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AGREEMENT AND PLAN OF MERGER
by and among
BILLING CONCEPTS CORP.,
BILLING CONCEPTS, INC.,
ENHANCED SERVICES BILLING, INC.,
BC TRANSACTION PROCESSING SERVICES, INC.,
APTIS, INC.,
OPERATOR SERVICE COMPANY,
BC HOLDING I CORPORATION,
BC HOLDING II CORPORATION,
BC HOLDING III CORPORATION,
BC ACQUISITION I CORPORATION,
BC ACQUISITION II CORPORATION,
BC ACQUISITION III CORPORATION
and
BC ACQUISITION IV CORPORATION
dated as of September 15, 2000
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS 2
1.1 Accounts Receivable.............................................................................2
1.2 Actual Monthly Revenue..........................................................................2
1.3 Actual Value....................................................................................2
1.4 Acquisition Proposal............................................................................2
1.5 Acquisition Sub 1, Acquisition Sub 2, Acquisition Sub 3, Acquisition Sub 4 and
Acquisition Subs................................................................................2
1.6 Acquisition Sub 1 Stock, Acquisition Sub 2 Stock, Acquisition Sub 3 Stock,
Acquisition Sub 4 Stock and Acquisition Sub Stock...............................................2
1.7 Affiliate.......................................................................................2
1.8 Affiliated Group................................................................................2
1.9 Ancillary Agreements............................................................................2
1.10 Aptis...........................................................................................2
1.11 Aptis Merger....................................................................................3
1.12 Aptis Merger Consideration......................................................................3
1.13 Aptis Stock.....................................................................................3
1.14 Article.........................................................................................3
1.15 BCC.............................................................................................3
1.16 BCI.............................................................................................3
1.17 BCI Merger......................................................................................3
1.18 BCI Merger Consideration........................................................................3
1.19 BCI Stock.......................................................................................3
1.20 BCTPS...........................................................................................3
1.21 BCTPS Merger Consideration......................................................................3
1.22 BCTPS Stock.....................................................................................3
1.23 Business........................................................................................3
1.24 Business Area...................................................................................3
1.25 Buyer I, Buyer II, Buyer III and the Buyers.....................................................3
1.26 Buyer Damages...................................................................................3
1.27 Buyer Indemnitees...............................................................................3
1.28 Claim...........................................................................................3
1.29 Closing.........................................................................................3
1.30 Closing Date....................................................................................3
1.31 Closing Date Balance Sheets.....................................................................3
1.32 Closing Date Working Capital....................................................................3
1.33 Code............................................................................................4
1.34 Companies.......................................................................................4
1.35 Companies Confidential Information..............................................................4
1.36 Companies Stock.................................................................................4
1.37 Competing Business..............................................................................4
1.38 Confidentiality Agreement.......................................................................4
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1.39 Consulting Agreement............................................................................4
1.40 Contested Non-Compete Royalty Payment...........................................................4
1.41 Contract........................................................................................4
1.42 Control.........................................................................................4
1.43 Damages.........................................................................................4
1.44 DGCL............................................................................................4
1.45 Disclosure Schedule.............................................................................4
1.46 Effective Time..................................................................................4
1.47 Employee Plans..................................................................................4
1.48 Employment Laws.................................................................................5
1.49 Encumbrance.....................................................................................5
1.50 Environmental Law...............................................................................5
1.51 Equipment Leases................................................................................5
1.52 ERISA...........................................................................................5
1.53 ERISA Affiliate.................................................................................5
1.54 ESBI............................................................................................5
1.55 ESBI Merger.....................................................................................5
1.56 ESBI Merger Consideration.......................................................................5
1.57 ESBI Stock......................................................................................5
1.58 Estimated Closing Date Working Capital..........................................................5
1.59 Exchange Act....................................................................................5
1.60 Financial Statements............................................................................5
1.61 FTC Matter......................................................................................5
1.62 GAAP............................................................................................5
1.63 Governmental Authority..........................................................................5
1.64 Guaranty........................................................................................5
1.65 Hazardous Substance.............................................................................6
1.66 High Value......................................................................................6
1.67 HSR Act.........................................................................................6
1.68 Indemnitee......................................................................................6
1.69 Indemnitor......................................................................................6
1.70 Intellectual Property...........................................................................6
1.71 IRS.............................................................................................6
1.72 Law.............................................................................................6
1.73 Leases..........................................................................................6
1.74 Low Value.......................................................................................6
1.75 Material Adverse Effect.........................................................................6
1.76 Material Consents...............................................................................6
1.77 Material Contracts..............................................................................6
1.78 Mergers.........................................................................................6
1.79 Merger Consideration............................................................................6
1.80 Monthly Revenues................................................................................6
1.81 Non-Compete Royalty Payment Dates...............................................................6
1.82 Non-Compete Royalty Payment Periods.............................................................7
1.83 Non-Compete Royalty Payments....................................................................7
1.84 Non-Compete Royalty Period......................................................................7
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1.85 OSC ............................................................................................7
1.86 OSC Merger......................................................................................7
1.87 OSC Merger Consideration........................................................................7
1.88 OSC Stock.......................................................................................7
1.89 Permits.........................................................................................7
1.90 Permitted Encumbrances..........................................................................7
1.91 Person..........................................................................................7
1.92 Projections.....................................................................................7
1.93 Proprietary Information.........................................................................7
1.94 SEC ............................................................................................7
1.95 SEC Documents...................................................................................7
1.96 Section.........................................................................................7
1.97 Section 338(h)(10) Election.....................................................................8
1.98 Securities Act..................................................................................8
1.99 Seller..........................................................................................8
1.100 Seller Confidential Information.................................................................8
1.101 Seller Damages..................................................................................8
1.102 Seller Indemnitees..............................................................................8
1.103 Superior Proposal...............................................................................8
1.104 Supplemental Disclosure.........................................................................8
1.105 Surviving Corporation 1, Surviving Corporation 2, Surviving Corporation 3,
Surviving Corporation 4 and Surviving Corporations..............................................8
1.106 Taxes...........................................................................................8
1.107 Tax Returns.....................................................................................8
1.108 Termination Fee.................................................................................8
1.109 Transfer Taxes..................................................................................8
1.110 Transferred Employees...........................................................................8
1.111 Transferred Trademarks and Logos................................................................8
1.112 Transition Services Agreement...................................................................8
1.113 Unaffiliated Firm...............................................................................8
1.114 WARN Act........................................................................................9
1.115 Working Capital.................................................................................9
ARTICLE II THE MERGERS 9
2.1 The Mergers.....................................................................................9
2.2 Surviving Corporations..........................................................................9
2.3 Liabilities....................................................................................10
2.4 Certificates/Articles of Incorporation and Bylaws..............................................10
2.5 Directors and Officers.........................................................................10
2.6 Conversion or Cancellation of Stock Upon Mergers...............................................11
2.7 Further Assurances.............................................................................11
2.8 Closing........................................................................................12
2.9 Working Capital Adjustment to Merger Consideration.............................................12
ARTICLE III RELATED MATTERS 14
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3.1 Use of Seller's Names and Logos................................................................14
3.2 Books and Records of the Companies.............................................................15
3.3 Transition Services............................................................................15
3.4 Intercompany Accounts..........................................................................15
3.5 Distributions .................................................................................15
3.6 Transfer of Assets ............................................................................15
3.7 Consulting Services ...........................................................................16
3.8 Guaranty of Performance .......................................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER 16
4.1 Organization ..................................................................................16
4.2 Authorization .................................................................................16
4.3 Capital Stock .................................................................................17
4.4 Ownership of the Companies Stock ..............................................................17
4.5 Consents and Approvals; No Violations .........................................................17
4.6 Financial Statements ..........................................................................17
4.7 Absence of Material Adverse and Other Changes .................................................18
4.8 Title, Ownership and Related Matters ..........................................................19
4.9 Leases ........................................................................................19
4.10 Intellectual Property; Software ...............................................................20
4.11 Proprietary Information .......................................................................21
4.12 Litigation ....................................................................................21
4.13 Compliance with Applicable Law ................................................................22
4.14 Certain Contracts and Arrangements ............................................................22
4.15 Taxes .........................................................................................23
4.16 Certain Fees ..................................................................................25
4.17 Employee Relations ............................................................................25
4.18 Insurance .....................................................................................26
4.19 Environmental Matters .........................................................................26
4.20 SEC Documents .................................................................................26
4.21 Employee Benefit Plans ........................................................................26
4.22 Accounts Receivable ...........................................................................28
4.23 Transactions with Officers, Directors and Employees ...........................................28
4.24 Sufficiency of Assets and Other Resources .....................................................28
4.25 Bank Accounts, Letters of Credit and Powers of Attorney .......................................29
4.26 Certain Payments ..............................................................................29
4.27 Customers and Suppliers .......................................................................29
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYERS
AND THE ACQUISITION SUBS 30
5.1 Organization and Authority ....................................................................30
5.2 Consents and Approvals; No Violations .........................................................30
5.3 Availability of Funds; Capitalization .........................................................31
5.4 Litigation ....................................................................................31
5.5 Certain Fees ..................................................................................31
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5.6 Ownership; No Prior Activities ................................................................31
5.7 No Additional Representations; Disclaimer Regarding Estimates and Projections .................31
ARTICLE VI COVENANTS 32
6.1 Conduct of the Companies' Business ............................................................32
6.2 Access to Information .........................................................................33
6.3 Consents ......................................................................................33
6.4 Reasonable Best Efforts .......................................................................34
6.5 Public Announcements ..........................................................................34
6.6 Updates to Disclosure Schedule ................................................................34
6.7 Employees and Employee Benefits ...............................................................34
6.8 Certain Tax Matters ...........................................................................36
6.9 Hart-Scott-Rodino Filings .....................................................................39
6.10 No Solicitation by Seller .....................................................................40
6.11 No Transfer or Accounting Change by the Buyers ................................................41
6.12 FTC Matter ....................................................................................41
6.13 Information Regarding the Buyers ..............................................................41
6.14 Capitalization of Seller ......................................................................42
ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE PARTIES 42
7.1 Conditions to Each Party's Obligation .........................................................42
7.2 Conditions to Obligations of Seller ...........................................................42
7.3 Conditions to Obligations of the Buyers .......................................................43
ARTICLE VIII TERMINATION, AMENDMENT, WAIVER 44
8.1 Termination ...................................................................................44
8.2 Procedure and Effect of Termination ...........................................................45
8.3 Fees and Expenses .............................................................................45
8.4 Amendment, Modification, Waiver and Extension .................................................45
ARTICLE IX INDEMNIFICATION 46
9.1 Seller's Agreement to Indemnify ...............................................................46
9.2 The Buyers' and the Acquisition Subs' Agreement to Indemnify ..................................46
9.3 General Provisions ............................................................................47
9.4 Third-Party Indemnification ...................................................................48
ARTICLE X NON-COMPETITION; NON-SOLICITATION OF EMPLOYEES AND CUSTOMERS 49
10.1 Non-Competition by Seller .....................................................................49
10.2 Non-Solicitation of Employees and Customers ...................................................50
10.3 Non-Compete Royalty Payments ..................................................................50
10.4 Confidentiality ...............................................................................52
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10.5 Reasonableness of Covenants ...................................................................53
ARTICLE XI MISCELLANEOUS 53
11.1 Notices .......................................................................................53
11.2 Severability ..................................................................................55
11.3 Binding Effect; Assignment ....................................................................55
11.4 No Third-Party Beneficiaries ..................................................................55
11.5 Interpretation ................................................................................55
11.6 Jurisdiction and Consent to Service ...........................................................55
11.7 Entire Agreement ..............................................................................55
11.8 Governing Law .................................................................................55
11.9 Specific Performance ..........................................................................56
11.10 Counterparts ..................................................................................56
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Schedules:
Disclosure Schedules
Schedule 3.4 Intercompany Agreements
Schedule 3.6 Transferred Assets
Schedule 6.13 Information Regarding the Buyers
Schedule 7.3(i) Consents for Closing
Schedule 9.1 Certain Indemnification Matters
Schedule 10.3 Non-Compete Royalty Payments
Exhibits:
Exhibit 1.46(a) Certificates of Merger
Exhibit 1.46(b) Articles of Merger
Exhibit 2.4 Articles of Incorporation of Surviving Corporation 4
Exhibit 3.3 Transition Services Agreement
Exhibit 3.7 Consulting Agreement
Exhibit 3.8 Guaranty of Performance
Exhibit 7.3(e) Opinion of Seller's Counsel
Exhibit 7.3(f) Opinion of Seller's Delaware counsel
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of this 15th day of September, 2000, by and among Billing
Concepts Corp., a Delaware corporation ("BCC" or "Seller"), Billing Concepts,
Inc. ("BCI"), Enhanced Services Billing, Inc. ("ESBI"), BC Transaction
Processing Services, Inc. ("BCTPS") and Aptis, Inc. ("Aptis"), each a
Delaware corporation and a wholly-owned subsidiary of Seller, and Operator
Service Company ("OSC"), a Texas corporation and a wholly-owned subsidiary of
Seller (BCI, ESBI, BCTPS, Aptis and OSC are referred to herein collectively
as the "Companies"), BC Holding I Corporation ("Buyer I"), BC Holding II
Corporation ("Buyer II") and BC Holding III Corporation ("Buyer III"), each a
Delaware corporation (Buyer I, Buyer II and Buyer III are referred to herein
collectively as the "Buyers"), BC Acquisition I Corporation ("Acquisition Sub
1") and BC Acquisition II Corporation ("Acquisition Sub 2"), each a Delaware
corporation and a wholly-owned subsidiary of Buyer I, BC Acquisition III
Corporation ("Acquisition Sub 3"), a Delaware corporation and a wholly-owned
subsidiary of Buyer II and BC Acquisition IV Corporation ("Acquisition Sub
4"), a Delaware corporation and a wholly-owned subsidiary of Buyer III
(Acquisition Sub 1, Acquisition Sub 2, Acquisition Sub 3 and Acquisition Sub
4 are referred to herein collectively as the "Acquisition Subs").
W I T N E S S E T H :
WHEREAS, the Companies are primarily in the business of providing
billing clearinghouse, directory assistance and teleservices and software
products and services primarily relating to telecommunications (collectively,
the "Business"); and
WHEREAS, Seller is the sole stockholder of each of the Companies,
holding all of the issued and outstanding shares of capital stock of each of
the Companies; and
WHEREAS, Buyer I has formed Acquisition Sub 1 for the purposes of
merging with and into BCI and acquiring BCI as wholly-owned subsidiary; and
WHEREAS, simultaneously with such merger, BCTPS will be merged with
and into BCI, with the result that upon such merger, BCI shall succeed to the
business of BCTPS; and
WHEREAS, Buyer I has formed Acquisition Sub 2 for the purposes of
merging with and into ESBI and acquiring ESBI as a wholly-owned subsidiary;
and
WHEREAS, Buyer II has formed Acquisition Sub 3 for the purposes of
merging with and into Aptis and acquiring Aptis as a wholly-owned subsidiary;
and
WHEREAS, Buyer III has formed Acquisition Sub 4 for the purposes of
merging with and into OSC and acquiring OSC as a wholly-owned subsidiary; and
WHEREAS, the respective boards of directors of each of the Buyers
(as applicable), each of the Acquisition Subs (as applicable), Seller and
each of the Companies (as applicable), and the respective stockholders of the
Acquisition Subs and the Companies (as applicable) have voted to approve (i)
the merger of Acquisition Sub 1 and BCTPS with and into BCI (the "BCI
Merger"),
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(ii) the merger of Acquisition Sub 2 with and into ESBI (the "ESBI Merger"),
(iii) the merger of Acquisition Sub 3 with and into Aptis (the "Aptis
Merger") and (iv) the merger of Acquisition Sub 4 with and into OSC (the "OSC
Merger" and collectively with the BCI Merger, the ESBI Merger and the Aptis
Merger, the "Mergers") pursuant to the terms and subject to the conditions of
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree that (i) Acquisition Sub 1 and BCTPS
shall be merged with and into BCI, (ii) Acquisition Sub 2 shall be merged
with and into ESBI, (iii) Acquisition Sub 3 shall be merged with and into
Aptis and (iv) Acquisition Sub 4 shall be merged with and into OSC, and that
the terms and conditions of the Mergers, the method of carrying the Mergers
into effect and certain other provisions relating thereto shall be as
hereinafter set forth:
ARTICLE I
DEFINITIONS
1.1 "ACCOUNTS RECEIVABLE" shall have the meaning assigned to it in
SECTION 4.22.
1.2 "ACTUAL MONTHLY REVENUE" shall have the meaning assigned to it
in SECTION 10.3(c).
1.3 "ACTUAL VALUE" shall have the meaning assigned to it in SECTION
2.9(d)(iii).
1.4 "ACQUISITION PROPOSAL" shall have the meaning assigned to it in
SECTION 6.10(a).
1.5 "ACQUISITION SUB 1", "ACQUISITION SUB 2", "ACQUISITION SUB 3",
"ACQUISITION SUB 4" and "ACQUISITION SUBS" each shall have the meaning
assigned to it in the Preamble.
1.6 "ACQUISITION SUB 1 STOCK", "ACQUISITION SUB 2 STOCK",
"ACQUISITION SUB 3 STOCK" and "ACQUISITION SUB 4 STOCK", shall mean the
common stock, $.001 par value, of Acquisition Sub 1, Acquisition Sub 2,
Acquisition Sub 3 and Acquisition Sub 4, respectively, and shall be referred
to collectively as the "ACQUISITION SUB STOCK".
1.7 "AFFILIATE" of any Person shall mean any Person Controlling,
Controlled by or under common Control with such Person.
1.8 "AFFILIATED GROUP" means any affiliated group within the
meaning of Section 1504(a) of the Code or any similar group defined under a
similar provision of state, local or foreign law.
1.9 "ANCILLARY AGREEMENTS" shall mean, collectively, the
agreements and documents to be executed in connection with this Agreement
including (without limitation) the Transition Services Agreement and all
exhibits thereto, any assignment agreements and the Consulting Agreement.
1.10 "APTIS" shall have the meaning assigned to it in the Preamble.
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1.11 "APTIS MERGER" shall have the meaning assigned to it in the
Recitals.
1.12 "APTIS MERGER CONSIDERATION" shall have the meaning assigned
to it in SECTION 2.6.
1.13 "APTIS STOCK" shall mean the common stock, $.01 par value, of
Aptis.
1.14 "ARTICLE" shall mean an Article of this Agreement unless
otherwise stated.
1.15 "BCC" shall have the meaning assigned to it in the Preamble.
1.16 "BCI" shall have the meaning assigned to it in the Preamble.
1.17 "BCI MERGER" shall have the meaning assigned to it in the
Recitals.
1.18 "BCI MERGER CONSIDERATION" shall have the meaning assigned to
it in SECTION 2.6.
1.19 "BCI STOCK" shall mean the common stock, $.01 par value, of
BCI.
1.20 "BCTPS" shall have the meaning assigned to it in the Preamble.
1.21 "BCTPS MERGER CONSIDERATION" shall have the meaning assigned
to it in SECTION 2.6.
1.22 "BCTPS STOCK" shall mean the common stock, $.01 par value, of
BCTPS.
1.23 "BUSINESS" shall have the meaning assigned to it in the Recitals.
1.24 "BUSINESS AREA" shall have the meaning assigned to it in
SECTION 10.1(a).
1.25 "BUYER I", "BUYER II", "BUYER III" and the "BUYERS" each shall
have the meaning assigned to it in the Preamble.
1.26 "BUYER DAMAGES" shall have the meaning assigned to it in
SECTION 9.1.
1.27 "BUYER INDEMNITEES" shall have the meaning assigned to it in
SECTION 9.1.
1.28 "CLAIM" shall have the meaning assigned to it in SECTION 9.4.
1.29 "CLOSING" shall have the meaning assigned to it in SECTION 2.8.
1.30 "CLOSING DATE" shall have the meaning assigned to it in
SECTION 2.8.
1.31 "CLOSING DATE BALANCE SHEETS" shall have the meaning assigned
to it in SECTION 2.9(b).
1.32 "CLOSING DATE WORKING CAPITAL" shall have the meaning assigned
to it in SECTION 2.9(b).
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1.33 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.34 "COMPANIES" shall have the meaning assigned to it in the
Preamble.
1.35 "COMPANIES CONFIDENTIAL INFORMATION" shall have the meaning
assigned to it in SECTION 10.4.
1.36 "COMPANIES STOCK" shall mean Aptis Stock, BCI Stock, BCTPS Stock,
ESBI Stock and OSC Stock, collectively.
1.37 "COMPETING BUSINESS" shall have the meaning assigned to it in
Section 10.1.
1.38 "CONFIDENTIALITY AGREEMENT" shall have the meaning assigned to
it in SECTION 6.2(b).
1.39 "CONSULTING AGREEMENT" shall have the meaning assigned to it
in SECTION 3.7.
