, claim, damage or expense
of any kind whatsoever arising out of or relating to any self-insured workers
compensation claims retained by Seller or the Seller Subsidiaries
hereunder. Buyer shall cooperate with
Seller and the Seller Subsidiaries in order to obtain the return or release of
bonds or securities or indemnifications given by Seller or the Seller
Subsidiaries to any state in connection with workers compensation
self-insurance with respect to the Acquired Business; and, in order to
effectuate such return or release, Buyer shall, to the extent required by any
state, post its own bonds, letters of credit, indemnifications or other
securities in substitution therefor.
5.12 Certain
Services and Benefits Provided by Affiliates. Buyer acknowledges that the Acquired Business
currently receives from Seller, the Seller Subsidiaries and their respective
Affiliates certain administrative and corporate (overhead, shared and other)
services, including: computer and
information processing services; finance, accounting and payroll services;
facilities management services, treasury services (including banking,
insurance, administration, taxation and internal audit); general administrative
services; executive and management services; legal services; and human
resources services. Buyer further
acknowledges that, except as expressly provided in the Transition Services
Agreement, all such services and benefits shall cease, and any agreement in
respect thereof shall terminate, as of the Closing Date, and Seller
acknowledges that no further payments with respect to such services shall be
payable to Seller or any of its Affiliates as of the Closing Date.
5.13 Business
Employees.
(a) On
or prior to the Closing Date, Buyer shall make offers, subject to the terms and
conditions determined by Buyer, to engage certain of the Employees listed on Section 5.13
of the Seller Disclosure Schedule (including those absent due to
vacation, holiday, illness, approved leave of absence or short-term disability,
but excluding any Employees on long-term disability) as employees of Buyer
effective upon the Closing or, in respect of any Employee to whom Section 5.20
applies, such later date as set forth in the Employees offer of employment
(such Employees receiving offers from Buyer or one of its Affiliates, Business Employees). Such offers of employment shall be at a base
salary or base hourly rate of pay that is not less than each such Business
Employees base salary or hourly rate of pay as set forth on Section 3.9
of the Seller Disclosure Schedule.
Business Employees who receive and accept offers of employment from Buyer
or its Affiliates are referred to as Transferred Employees
as of the effective date of their employment with Buyer, and shall enter into
such agreements as may be requested by Buyer, which may include customary
invention assignment, confidentiality, non-solicitation and non-competition
provisions. Employment with Buyer of
Transferred Employees shall be effective as of the day following the close of
business on the Closing Date. Seller
hereby agrees to use its commercially reasonable efforts, and to cause each
Seller Subsidiary to use its commercially reasonable efforts, to assist Buyer
in making offers and hiring any of the Business Employees, including providing
Buyer with access to such Business Employees during the period from the
effective date of this Agreement until Closing and using commercially
reasonable efforts to have the Business Employees accept employment with Buyer
or its Affiliates. Seller shall not
take, and shall cause each of the Seller Subsidiaries and each Affiliate of
Seller and the Seller Subsidiaries not to take, any action that would impede,
hinder, interfere or otherwise compete with Buyers effort to hire any
Transferred Employees. Seller shall be
responsible for Employees who do not become Transferred Employees and for all
severance, costs and expenses related to such Employees.
(b) No
employment related liabilities arising through the Closing Date with respect to
any Transferred Employees, any other employees of Seller or any Seller
Subsidiary or any of their
49
respective beneficiaries shall be assigned to or assumed by Buyer. Seller shall pay each Transferred Employee
any and all salary and other employment benefits due to such Transferred
Employee through the Closing Date, including any payments with respect to
severance or prior notice of termination.
Seller shall indemnify Buyer from and against any and all employment
related liabilities through the Closing Date, including (i) any
liabilities arising from the termination of employees (including Transferred
Employees or other Employees) by Seller or any Seller Subsidiary, (ii) any
payments due to any Transferred Employees, other Employees or their respective
beneficiaries at any time pursuant to any retention bonus arrangement,
severance program, change in control provision or similar arrangement to which
Seller or any Seller Subsidiary is a party that is in effect on or prior to the
Closing Date, (iii) any and all Liabilities under any Seller Plan, (iv) any
and all expense liabilities incurred by Transferred Employees, other Employees
or their respective beneficiaries through the Closing Date under the Seller
Plans, (v) any and all liabilities arising from the failure to provide
continuation coverage required by Section 4980B of the Code with respect
to Transferred Employees, other Employees or their respective beneficiaries,
and (vi) any and all workers compensation and other similar statutory
claims asserted by or with respect to any Transferred Employees, other Employees
or their respective beneficiaries in respect of any injury or other compensable
event or occupational illness or disease that occurred or is attributable to
any event, state of facts or conditions that existed or occurred in whole on or
prior to the Closing Date (collectively, the Pre-Closing
Employment Related Liabilities). Seller agrees that any and all Pre-Closing
Employment Related Liabilities are Excluded Liabilities.
(c) Buyer
shall not assume any Seller Plan.
(d) Except
to the extent prohibited by applicable law, beginning immediately after the
Closing Date, the Transferred Employees, while employed by Buyer or one of its
Affiliates, shall be eligible to participate in Buyers or its Affiliates
employee benefit plans (the Buyer Benefit Plans)
that provide employee benefits that in the aggregate are comparable to those
afforded to other similarly situated employees of Buyer, subject to the terms
and conditions of such plans. Except to
the extent prohibited by applicable law, the Buyer Benefit Plans shall
recognize prior service with Seller or its Subsidiaries to the extent
recognized under the corresponding Seller Plans prior to the Closing Date as
service with Buyer for eligibility and vesting purposes.
5.14 Bulk
Sale Filings. Buyer hereby waives,
in connection with the transactions contemplated by this Agreement, compliance
with the bulk sales provision of Article 6 of the Uniform Commercial
Code as it is in effect in the states where Seller or any Selling Subsidiary
owns assets to be conveyed to Buyer or any of its Subsidiaries hereunder and
other similar bulk transfer notice provisions other than bulk sale tax notice
provisions. Seller shall indemnify and
hold harmless Buyer against any and all liabilities that may be asserted by
third parties against Buyer as a result of such noncompliance.
5.15 Public
Announcements. Prior to the signing
of this Agreement, Seller and Buyer shall prepare a mutually agreeable release
announcing the transaction contemplated hereby.
Except for such press release, neither Seller nor Buyer shall, and
Seller and Buyer shall cause their respective Affiliates not to, without the
approval of the other party hereto, make any press release or other
announcement concerning the existence of this Agreement or the terms of the
transactions contemplated by this Agreement, except as and to the extent that
any such party shall be so obligated by Law, in which case the other party
shall be advised and the parties shall use their reasonable best efforts to
cause a mutually agreeable release or announcement to be issued; provided, however, that the foregoing shall not preclude
communications or disclosures necessary to comply with accounting, stock
exchange or securities Law disclosure obligations or other obligations under
this Agreement.
