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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
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Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended DECEMBER 31, 1997
Commission File Number 1-1969
CERIDIAN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 52-0278528
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
8100 34th Avenue South
Minneapolis, Minnesota 55425
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Telephone No.: (612) 853-8100
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS: NAME OF EACH EXCHANGE ON WHICH REGISTERED:
Common stock, par value $.50 ---- New York Stock Exchange, Inc.; The Chicago
Stock Exchange; and The Pacific Exchange
Has the Registrant (1) filed all reports required by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months and
(2) been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
Ceridian as of February 28, 1998 was $3,357,966,810.
The shares of Ceridian common stock outstanding as of February 28, 1998 were
72,375,214.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1997 Annual Report to Stockholders of Registrant: Parts I & II
Portions of the Proxy Statement for Annual Meeting of Stockholders, May 22,
1998: Parts III and IV
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CERIDIAN CORPORATION
PART I
THE INFORMATION CONTAINED IN THIS REPORT INCLUDES FORWARD-LOOKING
STATEMENTS, BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS, THAT INVOLVE RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE EXPRESSED IN THE FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS KNOWN TO
CERIDIAN THAT COULD CAUSE SUCH MATERIAL DIFFERENCES ARE IDENTIFIED IN THE
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION" UNDER THE CAPTION "CAUTIONARY FACTORS THAT COULD AFFECT FUTURE
RESULTS" ON PAGE 11 OF CERIDIAN'S 1997 ANNUAL REPORT TO STOCKHOLDERS, WHICH IS
INCORPORATED BY REFERENCE INTO PART II, ITEM 7 OF THIS REPORT.
ITEM 1. BUSINESS.
Ceridian Corporation ("Ceridian"), known as Control Data Corporation until
June 1992, was founded in 1957 and is incorporated in Delaware. The principal
executive office of Ceridian is located at 8100 34th Avenue South, Minneapolis,
Minnesota 55425, telephone (612) 853-8100.
As a result of the December 31, 1997 sale of Computing Devices
International, Ceridian's defense electronics business, Ceridian now operates
exclusively in the information services industry. Ceridian's information
services businesses, which consist of its Human Resource Services businesses
("HRS"), its Comdata subsidiary and its Arbitron division, provide products and
services to customers in the human resources, trucking and electronic media
markets. These businesses collect, manage and analyze data and process
transactions on behalf of customers, report information resulting from such
activities to customers, and provide customers with related software
applications and services. The technology-based products and services of these
businesses are typically provided through long-term customer relationships that
result in a high level of recurring revenue.
HUMAN RESOURCE SERVICES.
The businesses comprising HRS offer a broad range of services and software
designed to help employers more effectively manage their work forces and
information that is integral to human resource processes. HRS' revenue for the
years 1995, 1996 and 1997 was $412.2 million, $490.3 million and $578.6 million,
respectively.
MARKETS. The market for human resource services covers a comprehensive
range of information management and employer/employee assistance services and
software. These products and services include transaction-oriented
administrative services and software products, in areas such as payroll
processing, tax filing and benefits administration, as well as management
support software and services, in areas such as skills management, regulatory
compliance, employee training and employee assistance.
The market for these products and services is expected to continue to grow
as organizations seek not only to reduce costs and improve productivity by
outsourcing administrative services and further automating internal processes,
but also to adapt to the increasing scope and complexity of laws and regulations
governing businesses and increasingly complicated work-life issues faced by
employers and employees. Continuing growth in multinational companies
increasingly makes providing human resource services a global opportunity.
Ceridian classifies employers in the human resource services market into
three categories: small (fewer than 100 employees), medium (100 to 10,000
employees) and large (over 10,000
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employees). Smaller employers in the human resource services market tend to
be relatively more price sensitive, to require less customization or
flexibility in product and service offerings, and to switch more readily from
one provider to another. Medium- and large-sized employers' human resource
management needs tend to be more complex, and therefore often require more
customization and flexibility in products and services, greater integration
among data processing systems and a greater variety of products and services.
Ceridian believes, however, that with regard to any size employer, a
provider of a transaction-based service such as payroll processing is
afforded attractive opportunities to complement that core service with
additional products and services that are natural adjuncts to that core
service and potentially important factors in revenue growth.
PRODUCTS AND SERVICES. HRS' human resource management products and
services include payroll processing services and software, tax filing services,
human resource information software, benefits administration software, time and
attendance systems, and applications to give employees and managers direct
access to human resources information. These products and services are provided
in the United States, the United Kingdom and Canada through Ceridian Employer
Services. Payroll processing and tax filing services accounted for about
three-fourths of HRS' 1997 revenue, with about 90% of 1997 payroll processing
and tax filing revenue derived from the United States.
Payroll processing in the United States consists primarily of preparing and
furnishing employee payroll checks, direct deposit advices and supporting
journals and summaries, but does not involve the handling or transmission of
customer payroll funds. Ceridian also supplies quarterly and annual social
security, Medicare, and federal, state and local income tax withholding reports
required to be filed by employers and employees. Payroll tax filing consists
primarily of collecting funds for federal, state and local employment taxes from
customers based on payroll information provided, remitting funds collected to
the appropriate taxing authorities, filing applicable returns, and handling
regulatory correspondence and amendments. Payroll-related services are
typically priced on a fee-per-item-processed basis.
Revenue from payroll tax filing services in the United States also includes
investment income earned by Ceridian from tax filing deposits temporarily held
pending remittance on behalf of customers to taxing authorities. Customer
deposits are held in a fiduciary capacity in a tax filing trust established by
Ceridian. The trust invests primarily in high quality collateralized short-term
investments, top tier commercial paper, U.S. Treasury and Agency securities, AAA
rated asset-backed securities and corporate securities rated A3/A- or better.
The duration of investments is carefully managed to meet the liquidity needs of
the trust. About two-thirds of 1997 tax filing revenue and about 14% of HRS'
total 1997 revenue was attributable to such investment income. Due to the
significance of this investment income, HRS' quarterly revenue and profitability
fluctuate as a result of changes in interest rates and in the amount of tax
filing deposits held. Because the volume of payroll items processed increases
in the first and fourth quarters of each year in connection with employers'
year-end reporting requirements, and because the amount of tax filing deposits
also tends to be greatest in the first quarter, HRS' revenue and profitability
tend to be greater in those quarters.
Payroll processing in the United States is conducted using Ceridian's
proprietary "Signature" software at 31 district offices located throughout
the United States, all of which are linked in a nationwide network.
Ceridian's payroll system allows customers to input their own payroll data
via personal computers, transmit the data on-line to Ceridian for processing,
retrieve reports and data files from Ceridian and print reports and, in
certain instances, payroll checks or direct deposit advices on site.
Customers can also input payroll data by telephone or batch transmittal, with
payroll checks and related reports prepared by Ceridian at one of its
district processing centers. Ceridian's payroll processing system also
interfaces with both customer and third-party transaction processing systems
to facilitate services such as direct deposit of payroll.
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Ceridian's tax filing services are provided not only to employers who utilize
Ceridian's payroll processing service, but also to local and regional payroll
processors.
Ceridian provides human resource information systems (HRIS) software that
runs in either Windows (-) or DOS environments and serves as a "front-end" to
Ceridian's Signature payroll processing system, allowing customers to utilize
a common database for both payroll and HRIS purposes. This enables the
customer to create a single database of employee information for on-line
inquiry, updating and reporting in payroll and other areas important to human
resource administration and management, such as employee data tracking,
government compliance, compensation analysis and benefits administration.
As a result of its February 1997 acquisition of FLX Corporation, Ceridian
also provides HRIS software for Microsoft operating environments that
incorporates open, industry standard technology, is scalable from standalone
applications to full client/server configurations, and can be utilized with
an existing interface as a front-end for Ceridian's payroll processing and
tax filing services. Ceridian expects to introduce during 1998 versions of
this software that will enable it to serve as a fully integrated front-end to
the Signature payroll processing system, as well as an Internet/intranet
version which will enable employees and managers to view and modify various
types of human resources information on-line.
Through a cooperative relationship with Humanic Design Corporation,
Ceridian is authorized to resell Humanic's client/server HRIS software for
Oracle operating environments in connection with Ceridian's payroll
processing services. Because of the importance of being able to integrate
Ceridian's payroll processing and tax-filing systems with other systems and
applications utilized by customers and potential customers, particularly
third-party HRIS applications, Ceridian has also developed interfaces to
exchange employee-related information between Ceridian's payroll system and
the HRIS systems of vendors such as Oracle Corporation and PeopleSoft Inc.
In August 1997, Ceridian announced it was terminating development of its
CII payroll processing software system, which had been intended to be a
successor to the Signature system primarily for larger payroll processing
customers with more complex processing needs. Beta tests of the CII system had
revealed that the costs associated with installing and processing payrolls for
large numbers of customers with the system would be higher than previously
anticipated, and that significant further investment would be required. As a
result, Ceridian determined that the CII system would not provide an adequate
return on its investment and decided, in light of continuing customer
satisfaction with and enhancements being made to the Signature system and
increased functionality included in HRIS software front-ends to the Signature
system, to terminate the CII development. In connection with this decision,
Ceridian terminated a technology services agreement with IBM Global Services
under which IBM was to have provided centralized computer processing services
utilizing the CII software.
In recent years, Ceridian has expanded its payroll processing and HRIS
software businesses outside of the United States through acquisitions.
Approximately 8% of HRS' 1997 revenue was obtained from customers outside of the
U.S. Ceridian's Centre-file Limited subsidiary, acquired in 1995, provides
mainframe-based payroll processing services and HRIS software in the United
Kingdom. Centre-file's services do not involve the handling or transmission of
customer payroll funds.
In January 1998, Ceridian's Canadian subsidiary purchased the payroll
processing business of the Toronto-Dominion Bank, which had fiscal 1997 revenue
of approximately $22 million. In March 1998, Ceridian purchased the Comcheq
payroll processing business of the Canadian Imperial Bank of Commerce, which had
1997 revenue of approximately $55 million.
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Comcheq processes payrolls on a decentralized basis in its branch offices
utilizing a proprietary, PC-based system. Both of these Canadian payroll
businesses collect payroll and payroll tax amounts from customers and remit
tax amounts to applicable governmental authorities and make direct deposits
of payroll amounts to employees' bank accounts. As a result, revenue from
payroll processing services in Canada also includes investment income
received from temporarily holding these amounts. Ceridian expects that these
amounts will be invested in a similar fashion as comparable amounts in the
U.S. About 26% of the 1997 revenue of these Canadian businesses was
attributable to such investment income.
For large employers with complex information management needs that prefer
to have all aspects of their human resource management systems in-house,
Ceridian's Tesseract subsidiary provides mainframe-based payroll processing,
HRIS and benefits administration software, as well as consulting services. For
small employers located in the mid-Atlantic states, Ceridian's MiniData
subsidiary provides payroll processing, tax filing, unemployment compensation
management and related services. Ceridian also provides advanced time and
attendance software, including a client/server version which complements a
wide variety of HRIS and payroll systems, and a series of inter-related
software applications that allow employees and managers direct access to
employment-related information through telephones, touch screen kiosks,
personal computers and Internet/intranet technologies.
HRS also includes businesses that provide a variety of employee
assistance, work-life balance, management support and training products and
services. Ceridian Performance Partners provides services to help
organizations address workplace effectiveness issues and improve employee
recruitment, retention and productivity and reduce absenteeism. Staff
consultants provide confidential assistance 24 hours a day to customers'
employees to help them address issues ranging from everyday matters to crisis
situations. Supporting these consultants are research and product
specialists who provide specialized expertise in areas such as
parenting/child care, elder care, adult disabilities, addiction disorders,
mental health and financial, legal, managerial/supervisory and
education/schooling issues.
Ceridian's Usertech subsidiary provides customized end-user training and
support programs to organizations implementing new systems. Services
provided by Usertech include classroom and computer-based training,
print-based and on-line user guides and reference, and marketing
communications programs. Usertech's Information Learning Systems division
provides employee benefits knowledge base software that provides answers to
employee questions about their benefits and runs on company intranets and in
call centers.
Ceridian's Resumix subsidiary provides skills management software (and
related hardware) that employs image processing and knowledge base and database
technologies to enable organizations to manage large volumes of incoming resume
data to identify qualified candidates for hire and match them with available
staffing needs, and to manage the skills of an existing work force by matching
current employees with new jobs or projects. Resumix also provides a software
product that enables customers to link their Resumix systems with commercial
recruiting sites on the Internet.
SALES AND MARKETING. Payroll processing, tax filing and human resource
management software and services are marketed in the U.S. through a direct sales
force operating through about three dozen offices located throughout the U.S.
Marketing relationships have been established with banks, accounting firms and
insurance companies pursuant to which these products and services are offered to
the business clients of these entities. The most significant source of customer
leads for these transaction-based products and services are referrals from
existing customers and from the marketing relationships previously noted. The
other HRS businesses, including operations in the United Kingdom and Canada,
utilize their own direct
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sales forces. Customer leads for the products and services of these
businesses are generally obtained through referrals, trade shows, product
demonstration seminars and direct sales efforts.
HRS' customer base covers a wide range of industries and markets, and no
single customer represented more than 1% of HRS' 1997 revenue. HRS' products
and services are provided under written license or service agreements, with
contracts for repetitive services generally terminable upon relatively short
notice.
The HRS businesses have utilized cooperative marketing relationships with
other companies offering products or services that complement those of the HRS
businesses as well as informal marketing alliances with human resource
consulting firms, and are exploring similar cooperative arrangements with other
software, insurance and human resource services providers. HRS is also seeking
to further integrate and coordinate the sales and marketing efforts of its
businesses and to sell a greater variety of its products and services to the
customers of its various businesses.
COMPETITION. The human resource services industry is highly competitive.
Competition comes from national, regional and local third party transaction
processors, as well as from software companies, consulting firms and internally
developed and operated systems and software.
The majority of all payroll processing and tax filing in the U.S., Canada
and the United Kingdom is supported in-house, with the remainder supported by
third party providers. In the U.S., Automatic Data Processing, Inc. ("ADP") is
the largest third party provider, with Ceridian and Paychex, Inc. ("Paychex")
comprising the other two large, national providers. ADP serves all sizes of
employers, while Paychex focuses on small employers. Other third party payroll
and tax filing providers are generally regional and local competitors, although
larger, national providers of benefits administration or 401(k) processing
services may contemplate expansion into outsourced payroll processing. In both
the United Kingdom and Canada, Ceridian's respective subsidiaries are the
largest outsourced payroll processing providers in terms of revenue, in each
case competing with several other national providers, including a subsidiary of
ADP, and local providers. Competition in both the payroll processing and HRIS
software areas also comes from a number of large, national software companies
that provide both payroll processing software for in-house processing as well as
HRIS software, often in conjunction with other enterprise management software
applications.
Apart from payroll processing and tax filing services, HRS' businesses
generally compete with a variety of national and regional application software
companies, training companies, consulting firms and human resource services
providers. Generally, the market for these products and services is evolving
and is not dominated by a small number of competitors.
Currently, the principal competitive factors in the human resource services
industry are performance, price, functionality, ease and flexibility of use,
customer support and industry standard technology architecture. HRS believes
that the ability to integrate human resource management software applications
with customers' other in-house applications, and the ability to provide
client/server-based solutions are becoming increasingly important competitive
factors. While HRS believes its businesses are able to compete effectively in
the overall human resource services market, their continued ability to compete
effectively will depend in large measure on their ability to timely develop and
implement new technology, particularly that which incorporates industry standard
architecture and client/server-based solutions.
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COMDATA.
Ceridian's Comdata subsidiary provides transaction processing and decision
support services to the trucking industry. Comdata's revenue from products and
services provided to the trucking industry for the years 1995, 1996 and 1997 was
$156.2 million, $173.7 million and $197.8 million, respectively. On January 17,
1998, Comdata sold its gaming services business to First Data Corporation in
exchange for First Data's NTS transportation services business and cash.
Comdata expects that the operations of NTS, which are being integrated with
Comdata, will generate 1998 revenue of approximately $28 million for Comdata.
MARKETS. The trucking industry encompasses both long haul fleets and
local fleets. Private fleets, which are part of larger companies that have
significant shipping needs, predominate in the local fleet segment, but play
a lesser role in the long haul fleet segment. Common carriers, which provide
trucking services to companies that do not have fleets of their own,
predominate in the long haul fleet segment, which is comprised of
less-than-truckload and truckload components. The less-than-truckload
component, which involves trucks that make multiple stops to load and unload,
is characterized by large capital requirements and a relatively high degree
of consolidation. The truckload component, which involves the transportation
of full loads directly from shipper to final destination without going
through any sorting terminals, is highly fragmented and, Comdata believes, is
growing at the expense of the less-than-truckload component.
The majority of Comdata's trucking company customers are common carriers
serving the truckload component of the long haul segment. Many of these
carriers do not employ their drivers, but instead contract with individual
owner-operators. Such owner-operators usually settle their expenses with the
common carrier after the completion of each trip. Drivers for truckload
carriers often spend weeks on the road at a time, creating a number of unique
conditions and business opportunities. Truckload carriers are challenged to
monitor and control fuel purchases, provide driver services to aid in
recruitment and improve retention, obtain necessary licenses and permits, and
effectively manage the routing and logistics of such long-distance trips.
SERVICES. Comdata provides services to trucking companies, truck stops and
truck drivers in the long haul segment of the trucking industry, and is seeking
to expand its service offerings to the local fleet segment.
TRUCKING COMPANY SERVICES. Comdata provides trucking companies and their
drivers with a variety of funds transfer services, most commonly initiated
through the use of Comdata's proprietary Comchek-Registered Trademark- card,
which is used in a manner similar to an ordinary credit card. Comdata's funds
transfer system is designed to enable truck drivers to obtain funding for
purchases and cash advances at truck stops and other locations en route to their
destination. Drivers may use the Comchek card to purchase fuel, lodging and
other approved items, obtain cash advances from ATM machines or through the use
of Comchek drafts, make long distance phone calls and make direct deposits of
pay, settlements (for non-employee owner-operators) or trip advances to personal
bank accounts. In 1997, Comdata processed approximately 45 million funds
transfer transactions involving approximately $7.2 billion for the trucking
industry.
Use of the Comchek card allows the trucking company customer greater
control over its expenses by allowing it to set limits on the use of the cards,
such as by designating locations where the cards may be used, the frequency with
which they may be used, phone numbers which may be called and the amount of
authorized use. Use of a Comchek card also enables Comdata to capture and
provide to trucking company customers (usually within 24 hours after the
completion of a given trip) transaction and trip-related information that
greatly enhances a customer's ability to track and plan fuel purchases and other
trip expenses and settle with
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drivers. Comdata can also provide trucking companies with a Windows-based
software application that provides trucking companies with on-line access to
Comdata's computer system for data on fuel purchases and other trip
information, and facilitates pre- and post-trip planning functions.
Use of a Comchek card typically generates a Comchek draft, which is payable
through a Comdata bank account. Comdata funds the underlying transaction when
the truck stop (or other payee) negotiates the draft by depositing it in its
bank account. Comdata bills the trucking company for the amount of the draft
plus a portion of the service fee, and collects from the truck stop the balance
of the service fee. The trucking company remits payment to Comdata by wire
transfer or check, typically within six days, although trucking companies may be
billed by Comdata in advance for all funds transfers authorized for any purpose
in connection with a particular trip.
Approximately 18% of Comdata's funds transfer revenue is derived from
transactions that do not involve the Comchek card. When a truck driver makes a
request at a truck stop for a funds transfer, Comdata verifies that the driver's
company has established sufficient credit. Upon presentation of valid
identification, the truck stop obtains an authorization number from Comdata and
issues a Comchek draft, which is handled in the manner described earlier.
Comdata also provides the previously described information gathering and
processing services in connection with fueling transactions which Comdata does
not fund, but instead are billed directly by the truck stop to the trucking
company. Fees for these "direct bill" transactions are substantially lower.
Comdata also provides fuel price tracking reports and management within a
network of truck stops, including cost/plus fuel purchase programs.
Comdata's Transceiver-Registered Trademark- division determines the permits
needed for a designated trip, truck and load, purchases those permits on behalf
of the customer and delivers them by facsimile machine to a truck stop where
they can be picked up by the driver. Comdata also provides certain regulatory
compliance services, such as processing and auditing of driver trip logs,
reporting of fuel taxes, annual licensing and motor vehicle registration
verification. Vehicle escort services for oversized loads are also provided.
Comdata offers a computerized shipment interchange system to help trucking
companies find loads for their return trips, thereby reducing empty backhauls.
By making specific shipment information available to customers on a subscription
basis, available shipments can be matched with available cargo space on a
nationwide basis. Comdata generates and delivers invoices on behalf of trucking
companies to their customers, and also purchases trucking company freight bills
in addition to providing necessary invoicing. As a result of agreements with
two major long-distance telecommunications providers, Comdata offers to its
trucking company customers long distance telecommunications services at volume
discount rates that might not otherwise be available to such customers.
TRUCK STOP SERVICES. Comdata maintains a national network of 24-hour
independent truck stop service centers which have point-of-sale devices and
other computer equipment to facilitate communication with Comdata's database
and operations centers. The service centers act as Comdata's agents pursuant
to a service center agreement, and typically also offer the funds transfer
services of other companies.
Comdata's merchant services division provides fueling centers with
PC-based, point of sale systems which automate the various transactions that
occur at a fuel purchase desk, systems which enable customers to transact
card-based fuel purchases at the fuel pump, UPC scanning devices, and truck
stop management software. These Trendar systems accept many types of fuel
purchase cards currently used by drivers. Comdata also makes long distance
telecommunications services available to truck stops at volume discount
rates, and provides an
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800 number phone service and prepaid long distance phone cards to truck stops
for resale to their customers.
DRIVER RELATIONS SERVICES. In order to assist trucking company
customers in attracting and retaining drivers, Comdata makes available to
trucking company employees and independent drivers the employee assistance
services of Ceridian Performance Partners, and provides additional driver
relations services such as a monthly audio magazine and audio tapes for
drivers, and an electronic mail services to drivers through kiosks placed in
truck stops.
LOCAL FUELING. In August 1997, Comdata acquired the remaining equity
interest in International Automated Energy Systems, Inc. ("IAES"), a provider
of fuel management and payment systems for local transportation fleets. IAES
provides local fleet operators with VISA (+) cards for their drivers' fuel
purchases that offer the fleet operators transaction control and trip-related
information gathering features similar to those of the Comchek card. IAES
has not yet achieved significant revenue, and is seeking to increase the
number of fuel purchase cards issued and the number of sales outlets that
accept the cards.
SALES AND MARKETING. Comdata markets its services to the trucking
industry through a direct sales force operating in various cities throughout
the U.S., and through a centralized tele-sales operation. Comdata has
contracts with approximately 17,000 long haul trucking companies, ranging in
size from those with several thousand trucks to those with fewer than five
trucks. Comdata also has relationships with approximately 8,000 fueling
locations. Contracts with trucking companies generally range up to three
years in duration, while contracts with service centers are typically one or
two years in duration. No single customer represented more than 2% of
Comdata's 1997 revenue from services to the trucking industry. Comdata is
seeking to emphasize the selling of a greater variety of its products and
services to its existing customers.
COMPETITION. The principal competitive factors relevant to funds
transfers in the trucking industry are marketing efforts, pricing,
reliability of computer and communications systems, and time required to
effect transactions. The major credit and debit card companies are
significant competitors of Comdata in that they make cash available to, and
facilitate purchases of fuel and other products by, holders of their cards on
a nationwide basis. Several other companies also offer similar funds
transfer services. In addition, truckstops often negotiate directly with
trucking companies for a direct billing relationship. Certain of Comdata's
competitors also operate or franchise nationwide truckstop chains. In
addition, Comdata competes with service centers (such as truckstops) that
offer similar products and services. Comdata also faces increasing
competition in the funds transfer area from ATMs that participate in national
networks.
While the majority of permitting and legalization services continue to
be performed in-house, at least one other nationwide company and several
regional companies provide permit services similar to those provided by
Comdata. Competition in this market is influenced by price, the expertise of
personnel and the ease with which permits may be ordered and received.
Comdata believes that its competitive strengths include (i) its ability
to provide services to trucking companies and drivers at a large number of
locations in the continental United States and Canada, (ii) its ability to
offer a variety of services, frequently tailored to an individual customer's
needs, (iii) its proprietary databases regarding funds transfers and fuel
purchases, and (iv) its long-term experience and concomitant relationships in
the trucking industry.
NETWORK AND DATA PROCESSING OPERATIONS. Comdata's principal
communications center for its funds transfer business is located near its
corporate headquarters with a secondary center
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(+) "VISA" is a trademark of Visa International Service Association.
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located in Dallas, Texas. WorldCom is the primary supplier of
telecommunications services to Comdata pursuant to an agreement whose term
expires in 2003. Substantially all of Comdata's internal data processing
functions, including its payment processing systems, are provided by IBM
pursuant to an agreement for systems operations services that expires in
April 2005.
REGULATION. Many states require persons engaged in the business of
selling or issuing payment instruments (such as the Comchek draft) or in the
business of transmitting funds to obtain a license from the appropriate state
agency. In certain states, Comdata is required to post bonds or other
collateral to secure its obligations to its customers in those states.
Comdata believes that it is currently in compliance in all material respects
with the regulatory requirements applicable to its business. The failure to
comply with the requirements of any particular state could have a material
adverse effect on Comdata's business in that state.
ARBITRON.
Arbitron provides media and marketing information to broadcasters
(primarily in radio), advertising agencies, advertisers and, through a joint
venture, newspapers. Arbitron's revenue for the years 1995, 1996 and 1997
was $137.2 million, $153.1 million and $165.2 million, respectively.
MARKETS. Significant consolidation of radio station ownership has
occurred in the U.S. in recent years, which has tended to intensify
competition within the radio industry and to intensify competition between
radio and other forms of media for advertising dollars. At the same time,
audiences have become more fragmented as a result of greatly increased
programming choices and entertainment/media options. As a result,
advertisers increasingly seek to tailor advertising strategies to target
specific demographic groups through specific media, and the audience
information needs of radio broadcasters, advertising agencies and advertisers
have correspondingly become more complex. Increased competition and more
complex information requirements have heightened the need of radio
broadcasters for improved information management systems and more
sophisticated means to analyze such information. In addition, there is a
growing demand for quality radio audience information internationally from
global advertisers, U.S. broadcasters who have acquired broadcasting
interests in other countries, and an increasing number of private commercial
broadcasters in other countries.
These trends also affect other media. As the importance of reaching
niche audiences with targeted marketing strategies increases, broadcasters,
publishers, advertising agencies and advertisers increasingly require that
information regarding exposure to advertising be provided on a more
individualized basis and that such information be coupled with information
regarding shopping patterns and purchaser behavior. The need for purchase
data information may create opportunities for innovative approaches to
satisfy these information needs, particularly as technological advances
increase the alternatives available to advertisers for reaching potential
customers, including the possibilities of interactive communication.
SERVICES. Arbitron is a leading provider of radio audience measurement
information in the U.S. Arbitron estimates audience size and demographics in
the U.S. for local radio stations, and reports this and related data to its
customers. This information is used by radio stations to price and sell
advertising time and by advertising agencies and large corporate advertisers
in purchasing advertising time. Arbitron's proprietary data regarding radio
audience size and demographics is provided to customers through multi-year
license agreements. Arbitron uses listener diaries to gather radio listening
data from sample households in the 267 local markets for which it currently
provides radio ratings. Respondents mail the diaries to Arbitron's
processing center where Arbitron compiles periodic audience measurement
estimates. During the past three years, Arbitron has increased its survey
frequency so that all markets are measured at least twice each year, and
major markets are measured four times per year, and has taken actions
10
<PAGE>
toward increasing sample size, average response rates and the representation
of specific demographic groups.
Arbitron also provides software applications that give customers access
to Arbitron's database, and enable them to more effectively analyze and
understand that information and develop target marketing strategies.
Arbitron is also developing applications to enable customers to link
information provided by Arbitron's database with information from other
databases (such as product purchasing behavior) so as to enable customers to
further refine sales strategies and compete more effectively for advertising
dollars. The radio audience measurement service and related software sales
represented 83% of Arbitron's total 1997 revenue.
In November 1997, Arbitron acquired Continental Research, a United
Kingdom-based company that provides media, advertising, financial and
telecommunications research services in the United Kingdom and Europe.
Continental Research had 1997 revenue of $6.9 million. Arbitron expects to
utilize Continental Research to submit a bid for the United Kingdom radio
industry audience research contract being put out for tender during 1998 by
the Radio Joint Audience Research organization, and to explore other audience
measurement and market research opportunities in the United Kingdom and
Europe.
Arbitron also provides measurements of consumer retail behavior and
media usage in 243 local markets throughout the U.S. Arbitron's Scarborough
Research Partnership joint venture provides information regarding
product/service usage and media usage in 60 large U.S. markets, utilizing a
sample of consumers in the relevant markets to measure product and service
purchases. This information is provided twice each year to newspapers, radio
and television broadcasters, cable systems, advertisers and advertising
agencies in the form of the Scarborough Report. Arbitron has the exclusive
right to market the Scarborough Report to radio broadcasters and cable
systems. Arbitron has also developed and introduced in 43 mid-sized U.S.
markets its RetailDirect service, which is a locally oriented, purchase data
research service. The service, which utilizes diaries and telephone surveys,
provides a profile of the broadcast audience in terms of local media, retail
and consumer preferences so that local radio and television broadcasters and
cable systems will have information that helps them develop targeted sales
and programming strategies. Arbitron's Qualitative Diary service collects
consumer and media usage information from Arbitron radio diary keepers in 140
smaller U.S. markets.
Arbitron is exploring possible cooperative arrangements that would
facilitate the expansion of its radio audience measurement service into
selected international markets, provide additional software applications to
radio broadcasters and advertisers, and develop measurement products for the
Internet. Arbitron is also developing a passive, personalized electronic
measurement device to record broadcast listening or viewing for purposes of
audience measurement and verification that advertisements have been
broadcast.
SALES AND MARKETING. As of December 31, 1997, Arbitron provided its
radio audience measurement and related services to approximately 3,000 radio
stations and about 2,200 advertising agencies nationwide under contracts that
vary in length from one to seven years. Arbitron markets its products and
services through a direct sales force operating through offices in six cities
around the U.S. Reflecting the consolidation that has occurred in the radio
broadcasting industry, Arbitron's ten largest customers represented about 48%
of its 1997 revenue from radio audience measurement services and related
software sales.
Although the industry consolidation that has led to the increased
concentration of Arbitron's customer base could put pressure on the pricing
of Arbitron's radio ratings service, it has also contributed to an increase
in the number of stations subscribing for the ratings service, as stations
have become Arbitron customers upon their acquisition by a larger
broadcasting group. It has also been Arbitron's experience that stations
which are part of a larger broadcasting
11
<PAGE>
group have been somewhat more likely to purchase analytical software
applications and other services in addition to the ratings service.
COMPETITION. Arbitron competes with other providers of radio audience
measurement services, one of which utilizes a different survey methodology
than Arbitron and the other of which is a relatively new entrant into the
market. Arbitron also competes with other providers of applications software,
qualitative data and proprietary qualitative studies used by broadcasters,
cable systems, advertising agencies and advertisers.
DIVESTITURES
Ceridian's defense electronics business, Computing Devices
International, was sold to General Dynamics Corporation on December 31, 1997.
Computing Devices has facilities in the U.S., Canada and the United Kingdom,
and provides mission-critical electronics, software, systems integration and
information management for defense and other government agencies and
commercial customers in selected markets. Computing Devices' revenue for the
years 1995, 1996 and 1997 was $509.5 million, $553.0 million and 589.5
million, respectively. Computing Devices is shown as a discontinued
operation in Ceridian's year-end 1997 consolidated financial statements.
Comdata's gaming services business, which was sold in January 1998,
provided cash advance services to gaming patrons in casinos, racetracks and
other gaming locations through the use of credit cards and debit services
employing automated teller machines and similar devices. Revenue for this
business for the years 1995, 1996 and 1997 was $117.9 million, $125.5 million
and $133.2 million, respectively.
ADDITIONAL INFORMATION
PATENTS AND TRADEMARKS. Ceridian owns or is licensed under a number of
patents which relate to its products and are of importance to its business.
Certain of Ceridian's products and services are marketed under federally
registered trademarks which are helpful in creating recognition in the
marketplace. However, Ceridian believes that none of its businesses is
materially dependent upon any particular patent, license or trademark, or any
particular group of patents, licenses or trademarks.
BACKLOG. Although Ceridian's businesses are typically characterized by
long-term customer relationships that result in a high level of recurring
revenue, a substantial portion of the customer contracts utilized by these
businesses are terminable by the customers upon relatively short notice
periods, including contracts that have been extended beyond their original
terms. In addition, the period between the time a customer agrees to use a
Ceridian service and the time the service begins is generally relatively
short. For these reasons, Ceridian does not believe that meaningful backlog
information can be provided for its businesses.
RESEARCH AND DEVELOPMENT. The table below sets forth the amount of
research and development expenses for Ceridian's continuing operations for
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
Research and development $59.6 $52.5 $38.2
Percent of revenue 5.5% 5.6% 4.6%
</TABLE>
12
<PAGE>
Ceridian's research and development efforts are generally described
earlier in this Item in the description of Ceridian's businesses, and in Part
II, Item 7 of this report.
EMPLOYEES. As of December 31, 1997, Ceridian and its subsidiaries
employed approximately 8,000 people on a full- or part-time basis. None of
Ceridian's employees are covered by a collective bargaining agreement.
EXECUTIVE OFFICERS OF THE REGISTRANT. The executive officers of
Ceridian as of March 1, 1998, are as follows:
<TABLE>
<CAPTION> Executive
Name (Age) Position Officer Since
---------- -------- -------------
<S> <C> <C>
Lawrence Perlman (59) Chairman, President and Chief 1980
Executive Officer
John R. Eickhoff (57) Executive Vice President and 1989
Chief Financial Officer
Loren D. Gross (52)
Vice President and Corporate 1993
Controller
Tony G. Holcombe (42) Vice President, and President of 1997
Comdata Holdings Corporation
Carl O. Keil (56) Vice President, and President of 1997
Ceridian Employer Services
Stephen B. Morris (54) Executive Vice President, and 1992
President of Arbitron
Gary M. Nelson (46) Vice President and General Counsel 1997
Ronald L. Turner (51) Executive Vice President, Operations 1993
</TABLE>
The executive officers of Ceridian are elected by the Board of Directors
and serve at the pleasure of the Board of Directors and the Chief Executive
Officer. They are customarily elected each year at the meeting of the Board
of Directors held in conjunction with the annual meeting of stockholders.
Lawrence Perlman has been President and Chief Executive Officer of
Ceridian since January 1990, and was appointed Chairman in November 1992. He
is a director of Seagate Technology, Inc., The Valspar Corporation and
Computer Network Technology Corporation. Mr. Perlman has been a director of
Ceridian since 1985.
John R. Eickhoff has been Executive Vice President and Chief Financial
Officer of Ceridian since May 1995, and was Vice President and Chief
Financial Officer of Ceridian from June 1993 to May 1995. Mr. Eickhoff was
Vice President and Corporate Controller of Ceridian from July 1989 to June
1993.
Loren D. Gross has been Vice President and Corporate Controller of
Ceridian since July 1993. Mr. Gross was Assistant Corporate Controller of
Ceridian from March 1987 to July 1993.
Tony G. Holcombe has been Vice President of Ceridian and President of
its Comdata Holdings Corporation subsidiary since May 1997. Mr. Holcombe was
President and Chief
13
<PAGE>
Executive Officer of National Processing, Inc., which provides transaction
processing services and customized processing solutions, from October 1994 to
March 1997, and was Executive Vice President, Corporate Services for National
Processing from 1991 through 1994.
Carl O. Keil has been Vice President of Ceridian and President of
Ceridian Employer Services since April 1997. Mr. Keil was President and
Chief Executive Officer of EduServ Technologies, Inc., which originates,
services, and securitizes student loans, from March 1992 to January 1997;
Executive Vice President and Chief Operating Officer of International
Telecharge, Inc., which provides telecommunications and operator services,
from January 1991 to March 1992; and Senior Vice President of Marketing for
the Employer Services Group of Automatic Data Processing, Inc. from August
1987 to January 1991.
Stephen B. Morris has been Executive Vice President of Ceridian and
President of its Arbitron division since January 1996. Mr. Morris was Vice
President of Ceridian and President of Arbitron from December 1992 to January
1996. He was President and Chief Executive Officer of Vidcode, Inc., which
electronically monitors, verifies and reports the broadcast of television
commercials, from August 1990 to December 1992; and Director and co-founder
of Spectra Marketing Systems, a micro-marketing firm, from March 1987 to
March 1992. Prior to that time, he spent seventeen years at General Foods
Corporation, the last three as General Manager/President of the Maxwell House
Division.
Gary M. Nelson has been Vice President and General Counsel of Ceridian
since August 1997. From 1983 to July 1997, Mr. Nelson was a partner in the
Oppenheimer Wolff & Donnelly law firm.
Ronald L. Turner has been Executive Vice President, Operations of
Ceridian since March 1997. Mr. Turner was an Executive Vice President of
Ceridian and President of its Computing Devices International division from
January 1996 to March 1997. Mr. Turner was Vice President of Ceridian and
President of Computing Devices International from January 1993 to January
1996. Mr. Turner was President and Chief Executive Officer, GEC-Marconi
Electronics Systems Corporation, a defense electronics company, from March
1987 to January 1993. Mr. Turner is a director of FLIR Systems, Inc. and BTG,
Inc.
14
<PAGE>
ITEM 2. PROPERTIES.
At February 14, 1998, Ceridian's principal production and office
facilities were located in the metropolitan areas of Minneapolis, Minnesota;
Atlanta, Georgia; Columbia, Maryland; New York, New York; Fountain Valley and
San Francisco, California; Brentwood, Tennessee; St. Louis, Missouri; Toronto
and Montreal, Canada; and London, England.
The following table summarizes the usage and location of Ceridian's
facilities as of February 14, 1998:
<TABLE>
<CAPTION>
FACILITIES
(In thousands of square feet)
<CAPTION>
Type of Property Interest U.S. Non-U.S. Worldwide
------------------------- ----- -------- ---------
<S> <C> <C> <C>
Owned 29 15 44
Leased 2,933 102 3,035
----- -------- ---------
Total Square Feet 2,962 117 3,079
----- -------- ---------
<CAPTION>
Utilization
-----------
<S> <C> <C> <C>
Office, Computer Center & 2,111 117 2,228
Other
Vacant/Idle 71 -- 71
Leased or Subleased to Others 780 -- 780
----- -------- ---------
Total Square Feet 2,962 117 3,079
----- -------- ---------
</TABLE>
The 3.1 million square feet of aggregate space reflects a decrease of
1.1 million square feet from February 14, 1997 due to the sale of Computing
Devices International. Space subject to assigned leases is not included in
the table above, and Ceridian remains secondarily liable under all such
leases. As of December 31, 1997, these assigned leases involved 1.1 million
square feet of space and future rental obligations totaling $15.8 million.
The principal elements of these amounts are 0.4 million square feet and $1.8
million related to the spin-off of Control Data Systems, Inc. and 0.6 million
square feet and $12.6 million related to the 1989 sale of Imprimis Technology
Incorporated to Seagate Technology, Inc. Ceridian does not anticipate any
material nonperformance by the assignees of these leases.
No facilities owned by Ceridian or its subsidiaries are subject to any
major encumbrances. Ceridian believes that the facilities it currently
utilizes in its continuing operations are adequate for their intended
purposes, are adequately maintained and are reasonably necessary for current
and anticipated output levels of those businesses.
ITEM 3. LEGAL PROCEEDINGS.
Information regarding legal proceedings involving Ceridian and its
subsidiaries is incorporated herein by reference from Note N, LEGAL MATTERS,
on page 36 of Ceridian's 1997 Annual Report to Stockholders. Note N is part
of the consolidated financial statements contained in Ceridian's 1997 Annual
Report to Stockholders, which are attached hereto as Exhibit 13.03.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of Ceridian's stockholders during
the fourth quarter 1997.
15
<PAGE>
PART II
All information incorporated by reference into Items 5 through 8 below
is contained in the financial portions of Ceridian's 1997 Annual Report to
Stockholders (the "Annual Report"), which are filed with this Report as
Exhibits 13.01 through 13.04.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Ceridian's common stock, par value $.50 per share, is listed and trades
on the New York Stock Exchange as well as on the Chicago Stock Exchange and
The Pacific Exchange. The following table sets forth the high and low sales
prices for a share of Ceridian's common stock on the New York Stock Exchange.
<TABLE>
<CAPTION>
1997 1996
---------------------- ------------------------
High Low High Low
<S> <C> <C> <C> <C>
1st Quarter $42.50 $32.25 $46.875 $37.00
2nd Quarter 43.625 29.50 54.875 42.50
3rd Quarter 45.625 32.125 51.375 41.625
4th Quarter 47.75 35.25 53.125 39.00
</TABLE>
The number of holders of record of Ceridian common stock on February 28,
1998 was 14,125. No dividends have been declared or paid on the Ceridian's
common stock since 1985. Although Ceridian is not contractually precluded
from paying dividends on its common stock, it has no present intention of
paying such dividends.
ITEM 6. SELECTED FINANCIAL DATA.
See "Selected Five-Year Data" on the inside front cover of the Annual
Report, which is attached to the Report as Exhibit 13.01 and incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 6 through 13 of the Annual Report, which is
attached to this Report as Exhibit 13.02 and incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Ceridian's consolidated financial statements described in Item 14.(a)1 of
this Report are attached to this Report as Exhibit 13.03 and are incorporated
herein by reference. As for certain required supplementary financial
information, see "Supplementary Quarterly Data (Unaudited)" on page 37 of the
Annual Report, which is attached to this Report as Exhibit 13.04 and
incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
16
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
See information regarding the directors and nominees for director of
Ceridian under the heading "Nominees for Director" on pages 2 and 3 of the Proxy
Statement for the Annual Meeting of Stockholders, May 22, 1998 (the "Proxy
Statement"), which is incorporated herein by reference.
See the information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934 under the heading "Section 16(a) Beneficial
Ownership Reporting Compliance" on page 22 of the Proxy Statement, which is
incorporated herein by reference.
Information regarding the executive officers of Ceridian is on pages 13 and
14 of this Report, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
See information under the headings "Directors' Compensation" on page 5 of
the Proxy Statement and "Executive Compensation" on pages 13 through 19 of the
Proxy Statement, all of which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
See information under the heading "Share Ownership Information" on pages
20 and 21 of the Proxy Statement, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
17
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) 1. FINANCIAL STATEMENTS OF REGISTRANT
Ceridian's consolidated financial statements included in its 1997 Annual
Report to Stockholders, which are attached to this Report as Exhibit 13.03
and have been incorporated by reference into Part II, Item 8 of this Report,
are listed below (with the corresponding page numbers in the 1997 Annual
Report to Stockholders):
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Report of Management------------------------------------- 14
Independent Auditors' Report----------------------------- 15
Consolidated Statements of
Operations for the years ended
December 31, 1997, 1996 and 1995------------------------- 16
Consolidated Balance Sheets as of
December 31, 1997 and 1996------------------------------- 17
Consolidated Statements of Cash Flows
for the years ended
December 31, 1997, 1996 and 1995------------------------- 18
Notes to Consolidated Financial Statements for
the three years ended December 31, 1996------------------ 19-36
</TABLE>
(A) 2. FINANCIAL STATEMENT SCHEDULES OF REGISTRANT
Attached to this Report on pages 25 through 27 is Financial Statement
Schedule II - "Ceridian Corporation and Subsidiaries Valuation and Qualifying
Accounts," together with the Independent Auditors' report thereon.
(A) 3. EXHIBITS
The following is a complete list of Exhibits filed or incorporated by
reference as part of this Report.
EXHIBIT DESCRIPTION
2.01 Asset Purchase Agreement dated as of November 3, 1997 by and between
Ceridian Corporation and General Dynamics Corporation (exhibits and
schedules omitted) (incorporated by reference to Exhibit 2.1 to
Ceridian's Current Report on Form 8-K dated December 31, 1997 (File
No. 1-1969)).
18
<PAGE>
2.02 Closing Agreement dated as of December 31, 1997 between and among
Ceridian Corporation, General Dynamics Corporation, General Dynamics
Information Systems, Inc. and CDI Acquisition Company (exhibits and
schedules omitted) (incorporated by reference to Exhibit 2.2 to
Ceridian's Current Report on Form 8-K dated December 31, 1997 (File
No. 1-1969)).
2.03 Exchange Agreement, dated as of January 17, 1998, among First Data
Corporation, Integrated Payment Systems Inc., NTS, Inc., First Data
Financial Services, L.L.C., Ceridian Corporation, Comdata Network,
Inc. and Permicom Permits Services, Inc. (exhibits and schedules
omitted).
2.04 Share Purchase Agreement, dated as of January 26, 1998, among The
Toronto-Dominion Bank, Business Windows Inc., 3454916 Canada Inc.,
Ceridian Corporation, Ceridian Canada Ltd. and Ceridian Canada
Holdings, Inc. (exhibits and schedules omitted).
2.05 Agreement for the Purchase and Sale of Certain of the Assets of
Comcheq Services Limited, dated as of March 10, 1998, among the
Canadian Imperial Bank of Commerce, Comcheq Services Limited and
Ceridian Canada Ltd. (exhibits and schedules omitted) (incorporated
by reference to Exhibit 2.1 to Ceridian's Current Report on Form 8-K
dated March 10, 1998 (File No. 1-1969)).
3.01 Restated Certificate of Incorporation of Ceridian Corporation
(incorporated by reference to Exhibit 4.01 to Ceridian's Registration
Statement on Form S-8 (File No. 33-54379)).
3.02 Certificate of Amendment of Restated Certificate of Incorporation of
Ceridian Corporation (incorporated by reference to Exhibit 3 to
Ceridian's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996 (File No. 1-1969))
3.03 Bylaws of Ceridian Corporation, as amended (incorporated by reference
to Exhibit 3.01 to Ceridian's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993 (File No. 1-1969))
10.01* Amended and Restated Executive Employment Agreement between Ceridian
Corporation and Lawrence Perlman, dated as of November 8, 1996
(incorporated by reference to Exhibit 10.01 to Ceridian's Annual
Report on Form 10-K for the year ended December 31, 1996 (File
No. 1-1969)).
10.02* Executive Employment Agreement between Ceridian Corporation and
Ronald L. Turner, dated as of July 1, 1997.
10.03* Executive Employment Agreement between Ceridian Corporation and
Stephen B. Morris, dated as of July 1, 1997.
10.04* Executive Employment Agreement between Ceridian Corporation and John
R. Eickhoff, dated as of July 1, 1997.
10.05* Executive Employment Agreement between Ceridian Corporation and Carl
O. Keil, dated as of October 22, 1997.
- ---------------------
(*) Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Report.
19
<PAGE>
10.06* Executive Employment Agreement between Ceridian Corporation and Ronald
James, dated as of January 1, 1996 (incorporated by reference to
Exhibit 10.05 to Ceridian's Annual Report on Form 10-K for the year
ended December 31, 1996 (File No. 1-1969)).
10.07* Form of Amendment to Executive Employment Agreement (applicable to
agreement between Ceridian and Ronald James filed as Exhibit 10.06)
(incorporated by reference to Exhibit 10.06 to Ceridian's Annual
Report on Form 10-K for the year ended December 31, 1996 (File
No. 1-1969)).
10.08* Severance Compensation Agreement, dated as of November 29, 1994,
between Comdata Holdings Corporation and George L. McTavish
(incorporated by reference to Exhibit 10.05 to Ceridian's Annual
Report on Form 10-K for the year ended December 31, 1995 (File
No. 1-1969)).
10.09* Amendment No. 1 to Severance Compensation Agreement, dated as of
January 31, 1996, among Ceridian Corporation, Comdata Holdings
Corporation and George L. McTavish (incorporated by reference to
Exhibit 10.06 to Ceridian's Annual Report on Form 10-K for the year
ended December 31, 1995 (File No. 1-1969)).
10.10* Revision to Amendment No. 1 to Severance Compensation Agreement, dated
as of July 28, 1997, among Ceridian Corporation, Comdata Holdings
Corporation and George L. McTavish.
10.11* Ceridian Corporation 1993 Long-Term Incentive Plan (Amended and
Restated as of May 14, 1997) (incorporated by reference to Appendix A
to Ceridian's Proxy Statement for Annual Meeting of Stockholders, May
14, 1997 (File No. 1-1969)).
10.12* Form of Ceridian Corporation Employee Non-Statutory Stock Option Award
Agreement (under 1993 Long-Term Incentive Plan).
10.13* Form of Ceridian Corporation Performance-Based Stock Option Award
Agreement (under the 1993 Long-Term Incentive Plan).
10.14* Form of Ceridian Corporation Performance Restricted Stock Award
Agreement (under the 1993 Long-Term Incentive Plan) (incorporated by
reference to Exhibit 10.17 to Ceridian's Annual Report on Form 10-K
for the year ended December 31, 1996 (File No. 1-1969)).
10.15* Ceridian Corporation 1990 Long-Term Incentive Plan (1992 Restatement)
(as amended through October 21, 1994) (incorporated by reference to
Exhibit 10.12 to Ceridian's Annual Report on Form 10-K for the year
ended December 31, 1994 (File No. 1-1969)).
10.16* Description of the Ceridian Corporation Annual Executive Incentive
Plan.
10.17* Ceridian Corporation Benefit Equalization Plan, as amended (effective
generally as of January 1, 1994) (incorporated by reference to Exhibit
10.14 to Ceridian's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 1-1969)).
- ------------------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Report.
20
<PAGE>
10.18* Ceridian Corporation Employees' Benefit Protection Trust Agreement,
dated as of December 1, 1994, between Ceridian Corporation and First
Trust National Association (incorporated by reference to Exhibit 10.15
to Ceridian's Annual Report on Form 10-K for the year ended December
31, 1994 (File No. 1-1969)).
10.19* Ceridian Corporation Deferred Compensation Plan (incorporated by
reference to Exhibit 10.16 to Ceridian's Annual Report on Form 10-K
for the year ended December 31, 1994 (File No. 1-1969)).
10.20* First Declaration of Amendment to Ceridian Corporation Deferred
Compensation Plan (incorporated by reference to Exhibit 10.15 to
Ceridian's Annual Report on Form 10-K for the year ended December 31,
1996 (File No. 1-1969)).
10.21* Ceridian Corporation 1993 Non-Employee Director Stock Plan
(incorporated by reference to Exhibit 2 to Ceridian's Proxy Statement
for Annual Meeting of Stockholders, May 12, 1993 (File No. 1-1969)).
10.22* Ceridian Corporation 1996 Director Performance Incentive Plan (As
amended through December 15, 1997).
10.23* Form of Indemnification Agreement between Ceridian Corporation and its
Directors (incorporated by reference to Exhibit 10.16 to Ceridian's
Annual Report on Form 10-K for the year ended December 31, 1996 (File
No. 1-1969)).
10.24 Amended and Restated Credit Agreement, dated as of July 31, 1997,
among Ceridian Corporation, Bank of America National Trust and Savings
Association as Agent, and the Financial Institutions Parties Thereto
(exhibits and schedules omitted) (incorporated by reference to Exhibit
10.1 to Ceridian's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 (File No. 1-1969)).
10.25 Waiver and First Amendment to Credit Agreement, dated as of
December 2, 1997, among Ceridian Corporation, Bank of America
National Trust and Savings Association as Agent, and the Financial
Institutions Parties Thereto.
10.26 Credit Agreement, dated as of January 30, 1998, between The
Toronto-Dominion Bank and Ceridian Canada Ltd. (exhibits and
schedules omitted).
10.27 Guarantee Agreement, dated as of January 30, 1998, between Ceridian
Corporation and The Toronto-Dominion Bank.
10.28 Credit Agreement, dated as of March 2, 1998, between the Canadian
Imperial Bank of Commerce and Ceridian Canada Ltd. (exhibits and
schedules omitted).
10.29 Guarantee Agreement, dated as of March 2, 1998, between Ceridian
Corporation and the Canadian Imperial Bank of Commerce.
10.30 Letter Agreement dated as of December 16, 1997, between Comdata
Network, Inc. and International Business Machines Corporation
pertaining to the Amended and Restated Agreement for Systems
Operations Services dated May 1, 1995 between Comdata Network, Inc.
and Integrated Systems Solutions Corporation n.k.a. International
Business Machines Corporation (exhibits and schedules omitted).
- ------------------------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Report.
21
<PAGE>
10.31 Amended and Restated Agreement for Systems Operations Services dated
May 1, 1995 between Comdata Network, Inc. and Integrated Systems
Solutions Corporation n.k.a. International Business Machines
Corporation (exhibits and schedules omitted) (incorporated by
reference to Exhibit 10.20 to Ceridian's Annual Report on Form 10-K
for the year ended December 31, 1995 (File No. 1-1969)).
10.32 Telecommunications Services Agreement, dated as of September 1, 1997,
among WorldCom Network Services, Inc. d.b.a. WilTel, Comdata Network,
Inc. and Comdata Telecommunications Services, Inc., including Program
Enrollment Terms, as amended (exhibits and schedules omitted).
13.01 Selected Five-Year Data (inside front cover of Ceridian's 1997 Annual
Report to Stockholders).
13.02 Management's Discussion and Analysis of Results of Operations and
Financial Condition (pages 6 through 13 of Ceridian's 1997 Annual
Report to Stockholders).
13.03 Consolidated Financial Statements of Ceridian Corporation (pages 14
through 36 of Ceridian's 1997 Annual Report to Stockholders).
13.04 Supplementary Quarterly Data (Unaudited) (page 37 of Ceridian's 1997
Annual Report to Stockholders).
21. Subsidiaries of Ceridian
23.01 Consent of Independent Auditors - KPMG Peat Marwick LLP
23.02 Consent of Independent Auditors - Arthur Andersen LLP
24. Power of Attorney
27. Financial Data Schedule
If requested, Ceridian will provide copies of any of the exhibits listed
above upon payment of its reasonable expenses in furnishing such exhibits.
Ceridian will provide to the Securities and Exchange Commission, upon
request, any exhibit or schedule to any of the foregoing exhibits which has
not been filed. Neither Ceridian nor its subsidiaries has outstanding as of
the date of this Report any securities authorized pursuant to long-term debt
instruments.
(B) REPORTS ON FORM 8-K
Ceridian filed no reports on Form 8-K during the quarter ended December
31, 1997. On January 15, 1998, Ceridian did, however, file a report on Form
8-K dated December 31, 1997, which reported in "Item 2: Acquisition or
Disposition of Assets" the closing of the sale by Ceridian of its defense
electronics business, Computing Devices International ("CDI"), to General
Dynamics Corporation. Included in Item 7 of that Report was a pro forma
condensed consolidated balance sheet of Ceridian as of September 30, 1997
(assuming the sale of CDI took place on that date), and pro forma condensed
consolidated statements of operations for Ceridian for the nine months ended
September 30, 1997 and for the years 1996 and 1995 (assuming in each case the
sale of CDI took place on January 1, 1995).
On January 20, 1998, Ceridian filed a report on Form 8-K dated January
19, 1997, reporting under Item 5 important factors known to Ceridian that
could cause Ceridian's actual
22
<PAGE>
results in 1998 to differ materially from any forward-looking statements made
by Ceridian. This filing was made for purposes of the safe harbor provided
for forward-looking statements by Section 21E of the Securities Exchange Act
of 1934, as amended. On January 29, 1998, Ceridian filed a report on Form
8-K dated January 27, 1997, reporting under Item 5 thereof that Ceridian had
announced its results of operations for the quarter and year ended December
31, 1997, and attached as an exhibit to that report a copy of the press
release by which those results had been announced.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, as of March 27,
1998.
CERIDIAN CORPORATION
By /S/ Lawrence Perlman
-----------------------------------------
Lawrence Perlman
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated as of March 27, 1998.
/S/ Lawrence Perlman /S/ J.R. Eickhoff
- ------------------------------------- ----------------------------------
Lawrence Perlman J. R. Eickhoff
Chairman, President and Chief Executive Vice President and Chief
Executive Officer (Principal Financial Officer
Executive Officer) and Director (Principal Financial Officer)
/S/ Loren D. Gross
- --------------------------------------
Loren D. Gross
Vice President and Corporate
Controller (Principal Accounting
Officer)
*/S/ Ruth M. Davis */S/ George R. Lewis
- ------------------------------------- ----------------------------------
Ruth M. Davis, Director George R. Lewis, Director
*/S/ Charles Marshall
- ------------------------------------- ----------------------------------
Robert H. Ewald, Director Charles Marshall, Director
*/S/ Richard G. Lareau */S/ Carole J. Uhrich
- ------------------------------------- ----------------------------------
Richard G. Lareau, Director Carole J. Uhrich, Director
*/S/ Ronald T. Lemay */S/ Richard W. Vieser
- ------------------------------------- ----------------------------------
Ronald T. LeMay, Director Richard W. Vieser, Director
*/S/ Paul S. Walsh
----------------------------------
Paul S. Walsh, Director
/S/ John A. Haveman
- -------------------------------------
*By: John A. Haveman, Attorney-in-fact
24
<PAGE>
SCHEDULE II
CERIDIAN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
Restructure and Discontinued Operations Reserves
<TABLE>
<CAPTION>
Employer
Services
Arbitron TV Consolidation Other Total
<S> <C> <C> <C> <C>
Reserve Balance 12/31/94 $ 11.1 $ 12.4 $ 64.8 $ 88.3
Cash Payments (3.9) (0.7) (13.6) (18.2)
Other Non-cash Items 0.3 0.3
Reserve Balance 12/31/95 $ 7.5 $ 11.7 $ 51.2 $ 70.4
Cash Payments (1.6) (2.6) (10.7) (14.9)
Other Non-cash Items (1) (0.5) 0.2 1.7 1.4
Reserve Balance 12/31/96 $ 5.4 $ 9.3 $ 42.2 $ 56.9
Cash Payments (1.1) (3.2) (16.8) (21.1)
Other Non-cash Items (0.5) 0.3 0.2 --
Reserve Balance 12/31/97 $ 3.8 $ 6.4 $ 25.6 $ 35.8
</TABLE>
(1) Primarily proceeds from sale of idled assets which have been reclassified
as cash inflow from investing activities.
25
<PAGE>
SCHEDULE II (CONT.)
CERIDIAN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
<TABLE>
<CAPTION>
Allowance for Doubtful Accounts Receivable Year Ended December 31,
1997 1996(1) 1995(1)
------ ------- -------
<S> <C> <C> <C>
Balance at beginning of year $ 11.2 $ 11.7 $ 11.1
Additions charged to costs and expenses 7.9 5.4 6.3
Write-offs and other adjustments (2) (8.6) (5.9) (5.7)
Balance at end of year $ 10.5 $ 11.2 $ 11.7
</TABLE>
(1) Restated to remove discontinued operations.
(2) Other adjustments include balances removed as a result of sales of
businesses.
26
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
THE BOARD OF DIRECTORS AND STOCKHOLDERS
CERIDIAN CORPORATION:
Under date of January 27, 1998, we reported on the consolidated
balance sheets of Ceridian Corporation and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of operations and cash flows
for each of the years in the three-year period ended December 31, 1997, as
contained in Ceridian's 1997 Annual Report to Stockholders. Our report refers
to a report of other auditors with respect to the 1995 statements of operations
and cash flows of Comdata Holdings Corporation. These consolidated financial
statements and our report thereon are incorporated by reference in the Annual
Report on Form 10-K for the year 1997. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule as listed in the accompanying index
(see Item 14.(a)2.). This financial statement schedule is the responsibility of
Ceridian's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, based on our audits and the report of other auditors,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole presents fairly, in all
material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 27, 1998
27
<PAGE>
EXCHANGE AGREEMENT
Dated as of January 17, 1998
Among
FIRST DATA CORPORATION,
INTEGRATED PAYMENT SYSTEMS INC.,
NTS, INC.,
FIRST DATA FINANCIAL SERVICES, L.L.C.,
CERIDIAN CORPORATION,
COMDATA NETWORK, INC.
and
PERMICOM PERMITS SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . 1
1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
EXCHANGE . . . . . . . . . . . . . . . . . . 15
2.1. Exchange of Gaming Business for the NTS Business and Cash. . . . . . . . . . 15
2.2. Purchased Gaming Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3. Excluded Gaming Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.4. Assumed Gaming Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.5. Excluded Gaming Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 19
2.6. Purchased NTS Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.7. Excluded NTS Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.8. Assumed NTS Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.9. Excluded NTS Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE III
CASH ADJUSTMENT. . . . . . . . . . . . . . . . 24
3.1. Determination of Transferred Cash. . . . . . . . . . . . . . . . . . . . . . 24
3.2. Transferred Cash Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . 25
3.3. Determination of Gaming Receivables Adjustment . . . . . . . . . . . . . . . 25
3.4. Determination of NTS Receivables Adjustment. . . . . . . . . . . . . . . . . 27
3.5. Net Receivables Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IV
CLOSING . . . . . . . . . . . . . . . . . . 30
4.1. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.2. Delivery of Promissory Notes . . . . . . . . . . . . . . . . . . . . . . . . 30
4.3. FDC's, IPS', NTS' and FDFS' Additional Deliveries. . . . . . . . . . . . . . 30
4.4. Ceridian's, Comdata's and Permicom's Additional Deliveries . . . . . . . . . 33
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CERIDIAN AND COMDATA. . . . . . . 35
5.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.2. Subsidiaries and Investments . . . . . . . . . . . . . . . . . . . . . . . . 36
5.3. Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.5. Operations Since the Gaming Balance Sheet Date . . . . . . . . . . . . . . . 38
5.6. No Finder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.7. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.8. Availability of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.9. Governmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
-i-
<PAGE>
5.10. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.11. Real Property Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.12. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.13. Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.14. Personal Property Leases. . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.15. Intellectual Property; Software . . . . . . . . . . . . . . . . . . . . . . 44
5.16. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.17. Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.18. Employees and Related Agreements; ERISA . . . . . . . . . . . . . . . . . . 47
5.19. Employee Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.20. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.21. Status of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.22. No Violation, Litigation or Regulatory Action . . . . . . . . . . . . . . . 50
5.23. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.24. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.25. Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.26. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.27. Estimated Closing Date Gaming Special Report. . . . . . . . . . . . . . . . 51
5.28. Estimated Amount of Transferred Cash. . . . . . . . . . . . . . . . . . . . 51
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FDC, IPS AND NTS. . . . . . . . 52
6.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.2. Subsidiaries and Investments . . . . . . . . . . . . . . . . . . . . . . . . 53
6.3. Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.5. Operations Since the NTS Balance Sheet Date. . . . . . . . . . . . . . . . . 55
6.6. No Finder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.7. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.8. Availability of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.9. Governmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.10. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.11. Real Property Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.12. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.13. Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.14. Personal Property Leases. . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.15. Intellectual Property; Software . . . . . . . . . . . . . . . . . . . . . . 60
6.16. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.17. Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.18. Employees and Related Agreements; ERISA . . . . . . . . . . . . . . . . . . 63
6.19. Employee Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.20. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.21. Status of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
-ii-
<PAGE>
6.22. No Violation, Litigation or Regulatory Action . . . . . . . . . . . . . . . 66
6.23. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.24. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.25. Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.26. Bank Accounts; Powers of Attorney . . . . . . . . . . . . . . . . . . . . . 67
6.27. Estimated Closing Date NTS Special Report . . . . . . . . . . . . . . . . . 67
ARTICLE VII
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . 67
7.1. Covenant Not to Compete or Solicit Business by FDC, IPS, NTS and FDFS. . . . 67
7.2. Solicitation of Employees. . . . . . . . . . . . . . . . . . . . . . . . . . 69
7.3. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
7.4. Employees and Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 74
7.5. Collection of Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.6. Release of NonCompetition Provisions . . . . . . . . . . . . . . . . . . . . 81
7.7. Waiver of Exclusivity Obligations of Western Union Agents. . . . . . . . . . 81
7.8. NTS Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.9. Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.10. Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.11. Certain Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.12. Termination of FlashCash License. . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE VIII
INDEMNIFICATION. . . . . . . . . . . . . . . . 84
8.1. Indemnification by Ceridian. . . . . . . . . . . . . . . . . . . . . . . . . 84
8.2. Indemnification by FDC . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.3. Notice of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.4. Third-Person Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.5. Indemnification Payments Net of Insurance Recovery . . . . . . . . . . . . . 90
ARTICLE IX
GENERAL PROVISIONS . . . . . . . . . . . . . . . 90
9.1. Survival of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 90
9.2. Confidential Nature of Information . . . . . . . . . . . . . . . . . . . . . 90
9.3. No Public Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
9.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
9.5. Successors and Assigns; Third Party Beneficiaries. . . . . . . . . . . . . . 92
9.6. Access to Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
9.7. Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . . . . . . . 94
9.8. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.9. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.10. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.11. Partial Invalidity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
-iii-
<PAGE>
9.12. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 95
9.13. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
9.14. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
9.15. Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Schedules Description
- --------- -----------
<S> <C>
1.1 Gaming Agreed Accounting Principles
1.2 Gaming Armored Cars
1.3 Gaming ATM Machines
1.4 Gaming Booths
1.5 Gaming Vaults
1.6 IPS Agreed Accounting Principles
1.7 Gaming Bank Accounts
2.3 Comdata Excluded Assets
2.6 NTS Transferred Bank Accounts
2.7 IPS Excluded Assets
4.2(A) Comdata Bank Account Information
4.2(B) NTS Bank Account Information
5.2(A) Subsidiaries of Comdata
5.2(B) Capital Structure of the Gaming Subsidiary
5.3 Comdata Exceptions to Execution and Delivery
5.4 Gaming Business Financial Statements
5.5(A) Changes since Gaming Balance Sheet Date
5.5(B) Exceptions to Ordinary Course Since Gaming Balance Sheet Date
5.7 Gaming Business Taxes
5.8(A) Availability of Gaming Business Assets
5.8(B) Material Services Provided by Comdata
5.9 Gaming Business Governmental Permits
5.11(A) Gaming Business Leased Real Property
5.11(B) Exceptions to Title of Gaming Business Leased Real Property
5.11(C) Encumbrances on Gaming Business Leased Real Property
5.13(A) Gaming Business Personal Property
5.13(B) Gaming Business Personal Property Title Exceptions
5.14 Gaming Business Personal Property Lease
5.15(A) Gaming Intellectual Property
5.15(B) Gaming Software
5.15(C) Agreements Relating to Gaming Intellectual Property
5.15(D) Ownership of Gaming Intellectual Property
5.15(E) Validity and Enforceability of Gaming Business Intellectual
Property
5.15(F) Limitations on Gaming Business Intellectual Property
5.15(G) Limitations on Gaming Business Owned Software
5.15(H) Intellectual Property Agents, Consultants and Contractors
5.17 Gaming Business Exceptions to Title
5.18(A) Gaming Business Employee Agreements
5.18(C) Gaming Business Severance Plans
5.19(A) Gaming Business Compliance with Labor Laws
5.19(B) Gaming Business Conflicts of Interest
5.20 Gaming Business Contracts
5.21 Status of Gaming Agreements
-v-
<PAGE>
5.22 Gaming Business Litigation
5.23 Gaming Business Environmental Matters
5.24 Gaming Business Insurance
5.25 Gaming Business Customers
5.26 Gaming Bank Accounts
5.27 Estimated Closing Date Gaming Special Report
5.28 Estimated Amount of Transferred Cash
6.2(A) Subsidiaries of NTS; Organization
6.2(B) Capital Structure of the NTS Subsidiary
6.3 FDC Exceptions to Execution and Delivery
6.4 NTS Financial Statements
6.5(A) Changes since NTS Balance Sheet Date
6.5(B) Exceptions to Ordinary Course since NTS Balance Sheet Date
6.7 NTS Taxes
6.8(A) Availability of NTS Assets
6.8(B) Material Services Provided by IPS
6.9 NTS Governmental Permits
6.11(A) NTS Leased Real Property
6.11(B) Exceptions to Title of NTS Leased Real Property
6.11(C) Encumbrances on NTS Leased Real Property
6.13(A) NTS Personal Property
6.13(B) NTS Personal Property Title Exceptions
6.14 NTS Personal Property Lease
6.15(A) NTS Intellectual Property
6.15(B) NTS Software
6.15(C) Agreements Relating to NTS Intellectual Property
6.15(D) Ownership of NTS Intellectual Property
6.15(E) Validity and Enforceability of NTS Intellectual Property
6.15(F) Limitations on NTS Intellectual Property
6.15(G) Limitations on NTS Business Owned Software
6.15(H) Intellectual Property Agents, Consultants and Contractors
6.16 NTS Intellectual Property
6.17 NTS Exceptions to Title
6.18(A) NTS Business Employee Agreements
6.18(C) NTS Business Severance Plans
6.19(A) NTS Compliance with Labor Laws
6.19(B) NTS Conflicts of Interest
6.20 NTS Contracts
6.21 Status of NTS Agreements
6.22 NTS Litigation
6.23 NTS Environmental Matters
6.24 NTS Insurance
6.25 NTS Customers
6.26 NTS Bank Accounts
6.27 Estimated Closing Date NTS Special Report
-vi-
<PAGE>
7.4(A) NTS Employees
7.4(B) Comdata Employees
</TABLE>
-vii-
<PAGE>
Exhibits Description
- -------- -----------
Exhibit A Comdata Instrument of Assignment
Exhibit B Comdata Instrument of Assumption
Exhibit C NTS Instrument of Assignment
Exhibit D FDFS Instrument of Assumption
Exhibit E Services and Processing Agreement
Exhibit F Gaming Business Transition Services Agreement
Exhibit G NTS Business Transition Services Agreement
Exhibit H NTS State of Maryland Articles of Transfer
Exhibit I Intentionally Omitted
Exhibit J NTS Canadian Instrument of Assignment
Exhibit K NTS Canadian Instrument of Assumption
Exhibit L Comdata Canadian Instrument of Assignment
Exhibit M Comdata Canadian Instrument of Assumption
-viii-
<PAGE>
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT, dated as of January 17, 1998 (this "AGREEMENT"),
among First Data Corporation, a Delaware corporation ("FDC"), Integrated Payment
Systems Inc., a Delaware corporation and a wholly owned subsidiary of FDC
("IPS"), NTS, Inc., a Maryland corporation and wholly owned subsidiary of IPS
("NTS"), First Data Financial Services, L.L.C., a Delaware limited liability
company and wholly-owned subsidiary of IPS ("FDFS"), Ceridian Corporation, a
Delaware corporation ("CERIDIAN"), Comdata Network, Inc., a Maryland corporation
and an indirect, wholly owned subsidiary of Ceridian ("COMDATA"), and Permicom
Permits Services, Inc., an Ontario corporation and wholly owned subsidiary of
Comdata ("PERMICOM").
W I T N E S S E T H:
WHEREAS, Comdata, through its Gaming Services Division, is engaged in
the Gaming Business, as hereinafter defined;
WHEREAS, NTS is engaged in the NTS Business, as hereinafter defined;
WHEREAS, pursuant to this Agreement, NTS is conveying the NTS Business
(except the NT Canada Shares which NTS is conveying to Permicom) and a specified
amount of cash to Comdata in exchange for the Gaming Business; and
WHEREAS, NTS' rights to receive the Gaming Business pursuant to this
Agreement have been transferred to FDFS (by a distribution from NTS to IPS and
IPS' subsequent contribution of such rights to FDFS).
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed among FDC, IPS, NTS, FDFS,
Ceridian, Comdata and Permicom as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS. In this Agreement, the following terms have the
meanings specified or referred to in this SECTION 1.1 and shall be equally
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"ACTIVELY EMPLOYED" shall mean any employee who (i) is actually
performing services on the Closing Date; (ii) is on company-approved vacation or
other company-approved absence of less than 14 day duration; or (ii) is on
Statutorily Protected Leave.
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"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"AGREED ADJUSTMENTS" has the meaning specified in SECTION 3.1(c).
"AGREED GAMING ADJUSTMENTS" has the meaning specified in
SECTION 3.3(c).
"AGREED NTS ADJUSTMENTS" has the meaning specified in SECTION 3.4(c).
"AGREED RATE" means the fluctuating prime or corporate base rate of
interest published by, and as in effect from time to time of, Citibank, N.A., or
if that rate is no longer published, the interest rate designated as the prime
rate as published from time to time in the "Money Rates" section of THE WALL
STREET JOURNAL.
"ALLOCATION SCHEDULE" has the meaning set forth in SECTION 7.3(f).
"ARMORED CAR CASH" means the cash in the Gaming Armored Cars.
"ASSOCIATE" means, with respect to any Person (i) a corporation or
organization of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities, (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity and (iii) any relative or spouse of such Person,
or any relative of such spouse, who has the same home as such Person or who is a
director or officer of the person or any of its parents or subsidiaries.
"ASSUMED GAMING LIABILITIES" shall mean the liabilities described in
SECTION 2.4, but excluding the liabilities described in SECTION 2.5.
"ASSUMED NTS LIABILITIES" has the meaning specified in SECTION 2.8,
but excluding the liabilities described in SECTION 2.9.
"ATM CASH" means the cash in the Gaming ATM Machines.
"BANK ACCOUNT CASH" means the cash in the Gaming Bank Accounts.
"BOOTH CASH" means the cash in the Gaming Booths designated on
SCHEDULE 1.4 as "Booths Funded by Comdata" and as "Comdata Cash Provided for
Float".
"CASHCALL INC. SHARES" means all of the issued and outstanding shares
of capital stock of the Gaming Subsidiary.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Sections 9601 ET SEQ., any amendments thereto, any
successor statutes, and any regulations promulgated thereunder.
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"CERIDIAN GROUP MEMBER" means Ceridian, Comdata and their respective
Affiliates and their respective successors and assigns.
"CLAIM NOTICE" has the meaning specified in SECTION 8.3(a).
"CLOSING" means the following actions effected pursuant to the terms
of this Agreement: of (i) the transfer of the NT Canada Shares from NTS to
Permicom; (ii) the delivery by Permicom to NTS of the Permicom Note; (iii) the
transfer of the Purchased Gaming Assets from Comdata to FDFS; (iv) the transfer
of the Purchased NTS Assets (except the NT Canada shares) from NTS to Comdata;
and (v) the delivery by NTS of the NTS Note to Comdata. The actions referred to
in clauses (i) and (ii) shall be effected simultaneously, following which the
actions referred to in clauses (iii), (iv) and (v) shall be effected
simultaneously.
"CLOSING DATE" means the date hereof.
"CLOSING DATE GAMING SPECIAL REPORT" has the meaning specified in
SECTION 3.3(e).
"CLOSING DATE NTS SPECIAL REPORT" has the meaning specified in
SECTION 3.4(e).
"COBRA" means Sections 601 through 609 of ERISA.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMDATA ANCILLARY AGREEMENTS" means all agreements, instruments and
documents being or to be executed and delivered by Ceridian, Comdata or any of
their respective Affiliates under this Agreement or in connection herewith.
"COMDATA COLLECTION REPORT" has the meaning specified in SECTION 7.5.
"COMDATA EFFECTIVE DATE" has the meaning specified in SECTION
7.4(a)(iii).
"COMDATA EMPLOYEES" has the meaning specified in SECTION 7.4(a)(ii).
"COMDATA INSTRUMENT OF ASSIGNMENT" means the Instrument of Assignment
in the form of EXHIBIT A.
"COMDATA INSTRUMENT OF ASSUMPTION" means the Instrument of Assumption
in the form of EXHIBIT B.
"COMDATA PAYMENT INSTRUMENT" means a check or draft (such as a
Comchek-Registered Trademark- draft), which is (i) issued by Comdata or an
Affiliate thereof; (ii) drawn on a bank account of Comdata or an Affiliate
thereof; and (iii) used to effect a Gaming Business transaction at a Gaming
Establishment.
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"COMDATA PENSION PLANS" has the meaning specified in SECTION
7.4(c)(i).
"COMDATA WELFARE PLANS" has the meaning specified in SECTION
7.4(b)(ii).
"CONTAMINANT" means any waste, pollutant, hazardous or toxic substance
or waste, petroleum, petroleum-based substance or waste, special waste, or any
constituent of any such substance or waste.
"COPYRIGHTS" means United States and foreign copyrights, copyrightable
works, and maskworks, whether registered or unregistered, and pending
applications to register the same.
"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"E&Y" means Ernst & Young, LLP, independent public accountants.
"ENCUMBRANCE" means any lien (statutory or other), claim, charge,
security interest, mortgage, deed of trust, pledge, hypothecation, assignment,
easement, conditional sale or other title retention agreement, defect in title,
covenant, preference, priority or security agreement or preferential arrangement
of any kind or nature, and any easement, encroachment, covenant, restriction,
right of way or other restrictions of any kind.
"ENVIRONMENTAL ENCUMBRANCE" means an Encumbrance in favor of any
Governmental Body for (i) any liability under any Environmental Law, or (ii)
damages arising from, or costs incurred by such Governmental Body in response
to, a Release or threatened Release of a Contaminant into the environment.
"ENVIRONMENTAL LAW" means all Requirements of Laws derived from or
relating to all federal, state and local laws or regulations relating to or
addressing the environment, health or safety, including but not limited to
CERCLA, OSHA and RCRA and any state equivalent thereof.
"ENVIRONMENTAL PROPERTY TRANSFER ACTS" means any applicable
Requirements of Laws that for environmental reasons conditions, restricts,
prohibits or requires any notification or disclosure with respect to the direct
or indirect transfer, sale, lease or closure of any property, including any so-
called "Environmental Cleanup Responsibility Acts" or "Responsible Property
Transfer Acts."
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCHEAT LAWS" means all applicable Requirements of Law relating to
unclaimed property, escheat and similar federal and state statutes.
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"ESTIMATED AMOUNT OF TRANSFERRED CASH" has the meaning specified in
SECTION 5.28.
"ESTIMATED CLOSING DATE GAMING SPECIAL REPORT" has the meaning
specified in SECTION 5.27.
"ESTIMATED CLOSING DATE NTS SPECIAL REPORT" has the meaning specified
in SECTION 6.27.
"EXCLUDED COMDATA SUBSIDIARIES" means Comdata Network, Inc. of
California, Comdata Telecommunications Services, Inc. and Permicom.
"EXCLUDED GAMING ASSETS" has the meaning specified in SECTION 2.3.
"EXCLUDED GAMING LIABILITIES" has the meaning specified in SECTION
2.5.
"EXCLUDED NTS ASSETS" has the meaning specified in SECTION 2.7.
"EXCLUDED NTS LIABILITIES" has the meaning specified in SECTION 2.9.
"FDC" has the meaning specified in the first paragraph of this
Agreement.
"FDC GROUP" means any "affiliated group" (as defined in SECTION
1504(a) of the Code without regard to the limitations contained in SECTION
1504(b) of the Code) that includes FDC.
"FDC GROUP MEMBER" means FDC, NTS, IPS and FDFS and their respective
Affiliates and their respective successors and assigns.
"FDFS" has the meaning specified in the first paragraph of this
Agreement.
"FDFS EFFECTIVE DATE" has the meaning specified in SECTION 7.4(a)(iv).
"FDFS INSTRUMENT OF ASSUMPTION" means the Instrument of Assumption in
the form of EXHIBIT D.
"FDT" means First Data Technologies, Inc. a Delaware corporation and
wholly owned subsidiary of FDC.
"GAMING ACCOUNTING REPORT" has the meaning specified in
SECTION 3.3(e).
"GAMING AGREED ACCOUNTING PRINCIPLES" means generally accepted
accounting principles consistently applied; PROVIDED, HOWEVER, that, with
respect to any matter as to which there is more than one generally accepted
accounting principle, Gaming Agreed Accounting Principles means the generally
accepted accounting principles applied in the preparation of the
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Gaming Balance Sheet included in SCHEDULE 5.4; PROVIDED FURTHER that,
notwithstanding the foregoing, Gaming Agreed Accounting Principles shall include
the accounting policies and be subject to the exceptions described in
SCHEDULE 1.1; and PROVIDED FURTHER that, for purposes of the Gaming Agreed
Accounting Principles, no known adjustments for items or matters, regardless of
the amount thereof, shall be deemed to be immaterial.
"GAMING AGREEMENTS" has the meaning specified in SECTION 5.21.
"GAMING AMOUNTS" means the Gaming Receivables and the Gaming
Liabilities.
"GAMING ARMORED CARS" means the armored cars holding cash pertaining
to the Gaming Business listed on SCHEDULE 1.2.
"GAMING ATM MACHINES" means the ATM machines listed on SCHEDULE 1.3.
"GAMING BALANCE SHEET" means the unaudited balance sheet of the Gaming
Business as of September 30, 1997 included in SCHEDULE 5.4.