1.40 "CONTESTED NON-COMPETE ROYALTY PAYMENT" shall have the meaning
assigned to it in SECTION 10.3(c).
1.41 "CONTRACT" shall mean all contracts, arrangements, licenses,
leases, purchase orders, invoices or other agreements, whether written or
oral, to which any Company is a party or by which any Company or its
properties or assets is bound.
1.42 "CONTROL" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies
of the "controlled" Person, through ownership of equity interests, by
contract or otherwise, and shall be deemed to exist with respect to any
Person as to which the Person in question directly or indirectly holds 50% or
more of the outstanding voting rights of such controlled Person.
1.43 "DAMAGES" shall mean Buyer Damages and Seller Damages
collectively, or any of them.
1.44 "DGCL" shall mean the Delaware General Corporations Law.
1.45 "DISCLOSURE SCHEDULE" shall have the meaning assigned to it in
SECTION 4.1.
1.46 "EFFECTIVE TIME" shall mean the time at which properly
executed certificates of merger in substantially the forms attached to this
Agreement as EXHIBIT 1.46(a) (together with other documents required by law
to effect the Mergers) shall have been filed with the Secretary of State of
Delaware, properly executed articles of merger in substantially the form
attached to this Agreement as EXHIBIT 1.46(b) (together with other documents
required by law to effect the Mergers) shall have been filed with the
Secretary of State of Texas and such other documents and instruments shall
have been filed in any other jurisdiction where such a certificate or
articles of merger is required.
1.47 "EMPLOYEE PLANS" shall have the meaning assigned to it in
SECTION 4.21(a).
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1.48 "EMPLOYMENT LAWS" shall have the meaning assigned to it in
SECTION 4.17(b).
1.49 "ENCUMBRANCE" shall mean any security interest, mortgage,
pledge, option, charge, lien, encumbrance or proprietary right of any third
Person, including preemptive rights, subscription rights or other similar
rights.
1.50 "ENVIRONMENTAL LAW" means any federal, state, local or foreign
law, regulation, treaty, order, decree, permit, authorization, policy,
opinion, common law or agency requirement relating to (A) the protection,
investigation or restoration of the environment, health and safety, or
natural resources or exposure to any harmful or hazardous material including
(without limitation) petroleum and petroleum-based products, formaldehyde,
PCBs and asbestos, (B) the handling, use, presence, disposal, release or
threatened release of any chemical substance or waste water or (C) noise,
odor, wetlands, pollution, contamination or any injury or threat of injury to
persons or property.
1.51 "EQUIPMENT LEASES" shall have the meaning assigned to it in
SECTION 4.9(b).
1.52 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
1.53 "ERISA AFFILIATE" shall have the meaning assigned to it in
SECTION 4.21(a).
1.54 "ESBI" shall have the meaning assigned to it in the Preamble.
1.55 "ESBI MERGER" shall have the meaning assigned to it in the
Recitals.
1.56 "ESBI MERGER CONSIDERATION" shall have the meaning assigned to
it in SECTION 2.6.
1.57 "ESBI STOCK" shall mean the common stock, $.01 par value, of
ESBI.
1.58 "ESTIMATED CLOSING DATE WORKING CAPITAL" shall have the
meaning assigned to it in SECTION 2.9(a).
1.59 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
1.60 "FINANCIAL STATEMENTS" shall have the meaning assigned to it
in SECTION 4.6.
1.61 "FTC MATTER" shall have the meaning assigned to it in SECTION
6.12.
1.62 "GAAP" means United States generally accepted accounting
principles and practices as in effect from time to time and applied
consistently throughout the periods involved.
1.63 "GOVERNMENTAL AUTHORITY" means a court or tribunal, or
administrative governmental or regulatory body, agency or authority, either
within or outside the United States.
1.64 "GUARANTY" shall have the meaning assigned to it in SECTION
3.8.
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1.65 "HAZARDOUS SUBSTANCE" means any substance that is:
(A) listed, classified or regulated in any concentration pursuant to any
Environmental Law; (B) any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon; or (C) any other
substance which may be the subject of regulatory action by any Governmental
Authority pursuant to any Environmental Law.
1.66 "HIGH VALUE" shall have the meaning assigned to it in
SECTION 2.9(d)(ii).
1.67 "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
1.68 "INDEMNITEE" shall have the meaning assigned to it in SECTION
9.3(a)(i).
1.69 "INDEMNITOR" shall have the meaning assigned to it in SECTION
9.3(a)(i).
1.70 "INTELLECTUAL PROPERTY" shall mean any and all trademarks,
service marks, service names, logos, assumed names, trade names, copyrights,
United States or foreign patents and any and all other intellectual property
rights (including registrations, licenses and applications pertaining
thereto) owned by or licensed to any Company (or to Seller or any other
subsidiary of Seller that relates to or is used by any Company in connection
with the Business).
1.71 "IRS" shall mean the Internal Revenue Service.
1.72 "LAW" shall have the meaning assigned to it in SECTION 4.13.
1.73 "LEASES" shall have the meaning assigned to it in SECTION 4.9.
1.74 "LOW VALUE" shall have the meaning assigned to it in SECTION
2.9(d)(i).
1.75 "MATERIAL ADVERSE EFFECT" shall mean having a material
adverse effect on the assets, the Business, results of operations or
condition (financial or otherwise) of the Companies taken as a whole, other
than a material adverse effect arising from events or conditions relating to
the economy in general or the software or telecommunications industries in
general and not specifically relating to the Companies.
1.76 "MATERIAL CONSENTS" shall have the meaning assigned to it in
SECTION 6.3(a).
1.77 "MATERIAL CONTRACTS" shall have the meaning assigned to it in
SECTION 4.14(a).
1.78 "MERGERS" shall have the meaning assigned to it in the
Recitals.
1.79 "MERGER CONSIDERATION" shall have the meaning assigned to it
in SECTION 2.6.
1.80 "MONTHLY REVENUES" shall have the meaning assigned to it in
SECTION 10.3(a).
1.81 "NON-COMPETE ROYALTY PAYMENT DATES" shall have the meaning
assigned to it in SECTION 10.3(b).
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1.82 NON-COMPETE ROYALTY PAYMENT PERIODS" shall have the meaning
assigned to it in SECTION 10.3(b).
1.83 "NON-COMPETE ROYALTY PAYMENTS" shall have the meaning assigned
to it in SECTION 10.3(b).
1.84 "NON-COMPETE ROYALTY PERIOD" shall have the meaning assigned
to it in SECTION 10.3(a).
1.85 "OSC" shall have the meaning assigned to it in the Preamble.
1.86 "OSC MERGER" shall have the meaning assigned to it in the
Recitals.
1.87 "OSC MERGER CONSIDERATION" shall have the meaning assigned to
it in SECTION 2.6.
1.88 "OSC STOCK" shall mean the common stock, $.001 par value, of
OSC.
1.89 "PERMITS" shall have the meaning assigned to it in SECTION
4.13.
1.90 "PERMITTED ENCUMBRANCES" shall mean such of the following as
to which no enforcement, collection, execution, levy or foreclosure
proceeding shall have been commenced: (i) encumbrances or liens created by
this Agreement; (ii) mechanics', carriers', workmen's, warehousemen's,
repairmen's or other like liens arising in the ordinary course of business;
(iii) encumbrances or liens arising under original purchase price conditional
sale contracts and equipment leases with third parties entered into in the
ordinary course; (iv) encumbrances or liens for Taxes and other governmental
obligations not yet due or being contested in good faith; and (v) other
imperfections of title, restrictions or encumbrances, if any, which liens,
imperfections of title, restrictions or other encumbrances do not materially
impair the value or continued use in the business of the respective owner
thereof, and operation of the specific assets to which they relate.
1.91 "PERSON" shall mean any natural person, any Governmental
Authority and any entity, the separate existence of which is recognized by
any Governmental Authority, including, but not limited to, corporations,
partnerships, joint ventures, joint stock companies, trusts, estates,
companies and associations, whether organized for profit or otherwise.
1.92 "PROJECTIONS" shall have the meaning assigned to it in SECTION
5.7(b).
1.93 "PROPRIETARY INFORMATION" shall have the meaning assigned to
it in SECTION 4.11(a).
1.94 "SEC" shall mean the United States Securities and Exchange
Commission.
1.95 "SEC DOCUMENTS" means the forms, reports and other documents
required to be filed by Seller with the SEC pursuant to the Securities Act
and the Exchange Act.
1.96 "SECTION" shall mean a Section of this Agreement unless
otherwise stated.
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1.97 "SECTION 338(h)(10) ELECTION" shall have the meaning assigned
to it in SECTION 6.8(h).
1.98 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
1.99 "SELLER" shall have the meaning assigned to it in the Preamble.
1.100 "SELLER CONFIDENTIAL INFORMATION" shall have the meaning
assigned to it in SECTION 10.4.
1.101 "SELLER DAMAGES" shall have the meaning assigned to it in
SECTION 9.2.
1.102 "SELLER INDEMNITEES" shall have the meaning assigned to it in
SECTION 9.2.
1.103 "SUPERIOR PROPOSAL" shall have the meaning assigned to it in
SECTION 6.10(b).
1.104 "SUPPLEMENTAL DISCLOSURE" shall have the meaning assigned to
it in SECTION 6.6.
1.105 "SURVIVING CORPORATION 1", "SURVIVING CORPORATION 2",
"SURVIVING CORPORATION 3" and "SURVIVING CORPORATION 4" shall mean the
corporation existing at and after the Effective Time as a result of the BCI
Merger, the ESBI Merger, the Aptis Merger and the OSC Merger, respectively,
and are sometimes referred to collectively as the "SURVIVING CORPORATIONS".
1.106 "TAXES" shall mean any foreign, federal, state or local tax
(including (without limitation) any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, real property, personal property or windfall profit tax,
custom duty or other tax of any kind whatsoever), assessment, levy, impost,
duty, withholding, estimated payment or other similar governmental charge,
together with any penalties, additions to tax, fines, interest and similar
charges thereon or related thereto.
1.107 "TAX RETURNS" shall mean any report, return, certificate or
statement required to be supplied to a taxing authority in connection with
Taxes (including, without limitation, income, franchise, sales and use,
unemployment compensation, excise, severance, property, gross receipts,
profits, payroll and withholding Tax returns and information returns).
1.108 "TERMINATION FEE" shall have the meaning assigned to it in
SECTION 8.3(b).
1.109 "TRANSFER TAXES" shall have the meaning assigned to it in
SECTION 6.8(l).
1.110 "TRANSFERRED EMPLOYEES" shall have the meaning assigned to it
in SECTION 6.7(a).
1.111 "TRANSFERRED TRADEMARKS AND LOGOS" shall have the meaning
assigned to it in SECTION 3.1.
1.112 "TRANSITION SERVICES AGREEMENT" shall have the meaning
assigned to it in SECTION 3.3.
1.113 "UNAFFILIATED FIRM" shall have the meaning assigned to it in
SECTION 2.9(c).
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1.114 "WARN ACT" shall mean the Workers' Adjustment and Retraining
Notification Act, as amended, and the regulations thereunder.
1.115 "WORKING CAPITAL" shall mean the current assets minus
current liabilities of the Companies, collectively, calculated according to
GAAP on a basis consistent with the Financial Statements.
ARTICLE II
THE MERGERS
2.1 THE MERGERS. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time, (a) Acquisition Sub 1 and BCTPS
shall be merged with and into BCI in accordance with all applicable laws,
with BCI being Surviving Corporation 1, (b) Acquisition Sub 2 shall be merged
with and into ESBI in accordance with all applicable laws, with ESBI being
Surviving Corporation 2, (c) Acquisition Sub 3 shall be merged with and into
Aptis in accordance with all applicable laws, with Aptis being Surviving
Corporation 3 and (d) Acquisition Sub 4 shall be merged with and into OSC in
accordance with all applicable laws, with OSC being Surviving Corporation 4.
The Companies and the Acquisition Subs shall cause certificates of merger to
be filed with the Secretary of State of Delaware, articles of merger to be
filed with the Secretary of State of Texas and such other documents and
instruments to be filed in any other jurisdiction where such a certificate or
articles of merger is required to effect the Mergers, within two business
days after the Closing Date (as hereinafter defined), unless legally
prohibited from doing so.
2.2 SURVIVING CORPORATIONS.
(a) From and after the Effective Time, Surviving Corporation 1
shall have the name "Billing Concepts, Inc." and shall possess all assets and
property of every description, and every interest in the assets and property,
wherever located, and the rights, privileges, immunities, powers, franchises
and authority, of a public as well as of a private nature, of each of BCI,
BCTPS and Acquisition Sub 1, and all debts, liabilities, duties and all other
things in action or belonging or due to each of BCI, BCTPS and Acquisition
Sub 1, all of which shall be vested in Surviving Corporation 1 without
further act or deed, and title to any real estate or any interest in the real
estate vested in any of BCI, BCTPS or Acquisition Sub 1 shall not revert or
in any way be impaired.
(b) From and after the Effective Time, Surviving Corporation 2
shall have the name "Enhanced Services Billing, Inc." and shall possess all
assets and property of every description, and every interest in the assets
and property, wherever located, and the rights, privileges, immunities,
powers, franchises and authority, of a public as well as of a private nature,
of each of ESBI and Acquisition Sub 2, and all debts, liabilities, duties and
all other things in action or belonging or due to each of ESBI and
Acquisition Sub 2, all of which shall be vested in Surviving Corporation 2
without further act or deed, and title to any real estate or any interest in
the real estate vested in either ESBI or Acquisition Sub 2 shall not revert
or in any way be impaired.
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(c) From and after the Effective Time, Surviving Corporation 3
shall have the name "Aptis, Inc." and shall possess all assets and property
of every description, and every interest in the assets and property, wherever
located, and the rights, privileges, immunities, powers, franchises and
authority, of a public as well as of a private nature, of each of Aptis and
Acquisition Sub 3, and all debts, liabilities, duties and all other things in
action or belonging or due to each of Aptis and Acquisition Sub 3, all of
which shall be vested in Surviving Corporation 3 without further act or deed,
and title to any real estate or any interest in the real estate vested in
either Aptis or Acquisition Sub 3 shall not revert or in any way be impaired.
(d) From and after the Effective Time, Surviving Corporation 4
shall have the name "Operator Service Company" and shall possess all assets
and property of every description, and every interest in the assets and
property, wherever located, and the rights, privileges, immunities, powers,
franchises and authority, of a public as well as of a private nature, of each
of OSC and Acquisition Sub 4, and all debts, liabilities, duties and all
other things in action or belonging or due to each of OSC and Acquisition Sub
4, all of which shall be vested in Surviving Corporation 4 without further
act or deed, and title to any real estate or any interest in the real estate
vested in either of OSC or Acquisition Sub 4 shall not revert or in any way
be impaired.
2.3 LIABILITIES. Each Surviving Corporation shall be liable for
all the debts, liabilities and duties of each of its constituent
corporations; any action or proceeding pending, by or against any of the
Companies or any Acquisition Sub may be prosecuted to judgment, with right of
appeal, as if the Mergers had not taken place, or the applicable Surviving
Corporation may be substituted in its place, and all the rights of creditors
of each of the Companies and each Acquisition Sub shall be preserved
unimpaired, and all liens upon the property of each of the Companies and each
Acquisition Sub shall be preserved unimpaired, on only the property affected
by the liens immediately prior to the Effective Time.
2.4 CERTIFICATES/ARTICLES OF INCORPORATION AND BYLAWS. The
certificates of incorporation and bylaws of Surviving Corporation 1,
Surviving Corporation 2 and Surviving Corporation 3 shall be amended at the
Effective Time to conform with the certificates of incorporation and bylaws
of Acquisition Sub 1, Acquisition Sub 2 and Acquisition Sub 3, respectively,
in effect immediately prior to the Effective Time (except that the names of
the Surviving Corporations shall be amended as provided in SECTIONS 2.2(a),
(b) and (c) hereof) and as so amended shall be the certificates of
incorporation and bylaws of Surviving Corporation 1, Surviving Corporation 2
and Surviving Corporation 3, respectively, following the Mergers until
amended in accordance with applicable law. The articles of incorporation and
bylaws of Surviving Corporation 4 shall be amended at the Effective Time as
set forth in EXHIBIT 2.4 attached hereto and as so amended shall be the
articles of incorporation of Surviving Corporation 4 following the OSC Merger
until amended in accordance with applicable law.
2.5 DIRECTORS AND OFFICERS. The directors and officers of
Acquisition Sub 1, Acquisition Sub 2, Acquisition Sub 3 and Acquisition Sub 4
immediately prior to the Effective Time shall be the directors and officers
of Surviving Corporation 1, Surviving Corporation 2, Surviving Corporation 3
and Surviving Corporation 4, respectively, each to hold office until their
successors are duly elected or appointed and qualified in the manner provided
in the certificate and bylaws of the applicable Surviving Corporation, or as
otherwise provided by law.
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2.6 CONVERSION OR CANCELLATION OF STOCK UPON MERGERS. In
consideration for the Mergers, as of the Effective Time, by virtue of the
Mergers and without any action on the part of the holder of the shares of
Companies Stock or the holder of the shares of the Acquisition Sub Stock, (a)
all shares of BCI Stock issued and outstanding immediately before the
Effective Time shall be canceled and extinguished and be converted
automatically into and become a right to receive an aggregate of fifty-one
million nine hundred ninety-nine thousand seven hundred dollars ($51,999,700)
in cash, payable without interest at the Closing, subject to adjustment
pursuant to SECTION 2.9 below (collectively, the "BCI Merger Consideration"),
all shares of BCTPS Stock issued and outstanding immediately before the
Effective Time shall be canceled and extinguished and be converted
automatically into and become a right to receive an aggregate of one hundred
dollars ($100) in cash, payable without interest at the Closing, subject to
adjustment pursuant to SECTION 2.9 below (collectively, the "BCTPS Merger
Consideration") and each share of Acquisition Sub 1 Stock issued and
outstanding immediately before the Effective Time shall be converted into one
share of common stock, par value $.001, of Surviving Corporation 1; (b) all
shares of ESBI Stock issued and outstanding immediately before the Effective
Time shall be canceled and extinguished and be converted automatically into
and become a right to receive an aggregate of one hundred dollars ($100) in
cash, payable without interest at the Closing, subject to adjustment pursuant
to SECTION 2.9 below (collectively, the "ESBI Merger Consideration") and each
share of Acquisition Sub 2 Stock issued and outstanding immediately before
the Effective Time shall be converted into one share of common stock, par
value $.001, of Surviving Corporation 2; (c) all shares of Aptis Stock issued
and outstanding immediately before the Effective Time shall be canceled and
extinguished and be converted automatically into and become a right to
receive an aggregate of one hundred dollars ($100) in cash, payable without
interest at the Closing, subject to adjustment pursuant to SECTION 2.9 below
(collectively, the "Aptis Merger Consideration") and each share of
Acquisition Sub 3 Stock issued and outstanding immediately before the
Effective Time shall be converted into one share of common stock, par value
$.001, of Surviving Corporation 3; and (d) all shares of OSC Stock issued and
outstanding immediately before the Effective Time shall be canceled and
extinguished and be converted automatically into and become a right to
receive an aggregate of five hundred thousand dollars ($500,000) in cash,
payable without interest at the Closing, subject to adjustment pursuant to
SECTION 2.9 below (collectively, the "OSC Merger Consideration" and together
with the BCI Merger Consideration, the BCTPS Merger Consideration, the ESBI
Merger Consideration and the Aptis Merger Consideration, the "Merger
Consideration") and each share of Acquisition Sub 4 Stock issued and
outstanding immediately before the Effective Time shall be converted into one
share of common stock, par value $.001, of Surviving Corporation 4; provided,
that the Merger Consideration to be paid at Closing shall be fifty-two
million five hundred thousand dollars ($52,500,000), which amount shall be
subject to (i) reduction by the amount of any indebtedness for borrowed money
of the Companies (including any prepayment or termination fees and accrued
interest) and (ii) adjustment pursuant to SECTION 2.9 below.
2.7 FURTHER ASSURANCES. If, at any time after the Effective
Time, any Surviving Corporation shall consider or be advised that any further
assignments or assurances in law or otherwise are necessary or desirable to
vest, perfect or confirm, of record or otherwise, in such Surviving
Corporation, all rights, title and interests in all the assets and all
privileges, powers and franchises of its constituent Company or Companies or
Acquisition Sub, the Surviving Corporation and its proper officers and
directors, in the name and on behalf of its constituent
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Company or Companies and Acquisition Sub, shall execute and deliver all such
proper deeds, assignments and assurances in law and do all things necessary
and proper to vest, perfect or confirm title to such property or rights in
such Surviving Corporation and otherwise to carry out the purpose of this
Agreement, and the proper officers and directors of such Surviving
Corporation are fully authorized in the name of its constituent Company or
Companies or Acquisition Sub or otherwise to take any and all such action.