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5.16 Customer
and Other Business Relationships; Cooperation.
(a) Seller,
on behalf of itself and the Seller Subsidiaries, hereby constitutes and
appoints, effective as of the Closing Date, Buyer and its successors and
assigns as the true and lawful attorney of Seller or the Seller Subsidiaries,
as applicable, with full power of substitution in the name of Buyer, or in the
name of Seller or the Seller Subsidiaries, as applicable, but for the benefit
of Buyer, (i) to collect for the account of Buyer any items of the
Acquired Assets and (ii) to institute and prosecute all proceedings that
Buyer may in its sole discretion deem proper to assert or enforce any right,
title or interest in, to or under the Acquired Assets, and to defend or
compromise any and all Actions in respect of the Acquired Assets. Buyer shall be entitled to retain for its own
account any amounts collected pursuant to the foregoing powers, including any
amounts payable as interest in respect thereof.
(b) Prior to the Closing and from time to time
thereafter until 12 months after the Closing Date, (i) Seller shall, and
shall cause its Subsidiaries and Representatives to, cooperate with Buyer in its efforts to continue and maintain for the
benefit of Buyer those business relationships of Seller or any Seller
Subsidiary relating to the Acquired Business existing prior to the Closing and
relating to the business to be operated by Buyer after the Closing, including
relationships with lessors, employees, regulatory authorities, licensors,
customers, suppliers and others and (ii) Seller shall not, and shall cause
each Seller Subsidiary not to, take any action to discourage any lessor,
licensor, customer, supplier or other business associate of Seller or any
Seller Subsidiary from maintaining the same (or similar) business relationships
with Buyer after the Closing as it maintained with Seller or any Seller
Subsidiary prior to the Closing.
(c) Seller
shall take, or cause to be taken, all reasonable actions and do, or cause to be
done, all things reasonably necessary, proper, or advisable to register,
maintain, and prevent the diminution in value of the Assigned Intellectual
Property, including filing any affidavits of use in commerce with any
applicable Registration Offices, paying all recordation, registration,
maintenance, and other fees, responding to all office actions or other
correspondence from the Registration Offices, obtaining and recording all
documents necessary to establish, maintain, transfer, or identify Buyers
rights in such Intellectual Property, including all necessary assignments of
such Assigned Intellectual Property and fulfilling all of its duties and
obligations and avoid any material defaults under all Contracts regarding
Assigned Intellectual Property, and assist Buyer after the Closing with respect
to any legal or administrative action relating to the Intellectual Property,
including before any of the Registration Offices.
5.17 Excluded
Contracts. If any Excluded Contract
identified in part I of Section 2.2(a) of the Seller
Disclosure Schedule is amended or supplemented prior to Closing to
provide that the liabilities (other than for fraud, intentional misconduct or
similar conduct) of Seller or the applicable Selling Subsidiary under such
Excluded Contract are limited to the amount paid to Seller or such Selling
Subsidiary by the customer under such Excluded Contract, as contemplated by Section 5.4(f),
Section 2.2(a) of the Seller Disclosure Schedule shall be
amended to remove such Excluded Contract and Section 2.1(e) of the
Seller Disclosure Schedule shall be amended to add such contract as an
Assumed Contract.
5.18 Termination
and Renegotiation of Leases. Prior
to the Closing, Seller shall terminate the lease for each Leased Real Property
identified on Section 5.18 of the Seller Disclosure Schedule (the
New Leased Properties) and shall
use commercially reasonable efforts to assist Buyer and its Subsidiaries in
entering into new leases for each such New Leased Property, and Buyer shall use
commercially reasonable efforts to enter into a new lease covering each such
New Leased Property, each such lease to contain commercially reasonable terms
and conditions acceptable to Buyer.
51
5.19 Sales
and Use Taxes.
(a) Seller
will use its commercially reasonable efforts to obtain tax clearance
certificates, letters or other receipts indicating no Taxes are due in any
state or foreign jurisdiction where the Seller or any Seller Subsidiary is
registered for sales and use tax purposes (or the foreign jurisdiction
equivalent). Seller and Buyer will each
use commercially reasonable efforts to identify and mutually determine the
aggregate amount of sales and use taxes (or foreign jurisdiction equivalents)
due and payable or estimated to be due and payable by Seller or any Seller
Subsidiary to any Governmental Authority for any period prior to the Closing
Date (collectively, the Tax Settlement Amount)
no later than three Business Days prior to the Closing Date.
(b) Seller
will use its commercially reasonable efforts to obtain executed officers
certificates of occasional sale exemption qualification or similar instruments
as required by applicable law for every state in any state or foreign
jurisdiction where the Seller or any Seller Subsidiary is registered for sales
and use tax purposes (or the foreign jurisdiction equivalent) where such
exemption is available.
(c) Promptly
after the Closing, Seller and the Selling Subsidiaries will (i) file final
sales and use tax returns in every state or foreign jurisdiction in which they
are registered for sales and use tax purposes (or the foreign jurisdiction
equivalent), other than the State of Texas or any other state or foreign jurisdiction
where Seller or a Seller Subsidiary has obligations in respect of any Excluded
Contract under this Agreement or the Customer Services Agreement, and (ii) wind
up their respective business operations in every state or foreign jurisdiction
in which they are registered for sales and use tax purposes (or the foreign
jurisdiction equivalent), other than the State of Texas or any other state or
foreign jurisdiction where Seller or a Seller Subsidiary has obligations in
respect of any Excluded Contract under this Agreement or the Customer Services
Agreement.
5.20 Dubai
and Saudi Arabia Licenses. Buyer
will cause its subsidiary ACI Worldwide (EMEA) Limited (UK) (the UK Subsidiary) to use commercially
reasonable efforts to register a branch in each of Dubai and Saudi Arabia prior
to the Closing Date. If the UK
Subsidiary is unable to register one or both branches prior to the Closing
Date, Buyer and Seller agree that they will enter into a commercially
reasonable arrangement under which Seller will grant to the UK Subsidiary a
license, at Buyers expense, for an aggregate amount equal to Sellers cost to
use some or all of (a) the premises leased under the Dubai Lease, (b) the
assets used in the operation of the Business in Dubai, and (c) the
Business Employees domiciled in Dubai, and (d) the Business Employees
domiciled in Saudi Arabia, in each case, until such time as the UK Subsidiary
completes the registration of a branch in Dubai and/or Saudi Arabia, as the
case may be.
5.21 Distribution;
Dissolution.