"GAMING BANK ACCOUNTS" means the Bank Accounts listed on SCHEDULE 1.7.
"GAMING BALANCE SHEET DATE" means September 30, 1997.
"GAMING BOOTHS" means the on-floor Comdata booth operations listed on
SCHEDULE 1.4.
"GAMING BUSINESS" means the business of Comdata's Gaming Services
Division on the date hereof in providing the following financial and certain
information services related thereto to Gaming Establishments: (a) credit card
cash advance services, (b) debit services providing for withdrawals, balance
inquiries and similar transactions effected through an automated teller machine
or point-of-sale device and tied to an account, (c) operations of financial
services booths located on the premises of Gaming Establishments, (d) certain
development and marketing activities related to a cashless gaming system for use
in slot machines and similar gaming devices by gaming patrons at a Gaming
Establishment, (e) marketing services to Gaming Establishments for products and
services offered by Persons other than Comdata, such as certain services offered
by Western Union Financial Services, Inc., (f) a single system financial
services authorization platform to be utilized by Gaming Establishments known as
C.O.I.N.S.-TM- ("Casino Operations Information System") and (g) certain
marketing and information services related to the foregoing, including, without
limitation, the Financial Marketing System database and related systems. In
addition, the Gaming Business shall include any of the services provided
pursuant to the Master Agreement dated as of April 14, 1997 by and between
Comdata and ITT Sheraton Corporation.
"GAMING BUSINESS GOVERNMENTAL PERMITS" has the meaning specified in
SECTION 5.9.
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"GAMING BUSINESS LEASED REAL PROPERTY" has the meaning specified in
SECTION 5.11.
"GAMING BUSINESS OWNED SOFTWARE" has the meaning specified in
SECTION 5.15.
"GAMING BUSINESS PROPERTY" means any real or personal property, plant,
building, facility, structure, underground storage tank, equipment or unit, or
other asset owned, leased or operated by Comdata and used in the Gaming
Business.
"GAMING BUSINESS TRANSITION SERVICES AGREEMENT" means the Transition
Services Agreement in the form of Exhibit F.
"GAMING EQUALIZATION CASH AMOUNT" means the amount of cash, if any,
designated as "Gaming Equalization Cash" on SCHEDULE 5.27
"GAMING ESTABLISHMENT" means any locations at which wagering or gaming
activities are the primary business conducted. Notwithstanding any other
provision in this Agreement to the contrary, the parties acknowledge and agree
that a truck stop facility or a gasoline station shall not, under any
circumstance, be construed or interpreted to be a Gaming Establishment.
"GAMING LIABILITIES" means the liabilities listed on the Closing Date
Gaming Special Report.
"GAMING RECEIVABLES" means the receivables listed on the Closing Date
Gaming Special Report.
"GAMING RECEIVABLES ADJUSTMENT" shall equal:
(i) if the sum of the Gaming Receivables and the Gaming Equalization
Cash Amount is equal to the Gaming Liabilities, zero;
(ii) if the sum of the Gaming Receivables and the Gaming Equalization
Cash Amount is greater than the Gaming Liabilities, the amount of such
excess; and
(iii) if the sum of the Gaming Receivables and the Gaming
Equalization Cash Amount is less than the Gaming Liabilities, the amount of
such shortfall (represented as a negative number).
"GAMING SUBSIDIARY" means Cashcall Systems Inc., a Canadian
corporation.
"Gaming Subsidiary Excluded Assets" has the meaning specified in
SECTION 2.3.
"GAMING SUBSIDIARY EXCLUDED LIABILITIES" has the meaning specified in
SECTION 2.5.
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"GAMING VAULTS" means the bank vaults holding cash pertaining to the
Gaming Business listed on SCHEDULE 1.5.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or other
governmental authority or regulatory body.
"INDEMNIFICATION EXPENSES" means any and all expenses incurred in
connection with investigating, defending or asserting any claim, action, suit or
proceeding incident to any matter indemnified against hereunder (including,
without limitation, court filing fees, court costs, arbitration fees or costs,
witness fees, and reasonable fees and disbursements of legal counsel,
investigators, expert witnesses, consultants, accountants and other
professionals).
"INITIAL AMOUNT" means (a) the sum of (i) $65,400,000.00, (ii) the
Estimated Amount of Transferred Cash and (iii) the NTS Equalization Cash Amount
(which is a negative amount), less (b) the Gaming Equalization Cash Amount
(which is a positive amount).
"INTELLECTUAL PROPERTY" means Copyrights, Patent Rights, Trademarks
and Trade Secrets and all agreements, contracts, licenses, sublicenses,
assignments and indemnities which relate or pertain to any of the foregoing.
"IPS" has the meaning specified in the first paragraph of this
Agreement.
"IPS ANCILLARY AGREEMENTS" means all agreements, instruments and
documents being or to be executed and delivered by FDC, IPS, NTS or FDFS or
their respective Affiliates under this Agreement or in connection herewith.
"IPS PENSION PLANS" has the meaning specified in SECTION 7.4(c)(i).
"IPS WELFARE PLANS" has the meaning specified in SECTION 7.4(b)(ii).
"IRS" means the Internal Revenue Service.
"LOSSES" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges.
"MATERIAL ADVERSE EFFECT" means any condition, circumstance, change or
effect (or any development that, insofar as can be reasonably foreseen, would
result in any condition, circumstance, change or effect) that is materially
adverse to the assets, business, financial condition, results of operations or
prospects of the Gaming Business or NTS Business, as the case may be.
"NET AMOUNT OF GAMING RECEIVABLES" has the meaning specified in
SECTION 7.5.
"NET AMOUNT OF NTS RECEIVABLES" has the meaning specified in SECTION
7.5.
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"NET RECEIVABLES ADJUSTMENT" shall mean the amount, if any, paid by
any party pursuant to SECTION 3.5.
"NOTICE TO DEFEND" has the meaning specified in SECTION 8.4(b)(i).
"NT CANADA SHARES" means all the issued and outstanding shares of
capital stock of the NTS Subsidiary.
"NTS" has the meaning specified in the first paragraph of this
Agreement.
"NTS ACCOUNTING REPORT" has the meaning specified in SECTION 3.4(d).
"NTS AGREED ACCOUNTING PRINCIPLES" means generally accepted accounting
principles consistently applied, PROVIDED that, with respect to any matter as to
which there is more than one generally accepted accounting principle, NTS Agreed
Accounting Principles means the generally accepted accounting principles applied
in the preparation of the NTS Balance Sheet included in SCHEDULE 6.4; PROVIDED
FURTHER that, notwithstanding the foregoing, NTS Agreed Accounting Principles
shall include the accounting policies and be subject to the exceptions described
in SCHEDULE 1.6; and PROVIDED FURTHER that, for purposes of the NTS Agreed
Accounting Principles, no known adjustments for items or matters, regardless of
the amount thereof, shall be deemed to be immaterial.
"NTS AGREEMENTS" has the meaning specified in SECTION 6.21.
"NTS AMOUNTS" means the NTS Receivables and the NTS Liabilities.
"NTS BALANCE SHEET" means the unaudited balance sheet of NTS as of
September 30, 1997 included in SCHEDULE 6.4.
"NTS BALANCE SHEET DATE" means September 30, 1997.
"NTS BUSINESS" means the business of NTS on the date hereof in
providing the following products and services to trucking companies, truck
stops, vehicle fleets, service stations and others engaged in the transportation
industry wherever located: (i) credit, debit and funds transfer services for
the purchase of fuel, equipment and repairs and other services and products
generally necessary or appropriate in connection with the operation of a
trucking company, truck stop, fleet or service station, (ii) cash advance,
driver settlement and payroll services for those engaged in the transportation
industry, (iii) load identification and matching services, (iv) long distance
telecommunications and telephone card services, (v) factoring and financing
services, (vi) legalization services for the transportation industry, including,
permits, motor vehicle licensing and renewals, fuel tax reporting and
assistance, driver log auditing and driver safety programs, (vii) pilot car
services, (viii) in-route communications and (ix) information and data capture
services related to the foregoing. Notwithstanding the foregoing, or any other
provision in this Agreement to the contrary, the parties acknowledge and agree
that the NTS Business shall
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not include the products and services currently contemplated to be marketed
under the name "Transpay."
"NTS BUSINESS TRANSITION SERVICES AGREEMENT" means the Transition
Services Agreement in the form of EXHIBIT G.
"NTS COLLECTION REPORT" has the meaning specified in SECTION 7.5.
"NTS COMPUTER FACILITY" means the office space, raised floor area,
embossing facility, mailroom and other facilities which accommodate the computer
and telecommunications operations and equipment and are located principally on
the 1st floor and (G)arden level of the West Tower of the facility at 6000 and
6100 Western Place, Fort Worth, Texas 76107.
"NTS EMPLOYEES" has the meaning specified in SECTION 7.4(a)(i).
"NTS EQUALIZATION CASH AMOUNT" means the amount of cash, if any,
designated as "NTS Equalization Cash" on SCHEDULE 6.27.
"NTS GOVERNMENTAL PERMITS" has the meaning specified in SECTION 6.9.
"NTS INSTRUMENT OF ASSIGNMENT" means the Instrument of Assignment in
the form of Exhibit C.
"NTS LEASED REAL PROPERTY" has the meaning specified in SECTION 6.11.
"NTS LIABILITIES" means the liabilities listed on the Closing Date NTS
Special Report.
"NTS NOTE" has the meaning specified in SECTION 2.1.
"NTS OWNED SOFTWARE" has the meaning specified in SECTION 6.15.
"NTS PAYMENT INSTRUMENT" means any check or draft (such as an NTS
draft, and EDS draft or an ULTRANS draft) which is (i) issued by NTS or an
Affiliate thereof; (ii) drawn on a bank account of NTS or an Affiliate thereof;
and (iii) used to transfer funds for the payment of a purchase, cash advance or
settlement transaction with a vendor/merchant, client or client employee.
"NTS PROPERTY" means any real or personal property, plant, building,
facility, structure, underground storage tank, equipment or unit, or other asset
owned, leased or operated by NTS or the NTS Subsidiary.
"NTS RECEIVABLES" means the receivables listed on the Closing Date NTS
Special Report.
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"NTS RECEIVABLES ADJUSTMENT" shall equal:
(i) if the sum of the NTS Receivables and the NTS Equalization Cash
Amount is equal to the NTS Liabilities, zero;
(ii) if the sum of the NTS Receivables and the NTS Equalization Cash
Amount is greater than the NTS Liabilities, the amount of such excess; and
(iii) if the sum of the NTS Receivables and the NTS Equalization Cash
Amount is less than the NTS Liabilities, the amount of such shortfall
(represented as a negative number).
"NTS SUBSIDIARIES" means any corporation, partnership, limited
liability company, joint venture or other entity in which NTS (a) owns, or at
any relevant time owned, directly or indirectly, 50% or more of the outstanding
voting or equity interests or (b) is a general partner.
"NTS SUBSIDIARY" means National Truckers Service Canada, Inc., a
Canadian corporation.
"NTS SUBSIDIARY EXCLUDED ASSETS" has the meaning specified in
SECTION 2.7.
"NTS SUBSIDIARY EXCLUDED LIABILITIES" has the meaning specified in
SECTION 2.9.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
SECTIONS 651 ET SEQ., any amendment thereto, any successor statute, and any
regulations promulgated thereunder as well as any similar state or local laws.
"PATENT RIGHTS" means United States and foreign patents, patent
applications, continuations, continuations-in-part, divisions, reissues, patent
disclosures, inventions (whether or not patentable) or improvements thereto.
"PENSION PLAN" means any employee pension benefit plan, as such term
is defined in SECTION 3(2) of ERISA.
"PERMICOM NOTE" has the meaning specified in SECTION 2.1.
"PERMITTED ENCUMBRANCES" means (a) liens for taxes and other
governmental charges and assessments arising in the ordinary course of business
which are not yet due and payable, (b) liens of landlords and liens of carriers,
warehousemen, mechanics and materialmen and other like liens arising in the
ordinary course of business for sums not yet due and payable and (c) other liens
or imperfections on property which are not material in amount, do not interfere
with and are not violated by, the consummation of the transactions contemplated
by this
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Agreement and do not impair the marketability of, or materially detract from the
value of or materially impair the existing use of, the property affected by such
lien or imperfection.
"PERSON" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY CLOSING DATE GAMING SPECIAL REPORT" has the meaning
specified in SECTION 3.3(a)(i).
"PRELIMINARY CLOSING DATE NTS SPECIAL REPORT" has the meaning
specified in SECTION 3.4(a)(i).
"PRELIMINARY GAMING ACCOUNTING REPORT" has the meaning specified in
SECTION 3.3(a)(iii).
"PRELIMINARY GAMING AMOUNTS" has the meaning specified in
SECTION 3.3(a)(i).
"PRELIMINARY GAMING LIABILITIES" has the meaning specified in
SECTION 3.3(a)(i).
"PRELIMINARY GAMING RECEIVABLES" has the meaning specified in
SECTION 3.3(a)(i).
"PRELIMINARY GAMING RECEIVABLES ADJUSTMENT" has the meaning specified
in SECTION 3.3(a)(ii).
"PRELIMINARY NTS ACCOUNTING REPORT" has the meaning specified in
SECTION 3.4(a)(iii).
"PRELIMINARY NTS AMOUNTS" has the meaning specified in
SECTION 3.4(a)(i).
"PRELIMINARY NTS LIABILITIES" has the meaning specified in
SECTION 3.4(a)(i).
"PRELIMINARY NTS RECEIVABLES" has the meaning specified in
SECTION 3.4(a)(i).
"PRELIMINARY NTS RECEIVABLES ADJUSTMENT" has the meaning specified in
SECTION 3.4(a)(ii).
"PRELIMINARY TRANSFERRED CASH STATEMENT" has the meaning specified in
SECTION 3.1(a).
"PURCHASED GAMING ASSETS" shall mean the assets and properties
described in SECTION 2.2, but excluding the assets and properties described in
SECTION 2.3.
"PURCHASED NTS ASSETS" has the meaning specified in SECTION 2.6.
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"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
SECTIONS 6901 ET SEQ., and any successor statute, and any regulations
promulgated thereunder.
"REMEDIAL ACTION" means actions required to (i) clean up, remove,
treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threatened Release or minimize the
further Release of Contaminants or (iii) investigate and determine if a remedial
response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and local
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body (including, without limitation, those
pertaining to employment, wage and hour, electrical, building, zoning,
environmental and occupational safety and health requirements, the Bank Secrecy
Act and Money Laundering and Control Act and the rules and regulations
promulgated thereunder, and all laws governing or regulating gambling or gaming)
or common law.
"RESTRICTED COMDATA PARTIES" has the meaning specified in SECTION
7.2(a).
"RESTRICTED FDC PARTIES" has the meaning specified in SECTION 7.2(b).
"RESTRICTED TRUCKING ACTIVITIES" means (i) cash advance, factoring,
financing or in-cab communication services or products that are marketed
exclusively to the trucking industry or the usefulness of which is limited to
the trucking industry, (ii) legalization services for the trucking industry,
including permitting and licensing (and renewal thereof), fuel tax reporting and
assistance, driver log auditing and driver safety programs, (iii) pilot car
services for the trucking industry, and (iv) load matching services for the
trucking industry.
"SELECTED ACCOUNTING FIRM" means a major independent public accounting
firm (other than E&Y or KPMG Peat Marwick) which shall have been selected by the
joint decision of FDC and Ceridian.
"SERVICES AND PROCESSING AGREEMENT" means the Services and Processing
Agreement in the form of EXHIBIT E.
"SOFTWARE" means computer software programs and software systems,
including, without limitation, all databases, compilations, tool sets,
compilers, higher level or "proprietary" languages, related documentation and
materials, whether in source code, object code or human readable form.
"STATUTORILY PROTECTED LEAVE" shall mean any leave (i) pursuant to the
Family and Medical Leave Act; (ii) pursuant to a military leave of absence under
circumstances entitling the employee to return to his or her position or (iii)
pursuant to taking sick days or in the case of Transferring Comdata Employees,
those on short term disability leave.
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"STRADDLE PERIOD" means any taxable year or period beginning before
and ending after the Closing.
"TAX" (and, with correlative meaning, "TAXES") means any federal,
state, local or foreign income, gross receipts, property, sales, use, license,
excise, franchise, employment, payroll, withholding, alternative or add-on
minimum, ad valorem, value added, transfer or excise tax, or any other tax,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, imposed by any governmental
authority.
"TAX RETURN" means any return, report or similar statement required to
be filed with respect to any Tax (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
"THIRD-PERSON CLAIM" has the meaning specified in SECTION 8.4.
"TRADEMARKS" means United States, state and foreign trademarks,
service marks, logos, trade dress and trade names (including all assumed or
fictitious names under which the party is conducting business or has within the
past five years conducted business), whether registered or unregistered, and
pending applications to register the foregoing.
"TRADE SECRETS" means confidential ideas, trade secrets, know-how,
concepts, methods, processes, formulae, reports, data, customer lists, mailing
lists, business plans, or other proprietary information.
"TRANSFERRED CASH" means the sum of the ATM Cash, the Armored Car
Cash, the Booth Cash, the Bank Account Cash and the Vault Cash.
"TRANSFERRED CASH STATEMENT" has the meaning specified in
SECTION 3.1(b).
"TRANSFERRING COMDATA EMPLOYEES" has the meaning specified in SECTION
7.4(a)(iv).
"TRANSFERRING NTS EMPLOYEES" has the meaning specified in SECTION
7.4(a)(iii).
"UNRESOLVED GAMING OBJECTIONS" has the meaning specified in
SECTION 3.3(d).
"UNRESOLVED NTS OBJECTIONS" has the meaning specified in
SECTION 3.4(d).
"VAULT CASH" means the cash in the Gaming Vaults.
"WARN" means the Workers Adjustment and Retraining Notification Act.
"WELFARE PLAN" means any employee welfare benefit plan, as such term
is defined in SECTION 3(1) of ERISA.
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ARTICLE II
EXCHANGE
2.1. EXCHANGE OF GAMING BUSINESS FOR THE NTS BUSINESS AND CASH. As
more specifically provided herein, on the date hereof (immediately following the
acquisition provided for in the last sentence of this SECTION 2.1) Comdata is
(a) conveying and transferring to FDFS, free and clear of all Encumbrances
(except Permitted Encumbrances), the Purchased Gaming Assets and (b) assuming
the NTS Liabilities in exchange for (i) the simultaneous conveyance and transfer
by NTS to Comdata of the Purchased NTS Assets (excluding the NT Canada Shares
which are being conveyed and transferred to, and purchased by, Permicom), free
and clear of all Encumbrances (other than Permitted Encumbrances), (ii) the
simultaneous assumption by FDFS of the Gaming Liabilities and (iii) NTS'
delivery to Comdata of a promissory note of NTS in the principal amount and in a
form mutually acceptable to Comdata and NTS (the "NTS NOTE") equal to the
Initial Amount. The parties hereto agree to use their respective best efforts
to determine the fair market value of the NTS Business within twelve months of
Closing, which value shall in no event be less than $55 million or greater than
$65 million. The Initial Amount shall be subject to adjustment as provided in
Article III hereof. Simultaneously with the execution of this Agreement,
Permicom shall acquire the NT Canada Shares from NTS in exchange for Permicom's
delivery to NTS of a promissory note of Permicom in the principal amount of
$400,000 (US) and in a form mutually acceptable to Permicom and NTS (the
"PERMICOM NOTE").
2.2. PURCHASED GAMING ASSETS. The Purchased Gaming Assets shall
consist of all assets and properties of Ceridian or Comdata of every kind and
description, wherever located, real, personal or mixed, tangible or intangible,
heretofore used in connection with the Gaming Business, including, without
limitation, all right, title and interest of Ceridian or Comdata in, to and
under:
(a) all of the assets reflected on the Gaming Balance Sheet, except
those disposed of or converted into cash after the Gaming Balance Sheet
Date in the ordinary course of business;
(b) all notes and accounts receivable generated by the Gaming
Business;
(c) all inventory used in the Gaming Business (other than any blank,
unissued Comdata Payment Instruments);
(d) to the extent assignable, the Gaming Business Governmental
Permits listed in SCHEDULE 5.9;
(e) the Gaming Business Leased Real Property and leasehold
improvements listed or described in SCHEDULE 5.11(A) except to the extent
such Gaming Business Leased Real Property is (i) provided to FDFS pursuant
to the Gaming Business Transition Services Agreement or (ii) listed on
SCHEDULE 2.3;
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(f) the machinery, equipment, vehicles, furniture and other personal
property listed or referred to in SCHEDULES 1.2, 1.3, 1.4, 1.5, 1.7 or
SCHEDULE 5.13(A) except to the extent the use of such machinery, equipment,
vehicles, furniture and other property is (i) provided to NTS pursuant to
the Gaming Business Transition Services Agreement or (ii) listed on
SCHEDULE 2.3;
(g) the personal property leases listed in SCHEDULE 5.14, except to
the extent the use of such personal property leases are (i) provided to
FDFS pursuant to the Gaming Business Transition Services Agreement or (ii)
listed on SCHEDULE 2.3;
(h) the Copyrights, Patent Rights and Trademarks (and all goodwill
associated therewith), and the agreements, contracts, licenses,
sublicenses, assignments and indemnities, listed in SCHEDULE 5.15(A),
together with the licenses and other agreements with third parties related
thereto;
(i) the Gaming Business Owned Software listed in SCHEDULE 5.15 (B),
together with the licenses and other agreements with third parties related
thereto;
(j) all Trade Secrets and other proprietary or confidential
information used in or relating to the Gaming Business except those Trade
Secrets or other proprietary or confidential information which are used in
or relates to any other business of Ceridian or its Affiliates;
(k) the agreements listed in SCHEDULE 5.18(A);
(l) the contracts, agreements or understandings listed or described
in SCHEDULE 5.20 and all other contracts related to the Gaming Business to
which Ceridian, Comdata or the Gaming Subsidiary is a party that are
customary for companies engaged in the same line of business as the Gaming
Business;
(m) all books and records (including all data and other information
stored on discs, tapes or other media) of Comdata relating exclusively to
the assets, properties, business and operations of the Gaming Business and,
if requested, copies of all books and records (including all data and other
information stored on discs, tapes or other media) which are used in
connection with, (but not exclusively related to) the assets, properties,
business and operations of the Gaming Business, PROVIDED, HOWEVER, that
only such portions of such books and records relating to the Gaming
Business will be provided;
(n) Ceridian's and Comdata's interest in and to all telephone, telex
and telephone facsimile numbers and other directory listings utilized
primarily in connection with the Gaming Business;
(o) all of the Cashcall Inc. Shares;
(p) the Transferred Cash;
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(q) all personal property, Intellectual Property and agreements
relating to the "COINS" product;
(r) all personal property, Intellectual Property and agreements
relating to the "QuickPlay" product;
(s) all personal property, Intellectual Property and agreements
relating to the Financial Marketing System product; and
(t) all the Gaming Bank Accounts.
2.3. EXCLUDED GAMING ASSETS. Notwithstanding the provisions of
SECTION 2.2, the Purchased Gaming Assets shall not include the following (herein
referred to as the "EXCLUDED GAMING ASSETS"):
(a) all cash, bank deposits and cash equivalents except the
Transferred Cash (it being understood that the Gaming Equalization
Cash is reflected in the Initial Amount);
(b) the name "Comdata" and "Comchek" or any related or similar trade
names, trademarks, service marks or logos to the extent the same
incorporate the name "Comdata" and "Comchek" or any variation thereof;
(c) Ceridian's and Comdata's rights, claims or causes of action
against third parties relating to the assets, properties, business or
operations of the Gaming Business which may arise in connection with the
discharge by Ceridian or Comdata of the Excluded Gaming Liabilities;
(d) all contracts of insurance;
(e) all corporate minute books and stock transfer books and the
corporate seal of Comdata;
(f) Comdata's rights under the lease agreements referred to in point
7 on SCHEDULE 5.11(A);
(g) except to the extent provided in SECTION 7.4, Comdata's employee
benefit agreements, plans or arrangements listed in SCHEDULE 5.18(A) or
otherwise maintained by Comdata or the Gaming Subsidiary on behalf of
persons employed by Comdata or the Gaming Subsidiary;
(h) all shares of capital stock of each of the Excluded Comdata
Subsidiaries;
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(i) all refunds of any Tax to which Ceridian or Comdata is entitled
pursuant to SECTION 7.3; and
(j) the assets listed on SCHEDULE 2.3;
(k) that certain agreement among Comdata Network, Inc., Service Data
Corporation and SDC Enterprises, Inc. dated as of May 15, 1997;
(l) that certain agreement among Comdata, Concord Computing
Corporation and EFS National Bank dated as of April 30, 1996, as amended
and the Marketing Rights Agreement executed in connection therewith; and
(m) that certain Acquisition Agreement between Comdata and Western
Union Financial Services dated March 23, 1994.
With respect to any assets that were owned on the date preceding the date hereof
by the Gaming Subsidiary and that would have constituted Excluded Gaming Assets
if owned by Comdata (the "GAMING SUBSIDIARY EXCLUDED ASSETS"), Comdata shall,
immediately prior to the Closing, cause the Gaming Subsidiary to convey,
transfer and deliver, without any representation or warranty (express or
implied), to Comdata such assets and the Gaming Subsidiary Excluded Assets shall
be deemed to be Excluded Gaming Assets for purposes of this Agreement.
2.4. ASSUMED GAMING LIABILITIES. The Assumed Gaming Liabilities
shall consist of:
(a) all liabilities of the Gaming Business reflected in the Closing
Date Gaming Special Report as a dollar amount;
(b) all liabilities and obligations of Ceridian and Comdata to be
paid or performed after the date hereof under (i) the Gaming Agreements and
(ii) any contracts related to the Gaming Business to which Ceridian,
Comdata or the Gaming Subsidiary is a party that are customary for
companies engaged in the same line of business as the Gaming Business,
except in each case, to the extent such liabilities and obligations, (A)
but for a breach or default by Ceridian, Comdata or the Gaming Subsidiary,
would have been paid, performed or otherwise discharged on or prior to the
date hereof or to the extent the same arise out of any such breach or
default and (B) are not reflected on the Closing Date Gaming Special Report
and are not taken into account as a deduction in connection with the
determination of the Gaming Receivables Adjustment pursuant to SECTION 3.3;
and
(c) all liabilities in respect of Taxes for which FDC, IPS, NTS or
FDFS is liable pursuant to SECTION 7.3.
2.5. EXCLUDED GAMING LIABILITIES. Notwithstanding the provisions of
SECTION 2.4, the Assumed Gaming Liabilities shall not include the following
(herein referred to as the "EXCLUDED GAMING LIABILITIES"):
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(a) any liabilities in respect of Taxes for which Comdata or Ceridian
is liable pursuant to SECTION 7.3;
(b) any intercompany payables and other liabilities or
obligations of the Gaming Business to Comdata, Ceridian or any of
their respective Affiliates;
(c) any costs and expenses incurred by Comdata, Ceridian or the
Gaming Subsidiary incident to the negotiation and preparation of this
Agreement and their respective performance and compliance with the
agreements and conditions contained herein;
(d) any liabilities or obligations in respect of any Excluded Gaming
Assets;
(e) any liabilities in respect of the claims or proceedings
described in SCHEDULE 5.22;
(f) accrued liabilities of any kind required to be reflected on the
Closing Date Gaming Special Report prepared in accordance with the Gaming
Agreed Accounting Principles which were not reflected thereon as a dollar
amount;
(g) any liabilities and obligations related to, associated with or
arising out of (i) the occupancy, operation, use or control of any of the
Gaming Business Property on or prior to the date hereof or (ii) the
operation of the Gaming Business on or prior to the date hereof, in each
case incurred or imposed by any Environmental Law (including, without
limitation, any Release of any Contaminant on, at or from (1) the Gaming
Business Property, including, without limitation, all facilities,
improvements, structures and equipment thereon, surface water thereon or
adjacent thereto and soil or groundwater thereunder, or any conditions
whatsoever on, under or in the vicinity of such real property or (2) any
real property or facility owned by a third Person to which Contaminants
generated by the Gaming Business were sent prior to the date hereof);
(h) any product liability or claims for injury to person or property,
regardless of when made or asserted, relating to products manufactured,
distributed or sold by the Gaming Business or services performed by the
Gaming Business on or prior to the date hereof;
(i) any liabilities relating to Escheat Laws or the failure to file
reports, or to pay or turn over amounts due, thereunder which pertain to
(A) any Gaming Business transaction initiated prior to the Closing Date or
(B) any Gaming Business transactions for which a Comdata Payment Instrument
is issued during the twelve month period following Closing; and
(j) any liabilities arising under that certain Processing and Related
Services Agreement among Comdata, Concord Computing Corporation and EFS
National Bank
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dated as of April 30, 1996, as amended and the Marketing Rights Agreement
executed in connection therewith.
In order that the Gaming Subsidiary shall not be responsible in any respect for
any liabilities or obligations that would constitute Excluded Gaming Liabilities
in the case of Comdata, Comdata shall assume and agree to pay, perform and
discharge such liabilities and obligations of the Gaming Subsidiary (the "GAMING
SUBSIDIARY EXCLUDED LIABILITIES") and all Gaming Subsidiary Excluded Liabilities
shall be deemed to constitute Excluded Gaming Liabilities for purposes of this
Agreement.
2.6. PURCHASED NTS ASSETS. The Purchased NTS Assets shall consist of
all assets and properties of NTS of every kind and description, wherever
located, real, personal or mixed, tangible or intangible, heretofore used in
connection with the NTS Business, including, without limitation, all right,
title and interest of NTS in, to and under:
(a) all of the assets reflected on the NTS Balance Sheet, except
those disposed of or converted into cash after the NTS Balance Sheet Date
in the ordinary course of business;
(b) all notes and accounts receivable generated by the NTS Business;
(c) all inventory used in the NTS Business;
(d) to the extent assignable, the NTS Business Governmental Permits
listed in SCHEDULE 6.9;
(e) the NTS Business Leased Real Property and leasehold improvements
listed or described in SCHEDULE 6.11(A) except to the extent such NTS
Leased Real Property is (i) provided to Comdata pursuant to the NTS
Business Transition Services Agreement or (ii) is listed on SCHEDULE 2.7;
(f) the machinery, equipment, vehicles, furniture and other personal
property listed or referred to in SCHEDULE 6.13(A) except to the extent the
use of such machinery, equipment, vehicles, furniture and other property is
(i) provided to Comdata pursuant to the NTS Business Transition Services
Agreement or (ii) is listed on SCHEDULE 2.7;
(g) the personal property leases listed in SCHEDULE 6.14 except to
the extent the use of such personal property leases are (i) provided to
Comdata pursuant to the NTS Business Transition Services Agreement or (ii)
is listed on SCHEDULE 2.7;
(h) the Copyrights, Patent Rights and Trademarks (and all goodwill
associated therewith), the name "NTS," and the agreements, contracts,
licenses, sublicenses, assignments and indemnities, listed in SCHEDULE
6.15(A) except to the extent such Copyrights, Patent Rights and Trademarks
are (i) licensed or sublicensed to Comdata
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pursuant to the NTS Business Transition Services Agreement or (ii) is
listed on SCHEDULE 2.7;
(i) the NTS Business Owned Software listed in SCHEDULE 6.15(B) except
to the extent such NTS Business Owned Software is (i) licensed or
sublicensed to Comdata pursuant to the NTS Business Transition Services
Agreement or (ii) is listed on SCHEDULE 2.7;
(j) all Trade Secrets and other proprietary or confidential
information used in or relating to the NTS Business except those Trade
Secrets or other proprietary or confidential information which is used in
or relates to any other business of FDC or its Affiliates;
(k) the agreements listed in SCHEDULE 6.18(A);
(l) the contracts, agreements or understandings listed or described
in SCHEDULE 6.20 and all other contracts related to the NTS Business to
which FDC, IPS or NTS or the NTS Subsidiary is a party that are customary
for companies engaged in the same line of business as the NTS Business;
(m) all books and records (including all data and other information
stored on discs, tapes or other media) of FDC, IPS or NTS relating
exclusively to the assets, properties, business and operations of the NTS
Business and, if requested, copies of all books and records (including all
data and other information stored on discs, tapes or other media) which are
used in connection with, (but not exclusively related to) the assets,
properties, business and operations of the NTS Business, PROVIDED, HOWEVER,
that only the portions of such books and records relating to the NTS
Business will be provided;
(n) FDC's, IPS' and NTS' interest in and to all telephone, telex and
telephone facsimile numbers and other directory listings utilized primarily
in connection with the NTS Business;
(o) all of the NT Canada Shares;
(p) all of the bank accounts listed on SCHEDULE 2.6; and
(q) all of the blank, unissued NTS Payment Instruments.
2.7. EXCLUDED NTS ASSETS. Notwithstanding the provisions of
SECTION 2.6, the Purchased NTS Assets shall not include the following (herein
referred to as the "EXCLUDED NTS ASSETS"):
(a) all cash, bank deposits and cash equivalents (except for
that cash listed as a receivable on the Estimated NTS Special Report)
(it being understood that the NTS Equalization Cash is reflected in
the Initial Amount);
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(b) the names "IPS," "Western Union," "Greenback," "Transpay" or any
related or similar trade names, trademarks, service marks or logos to the
extent the same incorporate the name "IPS," "Western Union", "Greenback,"
"Transpay" or any variation thereof;
(c) FDC's and IPS' rights, claims or causes of action against third
parties relating to the assets, properties, business or operations of the
NTS Business which may arise in connection with the discharge by FDC or IPS
of the Excluded NTS Liabilities;
(d) all contracts of insurance;
(e) all corporate minute books and stock transfer books and the
corporate seal of IPS and NTS;
(f) FDC's and IPS' rights under the lease agreement described in
SCHEDULE 6.11(A);
(g) except to the extent provided in SECTION 7.4, NTS' employee
benefit agreements, plans or arrangements listed in SCHEDULE 6.18(A) or
otherwise maintained by IPS, NTS or the NTS Subsidiary on behalf of persons
employed by IPS, NTS or the NTS Subsidiary;
(h) all refunds of any Tax to which FDC or IPS is entitled pursuant
to SECTION 7.3;
(i) the assets listed on SCHEDULE 2.7;
(j) that certain agreement between PHH Corporation and IPS dated as
of February 12, 1996;
(k) that certain agreement between Electronic Data Systems
Corporation and IPS dated as of August 13, 1996; and
(l) all assets and agreements relating to the NTS Computer Facility.
With respect to any assets that were owned on the date preceding the date hereof
by the NTS Subsidiary and that would have constituted Excluded NTS Assets if
owned by NTS (the "NTS SUBSIDIARY EXCLUDED ASSETS"), NTS shall, immediately
prior to the Closing, cause the NTS Subsidiary to convey, transfer and deliver,
without any representation or warranty (express or implied), to NTS such assets
and the NTS Subsidiary Excluded Assets shall be deemed to be Excluded NTS Assets
for purposes of this Agreement.
2.8. ASSUMED NTS LIABILITIES. The Assumed NTS Liabilities shall
consist of:
(a) all liabilities of the NTS Business reflected in the Closing Date
NTS Special Report as a dollar amount;
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(b) all liabilities and obligations of NTS to be paid or performed
after the date hereof under (i) the NTS Agreements and (ii) all other
contracts related to the NTS Business to which FDC, IPS, NTS or the NTS
Subsidiary is a party that are customary for companies engaged in the same
line of business as the NTS Business, except in each case, to the extent
such liabilities and obligations, (A) but for a breach or default by FDC,
IPS, NTS or the NTS Subsidiary, would have been paid, performed or
otherwise discharged on or prior to the date hereof or to the extent the
same arise out of any such breach or default and (B) are not reflected on
the Closing Date NTS Special Report and are not taken into account as a
deduction in connection with the determination of the NTS Receivables
Adjustment pursuant to SECTION 3.4;
(c) all liabilities in respect of Taxes for which Comdata is liable
pursuant to SECTION 7.3.
(d) all liabilities pursuant to any NTS Payment Instrument issued on
or after the Closing Date.
2.9. EXCLUDED NTS LIABILITIES. Notwithstanding the provisions of
SECTION 2.8, the Assumed NTS Liabilities shall not include the following (herein
referred to as the "EXCLUDED NTS LIABILITIES"):
(a) any liabilities in respect of Taxes for which FDC, IPS, NTS, FDFS
or is liable pursuant to SECTION 7.3;
(b) any intercompany payables and other liabilities or
obligations of the NTS Business to IPS, FDC, FDFS or any of their
respective Affiliates;
(c) any costs and expenses incurred by IPS, FDC, NTS, the NTS
Subsidiary or FDFS incident to the negotiation and preparation of this
Agreement and their respective performance and compliance with the
agreements and conditions contained herein;
(d) any liabilities or obligations in respect of any Excluded NTS
Assets;
(e) any liabilities in respect of the claims or proceedings
described in SCHEDULE 6.22;
(f) accrued liabilities of any kind required to be reflected on the
Closing Date NTS Special Report prepared in accordance with the NTS Agreed
Accounting Principles which were not reflected thereon as a dollar amount;
(g) any liabilities and obligations related to, associated with or
arising out of (i) the occupancy, operation, use or control of any of the
NTS Property on or prior to the date hereof or (ii) the operation of the
NTS Business on or prior to the date hereof, in each case incurred or
imposed by any Environmental Law (including, without limitation, any
Release of any Contaminant on, at or from (1) the NTS Property, including,
without
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limitation, all facilities, improvements, structures and equipment thereon,
surface water thereon or adjacent thereto and soil or groundwater
thereunder, or any conditions whatsoever on, under or in the vicinity of
such real property or (2) any real property or facility owned by a third
Person to which Contaminants generated by the NTS Business were sent prior
to the date hereof);
(h) any product liability or claims for injury to person or property,
regardless of when made or asserted, relating to products manufactured,
distributed or sold by the NTS Business or services performed by the NTS
Business on or prior to the date hereof; and
(i) any liabilities relating to Escheat Laws or the failure to file
reports, or to pay or turn over amounts due, thereunder which pertain to
any NTS Business transaction initiated prior to the Closing Date.
In order that the NTS Subsidiary shall not be responsible in any respect for any
liabilities or obligations that would constitute Excluded NTS Liabilities in the
case of NTS, NTS shall assume and agree to pay, perform and discharge such
liabilities and obligations of the NTS Subsidiary (the "NTS SUBSIDIARY EXCLUDED
LIABILITIES") and all NTS Subsidiary Excluded Liabilities shall be deemed to
constitute Excluded NTS Liabilities for purposes of this Agreement.
ARTICLE III
CASH ADJUSTMENT
3.1. DETERMINATION OF TRANSFERRED CASH. (a) As promptly as
practicable (but not later than 60 business days) after the date hereof, IPS
shall prepare and deliver to Comdata a detailed statement (with appropriate work
papers attached) setting forth the amount of Transferred Cash as of 11:59 p.m.
central time on the date hereof (the "PRELIMINARY TRANSFERRED CASH STATEMENT").
(b) Promptly following receipt of the Preliminary Transferred Cash
Statement, Comdata may review the same and, within 60 days after the date of
such receipt, may deliver to IPS a certificate (signed by its chief financial
officer or its chief accounting officer) setting forth its objections, if any,
to the Preliminary Transferred Cash Statement, together with a summary of the
reasons therefor and calculations which, in its view, are necessary to eliminate
any such objections. In the event Comdata does not so object within such 60-day
period, the Preliminary Transferred Cash Statement shall be final and binding as
the "TRANSFERRED CASH STATEMENT" for purposes of this Agreement, but shall not
limit the representations, warranties, covenants and agreements of the parties
set forth elsewhere in this Agreement.
(c) In the event Comdata so objects within such 60-day period, IPS
and Comdata shall use their reasonable efforts to resolve by written agreement
(the "AGREED ADJUSTMENTS") any differences as to the Preliminary Transferred
Cash Statement and, in the event Comdata and IPS
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so resolve any such differences, the Preliminary Transferred Cash Statement as
adjusted by the Agreed Adjustments shall be final and binding as the Transferred
Cash Statement for purposes of this Agreement, but shall not limit the
representations, warranties, covenants and agreements of the parties set forth
elsewhere in this Agreement.
(d) In the event any objections raised by Comdata are not resolved by
Agreed Adjustments within the 60-day period next following such 60-day period,
then IPS and Comdata shall submit the objections that are then unresolved to the
Selected Accounting Firm and the Selected Accounting Firm shall be directed by
Comdata and IPS to resolve the unresolved objections as promptly as reasonably
practicable and to deliver written notice to each of Comdata and IPS setting
forth its resolution of the disputed matters. The Preliminary Transferred Cash
Statement, after giving effect to any Agreed Adjustments and to the resolution
of disputed matters by the Selected Accounting Firm, shall be final and binding
as the Transferred Cash Statement, for purposes of this Agreement but shall not
limit the representations, warranties, covenants and agreements of the parties
set forth elsewhere in this Agreement.
(e) The parties hereto shall make available to Comdata, IPS and, if
applicable, the Selected Accounting Firm, such books, records and other
information (including work papers) as any of the foregoing may reasonably
request to prepare or review the Preliminary Transferred Cash Statement or any
matters submitted to the Selected Accounting Firm. The fees and expenses of the
Selected Accounting Firm hereunder shall be paid 50% by Comdata and 50% by IPS.
3.2. TRANSFERRED CASH ADJUSTMENT. As promptly as practicable (but
not later than five business days) after the determination of the Transferred
Cash Statement pursuant to SECTION 3.1 that is final and binding as set forth
therein:
(i) if the aggregate amount of cash set forth in the Transferred
Cash Statement exceeds the Estimated Amount of Transferred Cash, NTS
shall pay to Comdata, by wire transfer of immediately available funds
to such bank account of Comdata as Comdata shall designate in writing
to NTS, an amount equal to such excess, plus interest on such excess
from the date hereof to the date of payment thereof at the Agreed
Rate; or
(ii) if the Estimated Amount of Transferred Cash exceeds the
aggregate amount of cash set forth in the Transferred Cash Statement,
Comdata shall pay to NTS, by wire transfer of immediately available
funds to such bank account of NTS as NTS shall designate in writing to
Comdata, an amount equal to such excess, plus interest on such excess
from the date hereof to the date of payment thereof at the Agreed
Rate.
3.3. DETERMINATION OF GAMING RECEIVABLES ADJUSTMENT. (a) As promptly
as practicable (but not later than sixty days) after the date hereof, IPS shall:
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(i) prepare, in accordance with the Gaming Agreed Accounting
Principles, a written report (the "Preliminary Closing Date Gaming Special
Report") which shall fairly present the amounts of the gaming receivables
and gaming liabilities, in each case, as of 11:59 p.m. central time on the
date hereof and of the type reflected as such in the Preliminary Closing
Date Gaming Special Report (the amounts of the gaming receivables and the
gaming liabilities as so reflected being referred to respectively herein as
the "PRELIMINARY GAMING RECEIVABLES" and the "PRELIMINARY GAMING
LIABILITIES" and collectively as the "PRELIMINARY GAMING AMOUNTS".)
(ii) calculate the Gaming Receivables Adjustment in accordance with
the provisions of this Agreement, based on the Preliminary Closing Date
Gaming Special Report and assuming for such purposes that the Preliminary
Gaming Amounts constitute the Gaming Amounts (the "PRELIMINARY GAMING
RECEIVABLES ADJUSTMENT"); and
(iii) deliver to Comdata the Preliminary Closing Date Gaming Special
Report and a certificate setting forth the Preliminary Gaming Receivables,
the Preliminary Gaming Liabilities and the Preliminary Gaming Receivables
Adjustment, together with the supporting calculations in reasonable detail
(collectively, the "PRELIMINARY GAMING ACCOUNTING REPORT").
(b) Promptly following such delivery of the Preliminary Gaming
Accounting Report, Comdata shall have the opportunity to review the Preliminary
Closing Date Gaming Special Report and the Preliminary Gaming Receivables
Adjustment. Not later than 60 days after the date of such receipt, Comdata may
deliver to IPS a certificate (signed by an officer of Comdata) setting forth its
objections to the Preliminary Closing Date Gaming Special Report, the
Preliminary Gaming Receivables, the Preliminary Gaming Liabilities or the
Preliminary Gaming Receivables Adjustment as set forth in the Preliminary Gaming
Accounting Report, together with a summary of the reasons therefor and
calculations which, in its view, are necessary to eliminate such objections. If
Comdata does not so object within such 60-day period, the Preliminary Closing
Date Gaming Special Report, the Preliminary Gaming Receivables, the Preliminary
Gaming Liabilities and the Preliminary Gaming Receivables Adjustment set forth
in the Preliminary Gaming Accounting Report shall be final and binding as the
Closing Date Gaming Special Report, the Gaming Receivables, the Gaming
Liabilities and the Gaming Receivables Adjustment, respectively, for purposes of
this Agreement but shall not limit the representations, warranties, covenants
and agreements of the parties set forth elsewhere in this Agreement.
(c) If Comdata so objects within such 60-day period, IPS and Comdata
shall use their reasonable efforts to resolve by written agreement (the "AGREED
GAMING ADJUSTMENTS") any differences as to the Preliminary Closing Date Gaming
Special Report, the Preliminary Gaming Receivables, the Preliminary Gaming
Liabilities and the Preliminary Gaming Receivables Adjustment and, if IPS and
Comdata so resolve any such differences, the Preliminary Closing Date Gaming
Special Report, the Preliminary Gaming Receivables, the Preliminary Gaming
Liabilities and the Preliminary Gaming Receivables Adjustment set forth in the
Preliminary Gaming Accounting Report as adjusted by the Agreed Gaming
Adjustments shall be final and binding as the Closing Date Gaming Special
Report, the Gaming Receivables, the Gaming
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Liabilities, and the Gaming Receivables Adjustment, respectively, for purposes
of this Agreement but shall not limit the representations, warranties, covenants
and agreements of the parties set forth elsewhere in this Agreement.
(d) If any objections raised by Comdata are not resolved by Agreed
Gaming Adjustments within the 60-day period next following such 60-day period,
then IPS and Comdata shall submit the objections that are then unresolved (the
"UNRESOLVED GAMING OBJECTIONS") to the Selected Accounting Firm and such
Selected Accounting Firm shall be directed by IPS and Comdata to resolve the
Unresolved Gaming Objections (based solely on the presentations by IPS and
Comdata as to whether any disputed matter had been determined in a manner
consistent with the Agreed Gaming Accounting Principles) as promptly as
reasonably practicable and to deliver written notice to each of IPS and Comdata
setting forth its resolution of the disputed matters. The Preliminary Closing
Date Gaming Special Report, the Preliminary Gaming Receivables, the Preliminary
Gaming Liabilities and the Preliminary Gaming Receivables Adjustment, after
giving effect to any Agreed Gaming Adjustments and to the resolution of disputed
matters by the Selected Accounting Firm, shall be final and binding as the
Closing Date Gaming Special Report, the Gaming Receivables, the Gaming
Liabilities, and the Gaming Receivables Adjustment, respectively, for purposes
of this Agreement but shall not limit the representations, warranties, covenants
and agreements of the parties set forth elsewhere in this Agreement. Any
determinations by the Selected Accounting Firm shall be final and binding on the
parties hereto. Comdata and IPS shall each be responsible for all fees of their
respective accountants and all expenses incurred by such respective firms in
connection with any settlement proceeding. The fees and expenses of the
Selected Accounting Firm incurred in connection with such settlement proceeding
shall be paid fifty (50%) percent by IPS and fifty (50%) percent by Comdata.
(e) Upon final determination pursuant to this SECTION 3.3 of the
Closing Date Gaming Special Report, the Gaming Amounts and the Gaming
Receivables Adjustment, IPS shall deliver to Comdata a report setting forth the
Closing Date Gaming Special Report, the Gaming Amounts, and the Gaming
Receivables Adjustment (the "GAMING ACCOUNTING REPORT").
(f) IPS and Comdata shall make available to one another and the
Selected Accounting Firm, as the case may be, such books, records and other
information (including work papers) as such Person may reasonably request during
the review of the Preliminary Gaming Accounting Report or the preparation of the
Gaming Accounting Report.
3.4. DETERMINATION OF NTS RECEIVABLES ADJUSTMENT. (a) As promptly as
practicable (but not later than sixty days) after the date hereof, Comdata
shall:
(i) prepare, in accordance with the NTS Agreed Accounting Principles,
a written report (the "Preliminary Closing Date NTS Special Report") which
shall fairly present the amounts of the NTS receivables and NTS
liabilities, in each case, as of 11:59 p.m. central time on the date hereof
and of the type reflected as such in the Preliminary Closing Date NTS
Special Report (the amounts of the NTS receivables, and the NTS liabilities
so reflected being referred to respectively herein as the "PRELIMINARY NTS
RECEIVABLES" and the "PRELIMINARY NTS LIABILITIES" and collectively as the
"PRELIMINARY NTS AMOUNTS".)
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(ii) calculate the NTS Receivables Adjustment in accordance with the
provisions of this Agreement, based on the Preliminary Closing Date NTS
Special Report and assuming for such purposes that the Preliminary NTS
Amounts constitute the NTS Amounts (the "PRELIMINARY NTS RECEIVABLES
ADJUSTMENT"); and
(iii) deliver to IPS the Preliminary Closing Date NTS Special Report
and a certificate setting forth the Preliminary NTS Receivables, the
Preliminary NTS Liabilities and the Preliminary NTS Receivables Adjustment,
together with the supporting calculations in reasonable detail
(collectively, the "PRELIMINARY NTS ACCOUNTING REPORT").
(b) Promptly following such delivery of the Preliminary NTS
Accounting Report, IPS shall have the opportunity to review the Preliminary
Closing Date NTS Special Report and the Preliminary NTS Receivables Adjustment.
Not later than 60 days after the date of such receipt, IPS may deliver to
Comdata a certificate (signed by an officer of IPS) setting forth its objections
to the Preliminary Closing Date NTS Special Report, the Preliminary NTS
Receivables, the Preliminary NTS Liabilities or the Preliminary NTS Receivables
Adjustment as set forth in the Preliminary NTS Accounting Report, together with
a summary of the reasons therefor and calculations which, in its view, are
necessary to eliminate such objections. If IPS does not so object within such
60-day period, the Preliminary Closing Date NTS Special Report, the Preliminary
NTS Receivables, the Preliminary NTS Liabilities and the Preliminary NTS
Receivables Adjustment set forth in the Preliminary NTS Accounting Report shall
be final and binding as the Closing Date NTS Special Report, the NTS
Receivables, the NTS Liabilities and the NTS Receivables Adjustment,
respectively, for purposes of this Agreement but shall not limit the
representations, warranties, covenants and agreements of the parties set forth
elsewhere in this Agreement.
(c) If IPS so objects within such 60-day period, Comdata and IPS
shall use their reasonable efforts to resolve by written agreement (the "AGREED
NTS ADJUSTMENTS") any differences as to the Preliminary Closing Date NTS Special
Report, the Preliminary NTS Receivables, the Preliminary NTS Liabilities and the
Preliminary NTS Receivables Adjustment and, if Comdata and IPS so resolve any
such differences, the Preliminary Closing Date NTS Special Report, the
Preliminary NTS Receivables, the Preliminary NTS Liabilities and the Preliminary
NTS Receivables Adjustment set forth in the Preliminary NTS Accounting Report as
adjusted by the Agreed NTS Adjustments shall be final and binding as the Closing
Date NTS Special Report, the NTS Receivables, the NTS Liabilities, and the NTS
Receivables Adjustment, respectively, for purposes of this Agreement but shall
not limit the representations, warranties, covenants and agreements of the
parties set forth elsewhere in this Agreement.
(d) If any objections raised by IPS are not resolved by Agreed NTS
Adjustments within the 60-day period next following such 60-day period, then
Comdata and IPS shall submit the objections that are then unresolved (the
"UNRESOLVED NTS OBJECTIONS") to the Selected Accounting Firm and such Selected
Accounting Firm shall be directed by Comdata and IPS to resolve the Unresolved
NTS Objections (based solely on the presentations by Comdata and IPS as to
whether any disputed matter had been determined in a manner consistent with the
Agreed NTS Accounting Principles) as promptly as reasonably practicable and to
deliver written notice to each
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of Comdata and IPS setting forth its resolution of the disputed matters. The
Preliminary Closing Date NTS Special Report, the Preliminary NTS Receivables,
the Preliminary NTS Liabilities and the Preliminary NTS Receivables Adjustment,
after giving effect to any Agreed NTS Adjustments and to the resolution of
disputed matters by the Selected Accounting Firm, shall be final and binding as
the Closing Date NTS Special Report, the NTS Receivables, the NTS Liabilities,
and the NTS Receivables Adjustment, respectively, for purposes of this Agreement
but shall not limit the representations, warranties, covenants and agreements of
the parties set forth elsewhere in this Agreement. Any determinations by the
Selected Accounting Firm shall be final and binding on the parties hereto. IPS
and Comdata shall each be responsible for all fees of their respective
accountants and all expenses incurred by such respective firms in connection
with any settlement proceeding. The fees and expenses of the Selected
Accounting Firm incurred in connection with such settlement proceeding shall be
paid fifty (50%) percent by IPS and fifty (50%) percent by Comdata.
(e) Upon final determination pursuant to this SECTION 4.4 of the
Closing Date NTS Special Report, the NTS Amounts and the NTS Receivables
Adjustment, Comdata shall deliver to IPS a report setting forth the Closing Date
NTS Special Report, the NTS Amounts and the NTS Receivables Adjustment (the "NTS
ACCOUNTING REPORT").
(f) IPS and Comdata shall make available to one another and the
Selected Accounting Firm, as the case may be, such books, records and other
information (including work papers) as such Person may reasonably request during
the review of the Preliminary NTS Accounting Report or the preparation of the
NTS Accounting Report.
3.5. NET RECEIVABLES ADJUSTMENT. Promptly (but not later than five
business days) after the later of (i) the determination of the Gaming
Receivables Adjustment pursuant to SECTION 3.3 that is final and binding as set
forth therein or (ii) the determination of the NTS Receivables Adjustment
pursuant to SECTION 3.4 that is final and binding as set forth therein:
(a) if the Gaming Receivables Adjustment exceeds the NTS Receivables
Adjustment, NTS shall pay to Comdata, by wire transfer of immediately available
funds to such bank account of Comdata as Comdata shall designate in writing to
NTS, an amount equal to such excess, plus interest on such excess from the date
hereof to the date of payment thereof at the Agreed Rate; or
(b) if the NTS Receivables Adjustment exceeds the Gaming Receivables
Adjustment, Comdata shall pay to NTS, by wire transfer of immediately available
funds to such bank account of NTS as NTS shall designate in writing to Comdata
an amount equal to such excess, plus interest on such excess from the date
hereof to the date or payment thereof at the Agreed Rate.
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ARTICLE IV
CLOSING
4.1. CLOSING. The Closing shall be consummated on January 16, 1998
at the offices of Sidley & Austin, One First National Plaza, Chicago, Illinois.
At the Closing, the parties shall effect the deliveries contemplated by SECTIONS
4.3 and 4.4. As soon as practicable thereafter, NTS and Comdata shall file with
the Department of Assessments and Taxation of the State of Maryland Articles of
Transfer in the form of EXHIBIT H. For all purposes of this Agreement, the
Closing shall be deemed effective as of 11:59 p.m. central time on the date
hereof (it being understood that the transfer of the NT Canada Shares from NTS
to Permicom shall be deemed to have occurred immediately prior to the transfer
of the Purchased NTS Assets to Comdata).
4.2. DELIVERY OF PROMISSORY NOTES. Simultaneously with the execution
hereof, Permicom shall deliver to NTS the Permicom Note, following which NTS
shall deliver to Comdata the NTS Note.
4.3. FDC's, IPS', NTS' AND FDFS' ADDITIONAL DELIVERIES.
Simultaneously with the execution hereof, FDC, IPS, NTS and FDFS shall deliver
to Comdata, Ceridian and Permicom all the following:
(a) A copy of the Certificate of Incorporation of FDC certified as of
a recent date by the Secretary of State of the State of Delaware;
(b) Certificate of Good Standing of FDC issued as of a recent date by
the Secretary of State of the State of Delaware;
(c) Certificate of the secretary or an assistant secretary of FDC,
dated the date hereof, in form and substance reasonably satisfactory to
Comdata, as to (i) no amendments to the Certificate of Incorporation of FDC
since a specified date; (ii) the by-laws of FDC; (iii) the resolutions of
the Board of Directors of FDC authorizing the execution and performance of
this Agreement and the transactions contemplated hereby; and (iv)
incumbency and signatures of the officers of FDC executing this Agreement
and any IPS Ancillary Agreement;
(d) A copy of the Certificate of Incorporation of IPS certified as of
a recent date by the Secretary of State of the State of Delaware;
(e) Certificate of Good Standing of IPS issued as of a recent date by
the Secretary of State of the State of Delaware;
(f) Certificate of the secretary or an assistant secretary of IPS,
dated the date hereof, in form and substance reasonably satisfactory to
Comdata, as to (i) no amendments to the Certificate of Incorporation of IPS
since a specified date; (ii) the by-laws of IPS; (iii) the resolutions of
the Board of Directors of IPS authorizing the execution and
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performance of this Agreement and the transactions contemplated hereby; and
(iv) incumbency and signatures of the officers of IPS executing this
Agreement and any IPS Ancillary Agreement;
(g) A copy of the Certificate of Incorporation of NTS certified as of
a recent date by the Secretary of State of the State of Maryland;
(h) Certificate of good standing of NTS issued as of a recent date by
the Secretary of State of the State of Maryland;
(i) Certificate of the secretary or an assistant secretary of NTS,
dated the date hereof, in form and substance reasonably satisfactory to
Comdata, as to (i) no amendments to the Certificate of Incorporation of NTS
since a specified date; (ii) the by-laws of NTS; (iii) the resolutions of
the Board of Directors of NTS and sole stockholder authorizing the
execution and performance of this Agreement and the transactions
contemplated hereby; and (iv) incumbency and signatures of the officers of
NTS executing this Agreement and any IPS Ancillary Agreement;
(j) Certificate of Good Standing of NTS Subsidiary issued as of a
recent date by Ministry of Consumer and Commercial Relations;
(k) Certificate of the secretary or an assistant secretary of NTS
Subsidiary dated the date hereof, in form and substance reasonably
satisfactory to Comdata, as to (i) no amendments to the Charter of NTS
Subsidiary since a specified date and (ii) the by-laws of the NTS
Subsidiary;
(l) Certificate of the secretary or assistant secretary of FDFS dated
the date hereof, in form and substance reasonably satisfactory to Comdata
as to (i) no amendments to the certificate of formation of FDFS since a
specified date;
(m) The FDFS Instrument of Assumption pursuant to which FDFS shall
assume and agree to discharge the Assumed Gaming Liabilities in accordance
with their respective terms and subject to the respective conditions
thereof duly executed by FDFS;
(n) The NTS Instrument of Assignment pursuant to which NTS shall
transfer and assign (i) the Purchased NTS Assets (except the NT Canada
Shares) to Comdata and (ii) the NT Canada Shares to Permicom, duly executed
by NTS;
(o) a stock certificate representing the NT Canada Shares,
accompanied by a duly executed and witnessed stock power, transferring the
NT Canada Shares to Permicom;
(p) Certificates of title or origin (or like documents) with respect
to any vehicles or other equipment included in the Purchased NTS Assets for
which a certificate of title or origin is required in order to transfer
title;
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(q) All consents, waivers or approvals obtained by FDC, IPS, FDFS,
NTS or the NTS Subsidiary with respect to the Purchased NTS Assets or the
consummation of the transactions contemplated by this Agreement;
(r) The Gaming Business Transition Services Agreement duly executed
by IPS, FDT and FDFS;
(s) The NTS Business Transition Services Agreement duly executed by
NTS, IPS and FDT;
(t) The Services and Processing Agreement duly executed by IPS and
FDT;
(u) All consents, waivers or approvals obtained by FDC, IPS, NTS,
FDFS or the NTS Subsidiary with respect to the consummation of the
transactions contemplated by this Agreement;
(v) A signed resignation by each of the directors and officers of the
NTS Subsidiary;
(w) All minute books and stock ledgers of the NTS Subsidiary;
(x) An assignment, in recordable form, with respect to each of the
leases of real estate described in SCHEDULE 6.11, duly executed by NTS and
in form and substance reasonably satisfactory to Comdata;
(y) Such other bills of sale, assignments and other instruments of
transfer or conveyance as Comdata may reasonably request or as may be
otherwise necessary to evidence and effect the sale, transfer, conveyance
and delivery of the Purchased NTS Assets (except the NT Canada Shares) to
Comdata and the NT Canada Shares to Permicom.
(z) A receipt evidencing receipt of the Cashcall Inc. Shares duly
executed by FDFS;
(aa) The NTS Canadian Instrument of Assignment pursuant to which the
NTS Subsidiary shall transfer and assign the NTS Subsidiary Excluded Assets
to NTS duly executed by NTS; and
(ab) The NTS Canadian Instrument of Assumption pursuant to which NTS
shall assume and agree to discharge the NTS Subsidiary Excluded Liabilities
of the NTS Subsidiary duly executed by NTS.
In addition to the above deliveries, FDC, IPS, NTS and the NTS Subsidiary shall
take all steps and actions including the delivery of such other bills of sale,
deeds, endorsements, assignments and other good and sufficient instruments of
conveyance and transfer, as Ceridian, Comdata or
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Permicom may reasonably request or as may otherwise be necessary to put Comdata
in control and possession of the Purchased NTS Assets (except the NT Canada
Shares) and Permicom in control and possession of the NT Canada Shares.
4.4. CERIDIAN'S, COMDATA'S AND PERMICOM'S ADDITIONAL DELIVERIES.
Simultaneously with the execution hereof, Ceridian, Comdata or Permicom shall
deliver to FDC, IPS, NTS and FDFS all the following:
(a) A copy of Ceridian's Certificate of Incorporation certified as of
a recent date by the Secretary of State of the State of Delaware;
(b) Certificate of Good Standing of Ceridian issued as of a recent
date by the Secretary of State of the State of Delaware;
(c) Certificate of the secretary or an assistant secretary of
Ceridian, dated the date hereof, in form and substance reasonably
satisfactory to FDC, as to (i) no amendments to the Certificate of
Incorporation of Ceridian since a specified date; (ii) the by-laws of
Ceridian; (iii) the resolutions of the Board of Directors of Ceridian
authorizing the execution and performance of this Agreement and the
transactions contemplated hereby; and (iv) incumbency and signatures of the
officers of Ceridian executing this Agreement and any Comdata Ancillary
Agreement;
(d) A copy of the Certificate of Incorporation of Comdata certified
as of a recent date by the Secretary of State of the State of Maryland;
(e) Certificate of good standing of Comdata issued as of a recent
date by the Secretary of State of the State of Maryland;
(f) Certificate of the secretary or an assistant secretary of
Comdata, dated the date hereof, in form and substance reasonably
satisfactory to FDC, as to (i) no amendments to the Certificate of
Incorporation of Comdata since a specified date; (ii) the by-laws of
Comdata; (iii) the resolutions of the Board of Directors of Comdata
authorizing the execution and performance of this Agreement and the
transactions contemplated hereby; and (iv) incumbency and signatures of the
officers of Comdata executing this Agreement and any Comdata Ancillary
Agreement;
(g) Certificate of Good Standing of Gaming Subsidiary issued as of a
recent date by the Ministry of Consumer and Commercial Relations.
(h) Certificate of the secretary or an assistant secretary of Gaming
Subsidiary dated the date hereof, in form and substance reasonably
satisfactory to FDC, as to (i) no amendments to the Charter of Gaming
Subsidiary since a specified date and (ii) the by-laws of Gaming
Subsidiary;
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(i) Certificate of the secretary or an assistant secretary of
Permicom dated the date hereof, in form and substance reasonably
satisfactory to FDC, as to (i) no amendments to the Charter of Permicom
since a specified date and (ii) the by-laws of Permicom;
(j) The Comdata Instrument of Assumption pursuant to which Comdata
shall assume and agree to discharge the Assumed NTS Liabilities in
accordance with their respective terms and subject to the respective
conditions thereof duly executed by Comdata;
(k) The Comdata Instrument of Assignment pursuant to which Comdata
shall transfer and assign the Purchased Gaming Assets to FDFS duly executed
by Comdata;
(l) Certificates of title or origin (or like documents) with respect
to any vehicles or other equipment included in the Purchased Gaming Assets
for which a certificate of title or origin is required in order to transfer
title;
(m) All consents, waivers or approvals obtained by Ceridian, Comdata
or the Gaming Subsidiary with respect to the Purchased Gaming Assets or the
consummation of the transactions contemplated by this Agreement;
(n) A stock certificate representing the Cashcall Inc. Shares,
accompanied by a duly executed and witnessed stock power transferring the
Cashcall Inc. Shares to FDFS;
(o) The Gaming Business Transition Services Agreement duly executed
by Comdata;
(p) The NTS Business Transition Services Agreement, duly executed by
Comdata;
(q) The Services and Processing Agreement duly executed by Comdata;
(r) All consents, waivers or approvals obtained by Comdata or the
Gaming Subsidiary with respect to the consummation of the transactions
contemplated by this Agreement;
(s) A signed resignation by each of the directors and officers of the
Gaming Subsidiary;
(t) All minute books and stock ledgers of the Gaming Subsidiary;
(u) An assignment, in recordable form, with respect to each of the
leases of real estate described in SCHEDULE 6.11, duly executed by Ceridian
or Comdata and in form and substance reasonably satisfactory to FDFS;
(v) Such other bills of sale, assignments and other instruments of
transfer or conveyance as FDFS may reasonably request or as may be
otherwise necessary to
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evidence and effect the sale, assignment, transfer, conveyance and delivery
of the Purchased Gaming Assets to FDFS;
(w) A receipt evidencing receipt of the NT Canada Shares, duly
executed by Permicom;
(x) A receipt evidencing receipt of the Initial Amount duly executed
by Comdata.
(y) The Comdata Canadian Instrument of Assignment pursuant to which
the Gaming Subsidiary shall transfer and assign the Gaming Subsidiary
Excluded Assets to Comdata; and
(z) The Comdata Canadian Instrument of Assumption pursuant to which
Comdata shall assume and agree to discharge the Gaming Subsidiary Excluded
Liabilities of the Gaming Subsidiary.
In addition to the above deliveries, Ceridian, Comdata and the Gaming Subsidiary
shall take all steps and actions, including the delivery of such other bills of
sale, deeds, endorsements, assignments, and other good and sufficient
instruments of conveyance and transfer, as IPS, FDC, NTS or FDFS may reasonably
request or as may otherwise be necessary to put FDFS in actual possession or
control of the Purchased Gaming Assets.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CERIDIAN AND COMDATA
As an inducement to FDC, IPS, NTS and FDFS to enter into this
Agreement and to consummate the transactions contemplated hereby, Ceridian,
Comdata and Permicom represent and warrant to FDC, IPS, NTS and FDFS and agree
as follows:
5.1. ORGANIZATION. (a) Ceridian is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Ceridian is duly qualified to transact business as a foreign corporation and is
in good standing in all jurisdictions except where the absence of such
qualification would not have a Material Adverse Effect. No other jurisdiction
has demanded, requested or otherwise indicated that Ceridian is required so to
qualify on account of the ownership or leasing of the Purchased Gaming Assets or
the conduct of the Gaming Business. Ceridian has full power and authority to
own or lease and to operate and use the Purchased Gaming Assets and to carry on
the Gaming Business as now conducted.
True and complete copies of the certificate of incorporation and all
amendments thereto and of the By-laws, as amended to date, of Ceridian have been
delivered to IPS.
(b) Comdata is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland. Comdata is duly
qualified to transact business as a
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foreign corporation and is in good standing in all jurisdictions except where
the absence of such qualification would not have a Material Adverse Effect. No
other jurisdiction has demanded, requested or otherwise indicated that Comdata
is required so to qualify on account of the ownership or leasing of the
Purchased Gaming Assets or the conduct of the Gaming Business. Except as set
forth on SCHEDULE 5.22, Comdata has full power and authority to own or lease and
to operate and use the Purchased Gaming Assets and to carry on the Gaming
Business as now conducted.
True and complete copies of the certificate of incorporation and all
amendments thereto and of the By-laws, as amended to date, of Comdata have been
delivered to IPS.
(c) The Gaming Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to transact business as a foreign
corporation and is in good standing in all jurisdictions except where the
absence of such qualification would not have a Material Adverse Effect and no
other jurisdiction has demanded, requested or otherwise indicated that the
Gaming Subsidiary is required so to qualify. The Gaming Subsidiary has full
power and authority to own or lease and to operate and use its properties and
assets and to carry on its business as now conducted.
True and complete copies of the certificate or articles of
incorporation and all amendments thereto, the By-laws, as amended to date, and
the stock ledger of the Gaming Subsidiary have been delivered to IPS.
(d) Permicom is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction.
5.2. SUBSIDIARIES AND INVESTMENTS. (a) Except for the Gaming
Subsidiary and as set forth in SCHEDULE 5.2(A), neither Ceridian or Comdata
directly or indirectly, (i) owns, of record or beneficially, any outstanding
voting securities or other equity interests in any corporation, partnership,
joint venture or other entity which is involved in or relates to the Gaming
Business or (ii) controls any corporation, partnership, limited liability
company, joint venture or other entity which is involved in or relates to the
Gaming Business.
(b) SCHEDULE 5.2(B) sets forth with respect to the Gaming Subsidiary
on the date hereof the number of authorized, issued and outstanding shares of
capital stock of each class, the number of issued shares of capital stock held
as treasury shares and the number of shares of capital stock unissued and
reserved for any purpose. Except as set forth in SCHEDULE 5.2(B) and except for
this Agreement, there are no agreements, arrangements, options, warrants, calls,
rights or commitments of any character relating to the issuance, sale, purchase
or redemption of any shares of capital stock of the Gaming Subsidiary. All of
the outstanding shares of capital stock of the Gaming Subsidiary are validly
issued, fully paid and nonassessable and, except as set forth in
SCHEDULE 5.2(B), are owned by Comdata of record and beneficially free from all
Encumbrances of any kind.
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5.3. AUTHORITY. (a) Ceridian has full power and authority to
execute, deliver and perform this Agreement. The execution, delivery and
performance of this Agreement by Ceridian has been duly authorized and approved
by Ceridian's board of directors and does not require any further authorization
or consent of Ceridian or its stockholders. This Agreement has been duly
authorized, executed and delivered by Ceridian and is the legal, valid and
binding obligation of Ceridian enforceable in accordance with its terms, and
upon execution and delivery by Ceridian will be a legal, valid and binding
obligation of Ceridian enforceable in accordance with its terms,
and each of the Comdata Ancillary Agreements has been duly authorized by
Ceridian and upon execution and delivery by Ceridian will be a legal, valid and
binding obligation of Ceridian enforceable in accordance with its terms.
(b) Comdata has full power and authority to execute, deliver and
perform this Agreement and all of the Comdata Ancillary Agreements. The
execution, delivery and performance of this Agreement and the Comdata Ancillary
Agreements by Comdata have been duly authorized and approved by Comdata's board
of directors and sole stockholder and do not require any further authorization
or consent. This Agreement has been duly authorized, executed and delivered by
Comdata and is the legal, valid and binding obligation of Comdata enforceable in
accordance with its terms, and each of the Comdata Ancillary Agreements has been
duly authorized by Comdata and upon execution and delivery by Comdata will be a
legal, valid and binding obligation of Comdata enforceable in accordance with
its terms.
(c) Permicom has full power and authority to execute, deliver and
perform this Agreement. The execution, delivery and performance of this
Agreement by Permicom have been duly authorized and approved by Permicom's board
of directors and sole stockholder and do not require any further authorization
or consent of Permicom or its stockholder. This Agreement has been duly
authorized, executed and delivered by Permicom and is the legal, valid and
binding obligation of Permicom enforceable in accordance with its terms.
(d) Except as set forth in SCHEDULE 5.3, neither the execution and
delivery of this Agreement or any of the Comdata Ancillary Agreements or the
consummation of any of the transactions contemplated hereby or thereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof or
thereof will:
(i) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, (1) the charter or By-laws of Ceridian, Comdata, the Gaming
Subsidiary or Permicom; (2) any Gaming Agreement, (3) any other material
note, instrument, agreement, mortgage, lease, license, franchise, permit or
other authorization, right, restriction or obligation to which Ceridian,
Comdata, the Gaming Subsidiary or Permicom is a party or any of the
Purchased Gaming Assets is subject or by which Ceridian, Comdata, the
Gaming Subsidiary or Permicom is bound, (4) any Court Order to which
Ceridian, Comdata, the Gaming Subsidiary or Permicom is a party or any of
the Purchased Gaming Assets is subject or by which Ceridian, Comdata, the
Gaming Subsidiary or Permicom is bound, or (5) any Requirements of Laws
affecting
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Ceridian, Comdata, the Gaming Subsidiary, Permicom or the Purchased Gaming
Assets; or
(ii) require the approval, consent, authorization or act of, or the
making by Ceridian, Comdata, the Gaming Subsidiary, Permicom or the Gaming
Business of any declaration, filing or registration with, any Person.
(e) With respect to the transactions contemplated by this Agreement,
Comdata is not required, pursuant to the Maryland General Corporation Law, to
file Articles of Transfer with the Department of Assessments and Taxation of the
State of Maryland or otherwise take any action pursuant to Sections 3-105, 3-107
or 3-110 of the Maryland General Corporation Law.
5.4. FINANCIAL STATEMENTS. SCHEDULE 5.4 contains (i) the unaudited
balance sheet of the Gaming Business as of December 31, 1996 and the related
statements of income and cash flows for the year then ended and (ii) the
unaudited balance sheet of the Gaming Business as of September 30, 1997 and the
related statements of income and cash flows for the nine months then ended.
Except as set forth therein, such balance sheets and statements of income and
cash flow have been prepared in conformity with generally accepted accounting
principles consistently applied, and such balance sheets and related statements
of income and cash flow present fairly the financial position and results of
operations and cash flow of the Gaming Business as of their respective dates and
for the respective periods covered thereby.
5.5. OPERATIONS SINCE THE GAMING BALANCE SHEET DATE. (a) Except as
set forth in SCHEDULE 5.5(A) or SCHEDULE 5.22, and except as due to changes in
the general economic environment, since the Gaming Balance Sheet Date, there has
been:
(i) no material adverse change in the Purchased Gaming Assets, the
Gaming Business or the operations, liabilities, profits, or condition
(financial or otherwise) of the Gaming Business, and no fact or condition
exists or is contemplated or, to the knowledge of Comdata or the Gaming
Subsidiary, threatened which might reasonably be expected to cause such a
change in the future; and
(ii) no damage, destruction, loss or claim, whether or not covered by
insurance, or condemnation or other taking adversely affecting any of the
Purchased Gaming Assets or the Gaming Business.
(b) Except as set forth in SCHEDULE 5.5(B), since the Gaming Balance
Sheet Date, Comdata and the Gaming Subsidiary conducted the Gaming Business only
in the ordinary course and in conformity with past practice. Without limiting
the generality of the foregoing, since the Gaming Balance Sheet Date, except as
set forth in such Schedule, Comdata has not, in respect of the Gaming Business,
and the Gaming Subsidiary has not:
(i) sold, leased (as lessor), transferred or otherwise disposed of
(including any transfers from the Gaming Business to Ceridian, Comdata or
any of their respective Affiliates), or mortgaged or pledged, or imposed or
suffered to be imposed any
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Encumbrance (other than a Permitted Encumbrance) on, any of the assets
reflected on the Gaming Balance Sheet or any assets acquired by the Gaming
Business after the Gaming Balance Sheet Date, except for inventory and
minor amounts of personal property sold or otherwise disposed of for fair
value in the ordinary course of the Gaming Business;
(ii) canceled any debts owed to or claims held by the Gaming Business
(including the settlement of any claims or litigation) or waived any other
rights held by the Gaming Business other than in the ordinary course of the
Gaming Business consistent with past practice;
(iii) paid any claims against the Gaming Business (including the
settlement of any claims and litigation against the Gaming Business or the
payment or settlement of any obligations or liabilities of the Gaming
Business) other than in the ordinary course of business consistent with
past practice;
(iv) created, incurred or assumed, or agreed to create, incur or
assume, any indebtedness for borrowed money in respect of the Gaming
Business (other than money borrowed or advances from Ceridian, Comdata or
any of their respective Affiliates in the ordinary course of the Gaming
Business consistent with past practice) or entered into, as lessee, any
capitalized lease obligations (as defined in Statement of Financial
Accounting Standards No. 13);
(v) accelerated or delayed collection of notes or accounts receivable
generated by the Gaming Business in advance of or beyond their regular due
dates or the dates when the same would have been collected in the ordinary
course of the Gaming Business consistent with past practice;
(vi) delayed or accelerated payment of any account payable or other
liability of the Gaming Business beyond or in advance of its due date or
the date when such liability would have been paid in the ordinary course of
the Gaming Business consistent with past practice;
(vii) acquired any real property or undertaken or committed to
undertake capital expenditures exceeding $10,000 in the aggregate;
(viii) made, or agreed to make, any payment of cash or distribution
of assets to Ceridian, Comdata or any of their respective Affiliates (other
than cash realized upon collection of receivables generated in the ordinary
course of the Gaming Business);
(ix) instituted any increase in any compensation payable to any
officer or employee of Comdata or the Gaming Subsidiary with respect to the
Gaming Business (other than changes made in accordance with normal
compensation practices and consistent with past compensation practices) or
in any profit-sharing, bonus, incentive, deferred compensation, insurance,
pension, retirement, medical, hospital, disability,
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welfare or other benefits made available to officers or employees of
Comdata or the Gaming Subsidiary with respect to the Gaming Business;
(x) made any change in (A) the accounting principles and practices
used by Comdata or the Gaming Subsidiary from those applied in the
preparation of the Gaming Balance Sheet and the related statements of
income and cash flow for the period then ended or (B) the charge-off
policies applicable to accounts receivable;
(xi) entered into or become committed to enter into any other material
transaction except in the ordinary course of business;
(xii) amended the Gaming Subsidiary's certificate of incorporation or
by-laws;
(xiii) issued, granted, sold or encumbered any shares of the Gaming
Subsidiary's capital stock or other securities; issued, granted, sold or
encumbered any security, option, warrant, put, call, subscription or other
right of any kind, fixed or contingent, that directly or indirectly calls
for the acquisition, issuance, sale, pledge or other disposition of any
shares of its capital stock or other securities or make any other changes
in the equity capital structure of the Gaming Subsidiary;
(xiv) made any material change in the operations of the Gaming
Business or any expenditure in respect of the Gaming Business which
shall exceed $50,000 in the aggregate;
(xv) made any capital expenditure with respect to the Gaming
Business or entered into any contract or commitment therefor which
shall exceed $50,000 in the aggregate;
(xvi) entered into any contract, agreement, undertaking or
commitment which would have been required to be set forth in
SCHEDULE 5.20 if in effect on the date hereof or entered into any
contract which requires the consent or approval of any third party to
consummate the transactions contemplated by this Agreement; or made
any material modification to any existing, material Gaming Agreement
or to any Gaming Business Governmental Permits, other than changes
made in good faith to cure document deficiencies; or
(xvii) entered into any contract for the purchase, lease (as
lessee) or other occupancy of real property to be used by the Gaming
Business or any option to extend a lease listed in SCHEDULE 5.11(A).