2.8 CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place within ninety (90) days of
the date hereof, provided that all of the conditions to Closing set forth in
ARTICLE VII hereof are satisfied or waived, on (x) the third business day
after all required approvals of Governmental Authorities for the OSC Merger
have been obtained, or (y) such earlier time within such 90-day period as
agreed to by the parties within seven (7) days from the date of written
notice from Seller to the Buyers stating that Seller is ready to close the
transactions contemplated by this Agreement. The Closing shall take place at
10:00 a.m., local time, at the offices of Seller located at 7411 John Smith
Drive, San Antonio, Texas, on the date set forth in the preceding sentence or
on such other date and at such other time or place as the parties may agree.
The date of the Closing is sometimes referred to herein as the "Closing
Date". The transactions contemplated by this Agreement shall be effective as
of the close of business on the Closing Date. On the Closing Date, the
Merger Consideration shall be sent by the Buyers to Seller by wire transfer
of immediately available funds to an account or accounts designated by Seller.
2.9 WORKING CAPITAL ADJUSTMENT TO MERGER CONSIDERATION.
(a) Not less than five (5) days prior to the Closing Date,
Seller shall deliver to the Buyers its estimate of the Working Capital as of
the Closing Date (the "Estimated Closing Date Working Capital"). Seller shall
provide the Buyers and their authorized representatives with reasonable
access to the books and records of the Companies and its work papers in
connection with such calculation and shall make itself available at
reasonable times upon request of the Buyers to discuss with the Buyers such
calculation. Not less than two (2) days prior to the Closing Date, the
Buyers shall inform Seller in writing of any objection to the Estimated
Closing Date Working Capital. The Buyers and Seller agree to use their
reasonable best efforts to agree on an amount of Estimated Closing Date
Working Capital. If the agreed-upon Estimated Closing Date Working Capital
is an amount greater than $4,000,000, then the Merger Consideration paid by
the Buyers to Seller on the Closing Date shall be increased by an amount
equal to (i) the amount by which the agreed-upon Estimated Closing Date
Working Capital exceeds $4,000,000, less (ii) any distributions made on
account of Estimated Closing Date Working Capital pursuant to SECTION 3.5;
provided, however, that in no event shall the Merger Consideration be
increased by an amount in excess of $4,000,000 pursuant to this SECTION
2.9(a). If the agreed-upon Estimated Closing Date Working Capital is an
amount greater than zero dollars ($0.00) but less than $4,000,000, then the
Merger Consideration paid at Closing shall be reduced by the amount by which
the Estimated Closing Date Working Capital is less than $4,000,000. If the
agreed-upon Estimated Closing Date Working Capital is an amount less than
zero dollars ($0.00), then the Merger Consideration paid at Closing shall be
reduced by an amount equal to the sum of (x) $4,000,000 and (y) the amount by
which the Estimated Closing Date Working Capital is less than zero dollars
($0.00).
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(b) As soon as practicable and in any event no later than thirty
(30) days after the Closing Date, Seller shall deliver to the Buyers the
unaudited balance sheets of the Companies as of the Closing Date (the "Closing
Date Balance Sheets") and its determination of Working Capital as of the
Closing Date (the "Closing Date Working Capital"). The Buyers shall provide
Seller and its authorized representatives with reasonable access to, and
Seller shall have the right, at its sole cost and expense, to make copies of,
the books and records of the Surviving Corporations after the Closing in order
to complete the calculation through the Closing Date. Seller shall provide
the Buyers and their authorized representatives with reasonable access to its
work papers in connection with such calculation and shall make itself
available at reasonable times upon request of the Buyers to discuss with the
Buyers such calculation.
(c) Within ninety (90) days after the Buyers' receipt of
Seller's determination of the Closing Date Working Capital, the Buyers shall
inform Seller in writing that either the Closing Date Working Capital
determination is acceptable or object to the Closing Date Working Capital
determination in writing setting forth a specific description of the Buyers'
objections (it being agreed that the failure of any Buyer to deliver such
written notice to Seller within such ninety (90) day period shall be deemed
acceptance by such Buyer). If the Buyers object as provided above and if
Seller does not agree with the Buyers' objections, if any (it being agreed
that the failure of Seller to deliver written notice to the Buyers of Seller's
disagreement with the Buyers' objections within thirty (30) days of Seller's
receipt of the Buyers' objections shall be deemed acceptance by Seller), or
such objections are not resolved on a mutually agreeable basis within thirty
(30) days after Seller's receipt of the Buyers' objections, any such
disagreement shall be promptly submitted to a mutually acceptable accounting
firm that has performed no services since January 1, 1997 for any of Seller,
any of the Buyers, any of the Companies, any Acquisition Sub or any of their
respective Affiliates (the "Unaffiliated Firm"). The Unaffiliated Firm shall
resolve within thirty (30) days after its engagement by the parties the
differences regarding the determination of the Closing Date Working Capital in
accordance with GAAP and this Agreement; provided however, in no event may the
Closing Date Working Capital be an amount greater than the amount proposed by
Seller or less than the amount proposed by the Buyers.
(d) The fees, expenses and costs of the Unaffiliated Firm
incurred in connection with this SECTION 2.9 shall be paid as follows:
(i) if the Unaffiliated Firm resolves all remaining
objections in favor of the Buyers' determination of Closing Date Working
Capital (the "Low Value"), Seller will be responsible for all of the fees,
expenses and costs of the Unaffiliated Firm;
(ii) if the Unaffiliated Firm resolves all remaining
objections in favor of Seller's determination of Closing Date Working Capital
(the "High Value"), the Buyers will be responsible for all of the fees,
expenses and costs of the Unaffiliated Firm; and
(iii) if the Unaffiliated Firm resolves some of the
remaining objections in favor of the Buyers and other remaining objections in
favor of Seller (Closing Date Working Capital so determined is referred to as
the "Actual Value"), Seller will be responsible for that fraction of the fees,
expenses and costs of the Unaffiliated Firm equal to (x) the difference
between the High Value and the Actual Value divided by (y) the difference
between the High Value and the Low
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Value, and the Buyers will be responsible for the remainder of the fees,
expenses and costs of the Unaffiliated Firm.
The Buyers and Seller shall each bear the fees, costs and expenses of its own
accountants. The Unaffiliated Firm's determination of the Closing Date
Working Capital shall be deemed to be final.
(e) (i) If the Closing Date Working Capital as finally
determined pursuant to this SECTION 2.9 shows that Closing Date Working
Capital is: (a) equal to or greater than $8,000,000, then the Merger
Consideration set forth in SECTION 2.6 shall be increased by an aggregate of
$4,000,000; (b) equal to or greater than $4,000,000 but less than $8,000,000,
then the Merger Consideration set forth in SECTION 2.6 shall be increased by
an aggregate amount equal to the amount by which the Closing Date Working
Capital exceeds $4,000,000; (c) greater than zero dollars ($0.00) but less
than $4,000,000, then the Merger Consideration set forth in SECTION 2.6 shall
be reduced by an aggregate amount equal to the amount by which the Closing
Date Working Capital is less than $4,000,000; (d) less than zero dollars
($0.00), then the Merger Consideration set forth in SECTION 2.6 shall be
reduced by an aggregate amount equal to the sum of (x) $4,000,000 and (y) the
amount by which the Closing Date Working Capital is less than zero dollars
($0.00). To the extent that the increase or reduction made to the Merger
Consideration pursuant to SECTION 2.9(a) is different from the aggregate
adjustment to the Merger Consideration required to be made pursuant to this
SECTION 2.9(e)(i), then the Buyers or Seller, as the case may be, shall pay
the other an amount in cash equal to the amount necessary to achieve the
aggregate increase or reduction to the Merger Consideration as required
pursuant to this SECTION 2.9(e)(i) after taking into account the increase or
reduction made pursuant to SECTION 2.9(a); provided that in no event shall
Seller receive amounts pursuant to this SECTION 2.9 in excess of $4,000,000,
less any distributions taken pursuant to SECTION 3.5 in respect of Estimated
Closing Date Working Capital.
(ii) Such amount owed pursuant to (i) above shall be
paid by wire transfer of immediately available funds to Seller or the Buyers,
as the case may be, within three days after such determination.
ARTICLE III
RELATED MATTERS
3.1 USE OF SELLER'S NAMES AND LOGOS. It is expressly agreed
that from and after the Closing Date the Buyers or the Surviving Corporations
shall have all of Seller's and the Companies' right, title or interest in the
names "Billing Concepts", "Billing Concepts, Inc.", "Enhanced Services
Billing, Inc.", "BC Transaction Processing Services, Inc.", "Aptis, Inc.",
"Operator Service Company" or any trade names, trademarks, identifying logos
or service marks related thereto (collectively, the "Transferred Trademarks
and Logos"); provided, however, that each Buyer agrees that Seller shall be
entitled to use the names "Billing Concepts" and "Billing Concepts Corp." and
the related abbreviation "BCC" and the symbol "BILL" (in connection with the
listing and trading of Seller's common stock on the Nasdaq National Market or
otherwise) and any identifying logos or service marks related thereto from and
after the Closing Date until the earlier of (i) Seller's next annual meeting
of stockholders or (ii) May 31, 2001. Except as provided in the preceding
sentence, Seller agrees that neither it nor any of its affiliates shall
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make any use of the Transferred Trademarks and Logos from and after the
Closing Date and will not use any items, including, without limitation, any
signage, stationery, invoices or other letterhead, bearing Transferred
Trademarks and Logos.
3.2 BOOKS AND RECORDS OF THE COMPANIES. Seller agrees to
deliver to the Buyers at or as soon as practicable after the Closing all books
and records of the Companies or of Seller to the extent relating exclusively
to the Companies and copies of Seller's records to the extent reasonably but
not exclusively related to the Companies (including, but not limited to,
correspondence, memoranda, books of account, Tax records and returns (except
for consolidated Tax returns and related records of Seller, originals of which
shall be retained by Seller and copies of which shall be delivered to the
Buyers), personnel and payroll records and the like). All information or
records relating to any of the Companies which are not delivered to the Buyers
pursuant hereto will be preserved by Seller for a period of at least five (5)
years following the Closing and Seller will permit the Buyers and their
authorized representatives to have reasonable access to, and examine and make
copies of, in each case, during normal business hours, all such information or
records as reasonably requested by the Buyers. All books and records
delivered by Seller to the Buyers will be preserved by the Buyers for a period
of at least five (5) years following the Closing and the Buyers will permit
Seller and its authorized representatives to have reasonable access to, and
examine and make copies of, in each case, during normal business hours, all
such books and records as reasonably requested by Seller. In addition to the
foregoing, the Buyers shall, upon reasonable request, furnish Seller with
system reports for operations of the Companies for any period ending on or
before the Closing Date at no additional cost to Seller.
3.3 TRANSITION SERVICES. At the Closing, the Buyers and Seller
shall enter into a transition services agreement in substantially the form of
EXHIBIT 3.3 attached hereto (the "Transition Services Agreement").
3.4 INTERCOMPANY ACCOUNTS. Except as set forth on SCHEDULE 3.4,
prior to the Closing Date, all intercompany accounts or any agreements or
transactions (a) between the Companies, on the one hand, and Seller and its
Affiliates, on the other hand, or (b) among the Companies, shall be canceled.
3.5 DISTRIBUTIONS. The parties agree that Seller shall have the
right, at or prior to the Closing, with the prior written consent of the
Buyers, to cause the Companies to distribute cash to Seller or its Affiliates,
by one or more cash dividends and/or other distributions; provided that Seller
may distribute cash only to the extent cash exceeds the amount shown on the
most recent monthly balance sheet as "Current Liabilities -- Third Party".
Notwithstanding the foregoing, Seller shall have the right to distribute prior
to the Closing, without the prior written consent of the Buyers, up to the
amount by which the Estimated Closing Date Working Capital as agreed to by the
Buyers and Seller exceeds $4,000,000; provided that (x) such distribution
shall reduce the amount of payment from the Buyers to Seller under SECTION
2.9(a) on a dollar-for-dollar basis and (y) in no event shall Seller
distribute more than $4,000,000 pursuant to this SECTION 3.5.
3.6 TRANSFER OF ASSETS. Prior to the Closing, Seller shall have
assigned its ownership interests in all of the assets set forth on SCHEDULE
3.6 to one or more of the Companies.
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3.7 CONSULTING SERVICES. At the Closing, Platinum Equity
Holdings, the Buyers and Seller shall enter into a consulting services
agreement in substantially the form of EXHIBIT 3.7 attached hereto (the
"Consulting Agreement").
3.8 GUARANTY OF PERFORMANCE. Simultaneously with the execution
of this Agreement, Platinum Equity Holdings has executed a guaranty of
performance in the form of EXHIBIT 3.8 attached hereto (the "Guaranty").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth on the Disclosure Schedule or in the SEC
Documents, Seller represents and warrants to each Buyer and each Acquisition
Sub as follows:
4.1 ORGANIZATION. Each of Seller and the Companies is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation and has all requisite corporate power and
authority to own, lease and operate its respective properties and to carry on
its respective operations as and where now being conducted. Each of the
Companies is duly qualified or licensed and in good standing to do business in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
which jurisdictions are listed in Section 4.1 of the Disclosure Schedule being
delivered to the Buyers and the Acquisition Subs by Seller herewith (the
"Disclosure Schedule"), except in any such jurisdictions where the failure to
be so duly qualified or licensed and in good standing, individually or in the
aggregate, would not have a Material Adverse Effect. Seller has previously
made available to the Buyers complete and correct copies of the Certificate or
Articles of Incorporation (as applicable) and Bylaws of each of the Companies,
each as currently in effect, all stock issuance and transfer records of the
Companies and any and all written records in Seller's possession reflecting
proceedings of the Boards of Directors and the stockholders of each of the
Companies. None of the Companies has any direct or indirect equity interest
in or Control of any Person. None of the Companies is a party to any joint
venture with any other Person.
4.2 AUTHORIZATION. Seller and each of the Companies each has
the corporate power and authority to execute and deliver this Agreement and
the Ancillary Agreements to which it is a party and consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the respective Boards of Directors of
Seller and each of the Companies and by the sole stockholder of each of the
Companies, and no other corporate proceedings or stockholder approvals on the
part of Seller, any of the Companies or any of their respective stockholders
are necessary to authorize the execution, delivery and performance of this
Agreement, the Ancillary Agreements or the consummation of the transactions so
contemplated. This Agreement has been duly executed and delivered by each of
Seller and each of the Companies and constitutes, and, when executed and
delivered, each of the Ancillary Agreements and all other documents and
instruments to be executed and delivered by either Seller or any of the
Companies pursuant hereto will constitute (assuming in each case the valid
authorization, execution and delivery of such agreements by the other parties
hereto or thereto), a valid and binding agreement of either Seller or such
Company, as applicable, enforceable against
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it in accordance with its terms, except that (a) such enforcement may be
subject to any bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws, now or hereafter in effect, relating to or limiting
creditors' rights generally, and (b) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
4.3 CAPITAL STOCK. Set forth in Section 4.3 of the Disclosure
Schedule is the number of authorized shares of the Companies Stock and the
number of such shares which are issued and outstanding. All of such shares of
the Companies Stock are duly authorized, validly issued, fully paid and
non-assessable. No other class of capital stock of any of the Companies is
authorized, issued or outstanding. There are no outstanding securities
convertible into, exchangeable for, or carrying the right to acquire, equity
or other securities of any of the Companies, nor are there any subscriptions,
warrants, options, rights, contracts, or other arrangements or commitments
(other than this Agreement) which could obligate any of the Companies or
Seller to issue, sell, deliver or transfer any shares of Companies Stock or
any equity or other securities of any of the Companies.
4.4 OWNERSHIP OF THE COMPANIES STOCK. Seller is the record and
beneficial owner of the Companies Stock, which comprises all of the issued and
outstanding shares of all classes of capital stock of each of the Companies.
Except as set forth in Section 4.4 of the Disclosure Schedule, Seller has good
title to the Companies Stock, free and clear of all Encumbrances.
4.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
applicable requirements of the HSR Act, or as set forth in Section 4.5 of the
Disclosure Schedule, neither the execution and delivery of this Agreement or
any Ancillary Agreement nor the consummation by Seller and each of the
Companies of the transactions contemplated hereby or thereby or the continued
lawful operation of the Business immediately after the Closing Date will: (a)
violate, conflict with or result in any breach of any provision of the
Certificate or Articles of Incorporation or By-Laws of Seller or any of the
Companies; (b) require any filing with, or the obtaining of any permit,
license, authorization, declaration, application, transfer, consent or
approval of, any Governmental Authority; (c) violate, conflict with or result
in a default (or any event that, with notice or lapse of time or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under, any of the terms, conditions or provisions
of any note, mortgage, other evidence of indebtedness, guarantee, license,
agreement, lease, Permit or other contract or instrument or obligation to
which Seller or any of the Companies is a party or by which Seller or any of
the Companies or any of their respective assets may be bound; (d) result in
the creation or imposition of any Encumbrance upon the assets of any of the
Companies, or give to any person any interest or right in any of the assets or
business of any of the Companies; or (e) violate any law, order, injunction,
decree, statute, rule or regulation of any governmental or regulatory
authority or any judgment applicable to Seller or any of the Companies;
excluding from the foregoing clauses (b), (c), (d) and (e), any such matters
which would not have a Material Adverse Effect and would not adversely affect
the ability of Seller or the Companies to consummate the transactions
contemplated by this Agreement.
4.6 FINANCIAL STATEMENTS. Attached as Section 4.6 of the
Disclosure Schedule are copies of each of: (i) the Companies' unaudited
balance sheets as of September 30, 1998,
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September 30, 1999 and July 31, 2000; (ii) the Companies' unaudited statements
of operations for the years ended September 30, 1998 and September 30, 1999
and the ten month period ended July 31, 2000; (iii) Seller's audited balance
sheets as of September 30, 1998 and September 30, 1999; and (iv) Seller's
audited statements of operations for the years ended September 30, 1998 and
September 30, 1999 (the financial statements referred to in clauses (i)
through (iv) are referred to herein collectively as the "Financial
Statements"). The Financial Statements present fairly, in all material
respects, the financial position of Seller and the Companies (as applicable)
as of the respective dates thereof, and the results of operations of Seller
and the Companies (as applicable) for the respective periods indicated, all in
conformity with GAAP, consistently applied, except for footnote disclosures
and normal, year-end audit adjustments required by GAAP.
4.7 ABSENCE OF MATERIAL ADVERSE AND OTHER CHANGES. Except as
set forth in Section 4.7 of the Disclosure Schedule or as otherwise
contemplated by this Agreement, since June 30, 2000 (i) the Companies have
conducted their respective businesses in all material respects in the ordinary
and usual course of such businesses and (ii) there has not been (a) any change
in the business, results of operations or financial condition of the Companies
that, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect, (b) any material damage, destruction or other
casualty loss (whether or not covered by insurance) with respect to any asset
or property owned, leased or otherwise used by any of the Companies which is
material to the Companies taken as a whole, (c) any declaration, setting aside
or payment of any dividend or other distribution in respect of the capital
stock of any of the Companies except as contemplated by SECTION 3.5, (d) any
significant change by any of the Companies in accounting principles or
methods, (e) any material transaction made by any of the Companies that is not
in the ordinary course of business or not consistent with past practices, (f)
any sale, disposal or transfer of any material assets of any of the Companies
or any cancellation of any material debts or claims, except sales in the
ordinary course of business of inventory or of an immaterial amount of other
tangible personal property not required in their respective businesses or the
cancellation of any debts or claims in the ordinary course of business, (g)
any material mortgage, pledge or subjection to an Encumbrance, except for
Permitted Encumbrances, of any of the Companies' properties or assets, (h) any
increase in, or commitment to increase, the compensation payable or to become
payable to any officer, director, employee or agent, or any bonus payment or
similar arrangement made to or with any of such officers, directors, employees
or agents, (i) any adoption of a plan or agreement or amendment to any
existing plan or agreement (or commitment for the same) providing any new or
additional benefits to employees, officers or directors, (j) any material
alteration in the manner of keeping their books, accounts or records, or in
the accounting practices reflected therein, (k) any intercompany loan or
borrowing to or from any stockholder of Seller, (l) any acquisition of any
assets, acquisition of any business or merger or consolidation, by or
involving any Company other than in the ordinary course of business, (m) any
material change by any Company in any pricing, marketing, purchasing, tax
practice, policy or method of calculating any bad debt, contingency or other
reserve, material Tax election or settlement or compromise of any material Tax
liability, (n) any incurrence, assumption or guaranty of any indebtedness or
any commitment to borrow money by any Company, (o) any issuance, sale or
redemption of any equity securities of any Company, (p) any incurrence of any
liability involving $100,000 or more other than in the ordinary course of
business, (q) any entrance or commitment to enter into any transaction between
any Company, on the one hand, and any stockholder, director, officer or
Affiliate of any Company, or any
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member of any such person's immediate family or any entity in which, to
Seller's knowledge, any of the foregoing has a beneficial ownership interest
in excess of five percent (5%), on the other hand, (r) any acceleration,
prepayment or performance of any indebtedness or account receivable or other
material obligation owed to or by any Company before it is due or otherwise
owed, (s) any amendment or termination of a contract that could meet the
definition of "Material Contract" or (t) any entrance into any agreement, plan
or commitment to do any of the foregoing.