(a) Before
Seller distributes any portion of the Purchase Price to its stockholders,
Seller shall either set aside a sufficient amount of the Purchase Price or use
the proceeds that Seller receives from the Purchase Price or otherwise make
arrangements to (i) pay in full all outstanding capital lease obligations,
(ii) repay all known Liabilities (with the exception of any Assumed
Liabilities), and (iii) establish adequate reserves for all contingent,
conditional or unmatured liabilities and for Actions that have not been made
known to Seller or that have not arisen but are reasonably likely to become
known or to arise after the date of dissolution, liquidation or wind-up of
Seller. Seller further agrees to remain
solvent after the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, and in no event shall Seller file a
voluntary bankruptcy petition for at least 90 days following the Closing Date.
52
(b) For
the purposes of this Section 5.21, solvent shall mean, with respect to
any Person on any date, that on such date (i) the fair value of the assets
of such Person is not less than the amount that will be required to pay the
debts of such Person as they become absolute and matured, (ii) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Persons ability to pay as such debts mature, (iii) that such Person will
be able to pay its debts as they become due in the usual course of business,
and (iv) such Person is not engaged in a business or a transaction, and is
not about to engage in a business or transaction, for which such Persons
property would constitute unreasonably small capital.
(c) In
the event that any Seller winds up its business and dissolves or liquidates, it
shall do so only in accordance with all applicable laws, including the laws of
the State of Delaware.
ARTICLE 6
CONDITIONS
6.1 Conditions
to Each Partys Obligations. The respective obligations of each party to
effect the Closing are subject to the satisfaction or waiver at or prior to the
Closing of the following conditions:
(a) All
necessary consents and approvals of any Governmental Authority required for the
consummation of the transactions contemplated by this Agreement shall have been
obtained.
(b) No
Action by any Governmental Authority shall have been instituted to restrain,
prohibit or invalidate the transactions contemplated by this Agreement. There shall be no Governmental Order in
existence that prohibits or could reasonably be expected to prohibit the
consummation of the transactions contemplated by this Agreement or renders it
unlawful to consummate.
6.2 Conditions
to the Buyers Obligations. The obligations of Buyer to effect the Closing
are further subject to the satisfaction or waiver at or prior to the Closing of
the following conditions:
(a) Each
of the representations and warranties made by Seller in this Agreement that is
qualified by reference to materiality, Seller Material Adverse Effect or
Business Material Adverse Effect shall be true and correct, and each of the
other representations and warranties made by Seller in this Agreement shall be
true and correct in all material respects, in each case as of the date of this
Agreement and at and as of the Closing Date as if made on that date (except in
any case that representations and warranties that expressly speak as of a
specified date or time need only be true and correct as of such specified date
or time).
(b) Seller
shall have performed and complied in all material respects with each agreement,
covenant and obligation required by this Agreement to be so performed or
complied with by Seller at or before the Closing.
(c) Since
the date of the Balance Sheet, no event, circumstance or change shall have
occurred, that individually or in the aggregate with one or more other events,
circumstances or changes, have had or reasonably could be expected to have, a
Seller Material Adverse Effect or a Business Material Adverse Effect.
53
(d) All
consents or approvals listed in Section 6.2(d) of the Seller
Disclosure Schedule shall have been obtained, and Buyer shall have
received copies of such consents in form and substance reasonably satisfactory
to Buyer.
(e) Seller
shall have executed and delivered, or cause to be executed and delivered, to
Buyer all of the documents required by Section 2.11.
(f) Buyer
or one of its Subsidiaries shall have entered into a new lease covering each
New Leased Property and shall have entered into any agreement required by the
landlord under the Heathrow Lease in connection with the execution of the
Heathrow License.
(g) The
individuals listed on Section 6.2(g) of the Seller Disclosure Schedule shall
have executed and delivered Employment and Non-Competition Agreements in form
and substance satisfactory to Buyer.
6.3 Conditions
to Sellers Obligations. The
obligations of Seller to effect the Closing are further subject to the
satisfaction or waiver at or prior to the Closing of the following conditions:
(a) Each
of the representations and warranties made by Buyer in this Agreement that is
qualified by reference to materiality or Buyer Material Adverse Effect shall be
true and correct, and each of the other representations and warranties made by
Buyer in this Agreement shall by true and correct in all material respects, in
each case as of the date of this Agreement and at and as of the Closing Date as
if made on that date (except in any case that representations and warranties
that expressly speak as of a specified date or time need only be true and
correct as of such specified date or time).
(b) Buyer
shall have performed and complied with, in all material respects, each
agreement, covenant and obligation required by this Agreement to be so
performed or complied with by Buyer at or before the Closing.
(c) Buyer
shall have executed and delivered, or cause to be executed and delivered, to
Seller all of the documents required by Section 2.10.
ARTICLE 7
SURVIVAL; INDEMNIFICATION
7.1 Survival
of Representations, Warranties, Covenants and Agreements.
(a) The
representations and warranties of Seller and Buyer contained in this Agreement
shall survive the Closing (i) indefinitely with respect to the
representations and warranties contained in Sections 3.1, 3.3(a), 3.3(b), 3.13,
4.1, 4.2(a) and 4.2(b)(the Excluded Representations);
and (ii) until 18 months after the Closing Date in the case of all other
representations and warranties; provided, however, that any representation, warranty that would
otherwise terminate in accordance with clause (ii) above will
continue to survive if a notice of a claim shall have been given under this ARTICLE 7
on or prior to the date on which it otherwise would terminate, until the related
claim for indemnification has been satisfied or otherwise resolved as provided
in this ARTICLE 7. Except as
otherwise expressly provided in this Agreement, each covenant hereunder shall
survive the Closing indefinitely or in accordance with its terms, if any.
(b) For
purposes of this Agreement, a partys representations and warranties shall be
deemed to include all documents or certificates delivered by or on behalf of
such party in connection with
54
this Agreement. No partys
rights hereunder (including rights under this ARTICLE 7) shall be affected
by any investigation conducted by or any knowledge acquired (or capable of
being acquired) by such party at any time, whether before or after the execution
or delivery of this Agreement or the Closing, or by the waiver of any condition
to Closing.
7.2 Indemnification
of Buyer. Seller shall indemnify and
hold harmless Buyer, its Affiliates and their respective successors and the
respective shareholders, officers, directors, employees and agents of each such
Indemnified Person (collectively, the Buyer Indemnified Parties)
from and against any and all Losses that may be asserted against or paid,
suffered or incurred by any Buyer Indemnified Party that, directly or
indirectly, arise out of, result from, are based upon or relate to (a) any
inaccuracy in or any breach of any representation and warranty made by Seller
or any Selling Subsidiary in this Agreement, in any of the Collateral
Agreements or in any certificate delivered by Seller or any Selling Subsidiary
pursuant to this Agreement or any Collateral Agreement; provided, however, that if any such representation or warranty (other
than the representations and warranties contained in Section 3.6) is qualified
in any respect by materiality, Seller Material Adverse Effect or Business
Material Adverse Effect, for purposes of this clause (a) such
materiality, Seller Material Adverse Effect or Business Material Adverse Effect
qualification will in all respects be ignored; (b) any failure by Seller
or any Selling Subsidiary to perform or fulfill any of its covenants or
agreements required to be performed by Seller or any Selling Subsidiary under
this Agreement, the Collateral Agreements or any certificate delivered by
Seller or any Selling Subsidiary pursuant to this Agreement; (c) any
Excluded Liability; and (d) the failure of Seller to comply with any bulk
sales Laws and Buyers waiver of compliance with such Laws.