5.6. NO FINDER. Neither Comdata, any Affiliate thereof nor any
Person acting on behalf of the foregoing has paid or become obligated to pay any
fee or commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
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5.7. TAXES. Except as set forth in SCHEDULE 5.7, (i) Ceridian and
Comdata have, in respect of the Gaming Business and the Purchased Gaming Assets,
and the Gaming Subsidiary has filed all Tax Returns which are required to be
filed and Ceridian, Comdata and the Gaming Subsidiary have paid all Taxes which
have become due pursuant to such Tax Returns or pursuant to any assessment which
has become payable; (ii) all such Tax Returns are complete and accurate and
disclose all Taxes required to be paid in respect of the Gaming Business, the
Purchased Gaming Assets and the Gaming Subsidiary; (iii) all such Tax Returns
relating to United States federal income Taxes have been examined by the
relevant taxing authority or the period for assessment of the Taxes in respect
of which such Tax Returns were required to be filed has expired; (iv) there is
no action, suit, investigation, audit, claim or assessment pending or proposed
or threatened with respect to Taxes of the Gaming Business, the Purchased Gaming
Assets or the Gaming Subsidiary; (v) none of Ceridian, Comdata or the Gaming
Subsidiary has waived or been requested to waive any statute of limitations in
respect of Taxes associated with the Gaming Business, the Purchased Gaming
Assets or the Gaming Subsidiary which waiver is currently in effect; (vi) all
monies required to be withheld by Comdata or the Gaming Subsidiary (including
from employees of the Gaming Business for income Taxes and social security and
other payroll Taxes) have been collected or withheld, and either paid to the
respective taxing authorities, set aside in accounts for such purpose, or
accrued, reserved against and entered upon the books of the Gaming Business;
(vii) Comdata is properly treated as the owner, for all federal, state, local
and other income Tax purposes, of all property of which it is the lessor; (viii)
no change in Tax accounting method which would affect the Gaming Subsidiary
after the Closing has been made, agreed to, requested or required with respect
to its assets or operations; (ix) all tax sharing arrangements and tax
indemnity arrangements relating to the Gaming Subsidiary (other than this
Agreement) will terminate prior to the Closing and the Gaming Subsidiary will
have no liability thereunder on or after the Closing; (x) the Gaming Subsidiary
is not a party to any agreement relating to a foreign sales corporation within
the meaning of Section 922 of the Code; (xi) there are no pending claims for
refund of any Tax attributable to the Gaming Subsidiary (including refunds of
Taxes allocable to the Gaming Subsidiary with respect to any consolidated,
combined, unitary, fiscal unity or similar Tax Returns; (xii) each asset with
respect to which the Gaming Subsidiary claims depreciation, amortization or
similar expense for Tax purposes is owned for Tax purposes by the Gaming
Subsidiary under applicable Tax law; (xiii) the Gaming Subsidiary has always
been properly classified as a corporation for United States federal income Tax
purposes;(xiv) there are no outstanding rulings of, or requests for rulings
with, any Tax authority expressly addressed to the Gaming Subsidiary (or to an
Affiliate of any Gaming Subsidiary) that are, or if issued would be, binding
upon the Gaming Subsidiary for any taxable year or period beginning after the
Closing; (xv) the Gaming Subsidiary (or any Affiliates of the Gaming Subsidiary
with respect to the Gaming Subsidiary) has not, in a manner that would be
binding on the Gaming Subsidiary for a taxable year or period beginning after
the Closing executed, become subject to or entered into any closing agreement
pursuant to Section 7121 of the Code or any similar or predecessor provision
thereof under the Code or other applicable Tax Law; (xvi) the Gaming Subsidiary
has not made and is not subject to any election under Section 341(f) of the
Code; (xvii) no "industrial development bonds" within the meaning of Section 103
of the United States Internal Revenue Code of 1954, as amended and in effect
prior to the enactment of the United States Tax Reform Act of 1986, "private
activity bonds" within the meaning of Section 141 of the Code or other tax
exempt financing have been used to finance any of the assets of the
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Gaming Subsidiary, whether leased or owned; (xviii) the Gaming Subsidiary has
not made or is not bound by any election under Section 197 of the Code; (xix)
Ceridian has not and will not file for the year in which the Closing occurs a
consolidated federal income tax return with the Gaming Subsidiary; (xx) all
material elections with respect to Taxes affecting the Gaming Subsidiary as of
the date hereof are set forth in SCHEDULE 5.7; (xxi) no amount with respect to
any outlay or expense that is deductible for the purpose of computing income
under the Canadian Income Tax Act has been owing by the Gaming Subsidiary for
longer than two years to any person with whom the Gaming Subsidiary was not
dealing at arms' length at the time of the outlay or expense was incurred or for
more than 180 days after the end of the taxation year in which the outlay or
expense was incurred in the case of a superannuation or pension benefit, a
retiring allowance, salary, wages or other remuneration with respect to any
office or employment; and (xxii) there are no circumstances which exist and
would result, or which have existed and have resulted, in Section 80 of the
Canadian Income Tax Act applying to the Gaming Subsidiary.
5.8. AVAILABILITY OF ASSETS. (a) Except as set forth in SCHEDULE
5.8(A) and except for the Excluded Gaming Assets, the Purchased Gaming Assets
constitute all the assets, services and properties used in or necessary for the
Gaming Business as currently configured (including, but not limited to, all
books, records, computers and computer programs and data processing systems) and
are in good condition (subject to normal wear and tear) and serviceable
condition and are suitable for the uses for which intended.
(b) SCHEDULE 5.8(B) sets forth a description of all material services
provided by Comdata or any Affiliate of Comdata, other than those services to be
provided pursuant to the Gaming Business Transition Services Agreement, to the
Gaming Business utilizing either (i) assets not included in the Purchased Gaming
Assets or (ii) employees not listed in SCHEDULE 7.4(B) and the manner in which
the costs of providing such services have been allocated to the Gaming Business.
5.9. GOVERNMENTAL PERMITS. Except as set forth in SCHEDULE 5.9,
Comdata or the Gaming Subsidiary owns, holds or possesses all licenses,
franchises, permits, privileges, immunities, approvals and other authorizations
from a Governmental Body which are necessary to entitle it to own or lease,
operate and use the Purchased Gaming Assets and to carry on and conduct the
Gaming Business substantially as currently conducted (herein collectively called
"GAMING BUSINESS GOVERNMENTAL PERMITS"), except for such Governmental Permits as
to which the failure to so own, hold or possess would not have a material
adverse effect on the Purchased Gaming Assets, the Gaming Business or the
operations, liabilities, profits, prospects or condition (financial or
otherwise) of the Gaming Business. SCHEDULE 5.9 sets forth a list and brief
description of each Gaming Business Governmental Permit. Complete and correct
copies of all of the Gaming Business Governmental Permits have heretofore been
delivered by Comdata to IPS.
Except as set forth in SCHEDULE 5.9, (i) Comdata or the Gaming
Subsidiary has fulfilled and performed its obligations under each of the Gaming
Business Governmental Permits, and, to the knowledge of Comdata or the Gaming
Subsidiary, no event has occurred or condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would constitute a breach
or default under any such Gaming Business Governmental Permit or which permits
or,
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after notice or lapse of time or both, would permit revocation or termination of
any such Gaming Business Governmental Permit, or which might adversely affect
the rights of Comdata or the Gaming Subsidiary under any such Gaming Business
Governmental Permit; (ii) no notice of cancellation, of default or of any
dispute concerning any Gaming Business Governmental Permit, or of any event,
condition or state of facts described in the preceding clause, has been received
by, or is known to, Comdata or the Gaming Subsidiary; and (iii) each of the
Gaming Business Governmental Permits is valid, subsisting and in full force and
effect.
5.10. REAL PROPERTY. Neither Comdata (in respect of the Gaming
Business) or the Gaming Subsidiary (a) owns any real property or (b) holds any
options to acquire real property.
5.11. REAL PROPERTY LEASES. SCHEDULE 5.11(A) sets forth a list and
brief description of each lease or similar agreement (showing the parties
thereto, annual rental, and the location of the real property covered by and the
space occupied under, such lease or other agreement) under which (i) Comdata (in
respect of the Gaming Business) or the Gaming Subsidiary is lessee of, or holds,
uses or operates, any real property owned by any third Person (the "GAMING
BUSINESS LEASED REAL PROPERTY") or (ii) Comdata (in respect of the Gaming
Business) or the Gaming Subsidiary is lessor of any of the Gaming Business
Leased Real Property. Except as set forth in SCHEDULE 5.11(B), Comdata or the
Gaming Subsidiary has the right to quiet enjoyment of all the Gaming Business
Leased Real Property described in SCHEDULE 5.11(A) for the full term of each
such lease or similar agreement (and any renewal option) relating thereto, and
the leasehold or other interest of Comdata or the Gaming Subsidiary in such
Gaming Business Leased Real Property is not subject or subordinate to any
Encumbrance except for Permitted Encumbrances. Except as set forth on
SCHEDULE 5.11(C), and except for Permitted Encumbrances, there are no agreements
or other documents governing or affecting the occupancy or tenancy of any of the
Gaming Business Leased Real Property by Comdata or the Gaming Subsidiary or by
any Person other than Comdata or the Gaming Subsidiary. Complete and correct
copies of any instruments evidencing Encumbrances, commitments for the issuance
of title insurance, title opinions, surveys and appraisals in Comdata's or the
Gaming Subsidiary's possession and any policies of title insurance currently in
force and in the possession of Comdata or the Gaming Subsidiary with respect to
each such parcel of Gaming Business Leased Real Property have heretofore been
delivered by Comdata to IPS.
5.12. CONDEMNATION. To the knowledge of Comdata or the Gaming
Subsidiary neither the whole nor any part of any real property leased, used or
occupied by Comdata or the Gaming Subsidiary in connection with the Gaming
Business is subject to any pending suit for condemnation or other taking by any
public authority and no such condemnation or other taking is threatened or
contemplated.
5.13. Personal Property. SCHEDULE 5.13(A) contains a detailed list
of all machinery, equipment, vehicles, furniture and other personal property
owned by Comdata having an original cost of $10,000 or more and used in or
relating to the Gaming Business. Except as set forth in SCHEDULE 5.13(B),
Comdata or the Gaming Subsidiary has good and marketable title to all of the
Purchased Gaming Assets free and clear of all Encumbrances, except for Permitted
Encumbrances.
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5.14. PERSONAL PROPERTY LEASES. SCHEDULE 5.14 contains a brief
description of each lease or other agreement or right, whether written or oral
(including in each case the annual rental, the expiration date thereof and a
brief description of the property covered), under which Comdata or the Gaming
Subsidiary is lessee of, or holds or operates, any machinery, equipment, vehicle
or other tangible personal property owned by a third Person and used in or
relating to the Gaming Business, except for any such lease, agreement or right
that is terminable by Comdata or the Gaming Subsidiary without penalty or
payment on notice of 30 days or less, or which involves the payment by Comdata
or the Gaming Subsidiary of rentals of less than $5,000 per year.
5.15. INTELLECTUAL PROPERTY; SOFTWARE. (a) SCHEDULE 5.15(A)
contains a list and description (showing in each case any product, device,
process, service, business or publication covered thereby, the registered or
other owner, expiration date and number, if any) of all Copyrights, Patent
Rights and Trademarks owned by, licensed to or used by Comdata or the Gaming
Subsidiary in connection with the conduct of the Gaming Business.
(b) SCHEDULE 5.15(B) contains a list and description (showing in each
case any owner, licensor or licensee) of all Software owned by, licensed to or
used by Comdata or the Gaming Subsidiary in the conduct of the Gaming Business,
provided that SCHEDULE 5.15(B) does not list Software licensed to Comdata or the
Gaming Subsidiary that is commercially available and subject to "shrink-wrap" or
"click on" license agreements.
(c) SCHEDULE 5.15(C) contains a list and description (showing in each
case the parties thereto) of all agreements, contracts, licenses, sublicenses,
assignments and indemnities which relate to (i) any Copyrights, Patent Rights or
Trademarks listed in SCHEDULE 5.15(A), (ii) any Trade Secrets owned by, licensed
to or used by Comdata or the Gaming Subsidiary in connection with the conduct of
the Gaming Business or (iii) any Software listed in SCHEDULE 5.15(B).
(d) Except as disclosed in SCHEDULE 5.15(D), Comdata or the Gaming
Subsidiary either: (i) owns the entire right, title and interest in and to the
Intellectual Property and Software included in the Purchased Gaming Assets, free
and clear of any Encumbrance; (ii) has the perpetual, royalty-free right to use
the same or (iii) in the case of third party vendor Software, has the ability to
transfer such Software without the necessity of obtaining consents or the
payment of fees.
(e) Except as disclosed in SCHEDULE 5.15(E): (i) all Copyrights,
Patent Rights and Trademarks, including registrations therefor, identified in
SCHEDULE 5.15(A) as being owned by Comdata or the Gaming Subsidiary are valid
and in force, and all patent applications with respect to Patent Rights and all
applications to register any unregistered Copyrights and Trademarks so
identified are pending and in good standing, all without challenge of any kind;
(ii) the Intellectual Property owned by Comdata or the Gaming Subsidiary and
included in the Purchased Gaming Assets is valid and enforceable; (iii) Comdata
or the Gaming Subsidiary has the sole and exclusive right to bring actions for
infringement or unauthorized use of the Intellectual Property and Software owned
by Comdata or the Gaming Subsidiary and included in the Purchased Gaming Assets,
and to the knowledge of Comdata or the Gaming Subsidiary, there is no basis for
any such
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action; (iv) Comdata or the Gaming Subsidiary has taken all actions reasonably
necessary to protect the Copyrights, Trademarks, Software, Patent Rights or
Trade Secrets included in the Purchased Gaming Assets, including by pursuing
registration where necessary; and (v) neither Comdata or the Gaming Subsidiary
is in breach of any agreement affecting any of the Intellectual Property and
Software included in the Purchased Gaming Assets, and has not taken any action
which would impair or otherwise adversely affect its rights in the Intellectual
Property and Software included in the Purchased Gaming Assets. Correct and
complete copies of: (x) registrations for all registered Copyrights, Patent
Rights and Trademarks identified in SCHEDULE 5.15(A) as being owned by Comdata
or the Gaming Subsidiary; and (y) all pending applications to register
unregistered Copyrights, Patent Rights and Trademarks identified in
SCHEDULE 5.15(A) as being owned by Comdata or the Gaming Subsidiary (together
with any subsequent correspondence or filings relating to the foregoing) have
heretofore been delivered by Comdata to IPS.
(f) Except as set forth in SCHEDULE 5.15(F), (i) to the knowledge of
Comdata or the Gaming Subsidiary, no infringement of any Intellectual Property
Right of any other Person has occurred or results in any way from the operations
of the Gaming Business as previously or currently conducted; (ii) no claim of
any infringement of any Intellectual Property Right of any other Person has been
made or asserted in respect of the operations of the Gaming Business; (iii)
neither Comdata or the Gaming Subsidiary has received notice that any claim of
invalidity of any Copyright, Trademark or Patent Right, Software or Trade Secret
has been made; (iv) no proceedings are pending or, to the knowledge of Comdata
or the Gaming Subsidiary, threatened which challenge the validity, ownership or
use of any of the Gaming Business Intellectual Property; and (v) neither Comdata
or the Gaming Subsidiary has had notice of, or knowledge of any basis for, a
claim against Comdata or the Gaming Subsidiary that the operations, activities,
products, software, equipment, machinery or processes of the Gaming Business
infringe any Intellectual Property Right of any other Person.
(g) Except as disclosed in SCHEDULE 5.15(G): (i) the Software used
in the Gaming Business (the "GAMING BUSINESS OWNED SOFTWARE") is not subject to
any transfer, assignment, source code escrow agreement, reversion, site,
equipment, or other operational limitations; (ii) Comdata or the Gaming
Subsidiary has maintained and protected the Gaming Business Owned Software
(including, without limitation, all source code and system specifications) with
appropriate proprietary notices (including, without limitation, the notice of
copyright in accordance with the requirements of 17 U.S.C. Section 401),
confidentiality and non-disclosure agreements and such other measures as are
reasonably necessary to protect the proprietary, trade secret or confidential
information contained therein; (iii) the Gaming Business Owned Software is
protectable under applicable copyright law and has not been forfeited to the
public domain and has been registered with the U.S. Copyright Office or is
eligible for registration; (iv) Comdata or the Gaming Subsidiary has copies of
all releases or separate versions of the Gaming Business Owned Software so that
the same may be subject to registration in the United States Copyright Office;
(v) Comdata or the Gaming Subsidiary has complete and exclusive right, title and
interest in and to the Gaming Business Owned Software; (vi) Comdata or the
Gaming Subsidiary has developed the Gaming Business Owned Software through its
own efforts and for its own account without the aid or use of any consultants,
agents, independent contractors or Persons (other than
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Persons that are employees of Comdata or the Gaming Subsidiary); (vii) to the
knowledge of Comdata or the Gaming Subsidiary, the Gaming Business Owned
Software does not infringe any Intellectual Property Right of any other Person;
(viii) any Gaming Business Owned Software includes the source code, system
documentation, statements of principles of operation and schematics, as well as
any pertinent commentary and explanation used for the development, maintenance,
implementation and use thereof, so that a trained computer programmer could
develop, maintain, enhance, modify, support, compile and use all releases or
separate versions of the same that are currently subject to maintenance
obligations by Comdata or the Gaming Subsidiary; and (ix) there are no
agreements or arrangements in effect with respect to the marketing,
distribution, licensing or promotion of the Gaming Business Owned Software by
any other Person.
(h) Except as disclosed in SCHEDULE 5.15(H), all agents, consultants
or contractors who have contributed to or participated in the creation or
development of any Intellectual Property or Software on behalf of Comdata or the
Gaming Subsidiary or any predecessor in interest thereto either: (i) is a party
to a "work-for-hire" agreement under which Comdata or the Gaming Subsidiary is
deemed to be the original owner/author of all property rights therein; or (ii)
has executed an assignment or an agreement to assign in favor of Comdata or the
Gaming Subsidiary (or such predecessor in interest, as applicable) of all right,
title and interest in such material.
(i) Except as expressly provided herein, FDFS acknowledges and agrees
that the conveyance of the Purchased Gaming Assets from Comdata to FDFS does not
result in any express or implied license or other rights to FDFS or any third
person under any patent rights of Comdata or its Affiliates or under any patent
rights of any third parties licensed to Comdata or its Affiliates whether by
implication, estoppel or otherwise. All such express or implied licenses or
other rights are hereby expressly excluded and disclaimed.
5.16. ACCOUNTS RECEIVABLE. All accounts receivable of the Gaming
Business have arisen from bona fide transactions by Comdata or the Gaming
Subsidiary in the ordinary course of the Gaming Business. All accounts
receivable are good and collectible in the ordinary course of business at the
aggregate recorded amounts thereof, net of any allowance for doubtful accounts;
and all accounts receivable to be reflected in the Closing Date Gaming Special
Report will be good and collectible in the ordinary course of business at the
aggregate recorded amounts thereof, net of any allowance for doubtful accounts,
which allowance will be determined on a basis consistent with the basis used in
determining the allowance for doubtful accounts reflected in the Gaming Balance
Sheet.
5.17. TITLE TO PROPERTY. Comdata or the Gaming Subsidiary has good
and marketable title to all of the Purchased Gaming Assets, free and clear of
all Encumbrances, except for Permitted Encumbrances and except as set forth in
SCHEDULE 5.17. Upon delivery to FDFS on the date hereof of the instruments of
transfer contemplated by Section 4.4, Comdata will thereby transfer to FDFS good
and marketable title to the Purchased Gaming Assets, subject to no Encumbrances,
except for Permitted Encumbrances.
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5.18. EMPLOYEES AND RELATED AGREEMENTS; ERISA. (a) Except as
described in SCHEDULE 5.18(A), neither Comdata or the Gaming Subsidiary is, with
respect to the Gaming Business, a party to or bound by any oral or written:
stock option, stock purchase, bonus or other incentive plan or agreement.
(b) Except as described in SCHEDULE 5.18(B), Comdata does not
maintain, and is not required to contribute to, any "employee pension benefit
plan" (as such term is defined in Section 3(2) of ERISA) or "Welfare Benefit
Plan" (as such term is defined in Section 3(1) of ERISA), on behalf of any
employees or former employees of the Gaming Business. None of Comdata's ERISA
Benefit Plans is a "multiemployer plan" as defined in Section 3(37) of ERISA, or
is or has been subject to Sections 4063 or 4064 of ERISA. Comdata has complied
with the healthcare continuation requirements of Section 601, ET. SEQ., of ERISA
with respect to employees of the Gaming Business and their spouses, former
spouses and dependents.
(c) SCHEDULE 5.18(C) hereto sets forth a true, correct and complete
copy of each severance plan, policy or practice in effect immediately prior to
Closing Date with respect to Transferring Comdata Employees.
5.19. EMPLOYEE RELATIONS. (a) Except as set forth in
SCHEDULE 5.19(A), Comdata and the Gaming Subsidiary have complied in respect of
the Gaming Business with all applicable laws, rules and regulations which relate
to prices, wages, hours, discrimination in employment, occupational safety and
health, and collective bargaining and are not liable for any arrears of wages or
any taxes, penalties or damages for failure to comply with any of the foregoing.
Comdata (in respect of the Gaming Business) and the Gaming Subsidiary are in
compliance with the requirements of WARN and all similar state and local
statutes, laws and regulations and have no liabilities pursuant to any of them.
Comdata believes that its relations with the employees of the Gaming Business
are satisfactory and are not likely to lead to collective bargaining efforts.
Neither Comdata nor the Gaming Subsidiary is a party to, and the Gaming Business
is not affected by or, to the knowledge of Comdata or the Gaming Subsidiary,
threatened with, any dispute or controversy with a union or with respect to
unionization or collective bargaining involving the employees of the Gaming
Business. Neither Comdata, the Gaming Subsidiary nor the Gaming Business is
materially affected by any dispute or controversy with a union or with respect
to unionization or collective bargaining involving any supplier or customer of
the Gaming Business. SCHEDULE 5.19(A) sets forth a description of any union
organizing or election activities involving any non-union employees of the
Gaming Business which have occurred since January 1, 1996 or, to the knowledge
of Comdata or the Gaming Subsidiary, are threatened as of the date hereof.
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(b) Except as set forth in SCHEDULE 5.19(B), since January 1, 1996,
the Gaming Business has not, directly or indirectly, purchased, leased from
others or otherwise acquired any material property or obtained any material
services from, or sold, leased to others or otherwise disposed of any material
property or furnished any material services to (except with respect to
remuneration for services rendered as a director, officer or employee of the
Gaming Business), in the ordinary course of business or otherwise, (i) any
Person who is an officer or director of Comdata or the Gaming Subsidiary or
(ii) any Associate of any person referred to in clause (i) above. Except as set
forth in SCHEDULE 5.19(B), the Gaming Business does not owe any amount in excess
of $10,000 to, or have any contract with or commitment to, Comdata or any
director, officer or employee of Comdata or the Gaming Subsidiary (other than
for compensation for current services not yet due and payable and reimbursement
of expenses arising in the ordinary course of business) and none of such Persons
owes any amount in excess of $10,000 to the Gaming Business.
(c) Neither the Gaming Business nor any officer, employee or agent or
other person acting on its behalf has, directly or indirectly, since January 1,
1993, given or agreed to give any gift or similar benefit (other than with
respect to bona fide payments for which adequate consideration has been given)
to any customer, supplier, governmental employee or other person who is or may
be in a position to help or hinder the business of the Gaming Business (or
assist the Gaming Business in connection with any actual or proposed
transaction) (i) which might subject the Gaming Business to any damage or
penalty in any civil, criminal or governmental litigation or proceeding,
(ii) which, if not continued in the future, would have an adverse effect on the
assets, business, operations or prospects of the Gaming Business or which would
subject the Gaming Business to suit or penalty in any private or governmental
litigation or proceeding, (iii) for any of the purposes described in Section
162(c) of the Code, or (iv) for establishment or maintenance of any concealed
fund or concealed bank account.
5.20. CONTRACTS. Except as set forth in SCHEDULE 5.20 or any other
SCHEDULE hereto, Comdata is not, with respect to the Gaming Business, and the
Gaming Subsidiary is not a party to or bound by:
(i) any contract for the purchase, sale or lease of real property;
(ii) any contract for the purchase of goods or services by Comdata or
the Gaming Subsidiary which involved the payment of more than $50,000 in
1997;
(iii) any contract for the purchase, licensing or development of
software to be used by the Gaming Business except for Software that is
available in consumer retail stores and subject to "shrink-wrap" license
agreements;
(iv) any consignment, distributor, dealer, manufacturers
representative, sales agency, advertising representative or advertising or
public relations contract except to the extent such contract is cancelable
without penalty within 30 days;
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(v) any guarantee of the obligations of customers, suppliers,
officers, directors, employees, Affiliates or others except to the extent
such contract is cancelable without penalty within 30 days;
(vi) any agreement which provides for, or relates to, the incurrence
by the Gaming Business of debt for borrowed money (including, without
limitation, any interest rate or foreign currency swap, cap, collar, hedge
or insurance agreements, or options or forwards on such agreements, or
other similar agreements for the purpose of managing the interest rate
and/or foreign exchange risk associated with its financing);
(vii) any contract not made in the ordinary course except to the
extent such contract is cancelable without penalty within 30 days; or
(viii) any other contract, agreement, commitment, understanding or
instrument which is material to the Gaming Business and which involves the
payment of more than $50,000.
5.21. STATUS OF CONTRACTS. Except as set forth in SCHEDULE 5.21 or
in any other Schedule hereto, each of the leases, contracts and other agreements
listed in SCHEDULES 5.11(A), 5.14, 5.15(A), 5.18(C) and 5.20 (collectively, the
"GAMING AGREEMENTS") constitutes a valid and binding obligation of the parties
thereto and is in full force and effect and (except as set forth in SCHEDULE 5.3
and except for those Gaming Agreements which by their terms will expire prior to
the date hereof or are otherwise terminated prior to the date hereof in
accordance with the provisions hereof) to the knowledge of Comdata or the Gaming
Subsidiary, may be transferred to FDFS pursuant to this Agreement and will
continue in full force and effect thereafter, in each case without breaching the
terms thereof or resulting in the forfeiture or impairment of any rights
thereunder and without the consent, approval or act of, the payment of any
transfer or similar fee, or the making of any filing with, any other party.
Comdata and the Gaming Subsidiary have fulfilled and performed their obligations
under each of the Gaming Agreements, and neither Comdata or the Gaming
Subsidiary is in, or alleged to be in, breach or material default under, nor is
there or is there alleged to be any basis for termination of, any of the Gaming
Agreements and to the knowledge of Comdata or the Gaming Subsidiary, no other
party to any of the Gaming Agreements has breached or committed a material
default thereunder, and to the knowledge of Comdata or the Gaming Subsidiary, no
event has occurred and no condition or state of facts exists which, with the
passage of time or the giving of notice or both, would constitute such a default
or breach by Comdata, the Gaming Subsidiary or by any such other party. Comdata
is not currently renegotiating any of the Gaming Agreements or paying liquidated
damages in lieu of performance thereunder.
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5.22. NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as set
forth in SCHEDULE 5.22:
(i) the Purchased Gaming Assets and the operation of the Gaming
Business complies with all applicable Requirements of Laws and Court
Orders;
(ii) Comdata and the Gaming Subsidiary have complied with all
Requirements of Laws and Court Orders which are applicable to the Purchased
Gaming Assets or the Gaming Business;
(iii) there are no lawsuits, claims, suits, proceedings or
investigations pending or, to the knowledge of Comdata or the Gaming
Subsidiary, threatened against or affecting Comdata or the Gaming
Subsidiary in respect of the Purchased Gaming Assets or the Gaming Business
nor, to the knowledge of Comdata or the Gaming Subsidiary, is there any
basis for any of the same, and there are no lawsuits, suits or proceedings
pending in which Comdata is the plaintiff or claimant and which relate to
the Purchased Gaming Assets or the Gaming Business;
(iv) there is no action, suit or proceeding pending or, to the
knowledge of Comdata or the Gaming Subsidiary, threatened which questions
the legality or propriety of the transactions contemplated by this
Agreement; and
(v) to the knowledge of Comdata or the Gaming Subsidiary, no
legislative or regulatory proposal or other proposal for the change in any
Requirements of Law or the interpretation thereof has been adopted or is
pending which could adversely affect the Gaming Business.
5.23. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 5.23:
(a) the operations of the Gaming Business are, and have been, in
compliance with, and the Gaming Business is not the subject of any judicial or
administrative proceedings or settlements involving alleged violations of or
liability under, Environmental Laws.
(b) no property now or previously owned or operated by the Gaming
Business is under investigation by any Governmental Body or requires remedial
action under any applicable Environmental Laws to address any Contaminant.
5.24. INSURANCE. SCHEDULE 5.24 sets forth a list and brief
description (including nature of coverage, limits, deductibles, premiums and the
loss experience for the most recent five years with respect to each type of
coverage) of all policies of insurance maintained, owned or held by Comdata or
the Gaming Subsidiary on the date hereof with respect to the Purchased Gaming
Assets or the Gaming Business. Comdata and the Gaming Subsidiary have complied
with each such insurance policies and have not failed to give any notice or
present any claim thereunder in a due and timely manner. Comdata or the Gaming
Subsidiary has delivered to FDFS correct and
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complete copies of the most recent inspection reports, if any, received from
insurance underwriters as to the condition of the Purchased Gaming Assets.
5.25. CUSTOMERS AND SUPPLIERS. Set forth in SCHEDULE 5.25 hereto is
a list of names and addresses of the fifteen largest customers for (i) the year
ended December 31, 1996 and (ii) the period from January 1, 1997 through
November 30, 1997 (measured by dollar volume of net revenue in each case) of
Comdata or the Gaming Subsidiary in respect of the Gaming Business and the
percentage of the Gaming Business which each such customer represents or
represented. Except as set forth in SCHEDULE 5.25, there exists no actual or to
the knowledge of Comdata or the Gaming Subsidiary, threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship of Comdata or the Gaming Subsidiary with any customer or group of
customers listed in SCHEDULE 5.25, or whose purchases individually or in the
aggregate are material to the operations of the Gaming Business, and to the
knowledge of Comdata or the Gaming Subsidiary, there exists no present or future
condition or state of facts or circumstances involving customers, suppliers or
sales representatives which Comdata or the Gaming Subsidiary can now reasonably
foresee would materially adversely affect the Gaming Business or prevent the
conduct of the Gaming Business after the consummation of the transactions
contemplated by this Agreement in essentially the same manner in which such
business has heretofore been conducted.
5.26. BANK ACCOUNTS. SCHEDULE 5.26 sets forth a complete and correct
list of all bank accounts and safe deposit boxes related to the Gaming Business
and the individuals authorized to sign or otherwise act with respect thereto as
of the date hereof and a complete and correct list of all Persons holding a
general or special power of attorney related to the Gaming Business granted by
Comdata and a complete and correct copy thereof.
5.27. ESTIMATED CLOSING DATE GAMING SPECIAL REPORT. SCHEDULE 5.27
contains Comdata's bona fide, good faith estimate of the Closing Date Gaming
Special Report (the "ESTIMATED CLOSING DATE GAMING SPECIAL REPORT").
5.28. ESTIMATED AMOUNT OF TRANSFERRED CASH. SCHEDULE 5.28 contains
Comdata's bona fide, good faith estimate of the amount of cash in each of the
Gaming ATM Machines, the Gaming Vaults, Gaming Armored Cars, the Gaming Bank
Accounts and Gaming Booths (identified by geographical location) as of 11:59
p.m. central time on the date hereof and the aggregate amount of such cash in
each case, together with supporting calculations in reasonable detail (the
"ESTIMATED AMOUNT OF TRANSFERRED CASH").
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FDC, IPS AND NTS
As an inducement to Ceridian, Comdata and Permicom to enter into this
Agreement and to consummate the transactions contemplated hereby, FDC, IPS, NTS
and FDFS hereby represent and warrant to Ceridian, Comdata and Permicom and
agree as follows:
6.1. ORGANIZATION. (a) FDC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. FDC is
duly qualified to transact business as a foreign corporation and is in good
standing in all jurisdictions except where the absence of such qualification
would not have a Material Adverse Effect. No other jurisdiction has demanded,
requested or otherwise indicated that FDC is required so to qualify on account
of the ownership or leasing of the Purchased NTS Assets or the conduct of the
NTS Business. Except as set forth on SCHEDULE 6.22, FDC has full power and
authority to own or lease and to operate and use the Purchased NTS Assets and to
carry on the NTS Business as now conducted.
True and complete copies of the certificate of incorporation and all
amendments thereto and of the By-laws, as amended to date, of FDC have been
delivered to Comdata.
(b) IPS is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. IPS is duly qualified to
transact business as a foreign corporation and is in good standing in all
jurisdictions except where the absence of such qualification would not have a
Material Adverse Effect. No other jurisdiction has demanded, requested or
otherwise indicated that IPS is required so to qualify on account of the
ownership or leasing of the Purchased NTS Assets or the conduct of the NTS
Business. IPS has full power and authority to own or lease and to operate and
use the Purchased NTS Assets and to carry on the NTS Business as now conducted.
True and complete copies of the certificate of incorporation and all
amendments thereto and of the By-laws, as amended to date, of IPS have been
delivered to Comdata.
(c) NTS is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland. NTS is duly qualified to
transact business as a foreign corporation and is in good standing in all
jurisdictions except where the absence of such qualification would not have a
Material Adverse Effect. No other jurisdiction has demanded, requested or
otherwise indicated that NTS is required so to qualify. NTS has full power and
authority to own or lease and to operate and use its properties and assets and
to carry on its business as now conducted.
True and complete copies of the certificate or articles of
incorporation and all amendments thereto, of the By-laws, as amended to date,
and of the stock ledger of NTS have been delivered to Comdata.
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(d) The NTS Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to transact business as a foreign
corporation and is in good standing in all jurisdictions except where the
absence of such qualification would not have a Material Adverse Effect. No
other jurisdiction has demanded, requested or otherwise indicated that the NTS
Subsidiary is required so to qualify. The NTS Subsidiary has full power and
authority to own or lease and to operate and use its properties and assets and
to carry on its business as now conducted.
True and complete copies of the certificate or articles of
incorporation and all amendments thereto, the By-laws, as amended to date, and
the stock ledger of the NTS Subsidiary have been delivered to Comdata.
(e) FDFS is a limited liability company duly organized, validly
existing and in good standing under the laws of the state of Delaware.
6.2. SUBSIDIARIES AND INVESTMENTS. (a) Except for the NTS Subsidiary
and as set forth in SCHEDULE 6.2(A), neither FDC, IPS, NTS or the NTS Subsidiary
directly or indirectly, (i) owns, of record or beneficially, any outstanding
voting securities or other equity interests in any corporation, partnership,
joint venture or other entity which is involved in or relates to the NTS
Business or (ii) controls any corporation, partnership, limited liability
company, joint venture or other entity which is involved in or relates to the
NTS Business.
(b) SCHEDULE 6.2(B) sets forth with respect to the NTS Subsidiary on
the date hereof the number of authorized, issued and outstanding shares of
capital stock of each class, the number of issued shares of capital stock held
as treasury shares and the number of shares of capital stock unissued and
reserved for any purpose. Except as set forth in SCHEDULE 6.2(B) and except for
this Agreement, there are no agreements, arrangements, options, warrants, calls,
rights or commitments of any character relating to the issuance, sale, purchase
or redemption of any shares of capital stock of the NTS Subsidiary. All of the
outstanding shares of capital stock of the NTS Subsidiary are validly issued,
fully paid and nonassessable and, except as set forth in SCHEDULE 6.2(B), are
owned by NTS of record and beneficially free from all Encumbrances of any kind.
6.3. AUTHORITY. (a) FDC has full power and authority to execute,
deliver and perform this Agreement. The execution, delivery and performance of
this Agreement by FDC has been duly authorized and approved by FDC's board of
directors and does not require any further authorization or consent of FDC or
its stockholders. This Agreement has been duly authorized, executed and
delivered by FDC and is the legal, valid and binding obligation of FDC
enforceable in accordance with its terms, and upon execution and delivery by FDC
will be a legal, valid and binding obligation of FDC enforceable in accordance
with its terms, and each of the IPS Ancillary Agreements has been duly
authorized by FDC and upon execution and delivery by FDC will be a legal, valid
and binding obligation of FDC enforceable in accordance with its terms.
(b) IPS has full power and authority to execute, deliver and perform
this Agreement and all of the IPS Ancillary Agreements. The execution, delivery
and performance of
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this Agreement and the IPS Ancillary Agreements by IPS have been duly authorized
and approved by IPS' board of directors and do not require any further
authorization or consent of IPS or its stockholders. This Agreement has been
duly authorized, executed and delivered by IPS and is the legal, valid and
binding obligation of IPS enforceable in accordance with its terms, and each of
the IPS Ancillary Agreements has been duly authorized by IPS and upon execution
and delivery by IPS will be a legal, valid and binding obligation of IPS
enforceable in accordance with its terms.
(c) NTS has full power and authority to execute, deliver and perform
this Agreement and all of the IPS Ancillary Agreements. The execution, delivery
and performance of this Agreement and the IPS Ancillary Agreements by NTS have
been duly authorized and approved by NTS' board of directors and sole
stockholder and, except for filing the NTS State of Maryland Articles of
Transfer, do not require any further authorization or consent. This Agreement
has been duly authorized, executed and delivered by NTS and is the legal, valid
and binding obligation of NTS enforceable in accordance with its terms, and each
of the IPS Ancillary Agreements has been duly authorized by NTS and upon
execution and delivery by NTS will be a legal, valid and binding obligation of
NTS enforceable in accordance with its terms.
(d) FDFS has full power and authority to execute, deliver and perform
this Agreement. The execution, delivery and performance of this Agreement by
FDFS have been duly authorized and approved by FDFS' board of directors and sole
stockholder and do not require any further authorization or consent. This
Agreement has been authorized, executed and delivered by FDFS and is the legal,
valid and binding obligation of FDFS enforceable in accordance with its terms.
(e) Except as set forth in SCHEDULE 6.3, neither the execution and
delivery of this Agreement or any of the IPS Ancillary Agreements or the
consummation of any of the transactions contemplated hereby or thereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof or
thereof will:
(i) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, (1) the charter or By-laws of FDC, IPS, NTS, the NTS
Subsidiary or FDFS; (2) any NTS Agreement, (3) any other material note,
instrument, agreement, mortgage, lease, license, franchise, permit or other
authorization, right, restriction or obligation to which FDC, IPS, NTS, the
NTS Subsidiary or FDFS is a party or any of the Purchased NTS Assets is
subject or by which FDC, IPS, NTS, the NTS Subsidiary or FDFS is bound, (4)
any Court Order to which FDC, IPS, NTS, the NTS Subsidiary or FDFS is a
party or any of the Purchased NTS Assets is subject or by which FDC, IPS,
NTS, the NTS Subsidiary or FDFS is bound, or (5) any Requirements of Laws
affecting FDC, IPS, NTS, the NTS Subsidiary or FDFS or the Purchased NTS
Assets; or
(ii) require the approval, consent, authorization or act of, or the
making by FDC, IPS, NTS, the NTS Subsidiary, FDFS or the NTS Business of
any declaration, filing or registration with, any Person.
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6.4. FINANCIAL STATEMENTS. SCHEDULE 6.4 contains (i) the unaudited
balance sheet of NTS as of December 31, 1996 and the related statements of
income for the year then ended and (ii) the unaudited balance sheet of NTS as of
September 30, 1997 and the related statements of income for the nine months then
ended. Except as set forth therein, such balance sheets and statements of
income have been prepared in conformity with generally accepted accounting
principles consistently applied, and such balance sheets and related statements
of income and cash flow present fairly the financial position and results of
operations of NTS as of their respective dates and for the respective periods
covered thereby.
6.5. OPERATIONS SINCE THE NTS BALANCE SHEET DATE. (a) Except as set
forth in SCHEDULE 6.5(A) or SCHEDULE 6.22, and except as due to changes in the
general economic environment, since the NTS Balance Sheet Date, there has been:
(i) no material adverse change in the Purchased NTS Assets, the NTS
Business or the operations, liabilities, profits or condition (financial or
otherwise) of the NTS Business, and no fact or condition exists or is
contemplated or to the knowledge of IPS, NTS or the NTS Subsidiary
threatened which might reasonably be expected to cause such a change in the
future; and
(ii) no damage, destruction, loss or claim, whether or not covered by
insurance, or condemnation or other taking adversely affecting any of the
Purchased NTS Assets or the NTS Business.
(b) Except as set forth in SCHEDULE 6.5(B), since the NTS Balance
Sheet Date, NTS and the NTS Subsidiary have conducted the NTS Business only in
the ordinary course and in conformity with past practice. Without limiting the
generality of the foregoing, since the NTS Balance Sheet Date, except as set
forth in such Schedule, neither NTS or the NTS Subsidiary has:
(i) sold, leased (as lessor), transferred or otherwise disposed of
(including any transfers from NTS or the NTS Subsidiary to IPS, FDC or any
of their respective Affiliates), or mortgaged or pledged, or imposed or
suffered to be imposed any Encumbrance (other than a Permitted Encumbrance)
on, any of the assets reflected on the NTS Balance Sheet or any assets
acquired by NTS or the NTS Subsidiary after the NTS Balance Sheet Date,
except for inventory and minor amounts of personal property sold or
otherwise disposed of for fair value in the ordinary course of business
consistent with past practice;
(ii) canceled any debts owed to or claims held by NTS or the NTS
Subsidiary (including the settlement of any claims or litigation) or waived
any other rights held by NTS or the NTS Subsidiary other than in the
ordinary course of business consistent with past practice;
(iii) paid any claims against NTS or the NTS Subsidiary (including
the settlement of any claims and litigation against NTS or the NTS
Subsidiary or the payment or
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settlement of any obligations or liabilities of NTS or the NTS Subsidiary)
other than in the ordinary course of business consistent with past
practice;
(iv) created, incurred or assumed, or agreed to create, incur or
assume, any indebtedness for borrowed money (other than money borrowed or
advances from IPS, FDC or any of their respective Affiliates in the
ordinary course of business consistent with past practice) or entered into,
as lessee, any capitalized lease obligations (as defined in Statement of
Financial Accounting Standards No. 13);
(v) accelerated or delayed collection of notes or accounts receivable
in advance of or beyond their regular due dates or the dates when the same
would have been collected in the ordinary course of the NTS Business
consistent with past practice;
(vi) delayed or accelerated payment of any account payable or other
liability of NTS or the NTS Subsidiary beyond or in advance of its due date
or the date when such liability would have been paid in the ordinary course
of the NTS Business consistent with past practice;
(vii) acquired any real property or undertaken or committed to
undertake capital expenditures exceeding $10,000 in the aggregate;
(viii) made, or agreed to make, any payment of cash or distribution
of assets to FDC, IPS or any of their respective Affiliates (other than
cash realized upon collection of receivables generated in the ordinary
course of the NTS Business);
(ix) instituted any increase in any compensation payable to any
officer or employee of NTS or the NTS Subsidiary with respect to the NTS
Business (other than changes made in accordance with normal compensation
practices and consistent with past compensation practices) or in any
profit-sharing, bonus, incentive, deferred compensation, insurance,
pension, retirement, medical, hospital, disability, welfare or other
benefits made available to officers or employees of NTS or the NTS
Subsidiary with respect to the NTS Business;
(x) made any change in (A) the accounting principles and practices
used by NTS or the NTS Subsidiary from those applied in the preparation of
the NTS Balance Sheet and the related statements of income and cash flow
for the period then ended or (B) the charge-off policies applicable to
accounts receivable;
(xi) entered into or become committed to enter into any other
material transaction except in the ordinary course of business; or
(xii) amended its certificate of incorporation or by-laws;
(xiii) issued, granted, sold or encumbered any shares of its capital
stock or other securities; issued, granted, sold or encumbered any
security, option, warrant, put, call,
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subscription or other right of any kind, fixed or contingent, that directly
or indirectly calls for the acquisition, issuance, sale, pledge or other
disposition of any shares of its capital stock or other securities or make
any other changes in the equity capital structure of NTS or the NTS
Subsidiary;
(xiv) made any material change in the NTS Business or the operations
of NTS or the NTS Subsidiary or make any expenditure which shall exceed
$50,000 in the aggregate;
(xv) made any capital expenditure or entered into any contract
or commitment therefor which shall exceed $50,000 in the aggregate;
(xvi) entered into any contract, agreement, undertaking or
commitment which would have been required to be set forth in
SCHEDULE 6.20 if in effect on the date hereof or entered into any
contract which requires the consent or approval of any third party to
consummate the transactions contemplated by this Agreement; or made
any material modification to any existing material NTS Agreement or to
any NTS Governmental Permits, other than changes made in good faith to
cure document deficiencies; or
(xvii) entered into any contract for the purchase, lease (as
lessee) or other occupancy of real property to be used by the NTS
Business or any option to extend a lease listed in SCHEDULE 6.11(A).
6.6. NO FINDER. Neither NTS, any Affiliate thereof nor any Person
acting on behalf of the foregoing has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
6.7. TAXES. Except as set forth in SCHEDULE 6.7, (i) FDC, IPS and NTS
have, in respect of the NTS Business and the Purchased NTS Assets, and the NTS
Subsidiary has filed all Tax Returns which are required to be filed and FDC,
IPS, NTS and the NTS Subsidiary have paid all Taxes which have become due
pursuant to such Tax Returns or pursuant to any assessment which has become
payable; (ii) all such Tax Returns are complete and accurate and disclose all
Taxes required to be paid in respect of the NTS Business, the Purchased NTS
Assets and the NTS Subsidiary; (iii) all such Tax Returns relating to United
States federal income Taxes have been examined by the relevant taxing authority
or the period for assessment of the Taxes in respect of which such Tax Returns
were required to be filed has expired; (iv) there is no action, suit,
investigation, audit, claim or assessment pending or proposed or threatened with
respect to Taxes of the NTS Business, the Purchased NTS Assets or the NTS
Subsidiary; (v) none of FDC, IPS, NTS or the NTS Subsidiary has waived or been
requested to waive any statute of limitations in respect of Taxes associated
with the NTS Business, the Purchased NTS Assets or the NTS Subsidiary which
waiver is currently in effect; (vi) all monies required to be withheld by NTS or
the NTS Subsidiary (including from employees of the NTS Business for income
Taxes and social security and other payroll Taxes) have been collected or
withheld, and either paid to the respective taxing authorities, set aside in
accounts for such purpose, or accrued, reserved against and entered upon the
books of the NTS Business; (vii) NTS is properly treated as the owner, for
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all federal, state, local and other income Tax purposes, of all property of
which it is the lessor; (viii) no change in Tax accounting method which would
affect the NTS Subsidiary after the Closing has been made, agreed to, requested
or required with respect to its assets or operations; (ix) all tax sharing
arrangements and tax indemnity arrangements relating to the NTS Subsidiary
(other than this Agreement) will terminate prior to the Closing and the NTS
Subsidiary will have no liability thereunder on or after the Closing; (x) the
NTS Subsidiary is not a party to any agreement relating to a foreign sales
corporation within the meaning of Section 922 of the Code; (xi) there are no
pending claims for refund of any Tax attributable to the NTS Subsidiary
(including refunds of Taxes allocable to the NTS Subsidiary with respect to any
consolidated, combined, unitary, fiscal unity or similar Tax Returns; (xii) each
asset with respect to which the NTS Subsidiary claims depreciation, amortization
or similar expense for Tax purposes is owned for Tax purposes by the NTS
Subsidiary under applicable Tax law; (xiii) the NTS Subsidiary has always been
properly classified as a corporation for United States federal income Tax
purposes; (xiv) there are no outstanding rulings of, or requests for rulings
with, any Tax authority expressly addressed to the NTS Subsidiary (or to an
Affiliate of any NTS Subsidiary) that are, or if issued would be, binding upon
the NTS Subsidiary for any taxable year or period beginning after the Closing;
(xv) the NTS Subsidiary (or any Affiliates of the NTS Subsidiary with respect to
the NTS Subsidiary) has not, in a manner that would be binding on the NTS
Subsidiary for a taxable year or period beginning after the Closing executed,
become subject to or entered into any closing agreement pursuant to Section 7121
of the Code or any similar or predecessor provision thereof under the Code or
other applicable Tax Law; (xvi) the NTS Subsidiary has not made and is not
subject to any election under Section 341(f) of the Code; (xvii) no "industrial
development bonds" within the meaning of Section 103 of the United States
Internal Revenue Code of 1954, as amended and in effect prior to the enactment
of the United States Tax Reform Act of 1986, "private activity bonds" within the
meaning of Section 141 of the Code or other tax exempt financing have been used
to finance any of the assets of the NTS Subsidiary, whether leased or owned;
(xviii) the NTS Subsidiary has not made or is not bound by any election under
Section 197 of the Code; (xix) FDC has filed for the taxable year immediately
preceding the current taxable year and will file for the year in which the
Closing occurs a consolidated federal income tax return with the NTS Subsidiary;
(xx) all material elections with respect to Taxes affecting the NTS Subsidiary
as of the date hereof are set forth in SCHEDULE 6.7; (xxi) no amount with
respect to any outlay or expense that is deductible for the purpose of computing
income under the Canadian Income Tax Act has been owing by the NTS Subsidiary
for longer than two years to any person with whom the NTS Subsidiary was not
dealing at arms' length at the time of the outlay or expense was incurred or for
more than 180 days after the end of the taxation year which the outlay or
expense was incurred in the case of a superannuation or pension benefit, a
retiring allowance, salary, wages or other remuneration with respect to any
office or employment; and (xxii) there are no circumstances which exist and
would result, or which have existed and have resulted, in Section 80 of the
Canadian Income Tax Act applying to the NTS Subsidiary.
6.8. AVAILABILITY OF ASSETS. (a) Except as set forth in
SCHEDULE 6.8(A) and except for the Excluded NTS Assets, the Purchased NTS Assets
constitute all of the assets, services and properties used in, or necessary for,
the NTS Business as currently configured (including, but not limited to, all
books, records, computers and computer programs and data processing systems)
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and are in good condition (subject to normal wear and tear) and serviceable
condition and are suitable for the uses for which intended.
(b) SCHEDULE 6.8(B) sets forth a description of all material services
provided by FDC or IPS or any Affiliate of FDC or IPS, other than those services
to be provided pursuant to the NTS Business Transition Services Agreement, to
NTS or the NTS Subsidiary utilizing either (i) assets not included in the
Purchased NTS Assets or (ii) employees not listed in SCHEDULE 7.4(B) and the
manner in which the costs of providing such services have been allocated to NTS
or the NTS Subsidiary.
6.9. GOVERNMENTAL PERMITS. Except as set forth in SCHEDULE 6.9, NTS
or the NTS Subsidiary owns, holds or possesses all licenses, franchises,
permits, privileges, immunities, approvals and other authorizations from a
Governmental Body which are necessary to entitle it to own or lease, operate and
use the Purchased NTS Assets and to carry on and conduct the NTS Business
substantially as currently conducted (herein collectively called "NTS
GOVERNMENTAL PERMITS"), except for such Governmental Permits as to which the
failure to so own, hold or possess would not have a material adverse effect on
the Purchased NTS Assets, the NTS Business or the operations, liabilities,
profits, prospects or condition (financial or otherwise) of NTS or the NTS
Subsidiary. SCHEDULE 6.9 sets forth a list and brief description of each
Governmental Permit. Complete and correct copies of all of the NTS Governmental
Permits have heretofore been delivered by IPS to Comdata.
Except as set forth in SCHEDULE 6.9, (i) NTS or the NTS Subsidiary has
fulfilled and performed its obligations under each of the NTS Governmental
Permits and to the knowledge of IPS, NTS or the NTS Subsidiary, no event has
occurred or condition or state of facts exists which constitutes or, after
notice or lapse of time or both, would constitute a breach or default under any
such NTS Governmental Permit or which permits or, after notice or lapse of time
or both, would permit revocation or termination of any such NTS Governmental
Permit, or which might adversely affect the rights of NTS or the NTS Subsidiary
under any such NTS Governmental Permit; (ii) no notice of cancellation, of
default or of any dispute concerning any NTS Governmental Permit, or of any
event, condition or state of facts described in the preceding clause, has been
received by, or is known to, IPS, NTS or the NTS Subsidiary; and (iii) each of
the NTS Governmental Permits is valid, subsisting and in full force and effect.
6.10. REAL PROPERTY. Neither NTS nor the NTS Subsidiary (a) owns any
real property or (b) holds any options to acquire real property.
6.11. REAL PROPERTY LEASES. SCHEDULE 6.11(A) sets forth a list and
brief description of each lease or similar agreement (showing the parties
thereto, annual rental and the location of the real property covered by and the
space occupied under such lease or other agreement) under which NTS or the NTS
Subsidiary is lessee of, or holds, uses or operates, any real property owned by
any third Person (the "NTS LEASED REAL PROPERTY") or (ii) NTS or the NTS
Subsidiary is lessor of any of the NTS Leased Real Property. Except as set
forth in SCHEDULE 6.11(B), NTS or the NTS Subsidiary has the right to quiet
enjoyment of all the NTS Leased Real Property described in SCHEDULE 6.11(A) for
the full term of each such lease or similar
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agreement (and any renewal option) relating thereto, and the leasehold or other
interest of NTS or the NTS Subsidiary in such NTS Leased Real Property is not
subject or subordinate to any Encumbrance except for Permitted Encumbrances.
Except as set forth on SCHEDULE 6.11(C), and except for Permitted Encumbrances,
there are no agreements or other documents governing or affecting the occupancy
or tenancy of any of the NTS Leased Real Property by NTS or the NTS Subsidiary
by any Person other than NTS or the NTS Subsidiary. Complete and correct copies
of any instruments evidencing Encumbrances, commitments for the issuance of
title insurance, title opinions, surveys and appraisals in IPS's, NTS's or the
NTS Subsidiary's possession and any policies of title insurance currently in
force and in the possession of IPS, NTS or the NTS Subsidiary with respect to
each such parcel of NTS Leased Real Property have heretofore been delivered by
IPS to Comdata.
6.12. CONDEMNATION. To the knowledge of IPS, NTS or the NTS
Subsidiary neither the whole nor any part of any real property leased, used or
occupied by NTS or the NTS Subsidiary is subject to any pending suit for
condemnation or other taking by any public authority and no such condemnation or
other taking is threatened or contemplated.
6.13. PERSONAL PROPERTY. SCHEDULE 6.13(A) contains a detailed list
of all machinery, equipment, vehicles, furniture and other personal property
owned by NTS or the NTS Subsidiary having an original cost of $10,000 or more.
Except as set forth in SCHEDULE 6.13(B), NTS or the NTS Subsidiary has good and
marketable title to all the Purchased NTS Assets free and clear of all
Encumbrances, except for Permitted Encumbrances.
6.14. PERSONAL PROPERTY LEASES. SCHEDULE 6.14 contains a brief
description of each lease or other agreement or right, whether written or oral
(including in each case the annual rental, the expiration date thereof and a
brief description of the property covered), under which NTS or the NTS
Subsidiary is lessee of, or holds or operates, any machinery, equipment, vehicle
or other tangible personal property owned by a third Person, except for any such
lease, agreement or right that is terminable by NTS or the NTS Subsidiary
without penalty or payment on notice of 30 days or less, or which involves the
payment by NTS or the NTS Subsidiary of rentals of less than $5,000 per year.
6.15. INTELLECTUAL PROPERTY; SOFTWARE. (a) SCHEDULE 6.15(A)
contains a list and description (showing in each case any product, device,
process, service, business or publication covered thereby, the registered or
other owner, expiration date and number, if any) of all Copyrights, Patent
Rights and Trademarks owned by, licensed to or used by NTS or the NTS
Subsidiary.
(b) SCHEDULE 6.15(B) contains a list and description (showing in each
case any owner, licensor or licensee) of all Software owned by, licensed to or
used by NTS or the NTS Subsidiary, PROVIDED that SCHEDULE 6.15(B) does not list
Software licensed to NTS or the NTS Subsidiary that is commercially available
and subject to "shrink-wrap" or "click on" license agreements.
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(c) SCHEDULE 6.15(C) contains a list and description (showing in each
case the parties thereto) of all agreements, contracts, licenses, sublicenses,
assignments and indemnities which relate to (i) any Copyrights, Patent Rights or
Trademarks listed in SCHEDULE 6.15(A), (ii) any Trade Secrets owned by, licensed
to or used by NTS or the NTS Subsidiary or (iii) any Software listed in SCHEDULE
6.15(B).
(d) Except as disclosed in SCHEDULE 6.15(D), NTS or the NTS
Subsidiary either: (i) owns the entire right, title and interest in and to the
Intellectual Property and Software included in the Purchased NTS Assets, free
and clear of any Encumbrance; or (ii) has the perpetual, royalty-free right to
use the same or (iii) in the case of third party vendor Software, has the
ability to transfer such Software without the necessity of obtaining consents or
the payment of fees.
(e) Except as disclosed in SCHEDULE 6.15(E): (i) all Copyrights,
Patent Rights and Trademarks, including registration therefor, identified in
SCHEDULE 6.15(A) as being owned by NTS or the NTS Subsidiary are valid and in
force, and all patent applications with respect to Patent Rights and all
applications to register any unregistered Copyrights and Trademarks so
identified are pending and in good standing, all without challenge of any kind;
(ii) the Intellectual Property owned by NTS or the NTS Subsidiary is valid and
enforceable; (iii) NTS or the NTS Subsidiary has the sole and exclusive right to
bring actions for infringement or unauthorized use of the Intellectual Property
and Software owned by NTS or the NTS Subsidiary, and to the knowledge of IPS,
NTS or the NTS Subsidiary, there is no basis for any such action; (iv) NTS or
the NTS Subsidiary has taken all actions reasonably necessary to protect the
Copyrights, Trademarks, Software, Patent Rights or Trade Secrets included in the
Purchased NTS Assets, including by pursuing registration where necessary; and
(v) neither NTS or the NTS Subsidiary is in breach of any agreement affecting
any of the Intellectual Property and Software included in the Purchased NTS
Assets, and has not taken any action which would impair or otherwise adversely
affect its rights in the Intellectual Property and Software included in the
Purchased NTS Assets. Correct and complete copies of: (x) registrations for all
registered Copyrights, Patent Rights and Trademarks identified in
SCHEDULE 6.15(A) as being owned by NTS or the NTS Subsidiary; and (y) all
pending applications to register unregistered Copyrights, Patent Rights and
Trademarks identified in SCHEDULE 6.15(A) as being owned by NTS or the NTS
Subsidiary (together with any subsequent correspondence or filings relating to
the foregoing) have heretofore been delivered by IPS to Comdata.
(f) Except as set forth in SCHEDULE 6.15(F), (i) to the knowledge of
IPS, NTS or the NTS Subsidiary, no infringement of any Intellectual Property
Right of any other Person has occurred or results in any way from the operations
of NTS or the NTS Subsidiary as previously or currently conducted; (ii) no
claim of any infringement of any Intellectual Property Right of any other Person
has been made or asserted in respect of the operations of the NTS Business;
(iii) neither IPS, NTS or the NTS Subsidiary has received notice that any claim
of invalidity of any Copyright, Trademark or Patent Right, Software or Trade
Secret has been made; (iv) no proceedings are pending or, to the knowledge of
IPS, NTS or the NTS Subsidiary, threatened which challenge the validity,
ownership or use of any of the NTS Business Intellectual Property; and (v)
neither IPS, NTS or the NTS Subsidiary has had notice of, or knowledge of any
basis for,
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a claim against NTS or the NTS Subsidiary that the operations, activities,
products, software, equipment, machinery or processes of NTS or the NTS
Subsidiary infringe any Intellectual Property Right of any other Person.
(g) Except as disclosed in SCHEDULE 6.15(G): (i) the Software used
in the NTS Business (the "NTS OWNED SOFTWARE") is not subject to any transfer,
assignment, source code escrow agreement, reversion, site, equipment, or other
operational limitations; (ii) NTS or the NTS Subsidiary has maintained and
protected the NTS Owned Software (including, without limitation, all source code
and system specifications) with appropriate proprietary notices (including,
without limitation, the notice of copyright in accordance with the requirements
of 17 U.S.C. SECTION 401), confidentiality and non-disclosure agreements and
such other measures as are reasonably necessary to protect the proprietary,
trade secret or confidential information contained therein; (iii) the NTS Owned
Software is protectable under applicable copyright law and has not been
forfeited to the public domain and has been registered with the U.S. Copyright
office or is eligible for registration; (iv) NTS or the NTS Subsidiary has
copies of all releases or separate versions of the NTS Owned Software so that
the same may be subject to registration in the United States Copyright Office;
(v) NTS or the NTS Subsidiary has complete and exclusive right, title and
interest in and to the NTS Owned Software; (vi) NTS or the NTS Subsidiary has
developed the NTS Owned Software through its own efforts and for its own account
without the aid or use of any consultants, agents, independent contractors or
Persons (other than Persons that are employees of NTS or the NTS Subsidiary);
(vii) to the knowledge of IPS, NTS or the NTS Subsidiary, the NTS Owned Software
does not infringe any Intellectual Property Right of any other Person; (viii)
any NTS Owned Software includes the source code, system documentation,
statements of principles of operation and schematics, as well as any pertinent
commentary and explanation language used for the development, maintenance,
implementation and use thereof, so that a trained computer programmer could
develop, maintain, enhance, modify, support, compile and use all releases or
separate versions of the same that are currently subject to maintenance
obligations by NTS or the NTS Subsidiary; and (ix) there are no agreements or
arrangements in effect with respect to the marketing, distribution, licensing or
promotion of the NTS Owned Software by any other Person.
(h) Except as disclosed in SCHEDULE 6.15(H), all agents, consultants
or contractors who have contributed to or participated in the creation or
development of any Intellectual Property or Software on behalf of NTS or the NTS
Subsidiary or any predecessor in interest thereto either: (i) is a party to a
"work-for-hire" agreement under which NTS or the NTS Subsidiary is deemed to be
the original owner/author of all property rights therein; or (ii) has executed
an assignment or an agreement to assign in favor of NTS or the NTS Subsidiary
(or such predecessor in interest, as applicable) of all right, title and
interest in such material.
(i) Except as expressly provided herein, Comdata acknowledges and
agrees that the conveyance of the Purchased NTS Assets from NTS to Comdata does
not result in any express or implied license or other rights to Comdata or any
third person under any patent rights of NTS or its Affiliates or under any
patent rights of any third parties licensed to NTS or its Affiliates (including,
without limitation, any patent rights licensed to NTS or its Affiliates by
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Ronald A. Katz Technology Licensing, L.P.) whether by implication, estoppel or
otherwise. All such express or implied licenses or other rights are hereby
expressly excluded and disclaimed.
6.16. ACCOUNTS RECEIVABLE. All accounts receivable of NTS or the NTS
Subsidiary have arisen from bona fide transactions by NTS or the NTS Subsidiary
in the ordinary course of the NTS Business. All accounts receivable are good
and collectible in the ordinary course of business at the aggregate recorded
amounts thereof, net of any allowance for doubtful accounts; and all accounts
receivable to be reflected in the Closing Date NTS Special Report will be good
and collectible in the ordinary course of business at the aggregate recorded
amounts thereof, net of any allowance for doubtful accounts, which allowance
will be determined on a basis consistent with the basis used in determining the
allowance for doubtful accounts reflected in the NTS Balance Sheet.
6.17. TITLE TO PROPERTY. NTS or the NTS Subsidiary has good and
marketable title to all of the Purchased NTS Assets, free and clear of all
Encumbrances, except for Permitted Encumbrances and except as set forth in
SCHEDULE 6.17. Upon delivery to Comdata on the date hereof of the instruments
of transfer contemplated by SECTION 4.3, NTS will thereby transfer to Comdata
good and marketable title to the Purchased NTS Assets, subject to no
Encumbrances, except for Permitted Encumbrances.
6.18. EMPLOYEES AND RELATED AGREEMENTS; ERISA. (a) Except as
described in SCHEDULE 6.18(A), neither NTS or the NTS Subsidiary is, with
respect to the NTS Business, a party to or bound by any oral or written stock
option, stock purchase, bonus or other incentive plan or agreement;
(b) Except as described in SCHEDULE 5.19B), NTS does not maintain,
and is not required to contribute to, any "employee pension benefit plan" (as
such term is defined in Section 3(2) of ERISA) or "Welfare Benefit Plan" (as
such term is defined in Section 3(1) of ERISA), on behalf of any employees or
former employees of the NTS Business. None of NTS' ERISA Benefit Plans is a
"multiemployer plan" as defined in Section 3(37) of ERISA, or is or has been
subject to Sections 4063 or 4064 of ERISA. NTS has complied with the healthcare
continuation requirements of Section 601, ET. SEQ., of ERISA with respect to
employees of the NTS Business and their spouses, former spouses and dependents.
(c) SCHEDULE 6.18(C) hereto set forth a true, correct and complete
copy of each NTS severance plan, policy or practice in effect immediately prior
to the Closing Date with respect to Transferring NTS Employees.
6.19. EMPLOYEE RELATIONS. (a) Except as set forth in
SCHEDULE 6.19(A), NTS and the NTS Subsidiary have complied with all applicable
laws, rules and regulations which relate to prices, wages, hours, discrimination
in employment, occupational safety and health, and collective bargaining and are
not liable for any arrears of wages or any taxes, penalties or damages for
failure to comply with any of the foregoing. NTS and the NTS Subsidiary are in
compliance with the requirements of WARN and all similar state and local
statutes, laws and regulations and have no liabilities pursuant to any of them.
NTS believes that its relations with the employees of the
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NTS Business are satisfactory and are not likely to lead to collective
bargaining efforts. Neither NTS or the NTS Subsidiary is a party to or affected
by or, to the knowledge of IPS, NTS or the NTS Subsidiary, threatened with, any
dispute or controversy with a union or with respect to unionization or
collective bargaining involving the employees of NTS or the NTS Subsidiary.
Neither NTS nor the NTS Subsidiary is materially affected by any dispute or
controversy with a union or with respect to unionization or collective
bargaining involving any supplier or customer of NTS or the NTS Subsidiary.
SCHEDULE 6.19(A) sets forth a description of any union organizing or election
activities involving any non-union employees of NTS or the NTS Subsidiary which
have occurred since January 1, 1996 or, to the knowledge of IPS, NTS or the NTS
Subsidiary, are threatened as of the date hereof.
(b) Except as set forth in SCHEDULE 6.19(B), since January 1, 1996,
neither NTS or the NTS Subsidiary has directly or indirectly, purchased, leased
from others or otherwise acquired any material property or obtained any material
services from, or sold, leased to others or otherwise disposed of any material
property or furnished any material services to (except with respect to
remuneration for services rendered as a director, officer or employee of NTS or
the NTS Subsidiary), in the ordinary course of business or otherwise, (i) any
Person who is an officer or director of NTS or the NTS Subsidiary or (ii) any
Associate of any person referred to in clause (i) above. Except as set forth in
SCHEDULE 6.19(B), neither NTS or the NTS Subsidiary owes any amount in excess of
$10,000 to, or has any contract with or commitment to, IPS or any director,
officer or employee of NTS or the NTS Subsidiary (other than for compensation
for current services not yet due and payable and reimbursement of expenses
arising in the ordinary course of business) and none of such Persons owes any
amount in excess of $10,000 to NTS or the NTS Subsidiary.
(c) Neither NTS, the NTS Subsidiary or any officer, employee or agent
or other person acting on either of their behalf has, directly or indirectly,
since January 1, 1993, given or agreed to give any gift or similar benefit
(other than with respect to bona fide payments for which adequate consideration
has been given) to any customer, supplier, governmental employee or other person
who is or may be in a position to help or hinder the business of NTS or the NTS
Subsidiary (or assist NTS or the NTS Subsidiary in connection with any actual or
proposed transaction) (i) which might subject NTS or the NTS Subsidiary to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) which, if not continued in the future, would have an adverse
effect on the assets, business, operations or prospects of NTS or the NTS
Subsidiary or which would subject NTS or the NTS Subsidiary to suit or penalty
in any private or governmental litigation or proceeding, (iii) for any of the
purposes described in SECTION 162(c) of the Code, or (iv) for establishment or
maintenance of any concealed fund or concealed bank account.
6.20. CONTRACTS. Except as set forth in SCHEDULE 6.20 or any other
SCHEDULE hereto, neither NTS or the NTS Subsidiary is a party to or bound by:
(i) any contract for the purchase, sale or lease of real property;
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(ii) any contract for the purchase of goods or services by NTS or the
NTS Subsidiary which involved the payment of more than $50,000 in 1997;
(iii) any contract for the purchase, licensing or development of
software to be used by NTS or the NTS Subsidiary except for Software that
is available in consumer retail stores and subject to "shrink-wrap" license
agreements;
(iv) any consignment, distributor, dealer, manufacturers
representative, sales agency, advertising representative or advertising or
public relations contract except to the extent such contract is cancelable
without penalty within 30 days;
(v) any guarantee of the obligations of customers, suppliers,
officers, directors, employees, Affiliates or others except to the extent
such contract is cancelable without penalty within 30 days;
(vi) any agreement which provides for, or relates to, the incurrence
by NTS or the NTS Subsidiary of debt for borrowed money (including, without
limitation, any interest rate or foreign currency swap, cap, collar, hedge
or insurance agreements, or options or forwards on such agreements, or
other similar agreements for the purpose of managing the interest rate
and/or foreign exchange risk associated with its financing);
(vii) any contract not made in the ordinary course except to the
extent such contract is cancelable without penalty within 30 days; or
(viii) any other contract, agreement, commitment, understanding or
instrument which is material to NTS or the NTS Subsidiary and which
involves the payment of more than $50,000.
6.21. STATUS OF CONTRACTS. Except as set forth in SCHEDULE 6.21 or
in any other Schedule hereto, each of the leases, contracts and other agreements
listed in SCHEDULES 6.11(A), 6.14, 6.15(C), 6.18(A) and 6.20 (collectively, the
"NTS AGREEMENTS") constitutes a valid and binding obligation of the parties
thereto and is in full force and effect and (except as set forth in SCHEDULE 6.3
and except for those NTS Agreements which by their terms will expire prior to
the date hereof or are otherwise terminated prior to the date hereof in
accordance with the provisions hereof) to the knowledge of IPS, NTS or the NTS
Subsidiary, may be transferred to Comdata pursuant to this Agreement and will
continue in full force and effect thereafter, in each case without breaching the
terms thereof or resulting in the forfeiture or impairment of any rights
thereunder and without the consent, approval or act of, the payment of any
transfer or similar fee, or the making of any filing with, any other party. NTS
and the NTS Subsidiary have fulfilled and performed their obligations under each
of the NTS Agreements, and neither NTS or the NTS Subsidiary is in, or alleged
to be in, breach or material default under, nor is there or is there alleged to
be any basis for termination of, any of the NTS Agreements and to the knowledge
of IPS, NTS or the NTS Subsidiary, no other party to any of the NTS Agreements
has breached or committed a material default thereunder, and to the knowledge of
IPS, NTS or the NTS Subsidiary, no event has occurred and no condition or state
of facts exists which, with the passage
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of time or the giving of notice or both, would constitute such a default or
breach by NTS, the NTS Subsidiary or by any such other party. Neither NTS or
the NTS Subsidiary is currently renegotiating any of the NTS Agreements or
paying liquidated damages in lieu of performance thereunder.
6.22. NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as set
forth in SCHEDULE 6.22:
(i) the Purchased NTS Assets and the operation of the NTS Business
complies with all applicable Requirements of Laws and Court Orders;
(ii) NTS and the NTS Subsidiary have complied with all Requirements
of Laws and Court Orders which are applicable to the Purchased NTS Assets
or the NTS Business;
(iii) there are no lawsuits, claims, suits, proceedings or
investigations pending or, to the knowledge of IPS, NTS or the NTS
Subsidiary, threatened against or affecting NTS or the NTS Subsidiary nor,
to the knowledge of IPS, NTS or the NTS Subsidiary, is there any basis for
any of the same, and there are no lawsuits, suits or proceedings pending in
which NTS or the NTS Subsidiary is the plaintiff or claimant;
(iv) there is no action, suit or proceeding pending or, to the
knowledge of IPS, NTS or the NTS Subsidiary, threatened which questions the
legality or propriety of the transactions contemplated by this Agreement;
and
(v) to the knowledge of IPS, NTS or the NTS Subsidiary, no
legislative or regulatory proposal or other proposal for the change in any
Requirements of Law or the interpretation thereof has been adopted or is
pending which could adversely affect NTS or the NTS Subsidiary.
6.23. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 6.23:
(a) the operations of NTS and the NTS Subsidiary are, and have been,
in compliance with, and neither NTS or the NTS Subsidiary is the subject of any
judicial or administrative proceedings or settlements involving alleged
violations of or liability under, Environmental Laws.
(b) no property now or previously owned or operated by NTS or the NTS
Subsidiary is under investigation by any Governmental Body or requires remedial
action under any applicable Environmental Laws to address any Contaminant.
6.24. INSURANCE. SCHEDULE 6.24 sets forth a list and brief
description (including nature of coverage, limits, deductibles, premiums and the
loss experience for the most recent five years with respect to each type of
coverage) of all policies of insurance maintained, owned or held by NTS or the
NTS Subsidiary on the date hereof. NTS and the NTS Subsidiary have complied
with each such insurance policy and have not failed to give any notice or
present any claim
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thereunder in a due and timely manner. NTS or the NTS Subsidiary has delivered
to Comdata correct and complete copies of the most recent inspection reports, if
any, received from insurance underwriters as to the condition of the Purchased
NTS Assets.
6.25. CUSTOMERS. Set forth in SCHEDULE 6.25 hereto is (i) a list of
names and addresses of the five largest truck stop customers of the NTS Business
as measured by the total transaction volume of the NTS Business which each such
truck stop represents the period January 1, 1997 through November 30, 1997 and
(ii) a list of names and addresses of the 25 largest trucking customers
(measured by dollar volume of net revenues in each case) of the NTS Business and
the percentage of the NTS Business which each such customer represents. Except
as set forth in SCHEDULE 6.25, there exists no actual or to the knowledge of
IPS, NTS or the NTS Subsidiary, threatened termination, cancellation or
limitation of, or any modification or change in, the business relationship of
NTS and the NTS Subsidiary with any customer or group of customers listed in
SCHEDULE 6.25, or whose purchases individually or in the aggregate are material
to the operation of the NTS Business, and to the knowledge of IPS, NTS or the
NTS Subsidiary, there exists no present or future condition or state of facts or
circumstances involving customers, suppliers or sales representatives which IPS
or NTS can now reasonably foresee would materially adversely affect NTS or the
NTS Subsidiary (taken as a whole) or prevent the conduct of the NTS Business
after the consummation of the transactions contemplated by this Agreement in
essentially the same manner in which such business has heretofore been
conducted.
6.26. BANK ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 6.26 sets forth a
complete and correct list of all bank accounts and safe deposit boxes of NTS and
the NTS Subsidiary and the individuals authorized to sign or otherwise act with
respect thereto as of the date hereof and a complete and correct list of all
Persons holding a general or special power of attorney granted by NTS or the NTS
Subsidiary and a complete and correct copy thereof.
6.27. ESTIMATED CLOSING DATE NTS SPECIAL REPORT. SCHEDULE 6.27
contains IPS's bona fide, good faith estimate of the Closing Date NTS Special
Report (the "ESTIMATED CLOSING DATE NTS SPECIAL REPORT").
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. COVENANT NOT TO COMPETE OR SOLICIT BUSINESS BY FDC, IPS, NTS AND
FDFS. (a) In furtherance of the exchange of the Purchased Gaming Assets for the
Purchased NTS Assets and the Initial Amount hereunder, by virtue of the
transactions contemplated hereby and more effectively to protect the value and
goodwill of the Purchased Gaming Assets and the Purchased NTS Assets so
exchanged, FDC, IPS, NTS and FDFS, covenant and agree that, for a period ending
on the third anniversary of the date hereof, neither FDC, IPS, NTS, FDFS nor any
of their respective controlled Affiliates will:
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(i) directly or indirectly (whether as principal, agent,
independent contractor, partner or otherwise) own, manage, operate,
control, participate in, or otherwise carry on, a business engaged in
Restricted Trucking Activities anywhere in the U.S. and Canada (it
being understood by the parties hereto that the NTS Business is not
limited to any particular region and that such business may be engaged
in effectively from any location); or
(ii) induce or attempt to persuade any customer of NTS or the
NTS Subsidiary to terminate such business relationship in order to
enter into any such relationship on behalf of any other business
organization in competition with the NTS Business;
PROVIDED, HOWEVER, that nothing set forth in this SECTION 7.1(a) shall prohibit
FDC, IPS, NTS, FDFS or their respective Affiliates from (v) owning not in excess
of 5% in the aggregate of any class of capital stock of any corporation if such
stock is publicly traded and listed on any national or regional stock exchange
or on the NASDAQ national market system (w) purchasing, and following such
purchase, actively engaging in, any business that has a subsidiary, division,
group, franchise or segment that is engaged in any Restricted Trucking Activity,
so long as: (A) on the date of such purchase, not more than 20% of the
consolidated revenues of such business are derived from such Restricted Trucking
Activity and (B) such business divests itself of such subsidiary, division,
group, franchise or segment as soon as practicable after the date of such
purchase, PROVIDED, that with respect to any purchase intended to be accounted
for as a pooling of interests under GAAP or treated for federal income tax
purposes as a tax-free reorganization, no such divestiture shall be required
until, in the reasonable opinion of FDC, such divestiture would no longer
endanger the accounting of such purchase as a pooling of interests under GAAP or
the treatment for federal income tax purposes of such purchase as a tax-free
reorganization; (x) performing any services pursuant to the NTS Business
Transition Services Agreement; (y) the provision of payroll delivery services
or products (whether or not under the name "Transpay") or any products currently
contemplated by NTS to be offered under the name "Transpay" unrelated to the
Restricted Trucking Activities; and (z) except for the Restricted Trucking
Activities (to the extent not otherwise permitted by reason of the foregoing),
engaging in any other activity which may now or hereafter be provided by such
party.
(b) In addition, FDC, IPS, NTS and FDFS covenant and agree that
neither they nor any of their respective Affiliates will divulge or make use of
any Trade Secrets or other confidential information of the NTS Business in each
case relating exclusively to the Purchased NTS Assets other than to disclose
such secrets and information to Ceridian, Comdata or their respective
Affiliates.
(c) Nothing in this Agreement, including without limitation, SECTION
7.1(a), shall prevent any Affiliate of FDC from engaging in Restricted Trucking
Activities after such Affiliate ceases to be an Affiliate of FDC.
(d) In the event FDC, IPS, NTS, FDFS or any of their respective
Affiliates violates any of their respective obligations under this SECTION 7.1,
Ceridian or Comdata may
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proceed against it in law or in equity for such damages or other relief as a
court may deem appropriate. FDC, IPS, NTS and FDFS acknowledge that a violation
of this SECTION 7.1 may cause Ceridian or Comdata irreparable harm which may not
be adequately compensated for by money damages. FDC, IPS, NTS and FDFS
therefore agree that in the event of any actual or threatened violation of this
SECTION 7.1, Ceridian or Comdata shall be entitled, in addition to other
remedies that they may have, to a temporary restraining order and to preliminary
and final injunctive relief against FDC, IPS, NTS, FDFS or such Affiliate of
FDC, IPS, NTS or FDFS to prevent any violations of this SECTION 7.1, without the
necessity of posting a bond. The prevailing party in any action commenced under
this SECTION 7.1 shall also be entitled to receive reasonable attorneys' fees
and court costs.
(e) It is the intent and understanding of each party hereto that if,
in any action before any court or agency legally empowered to enforce this
SECTION 7.1, any term, restriction, covenant or promise in this SECTION 7.1 is
found to be unreasonable and for that reason unenforceable, then such term,
restriction, covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency.
7.2. SOLICITATION OF EMPLOYEES. (a) Prior to the first anniversary
of the date hereof, without the consent of FDC, none of Comdata, Ceridian or any
of their controlled Affiliates (the "RESTRICTED COMDATA PARTIES") shall solicit
or seek to hire any Transferred Comdata Employee; PROVIDED, HOWEVER, that the
foregoing shall not prevent any Restricted Comdata Party from hiring any such
person (i) who contacts such Restricted Comdata Party on his or her own
initiative without solicitation from any of the Restricted Comdata Parties, (ii)
in connection with general employment advertisements published in magazines,
journals, newspapers and other publications that are not targeted at the
Transferred Comdata Employees or (iii) who has been discharged by the Gaming
Business prior to any such solicitation.
(b) Prior to the first anniversary of the date hereof, without the
consent of Ceridian, none of FDC, IPS, NTS, FDFS or any of their controlled
Affiliates (the "RESTRICTED FDC PARTIES") shall solicit or seek to hire any
Transferred NTS Employee; PROVIDED, HOWEVER, that the foregoing shall not
prevent any Restricted FDC Party from hiring any such person (i) who contacts
such Restricted FDC Party on his or her own initiative without solicitation from
any of the Restricted FDC Parties, (ii) in connection with general employment
advertisements published in magazines, journals, newspapers and other
publications that are not targeted at the Transferred NTS Employees or (iii) who
has been discharged by the NTS Business prior to any such solicitation.
7.3. TAX MATTERS.
(a) Liability for Taxes.