4.8 TITLE, OWNERSHIP AND RELATED MATTERS.
(a) Since August 2, 1996, none of the Companies has owned, or
held any option to acquire, any real property.
(b) Each of the Companies has, or will as of the Closing have,
good and marketable title to all material items of personal property reflected
in its July 31, 2000 balance sheet as being owned by it or thereafter acquired
by it, except those items sold or otherwise disposed of since the date thereof
in the ordinary course of business consistent with past practices, free and
clear of any Encumbrances, except (i) such as are disclosed in Section 4.8(b)
of the Disclosure Schedule and (ii) Permitted Encumbrances. The material
personal property set forth in the July 31, 2000 balance sheet as being owned
by any of the Companies taken as a whole is, to the extent currently used in
operations, in reasonably good operating condition and repair, normal wear and
tear excepted. This SECTION 4.8(b) does not relate to interests in real
property, which are the subject of SECTION 4.9(a), or to intellectual property
or software, which are the subject of SECTIONS 4.10 and 4.11.
4.9 LEASES.
(a) Section 4.9(a) of the Disclosure Schedule lists, as of the
date hereof, all real property leases and subleases for space occupied by any
of the Companies (collectively, the "Leases"). True and complete copies of
the Leases and all written amendments and agreements relating thereto have
been made available to the Buyers. All of the Leases are valid, binding and
enforceable against Seller or the Company party thereto, as the case may be,
in accordance with their terms, and neither Seller nor any of the Companies
(including, without limitation, with respect to their respective occupancy,
maintenance and use of the property) nor, to the knowledge of Seller, the
other party to any Lease is in default under such Lease or any applicable law
relating to the occupancy, maintenance and use of the property, except for
defaults, if any, which would not, individually or in the aggregate, have a
Material Adverse Effect. No written notice from any lessor, governmental body
or other person has been received by Seller or any of the Companies claiming
any violation of, or breach or default under, any Lease or law relating to any
Lease, or requiring or calling attention to the need for any work, repairs,
construction, alternation or installations.
(b) Section 4.9(b) of the Disclosure Schedule lists, as of the
date hereof, all leases or other agreements or rights under which any of the
Companies is the lessee of, or holds or operates, any machinery, equipment,
vehicles or other tangible personal property owned by a third party, except
those that are not material to the business of the Companies taken as a whole
(collectively, the "Equipment Leases"). Each item of material personal
property leased by any of the Companies is in such condition, normal wear and
tear excepted, that upon the return of such
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property to its owner or lessor in its present condition at the end of the
relevant lease term or as otherwise contemplated by the applicable agreement
between the Company leasing such item and the owner or lessor thereof, the
obligations of the Company leasing such item to such owner or lessor should be
discharged without the requirement for any material payment.
4.10 INTELLECTUAL PROPERTY; SOFTWARE.
(a) Section 4.10(a) of the Disclosure Schedule sets forth a
complete and correct list of all patents, patent applications, trademarks
(registered or otherwise), service marks, trade names and copyrights included
in the Intellectual Property and of all Intellectual Property licensed from an
affiliate of Seller or any third party, other than licenses of software or
other Intellectual Property that is generally commercially available and
complete and correct list of all agreements relating to Intellectual Property,
except for agreements relating to Intellectual Property that is generally
commercially available. The Intellectual Property constitutes all of the
intellectual property rights necessary and sufficient for the Buyers to
operate the Business as currently conducted immediately after the Closing.
Each of the Companies owns or possesses valid and adequate rights to use the
Intellectual Property, free and clear of Encumbrances, except where the
failure to own or possess valid and adequate rights to use such Intellectual
Property would not have a Material Adverse Effect.
(b) Except as set forth in Section 4.10(b) of the Disclosure
Schedule, there are no outstanding or, to the knowledge of Seller, threatened
disputes or disagreements with respect to any Intellectual Property rights or
similar agreements and except as set forth in Section 4.10(b) of the
Disclosure Schedule, to the knowledge of Seller, the conduct of the business
of the Companies does not infringe and has not since August 2, 1996 infringed
any valid patents, trademarks, trade names, service marks, service names,
logos, assumed names or copyrights of others. The consummation of the
transactions contemplated by this Agreement will not result in the loss or
impairment of any of the Companies' Intellectual Property rights.
(c) Except as set forth in Section 4.10(c) of the Disclosure
Schedule, none of the Companies is obligated or under any liability to make
any payments by way of royalties, fees or otherwise to any owner or licensee
of, or other claimant to, any patent, trademark, service mark, trade name,
copyright or other intangible asset, with respect to the use thereof or in
connection with the conduct of its business except for payments for software
or other Intellectual Property that is generally commercially available, nor
are any of the Companies in default, and to Seller's knowledge no third party
is in default, under any license, sublicense or agreement by which any Company
holds, or has given others the right to use, any Intellectual Property, except
for any such defaults that would not have a Material Adverse Effect.
(d) Except as set forth in Section 4.10(d) of the Disclosure
Schedule, all fees to the U.S. Patent Office and any other relevant
registration fees regarding the Intellectual Property that are due and payable
on or before the date of this Agreement have been paid, and the Intellectual
Property is not the subject of any pending or threatened proceedings for
opposition, cancellation or revocation.
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(e) Except as set forth in Section 4.10(e) of the Disclosure
Schedule, none of the Intellectual Property has been declared invalid or been
limited in any significant respect by any authority.
4.11 PROPRIETARY INFORMATION.
(a) Except as set forth in Section 4.11(a) of the Disclosure
Schedule, the Companies own, free and clear of any Encumbrances, or have valid
licenses or other rights to use all trade secrets, including know-how,
inventions, designs, processes, works of authorship, computer programs (with
the exception of commercially available software purchased and sold as such)
and technical data and information (collectively herein "Proprietary
Information") used in the development, manufacture, operation and sale of all
products and services sold by the Companies. Except as set forth in Section
4.11(a) of the Disclosure Schedule, there are no outstanding or, to the
knowledge of Seller, threatened disputes or disagreements with respect to any
Proprietary Information. Section 4.11(a) of the Disclosure Schedule contains
a true and correct listing of all material software products (other than
commercially available software purchased and sold as such) used by or sold or
distributed by any of the Companies and all written Contracts involving
payments of more than $200,000 in any twelve (12) month period relating to
such software.
(b) Except as set forth in Section 4.11(b) of the Disclosure
Schedule, the Companies own any and all Proprietary Information used in the
conduct of the Business as currently conducted by the Companies, and to the
knowledge of Seller, no material impediment to the development of any product
contemplated by any of the Companies as part of the business currently
proposed to be conducted by it exists.
(c) Except as set forth in Section 4.11(c) of the Disclosure
Schedule, to Seller's knowledge, the conduct of the Business by the Companies
does not infringe upon or otherwise act adversely to the right or claimed
right of any former employee, consultant and/or former employer of any of its
past or present employees or consultants, and all employee invention claims
due and payable on or before the date of this Agreement have been paid in full.
(d) The Companies have taken the security measures set forth in
Section 4.11(d) of the Disclosure Schedule to protect the secrecy,
confidentiality and value of the Proprietary Information, which measures they
believe are reasonable and customary in the industries in which they operate
and which include having certain employees of the Companies execute
confidentiality and work-for-hire and assignment agreements. Except as set
forth in Section 4.11(d) of the Disclosure Schedule, to Seller's knowledge,
none of any of the Companies' employees, consultants, contractors, or former
employees has made any claim of ownership in or rights with respect to any of
the Proprietary Information.
4.12 LITIGATION. Except as set forth in Section 4.12 of the
Disclosure Schedule: (a) there is no action, suit, condemnation, litigation
proceeding, arbitration or governmental or regulatory investigation pending
or, to the knowledge of Seller, threatened against Seller, any of the
Companies or any of their properties or assets by any Person or by or before
any Governmental Authority; (b) there is no outstanding judgment, order, writ,
injunction, fine, citation, award, decree or other judgment of any nature of
any court, Governmental Authority or
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arbitration tribunal against any of the Companies, or their businesses or
assets; and (c) no breach of contract, tort or other claim (whether arising
from the operations of the Business or otherwise) by any third party seeking
material damages has been asserted and is outstanding against any of the
Companies.
4.13 COMPLIANCE WITH APPLICABLE LAW. The Companies hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Authorities necessary for the lawful conduct of their businesses
(collectively, the "Permits"), except for failures to hold such Permits which
would not have a Material Adverse Effect. All material Permits are set forth
on Section 4.13 of the Disclosure Schedule. The Companies are in compliance
with the terms of the Permits except where the failure so to comply would not
have a Material Adverse Effect. The Companies' businesses have not been since
August 2, 1996 and are not being conducted in violation of any law, statute,
rule, ordinance or regulation of any Governmental Authority ("Law"), except
for violations or possible violations which do not and, insofar as reasonably
can be foreseen in the future, will not have a Material Adverse Effect.
Except as set forth in Section 4.13 of the Disclosure Schedule, no
investigation or review by any Governmental Authority with respect to any of
the Companies is pending or, to the knowledge of Seller, threatened nor, to
the knowledge of Seller, has any Governmental Authority indicated an intention
to conduct the same. Except as set forth on Section 4.13 of the Disclosure
Schedule, Seller and the Companies have not received any written notice to the
effect that, or been advised in writing that, any of the Companies is not in
compliance with any Law, other than any such non-compliance that has been
cured. No representation or warranty is made in this SECTION 4.13 with
respect to Environmental Laws which are covered in SECTION 4.19 below.
4.14 CERTAIN CONTRACTS AND ARRANGEMENTS.
(a) Section 4.14(a) of the Disclosure Schedule lists each
material written Contract, including each material written: (i) indenture,
mortgage, note, installment obligation, agreement or other instrument or
contract relating to the borrowing of money by any of the Companies or the
guarantee of any obligation for the borrowing of money by any of the
Companies; (ii) contract, agreement, purchase order, license or commitment for
the purchase or sale of goods, materials, supplies or services involving
payments of more than $200,000 in any twelve (12) month period; (iii) security
agreement and other agreement to which any Company is a party involving the
borrowing of money by, or any extension of credit (other than trade credit)
to, such Company; (iv) agreement or commitment to make a capital expenditure
in excess of $50,000 with respect to the Business; (v) agreement to sell,
lease or otherwise dispose of any assets or properties of any Company other
than in the ordinary course of business; (vi) agreement limiting the freedom
of any Company to compete in any line of business or in any geographic area or
with any person; (vii) Contract of an annual value in excess of $200,000 that
is not terminable by any Company on 90 days' notice or less; (viii) joint
venture agreements and partnership agreements to which any Company is a party
or by which it is bound; (ix) employment contract (other than offer letters in
standard form for employees at will that set forth standard compensation
packages and employment terms), severance agreement or other similar
agreement; and (x) other contracts, agreements or other instruments, material
to the business of any of the Companies (the items referred to in clauses (i)
through (x) are referred to herein collectively as the "Material Contracts"),
to which any of the Companies is a party or by which any of their assets are
bound.
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(b) Except as set forth in Section 4.14(b) of the Disclosure
Schedule, each Material Contract is valid, binding and enforceable against any
Company party thereto in accordance with its terms and, to the knowledge of
Seller, neither any Company party thereto nor any other party thereto is in
default under any of the aforesaid Material Contracts other than such
defaults, if any, which would not, individually or in the aggregate, have a
Material Adverse Effect.
4.15 TAXES.
(a) Except as set forth in Section 4.15(a) of the Disclosure
Schedule, Seller has (i) timely filed or caused to be filed on a timely basis
with the appropriate taxing authorities all material Tax Returns required to
be filed by or with respect to the Companies (including, without limitation,
any income Tax Return required to be filed by any Affiliated Group with
respect to which Seller or any of its subsidiaries was a member), and (ii)
paid or made adequate provision on the financial statements of the Companies
for the payment of all Taxes owed by the Companies and/or any other member of
an Affiliated Group (whether or not shown on any Tax Return) for each taxable
period ending prior to the date hereof and made all deposits required by law
to be made with respect to such Taxes. Except as set forth in Section 4.15(a)
of the Disclosure Schedule, the Companies will not accrue a liability for
Taxes after the end of each taxable period ending prior to the date hereof
other than a liability for Taxes accrued in the ordinary course of business.
To Seller's knowledge, all such Tax Returns are true, correct and complete in
all material respects.
(b) Except as set forth in Section 4.15(b) of the Disclosure
Schedule, (i) there are no liens for Taxes with respect to the assets of the
Companies except for statutory liens for current Taxes not yet delinquent and
no claims with respect to Taxes are being asserted by any taxing authority in
writing, which individually or in the aggregate would have a Material Adverse
Effect, (ii) all deficiencies asserted in writing as a result of any
examinations by the IRS or any other taxing authority have been paid and fully
settled, (iii) none of the Tax Returns applicable to the Companies is
currently being audited or examined or to the knowledge of Seller, threatened
to be audited or examined, by any taxing authority, (iv) no adjustment to any
Tax Return applicable to the Companies has been proposed to Seller or any
Company formally or informally by any taxing authority and (v) there is no
unpaid tax deficiency, determination or assessment currently outstanding
against any of the Companies.
(c) Except as set forth in Section 4.15(c) of the Disclosure
Schedule:
(i) none of the Companies or Seller has taken any
action that would require an adjustment pursuant to Section 481 or Section
263A of the Code or any comparable provision under state or foreign Tax laws,
by reason of a change in accounting method or otherwise, with respect to any
of the Companies;
(ii) none of the Companies or Seller has filed a consent
under Section 341(f)(1) of the Code or agreed to have the provisions of
Section 341(f)(2) of the Code apply to any of the Companies upon any
disposition of "subsection (f) assets" as such term is defined in Section
341(f)(4) of the Code;
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(iii) no consents waiving or extending any applicable
statutes of limitations for the Tax Returns of any of the Companies, or any
Taxes required to be paid thereunder, have been filed;
(iv) Seller has made available to the Buyers complete
and correct copies of all audit reports and statements of deficiencies in
Seller's possession with respect to any Tax assessed against or agreed to by
any of the Companies (or by Seller on behalf of any of the Companies), for the
three most recent taxable periods for which such audit reports and statements
of deficiencies have been received by any of the Companies or Seller;
(v) Seller has delivered to the Buyers complete,
current and correct copies of the United States Income Tax Returns of Seller
for the years ended in 1997, 1998 and 1999; Seller has made available to the
Buyers complete, current and correct copies of all state, local and foreign
Tax Returns filed by any of the Companies or by Seller on behalf of any of the
Companies for the three most recent taxable years for which such Tax Returns
have been filed immediately preceding the date of this Agreement, and other
than with respect to Taxes shown on such Tax Returns, none of the Companies is
subject to any Tax imposed on net income in any jurisdiction or by any Taxing
Authority;
(vi) none of the Companies is a party to or bound by any
Tax sharing, Tax indemnity or Tax allocation agreement or other similar
agreement;
(vii) none of the Companies has made any payments, is
obligated to make any payments or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Section 280G or 162(m) of the Code;
(viii) the Companies do not have any excess loss accounts
(as defined in Treasury Regulations section 1.1502-19) nor any deferred
intercompany gains (as defined in Treasury Regulations section 1.1502-13);
(ix) none of the assets of any Company (1) are property
that such Company is required to treat as being owned by any other person
pursuant to the so-called "safe harbor lease" provisions of former Section
168(f)(8) of the Code, (2) directly or indirectly secure any debt the interest
on which is tax exempt under Section 103(a) of the Code or (3) are "tax-exempt
use property" within the meaning of Section 168(h) of the Code;
(x) neither Seller nor any Company has taken any action
that is not in accordance with past practice that could defer a liability for
Taxes of the Companies from any taxable period ending on or before the Closing
Date to any taxable period ending after the Closing Date;
(xi) all related party transactions conducted by the
Companies and Seller and other subsidiaries of Seller have been on an
arms-length basis in accordance with Section 482 of the Code;
(xii) no Company is, or has been, a "reporting
corporation" subject to the information reporting and record maintenance
requirements of Section 6038A of the Code and the regulations promulgated
thereunder;
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(xiii) none of the Companies has executed or entered into
any closing agreement pursuant to Section 7121 of the Code, or any predecessor
provisions thereof or any similar provision of state or other law; and
(xiv) Seller has disclosed on its federal income tax
return any material "reportable transaction" that it was required to disclose
pursuant to Section 6011 of the Code and the regulations promulgated
thereunder.
4.16 CERTAIN FEES. Except for the engagement of Donaldson,
Lufkin & Jenrette Securities Corporation, the fees and expenses of which shall
be the sole responsibility of Seller, neither Seller nor any of the Companies
has employed any financial advisor or finder or incurred any liability for any
financial advisory or finders or brokers fees in connection with this
Agreement or the transactions contemplated hereby.
4.17 EMPLOYEE RELATIONS.
(a) Section 4.17(a) of the Disclosure Schedule sets forth a
complete and accurate list of the names, positions and current compensation
levels of all salaried employees of Seller and each Company, other than those
employees of Seller who shall remain employed by Seller upon the Closing, and
indicates in each case the employer of such employee and whether such employee
is a party to an employment or severance agreement or is otherwise entitled to
any employee benefits that are not available generally to all employees. None
of the Companies has been a party to or bound by any union or collective
bargaining agreement, nor is any such agreement currently in effect or being
negotiated by or on behalf of any of the Companies. There are no pending,
nor, to the knowledge of Seller, threatened walkouts, strikes, union
organizing efforts or labor disturbances, or any pending arbitration, unfair
labor practice or grievance, with respect to employees of any of the Companies.
(b) Except as set forth in Section 4.17(b) of the Disclosure
Schedule and except for any limitations of general application under
applicable Law relating to employment and employment practices, terms and
conditions of employment and wages and hours (collectively, "Employment
Laws"), none of the Companies is party to any written or oral employment
agreement with any of its officers, directors, employees, consultants, agents,
or other persons which is not terminable by such Company at will without
penalty or cost to such Company.
(c) Each of the Companies is and has been at all times since
August 2, 1996 in compliance in all material respects with all applicable
Employment Laws.
(d) None of the Companies has incurred any liability under the
WARN Act or any other comparable law.
(e) Section 4.17(e) of the Disclosure Schedule lists all
charges, investigations, administrative proceedings and formal complaints of
discrimination (including discrimination based upon sex, age, marital status,
race, national origin, sexual preference, handicap or veteran status) pending
or, to Seller's knowledge, threatened before the Equal Employment Opportunity
Commission or any Governmental Authority.
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4.18 INSURANCE. Section 4.18 of the Disclosure Schedule contains
an accurate list of all policies of insurance maintained by Seller or any
Company (indicating in each case which entity holds such policy) covering any
of the Companies or the Business. Seller has provided the Buyers with, or
made available for the Buyers' review, true and correct copies of all such
insurance policies. All such policies are valid, outstanding and enforceable
in all material respects and neither Seller nor any of the Companies has
agreed to modify or cancel any of such policies prior to the Closing, nor has
Seller or any Company received notice of any actual or threatened
modification or cancellation of any such insurance.
4.19 ENVIRONMENTAL MATTERS. Except as set forth in Section 4.19
of the Disclosure Schedule, neither Seller nor any of the Companies has
received written notice of any alleged violation of Environmental Law or
liability for any release of any Hazardous Substance in connection with the
present or past business or properties of the Companies, and there exists no
writ, injunction, decree, order or judgment outstanding, nor any lawsuit,
proceeding, citation, summons or governmental agency investigation relating
thereto. Seller has made available to the Buyers copies of all environmental
audits, studies or documents in Seller's possession or control relating to
the Companies or any of their respective properties.
4.20 SEC DOCUMENTS. Seller has filed all required SEC Documents
with the SEC since January 1, 1998, each of which has complied in all
material respects with all applicable requirements of the Securities Act and
the Exchange Act, each as in effect on the dates such forms, reports and
documents were filed. None of such SEC Documents, including, without
limitation, any financial statements or schedules included or incorporated by
reference therein, with respect to the Companies contained when filed any
untrue statement of material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein in light of the circumstances under which they were made not
misleading.