7.3 Indemnification
of Seller. Buyer shall indemnify and
hold harmless Seller and its Affiliates and successors to the foregoing (and
their respective shareholders, officers, directors, employees and agents)
(collectively the Seller Indemnified Parties)
from and against any and all Losses that may be asserted against, or paid,
suffered or incurred by any Seller Indemnified Party that, directly or
indirectly, arise out of, result from, are based upon or relate to (a) any
inaccuracy in or breach of any representation or warranty made by Buyer in this
Agreement; provided, however,
that if any such representation or warranty is qualified in any respect by
materiality, for purposes of this ARTICLE 7 such materiality qualification
will in all respects be ignored; (b) any failure by Buyer to perform or fulfill
any of its covenants or agreements required to be performed by Buyer under this
Agreement, the Collateral Agreements or any document or other paper delivered
by Buyer pursuant to this Agreement; and (c) any Assumed Liability; and (d) Buyers
performance of any Nonassignable Asset in accordance with Section 5.10.
7.4 Method
of Asserting Claims. All claims for
indemnification by any Indemnified Party under this ARTICLE 7 shall be
asserted and resolved as follows:
(a) In
the event that any Indemnified Party should have a claim against any
Indemnifying Party under Section 7.2 or 7.3 that does not involve a
third-party claim being asserted against or sought to be collected from such
Indemnified Party, the Indemnified Party shall deliver notice of such claim to
the Indemnifying Party. If the
Indemnifying Party does not notify the Indemnified Party within 30 days
following its receipt of such notice that the Indemnifying Party disputes its
liability to the Indemnified Party under Section 7.2 or 7.3, such claim
specified by the Indemnified Party in such notice shall be conclusively deemed
a liability of the Indemnifying Party under Section 7.2 or 7.3, and the
Indemnifying Party shall pay the amount of such liability to the Indemnified
Party on demand or, in the case of any notice in which the amount of the claim
(or any portion thereof) is estimated, on such later date when the amount of
such claim (or such portion thereof) becomes finally determined. No delay in or failure to give notice by the
Indemnified Party to the Indemnifying Party pursuant to this Section 7.4(a) shall
adversely affect any of the other rights or remedies which the Indemnified
Party has under this
55
Agreement, or alter or relieve the Indemnifying Party of its obligation
to indemnify the Indemnified Party to the extent that such delay or failure has
not materially prejudiced the Indemnifying Party.
(b) If
such claim involves a claim by a third party against the Indemnified Party, and
provided that such claim solely involves
monetary damages and the majority of such monetary damages would be payable by
the Indemnifying Party pursuant to the indemnification obligations set forth in
this Agreement in the event such third party won such claim, the Indemnifying
Party may, within 10 days after receipt of such notice and upon notice to the
Indemnified Party, assume, with counsel of its own choice, reasonably
satisfactory to the Indemnified Party, at the sole cost and expense of the
Indemnifying Party, the settlement or defense thereof (in which case any Loss
associated therewith shall be the sole responsibility of the Indemnifying
Party), provided that the Indemnified Party may,
at its sole cost and expense, participate in such settlement or defense through
counsel chosen by it without any right to control thereof, and the Indemnified
Party shall cooperate with the Indemnifying Party in connection therewith. No delay in or failure to give notice by the
Indemnified Party to the Indemnifying Party pursuant to this Section 7.4(b) shall
adversely affect any of the other rights or remedies which the Indemnified
Party has under this Agreement, or alter or relieve the Indemnifying Party of
its obligation to indemnify the Indemnified Party to the extent that such delay
or failure has not materially prejudiced the Indemnifying Party.
(c) For
all other such claims that involve a claim by a third party against the
Indemnified Party, the Indemnified Party shall have the right to conduct and
control, through counsel of its own choosing, reasonably acceptable to the
Indemnifying Party, any third party legal action or other claim, but the
Indemnifying Party may, at its election, participate in the defense thereof at
its sole cost and expense; provided, however,
that if the Indemnified Party shall fail to defend any such legal action or
other claim, then the Indemnifying Party may defend, through counsel of its own
choosing, such legal action or other claim, and so long as it gives the
Indemnified Party at least 15 days notice of the terms of the proposed
settlement thereof and permits the Indemnified Party to then undertake the
defense thereof, except as set forth below, and settle such legal action or
other claim and reduce the Indemnity Amount in the amount of such settlement or
of any judgment and the costs and expenses of such defense.
(d) Notwithstanding
any of the foregoing, (i) the Indemnified Party may, at the sole cost and
expense of the Indemnified Party, at any time prior to the Indemnifying Partys
delivery of the notice referred to in Section 7.4(b), file any motion,
answer or other pleadings or take any other action that the Indemnified Party
reasonably believes to be necessary or appropriate to protect its interests, (ii) the
Indemnified Party may take over the control of the defense or settlement of a
third-party claim at any time if it irrevocably waives its right to indemnity
under this ARTICLE 7 with respect to such claim, and (iii) except as
provided in Section 7.4(c), the Indemnifying Party may not, without the
consent of the Indemnified Party, settle or compromise any action or consent to
the entry of any judgment, such consent not to be unreasonably withheld. So long as the Indemnifying Party is
contesting any such claim in good faith, the Indemnified Party shall not pay or
settle any such claim without the Indemnifying Partys consent, such consent
not to be unreasonably withheld.
(e) If
the Indemnifying Party is not entitled to assume the defense of the claim
pursuant to the foregoing provisions or is entitled but does not contest such
claim in good faith (including if it does not notify the Indemnified Party of
its assumption of the defense of such claim within the 10-day period set forth
above), then the Indemnified Party may conduct and control, through counsel of
its own choosing and at the expense of the Indemnifying Party, the settlement
or defense thereof, and the Indemnifying Party shall cooperate with it in
connection therewith.
(f) The
failure of the Indemnified Party to participate in, conduct or control such
defense shall not relieve the Indemnifying Party of any obligation it may have
hereunder. Any defense
56
costs required to be paid by the Indemnifying Party shall be paid as
incurred, promptly against delivery of invoices therefor.