(i) FDC TAXES. FDC shall be liable for and pay, and pursuant to
ARTICLE VIII (and subject to the limitations thereof) shall indemnify each
Ceridian Group Member against, all Taxes (A) applicable to the NTS Business, the
Purchased NTS Assets and the Assumed NTS Liabilities, in each case attributable
to taxable years or periods ending at the time
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of or prior to the Closing and, with respect to any Straddle Period, the portion
of such Straddle Period ending on and including the Closing, (B) imposed on the
NTS Subsidiary or for which the NTS Subsidiary may otherwise be liable for any
taxable year or period that ends on or before the Closing and, with respect to
any Straddle Period, the portion of such Straddle Period ending on and including
the Closing (including, without limitation, any Taxes imposed on the NTS
Subsidiary pursuant to Treas. Reg. SECTION 1.1502-6 or similar provision of
state, local, or foreign law or any Taxes imposed on the NTS Subsidiary as a
result of the termination of its election under Section 1504(d) of the Code),
(C) applicable to the Gaming Business, the Purchased Gaming Assets and the
Assumed Gaming Liabilities, in each case attributable to taxable years or
periods beginning after the Closing and, with respect to any Straddle Period,
the portion of such Straddle Period beginning after the Closing, and (D) imposed
on the Gaming Subsidiary or for which the Gaming Subsidiary may otherwise be
liable for any taxable year or period that begins after the Closing and, with
respect to any Straddle Period, the portion of such Straddle Period beginning
after the Closing. FDC shall be entitled to any refund of (or credit for)
Taxes for which FDC would be liable pursuant to this SECTION 7.3(a)(i).
(ii) CERIDIAN TAXES. Ceridian shall be liable for and pay, and
pursuant to ARTICLE VIII (and subject to the limitations thereof) shall
indemnify each FDC Group Member against, all Taxes (A) applicable to the Gaming
Business, the Purchased Gaming Assets and the Assumed Gaming Liabilities, in
each case attributable to taxable years or periods ending at the time of or
prior to the Closing and, with respect to any Straddle Period, the portion of
such Straddle Period ending on and including the Closing, (B) imposed on the
Gaming Subsidiary or for which the Gaming Subsidiary may otherwise be liable for
any taxable year or period that ends on or before the Closing and, with respect
to any Straddle Period, the portion of such Straddle Period ending on and
including the Closing (including, without limitation, any Taxes imposed on the
Gaming Subsidiary pursuant to Treas. Reg. SECTION 1.1502-6 or similar provision
of state, local or foreign law or any Taxes imposed on the Gaming Subsidiary as
a result of a termination of an election under Section 1504(d) of the Code), (C)
applicable to the NTS Business, the Purchased NTS Assets and the Assumed NTS
Liabilities, in each case attributable to taxable years or periods beginning
after the Closing and, with respect to any Straddle Period, the portion of such
Straddle Period beginning after the Closing, and (D) imposed on the NTS
Subsidiary or for which the NTS Subsidiary may otherwise be liable for any
taxable year or period that begins after the Closing and, with respect to any
Straddle Period, the portion of such Straddle Period beginning after the
Closing. Ceridian shall be entitled to any refund of (or credit for) Taxes for
which Ceridian would be liable pursuant to this SECTION 7.3(a)(ii).
(iii) STRADDLE PERIODS. For purposes of paragraphs (a)(i) and
(a)(ii), whenever it is necessary to determine the liability for Taxes for a
Straddle Period, the determination of the Taxes for the portion of the Straddle
Period ending on and including, and the portion of the Straddle Period beginning
after, the Closing shall be determined by assuming that the Straddle Period
consisted of two taxable years or periods, one which ended at the Closing and
the other which began immediately after the Closing, and items of income, gain,
deduction, loss or credit for the Straddle Period shall be allocated between
such two taxable years or periods on a "closing of the books basis" by assuming
that the books of the NTS Business or the Gaming Business, as the case may be,
were closed at the time of the Closing, PROVIDED, HOWEVER, that
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exemptions, allowances or deductions that are calculated on an annual basis,
such as the deduction for depreciation, shall be apportioned between such two
taxable years or periods on a daily basis.
(iv) OFFSET TO LIABILITY. If, as a result of any action, suit,
investigation, audit, claim, assessment or amended Tax Return, there is any
change after the date hereof in an item of income, gain, loss, deduction, credit
or amount of Tax that results in an increase in a Tax liability for which FDC
would otherwise be liable pursuant to paragraph (a)(i) of this SECTION 7.3, and
such change results in a decrease in the Tax liability of the NTS Subsidiary,
Ceridian or any Affiliate or successor of any thereof for any taxable year or
period beginning after the Closing or for the portion of any Straddle Period
beginning after the Closing, FDC shall not be liable pursuant to such paragraph
(a)(i) with respect to such increase to the extent of such decrease (and, to the
extent such increase in Tax liability is paid to a taxing authority by FDC or
any Affiliate thereof, Ceridian shall pay FDC an amount equal to such decrease).
If, as a result of any action, suit, investigation, audit, claim, assessment or
amended Tax Return, there is any change after the date hereof in an item of
income, gain, loss, deduction, credit or amount of Tax that results in an
increase in a Tax liability for which Ceridian would otherwise be liable
pursuant to paragraph (a)(ii) of this SECTION 7.3, and such change results in a
decrease in the Tax liability of the Gaming Subsidiary, FDC or any Affiliate or
successor thereof for any taxable year or period beginning after the Closing or
for the portion of any Straddle Period beginning after the Closing, Ceridian
shall not be liable pursuant to such paragraph (a)(ii) with respect to such
increase to the extent of such decrease (and, to the extent such increase in Tax
liability is paid to a taxing authority by Ceridian or any Affiliate thereof,
FDC shall pay Ceridian an amount equal to such decrease).
(v) TRANSFER TAXES. Notwithstanding anything herein to the
contrary, (A) Ceridian shall pay, and shall indemnify each FDC Group Member
against one-half of any real property transfer or gains Tax, sales Tax, use
Tax, stamp Tax, stock transfer Tax, or other similar Tax imposed on the
transactions contemplated by this Agreement and (B) FDC shall pay, and shall
indemnify each Ceridian Group Member against, one-half of any real property
transfer or gains Tax, sales Tax, use Tax, stamp Tax, stock Transfer Tax, or
other similar Tax imposed on the transactions contemplated by this Agreement.
(b) TAX RETURNS.
(i) FDC TAX RETURNS. FDC shall timely file or cause to be
timely filed when due (taking into account all extensions properly obtained) all
Tax Returns (A) attributable to the NTS Business, the Purchased NTS Assets or
the NTS Subsidiary for taxable years or periods ending on or before the Closing
and (B) attributable to the Gaming Business, the Purchased Gaming Assets or the
Gaming Subsidiary for taxable years or periods beginning after the Closing or
Straddle Periods. In each case FDC shall remit or cause to be remitted any
Taxes due in respect of such Tax Returns.
(ii) CERIDIAN TAX RETURNS. Ceridian shall timely file or cause
to be timely filed when due (taking into account all extensions properly
obtained) all Tax Returns (A)
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attributable to the Gaming Business, the Purchased Gaming Assets or the Gaming
Subsidiary for taxable years or periods ending on or before the Closing and (B)
attributable to the NTS Business, the Purchased NTS Assets or the NTS Subsidiary
for taxable years or periods beginning after the Closing or Straddle Periods.
In each case, Ceridian shall remit or cause to be remitted any Taxes due in
respect of such Tax Returns.
(iii) REMITTANCE. FDC or Ceridian shall pay the other party for
the Taxes for which FDC or Ceridian, respectively, is liable pursuant to
paragraph (a) of this SECTION 7.3 but which are payable with any Tax Return to
be filed by the other party pursuant to this paragraph (b) upon the written
request of the party entitled to payment, setting forth in detail the
computation of the amount owed by FDC or Ceridian, as the case may be, but in no
event earlier than 10 days prior to the due date for paying such Taxes.
(iv) AMENDED RETURNS. None of Ceridian or any Affiliate of
Ceridian shall (or shall cause or permit the NTS Subsidiary to) amend, refile or
otherwise modify (or grant an extension of any statute of limitation with
respect to) any Tax Return relating in whole or in part to the NTS Business, the
Purchased NTS Assets or the NTS Subsidiary with respect to any taxable year or
period ending on or before the Closing (or with respect to any Straddle Period)
without the prior written consent of FDC, which consent may not be unreasonably
withheld. None of FDC or any Affiliate of FDC shall (or shall cause the Gaming
Subsidiary to) amend, refile or otherwise modify (or grant an extension of any
statute of limitation with respect to) any Tax Return relating in whole or in
part to the Gaming Business, the Purchased Gaming Assets or the Gaming
Subsidiary with respect to any taxable year or period ending on or before the
Closing (or with respect to any Straddle Period) without the prior written
consent of Ceridian, which consent may not be unreasonably withheld.
(c) CONTEST PROVISIONS.
(i) CONTESTS INVOLVING PRE-CLOSING TAXES OF THE NTS BUSINESS,
THE PURCHASED NTS ASSETS OR THE NTS SUBSIDIARY. Ceridian shall promptly notify
FDC, in writing upon receipt by Ceridian, Comdata, any of their Affiliates, or
the NTS Subsidiary of written notice of any pending or threatened federal,
state, local or foreign Tax audits, examinations or assessments which might
affect the Tax liabilities for which FDC may be liable pursuant to paragraph
(a)(i) of this SECTION 7.3. FDC shall have the sole right to control any Tax
audit or administrative or court proceeding relating to the NTS Business, the
Purchased NTS Assets or the NTS Subsidiary for taxable periods ending on or
before the Closing, and to employ counsel of its choice at its expense. None
of Ceridian, any of its Affiliates, or the NTS Subsidiary may settle any Tax
claim for any Taxes for which FDC may be liable pursuant to paragraph (a)(i) of
this SECTION 7.3, without the prior written consent of FDC, which consent may
not be unreasonably withheld.
(ii) CONTESTS INVOLVING PRE-CLOSING TAXES OF THE GAMING BUSINESS
OR THE PURCHASED GAMING ASSETS. FDC shall promptly notify Ceridian in writing
upon receipt by FDC, FDFS, NTS, any of their Affiliates or the Gaming Subsidiary
of written notice of any pending or threatened federal, state, local or foreign
Tax audits, examinations or assessments which might
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affect the Tax liabilities for which Ceridian may be liable pursuant to
paragraph (a)(ii) of this SECTION 7.3. Ceridian shall have the sole right to
control any Tax audit or administrative or court proceeding relating to the
Gaming Business, the Purchased Gaming Assets or the Gaming Subsidiary for
taxable periods ending on or before the Closing, and to employ counsel of its
choice at its expense. None of FDC or any of its Affiliates may settle any Tax
claim for any Taxes for which Ceridian may be liable pursuant to paragraph
(a)(ii) of this SECTION 7.3, without the prior written consent of Ceridian,
which consent may not be unreasonably withheld.
(iii) STRADDLE PERIODS. In the case of a Straddle Period, the
party (the "Filing Party" responsible for filing (or causing to be filed) the
Tax Returns related to such Straddle Period pursuant to SECTION 7.3(b) shall
control any Tax audit or administrative or court proceeding relating to such
Straddle Period; PROVIDED, HOWEVER, that the other party (the "Non-Filing
Party") shall be entitled to participate at its expense in such proceeding to
the extent the Non-Filing Party is liable for Taxes relating to such Straddle
Period pursuant to SECTION 7.3(a) and, with the written consent of the Filing
Party, and at the Non-Filing Party's sole expense, may assume the entire control
of such audit or proceeding.
(d) ASSISTANCE AND COOPERATION. After the date hereof, each of FDC
and Ceridian shall (and cause their respective Affiliates to):
(i) assist the other party in preparing any Tax Returns which
such other party is responsible for preparing and filing in accordance with
paragraph (b) of this SECTION 7.3;
(ii) cooperate fully in preparing for any audits of, or disputes
with taxing authorities regarding, any Tax Returns relating to the NTS Business,
the Purchased NTS Assets, the NTS Subsidiary, the Gaming Business, the Purchased
Gaming Assets or the Gaming Subsidiary;
(iii) make available to the other and to any taxing authority as
reasonably requested all information, records, and documents relating to Taxes
of the NTS Business, the Purchased NTS Assets, the NTS Subsidiary, the NTS
Business, the Purchased NTS Assets, the Gaming Business, the Purchased Gaming
Assets or the Gaming Subsidiary;
(iv) timely sign and deliver such certificates or forms as may
be necessary or appropriate to establish an exemption from (or otherwise
reduce), or file Tax Returns or other reports with respect to, Taxes described
in paragraph (a)(v) of this SECTION 7.3 (relating to sales, transfer and similar
Taxes); and
(v) timely provide to the other powers of attorney or similar
authorizations necessary to carry out the purposes of this SECTION 7.3;
(e) The parties hereto agree to file all federal, state, local and
foreign Tax Returns in a manner consistent with the fair market values
identified in SECTION 2.1. Within 60 days following the date hereof or as soon
as is reasonably practicable, FDC and Ceridian shall negotiate
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and draft a schedule (the "ALLOCATION SCHEDULE") allocating such amounts among
the Purchased NTS Assets and the Purchased Gaming Assets. The Allocation
Schedule shall be consistent with the values set forth above and shall be
prepared in accordance with Section 1060 of the Code and the regulations
thereunder. FDC and Comdata each agrees that promptly upon receiving said
Allocation Schedule it shall return an executed copy thereof to the other party.
FDC and Comdata each agrees to file all federal, state, local and foreign Tax
Returns in accordance with the Allocation Schedule.
(f) REVENUE CANADA APPROVALS. FDC has filed, with respect to the
sale of the stock of the NTS Subsidiary by FDC, and Ceridian has filed, with
respect to the sale of the stock of the Gaming Subsidiary by Ceridian, a Notice
by a Non-Resident of Canada Concerning the Disposition or Proposed Disposition
of Taxable Canadian Property (the "FORM T2062") as required by Section 116 of
the Canadian INCOME TAX ACT and, in the case of Ceridian, Notice by a Non-
Resident of Quebec concerning the Disposition or Proposed Disposition of Taxable
Quebec Property (The "Form TP 1097") as required by Section 1097 of The Quebec
Taxation Act. The parties hereby agree that the good faith estimated value of
the purchase price allocable to the outstanding shares of capital stock of the
NTS Subsidiary is $571,000 (Canadian dollars) and the good faith estimated value
of the purchase price allocable to the outstanding shares of capital stock of
the Gaming Subsidiary, is $2,857,000 (Canadian dollars), subject to any post-
closing adjustments which are agreed to by the parties. Each of Ceridian and
FDC shall use commercially reasonable efforts to obtain from Revenue Canada a
certificate under Section 116 of the INCOME TAX ACT (Canada) and, in the case of
Ceridian, the equivalent certificate under the TAXATION ACT (Quebec) with a
"certificate limit" greater than or equal to the purchase price allocable to the
shares sold by it (the "Canadian Tax Certificate") within 30 days after the end
of the month during which the Closing occurs (the "Certificate Date"), and to
provide the purchaser of the shares with its copy of the Canadian Tax
Certificate forthwith. If the Canadian Tax Certificate is not obtained by the
seller and delivered to the purchaser by the Certificate Date, then the seller
will indemnify the purchaser and hold the purchaser harmless with respect to any
tax, penalties and interest which may be assessed against the purchaser under
the INCOME TAX ACT (Canada) or the TAXATION ACT (Quebec) by virtue of the
purchaser's failure to withhold and remit or pay any tax required to be remitted
or paid by the purchaser under subsection 116(5) of the INCOME TAX ACT (Canada)
or the equivalent provision of the TAXATION ACT (Quebec).
7.4. EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
(a) TRANSFERRING EMPLOYEES.
(i) NTS has listed on SCHEDULE 7.4(A) those employees of either NTS
or the NTS Subsidiary who NTS or the NTS Subsidiary intends to transfer to
Comdata and who are Actively Employed on the date hereof and whose duties
primarily relate to the NTS Business (collectively, the "NTS EMPLOYEES"). On
SCHEDULE 7.4(A), NTS shall designate separately those NTS Employees on a
Statutorily Protected Leave.
(ii) Comdata has listed on SCHEDULE 7.4(B) those employees of either
Comdata or the Gaming Subsidiary who Comdata intends to transfer to FDFS and who
are Actively Employed
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on the date hereof and whose duties primarily relate to the Gaming Business
(collectively, the "COMDATA EMPLOYEES"). On SCHEDULE 7.4(B), Comdata shall
designate separately those Comdata Employees on a Statutorily Protected Leave.
(iii) On the Closing Date, Comdata shall offer employment to each of
the NTS Employees. All such employees who do not decline Comdata's offer of
employment and actually perform services for Comdata on the Closing Date or who,
on the Closing Date, are on NTS approved absences or Statutorily Protected
Leaves and do not later decline Comdata's offer of employment and actually
perform services for Comdata on the next business day following the expiration
of such approved absence or Statutorily Protected Leave, are hereinafter
referred to as "TRANSFERRING NTS EMPLOYEES." The employment of the NTS
Employees with Comdata shall be considered effective and their employment by NTS
shall transfer to Comdata on the Closing Date, or in the case of employees on
NTS approved absences or Statutorily Protected Leaves, as of the date they first
perform services for Comdata (the "COMDATA EFFECTIVE DATE").
(iv) On the Closing Date, FDFS shall offer employment to each of the
Comdata Employees. All such employees who do not decline FDFS' offer of
employment and actually perform services for FDFS on the Closing Date or who, on
the Closing Date, are on Comdata approved absence or Statutorily Protected
Leaves and do not later decline FDFS' offer of employment and actually perform
services for FDFS on the next business day following the expiration of such
approved absence or Statutorily Protected Leave are hereinafter referred to as
"TRANSFERRING COMDATA EMPLOYEES." The employment of the Comdata Employees with
FDFS shall be considered effective and their employment by Comdata shall
transfer to FDFS on the Closing Date, or, in the case of employees on Comdata
approved absences or Statutorily Protected Leaves, as of the date they first
perform services for FDFS (the "FDFS EFFECTIVE DATE").
(v) NTS shall be responsible for paying out any earned, unused
vacation days of Transferring NTS Employees upon their termination of employment
with NTS and in accordance with NTS' vacation policy. In no event will Ceridian
or Comdata have any responsibility or liability for payment of any vacation or
sick days earned by a Transferring NTS Employee during his employment with NTS.
(vi) Comdata shall be responsible for paying out any earned, unused
vacation and sick days of Transferring Comdata Employees upon their termination
of employment with Comdata and in accordance with Comdata's vacation and sick
pay policy. In no event will FDC, IPS or FDFS have any responsibility or
liability for payment of any vacation or sick days earned by a Transferring
Comdata Employee during his employment with Comdata.
(vii) FDC, IPS and FDFS shall be solely liable for, and indemnify and
hold Ceridian and Comdata harmless from all claims, demands, costs or other
liabilities, including reasonable attorneys' fees, related to the employees
listed on SCHEDULE 7.4(A): (A) who do not become Transferring NTS Employees; (B)
to the extent such liability arises from any action, event or course of conduct
except for any action, event or course of conduct of Ceridian or Comdata
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that occurs prior to the Comdata Effective Date; or (C) to the extent such
liability arises under or relates to any employee benefit plan of FDC or IPS
except for any liability related to such plans with respect to any Transferred
NTS Employee arising during the transition period described in SECTION 7.4(a)(x)
below, which shall be the responsibility of Comdata.
(viii) Ceridian and Comdata shall be solely liable for, and indemnify
and hold FDC, IPS and FDFS harmless from all claims, demands, costs or other
liabilities, including reasonable attorneys' fees, related to the employees
listed on SCHEDULE 7.4(B): (A) who do not become Transferring Comdata Employees;
(B) to the extent such liability arises from any action, event or course of
conduct except for any action, event or course of conduct of FDC, IPS or FDFS
that occurs prior to the FDFS Effective Date; or (C) to the extent such
liability arises under or relates to any employee benefit plan of Ceridian or
Comdata except for any liability related to such plans with respect to any
Transferred Comdata Employee arising during the transition period described in
SECTION 7.4(b)(ix) below, which shall be the responsibility of FDC.
(ix) Comdata will, for administrative convenience only, allow the
Transferring Comdata Employees to remain on its payroll and welfare benefit
plans for a transition period of up to 30 days following the Closing Date. FDC,
IPS and FDFS shall reimburse Comdata for all direct costs associated with the
Transferring Comdata Employees remaining on its payroll and welfare benefit
plans during this transition period.
(x) FDC will, for administrative convenience only, allow the
Transferring NTS Employees to remain on its payroll and welfare benefit plans
for a transition period of up to 30 days following the Closing Date. Ceridian
and Comdata shall reimburse NTS for all direct costs associated with the
Transferring NTS Employees remaining on its payroll and welfare benefit plans
during this transition period.
(b) WELFARE PLANS.
(i) Except as otherwise required by the terms of any such plan, all
Transferring NTS Employees shall cease participation in any Welfare Plan
sponsored or maintained by FDC, IPS or NTS except for any transition period
provided for in SUBSECTION 7.4(a)(x) above. Except as otherwise required by the
terms of any such plan, all Transferring Comdata Employees shall cease
participation in any Welfare Plan sponsored or maintained by Ceridian or Comdata
except for any transition period provided for in SUBSECTION 7.4(a)(ix) above.
(ii) Commencing on the Comdata Effective Date, Transferring NTS
Employees shall be eligible for those Welfare Plans of Ceridian and Comdata in
effect for similarly situated existing employees of Comdata (collectively, the
"COMDATA WELFARE PLANS"). Transferring NTS Employees shall be credited for
their length of service with NTS and its Affiliates for all purposes under the
Comdata Welfare Plans, including eligibility. Any pre-existing condition
limitation under a Comdata Welfare Plan shall be waived for Transferring NTS
Employees and their eligible dependents. Commencing on the FDFS Effective Date,
Transferring Comdata Employees shall be eligible for those Welfare Plans of FDC
or IPS in effect for similarly situated existing employees of IPS (collectively,
the "IPS WELFARE PLANS"). Transferring Comdata Employees shall be credited
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for their length of service with Comdata and its Affiliates for all purposes
under the IPS Welfare Plans, including eligibility. Any pre-existing condition
limitation under an IPS Welfare Plan shall be waived for Transferring Comdata
Employees and their eligible dependents.
(iii) IPS shall be responsible for providing continuation coverage
to NTS Employees who do not become Transferred NTS Employees (and their covered
dependents) and Transferring NTS Employees (and their covered dependents) under
each of its applicable health plans with respect to all qualifying events under
COBRA and comparable state law which occur before the Comdata Effective Date.
Comdata shall be responsible for providing continuation coverage to Transferring
NTS Employees (and their covered dependents) under each of its applicable group
health plans with respect to all qualifying events under COBRA and comparable
state law which occur on or after the Comdata Effective Date. Comdata shall be
responsible for providing continuation coverage to Comdata Employees who do not
become Transferring Comdata Employees (and their covered dependents) and
Transferring Comdata Employees (and their covered dependents) under each of its
applicable group health plans with respect to all qualifying events under COBRA
and comparable state law which occur before the IPS Effective Date. IPS shall
be responsible for providing continuation coverage to Transferring Comdata
Employees (and their covered dependents) under each of its applicable group
health plans with respect to all qualifying events under COBRA and comparable
state law which occur on or after the IPS Effective Date.
(iv) Except as otherwise expressly provided in this SECTION 7.4(b),
IPS shall be liable for, and shall indemnify and hold each Ceridian Group Member
harmless from, all claims incurred by Transferring NTS Employees and other
current or former employees of IPS (and their covered dependents) under the IPS
Welfare Plans. Except as otherwise expressly provided in this SECTION 7.4(b),
Comdata shall be liable for, and shall indemnify and hold each FDC Group Member
harmless from, all claims incurred by Transferring Comdata Employees which occur
before the IPS Effective Date and other current or former employees of Comdata
(and their covered dependents) under the Comdata Welfare Plans.
(c) PENSION PLANS.
(i) As of the Comdata Effective Date, all Transferring NTS Employees
shall cease accruing benefits under any Pension Plan sponsored or maintained by
FDC, IPS or NTS (collectively, the "IPS PENSION PLANS"). As of the FDFS
Effective Date, all Transferring Comdata Employees shall cease accruing benefits
under any Pension Plan sponsored or maintained by Ceridian or Comdata
(collectively, the "COMDATA PENSION PLANS").
(ii) Commencing on the Comdata Effective Date, Transferring NTS
Employees shall be eligible for those Comdata Pension Plans in effect for
similarly situated existing employees of Comdata PROVIDED, HOWEVER, that
Transferring NTS Employees shall not be considered eligible for the Ceridian
Corporation Retirement Plan which is closed to new entrants. Transferring NTS
Employees shall be credited for their length of service with NTS and its
Affiliates for purposes of eligibility and vesting under the Comdata Pension
Plans. Commencing on the FDFS Effective Date, Transferring Comdata Employees
shall be eligible for those IPS Pension Plans in effect for
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similarly situated existing employees of IPS; provided, however, that
Transferring Comdata Employees shall not be considered eligible for the FDC
Retirement Plan, which is frozen. Transferring Comdata Employees shall be
credited for their length of service with Comdata and its Affiliates for
purposes of eligibility and vesting under the IPS Pension Plans.
(iii) Subject to the approval of the FDC Employee Benefits
Administration and Investment Committee, IPS shall cause the accounts of the
Transferring NTS Employees under IPS's 401(k) plan or plans to be fully vested
as of the Closing Date. Subject to the approval of the plan administrator,
Comdata shall cause the accounts of the Transferring Comdata Employees under
Ceridian's and Comdata's 401(k) plan or plans to be fully vested as of the
Closing Date. If IPS determines that it is unable to make distribution from its
401(k) plan or plans in connection with the transactions contemplated by this
Agreement pursuant to SECTION 401(k)(10) of the Code, it will provide notices of
such determination to Comdata. Thereafter, Comdata will promptly notify IPS
whenever a Transferring NTS Employee ceases to be employed with Comdata and its
Affiliates, including any such cessation that occurred before Comdata received
the notice. If Comdata determines that it is unable to make distributions from
its 401(k) plan or plans in connection with the transactions contemplated by
this Agreement pursuant to SECTION 401(k)(10) of the Code, it will provide
written notice of such determination to IPS. Thereafter, IPS will promptly
notify Comdata whenever a Transferring Comdata Employee ceases to be employed
with IPS and its Affiliates, including any such cessation that occurred before
IPS received the notice.
(d) OTHER BENEFITS.
(i) As of the Comdata Effective Date, the Transferring NTS Employees
shall be eligible for vacation, sick leave and all other compensation and
benefit programs not specifically addressed in SECTION 7.4(b) or (c) in effect
for similarly situated existing employees of Comdata and shall be credited for
their length of service with NTS and its Affiliates for all purposes under such
programs.
(ii) As of the FDFS Effective Date, the Transferring Comdata
Employees shall be eligible for vacation, sick leave and all other compensation
and benefit programs not specifically addressed in SECTION 7.4(b) or (c) in
effect for similarly situated existing employees of IPS and shall be credited
for their length of service with Comdata and its Affiliates for all purposes
under such programs.
(e) MISCELLANEOUS.
(i) During the 12-month period beginning at Closing, Comdata shall
follow the terms of a severance plan which covers each Transferring NTS Employee
and which is at least as favorable to each such Transferring NTS Employee as the
applicable NTS severance plan, policy or practice, to the extent it is described
on SCHEDULE 6.18(d) in effect immediately prior to Closing with respect to such
Transferring NTS Employee. During the 12-month period beginning at Closing,
FDFS shall follow the terms of a severance plan which covers each Transferring
Comdata Employee as the applicable Comdata severance plan, policy or practice,
to the extent it
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is described on SCHEDULE 5.18(d) in effect immediately prior to Closing with
respect to such transferring Comdata Employee.
(ii) IPS shall be responsible for compliance with the federal Worker
Adjustment and Retraining Notification Act ("WARN") and any similar applicable
state or local laws and assumes any liability for non-compliance with such laws
with respect to IPS' termination of any Transferring Comdata Employee. Comdata
shall be responsible for compliance with WARN and any similar applicable state
or local laws and assume any liability for non-compliance with such laws with
respect to Comdata's termination of any Transferring NTS Employee.
(f) IPS shall be liable for any workers' compensation or similar
workers' protection claims by Transferring NTS Employees originating prior to
the Comdata Effective Date and by Transferring Comdata Employees for occurrences
originating on or after the FDFS Effective Date. Comdata shall be liable for
any workers' compensation or similar workers' protection claims by Transferring
Comdata Employees originating prior to the FDFS Effective Date and by
Transferring NTS Employees for occurrences originating on or after the Comdata
Effective Date.
(g) No Transferring NTS Employee, Transferring Comdata Employee or
other current or former employee of NTS or Comdata (including any beneficiary or
dependent thereof), or any other person not a party to this Agreement, shall be
entitled to assert any claim hereunder.
7.5. COLLECTION OF RECEIVABLES. (a) From and after the Closing
Date, Comdata shall use reasonable efforts to collect the NTS Receivables
reflected in the Closing Date NTS Special Report generally in accordance with
the billing and collection practices presently applied by Comdata in the
collection of its accounts and notes receivable, except that with respect to any
particular NTS Receivable, Comdata shall be under no obligation to commence
litigation to effect collection and may make any concession or settlement which
in the good faith judgment of Comdata is commercially reasonable. In connection
with the collections by Comdata, if a payment is received from an account debtor
who has not designated the invoice being paid thereby, such payment shall be
applied to the earliest invoice outstanding with respect to indebtedness of such
account debtor reflected on the Closing Date NTS Special Report, except for
those invoices which are subject to a dispute to the extent of such dispute.
(b) Comdata shall, on or before the tenth business day of each
calendar month commencing with the second complete calendar month following the
Closing Date, deliver to NTS a written report ("NTS COLLECTION REPORT") of the
following information with respect to the NTS Receivables:
(i) The aggregate amount of the NTS Receivables (and the number of
accounts comprising such NTS Receivables); and
(ii) The aggregate amount of cash collections of the NTS Receivables
during the period from the Closing Date through the date of the NTS
Collection Report.
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(c) If Comdata has not collected, within 180 days after the Closing
Date, an amount equal to the excess of the NTS Receivables over the allowance
for doubtful accounts shown on the Closing Date NTS Special Report (such excess
being referred to herein as the "NET AMOUNT OF NTS RECEIVABLES"), then Comdata
shall have the right to require NTS to pay Comdata an amount, if positive, equal
to (i) the sum of (A) Net Amount of NTS Receivables and (B) all collection fees
incurred by Comdata (in accordance with SECTION 7.5(a)), MINUS (ii) the amount
collected in cash by Comdata during such 180 days period in respect of the NTS
Receivables; PROVIDED, HOWEVER, that concurrently with the payment by NTS of
such amount, Comdata shall reassign to NTS all such NTS Receivables together
with all security interests or other rights securing payment thereof; PROVIDED,
FURTHER, that, with respect to each NTS Receivable required to be so reassigned,
during the two-year period commencing on the 180th day after the date hereof
neither Comdata nor any of its Affiliates shall provide to the account debtor
relating to such NTS Receivable any services, goods or products relating to the
NTS Business. Notwithstanding the foregoing, Comdata will not be entitled to
require NTS to make any such payment with respect to the NTS Receivable referred
to in item 3 of SCHEDULE 1.6 until after (i) the third anniversary of the
Closing Date or (ii) if there is a payment default after the date hereof and
prior to such third anniversary, in respect of such NTS Receivable, in which
case the date of such default. If Comdata then elects to require such payment
with respect to such NTS Receivable, Comdata shall concurrently therewith
reassign to NTS such NTS Receivable together with all security interests or
other rights securing payment thereof; PROVIDED, HOWEVER, that prior to any such
payment and reassignment, Comdata shall have terminated the marketing services
agreement entered into with the account debtor relating to such NTS Receivable.
In addition, if Comdata so elects to require such payment, during the two-year
period commencing on such third anniversary, neither Comdata nor any of its
Affiliates shall provide to such account debtor any services, goods or products
relating to the NTS Business.
(d) If, after the Closing Date, NTS shall receive any remittance from
any account debtors with respect to the NTS Receivables (excluding any NTS
Receivable reassigned to NTS), NTS shall endorse such remittance to the order of
Comdata and forward it to Comdata immediately upon receipt thereof, and any such
amounts shall be deemed to have been collected by Comdata for purposes of this
SECTION 7.5.
(e) In the event Comdata shall receive any remittance from or on
behalf of any account debtor with respect to any Receivable after such NTS
Receivable has been reassigned to NTS, Comdata shall endorse such remittance to
the order of NTS and forward it to NTS immediately upon receipt thereof.
(f) From and after the Closing Date, FDFS shall use reasonable
efforts to collect the Gaming Receivables reflected in the Closing Date Gaming
Special Report generally in accordance with the billing and collection practices
presently applied by FDFS in the collection of its accounts and notes
receivable, except that with respect to any particular Gaming Receivable, FDFS
shall be under no obligation to commence litigation to effect collection and may
make any concession or settlement which in the good faith judgment of FDFS is
commercially reasonable. In connection with the collections by FDFS, if a
payment is received from an account debtor who has not designated the invoice
being paid thereby, such payment shall be applied to the earliest
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invoice outstanding with respect to indebtedness of such account debtor
reflected on the Closing Date Gaming Special Report, except for those invoices
which are subject to a dispute to the extent of such dispute.
(g) FDFS shall, on or before the tenth business day of each calendar
month commencing with the second complete calendar month following the Closing
Date, deliver to Comdata a written report ("COMDATA COLLECTION REPORT") of the
following information with respect to the Gaming Receivables:
(i) The aggregate amount of the Gaming Receivables (and the number of
accounts comprising such Gaming Receivables); and
(ii) The aggregate amount of cash collections of the Gaming
Receivables during the period from the Closing Date through the date of the
Comdata Collection Report.
(h) If FDFS has not collected, within 180 days after the Closing
Date, an amount equal to the excess of the Gaming Receivables over the allowance
for doubtful accounts shown on the Closing Date Gaming Special Report (such
excess being referred to herein as the "NET AMOUNT OF GAMING RECEIVABLES"), then
FDFS shall have the right to require Comdata to pay FDFS an amount, if positive,
equal to (i) the sum of (A) Net Amount of Gaming Receivables and (B) all
collection fees incurred by FDFS (in accordance with SECTION 7.5(f)), MINUS
(ii) the amount collected in cash by FDFS during such 180 day period in respect
of the Comdata Receivables; PROVIDED, HOWEVER, that concurrently with the
payment by Comdata of such amount, FDFS shall reassign to Comdata all such
uncollected Gaming Receivables.
(i) If, after the Closing Date, Comdata shall receive any remittance
from any account debtors with respect to the Gaming Receivables (excluding any
Gaming Receivable reassigned to Comdata), Comdata shall endorse such remittance
to the order of FDFS and forward it to FDFS immediately upon receipt thereof,
and any such amounts shall be deemed to have been collected by FDFS for purposes
of this SECTION 7.5.
(j) In the event FDFS shall receive any remittance from or on behalf
of any account debtor with respect to any Gaming Receivable after such Gaming
Receivable has been reassigned to Comdata, FDFS shall endorse such remittance to
the order of Comdata and forward it to Comdata immediately upon receipt thereof.
7.6. RELEASE OF NONCOMPETITION PROVISIONS. The parties agree that
the non-competition provisions included in this Article VII shall supersede,
replace, and be the sole source of any non-competition provisions between them
and their respective Affiliates as of the Closing Date to the extent relating to
the Gaming Business or the NTS Business.
7.7. WAIVER OF EXCLUSIVITY OBLIGATIONS OF WESTERN UNION AGENTS.
Ceridian and Comdata, on behalf of themselves and their Affiliates, hereby waive
any currently existing obligations of Western Union agents to utilize
exclusively the services of Comdata or any of its Affiliates with respect to the
receipt of wire money transfers.
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7.8. NTS NAME. On the Closing Date, NTS shall change its name to a
name not including "NTS."
7.9. SUBLEASE. With respect to NTS' current lease with respect to
the office buildings located at 6000 and 6100 Western Place, Fort Worth,
Texas 76107, Comdata hereby subleases from NTS, and NTS hereby subleases to
Comdata, those certain portions of the 8th floor in the East Tower and the 2nd
floor in the West Tower which are currently leased to NTS and the entire 9th
floor in the East Tower (the "SUBLEASED FLOORS") of the office buildings located
at 6000 and 6100 Western Place, Fort Worth, Texas 76107 for the period
commencing on the date hereof and ending on March 31, 2002 on the same terms and
conditions applicable to NTS with respect to the Subleased Floors. Comdata
shall be subject to all of the restrictions contained in such lease relating to
the Subleased Floors and any tenant thereof. Comdata shall pay to NTS (or such
other third party as may be consented to by NTS) all rents and other amounts
required to be paid by NTS or any of its Affiliates to any third party and all
other costs, charges or expenses incurred by NTS or any of its Affiliates, in
each case, in respect of the Subleased Floors. NTS shall provide Comdata with
periodic statements of any such amounts required to be paid. Any such payments
to NTS shall be made not later than the first business day of each calendar
month or, in the case of any other incurred costs, charges or expenses, not
later than 15 business days after notice is provided to Comdata of the amount
owing. Any such payments made by Comdata to any third party (with the consent
of NTS as aforesaid) shall be made not later than the date on which the payment
is due to such third party.
7.10. PRORATION. With respect to all third party charges (including,
without limitation, telephone and utility charges) other than Taxes incurred in
the ordinary course of business by the Gaming Business, the NTS Business or in
respect of the Purchased Gaming Assets or the Purchased NTS Assets that are
payable after the date hereof and that relate to a period that commenced prior
to the date hereof, it is the intent of the parties hereto that the pro-rated
portion thereof applicable to the period ending on or prior to the date hereof
shall be the responsibility of Comdata or NTS, respectively, except to the
extent such amount is recorded as a liability on the Closing Date Gaming Special
Report or the Closing Date NTS Special Report. Comdata or FDFS, as the case may
be, shall reimburse NTS or Comdata, respectively, for any portion of such
charges that is paid by one party that is the responsibility of the other party
in accordance with the term of this SECTION 7.10. Any receivables which are
incurred in the ordinary course of business by the Gaming Business, the NTS
Business or in respect of the Purchased Gaming Assets or the Purchased NTS
Assets that are collected after the date hereof and that relate to a period that
commenced prior to the date hereof, except to the extent that such amounts are
recorded as receivables on the Closing Date Gaming Special Report or the Closing
Date NTS Special Report, shall be treated in a similar manner.
7.11. CERTAIN CONSENTS. (a) Following the Closing, at the request
of FDFS, Comdata shall use commercially reasonable efforts (but which shall not
include the payment of fees by Comdata to any third party) to assist FDFS in
obtaining any consent of any third party which may be required in order to
assign any rights or other assets constituting Purchased Gaming Assets. If FDFS
is unable to obtain any such consent, or believes that an attempt to assign such
Purchased Gaming Asset would be ineffective or would adversely affect the
ability of FDFS to
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receive the asset in question, at the request of FDFS Comdata will cooperate
with FDFS in any commercially reasonable alternative arrangement designed to
provide FDFS the benefits that, with respect to such Purchased Gaming Assets,
were contemplated to be conferred on FDFS by this Agreement. If FDFS is unable
to obtain such consent, such Purchased Gaming Asset shall, at FDFS's election,
be deemed to have been excluded from the Purchased Gaming Assets conveyed to
FDFS hereunder and be deemed to have been an Excluded Gaming Asset for the
purposes of the Agreement, PROVIDED, HOWEVER, that to the extent any such
Purchased Gaming Asset would have been included on the Closing Date Gaming
Special Report if such consent had been obtained, it shall be included on the
Closing Date Gaming Special Report even in the absence of such consent; and
PROVIDED, FURTHER, that, notwithstanding any such election, the liabilities or
obligations of FDFS relating to such Purchased Gaming Asset shall, except to the
extent provided in SECTION 2.5 (other than SECTION 2.5(d)), be deemed to have
been an Assumed Gaming Liability for purposes of this Agreement. Notwithstanding
the foregoing, nothing in this Agreement shall be construed as an attempt to
assign any Purchased Gaming Asset in respect of which FDFS has made the an
election contemplated by the third sentence of this SECTION 7.11(a) without the
consent of the other party thereto.
(b) Following the Closing, at the request of Comdata, NTS shall use
commercially reasonable efforts (but which shall not include the payment of fees
by NTS to any third party) to assist Comdata in obtaining any consent of any
third party which may be required in order to assign any rights or other assets
constituting Purchased NTS Assets. If Comdata is unable to obtain any such
consent, or believes that an attempt to assign such Purchased NTS Asset would be
ineffective or would adversely affect the ability of Comdata to receive the
asset in question, at the request of Comdata NTS will cooperate with Comdata in
any commercially reasonable alternative arrangement designed to provide Comdata
the benefits that, with respect to such Purchased NTS Assets, were contemplated
to be conferred on Comdata by this Agreement. If Comdata is unable to obtain
such consent, such Purchased NTS Asset shall, at Comdata's election, be deemed
to have been excluded from the Purchased NTS Assets conveyed to Comdata
hereunder and be deemed to have been an Excluded NTS Asset for the purposes of
the Agreement, PROVIDED, HOWEVER, that to the extent any such Purchased NTS
Asset would have been included on the Closing Date NTS Special Report if such
consent had been obtained, it shall be included on the Closing Date NTS Special
Report even in the absence of such consent; and PROVIDED, FURTHER, that,
notwithstanding any such election, the liabilities or obligations of Comdata
relating to such Purchased NTS Asset shall, except to the extent provided in
SECTION 2.9 (other than SECTION 2.9(d)), be deemed to have been an Assumed NTS
Liability for purposes of this Agreement. Notwithstanding the foregoing, nothing
in this Agreement shall be construed as an attempt to assign any Purchased NTS
Asset in respect of which Comdata has made the an election contemplated by the
third sentence of this SECTION 7.11(b) without the consent of the other party
thereto.
7.12. TERMINATION OF FLASHCASH LICENSE. Comdata hereby relinquishes
and terminates any rights it may have under that certain License Agreement by
and between Western Union Financial Services, Inc. and Comdata dated as of
April 6, 1994.
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ARTICLE VIII
INDEMNIFICATION
8.1. INDEMNIFICATION BY CERIDIAN. (a) Ceridian agrees to indemnify
and hold harmless each FDC Group Member from and against any and all Losses and
Indemnification Expenses incurred by such FDC Group Member in connection with or
arising from:
(i) any breach by Ceridian or any of its Affiliates of any of their
respective covenants or agreements in this Agreement;
(ii) any failure of Ceridian or any of its Affiliates to perform any
of their respective obligations in this Agreement;
(iii) any breach of any warranty or the inaccuracy of any
representation of Ceridian or any of its Affiliates contained or referred
to in this Agreement or any certificate delivered by or on behalf of
Ceridian or any of its Affiliates pursuant hereto;
(iv) the failure of Comdata to comply with any applicable bulk sales
law, except that this clause shall not affect the obligation of FDFS to pay
and discharge the Assumed Gaming Liabilities;
(v) any Excluded Gaming Liability;
(vi) any recalls on or after the date hereof mandated by any
Governmental Body of the products manufactured, distributed or sold by the
Gaming Business on or prior to the date hereof; or
(vii) any obligations to provide parts and service on, or to repair
or replace, any products manufactured, distributed or sold by the Gaming
Business on or prior to the date hereof.
(b) Notwithstanding the foregoing SECTION 8.1(a), Ceridian shall be
required to indemnify and hold harmless under clauses (i), (ii) and (iii) of
SECTION 8.1(a) with respect to Losses and Indemnification Expenses incurred by
FDC Group Members only:
(i) to the extent that the aggregate amount of any and all
Losses and Indemnification Expenses exceeds $1,950,000; and
(ii) to the extent that the aggregate amount required to be paid by
Ceridian pursuant to SECTION 8.1(a)(i)-(iii) shall not exceed $22,550,000.
(c) Notwithstanding the limitations in SECTION 8.1(b);
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(i) the limitations in SECTION 8.1(b)(i)-(ii) shall not apply to
(A) any Losses or Indemnification Expenses incurred as result of
a failure to pay or discharge an Excluded Gaming Liability or any
obligation set forth in ARTICLE III, (B) any Losses or
Indemnification Expenses incurred as a result of inaccuracies of
the representations and warranties contained in SECTIONS 5.1,
5.2, 5.3(a)-(c), 5.6 and 5.7 and (C) any Losses and
Indemnification Expenses incurred as a result of a breach by
Comdata or Ceridian of their respective covenants and obligations
set forth in SECTIONS 7.3, 7.4, 7.5, 7.9, 7.10, 9.2 and 9.10; and
(ii) none of (A) any Losses or Indemnification Expenses incurred
as a result of a failure to pay or discharge an Excluded Gaming
Liability or any obligation set forth in ARTICLE III,
(B) any Losses or Indemnification Expenses incurred as a result
of inaccuracies of the representations and warranties contained
in SECTIONS 5.1, 5.2, 5.3(a)-(c), 5.6 and 5.7, and (C) any Losses
and Indemnification Expenses incurred as a result of a breach by
Comdata or Ceridian of their respective covenants and obligations
set forth in SECTIONS 7.3, 7.4, 7.5, 7.9, 7.10, 9.2 and 9.10,
shall be applied toward the amounts specified in SECTION
8.1(b)(i)-(ii).
(d) The indemnification provided for in this SECTION 8.1 shall
terminate 3 years after the date hereof (and no claims shall be made by any FDC
Group Member under this SECTION 8.1 thereafter), except that the indemnification
by Ceridian and its Affiliates shall continue as to:
(i) the obligations of Comdata under the Comdata Instrument of
Assignment, the Comdata Instrument of Assumption, the Comdata Canadian
Instrument of Assignment and the Comdata Canadian Instrument of Assumption,
as to which no time limitation shall apply;
(ii) the obligations of Comdata or Ceridian set forth in ARTICLE III,
the representations and warranties set forth in SECTIONS 5.1, 5.2,
5.3(a)-(c), 5.6, 5.7 and the covenants of Ceridian and its Affiliates set
forth in SECTIONS 7.3, 7.4, 7.5, 7.10, 9.2, 9.6, 9.10 and 9.13, as to all
of which no time limitation shall apply;
(iii) the covenants set forth in SECTION 7.2(a) as to which the
indemnification provided for in this SECTION 8.1 shall terminate one year
after the expiration of the period provided for therein; and
(iv) any Losses or Indemnification Expenses of which any FDC Group
Member has notified Ceridian or Comdata in accordance with the requirements
of SECTION 8.3 on or prior to the date such indemnification would otherwise
terminate in accordance with this SECTION 8.1, as to which the obligation
of Ceridian shall continue until the liability of Ceridian shall have been
determined pursuant to this ARTICLE VIII, and Ceridian shall have
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reimbursed all FDC Group Members for the full amount of such Losses and
Indemnification Expenses in accordance with this ARTICLE VIII.
(e) Notwithstanding anything in this SECTION 8.1 to the contrary, Ceridian
shall not indemnify or hold any FDC Group Member harmless from or against any
Losses or Indemnification Expenses incurred by such FDC Group Member in
connection with or arising from any matter on SCHEDULE 8.1; it being understood
and agreed that any such Losses or Indemnification Expenses shall constitute
Excluded NTS Liabilities nothwithstanding anything to the contrary set forth in
SECTION 2.4 of this Agreement.
8.2. INDEMNIFICATION BY FDC. (a) FDC agrees to indemnify and hold
harmless each Ceridian Group Member from and against any and all Losses and
Indemnification Expenses incurred by such Ceridian Group Member in connection
with or arising from:
(i) any breach by FDC or any of its Affiliates of any of its
covenants or agreements in this Agreement;
(ii) any failure by FDC or any of its Affiliates to perform any of
their obligations in this Agreement;
(iii) any breach of any warranty or the inaccuracy of any
representation of FDC or any of its Affiliates contained or referred to in
this Agreement or in any certificate delivered by or on behalf of FDC;
(iv) the failure of NTS to comply with any applicable bulk sales law,
except that this clause shall not effect the obligation of Comdata to pay,
perform or discharge the Assumed NTS Liabilities; or
(v) any Excluded NTS Liabilities;
(vi) any recalls on or after the date hereof mandated by any
Governmental Body of the products manufactured, distributed or sold by the
NTS Business on or prior to the date hereof; or
(vii) any obligations to provide parts and service on, or to repair
or replace, any products manufactured, distributed or sold by the NTS
Business on or prior to the date hereof.
(b) Notwithstanding the foregoing SECTION 8.2(a), FDC shall be
required to indemnify and hold harmless under clauses (i), (ii) and (iii) of
SECTION 8.2(a) with respect to Losses and Indemnification Expenses incurred by
Ceridian Group Members only:
(i) to the extent that the aggregate amount of any and all
Losses and Indemnification Expenses exceeds $975,000; and
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(ii) to the extent that the aggregate amount required to be paid by
FDC pursuant to SECTION 8.2(a)(i)-(iii) shall not exceed $11,375,000.
(c) Notwithstanding the limitations in SECTION 8.2(b);
(i) the limitations in SECTION 8.2(b)(i)-(ii) shall not apply to
(A) any Losses or Indemnification Expenses incurred as result of
a failure to pay or discharge an Excluded NTS Liability or any
obligation set forth in ARTICLE III, (B) any Losses or
Indemnification Expenses incurred as a result of inaccuracies of
the representations and warranties contained in SECTIONS 6.1,
6.2, 6.3(a)-(c), 6.6, 6.7 and (C) any Losses and Indemnification
Expenses incurred as a result of a breach by FDC, IPS, NTS or
FDFS of their respective covenants and obligations set forth in
SECTIONS 7.3, 7.4, 7.5, 7.9, 7.10, 9.2 and 9.10;
(ii) the limitations SECTION 8.2(b)(i) shall not apply to Losses
and Indemnification Expenses incurred as a result of a breach by
FDC, IPS, NTS or FDFS of their respective covenants and
obligations set forth in SECTION 7.1;
(iii) none of (A) any Losses or Indemnification Expenses
incurred as a result of a failure to pay or discharge an Excluded
NTS Liability or any obligation set forth in ARTICLE III, (B) any
Losses or Indemnification Expenses incurred as a result of
inaccuracies of the representations and warranties contained in
SECTIONS 6.1, 6.2, 6.3(a)-(c), 6.6, 6.7, and (C) any Losses and
Indemnification Expenses incurred as a result of a breach by FDC,
IPS, NTS or FDFS of their respective covenants and obligations
set forth in SECTION 7.3, 7.4, 7.5, 7.9, 7.10, 9.2 and 9.10;
shall be applied toward the amounts specified in SECTION
8.2(b)(i)-(ii); and
(iv) the Losses and Indemnification Expenses incurred as a
result of a breach by FDC, IPS or NTS of their respective
covenants and obligations set forth in SECTION 7.1 shall not be
applied toward the amount specified in SECTION 8.2(b)(i).
(d) The indemnification provided for in this SECTION 8.2 shall
terminate 3 years after the date hereof (and no claims shall be made by any
Ceridian Group Member under this SECTION 8.2 thereafter), except that the
indemnification by FDC and its Affiliates shall continue as to:
(i) the obligations of NTS and FDFS under the NTS Instrument of
Assignment, the FDFS Instrument of Assumption, the NTS Canadian Instrument of
Assignment or the NTS Canadian Instrument of Assumption, as to which no time
limitation shall apply;
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(ii) the obligations of FDC or IPS set forth in ARTICLE III, the
representations and warranties set forth in SECTIONS 6.1, 6.2, 6.3(a)-(c),
6.6, 6.7 and the covenants of FDC and its Affiliates set forth in SECTIONS
7.3, 7.4, 7.5, 7.10, 9.2, 9.6, 9.10 and 9.13, as to all of which no time
limitation shall apply;
(iii) the covenants set forth in SECTIONS 7.1 and 7.2(b) as to which
the indemnification provided for in this SECTION 8.2 shall terminate one
year after the expiration of the respective periods provided for therein;
and
(iv) any Losses or Indemnification Expenses of which any Ceridian
Group Member has notified FDC or IPS in accordance with the requirements of
SECTION 8.3 on or prior to the date such indemnification would otherwise
terminate in accordance with this SECTION 8.2, as to which the obligation
of FDC shall continue until the liability of FDC shall have been determined
pursuant to this ARTICLE VIII, and FDC shall have reimbursed all Ceridian
Group Members for the full amount of such Losses and Indemnification
Expenses in accordance with this ARTICLE VIII.
(e) Notwithstanding anything in this SECTION 8.2 to the contrary, FDC
shall not indemnify or hold any Ceridian Group Member harmless from or against
any Losses or Indemnification Expenses incurred by such Ceridian Group Member in
connection with or arising from any matter on SCHEDULE 8.2, it being understood
and agreed that any such Losses or Indemnification Expenses shall constitute
Assumed NTS Liabilities notwithstanding anything to the contrary set forth in
SCHEDULE 2.4 of this Agreement.
8.3. NOTICE OF CLAIMS. Any FDC Group Member or Ceridian Group Member
(the "INDEMNIFIED PARTY") seeking indemnification hereunder shall give to the
party obligated to provide indemnification to such Indemnified Party (the
"INDEMNITOR") a notice (a "CLAIM NOTICE") describing in reasonable detail the
facts giving rise to any claim for indemnification hereunder and shall include
in such Claim Notice (if then known) the amount or the method of computation of
the amount of such claim, and a reference to the provision of this Agreement or
any other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is based; PROVIDED, HOWEVER, that a Claim Notice
in respect of any action at law or suit in equity by or against a third Person
as to which indemnification will be sought shall be given promptly after the
action or suit is commenced; and PROVIDED FURTHER that failure to give such
notice shall not relieve the Indemnitor of its obligations hereunder except to
the extent it shall have been prejudiced by such failure.
(b) After the giving of any Claim Notice pursuant hereto, the amount
of indemnification to which an Indemnified Party shall be entitled under this
ARTICLE VIII shall be determined: (i) by the written agreement between the
Indemnified Party and the Indemnitor; (ii) by a final judgment or decree of any
court of competent jurisdiction; or (iii) by any other means to which the
Indemnified Party and the Indemnitor shall agree. The judgment or decree of a
court shall be deemed final when the time for appeal, if any, shall have expired
and no appeal shall have been taken or when all appeals taken shall have been
finally determined. The Indemnified Party
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shall have the burden of proof in establishing the amount of Loss and
Indemnification Expense suffered by it.
8.4. THIRD-PERSON CLAIMS. (a) In order for an Indemnified Party to
be entitled to any indemnification provided for under this Agreement in respect
of, arising out of or involving a claim or demand made by any third Person
against the Indemnified Party (a "THIRD-PERSON CLAIM"), such Indemnified Party
shall give to an Indemnitor a Claim Notice relating to the Third-Person Claim
within 15 days after receipt by such Indemnified Party of written notice of the
Third-Person Claim; PROVIDED, HOWEVER, that failure to give such notice shall
not relieve an Indemnitor of its obligations hereunder except to the extent the
Indemnitor shall have been prejudiced by such failure (except that the
Indemnitor shall not be liable for any Indemnification Expenses incurred during
the period in excess of the initial 15 days in which the Indemnified Party
failed to give such notice) (it being understood that the Indemnified Party
shall use good faith efforts to notify the Indemnitor promptly upon receipt of
any oral or written notice of a Third-Person Claim). Thereafter, the
Indemnified Party shall deliver to the Indemnitor, within five business days
after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party relating to
the Third-Person Claim. Notwithstanding the foregoing, should an Indemnified
Party be physically served with a complaint with regard to a Third-Person Claim,
the Indemnified Party must notify an Indemnitor with a copy of the complaint
within five business days after receipt thereof and shall deliver to the
Indemnitor within seven business days after the receipt of such complaint copies
of notices and documents (including court papers) received by the Indemnified
Party relating to the Third-Person Claim; PROVIDED, HOWEVER, that failure to
give such notice shall not relieve the Indemnitor of its obligations hereunder
except to the extent the Indemnitor shall have been prejudiced by such failure.
(b) (i) In the event of a Third-Person Claim an Indemnitor shall have
the absolute right after the receipt of notice, at its option and at its own
expense, to be represented by counsel of its choice (which shall be satisfactory
to the Indemnified Party) and to defend any proceeding, claim, or demand which
relates to any Loss or Indemnification Expense indemnified against hereunder if
the Indemnitor gives written notice to the Indemnified Party of its intention to
defend a ("NOTICE TO DEFEND") within seven business days following receipt of
the Claim Notice. The Notice to Defend must also state that the Indemnitor
agrees to fully indemnify the Indemnified Party for the Third-Person Claim to
the extent provided for in this ARTICLE VIII; PROVIDED, HOWEVER, that the
Indemnified Party may participate in any such proceeding with counsel of its
choice and at its expense. The parties hereto agree to cooperate fully with
each other in connection with the defense, negotiation or settlement of any such
legal proceeding, claim or demand. To the extent an Indemnitor elects not to
defend such proceeding, claim or demand or fails to give a Notice to Defend
within such seven business-day period, and the Indemnified Party defends against
or otherwise deals with any such proceeding, claim or demand, the Indemnified
Party may retain counsel, at the expense of the Indemnitor to the extent
provided for in this ARTICLE VIII, and control the defense of such proceeding.
Neither the Indemnitor nor the Indemnified Party may settle any such proceeding
which settlement obligates the other party, pursuant to such settlement or this
ARTICLE VIII, to pay money, to perform obligations, to refrain
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from performing acts or to admit liability without the consent of the other
party which shall not be unreasonably withheld.
(ii) After any final judgment or award shall have been rendered by a
court, arbitration board or administrative agency of competent jurisdiction and
the time in which to appeal therefrom has expired, or a settlement shall have
been consummated, or the Indemnified Party and the Indemnitor shall arrive at a
mutually binding agreement with respect to each separate matter alleged to be
indemnified by an Indemnitor hereunder, the Indemnified Party shall forward to
the Indemnitor notice of any sums due and owing by it with respect to such
matter and the Indemnitor shall pay all of the sums so owing to the Indemnified
Party by wire transfer, certified or bank cashier's check within 30 days after
the date of such notice.
(iii) The Indemnified Party shall neither be required to refrain from
paying or satisfying any claim which the Indemnitor has not acknowledged in
writing its obligations to indemnify the Indemnified Party, provided that the
Indemnified Party shall have given notice of such claim to the Indemnitor in
accordance with SECTION 8.3 and 8.4, or which has matured by court judgment or
decree, unless appeal is taken thereafter and proper appeal bond posted by the
Indemnitor, nor shall the Indemnified Party be required to refrain from paying
or satisfying any Third-Person Claim after and to the extent that such
Third-Person Claim has resulted in an unstayed permanent injunction or other
similar equitable relief against the Indemnified Party (unless such claim shall
have been discharged or enforcement thereof stayed by the filing of a legally
permitted bond by the Indemnitor or otherwise, at its sole expense).
(c) If there shall be any conflicts between the provisions of this
SECTION 8.4 and SECTION 7.3(c) (relating to Tax Contests), the provisions of
SECTION 7.3(c) shall control with respect to Tax Contests.
8.5. INDEMNIFICATION PAYMENTS NET OF INSURANCE RECOVERY. In
calculating any Loss or Indemnification Expense there shall be deducted any
insurance recovery in respect thereof (and no right of subrogation shall accrue
hereunder to any insurer.) FDC and Ceridian agree to report each payment made
in respect of a Loss or Indemnification Expense as an adjustment to the Initial
Amount for income tax purposes.
ARTICLE IX
GENERAL PROVISIONS
9.1. SURVIVAL OF OBLIGATIONS. All representations, warranties,
covenants, agreements and obligations contained in this Agreement shall survive
the consummation of the transactions contemplated by this Agreement; PROVIDED,
HOWEVER, that, except as otherwise provided in ARTICLE VIII, the representations
and warranties contained in ARTICLES V and VI shall terminate on the third
anniversary of the date hereof (other than the representations and warranties
contained in SECTIONS 5.1, 5.2, 5.3, 5.6, 5.7, 6.1, 6.2, 6.3, 6.6 and 6.7, each
of which shall survive indefinitely). Except as otherwise provided herein, no
claim shall be made for the
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breach of any representation or warranty contained in ARTICLE V or VI or under
any certificate delivered with respect thereto under this Agreement after the
date on which such representations and warranties terminate as set forth in this
SECTION 9.1.
9.2. CONFIDENTIAL NATURE OF INFORMATION. Each party agrees that it
will treat in confidence all documents, materials and other information which it
shall have obtained regarding the other party during the course of the
negotiations leading to the consummation of the transactions contemplated
hereby, the investigation provided for herein and the preparation of this
Agreement and other related documents. Such documents, materials and
information shall not be communicated to any third Person (other than, in the
case of FDC or IPS, to its counsel, accountants, financial advisors or lenders,
and in the case of Ceridian or Comdata, to its counsel, accountants or financial
advisors or lenders). No other party shall use any confidential information in
any manner whatsoever except solely for the purpose of evaluating the
transactions contemplated herein; PROVIDED, HOWEVER, that (i) IPS, FDFS, and the
Gaming Subsidiary may use or disclose any confidential information included in
the Purchased Gaming Assets or otherwise reasonably related to the Gaming
Business or the Purchased Gaming Assets, and (ii) Comdata, the NTS Subsidiary
and Permicom may use or disclose any confidential information included in the
Purchased NTS Assets related or otherwise reasonably related to the NTS Business
or the Purchased NTS Assets. The obligation of each party to treat such
documents, materials and other information in confidence shall not apply to any
information which (a) is or becomes available to such party from a source other
than such party, (b) is or becomes available to the public other than as a
result of disclosure by such party or its agents, (c) is required to be
disclosed under applicable law or judicial process, but only to the extent it
must be disclosed, or (d) such party reasonably deems necessary to disclose to
obtain any of the consents or approvals contemplated hereby.
9.3. NO PUBLIC ANNOUNCEMENT. FDC and IPS and their Affiliates shall
not, without the approval of Ceridian, and Ceridian and Comdata and their
Affiliates shall not, without the approval of FDC, make any press release or
other public announcement concerning the transactions contemplated by this
Agreement; PROVIDED, HOWEVER, that any party may make a press release or other
public announcement; to the extent such party shall be so obligated by law or by
the rules of any stock exchange (in which case the other party shall be advised
and the parties shall use their reasonable best efforts to cause a mutually
agreeably release or announcement to be issued).
9.4. NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
(i) when delivered personally, (ii) if transmitted by facsimile when
confirmation of transmission is received, or (iii) if sent by registered or
certified mail return receipt requested or by private courier when received and
shall be addressed as follows:
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If to FDC, IPS, NTS or FDFS:
First Data Corporation
6200 S. Quebec
Englewood, Colorado 80111
Attention: General Counsel - Integrated Services Division
Facsimile: (303) 488-8631
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Frederick C. Lowinger
Facsimile: (312) 853-7036
If to Ceridian or Comdata, to:
Ceridian Corporation
8100 34th Avenue South
Minneapolis, MN 55425-1640
Attention: Executive Vice President, Operations
Facsimile: (612) 853-7272
with copies to:
Ceridian Corporation
8100 34th Avenue South
Minneapolis, MN 55425-1640
Attention: General Counsel
Facsimile: (612) 853-7272
Comdata Network, Inc.
5301 Maryland Way
Brentwood, TN 37027
Attention: President
Facsimile: (615) 370-7614
Comdata Network, Inc.
5301 Maryland Way
Brentwood, TN 37027
Attention: Chief Counsel
Facsimile: (615) 370-7614
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<PAGE>
Carter R. Todd, Esq.
Stokes & Bartholomew, P.A.
424 Church Street, 28th Floor
Nashville, TN 37219
Facsimile: (615) 259-1470
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
9.5. SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. (a) The
rights of any party under this Agreement shall not be assignable by such party
hereto without the prior written consent of the other except that (i) any party
may assign its rights hereunder to any Affiliate; (ii) FDC may assign its rights
hereunder to a subsequent purchaser of substantially all of the assets of FDC,
IPS, NTS or FDFS; and (iii) Ceridian may assign its rights hereunder to a
subsequent purchaser of substantially all of the assets of Ceridian or Comdata.
Notwithstanding anything in this SECTION 9.5, FDFS may assign all of its rights
and obligations hereunder to any Affiliate of FDC, IPS, NTS or FDFS without the
prior written consent of Ceridian or Comdata, PROVIDED, HOWEVER, that
notification of such assignment is provided to Ceridian and Comdata and,
PROVIDED, FURTHER, that upon such assignment FDC shall remain liable to Ceridian
and Comdata for all its obligations under this Agreement. Notwithstanding
anything in this SECTION 9.5, Comdata may assign all of its rights and
obligations hereunder to any Affiliate of Comdata without the prior written
consent of FDC or its Affiliates, PROVIDED, HOWEVER, that notification of such
assignment is provided to FDC, IPS, NTS and FDFS and, PROVIDED, FURTHER, that
upon such assignment Ceridian shall remain liable to FDC, IPS, NTS and FDFS for
all of its obligations under this Agreement.
(b) Nothing contained in this Agreement or in any instrument or
document executed by any party in connection with the transactions contemplated
hereby shall create any rights in, or be deemed to have been executed for the
benefit of, any person or entity that is not a party hereto or a successor or
permitted assign of such a party.
9.6. ACCESS TO RECORDS. (a) For a period of six years after the date
hereof, Comdata and its representatives shall have reasonable access to all of
the books and records of the Gaming Business transferred to FDFS hereunder to
the extent that such access may reasonably be required by Comdata in connection
with matters relating to or affected by the operations of the Gaming Business
prior to the date hereof. Such access shall be afforded by FDFS upon receipt of
reasonable advance notice and during normal business hours. Comdata shall be
solely responsible for any costs or expenses incurred by it pursuant to this
SECTION 9.6(a). If FDFS shall desire to dispose of any of such books and
records prior to the expiration of such six-year period, FDFS shall, prior to
such disposition, give Comdata a reasonable opportunity, at Comdata's expense,
to segregate and remove such books and records as Comdata may select.
(b) For a period of six years after the date hereof, FDFS and its
representatives shall have reasonable access to all of the books and records
relating to the Gaming Business which Comdata or any of its Affiliates may
retain after the date hereof. Such access shall be afforded by Comdata and its
Affiliates upon receipt of reasonable advance notice and during
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normal business hours. FDFS shall be solely responsible for any costs and
expenses incurred by it pursuant to this SECTION 9.6(b). If Comdata or any of
its Affiliates shall desire to dispose of any of such books and records prior to
the expiration of such six-year period, Comdata shall, prior to such
disposition, give FDFS a reasonable opportunity, at FDFS' expense, to segregate
and remove such books and records as FDFS may select.
(c) For a period of six years after the date hereof, NTS and its
representatives shall have reasonable access to all of the books and records of
the NTS Business to the extent that such access may reasonably be required by
IPS in connection with matters relating to or affected by the operations of the
NTS Business prior to the date hereof. Such access shall be afforded by Comdata
upon receipt of reasonable advance notice and during normal business hours. NTS
shall be solely responsible for any costs or expenses incurred by it pursuant to
this SECTION 9.6(c). If Comdata shall desire to dispose of any of such books
and records prior to the expiration of such six-year period, Comdata shall,
prior to such disposition, give NTS a reasonable opportunity, at IPS' expense,
to segregate and remove such books and records as NTS may select.
(d) For a period of six years after the date hereof, Comdata and its
representatives shall have reasonable access to all of the books and records
relating to the NTS Business which NTS or any of its Affiliates may retain after
the date hereof. Such access shall be afforded by NTS and its Affiliates upon
receipt of reasonable advance notice and during normal business hours. Comdata
shall be solely responsible for any costs and expenses incurred by it pursuant
to this SECTION 9.6(d). If NTS or any of its Affiliates shall desire to dispose
of any of such books and records prior to the expiration of such six-year
period, NTS shall, prior to such disposition, give Comdata a reasonable
opportunity, at Comdata's expense, to segregate and remove such books and
records as Comdata may select.
9.7. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Exhibits
and Schedules referred to herein and the documents delivered pursuant hereto
contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all prior agreements,
understandings or letters of intent between or among any of the parties hereto.
This Agreement shall not be amended, modified or supplemented except by a
written instrument signed by an authorized representative of each of the parties
hereto.
9.8. INTERPRETATION. Article titles and headings to sections herein
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement. The Schedules
and Exhibits referred to herein shall be construed with and as an integral part
of this Agreement to the same extent as if they were set forth verbatim herein.
9.9. WAIVERS. Any term or provision of this Agreement may be waived,
or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement
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or any part hereof or the right of any party thereafter to enforce each and
every such provision. No waiver of any breach of this Agreement shall be held
to constitute a waiver of any other or subsequent breach.
9.10. EXPENSES. Each party hereto will pay all costs and expenses
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements and conditions contained herein
on its part to be performed or complied with, including the fees, expenses and
disbursements of its counsel and accountants.
9.11. PARTIAL INVALIDITY. Wherever possible, each provision hereof
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
9.12. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement, and
shall become binding when one or more counterparts have been signed by each of
the parties hereto and delivered to each of FDC and Ceridian.
9.13. FURTHER ASSURANCES. (a) From time to time following the date
hereof, Comdata shall, at FDFS' expense, execute and deliver, or cause to be
executed and delivered, to FDFS, such other instruments of conveyance and
transfer as FDFS may reasonably request or as may be otherwise necessary to more
effectively convey and transfer to, and vest in, FDFS and put FDFS in possession
of, any part of the Purchased Gaming Assets.
(b) From time to time following the date hereof, shall, at Comdata's
(or, in the case of the NT Canada Shares, Permicom) expense, execute and
deliver, or cause to be executed and delivered, to Comdata (or, in the case of
the NT Canada Shares, Permicom) such other instruments of conveyance and
transfer as Comdata (or, in the case of the NT Canada Shares, Permicom) may
reasonably request or as may be otherwise necessary to more effectively convey
and transfer to, and vest in, Comdata (or, in the case of the NT Canada Shares,
Permicom) and put Comdata (or, in the case of the NT Canada Shares, Permicom) in
possession of, the Purchased NTS Assets.
9.14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of Delaware.
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9.15. ATTORNEY'S FEES. In connection with any legal proceeding, suit
or action arising out of a dispute regarding the terms of this Agreement, the
party that is determined by the court or tribunal to have substantially
prevailed in such proceeding, suit or action shall be entitled to recover from
the other party thereto its reasonable costs, fees and expenses incurred in
connection with such legal proceeding, suit or action (including the reasonable
fees and expenses of its legal counsel and other professional advisors).
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ACCORDINGLY, the parties hereto have caused this Agreement to be
executed the day and year first above written.
FIRST DATA CORPORATION
/s/ Charles Fote
--------------------------------
By Charles Fote
-----------------------------
Its Executive Vice President
-----------------------------
INTEGRATED PAYMENT SYSTEMS INC.
/s/ Charles Fote
--------------------------------
By Charles Fote
-----------------------------
Its Authorized Representative
-----------------------------
NTS, INC.
/s/ Charles Fote
--------------------------------
By Charles Fote
-----------------------------
Its Authorized Representative
-----------------------------
FIRST DATA FINANCIAL SERVICES, L.L.C.
/s/ Charles Fote
--------------------------------
By Charles Fote
-----------------------------
Its Authorized Representative
-----------------------------
Signature Page 1
to
Exchange Agreement
dated January 17, 1998
<PAGE>
CERIDIAN CORPORATION
/s/ Gary M. Nelson
--------------------------------
By Gary M. Nelson
-----------------------------
Its Vice President
-----------------------------
COMDATA NETWORK, INC.
/s/ Gary M. Nelson
--------------------------------
By Gary M. Nelson
-----------------------------
Its Vice President
-----------------------------
PERMICOM PERMITS SERVICES, INC.
/s/ Gary M. Nelson
--------------------------------
By Gary M. Nelson
-----------------------------
Its Vice President
-----------------------------
Signature Page 2
to
Exchange Agreement
dated January 17, 1998
<PAGE>
Exhibit 2.04
CONFIDENTIAL INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND IS BEING FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH OMISSIONS
IN THIS DOCUMENT ARE INDICATED BY THE REFERENCE
"[CONFIDENTIAL INFORMATION OMITTED]".
SHARE PURCHASE AGREEMENT
THE TORONTO-DOMINION BANK
and
BUSINESS WIND0WS INC.
and
3454916 CANADA INC.
and
CERIDIAN CANADA LTD.
and
CERIDIAN CORPORATION
and
CERIDIAN CANADA HOLDINGS, INC.
JANUARY 26,1998
<PAGE>
TABLE OF CONTENTS
1. DEFINED TERMS AND SCHEDULES 2
1.1 Definitions 2
1.2 Additional Definitions 6
1.3 Exhibits and Schedules 7
1.4 Headings and Table of Contents 7
1.5 Gender and Number 7
1.6 Currency 7
1.7 Invalidity of Provisions 8
1.8 Entire Agreement 8
1.9 Waiver and Amendment 8
1.10 Generally Accepted Accounting Principles 8
1.11 Governing Law and Attornment 8
2. PURCHASE AND SALE 9
2.1 Purchase and Sale of Assets 9
2.2 Purchase and Sale of Shares 9
2.3 Excluded Contracts and Software 9
2.4 Ancillary Agreements 9
2.5 Deliveries 9
3. PURCHASE PRICE 10
3.1 Purchase Price 10
3.2 Adjustments 10
4. REPRESENTATIONS AND WARRANTIES OF THE BANK AND BW 11
4.1 Organization, Standing and Authority 11
4.2 Authorization 12
4.3 No Conflicting Agreements 12
4.4 Bank Consents 12
4.5 The Corporation 12
4.6 Authorization 13
4.7 Consents re: the Corporation 13
4.8 Title to Shares 13
4.9 Title to Payroll Assets 13
4.10 Legal Proceedings 13
4.11 No Option 14
4.12 Conduct of Payroll Business 14
4.13 Financial Information 14
4.14 Litigation 14
4.15 Payroll Client Contracts 14
4.16 Proprietary Payroll Software 15
<PAGE>
4.17 Labour Relations 15
(a) Employees 15
(b) Written or Oral Contracts 16
(c) Collective Agreements 16
(d) Liabilities to Employees 16
(e) Compliance with Laws 16
(f) No Changes 17
(g) Retiree Benefits 17
4.18 Payroll Trademarks 17
4.19 No Finder's Fee or Broker's Fee 18
4.20 Bank's Residence 18
4.21 Registration for Taxes 18
4.22 Plans 18
4.23 List of Customers 18
4.24 Undisclosed Liabilities 18
4.25 Operation of the Businesses 19
4.26 Product Defects 19
4.27 Organization, Standing and Authority of BW 19
4.28 BW Shares 19
4.29 BW Authorization 19
4.30 No Conflicting BW Agreements 19
4.31 BW Consents 20
4.32 Title to Assets 20
4.33 Legal Proceedings 20
4.34 No Option 20
4.35 Financial Information 20
4.36 Undisclosed Liabilities 21
4.37 Conduct of the HRMS Business 21
4.38 HRMS Litigation 21
4.39 HRMS Client Contracts 21
4.40 Proprietary HRMS Software 21
4.41 HRMS Trademarks 22
4.42 Labour Relations 23
4.43 No Finder's Fee or Broker's Fee 23
4.44 BW's Residence 23
4.45 BW Registration for Taxes 23
5. REPRESENTATIONS AND WARRANTIES OF CERIDIAN, CERIDIAN HOLDINGS AND
THE PURCHASER 23
5.1 Organization, Standing and Authorization 23
5.2 Authorization, Execution and Enforceability 23
5.3 No Conflicting Agreements 24
5.4 Consents 24
5.5 Legal Proceedings 24
5.6 Compliance with Laws 24
<PAGE>
5.7 No Bankruptcy Proceedings 24
5.8 Organization, Standing and Authorization 25
5.9 Authorization, Execution and Enforceability
re: Ceridian and Ceridian Holdings 25
5.10 No Conflicting Agreements 25
5.11 Consents 25
5.12 Legal Proceedings 26
5.13 Authorization, Execution and Enforceability re: the
Corporation 26
5.14 No Conflicting Agreements 26
5.15 Consents 26
5.16 Duly Licenced 26
5.17 Brokers' and Finders' Fees 27
5.18 Corporation Plans 27
6. SURVIVAL AND INDEMNIFICATION 27
6.1 Survival 27
6.2 Indemnification by Bank and BW 27
6.3 Software and Trademark Indemnification 28
6.4 Indemnification by the Purchaser 30
6.5 Indemnification for Claims Other Than
Third Party Claims 31
6.6 Indemnification against Third Party Claims 31
6.7 Expiry of Liability 33
6.8 Limit 33
7. COVENANTS 33
7.1 Covenants of the Bank and BW 33
(a) Reasonable Efforts to Maintain and Preserve 33
(b) Notice of Cessation in Ordinary Course 34
(c) Covenant Not to Compete 34
(d) Non-Solicitation 35
(e) Documents 36
(o Reasonable Assistance 36
7.2 Covenants of the Purchaser and the Corporation 36
(a) Documents 36
(b) Non-Solicitation 36
(c) Receivables 37
7.3 Other Covenants 37
(a) Employees 37
(b) Bank's Benefit Plans 41
(c) Pension Plan 43
(d) Competition Act/Investment Canada Act 43
(e) Confidentiality 43
(f) Consents Required in Contracts 44
(h) Trust Funds Under Administration 44
(i) Third Party Payments 44
(j) Transfer Agreement Fees 45
<PAGE>
(k) Returns 45
8. CONDITIONS OF CLOSING 45
8.1 For the Benefit of the Purchaser 45
(a) Representations and Warranties Remain Correct 46
(b) Compliance with Covenants 46
(c) No Actions or Proceedings 46
(d) Consents, Authorizations and Registrations 46
(e) Agreements 46
(f) Consents 47
8.2 For the Benefit of the Bank and BW 47
(a) Representations and Warranties Remain Correct 47
(b) Compliance with Covenants 48
(c) No Actions or Proceedings 48
(d) Consents, Authorizations and Registrations 48
(e) Documents 48
(o Approval 48
9. CLOSING 49
10. GENERAL PROVISIONS 49
10.1 Independent Contractors 49
10.2 Notices 49
10.3 Exclusion of Consequential Damages 50
10.4 Termination 50
10.5 Time of the Essence 51
10.6 Public Notices and Confidentiality 51
10.7 Year 2000 Estimates 51
10.8 Counterparts 51
10.9 No Assignment 51
10.10 Further Assurances 52
10.11 Language 52
10.12 Successors and Assigns 52
<PAGE>
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made as of the 26th day of January, 1998,
AMONG:
THE TORONTO-DOMINION BANK, a Canadian chartered bank,
(hereinafter called the "Bank"),
OF THE FIRST PART,
-and-
BUSINESS WINDOWS INC., a corporation existing under the laws of
Ontario
(hereinafter called "BW'),
OF THE SECOND PART,
- and -
3454916 CANADA INC., a corporation existing under the laws of
Canada,
(hereinafter called the "Corporation"),
OF THE THIRD PART,
-and-
CERIDIAN CANADA LTD., a corporation existing under the laws of
Canada,
(hereinafter called the "Purchaser"),
OF THE FOURTH PART,
- and -
CERIDIAN CORPORATION, a corporation existing under the laws of
Delaware,
(hereinafter called "Ceridian"),
OF THE FIFTH PART,
- and -
<PAGE>
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CERIDIAN CANADA HOLDINGS, INC., a corporation existing under the laws of
Delaware,
(hereinafter called "Ceridian Holdings"),
OF THE SIXTH PART.