4.21 EMPLOYEE BENEFIT PLANS.
(a) Section 4.21(a) of the Disclosure Schedule lists all
employee benefit plans (as defined in Section 3(3) of ERISA) and all bonus,
stock option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar fringe or employee benefit plans,
programs or arrangements and any current or former employment or executive
compensation or severance agreements, written or otherwise, maintained or
contributed to for the benefit of or relating to any current or former
employee of the Companies, any trade or business (whether or not
incorporated) which is a member of a controlled group including any of the
Companies or which is under common control with any of the Companies within
the meaning of Section 414 of the Code (an "ERISA Affiliate") as well as each
plan with respect to which any of the Companies or an ERISA Affiliate could
incur liability under Section 4069 (if such plan has been or were terminated)
or Section 4212(c) of ERISA (together, the "Employee Plans"), excluding, in
each case, plans, agreements, programs or arrangements or former plans,
agreements, programs or arrangements under which the Companies have no
remaining material obligations. Seller has made available to the Buyers a
copy of (i) the most recent annual report on Form 5500 filed with the IRS for
each disclosed Employee Plan where such report is required and (ii) the
documents and instruments governing each such Employee Plan. Each Employee
Plan that is intended to be a tax-qualified plan within the meaning of
Section 401(a) of the Code has received a determination letter from the IRS
that it is so qualified, and, to the knowledge of
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Seller, there exists no fact or set of facts that could cause the qualified
status of any such Employee Plan to be adversely affected. No event has
occurred and, to the knowledge of Seller, there currently exists no condition
or set of circumstances in connection with which any of the Companies could
be subject to any liability under the terms of any Employee Plan, ERISA, the
Code or any other applicable law, including without limitation, any liability
under Title IV of ERISA, which reasonably could be expected to have a
Material Adverse Effect.
(b) Each Employee Plan complies with the provisions of and has
been administered in compliance with its terms and in accordance with the
applicable provisions of ERISA, the Code, any securities laws or regulations
and all other applicable laws, except for such non-compliance that would not
have a Material Adverse Effect. Without limiting the generality of the
foregoing, no "prohibited transaction" (as such term is defined in Section
4975 of the Code, or in Part 4 of Subtitle B of Title I of ERISA) has
occurred with respect to any Employee Plan that could result in the
imposition of Taxes or penalties, and there has been no failure to make any
contribution to, or to make any payment under, any Employee Plan that was
required pursuant to the terms of such Employee Plan or pursuant to
applicable law, except for those that would not have a Material Adverse
Effect. There is no pending or, to Seller's knowledge, threatened action or
claim against or involving any Employee Plan except for routine claims for
benefits.
(c) All pension plans that are intended to be qualified under
Section 401(a) of the Code are so qualified and are exempt from Federal
income taxes under Section 501(a) of the Code.
(d) Neither Seller, any Company nor any ERISA Affiliate has
ever maintained, contributed to or been obligated to contribute to any Plan
that is subject to Title IV of ERISA or Section 412 of the Code.
(e) There is no investigation by any Governmental Authority or
any proceeding or other claim (other than claims for benefits in the normal
operations of the Employee Plans or relating to qualified domestic relations
orders), action, suit or proceeding against or involving any Employee Plan or
asserting any right or claim to benefits thereunder.
(f) All contributions required to be made to each Employee Plan
under the terms thereof, ERISA, the Code or any other applicable law have
been timely made, and are fully deductible in the year for which they were
paid. All other amounts that should be accrued to date as liabilities of any
Company under or with respect to each Employee Plan (including incurred but
not reported claims) for the current year of each Employee Plan have been
recorded on the books of such Company.
(g) There will be no material liability of any Company (i) with
respect to any Employee Plan that has previously been terminated or (ii)
under any insurance policy or similar arrangement procured in connection with
any Employee Plan in the nature of a retroactive rate adjustment, loss
sharing arrangement or other such liability arising wholly or partially out
of events occurring before the Closing. None of the assets of any Employee
Plan are invested in a group annuity contract or other insurance contract
that is subject to any surrender charge, interest rate adjustment or other
similar expense upon its premature termination.
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(h) To Seller's knowledge, none of the persons performing
services for any Company has been improperly classified as being independent
contractors or leased employees or as being exempt from the payment of wages
for overtime.
(i) The consummation of the transactions contemplated by this
Agreement will not require the funding (whether formal or informal) of the
benefits under any Employee Plan (e.g., contributions to a "Rabbi Trust").
(j) Except as disclosed in Section 4.21(j) of the Disclosure
Schedule, there will be no creation of any obligation, payment, accrual of
additional benefits, acceleration of payments or vesting in any benefit under
any Employee Plan or any agreement or arrangement disclosed under this
Section 4.21 or any other employment, consulting, severance, change in
control or similar agreement or arrangement, or otherwise by reason of
entering into or in connection with the transactions contemplated by this
Agreement.
(k) No Employee Plan that is a welfare benefit plan within the
meaning of Section 3(1) of ERISA provides benefits to former employees of any
of the Companies or their ERISA Affiliates other than pursuant to Section
4980B of the Code.
4.22 ACCOUNTS RECEIVABLE. The accounts receivable (including
notes receivable, purchased receivables and trade receivables, whether billed
or unbilled) of each Company as of July 31, 2000 (collectively, the "Accounts
Receivable") represent bona fide sales actually made or services actually
performed on or prior to such date in the ordinary course of business of the
Companies and consistent with past practices. Except as set forth in Section
4.22 of the Disclosure Schedule, to Seller's knowledge there is no contest,
claim or right of set-off contained in any oral or written agreement with any
account debtor relating to the amount or validity of any Account Receivable
or any other account receivable created after such date. The reserves
reflected in the Financial Statements have been established in the ordinary
course of business, in accordance with GAAP, and are consistent with past
practices of the Companies.
4.23 TRANSACTIONS WITH OFFICERS, DIRECTORS AND EMPLOYEES. Except
as set forth in Section 4.23 of the Disclosure Schedule and other than as
contemplated by this Agreement, except for accrued but unpaid salary and
employee benefits, there are no amounts owing from any of the Companies to
any officer, director or employee of Seller or any of the Companies or any
member of the immediate family of any such officer, director or employee, nor
are there any amounts owing from any of such persons to Seller or any of the
Companies, other than advances in the ordinary course of business consistent
with past practices.
4.24 SUFFICIENCY OF ASSETS AND OTHER RESOURCES. Except as set
forth on Section 4.24 of the Disclosure Schedule, the material assets of the
Companies as of the date of this Agreement and other resources owned by,
leased by or licensed to the Companies constitute all of the material assets
and other resources that are currently used by the Companies in the conduct
of the Business and that are necessary for the Companies to continue to
conduct the Business in all material respects immediately following the
Closing in the same manner as such Business was conducted on the date hereof.
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4.25 BANK ACCOUNTS, LETTERS OF CREDIT AND POWERS OF ATTORNEY.
Section 4.25 of the Disclosure Schedule sets forth a complete and accurate
list of (i) all bank accounts, lock boxes and safe deposit boxes in the name
of any of the Companies (including the name of the bank or other institution
where such account or box is located and the name of each authorized
signatory thereto), (ii) all outstanding letters of credit issued by
financial institutions for the account of the Companies (setting forth, in
each case, the financial institution issuing such letter of credit, the
maximum amount available under such letter of credit, the terms (including
the expiration date) of such letter of credit and the party or parties in
whose favor such letter of credit was issued) and (iii) the name and address
of each person who has a power of attorney to act on behalf of any Company.
Seller has heretofore delivered or made available to the Buyers copies of
each letter of credit and each power of attorney described in Section 4.25 of
the Disclosure Schedule.
4.26 CERTAIN PAYMENTS. Neither Seller nor the Companies, nor to
Seller's knowledge any other Person has, directly or indirectly, on behalf of
or with respect to any Company (i) made or received any payment which was not
legal to make or receive, including without limitation, payments prohibited
under applicable federal and state "fraud and abuse" or anti-kickback
statutes, (ii) made an illegal political contribution or (iii) engaged in any
conduct constituting a violation of the Foreign Corrupt Practices Act of
1977, in each case that would have a Material Adverse Effect.
4.27 CUSTOMERS AND SUPPLIERS.
(a) Section 4.27(a) of the Disclosure Schedule sets forth the
names of the ten (10) largest (based upon revenues received) customers,
contractors or other Persons from whom each Company derived revenues for the
twelve (12) month period ended July 31, 2000, and the amount which each such
customer, contractor or other Person paid during such period. Except as set
forth on such schedule, no Company or Seller has received any notice that any
such customer, contractor or other Person set forth in such schedule has
ceased or will cease to purchase or use products of such Company, or has
substantially reduced or will substantially reduce the purchase or use of
products of such Company and there is no material dispute between any such
customer, contractor or other Person and any Company.
(b) Section 4.27(b) of the Disclosure Schedule sets forth the
names of the ten (10) largest (based upon payments made) suppliers, vendors,
or other providers of services of each Company from which such Company
ordered raw materials, supplies and other goods and services for the twelve
(12) month period ended July 31, 2000. Except as set forth on such schedule,
no Company or Seller has received any notice that any such supplier, vendor
or other provider of services set forth in such schedule has ceased or will
cease to supply such raw materials, supplies or goods or services to such
Company, or has substantially reduced or will substantially reduce the supply
of such items or services to such Company and there is no material dispute
between any such supplier, vendor or other provider of services and any
Company.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
AND THE ACQUISITION SUBS
Each of the Buyers and each of the Acquisition Subs jointly and
severally represents and warrants to Seller as follows:
5.1 ORGANIZATION AND AUTHORITY.
(a) Each of the Buyers and each of the Acquisition Subs is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation. The Buyers have previously delivered to
Seller complete and correct copies of the Certificate of Incorporation and
By-laws of each of the Buyers and each of the Acquisition Subs, each as
currently in effect. Each of the Buyers and each of the Acquisition Subs
each has the corporate power and authority to execute and deliver this
Agreement and the Ancillary Agreements to which it is a party and consummate
the transactions contemplated hereby and thereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the respective Boards of
Directors of each of the Buyers and each of the Acquisition Subs and by the
sole stockholder of each of the Acquisition Subs, and no other corporate
proceedings or stockholder approvals on the part of any of the Buyers, any of
the Acquisition Subs or any of their respective stockholders are necessary to
authorize the execution, delivery and performance of this Agreement, the
Ancillary Agreements or the consummation of the transactions so contemplated.
(b) This Agreement has been duly executed and delivered by each
of the Buyers and each of the Acquisition Subs and constitutes, and, when
executed and delivered, each of the Ancillary Agreements and all other
documents and instruments to be executed and delivered by any of the Buyers
or any of the Acquisition Subs pursuant hereto will constitute (assuming in
each case the valid authorization, execution and delivery of such agreement
by the other parties thereto), a valid and binding agreement of such Buyer or
such Acquisition Sub, as applicable, enforceable against it in accordance
with its terms, except that (i) such enforcement may be subject to any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
other laws, now or hereafter in effect, relating to or limiting creditors'
rights generally, and (ii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought.
5.2 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for
applicable requirements of the HSR Act, neither the execution and delivery of
this Agreement or any Ancillary Agreement nor the consummation by each of the
Buyers and each of the Acquisition Subs of the transactions contemplated
hereby or thereby will: (a) violate, conflict with or result in any breach of
any provision of the Certificate of Incorporation or By-Laws of any of the
Buyers or any of the Acquisition Subs; (b) require any filing with, or the
obtaining of any permit, license, authorization, declaration, application,
transfer, consent or approval of, any Governmental Authority; (c) violate,
conflict with or result in a default (or any event which, with notice or
lapse of time or both, would constitute a default) under, or give rise to any
right of termination, cancellation or acceleration under, any of the terms,
conditions or provisions of any note,
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mortgage, other evidence of indebtedness, guarantee, license, agreement,
lease, permit or other contract or instrument or obligation to which any of
the Buyers or any of the Acquisition Subs is a party or by which any of the
Buyers or any of the Acquisition Subs or any of their respective assets may
be bound; or (d) violate any law, order, injunction, decree, statute, rule or
regulation of any governmental or regulatory authority or any judgment
applicable to any of the Buyers or any of the Acquisition Subs; excluding
from the foregoing clauses (b), (c) and (d), (i) such matters which would not
adversely affect the ability of the Buyers or the Acquisition Subs to
consummate the transactions contemplated by this Agreement, or (ii) which
become applicable as a result of any acts or omissions by, or the status of
or any facts pertaining to, the Companies or Seller.
5.3 AVAILABILITY OF FUNDS; CAPITALIZATION. The Buyers have, or
will have at Closing, sufficient immediately available funds, in cash, to pay
the Merger Consideration, to provide the Surviving Corporations with
sufficient working capital and to pay any other amounts payable pursuant to
this Agreement and to effect the transactions contemplated hereby.
5.4 LITIGATION. There is no claim, action, suit, condemnation,
litigation, proceeding, arbitration or governmental or regulatory
investigation pending or, to the knowledge of any Buyer, threatened against
any of the Buyers or any of the Acquisition Subs or any of their respective
properties or assets, by or before any court, governmental or regulatory
authority or by any third party which challenges the validity of this
Agreement or which could reasonably be expected to prevent or delay the
consummation of the transactions contemplated hereby.
5.5 CERTAIN FEES. Neither any of the Buyers, any of the
Acquisition Subs nor any of their affiliates has employed any financial
advisor or finder or incurred any liability for any financial advisory or
finders' fees in connection with this Agreement or the transactions
contemplated hereby.
5.6 OWNERSHIP; NO PRIOR ACTIVITIES. Buyer I is the record and
beneficial owner of Acquisition Sub 1 Stock and Acquisition Sub 2 Stock,
Buyer II is the record and beneficial owner of Acquisition Sub 3 Stock and
Buyer III is the record and beneficial owner of Acquisition Sub 4 Stock,
which comprises all of the issued and outstanding shares of all classes of
capital stock of each of the Acquisition Subs. Except for obligations
incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions
contemplated hereby, none of the Acquisition Subs has either incurred any
obligation or liability or engaged in any business or activity of any type or
kind whatsoever or entered into any agreement or arrangement with any Person.
5.7 NO ADDITIONAL REPRESENTATIONS; DISCLAIMER REGARDING
ESTIMATES AND PROJECTIONS.
(a) Each of the Buyers and each of the Acquisition Subs
acknowledge that none of Seller, any of the Companies, any of their
affiliates or any other Person acting on behalf of Seller or any of the
Companies (i) has made any representation or warranty, express or implied,
including any implied representation or warranty as to the condition,
merchantability, suitability or fitness for a particular purpose of any of
the assets used in the business of or held by any of the Companies or (ii)
has made any representation or warranty, express or implied, as to the
accuracy or completeness of any information regarding Seller or any of the
Companies, their
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business or any of their affiliates, in each case except as expressly set
forth in this Agreement or as and to the extent required by this Agreement to
be disclosed on the Disclosure Schedule hereto. Each of the Buyers and each
of the Acquisition Subs further agree that none of Seller, any of the
Companies, any of their affiliates or any other Person acting on behalf of
Seller or any of the Companies will have or be subject to any liability,
except as specifically set forth in this Agreement, to any of the Buyers, any
of the Acquisition Subs or any other Person resulting from the distribution
to any Buyer, for any Buyer's use, of any such information, including any
information, document or material made available to any Buyer by Donaldson,
Lufkin & Jenrette, or in any "data rooms," management presentations or any
other form in expectation of the transactions contemplated by this Agreement.
(b) In connection with the Buyers' investigation of the
Companies, the Buyers have received certain projections, including projected
statements of operating revenues and income from operations of the Companies
for the fiscal years ending September 30, 2000, September 30, 2001, September
30, 2002 and September 30, 2003 and certain business plan information for
such fiscal years and succeeding fiscal years (collectively, the
"Projections"). Each of the Buyers acknowledges that there are uncertainties
inherent in attempting to make such Projections, that such Buyer is familiar
with such uncertainties and that such Buyer is taking full responsibility for
making its own evaluation of the adequacy and accuracy of the Projections so
furnished to it. Accordingly, while Seller and the Companies believe the
assumptions underlying the Projections are reasonable, neither Seller nor any
of the Companies makes any representation or warranty with respect to such
Projections.
ARTICLE VI
COVENANTS
6.1 CONDUCT OF THE COMPANIES' BUSINESS. Seller agrees that,
during the period from the date of this Agreement to the Closing, except as
otherwise contemplated by this Agreement or consented to by the Buyers:
(a) Seller shall use its reasonable best efforts to cause each
of the Companies to conduct its business operations in the ordinary course
consistent with past practice and, consistent with past practices, to
preserve its relationships with customers, suppliers and others with whom it
deals; and
(b) Seller shall not, and shall cause the Companies not to,
take or agree in writing or otherwise to take any action which would make any
of the representations or warranties made by Seller in SECTION 4.7 of this
Agreement untrue or incorrect as of the Closing Date. From the date hereof
through the Closing Date, Seller (x) shall confer on a regular and frequent
basis with the Buyers with respect to the Business and the Companies'
operations and other matters relevant to the transactions contemplated
hereby, (y) shall promptly advise the Buyers, orally or in writing, of any
change or event, including without limitation, any complaint, investigation
or hearing by any Governmental Authority (or communication indicating the
same may be contemplated) or the institution or threat of litigation, having
or which insofar as can be reasonably foreseen could have a Material Adverse
Effect or a material adverse effect on the ability of Seller to consummate
the transactions contemplated hereby and (z) shall not and shall cause the
Companies not to, without the prior approval of the Buyers, make or commit to
make any capital
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expenditure on the part of the Companies in excess of $25,000 or any other
expenditure on the part of the Companies in excess of $25,000 that is outside
of the ordinary course of the Companies' business.
6.2 ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the Closing, Seller
shall: (i) give the Buyers and their authorized representatives reasonable
access to all employees, consultants, books, records, offices and other
facilities and properties of the Companies as the Buyers may reasonably
request; (ii) permit the Buyers to make such inspections thereof as the
Buyers may reasonably request; and (iii) cause the officers of Seller and the
Companies to furnish the Buyers with such financial and operating data and
other information with respect to the business and properties of the
Companies as the Buyers may from time to time reasonably request; provided
that any such investigation shall be conducted after reasonable notice during
normal business hours, under the supervision of Seller's personnel and in
such a manner as to maintain the confidentiality of this Agreement and the
transactions contemplated hereby and not interfere unreasonably with the
business operations of Seller or any of the Companies. No investigation by
the Buyers shall modify any of the representations, warranties or covenants
contained herein.
(b) All information concerning Seller furnished or provided by
Seller or its affiliates to the Buyers or their representatives (whether
furnished before or after the date of this Agreement) shall be held subject
to a confidentiality agreement between Seller and Platinum Equity Holdings,
an affiliate of each of the Buyers, dated as of July 19, 2000 (the
"Confidentiality Agreement"). The Confidentiality Agreement shall survive
the Closing.
6.3 CONSENTS.
(a) Each of Seller and the Buyers shall cooperate, and use its
reasonable best efforts, to make all filings and obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties necessary to consummate the
transactions contemplated by this Agreement (collectively, the "Material
Consents"). In addition to the foregoing, each Buyer agrees to provide such
assurances as to financial capability, resources and credit worthiness as may
be reasonably requested by any third party whose consent or approval is
sought hereunder; provided, however, that no Buyer shall be required to
provide any guarantee or surety or be obligated to make any payment or agree
to any material amendment or modification of any Contract, Lease or Permit in
connection with obtaining the Material Consents.
(b) With respect to any agreements for which any required
consent or approval is not obtained prior to the Closing, Seller and the
Buyers shall each use their reasonable best efforts to obtain any such
consent or approval after the Closing Date until such consent or approval has
been obtained and Seller shall provide the Buyers with the same benefits
arising under such agreements, including performance by Seller as agent, if
legally and commercially feasible, provided, that the Buyers and the
Surviving Corporations shall provide Seller with such access to the premises,
books and records and personnel as is necessary to enable Seller to perform
its obligations under such agreements and the Buyers or the Surviving
Corporations shall pay or satisfy the corresponding liabilities for the
enjoyment of such benefits to the extent the Buyers or
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the Surviving Corporations would have been responsible therefor if such
consent or approval had been obtained prior to Closing.
6.4 REASONABLE BEST EFFORTS. Each of Seller and each of the
Buyers shall cooperate, and use its reasonable best efforts to take, or cause
to be taken, all action, and to do, or cause to be done, all things
necessary, proper, or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. Seller and each
Buyer further covenants and agrees, with respect to a threatened or pending
preliminary or permanent injunction or other order, decree or ruling or
statute, rule, regulation or executive order that would adversely affect the
ability of the parties hereto to consummate the transactions contemplated
hereby, to use all reasonable best efforts to prevent or lift the entry,
enactment or promulgation thereof, as the case may be. Seller further
covenants and agrees that, during the period from the date of this Agreement
through Closing, it will use its reasonable best efforts to obtain an
executed "Ownership of Intellectual Property Agreement" from each of the
persons listed in Section 4.11(d) of the Disclosure Schedule as not having
yet executed such an agreement.