(g) So
long as funds continue to be held in accordance with the Escrow Agreement,
Losses recoverable by the Buyer Indemnified Parties under Section 7.2
shall first be recoverable from the funds held in accordance with the Escrow
Agreement.
7.5 Limitations. No amounts of indemnity shall be payable as a
result of any claim arising under clause (a) of Section 7.2, other
than a claim arising out of an inaccuracy or breach of an Excluded
Representation, or clause (a) of Section 7.3 unless and until the
Buyer Indemnified Parties or the Seller Indemnified Parties, as the case may
be, have suffered, incurred, sustained or become subject to Losses referred to
in that clause in excess of Three Hundred Thousand U.S. Dollars (US $300,000)
(the Deductible Amount) in the
aggregate, in which case the Buyer Indemnified Parties or the Seller
Indemnified Parties, as the case may be, may bring a claim only for Losses in
excess of the Deductible Amount. Nothing
in the preceding sentence shall apply to, or in any way limit the obligations
of, an Indemnifying Party to pay all defense costs in respect of third-party
claims. The maximum liability of Seller
under clause (a) of Section 7.2, other than for a claim arising out
of an inaccuracy or breach of an Excluded Representation, shall not exceed the
amount of the Escrow Funds plus any Set-Off Amount available in accordance with
Section 2.7(h) (collectively, the Cap)
in the aggregate, and the maximum liability of Buyer under clause (a) of Section 7.3,
other than for a claim arising out of an inaccuracy or breach of an Excluded
Representation, shall not exceed the Cap in the aggregate. In determining the amount of any Losses in
respect of any inaccuracy in or any breach of any representation and warranty,
any materiality, Seller Material Adverse Effect or Business Material Adverse
Effect qualification contained in such representation or warranty will in all
respects be ignored.
7.6 Exclusive Remedy. Other than with respect to claims for fraud,
the adjustment to the Purchase Price contemplated by Section 2.6, the
Contingent Payments to be made under Section 2.7 and the right of set-off
contained in Section 2.7(h), the indemnification provided in this ARTICLE 7
shall be the exclusive remedy after the Closing Date for damages available to
the parties to this Agreement for breach of any of the terms, conditions,
representations or warranties contained herein or any right or Action arising
from the transactions contemplated by this Agreement; provided,
however, this exclusive remedy for damages does not preclude a party
from bringing an action for specific performance or other equitable remedy to
require a party to perform its obligations under Sections 5.3, 5.8 or 5.9 of
this Agreement or any Collateral Agreement.
7.7 Character
of Indemnity Payments. The parties
hereto hereby acknowledge and agree that any indemnification payments made with
respect to this Agreement shall be treated for all Tax purposes as an
adjustment to the Purchase Price, unless otherwise required by Law (including
by a determination of a Tax authority that, under applicable Law, is not
subject to further review or appeal). If
an indemnification payment by Law cannot be treated as an adjustment to
Purchase Price, the Indemnifying Party will pay an amount to the Indemnified
Party that reflects the hypothetical Tax consequences of the receipt or accrual
of such indemnification payment (net of any deduction or other Tax benefit
resulting from the Indemnified Partys incurrence of the Losses for which the
indemnification payments are being made), using the maximum applicable
statutory rate (or, in the case of an item that affects more than one Tax,
rates) of Tax and reflecting, for example, the effect of deductions available
for Taxes such as state and local income Taxes.
7.8 Mitigation. If an Indemnified Party has a meritorious
right of recovery against one or more third parties (including any right of
recovery under an insurance policy or indemnification arrangement) and it is
reasonably likely that the pursuit of such right by the Indemnified Party will
result in a recovery, the Indemnified Party must seek recovery in a
commercially reasonable manner from such
57
third party(ies) for so long as pursuit of such recovery remains
commercially reasonable. If an
Indemnified Party receives payment in readily available funds from any third
party in respect of any recovery sought in accordance with this Section 7.8,
the funds actually received shall reduce the amount of Losses for purposes of
determining the amount of the Indemnifying Partys obligations under this ARTICLE 7. In addition, if such funds are actually
received by the Indemnified Party after any indemnity payment by the
Indemnifying Party under this ARTICLE 7, the amount of the funds actually
received, up to the amount previously paid by the Indemnifying Party, shall be
paid over to the Indemnifying Party.
Notwithstanding any provision of this Section 7.8, this Section 7.8
shall in no manner limit an Indemnified Partys rights under this ARTICLE 7
to (a) initiate, pursue or prosecute a claim against the Indemnifying
Party, or (b) collect a recovery from the Indemnifying Party.
ARTICLE 8
TERMINATION OF AGREEMENT
8.1 Termination. This Agreement may be terminated, and the
transactions contemplated by this Agreement may be abandoned, at any time prior
to the Closing:
(a) by
the mutual written agreement of Seller and Buyer;
(b) by
Buyer or Seller if the Closing shall not have occurred by September 30,
2005; provided, however, that the right to
terminate this Agreement under this clause (b) shall not be available to
any party whose action or failure to act has been a principal cause of or
resulted in the failure of the transactions contemplated hereby to occur on or
before such date and such action or failure to act constitutes a material
breach of this Agreement;
(c) by
Buyer or Seller if (i) there shall be a final non-appealable order of any
court in effect preventing consummation of the transactions contemplated
hereby, or (ii) there shall be any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Closing by any
Governmental Authority that would make consummation of the Closing illegal;
(d) by
Buyer if there shall be any action taken, or any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the transactions
contemplated hereby by any Governmental Authority, which would (i) prohibit
Buyers ownership or operation of any portion of the Business or the Acquired
Assets or (ii) compel Buyer to dispose of or hold separate all or any
portion of the Business or the Acquired Assets as a result of the transactions
contemplated hereby;
(e) by
Buyer if Buyer is not in material breach of its obligations under this
Agreement and there has been a breach of any representation, warranty, covenant
or agreement of the Seller contained in this Agreement such that the conditions
set forth in Section 6.2 would not be satisfied and such breach has not
been cured within 20 Business Days after written notice thereof to the Seller; provided, however, that no cure period shall be required for
a breach which by its nature cannot be cured; or
(f) by
Seller if Seller is not in material breach of its obligations under this
Agreement and there has been a breach of any representation, warranty, covenant
or agreement of Buyer contained in this Agreement such that the conditions set
forth in Section 6.3 would not be satisfied and such breach has not been
cured within 20 Business Days after written notice thereof to Buyer; provided, however, that no cure period shall be required for
a breach which by its nature cannot be cured.
Where action is taken to terminate this Agreement
pursuant to this Section 8.1, it shall be sufficient for such action to be
authorized by the Board of Directors of the party taking such action.