WHEREAS the Bank and BW own and operate the Payroll Business and the HRMS
Business;
AND WHEREAS effective as of the Effective Transfer Time, the Bank and BW
intend to sell to the Corporation and the Corporation intends to purchase the
Purchased HRMS Assets and the Purchased Payroll Assets, for valuable
consideration, upon and subject to the terms and conditions of the Transfer
Agreement;
AND WHEREAS upon the Effective Transfer Time, the Bank and BW shall be
the registered and beneficial owners of the Shares;
AND WHEREAS effective as of the Effective Time, the Bank and BW intend
to sell to the Purchaser and the Purchaser intends to purchase from the Bank
and BW all of the Shares, for valuable consideration, upon and subject to the
terms and conditions of this Agreement;
AND WHEREAS each of Ceridian and Ceridian Holdings is a party to this
Agreement for the purposes of guaranteeing the performance by the Corporation
(after the Effective Time) and the Purchaser of their obligations hereunder;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and agreements herein set out and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto covenant and agree as follows:
1. DEFINED TERMS AND SCHEDULES
1.1 Definitions - Where used herein, except where the context otherwise
requires, the following terms shall have the following meanings
respectively:
(a) "Absent Employees" means those employees of the Payroll Business
who are on Short-Term Disability, maternity leave, parental
leave, or other approved leave of absence (except Long-Term
Disability), as listed on Schedule 1.1(a);
(b) "Agreement" means this agreement and all schedules attached to
this agreement, in each case as they may be amended or
supplemented from time to time, and the
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expressions "hereof', "herein", "hereto", "hereunder", "hereby"
and similar expressions refer to this agreement and, unless
otherwise indicated, references to articles and sections are to
"Articles" and "Sections" in this agreement;
(c) "Ancillary Agreements" means the Trademark Licence Agreement, the
Transitional Services Agreement and the Joint Sales and Marketing
Agreement;
(d) "Bank's Benefit Plans" means the benefit plans, arrangements,
agreements, programs, policies, or practices of the Bank set
forth in Schedule 1. I (d) hereto, and for greater certainty,
includes the Pension Plan;
(e) "Business Day" means a day other than a Saturday, Sunday or
statutory holiday in the Province of Ontario;
(f) "Closing" means the consummation and completion of the
purchase and sale by the Purchaser of the Shares and the
additional transactions and agreements provided hereunder;
(g) "Closing Date" means 10:00 a.m. Toronto time at the Closing Place
on January 30, 1998, or such other time and date as the parties
may agree upon in writing;
(h) "Closing Place" means the offices of Miller Thomson, 20 Queen
Street West, Suite 2500, Toronto, Ontario M5H 3 SI;
(i) "Designated Employees" means the employees of the Bank listed in
Schedule 4.17(a) hereto (which schedule includes Absent Employees
but excludes LTD Employees) whose employment will be continued
with the Corporation, as required pursuant to this Agreement;
(j) "Effective Date" means January 31, 1998 or such other date as the
parties may agree upon in writing, provided that in respect of
Absent Employees, the "Effective Date" means the date upon which
they commence employment with the Corporation;
(k) "Effective Time" means 12:02 a.m. (Toronto Time) on the Effective
Date, or such other time as the parties may agree upon in
writing, provided that in respect of Absent Employees, the
"Effective Time" means 12:01 a.m. on the date upon which they
commence employment with the Corporation;
(l) "Effective Transfer Time" means 12:01 a.m. (Toronto Time) on
the Effective Date, or such other time as the parties may agree
upon in writing;
<PAGE>
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(m) "HR/Architect" means the human resource management system of BW
which is operated under the trademark "HR/Architect";
(n) "HR/Foundation" means the human resource management system of BW
which is operated under the trademark "HR/Foundation";
(o) "HRMS Business" means the business of providing HRMS Services to
HRMS Clients carried on by BW as of the Closing Date;
(p) "HRMS Clients" mean Persons to whom BW provides HRMS Services as
of the Closing Date;
(q) "HRMS Services" means human resource management services provided
through the use of HR/Foundation and HR/Architect;
(r) "HRMS Trademarks" means "HR/Architect" and "HR/Foundation";
(s) "Joint Sales and Marketing Agreement" means the agreement dated
the .Effective Date between the Bank and the Corporation,
substantially in the form of .Exhibit "C" hereto;
(t) "Long-Term Disability" means the long-term disability plan of the
Bank applicable to employees of the Payroll Business;
(u) "LTD Employees" means the employees of the Payroll Business
collecting benefits from Long-Term Disability, all of whom are
listed on Schedule 1.I (u) hereto;
(v) "Mainframe Computer" means the host OS/390 processor owned by the
Bank and used in connection with, inter alia, the processing of
Payroll Services, and any replacement thereof,
(w) "Payflex" means the payroll processing services system of the
Bank which is operated under the trademarks "Payflex" and
"Paieflex";
(x) "Paymaster" means the payroll processing services system of the
Bank which is operated under the trademarks "Paymaster",
"Paiemaitre" and "Autopay";
(y) "PaymasterE" means the payroll processing services system of the
Bank which is operated under the name "PaymasterE";
<PAGE>
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(z) "Payroll Business" means the business of providing Payroll
Services to Payroll Clients carried on by the Bank as of the
Closing Date;
(aa) "Payroll Clients" means Persons to whom the Bank provides Payroll
Services as of the Closing Date;
(bb) "Payroll Services" means payroll and payroll-related services,
including, without limitation, services processed through the use
of Payflex, Paymaster, PaymasterE, and Phone'n Pay, but excluding
payroll processed for employees of the Bank;
(cc) "Payroll Trademarks" means "Autopay", "Payflex", "Paieflex",
"Phone'n Pay", "PayLink", "Paymaster" and "Paiemaitre";
(dd) "Pension Plan" means The Pension Fund Society of The
Toronto-Dominion Bank established by the Bank, which is a
registered pension plan under the Income Tax Act (Canada) and the
Pension Benefits Standards Act (Canada) in which the Designated
Employees, among others, contribute to and accrue pension
benefits;
(ee) "Person" means an individual, partnership, joint venture,
association, corporation, trust, or a government or any
department or agency thereof. or any other entity;
(ff) "Phone'n Pay" means the payroll processing services system of the
Bank which is operated under the trademark "Phone'n Pay" and the
tradename "Paiedirect";
(gg) "Purchase Price" means the price payable by the Purchaser to the
Bank and BW for the Shares, as determined in accordance with the
provisions of Article 3 hereof;
(hh) "Shares" means 49,687,167 common shares of the Corporation, being
all of the issued and outstanding common shares of the
Corporation;
(ii) "Short-Term Disability" means the short-term disability plan of
the Bank applicable to employees of the Payroll Business;
(jj) "Taxes" means federal, provincial or municipal taxes, including,
without limitation, income, sales, goods and services, excise,
business, duties and other like charges and all penalties,
interest and fines with respect thereto, payable to any federal,
provincial, municipal, local or other government or governmental
agency, authority, board, bureau or commission, domestic or
foreign, and "Tax
<PAGE>
- Page 6 -
Legislation" means legislation pursuant to which Taxes may be
exigible or payable;
(kk) "Trademark Licence Agreement" means the trademark licence
agreement dated the Effective Date between the Bank and the
Corporation, substantially in the form of Exhibit "A" hereto,
pursuant to which each of the Corporation and the Bank is granted
a limited licence and right to use certain trademarks of the
other in connection with post-Closing products and promotional
materials of the HRMS Business and the Payroll Business;
(11) "Transaction Fees" means, with respect to the twelve-month period
ended October 31, 1997, the aggregate of. (i) (A) fees invoiced
by the Bank during such period with respect to payroll
transactions, maintenance, custom programming, implementation,
customer training, T4 and other regulatory form preparation, and
other similar transactions, and (B) interest income (with imputed
interest income calculated at a rate of 3.85% per annum on the
average daily cash balances of the Payroll Business), all with
respect to the Payroll Business, and (ii) fees invoiced by BW
during such period with respect to software sales, maintenance,
custom programming, implementation and customer training, and
other similar transactions, all with respect to the HRMS
Business;
(mm) "Transfer Agreement" means the asset transfer agreement to be
entered into between the Bank, BW and the Corporation, pursuant
to which, effective as of the Effective Transfer Time, the Bank
and BW shall transfer the Purchased HRMS Assets and the Purchased
Payroll Assets to the Corporation and the Corporation shall issue
all but one of the Shares to the Bank and BW and shall assume and
become liable for the Assumed HRMS Liabilities and the Assumed
Payroll Liabilities, substantially in the form of Exhibit "D"
hereto;
(nn) "Transferred Employees" means the Designated Employees who do not
reject the continued employment with the Corporation pursuant to
Article 7;
(oo) "Transition Period" has the meaning ascribed to it in the
Transitional Services Agreement; and
(pp) "Transitional Services Agreement" means the transitional services
agreement dated the Effective Date, between the Bank and the
Corporation, substantially in the form of Exhibit "B" hereto.
1.2 Additional Definitions - the terms "Assumed HRMS Liabilities",
"Assumed Payroll Liabilities", "HRMS Contracts", "Payroll Contracts",
"Excluded Contracts", "Excluded Software", "Payroll Clients",
"Purchased HRMS Assets", "Purchased Payroll Assets",
<PAGE>
- Page 7 -
"Proprietary Payroll Software" and "Proprietary HRMS
Software" shall have the meaning ascribed to them in the
Transfer Agreement.
1.3 Exhibits and Schedules - The following are the exhibits and schedules
annexed hereto which are incorporated by reference herein and are
deemed to be a part hereof:
Exhibits
"A" - Trademark Licence Agreement
"B" - Transitional Services Agreement
"C" - Joint Sales and Marketing Agreement
"D" - Transfer Agreement
Schedules
1. 1 (a) - Absent Employees
1. 1 (d) - Bank Benefit Plans
1. I (u) - LTD Employees
3.1 - Calculation of the Purchase Price
4.13 - Financial Information
4.15 - Material Non-Standard Payroll Contracts
4.16 - Year 2000
4.17(a) - Designated Employees
4.17(b) - Standard Bank Employment Contracts
4.17(f) - Plan Changes
4.17(g) - Retiree Benefits
4.24 - Undisclosed Liabilities
5.18 - Corporation Plans
8. 1 (f) - Material Contracts
10.7 - Year 2000 Estimates
1.4 Headings and Table of Contents - The inclusion of headings and a table
of contents in this Agreement is for convenience of reference only and
shall not affect the construction or interpretation of this Agreement.
1.5 Gender and Number - In this Agreement, unless the context otherwise
requires, words importing the singular include the plural and vice
versa and words importing gender include all genders.
1.6 Currency - Except where otherwise expressly provided, all amounts in
this Agreement are stated and shall be paid in Canadian currency.
<PAGE>
- Page 8 -
1.7 Invalidity of Provisions - Each of the provisions contained in this
Agreement is distinct and severable and a declaration of invalidity or
unenforceability of any such provision or part thereof by a court of
competent jurisdiction shall not affect the validity or enforceability
of any other provision of this Agreement. Any provision of this
Agreement which is illegal, prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such illegality, prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
1.8 Entire Agreement - This Agreement, the Ancillary Agreements and the
Transfer Agreement embody the entire agreement and understanding among
the parties hereto and supersede all prior agreements between such
parties in connection with the subject matter hereof Other than the
foregoing mentioned agreements, there are no representations,
warranties or covenants (including any that may be implied by statute)
and there are no agreements between the parties in connection with
such subject matter except as specifically set forth or referred to in
this Agreement. No reliance is placed on any warranty,
representation, opinion, advice or assertion of fact made by any party
hereto or its employees or agents, except to the extent that the same
has been reduced to writing and included as a term of this Agreement
or in any of the foregoing mentioned agreements. Accordingly, there
shall be no liability, either in tort or in contract, assessed in
relation to any such warranty, representation, opinion, advice or
assertion of fact, except to the extent aforesaid. Except as provided
in this Agreement, neither this Agreement nor any of the terms hereof
may be changed, waived, discharged or terminated otherwise than by an
instrument in writing signed by the party against which enforcement of
such change, waiver, discharge or modification is sought.
1.9 Waiver and Amendment - Except as expressly provided in this Agreement,
no amendment, waiver or termination of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No
waiver of any provision of this Agreement shall constitute a waiver of
any other provision nor shall any waiver of any provision of this
Agreement constitute a continuing waiver unless otherwise expressly
provided. No failure to enforce any provision hereof shall operate as
a waiver of such provision or of any other provision hereof.
1.10 Generally Accepted Accounting Principles - In this Agreement, except
to the extent otherwise expressly provided, references to "generally
accepted accounting principles" mean, for all principles stated in the
Handbook of the Canadian Institute of Chartered Accountants, such
principles so stated.
1.11 Governing Law and Attornment - This Agreement shall be governed by and
construed in accordance with the law of the Province of Ontario and
the federal law of Canada
<PAGE>
Page 9 -
applicable therein. The parties shall attorn to the non-exclusive
jurisdiction of the courts of the Province of Ontario.
2. PURCHASE AND SALE
2.1 Purchase and Sale of Assets - Subject to the terms and conditions
contained herein, the Bank, BW and the Corporation covenant and agree
to enter into the Transfer Agreement on the (,'losing Date, pursuant
to which, effective as of the Effective Transfer Time, the Bank and BW
shall sell, assign and transfer the Purchased Payroll Assets and the
Purchased HRMS Assets to the Corporation and the Corporation shall
purchase and acquire the Purchased Payroll Assets and the Purchased
HRMS Assets, in consideration for the issuance to the Bank and BW of
all of the Shares (less one common share of the Corporation issued to
the Bank prior to the Effective Transfer Time), and the Corporation
shall assume and become liable for the Assumed Payroll Liabilities and
the Assumed HRMS Liabilities on and after the Effective Transfer Time.
2.2 Purchase and Sale of Shares - Subject to the terms and conditions
contained herein, the Bank and BW covenant and agree to sell, assign
and transfer the Shares to the Purchaser, and the Purchaser covenants
and agrees to purchase and acquire the Shares, on the Closing Date but
with effect as of the Effective Time, in consideration for payment by
the Purchaser to the Bank and BW of the Purchase Price, subject to
adjustments, which shall be allocated between the Bank and BW in
accordance with Section 3. 1.
2.3 Excluded Contracts and Software - The Purchaser and the Corporation
acknowledge and agree that they have been notified of the nature and
purpose of the Excluded Contracts and the Excluded Software, the
services and functions of which the Bank shall make available to the
Corporation during the Transition Period, subject to the terms of the
Transitional Services Agreement. If from and after the end of the
Transition Period the Corporation requires goods and services of the
type provided under the Excluded Contracts, or software with
functionality of the type provided by the Excluded Software, the
Corporation shall be responsible, at its cost, and with the reasonable
cooperation of the Bank and BW, to establish its own contractual
relationships with the parties to the Excluded Contracts, or to make
alternative arrangements for the provision of the goods and services
that were provided to the Bank or BW pursuant to the Excluded
Contracts, and to separately licence, purchase or establish equivalent
software to the Excluded Software.
2.4 Ancillary Agreements - On Closing, the parties hereto covenant and
agree to enter into the Ancillary Agreements applicable to them.
2.5 Deliveries - Delivery of and access to substantially all of the
Purchased HRMS Assets and the Purchased Payroll Assets shall be made
by the Bank and BW to the Corporation
<PAGE>
- Page 10 -
on the Closing Date and delivery of and access to the remaining
Purchased HRMS Assets and Purchased Payroll Assets shall be made by
the Bank and BW to the Corporation as soon as reasonably practicable
after Closing.
3. PURCHASE PRICE
3.1 Purchase Price - The Purchase Price for the Shares shall be an amount
equal to $49,687,167, which is the aggregate of (i) $49,471,494, being
the product of 1.5 and the amount of the Transaction Fees, the
calculation of which is set forth in Schedule 3. 1;
(ii) $1, being the amount paid by the Bank as the subscription price
for one common share of the Corporation; and (iii) $215,672, being the
agreed Canadian dollar equivalent of US$150,000. The Purchase Price
shall be allocated as to $100,000 to BW, and the balance to the Bank.
The Purchase Price shall be subject to adjustments determined in
accordance with Section 3.2 and shall be payable by the Purchaser to
the Bank (on behalf of the Bank and BW) on the Closing Date by
certified cheque or bank draft of a Canadian chartered bank or by wire
transfer of immediately available funds to the Bank's account
designated by the Bank in writing to the Purchaser at least two
Business Days prior to the Closing Date.
3.2 Adjustments - The parties agree that the Purchase Price shall be
adjusted by those items properly subject to adjustment with respect to
the Payroll Business and the HRMS Business transferred pursuant to the
Transfer Agreement including, without limitation, (i) work-in-process
accrued up to the Effective Transfer Time, (ii) prepaid expenses
related to the HRMS Business and the Payroll Business, (iii)
contractual obligations of the Bank and BW which have been prepaid to
the Bank or BW or for which deposits have been submitted to the Bank
or BW and (iv) obligations or remittances with respect to the
Designated Employees including, without limitation, statutory vacation
pay, premiums for unemployment insurance, provincial health care
plans, employer health tax and Quebec and Canada Pension Plan, accrued
wages, salaries and bonuses, (collectively the "Adjustable Items"),
which shall be calculated and adjusted as of the Effective Date. The
principle of the adjustment procedure is that the Bank and BW are
entitled to the benefits of and are responsible for and shall pay all
applicable amounts relating to the foregoing for the period ending as
of the Effective Transfer Time, and the Corporation is entitled to the
benefits of and is responsible for and shall pay all applicable
amounts relating to the foregoing for the period commencing from and
after the Effective Transfer Time. To the extent that the Bank or BW
has paid amounts relating to the Adjustable Items, the benefit of
which will continue from and after the Effective Date, the Purchase
Price shall be adjusted in favour of the Bank or BW, as the case may
be, in the amount which is attributable to the HRMS Business or the
Payroll Business for the period following the Effective Transfer Time
and the benefit of which is receivable by the Corporation following
the Effective Transfer Time. To the extent that the Bank or BW has
received amounts relating to Adjustable Items which are properly
allocable to the HRMS Business
<PAGE>
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or the Payroll Business from and after the Effective Transfer Time,
the Purchase Price shall be adjusted in favour of the Purchaser in the
amount which is attributable to the HRMS Business or the Payroll
Business for the period following the Effective Date.
An adjustment shall also be made between the parties, if necessary,
with respect to funds under administration, including funds held on
behalf of Payroll Clients pursuant to statutory trusts, to be
transferred by the Bank to the Corporation pursuant to Section 7.3(h),
in the event that an incorrect amount of such funds is transferred.
The parties agree to use reasonable efforts to determine and account
for any such adjustments prior to Closing. On or before 120 days
after the Closing Date, the parties shall co-operate to prepare a
statement of adjustments for Adjustable Items determined after the
Closing, and any required payments shall be made forthwith thereafter.
Adjustable Items determined after such period shall be itemized on a
case by case basis and any required payments shall be made forthwith
thereafter.
In the event that the parties are unable to agree on the amount of
adjustments for all Adjustable Items, adjustments shall be made
between the parties with respect to those of the Adjustable Items set
forth in the statement of adjustments that are not in dispute. With
respect to those of the Adjustable Items that are subject to a
dispute, in the event that the parties, acting reasonably, are unable
to reach agreement, the dispute shall be presented for determination
to a major national accounting firm as agreed by the Bank and the
Purchaser as soon as possible after the 120-day period after the
Closing Date referred to above. Such accounting firm shall act as an
expert and not an arbitrator, and the decision of the accounting firm
shall be conclusive and binding on the Bank and the Purchaser, and
shall be final and not subject to judicial review. It is the
intention of the parties hereto that the decision of the accounting
firm shall be enforced to the fullest extent permitted by applicable
law.
The apportionment of the fees and expenses of the accountant as
between the parties shall be the subject of determination by the
accountant.
4. REPRESENTATIONS AND WARRANTIES OF THE BANK AND BW
The Bank and BW jointly and severally represent and warrant to the Purchaser as
follows:
4.1 Organization, Standing and Authority - The Bank is a Canadian
chartered bank, validly existing under the laws of Canada. The Bank
has all requisite power and authority to execute and deliver this
Agreement, the Transfer Agreement and each of the Ancillary Agreements
and to perform its obligations hereunder and thereunder, and to
complete the transaction of purchase and sale contemplated hereunder
and thereunder.
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4.2 Authorization - The execution, delivery and performance by the Bank of
this Agreement, the Transfer Agreement and the Ancillary Agreements
have been duly authorized by all necessary corporate action of the
Bank, and all persons executing this Agreement, the Transfer Agreement
and the Ancillary Agreements on behalf of the Bank have been duly
authorized to do so by all necessary corporate action on the part of
the Bank. This Agreement has been, and each of the Transfer Agreement
and the Ancillary Agreements when executed by the Bank will be, duly
executed and delivered by the Bank. This Agreement constitutes, and
each of the Transfer Agreement and the Ancillary Agreements when
executed and delivered by the Bank will constitute, the legal, valid
and binding obligation of the Bank, enforceable against it in
accordance with their terms, except as enforceability thereof may be
limited by bankruptcy, insolvency, reorganization or similar laws of
general application, and equitable remedies that may be granted or
imposed by a court of competent jurisdiction.
4.3 No Conflicting Agreements - The execution and delivery by the Bank of
this Agreement and each of the Transfer Agreement and the Ancillary
Agreements and the performance by the Bank of its obligations
hereunder and thereunder do not and will not (i) result in or
constitute a default under, breach or violation of, or an event that
with notice or lapse of time or both would be a breach or violation
of, the organizational documents of the Bank, or any existing note,
bond, mortgage, indenture, deed of trust, licence, permit, lease, loan
agreement, contract or other agreement, instrument or arrangement to
which the Bank is a party or by the terms of which the Bank is or may
be bound or affected; or (ii) violate or contravene any law to which
it is subject.
4.4 Bank Consents - No consent, approval or authorization under any
material indenture, contract, instrument or other agreement (excluding
Payroll Contracts) to which the Bank is a party is required to be
obtained in connection with the execution, delivery and performance by
the Bank of this Agreement or any of the Ancillary Agreements. There
are no consents, approvals, permits or authorizations, declarations,
filings or registrations with, or notices to, any governmental or
regulatory authority required to be made or obtained by the Bank in
connection with the execution and delivery of this Agreement or any of
the Transfer Agreement or the Ancillary Agreements and the performance
of the transactions contemplated hereby or thereby, except for the
consent of the Office of the Superintendent of Financial Institutions
with respect to the temporary substantial investment of the Bank in
the Corporation.
4.5 The Corporation - The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of Canada. The
authorized capital of the Corporation consists solely of an unlimited
number of common shares. Effective as of the Effective Transfer Time,
the Shares shall be all of the issued and outstanding shares of the
Corporation and shall have been issued to the Bank and BW as fully
paid and nonassessable shares in the capital of the Corporation.
Immediately prior to the Effective
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Transfer Time, the Corporation shall have no active business, assets,
liabilities or employees.
4.6 Authorization - The execution, delivery and performance by the
Corporation of this Agreement and the Transfer Agreement have been or
will be duly authorized by all necessary corporate action of the
Corporation, and all persons executing this Agreement and the Transfer
Agreement on behalf of the Corporation have been or will be duly
authorized to do so by all necessary corporate action on the part of
the Corporation. This Agreement has been, and the Transfer Agreement
when executed by the Corporation will be, duly executed and delivered
by the Corporation. This Agreement constitutes, and the Transfer
Agreement when executed and delivered by the Corporation will
constitute, the legal, valid and binding obligation of the
Corporation, enforceable against it in accordance with its terms,
except as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws of general application, and
equitable remedies that may be granted or imposed by a court of
competent jurisdiction.
4.7 Consents re: the Corporation - No consent, approval or authorization
under any material indenture, contract, instrument or other agreement
to which the Corporation is a party or by which it is bound is
required to be obtained in connection with the execution, delivery and
performance by the Corporation of this Agreement or the Transfer
Agreement. There are no consents, approvals, permits or
authorizations, declarations, filings or registrations with, or
notices to, any governmental or regulatory authority required to be
made or obtained by the Corporation in connection with the execution
and delivery of this Agreement or the Transfer Agreement and the
performance of the transactions contemplated hereby or thereby.
4.8 Title to Shares - On Closing, the Bank and BW shall have good and
marketable title to the Shares free and clear of all liens, security
interests and other encumbrances, and shall have the full legal right,
power and authority to sell and transfer the Shares to the Purchaser.
4.9 Title to Payroll Assets - The Bank now is, and immediately prior to
the Effective Transfer Time the Bank will be, the sole registered and
beneficial owner of all right, title and interest in and to the
Purchased Payroll Assets, free and clear of claims, liens, security
interests, and other encumbrances. The Bank has the full legal right,
power and authority to sell, assign and transfer the Purchased
Pay-roll Assets to the Corporation effective as of the Effective
Transfer Time and has not assigned, licensed or otherwise conveyed
such rights, licenses or privileges to any other Person.
4.10 Legal Proceedings - There are no legal proceedings pending, and the
Bank and BW are not aware of any legal proceedings threatened or of
any circumstances which may reasonably be expected to give rise to
such proceedings, which in any way might interfere
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with the sale or delivery of the Purchased Payroll Assets or the
Shares, or the consummation of any of the transactions contemplated
herein or under the Transfer Agreement or the Ancillary Agreements.
4.11 No Option - Except for the Corporation, no Person has any agreement or
option or any right or privilege (whether by law or by contract)
capable of becoming an agreement or option to acquire any of the
Purchased Payroll Assets. Except for the Purchaser, no Person has any
agreement or option or any right or privilege (whether by law or by
contract) capable of becoming an agreement or option to acquire any of
the Shares from the Bank
4.12 Conduct of Payroll Business - The Payroll Business has been conducted
since October 31, 1997 (the "Payroll Reference Date") in the ordinary
course, consistent with past practice. Since the Payroll Reference
Date, there has not been any change in the operation business, assets
or financial condition of the Payroll Business other than changes in
the ordinary course which have not individually or collectively had
any material adverse effect on the condition (financial or other),
results of operation, or assets of the Payroll Business and, since the
Payroll Reference Date, the Bank has not entered into any transaction
in connection with the Payroll Business not in the ordinary course of
the Payroll Business, other than this Agreement.
4.13 Financial Information - The financial information relating to the
Payroll Business provided by the Bank to the Purchaser and set forth
in Schedule 4.13 hereto has been prepared in accordance with generally
accepted accounting principles, consistently applied, and presents a
true and complete statement of the financial condition of the Payroll
Business for the fiscal periods stated therein.
4.14 Litigation - There is no suit, action, litigation, arbitration or
proceeding in progress, pending or threatened against or involving the
Payroll Business with the exception of the action commenced in Quebec
Superior Court by Jerry Radowitz, particulars of which have been
provided to the Purchaser, and there is not presently outstanding
against the Bank in respect of the Payroll Business any judgment,
decree, injunction or order of any court, governmental department,
agency or arbitrator.
4.15 Payroll Client Contracts - The Bank has delivered to the Purchaser a
true and correct copy of its standard contract terms incorporated in
Payroll Contracts entered into with Payroll Clients for the provision
of Payroll Services. Each of the Payroll Clients has entered into
such form of standard contract with the Bank or has been provided
Payroll Services consistent therewith or a variation thereto that is
not materially adverse to the Payroll Business. Schedule 4.15 sets
forth the material non-standard Payroll Contracts entered into with
Payroll Clients, copies of which have been made available to the
Purchaser.
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4.16 Proprietary Payroll Software -
(a) The Proprietary Payroll Software does not infringe any copyright,
patent, trademark, trade secret, or other intellectual property,
proprietary or other right of any third party.
(b) Schedule 1. 1(11) to the Transfer Agreement sets forth a complete
and accurate list of the Proprietary Payroll Software of the
Payroll Business. The Proprietary Payroll Software, together
with the other software to be made available to the Corporation
pursuant to the Transitional Services Agreement, constitutes all
of the material software used in the Payroll Business.
(c) The Proprietary Payroll Software:
(i) is complete in all respects and shall perform in
accordance with its data control manuals and user
manuals;
(ii) is free of all viruses, errors, defects and disabling
devices that would cause any component of the
Proprietary Payroll Software or of databases created
thereby to be erased, modified, deleted, damaged,
disabled or made inoperable or otherwise rendered
incapable of performing in accordance with its
published specifications; and
(iii) has been designed, developed, configured and
implemented in a good and workmanlike manner.
(d) Schedule 4.16 sets forth testing and other procedures conducted
with respect to the Paymaster (CPX) for verifying Year 2000
compliance, and also sets forth testing that has not yet been
conducted that would verify Year 2000 compliance for such
software. All other Proprietary Payroll Software is not Year
2000 compliant.
4.17 Labour Relations -
(a) Employees: Schedule 4.17(a) contains a true and complete list of
the Designated Employees, their titles and positions held as of
the date of this Agreement, their length of service with the
Bank, the locations of their employment and the material terms
and conditions of their employment or engagement, including their
current annual compensation, standard hours of work, commissions
and bonuses and their benefits and perquisites, and participation
in the Pension Plan and the other Bank's Benefit Plans.
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(b) Written or Oral Contracts: Except for standard Bank
employment/offer contracts (a copy of all standard versions of
which are attached as Schedule 4.17(b)), there are (i) no written
contracts of employment entered into with any Designated
Employees; (ii) no oral contracts of employment which provide
termination notice or pay in lieu of such notice or severance pay
to any of the Designated Employees in excess of termination
notice or pay in lieu of such notice or severance pay required by
applicable labour or employment standards law or at common law;
and (iii) no confidentiality, non-competition or nonsolicitation
contracts between the Bank and any Designated Employees.
There are no variations to any of the standard versions of
employment contracts attached as Schedule 4.17(b), entered into
by any of the Designated Employees, which are individually or in
the aggregate materially adverse to the Payroll Business.
(c) Collective Agreements: The Bank has not made any agreements with
any labour union or employee association in connection with the
Payroll Business or the HRMS Business nor made any commitments to
or conducted any negotiations with any labour union or employee
association with respect to any future agreements relating to the
Payroll Business or the HRMS Business. To the best knowledge of
the Bank, there have been no attempts to organize a trade union
or employee association for any employees of the Payroll Business
or the HRMS Business. There is no labour strike, employee
disturbance or work stoppage or slowdown pending or, to the best
knowledge of the Bank, threatened against the Bank with respect
to the Payroll Business or the HRMS Business.
(d) Liabilities to Employees: The Bank has no liability of any kind
to any Designated Employee except for compensation, commissions,
bonuses, and benefits and pensions payable to such Designated
Employee in the ordinary course of the Payroll Business or the
HRMS Business.
(e) Compliance with Laws: The Bank is in compliance (and shall be in
compliance immediately prior to the Effective Time) in all
material respects with all applicable laws, statutes,
regulations, rules and by-laws relating to the employment of
Designated Employees, including, without limiting the generality
of the foregoing, those related to wages, pay equity, hours of
work, collective bargaining and labour relations, occupational
health and safety, workers compensation, human rights, pension
benefits standards and labour and employment standards and is not
liable for any arrears of wages, assessments, penalties or other
sums for failure to comply with any of the foregoing.
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(f) No Changes: Except as disclosed in Schedule 4.17(f), with respect
to the Designated Employees, no commitment, express or implied,
has been made to change compensation or to change any benefit
under the Pension Plan or the other Bank's Benefit Plans or to
offer additional benefits.
(g) Retiree Benefits: Except as disclosed in Schedule 4.17(g), there
are no benefits promised to Designated Employees, applicable to
them, or their dependents upon the retirement of the Designated
Employees, other than in respect of the Pension Plan.
(h) No Vacation Accrual: As at January 31, 1998, none of the
Designated Employees shall have any accrued and unused vacation
for the period ended December 31, 1997.
4.18 Payroll Trademarks -
(a) The only trademarks used in connection with the Payroll Business
are the Payroll Trademarks and the trademarks of the Bank
licenced pursuant to the Trademark Licence Agreement;
(b) The Bank has the unrestricted right and has not licenced or
otherwise permitted any other Person to use the Payroll
Trademarks;
(c) The Bank has registered the Payroll Trademarks in the Canadian
Trademarks office;
(d) The Payroll Trademarks are in full force and effect and have not
been used or enforced or failed to be used or enforced in a
manner that would result in the abandonment, cancellation or
unenforceability of any right in the Payroll Trademarks;
(e) The Bank has no knowledge of any claim of adverse ownership or
invalidity or other opposition or conflict with any of the
Payroll Trademarks nor of any pending or threatened suit,
proceeding, claim, demand, action or investigation of any nature
or kind against the Bank relating to the Payroll Trademarks; and
(f) The Bank has no knowledge that any activity relating to the
conduct of the Payroll Business or the Payroll Trademarks
breaches, violates, infringes or interferes with any trademarks
or other intellectual property rights of any third party or
requires payment for the use of any trademarks or other
intellectual property rights of a third party.
<PAGE>
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4.19 No Finder's Fee or Broker's Fee - No Person has, or as a result of any
of the transactions contemplated hereby will have, by reason of any
commitment of the Bank towards such Person, any right, interest or
valid claim against or upon Ceridian, Ceridian Holdings, the Purchaser
or the Corporation or any property of Ceridian, Ceridian Holdings, the
Purchaser or the Corporation for any commission, fee or other
compensation as broker or finder or for services in any similar
capacity.
4.20 Bank's Residence - The Bank is not a non-resident within the meaning
of that term as used in the Income Tax Act (Canada).
4.21 Registration for Taxes - The Bank is duly registered under Part IX of
the Excise Tax Act (Canada) under registration number 105255145 and
under the Quebec Sales Tax Act under registration number 100004293.
4.22 Plans - The Bank Benefit Plans are all of the benefit plans,
arrangements, agreements, programs, policies or practices, whether
oral or written, formal or informal, funded or unfunded (other than
governmental mandated benefits of general application) in which the
Designated Employees participate or are eligible to participate,
including but not limited to:
(i) retirement savings or pensions including, without
limitation, any registered retirement savings plan, or
supplemental pension or retirement plan;
(ii) stock option, hospitalization, health, dental,
disability, unemployment insurance, vacation pay,
severance pay, sick leave, club membership, company
car, company awards, company loans, consulting or other
similar compensation arrangements.
Summaries of the Bank Benefit Plans, copies of all material employee
communications relative to Bank Benefit Plans and copies of all work
permits and employment related government authorizations or permits
have been provided to the Purchaser.
4.23 List of Customers - The lists of HRMS Clients and Payroll Clients to
be delivered on Closing to the Purchaser pursuant to Article 8, shall
be complete and accurate lists.
4.24 Undisclosed Liabilities - Except as disclosed in Schedule 4.24 hereto
and except as incurred in the ordinary and usual course of the Payroll
Business, there is no outstanding indebtedness or liabilities or
obligations (whether accrued, absolute, contingent or otherwise) of
the Payroll Business of a nature customarily reflected or reserved
against in a balance sheet (including the notes thereto) prepared in
accordance with generally accepted accounting principles.
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Page 19 -
4.25 Operation of the Businesses - The Purchased Payroll Assets and the
Purchased HRMS Assets, together with the services to be provided by
the Bank to the Corporation under the Transitional Services Agreement,
are sufficient to operate the Payroll Business and the HRMS Business
as was conducted as of the Closing Date.
4.26 Product Defects - There are no defects in the products or services of
the Payroll Business heretofore or currently being distributed or sold
by the Payroll Business which would materially adversely affect the
performance and quality of such products and services, provided,
however, that this representation and warranty does not extend to any
aspect or component of the products or services of the Payroll
Business that are not defective as at the Effective Time but that
become defective after the Effective Time as a result of modifications
made to such products or services by the Corporation. There are no
express or implied warranties outstanding with respect to the products
or services of the Payroll Business except as imposed by law or as
described in the contracts referred to in Section 4.15.
4.27 Organization, Standing and Authority of BW - BW is a corporation
validly existing under the laws of Ontario, and it has all necessary
corporate power, authority and capacity to own its property and assets
and to carry on the HRMS Business as is presently conducted by it. BW
has all requisite power and authority to execute and deliver this
Agreement and the Transfer Agreement and to perform its obligations
hereunder and thereunder and to complete the transaction of purchase
and sale contemplated hereunder and thereunder.
4.28 BW Shares - All of the issued and outstanding shares of BW are owned
as of record and beneficially by the Bank. No options, warrants or
other rights to purchase shares or other securities of BW have been
authorized or agreed to be issued or are outstanding.
4.29 BW Authorization - The execution, delivery and performance by BW of
this Agreement and Transfer Agreement have been duly authorized by all
necessary corporate action of BW, and all persons executing such
agreements on behalf of BW have been duly authorized to do so by all
necessary corporate action on the part of BW. This Agreement and the
Transfer Agreement have been duly executed and delivered by BW and
constitute the legal, valid and binding obligations of BW, enforceable
against BW in accordance with their terms, except as enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or
similar laws of general application, and equitable remedies that may
be granted or imposed by a court of compete-.it jurisdiction.
4.30 No Conflicting BW Agreements - The execution and delivery by BW of
this Agreement and the Transfer Agreement and the performance by EW of
its obligations hereunder and thereunder does not and will not (i)
result in or constitute a default under, breach or violation of, or an
event that with notice or lapse of time or both would be a breach or
<PAGE>
- Page 20 -
violation of the organizational documents of BW, or any existing note,
bond, mortgage, indenture, deed of trust, licence, permit, lease, loan
agreement, contract or other agreement, instrument or arrangement to
which BW is a party or by the terms of which BW is or may be bound or
affected, or (ii) violate or contravene any law to which it is
subject.
4.31 BW Consents - No consent, approval or authorization under any material
indenture, contract, instrument or other agreement (excluding HRMS
Contracts) to which the Bank or BW is a party or by which they are
bound is required to be obtained in connection with the execution,
delivery and performance by BW of this Agreement and the Transfer
Agreement. There are no consents, approvals, permits or
authorizations, declarations, filings or registrations with, or
notices to, any governmental or regulatory authority required to be
made or obtained by BW in connection with the execution and delivery
of this Agreement and the Transfer Agreement and the performance of
the transactions contemplated hereby or thereby.
4.32 Title to Assets - BW now is and immediately prior to the Effective
Transfer Time will be (and the Bank, to the extent that it owns any of
the Purchased HRMS Assets now is and immediately prior to the
Effective Transfer Time will be) the sole registered and beneficial
owner of all right, title and interest in and to the Purchased HRMS
Assets, free and clear of claims, liens, security interests, and other
encumbrances. BW (and the Bank, to the extent that it owns any of the
Purchased HRMS Assets) has the full legal right, power and authority
to sell, assign and transfer the Purchased HRMS Assets to the
Corporation effective as of the Effective Transfer Time, and has not
assigned, licensed or otherwise conveyed such rights, licences or
privileges to any other Person.
4.33 Legal Proceedings - There are no legal proceedings pending and BW and
the Bank are not aware of any legal proceedings threatened or of any
circumstances which may reasonably be expected to give rise to such
proceedings which in any way might interfere with the sale or delivery
of the Purchased HRMS Assets, or the consummation of any of the
transactions contemplated herein.
4.34 No Option - Except for the Corporation, no Person has any agreement or
option or any right or privilege (whether by law or by contract)
capable of becoming an agreement or option to acquire any of the
Purchased HRMS Assets. Except for the Purchaser, no Person has any
agreement or option or any right or privilege (whether by law or by
contract) capable of becoming an agreement or option to acquire any of
the Shares from BW.
4.35 Financial Information - The financial information relating to the HPMS
Business provided to the Purchaser and set forth in Schedule 4.13
hereto has been prepared in accordance with generally accepted
accounting principles, consistently applied, and
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presents a true and complete statement of the financial condition of
the HRMS Business for the fiscal periods stated therein.
4.36 Undisclosed Liabilities - Except as disclosed in Schedule 4.24 hereto
and except as incurred in the ordinary and usual course of the HRMS
Business, there is no outstanding indebtedness or liabilities or
obligations (whether current, absolute, contingent or otherwise) of
the HRMS Business of a nature customarily reflected or reserved
against any balance sheet (including the notes thereto) prepared in
accordance with generally accepted accounting principles.
4.37 Conduct of the HRMS Business - The HRMS Business has been conducted
since October 31, 1997 (the "HRMS Reference Date") in the ordinary
course, consistent with past practice. Since the HRMS Reference Date,
there has not been any change in the operation, business, assets or
financial condition of the HRMS Business other than changes in the
ordinary course which have not individually or collectively had any
material adverse effect on the condition (financial or other), results
of operation, or assets of the HRMS Business, and since the HRMS
Reference Date, neither the Bank nor BW has entered into any
transaction in connection with the HRMS Business not in the ordinary
course of the HPMS Business, other than this Agreement.
4.38 HRMS Litigation - There is no suit, action, litigation, arbitration or
proceeding in progress, pending or threatened against or involving the
HRMS Business and there is not presently outstanding against BW or the
Bank in respect of the HRMS Business any judgment, decree, injunction
or order of any court, governmental department, agency or arbitrator.
4.39 HRMS Client Contracts - BW has delivered to the Purchaser a true and
correct copy of the standard contract terms incorporated in contracts
entered into between BW (or the Bank) and HRMS Clients for the
provision of HRMS Services. Each of the HRMS Clients has entered into
such form of standard contract with BW (or the Bank) or has been
provided services consistent therewith or with a variation thereto
that is not materially adverse to the HRMS Business.
4.40 Proprietary HRMS Software -
(a) The Proprietary HRMS Software does not infringe any copyright,
patent, trademark, trade secret, or other intellectual property,
proprietary or other right of any third party.
(b) The Phipps HR Interface software is the only Proprietary HRMS
Software of the HRMS Business.
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(c) The Proprietary HRMS Software:
(i) is complete in all respects and shall perform in
accordance with its scope documents and user manuals;
(ii) is free of all viruses, errors, defects and disabling
devices that would cause any component of the
Proprietary HRMS Software or of databases created
thereby to be erased, modified, deleted, damaged,
disabled or made inoperable or otherwise rendered
incapable of performing in accordance with its
published specifications; and
(iii) has been designed, developed, configured and
implemented in a good and workmanlike manner.
(d) The Proprietary HRMS Software is not year 2000 compliant.
4.41 HRMS Trademarks -
(a) The only trademarks used in connection with the HRMS Business are
the HRMS Trademarks and the trademarks of the Bank licenced
pursuant to the Trademark Licence Agreement;
(b) The Bank and BW have the unrestricted right and has not licenced
or otherwise permitted any other Person to use the HRMS
Trademarks;
(c) The Bank and BW have registered the HRMS Trademarks in the
Canadian Trademarks office;
(d) The HRMS Trademarks are in full force and effect and have not
been used or enforced or failed to be used or enforced in a
manner that would result in the abandonment, cancellation or
unenforceability of any right in the HRMS Trademarks;
(e) The Bank and BW have no knowledge of any claim of adverse
ownership or invalidity or other opposition or conflict with any
of the BRMS Trademarks nor of any pending or threatened suit,
proceeding, claim, demand, action or investigation of any nature
or kind against the Bank relating to the HRMS Trademarks; and
(f) The Bank and BW have no knowledge that any activity relating to
the conduct of the HRMS Business or the HRMS Trademarks breaches,
violates, infringes or interferes with any trademarks or other
intellectual property rights of any third
<PAGE>
- Page 23 -
party or requires payment for the use of any trademarks or other
intellectual property rights of another party.
4.42 Labour Relations - BW does not employ any employees for the HRMS
Business.
4.43 No Finder's Fee or Broker's Fee - No Person has, or as a result of any
of the transactions contemplated hereby will have, by reason of any
commitment of BW towards such Person, any right, interest or valid
claim against or upon Ceridian, Ceridian Holdings, the Purchaser or
the Corporation or any property of Ceridian, Ceridian Holdings, the
Purchaser or the Corporation for any commission, fee or other
compensation as broker or finder or for services in any similar
capacity.
4.44 BW's Residence - BW is not a non-resident within the meaning of that
term as used in the Income Tax Act (Canada).
4.45 BW Registration for Taxes - BW is duly registered under Part IX of the
Excise Tax Act (Canada) under registration number 139484307 and under
the Quebec Sales Tax Act under registration number 101772976 1.
5. REPRESENTATIONS AND WARRANTIES OF CERIDIAN, CERIDIAN HOLDINGS AND THE
PURCHASER
The Purchaser, Ceridian Holdings and Ceridian jointly and severally represent
and warrant to the Bank and BW as follows:
5.1 Organization, Standing and Authorization - The Purchaser is a
corporation, duly organized, validly existing and in good standing
under the laws of Canada. The Purchaser has all necessary power and
authority to own, lease or licence its property and to conduct its
business as now conducted. The Purchaser has the requisite power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder, and to consummate the transactions contemplated
hereby including, without limitation, the purchase of the Shares.
5.2 Authorization, Execution and Enforceability - The execution, delivery
and performance by the Purchaser of this Agreement have been duly
authorized by all necessary corporate action of the Purchaser, and no
further corporate action is required to be taken by the Purchaser in
order to execute, deliver and perform this Agreement. All persons
executing this Agreement on behalf of the Purchaser have been duly
authorized to do so by all necessary corporate action on the part of
the Purchaser. This Agreement has been duly executed and delivered by
the Purchaser and constitutes the legal, valid and binding obligation
of the Purchaser, enforceable against the Purchaser in accordance with
its terms, except as enforceability thereof may be limited by
bankruptcy, insolvency,
<PAGE>
- Page 24 -
reorganization or similar laws of general application, and equitable
remedies that may be granted or imposed by a court of competent
jurisdiction.
5.3 No Conflicting Agreements - The execution and delivery by the
Purchaser of this Agreement and the performance by the Purchaser of
its obligations hereunder does not and will not (i) result in or
constitute a default under, breach or violation of, or an event that
with notice or lapse of time or both would be a breach or violation
of, the organizational documents of the Purchaser, or any existing
note, bond, mortgage, indenture, deed of trust, licence, permit,
lease, loan agreement, contract or other agreement, instrument or
arrangement to which the Purchaser is a party or by the terms of which
the Purchaser is or may be bound or affected; or (ii) violate or
contravene any law to which it is subject.
5.4 Consents - No consent, approval or authorization under any material
indenture, contract, instrument or other agreement to which Ceridian
or the Purchaser is a party or by which either of them is bound is
required to be obtained in connection with the execution, delivery and
performance by the Purchaser of this Agreement. There are no
consents, approvals, permits or authorizations, declarations, filings
or registrations with, or notices to, any governmental or regulatory
authority required to be made or obtained by the Purchaser in
connection with the execution and delivery of this Agreement and the
performance of the transactions contemplated hereby or thereby, except
that Ceridian or the Purchaser will make appropriate filings under the
Investment Canada Act within 30 days following the Closing.
5.5 Legal Proceedings - There are no legal proceedings pending and
Ceridian and the Purchaser are not aware of any legal proceedings
threatened or of any circumstances which may reasonably be expected to
give rise to such proceedings against Ceridian which in any way might
interfere with the purchase of the Shares or the consummation of any
of the transactions contemplated under this Agreement.
5.6 Compliance with Laws - The Purchaser is not in default under or in
violation of any law, except for such defaults or violations that
would not, individually or in the aggregate, result in a material
adverse effect on the condition (financial or other) or prospects of
the Purchaser.
5.7 No Bankruptcy Proceedings - There are no bankruptcy, insolvency or
receivership proceedings outstanding against Ceridian, Ceridian
Holdings or the Purchaser and neither the Purchaser, Ceridian Holdings
nor Ceridian has made any assignment for the benefit of any creditors
and no execution or attachment has been levied against the Purchaser
on account of any liens or judicial process.
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5.8 Organization, Standing and Authorization - Each of Ceridian and
Ceridian Holdings is a corporation, duly organized, validly existing
and in good standing under the laws of Delaware. Each of Ceridian and
Ceridian Holdings has all necessary power and authority to own, lease
or licence its property and to conduct its business as now conducted
and has the requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder.
5.9 Authorization, Execution and Enforceability re: Ceridian and Ceridian
Holdings The execution, delivery and performance by Ceridian and
Ceridian Holdings of this Agreement have been duly authorized by all
necessary corporate action of Ceridian, and no further corporate
action is required to be taken by Ceridian or Ceridian Holdings in
order to execute, deliver and perform this Agreement. All persons
executing this Agreement on behalf of Ceridian and Ceridian Holdings
have been duly authorized to do so by all necessary corporate action
on the part of Ceridian. This Agreement has been duly executed and
delivered by Ceridian and Ceridian Holdings and constitutes the legal,
valid and binding obligation of Ceridian and Ceridian Holdings,
enforceable against them in accordance with its terms, except as
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or similar laws of general application, and equitable
remedies that may be granted or imposed by a court of competent
Jurisdiction.
5.10 No Conflicting Agreements - The execution and delivery by each of
Ceridian and Ceridian Holdings of this Agreement and the performance
by each of Ceridian and Ceridian Holdings of their obligations
hereunder do not and will not (i) result in or constitute a default
under, breach or violation of, or an event that with notice or lapse
of time or both would be a breach or violation of, the organizational
documents of Ceridian or Ceridian Holdings, or any existing note,
bond, mortgage, indenture, deed of trust, licence, permit, lease, loan
agreement, contract or other agreement, instrument or arrangement to
which Ceridian or Ceridian Holdings is a party or by the terms of
which Ceridian or Ceridian Holdings is or may be bound or affected; or
(ii) violate or contravene any law to which they are subject.
5.11 Consents - No consent, approval or authorization under any material
indenture, contract, instrument or other agreement to which either of
Ceridian or Ceridian Holdings is a party or by which either of them is
bound is required to be obtained in connection with the execution,
delivery and performance by Ceridian or Ceridian Holdings of this
Agreement. There are no consents, approvals, permits or
authorizations, declarations, filings or registrations with, or
notices to, any governmental or regulatory authority required to be
made or obtained by Ceridian or Ceridian Holdings in connection with
the execution and delivery of this Agreement and the performance of
the transactions contemplated hereby or thereby, except that Ceridian
or the Purchaser will make appropriate filings under the Investment
Canada Act within 30 days following the Closing.
<PAGE>
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5.12 Legal Proceedings - There are no legal proceedings pending and neither
of Ceridian nor Ceridian Holdings is aware of any legal proceedings
threatened or of any circumstances which may reasonably be expected to
give rise to such proceedings against the Purchaser which in any way
might interfere with the entering into of this Agreement by Ceridian
or Ceridian Holdings or the performance of their obligations
hereunder.
5.13 Authorization, Execution and Enforceability re: the Corporation - The
execution, delivery and performance by the Corporation of the
Ancillary Agreements shall as of the Effective Date be duly authorized
by all necessary corporate action of the Corporation, and no further
corporate action shall be required to be taken by the Corporation in
order to execute, deliver and perform the Ancillary Agreement. All
persons executing the Ancillary Agreements on behalf of the
Corporation shall be duly authorized to do so by all necessary
corporate action on the part of the Corporation. The Ancillary
Agreements shall be duly executed and delivered by the Corporation and
shall constitute, the legal, valid and binding obligation of the
Corporation enforceable against the Corporation in accordance with its
terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws of general application, and
equitable remedies that may be granted or imposed by a court of
competent jurisdiction.
5.14 No Conflicting Agreements - The execution and delivery by the
Corporation of the Ancillary Agreements and the performance by the
Corporation of its obligations thereunder will not (i) result in or
constitute a default under, breach or violation of, or an event that
with notice or lapse of time or both would be a breach or violation
of, the organizational documents of the Corporation, or any existing
note, bond, mortgage, indenture, deed of trust, licence, permit,
lease, loan agreement, contract or other agreement, instrument or
arrangement to which Ceridian, Ceridian Holdings or the Purchaser may
be a party or by the terms of which Ceridian, Ceridian Holdings, the
Purchaser or the Corporation (following the Effective Time) may be
bound or affected; or (ii) violate or contravene any law to which
it is subject.
5.15 Consents - No consent, approval or authorization under any material
indenture, contract, instrument or other agreement to which Ceridian
or the Purchaser is a party or by which Ceridian, the Purchaser or the
Corporation (following the Effective Time) may be bound is required to
be obtained in connection with the execution, delivery and performance
by the Corporation of the Ancillary Agreements. There are no
consents, approvals, permits or authorizations, declarations, filings
or registrations with, or notices to, any governmental or regulatory
authority required to be made or obtained by the Corporation in
connection with the execution and delivery of the Ancillary Agreements
and the performance of the transactions contemplated hereby or
thereby.
5.16 Duly Licenced - Following the Closing, the Purchaser shall cause the
Corporation to be duly licenced, registered or qualified in each
jurisdiction in which it shall conduct the
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- Page 27 -
HRMS Business and the Payroll Business, to perform its obligations
under this
Agreement and the Ancillary Agreements, and to enable the HRMS
Business and Payroll Business to be conducted as it is now conducted,
and all such licences, registrations, and qualifications shall be
valid, subsisting and in good standing.
5.17 Brokers' and Finders' Fees - No Person has, or as a result of any of
the transactions contemplated hereby will have, by reason of any
commitment of Ceridian, Ceridian Holdings or the Purchaser towards
such Person, any right, interest or valid claim against or upon BW or
the Bank or any property of BW or the Bank for any commission, fee or
other compensation as broker or finder or for services in any similar
capacity.
5.18 Corporation Plans - Schedule 5.18 sets forth a list of benefits that
the Corporation will make available to the Transferred Employees on
and after the dates set out in Schedule 5.18, subject to regulatory
approval.
6. SURVIVAL AND INDEMNIFICATION
6.1 Survival - Except as specifically provided in this Agreement, the
representations, warranties and covenants set forth herein or in any
certificate or other document delivered pursuant hereto and the
obligations of the parties hereto with respect thereto shall survive
the Closing and shall continue in full force and effect, provided that
such representations, and warranties shall only survive for a period
of [confidential information omitted] from the Closing Date, except
with respect to (i) tax matters (which shall survive the Closing Date
and continue in full force and effect until, but not after,
[confidential information omitted] or (ii) the matters represented and
warranted in Sections 4.8, 4.9 and 4.32 [confidential information
omitted]. If prior to the expiry of the said period no claim shall
have been made hereunder with respect to any such matters, the parties
shall have no further liability hereunder with respect thereto. No
due diligence investigation by a party hereto shall have the effect of
waiving any representation or warranty in its favour by another party.
6.2 Indemnification by Bank and BW - Subject to Section 6.3, the Bank and
BW shall be jointly and severally liable to Ceridian, Ceridian
Holdings, the Purchaser and the Corporation and shall defend,
indemnify and hold harmless Ceridian, Ceridian Holdings the Purchaser
and the Corporation and their respective officers, directors,
shareholders and employees against any and all losses, liabilities,
damages, demands, claims, suits, actions, judgments, causes of action,
assessments, fines, costs or expenses including, without limitation,
interest, penalties and attorneys' and accounting fees, asserted
against, resulting to, imposed on or incurred or suffered by Ceridian,
Ceridian Holdings, the Purchaser or the Corporation, directly or
indirectly, as a result of or arising out of:
<PAGE>
- Page 28 -
(a) the breach of any agreement, covenant, or representation and
warranty of the Bank or BW contained in this Agreement, the
Transfer Agreement, the Ancillary Agreements, or in any document
required to be entered into by the Bank or BW in favour of the
Corporation, the Purchaser, Ceridian or Ceridian Holdings
hereunder;
(b) non-fulfilment of any agreement, covenant or obligation of the
Bank or BW contained in this Agreement, the Transfer Agreement,
the Ancillary Agreements or in any document required to be
entered into by the Bank or BW in favour of the Purchaser, the
Corporation, Ceridian or Ceridian Holdings hereunder;
(c) all claims brought by or in respect of any of the Designated
Employees resulting from matters arising and accruing prior to
the Effective Time and all claims brought by or in respect of any
of the LTD Employees resulting from matters arising and accruing
at any time, in respect of, without limitation, wages, salaries,
bonuses, commissions, vacation pay, holiday pay, severance pay,
termination notice or pay in lieu of such notice, termination
pay, pension and other employee benefits, income tax
withholdings, unemployment insurance, employer health tax and any
other federal or provincial employment legislation related to
employment matters, except for any matters for which the
Corporation has expressly assumed responsibility under the terms
of this Agreement, the Transfer Agreement or the Ancillary
Agreements; and
(d) non-compliance with applicable bulk sales legislation in
connection with the transactions contemplated by the Transfer
Agreement.
6.3 Software and Trademark Indemnification
(a) The Bank shall, at its own expense, defend or arrange for the
defence of, or settle any action brought or claim made against
Ceridian, Ceridian Holdings, the Purchaser or the Corporation
based on any allegation that (i) the Proprietary HRMS Software or
the Proprietary Payroll Software infringes any patent, copyright,
trade secret or any other intellectual property right in any
jurisdiction, or (ii) that the Payroll Trademarks or the HRMS
Trademarks infringe any trademarks or other intellectual property
rights of any other Person. The Bank shall be liable to and
shall indemnify and hold harmless Ceridian, Ceridian Holdings,
the Purchaser and the Corporation and their respective officers,
directors, shareholders and employees against any and all costs,
losses, liabilities, demands, claims, suits, actions, judgments,
assessments, causes of actions, fees and expenses and damages in
any such claim or action including, without limitation, interest,
penalties and attorney's and accounting fees asserted against,
resulting to, imposed on or incurred or suffered by Ceridian,
Ceridian Holdings,
<PAGE>
Page 29 -
the Purchaser or the Corporation directly or indirectly as a
result of or arising out of any of the aforementioned claims or
actions, provided that:
(i) Ceridian, Ceridian Holdings, the Purchaser and the
Corporation promptly notify the Bank when it receives
any notice of such claim or allegation of infringement;
(ii) Ceridian, Ceridian Holdings, the Purchaser and the
Corporation fully cooperate with the Bank in the
defence or settlement of such action; and
(iii) the Bank shall have sole control of the defence or
settlement of any such claim or action.
(b) The Bank shall not be liable for any infringement or claim
thereof based on any modifications to the Proprietary HRMS
Software or the Proprietary Payroll Software made by, or improper
use thereof by Ceridian, Ceridian Holdings, the Purchaser, the
Corporation, or any third party.
(c) In the event a successful claim of infringement (save and except
for a claim made under Section 6.3(b)) shall restrain Ceridian's,
Ceridian Holdings, the Purchaser's or the Corporation's use of
all or part of the Proprietary HRMS Software or the .Proprietary
Payroll Software, the Bank shall, at its expense, take one of the
following actions (the selection of which shall be in the sole
discretion of the .Bank):
(i) procure for Ceridian, Ceridian Holdings, the Purchaser
or the Corporation the right to continue using the
alleged infringing or misappropriated Proprietary HRMS
Software or the Proprietary Payroll Software at no cost
to Ceridian, Ceridian Holdings, the Purchaser or the
Corporation; or
(ii) replace or modify the Proprietary HRMS Software or the
Proprietary Payroll Software so that it becomes
non-infringing (with the reasonable assistance of the
Purchaser, provided that the services of the
Purchaser's SR&D personnel engaged to assist with this
process shall be paid by the Bank at reasonable per
them rates). The Bank agrees that such replacement or
modification will be equivalent to the original
Proprietary HRMS Software or the Proprietary Payroll
Software in functionality and performance as is
reasonably practicable, provided, however, that the
functionality and performance shall not be materially
changed or degraded.
<PAGE>
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(d) The foregoing paragraphs of this Section 6.3 state the entire
liability of the Bank for any loss or damage whatsoever as a
result of the infringement of any intellectual property rights
and supersede, in the event of conflict with, any other provision
of this Agreement.
6.4 Indemnification by the Purchaser - Ceridian, Ceridian Holdings, the
Purchaser and the Corporation shall be jointly and severally liable to
the Bank and BW and shall defend, indemnify and hold harmless the Bank
and BW and their officers, directors, shareholders and employees
against any and all losses, liabilities, damages, demands, claims,
suits, actions, judgments, causes of action, assessments, fines, costs
or expenses including, without limitation, interest, penalties and
attorneys' and accounting fees, asserted against, resulting to,
imposed on, or incurred or suffered by the Bank and BW, directly or
indirectly, as a result of or arising out of-
(a) the breach of any agreement, covenant, representation or warranty
by the Purchaser, the Corporation, Ceridian or Ceridian Holdings
contained in this Agreement, the Transfer Agreement, the
Ancillary Agreements or in any document required to be entered
into by the Purchaser, Ceridian, Ceridian Holdings or the
Corporation in favour of the Bank or BW hereunder;
(b) any matter requiring indemnification by the Corporation in favour
of the Bank pursuant to subsection 12. 1 (b)(ii), (iii) and (iv)
of the Transitional Services Agreement;
(c) the non-fulfilment of any agreement, covenant or obligation of
the Purchaser or the Corporation contained in this Agreement, the
Transfer Agreement, the Ancillary Agreements or in any document
required to be entered into by the Purchaser, the Corporation,
Ceridian Holdings or Ceridian in favour of the Bank or BW
hereunder or thereunder, including, without limitation, the
assumption of the Assumed BRMS Liabilities and the Assumed
Payroll Liabilities;
(d) all claims brought by or in respect of any of the Transferred
Employees, resulting from matters arising and accruing on and
after the Effective Time, in respect of wages, salaries, bonuses,
commissions, vacation pay, holiday pay, severance pay,
termination notice or pay in lieu of such notice, termination
pay, pension and other employee benefits, income tax
withholdings, unemployment insurance, employer health tax and any
other federal or provincial employment legislation related to
employment matters, except for any matters for which the Bank has
expressly retained responsibility under the terms of this
Agreement, the Transfer Agreement or the Ancillary Agreements;
and
<PAGE>
- Page 31 -
(e) all liability of the Bank and BW for Taxes that may be assessed
upon them in connection with the transfer of the Purchased
Payroll Assets and the Purchased HRMS Assets pursuant to the
Transfer Agreement, but excluding income taxes payable by BW or
the Bank as a result of the disposition of the Purchased HRMS
Assets or Purchased Payroll Assets to the Corporation pursuant to
the Transfer Agreement.
6.5 Indemnification for Claims Other Than Third Party Claims - Following
receipt from a party hereto (the "Indemnified Party") of a written
notice of a claim for indemnification which has not arisen in respect
of a Third Party Claim (as defined in Section 6.6 below), the party or
parties in receipt of such notice (the "Indemnifying Party") shall
have thirty (30) Business Days to make such investigation of the
claim as the Indemnifying Party considers necessary or desirable.
For the purpose of such investigation, the Indemnified Party shall
make available to the Indemnifying Party the information relied upon
by the Indemnified Party to substantiate the claim. If the
Indemnified Party and the Indemnifying Party agree at or prior to the
expiration of such thirty (30) Business Days (or any mutually agreed
upon extension thereof) to the validity and amount of the claim, the
Indemnifying Party shall immediately pay to the Indemnified Party the
full agreed upon amount of the claim. If the Indemnified Party and
the Indemnifying Party do not reach agreement within such period
(or any mutually agreed upon extension thereof), such dispute shall
be resolved by any arbitration proceeding as may be agreed between
the Indemnified Party and the Indemnifying Party, or shall be subject
to resolution by proceedings to be commenced before a court of
competent jurisdiction.
6.6 Indemnification against Third Party Claims
Except as provided in Section 6.3,
(a) Promptly upon receipt by a party hereto (herein referred to as
the "Indemnitee") of notice of any claim by a third party (a
"Third Party Claim") in respect of which the Indemnitee proposes
to demand indemnification from another party or parties to this
Agreement (the "Indemnitor"), the lndemnitee shall give notice
(the "Notice") to that effect to the Indemnitor. The Notice
shall set forth the actual or estimated amount of the loss or
losses incurred or to possibly be incurred, and shall specify in
reasonable detail the items of loss or potential loss included in
the amount so stated, the date such matter occurred, the basis
for any anticipated loss or losses, and the nature of the
misrepresentation, breach of warranty or breach of covenant or
claim to which such items relate. The failure the give the
Notice on a timely basis shall not affect the Indemnitee's right
to indemnification hereunder except to the extent that the
Indemnitor is materially prejudiced thereby, subject to Section
6.7.
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- Page 32 -
(b) 'The Indemnitor shall have the right, by notice to the Indemnitee
not later than the earlier of (i) twenty (20) Business Days after
receipt of the notice described in Section 6.6(a) and (ii) the
date upon which any action must be taken in reply to such Notice,
to assume the control of the defence, compromise or settlement of
the Third Party Claim, provided that:
such assumption shall, by its terms, be without cost to
the Indemnitee; and
(ii) the Indemnitor shall at the Indemnitee's request
furnish the Indemnitee with reasonable security against
any costs or other liabilities to which it may be or
become exposed by reason of such defence, compromise or
settlement.
(c) Upon the assumption of control by the Indemnitor as aforesaid,
the Indemnitor shall diligently proceed with the defence,
compromise or settlement of the Third Party Claim, at the
Indemnitor's sole expense, including employment of counsel
reasonably satisfactory to the lndemnitee (verification of
satisfaction with the choice of counsel not to be unreasonably
withheld or delayed) and, in connection therewith, the Indemnitee
shall co-operate fully, but at the expense of the Indemnitor, to
make available to the Indemnitor all pertinent information and
witnesses under the Indemnitee's control, make such assignments
and take such other steps as are necessary to enable the
Indemnitor to conduct such defence, compromise or settlement,
provided always that the Indemnitee shall be entitled to
reasonable security from the Indemnitor for any expense, costs or
other liabilities to which it may be or may become exposed by
reason of such cooperation. Provided that the Indemnitor is
reasonably contesting any such Thirty Party Claim in good faith,
the Indemnitee shall not pay or settle any such Third Party
Claim. Notwithstanding the foregoing, the Indemnitee shall have
the right to pay or settle any such claim, provided that in such
event the Indemnitee shall waive any right to indemnification
therefor by the Indemnitor.
(d) If the Indemnitor fails to give notice to the Indemnitee as
provided in Section 6.6(b) or if the Indemnitor does not
reasonably contest the Third Party Claim in good faith, the
Indemnitee shall be entitled to assume the control of the
defence, compromise or settlement of the Third Party Claim as in
its sole discretion may appear advisable. The Indemnitee shall,
however, consult with the Indemnitor prior to agreeing to any
compromise or settlement of the Third Party Claim.
(e) The final determination of any such Third Party Claim including
all related costs and expenses (including all legal fees and
disbursements incurred by the Indemnitee) shall be binding and
conclusive upon the parties hereto as to the
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validity or invalidity, as the case may be, of such Third Party
Claim against the Indemnitor hereunder.
6.7 Expiry of Liability -
(a) The foregoing obligations of indemnification with respect to
representations and warranties shall be subject to the time
limitations set forth in Section 6.1 hereof and no party shall be
required to indemnify and save harmless any other party with
respect to such matters for which indemnification is sought
unless such party shall have been provided with notice pursuant
to Section 6.5 or Section 6.6, as the case may be, on or prior to
the expiration of the time periods set out in Section 6.1. With
respect to the obligations of indemnification under Sections
6.2(c) and 6.4(d) and 6.4(e), no party shall be required to
indemnify and save harmless any other party with respect to such
matters for which indemnification is sought unless such party
shall have been provided with notice pursuant to Section 6.5 or
6.6, as the case may be, on or prior to sixty (60) days after the
expiration of the applicable limitation periods in which a claim
can be made with respect to such matters.
(b) The assumption of liabilities by the Corporation relating to the
Assumed HRMS Liabilities and the Assumed Payroll Liabilities
shall terminate only upon complete performance thereof.
6.8 Limit - Notwithstanding any other provision of this Agreement, except
for the indemnification granted under Section 6.4(e), no claim for
indemnification, damages or other relief will be valid against a party
hereto until such time as the cumulative amount of losses for which
claims for indemnification made against the party exceeds $1 00,000,
at which time the losses indemnified shall revert to the first dollar
of loss. The maximum aggregate liability of a party, under all such
claims, shall not exceed the amount of the Purchase Price.
7. COVENANTS
7.1 Covenants of the Bank and BW - The Bank and BW covenant and agree with
the Purchaser as follows:
(a) Reasonable Efforts to Maintain and Preserve: The Bank and BW will
exercise all reasonable efforts to ensure that, from the date
hereof until the Closing Date, except as otherwise herein
provided or approved in writing by the Purchaser,
(i) the Payroll Business and the HRMS Business will each be
conducted only in the ordinary course in substantially
the same manner as prior to the date
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- Page 34 -
hereof and in such manner that each of the
representations and warranties made by the Bank and BW
herein as of the date hereof will, as of the Effective
Time, be true and correct in all material respects,
provided that any price increases or decreases
implemented by the Bank for the Payroll Services, or by
BW for the HRMS Services prior to the Effective Time,
shall be consistent with the Bank's and BW's usual
practice of instituting price increases or decreases;
and
(ii) the organization of the Payroll Business and the HRMS
Business will be maintained intact, the services of
their competent employees will be retained, and their
relationships with and the goodwill of their customers,
suppliers and others having business relations with
them will be preserved, the whole so as to maintain the
goodwill of the Payroll Business and the HRMS Business.
(b) Notice of Cessation in Ordinary Course: The Bank and BW will
promptly notify the Purchaser of the happening or existence or
apprehended happening or existence of any event or circumstance
on or prior to the Effective Time by reason of which either of
the Payroll Business or the HRMS Business has ceased or may cease
to be conducted in the ordinary course as heretofore provided or
by reason of which any of the representations and warranties made
by the Bank or BW herein may cease to be true and correct.
(c) Covenant Not to Compete: For a period of [confidential
information omitted] from and after the Closing Date, the Bank
and BW shall not, and shall ensure that their respective
affiliates do not directly or indirectly [confidential
information omitted] provide payroll services or human resource
management services similar to the type carried on by the Payroll
Business and the HRMS Business, provided that the Bank and its
affiliates shall not be precluded from any of the following:
(i) providing payroll services and human resource
management services to employees of the Bank and its
affiliates;
(ii) acquiring an interest in the assets or shares of a
Person that carries on, as its non-principal business,
a payroll services and/or human resource management
services business, provided that the Corporation shall
be given a right of first opportunity to purchase such
Person's Canadian payroll services business and/or
human resource management services business, on terms
as may be negotiated in good faith. In the event of
the waiver or other termination of such right of first
opportunity by the Corporation without the Corporation
having purchased such business or businesses, the Bank
and its affiliates shall not be obligated to cause any
<PAGE>
- Page 35 -
such Person to cease providing payroll services and/or
human resource management services, whether or not such
services compete with the Payroll Business, provided
that the payroll services and/or human resource
management services of such Person shall not be branded
with the trademarks, tradenames or logos of the Bank;
In the event that the payroll services and/or human
resource management services business of such Person
subsequently becomes the principal business of such
Person, the Corporation shall again be given a right of
first opportunity to purchase such Person's Canadian
payroll services business and/or human resource
management services business on terms as may be
negotiated in good faith. In the event of the waiver
or other termination of such right of first opportunity
by the Corporation without the Corporation having
purchased such business or businesses, the Bank and its
affiliates shall not be obligated to cause any such
Person to cease providing payroll services and/or human
resource management services, whether or not such
services compete with the Payroll Business, provided
that the payroll services and/or human resource
management services of such Person shall not be branded
with the trademarks, tradenames or logos of the Bank;
(iii) acquiring an interest in the assets or shares of a
Person that carries on the business of providing
payroll services or human resource management services,
on a passive basis and for investment purposes only, or
on a security enforcement, provided that the payroll
services and human resource management services of such
Person are not branded with the trademarks, tradenames
or logos of the Bank; or
(iv) providing banking, financial services, and all other
non-payroll and non-human resource management services
to the Payroll Clients and to HRMS Clients.
(d) Non-Solicitation: For a period of [confidential information
omitted] from and after the Closing Date, the Bank shall not, and
shall ensure that its respective affiliates do not, solicit the
Transferred Employees directly or indirectly, for employment with
or provision of services to the Bank or its affiliates (provided
that general advertisements to the public for employment
positions shall be deemed not to be a solicitation for the
purposes of this subsection).
For a period of [confidential information omitted] from and after the Closing
Date, the Bank shall not, and shall ensure that its respective affiliates do
not, solicit:
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(i) Payroll Clients to purchase payroll services of any
type from the Bank or any other Person; and
(ii) HRMS Clients to purchase human resource management
services of any type from the Bank or any other Person.
Notwithstanding the foregoing, the Bank may make solicitations in
order to provide the services that it is not precluded from
providing pursuant to Section 7. 1 (c)(iv).
(e) Documents: On or prior to the Closing Date, the Bank and BW will
execute all such agreements or documents contemplated in Section
8.1 and all other documents reasonably required by Ceridian,
Ceridian Holdings, the Purchaser or the Corporation to give
effect to the transactions contemplated herein.
Reasonable Assistance: The Bank shall provide the Purchaser with
reasonable assistance, at no expense to the Bank, in order to obtain
all necessary
governmental and regulatory approvals to be obtained by the Purchaser,
if any, in connection with the transactions provided for herein.
7.2 Covenants of the Purchaser and the Corporation - The Purchaser, the
Corporation, Ceridian Holdings and Ceridian covenant and agree with
the Bank as follows:
(a) Documents: On or prior to the Closing Date, the Purchaser, the
Corporation, Ceridian Holdings and Ceridian will execute all such
agreements or documents contemplated in Section 8.2 and all other
documents reasonably required by the Bank to give effect to the
transactions contemplated herein.
(b) Non-Solicitation: For a period of [confidential information
omitted] from and after the Closing Date, the Purchaser, the
Corporation, Ceridian Holdings and Ceridian shall not, and shall
ensure that their respective affiliates do not solicit employees
of the Bank and its affiliates that are not Designated Employees,
directly or indirectly, for employment with or provision of
services to the Purchaser or its affiliates (provided that
general advertisements made to the public for employment
positions shall not be deemed to be a solicitation for the
purposes of this subsection).
For a period of [confidential information omitted] from and after the
Closing Date, the Purchaser, the Corporation, Ceridian and Ceridian
Holdings shall not, and shall ensure that their respective affiliates
do not, directly or indirectly, sell or otherwise make available to a
Comparable Financial Institution, the lists of (i) Payroll Clients and
HRMS Clients and (ii) those customers of the Bank referred to the
Corporation pursuant
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- Page 37 -
to the Joint Sales and Marketing Agreement, nor shall they permit or
acquiesce in any other Person doing the same.
For the purposes hereof, "Comparable Financial Institution" means a
bank or loan and trust corporation or any of their affiliates.
Insurance companies shall also be deemed to be a Comparable Financial
Institution at a future time if, pursuant to legislative changes,
insurance companies shall be permitted to engage in the provision of
banking and financial services comparable to those types of services
that a bank is permitted to conduct.
(c) Receivables: - The Corporation shall receive in trust for the
Bank and BW and shall deliver to the Bank and BW all payments
made to the Corporation in respect of accounts receivable of the
Payroll Business and the HRMS Business which are due in whole or
in part to the Bank and BW, both in respect of billings made
prior to the Effective Date and billings made on or after the
Effective Date, including those in respect of the work-in-process
allocated between the parties in accordance with Section 3.2.
The Corporation, the Bank and BW shall cooperate in the
accounting and delivery to the Bank and BW of such payments.
7.3 Other Covenants
(a) Employees:
(i) Employee Continuation -
A. The Corporation shall offer to continue the
employment of all of the Designated Employees
consistent with the provisions of this Section
7.3, commencing effective the Effective Time,
subject to Section 7.3(a)(vi). The Bank and the
Purchaser shall participate in a joint
communication strategy, to advise the Designated
Employees at least three Business Days prior to
the Closing Date of the continuation of their
employment by the Corporation.
The continuation of employment of the Transferred
Employees shall include terms and conditions which
are [confidential information omitted]. The terms
and conditions of continued employment shall
include,
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- Page 38 -
without limitation, (i) job functions [confidential
information omitted]; (ii) [confidential information
omitted] base salaries [confidential information
omitted]; (iii) [confidential information omitted]
commissions, gain-sharing and bonuses [confidential
information omitted]; (iv) [confidential information
omitted] merit increase policy; (v) [confidential
information omitted], the benefits set forth in
[confidential information omitted], or other benefits
or compensation [confidential information omitted];
(vi) vacation, [confidential information omitted]; and
(vii) [confidential information omitted] retiree
benefits [confidential information omitted].
[confidential information omitted]
For the purposes of calculating service dates with
respect to eligibility for participation under the
Corporation's employee benefit plans and policies,
[confidential information omitted] and for any other
purposes required by law, the length of service of each
Transferred Employee [confidential information
omitted].
B. The [confidential information omitted] shall be
responsible to pay to the Transferred Employees
commissions and gain sharing amounts earned prior to
the Effective Time in accordance with the terms of the
applicable commission and gain sharing programs.
[confidential information omitted]
The [confidential information omitted] shall be
responsible to pay bonuses to the Transferred Employees
based on the fiscal year of the Payroll Business and
the HRMS Business ended October 31, 1997, and the
[confidential information omitted] shall be responsible
for the payment of a pro-rata amount of such bonuses
<PAGE>
- Page 39 -
in respect of the performance of Transferred Employees
for the period of November 1, 1997 up to the Effective
Date, [confidential information omitted]
For the purposes hereof, references to commissions,
gain sharing amounts and bonuses shall be references to
the commission and bonus programs offered by the Bank
to Transferred Employees in effect on the Effective
Date as set forth in Schedules 4.17(a) and 4.17(b). To
the extent that any of such commissions, gain sharing
amounts and bonuses are calculated on a fiscal year
basis, adjustments with respect to these matters shall
be made as soon as possible after the period ended
October 31, 1998.
(ii) No Discouragement - Neither Ceridian, Ceridian
Holdings, the Purchaser, the Corporation the Bank, or
their affiliates shall take any action to discourage
any of the Designated Employees from accepting the
continued employment on behalf of the Corporation.
(iii) Transferred Employees - Subject to subsection
7.3(a)(vi), as at the Effective Time, all Transferred
Employees shall become employees of the Corporation for
all purposes and except as provided for herein, the
Bank shall have no obligations or liability in respect
of Transferred Employees only to the extent any such
obligation or liability arises from any action, event
or course of conduct that occurs on and after the
Effective Time. [confidential information omitted]
(iv) Consequences Upon Rejection - In the event that the
Bank terminates the employment of any Designated
Employees who reject continued employment with the
Corporation (the "Non-Transferred Employees") on, prior
to or after the Closing Date, [confidential information
omitted].
<PAGE>
- Page 40 -
(v) Long-Term Disability - LTD Employees shall
[confidential information omitted].
(vi) Absent Employees - Subject to the provisions of this
subsection 7.3(a)(vi), the Corporation [confidential
information omitted] the employment of Absent Employees
[confidential information omitted]. The Corporation
shall, at the same time that offers of continued
employment are made to all Designated Employees or
shortly thereafter, communicate the intention of the
Corporation to [confidential information omitted] the
employment of an Absent Employee who is collecting
benefits under Short-Term Disability shall be
conditional upon [confidential information omitted] the
employment of those of the Absent Employees who are on
maternity or parental leave shall be conditional upon
[confidential information omitted] employment to any
other Absent Employee shall be conditional upon
[confidential information omitted]
[confidential information omitted] employment of Absent
Employees shall be consistent with all other provisions
of this Section 7.3 [confidential information omitted]
[confidential information omitted]. Without limiting
the preceding sentence, if the status of any Absent
Employee changes so that he or she commences collecting
benefits under Long-Term Disability [confidential
information omitted] such employee is an LTD Employee
for the purposes of this Agreement.
(vii) Vacation - The Corporation shall grant vacation to the
Transferred Employees [confidential information
omitted]
<PAGE>
- Page 41 -
Statutory vacation pay accrual prior to the Effective
Time[confidential information omitted]
(viii) Dismissal - The Corporation shall not provide notice of
termination of employment to any of the Transferred
Employees, except for cause, until [confidential
information omitted]. Without limiting Section
7.3(a)(iii) and for greater certainty, in the event
that a Transferred Employee's service is terminated by
the Corporation [confidential information omitted]
(ix) Timing: The information in Schedule 4.17(a) and the
list of Absent Employees and LTD Employees shall be
updated on the Closing Date, and all references in this
Section 7.3 to the Designated Employees, the Absent
Employees and LTD Employees shall be deemed to be
reference to those persons and the information set
forth in such updated lists.
(b) Bank's Benefit Plans:
(i) [confidential information omitted] Except as expressly
provided in the Transitional Services Agreement, the
Transferred Employees shall cease to be covered by the
Bank's Benefit Plans from and after the Effective Time
[confidential information omitted] and shall thereafter
be covered by the Corporation's benefit plans.
[confidential information omitted] Transferred
Employees [confidential information omitted]
<PAGE>
- Page 42 -
under the Corporation's benefit plans due to a
pre-existing condition.
(ii) Any claims for benefits incurred by the Transferred
Employees up to the Effective Time [confidential
information omitted] shall be payable by the Bank's
Benefit Plans. The Bank shall be liable to the
Corporation and shall defend, indemnify and hold
harmless the Corporation against any and all loss,
liability or expense arising out of any such claims
incurred as of or before the Effective Time.
(iii) Any claims for benefits incurred by the Transferred
Employees from and after the Effective Time
[confidential information omitted] shall be payable by
the Corporation's benefit plans according to their
terms. The Corporation shall be liable to the Bank and
shall defend, indemnify and hold harmless the Bank
against any and all loss, liability or expense arising
out of any such claims incurred on and after the
Effective Time [confidential information omitted].
However, nothing in this Agreement obligates the
Corporation to provide any particular benefit or
benefit plans so long as the Corporation has complied
with subsection 7.3(a)(i).
For the purposes of subsections 7.3(b)(ii) and
7.3(b)(iii), a claim shall be deemed to have been
incurred:
A. with respect to death or dismemberment, on the
actual date of death or of dismemberment;
B. with respect to short-term disability and
long-term disability, on the date the claimant
became disabled as determined in accordance with
the applicable plan; and
C. with respect to all extended health or dental, on
the date a service or supply giving rise to a
claim under the applicable Plan is purchased or
received by the claimant or his/her eligible
dependent.
Where a claim includes more than one service or supply, each of which
occurs at a single point in time (for example, a series of dental
appointments related to a treatment plan), each such service or supply
shall result in a separate claim
<PAGE>
- Page 43 -
incurred as of the date on which the supply or service is
purchased or received as aforesaid. If sufficient information is
not available to identify charges associated with each claim (but
is sufficient for payment of the claims in the ordinary course of
claims adjudication), the total charges shall be prorated over
the number of claims.