6.5 PUBLIC ANNOUNCEMENTS. Except as otherwise agreed to by the
parties, the parties shall not issue any report, statement or press release
or otherwise make any public statements with respect to this Agreement and
the transactions contemplated hereby, except as in the reasonable judgment of
the party may be required by law or in connection with the obligations of a
publicly-held, exchange-listed company, in which case the parties will
exercise their reasonable best efforts to reach mutual agreement as to the
language of any such report, statement or press release; provided however,
that the Buyers may, following the Closing, without the consent of Seller,
publish (and use in future marketing materials) standard "tombstone"
announcements of the consummation of the transactions contemplated by this
Agreement. Upon the execution of this Agreement and upon the Closing, Seller
and the Buyers will consult with each other with respect to the issuance of a
joint or individual report, statement or press release with respect to this
Agreement and the transactions contemplated hereby.
6.6 UPDATES TO DISCLOSURE SCHEDULE. During the period from the
date of this Agreement until the Closing, if any event, condition, fact or
circumstance of which Seller or any Company is aware that is required to be
disclosed pursuant to this Agreement requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming such Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then Seller shall promptly after becoming so aware deliver to
the Buyers an update to such Disclosure Schedule specifying such change
("Supplemental Disclosure"). No Supplemental Disclosure shall be deemed to
supplement or amend the Disclosure Schedule attached hereto for purposes of
(i) determining the accuracy of any of the representations and warranties
made by Seller in this Agreement or (ii) determining whether any of the
conditions set forth in ARTICLE VII has been satisfied.
6.7 EMPLOYEES AND EMPLOYEE BENEFITS.
(a) The Buyers shall cause the Surviving Corporations to
provide all employees listed on Section 4.17(a) of the Disclosure Schedule
hereto (the "Transferred Employees") with positions that are the same as and
wages and salaries that are no less than the positions, wages
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and salaries set forth with respect to such Transferred Employees in Section
4.17(a) of the Disclosure Schedule. The Buyers shall provide all Transferred
Employees with benefits substantially similar to employees of Platinum Equity
Holdings. Notwithstanding the foregoing, nothing in this Agreement shall be
deemed to create an obligation on the part of any Buyer or any Surviving
Corporation to continue to employ any Transferred Employee for any length of
time. The covenants set forth in this clause (a) shall survive for six (6)
months following the Closing Date.
(b) Effective on the Closing Date, one or more of the Buyers
shall assume sponsorship of Seller's 401(k) Plan. Seller shall cause the
accounts of all Transferred Employees under Seller's 401(k) Plan to become
100% vested as of the Closing Date.
(c) Following the Closing Date, the Buyers shall give full
credit for all service with any of the Companies or any Affiliate thereof,
and any predecessor thereto to the extent that service with such predecessor
entity was recognized under the applicable plan of the Companies or any
Affiliate, to each Transferred Employee for purposes of waiting periods
relating to preexisting conditions under medical plans, eligibility to
participate in, vesting under, and eligibility for early retirement or any
subsidized benefit provided for under, any employee benefit plan (including
but not limited to any "employee benefit plan" as defined in Section 3(3) of
ERISA) maintained by a Buyer or a Surviving Corporation (including, without
limitation, any vacation or accrued sick pay plan or policy) on or after the
Closing Date. Prior to the Closing Date, Seller shall furnish the Buyers
with a list of the length of service with Seller or its Affiliates for each
of the Transferred Employees. For purposes of computing deductible amounts
(or like adjustments or limitations on coverage) under any employee welfare
benefit plan (including, without limitation, any "employee welfare benefit
plan" as defined in Section 3(1) of ERISA), expenses and claims previously
recognized for similar purposes under the applicable welfare benefit plan of
the Companies or any Affiliate shall be credited or recognized under the
comparable plan maintained after the Closing Date by the applicable Buyer or
the applicable Surviving Corporation to the extent the expenses and claims
can be established by Transferred Employees. Seller shall reimburse the
applicable Buyer or the applicable Surviving Corporation for the amount of
such deductible amounts in excess of $200,000 with respect to expenses and
claims for calendar year 2000 promptly upon receipt of invoices from time to
time delivered by the Buyers.
(d) Following the Closing Date, the Surviving Corporations
shall be responsible and assume all liability for all notices or payments due
to any Transferred Employee, and all notices, payments, fines or assessments
due to any Governmental Authority, pursuant to any applicable law, with
respect to the employment, discharge or layoff of employees by the Surviving
Corporations after the Closing Date, including, but not limited to, the WARN
Act and any rules or regulations as have been issued, in connection with the
foregoing; provided that Seller shall reimburse the applicable Buyer or the
applicable Surviving Corporation for (i) all severance expenses due to such
Transferred Employee pursuant to the terms of his or her employment contract
relating to the termination of any of the Transferred Employees listed in
Section 4.17(b) of the Disclosure Schedule except Messrs. M. Smith, K. Smith
or D. Philbin and (ii) 50% of the severance expenses due to such Transferred
Employee pursuant to the terms of his employment contract relating to the
termination of Messrs. M. Smith, K. Smith or D. Philbin; in each case, if
such Transferred Employee is terminated within ninety (90) days after the
Closing.
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6.8 CERTAIN TAX MATTERS.
(a) The Buyers shall cause the Surviving Corporations to
consent to join, for all taxable periods of the Companies ending on or before
the Closing Date (and with respect to any taxable period that commences
before but ends after the Closing Date, for the portion of such period up to
and including the Closing Date) for which the Companies are eligible to do
so, in any consolidated, combined, or unitary Tax Returns which Seller shall
request it to join. Seller shall cause to be prepared and filed all such
consolidated, combined, and unitary Tax Returns. Each Buyer agrees to
cooperate with and provide assistance, as necessary, to Seller and its
Affiliates in the preparation of the portions of such Tax Returns pertaining
to the Surviving Corporations.
(b) Seller shall prepare, or cause to be prepared, all other
Tax Returns of the Companies required to be filed for periods ending on or
before the Closing Date. Provided that such returns are prepared consistent
with applicable law, the Buyers shall cause such Tax Returns to be executed
and timely filed. The Buyers shall prepare and file, or caused to be
prepared and filed, all Tax Returns of the Companies for all periods ending
after the Closing Date.
(c) Seller shall pay, or cause to be paid: (i) any and all
Taxes with respect to the Companies for any taxable period (or any partial
period) ending on or before the Closing Date; (ii) any and all income Taxes
(or franchise or other Taxes measured by net income) resulting solely from
any of the Companies having been included in any consolidated, combined or
unitary tax return that included any Company for any taxable period (or
portion thereof) ending on or before the Closing Date pursuant to Treasury
Regulation Section 1.1502-6(a) or any analogous or similar state, local or
foreign law or regulations (other than any liability arising under such
Treasury Regulation or analogous law by reason of any of the Companies
becoming a member of the consolidated combined or unitary groups of which any
Buyer is a member); and (iii) any and all other Taxes with respect to the
Companies for any Tax period ending on or prior to the Closing Date or with
respect to periods beginning before the Closing Date and ending after the
Closing Date to the extent allocated to the Company for the partial period
ending on (and including) the Closing Date pursuant to SECTION 6.8(i) hereof
and not previously paid; except, in the case of each of (i), (ii) and (iii),
for any and all Taxes which are accrued and on the books of the Companies as
reflected on the Closing Date Balance Sheets.
(d) The Buyers shall pay, or cause to be paid: (i) any and all
Taxes with respect to the Companies for any taxable period (or any partial
period) ending after the Closing Date; (ii) any and all income Taxes (or
franchise or other Taxes measured by net income) resulting solely from any of
the Companies being included in any consolidated, combined or unitary tax
return that includes any Company for any taxable period (or portion thereof)
ending after the Closing Date pursuant to Treasury Regulation
Section 1.1502-6(a) or any analogous or similar state, local or foreign law or
regulations (other than any liability arising under such Treasury Regulation
or analogous law by reason of any of the Companies having been a member of
the consolidated combined or unitary groups of which Seller is a member);
(iii) any and all other Taxes with respect to the Companies for any Tax
period ending after the Closing Date or with respect to periods beginning
before the Closing Date and ending after the Closing Date to the extent
allocated to the Company for the partial period ending after the Closing Date
pursuant to SECTION
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6.8(i) hereof and not paid by the Buyers; and (iv) any and all Taxes of the
Companies for any taxable period (or any partial period) ending on or before
the Closing Date which are accrued and on the books of the Companies as
reflected on the Closing Date Balance Sheets.
(e) Seller shall promptly notify the Buyers of any action,
suit, proceeding, claim, or audit pending against or with respect to Seller
or any of the Companies in respect of any Tax where there is a reasonable
possibility of a determination or decision which would result in liability of
the Buyers or the Surviving Corporations.
(f) The Buyers shall promptly notify Seller of any action,
suit, proceeding, claim, or audit pending against or with respect to any of
the Companies or the Surviving Corporations in respect of any Tax where there
is a reasonable possibility of a determination or decision which would result
in liability of Seller.
(g) To the extent that any of the Surviving Corporations or any
of their Affiliates are entitled to a refund of any Taxes paid by any of the
Companies or Seller prior to the Closing Date as a result of any loss
suffered by Seller or any of its subsidiaries during any period that includes
the Closing Date or any prior period, the Buyers shall, and shall cause the
Surviving Corporations, to use all reasonable efforts to secure any such
refunds and promptly transfer them to Seller.
(h) (i) The parties hereby covenant and agree to make an
election under Section 338(h)(10) of the Code and the Treasury Regulations
promulgated under the Code and any corresponding or similar elections under
state, local or foreign Tax law (collectively, a "Section 338(h)(10)
Election") with respect to the acquisition of the stock of the Companies
hereunder in accordance with the provisions hereof.
(ii) Seller and the Buyers shall report, in connection
with the determination of income, franchise or other Taxes measured by net
income, the transactions being undertaken pursuant to this Agreement in a
manner consistent with the Section 338(h)(10) Election. The Buyers shall be
responsible for the preparation of two copies of all forms and documents
required in connection with the Section 338(h)(10) Election (including
Internal Revenue Service Form 8023). Once the Buyers properly prepare
documents and forms as may be required by applicable Tax laws to complete and
make properly the Section 338(h)(10) Election and timely deliver two copies
of such forms and documents to Seller, Seller shall execute both copies no
later than thirty (30) days following receipt of such forms and timely file
one copy of such forms and documents with the Internal Revenue Service and
return the other copy to the Buyers for timely filing.
(iii) The Buyers shall provide Seller with a valuation
statement reflecting, as of the Closing Date, the fair market values of all
of the assets and the liabilities and obligations of the Companies. The
Buyers shall provide Seller and its authorized representatives with
reasonable access to the books and records of the Companies and its working
papers in connection with such valuations and shall make itself available at
reasonable times upon request of Seller to discuss with Seller such
valuations. The Buyers and Seller shall use their reasonable best efforts to
agree on such valuations. The Buyers and Seller shall file, and/or shall
cause members of their respective affiliated groups to file, all Tax Returns
in connection therewith in a
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manner consistent with such valuations and this Agreement and shall take no
position contrary thereto unless required to do so by applicable Tax laws.
Seller shall have the right to review and approve (which approval shall not
be unreasonably withheld) any appraisal upon which such valuations are based
and any such forms and schedules relating to such valuations, prior to the
filing thereof. Any disputes regarding the valuation statement or the
preparation, execution or filing of the forms and documents required in
connection with making the Section 338(h)(10) Election shall be resolved in
an arbitration to be conducted by an Unaffiliated Firm jointly selected by
the Buyers and Seller, whose fees shall be borne equally by the parties.
Each of the parties to this Agreement shall be bound by the decision of the
Unaffiliated Firm rendered in such arbitration.
(iv) To the extent permitted by state, local or foreign
Tax laws, the principles and procedures of this subsection (h) shall also
apply with respect to a Section 338(h)(10) Election under state, local or
foreign law. Seller shall join with the Buyers in making any election
similar to the Section 338(h)(10) Election which is optional under any state,
local or foreign law, and shall cooperate and join in any election made by
the Buyers or the Companies to effect such an election so as to treat the
transactions contemplated herein as a sale of assets for state, local and
foreign income Tax purposes.
(i) In any case in which a Tax is assessed with respect to a
taxable period which begins before the Closing Date and ends after the
Closing Date, the resulting Tax obligation shall be allocated (i) to Seller
for the period up to and including the Closing Date, except to the extent
accrued and on the books of the Companies as reflected on the Closing Date
Balance Sheets, and (ii) to the Companies for the period subsequent to the
Closing Date and to the extent of any such accrual. Any allocation of Taxes
attributable to any period beginning before and ending after the Closing Date
shall be made by means of a closing of the books and records of the Companies
as of the close of business on the Closing Date, provided that exemptions,
allowances, deductions (including, but not limited to, depreciation and
amortization deductions) or any Taxes (such as property or similar Taxes)
that are calculated on an annual basis shall be allocated between the period
ending on the Closing Date and the period after the Closing Date in
proportion to the number of days in each such period.
(j) After the Closing Date, each of Seller and each Buyer shall:
(i) assist (and cause its respective affiliates to
assist) the other party in preparing any Tax Returns which such other party
is responsible for preparing and filing;
(ii) cooperate fully in preparing for any audits of, or
disputes, contests or proceedings with, Taxing Authorities regarding any Tax
Returns which relate to any of the Companies;
(iii) make available to the other and to any Taxing
Authority as reasonably requested all information, records and documents
relating to Tax liabilities which are attributable to any of the Companies;
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(iv) preserve all such information, records and
documents until the expiration of any applicable statutes of limitations or
extensions thereof and as otherwise required by law;
(v) make available to the other, as reasonably
requested, personnel responsible for preparing or maintaining information,
records and documents in connection with Tax matters;
(vi) provide timely notice to the other in writing upon
receipt of notice of any pending or threatened Tax audits or assessments
relating to the Companies for periods beginning prior to the Closing Date;
provided that any failure to provide such notice shall not relieve Seller of
any obligation under this Section 6.8 unless Seller is materially prejudiced
by such failure;
(vii) furnish the other with copies of all
correspondence received from any Taxing Authority in connection with any Tax
audit or information request with respect to any such period;
(viii) keep confidential any information obtained
pursuant to this Section 6.8, except as may otherwise be necessary in
connection with the filing of returns or claims for refund or in conducting
any audit or other Tax proceeding; and
(ix) furnish the other with adequate information which
would enable the other party to determine its entitlement to, and the amount
of, any refund or credit to which either party reasonably believes the other
party may be entitled.
(k) All Tax sharing and similar agreements (other than the
provisions of this Agreement) between any of the Companies and Seller or any
other corporation or corporations shall be terminated as of the Closing Date,
and the Companies shall not have any liability from and after the Closing
Date under any such agreement.
(l) Seller shall pay all excise, sales, use, transfer
(including real property transfer or gains), stamp, documentary, filing,
recordation and other similar Taxes which may be imposed in connection with
the transactions contemplated by this Agreement, together with any interest,
additions or penalties with respect thereto ("Transfer Taxes"). Each party
hereto hereby agrees to file all necessary documentation in connection with
the payment and reporting of Transfer Taxes.
(m) Each of the Buyers and Seller agree that Seller is entitled
to any compensation deductions that are attributable to the exercise by
employees of the Companies of options to purchase stock of Seller, and none
of such parties will take any contrary position on any Tax Return unless
otherwise required by law.
6.9 HART-SCOTT-RODINO FILINGS. As promptly as practicable after
the date of this Agreement, but in no event later than five (5) business days
following the date of this Agreement, the Buyers and Seller shall make all
filings under the HSR Act which are required in connection with the
transactions contemplated by this Agreement. Any such filing shall be in
substantial compliance with the requirements of the HSR Act. The Buyers shall
pay all filing fees in connection with such HSR Act filings. Seller and the
Buyers shall keep each other
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apprised of the status of any communications with, and any inquiries or
requests for additional information from, the Federal Trade Commission and
the Department of Justice and shall comply promptly with any such inquiry or
request and shall promptly provide any supplemental information requested in
connection with the filings made hereunder pursuant to the HSR Act. Any such
supplemental information shall be in substantial compliance with the
requirements of the HSR Act. Each party shall cooperate with the other party
in connection with the other party's filings under the HSR Act including,
without limitation, providing all information reasonably requested by each
party to the other and taking all reasonable actions to cause the early
termination of all applicable waiting periods.
6.10 NO SOLICITATION BY SELLER.
(a) Seller shall not and shall not authorize or permit any
Company or its or their respective officers, directors or employees or any
investment banker, attorney or other advisor or representative retained by
any of them to, (i) solicit, initiate or encourage the submission of, any
Acquisition Proposal (as hereinafter defined), or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Acquisition Proposal; provided, however, that
prior to the payment of the Merger Consideration, to the extent required by
the fiduciary obligations of the Board of Directors of Seller, determined in
good faith by a majority of the members thereof, Seller may, in response to
an unsolicited Acquisition Proposal, furnish information with respect to the
Companies to any person pursuant to a customary confidentiality agreement and
discuss such information with such person and participate in negotiations
regarding such Acquisition Proposal. For purposes of this Agreement,
"Acquisition Proposal" means any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of all or
substantially all of the assets or shares of capital stock of the Companies,
or any merger, consolidation, business combination, sale of substantially all
assets, recapitalization, liquidation, dissolution or similar transaction
involving Seller or the Companies, other than the transactions contemplated
by this Agreement. Seller shall immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing. Seller agrees not to release any third
party from, or waive any provision of, any confidentiality agreement to which
Seller or any Company is a party to the extent it relates to the Companies.
(b) Except as set forth herein, neither the Board of Directors
of Seller nor any committee thereof shall (i) withdraw or modify, or propose
to withdraw or modify, in a manner adverse to the Buyers, the approval or
recommendation by such Board of Directors or any such committee of this
Agreement or the Mergers, (ii) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal or (iii) enter into any agreement with
respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to
the payment of the Merger Consideration, the Board of Directors of Seller, to
the extent required by the fiduciary obligations thereof, as determined in
good faith by a majority of the members thereof, may (subject to the
following limitations), (i) withdraw or modify its approval or recommendation
of the amount of the Merger Consideration, this Agreement or the Mergers,
(ii) approve or recommend any Superior Proposal (as hereinafter defined),
(iii) enter into an agreement with respect to such Superior Proposal or
(iv) terminate this Agreement, in each case at any time
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following the Buyers' receipt of written notice advising the Buyers that the
Board of Directors of Seller has received a Superior Proposal and specifying
the material terms and conditions of such Superior Proposal but without
identifying the person making such Superior Proposal. For purposes of this
Agreement, "Superior Proposal" means a bona fide Acquisition Proposal made by
a third party on terms which a majority of the members of the Board of
Directors of Seller determines in its good faith judgment to be more
favorable to Seller's stockholders than the terms of this Agreement and the
Mergers.
6.11 NO TRANSFER OR ACCOUNTING CHANGE BY THE BUYERS. During the
Non-Compete Royalty Period, no Buyer shall and no Buyer shall permit any
Surviving Corporation to: (a) transfer, assign, sell or dispose of (i) any
contract, agreement, purchase order, license, commitment for purchase or
other instrument relating to any of the Companies which is in effect at the
Effective Time or which is being negotiated at the Effective Time and becomes
effective during the Non-Compete Royalty Period or (ii) any interest in or
right to any of the revenues related to any such contract, agreement,
purchase order, license, commitment for purchase or instrument or to which
any of the Surviving Corporations is otherwise entitled; provided that this
clause (a) will not prevent any Buyer or any Surviving Corporation from
terminating or modifying any such contract, agreement, purchase order,
license, commitment for purchase or other instrument that it reasonably deems
unprofitable or detrimental to the Business or from pledging any contracts or
accounts receivable to secure its obligations; (b) make any change in the
method of revenue recognition of any of the Surviving Corporations that is
not consistent with their respective past practices, provided such revenue
recognition method is in accordance with GAAP; or (c) cease conducting the
business of any of the Companies in any material respect in the manner it was
conducted on the date hereof other than as permitted in clause (a) of this
SECTION 6.11; provided, however, that this clause (c) will not prevent any
Buyer or any Surviving Corporation from ceasing the business of any Company
that has become materially less profitable than it was immediately prior to
the Closing Date. With respect to Surviving Corporation 3 and for purposes
of determining the amounts of the Non-Compete Royalty Payments, Surviving
Corporation 3 revenue during the Non-Compete Royalty Period will include the
contract value (excluding prospective maintenance for periods beyond the
Non-Compete Royalty Period) of any software license fee revenue sold, during
the period such sale is made, even if such contract is amortized over future
periods.
6.12 FTC MATTER. Seller shall keep the Buyers informed as to
the status of the inquiry being conducted by the Federal Trade Commission
described in Section 4.12 of the Disclosure Schedule (the "FTC Matter"). The
Buyers shall have the right to approve any settlement or other final
disposition of the FTC Matter; provided that such approval may not be
unreasonably withheld, delayed or conditioned.