58
8.2 Effect
of Termination. If this Agreement is
validly terminated pursuant to Section 8.1, this Agreement will forthwith
become null and void and have no further effect, without any liability on the
part of any party hereto or its Affiliates, directors, officers or
securityholders, other than the provisions of Section 5.3, Section 5.15,
this Section 8.2 and ARTICLE 9 hereof. Nothing contained in this Section 8.2
shall relieve any party from liability for any breach of this Agreement
occurring prior to termination.
ARTICLE 9
MISCELLANEOUS
9.1 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person or when dispatched by electronic
facsimile transfer (if confirmed in writing by mail simultaneously dispatched)
or one business day after having been dispatched by a nationally recognized
overnight courier service to the appropriate party at the address or facsimile
number specified below:
If to Seller:
S2 Systems, Inc.
c/o Baker Capital Corp.
540 Madison Avenue
New York, NY 10022
Facsimile: (212) 486-0660
Attention: Jon Grabel
With a copy (which shall not constitute notice) to:
Baker Botts L.L.P.
2001 Ross Avenue
Suite 700
Dallas, TX 75201
Facsimile: (214) 661-4418
Attention: Bill Howell
If to Buyer:
Transaction Systems
Architects, Inc.
224 South 108th Avenue
Suite 7
Omaha, NE 68154
Facsimile: (402) 390-8077
Attention: Dennis P. Byrnes
With a copy (which shall not constitute notice) to:
Jones Day
2882 Sand Hill Road, Suite 240
Menlo Park, CA 94025
Facsimile: (650) 739-3900
Attention: Sean M. McAvoy
59
Any party hereto may change its address or facsimile
number for the purposes of this Section 9.1 by giving notice as provided
herein.
9.2 Entire
Agreement. This Agreement, the
exhibits and schedules hereto, the Collateral Agreements and the
Confidentiality Agreement supersede all prior and contemporaneous discussions
and agreements, both written and oral, among the parties with respect to the
subject matter of this Agreement and the Collateral Agreements and constitute
the sole and entire agreement among the parties to this Agreement with respect
to the subject matter of this Agreement, and supersedes all prior and contemporaneous
agreements and understandings, written or oral, with respect to the subject
matter hereof.
9.3 Expenses. Except as otherwise expressly provided in
this Agreement, whether or not the transactions contemplated by this Agreement
are consummated, each party will pay its own costs and expenses, including fees
of investment business, attorneys and accountants, incurred in connection with
the preparation, negotiation, execution, delivery and performance of this
Agreement, the Collateral Agreements and each of the other documents and
instruments executed in connection herewith or therewith and in connection with
the consummation of the transactions contemplated by this Agreement and the
Collateral Agreements.
9.4 Waiver. At any time prior to the Closing Date, any
party may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies
in the representations and warranties of the other party contained herein or in
any document delivered pursuant hereto, or (c) waive compliance with any
of the agreements or conditions of the other party contained herein, to the
extent permitted by applicable Law. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party to be bound thereby. 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 such prior or subsequent occurrence.
9.5 Amendment. This Agreement may be amended, supplemented
or modified only by a written instrument duly executed by or on behalf of each
party to this Agreement.
9.6 No
Third-Party Beneficiaries. Except as
provided in ARTICLE 7, this Agreement is for the sole benefit of the
parties hereto and their permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other Person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement.
9.7 Assignment;
Binding Effect. Neither this
Agreement nor any right, interest or obligation under this Agreement may be
assigned by any party to this Agreement by operation of Law or otherwise
without the prior written consent of the other party to this Agreement and any
attempt to do so will be void, except that Buyer may assign any or all of its
rights, interests and obligations under this Agreement (i) before or after
the Closing, to any Affiliate and (ii) after the Closing, to any Person provided that any such Affiliate or Person, as applicable,
agrees in writing to be bound by all of the terms, conditions and provisions
contained in this Agreement, but no such assignment shall relieve Buyer of its
obligations under this Agreement if such assignee does not perform such
obligations. Without limiting the
generality of the foregoing, if requested by Buyer, Seller agrees to cause the
Business, the Acquired Assets and the Assumed Liabilities or, in each case, any
portion thereof, at Closing to be transferred to any Subsidiary of Buyer as
Buyer may direct. Subject to the
foregoing, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties to this Agreement and their respective successors
and assigns.
60
9.8 Arbitration;
Dispute Resolution.
(a) The
parties agree to negotiate in good faith to resolve any controversy, dispute or
claim arising out of, in connection with, or in relation to the interpretation,
performance, non-performance, validity or breach of this Agreement or the
Collateral Agreements or otherwise arising out of, or in any way related to,
this Agreement or the Collateral Agreements including any claim based on
contract, tort, statute or constitution (a Dispute);
provided that whether the parties
negotiated in good faith to resolve any Disputes will not be an issue to be
resolved in any forum. In the event the
parties are unable to resolve such Dispute, any party may demand that such
Dispute be determined by arbitration conducted in English, and the place of
such arbitration shall be Dallas, Texas.
Such arbitration shall be conducted before the American Arbitration
Association (the AAA) and, except as
otherwise provided herein, in accordance with the rules of the AAA in
effect at the time of such arbitration, by, and all decisions and awards shall
be rendered by, three arbitrators listed on the AAA roster, one appointed by
Buyer, one appointed by the Seller and one appointed by the two arbitrators
appointed by the parties (together the Arbitration Panel).
(b) Except
as provided in Section 9.8(g), all controversies, disputes and claims,
including those involving non-monetary remedies, whether a dispute is an
arbitrable dispute, whether arbitration has been waived, whether an assignee of
this Agreement is bound to arbitrate, or as to the interpretation or enforceability
of this Section 9.8, shall be determined by the Arbitration Panel in
accordance with the rules of the AAA.
(c) Any
award rendered by the Arbitration Panel shall be final, binding and
unappealable except as provided in the Federal Arbitration Act, 9 U.S.C.
§1 et seq., and judgment may be entered on
any such award by any state or federal court having competent jurisdiction.
(d) The
Arbitration Panel shall be entitled, if appropriate, to award any remedy in
such proceedings, including monetary damages, specific performance and all
other forms of legal and equitable relief.
The provisions of this Section 9.8 shall not apply to any dispute
resolution between the parties conducted by the Reviewing Accountant pursuant
to Sections 2.6 or 2.7.
(e) In
any arbitration pursuant to this Section 9.8, and before the Arbitration
Panel establishes the facts of the case, each party shall be entitled to the
timely production by the other party of relevant, non-privileged documents or
copies thereof. If the parties are
unable to agree on the scope and/or timing of such document production, the
Arbitration Panel shall have the power, upon application of any party, to make
all appropriate orders for the production of documents by any party.
(f) In
any arbitration pursuant to this Section 9.8, and before the Arbitration
Panel establishes the facts of the case, each party shall be entitled to
examine witnesses by deposition to provide non-privileged testimony that is
relevant to the controversies, claims or disputes at issue. If the parties are unable to agree on the
propriety of a deposition, or its scope and/or timing, the Arbitration Panel
shall have the power, upon the application of any party, to make all
appropriate orders in connection with a proposed deposition.