(v) All Transferred Employees who participated in the
Bank's employee stock purchase plan immediately prior
to the Effective Date [confidential information
omitted]
(c) Pension Plan:
(1) Subject to and without limiting the Corporation's
commitment under subsection 7.3(a)(i), as soon as
practicable after the Closing Date, but effective as of
the Effective Time, the Corporation shall establish and
register with the applicable regulatory authorities, or
shall otherwise cause to be provided, a defined
contribution retirement plan (the "Corporation's
Pension Plan") for all Transferred Employees.
(ii) The Bank shall retain responsibility for, and satisfy
its obligations with respect to, all pension and
ancillary benefits accrued to the Transferred Employees
who participated in the Pension Plan to the Effective
Time in accordance with the terms thereof and
applicable federal and provincial laws.
(iii) As of the Effective Time, each of the Transferred
Employees will cease to actively participate in and
accrue benefits under the Pension Plan and will
commence participating in the Corporation's Pension
Plan for future service only in accordance with the
terms thereof and applicable federal and provincial
laws.
The Corporation's Pension Plan shall recognize the
period of employment of each of the Transferred
Employees with the Bank and its predecessors as
required by applicable federal and provincial laws.
(d) Competition Act/Investment Canada Act: The Bank, BW, the
Purchaser and the Corporation agree to file either individually,
o,- jointly (if required by law) all notices that may be required
under either the Competition Act and/or Investment Canada Act.
(e) Confidentiality: Ceridian, Ceridian Holdings, the Purchaser and
the Corporation shall keep confidential all confidential
information (unless readily available from
<PAGE>
- Page 44 -
public or published information or sources or required to be
disclosed by law) obtained from the Bank and BW and not relating
to the Payroll Business or the HRMS Business. If this Agreement
is terminated without completion of the transactions contemplated
in this Agreement then, promptly after such termination, all
documents, work papers and other written material obtained from
the Bank and BW in connection with this Agreement shall be
returned to the Bank and BW, and Ceridian, Ceridian Holdings and
the Purchaser shall destroy any copies or notes taken summarizing
such information.
Consents Required in Contracts: The Bank, in co-operation with
the Purchaser, shall use reasonable efforts to obtain the
consents of third parties as may be necessary for the transfer
and assignment of Payroll Contracts and HRMS Contracts to the
Corporation and the subsequent change of control of the
Corporation. The Bank, acting jointly with the Purchaser, shall
use reasonable efforts to obtain the consent of Spectrum, Inc. as
may be necessary for the transfer and assignment of the contract
entered into between BW and Spectrum, Inc., to the Corporation,
and the subsequent change of control of the Corporation. If
consents cannot be obtained, any such contracts shall not be
assigned and the Bank or BW, as the case may be, shall to the
extent legally possible, hold its right, title and interest in,
to and under such contracts in trust for the benefit of the
Corporation in accordance with the Transfer Agreement.
(g) [Intentionally deleted]
(h) Trust Funds Under Administration: As of the Effective Time or on
the first Business Day thereafter, the Bank shall transfer all
funds under administration, including funds held on behalf of
Payroll Clients pursuant to statutory trusts (the "Funds") that
the Bank then holds in respect of payroll processed for Payroll
Clients, to a bank account of the Corporation designated in
writing by the Purchaser at least two Business Days prior to the
Closing Date. Notwithstanding the foregoing, subject to
agreement between the Bank and the Purchaser, the Bank shall make
a temporary investment of the Funds, and upon maturity of the
investment, the Bank shall transfer the Funds and the income
earned thereon to the bank account so designated in writing by
the Purchaser.
(1) Third Party Payments: On or prior to the Closing, the Bank shall
pay [confidential information omitted] to Cyborg Systems of
Canada Inc. ("Cyborg") in respect of the agreed upon fee for
securing Cyborg's consent to the assignment to the Corporation of
the contract between Bank and Cyborg. Unless otherwise agreed by
the parties, any fees payable to Spectrum, Inc. in respect of the
assignment to the Corporation of the contract between BW and
Spectrum, Inc. shall be paid by the Corporation. In addition,
the parties shall negotiate any apportionment of
<PAGE>
- Page 45 -
payments required to be made to third parties to secure any
consents required to be obtained with respect to this Agreement
and the agreements contemplated hereby.
Transfer Agreement Fees: At the Closing, the Purchaser shall pay
to the Bank an amount equal to the legal fees and disbursements
incurred by the Bank as a result of the preparation of documents
and implementation of the transactions contemplated by the
Transfer Agreement, up to but not exceeding an amount of $17,500.
(k) Returns: The Bank will provide the Purchaser with copies of the
portions of the Bank's T661 returns filed with Revenue Canada for
the Bank's 1994, 1995, 1996 and 1997 taxation years that relate
to scientific research and experimental development related to
the Purchased Payroll Assets or the Purchased HRMS Assets (the
"Payroll/HRMS SR & ED"), together with copies of the portions of
all supporting reports and other documents that relate to the
Payroll/HRMS SR & ED, except for any such documents which the
Bank is not permitted to disclose or copy without the consent of
any third party. The foregoing copies shall be delivered by the
Bank as soon as reasonably practicable following the Closing
Date, provided that the Purchaser acknowledges that the Bank
requires a significant period of time to identify all of the
relevant documents. All such documents shall be kept in
strictest confidence by the Purchaser and the Purchaser shall not
disclose any portion of any of such documents to any person
except as required by law.
(1) Registrations: On or before Closing, the Bank shall register the
Corporation under part IX of the Excise Tax Act (Canada) and
under the Quebec Sales Tax Act and shall provide registration
particulars to the Purchaser.
(in) Statement: At Closing, the Bank shall provide the Purchaser with
a balance sheet of the Corporation prepared in accordance with
generally accepted accounting principles as at the Effective
Transfer Time reflecting the acquisition by the Corporation of
the Purchased Payroll Assets and the Purchased HRMS Assets, and
the issue of Shares by the Corporation pursuant to the Transfer
Agreement.
8. CONDITIONS OF CLOSING
8.1 For the Benefit of the Purchaser - The purchase and sale of the Shares
is subject to the following terms and conditions for the exclusive
benefit of the Ceridian, Ceridian Holdings and the Purchaser to be
fulfilled and performed on or prior to the Closing Date, provided that
Ceridian, Ceridian Holdings and the Purchaser in their sole discretion
may waive any of the said terms and conditions in whole or in part:
<PAGE>
- Page 46 -
(a) Representations and Warranties Remain Correct: The
representations and warranties of the Bank and BW contained in
this Agreement or in any certificate or other document delivered
to the Purchaser pursuant hereto shall be true and correct on and
as of the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of
such date.
(b) Compliance with Covenants: Each of the Bank, BW and the
Corporation shall have complied with all covenants and agreements
herein agreed to be performed or caused to be performed by it, in
all material respects, on or prior to the Closing Date,
including, without limitation, the sale and transfer of the
Purchased HRMS Assets and the Purchased Payroll Assets to the
Corporation pursuant to the Transfer Agreement.
(c) No Actions or Proceedings: No action or proceeding at law or in
equity shall be pending or threatened by any Person, including
without limiting the generality thereof, any governmental
authority, regulatory body or agency, to enjoin or prohibit:
(i) the purchase and sale of the Shares;
(ii) the purchase and sale of the Purchased HRMS Assets or
the Purchased Payroll Assets contemplated by the
Transfer Agreement or the right of the Corporation to
own the Purchased HRMS Assets or the Purchased Payroll
Assets; and
(iii) the right of the Corporation, Ceridian, Ceridian
Holdings or the Purchaser to conduct and carry on the
Payroll Business and the HRMS Business in the normal
course.
(d) Consents, Authorizations and Registrations: All necessary
consents, approvals, orders and authorizations of any Persons or
governmental authorities in Canada or elsewhere or required
pre-closing registrations, declarations, filings or recordings
with any such authorities in connection with the completion of
any of the transactions contemplated by this Agreement, the
Transfer Agreement or the Ancillary Agreements, shall have been
obtained or made on or before Closing.
(e) Agreements: The Bank and BW shall have delivered or caused to be
delivered to the Purchaser:
(i) the Ancillary Agreements;
<PAGE>
- Page 47 -
(ii) an opinion of counsel of the Bank and BW in form and
substance satisfactory to the Purchaser's counsel,
acting reasonably;
(iii) share certificates representing the Shares duly
endorsed in blank for transfer, and the corporate
minute book, share certificates, corporate seal and
other corporate records of the Corporation;
the resignations of all of the directors of the
Corporation;
(v) a list of work-in-process of the HRMS Business and the
Payroll Business as at the Closing Date;
(vi) the lists of HMRS Clients and Payroll Clients;
(vii) a list, as at the Closing Date, of all Absent Employees
and any updates to Schedule 4.17(a); and
(viii) all other instruments, agreements and other documents
as the Purchaser and its counsel may reasonably require
in connection with the Closing; and
(f) Consents: Consents to the assignment, sublease or sublicence of
the material contracts set forth in Schedule 8. 1 (f) and the
change of control of the Corporation following such assignment,
sublease or sublicense shall have been received in form and
content satisfactory to the Purchaser, acting reasonably.
If any of the conditions contained in this Section 8.1 shall not be
fulfilled or performed at or prior to Closing to the satisfaction of
the Purchaser, acting reasonably, the Purchaser may, by notice to the
Bank and BW, terminate this agreement and the obligations of the Bank,
BW, Ceridian, Ceridian Holdings, the Corporation and the Purchaser
under this Agreement, without prejudice to any rights or remedies of
the Ceridian and the Purchaser. For greater certainty,
notwithstanding any provision in this Agreement, no right of
termination arises as a result of the breach of a representation,
warranty, or non-fulfillment of a covenant unless such breach or
non-fulfillment was material.
8.2 For the Benefit of the Bank and BW - The purchase and sale of the
Shares is subject to the following terms and conditions for the
exclusive benefit of the Bank and BW to be fulfilled and performed on
or prior to the Closing Date, provided that the Bank and BW in its
sole discretion may waive any of the said terms and conditions in
whole or in part:
(a) Representations and Warranties Remain Correct: The
representations and warranties of Ceridian, Ceridian Holdings and
the Purchaser contained in this
<PAGE>
- Page 48 -
Agreement or in any certificate or other document delivered to
the Bank and BW pursuant hereto shall be true and correct in the
aggregate in all material respects on and as of the Closing Date
with the same force and effect as though such representations and
warranties had been made on and as of such date.
(b) Compliance with Covenants: Each of the Purchaser, Ceridian
Holdings and Ceridian shall have complied with all covenants and
agreements herein agreed to be performed or caused to be
performed by it in all material respects on or prior to the
Closing Date.
(c) No Actions or Proceedings: No action or proceeding at law or in
equity shall be pending or threatened by any Person, including
without limiting the generality thereof, any governmental
authority, regulatory body or agency to enjoin or prohibit the
purchase and sale of the Purchased HRMS Assets and the Purchased
Payroll Assets pursuant to the Transfer Agreement, and the sale
of the Shares to the Purchaser or any other transaction
contemplated hereby.
(d) Consents, Authorizations and Registrations: All necessary
consents, approvals, orders and authorizations of any Persons or
governmental authorities in Canada or elsewhere or required
pre-closing registrations, declarations, filings or recordings
with any such authorities in connection with the completion of
any of the transactions contemplated by this Agreement, the
Transfer Agreement or the Ancillary Agreements, shall have been
obtained or made on or before Closing.
(e) Documents: The Purchaser shall have delivered or caused to be
delivered to the Bank and BW:
(i) the Ancillary Agreements;
(ii) an opinion of counsel of Ceridian, Ceridian Holdings,
the Purchaser and the Corporation (post-acquisition),
in form and substance satisfactory to the Bank's
counsel, acting reasonably;
(iii) payment of the Purchase Price, subject to adjustments;
and
(iv) all other instruments, agreements and other documents
as the Bank and its counsel may reasonably require in
connection with the Closing
(f) Approval: The Bank's board of directors (or the authorized
committee thereof) shall have approved the entering into by the
Bank of this Agreement, the Transfer Agreement, the Ancillary
Agreements and the transactions and other agreements contemplated
hereunder.
<PAGE>
Page 49 -
If any of the conditions contained in this Section 8.2 shall not
be fulfilled or performed at or prior to Closing to the
satisfaction of the Bank and BW, acting reasonably, the Bank and
BW may, by notice to the Purchaser, terminate this agreement and
the obligations of the Bank, BW, Ceridian, Ceridian Holdings, the
Corporation and the Purchaser under this Agreement, without
prejudice to any rights or remedies of the Bank and BW. For
greater certainty, notwithstanding any provision in this
Agreement, no right of termination arises as a result of the
breach of a representation, warranty, or non-fulfilment of a
covenant unless such breach or non-fulfilment was material.
9. CLOSING
Subject to Article 8, the sale and purchase of the Shares, the Purchased HRMS
Assets, and the Purchased Payroll Assets, and the assumption of the Assumed HRMS
Liabilities and the Assumed Payroll Liabilities, and the other transactions
herein provided for, shall be consummated and completed on the Closing Date at
the Closing Place.
10. GENERAL PROVISIONS
10.1 Independent Contractors - Nothing in this Agreement shall be construed
to create a partnership, joint venture, agency relationship or other
association between the Bank and BW, on the one hand, and the
Purchaser, the Corporation, Ceridian Holdings and Ceridian, on the
other, and neither of such parties has express or implied authority to
act on behalf of or make any representations whatsoever on behalf of
the other.
10.2 Notices - All notices, requests, demands, or other instruments or
communications required or permitted to be given hereunder or in
connection herewith may be hand delivered or sent by registered mail,
postage fully prepaid, or sent by telecopier or other electronic means
of written communication and addressed to the addressee as follows:
(a) in the case of the Bank and BW:
The Toronto-Dominion Bank
Corporate and Investment Banking Group
79 Wellington Street West, 10th floor
P.O. Box I
Toronto-Dominion Center
TORONTO ON M5K I A2
Attention: Kenneth L. Dowd
Senior Vice-President Treasury Services
Telecopier no.: 416-982-5047
Telephone no.: 416-982-5445
<PAGE>
- Page 50 -
(b) in the case of Ceridian, Ceridian Holdings, the Purchaser and the
Corporation:
Ceridian Corporation
8100 34th Avenue South
MINNEAPOLIS, MINNESOTA
55425-1640
Attention: Gary M. Nelson
Vice President and General Counsel
Telecopier no.: 612-853-7272
Telephone no.: 612-853-4291
or such other address as any of the said parties shall by notice in
writing direct. All notices, requests, demands or other instruments
or communications shall be deemed to be received:
(i) on the date of delivery, if delivered on a Business
Day, or if not a Business Day, on the Business Day next
following the day of delivery, and
(ii) on the fifth Business Day following the mailing
thereof, if mailed. In the event of a mail strike or
postal interruption all notices, requests, demands or
other instruments or communications shall be delivered
or sent by telecopier or other electronic means of
written communication.
All notices, requests, demands or other instruments or communications
sent by telecopier or other electronic means of written communication
shall be deemed to be received upon the completion of transmission, if
sent during the usual business hours of the jurisdiction where the
recipient is situate or if not sent during such business hours, then
at the opening of business on the next business day of such
jurisdiction.
10.3 Exclusion of Consequential Damages - No party shall be liable to any
other party (including any affiliates or subsidiaries) or to any other
Person for any special, incidental, consequential, punitive or any
other indirect loss or damage (including the loss of business
opportunities or the loss of future profits) arising out of this
Agreement or any obligation resulting herefrom, whether in an action
for or arising out of breach of contract, tort or any other cause of
action, even if such party has been advised of the possibility of such
damages.
10.4 Termination - This Agreement may be terminated at any time prior to
the Closing Date by mutual consent of the Bank and Ceridian. If the
transactions contemplated hereunder shall not have been completed on
or before February 6, 1998, either the Bank or Ceridian acting
individually may terminate this Agreement at any time thereafter upon
at least ten
<PAGE>
- Page 51 -
(10) Business Days' prior notice to the other of them. In the event
of termination of this Agreement, this Agreement will be of no further
force or effect and there will be no liability on the part of any
party with respect thereto, except that the provisions of this Section
and Section 10.6 will survive any such termination and nothing herein
will relieve any party from liability for any wilful breach of this
Agreement.
10.5 Time of the Essence - Time shall be of the essence of this Agreement.
10.6 Public Notices and Confidentiality - All notices to third parties,
Payroll Clients and HP,MS Clients and all other publicity concerning
the transactions contemplated by this Agreement shall be jointly
planned and coordinated by the Bank, BW, the Purchaser, Ceridian and
the Corporation and no party shall act unilaterally in this regard
without the prior approval of the other party (such approval not to be
unreasonably withheld), except where required to do so by law or by
the applicable regulations or policies of any provincial, federal or
other regulatory agency of competent jurisdiction or any stock
exchange. None of the Bank, BW, the Purchaser, the Corporation or
Ceridian will disclose the basic terms of this Agreement, the Transfer
Agreement and the Ancillary Agreements to the public or media or any
other Person without the specific prior written consent of the other
parties.
10.7 Year 2000 Estimates - Attached as Schedule 10.7 hereto is a list of
certain work estimated by the Bank to achieve year 2000 compliance
with respect to certain of the Proprietary Payroll Software, and the
Bank's estimate of the time and cost of completion of such work. The
Bank does not represent and warrant, in any respect, the accuracy of
the estimates contained in such schedule. Ceridian, Ceridian
Holdings, the Purchaser and the Corporation acknowledge and agree that
the Bank shall have no liability for any inaccuracy of the estimates
contained in such schedule.
10.8 Counterparts - This Agreement may be executed by the parties hereto in
several counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall constitute but
one and the same instrument.
10.9 No Assignment - No party shall have the right to assign any interest
under this Agreement without the prior written consent of the other
parties. Notwithstanding the foregoing, the Bank shall be entitled to
assign its rights under this Agreement to a wholly-owned subsidiary of
the Bank to whom the Payroll Business or the HRMS Business may be
transferred prior to Closing, provided that no such assignment shall
relieve the Bank from any of its liabilities and obligations
hereunder. Ceridian, Ceridian Holdings and the Purchaser shall be
entitled to assign their rights under this Agreement to controlled
direct or indirect subsidiaries of Ceridian, provided that no such
assignment shall relieve Ceridian, Ceridian Holdings or the Purchaser
from any of its liabilities and obligations hereunder. In the event
of an assignment as contemplated by this Section, the
<PAGE>
Page 52 -
assigning party or parties shall enter into such assurances as may be
reasonably required by the non-assigning party or parties.
10.10 Further Assurances - Each of the parties hereto shall promptly do,
make, execute and deliver, or cause to be done, made, executed and
delivered, all such further acts, documents and things as the other
party hereto may reasonably require from time to time for the purpose
of giving effect to this Agreement and shall use reasonable efforts
and take all such steps as may be reasonably within its power to
implement to the full extent the provisions of this Agreement.
10.11 Language - The parties hereto confirm that it is their wish that this
Agreement as well as all other documents relating hereto, including
communications, have been and shall be drawn up in English only.
Les parties aux presentes confirment leur volonte que cette convention
de meme que tous les documents, y compris tous avis, s'y rattachant,
soient rediges en anglais seulement.
10.12 Successors and Assigns - This Agreement shall enure to the benefit of
and be binding upon the parties hereto and their respective successors
and permitted assigns.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first written above.
THE TORONTO-DOMINION BANK
Per: /s/Kenneth L. Dowd
Name:
Title:
I have authority to bind the Bank
BUSINESS WINDOWS INC.
Per: /s/Kenneth L. Dowd
Name:
Title:
I have authority to bind the corporation
[Executions continued on page 53]
<PAGE>
- Page 53 -
[Executions continued from page 52 ... ]
3454916 CANADA INC.
Per: /s/Kenneth L. Dowd
Name:
Title:
I have authority to bind the corporation
CERIDIAN CANADA LTD.
Per: /s/Gary M. Nelson
Name:
Title:
I have authority to bind the corporation
CERIDIAN CORPORATION
Per: /s/Gary M.Nelson
Name:
Title:
I have authority to bind the corporation
CERIDIAN CANADA HOLDINGS, INC.
Per: /s/Gary M. Nelson
Name:
Title:
I have authority to bind the corporation
<PAGE>
EXHIBIT 10.02
CERIDIAN CORPORATION
EXECUTIVE EMPLOYMENT AGREEMENT
PARTIES
CERIDIAN CORPORATION (A DELAWARE CORPORATION)
8100 34TH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55425-1640
AND
RONALD L. TURNER
DATE: JULY 1, 1997
RECITALS
A. Ceridian wishes to obtain the services of Executive for at least the
duration of this Agreement, and the Executive wishes to provide his or
her services for such period.
B. Ceridian desires reasonable protection of Ceridian's Confidential
Information (as defined below).
C. Ceridian desires assurance that Executive will not compete with Ceridian
or engage in recruitment of Ceridian's employees for a reasonable period
of time after termination of employment, and Executive is willing to
refrain from competition and recruitment.
D. Executive desires to be assured of a minimum Base Salary (as defined
below) from Ceridian for Executive's services for the term of this
Agreement (unless terminated earlier pursuant to the terms of this
Agreement).
E. It is expressly recognized by the parties that Executive's acceptance of,
and continuance in, Executive's position with Ceridian and agreement to
be bound by the terms of this Agreement represents a substantial
commitment to Ceridian in terms of Executive's personal and professional
career and a foregoing of present and future career options by Executive,
for all of which Ceridian receives substantial value.
F. The parties recognize that a Change of Control (as defined below) may
result in material alteration or diminishment of Executive's position and
responsibilities and substantially frustrate the purpose of Executive's
commitment to Ceridian and forebearance of options.
<PAGE>
G. The parties recognize that in light of the above-described commitment and
forebearance of options, it is essential that, for the benefit of
Ceridian and its stockholders, provision be made for a Change of Control
Termination (as defined below) in order to enable Executive to accept and
effectively continue in Executive's position in the face of inherently
disruptive circumstances arising from the possibility of a Change of
Control of the Parent Corporation (as defined below), although no such
change is now contemplated or foreseen.
H. The parties wish to replace any and all prior agreements and undertakings
with respect to the Executive's employment and Change of Control
occurrences and compensation.
NOW, THEREFORE, in consideration of Executive's acceptance of and continuance in
Executive's employment for the term of this Agreement and the parties' agreement
to be bound by the terms contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 "BASE SALARY" shall mean regular cash compensation paid on a periodic
basis exclusive of benefits, bonuses or incentive payments.
1.02 "BOARD" shall mean the Board of Directors of Ceridian Corporation (the
"Parent Corporation").
1.03 "CERIDIAN" shall mean Ceridian Corporation and, except as otherwise
provided in Article VIII and Section 9.02 of Article IX,
(a) any Subsidiary (as that term is defined in Section 1.07); and
(b) any successor in interest by way of consolidation, operation of
law, merger or otherwise.
1.04 "CONFIDENTIAL INFORMATION" shall mean information or material which is
not generally available to or used by others, or the utility or value of
which is not generally known or recognized as standard practice, whether
or not the underlying details are in the public domain, including:
(a) information or material relating to Ceridian and its business as
conducted or anticipated to be conducted; business plans;
operations; past, current or anticipated software, products or
services; customers or prospective customers; or research,
engineering, development, manufacturing, purchasing, accounting,
or marketing activities;
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(b) information or material relating to Ceridian's inventions,
improvements, discoveries, "know-how," technological developments,
or unpublished writings or other works of authorship, or to the
materials, apparatus, processes, formulae, plans or methods used
in the development, manufacture or marketing of Ceridian's
software, products or services;
(c) information which when received is marked as "proprietary,"
"private," or "confidential;"
(d) trade secrets;
(e) software in various stages of development, including computer
programs in source code and binary code form, software designs,
specifications, programming aids (including "library subroutines"
and productivity tools), programming languages, interfaces, visual
displays, technical documentation, user manuals, data files and
databases; and
(f) any similar information of the type described above which Ceridian
obtained from another party and which Ceridian treats as or
designates as being proprietary, private or confidential, whether
or not owned or developed by Ceridian.
Notwithstanding the foregoing, "Confidential Information" does not
include any information which is properly published or in the public
domain; provided, however, that information which is published by or with
the aid of Executive outside the scope of employment or contrary to the
requirements of this Agreement will not be considered to have been
properly published, and therefore will not be in the public domain for
purposes of this Agreement.
1.05 "DISABILITY" shall mean the inability of Executive to perform his or her
duties under this Agreement because of illness or incapacity for a
continuous period of five months.
1.06 "PARENT CORPORATION" shall mean Ceridian Corporation and, except as
otherwise provided in Article VIII and Section 9.02 of Article IX, any
successor in interest by way of consolidation, operation of law, merger
or otherwise. "Parent Corporation" shall not include any Subsidiary.
1.07 "SUBSIDIARY" shall mean: (a) any corporation at least a majority of
whose securities having ordinary voting power for the election of
directors (other than securities having such power only by reason of the
occurrence of a contingency) is at the time owned by Parent Corporation
and/or one or more Subsidiaries; and (b) any division or business unit
(or portion thereof) of Parent Corporation or a corporation described in
clause (a) of this Section 1.07.
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ARTICLE II
EMPLOYMENT, DUTIES AND TERM
2.01 EMPLOYMENT. Upon the terms and conditions set forth in this Agreement,
Ceridian hereby employs Executive, and Executive accepts such employment.
Except as expressly provided herein, termination of this Agreement by
either party shall also terminate Executive's employment by Ceridian.
2.02 DUTIES. Executive shall devote his or her full-time and best efforts to
Ceridian and to fulfilling the duties of his or her position which shall
include such duties as may from time to time be assigned him or her by
Ceridian, provided that such duties are reasonably consistent with
Executive's education, experience and background. Executive shall comply
with Ceridian's policies and procedures to the extent they are not
inconsistent with this Agreement in which case the provisions of this
Agreement prevail.
2.03 TERM. Subject to the provisions of Articles IV, VII, and VIII,
Executive's employment shall continue until the later of: (a) June 30,
1999; and (b) two years after a Change of Control which occurs prior to
June 30, 1999. In any event, the Agreement shall automatically terminate
without notice when Executive reaches 65 years of age. If employment is
continued after the age of 65 by mutual agreement, it shall be terminable
at will by either party.
ARTICLE III
COMPENSATION AND EXPENSES
3.01 BASE SALARY. For all services rendered under this Agreement during the
term of Executive's employment, Ceridian shall pay Executive a minimum
Base Salary at the annual rate currently being paid or, if Executive is
not currently in Ceridian's employ, at the annual rate specified in the
written offer of employment. If Executive's salary is increased from
time to time during the term of this Agreement, the increased amount
shall be the Base Salary for the remainder of the term and any
extensions.
3.02 BONUS AND INCENTIVE. Bonus or incentive compensation shall be in the
sole discretion of Ceridian. Except as otherwise provided in Article
VII, Ceridian shall have the right in accordance with their terms to
alter, amend or eliminate any bonus or incentive plans, or Executive's
participation therein, without compensation to Executive.
3.03 BUSINESS EXPENSES. Ceridian shall, in accordance with, and to the extent
of, its policies in effect from time to time, bear all ordinary and
necessary business expenses incurred by Executive in performing his or
her duties as an employee of Ceridian, provided that Executive accounts
promptly for such expenses to Ceridian in the manner prescribed from time
to time by Ceridian.
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ARTICLE IV
EARLY TERMINATION
4.01 EARLY TERMINATION. Subject to the respective continuing obligations of
the parties pursuant to Articles V, VI, and IX, this Article sets forth
the terms for early termination of this Agreement; provided, however,
that this Article shall not apply to a Change of Control Termination
which is governed solely by the provisions of Article VII.
4.02 TERMINATION FOR CAUSE. Ceridian may terminate this Agreement immediately
for cause. For the purpose hereof "cause" means (a) fraud, (b)
misrepresentation, (c) theft or embezzlement of Ceridian assets,
(d) intentional violations of law involving moral turpitude, (e) the
continued failure by Executive to satisfactorily perform his or her
duties as reasonably assigned to Executive pursuant to Section 2.02 of
Article II of this Agreement for a period of 60 days after a written
demand for such satisfactory performance which specifically identifies
the manner in which it is alleged Executive has not satisfactorily
performed such duties. In the event of termination for cause pursuant to
this Section 4.02, Executive shall be paid at the usual rate of
Executive's annual Base Salary through the date of termination specified
in any notice of termination.
4.03 TERMINATION WITHOUT CAUSE. Either Executive or Ceridian may terminate
this Agreement and Executive's employment without cause on at least 75
days' written notice. In the event of termination of this Agreement and
of Executive's employment pursuant to this Section 4.03, compensation
shall be paid as follows:
(a) if the notice of termination is given by Executive at any time
Executive shall be paid at the usual rate of his or her annual
Base Salary through the date of termination specified in such
notice (but not to exceed 75 days);
(b) if the notice of termination is given by Ceridian and effective
prior to Executive's 65th birthday, (1) Executive shall be paid at
the usual rate of his or her annual Base Salary through the date
of termination specified in the notice provided, however, Ceridian
shall have the option of making termination of the Agreement and
Executive's employment effective immediately upon notice in which
case Executive shall be paid a lump sum representing the value of
75 days worth of salary; and (2) Executive shall receive, starting
within 15 days following termination, a payment equivalent to one
years' Base Salary payable, at the sole discretion of Ceridian, in
either the form of a lump sum payment or on a regular payroll
period basis. In addition, the Executive shall receive the bonus,
if any, to which Executive would otherwise have become entitled
under all Ceridian bonus plans in effect at the time of
termination of this Agreement had Executive remained continuously
employed for the full fiscal year in which termination occurred
and continued to perform his or her duties in the same manner as
they were performed
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immediately prior to termination, multiplied by a fraction, the
numerator of which shall be the number of whole months Executive
was employed in the year in which termination occurred and the
denominator of which is 12. This bonus amount shall be paid within
15 days after the date such bonus would have been paid had
Executive remained employed for the full fiscal year.
(c) If the event that termination occurs pursuant to Section 4.03(b),
in addition to the payments specified in said Section, Ceridian
shall pay to Executive an amount equal to one years' Base Salary
payable, at the sole discretion of Ceridian, in either the form of
a lump sum payment or on a regular payroll period basis, provided
the Executive executes a release, similar to that attached as
Exhibit A, of all claims against the Company.
(d) If the notice of termination is given by Ceridian to be effective
on or after Executive's 65th birthday, Executive shall be paid at
the usual rate of his or her annual Base Salary through the date
of termination specified in any notice. In addition, Executive
will be paid the bonus, if any, to which Executive would otherwise
have become entitled under all Ceridian bonus plans in effect at
the time of termination of this Agreement had Executive remained
continuously employed for the full fiscal year in which
termination occurred and continued to perform his or her duties in
the same manner as they were performed immediately prior to
termination, multiplied by a fraction, the numerator of which
shall be the number of whole months Executive was employed in the
year in which termination occurred and the denominator of which is
12. The amount payable pursuant to this Section 4.03(d) shall be
paid within 15 days after the date such bonus would have been paid
had Executive remained employed for the full fiscal year.
4.04 TERMINATION IN THE EVENT OF DEATH OR DISABILITY. This Agreement shall
terminate in the event of death or disability of Executive.
(a) In the event of Executive's death, Ceridian shall pay an amount
equal to 12 months of Base Salary at the rate in effect at the
time of Executive's death plus the amount Executive would have
received in annual incentive plan bonus for the year in which
termination occurs had "target" goals been achieved. Such amount
shall be paid (1) to the beneficiary or beneficiaries designated
in writing to Ceridian by Executive, (2) in the absence of such
designation to the surviving spouse, or (3) if there is no
surviving spouse, or such surviving spouse disclaims all or any
part, then the full amount, or such disclaimed portion, shall be
paid to the executor, administrator or other personal
representative of Executive's estate. The amount shall be paid as
a lump sum as soon as practicable following Ceridian's receipt of
notice of Executive's death. All such payments shall be in
addition to any payments due pursuant to Section 4.04(c) below.
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(b) In the event of disability, Base Salary shall be terminated as of
the end of the month in which the last day of the five-month
period of Executive's inability to perform his or her duties
occurs.
(c) In the event of termination by reason of Executive's death or
disability, Ceridian shall pay to Executive any amount equal to
(1) the amount Executive would have received in annual incentive
plan bonus for the year in which termination occurs had "target"
goals been achieved, multiplied by (2) a fraction, the numerator
of which shall be the number of whole months Executive was
employed in the year in which the death or disability occurred and
the denominator of which is 12. The amount payable pursuant to
this Section 4.04(c) shall be paid within 15 days after the date
such bonus would have been paid had Executive remained employed
for the full fiscal year.
4.05 ENTIRE TERMINATION PAYMENT. The compensation provided for in this
Article IV for early termination of this Agreement and termination
pursuant to this Article IV shall constitute Executive's sole remedy for
such termination. Executive shall not be entitled to any other
termination or severance payment which may be payable to Executive under
any other agreement between Executive and Ceridian.
ARTICLE V
CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT
5.01 CONFIDENTIALITY. Executive will not, during the term or after the
termination or expiration of this Agreement, publish, disclose, or
utilize in any manner any Confidential Information obtained while
employed by Ceridian. If Executive leaves the employ of Ceridian,
Executive will not, without Ceridian's prior written consent, retain or
take away any drawing, writing or other record in any form containing any
Confidential Information.
5.02 BUSINESS CONDUCT AND ETHICS. During the term of employment with Ceridian,
Executive will engage in no activity or employment which may conflict
with the interest of Ceridian, and will comply with Ceridian's policies
and guidelines pertaining to business conduct and ethics.
5.03 DISCLOSURE. Executive will disclose promptly in writing to Ceridian all
inventions, discoveries, software, writings and other works of authorship
which are conceived, made, discovered, or written jointly or singly on
Ceridian time or on Executive's own time, providing the invention,
improvement, discovery, software, writing or other work of authorship is
capable of being used by Ceridian in the normal course of business, and
all such inventions, improvements, discoveries, software, writings and
other works of authorship shall belong solely to Ceridian.
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5.04 INSTRUMENTS OF ASSIGNMENT. Executive will sign and execute all
instruments of assignment and other papers to evidence vestiture of
Executive's entire right, title and interest in such inventions,
improvements, discoveries, software, writings or other works of
authorship in Ceridian, at the request and the expense of Ceridian, and
Executive will do all acts and sign all instruments of assignment and
other papers Ceridian may reasonably request relating to applications for
patents, patents, copyrights, and the enforcement and protection thereof.
If Executive is needed, at any time, to give testimony, evidence, or
opinions in any litigation or proceeding involving any patents or
copyrights or applications for patents or copyrights, both domestic and
foreign, relating to inventions, improvements, discoveries, software,
writings or other works of authorship conceived, developed or reduced to
practice by Executive, Executive agrees to do so, and if Executive leaves
the employ of Ceridian, Ceridian shall pay Executive at a rate mutually
agreeable to Executive and Ceridian, plus reasonable traveling or other
expenses.
5.05 INVENTIONS DEVELOPED ON EXECUTIVE'S OWN TIME. The two immediately
preceding sections entitled "Disclosure" and "Instruments of Assignment"
do not apply to inventions in which a Ceridian claim of any rights will
create a violation of Chapter 47 Minnesota Revised Statutes, Section
1-181.78, reproduced below and constituting the written notification of
its Subdivision 3.
181.78 Agreements relating to inventions
Subdivision 1.
Any provision in an employment agreement which provides that an Executive
shall assign or offer to assign any of his rights in an invention to his
employer shall not apply to an invention for which no equipment,
supplies, facility or trade secret information of the employer was used
and which was developed entirely on the employee's own time, and
(1) which does not relate (a) directly to the business of the employer or
(b) to the employer's actual or demonstrably anticipated research or
development, or (2) which does not result from any work performed by the
employee for the employer. Any provision which purports to apply to such
an invention is to that extent against the public policy of this state
and is to that extent void and unenforceable.
Subdivision 2.
No employer shall require a provision made void and unenforceable by
subdivision 1 as a condition of employment or continuing employment.
Subdivision 3.
IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS A
PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF HIS
RIGHTS IN ANY INVENTION TO HIS EMPLOYER, THE EMPLOYER MUST ALSO, AT THE
TIME THE AGREEMENT IS MADE, PROVIDE
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A WRITTEN NOTIFICATION TO THE EMPLOYEE THAT THE AGREEMENT DOES NOT APPLY
TO AN INVENTION FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE
SECRET INFORMATION OF THE EMPLOYER WAS USED AND WHICH WAS DEVELOPED
ENTIRELY ON THE EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT RELATE (a)
DIRECTLY TO THE BUSINESS OF THE EMPLOYER OR (b) TO THE EMPLOYER'S ACTUAL
OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (2) WHICH DOES
NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER.
5.06 EXECUTIVE'S DECLARATION. Executive has no inventions, improvements,
discoveries, software, writings or other works of authorship useful to
Ceridian in the normal course of business, which were conceived, made or
written prior to the date of this Agreement and which are excluded from
this Agreement.
5.07 SURVIVAL. The obligations of this Article V shall survive the expiration
or termination of this Agreement.
ARTICLE VI
NON-COMPETITION, NON-RECRUITMENT
6.01 GENERAL. The parties hereto recognize and agree that (a) Executive is a
senior executive of Ceridian and is a key Executive of Ceridian, (b)
Executive has received, and will in the future receive, substantial
amounts of Confidential Information, (c) Ceridian's business is conducted
on a worldwide basis, and (d) provision for non-competition and
non-recruitment obligations by Executive is critical to Ceridian's
continued economic well-being and protection of Ceridian's Confidential
Information. In light of these considerations, this Article VI sets
forth the terms and conditions of Executive's obligations of
non-competition and non-recruitment subsequent to the termination of this
Agreement and/or Executive's employment for any reason.
6.02 NON-COMPETITION.
(a) Unless the obligation is waived or limited by Ceridian in
accordance with subsection (b) of this Section 6.02, Executive
agrees that for a period of two years following termination of
employment for any reason, Executive will not directly or
indirectly, alone or as a partner, officer, director, shareholder
or employee of any other firm or entity, engage in any commercial
activity in competition with any part of Ceridian's business as
conducted as of the date of such termination of employment or with
any part of Ceridian's contemplated business with respect to which
Executive has Confidential Information as governed by Article V of
this Agreement. For purposes of this subsection (a),
"shareholder" shall not include beneficial ownership of less than
five percent (5%) of the combined voting power
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of all issued and outstanding voting securities of a publicly held
corporation whose stock is traded on a major stock exchange. Also
for purposes of this subsection (a), "Ceridian's business" shall
include business conducted by Ceridian or its affiliates and any
partnership or joint venture in which Ceridian or its affiliates
is a partner or joint venturer; provided that, "affiliate" as used
in this sentence shall not include any corporation in which
Ceridian has ownership of less than fifteen percent (15%) of the
voting stock.
(b) At its sole option Ceridian may, by written notice to Executive
within 30 days after the effective date of termination of
Executive's employment, waive or limit the time and/or geographic
area in which Executive cannot engage in competitive activity.
(c) During the term of the non-competition obligation, prior to
accepting employment with, or agreeing to provide consulting
services to, any firm which offers products or services in the
fields of electronics or information processing, Executive shall
give 30 days prior written notice to Ceridian. Such written
notice shall describe the proposed employment or consulting
services and the firm to which they will be rendered. Ceridian's
failure to respond or object to such notice shall not in any way
constitute acquiescence or waiver of Ceridian's rights under this
Article VI.
(d) During any period of non-competition pursuant to this Article VI
Ceridian shall pay Executive an amount equal to the usual rate of
Executive's Base Salary in effect at the time of termination.
There shall be credited against Ceridian's obligation to make such
payments any other payments made by Ceridian to Executive pursuant
to Article IV of this Agreement. In the event that Ceridian
elects, pursuant to subsection (b) of this Section 6.02, to waive
all or any portion of the non-competition obligation, no payment
shall be required by Ceridian with respect to the portion of the
non-competition period which has been waived.
6.03 NON-RECRUITMENT. For a period of two years following termination of
employment for any reason, Executive will not initiate or actively
participate in any other employer's recruitment or hiring of Ceridian
employees. This provision shall not preclude Executive from responding
to a request (other than by Executive's employer) for a reference with
respect to an individual's employment qualifications.
6.04 SURVIVAL. The obligations of this Article VI shall survive the
expiration or termination of this Agreement.
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ARTICLE VII
CHANGE OF CONTROL
7.01 DEFINITIONS. For purposes of this Article VII, the following definitions
shall be applied:
(a) "BENEFIT PLAN" means any formal or informal plan, program or other
arrangement heretofore or hereafter adopted by Ceridian for the
direct or indirect provision of compensation to the Executive
(including groups or classes of participants or beneficiaries of
which the Executive is a member), whether or not such compensation
is deferred, is in the form of cash or other property or rights,
or is in the form of a benefit to or for the Executive.
(b) "CHANGE OF CONTROL" shall mean any of the following events:
(1) a merger or consolidation to which Parent
Corporation is a party if the individuals and
entities who were stockholders of Parent Corporation
immediately prior to the effective date of such
merger or consolidation have beneficial ownership
(as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of less than fifty percent
(50%) of the total combined voting power for
election of directors of the surviving corporation
immediately following the effective date of such
merger or consolidation; or
(2) the direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange
Act of 1934) in the aggregate of securities of
Parent Corporation representing twenty-five percent
(25%) or more of the total combined voting power of
Parent Corporation's then issued and outstanding
securities by any person or entity, or group of
associated persons or entities acting in concert; or
(3) the sale of the properties and assets of Parent
Corporation, substantially as an entirety, to any
person or entity which is not a wholly-owned
subsidiary of Parent Corporation; or
(4) the stockholders of Parent Corporation approve any
plan or proposal for the liquidation of Parent
Corporation; or
(5) a change in the composition of the Board at any time
during any consecutive 24 month period such that the
"Continuity Directors" cease for any reason to
constitute at least a seventy percent (70%) majority
of the Board. For purposes of this clause,
"Continuity Directors" means those members of the
Board who either (A) were directors at the beginning
of such consecutive 24 month period, or
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(B) were elected by, or on the nomination or
recommendation of, at least a two-thirds (2/3)
majority of the then-existing Board.
(c) "CHANGE OF CONTROL COMPENSATION" means any payment or benefit
(including any transfer of property) in the nature of compensation, to or
for the benefit of a Participant under this Agreement or any Other
Agreement or Benefit Plan, which is considered to be contingent on a
Change of Control for purposes of Section 280G of the Code.
(d) "CHANGE OF CONTROL TERMINATION" means, with respect to Executive,
either of the following events occurring within two years after a Change
of Control:
(1) Termination of Executive's employment by Ceridian
for any reason other than (A) fraud, (B) theft or
embezzlement of Ceridian assets, (C) intentional
violations of law involving moral turpitude, or (D)
the substantial and continuing failure by Executive
to satisfactorily perform his or her duties as
reasonably assigned to Executive pursuant to Section
2.02 of Article II of this Agreement for a period of
60 days after a written demand for such satisfactory
performance which specifically identifies the manner
in which it is alleged Executive has not
satisfactorily performed such duties; or
(2) Termination of employment with Ceridian by Executive
pursuant to Section 7.02 of this Article VII.
A Change of Control Termination by Executive shall not, however,
include termination by reason of death or Disability.
(e) "CODE" means the Internal Revenue Code of 1986, as amended. Any
reference to a section of the Code shall include the corresponding
section of such Code as from time to time amended.
(f) "EXCISE TAX" means any applicable federal excise tax imposed by
Section 4999 of the Code.
(g) "GOOD REASON" means a good faith determination by Executive, in
Executive's sole and absolute judgment, that any one or more of the
following events has occurred, without Executive's express written
consent, after a Change of Control:
(1) A change in Executive's reporting responsibilities,
titles or offices as in effect immediately prior to
the Change of Control, or any removal of Executive
from, or any failure to re-elect Executive to, any
of such positions, which has the effect of
materially diminishing Executive's responsibility or
authority;
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(2) A reduction by Ceridian in Executive's Base Salary
as in effect immediately prior to the Change of
Control or as the same may be increased from time to
time thereafter;
(3) Ceridian requiring Executive to be based anywhere
other than within 25 miles of Executive's job
location at the time of the Change of Control;
(4) Without replacement by plans, programs, or
arrangements which, taken as a whole, provide
benefits to Executive at least reasonably comparable
to those discontinued or adversely affected, (A) the
failure by Ceridian to continue in effect, within
its maximum stated term, any pension, bonus,
incentive, stock ownership, purchase, option, life
insurance, health, accident, disability, or any
other employee compensation or benefit plan, program
or arrangement, in which Executive is participating
immediately prior to a Change of Control; or (B) the
taking of any action by Ceridian that would
materially adversely affect Executive's
participation or materially reduce Executive's
benefits under any of such plans, programs or
arrangements;
(5) The failure by Ceridian to provide office space,
furniture, and secretarial support at least
comparable to that provided Executive immediately
prior to the Change of Control or the taking of any
similar action by Ceridian that would materially
adversely affect the working conditions in or under
which Executive performs his or her employment
duties;
(6) If Executive's primary employment duties are with a
Subsidiary, the sale, merger, contribution, transfer
or any other transaction in conjunction with which
Parent Corporation's ownership interest in such
Subsidiary decreases below the level specified in
Section 1.07 of Article I unless (A) this Agreement
is assigned to the purchaser/transferee with the
provisions of Article VII in full force and effect
and operative as if a Change of Control has occurred
with respect to the purchaser/transferee as Parent
Corporation immediately after the purchase/transfer
becomes effective, and (B) such purchaser/transferee
has a creditworthiness reasonably equivalent to
Parent Corporation's; or
(7) Any material breach of this Agreement by Ceridian.
(h) "OTHER AGREEMENTS" means any agreement, contract or understanding
heretofore or hereafter entered into between Executive and Ceridian for
the direct or indirect provision of compensation to Executive.
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(i) "REDUCED AMOUNT" means the largest amount that could be received
by a Participant as Change of Control Compensation such that no portion
of such Change of Control Compensation would be subject to the Excise
Tax.
7.02 CHANGE OF CONTROL TERMINATION RIGHT. For a period of two years following
a Change of Control, Executive shall have the right, at any time and
within Executive's sole discretion, to terminate employment with Ceridian
for Good Reason. Such termination shall be accomplished by, and
effective upon, Executive giving written notice to Ceridian of
Executive's decision to terminate. Except as otherwise expressly
provided in this Agreement, upon the exercise of said right, all
obligations and duties of Executive under this Agreement shall be of no
further force and effect.
7.03 CHANGE OF CONTROL TERMINATION PAYMENT. In the event of a Change of
Control Termination, and subject to the "Limitation on Change of Control
Compensation" contained in Section 7.04, then, and without further action
by the Board, Compensation Committee or otherwise, Parent Corporation
shall, within five days of such termination, make a lump sum payment to
Executive in an amount equal to one dollar ($1.00) less than three times
the average annualized compensation, as defined by Section 280G of the
Code, received by Executive from Ceridian and includible in Executive's
gross income for federal income tax purposes for the five most recent
taxable years of the Executive ending before the date upon which the
Change in Control occurred (or such portion of such period during which
Executive was an employee of Ceridian).
7.04 LIMITATION ON CHANGE OF CONTROL COMPENSATION. Notwithstanding any other
provisions of this Agreement or of any Other Agreement or Benefit Plan,
if any Change of Control Compensation would be considered a "parachute
payment" within the meaning of Section 280G(b)(2) of the Code and if,
after reduction for any Excise Tax and federal income tax imposed by the
Code, Executive's net proceeds of such Change of Control Compensation
would be less than the amount of Executive's net proceeds resulting from
the payment of the Reduced Amount after reduction for federal income
taxes, then the Change of Control Compensation payable to Executive shall
be limited to the Reduced Amount. The determinations required by the
preceding sentence shall be made by the firm of independent certified
public accountants serving as the outside auditor of Ceridian as of the
date of the applicable Change of Control, and such determinations shall
be binding upon Ceridian and Executive. If Change of Control
Compensation to Executive is limited to the Reduced Amount, then
Executive shall have the right, in his or her sole discretion, to
designate those payments or benefits under this Agreement, any Other
Agreements and/or any Benefit Plans that should be reduced or eliminated
so as to avoid having Executive's Change of Control Compensation be
subject to the Excise Tax. If Executive fails to make such designation
within 30 days of having received notification that such designation is
required, Ceridian shall make such designations and shall promptly inform
Executive of its actions in such regard.
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7.05 INTEREST. In the event Parent Corporation does not make timely payment
in full of the Change of Control Termination payment described in Section
7.03, Executive shall be entitled to receive interest on any unpaid
amount at the lower of: (a) the prime rate of interest (or such
comparable index as may be adopted) established from time to time by the
First Bank National Association, Minneapolis, Minnesota; or (b) the
maximum rate permitted under Section 280G(d)(4) of the Internal Revenue
Code."
7.06 ATTORNEYS' FEES. In the event Executive incurs any legal expense to
enforce or defend his or her rights under this Article VII of this
Agreement, or to recover damages for breach thereof, Executive shall be
entitled to recover from Ceridian any expenses for attorneys' fees and
disbursements incurred.
7.07 BENEFITS CONTINUATION. In the event of a Change of Control Termination,
Executive (and anyone entitled to claim under or through Executive)
shall, until age 65, be entitled to receive from Ceridian the same or
equivalent health, dental, accidental death and dismemberment, short and
long-term disability, life insurance coverages, and all other insurance
policies and health and welfare benefits programs, policies or
arrangements, at the same levels and coverages as Executive was receiving
on the day immediately prior to the Change of Control. To the extent
that election of continuation of any of such coverages, programs,
policies, or arrangements is made available to employees terminating at
age 55 with 15 or more years of service, Executive shall be required to
pay no more for continuation than is required of such employees on the
day immediately prior to the Change of Control. If no such continuation
program is available, Executive shall be required to pay no more than
he/she paid as an active employee, or if provided by Ceridian at no cost
to employees on the day immediately prior to the Change of Control, they
shall continue to be made available to Executive on this basis.
ARTICLE VIII
CHANGE OF SUBSIDIARY STATUS
8.01 In the event that, prior to a Change of Control: (a) a Subsidiary is
sold, merged, contributed, or in any other manner transferred, or if for
any reason Parent Corporation's ownership interest in any such Subsidiary
falls below the level specified in Section 1.07, (b) Executive's primary
employment duties are with the Subsidiary at the time of the occurrence
of such event, and (c) Executive does not, in conjunction therewith,
transfer employment directly to Parent Corporation or another Subsidiary,
then:
(a) If Executive gives his or her written consent to the assignment of
this Agreement to such Subsidiary, or to the purchaser or new
majority interest holder of such Subsidiary, (and such assignment
is accepted) this Agreement shall remain in full force and effect
between Executive and the assignee, except that the provisions of
Article VII of this Agreement shall become null and void;
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(b) If such assignment is not accepted by the Subsidiary or purchaser,
then this Agreement shall be deemed to have been terminated by
Ceridian without cause pursuant to Section 4.03 of Article IV; and
(c) In all other cases, this Agreement shall be deemed terminated for
cause pursuant to Section 4.02 of Article IV.
ARTICLE IX
GENERAL PROVISIONS
9.01 NO ADEQUATE REMEDY. The parties declare that it is impossible to measure
in money the damages which will accrue to either party by reason of a
failure to perform any of the obligations under this Agreement.
Therefore, if either party shall institute any action or proceeding to
enforce the provisions hereof, such party against whom such action or
proceeding is brought hereby waives the claim or defense that such party
has an adequate remedy at law, and such party shall not urge in any such
action or proceeding the claim or defense that such party has an adequate
remedy at law.
9.02 SUCCESSORS AND ASSIGNS. Except as otherwise provided in Article VIII,
this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of Parent Corporation and each Subsidiary, whether
by way of merger, consolidation, operation of law, assignment, purchase
or other acquisition of substantially all of the assets or business of
Ceridian, and any such successor or assign shall absolutely and
unconditionally assume all of Ceridian's obligations hereunder.
9.03 NOTICES. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and be
delivered or mailed to any such party at its address:
(a) Ceridian Corporation
8100 34th Avenue South
Minneapolis, Minnesota 55425-1640
Attention: Office of General Counsel
(b) In the case of Executive shall be:
At the address listed on the last page of this Agreement.
Either party may, by notice hereunder, designate a changed
address. Any notice, if mailed properly addressed, postage
prepaid, registered or certified mail, shall be deemed dispatched
on the registered date or that stamped on the certified mail
receipt, and shall be deemed received within the second business
day thereafter or when it is actually received, whichever is
sooner.
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9.04 CAPTIONS. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of
this Agreement.
9.05 GOVERNING LAW. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota and any
and every legal proceeding arising out of or in connection with this
Agreement shall be brought in the appropriate courts of the State of
Minnesota, each of the parties hereby consenting to the exclusive
jurisdiction of said courts for this purpose. The parties hereto
expressly recognize and agree that the implementation of this Governing
Law provision is essential in light of the fact that Parent Corporation's
corporate headquarters and its principal executive offices are located
within the State of Minnesota, and there is a critical need for
uniformity in the interpretation and enforcement of the employment
agreements between Ceridian and its senior executives.
9.06 CONSTRUCTION. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions
of this Agreement.
9.07 WAIVERS. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right or
remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right or remedy granted hereby or by any related
document or by law.
9.08 MODIFICATION. This Agreement may not be and shall not be modified or
amended except by written instrument signed by the parties hereto.
9.09 ARBITRATION. Because the parties recognize that resolving any future
differences in the courts can require a long time and great expense,
Company and Executive agree that their only remedy for disputes either
may have with the other and that arise out of Executive's employment, or
any aspect of this Agreement, shall be to submit all disputes to final
and binding arbitration in accordance with the Employment Dispute
Resolution Rules of the American Arbitration Association. The aggrieved
party must send a written notice of claim to the other party by certified
mail, return receipt requested to the address listed in Section 9.03 of
this Agreement. The arbitrator shall apply the law in accordance with
this Agreement, or federal law, or both, as applicable to the claim(s)
asserted.
9.10 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the matters
herein agreed upon. This Agreement replaces in full all prior employment
agreements or understandings of the parties hereto, and any and all such
prior agreements or understandings are hereby rescinded by mutual
agreement. Any changes or amendments to this Agreement must be in
writing and signed by both parties.
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IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
EXECUTIVE CERIDIAN CORPORATION
/s/ Ronald L. Turner By: /s/ Michael E. Kotten
- ----------------------------- -------------------------------
Title: Vice President
-------------------------------
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EXHIBIT 10.03
CERIDIAN CORPORATION
EXECUTIVE EMPLOYMENT AGREEMENT
PARTIES
CERIDIAN CORPORATION (A DELAWARE CORPORATION)
8100 34TH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55425-1640
AND
STEPHEN B. MORRIS
DATE: JULY 1, 1997
RECITALS
A. Ceridian wishes to obtain the services of Executive for at least the
duration of this Agreement, and the Executive wishes to provide his or
her services for such period.
B. Ceridian desires reasonable protection of Ceridian's Confidential
Information (as defined below).
C. Ceridian desires assurance that Executive will not compete with
Ceridian or engage in recruitment of Ceridian's employees for a
reasonable period of time after termination of employment, and
Executive is willing to refrain from competition and recruitment.
D. Executive desires to be assured of a minimum Base Salary (as defined
below) from Ceridian for Executive's services for the term of this
Agreement (unless terminated earlier pursuant to the terms of this
Agreement).
E. It is expressly recognized by the parties that Executive's acceptance
of, and continuance in, Executive's position with Ceridian and
agreement to be bound by the terms of this Agreement represents a
substantial commitment to Ceridian in terms of Executive's personal
and professional career and a foregoing of present and future career
options by Executive, for all of which Ceridian receives substantial
value.
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F. The parties recognize that a Change of Control (as defined below) may
result in material alteration or diminishment of Executive's position
and responsibilities and substantially frustrate the purpose of
Executive's commitment to Ceridian and forebearance of options.
G. The parties recognize that in light of the above-described commitment
and forebearance of options, it is essential that, for the benefit of
Ceridian and its stockholders, provision be made for a Change of
Control Termination (as defined below) in order to enable Executive to
accept and effectively continue in Executive's position in the face of
inherently disruptive circumstances arising from the possibility of a
Change of Control of the Parent Corporation (as defined below),
although no such change is now contemplated or foreseen.
H. The parties wish to replace any and all prior agreements and
undertakings with respect to the Executive's employment and Change of
Control occurrences and compensation.
NOW, THEREFORE, in consideration of Executive's acceptance of and continuance in
Executive's employment for the term of this Agreement and the parties' agreement
to be bound by the terms contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 "BASE SALARY" shall mean regular cash compensation paid on a periodic
basis exclusive of benefits, bonuses or incentive payments.
1.02 "BOARD" shall mean the Board of Directors of Ceridian Corporation (the
"Parent Corporation").
1.03 "CERIDIAN" shall mean Ceridian Corporation and, except as otherwise
provided in Article VIII and Section 9.02 of Article IX,
(a) any Subsidiary (as that term is defined in Section 1.07); and
(b) any successor in interest by way of consolidation, operation of
law, merger or otherwise.
1.04 "CONFIDENTIAL INFORMATION" shall mean information or material which is
not generally available to or used by others, or the utility or value
of which is not generally known or recognized as standard practice,
whether or not the underlying details are in the public domain,
including:
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(a) information or material relating to Ceridian and its business as
conducted or anticipated to be conducted; business plans;
operations; past, current or anticipated software, products or
services; customers or prospective customers; or research,
engineering, development, manufacturing, purchasing, accounting,
or marketing activities;
(b) information or material relating to Ceridian's inventions,
improvements, discoveries, "know-how," technological
developments, or unpublished writings or other works of
authorship, or to the materials, apparatus, processes, formulae,
plans or methods used in the development, manufacture or
marketing of Ceridian's software, products or services;
(c) information which when received is marked as "proprietary,"
"private," or "confidential;"
(d) trade secrets;
(e) software in various stages of development, including computer
programs in source code and binary code form, software designs,
specifications, programming aids (including "library subroutines"
and productivity tools), programming languages, interfaces,
visual displays, technical documentation, user manuals, data
files and databases; and
(f) any similar information of the type described above which
Ceridian obtained from another party and which Ceridian treats as
or designates as being proprietary, private or confidential,
whether or not owned or developed by Ceridian.
Notwithstanding the foregoing, "Confidential Information" does not
include any information which is properly published or in the public
domain; provided, however, that information which is published by or
with the aid of Executive outside the scope of employment or contrary
to the requirements of this Agreement will not be considered to have
been properly published, and therefore will not be in the public
domain for purposes of this Agreement.
1.05 "DISABILITY" shall mean the inability of Executive to perform his or
her duties under this Agreement because of illness or incapacity for a
continuous period of five months.
1.06 "PARENT CORPORATION" shall mean Ceridian Corporation and, except as
otherwise provided in Article VIII and Section 9.02 of Article IX, any
successor in interest by way of consolidation, operation of law,
merger or otherwise. "Parent Corporation" shall not include any
Subsidiary.
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1.07 "SUBSIDIARY" shall mean: (a) any corporation at least a majority of
whose securities having ordinary voting power for the election of
directors (other than securities having such power only by reason of
the occurrence of a contingency) is at the time owned by Parent
Corporation and/or one or more Subsidiaries; and (b) any division or
business unit (or portion thereof) of Parent Corporation or a
corporation described in clause (a) of this Section 1.07.
ARTICLE II
EMPLOYMENT, DUTIES AND TERM
2.01 EMPLOYMENT. Upon the terms and conditions set forth in this
Agreement, Ceridian hereby employs Executive, and Executive accepts
such employment. Except as expressly provided herein, termination of
this Agreement by either party shall also terminate Executive's
employment by Ceridian.
2.02 DUTIES. Executive shall devote his or her full-time and best efforts
to Ceridian and to fulfilling the duties of his or her position which
shall include such duties as may from time to time be assigned him or
her by Ceridian, provided that such duties are reasonably consistent
with Executive's education, experience and background. Executive
shall comply with Ceridian's policies and procedures to the extent
they are not inconsistent with this Agreement in which case the
provisions of this Agreement prevail.
2.03 TERM. Subject to the provisions of Articles IV, VII, and VIII,
Executive's employment shall continue until the later of: (a) June
30, 1999; and (b) two years after a Change of Control which occurs
prior to June 30, 1999. In any event, the Agreement shall
automatically terminate without notice when Executive reaches 65 years
of age. If employment is continued after the age of 65 by mutual
agreement, it shall be terminable at will by either party.
ARTICLE III
COMPENSATION AND EXPENSES
3.01 BASE SALARY. For all services rendered under this Agreement during
the term of Executive's employment, Ceridian shall pay Executive a
minimum Base Salary at the annual rate currently being paid or, if
Executive is not currently in Ceridian's employ, at the annual rate
specified in the written offer of employment. If Executive's salary
is increased from time to time during the term of this Agreement, the
increased amount shall be the Base Salary for the remainder of the
term and any extensions.
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3.02 BONUS AND INCENTIVE. Bonus or incentive compensation shall be in the
sole discretion of Ceridian. Except as otherwise provided in Article
VII, Ceridian shall have the right in accordance with their terms to
alter, amend or eliminate any bonus or incentive plans, or Executive's
participation therein, without compensation to Executive.
3.03 BUSINESS EXPENSES. Ceridian shall, in accordance with, and to the
extent of, its policies in effect from time to time, bear all ordinary
and necessary business expenses incurred by Executive in performing
his or her duties as an employee of Ceridian, provided that Executive
accounts promptly for such expenses to Ceridian in the manner
prescribed from time to time by Ceridian.
ARTICLE IV
EARLY TERMINATION
4.01 EARLY TERMINATION. Subject to the respective continuing obligations
of the parties pursuant to Articles V, VI, and IX, this Article sets
forth the terms for early termination of this Agreement; provided,
however, that this Article shall not apply to a Change of Control
Termination which is governed solely by the provisions of Article VII.
4.02 TERMINATION FOR CAUSE. Ceridian may terminate this Agreement
immediately for cause. For the purpose hereof "cause" means (a)
fraud, (b) misrepresentation, (c) theft or embezzlement of Ceridian
assets, (d) intentional violations of law involving moral turpitude,
(e) the continued failure by Executive to satisfactorily perform his
or her duties as reasonably assigned to Executive pursuant to Section
2.02 of Article II of this Agreement for a period of 60 days after a
written demand for such satisfactory performance which specifically
identifies the manner in which it is alleged Executive has not
satisfactorily performed such duties. In the event of termination for
cause pursuant to this Section 4.02, Executive shall be paid at the
usual rate of Executive's annual Base Salary through the date of
termination specified in any notice of termination.
4.03 TERMINATION WITHOUT CAUSE. Either Executive or Ceridian may terminate
this Agreement and Executive's employment without cause on at least 75
days' written notice. In the event of termination of this Agreement
and of Executive's employment pursuant to this Section 4.03,
compensation shall be paid as follows:
(a) if the notice of termination is given by Executive at any time
Executive shall be paid at the usual rate of his or her annual
Base Salary through the date of termination specified in such
notice (but not to exceed 75 days);
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(b) if the notice of termination is given by Ceridian and effective
prior to Executive's 65th birthday, (1) Executive shall be paid
at the usual rate of his or her annual Base Salary through the
date of termination specified in the notice provided, however,
Ceridian shall have the option of making termination of the
Agreement and Executive's employment effective immediately upon
notice in which case Executive shall be paid a lump sum
representing the value of 75 days worth of salary; and
(2) Executive shall receive, starting within 15 days following
termination, a payment equivalent to one years' Base Salary
payable, at the sole discretion of Ceridian, in either the form
of a lump sum payment or on a regular payroll period basis. In
addition, the Executive shall receive the bonus, if any, to which
Executive would otherwise have become entitled under all Ceridian
bonus plans in effect at the time of termination of this
Agreement had Executive remained continuously employed for the
full fiscal year in which termination occurred and continued to
perform his or her duties in the same manner as they were
performed immediately prior to termination, multiplied by a
fraction, the numerator of which shall be the number of whole
months Executive was employed in the year in which termination
occurred and the denominator of which is 12. This bonus amount
shall be paid within 15 days after the date such bonus would have
been paid had Executive remained employed for the full fiscal
year.
(c) If the event that termination occurs pursuant to Section 4.03(b),
in addition to the payments specified in said Section, Ceridian
shall pay to Executive an amount equal to one years' Base Salary
payable, at the sole discretion of Ceridian, in either the form
of a lump sum payment or on a regular payroll period basis,
provided the Executive executes a release, similar to that
attached as Exhibit A, of all claims against the Company.
(d) If the notice of termination is given by Ceridian to be effective
on or after Executive's 65th birthday, Executive shall be paid at
the usual rate of his or her annual Base Salary through the date
of termination specified in any notice. In addition, Executive
will be paid the bonus, if any, to which Executive would
otherwise have become entitled under all Ceridian bonus plans in
effect at the time of termination of this Agreement had Executive
remained continuously employed for the full fiscal year in which
termination occurred and continued to perform his or her duties
in the same manner as they were performed immediately prior to
termination, multiplied by a fraction, the numerator of which
shall be the number of whole months Executive was employed in the
year in which termination occurred and the denominator of which
is 12. The amount payable pursuant to this Section 4.03(d) shall
be paid within 15 days after the date such bonus would have been
paid had Executive remained employed for the full fiscal year.
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4.04 TERMINATION IN THE EVENT OF DEATH OR DISABILITY. This Agreement shall
terminate in the event of death or disability of Executive.
(a) In the event of Executive's death, Ceridian shall pay an amount
equal to 12 months of Base Salary at the rate in effect at the
time of Executive's death plus the amount Executive would have
received in annual incentive plan bonus for the year in which
termination occurs had "target" goals been achieved. Such amount
shall be paid (1) to the beneficiary or beneficiaries designated
in writing to Ceridian by Executive, (2) in the absence of such
designation to the surviving spouse, or (3) if there is no
surviving spouse, or such surviving spouse disclaims all or any
part, then the full amount, or such disclaimed portion, shall be
paid to the executor, administrator or other personal
representative of Executive's estate. The amount shall be paid
as a lump sum as soon as practicable following Ceridian's receipt
of notice of Executive's death. All such payments shall be in
addition to any payments due pursuant to Section 4.04(c) below.
(b) In the event of disability, Base Salary shall be terminated as of
the end of the month in which the last day of the five-month
period of Executive's inability to perform his or her duties
occurs.
(c) In the event of termination by reason of Executive's death or
disability, Ceridian shall pay to Executive any amount equal to
(1) the amount Executive would have received in annual incentive
plan bonus for the year in which termination occurs had "target"
goals been achieved, multiplied by (2) a fraction, the numerator
of which shall be the number of whole months Executive was
employed in the year in which the death or disability occurred
and the denominator of which is 12. The amount payable pursuant
to this Section 4.04(c) shall be paid within 15 days after the
date such bonus would have been paid had Executive remained
employed for the full fiscal year.
4.05 ENTIRE TERMINATION PAYMENT. The compensation provided for in this
Article IV for early termination of this Agreement and termination
pursuant to this Article IV shall constitute Executive's sole remedy
for such termination. Executive shall not be entitled to any other
termination or severance payment which may be payable to Executive
under any other agreement between Executive and Ceridian.
ARTICLE V
CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT
5.01 CONFIDENTIALITY. Executive will not, during the term or after the
termination or expiration of this Agreement, publish, disclose, or
utilize in any manner any
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Confidential Information obtained while employed by Ceridian. If
Executive leaves the employ of Ceridian, Executive will not, without
Ceridian's prior written consent, retain or take away any drawing,
writing or other record in any form containing any Confidential
Information.
5.02 BUSINESS CONDUCT AND ETHICS. During the term of employment with
Ceridian, Executive will engage in no activity or employment which may
conflict with the interest of Ceridian, and will comply with
Ceridian's policies and guidelines pertaining to business conduct and
ethics.
5.03 DISCLOSURE. Executive will disclose promptly in writing to Ceridian
all inventions, discoveries, software, writings and other works of
authorship which are conceived, made, discovered, or written jointly
or singly on Ceridian time or on Executive's own time, providing the
invention, improvement, discovery, software, writing or other work of
authorship is capable of being used by Ceridian in the normal course
of business, and all such inventions, improvements, discoveries,
software, writings and other works of authorship shall belong solely
to Ceridian.
5.04 INSTRUMENTS OF ASSIGNMENT. Executive will sign and execute all
instruments of assignment and other papers to evidence vestiture of
Executive's entire right, title and interest in such inventions,
improvements, discoveries, software, writings or other works of
authorship in Ceridian, at the request and the expense of Ceridian,
and Executive will do all acts and sign all instruments of assignment
and other papers Ceridian may reasonably request relating to
applications for patents, patents, copyrights, and the enforcement and
protection thereof. If Executive is needed, at any time, to give
testimony, evidence, or opinions in any litigation or proceeding
involving any patents or copyrights or applications for patents or
copyrights, both domestic and foreign, relating to inventions,
improvements, discoveries, software, writings or other works of
authorship conceived, developed or reduced to practice by Executive,
Executive agrees to do so, and if Executive leaves the employ of
Ceridian, Ceridian shall pay Executive at a rate mutually agreeable to
Executive and Ceridian, plus reasonable traveling or other expenses.
5.05 INVENTIONS DEVELOPED ON EXECUTIVE'S OWN TIME. The two immediately
preceding sections entitled "Disclosure" and "Instruments of
Assignment" do not apply to inventions in which a Ceridian claim of
any rights will create a violation of Chapter 47 Minnesota Revised
Statutes, Section 1-181.78, reproduced below and constituting the
written notification of its Subdivision 3.
181.78 Agreements relating to inventions
Subdivision 1.
Any provision in an employment agreement which provides that an
Executive shall assign or offer to assign any of his rights in an
invention to his employer shall not
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apply to an invention for which no equipment, supplies, facility or
trade secret information of the employer was used and which was
developed entirely on the employee's own time, and (1) which does not
relate (a) directly to the business of the employer or (b) to the
employer's actual or demonstrably anticipated research or development,
or (2) which does not result from any work performed by the employee
for the employer. Any provision which purports to apply to such an
invention is to that extent against the public policy of this state
and is to that extent void and unenforceable.
Subdivision 2.
No employer shall require a provision made void and unenforceable by
subdivision 1 as a condition of employment or continuing employment.
Subdivision 3.
IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS
A PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF
HIS RIGHTS IN ANY INVENTION TO HIS EMPLOYER, THE EMPLOYER MUST ALSO,
AT THE TIME THE AGREEMENT IS MADE, PROVIDE A WRITTEN NOTIFICATION TO
THE EMPLOYEE THAT THE AGREEMENT DOES NOT APPLY TO AN INVENTION FOR
WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF
THE EMPLOYER WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON THE
EMPLOYEE'S OWN TIME, AND (1) WHICH DOES NOT RELATE (a) DIRECTLY TO THE
BUSINESS OF THE EMPLOYER OR (b) TO THE EMPLOYER'S ACTUAL OR
DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (2) WHICH DOES
NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER.
5.06 EXECUTIVE'S DECLARATION. Executive has no inventions, improvements,
discoveries, software, writings or other works of authorship useful to
Ceridian in the normal course of business, which were conceived, made
or written prior to the date of this Agreement and which are excluded
from this Agreement.
5.07 SURVIVAL. The obligations of this Article V shall survive the
expiration or termination of this Agreement.
ARTICLE VI
NON-COMPETITION, NON-RECRUITMENT
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6.01 GENERAL. The parties hereto recognize and agree that (a) Executive is
a senior executive of Ceridian and is a key Executive of Ceridian, (b)
Executive has received, and will in the future receive, substantial
amounts of Confidential Information, (c) Ceridian's business is
conducted on a worldwide basis, and (d) provision for non-competition
and non-recruitment obligations by Executive is critical to Ceridian's
continued economic well-being and protection of Ceridian's
Confidential Information. In light of these considerations, this
Article VI sets forth the terms and conditions of Executive's
obligations of non-competition and non-recruitment subsequent to the
termination of this Agreement and/or Executive's employment for any
reason.
6.02 NON-COMPETITION.
(a) Unless the obligation is waived or limited by Ceridian in
accordance with subsection (b) of this Section 6.02, Executive
agrees that for a period of two years following termination of
employment for any reason, Executive will not directly or
indirectly, alone or as a partner, officer, director, shareholder
or employee of any other firm or entity, engage in any commercial
activity in competition with any part of Ceridian's business as
conducted as of the date of such termination of employment or
with any part of Ceridian's contemplated business with respect to
which Executive has Confidential Information as governed by
Article V of this Agreement. For purposes of this subsection
(a), "shareholder" shall not include beneficial ownership of less
than five percent (5%) of the combined voting power of all issued
and outstanding voting securities of a publicly held corporation
whose stock is traded on a major stock exchange. Also for
purposes of this subsection (a), "Ceridian's business" shall
include business conducted by Ceridian or its affiliates and any
partnership or joint venture in which Ceridian or its affiliates
is a partner or joint venturer; provided that, "affiliate" as
used in this sentence shall not include any corporation in which
Ceridian has ownership of less than fifteen percent (15%) of the
voting stock.
(b) At its sole option Ceridian may, by written notice to Executive
within 30 days after the effective date of termination of
Executive's employment, waive or limit the time and/or geographic
area in which Executive cannot engage in competitive activity.
(c) During the term of the non-competition obligation, prior to
accepting employment with, or agreeing to provide consulting
services to, any firm which offers products or services in the
fields of electronics or information processing, Executive shall
give 30 days prior written notice to Ceridian. Such written
notice shall describe the proposed employment or consulting
services and the firm to which they will be rendered. Ceridian's
failure to
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respond or object to such notice shall not in any way constitute
acquiescence or waiver of Ceridian's rights under this Article
VI.
(d) During any period of non-competition pursuant to this Article VI
Ceridian shall pay Executive an amount equal to the usual rate of
Executive's Base Salary in effect at the time of termination.
There shall be credited against Ceridian's obligation to make
such payments any other payments made by Ceridian to Executive
pursuant to Article IV of this Agreement. In the event that
Ceridian elects, pursuant to subsection (b) of this Section 6.02,
to waive all or any portion of the non-competition obligation, no
payment shall be required by Ceridian with respect to the portion
of the non-competition period which has been waived.
6.03 NON-RECRUITMENT. For a period of two years following termination of
employment for any reason, Executive will not initiate or actively
participate in any other employer's recruitment or hiring of Ceridian
employees. This provision shall not preclude Executive from
responding to a request (other than by Executive's employer) for a
reference with respect to an individual's employment qualifications.
6.04 SURVIVAL. The obligations of this Article VI shall survive the
expiration or termination of this Agreement.
ARTICLE VII
CHANGE OF CONTROL
7.01 DEFINITIONS. For purposes of this Article VII, the following
definitions shall be applied:
(a) "BENEFIT PLAN" means any formal or informal plan, program or
other arrangement heretofore or hereafter adopted by Ceridian for
the direct or indirect provision of compensation to the Executive
(including groups or classes of participants or beneficiaries of
which the Executive is a member), whether or not such
compensation is deferred, is in the form of cash or other
property or rights, or is in the form of a benefit to or for the
Executive.
(b) "CHANGE OF CONTROL" shall mean any of the following events:
(1) a merger or consolidation to which Parent Corporation
is a party if the individuals and entities who were
stockholders of Parent Corporation immediately prior to
the effective date of such merger or consolidation have
beneficial ownership (as defined in Rule 13d-3 under
the Securities
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Exchange Act of 1934) of less than fifty percent (50%)
of the total combined voting power for election of
directors of the surviving corporation immediately
following the effective date of such merger or
consolidation; or
(2) the direct or indirect beneficial ownership (as defined
in Rule 13d-3 under the Securities Exchange Act of
1934) in the aggregate of securities of Parent
Corporation representing twenty-five percent (25%) or
more of the total combined voting power of Parent
Corporation's then issued and outstanding securities by
any person or entity, or group of associated persons or
entities acting in concert; or
(3) the sale of the properties and assets of Parent
Corporation, substantially as an entirety, to any
person or entity which is not a wholly-owned subsidiary
of Parent Corporation; or
(4) the stockholders of Parent Corporation approve any plan
or proposal for the liquidation of Parent Corporation;
or
(5) a change in the composition of the Board at any time
during any consecutive 24 month period such that the
"Continuity Directors" cease for any reason to
constitute at least a seventy percent (70%) majority of
the Board. For purposes of this clause, "Continuity
Directors" means those members of the Board who either
(A) were directors at the beginning of such consecutive
24 month period, or (B) were elected by, or on the
nomination or recommendation of, at least a two-thirds
(2/3) majority of the then-existing Board.
(c) "CHANGE OF CONTROL COMPENSATION" means any payment or benefit
(including any transfer of property) in the nature of compensation, to
or for the benefit of a Participant under this Agreement or any Other
Agreement or Benefit Plan, which is considered to be contingent on a
Change of Control for purposes of Section 280G of the Code.
(d) "CHANGE OF CONTROL TERMINATION" means, with respect to Executive,
either of the following events occurring within two years after a
Change of Control:
(1) Termination of Executive's employment by Ceridian for
any reason other than (A) fraud, (B) theft or
embezzlement of Ceridian assets, (C) intentional
violations of law involving moral turpitude, or (D) the
substantial and continuing failure by Executive to
satisfactorily perform his or her duties as
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reasonably assigned to Executive pursuant to Section
2.02 of Article II of this Agreement for a period of 60
days after a written demand for such satisfactory
performance which specifically identifies the manner in
which it is alleged Executive has not satisfactorily
performed such duties; or
(2) Termination of employment with Ceridian by Executive
pursuant to Section 7.02 of this Article VII.
A Change of Control Termination by Executive shall not, however,
include termination by reason of death or Disability.
(e) "CODE" means the Internal Revenue Code of 1986, as amended. Any
reference to a section of the Code shall include the corresponding
section of such Code as from time to time amended.
(f) "EXCISE TAX" means any applicable federal excise tax imposed by
Section 4999 of the Code.
(g) "GOOD REASON" means a good faith determination by Executive, in
Executive's sole and absolute judgment, that any one or more of the
following events has occurred, without Executive's express written
consent, after a Change of Control:
(1) A change in Executive's reporting responsibilities,
titles or offices as in effect immediately prior to the
Change of Control, or any removal of Executive from, or
any failure to re-elect Executive to, any of such
positions, which has the effect of materially
diminishing Executive's responsibility or authority;
(2) A reduction by Ceridian in Executive's Base Salary as
in effect immediately prior to the Change of Control or
as the same may be increased from time to time
thereafter;
(3) Ceridian requiring Executive to be based anywhere other
than within 25 miles of Executive's job location at the
time of the Change of Control;
(4) Without replacement by plans, programs, or arrangements
which, taken as a whole, provide benefits to Executive
at least reasonably comparable to those discontinued or
adversely affected, (A) the failure by Ceridian to
continue in effect, within its maximum stated term, any
pension, bonus, incentive, stock ownership, purchase,
option, life insurance,
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health, accident, disability, or any other employee
compensation or benefit plan, program or arrangement,
in which Executive is participating immediately prior
to a Change of Control; or (B) the taking of any action
by Ceridian that would materially adversely affect
Executive's participation or materially reduce
Executive's benefits under any of such plans, programs
or arrangements;
(5) The failure by Ceridian to provide office space,
furniture, and secretarial support at least comparable
to that provided Executive immediately prior to the
Change of Control or the taking of any similar action
by Ceridian that would materially adversely affect the
working conditions in or under which Executive performs
his or her employment duties;
(6) If Executive's primary employment duties are with a
Subsidiary, the sale, merger, contribution, transfer or
any other transaction in conjunction with which Parent
Corporation's ownership interest in such Subsidiary
decreases below the level specified in Section 1.07 of
Article I unless (A) this Agreement is assigned to the
purchaser/transferee with the provisions of Article VII
in full force and effect and operative as if a Change
of Control has occurred with respect to the
purchaser/transferee as Parent Corporation immediately
after the purchase/transfer becomes effective, and (B)
such purchaser/transferee has a creditworthiness
reasonably equivalent to Parent Corporation's; or
(7) Any material breach of this Agreement by Ceridian.
(h) "OTHER AGREEMENTS" means any agreement, contract or understanding
heretofore or hereafter entered into between Executive and Ceridian
for the direct or indirect provision of compensation to Executive.
(i) "REDUCED AMOUNT" means the largest amount that could be received
by a Participant as Change of Control Compensation such that no
portion of such Change of Control Compensation would be subject to the
Excise Tax.