6.13 INFORMATION REGARDING THE BUYERS. Each Buyer agrees that it
shall, and shall cause the Acquisition Subs to, (a) provide Seller within
three business days of the date of execution of this Agreement, with the
information regarding the Buyers and the Acquisition Subs set forth on
SCHEDULE 6.13 hereto, (b) cooperate with Seller in promptly providing any
additional information requested by any applicable Governmental Authority in
connection with the OSC Merger and (c) promptly review and affix any required
signatures to any documentation reasonably deemed necessary by Seller in
connection with obtaining approval from applicable Governmental Authorities
in connection with the OSC Merger.
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6.14 CAPITALIZATION OF SELLER. Seller agrees that it shall, for
a period of six (6) months commencing on the Closing Date, maintain cash or
cash equivalents as reflected on its financial statements of no less than
twenty million dollars ($20,000,000).
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION. The respective
obligation of each party to consummate the transactions contemplated herein is
subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) no statute, rule or regulation shall have been enacted by
any Governmental Authority which prohibits or restricts the consummation of
the transactions contemplated hereby;
(b) there shall not be in effect any final judgment of any court
of competent jurisdiction enjoining the consummation of the transactions
contemplated hereby;
(c) there shall not be any legal proceeding instituted, pending
or threatened by any Person which seeks to enjoin or otherwise prevent, or
which seeks material monetary penalties as a result of, consummation of the
transactions contemplated hereby; and
(d) any waiting periods applicable to the transactions
contemplated by this Agreement under applicable U.S. antitrust or trade
regulation laws and regulations, including, without limitation, under the HSR
Act shall have expired or been terminated.
7.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of
Seller to consummate the transactions contemplated hereby are further subject
to the satisfaction (or waiver) at or prior to the Closing of the following
conditions:
(a) each representation and warranty made by the Buyers and the
Acquisition Subs in ARTICLE V of this Agreement shall be true and correct (i)
in all material respects with respect to representations and warranties which
are not modified by materiality and (ii) in all respects with respect to
representations and warranties which are modified by materiality, in either
case, on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date except for those representations and
warranties made as of a specified date which shall continue to be true and
correct as of such date and except for changes permitted or contemplated
hereby;
(b) each Buyer shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Closing pursuant to the terms hereof;
(c) the Transition Services Agreement, in substantially the form
of EXHIBIT 3.3 hereto, shall have been entered into by the parties thereto; and
(d) the Consulting Agreement, in the form of EXHIBIT 3.7 hereto,
shall have been executed and delivered by the parties thereto.
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Notwithstanding the failure of any one or more of the foregoing
conditions, Seller may proceed with the Closing without satisfaction, in whole
or in part, of any one or more of such conditions. To the extent that Seller
proceeds with the Closing, Seller shall be deemed to have waived for all
purposes any rights or remedies it may have against the Buyers by reason of
the failure of any such condition or the breach of any such representation or
warranty to the extent described in such notice.
7.3 CONDITIONS TO OBLIGATIONS OF THE BUYERS. The obligations of
the Buyers to consummate the transactions contemplated hereby are further
subject to the satisfaction (or waiver) at or prior to the Closing of the
following conditions:
(a) no material breach of any representation and warranty set
forth in SECTIONS 4.2, 4.3 or 4.4 shall have occurred and no breach of any
other representation and warranty made by Seller in ARTICLE IV of this
Agreement shall have occurred as of the Closing Date that has a Material
Adverse Effect;
(b) Seller shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Closing pursuant to the terms hereof;
(c) there shall have been no event that has a Material Adverse
Effect;
(d) Seller shall have provided a certificate, dated as of the
Closing Date, certifying the conditions specified in clauses (a), (b) and (c)
above have been fulfilled and shall have delivered to the Buyers all stock
certificates evidencing the outstanding capital stock of the Companies;
(e) the Buyers shall have received an opinion of Seller's
counsel, substantially in the form of EXHIBIT 7.3(e) attached hereto;
(f) the Buyers shall have received an opinion of Seller's
Delaware counsel, substantially in the form of EXHIBIT 7.3(f) attached hereto;
(g) the assets set forth in SCHEDULE 3.6 shall have been
transferred from Seller to one or more of the Companies;
(h) the receipt of written resignations of the officers and
directors of the Companies, as requested by the Buyers no later than five (5)
days prior to Closing; and
(i) the consents or filings listed on SCHEDULE 7.3(i) hereto
shall have been duly obtained or made.
Notwithstanding the failure of any one or more of the foregoing
conditions, the Buyers may proceed with the Closing without satisfaction, in
whole or in part, of any one or more of such conditions. To the extent that
the Buyers proceed with the Closing, the Buyers shall be deemed to have waived
for all purposes any rights or remedies they may have against Seller by reason
of the failure of any such condition or the breach of any such representation
or warranty to the extent described in such notice.
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ARTICLE VIII
TERMINATION, AMENDMENT, WAIVER
8.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time:
(a) at any time, by mutual written consent of Seller, the
Companies, the Buyers and the Acquisition Subs;
(b) by the Buyers or Seller if: (i) any court of competent
jurisdiction in the United States or any United States governmental body shall
have issued a final and non-appealable order, decree, or ruling permanently
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; provided, that no party hereto affiliated
with the Person who brought the action seeking the permanent enjoinment of the
transactions contemplated hereby may seek termination of this Agreement
pursuant to this SECTION 8.1(b)(i); or (ii) the Mergers have not been
consummated by the date ninety (90) days from the date of this Agreement (or
such later date as Seller and the Buyers shall have agreed in writing);
provided, that no party may terminate this Agreement pursuant to this SECTION
8.1(b)(ii) if such party's failure to fulfill any of its obligations under
this Agreement shall have been the reason that the Effective Time shall not
have occurred on or before said date;
(c) by Seller if: (i) the Board of Directors of Seller shall
have withdrawn or modified in a manner adverse to the Buyers its approval of
the Mergers or the Agreement and approved or recommended any Superior
Proposal, but only upon payment of the termination fee set forth in SECTION
8.3; (ii) Seller or any of the Companies shall have entered into any agreement
with respect to any Superior Proposal in accordance with SECTION 6.10, but
only upon payment of the termination fee set forth in SECTION 8.3; (iii) there
shall have been a material breach of any representation or warranty on the
part of any of the Buyers or any of the Acquisition Subs set forth in this
Agreement or if any representation or warranty of any of the Buyers or any of
the Acquisition Subs shall have become untrue in any material respect, and
such breach shall not have been cured or such representation or warranty shall
not have been made true within 15 business days after notice by Seller
thereof, provided that Seller has not breached in any material respect any of
its obligations hereunder; or (iv) there shall have been a breach by any of
the Buyers or any of the Acquisition Subs of any of its respective covenants
or agreements hereunder having a material adverse effect on the Buyers or
materially adversely affecting (or materially delaying) the consummation of
the Mergers, and the Buyers or the Acquisition Subs have not cured such breach
within 15 days after notice by Seller thereof, provided that Seller has not
breached in any material respect any of its obligations hereunder.
(d) by the Buyers if: (i) there shall have been a material
breach of any representation or warranty on the part of Seller set forth in
this Agreement or if any representation or warranty of Seller shall have
become untrue in any material respect, and (other than with respect to any
breach of SECTION 4.2, SECTION 4.3 or SECTION 4.4) such breach or untrue
representation or warranty has a Material Adverse Effect, and such breach
shall not have been cured or such representation or warranty shall not have
been made true within 15 business days after notice by any of the Buyers or
any of the Acquisition Subs thereof, provided that neither any of the Buyers
nor any of the Acquisition Subs has breached in any material respect any of
its obligations
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hereunder; or (ii) there shall have been a breach by Seller of any of its
covenants or agreements hereunder having a Material Adverse Effect or
materially adversely affecting (or materially delaying) the consummation of
the Mergers, and Seller has not cured such breach within 15 days after notice
by any of the Buyers or any of the Acquisition Subs thereof, provided that
neither any of the Buyers nor any of the Acquisition Subs has breached in any
material respect any of its obligations hereunder.
8.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby pursuant to SECTION 8.1 hereof, written notice thereof
shall forthwith be given by the party so terminating to the other parties and
this Agreement shall terminate and the transactions contemplated hereby shall
be abandoned, without further action by any party. If this Agreement is
terminated pursuant to SECTION 8.1 hereof:
(a) each party shall redeliver all documents, work papers and
other materials of the other parties relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the party
furnishing the same, and all confidential information received by any party
hereto with respect to the other party shall be treated in accordance with the
Confidentiality Agreement, which shall remain in full force and effect
notwithstanding the termination of this Agreement, and SECTION 6.2(b) hereof;
(b) all filings, applications and other submissions made
pursuant hereto shall, at the option of Seller, and to the extent practicable,
be withdrawn from the agency or other person to which made; and
(c) there shall be no liability or obligation hereunder on the
part of Seller, any of the Companies, any of the Buyers, any of the
Acquisition Subs or any of their respective directors, officers, employees,
affiliates, controlling persons, agents or representatives, except that Seller
and the Companies on the one hand, or the Buyers and the Acquisition Subs on
the other hand, as the case may be, may have liability to the other party if
the basis of termination is a breach or default by Seller, the Companies, the
Buyers or the Acquisition Subs, as the case may be, of one or more provisions
of this Agreement, and except that the provisions of SECTIONS 5.7, 6.2(b),
6.5, 8.2(a), 8.2(b), this 8.2(c), 8.3 and 11.1 hereof shall survive any such
termination.
8.3 FEES AND EXPENSES.
(a) Except as expressly provided herein, all fees and expenses
incurred in connection with the Mergers, this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such fees
or expenses, whether or not the Mergers are consummated.
(b) Seller shall promptly pay, or cause to be paid, to the
Buyers a fee equal to $4,000,000 (the "Termination Fee"), payable in next day
funds, if this Agreement is terminated pursuant to SECTION 8.1(c)(i) or
SECTION 8.1(c)(ii) or if Seller (or its Board of Directors) takes the actions
described in SECTION 6.10(b) and all parties have agreed that this Agreement
is terminated.
8.4 AMENDMENT, MODIFICATION, WAIVER AND EXTENSION. This
Agreement may be amended, modified or supplemented at any time by written
agreement of Seller, the Companies,
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the Buyers and the Acquisition Subs. Any failure of Seller, any of the
Companies, any of the Buyers or any of the Acquisition Subs to comply with any
term or provision of this Agreement may be waived, with respect to the Buyers
and the Acquisition Subs, by Seller and, with respect to Seller and the
Companies, by any Buyer, by an instrument in writing signed by or on behalf of
the appropriate party, but such waiver or failure to insist upon strict
compliance with such term or provision shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure to comply. At any
time prior to the Effective Time, each party hereto may (i) extend the time
for the performance of any of the obligations or other acts of the other
parties, (ii) waive any inaccuracies in the representations and warranties of
the other parties contained herein or in any document, certificate or writing
delivered pursuant hereto or (iii) waive compliance by the other parties with
any of the agreements or conditions contained herein. Any agreement on the
part of any party hereto to any such extension or waiver shall be valid only
if set forth in an instrument, in writing, signed on behalf of such party.
The failure of any party hereto to assert any of its rights hereunder shall
not constitute a waiver of such rights.
ARTICLE IX
INDEMNIFICATION
9.1 SELLER'S AGREEMENT TO INDEMNIFY. Subject to the terms and
conditions set forth herein, from and after the Closing, Seller shall
indemnify and hold harmless the Buyers and the Surviving Corporations and
their respective directors, officers, employees, affiliates, controlling
persons, agents and representatives and their successors and assigns
(collectively, the "Buyer Indemnitees") from and against: (a) all liability,
demands, claims, actions or causes of action, assessments, losses, damages,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses) (collectively with the damages set forth in clauses (b) and (c)
hereof, "Buyer Damages") arising out of or caused by, directly or indirectly,
any or all of the following: (i) the matter set forth on SCHEDULE 9.1; (ii)
any misrepresentation, breach or failure of any warranty or representation
made by Seller in or pursuant to this Agreement without giving effect to any
Material Adverse Effect, materiality or knowledge qualifiers contained
therein; and (iii) any failure or refusal by Seller to satisfy or perform in
all material respects any covenant, term or condition of this Agreement
required to be satisfied or performed by Seller; (b) any actual losses,
penalties or fines relating to the failure to obtain any required approval of
a Governmental Authority for the OSC Merger; or (c) any actual losses or
penalties relating to the failure to obtain within 90 days after the Closing,
any required consent listed on Section 4.5 of the Disclosure Schedule or
pursuant to any contract listed on Section 4.10(a) of the Disclosure Schedule,
to the extent such consents are material to the Companies. The Buyers may
offset against any amounts owing from the Buyers to Seller pursuant to SECTION
10.3(b), any amounts either agreed by Seller or determined by a court of
competent jurisdiction to constitute Buyer Damages.
9.2 THE BUYERS' AND THE ACQUISITION SUBS' AGREEMENT TO
INDEMNIFY. Subject to the terms and conditions set forth herein, from and
after the Closing, each of the Buyers and each of the Acquisition Subs shall,
jointly and severally, indemnify and hold harmless Seller and its directors,
officers, employees, affiliates, controlling persons, agents and
representatives and their successors and assigns (collectively, the "Seller
Indemnitees") from and against all liability, demands, claims, actions or
causes of action, assessments, losses, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) (collectively,
"Seller
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Damages") arising out of or caused by, directly or indirectly, any or all of
the following: (i) any misrepresentation, breach or failure of any warranty
or representation made by any of the Buyers or any of the Acquisition Subs in
or pursuant to this Agreement; (ii) any failure or refusal by any of the
Buyers or any of the Acquisition Subs or Surviving Corporations to satisfy or
perform in all material respects any covenant, term or condition of this
Agreement required to be satisfied or performed by any of the Buyers or any
of the Acquisition Subs or Surviving Corporations; (iii) any claim against
Seller under any guarantee of the Leases, Equipment Leases or Contracts with
respect to obligations or liabilities arising on or after the Closing Date;
and (iv) subject to the last sentence of SECTION 6.7(c) and to SECTION
6.7(d), any claims against Seller of, or damages or penalties sought against
Seller by, any Transferred Employee, or any Governmental Authority on behalf
of or concerning any Transferred Employee, with respect to any act or failure
to act by any of the Buyers or any of the Surviving Corporations to the
extent arising from the employment, discharge, layoff or termination of any
Transferred Employee on or after the Closing Date.
9.3 GENERAL PROVISIONS.
(a) Seller's obligations to indemnify the Buyer Indemnitees
pursuant to SECTION 9.1, and the Buyers' and Acquisition Subs' obligation to
indemnify the Seller Indemnitees pursuant to SECTION 9.2, are subject to the
following limitations:
(i) No indemnification shall be made by an indemnifying
party (referred to as an "Indemnitor") unless the aggregate amount of all
Damages to be indemnified by such Indemnitor to the Buyer Indemnitees or
Seller Indemnitees, as the case may be (Buyer Indemnitees and Seller
Indemnitees are sometimes referred to as "Indemnitees"), exceeds $175,000 and,
in such event, indemnification shall be made by such Indemnitor only to the
extent such Damages exceed $175,000; provided, however, that any Buyer Damages
arising out of or related to SECTION 2.9, SECTION 4.2, SECTION 4.4, SECTION
6.7(c) and (d), SCHEDULE 9.1, SECTION 9.1(b), SECTION 10.1 or SECTION 10.2 and
any Seller Damages arising out of or related to SECTION 2.9, SECTION 10.2,
SECTION 10.3 or SECTION 6.11, shall not be subject to the foregoing limitation.
(ii) In no event shall the aggregate obligation of an
Indemnitor to indemnify the Indemnitees pursuant to this Agreement exceed
$15,000,000; provided, however, that this limitation shall not apply to any
claim for indemnification for Seller Damages arising out of or related to
SECTION 2.9, SECTION 6.8, SECTION 6.11, SECTION 10.2 or SECTION 10.3 hereof or
any claim for indemnification for Buyer Damages arising out of or related to
SECTION 2.9, SECTION 4.2, SECTION 4.4, SECTION 4.15, SECTION 6.8, SCHEDULE
9.1, SECTION 9.1(b), SECTION 10.1 and SECTION 10.2 hereof; and provided,
further, that any claims arising out of or related to SECTION 2.9, SECTION
6.11, SECTION 4.2, SECTION 4.4, SECTION 4.15, SECTION 6.8, SCHEDULE 9.1,
SECTION 9.1(b), SECTION 10.1, SECTION 10.2 or SECTION 10.3 shall not be
aggregated with any other claims for indemnification for purposes of
determining the aggregate obligation of an Indemnitor pursuant to this
Agreement. Notwithstanding anything to the contrary in the foregoing
sentence, in no event shall the aggregate obligation of an Indemnitor to
indemnify the Indemnitees pursuant to this Agreement exceed $70,000,000.
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(iii) Notwithstanding anything to the contrary contained
herein, except for Damages arising out of or related to a willful or knowing
breach of SECTION 10.1 or SECTION 10.2, in no event shall an Indemnitor be
obligated to indemnify an Indemnitee for any Damages that are speculative or
consequential such as lost business opportunities or lost profits, other than
lost profits from contractual obligations to which the Indemnitee was a party
at the time of the event giving rise to the Damages.
(iv) An Indemnitor shall be obligated to indemnify the
Indemnitees only for those claims giving rise to Damages as to which the
Indemnitees have given Indemnitor written notice thereof, which notice must be
given prior to the end of the indemnification period set forth in SECTION
9.3(b). Any written notice delivered by an Indemnitee to an Indemnitor with
respect to Damages shall set forth with as much specificity as is reasonably
practicable the basis of the claim for Damages and, to the extent reasonably
practicable, a reasonable estimate of the amount thereof.
(v) Any amounts of Damages for which indemnification is
provided under this ARTICLE IX shall be reduced by an amount equal to (i) any
related recoveries actually received by an Indemnitee under insurance policies
or other related payments actually received from any other Person, (ii) any
Tax benefits realized by an Indemnitee or any of its Affiliates on account of
and within three (3) years following the matter resulting in such Damages or
the payment of such Damages and (iii) with respect to Buyer Damages, the
amount of reserves, if any, reflected on the Closing Date Balance Sheets with
respect to the specific matter for which indemnification is provided. In the
event an Indemnitee receives any such recoveries or Tax benefits on account of
any Damages that have been previously indemnified by the Indemnitor under this
ARTICLE IX, the Indemnitee shall, after receipt thereof, promptly pay over to
the Indemnitor the full amount of such recoveries or Tax benefits received,
but only to the extent of indemnification made by the Indemnitor on account
thereof. In the event any matter for which indemnification is made to a Buyer
Indemnitee is specifically reserved against on the Closing Date Balance
Sheets, the amount of such indemnification shall be reduced by the amount of
such reserve.
(vi) Except for (x) injunctive or provisional relief and
(y) claims arising from or related to the Transition Services Agreement, the
Guaranty and the Consulting Agreement, if the Closing occurs, this ARTICLE IX
shall be the exclusive remedy for breaches of this Agreement and all other
documents, agreements and transactions related hereto (including any covenant,
obligation, representation or warranty contained in this Agreement or in any
document or agreement delivered pursuant to this Agreement) or otherwise in
respect of the Mergers contemplated hereby.
(b) Other than any claim for indemnification for (i) Damages
arising out of or related to SECTION 4.15 or SECTION 6.8, which claims may be
brought until the expiration of the applicable statutory period of limitation,
giving effect to any waiver, mitigation or extension thereof, (ii) Damages
arising out of or related to any other covenant, which claims may be brought
prior to the later of one year from the Closing Date or ninety (90) days after
the date on which such covenant should be fully performed, and (iii) Damages
arising out of or related to SECTION 4.2 or SECTION 4.4, which claims may be
brought indefinitely, any claim for indemnification pursuant to this ARTICLE
IX shall be brought within two (2) years of the Closing Date.