(g) In
any dispute under Sections 5.3 or 5.9 of this Agreement, any party hereto may,
notwithstanding the other provisions of this Section 9.8, request at any
time pending a final decision under this Agreement, a temporary restraining
order, preliminary injunction and/or any other interim relief from any court of
competent jurisdiction without thereby waiving its other rights under this
Agreement or being in violation of this Section 9.8.
61
9.9 Invalid
Provisions. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under any present or
future Law, (i) such provision shall be fully severable, (ii) this
Agreement shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement shall remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and will be interpreted so as reasonably to effect the
intent of the parties hereto, and (iv) in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as a part of this
Agreement a legal, valid and enforceable provision that shall achieve, to the
extent possible, the economic, business and other purposes of such illegal,
invalid or unenforceable provision.
9.10 GOVERNING
LAW. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE, IRRESPECTIVE OF THE CHOICE OF LAWS
PRINCIPLES OF THE STATE OF DELAWARE, AS TO ALL MATTERS, INCLUDING MATTERS OF
VALIDITY, CONSTRUCTION, EFFECT, ENFORCEABILITY, PERFORMANCE AND REMEDIES.
9.11 WAIVER
OF JURY TRIAL. EACH OF SELLER AND BUYER
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF SELLER OR BUYER IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
9.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Agreement by telecopier or e-mail shall be
effective as delivery of a manually executed counterpart of this Agreement.
9.13 Time
of Essence. Each of the parties
hereto hereby agrees that, with regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
9.14 Interpretation. The parties have participated jointly in the
negotiating and drafting of this Agreement.
If an ambiguity or a 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 provisions of this Agreement.
[Signatures begin on the next page.]
62
IN WITNESS WHEREOF, each party has caused this Asset
Purchase Agreement to be duly executed on its behalf by its duly authorized
officer as of the date first written above.
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S2 SYSTEMS, INC.
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By:
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/s/ Stephen J. Clarke
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Name:
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Stephen J. Clarke
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Title:
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President and Chief Executive Officer
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TRANSACTION SYSTEMS ARCHITECTS, INC.
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By:
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/s/ Phillip G. Heasley
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Name:
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Phillip G. Heasley
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Title:
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President and Chief Executive Officer
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Exhibit
99.1
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TRANSACTION SYSTEMS
ARCHITECTS INC
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224 SOUTH 108 AVENUE
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News Release
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OMAHA, NEBRASKA 68154
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402.334.5101
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FAX 402.390.8077
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For more information
contact:
William J. Hoelting
Vice President, Investor
Relations
402.390.8990
FOR IMMEDIATE RELEASE
Transaction
Systems Architects to Acquire S2 Systems
Accretive
Acquisition Strengthens Industry Leadership
(OMAHA, Neb.June 29, 2005)Transaction Systems Architects, Inc.
(Nasdaq: TSAI), a leading global provider of enterprise e-payments solutions,
today announced the signing of a definitive agreement to acquire substantially
all of the assets of S2 Systems.
S2 Systems is a global provider of electronic
payments and network connectivity software with significant presence in Europe,
Middle East and Asia-Pacific. S2 Systems
has more than 120 active customers and generates nearly half of its revenue
from international markets. S2 primarily
serves financial services and retail customers, which are homogeneous and
complementary to the Companys target markets.
We welcome S2s customers and its talented
group of employees to TSA, said Philip G. Heasley, CEO. We believe this acquisition will enable us
to leverage our combined expertise and strengthen our leadership position in
the growing payments industry. The S2
acquisition will expand our presence in important markets and improve our
cross-sell opportunities to customers around the globe.
Under the terms of the agreement, Transaction
Systems will acquire substantially all of the assets of S2 Systems in exchange
for $35 million in cash, subject to certain holdbacks, and earn-out payments
based on incremental performance criteria.
The Company expects the transaction to be
-more-
accretive to its financial performance. The acquisition, which has been approved by
the boards of directors of both companies, is expected to close in late July 2005
subject to customary closing conditions.
Gregory D. Derkacht, Executive Vice President,
will oversee the Companys integration of S2s business and key members from
the Company and S2 have been identified to ensure effective integration of each
functional area. Upon closing, Lynn
Holland, S2 Systems Chief Technical Officer, is expected to serve as Vice
President with ACI Worldwide.
The acquisition will add talented development
and support personnel with open systems expertise and expand TSAs global
presence. S2 facilities in England and
Australia will be integrated into ACI Worldwide offices, while other acquired
locations will increase the Companys presence in the Middle East and U.S.
Transaction Systems Architects will hold a
conference call at 9:00 a.m. EDT (8:00 a.m. CDT) on June 30,
2005 to further discuss this transaction.
Interested persons may access a real-time audio broadcast of the
teleconference at: www.tsainc.com/investors.
Portico Capital Securities of Greenwich, CT
advised S2 Systems on the transaction.
About Transaction Systems Architects, Inc.
The Companys software facilitates electronic payments by providing consumers
and companies access to their money. Its
products are used to process transactions involving credit cards, debit cards,
secure electronic commerce, mobile commerce, smart cards, secure electronic
document delivery and payment, checks, high-value money transfers, bulk payment
clearing and settlement, and enterprise e-infrastructure. The Companys solutions are used on more than
1,770 product systems in 79 countries on six continents. Visit Transaction
Systems Architects, Inc. on the Internet at www.tsainc.com.
Forward-Looking Statements
This press release
contains forward-looking statements based on current expectations that involve
a number of risks and uncertainties.
Generally, forward-looking statements do not relate strictly to
historical or current facts, and include words or phrases such as we believe, the Company expects, the Company plans, the
Company will, and words and phrases of similar impact, and include but are not
limited to statements regarding future operations, business strategy and
expansion into future markets. The
forward-looking statements are made pursuant to safe harbor provisions of the
Private Securities Litigation Reform Act of 1995.
The Companys
actual results could differ materially from the results discussed in its
forward-looking statements.
There are numerous risks
associated with the acquisition discussed in this press release. Additionally,
the Company operates in a rapidly changing technological and economic
environment that presents other risks. Many
of these risks are beyond the Companys control and are driven by factors that
often cannot be predicted. The following discussion highlights some of these
risks:
The closing of the
contemplated acquisition is subject to certain conditions, many of which are
outside of the Companys control. There
can be no assurance that all or substantially all of the closing conditions
will be satisfied. If a closing
condition is not satisfied, or otherwise waived, in a timely manner, the
transaction may not close when expected or at all.