7.02 CHANGE OF CONTROL TERMINATION RIGHT. For a period of two years
following a Change of Control, Executive shall have the right, at any
time and within Executive's sole discretion, to terminate employment
with Ceridian for Good Reason. Such termination shall be accomplished
by, and effective upon, Executive giving written notice to Ceridian of
Executive's decision to terminate. Except as
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otherwise expressly provided in this Agreement, upon the exercise of
said right, all obligations and duties of Executive under this
Agreement shall be of no further force and effect.
7.03 CHANGE OF CONTROL TERMINATION PAYMENT. In the event of a Change of
Control Termination, and subject to the "Limitation on Change of
Control Compensation" contained in Section 7.04, then, and without
further action by the Board, Compensation Committee or otherwise,
Parent Corporation shall, within five days of such termination, make a
lump sum payment to Executive in an amount equal to one dollar ($1.00)
less than three times the average annualized compensation, as defined
by Section 280G of the Code, received by Executive from Ceridian and
includible in Executive's gross income for federal income tax purposes
for the five most recent taxable years of the Executive ending before
the date upon which the Change in Control occurred (or such portion of
such period during which Executive was an employee of Ceridian).
7.04 LIMITATION ON CHANGE OF CONTROL COMPENSATION. Notwithstanding any
other provisions of this Agreement or of any Other Agreement or
Benefit Plan, if any Change of Control Compensation would be
considered a "parachute payment" within the meaning of Section
280G(b)(2) of the Code and if, after reduction for any Excise Tax and
federal income tax imposed by the Code, Executive's net proceeds of
such Change of Control Compensation would be less than the amount of
Executive's net proceeds resulting from the payment of the Reduced
Amount after reduction for federal income taxes, then the Change of
Control Compensation payable to Executive shall be limited to the
Reduced Amount. The determinations required by the preceding sentence
shall be made by the firm of independent certified public accountants
serving as the outside auditor of Ceridian as of the date of the
applicable Change of Control, and such determinations shall be binding
upon Ceridian and Executive. If Change of Control Compensation to
Executive is limited to the Reduced Amount, then Executive shall have
the right, in his or her sole discretion, to designate those payments
or benefits under this Agreement, any Other Agreements and/or any
Benefit Plans that should be reduced or eliminated so as to avoid
having Executive's Change of Control Compensation be subject to the
Excise Tax. If Executive fails to make such designation within 30
days of having received notification that such designation is
required, Ceridian shall make such designations and shall promptly
inform Executive of its actions in such regard.
7.05 INTEREST. In the event Parent Corporation does not make timely
payment in full of the Change of Control Termination payment described
in Section 7.03, Executive shall be entitled to receive interest on
any unpaid amount at the lower of: (a) the prime rate of interest (or
such comparable index as may be adopted) established from time to time
by the First Bank National Association, Minneapolis, Minnesota; or (b)
the maximum rate permitted under Section 280G(d)(4) of the Internal
Revenue Code."
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7.06 ATTORNEYS' FEES. In the event Executive incurs any legal expense to
enforce or defend his or her rights under this Article VII of this
Agreement, or to recover damages for breach thereof, Executive shall
be entitled to recover from Ceridian any expenses for attorneys' fees
and disbursements incurred.
7.07 BENEFITS CONTINUATION. In the event of a Change of Control
Termination, Executive (and anyone entitled to claim under or through
Executive) shall, until age 65, be entitled to receive from Ceridian
the same or equivalent health, dental, accidental death and
dismemberment, short and long-term disability, life insurance
coverages, and all other insurance policies and health and welfare
benefits programs, policies or arrangements, at the same levels and
coverages as Executive was receiving on the day immediately prior to
the Change of Control. To the extent that election of continuation of
any of such coverages, programs, policies, or arrangements is made
available to employees terminating at age 55 with 15 or more years of
service, Executive shall be required to pay no more for continuation
than is required of such employees on the day immediately prior to the
Change of Control. If no such continuation program is available,
Executive shall be required to pay no more than he/she paid as an
active employee, or if provided by Ceridian at no cost to employees on
the day immediately prior to the Change of Control, they shall
continue to be made available to Executive on this basis.
ARTICLE VIII
CHANGE OF SUBSIDIARY STATUS
8.01 In the event that, prior to a Change of Control: (a) a Subsidiary is
sold, merged, contributed, or in any other manner transferred, or if
for any reason Parent Corporation's ownership interest in any such
Subsidiary falls below the level specified in Section 1.07,
(b) Executive's primary employment duties are with the Subsidiary at
the time of the occurrence of such event, and (c) Executive does not,
in conjunction therewith, transfer employment directly to Parent
Corporation or another Subsidiary, then:
(a) If Executive gives his or her written consent to the assignment
of this Agreement to such Subsidiary, or to the purchaser or new
majority interest holder of such Subsidiary, (and such assignment
is accepted) this Agreement shall remain in full force and effect
between Executive and the assignee, except that the provisions of
Article VII of this Agreement shall become null and void;
(b) If such assignment is not accepted by the Subsidiary or
purchaser, then this Agreement shall be deemed to have been
terminated by Ceridian without cause pursuant to Section 4.03 of
Article IV; and
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(c) In all other cases, this Agreement shall be deemed terminated for
cause pursuant to Section 4.02 of Article IV.
ARTICLE IX
GENERAL PROVISIONS
9.01 NO ADEQUATE REMEDY. The parties declare that it is impossible to
measure in money the damages which will accrue to either party by
reason of a failure to perform any of the obligations under this
Agreement. Therefore, if either party shall institute any action or
proceeding to enforce the provisions hereof, such party against whom
such action or proceeding is brought hereby waives the claim or
defense that such party has an adequate remedy at law, and such party
shall not urge in any such action or proceeding the claim or defense
that such party has an adequate remedy at law.
9.02 SUCCESSORS AND ASSIGNS. Except as otherwise provided in Article VIII,
this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of Parent Corporation and each Subsidiary,
whether by way of merger, consolidation, operation of law, assignment,
purchase or other acquisition of substantially all of the assets or
business of Ceridian, and any such successor or assign shall
absolutely and unconditionally assume all of Ceridian's obligations
hereunder.
9.03 NOTICES. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and
be delivered or mailed to any such party at its address:
(a) Ceridian Corporation
8100 34th Avenue South
Minneapolis, Minnesota 55425-1640
Attention: Office of General Counsel
(b) In the case of Executive shall be:
At the address listed on the last page of this Agreement.
Either party may, by notice hereunder, designate a changed
address. Any notice, if mailed properly addressed, postage
prepaid, registered or certified mail, shall be deemed dispatched
on the registered date or that stamped on the certified mail
receipt, and shall be deemed received within the second business
day thereafter or when it is actually received, whichever is
sooner.
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9.04 CAPTIONS. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of
this Agreement.
9.05 GOVERNING LAW. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota and
any and every legal proceeding arising out of or in connection with
this Agreement shall be brought in the appropriate courts of the State
of Minnesota, each of the parties hereby consenting to the exclusive
jurisdiction of said courts for this purpose. The parties hereto
expressly recognize and agree that the implementation of this
Governing Law provision is essential in light of the fact that Parent
Corporation's corporate headquarters and its principal executive
offices are located within the State of Minnesota, and there is a
critical need for uniformity in the interpretation and enforcement of
the employment agreements between Ceridian and its senior executives.
9.06 CONSTRUCTION. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
9.07 WAIVERS. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
or remedy hereunder preclude any other or further exercise thereof or
the exercise of any other right or remedy granted hereby or by any
related document or by law.
9.08 MODIFICATION. This Agreement may not be and shall not be modified or
amended except by written instrument signed by the parties hereto.
9.09 ARBITRATION. Because the parties recognize that resolving any future
differences in the courts can require a long time and great expense,
Company and Executive agree that their only remedy for disputes either
may have with the other and that arise out of Executive's employment,
or any aspect of this Agreement, shall be to submit all disputes to
final and binding arbitration in accordance with the Employment
Dispute Resolution Rules of the American Arbitration Association. The
aggrieved party must send a written notice of claim to the other party
by certified mail, return receipt requested to the address listed in
Section 9.03 of this Agreement. The arbitrator shall apply the law in
accordance with this Agreement, or federal law, or both, as applicable
to the claim(s) asserted.
9.10 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the
matters herein
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agreed upon. This Agreement replaces in full all prior employment
agreements or understandings of the parties hereto, and any and all
such prior agreements or understandings are hereby rescinded by mutual
agreement. Any changes or amendments to this Agreement must be in
writing and signed by both parties.
IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
EXECUTIVE CERIDIAN CORPORATION
/s/ Stephen B. Morris By: /s/ Michael E. Kotten
- --------------------- ---------------------
Title: Vice President
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EXHIBIT 10.04
CERIDIAN CORPORATION
EXECUTIVE EMPLOYMENT AGREEMENT
PARTIES
CERIDIAN CORPORATION (A DELAWARE CORPORATION)
8100 34TH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55425-1640
AND
JOHN R. EICKHOFF ("EXECUTIVE")
DATE: JULY 1, 1997
RECITALS
A. Ceridian wishes to obtain the services of Executive for at least the
duration of this Agreement, and the Executive wishes to provide his or her
services for such period.
B. Ceridian desires reasonable protection of Ceridian's Confidential
Information (as defined below).
C. Ceridian desires assurance that Executive will not compete with Ceridian or
engage in recruitment of Ceridian's employees for a reasonable period of
time after termination of employment, and Executive is willing to refrain
from competition and recruitment.
D. Executive desires to be assured of a minimum Base Salary (as defined below)
from Ceridian for Executive's services for the term of this Agreement
(unless terminated earlier pursuant to the terms of this Agreement).
E. It is expressly recognized by the parties that Executive's acceptance of,
and continuance in, Executive's position with Ceridian and agreement to be
bound by the terms of this Agreement represents a substantial commitment to
Ceridian in terms of Executive's personal and professional career and a
foregoing of present and future career options by Executive, for all of
which Ceridian receives substantial value.
F. The parties recognize that a Change of Control (as defined below) may
result in material alteration or diminishment of Executive's position and
responsibilities and substantially frustrate the purpose of Executive's
commitment to Ceridian and forebearance of options.
<PAGE>
G. The parties recognize that in light of the above-described commitment and
forebearance of options, it is essential that, for the benefit of Ceridian
and its stockholders, provision be made for a Change of Control Termination
(as defined below) in order to enable Executive to accept and effectively
continue in Executive's position in the face of inherently disruptive
circumstances arising from the possibility of a Change of Control of the
Parent Corporation (as defined below), although no such change is now
contemplated or foreseen.
H. The parties wish to replace any and all prior agreements and undertakings
with respect to the Executive's employment and Change of Control
occurrences and compensation.
NOW, THEREFORE, in consideration of Executive's acceptance of and continuance in
Executive's employment for the term of this Agreement and the parties' agreement
to be bound by the terms contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 "BASE SALARY" shall mean regular cash compensation paid on a periodic basis
exclusive of benefits, bonuses or incentive payments.
1.02 "BOARD" shall mean the Board of Directors of Ceridian Corporation (the
"Parent Corporation").
1.03 "CERIDIAN" shall mean Ceridian Corporation and, except as otherwise
provided in Article VIII and Section 9.02 of Article IX,
(a) any Subsidiary (as that term is defined in Section 1.07); and
(b) any successor in interest by way of consolidation, operation of
law, merger or otherwise.
1.04 "CONFIDENTIAL INFORMATION" shall mean information or material which is not
generally available to or used by others, or the utility or value of which
is not generally known or recognized as standard practice, whether or not
the underlying details are in the public domain, including:
(a) information or material relating to Ceridian and its business as
conducted or anticipated to be conducted; business plans; operations;
past, current or anticipated software, products or services; customers
or prospective customers; or research, engineering, development,
manufacturing, purchasing, accounting, or marketing activities;
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(b) information or material relating to Ceridian's inventions,
improvements, discoveries, "know-how," technological developments, or
unpublished writings or other works of authorship, or to the
materials, apparatus, processes, formulae, plans or methods used in
the development, manufacture or marketing of Ceridian's software,
products or services;
(c) information which when received is marked as "proprietary," "private,"
or "confidential;"
(d) trade secrets;
(e) software in various stages of development, including computer programs
in source code and binary code form, software designs, specifications,
programming aids (including "library subroutines" and productivity
tools), programming languages, interfaces, visual displays, technical
documentation, user manuals, data files and databases; and
(f) any similar information of the type described above which Ceridian
obtained from another party and which Ceridian treats as or designates
as being proprietary, private or confidential, whether or not owned or
developed by Ceridian.
Notwithstanding the foregoing, "Confidential Information" does not include
any information which is properly published or in the public domain;
provided, however, that information which is published by or with the aid
of Executive outside the scope of employment or contrary to the
requirements of this Agreement will not be considered to have been properly
published, and therefore will not be in the public domain for purposes of
this Agreement.
1.05 "DISABILITY" shall mean the inability of Executive to perform his or her
duties under this Agreement because of illness or incapacity for a
continuous period of five months.
1.06 "PARENT CORPORATION" shall mean Ceridian Corporation and, except as
otherwise provided in Article VIII and Section 9.02 of Article IX, any
successor in interest by way of consolidation, operation of law, merger or
otherwise. "Parent Corporation" shall not include any Subsidiary.
1.07 "SUBSIDIARY" shall mean: (a) any corporation at least a majority of whose
securities having ordinary voting power for the election of directors
(other than securities having such power only by reason of the occurrence
of a contingency) is at the time owned by Parent Corporation and/or one or
more Subsidiaries; and (b) any division or business unit (or portion
thereof) of Parent Corporation or a corporation described in clause (a) of
this Section 1.07.
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ARTICLE II
EMPLOYMENT, DUTIES AND TERM
2.01 EMPLOYMENT. Upon the terms and conditions set forth in this Agreement,
Ceridian hereby employs Executive, and Executive accepts such employment.
Except as expressly provided herein, termination of this Agreement by
either party shall also terminate Executive's employment by Ceridian.
2.02 DUTIES. Executive shall devote his or her full-time and best efforts to
Ceridian and to fulfilling the duties of his or her position which shall
include such duties as may from time to time be assigned him or her by
Ceridian, provided that such duties are reasonably consistent with
Executive's education, experience and background. Executive shall comply
with Ceridian's policies and procedures to the extent they are not
inconsistent with this Agreement in which case the provisions of this
Agreement prevail.
2.03 TERM. Subject to the provisions of Articles IV, VII, and VIII, Executive's
employment shall continue until the later of: (a) June 30, 1999; and (b)
two years after a Change of Control which occurs prior to June 30, 1999.
In any event, the Agreement shall automatically terminate without notice
when Executive reaches 65 years of age. If employment is continued after
the age of 65 by mutual agreement, it shall be terminable at will by either
party.
ARTICLE III
COMPENSATION AND EXPENSES
3.01 BASE SALARY. For all services rendered under this Agreement during the
term of Executive's employment, Ceridian shall pay Executive a minimum Base
Salary at the annual rate currently being paid or, if Executive is not
currently in Ceridian's employ, at the annual rate specified in the written
offer of employment. If Executive's salary is increased from time to time
during the term of this Agreement, the increased amount shall be the Base
Salary for the remainder of the term and any extensions.
3.02 BONUS AND INCENTIVE. Bonus or incentive compensation shall be in the sole
discretion of Ceridian. Except as otherwise provided in Article VII,
Ceridian shall have the right in accordance with their terms to alter,
amend or eliminate any bonus or incentive plans, or Executive's
participation therein, without compensation to Executive.
3.03 BUSINESS EXPENSES. Ceridian shall, in accordance with, and to the extent
of, its policies in effect from time to time, bear all ordinary and
necessary business expenses incurred by Executive in performing his or her
duties as an employee of Ceridian, provided that Executive accounts
promptly for such expenses to Ceridian in the manner prescribed from time
to time by Ceridian.
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ARTICLE IV
EARLY TERMINATION
4.01 EARLY TERMINATION. Subject to the respective continuing obligations of the
parties pursuant to Articles V, VI, and IX, this Article sets forth the
terms for early termination of this Agreement; provided, however, that this
Article shall not apply to a Change of Control Termination which is
governed solely by the provisions of Article VII.
4.02 TERMINATION FOR CAUSE. Ceridian may terminate this Agreement immediately
for cause. For the purpose hereof "cause" means (a) fraud, (b)
misrepresentation, (c) theft or embezzlement of Ceridian assets,
(d) intentional violations of law involving moral turpitude, (e) the
continued failure by Executive to satisfactorily perform his or her duties
as reasonably assigned to Executive pursuant to Section 2.02 of Article II
of this Agreement for a period of 60 days after a written demand for such
satisfactory performance which specifically identifies the manner in which
it is alleged Executive has not satisfactorily performed such duties. In
the event of termination for cause pursuant to this Section 4.02, Executive
shall be paid at the usual rate of Executive's annual Base Salary through
the date of termination specified in any notice of termination.
4.03 TERMINATION WITHOUT CAUSE. Either Executive or Ceridian may terminate this
Agreement and Executive's employment without cause on at least 75 days'
written notice. In the event of termination of this Agreement and of
Executive's employment pursuant to this Section 4.03, compensation shall be
paid as follows:
(a) if the notice of termination is given by Executive at any time
Executive shall be paid at the usual rate of his or her annual Base
Salary through the date of termination specified in such notice (but
not to exceed 75 days);
(b) if the notice of termination is given by Ceridian and effective prior
to Executive's 65th birthday, (1) Executive shall be paid at the usual
rate of his or her annual Base Salary through the date of termination
specified in the notice provided, however, that Ceridian shall have
the option of making termination of the Agreement and Executive's
employment effective immediately upon notice in which case Executive
shall be paid a lump sum representing the value through a notice
period of 75 days worth of salary; and (2) Executive shall receive,
starting within 15 days following termination, a payment equivalent to
one years' Base Salary payable, at the sole discretion of Ceridian, in
either the form of a lump sum payment or on a regular payroll period
basis. In addition, the Executive shall receive the bonus, if any, to
which Executive would otherwise have become entitled under all
Ceridian bonus plans in effect at the time of termination of this
Agreement had Executive remained continuously employed for the full
fiscal year in which termination occurred and continued to perform his
or her duties in the
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same manner as they were performed immediately prior to termination,
multiplied by a fraction, the numerator of which shall be the number
of whole months Executive was employed in the year in which
termination occurred and the denominator of which is 12. This bonus
amount shall be paid within 15 days after the date such bonus would
have been paid had Executive remained employed for the full fiscal
year.
(c) If the event that notice of termination occurs pursuant to Section
4.03(b), in addition to the payments specified in said Section,
Ceridian shall pay to Executive an amount equal to one years' Base
Salary payable, at the sole discretion of Ceridian, in either the form
of a lump sum payment or on a regular payroll period basis, provided
the Executive executes a release, similar to that attached as Exhibit
A, of all claims against the Company.
(d) If the notice of termination is given by Ceridian to be effective on
or after Executive's 65th birthday, Executive shall be paid at the
usual rate of his or her annual Base Salary through the date of
termination specified in any notice. In addition, Executive will be
paid the bonus, if any, to which Executive would otherwise have become
entitled under all Ceridian bonus plans in effect at the time of
termination of this Agreement had Executive remained continuously
employed for the full fiscal year in which termination occurred and
continued to perform his or her duties in the same manner as they were
performed immediately prior to termination, multiplied by a fraction,
the numerator of which shall be the number of whole months Executive
was employed in the year in which termination occurred and the
denominator of which is 12. The amount payable pursuant to this
Section 4.03(d) shall be paid within 15 days after the date such bonus
would have been paid had Executive remained employed for the full
fiscal year.
4.04 TERMINATION IN THE EVENT OF DEATH OR DISABILITY. This Agreement shall
terminate in the event of death or disability of Executive.
(a) In the event of Executive's death, Ceridian shall pay an amount equal
to 12 months of Base Salary at the rate in effect at the time of
Executive's death plus the amount Executive would have received in
annual incentive plan bonus for the year in which termination occurs
had "target" goals been achieved. Such amount shall be paid (1) to
the beneficiary or beneficiaries designated in writing to Ceridian by
Executive, (2) in the absence of such designation to the surviving
spouse, or (3) if there is no surviving spouse, or such surviving
spouse disclaims all or any part, then the full amount, or such
disclaimed portion, shall be paid to the executor, administrator or
other personal representative of Executive's estate. The amount shall
be paid as a lump sum as soon as practicable following Ceridian's
receipt of notice of Executive's death. All such payments shall be in
addition to any payments due pursuant to Section 4.04(c) below.
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(b) In the event of disability, Base Salary shall be terminated as of the
end of the month in which the last day of the five-month period of
Executive's inability to perform his or her duties occurs.
(c) In the event of termination by reason of Executive's death or
disability, Ceridian shall pay to Executive any amount equal to (1)
the amount Executive would have received in annual incentive plan
bonus for the year in which termination occurs had "target" goals been
achieved, multiplied by (2) a fraction, the numerator of which shall
be the number of whole months Executive was employed in the year in
which the death or disability occurred and the denominator of which is
12. The amount payable pursuant to this Section 4.04(c) shall be paid
within 15 days after the date such bonus would have been paid had
Executive remained employed for the full fiscal year.
4.05 PENSION SUPPLEMENT. If Ceridian terminates Executive's employment without
cause prior to Executive's 65th birthday, Ceridian shall provide to
Executive, out of its general assets, a monthly supplemental retirement
benefit in an amount equal to the actuarial equivalent of the difference,
if any, between:
(a) the monthly benefit to which Executive would have been entitled under
the defined benefit pension plan or plans in which he or she
participated immediately prior to his or her termination of employment
if the amount of payment to which Executive is entitled under Section
4.03(b)(2) were taken into account for purposes of determining his or
her "final average pay" or similar term (as then defined under the
terms of such plan or plans) for either (1) the year in which
Executive's termination of employment occurred; or (2) the prior full
year, whichever provides the highest total final average pay; and
(b) the amount to which Executive is, in fact, entitled under such plan or
plans.
The benefit calculated under this Section 4.05 shall be paid at the same
time and in the same form as the benefit under the plan with respect to
which such calculation is made.
4.06 ENTIRE TERMINATION PAYMENT. The compensation provided for in this
Article IV for early termination of this Agreement and termination pursuant
to this Article IV shall constitute Executive's sole remedy for such
termination. Executive shall not be entitled to any other termination or
severance payment which may be payable to Executive under any other
agreement between Executive and Ceridian.
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ARTICLE V
CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT
5.01 CONFIDENTIALITY. Executive will not, during the term or after the
termination or expiration of this Agreement, publish, disclose, or utilize
in any manner any Confidential Information obtained while employed by
Ceridian. If Executive leaves the employ of Ceridian, Executive will not,
without Ceridian's prior written consent, retain or take away any drawing,
writing or other record in any form containing any Confidential
Information.
5.02 BUSINESS CONDUCT AND ETHICS. During the term of employment with Ceridian,
Executive will engage in no activity or employment which may conflict with
the interest of Ceridian, and will comply with Ceridian's policies and
guidelines pertaining to business conduct and ethics.
5.03 DISCLOSURE. Executive will disclose promptly in writing to Ceridian all
inventions, discoveries, software, writings and other works of authorship
which are conceived, made, discovered, or written jointly or singly on
Ceridian time or on Executive's own time, providing the invention,
improvement, discovery, software, writing or other work of authorship is
capable of being used by Ceridian in the normal course of business, and all
such inventions, improvements, discoveries, software, writings and other
works of authorship shall belong solely to Ceridian.
5.04 INSTRUMENTS OF ASSIGNMENT. Executive will sign and execute all instruments
of assignment and other papers to evidence vestiture of Executive's entire
right, title and interest in such inventions, improvements, discoveries,
software, writings or other works of authorship in Ceridian, at the request
and the expense of Ceridian, and Executive will do all acts and sign all
instruments of assignment and other papers Ceridian may reasonably request
relating to applications for patents, patents, copyrights, and the
enforcement and protection thereof. If Executive is needed, at any time,
to give testimony, evidence, or opinions in any litigation or proceeding
involving any patents or copyrights or applications for patents or
copyrights, both domestic and foreign, relating to inventions,
improvements, discoveries, software, writings or other works of authorship
conceived, developed or reduced to practice by Executive, Executive agrees
to do so, and if Executive leaves the employ of Ceridian, Ceridian shall
pay Executive at a rate mutually agreeable to Executive and Ceridian, plus
reasonable traveling or other expenses.
5.05 INVENTIONS DEVELOPED ON EXECUTIVE'S OWN TIME. The two immediately
preceding sections entitled "Disclosure" and "Instruments of Assignment" do
not apply to inventions in which a Ceridian claim of any rights will create
a violation of Chapter 47 Minnesota Revised Statutes, Section 1-181.78,
reproduced below and constituting the written notification of its
Subdivision 3.
181.78 Agreements relating to inventions
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Subdivision 1.
Any provision in an employment agreement which provides that an Executive
shall assign or offer to assign any of his rights in an invention to his
employer shall not apply to an invention for which no equipment, supplies,
facility or trade secret information of the employer was used and which was
developed entirely on the employee's own time, and (1) which does not
relate (a) directly to the business of the employer or (b) to the
employer's actual or demonstrably anticipated research or development, or
(2) which does not result from any work performed by the employee for the
employer. Any provision which purports to apply to such an invention is to
that extent against the public policy of this state and is to that extent
void and unenforceable.
Subdivision 2.
No employer shall require a provision made void and unenforceable by
subdivision 1 as a condition of employment or continuing employment.
Subdivision 3.
IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS A
PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF HIS
RIGHTS IN ANY INVENTION TO HIS EMPLOYER, THE EMPLOYER MUST ALSO, AT THE
TIME THE AGREEMENT IS MADE, PROVIDE A WRITTEN NOTIFICATION TO THE EMPLOYEE
THAT THE AGREEMENT DOES NOT APPLY TO AN INVENTION FOR WHICH NO EQUIPMENT,
SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF THE EMPLOYER WAS USED AND
WHICH WAS DEVELOPED ENTIRELY ON THE EMPLOYEE'S OWN TIME, AND (1) WHICH DOES
NOT RELATE (a) DIRECTLY TO THE BUSINESS OF THE EMPLOYER OR (b) TO THE
EMPLOYER'S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR
(2) WHICH DOES NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE
EMPLOYER.
5.06 EXECUTIVE'S DECLARATION. Executive has no inventions, improvements,
discoveries, software, writings or other works of authorship useful to
Ceridian in the normal course of business, which were conceived, made or
written prior to the date of this Agreement and which are excluded from
this Agreement.
5.07 SURVIVAL. The obligations of this Article V shall survive the expiration
or termination of this Agreement.
ARTICLE VI
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NON-COMPETITION, NON-RECRUITMENT
6.01 GENERAL. The parties hereto recognize and agree that (a) Executive is a
senior executive of Ceridian and is a key Executive of Ceridian, (b)
Executive has received, and will in the future receive, substantial amounts
of Confidential Information, (c) Ceridian's business is conducted on a
worldwide basis, and (d) provision for non-competition and non-recruitment
obligations by Executive is critical to Ceridian's continued economic
well-being and protection of Ceridian's Confidential Information. In light
of these considerations, this Article VI sets forth the terms and
conditions of Executive's obligations of non-competition and
non-recruitment subsequent to the termination of this Agreement and/or
Executive's employment for any reason.
6.02 NON-COMPETITION.
(a) Unless the obligation is waived or limited by Ceridian in accordance
with subsection (b) of this Section 6.02, Executive agrees that for a
period of two years following termination of employment for any
reason, Executive will not directly or indirectly, alone or as a
partner, officer, director, shareholder or employee of any other firm
or entity, engage in any commercial activity in competition with any
part of Ceridian's business as conducted as of the date of such
termination of employment or with any part of Ceridian's contemplated
business with respect to which Executive has Confidential Information
as governed by Article V of this Agreement. For purposes of this
subsection (a), "shareholder" shall not include beneficial ownership
of less than five percent (5%) of the combined voting power of all
issued and outstanding voting securities of a publicly held
corporation whose stock is traded on a major stock exchange. Also for
purposes of this subsection (a), "Ceridian's business" shall include
business conducted by Ceridian or its affiliates and any partnership
or joint venture in which Ceridian or its affiliates is a partner or
joint venturer; provided that, "affiliate" as used in this sentence
shall not include any corporation in which Ceridian has ownership of
less than fifteen percent (15%) of the voting stock.
(b) At its sole option Ceridian may, by written notice to Executive within
30 days after the effective date of termination of Executive's
employment, waive or limit the time and/or geographic area in which
Executive cannot engage in competitive activity.
(c) During the term of the non-competition obligation, prior to accepting
employment with, or agreeing to provide consulting services to, any
firm which offers products or services in the fields of electronics or
information processing, Executive shall give 30 days prior written
notice to Ceridian. Such written notice shall describe the proposed
employment or consulting services and the firm to which they will be
rendered. Ceridian's failure to respond or object to such notice
shall not in any way constitute acquiescence or waiver of Ceridian's
rights under this Article VI.
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(d) During any period of non-competition pursuant to this Article VI
Ceridian shall pay Executive an amount equal to the usual rate of
Executive's Base Salary in effect at the time of termination. There
shall be credited against Ceridian's obligation to make such payments
any other payments made by Ceridian to Executive pursuant to Article
IV of this Agreement. In the event that Ceridian elects, pursuant to
subsection (b) of this Section 6.02, to waive all or any portion of
the non-competition obligation, no payment shall be required by
Ceridian with respect to the portion of the non-competition period
which has been waived.
6.03 NON-RECRUITMENT. For a period of two years following termination of
employment for any reason, Executive will not initiate or actively
participate in any other employer's recruitment or hiring of Ceridian
employees. This provision shall not preclude Executive from responding to
a request (other than by Executive's employer) for a reference with respect
to an individual's employment qualifications.
6.04 SURVIVAL. The obligations of this Article VI shall survive the expiration
or termination of this Agreement.
ARTICLE VII
CHANGE OF CONTROL
7.01 DEFINITIONS. For purposes of this Article VII, the following definitions
shall be applied:
(a) "BENEFIT PLAN" means any formal or informal plan, program or other
arrangement heretofore or hereafter adopted by Ceridian for the direct
or indirect provision of compensation to the Executive (including
groups or classes of participants or beneficiaries of which the
Executive is a member), whether or not such compensation is deferred,
is in the form of cash or other property or rights, or is in the form
of a benefit to or for the Executive.
(b) "CHANGE OF CONTROL" shall mean any of the following events:
(1) a merger or consolidation to which Parent Corporation is a
party if the individuals and entities who were stockholders
of Parent Corporation immediately prior to the effective
date of such merger or consolidation have beneficial
ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of less than fifty percent (50%) of
the total combined voting power for election of directors of
the surviving corporation immediately following the
effective date of such merger or consolidation; or
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(2) the direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) in the
aggregate of securities of Parent Corporation representing
twenty-five percent (25%) or more of the total combined
voting power of Parent Corporation's then issued and
outstanding securities by any person or entity, or group of
associated persons or entities acting in concert; or
(3) the sale of the properties and assets of Parent Corporation,
substantially as an entirety, to any person or entity which
is not a wholly-owned subsidiary of Parent Corporation; or
(4) the stockholders of Parent Corporation approve any plan or
proposal for the liquidation of Parent Corporation; or
(5) a change in the composition of the Board at any time during
any consecutive 24 month period such that the "Continuity
Directors" cease for any reason to constitute at least a
seventy percent (70%) majority of the Board. For purposes
of this clause, "Continuity Directors" means those members
of the Board who either (A) were directors at the beginning
of such consecutive 24 month period, or (B) were elected by,
or on the nomination or recommendation of, at least a
two-thirds (2/3) majority of the then-existing Board.
(c) "CHANGE OF CONTROL COMPENSATION" means any payment or benefit
(including any transfer of property) in the nature of compensation, to or
for the benefit of a Participant under this Agreement or any Other
Agreement or Benefit Plan, which is considered to be contingent on a Change
of Control for purposes of Section 280G of the Code.
(d) "CHANGE OF CONTROL TERMINATION" means, with respect to Executive,
either of the following events occurring within two years after a Change of
Control:
(1) Termination of Executive's employment by Ceridian for any
reason other than (A) fraud, (B) theft or embezzlement of
Ceridian assets, (C) intentional violations of law involving
moral turpitude, or (D) the substantial and continuing
failure by Executive to satisfactorily perform his or her
duties as reasonably assigned to Executive pursuant to
Section 2.02 of Article II of this Agreement for a period of
60 days after a written demand for such satisfactory
performance which specifically identifies the manner in
which it is alleged Executive has not satisfactorily
performed such duties; or
(2) Termination of employment with Ceridian by Executive
pursuant to Section 7.02 of this Article VII.
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A Change of Control Termination by Executive shall not, however,
include termination by reason of death or Disability.
(e) "CODE" means the Internal Revenue Code of 1986, as amended. Any
reference to a section of the Code shall include the corresponding section
of such Code as from time to time amended.
(f) "EXCISE TAX" means any applicable federal excise tax imposed by
Section 4999 of the Code.
(g) "GOOD REASON" means a good faith determination by Executive, in
Executive's sole and absolute judgment, that any one or more of the
following events has occurred, without Executive's express written consent,
after a Change of Control:
(1) A change in Executive's reporting responsibilities, titles
or offices as in effect immediately prior to the Change of
Control, or any removal of Executive from, or any failure to
re-elect Executive to, any of such positions, which has the
effect of materially diminishing Executive's responsibility
or authority;
(2) A reduction by Ceridian in Executive's Base Salary as in
effect immediately prior to the Change of Control or as the
same may be increased from time to time thereafter;
(3) Ceridian requiring Executive to be based anywhere other than
within 25 miles of Executive's job location at the time of
the Change of Control;
(4) Without replacement by plans, programs, or arrangements
which, taken as a whole, provide benefits to Executive at
least reasonably comparable to those discontinued or
adversely affected, (A) the failure by Ceridian to continue
in effect, within its maximum stated term, any pension,
bonus, incentive, stock ownership, purchase, option, life
insurance, health, accident, disability, or any other
employee compensation or benefit plan, program or
arrangement, in which Executive is participating immediately
prior to a Change of Control; or (B) the taking of any
action by Ceridian that would materially adversely affect
Executive's participation or materially reduce Executive's
benefits under any of such plans, programs or arrangements;
(5) The failure by Ceridian to provide office space, furniture,
and secretarial support at least comparable to that provided
Executive immediately prior to the Change of Control or the
taking of any
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similar action by Ceridian that would materially adversely
affect the working conditions in or under which Executive
performs his or her employment duties;
(6) If Executive's primary employment duties are with a
Subsidiary, the sale, merger, contribution, transfer or any
other transaction in conjunction with which Parent
Corporation's ownership interest in such Subsidiary
decreases below the level specified in Section 1.07 of
Article I unless (A) this Agreement is assigned to the
purchaser/transferee with the provisions of Article VII in
full force and effect and operative as if a Change of
Control has occurred with respect to the
purchaser/transferee as Parent Corporation immediately after
the purchase/transfer becomes effective, and (B) such
purchaser/transferee has a creditworthiness reasonably
equivalent to Parent Corporation's; or
(7) Any material breach of this Agreement by Ceridian.
(h) "OTHER AGREEMENTS" means any agreement, contract or understanding
heretofore or hereafter entered into between Executive and Ceridian for the
direct or indirect provision of compensation to Executive.
(i) "REDUCED AMOUNT" means the largest amount that could be received by a
Participant as Change of Control Compensation such that no portion of such
Change of Control Compensation would be subject to the Excise Tax.
7.02 CHANGE OF CONTROL TERMINATION RIGHT. For a period of two years following a
Change of Control, Executive shall have the right, at any time and within
Executive's sole discretion, to terminate employment with Ceridian for Good
Reason. Such termination shall be accomplished by, and effective upon,
Executive giving written notice to Ceridian of Executive's decision to
terminate. Except as otherwise expressly provided in this Agreement, upon
the exercise of said right, all obligations and duties of Executive under
this Agreement shall be of no further force and effect.
7.03 CHANGE OF CONTROL TERMINATION PAYMENT. In the event of a Change of Control
Termination, and subject to the "Limitation on Change of Control
Compensation" contained in Section 7.04, then, and without further action
by the Board, Compensation Committee or otherwise, Parent Corporation
shall, within five days of such termination, make a lump sum payment to
Executive in an amount equal to one dollar ($1.00) less than three times
the average annualized compensation, as defined by Section 280G of the
Code, received by Executive from Ceridian and includible in Executive's
gross income for federal income tax purposes for the five most recent
taxable years of the Executive ending before the date upon which the Change
in Control occurred (or such portion of such period during which Executive
was an employee of Ceridian).
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7.04 LIMITATION ON CHANGE OF CONTROL COMPENSATION. Notwithstanding any other
provisions of this Agreement or of any Other Agreement or Benefit Plan, if
any Change of Control Compensation would be considered a "parachute
payment" within the meaning of Section 280G(b)(2) of the Code and if, after
reduction for any Excise Tax and federal income tax imposed by the Code,
Executive's net proceeds of such Change of Control Compensation would be
less than the amount of Executive's net proceeds resulting from the payment
of the Reduced Amount after reduction for federal income taxes, then the
Change of Control Compensation payable to Executive shall be limited to the
Reduced Amount. The determinations required by the preceding sentence
shall be made by the firm of independent certified public accountants
serving as the outside auditor of Ceridian as of the date of the applicable
Change of Control, and such determinations shall be binding upon Ceridian
and Executive. If Change of Control Compensation to Executive is limited
to the Reduced Amount, then Executive shall have the right, in his or her
sole discretion, to designate those payments or benefits under this
Agreement, any Other Agreements and/or any Benefit Plans that should be
reduced or eliminated so as to avoid having Executive's Change of Control
Compensation be subject to the Excise Tax. If Executive fails to make such
designation within 30 days of having received notification that such
designation is required, Ceridian shall make such designations and shall
promptly inform Executive of its actions in such regard.
7.05 INTEREST. In the event Parent Corporation does not make timely payment in
full of the Change of Control Termination payment described in Section
7.03, Executive shall be entitled to receive interest on any unpaid amount
at the lower of: (a) the prime rate of interest (or such comparable index
as may be adopted) established from time to time by the First Bank National
Association, Minneapolis, Minnesota; or (b) the maximum rate permitted
under Section 280G(d)(4) of the Internal Revenue Code."
7.06 ATTORNEYS' FEES. In the event Executive incurs any legal expense to
enforce or defend his or her rights under this Article VII of this
Agreement, or to recover damages for breach thereof, Executive shall be
entitled to recover from Ceridian any expenses for attorneys' fees and
disbursements incurred.
7.07 BENEFITS CONTINUATION. In the event of a Change of Control Termination,
Executive (and anyone entitled to claim under or through Executive) shall,
until age 65, be entitled to receive from Ceridian the same or equivalent
health, dental, accidental death and dismemberment, short and long-term
disability, life insurance coverages, and all other insurance policies and
health and welfare benefits programs, policies or arrangements, at the same
levels and coverages as Executive was receiving on the day immediately
prior to the Change of Control. To the extent that election of
continuation of any of such coverages, programs, policies, or arrangements
is made available to employees terminating at age 55 with 15 or more years
of service, Executive shall be required to pay no more for continuation
than is required of such employees on the day immediately prior to the
Change of Control. If no such continuation program is available, Executive
shall be required to pay no more than he/she paid as an active employee, or
if provided by Ceridian
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at no cost to employees on the day immediately prior to the Change of
Control, they shall continue to be made available to Executive on this
basis.
7.08 PENSION SUPPLEMENT. In the event of a Change of Control Termination,
Parent Corporation shall, within five days, make a lump sum payment to
Executive in an amount equal to the actuarial equivalent of the difference,
if any, between:
(a) the monthly benefit to which Executive would have been entitled under
the defined benefit pension plan or plans in which he or she
participated immediately prior to his or her Change of Control
Termination if the amount of payment to which Executive is entitled
under Section 7.03 were taken into account for purposes of determining
his or her "final average pay" or similar term (as then defined under
the terms of such plan or plans) for either (1) the year in which the
Change of Control Termination occurred; or (2) the prior full year,
whichever provides the highest total final average pay; and
(b) the amount to which Executive is, in fact, entitled under such plan or
plans.
For purposes of determining actuarial equivalencies for this Section 7.08,
the actuarial factors specified in the particular plan or plans with
respect to which the determination is being made shall be applied.
ARTICLE VIII
CHANGE OF SUBSIDIARY STATUS
8.01 In the event that, prior to a Change of Control: (a) a Subsidiary is sold,
merged, contributed, or in any other manner transferred, or if for any
reason Parent Corporation's ownership interest in any such Subsidiary falls
below the level specified in Section 1.07, (b) Executive's primary
employment duties are with the Subsidiary at the time of the occurrence of
such event, and (c) Executive does not, in conjunction therewith, transfer
employment directly to Parent Corporation or another Subsidiary, then:
(a) If Executive gives his or her written consent to the assignment of
this Agreement to such Subsidiary, or to the purchaser or new majority
interest holder of such Subsidiary, (and such assignment is accepted)
this Agreement shall remain in full force and effect between Executive
and the assignee, except that the provisions of Article VII of this
Agreement shall become null and void;
(b) If such assignment is not accepted by the Subsidiary or purchaser,
then this Agreement shall be deemed to have been terminated by
Ceridian without cause pursuant to Section 4.03 of Article IV; and
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(c) In all other cases, this Agreement shall be deemed terminated for
cause pursuant to Section 4.02 of Article IV.
ARTICLE IX
GENERAL PROVISIONS
9.01 NO ADEQUATE REMEDY. The parties declare that it is impossible to measure
in money the damages which will accrue to either party by reason of a
failure to perform any of the obligations under this Agreement. Therefore,
if either party shall institute any action or proceeding to enforce the
provisions hereof, such party against whom such action or proceeding is
brought hereby waives the claim or defense that such party has an adequate
remedy at law, and such party shall not urge in any such action or
proceeding the claim or defense that such party has an adequate remedy at
law.
9.02 SUCCESSORS AND ASSIGNS. Except as otherwise provided in Article VIII, this
Agreement shall be binding upon and inure to the benefit of the successors
and assigns of Parent Corporation and each Subsidiary, whether by way of
merger, consolidation, operation of law, assignment, purchase or other
acquisition of substantially all of the assets or business of Ceridian, and
any such successor or assign shall absolutely and unconditionally assume
all of Ceridian's obligations hereunder.
9.03 NOTICES. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and be
delivered or mailed to any such party at its address:
(a) Ceridian Corporation
8100 34th Avenue South
Minneapolis, Minnesota 55425-1640
Attention: Office of General Counsel
(b) In the case of Executive shall be:
At the address listed on the last page of this Agreement.
Either party may, by notice hereunder, designate a changed address.
Any notice, if mailed properly addressed, postage prepaid, registered
or certified mail, shall be deemed dispatched on the registered date
or that stamped on the certified mail receipt, and shall be deemed
received within the second business day thereafter or when it is
actually received, whichever is sooner.
9.04 CAPTIONS. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
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9.05 GOVERNING LAW. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota and any
and every legal proceeding arising out of or in connection with this
Agreement shall be brought in the appropriate courts of the State of
Minnesota, each of the parties hereby consenting to the exclusive
jurisdiction of said courts for this purpose. The parties hereto expressly
recognize and agree that the implementation of this Governing Law provision
is essential in light of the fact that Parent Corporation's corporate
headquarters and its principal executive offices are located within the
State of Minnesota, and there is a critical need for uniformity in the
interpretation and enforcement of the employment agreements between
Ceridian and its senior executives.
9.06 CONSTRUCTION. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
9.07 WAIVERS. No failure on the part of either party to exercise, and no delay
in exercising, any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof or the exercise of
any other right or remedy granted hereby or by any related document or by
law.
9.08 MODIFICATION. This Agreement may not be and shall not be modified or
amended except by written instrument signed by the parties hereto.
9.09 ARBITRATION. Because the parties recognize that resolving any future
differences in the courts can require a long time and great expense,
Company and Executive agree that their only remedy for disputes either may
have with the other and that arise out of Executive's employment, or any
aspect of this Agreement, shall be to submit all disputes to final and
binding arbitration in accordance with the Employment Dispute Resolution
Rules of the American Arbitration Association. The aggrieved party must
send a written notice of claim to the other party by certified mail, return
receipt requested to the address listed in Section 9.03 of this Agreement.
The arbitrator shall apply the law in accordance with this Agreement, or
federal law, or both, as applicable to the claim(s) asserted.
9.10 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the matters
herein agreed upon. This Agreement replaces in full all prior employment
agreements or understandings of the parties hereto, and any and all such
prior agreements or understandings are hereby rescinded by mutual
agreement.
IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
EXECUTIVE CERIDIAN CORPORATION
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/s/ J.R. Eickhoff By: /s/ Michael E. Kotten
- --------------------------------- ------------------------------
Title: Vice President
------------------------------
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EXHIBIT 10.05
CERIDIAN CORPORATION
EXECUTIVE EMPLOYMENT AGREEMENT
PARTIES
CERIDIAN CORPORATION (A DELAWARE CORPORATION)
8100 34TH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55425-1640
AND
CARL KEIL
DATE: OCTOBER 22, 1997
RECITALS
A. Ceridian wishes to obtain the services of Executive for at least the
duration of this Agreement, and the Executive wishes to provide his or her
services for such period.
B. Ceridian desires reasonable protection of Ceridian's Confidential
Information (as defined below).
C. Ceridian desires assurance that Executive will not compete with Ceridian
or engage in recruitment of Ceridian's employees for a reasonable period
of time after termination of employment, and Executive is willing to
refrain from competition and recruitment.
D. Executive desires to be assured of a minimum Base Salary (as defined
below) from Ceridian for Executive's services for the term of this
Agreement (unless terminated earlier pursuant to the terms of this
Agreement).
E. It is expressly recognized by the parties that Executive's acceptance of,
and continuance in, Executive's position with Ceridian and agreement to be
bound by the terms of this Agreement represents a substantial commitment
to Ceridian in terms of Executive's personal and professional career and a
foregoing of present and future career options by Executive, for all of
which Ceridian receives substantial value.
F. The parties recognize that a Change of Control (as defined below) may
result in material alteration or diminishment of Executive's position and
responsibilities and substantially frustrate the purpose of Executive's
commitment to Ceridian and forebearance of options.
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G. The parties recognize that in light of the above-described commitment and
forebearance of options, it is essential that, for the benefit of Ceridian
and its stockholders, provision be made for a Change of Control
Termination (as defined below) in order to enable Executive to accept and
effectively continue in Executive's position in the face of inherently
disruptive circumstances arising from the possibility of a Change of
Control of the Parent Corporation (as defined below), although no such
change is now contemplated or foreseen.
H. The parties wish to replace any and all prior agreements and undertakings
with respect to the Executive's employment and Change of Control
occurrences and compensation.
NOW, THEREFORE, in consideration of Executive's acceptance of and continuance in
Executive's employment for the term of this Agreement and the parties' agreement
to be bound by the terms contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 "BASE SALARY" shall mean regular cash compensation paid on a periodic
basis exclusive of benefits, bonuses or incentive payments.
1.02 "BOARD" shall mean the Board of Directors of Ceridian Corporation (the
"Parent Corporation").
1.03 "CERIDIAN" shall mean Ceridian Corporation and, except as otherwise
provided in Article VIII and Section 9.02 of Article IX,
(a) any Subsidiary (as that term is defined in Section 1.07); and
(b) any successor in interest by way of consolidation, operation of law,
merger or otherwise.
1.04 "CONFIDENTIAL INFORMATION" shall mean information or material which is not
generally available to or used by others, or the utility or value of which
is not generally known or recognized as standard practice, whether or not
the underlying details are in the public domain, including:
(a) information or material relating to Ceridian and its business as
conducted or anticipated to be conducted; business plans;
operations; past, current or anticipated software, products or
services; customers or prospective customers; or research,
engineering, development, manufacturing, purchasing, accounting, or
marketing activities;
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(b) information or material relating to Ceridian's inventions,
improvements, discoveries, "know-how," technological developments,
or unpublished writings or other works of authorship, or to the
materials, apparatus, processes, formulae, plans or methods used in
the development, manufacture or marketing of Ceridian's software,
products or services;
(c) information which when received is marked as "proprietary,"
"private," or "confidential;"
(d) trade secrets;
(e) software in various stages of development, including computer
programs in source code and binary code form, software designs,
specifications, programming aids (including "library subroutines"
and productivity tools), programming languages, interfaces, visual
displays, technical documentation, user manuals, data files and
databases; and
(f) any similar information of the type described above which Ceridian
obtained from another party and which Ceridian treats as or
designates as being proprietary, private or confidential, whether or
not owned or developed by Ceridian.
Notwithstanding the foregoing, "Confidential Information" does not
include any information which is properly published or in the public
domain; provided, however, that information which is published by or
with the aid of Executive outside the scope of employment or
contrary to the requirements of this Agreement will not be
considered to have been properly published, and therefore will not
be in the public domain for purposes of this Agreement.
1.05 "DISABILITY" shall mean the inability of Executive to perform his or her
duties under this Agreement because of illness or incapacity for a
continuous period of five months.
1.06 "PARENT CORPORATION" shall mean Ceridian Corporation and, except as
otherwise provided in Article VIII and Section 9.02 of Article IX, any
successor in interest by way of consolidation, operation of law, merger or
otherwise. "Parent Corporation" shall not include any Subsidiary.
1.07 "SUBSIDIARY" shall mean: (a) any corporation at least a majority of whose
securities having ordinary voting power for the election of directors
(other than securities having such power only by reason of the occurrence
of a contingency) is at the time owned by Parent Corporation and/or one or
more Subsidiaries; and (b) any division or business unit (or portion
thereof) of Parent Corporation or a corporation described in clause (a) of
this Section 1.07.
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ARTICLE II
EMPLOYMENT, DUTIES AND TERM
2.01 EMPLOYMENT. Upon the terms and conditions set forth in this Agreement,
Ceridian hereby employs Executive, and Executive accepts such employment.
Except as expressly provided herein, termination of this Agreement by
either party shall also terminate Executive's employment by Ceridian.
2.02 DUTIES. Executive shall devote his or her full-time and best efforts to
Ceridian and to fulfilling the duties of his or her position which shall
include such duties as may from time to time be assigned him or her by
Ceridian, provided that such duties are reasonably consistent with
Executive's education, experience and background. Executive shall comply
with Ceridian's policies and procedures to the extent they are not
inconsistent with this Agreement in which case the provisions of this
Agreement prevail.
2.03 TERM. Subject to the provisions of Articles IV, VII, and VIII,
Executive's employment shall continue until the later of: (a) June 30,
1999; and (b) two years after a Change of Control which occurs prior to
June 30, 1999. In any event, the Agreement shall automatically terminate
without notice when Executive reaches 65 years of age. If employment is
continued after the age of 65 by mutual agreement, it shall be terminable
at will by either party.
ARTICLE III
COMPENSATION AND EXPENSES
3.01 BASE SALARY. For all services rendered under this Agreement during the
term of Executive's employment, Ceridian shall pay Executive a minimum
Base Salary at the annual rate currently being paid or, if Executive is
not currently in Ceridian's employ, at the annual rate specified in the
written offer of employment. If Executive's salary is increased from time
to time during the term of this Agreement, the increased amount shall be
the Base Salary for the remainder of the term and any extensions.
3.02 BONUS AND INCENTIVE. Bonus or incentive compensation shall be in the sole
discretion of Ceridian. Except as otherwise provided in Article VII,
Ceridian shall have the right in accordance with their terms to alter,
amend or eliminate any bonus or incentive plans, or Executive's
participation therein, without compensation to Executive.
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3.03 BUSINESS EXPENSES. Ceridian shall, in accordance with, and to the extent
of, its policies in effect from time to time, bear all ordinary and
necessary business expenses incurred by Executive in performing his or her
duties as an employee of Ceridian, provided that Executive accounts
promptly for such expenses to Ceridian in the manner prescribed from time
to time by Ceridian.
ARTICLE IV
EARLY TERMINATION
4.01 EARLY TERMINATION. Subject to the respective continuing obligations of
the parties pursuant to Articles V, VI, and IX, this Article sets forth
the terms for early termination of this Agreement; provided, however, that
this Article shall not apply to a Change of Control Termination which is
governed solely by the provisions of Article VII.
4.02 TERMINATION FOR CAUSE. Ceridian may terminate this Agreement immediately
for cause. For the purpose hereof "cause" means (a) fraud, (b)
misrepresentation, (c) theft or embezzlement of Ceridian assets,
(d) intentional violations of law involving moral turpitude, (e) the
continued failure by Executive to satisfactorily perform his or her duties
as reasonably assigned to Executive pursuant to Section 2.02 of Article II
of this Agreement for a period of 60 days after a written demand for such
satisfactory performance which specifically identifies the manner in which
it is alleged Executive has not satisfactorily performed such duties. In
the event of termination for cause pursuant to this Section 4.02,
Executive shall be paid at the usual rate of Executive's annual Base
Salary through the date of termination specified in any notice of
termination.
4.03 TERMINATION WITHOUT CAUSE. Either Executive or Ceridian may terminate
this Agreement and Executive's employment without cause on at least 75
days' written notice. In the event of termination of this Agreement and
of Executive's employment pursuant to this Section 4.03, compensation
shall be paid as follows:
(a) if the notice of termination is given by Executive at any time
Executive shall be paid at the usual rate of his or her annual Base
Salary through the date of termination specified in such notice (but
not to exceed 75 days);
(b) if the notice of termination is given by Ceridian and effective
prior to Executive's 65th birthday, (1) Executive shall be paid at
the usual rate of his or her annual Base Salary through the date of
termination specified in the notice provided, however, Ceridian
shall have the option of making termination of the Agreement and
Executive's employment effective immediately upon notice in which
case Executive shall be paid a lump sum representing the value of 75
days worth of salary; and (2) Executive shall receive, starting
within 15 days following termination, a payment equivalent to one
years' Base Salary payable, at the sole
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discretion of Ceridian, in either the form of a lump sum payment or
on a regular payroll period basis. In addition, the Executive shall
receive the bonus, if any, to which Executive would otherwise have
become entitled under all Ceridian bonus plans in effect at the time
of termination of this Agreement had Executive remained continuously
employed for the full fiscal year in which termination occurred and
continued to perform his or her duties in the same manner as they
were performed immediately prior to termination, multiplied by a
fraction, the numerator of which shall be the number of whole months
Executive was employed in the year in which termination occurred and
the denominator of which is 12. This bonus amount shall be paid
within 15 days after the date such bonus would have been paid had
Executive remained employed for the full fiscal year.
(c) If the event that termination occurs pursuant to Section 4.03(b), in
addition to the payments specified in said Section, Ceridian shall
pay to Executive an amount equal to one years' Base Salary payable,
at the sole discretion of Ceridian, in either the form of a lump sum
payment or on a regular payroll period basis, provided the Executive
executes a release, similar to that attached as Exhibit A, of all
claims against the Company.
(d) If the notice of termination is given by Ceridian to be effective on
or after Executive's 65th birthday, Executive shall be paid at the
usual rate of his or her annual Base Salary through the date of
termination specified in any notice. In addition, Executive will be
paid the bonus, if any, to which Executive would otherwise have
become entitled under all Ceridian bonus plans in effect at the time
of termination of this Agreement had Executive remained continuously
employed for the full fiscal year in which termination occurred and
continued to perform his or her duties in the same manner as they
were performed immediately prior to termination, multiplied by a
fraction, the numerator of which shall be the number of whole months
Executive was employed in the year in which termination occurred and
the denominator of which is 12. The amount payable pursuant to this
Section 4.03(d) shall be paid within 15 days after the date such
bonus would have been paid had Executive remained employed for the
full fiscal year.
4.04 TERMINATION IN THE EVENT OF DEATH OR DISABILITY. This Agreement shall
terminate in the event of death or disability of Executive.
(a) In the event of Executive's death, Ceridian shall pay an amount
equal to 12 months of Base Salary at the rate in effect at the time
of Executive's death plus the amount Executive would have received
in annual incentive plan bonus for the year in which termination
occurs had "target" goals been achieved. Such amount shall be paid
(1) to the beneficiary or beneficiaries designated in writing to
Ceridian by Executive, (2) in the absence of such designation to the
surviving spouse, or (3) if there is no surviving spouse, or such
surviving spouse disclaims all or any part, then the full amount, or
such disclaimed portion, shall be paid to the executor,
administrator or other personal representative of Executive's
estate. The amount
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shall be paid as a lump sum as soon as practicable following
Ceridian's receipt of notice of Executive's death. All such
payments shall be in addition to any payments due pursuant to
Section 4.04(c) below.
(b) In the event of disability, Base Salary shall be terminated as of
the end of the month in which the last day of the five-month period
of Executive's inability to perform his or her duties occurs.
(c) In the event of termination by reason of Executive's death or
disability, Ceridian shall pay to Executive any amount equal to (1)
the amount Executive would have received in annual incentive plan
bonus for the year in which termination occurs had "target" goals
been achieved, multiplied by (2) a fraction, the numerator of which
shall be the number of whole months Executive was employed in the
year in which the death or disability occurred and the denominator
of which is 12. The amount payable pursuant to this Section 4.04(c)
shall be paid within 15 days after the date such bonus would have
been paid had Executive remained employed for the full fiscal year.
4.05 ENTIRE TERMINATION PAYMENT. The compensation provided for in this
Article IV for early termination of this Agreement and termination
pursuant to this Article IV shall constitute Executive's sole remedy for
such termination. Executive shall not be entitled to any other
termination or severance payment which may be payable to Executive under
any other agreement between Executive and Ceridian.
ARTICLE V
CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT
5.01 CONFIDENTIALITY. Executive will not, during the term or after the
termination or expiration of this Agreement, publish, disclose, or utilize
in any manner any Confidential Information obtained while employed by
Ceridian. If Executive leaves the employ of Ceridian, Executive will not,
without Ceridian's prior written consent, retain or take away any drawing,
writing or other record in any form containing any Confidential
Information.
5.02 BUSINESS CONDUCT AND ETHICS. During the term of employment with Ceridian,
Executive will engage in no activity or employment which may conflict with
the interest of Ceridian, and will comply with Ceridian's policies and
guidelines pertaining to business conduct and ethics.
5.03 DISCLOSURE. Executive will disclose promptly in writing to Ceridian all
inventions, discoveries, software, writings and other works of authorship
which are conceived, made, discovered, or written jointly or singly on
Ceridian time or on Executive's own time, providing the invention,
improvement, discovery, software, writing or other work of
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authorship is capable of being used by Ceridian in the normal course of
business, and all such inventions, improvements, discoveries, software,
writings and other works of authorship shall belong solely to Ceridian.
5.04 INSTRUMENTS OF ASSIGNMENT. Executive will sign and execute all
instruments of assignment and other papers to evidence vestiture of
Executive's entire right, title and interest in such inventions,
improvements, discoveries, software, writings or other works of authorship
in Ceridian, at the request and the expense of Ceridian, and Executive
will do all acts and sign all instruments of assignment and other papers
Ceridian may reasonably request relating to applications for patents,
patents, copyrights, and the enforcement and protection thereof. If
Executive is needed, at any time, to give testimony, evidence, or opinions
in any litigation or proceeding involving any patents or copyrights or
applications for patents or copyrights, both domestic and foreign,
relating to inventions, improvements, discoveries, software, writings or
other works of authorship conceived, developed or reduced to practice by
Executive, Executive agrees to do so, and if Executive leaves the employ
of Ceridian, Ceridian shall pay Executive at a rate mutually agreeable to
Executive and Ceridian, plus reasonable traveling or other expenses.
5.05 INVENTIONS DEVELOPED ON EXECUTIVE'S OWN TIME. The two immediately
preceding sections entitled "Disclosure" and "Instruments of Assignment"
do not apply to inventions in which a Ceridian claim of any rights will
create a violation of Chapter 47 Minnesota Revised Statutes, Section
1-181.78, reproduced below and constituting the written notification of
its Subdivision 3.
181.78 Agreements relating to inventions
Subdivision 1.
Any provision in an employment agreement which provides that an Executive
shall assign or offer to assign any of his rights in an invention to his
employer shall not apply to an invention for which no equipment, supplies,
facility or trade secret information of the employer was used and which
was developed entirely on the employee's own time, and (1) which does not
relate (a) directly to the business of the employer or (b) to the
employer's actual or demonstrably anticipated research or development, or
(2) which does not result from any work performed by the employee for the
employer. Any provision which purports to apply to such an invention is
to that extent against the public policy of this state and is to that
extent void and unenforceable.
Subdivision 2.
No employer shall require a provision made void and unenforceable by
subdivision 1 as a condition of employment or continuing employment.
Subdivision 3.
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IF AN EMPLOYMENT AGREEMENT ENTERED INTO AFTER AUGUST 1, 1977, CONTAINS A
PROVISION REQUIRING THE EMPLOYEE TO ASSIGN OR OFFER TO ASSIGN ANY OF HIS
RIGHTS IN ANY INVENTION TO HIS EMPLOYER, THE EMPLOYER MUST ALSO, AT THE
TIME THE AGREEMENT IS MADE, PROVIDE A WRITTEN NOTIFICATION TO THE EMPLOYEE
THAT THE AGREEMENT DOES NOT APPLY TO AN INVENTION FOR WHICH NO EQUIPMENT,
SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF THE EMPLOYER WAS USED
AND WHICH WAS DEVELOPED ENTIRELY ON THE EMPLOYEE'S OWN TIME, AND (1) WHICH
DOES NOT RELATE (a) DIRECTLY TO THE BUSINESS OF THE EMPLOYER OR (b) TO THE
EMPLOYER'S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR
(2) WHICH DOES NOT RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE
EMPLOYER.
5.06 EXECUTIVE'S DECLARATION. Executive has no inventions, improvements,
discoveries, software, writings or other works of authorship useful to
Ceridian in the normal course of business, which were conceived, made or
written prior to the date of this Agreement and which are excluded from
this Agreement.
5.07 SURVIVAL. The obligations of this Article V shall survive the expiration
or termination of this Agreement.
ARTICLE VI
NON-COMPETITION, NON-RECRUITMENT
6.01 GENERAL. The parties hereto recognize and agree that (a) Executive is a
senior executive of Ceridian and is a key Executive of Ceridian, (b)
Executive has received, and will in the future receive, substantial
amounts of Confidential Information, (c) Ceridian's business is conducted
on a worldwide basis, and (d) provision for non-competition and
non-recruitment obligations by Executive is critical to Ceridian's
continued economic well-being and protection of Ceridian's Confidential
Information. In light of these considerations, this Article VI sets forth
the terms and conditions of Executive's obligations of non-competition and
non-recruitment subsequent to the termination of this Agreement and/or
Executive's employment for any reason.
6.02 NON-COMPETITION.
(a) Unless the obligation is waived or limited by Ceridian in accordance
with subsection (b) of this Section 6.02, Executive agrees that for
a period of two years following termination of employment for any
reason, Executive will not directly or indirectly, alone or as a
partner, officer, director, shareholder or employee of any other
firm or entity, engage in any commercial activity in competition
with any part of Ceridian's business as conducted as of the date of
such termination of
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employment or with any part of Ceridian's contemplated business with
respect to which Executive has Confidential Information as governed
by Article V of this Agreement. For purposes of this subsection
(a), "shareholder" shall not include beneficial ownership of less
than five percent (5%) of the combined voting power of all issued
and outstanding voting securities of a publicly held corporation
whose stock is traded on a major stock exchange. Also for purposes
of this subsection (a), "Ceridian's business" shall include business
conducted by Ceridian or its affiliates and any partnership or joint
venture in which Ceridian or its affiliates is a partner or joint
venturer; provided that, "affiliate" as used in this sentence shall
not include any corporation in which Ceridian has ownership of less
than fifteen percent (15%) of the voting stock.
(b) At its sole option Ceridian may, by written notice to Executive
within 30 days after the effective date of termination of
Executive's employment, waive or limit the time and/or geographic
area in which Executive cannot engage in competitive activity.
(c) During the term of the non-competition obligation, prior to
accepting employment with, or agreeing to provide consulting
services to, any firm which offers products or services in the
fields of electronics or information processing, Executive shall
give 30 days prior written notice to Ceridian. Such written notice
shall describe the proposed employment or consulting services and
the firm to which they will be rendered. Ceridian's failure to
respond or object to such notice shall not in any way constitute
acquiescence or waiver of Ceridian's rights under this Article VI.
(d) During any period of non-competition pursuant to this Article VI
Ceridian shall pay Executive an amount equal to the usual rate of
Executive's Base Salary in effect at the time of termination. There
shall be credited against Ceridian's obligation to make such
payments any other payments made by Ceridian to Executive pursuant
to Article IV of this Agreement. In the event that Ceridian elects,
pursuant to subsection (b) of this Section 6.02, to waive all or any
portion of the non-competition obligation, no payment shall be
required by Ceridian with respect to the portion of the
non-competition period which has been waived.
6.03 NON-RECRUITMENT. For a period of two years following termination of
employment for any reason, Executive will not initiate or actively
participate in any other employer's recruitment or hiring of Ceridian
employees. This provision shall not preclude Executive from responding to
a request (other than by Executive's employer) for a reference with
respect to an individual's employment qualifications.
6.04 SURVIVAL. The obligations of this Article VI shall survive the expiration
or termination of this Agreement.
ARTICLE VII
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CHANGE OF CONTROL
7.01 DEFINITIONS. For purposes of this Article VII, the following definitions
shall be applied:
(a) "BENEFIT PLAN" means any formal or informal plan, program or other
arrangement heretofore or hereafter adopted by Ceridian for the
direct or indirect provision of compensation to the Executive
(including groups or classes of participants or beneficiaries of
which the Executive is a member), whether or not such compensation
is deferred, is in the form of cash or other property or rights, or
is in the form of a benefit to or for the Executive.
(b) "CHANGE OF CONTROL" shall mean any of the following events:
(1) a merger or consolidation to which Parent Corporation is a
party if the individuals and entities who were stockholders
of Parent Corporation immediately prior to the effective
date of such merger or consolidation have beneficial
ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of less than fifty percent (50%) of
the total combined voting power for election of directors
of the surviving corporation immediately following the
effective date of such merger or consolidation; or
(2) the direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) in
the aggregate of securities of Parent Corporation
representing twenty-five percent (25%) or more of the total
combined voting power of Parent Corporation's then issued
and outstanding securities by any person or entity, or
group of associated persons or entities acting in concert;
or
(3) the sale of the properties and assets of Parent
Corporation, substantially as an entirety, to any person or
entity which is not a wholly-owned subsidiary of Parent
Corporation; or
(4) the stockholders of Parent Corporation approve any plan or
proposal for the liquidation of Parent Corporation; or
(5) a change in the composition of the Board at any time during
any consecutive 24 month period such that the "Continuity
Directors" cease for any reason to constitute at least a
seventy percent (70%) majority of the Board. For purposes
of this clause, "Continuity Directors" means those members
of the Board who either (A) were directors at the beginning
of such consecutive 24 month period, or
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(B) were elected by, or on the nomination or recommendation
of, at least a two-thirds (2/3) majority of the
then-existing Board.
(c) "CHANGE OF CONTROL COMPENSATION" means any payment or benefit
(including any transfer of property) in the nature of compensation, to or
for the benefit of a Participant under this Agreement or any Other
Agreement or Benefit Plan, which is considered to be contingent on a
Change of Control for purposes of Section 280G of the Code.
(d) "CHANGE OF CONTROL TERMINATION" means, with respect to Executive,
either of the following events occurring within two years after a Change
of Control:
(1) Termination of Executive's employment by Ceridian for any
reason other than (A) fraud, (B) theft or embezzlement of
Ceridian assets, (C) intentional violations of law
involving moral turpitude, or (D) the substantial and
continuing failure by Executive to satisfactorily perform
his or her duties as reasonably assigned to Executive
pursuant to Section 2.02 of Article II of this Agreement
for a period of 60 days after a written demand for such
satisfactory performance which specifically identifies the
manner in which it is alleged Executive has not
satisfactorily performed such duties; or
(2) Termination of employment with Ceridian by Executive
pursuant to Section 7.02 of this Article VII.
A Change of Control Termination by Executive shall not, however,
include termination by reason of death or Disability.
(e) "CODE" means the Internal Revenue Code of 1986, as amended. Any
reference to a section of the Code shall include the corresponding section
of such Code as from time to time amended.
(f) "EXCISE TAX" means any applicable federal excise tax imposed by
Section 4999 of the Code.
(g) "GOOD REASON" means a good faith determination by Executive, in
Executive's sole and absolute judgment, that any one or more of the
following events has occurred, without Executive's express written
consent, after a Change of Control:
(1) A change in Executive's reporting responsibilities, titles
or offices as in effect immediately prior to the Change of
Control, or any removal of Executive from, or any failure
to re-elect Executive to, any of such positions, which has
the effect of materially diminishing Executive's
responsibility or authority;
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(2) A reduction by Ceridian in Executive's Base Salary as in
effect immediately prior to the Change of Control or as the
same may be increased from time to time thereafter;
(3) Ceridian requiring Executive to be based anywhere other
than within 25 miles of Executive's job location at the
time of the Change of Control;
(4) Without replacement by plans, programs, or arrangements
which, taken as a whole, provide benefits to Executive at
least reasonably comparable to those discontinued or
adversely affected, (A) the failure by Ceridian to continue
in effect, within its maximum stated term, any pension,
bonus, incentive, stock ownership, purchase, option, life
insurance, health, accident, disability, or any other
employee compensation or benefit plan, program or
arrangement, in which Executive is participating
immediately prior to a Change of Control; or (B) the taking
of any action by Ceridian that would materially adversely
affect Executive's participation or materially reduce
Executive's benefits under any of such plans, programs or
arrangements;
(5) The failure by Ceridian to provide office space, furniture,
and secretarial support at least comparable to that
provided Executive immediately prior to the Change of
Control or the taking of any similar action by Ceridian
that would materially adversely affect the working
conditions in or under which Executive performs his or her
employment duties;
(6) If Executive's primary employment duties are with a
Subsidiary, the sale, merger, contribution, transfer or any
other transaction in conjunction with which Parent
Corporation's ownership interest in such Subsidiary
decreases below the level specified in Section 1.07 of
Article I unless (A) this Agreement is assigned to the
purchaser/transferee with the provisions of Article VII in
full force and effect and operative as if a Change of
Control has occurred with respect to the
purchaser/transferee as Parent Corporation immediately
after the purchase/transfer becomes effective, and (B) such
purchaser/transferee has a creditworthiness reasonably
equivalent to Parent Corporation's; or
(7) Any material breach of this Agreement by Ceridian.
(h) "OTHER AGREEMENTS" means any agreement, contract or understanding
heretofore or hereafter entered into between Executive and Ceridian for
the direct or indirect provision of compensation to Executive.
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(i) "REDUCED AMOUNT" means the largest amount that could be received by
a Participant as Change of Control Compensation such that no portion of
such Change of Control Compensation would be subject to the Excise Tax.
7.02 CHANGE OF CONTROL TERMINATION RIGHT. For a period of two years following
a Change of Control, Executive shall have the right, at any time and
within Executive's sole discretion, to terminate employment with Ceridian
for Good Reason. Such termination shall be accomplished by, and effective
upon, Executive giving written notice to Ceridian of Executive's decision
to terminate. Except as otherwise expressly provided in this Agreement,
upon the exercise of said right, all obligations and duties of Executive
under this Agreement shall be of no further force and effect.
7.03 CHANGE OF CONTROL TERMINATION PAYMENT. In the event of a Change of
Control Termination, and subject to the "Limitation on Change of Control
Compensation" contained in Section 7.04, then, and without further action
by the Board, Compensation Committee or otherwise, Parent Corporation
shall, within five days of such termination, make a lump sum payment to
Executive in an amount equal to one dollar ($1.00) less than three times
the average annualized compensation, as defined by Section 280G of the
Code, received by Executive from Ceridian and includible in Executive's
gross income for federal income tax purposes for the five most recent
taxable years of the Executive ending before the date upon which the
Change in Control occurred (or such portion of such period during which
Executive was an employee of Ceridian).
7.04 LIMITATION ON CHANGE OF CONTROL COMPENSATION. Notwithstanding any other
provisions of this Agreement or of any Other Agreement or Benefit Plan, if
any Change of Control Compensation would be considered a "parachute
payment" within the meaning of Section 280G(b)(2) of the Code and if,
after reduction for any Excise Tax and federal income tax imposed by the
Code, Executive's net proceeds of such Change of Control Compensation
would be less than the amount of Executive's net proceeds resulting from
the payment of the Reduced Amount after reduction for federal income
taxes, then the Change of Control Compensation payable to Executive shall
be limited to the Reduced Amount. The determinations required by the
preceding sentence shall be made by the firm of independent certified
public accountants serving as the outside auditor of Ceridian as of the
date of the applicable Change of Control, and such determinations shall be
binding upon Ceridian and Executive. If Change of Control Compensation to
Executive is limited to the Reduced Amount, then Executive shall have the
right, in his or her sole discretion, to designate those payments or
benefits under this Agreement, any Other Agreements and/or any Benefit
Plans that should be reduced or eliminated so as to avoid having
Executive's Change of Control Compensation be subject to the Excise Tax.
If Executive fails to make such designation within 30 days of having
received notification that such designation is required, Ceridian shall
make such designations and shall promptly inform Executive of its actions
in such regard.
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7.05 INTEREST. In the event Parent Corporation does not make timely payment in
full of the Change of Control Termination payment described in Section
7.03, Executive shall be entitled to receive interest on any unpaid amount
at the lower of: (a) the prime rate of interest (or such comparable index
as may be adopted) established from time to time by the First Bank
National Association, Minneapolis, Minnesota; or (b) the maximum rate
permitted under Section 280G(d)(4) of the Internal Revenue Code."
7.06 ATTORNEYS' FEES. In the event Executive incurs any legal expense to
enforce or defend his or her rights under this Article VII of this
Agreement, or to recover damages for breach thereof, Executive shall be
entitled to recover from Ceridian any expenses for attorneys' fees and
disbursements incurred.
7.07 BENEFITS CONTINUATION. In the event of a Change of Control Termination,
Executive (and anyone entitled to claim under or through Executive) shall,
until age 65, be entitled to receive from Ceridian the same or equivalent
health, dental, accidental death and dismemberment, short and long-term
disability, life insurance coverages, and all other insurance policies and
health and welfare benefits programs, policies or arrangements, at the
same levels and coverages as Executive was receiving on the day
immediately prior to the Change of Control. To the extent that election
of continuation of any of such coverages, programs, policies, or
arrangements is made available to employees terminating at age 55 with 15
or more years of service, Executive shall be required to pay no more for
continuation than is required of such employees on the day immediately
prior to the Change of Control. If no such continuation program is
available, Executive shall be required to pay no more than he/she paid as
an active employee, or if provided by Ceridian at no cost to employees on
the day immediately prior to the Change of Control, they shall continue to
be made available to Executive on this basis.
ARTICLE VIII
CHANGE OF SUBSIDIARY STATUS
In the event that, prior to a Change of Control: (a) a Subsidiary is sold,
merged, contributed, or in any other manner transferred, or if for any reason
Parent Corporation's ownership interest in any such Subsidiary falls below the
level specified in Section 1.07, (b) Executive's primary employment duties are
with the Subsidiary at the time of the occurrence of such event, and (c)
Executive does not, in conjunction therewith, transfer employment directly to
Parent Corporation or another Subsidiary, then:
(1) If Executive gives his or her written consent to the assignment of
this Agreement to such Subsidiary, or to the purchaser or new
majority interest holder of such Subsidiary, (and such assignment is
accepted) this Agreement shall remain in full force and effect
between Executive and the assignee, except that the provisions of
Article VII of this Agreement shall become null and void;
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<PAGE>
(2) If such assignment is not accepted by the Subsidiary or purchaser,
then this Agreement shall be deemed to have been terminated by
Ceridian without cause pursuant to Section 4.03 of Article IV; and
(3) In all other cases, this Agreement shall be deemed terminated for
cause pursuant to Section 4.02 of Article IV.
ARTICLE IX
GENERAL PROVISIONS
9.01 NO ADEQUATE REMEDY. The parties declare that it is impossible to measure
in money the damages which will accrue to either party by reason of a
failure to perform any of the obligations under this Agreement.
Therefore, if either party shall institute any action or proceeding to
enforce the provisions hereof, such party against whom such action or
proceeding is brought hereby waives the claim or defense that such party
has an adequate remedy at law, and such party shall not urge in any such
action or proceeding the claim or defense that such party has an adequate
remedy at law.
9.02 SUCCESSORS AND ASSIGNS. Except as otherwise provided in Article VIII,
this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of Parent Corporation and each Subsidiary, whether
by way of merger, consolidation, operation of law, assignment, purchase or
other acquisition of substantially all of the assets or business of
Ceridian, and any such successor or assign shall absolutely and
unconditionally assume all of Ceridian's obligations hereunder.
9.03 NOTICES. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and be
delivered or mailed to any such party at its address:
(a) Ceridian Corporation
8100 34th Avenue South
Minneapolis, Minnesota 55425-1640
Attention: Office of General Counsel
(b) In the case of Executive shall be:
At the address listed on the last page of this Agreement.
Either party may, by notice hereunder, designate a changed address.
Any notice, if mailed properly addressed, postage prepaid,
registered or certified mail, shall be deemed dispatched on the
registered date or that stamped on the certified mail receipt, and
shall be deemed received within the second business day thereafter
or when it is actually received, whichever is sooner.
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9.04 CAPTIONS. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of
this Agreement.
9.05 GOVERNING LAW. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota and any
and every legal proceeding arising out of or in connection with this
Agreement shall be brought in the appropriate courts of the State of
Minnesota, each of the parties hereby consenting to the exclusive
jurisdiction of said courts for this purpose. The parties hereto
expressly recognize and agree that the implementation of this Governing
Law provision is essential in light of the fact that Parent Corporation's
corporate headquarters and its principal executive offices are located
within the State of Minnesota, and there is a critical need for uniformity
in the interpretation and enforcement of the employment agreements between
Ceridian and its senior executives.
9.06 CONSTRUCTION. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this
Agreement.
9.07 WAIVERS. No failure on the part of either party to exercise, and no delay
in exercising, any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof or the exercise
of any other right or remedy granted hereby or by any related document or
by law.
9.08 MODIFICATION. This Agreement may not be and shall not be modified or
amended except by written instrument signed by the parties hereto.
9.09 ARBITRATION. Because the parties recognize that resolving any future
differences in the courts can require a long time and great expense,
Company and Executive agree that their only remedy for disputes either may
have with the other and that arise out of Executive's employment, or any
aspect of this Agreement, shall be to submit all disputes to final and
binding arbitration in accordance with the Employment Dispute Resolution
Rules of the American Arbitration Association. The aggrieved party must
send a written notice of claim to the other party by certified mail,
return receipt requested to the address listed in Section 7.03 of this
Agreement. The arbitrator shall apply the law in accordance with this
Agreement, or federal law, or both, as applicable to the claim(s)
asserted.
9.10 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the matters
herein agreed upon. This Agreement replaces in full all prior employment
agreements or understandings of the parties hereto, and any and all such
prior agreements or understandings are hereby rescinded by mutual
agreement. Any changes or amendments to this Agreement must be in writing
and signed by both parties.
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IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
EXECUTIVE CERIDIAN CORPORATION
/s/ Carl O. Keil By: /s/ John A. Haveman
- ----------------------------------- --------------------------------
Title: Vice President & Secretary
--------------------------------
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EXHIBIT 10.10
REVISION TO AMENDMENT NO. 1 TO
SEVERANCE COMPENSATION AGREEMENT
This Revision to the Amendment No. 1 to Severance Compensation Agreement,
dated as of July 28, 1997 (the "Revision"), is entered into by and among George
L. McTavish (the "Executive"), Comdata Holdings Corporation (the "Company"), and
Ceridian Corporation ("Ceridian").