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9.4 THIRD-PARTY INDEMNIFICATION. The obligations of an
Indemnitor to indemnify the Indemnitees under SECTION 9.1 or SECTION 9.2
hereof, as the case may be, with respect to Damages resulting from the
assertion of liability by third parties (a "Claim"), will be subject to the
following terms and conditions:
(a) Any party against whom any Claim is asserted will give the
Indemnitor written notice of any such Claim promptly after learning of such
Claim, and the Indemnitor may at its option undertake the defense thereof by
representatives of its own choosing, who shall be reasonably satisfactory to
the Indemnitee. Failure to give prompt notice of a Claim hereunder shall not
affect an Indemnitor's obligations under this ARTICLE IX, except to the extent
(and only to the extent) the Indemnitor is materially prejudiced by such
failure to give prompt notice. If an Indemnitor, within thirty (30) days
after notice of any such Claim, or such shorter period as is reasonably
required, fails to assume the defense of such Claim, or does not continue to
defend the Claim in good faith, the Indemnitee against whom such claim has
been made will (upon further notice to the Indemnitor) have the right to
undertake the defense, compromise or settlement of such claim on behalf of and
for the account and risk, and at the expense, of the Indemnitor, by
representatives selected by the Indemnitee who shall be reasonably
satisfactory to the Indemnitor. If an Indemnitor elects to assume the defense
of such Claim, the Indemnitee shall have the right to employ (at its expense)
its own counsel and to participate in such defense. If an Indemnitee
reasonably believes that the handling of the defense by the Indemnitor may
have a material adverse affect on any Indemnitee, its business or financial
condition, or its relationship with any customer, prospect, supplier,
employee, salesman, consultant, agent or representative, then the Indemnitee
may, at its option and expense and through counsel of its choice, jointly with
the Indemnitor assume control of the defense of such Claim, provided that
nothing in this sentence shall be deemed to relieve the Indemnitor of any
liability it may have under this ARTICLE IX other than liability for the
expenses of Indemnitee's counsel.
(b) Anything in this SECTION 9.4 to the contrary
notwithstanding, the Indemnitor shall not enter into any settlement or
compromise of any action, suit or proceeding or consent to the entry of any
judgment (i) which does not include as an unconditional term thereof the
delivery by the claimant or plaintiff to the Indemnitee of a written release
from all liability in respect of such action, suit or proceeding or (ii) for
other than monetary damages to be borne in full by the Indemnitor, without the
prior written consent of the Indemnitee, which consent shall not be
unreasonably withheld.
ARTICLE X
NON-COMPETITION; NON-SOLICITATION OF EMPLOYEES AND CUSTOMERS
10.1 NON-COMPETITION BY SELLER.
(a) During the period commencing on the Closing Date and ending
on the second anniversary thereafter and subject to the provisions of
subsection (b) below, neither Seller nor any of its Affiliates shall, nor
shall Seller cause any of its Affiliates to, directly or indirectly, own,
manage, operate, control, enable or otherwise engage or participate in, or be
a stockholder, partner, member, lender, guarantor or advisor of, or consultant
to, any Person that is engaged in a business that directly and materially
competes with the Business as conducted by the Companies as of the Closing
Date (a "Competing Business") in the Business Area; provided, however, that
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nothing herein shall be deemed to prohibit Seller from holding an ownership
interest in Princeton eCom Corporation, FIData, Inc. (d/b/a FIData.com) or
COREINTELLECT, Inc. For purposes of this Agreement, "Business Area" shall
mean the entire United States of America.
(b) Notwithstanding subsection (a) above, Seller and any of its
Affiliates may own securities in any publicly-traded entity that may be
engaged in a Competing Business, but only to the extent Seller and its
Affiliates, collectively, do not own, of record or beneficially, more than
fifteen percent (15%) of the outstanding beneficial ownership of such entity;
and provided that neither Seller nor its Affiliates may take any action to
assist in the solicitation by any such publicly-traded entity for purposes of
any Competing Business of any Person that is a customer of any Company as of
the Closing Date.
10.2 NON-SOLICITATION OF EMPLOYEES AND CUSTOMERS.
(a) Each of (x) Seller and its Affiliates and (y) each of the
Buyers, each of the Surviving Corporations and each of their respective
Affiliates agree that, for a period of two (2) years after the Closing Date,
it shall not, without the prior written consent of the other, (i) solicit,
influence or attempt to influence any employee of the other to terminate his
or her employment or other contractual relationship with his or her respective
employer for any reason, including, without limitation, working for such
soliciting party or (ii) hire any person who is an employee of the other as of
the Closing Date. Each of Seller, the Buyers and the Surviving Corporations
shall cause its respective Affiliates to comply with the provisions of this
SECTION 10.2(a).
(b) Seller agrees that, for a period of two (2) years after the
Closing Date, without the prior written consent of the Buyers, it shall not
and it shall not permit its Affiliates to, (x) solicit, influence or attempt
to influence any Person who is a customer of the Surviving Corporations as of
the Closing Date to terminate its customer relationship with such Surviving
Corporation for any reason or to engage with Seller or any such Affiliate in a
business that directly and materially competes with the Business as conducted
by the Companies as of the Closing Date in the Business Area, or (y) with
respect to any entity in which Seller has an ownership interest but which is
not an Affiliate, to suggest that such entity take any action that is
prohibited by clause (x) above or to assist such entity in taking any such
action.
10.3 NON-COMPETE ROYALTY PAYMENTS.
(a) As soon as practicable and in any event no later than thirty
(30) days after the last day of each month beginning with the month following
the month in which the Closing occurs and extending (i) with respect to
Surviving Corporation 1 and Surviving Corporation 2, for 18 months and (ii)
with respect to Surviving Corporation 3 and Surviving Corporation 4, for 36
months (collectively, the "Non-Compete Royalty Period"), the Buyers shall
deliver to Seller their determinations of revenues of each of the Surviving
Corporations for such month (collectively, the "Monthly Revenues"), determined
in accordance with GAAP except as provided in SECTION 6.11. The Buyers shall
provide Seller and its authorized representatives with reasonable access to
its work papers and to the books and records of each of the Surviving
Corporations, and Seller shall have the right, at its sole cost and expense,
to make copies thereof, in connection with such calculations and the Buyers
shall make themselves available at reasonable times upon request of Seller to
discuss with Seller such calculations.
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(b) As consideration for Seller's covenants contained in
SECTIONS 10.1 and 10.2, and subject to SECTION 9.1, the Buyers agree to pay to
Seller an amount in cash equal to the amounts set forth in SCHEDULE 10.3 if
the aggregate of the Monthly Revenues of the applicable Surviving Corporation,
as finally determined pursuant to this SECTION 10.3, equals or exceeds the
Annual Revenue Targets for such Surviving Corporation for such period as set
forth in Schedule 10.3 (collectively, the "Non-Compete Royalty Payments").
Such amounts shall be paid by wire transfer of immediately available funds to
Seller on the sixtieth day following the end of the period for which the
payment is due (collectively, the "Non-Compete Royalty Payment Dates") for the
12-month or 18-month periods as set forth in SCHEDULE 10.3 (collectively, the
"Non-Compete Royalty Payment Periods"), within the applicable Non-Compete
Royalty Period Notwithstanding anything to the contrary contained herein, in
the event that a Cumulative Revenue Target set forth in SCHEDULE 10.3 is met
for any period from the beginning of the Non-Compete Royalty Period through
the applicable 12-month period, any Non-Compete Royalty Payment with respect
to such Surviving Corporation for that period and for any previous period that
has not previously been paid shall then be paid on the next Non-Compete
Royalty Payment Date. By means of example with respect to the foregoing, (i)
if actual revenues for Surviving Corporation 3 for the first 12-month period
following the Closing Date were $30,000,000, no Non-Compete Royalty Payment
would be made with respect thereto on the following Non-Compete Royalty
Payment Date; and if actual revenues for Surviving Corporation 3 for the
second 12-month period following the Closing Date were $37,000,000, then the
Non-Compete Royalty Payment with respect to both the first 12-month-period and
the second 12-month period would be made on the next Non-Compete Royalty
Payment Date (because the cumulative target for the second 12-month period is
exceeded); and (ii) if actual revenues for Surviving Corporation 4 for the
first 12-month period following the Closing Date were $27,000,000, then the
Non-Compete Royalty Payment with respect to such period would be made on the
next Non-Compete Royalty Payment Date, and if actual revenues for Surviving
Corporation 4 for the second 12-month period following the Closing Date were
$30,000,000, then the Non-Compete Royalty Payment with respect thereto would
be made on the next Non-Compete Royalty Payment Date (because the cumulative
target for the second 12-month period is exceeded).
(c) Within fifteen (15) days after receipt by Seller of the
Buyers' Monthly Revenues determination for the last month in any Non-Compete
Royalty Payment Period, Seller shall either inform the Buyers in writing that
the Monthly Revenues determination for each month in such Non-Compete Royalty
Payment Period is acceptable or object to the Monthly Revenues determination
in writing setting forth a specific description of Seller's objections and the
Monthly Revenues objected thereto (it being agreed that the failure of Seller
to deliver such written notice to the Buyers within such fifteen (15) day
period shall be deemed acceptance by Seller). If Seller objects as provided
above and if the Buyers do not agree with Seller's objections, if any (it
being agreed that the failure of any Buyer to deliver written notice to Seller
of such Buyer's disagreement with Seller's objections within fifteen (15) days
of such Buyer's receipt of Seller's objections shall be deemed acceptance by
such Buyer), or such objections are not resolved on a mutually agreeable basis
within fifteen (15) days after the Buyers' receipt of Seller's objections, any
such disagreement shall be promptly submitted to a mutually acceptable
Unaffiliated Firm; provided, however, that, notwithstanding such dispute, the
Buyers shall pay to Seller on the Non-Compete Royalty Payment Date the amount
of Non-Compete Royalty Payment calculated by the Buyers as owing for such
Non-Compete Royalty Period (the "Contested Non-Compete Royalty Payment"). The
Unaffiliated Firm shall resolve within thirty
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(30) days after its engagement by the parties the differences regarding the
determination of the Monthly Revenues in accordance with GAAP and this
Agreement (Monthly Revenues so determined is referred to as the "Actual
Monthly Revenues"). If the Non-Compete Royalties owed based on the Actual
Monthly Revenues exceeds the Contested Non-Compete Royalty Payment, then the
Buyers shall pay Seller an amount in cash equal to such excess within five (5)
business days after such determination is made.
(d) The fees, expenses and costs of the Unaffiliated Firm
incurred in connection with this SECTION 10.3 shall be paid by the parties
using the methodology set forth in SECTION 2.9(d). The Buyers and Seller
shall each bear the fees, costs and expenses of its own accountants. The
Unaffiliated Firm's determination of the Monthly Revenues shall be deemed to
be final.
10.4 CONFIDENTIALITY.
(a) For a period of three years after the Closing,
Seller shall not, and shall cause its Affiliates not to use for any purpose or
knowingly divulge, directly or indirectly, to any entity or person, any
Companies Confidential Information (as defined below), except Companies
Confidential Information which is (i) in the public domain, (ii) becomes
public knowledge through no fault of Seller, (iii) is required to be disclosed
by court order or other government process or the disclosure of which is
necessary to enable Seller to comply with applicable law or (iv) disclosed to
a Governmental Authority in connection with any audit, Tax filing,
investigation or similar proceeding. In the event that Seller or any of its
Affiliates shall be required to make disclosure pursuant to the provisions of
clause (iii) of the preceding sentence, such Person shall promptly notify the
Buyers and take, at the expense of the Buyers, all reasonably necessary steps
requested by the Buyers to defend against the enforcement of such court order
or other government process, and permit the Buyers to participate with counsel
of their choice in any proceeding relating to the enforcement thereof.
(b) For a period of three years after the Closing, no
Buyer shall, and the Buyers shall cause the Surviving Corporations and their
respective Affiliates not to use for any purpose or knowingly divulge,
directly or indirectly, to any entity or person, any Seller Confidential
Information (as defined below), except Seller Confidential Information which
is (i) in the public domain, (ii) becomes public knowledge through no fault of
any Buyer, (iii) is required to be disclosed by court order or other
government process or the disclosure of which is necessary to enable the
Buyers to comply with applicable law or (iv) disclosed to a Governmental
Authority in connection with any audit, Tax filing, investigation or similar
proceeding. In the event that any Buyer, any Surviving Corporation or any of
their respective Affiliates shall be required to make disclosure pursuant to
the provisions of clause (iii) of the preceding sentence, such Person shall
promptly notify Seller and take, at the expense of Seller, all reasonably
necessary steps requested by Seller to defend against the enforcement of such
court order or other government process, and permit Seller to participate with
counsel of its choice in any proceeding relating to the enforcement thereof.
For purposes of this SECTION 10.4, "Companies Confidential
Information" shall include, but not be limited to the following: all data,
information and materials related to the Companies or any Surviving
Corporation, or any subsidiary or division thereof which is not generally
known or readily available to competitors or the public including, but not
limited to: (1) proposals, text,
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illustrations, designs, characters, trade secrets, intellectual property,
proprietary information, trademarks (both existing and proposed) and trade
names; (2) matters of the business of the Companies or any Surviving
Corporation or any subsidiary or division thereof including, but not limited
to: financial data or plans; business procedures and plans; product plans;
research and development; marketing plans and materials; information
concerning employees, customers and/or vendors; lists of actual or potential
customers or suppliers, price lists, pricing policies, and any information
about such business, clients, customer lists, partners, contracts, assets,
liabilities, or other financial information; past, present or proposed
business operations, or projects or business opportunities for new or
developing business; and (3) information or data including, but not limited
to: software; specifications; designs; plans; drawings; and any other
proprietary information relating to the business of the Companies or the
Surviving Corporations, whether oral, graphic, written, electronic or in
machine readable form.
For purposes of this SECTION 10.4, "Seller Confidential Information"
shall include, but not be limited to the following: all data, information and
materials related to Seller, any Affiliate of Seller, or any subsidiary,
Affiliate, or division thereof which is not generally known or readily
available to competitors or the public including, but not limited to:
(1) proposals, text, illustrations, designs, characters, trade secrets,
intellectual property, proprietary information, trademarks (both existing and
proposed) and trade names; (2) matters of the business of Seller, or any
subsidiary, Affiliate, or division thereof including, but not limited to:
financial data or plans; business procedures and plans; product plans;
research and development; marketing plans and materials; information
concerning employees, customers and/or vendors; lists of actual or potential
customers or suppliers, price lists, pricing policies, and any information
about such business, clients, customer lists, partners, contracts, assets,
liabilities, or other financial information; past, present or proposed
business operations, or projects or business opportunities for new or
developing business; and (3) information or data including, but not limited
to: software; specifications; designs; plans; drawings; and any other
proprietary information relating to the business of Seller, whether oral,
graphic, written, electronic or in machine readable form.
10.5 REASONABLENESS OF COVENANTS. The covenants of Seller, the
Buyers and the Surviving Corporations contained in ARTICLE X will be construed
as independent of any other provision in this Agreement; and the existence of
any claim or cause of action by any party against the other will not
constitute a defense to the enforcement of said covenants.
It is the desire and intent of the parties to this Agreement that the
provisions of this ARTICLE X shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. If any particular provisions or portion of this
ARTICLE X shall be adjudicated to be invalid or unenforceable, this ARTICLE X
shall be deemed amended to modify or delete therefrom such provision or
portion adjudicated to be invalid or unenforceable, such amendment to apply
only with respect to the operation of this ARTICLE X in the particular
jurisdiction in which such adjudication is made.
ARTICLE XI
MISCELLANEOUS
11.1 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and may be given by
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any of the following methods: (a) personal delivery; (b) facsimile
transmission; (c) registered or certified mail, postage prepaid, return
receipt requested; or (d) overnight delivery service. Notices shall be sent
to the appropriate party at its address or facsimile number given below (or at
such other address or facsimile number for such party as shall be specified by
notice given hereunder):
If to any of the Buyers, any of the Acquisition Subs or any of the
Surviving Corporations, to:
c/o Platinum Equity Holdings, LLC
2049 Century Park East, Suite 2700
Los Angeles, California 90067
Attention: Eva Kalawski, Esq.
Fax No.: (310) 712-1863
With a copy to:
Riordan & McKinzie
300 South Grand Avenue, 29th Floor
Los Angeles, California 90071
Attention: Cynthia M. Dunnett, Esq.
Fax No.: (213) 229-8550
If to Seller or any of the Companies (prior to the Mergers), to:
Billing Concepts Corp.
7411 John Smith Drive, Suite 1500
San Antonio, Texas 78229
Attention: W. Audie Long, Esq.
Fax No.: (210) 949-7024
With a copy to:
Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue, N.W.
Suite 900
Washington, D.C. 20036
Attention: Howard B. Adler, Esq.
Fax No.: 202-467-0539
All such notices, requests, demands, waivers and communications shall be
deemed received upon (i) actual receipt thereof by the addressee, (ii) actual
delivery thereof to the appropriate address or (iii) in the case of a
facsimile transmission, upon transmission thereof by the sender and issuance
by the transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously
mail a copy of the notice to the
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addressee at the address provided for above. However, such mailing shall in
no way alter the time at which the facsimile notice is deemed received.
11.2 SEVERABILITY. Should any provision of this Agreement for
any reason be declared invalid or unenforceable, (i) such decision shall not
affect the validity or enforceability of any of the other provisions of this
Agreement, which remaining provisions shall remain in full force and effect
and (ii) the application of such invalid or unenforceable provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable shall be valid and enforced to the fullest extent permitted by
law, but only to the extent that such enforceability or application is in
accordance with the intent of the parties as evidenced by this Agreement.
11.3 BINDING EFFECT; ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned, directly or indirectly, including, without limitation, by
operation of law, by any party hereto without the prior written consent of the
other parties hereto.
11.4 NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for
the benefit of the parties hereto and their respective successors and
permitted assigns, and this Agreement shall not be deemed to confer upon or
give to any other third party any remedy, claim, liability, reimbursement,
cause of action or other legal or equitable right.
11.5 INTERPRETATION.
(a) The article and section headings contained in this Agreement
are solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement.
(b) In view of the fact that each of the parties hereto has been
represented by its own counsel and this Agreement has been fully negotiated by
all parties, the legal principle that ambiguities in a document are construed
against the draftsperson of that document shall not apply to this Agreement.
11.6 JURISDICTION AND CONSENT TO SERVICE. Each of Seller, the
Companies, the Buyers and the Acquisition Subs (a) agrees that any suit,
action or proceeding arising out of or relating to this Agreement may be
brought solely in the state or Federal courts of either the Western District
of Texas or the Central District of California, (b) consents to the exclusive
jurisdiction of any such court in any suit, action or proceeding relating to
or arising out of this Agreement, (c) waives any objection which it may have
to the laying of venue in any such suit, action or proceeding in any such
court and (d) agrees that service of any court paper may be made in such
manner as may be provided under applicable laws or court rules governing
service of process.
11.7 ENTIRE AGREEMENT. This Agreement, the Confidentiality
Agreement, the Disclosure Schedule, and the Schedules and Exhibits and other
documents referred to herein or delivered pursuant hereto which form a part
hereof constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, between the parties or any of them with
respect to the subject matter hereof.
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11.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas (regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.
11.9 SPECIFIC PERFORMANCE. The parties agree that any breach of
the terms of this Agreement would give rise to irreparable harm for which
money damages would not be an adequate remedy and accordingly the parties
agree that, in addition to any other remedies, each shall be entitled to
enforce the terms of this Agreement by a decree of specific performance
without the necessity of proving the inadequacy of money damages as a remedy.
11.10 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
(SIGNATURES APPEAR ON NEXT PAGE)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
BILLING CONCEPTS CORP.
By: /s/ David P. Tusa
-------------------------------------
Name: David P. Tusa
Title: Senior Vice President and Chief
Financial Officer
BILLING CONCEPTS, INC.
By: /s/ David P. Tusa
-------------------------------------
Name: David P. Tusa
Title: Senior Vice President and Chief
Financial Officer
ENHANCED SERVICES BILLING, INC.
By: /s/ David P. Tusa
-------------------------------------
Name: David P. Tusa
Title: Senior Vice President and Chief
Financial Officer
BC TRANSACTION PROCESSING SERVICES, INC.
By:: /s/ David P. Tusa
------------------------------------
Name: David P. Tusa
Title: Senior Vice President and Chief
Financial Officer
APTIS, INC.
By:: /s/ David P. Tusa
------------------------------------
Name: David P. Tusa
Title: Senior Vice President and Chief
Financial Officer
OPERATOR SERVICE COMPANY
By:: /s/ David P. Tusa
------------------------------------
Name: David P. Tusa
Title: Senior Vice President and Chief
Financial Officer
BC HOLDING I CORPORATION
By: /s/ Johnny O. Lopez
-------------------------------------
Name: Johnny O. Lopez
Title: Vice President
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BC HOLDING II CORPORATION
By: /s/ Johnny O. Lopez
-------------------------------------
Name: Johnny O. Lopez
Title: Vice President
BC HOLDING III CORPORATION
By: /s/ Johnny O. Lopez
-------------------------------------
Name: Johnny O. Lopez
Title: Vice President
BC ACQUISITION I CORPORATION
By: /s/ Johnny O. Lopez
-------------------------------------
Name: Johnny O. Lopez
Title: Vice President
BC ACQUISITION II CORPORATION
By: /s/ Johnny O. Lopez
-------------------------------------
Name: Johnny O. Lopez
Title: Vice President
BC ACQUISITION III CORPORATION
By: /s/ Johnny O. Lopez
-------------------------------------
Name: Johnny O. Lopez
Title: Vice President
BC ACQUISITION IV CORPORATION
By: /s/ Johnny O. Lopez
-------------------------------------
Name: Johnny O. Lopez
Title: Vice President
58