There can be no assurance
that third parties or governmental authorities within the United States or
other countries may not seek to enjoin, prohibit or otherwise invalidate the
acquisition, in whole or in part, based on the perceived market impact of the
transaction or otherwise. Responding to
any inquiries by governmental authorities may divert managements time and
resources and result in increased expenses and delays in closing the
transaction.
No assurance can be given
that the Company will be successful in integrating and operating the acquired
company. The failure to successfully
integrate and operate the acquired company could cause the actual financial
results derived from the acquisition to differ materially from the expected
financial results and may also have a material adverse effect on the Companys
business, financial condition and results of operations.
The contemplated
acquisition is subject to a number of additional risks, including diversion of
management time and resources, disruption of the Companys ongoing business,
lack of familiarity with new vertical markets and difficulties in supporting
new products.
The Companys business is
concentrated in the financial services industry, making it susceptible to a downturn
in that industry. Consolidation activity
among financial institutions has increased in recent years. There are several potential negative effects
of increased consolidation activity.
Continuing consolidation of financial institutions may result in a fewer
number of existing and potential customers for the Companys products and
services. Consolidation of two of the
Companys customers could result in reduced revenues if the combined entity
were to negotiate greater volume discounts or discontinue use of certain of the
Companys products. Additionally, if a non-customer and a customer combine and
the combined entity in turn decided to forego future use of the Companys
products, the Companys revenues would decline.
No assurance can be given that
operating results will not vary from quarter to quarter, and any fluctuations
in quarterly operating results may result in volatility in the Companys stock
price. The Companys stock price may
also be volatile, in part, due to external factors such as announcements by
third parties or competitors, inherent volatility in the technology sector and
changing market conditions in the software industry. The Companys stock price may also become
volatile, in part, due to developments in the various lawsuits filed against
the Company relating to its restatement of prior consolidated financial
results.
The Company has historically derived
a majority of its revenues from international operations and anticipates
continuing to do so, and is thereby subject to risks of conducting
international operations. One of the
principal risks associated with international operations is potentially adverse
movements of foreign currency exchange
rates. The Companys exposures resulting from
fluctuations in foreign currency exchange rates may change over time as the
Companys business evolves and could have an adverse impact on the Companys
financial condition and results of operations.
The Company has not entered into any derivative instruments or hedging
contracts to reduce exposure to adverse foreign currency changes. Other potential risks associated with the
Companys international operations include difficulties in staffing and
management, reliance on independent distributors, longer payment cycles,
potentially unfavorable changes to foreign tax rules, compliance with foreign
regulatory requirements, reduced protection of intellectual property rights,
variability of foreign economic conditions, changing restrictions imposed by
U.S. export laws, and general economic and political conditions in the
countries where the Company sells its products and services.
The Companys BASE24-es
product is a significant new product for the Company. If the Company is unable to generate adequate
sales of BASE24-es, if market acceptance of BASE24-es is delayed,
or if the Company is unable to successfully deploy BASE24-es in
production environments, the Companys business, financial condition and
results of operations could be materially adversely affected.
Historically, a majority of the
Companys total revenues resulted from licensing its BASE24 product line and
providing related services and maintenance.
Any reduction in demand for, or increase in competition with respect to,
the BASE24 product line could have a material adverse effect on the Companys
financial condition and results of operations.
To protect its proprietary rights,
the Company relies on a combination of contractual provisions, including
customer licenses that restrict use of the Companys products, confidentiality
agreements and procedures, and trade secret and copyright laws. Despite such efforts, the Company may not be
able to adequately protect its proprietary rights, or the Companys competitors
may independently develop similar technology, duplicate products or design
around any rights the Company believes to be proprietary. This may be particularly true in countries
other than the United States because some foreign laws do not protect
proprietary rights to the same extent as certain laws of the United
States. Any failure or inability of the
Company to protect its proprietary rights could materially adversely affect the
Company.
The Companys software
products are complex. They may contain
undetected errors or failures when first introduced or as new versions are
released. This may result in loss of, or
delay in, market acceptance of the Companys products and a corresponding loss
of sales or revenues. Customers depend
upon the Companys products for mission-critical applications. Software product errors or failures could
subject the Company to product liability, as well as performance and warranty
claims, which could materially adversely affect the Companys business,
financial condition and results of operations.
There has been a
substantial amount of litigation in the software industry regarding
intellectual property rights. The Company anticipates that software product
developers and providers of electronic commerce solutions could increasingly be
subject to infringement claims, and third parties may claim that the Companys
present and future products infringe upon their intellectual property
rights. Any claims, with or without
merit, could be time-consuming, result in costly litigation, cause product
delivery delays or require the Company to enter into royalty or licensing
agreements. A successful claim by a
third party of intellectual property infringement by the Company could compel
the Company to enter into costly royalty or license agreements, pay significant
damages or even stop selling certain products.
Royalty or licensing agreements, if required, may not be available on
terms acceptable to the Company or at all, which could adversely affect the
Companys business.
The Company continues to
evaluate the claims made in various lawsuits filed against the Company and
certain directors and officers relating to its restatement of prior
consolidated financial results. The
Company intends to defend these lawsuits vigorously, but cannot predict their
outcomes and is not currently able to evaluate the likelihood of its success or
the range of potential loss, if any.
However, if the Company were to lose any of these lawsuits or if they
were not settled on favorable terms, the judgment or settlement could have a
material adverse effect on its financial condition, results of operations and
cash flows.
Additional related suits against the
Company may be commenced in the future.
The Company will fully analyze such suits and intends to vigorously
defend against them. There is a risk
that the above-described
litigation, as well as any additional
suits, could result in substantial costs and divert management attention and
resources, which could adversely affect the Companys business, financial
condition and results of operations.
From time to time, the Company is
involved in litigation relating to claims arising out of its operations. Any claims, with or without merit, could be
time-consuming and result in costly litigation.
Failure to successfully defend against these claims could result in a
material adverse effect on the Companys business, financial condition, results
of operations and cash flows.
Any or all of the
forward-looking statements may turn out to be wrong. They can be affected by inaccurate
assumptions or by known or unknown risks and uncertainties. Many of these factors will be important in
determining the Companys actual future results. Consequently, no forward-looking statement
can be guaranteed. Actual future results
may vary materially from those expressed or implied in any forward-looking
statements.
These cautionary
statements and any other cautionary statements that may accompany such
forward-looking statements, whether written or oral, expressly qualify all of
the forward-looking statements. In
addition, the Company disclaims any obligation to update any forward-looking
statements after the date of this release unless applicable securities laws
require it to do so.
For a detailed discussion
of these and other risk factors, interested parties should review the Companys
filings with the Securities and Exchange Commission, including the Companys Form 10-K
filed on December 14, 2004, the Companys Form 10-Q/A filed on February 18,
2005, and the Companys Form 10-Q filed on May 10, 2005.
-end-