RECITALS:
WHEREAS, the Company and the Executive are parties to a Severance
Compensation Agreement, dated as of November 29, 1994 ("Agreement") and the
Company, Executive, and Ceridian are parties to Amendment No. 1 to that
Severance Compensation Agreement dated as of January 31, 1996 ("Amendment"); and
WHEREAS, "Good Reason" as defined in Section 3(e)(i) of the Amendment has
taken place as of May 12, 1997 insofar as Executive's assignment and title
changed; and
WHEREAS, the Executive has agreed to remain employed pursuant to the terms
as revised herein through December 31, 1997 notwithstanding the occurrence of
"Good Reason";
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and conditions set forth in this Revision and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company, the Executive and Ceridian hereby agree as follows:
(1) Section 1 of the Amendment is hereby amended by deleting such section
from the Amendment in its entirety, and by substituting in lieu thereof the
following new section:
"1. TERM. This Agreement shall terminate, except to the
extent that any obligation of the Company hereunder remains unpaid as of such
time, upon the earlier of (i) the termination of the Executive's employment with
the Company based on death, Disability (as defined in Section 3(b)), Retirement
(as defined in Section 3(c)), or by the Executive other than for Good Reason (as
defined in Section 3(e)); and (ii) December 31, 1997 if the Executive has not
terminated his employment for Good Reason (other than for the Good Reasons
described above in the Recitals to this Revision),"
(2) Section 4(a) of the Amendment is hereby amended by deleting such
section in its entirety, and by substituting in lieu thereof the following new
Section 4(a):
<PAGE>
"(a) If the Company shall terminate the Executive's employment other than
pursuant to Section 3(b), 3(c) or 3(d) or if the Executive shall terminate
his employment for Good Reason (other than for the Good Reasons described
above in the Recitals to this Revision) by December 31, 1997, then the
Executive shall be entitle to the benefits provided in Sections 4(a) (as
amended), (b) and (c) of the Agreement. Severance pay, as defined in
Section 4(a) (as amended) will be as shown in Attachment A to this Revision
and will be paid in a lump sum, in cash, on the fifth day following the
Termination Date.
(3) Paragraph 3 "Salary and Benefits" of Schedule 1 of the Amendment is
hereby amended by deleting such paragraph section in its entirety, and by
substituting in lieu thereof the following new paragraph:
"Annual salary of $348,140. The Executive is eligible to participate in
the 1997 Ceridian Executive Incentive Plan with a target annual payment, based
on performance, for the first five months of 1997, calculated using 40% of the
Executive's year-end annualized salary, with a maximum payout under the plan
calculated at 60% (prorated by the number of months of participation), and for
the last seven months of 1997, calculated using 55% of the Executive's year-end
annualized salary, with a maximum payout under the plan calculated at 82.5%
(prorated by the number of months participation).
CERIDIAN: EXECUTIVE:
CERIDIAN CORPORATION /s/ G.L. McTavish
----------------------------------
George L. McTavish
By:/s/ Michael E. Kotten
-------------------------------
Its: Vice President COMPANY:
------------------------------
By: /s/ Michael E. Kotten
-------------------------------
Its:
-------------------
<PAGE>
EXHIBIT 10.12
CERIDIAN CORPORATION
EMPLOYEE NON-STATUTORY STOCK OPTION
AWARD AGREEMENT
1993 LONG-TERM INCENTIVE PLAN
This Agreement between you, (NAME), and Ceridian Corporation (the
"Company") is dated as of (DATE OF GRANT) (the "Date of Grant") and evidences
the grant of a Non-Statutory Stock Option (the "Stock Option") to you pursuant
to the 1993 Long-Term Incentive Plan of the Company (the "Plan"). Any
capitalized term used in this Agreement which is defined in the Plan shall have
the same meaning as set forth in the Plan.
1. Effective as of the Date of Grant, the Company has granted to you the
option to purchase from the Company, and the Company has agreed to sell to
you, (SHARES) shares of Common Stock at a price of $00.00 per share (the
"Option Shares").
2. This Option shall become void and expire at midnight (Minneapolis time) on
the tenth anniversary of the Date of Grant and may not be exercised after
that time.
3. Except as otherwise expressly provided in paragraphs 4 through 9 of this
Agreement, and provided you have been continuously employed by the Company
or a Subsidiary since the Date of Grant, upon (DATE OF 1ST VESTING), this
Option shall become exercisable with respect to one-third of the Option
Shares, and upon each succeeding (VESTING DATE), the Option shall become
exercisable with respect to an additional one-third of the Option Shares.
4. If your employment should be terminated by the Company or any Subsidiary
for Cause (as defined in Section 10.3(b) of the Plan), this Option may not
be exercised after such termination of employment, and all your rights
under the Plan and this Agreement will immediately terminate.
5. If your employment with the Company and all Subsidiaries should terminate
by reason of death or Disability, the Option shall become immediately
exercisable in full and will remain exercisable for the period specified in
paragraph 2 of this Agreement.
6. If your employment with the Company and all Subsidiaries should terminate
by reason of Retirement, the Option shall continue to become exercisable in
accordance with the terms of this Agreement and the Plan, and may be
exercised at any time after it becomes exercisable and before it becomes
void and expires as set forth in paragraph 2 of this Agreement.
<PAGE>
7. If your employment with the Company and all Subsidiaries of the Company
should terminate other than by reason of death, Disability, Retirement or
termination by the Company or any Subsidiary for Cause, you shall have
three months following the date of such termination to exercise this Option
(but in no event after the time it becomes void and expires as set forth in
paragraph 2) to the extent that you were entitled to exercise it as of the
date of such termination.
8. If a Change of Control occurs, and if this Option has been outstanding for
at least six months from the Date of Grant, then you shall have the rights,
if any, to accelerated exercisability of this Option as are specified in
Section 12 of the Plan as in effect on the date of the Change of Control.
9. If, at any time during the period that this Stock Option is or may yet
become exercisable in whole or in part, or at any time prior to one year
after the termination of your employment with the Company and all
Subsidiaries, whichever is later, you (i) engage in any commercial activity
in competition with any part of the business of the Company or its
Subsidiaries, (ii) divert or attempt to divert from Ceridian or its
Subsidiaries any business of any kind, including, without limitation,
interference with any business relationships with suppliers, customers,
licensees, licensors, clients or contractors, (iii) make, or cause or
attempt to cause any other person to make, any statement, either written or
oral, or convey any information about the Company which is disparaging or
which in any way reflects negatively upon the Company, or (iv) engage in
any other activity that is inimical, contrary or harmful to the interests
of the Company or its Subsidiaries, including influencing or advising any
person who is employed by or in the service of the Company or its
Subsidiaries to leave such employment or service to compete with the
Company or its Subsidiaries or to enter into the employment or service of
any actual or prospective competitor of the Company or its Subsidiaries, or
influencing or advising any competitor of the Company or its Subsidiaries
to employ or to otherwise engage the services of any person who is employed
by or in the service of the Company or its Subsidiaries, or improperly
disclosing or otherwise misusing any confidential information regarding the
Company or its Subsidiaries, then (1) this Stock Option shall terminate
effective the date on which you enter into such activity, unless terminated
sooner by operation of another term of this Agreement or the Plan, and (2)
any gain realized by you from exercising all or any portion of this Stock
Option during a period beginning six months prior to the date on which you
enter into such activity shall be paid by you to the Company.
10. By accepting this Agreement, you consent to a reduction from any amounts
the Company owes you from time to time (including wages or other
compensation) of any amount you owe the Company under Section 9 of this
Agreement. If the Company does not recover by means of set-off the full
amount you owe it, you agree to immediately repay the unpaid balance to the
Company.
11. Notwithstanding any other provision of this Agreement, the Option shall not
be exercisable prior to the expiration of six months after the Date of
Grant, except in the case of death or Disability.
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12. Nothing in the Plan or this Agreement shall confer upon you any right with
respect to continuance of employment by the Company or any Subsidiary, nor
interfere in any way with the right of the Company or a Subsidiary to
terminate your employment at any time.
13. This Option grant, the Option forming a part thereof, and your rights under
this Agreement shall be nontransferable (i.e., may not be sold, pledged,
donated or otherwise assigned or transferred) by you, either voluntarily or
involuntarily, except by will or by applicable law, and any attempt to do
so shall void this Option grant and Agreement. This Option shall be
exercisable during your lifetime only by you or by your guardian or other
legal representative.
14. Neither you nor any other person shall have any rights as a stockholder
with respect to any Option Shares until you or such other person shall have
become a holder of record of such shares and, except as otherwise provided
in Section 4.4 of the Plan, no adjustments shall be made for dividends or
other distributions or rights as to which there is a record date preceding
the date you become the holder of record of such shares.
15. This Agreement is subject to all of the terms and conditions of the Plan
and, where any questions or interpretations arise, the terms and conditions
of the Plan and the rules of the Committee administering the Plan shall
control.
16. Any notice to be given with respect to this Option, including without
limitation a notice of exercise, shall be addressed to the Company,
Attention: Corporate Treasury at its principal executive office at 8100
34th Avenue South, Minneapolis, Minnesota 55425, Facsimile No.
612-853-3932, and any notice to be given to you shall be addressed to you
at the address given beneath your signature hereto, or at such other
address as either party may hereafter designate in writing to the other.
17. Any notice of stock option exercise must specify the number of shares with
respect to which the Option is being exercised and be accompanied by either
(i) payment in full of the purchase price for the shares exercised or (ii)
a Broker Exercise Notice in form and substance satisfactory to the Company.
The exercise of the Option shall be deemed effective upon receipt by
Corporate Treasury of such notice and payment of the exercise price from
you or the broker or dealer named in the Broker Exercise Notice. Any such
notice will not be deemed given until actual receipt by Corporate Treasury.
In Witness Whereof, Ceridian Corporation and you have executed this
Agreement as of the Date of Grant.
CERIDIAN CORPORATION OPTIONEE
By
------------------------ -----------------------------
3
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EXHIBIT 10.13
FORM OF
CERIDIAN CORPORATION
PERFORMANCE-BASED STOCK OPTION AWARD AGREEMENT
1993 LONG-TERM INCENTIVE PLAN
This Agreement between you, NAME, and Ceridian Corporation (the "Company")
is dated as of DATE (the "Date of Grant") and evidences the grant of a
Non-Statutory Stock Option (the "Stock Option") to you pursuant to the 1993
Long-Term Incentive Plan of the Company (the "Plan").
1. Any capitalized term used in this Agreement which is defined in the
Plan shall have the same meaning as set forth in the Plan. When used in this
Agreement, the following additional terms shall have the meanings indicated:
(a) "TOTAL RETURN TO SHAREHOLDERS" means, with respect to the Company
or any other S&P 500 Company, the total return to a holder of the common stock
of such company as a result of his or her ownership of such common stock during
the Measurement Period, such total return (i) to be expressed as a percentage of
an assumed initial investment in such common stock on July 31, 1997 and (ii) to
include both the appreciation in the per share price of such common stock during
the Measurement Period and the per share fair market value of all dividends and
distributions paid or distributed by such company with respect to such common
stock during the Measurement Period, assuming that all such dividends and
distributions are reinvested in shares of such common stock at their Fair Market
Value on the last trading day of the month in which the dividend or distribution
is paid or distributed. For purposes of calculating TRS for the Company or any
other S&P 500 Company, the assumed initial investment in such company's common
stock on July 31, 1997 shall be at the applicable Starting Price, and the value
of a share of such company's common stock at the end of the Measurement Period
shall be the applicable Ending Price.
(b) "ENDING PRICE" means, with respect to any S&P 500 Company
(including the Company), the average daily last reported sales price of a share
of such company's common stock as reported in the WALL STREET JOURNAL during the
period September 1, 2001 through September 30, 2001.
(c) "FAIR MARKET VALUE" (i) with respect to the Company has the same
meaning as specified in Section 2.10 of the Plan, and (ii) with respect to any
other S&P 500 Company means the last reported sales price of a share of such
company's common stock on the date in question as reported in the WALL STREET
JOURNAL.
(d) "MEASUREMENT PERIOD" means the period July 31, 1997 through
September 30, 2001.
<PAGE>
(e) "S&P 500 COMPANIES" means the companies that comprise the
Standard & Poors' 500 Stock Index as it existed on July 31, 1997, and which are
still publicly traded on September 30, 2001.
(f) "STARTING PRICE" means, with respect to any S&P 500 Company
(including the Company), the average daily last reported sales price of a share
of such company's common stock as reported in the WALL STREET JOURNAL during the
period July 1, 1997 through July 30, 1997.
2. Effective as of the Date of Grant, the Company has granted to you the
option to purchase from the Company, and the Company has agreed to sell to you,
NUMBER shares of Common Stock at a price of $00.00 per share (the "Option
Shares").
3. This Stock Option will become void and expire at midnight (Minneapolis
time) on the tenth anniversary of the Date of Grant and may not be exercised
after that time.
4. Except as otherwise expressly provided in Sections 5 through 8 of this
Agreement, this Stock Option will become exercisable at the times and to the
extent specified in this Section 4, but only if, at the time specified, you have
been continuously employed by the Company or a Subsidiary since the Date of
Grant.
(a) This Stock Option will become exercisable with regard to
one-third of the Option Shares on July 31, 1999 if the average closing price of
a share of the Company's Common Stock on the New York Stock Exchange for any 20
consecutive trading days during the period beginning on the Grant Date and
ending on July 30, 1999 is greater than $54.00.
(b) This Stock Option will become exercisable with regard to
two-thirds of the Option Shares in the aggregate (inclusive of any Option Shares
that became exercisable pursuant to paragraph 4(a)) on July 31, 2000 if the
average closing price of a share of the Company's Common Stock on the New York
Stock Exchange for any 20 consecutive trading days during the period beginning
on the Grant Date and ending on July 30, 2000 is greater than $62.00.
(c) This Stock Option will become exercisable with regard to all of
the Option Shares on October 1, 2001 if the average closing price of a share of
the Company's Common Stock on the New York Stock Exchange for any 20 consecutive
trading days during the period beginning on the Grant Date and ending on
September 30, 2001 is greater than $72.00.
(d) If the condition specified in paragraph (c) of this Section 4 is
not satisfied, this Stock Option will, nevertheless, become exercisable with
regard to three-fourths of the Option Shares in the aggregate (inclusive of any
Option Shares that became exercisable pursuant to paragraphs 4(a) or (b)) as of
October 1, 2001 if the Company's rank for Total Return to Shareholders among S&P
500 Companies during the Measurement Period is at least at the 75th percentile.
(e) Notwithstanding paragraphs (a) through (d) of this Section 4,
this Stock Option shall become exercisable with respect to all of the Option
Shares on July 30, 2006.
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(f) If there is any change in the corporate structure or shares of
the Company of the types described in Sections 3.2(c) or 4.4 of the Plan, then
the number of Option Shares, the Starting Price and Ending Price specified in
Section 1 and the per share prices specified in paragraphs 4(a), (b) and (c)
shall be appropriately adjusted as contemplated by Sections 3.2(c) and 4.4 of
the Plan so as to prevent diminution or enlargement of your rights under this
Agreement.
5. If your employment is terminated by the Company or any Subsidiary for
Cause (as defined in Section 10.3(b) of the Plan), this Stock Option may not be
exercised after such termination of employment, and all of your rights under the
Plan and this Agreement will immediately terminate.
6. If your employment with the Company and all Subsidiaries terminates
because of death, Disability or a Change of Control Termination, the Stock
Option shall immediately become exercisable with respect to that portion of the
Option Shares as corresponds to the greatest stock price performance standard
specified in paragraphs 4(a), (b) and (c) that was satisfied prior to the date
of such termination. In addition, if termination as a result of death or
Disability occurs prior to September 30, 2001, the Stock Option shall
immediately become exercisable as to the remainder (if any) of the Option Shares
if, during the period beginning on the date of such termination and ending on
the earlier of the first anniversary of such termination or September 30, 2001,
the stock price performance standard specified in paragraph 4(c) is satisfied.
If your employment with the Company and all Subsidiaries terminates because of
Retirement, then if one or more of the stock price performance standards
specified in paragraphs 4(a), (b) and (c) was satisfied prior to the date of
such termination, the Stock Option shall become exercisable after such
termination on the date(s) and to the extent specified in the applicable
paragraph(s) of Section 4. In addition, if termination as a result of
Retirement occurs prior to September 30, 2001, the Stock Option shall become
exercisable as to the remainder (if any) of the Option Shares on October 1, 2001
if, during the period beginning on the date of such termination and ending on
the earlier of the first anniversary of such termination or September 30, 2001,
the stock price performance standard specified in paragraph 4(c) is satisfied.
To the extent the Stock Option becomes exercisable as a result of this Section 6
or is already exercisable at the time of any termination of employment
contemplated by this Section 6, it shall remain so exercisable until the date
specified in Section 3 of this Agreement.
7. If your employment with the Company and all Subsidiaries terminates for
any reason other than as provided in Sections 5 and 6 of this Agreement, you
will forfeit any portion of the Stock Option that has not yet become exercisable
as of the employment termination date. To the extent that you were entitled to
exercise the Stock Option as of the date of such termination, the Stock Option
will remain exercisable for a period of three months after the date of such
termination (but in no event after the time it expires as set forth in Section 3
of this Agreement). YOU EXPRESSLY AGREE THAT EXCEPT AS SPECIFICALLY PROVIDED IN
SECTION 6 OF THIS AGREEMENT, YOU WILL HAVE NO RIGHT TO ACCELERATED
EXERCISABILITY OF THIS STOCK OPTION UNDER SECTION 12 OF THE PLAN IN THE EVENT OF
A CHANGE OF CONTROL OR A CHANGE OF CONTROL TERMINATION, AND AGREE THAT FOR
3
<PAGE>
PURPOSES OF THIS STOCK OPTION, SECTION 12 OF THE PLAN SHALL OTHERWISE BE DEEMED
TO HAVE BEEN RESCINDED BY THE BOARD.
8. If, at any time during the period that this Stock Option is or may yet
become exercisable in whole or in part, or at any time prior to one year after
the termination of your employment with the Company and all Subsidiaries,
whichever is later, you (i) engage in any commercial activity in competition
with any part of the business of the Company or its Subsidiaries, (ii) divert or
attempt to divert from Ceridian or its Subsidiaries any business of any kind,
including, without limitation, interference with any business relationships with
suppliers, customers, licensees, licensors, clients or contractors, (iii) make,
or cause or attempt to cause any other person to make, any statement, either
written or oral, or convey any information about the Company which is
disparaging or which in any way reflects negatively upon the Company, or (iv)
engage in any other activity that is inimical, contrary or harmful to the
interests of the Company or its Subsidiaries, including influencing or advising
any person who is employed by or in the service of the Company or its
Subsidiaries to leave such employment or service to compete with the Company or
its Subsidiaries or to enter into the employment or service of any actual or
prospective competitor of the Company or its Subsidiaries, or influencing or
advising any competitor of the Company or its Subsidiaries to employ or to
otherwise engage the services of any person who is employed by or in the service
of the Company or its Subsidiaries, or improperly disclosing or otherwise
misusing any confidential information regarding the Company or its Subsidiaries,
then (1) this Stock Option shall terminate effective the date on which you enter
into such activity, unless terminated sooner by operation of another term of
this Agreement or the Plan, and (2) any gain realized by you from exercising all
or any portion of this Stock Option during a period beginning three months prior
to the date on which you enter into such activity shall be paid by you to the
Company.
9. By accepting this Agreement, you consent to a reduction from any
amounts the Company owes you from time to time (including wages or other
compensation) of any amount you owe the Company under Section 8 of this
Agreement. If the Company does not recover by means of set-off the full amount
you owe it, you agree to immediately repay the unpaid balance to the Company.
10. Nothing in the Plan or this Agreement shall confer upon you any right
with respect to continued employment by the Company or any Subsidiary, nor
interfere in any way with the right of the Company or a Subsidiary to terminate
your employment at any time.
11. Except as provided in Sections 7 and 8 of this Agreement, this
Agreement is subject to all of the terms and conditions of the Plan and, where
any questions or matters of interpretation arise, the terms and conditions of
the Plan and the rules of the Committee administering the Plan shall control.
12. Neither you nor any other person shall have any rights as a
stockholder with respect to any Option Shares until you or such other person
shall have become a holder of record of such shares and, except as otherwise
provided in Section 4.4 of the Plan, no adjustments shall be made
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for dividends or other distributions or rights as to which there is a record
date preceding the date you become the holder of record of such shares.
13. Any notice to be given with respect to this Stock Option, including
without limitation a notice of exercise, shall be addressed to the Company,
Attention: Corporate Treasury, at its principal executive office at 8100 34th
Avenue South, Minneapolis, Minnesota 55425, Facsimile No. 612-853-3932, and any
notice to be given to you shall be addressed to you at the address given beneath
your signature below, or at such other address as either party may hereafter
designate in writing to the other.
14. Any notice of stock option exercise must specify the number of shares
with respect to which the Stock Option is being exercised and be accompanied by
either (i) payment in full of the purchase price for the shares exercised or
(ii) a Broker Exercise Notice in form and substance satisfactory to the Company.
The exercise of the Stock Option shall be deemed effective upon receipt by
Corporate Treasury of such notice and payment of the exercise price from the
Participant or the broker or dealer named in the Broker Exercise Notice. Any
such notice will not be deemed given until actual receipt by Corporate Treasury.
In Witness Whereof, Ceridian Corporation and you have executed this
Agreement as of the Date of Grant.
CERIDIAN CORPORATION OPTIONEE
By
----------------------------- -------------------------------
Assistant Secretary Name
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EXHIBIT 10.16
DESCRIPTION OF THE CERIDIAN CORPORATION ANNUAL EXECUTIVE INCENTIVE PLAN
Ceridian's Annual Executive Incentive Plan provides yearly cash bonuses to
Ceridian executives. The annual determination of an individual executive's
target bonus, expressed as a percentage of base salary, is based on a subjective
assessment by the Board's Compensation and Human Resources Committee (the
"Committee") of the responsibilities of the position, competitive practice and
the Committee's desire to give greater weight to performance-based compensation
at higher levels of responsibility within Ceridian.
For 1997, target bonus percentages for executive officers ranged from 35%
to 65% of base salary, with the maximum possible bonus one and one-half times
the target amount and the threshold bonus one-half of the target amount. For
staff officers, generally 100% of the total potential annual bonus was dependent
upon Ceridian achieving specified levels of earnings per share ("EPS") for 1997.
For an executive officer assigned to an operating unit, 20% of the total
potential bonus consisted of the same Ceridian EPS requirement, 50% consisted of
a requirement that the operating unit achieve specified levels of pre-tax
earnings, 20% consisted of a requirement that the operating unit achieve
specified levels of revenue growth, and 10% was based on the Committee's
subjective assessment of the executive officer's individual performance in the
area of fostering work force diversity. Payment of the financial components of
the annual bonus could be made at, above or below the target percentages
depending on whether the financial performance of Ceridian (and, if applicable,
the business unit to which the executive was assigned) met, exceeded or fell
short of the applicable budgeted amounts, but no bonus would be payable if the
applicable threshold amounts were not achieved. The Committee retains
discretion to exclude the financial impact of unusual or extraordinary events
from the calculation of the financial components of annual bonuses, and to
adjust a bonus payment if warranted in individual circumstances.
For purposes of determining 1997 bonuses, the Committee exercised its
discretion in evaluating the impact on the financial performance of Ceridian and
its business units of unusual events such as the gain from the sale of
Ceridian's defense electronics division, the recognition of the future tax
benefits of Ceridian's net operating loss carryforwards, and the asset
impairment and other unusual charges that were recorded during 1997. As a
result, 1997 bonus payments for executive officers ranged between 35% and 74.3%
of base salary. For 1997 only, the employment agreements for two executive
officers hired in 1997 guaranteed payment of a bonus at target bonus percentage.
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CERIDIAN CORPORATION
1996 DIRECTOR PERFORMANCE INCENTIVE PLAN
(As amended through December 15, 1997)
1. PURPOSE OF PLAN.
The purpose of the Ceridian Corporation 1996 Director Performance Incentive
Plan (the "Plan") is to advance the interests of Ceridian Corporation (the
"Company") and its stockholders by enabling the Company to attract and retain
the services of experienced and knowledgeable non-employee directors, to
increase the proprietary interests of such non-employee directors in the
Company's long-term success and their identification with the interests of the
Company's stockholders, and to serve as the source of transitional awards of
Common Stock (as defined below) in connection with the termination of the
Company's Directors Deferred Compensation Plan (the "Directors' Retirement
Plan"), a retirement plan for non-employee directors.
2. DEFINITIONS.
The following terms will have the meanings set forth below, unless the
context clearly otherwise requires:
2.1 "AWARD" means an Option, Restricted Stock Award or Share Award granted
to an Eligible Director pursuant to the Plan.
2.2 "BOARD" means the Board of Directors of the Company.
2.3 "BROKER EXERCISE NOTICE" means a written notice pursuant to which an
Eligible Director, upon exercise of an Option, irrevocably instructs a broker or
dealer to sell a sufficient number of shares or loan a sufficient amount of
money to pay all or a portion of the exercise price of the Option and/or any
related withholding tax obligations and remit such sums to the Company and
directs the Company to deliver stock certificates to be issued upon such
exercise directly to such broker or dealer.
2.4 "CODE" means the Internal Revenue Code of 1986, as amended.
2.5 "COMMITTEE" means the group of individuals administering the Plan, as
provided in Section 3 of the Plan.
2.6 "COMMON STOCK" means the common stock of the Company, par value $0.50
per share, or the number and kind of shares of stock or other securities into
which such Common Stock may be changed in accordance with Section 4.3 of the
Plan.
2.7 "DISABILITY" means the disability of an Eligible Director such as
would entitle the Eligible Director to receive disability income benefits
pursuant to the long-term disability plan of the Company then covering the
Eligible Director or, if no such plan exists or is applicable to the Eligible
Director, the permanent and total disability of the Eligible Director within the
meaning of Section 22(e)(3) of the Code.
2.8 "ELIGIBLE DIRECTORS" means all directors of the Company who are not
employees of the Company or any subsidiary of the Company.
2.9 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
2.10 "FAIR MARKET VALUE" means, with respect to the Common Stock, as of any
date (or, if no shares were traded or quoted on such date, as of the next
preceding date on which there was such a trade or quote), the closing market
price per share of the Common Stock as reported on the New York Stock Exchange
Composite Tape on that date.
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2.11 "OPTION" means a right to purchase 2,000 shares of Common Stock
(subject to adjustment as provided in Section 4.3 of the Plan) granted to an
Eligible Director pursuant to Section 6 of the Plan that does not qualify as an
"incentive stock option" within the meaning of Section 422 of the Code.
[Section 2.11 as amended effective October 23, 1997.]
2.12 "RESTRICTED SHARES" means shares of Common Stock that are the subject
of a Restricted Stock Award, and therefore subject to the restrictions on
transferability and the risk of forfeiture imposed by the provisions of
Sections 5 and 8 of the Plan.
2.13 "RESTRICTED STOCK AWARD" means an award of Restricted Shares to an
Eligible Director pursuant to Section 5 of the Plan.
2.14 "SECURITIES ACT" means the Securities Act of 1933, as amended.
2.15 "SHARE AWARD" means an award of shares of Common Stock granted to an
Eligible Director pursuant to Section 7 of the Plan.
3. PLAN ADMINISTRATION.
The Plan will be administered by the Nominating and Board Governance
Committee of the Board, or any successor committee thereto (the "Committee").
All questions of interpretation of the Plan will be determined by the Committee,
each determination, interpretation or other action made or taken by the
Committee pursuant to the provisions of the Plan will be conclusive and binding
for all purposes and on all persons, and no member of the Committee will be
liable for any action or determination made in good faith with respect to the
Plan or any Award granted under the Plan. The Committee, however, will have no
power to determine the eligibility for participation in the Plan, the number of
shares of Common Stock to be subject to Awards, or the timing, pricing or other
terms and conditions of the Awards.
4. SHARES AVAILABLE FOR ISSUANCE.
4.1 MAXIMUM NUMBER OF SHARES AVAILABLE. Subject to adjustment as provided
in Section 4.3 of the Plan, the maximum number of shares of Common Stock that
will be available for issuance under the Plan will be 125,000 shares. The
shares available for issuance under the Plan may, at the election of the
Committee, be either treasury shares or shares authorized but unissued, and, if
treasury shares are used, all references in the Plan to the issuance of shares
will, for corporate law purposes, be deemed to mean the transfer of shares from
treasury.
4.2 ACCOUNTING FOR AWARDS. Shares of Common Stock that are issued under
the Plan or that are subject to outstanding Awards will be applied to reduce the
maximum number of shares of Common Stock remaining available for issuance under
the Plan. Any shares of Common Stock that are subject to an Award that lapses,
expires, or for any reason is terminated unexercised will automatically again
become available for issuance under the Plan.
4.3 ADJUSTMENTS TO SHARES AND AWARDS. In the event of any reorganization,
merger, consolidation, recapitalization, liquidation, reclassification, stock
dividend, stock split, combination of shares, rights offering, divestiture or
extraordinary dividend (including a spin-off) or any other change in the
corporate structure or shares of the Company, the Committee (or, if the Company
is not the surviving corporation in any such transaction, the board of directors
of the surviving corporation) will make appropriate adjustment (which
determination will be conclusive) as to the number and kind of securities
available for issuance under the Plan and, in order to prevent dilution or
enlargement of the rights of Eligible Directors, the number, kind and, where
applicable, exercise price of securities subject to outstanding Incentive
Awards.
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5. RESTRICTED STOCK AWARDS.
5.1 GRANTS TO NEW DIRECTORS. At such time on or after the effective date
of this Plan as additional Eligible Directors are first elected or appointed to
the Board to fill new directorships or to fill vacancies, each such Eligible
Director will receive, on a one-time basis on the date of his or her first
election or appointment to the Board, a Restricted Stock Award. The number of
Restricted Shares to be awarded to each such Eligible Director pursuant to such
Restricted Stock Award shall be determined by first multiplying the dollar value
of the then current annual retainer paid to Eligible Directors by 2.5, then
dividing that result by the average closing price of a share of Common Stock on
the New York Stock Exchange for the ten trading days immediately prior to the
date of such Eligible Director's first election or appointment to the Board, and
then rounding the result to the nearest 100 shares. [Section 5.1 as amended
effective December 15, 1997.]
5.2 TRANSITIONAL GRANTS TO EXISTING DIRECTORS. A Restricted Stock Award
will be granted, on a one-time basis as of the date the Plan is approved by the
Company's stockholders, to each Eligible Director as of such date who has not
yet completed 48 calendar quarters of service on the Board and who has consented
to the termination of the Directors' Retirement Plan. The number of Restricted
Shares to be awarded to each such Eligible Director pursuant to such Restricted
Stock Award shall be determined by multiplying the number of Restricted Shares
that would be awarded pursuant to Section 5.1 to a new director who was first
elected to the Board on May 8, 1996 by a fraction, the denominator of which is
48 and the numerator of which is the number of whole and partial calendar
quarters from July 1, 1996 through the earlier of (i) the twelfth anniversary of
such director's initial election or appointment to the Board, or (ii) the date
of the first annual meeting of the Company's stockholders occurring after the
director reaches the age of 70.
5.3 RESTRICTIONS. Restricted Shares issued to an Eligible Director may
not be sold, assigned or otherwise transferred, or subjected to any lien, either
voluntarily or involuntarily, by operation of law or otherwise, until such time
and only to the extent that such restrictions on transferability have lapsed as
provided in this Section 5.3 or in Section 8. For purposes of this Plan, the
lapsing of such transferability restrictions is referred to as "vesting," and
Restricted Shares that are no longer subject to such transferability
restrictions are referred to as "vested." Except as provided in Section 8,
Restricted Shares will vest during the period of an Eligible Director's service
on the Board as follows:
(a) With respect to a Restricted Stock Award made pursuant to Section
5.1, 20% of the total number of Restricted Shares subject to such Award will
vest on each of the first five anniversary dates of the date such Restricted
Stock Award was first granted.
(b) With respect to a Restricted Stock Award made pursuant to Section
5.2, a fraction of the total number of Restricted Shares subject to such Award
will vest on each anniversary date of the date such Restricted Stock Award was
first granted, the numerator of such fraction being 4 and the denominator being
the number of whole and partial calendar quarters from July 1, 1996 through the
earliest of (i) the twelfth anniversary of such director's initial election or
appointment to the Board, (ii) the date of the first annual meeting of the
Company's stockholders occurring after the director reaches the age of 70, or
(iii) June 30, 2001.
5.4 DIVIDENDS AND DISTRIBUTIONS. Unless the Committee determines
otherwise in its sole discretion (either in the agreement evidencing the
Restricted Stock Award at the time of grant or at any time after the grant of
the Restricted Stock Award), any dividends or distributions (including regular
quarterly cash dividends) paid with respect to Restricted Shares will be
currently paid to the Eligible Director and will not be subject to the same
restrictions as the Restricted Shares to which such dividends or distributions
relate. In the event the Committee determines not to pay such dividends or
distributions currently, the Committee will determine in its sole discretion
whether any interest will be paid on such dividends or distributions.
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5.5 RIGHTS AS A STOCKHOLDER. Except as provided in this Section 5 and in
Section 8, an Eligible Director will have all voting, dividend and other rights
with respect to Restricted Shares issued to the Eligible Director upon the
Eligible Director becoming the holder of record of such Restricted Shares as if
such Eligible Director were a holder of record of shares of unrestricted Common
Stock.
5.6 ENFORCEMENT OF RESTRICTIONS. To enforce the restrictions referred to
in this Section 5, the Committee will place a legend on the stock certificates
referring to such restrictions and will require Eligible Directors, until the
Restricted Shares vest, to keep the stock certificates, together with duly
endorsed stock powers, in the custody of the Company or its transfer agent or to
maintain evidence of stock ownership, together with duly endorsed stock powers
if required, in a certificateless book-entry stock account with the Company's
transfer agent for its Common Stock.
6. OPTIONS.
6.1 GRANT. Each Eligible Director will be granted on an annual basis, at
such time as the Eligible Director is elected or re-elected to the Board by the
stockholders of the Company, an Option. Such Option will be granted only upon
such election or re-election of the Eligible Director, and no Option will be
granted if the Eligible Director is not so elected or re-elected.
6.2 EXERCISE PRICE. The per share price to be paid by an Eligible
Director upon exercise of an Option will be 100% of the Fair Market Value of one
share of Common Stock on the date of grant. The total purchase price of the
shares to be purchased upon exercise of an Option will be paid entirely in cash
(including check, bank draft or money order), or such payment may be made, in
whole or in part, by tender of a Broker Exercise Notice.
6.3 EXERCISABILITY AND DURATION. Other than as provided in Section 8 of
the Plan, each Option will become exercisable in full six months following its
date of grant and will expire and will no longer be exercisable 10 years from
its date of grant.
6.4 MANNER OF EXERCISE. An Option may be exercised by an Eligible
Director in whole or in part from time to time, subject to the conditions
contained in the Plan and in the agreement evidencing such Option, by delivery
in person, by facsimile or electronic transmission or through the mail of
written notice of exercise to the Company, Attention: Corporate Treasury, at its
principal executive office in Bloomington, Minnesota and by paying in full the
total exercise price for the shares of Common Stock to be purchased in
accordance with Section 6.2 of the Plan.
6.5 RIGHTS AS A STOCKHOLDER. As a holder of Options, an Eligible Director
will have no rights as a stockholder unless and until such Options are exercised
for shares of Common Stock and the Eligible Director becomes the holder of
record of such shares. No adjustment will be made for dividends or
distributions with respect to Options as to which there is a record date
preceding the date the Eligible Director becomes the holder of record of such
shares.
7. SHARE AWARDS.
Share Awards pursuant to the Plan will take the form of either Retirement
Plan Share Awards pursuant to Section 7.1 hereof, or Retainer Share Awards
pursuant to Section 7.2 hereof.
7.1 IN LIEU OF DIRECTORS' RETIREMENT PLAN BENEFITS. A Retirement Plan
Share Award will be granted, on a one-time basis as of the date the Plan is
approved by the Company's stockholders, to each Eligible Director as of such
date who has consented to the termination of the Directors' Retirement Plan and
agreed to relinquish his or her accrued benefits thereunder. The number of
shares of Common Stock to be awarded to each such Eligible Director pursuant to
such a Retirement Plan Share Award shall be determined by dividing the present
value, using an 8% discount rate, of such Eligible Director's accrued benefits
(without regard to the satisfaction of the length of service eligibility
requirement in Article III of the Directors' Retirement Plan) under the
Directors' Retirement Plan
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(assuming commencement of such benefits immediately upon termination of the
Directors' Retirement Plan) by the average closing price of a share of Common
Stock on the New York Stock Exchange for the ten trading days immediately prior
to May 8, 1996, rounded to the nearest whole share. Shares subject to a
Retirement Plan Share Award made pursuant to this Section 7.1 will not be
subject to any contractual restrictions on transferability or to any contractual
risk of forfeiture.
7.2 AS PAYMENT OF A PORTION OF ANNUAL RETAINER.
(a) A Retainer Share Award will be granted annually as of the first
trading day of each calendar year, commencing January 2, 1997, to each Eligible
Director as of such date. The number of shares of Common Stock to be awarded to
each Eligible Director pursuant to a Retainer Share Award shall be determined by
dividing one-half of the dollar amount of the annual retainer (not to include
any supplemental annual retainer payments payable to chairpersons of Board
committees or for other purposes) to be paid to each Eligible Director for
service as a member of the Board for the calendar year during which such award
occurs (the "Issuance Year") by the average closing price of a share of Common
Stock on the New York Stock Exchange for the last ten trading days of the
immediately preceding calendar year, rounded to the nearest whole share. The
issuance of such a Retainer Share Award shall be in lieu of payment of that half
of the annual retainer in cash.
(b) Shares subject to a Retainer Share Award may not be sold,
assigned or otherwise transferred, or subjected to any lien, either voluntarily
or involuntarily, by operation of law or otherwise, until such time as the
Eligible Director's service as a director of the Company ceases. In addition, a
portion of the shares subject to an Eligible Director's most recent Retainer
Share Award shall be forfeited if the Eligible Director's service as a director
of the Company ceases for any reason prior to December 31 of the Issuance Year.
The portion of the shares subject to a Retainer Share Award that shall be
forfeited pursuant to this paragraph 7.2(b) shall be determined by multiplying
the number of shares subject to such Retainer Share Award by a fraction, the
numerator of which is the number of days remaining in the Issuance Year after
the date of such Eligible Director's cessation of service as a director and the
denominator of which is 365, rounded down to the nearest whole share.
(c) Except as otherwise provided in this Section 7.2, an Eligible
Director will have all voting, dividend, distribution and other rights with
respect to shares subject to a Retainer Share Award upon the Eligible Director
becoming the holder of record of such shares as if such Eligible Director were a
holder of record of shares of unrestricted Common Stock.
(d) To enforce the restrictions referred to in this Section 7.2,
ownership of shares subject to a Retainer Share Award will be evidenced in a
certificateless book-entry stock account in the name of each Eligible Director
with the Company's transfer agent for its Common Stock. A certificate for the
number of shares in such a book-entry account that are not subject to forfeiture
pursuant to paragraph 7.2(b) hereof will be issued to the applicable Eligible
Director when such director's term of service on the Company's Board ceases.
[Section 7 as amended effective December 31, 1996.]
8. EFFECT OF TERMINATION OF SERVICE AS DIRECTOR.
8.1 TERMINATION DUE TO DEATH OR DISABILITY. If an Eligible Director's
service as a director of the Company is terminated by reason of death or
Disability, all outstanding Options then held by the Eligible Director will
become immediately exercisable in full and will remain exercisable for the
remainder of their terms, and all Restricted Shares then held by such Eligible
Director shall immediately and fully vest.
8.2 VOLUNTARY TERMINATION. If an Eligible Director voluntarily resigns
from the Board (which does not include the submission of an offer not to stand
for re-election as a director in accordance with Company policies), the Eligible
Director shall forfeit all Restricted Shares not yet vested, and outstanding
Options then held by the Eligible Director will remain exercisable for a
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period of three months after such termination (but in no event after the
expiration date of any such Option) only to the extent they were exercisable as
of such termination.
8.3 TERMINATION FOR OTHER REASONS. If an Eligible Director's service as a
director of the Company terminates for any reason other than those specified in
Sections 8.1 and 8.2, the portion of such Eligible Director's Restricted Shares
that were scheduled to vest on the next vesting date following the date of such
termination shall immediately vest, but all remaining unvested Restricted Shares
shall be forfeited, and outstanding Options then held by the Eligible Director
will remain exercisable until the expiration date of each such Option only to
the extent such Options were exercisable as of such termination.
8.4 DATE OF TERMINATION OF SERVICE AS A DIRECTOR. An Eligible Director's
service as a director of the Company will, for purposes of the Plan, be deemed
to have terminated on the date recorded on the personnel or other records of the
Company, as determined by the Committee based upon such records.
9. RIGHTS OF ELIGIBLE DIRECTORS; TRANSFERABILITY OF INTERESTS.
9.1 SERVICE AS A DIRECTOR. Nothing in the Plan will interfere with or
limit in any way the right of the Board or the stockholders of the Company to
terminate an Eligible Director, and neither the Plan, nor the granting of an
Award nor any other action taken pursuant to the Plan, will constitute or be
evidence of any agreement or understanding, express or implied, that the Board
or the stockholders of the Company will retain an Eligible Director for any
period of time or at any particular rate of compensation.
9.2 RESTRICTIONS ON TRANSFER OF INTERESTS. Except pursuant to
testamentary will or the laws of descent and distribution or as otherwise
expressly permitted by the Plan, no right or interest of any Eligible Director
in an Award prior to the exercise of Options or the vesting of Restricted Shares
will be assignable or transferable, or subjected to any lien, during the
lifetime of the Eligible Director, either voluntarily or involuntarily, by
operation of law or otherwise. An Eligible Director will, however, be entitled
to designate a beneficiary to receive an Award upon such Eligible Director's
death, and in the event of an Eligible Director's death, payment of any amounts
due under the Plan will be made to, and exercise of any Options (to the extent
permitted pursuant to Section 6 of the Plan) may be made by, the Eligible
Director's legal representatives, heirs and legatees.
9.3 NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
intended to create any limitations on the power or authority of the Board to
adopt such additional or other compensation arrangements for non-employee
directors as the Board may deem necessary or desirable.
10. SECURITIES LAW AND OTHER RESTRICTIONS.
Notwithstanding any other provision of the Plan or any agreements entered
into pursuant to the Plan, the Company will not be required to issue any shares
of Common Stock under this Plan, and an Eligible Director may not sell, assign,
transfer or otherwise dispose of shares of Common Stock issued pursuant to
Awards granted under the Plan, unless (a) there is in effect with respect to
such shares a registration statement under the Securities Act and any applicable
state securities laws or an exemption from such registration under the
Securities Act and applicable state securities laws, and (b) there has been
obtained any other consent, approval or permit from any other regulatory body
which the Committee, in its sole discretion, deems necessary or advisable. The
Company may condition such issuance, sale or transfer upon the receipt of any
representations or agreements from the parties involved, and the placement of
any legends on certificates representing shares of Common Stock, as may be
deemed necessary or advisable by the Company in order to comply with such
securities law or other restrictions.
11. PLAN AMENDMENT, MODIFICATION AND TERMINATION.
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The Board may suspend or terminate the Plan or any portion thereof at any
time, and may amend the Plan from time to time in such respects as the Board may
deem advisable in order that Awards under the Plan will conform to any change in
applicable laws or regulations or in any other respect the Board may deem to be
in the best interests of the Company; provided, however, that (a) no amendments
to the Plan will be effective without approval of the stockholders of the
Company if stockholder approval of the amendment is then required pursuant to
Rule 16b-3 under the Exchange Act or the rules of the New York Stock Exchange,
and (b) to the extent prohibited by Rule 16b-3 of the Exchange Act, the Plan may
not be amended more than once every six months. No termination, suspension or
amendment of the Plan may adversely affect any outstanding Award without the
consent of the affected Eligible Director; provided, however, that this sentence
will not impair the right of the Committee to take whatever action it deems
appropriate under Section 4.3 of the Plan.
12. EFFECTIVE DATE AND DURATION OF THE PLAN.
The Plan will be effective as of May 8, 1996, the date it is to be approved
by the Company's stockholders. The Plan will terminate at midnight on May 31,
2001, and may be terminated prior thereto by Board action, and no Award will be
granted after such termination. Awards outstanding upon termination of the Plan
may continue to be exercised or to vest in accordance with their terms.
13. MISCELLANEOUS.
13.1 GOVERNING LAW. The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed exclusively in accordance
with the laws of the State of Minnesota.
13.2 SUCCESSORS AND ASSIGNS. The Plan will be binding upon and inure to
the benefit of the successors and permitted assigns of the Company and the
Eligible Directors.
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Exhibit 10.25
WAIVER AND FIRST AMENDMENT TO CREDIT AGREEMENT
THIS WAIVER AND FIRST AMENDMENT TO CREDIT AGREEMENT ("Waiver and
Amendment"), dated as of December 2, 1997, is entered into by and among
CERIDIAN CORPORATION (the "Company"), BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as agent for itself and the Banks (the "Agent"), the
several financial institutions party to the Credit Agreement (collectively,
the "Banks") and BancAmerica SECURITIES, INC. with THE BANK OF NEW YORK AND
FIRST BANK NATIONAL ASSOCIATION (collectively, the "Co-Agents").
RECITALS
A. The Company, Banks, and Agent are parties to an Amended and
Restated Credit Agreement (the "Credit Agreement") dated as of December 12,
1995 and amended and restated as of July 31, 1997, pursuant to which the
Agent and the Banks have extended certain credit facilities to the Company.
B. The Company has reported to the Agent and the Banks the
existence of a circumstance which could potentially result in a future Event
of Default under the Credit Agreement. The Company has requested that the
Banks waive any such potential Event of Default and agree to certain
amendments of the Credit Agreement.
C. The Banks are willing to waive the potential default under the
Credit Agreement, and to amend the Credit Agreement, subject to the terms and
conditions of this Waiver and Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings, if any, assigned to them in the
Credit Agreement.
2. Defaults and Waiver.
(a) For purposes of this Waiver and Amendment, "Potential
Default" shall mean the Event of Default which would exist on January 1, 1998
under Section 7.10 of the Credit Agreement in the event the sale of Computing
Devices International ("CDI") has not closed on or before December 31, 1997.
(b) Subject to the effectiveness of this Waiver and
Amendment, and provided the sale of CDI has not closed on or before December
31, 1997, the Banks hereby waive compliance by the Company with Section 7.10
of the Credit Agreement for the period January 1, 1998 through March 31, 1998.
(c) Nothing contained herein shall be deemed a waiver of (or
otherwise affect the Agent's or the Banks' ability to enforce) any other
default or Event of Default.
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3. Amendments to Credit Agreement.
(a) The Credit Agreement is hereby amended by deleting
Schedule 7.02 attached to the Agreement and substituting the Schedule 7.02
attached to this Waiver and Amendment.
(b) The Credit Agreement is hereby amended by deleting
Section 7.04 in its entirety and substituting the following Section 7.04:
"7.04 Indebtedness. The Company shall not, and shall not
permit any of its Subsidiaries to, incur, assume or suffer to
exist any Indebtedness (a) if a Default or Event of Default has
occurred and is continuing or would result from the incurrence
or assumption of such indebtedness, or (b) if the aggregate
principal amount of all such Indebtedness of such Subsidiaries
would exceed 10% of Consolidated Net Worth; provided, however,
that up to U.S. $150,000,000 (or the Canadian Dollar equivalent)
of purchase money debt incurred by Subsidiaries of the Company to
acquire certain payroll businesses in Canada shall not be
included as Indebtedness for purposes of computing (b) above.
(c) The Credit Agreement is hereby amended by deleting
Section 7.09 in its entirety and substituting the following Section 7.09:
"7.09 Interest Coverage Ratio. On and after the Closing
Date, the Company shall not permit its ratio of (a) EBIT to (b)
Consolidated Interest Expense, all calculated on a consolidated
basis for the immediately preceding four fiscal quarters of the
Company, to be less than 2.75 to 1.00; provided, however, that
for the purposes of computing compliance with this covenant, the
following shall be excluded: (a) charges of $150,000,000 related
to the termination of the development of the CII payroll
processing software recorded in the third quarter of fiscal 1997
plus (b) fiscal fourth quarter 1997 charges of up to $150,000,000
for write-offs of prepaid pension costs, goodwill and other
assets, and for costs of consolidating certain operations.
(d) The Credit Agreement is hereby amended by deleting
Section 7.13 and substituting the following Section 7.13:
"7.13 Contracts of Subsidiaries. The Company shall not
permit any of its Subsidiaries (other than Computing
<PAGE>
Devices Canada Ltd., Computing Devices Company Ltd. and its
subsidiaries, or any Canadian payroll processing subsidiary
purchased or established after the Effective Date) to enter into
any contract restricting the ability of such Subsidiary to pay
dividends or make loans to the Company or Subsidiaries of the
Company."
4. Representations and Warranties. The Company hereby represents
and warrants to the Agent and the Banks as follows:
(a) Other than the Potential Default, no Event of Default has
occurred and is continuing.
(b) The execution, delivery, and performance by the Company of
this Waiver and Amendment have been duly authorized by all
necessary corporate and other action and do not and will not
require any other registration with, consent or approval of,
notice to or action by, any Person (including any Governmental
Authority) in order to be effective and enforceable. The Credit
Agreement as amended by this Waiver and Amendment constitutes the
legal, valid, and binding obligations of the Company, enforceable
against it in accordance with its respective terms, except as
such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating
to enforceability.
(c) Subject to the Potential Default, all representations and
warranties of the Company contained in the Credit Agreement are
true and correct on and as of the date of this Waiver and
Amendment with the same effect as if made on and as of such date
(except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be
true and correct as of such earlier date).
(d) The Company is entering into this Waiver and Amendment on
the basis of its own investigation and for its own reasons,
without reliance upon the Agent and the Banks or any other
Person.
5. Effective Date. This Waiver and Amendment will become
effective as of December 2, 1997 (the "Effective Date"), provided that each
of the following condition precedents are satisfied:
(a) The Agent has received from the Company and the Majority
Banks a duly executed original (or, if elected by the Agent,
an executed facsimile copy) of this Waiver and Amendment.
(b) The Agent has received from the Company a copy of a
resolution passed by the board of directors of such
<PAGE>
corporation, certified by the Secretary or an Assistant Secretary
of the Company as being in full force and effect on the date
hereof, authorizing the execution, delivery, and performance of
this Waiver and Amendment.
(c) All representations and warranties contained herein are true
and correct as of the Effective Date.
6. Reservation of Rights. The Company acknowledges and agrees
that neither the Agent's nor the Banks' forbearance in exercising their
rights and remedies in connection with the Potential Default, nor the
execution and delivery by the Agent and the Banks of this Waiver and
Amendment, shall be deemed (i) to create a course of dealing or otherwise
obligate the Agent or the Banks to forbear or execute similar waivers under
the same or similar circumstances in the future, or (ii) to waive,
relinquish, or impair any right of the Agent or the Banks to receive any
indemnity or similar payment from any Person or entity as a result of any
matter arising from or relating to the Potential Default.
7. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants,
and provisions of the Credit Agreement are and shall remain in full force and
effect and all references therein to such Credit Agreement shall henceforth
refer to the Credit Agreement as amended by this Waiver and Amendment. This
Waiver and Amendment shall be deemed incorporated into, and a part of, the
Credit Agreement.
(b) This Waiver and Amendment shall be binding upon and inure
to the benefit of the parties hereto and thereto and their respective
successors and assigns. No third party beneficiaries are intended in
connection with this Waiver and Amendment.
(c) This Waiver and Amendment shall be governed by and
construed in accordance with the law of the State of Illinois.
(d) This Waiver and Amendment may be executed in any number
of counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each
of the parties hereto understands and agrees that this document (and any
other document required herein) may be delivered by any party thereto either
in the form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by the Agent of a facsimile transmitted document purportedly
bearing the signature of a Bank or the Company shall bind such Bank or the
Company, respectively, with the same force and effect as the delivery of a
hard copy original. Any failure by the Agent to receive the hard copy
executed original of such document shall not diminish the binding effect of
receipt of the facsimile transmitted executed original of such document of
the party whose hard copy page was not received by the Agent.
(e) This Waiver and Amendment, together with the Credit
Agreement, contains the entire and exclusive agreement of the
<PAGE>
parties hereto with reference to the matters discussed herein and therein.
This Waiver and Amendment supersedes all prior drafts and communications with
respect thereto. This Waiver and Amendment may not be amended except in
accordance with the provisions of Section 10.01 of the Credit Agreement.
(f) If any term or provision of this Waiver and Amendment
shall be deemed prohibited by or invalid under any applicable law, such
provision shall be invalidated without affecting the remaining provisions of
this Waiver and Amendment or the Credit Agreement, respectively.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
CERIDIAN CORPORATION
By: /s/John H. Grierson
Name: John H. Grierson
Title: Vice President & Treasurer
Address for notices:
8100 34th Avenue South
Minneapolis, Minnesota 55425
Attention: Treasury Department
Facsimile: (612) 853-3932
Telephone: (612) 853-5265
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/R. Guy Stapleton
Name: R. Guy Stapleton
Title: Managing Director
Address for notices:
Bank of America National Trust and Savings Association
1455 Market Street, 13th Floor
San Francisco, California 94103
Attn: Agency Administrative Services #5596
Re: Ceridian
Facsimile: (415) 436-2700
Telephone: (415) 436-2749
Attention: Al Johnson
THE BANK OF NEW YORK
By: /s/Richard A. Raffetto
Name: Richard A. Raffetto
Title: Vice President
Lending Office:
The Bank of New York
<PAGE>
101 Barclay Street
New York, NY 10007
Attention: Commercial Lending Office
Facsimile: (212) 635-7923 or 7924
Telephone: (212) 635-6991
Address for notices:
The Bank of New York
One Wall Street, 19th Floor
New York, NY 10286
Attention: Richard A. Raffetto
Facsimile: (212) 635-1208
Telephone: (212) 635-8044
THE CHASE MANHATTAN BANK
By: /s/John Huber III
Name: John Huber III
Title:
Lending Office:
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attention: Donna Montgomery
Facsimile: (212) 552-5700
Telephone:(212) 552-7477
Address for notices:
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attention: John Huber
Facsimile:(212) 270-4584
Telephone: (212) 270-1402
FIRST AMERICAN NATIONAL BANK
By: /s/Russell S. Rogers
Name: Russell S. Rogers
Title: Sr. Vice President
Lending Office:
First American National Bank
315 Union Street
Nashville, TN 37237-0075
Attention: Frenisa Joy
<PAGE>
Facsimile: (615) 748-6098
Telephone: (615) 736-6747
Address for notices:
First American National Bank
315 Deaderick Street
Nashville, TN 37237-0075
Attention: Russell S. Rogers
Facsimile: (615) 748-6072
Telephone: (615) 748-2548
FIRST BANK NATIONAL ASSOCIATION
By: /s/Elliot Jaffee
Name: Elliott Jaffee
Title: Vice President
Lending Office:
First Bank National Association
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Karen Johnson
Facsimile: (612) 973-0825
Telephone: (612) 973-0546
Address for notices:
First Bank National Association
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Elliot Jaffee
Facsimile: (612) 973-0825
Telephone: (612) 973-0543
PNC BANK, NATIONAL ASSOCIATION
By: /s/James A. Wiehe
Name: James A. Wiehe
Title: Assistant Vice President
Lending Office:
PNC Bank, National Association
One PNC Plaza
Pittsburgh, PA 15265
Attention:
Facsimile: (412) 762-6484
Telephone: (412) 762-2000
<PAGE>
Address for notices:
PNC Bank, National Association
500 W. Madison Street, Suite 3140
Chicago, IL 60661
Attention: James Wiehe
Facsimile: (312) 906-3420
Telephone: (312) 906-3428
WELLS FARGO BANK, N.A.
By: /s/Frieda Youlios
Name: Frieda Youlios
Title: Vice President
Lending Office:
Wells Fargo Bank, N.A.
420 Montgomery Street, 9th Floor
San Francisco, CA 94104
Attention: Judi Steele
Facsimile: (415) 989-4319
Telephone: (415) 396-3807
Address for notices:
Wells Fargo Bank, N.A.
420 Montgomery Street, 9th Floor
San Francisco, CA 94104
Attention: Laila Partridge
Facsimile: (415) 421-1352
Telephone: (415) 396-2494
TORONTO DOMINION BANK (TEXAS), INC.
By: /s/Darlene Riedel
Name: Darlene Riedel
Title: Vice President
Lending Office:
Toronto Dominion Bank (Texas), Inc.
909 Fannin Street, Suite 1700
Houston, TX 77010
Attention:Darlene Riedel
Facsimile: (713) 951-9921
Telephone: (713) 653-8250
<PAGE>
Address for notices:
Toronto Dominion Bank (Texas), Inc.
909 Fannin Street, Suite 1700
Houston, TX 77010
Attention: Darlene Riedel
Facsimile: (713) 951-9921
Telephone: (713) 653-8250
THE LONG TERM CREDIT BANK OF JAPAN, LTD.
By: /s/Armund J. Schoen, Jr.
Name: Armund J. Schoen, Jr.
Title: Sr. Vice President
Lending Office:
The Long Term Credit Bank of Japan, Ltd.
New York Branch
165 Broadway - 48th Floor
New York, NY 10006
Attention:Robert Pacifici
Facsimile: (212) 608-3452
Telephone: (212) 335-4801
Address for notices:
The Long Term Credit Bank of Japan, Ltd.
New York Branch
165 Broadway - 48th Floor
New York, NY 10006
Attention: Robert Pacifici
Facsimile: (212) 608-3452
Telephone: (212) 335-4801
NATIONSBANK
By: /s/Valerie C. Mills
Name: Valerie C. Mills
Title: Sr. Vice President
<PAGE>
LENDING OFFICE:
NationsBank
101 N. Tryon
Charlotte, NC 28255
Attention: Tia Bailey
Facsimile: (704) 386-8694
Telephone: (704) 386-5181
ADDRESS FOR NOTICES:
NationsBank
233 S. Wacker Drive, Suite 2800
Chicago, IL 60606
Attention: Valerie Mills
Facsimile: (312) 234-5601
Telephone: (312) 234-5649
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION as a Bank
By: /s/R. Guy Stapleton
Name:
Title: Managing Director
Lending Office:
Bank of America-Account Administration
1850 Gateway Blvd., Third Floor
Concord, CA 94520
Attention: Lenora Minkin
Facsimile: (510)603-8217
Telephone: (510)675-7761
Address for notices:
Bank of America-Account Administration
1850 Gateway Boulevard, Third Floor
Concord, CA 94520
Attention: Lenora Minkin
Facsimile: (510)603-8217
Telephone: (510)675-7761
<PAGE>
With a copy to:
Bank of America NT&SA
231 South LaSalle Street (9J)
Chicago, IL 60697
Attention: Casey Cosgrove
Facsimile: (312)987-1276
Telephone: (312)828-3092
Address for payment:
Bank of America NT&SA
ABA No. 121-000-358
Attn: Agency Administrative Services
No. 5596
Credit to Account No. 12339-15086
<PAGE>
CREDIT AGREEMENT
THIS AGREEMENT made as of the 30th day of January, 1998.
B E T W E E N:
THE TORONTO-DOMINION BANK, a Canadian chartered bank
(herein called the "Bank"),
- and -
CERIDIAN CANADA LTD., a corporation incorporated under the laws of
Canada
(herein called the "Borrower").
WHEREAS the Borrower has requested the Bank to establish a reducing, revolving
credit facility to be used to finance the acquisition by the Borrower of all of
the issued and outstanding shares in the capital stock of 3454916 Canada Inc.
("Newco") a corporation established by the Bank to acquire the the Bank's
Payroll Business, and for other general corporate purposes;
AND WHEREAS the Bank is willing to provide such a reducing, revolving credit
facility to the Borrower for the aforesaid purposes upon the terms and
conditions contained herein;
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual
covenants and agreements herein contained and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties hereto covenant and agree as follows:
ARTICLE 1
INTERPRETATION
1.01 Defined Terms. The defined terms set forth in Appendix A shall for all
purposes of this agreement, or any amendment hereto, have the respective
meanings set forth therein unless the context otherwise specifies or requires or
unless otherwise defined herein.
1.02 Applicable Law. This agreement and all documents delivered pursuant
hereto shall be governed by and construed and interpreted in accordance with the
laws of the Province of Ontario and
<PAGE>
the laws of Canada applicable therein and the parties hereto do hereby attorn to
the non-exclusive jurisdiction of the courts of the Province of Ontario.
1.03 Amount of Credit. Any reference herein to the amount of credit
outstanding shall mean, at any particular time:
(a) in the case of a Prime Rate Loan, the principal amount thereof;
(b) in the case of a LIBO Loan or Base Rate Canada Loan, the Canadian
Dollar Equivalent of the principal amount of such Loan;
(c) in the case of a Bankers' Acceptance, the face amount of the
Bankers' Acceptance.
1.04 Canadian Dollars. All amounts referred to herein shall refer to lawful
currency of Canada, unless otherwise stated.
ARTICLE 2
CREDIT FACILITY
2.01 Establishment of Credit Facility. Subject to the terms and conditions
hereof, the Bank hereby establishes in favour of the Borrower a reducing,
revolving term credit facility (the "Credit Facility") in the amount of the
Facility Limit.
ARTICLE 3
GENERAL PROVISIONS RELATING TO CREDITS
3.01 Types of Credit Availments. The Borrower may obtain credit under the
Credit Facility by way of one or more Prime Rate Loans, Base Rate Canada Loans,
LIBO Loans (subject in all cases to availability), and Bankers' Acceptances.
3.02 Loan Advances and Payments. Each Loan advance and each payment by the
Borrower hereunder shall be made prior to 12:00 noon (Toronto time) on the
relevant date by deposit to the Designated Account. The Bank shall be entitled
to withdraw the amount of any payment due to it hereunder from such account on
the day specified for payment.
3.03 (a) Bankers' Acceptances. To facilitate the drawing of Bankers
Acceptances hereunder, the Borrower shall execute and deliver to the Bank a
supply of drafts executed by the Borrower, which the Bank shall hold in
safekeeping. The Bank shall not be responsible for its failure to accept a
draft as required hereunder if the cause of the failure is, in whole or in part,
due to the failure of the Borrower to provide such drafts to the Bank on a
timely basis. The Bank agrees to use its best efforts to advise the Borrower in
a timely manner when it requires additional executed drafts. If executed but
2
<PAGE>
incomplete drafts are delivered to the Bank, the Bank may complete the same on
behalf of the Borrower following receipt of a drawdown notice from the Borrower
to accept drafts pursuant to Sec. 3.06 herein.
(b) No Obligation to Purchase. The Bank shall not be obligated to
purchase or discount any Bankers' Acceptances. The Borrower shall be
responsible for arranging the purchase or discounting of any such Bankers'
Acceptances by a money market dealer or the Bank, and if a money market dealer
is used to facilitate settlement, the details of such purchase or discounting
shall be advised promptly by the Borrower to the Bank, by telephone or facsimile
transmission.
3.04 Timing of Credit Availments. No Bankers' Acceptance or LIBO Loan may
have an Interest Period which would exceed the Maturity Date.
3.05 Evidence of Indebtedness. The Bank shall open and maintain accounts
wherein the Bank shall record the amount of outstanding credit, each payment of
principal and interest on account of each Loan, each Bankers' Acceptance
accepted and cancelled and all other amounts becoming due to and being paid to
the Bank hereunder, including Stamping Fees. The Bank's accounts constitute, in
the absence of manifest error, prima facie evidence of the indebtedness of the
Borrower to the Bank pursuant to this agreement.
3.06 Notice Periods. Each notice of a drawdown, rollover, prepayment,
repayment or conversion from one type of credit availment to another hereunder
shall be irrevocable and shall be given to the Bank in the forms attached hereto
as Appendix "B" :
(a) prior to 10:30 a.m. (Toronto time) on the third Banking Day prior
to the date of a drawdown of, rollover of, conversion into,
conversion of, prepayment of or repayment of a LIBO Loan;
(b) prior to 10:30 am (Toronto time) on the second Banking Day prior
to the date of drawdown or conversion into a Bankers' Acceptance;
(c) prior to 10:30 a.m. (Toronto time) on the first Banking Day prior
to the date of a drawdown of, conversion into, conversion of,
prepayment of or repayment of a Prime Rate Loan in a principal
amount exceeding Cdn. $10,000,000 or a Base Rate Canada Loan in a
principal amount exceeding U.S. $10,000,000; and
(d) prior to 10:30 a.m. (Toronto time) on the Banking Day of any other
drawdown, rollover, conversion, prepayment or repayment.
3.07 Absence of Instructions. In the absence of written notice from the
Borrower within the appropriate time periods referred to herein, a maturing LIBO
Loan shall be automatically converted
3
<PAGE>
into a Base Rate Canada Loan and a maturing Bankers' Acceptance shall be
automatically converted into a Prime Rate Loan.
3.08 Reimbursement Obligation. The Bank shall, on the maturity date of a
Bankers' Acceptance, pay to the holder thereof the face amount of such Bankers'
Acceptance and the Borrower shall fully reimburse the Bank on such date for the
amount of any such payment.
ARTICLE 4
INTEREST AND FEES
4.01 Interest Rates. The Borrower shall pay to the Bank interest and fees on
the outstanding principal amount from time to time of each Loan from time to
time, at the rate per annum equal to the following rates or equal to the
following fees, as the case may be:
(a) in the case of each Prime Rate Loan, the Prime Rate;
(b) in the case of each Base Rate Canada Loan, the Alternate Base Rate
Canada;
(c) in the case of each LIBO Loan, the LIBO Rate plus 47.5 basis
points; and
(d) in the case of Banker's Acceptances, the Stamping Fee at 47.5
basis points per annum.
4.02 Calculation and Payment of Interest.
(a) Interest on the outstanding principal amount from time to time of each
Loan and on the amount of overdue interest thereon from time to time shall
accrue from day to day (both before and after maturity and as well after as
before judgment) and shall be calculated on the basis of the actual number of
days elapsed divided by the actual number of days in the year in the case of a
Prime Rate Loan or Base Rate Canada Loan or divided by 360 in the case of a LIBO
Loan.
(b) Accrued interest shall be paid,
(i) in the case of interest on Prime Rate Loans and Base Rate Canada
Loans, monthly in arrears on the last Banking Day of each calendar
month; and
(ii) in the case of interest on LIBO Loans, on the last day of the
applicable Interest Period.
4
<PAGE>
4.03 General Interest Rules.
(a) For the purposes hereof, whenever interest is calculated on the basis of
a year of 360 days, each rate of interest determined pursuant to such
calculation expressed as an annual rate for the purposes of the Interest Act
(Canada) is equivalent to such rate as so determined multiplied by the actual
number of days in the calendar year in which the same is to be ascertained and
divided by 360.
(b) Following the occurrence of an Event of Default, the Borrower shall pay
interest on amounts outstanding (as well after as before judgment) at the rate
per annum, calculated and compounded monthly, which is equal to the Prime Rate
plus 2%. Such interest on overdue amounts shall become due and be paid on
demand made by the Bank.
4.04 Stamping Fees. Upon the acceptance of any draft of the Borrower
pursuant hereto, the Borrower shall pay to the Bank, in advance, the Stamping
Fee calculated at the rate per annum, on the basis of the actual number of days
in the year, equal to 47.5 basis points per annum on the face amount of such
Bankers' Acceptance for its term, being the actual number of days in the period
commencing on the date of acceptance of the Borrower's draft and ending on but
excluding the maturity date of the Bankers' Acceptance.
4.05 Stand-by Fee. On the first Banking Day of each calendar quarter
commencing April 1, 1998, and on the Maturity Date, the Borrower shall pay to
the Bank, in arrears, a Stand-by Fee calculated on the basis of a year of 365
days or 366 days in the case of a leap year at 12.5 basis points per annum, on
the daily average of the unused portion of the Credit Facility, such fee to
accrue daily from, and including the first day of the previous calendar quarter
(or the date hereof, if later) to and including the last day of the previous
calendar quarter, and in the case of the final payment, up to the Maturity Date.
4.06 Arrangement Fee. On or prior to the date of execution of this
Agreement, the Borrower shall pay to the Bank an arrangement fee in an amount
equal to $40,000.
ARTICLE 5
REPAYMENTS AND PREPAYMENTS
5.01 Repayments under Credit Facility. The Borrower will repay all amounts
outstanding hereunder to ensure that the amount outstanding does not exceed the
Facility Limit, and to ensure that all amounts outstanding are repaid in full on
or before the Maturity Date, or earlier, if the Bank demands repayment following
the occurrence of an Event of Default.
5
<PAGE>
5.02 Facility Limit. The Facility Limit shall reduce in accordance with the
following repayment schedule:
Date Facility Limit*
July 31, 1998 $40,000,000 Cdn
July 31, 1999 $40,000,000 Cdn
July 31, 2000 $40,000,000 Cdn
July 31, 2001 $35,000,000 Cdn
July 31, 2002 $0
(* Canadian dollars or the U.S. Dollar Equivalent thereof)
5.03 Repayments of Credit Excess. The Borrower shall also repay to the Bank
automatically, and without the necessity of demand, the Credit Excess from time
to time, whether such Credit Excess results from the calculation by the Bank
each day of the Canadian Dollar Equivalent of amounts outstanding in U.S.
dollars, or otherwise.
5.04 Prepayments. The Borrower shall be entitled to prepay all or any
portion of the amount outstanding under the Credit Facility at any time upon
notice given to the Bank in accordance with Section 3.06, provided that:
(i) if the Borrower pays a LIBO Loan prior to expiry of the Interest Period
applicable to that LIBO Loan the Borrower will pay to the Bank all costs and
expenses of re-employing the amounts so repaid and the Borrower will comply with
paragraph 7.01(i) in connection with such prepayment, and
(ii) Bankers' Acceptances may not be repaid prior to the expiry of the Interest
Period of such Bankers' Acceptance.
Prior to the Maturity Date, all amounts which are prepaid as aforesaid may be
reborrowed up to the Facility Limit.
5.05 Cancellation. The Borrower may permanently cancel all or any portion of
the Credit Facility upon 30 days prior written notice to the Bank.
5.06 Withholding Tax. All payments made by the Borrower to the Bank will be
made free and clear of all present and future taxes (excluding the Bank's income
or capital taxes), withholdings or deductions of whatever nature. If these
taxes, withholdings or deductions are required by applicable law and are made,
the Borrower, shall, as a separate and independent obligation, pay to the Bank
all additional amounts as shall fully indemnify the Bank from any such taxes,
withholding or deduction.
6
<PAGE>
5.07 Waiver of Set-Off. The Borrower agrees to make all payments due
hereunder without set-off or counterclaim. In addition, the Borrower shall make
all payments hereunder free and clear of, and without deduction for, any amount
owed to the Borrower and the Guarantor by the Bank, pursuant to or in connection
with, the Share Purchase Agreement, or otherwise in connection with the purchase
by the Borrower of the Shares. The Borrower hereby waives any right to set-off
any and all amounts owing to the Borrower or the Guarantor by the Bank against
any and all amounts owing by the Borrower to the Bank.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.01 Representations and Warranties. To induce the Bank to enter into this
agreement, the Borrower hereby represents and warrants to the Bank as follows
and acknowledges and confirms that the Bank is relying upon such representations
and warranties in extending credit hereunder:
(a) Status and Power. The Borrower is a corporation duly incorporated and
organized and validly subsisting under the laws of the jurisdiction of
its incorporation and is duly qualified, registered or licensed in all
jurisdictions where such qualification, registration or licensing is
required to the extent that it is material. The Borrower has all
requisite corporate capacity, power and authority to own, hold under
licence or lease its properties, to carry on its business as now
conducted and to otherwise enter into, and carry out the transactions
contemplated by, this agreement.
(b) Authorization and Enforcement of Documents. All necessary action,
corporate or otherwise, has been taken to authorize the execution,
delivery and performance of this agreement by the Borrower and the
Borrower has duly executed and delivered this agreement. This agreement
is a legal, valid and binding obligation of the Borrower, enforceable
against the Borrower by the Bank in accordance with its terms.
(c) Compliance with Other Instruments. The execution, delivery and
performance of this agreement and the consummation of the transactions
contemplated herein do not and will not conflict with, result in any
breach or violation of, or constitute a default under, the terms,
conditions or provisions of the constating documents or by-laws of the
Borrower or of any law, regulation, judgment, decree or order binding on
or applicable to the Borrower or by which the Borrower benefits or to
which any of its property is subject or of any material agreement,
lease, licence, permit or other instrument to which the Borrower is a
party or is otherwise bound or by which the Borrower benefits or to
which any of its property is subject and do not require the consent or
approval of any other party or any governmental body, agency or
authority.
7
<PAGE>
(d) Litigation. There are no actions, suits, inquiries, claims or
proceedings pending or, to the knowledge of the Borrower, threatened
against or affecting the Borrower before any government, parliament,
legislature, regulatory authority, agency, commission, board or court or
before any private arbitrator, mediator or referee which in any case or
in the aggregate may result in any material adverse change in the
ability of the Borrower to perform its obligations under this agreement.
(e) Compliance with Laws. The Borrower is not in violation of any mortgage,
franchise, licence, judgment, decree, order, statute, rule or regulation
relating in any way to the Borrower, to the operation of its business or
to its property or assets where such violation might reasonably be
expected to result in a material adverse change in the business,
financial condition or operations of the Borrower.
(f) Taxes. All of the remittances required to be made by the Borrower to
the federal, provincial and municipal governments have been made and are
currently up to date. Without limiting the foregoing, all employee
source deductions (including income taxes, unemployment insurance and
Canada pension plan), sales taxes (both provincial and federal),
corporate income taxes, payroll taxes and workmen's compensation dues
are currently paid and up to date, except for such taxes which are being
contested in good faith by proper proceedings with appropriate reserves
having been set aside.
(g) Environmental.
(i) The condition and use of any of the Borrower's properties and any
prior use by the Borrower of such properties is in material
compliance with all applicable environmental, health and safety
laws and standards.
(ii) None of the Borrower's properties, or any part thereof, is subject
to any remedial control, action, direction, order, or
investigation (which is material) by the Ministry of the
Environment or any authority having jurisdiction over matters
involving the environment.
(h) Financial Statements
The audited financial statements for the Guarantor last delivered to the
Bank present fairly its financial position in all material respects, as
of the date shown on such financial statements, and have been prepared
in accordance with generally accepting accounting principles,
consistently applied. Since such date no material adverse change in the
business or financial position, operation, property or assets of the
Borrower or the Guarantor has occurred, other than has
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been disclosed in writing to the Bank and in filings with the United
States Securities and Exchange Commission prior to the date hereof
relating to (i) charges incurred by the Guarantor in the third and
fourth quarters of 1997; (ii) the sale of Guarantor's detense
electronics business and (iii) the repurchase by the Guarantor of its
stock.
(i) Guarantor.
The address of the Guarantor's corporate head office and chief executive
office and the office at which the Guarantor's primary corporate and
business records are maintained is 8100 34th Avenue South, Minncapolis,
MN, USA 55438.
6.02 Survival of Representations and Warranties. All of the
representations and warranties of the Borrower contained in Section 6.01 shall
survive the execution and delivery of this agreement notwithstanding any
investigation made at any time by or on behalf of the Bank and shall be deemed
to be repeated on the date of each Advance hereunder.
ARTICLE 7
COVENANTS
7.01 Covenants. The Borrower hereby covenants and agrees with the Bank that,
so long as any amount is outstanding hereunder or so long as the Bank shall have
any commitment hereunder, unless the Bank otherwise expressly consents in
writing:
(a) Punctual Payment. The Borrower will pay all amounts outstanding
hereunder and all interest thereon and all fees and other amounts
required to be paid by it hereunder in the manner and at the times
specified hereunder.
(b) Financial Reporting. The Borrower shall furnish the Bank with the
following statements, reports and certificates:
(i) within 120 days after the end of each fiscal year of the Borrower,
copies of the Borrower's annual financial statements with respect
thereto;
(ii) upon delivery of the financial statements, a certificate of a
senior officer of the Borrower certifying that no Default related
to the Borrower has occurred and is continuing; and
(iii) such other statements, reports and information as the Bank may
reasonably request from time to time.
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(c) Corporate Existence. Subject to section 7.01(s), the Borrower shall
maintain its corporate existence in good standing and shall not take
part in any dissolution, reorganization, amalgamation, merger or any
similar proceeding or arrangement without the Bank's prior written
consent, not to be unreasonably withheld.
(d) Material Adverse Change. The Borrower shall promptly notify the Bank of
any material adverse change in the financial condition of the Borrower
or in the ability of the Borrower to satisfy its obligations hereunder.
(e) Costs and Expenses. The Borrower shall pay all reasonable costs, fees,
and expenses, (including outside legal fees) incurred by the Bank (i)
for services rendered by outside counsel in connection with the
preparation of this Agreement and the Guarantee and with the
establishment of the Credit Facility, but in no event shall such costs,
fees and expenses to be paid by the Borrower and Guarantor pursuant to
section 6.11 of the Guarantee exceed $20,000 Cdn.; and (ii) in
connection with the enforcement of this Agreement and the collection of
amounts outstanding hereunder and outstanding under the Guarantee.
(f) Notice of Default. The Borrower shall promptly notify the Bank of the
occurrence of any Default or Event of Default and shall concurrently
deliver to the Bank a detailed statement of a senior officer of the
Borrower of the steps, if any, being taken to cure or remedy such
Default or Event of Default.
(g) Negative Pledge. Other than Permitted Liens, the Borrower will not
create, issue, incur, assume or permit to exist any security interest,
lien, charge or other encumbrance of any kind on or in respect of any of
its assets or undertakings.
(h) Change of Circumstances. If the introduction or adoption of any law,
regulation, guideline, request or directive (whether or not having the
force of law) of any governmental authority, central bank or comparable
agency ("Restraint") or any change therein or in the application thereof
to the Borrower or to the Bank or in the interpretation or
administration thereof or any compliance by the Bank therewith shall
impose or require any reserve, special deposit requirements or tax
(excluding taxes measured with reference to the net income or capital of
the Bank), shall establish an appropriate amount of capital to be
maintained by the Bank or shall impose any other requirement or
condition which results in an increased cost to the Bank of extending or
maintaining a credit or obligation hereunder or reduces the amount
received or receivable by the Bank with respect to the Credit Facility
under this agreement or reduces the Bank's effective return hereunder or
on its capital or causes the Bank to make any payment or to forego any
return based on any amount received or receivable hereunder, then,
provided that
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there has been notification to the Borrower by the Bank, the Borrower
shall pay to the Bank such amounts as shall fully compensate the Bank
for all such increased costs, reductions, payments or foregone returns
which accrue after the 100th day following such notification. The Bank
shall notify the Borrower of any actual increased or imposed costs,
reductions, payments or foregone returns forthwith on becoming aware of
same and shall concurrently provide to the Borrower a certificate of an
officer of the Bank setting forth the amount of compensation to be paid
to the Bank and the basis for the calculation of such amount.
(i) Indemnity. Upon notice from the Bank (which notice shall be accompanied
by a detailed calculation of the amount to be paid by the Borrower), the
Borrower shall pay to the Bank such amount or amounts as will compensate
the Bank for any loss, cost or expense incurred by it in the liquidation
or re-deposit of any funds acquired by the Bank to fund or maintain any
portion of a LIBO Loan as a result of:
(i) the failure of the Borrower to borrow or make repayments on the
dates specified under this agreement or in any notice from the
Borrower to the Bank; or
(ii) the repayment or prepayment of any amounts on a day other than the
payment dates prescribed herein.
(j) Existence and Conduct of Business. The Borrower shall maintain its
existence in good standing (subject to section 7.01(s)) and do or cause
to be done all things necessary to keep in full force and effect all
rights, franchises, licenses, contracts and agreements which are
necessary to own its assets and carry on its business. The Borrower
will maintain its assets in good repair and working condition and will
carry on only the type of businesses carried on by the Guarantor at the
date hereof . The Borrower shall conduct its business in such a manner
so as to comply in all material respects with all applicable laws and
regulations.
(k) Further Assurances. The Borrower shall, at the Bank's request, and at
the Borrower's expense, perform such acts as may be necessary or
advisable to carry out the intent of this Agreement.
(l) Litigation, etc. The Borrower shall give the Bank prompt written notice
of any material litigation involving the Borrower or proceeding which
might reasonably be considered to materially adversely affect the
Borrower's financial status or the operation of its business.
(m) Insurance. The Borrower shall maintain in force with reputable insurers
insurance with respect to losses of or damage to its assets from such
risks, casualties and contingencies and of such
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types and in such amounts and subject to such deductible amounts as are
customary in the case of persons engaged in the same or similar business
with similar assets.
(n) Rights of Inspection. At any reasonable time and from time to time upon
reasonable prior notice, which in any event shall not be less than 3
Banking Days, the Borrower will, within the limits of its powers and the
law, permit the Bank or any authorized representative thereof, at the
expense of the Bank, to inspect its assets and properties and to examine
and make copies of any financial information in its possession relating
to its records and books of account. In exercising the Bank's rights
under this section, the Bank will take all reasonable steps to minimize
the disruption to the ordinary course of operation of the Borrower's
business.
(o) No Sale. The Borrower will not, sell, assign, transfer, convey, or
otherwise dispose of or permit or acquiesce in the sale, assignment,
transfer, conveyance or other disposition of its assets other than in
the ordinary course of business and other than the sale of obsolete
assets or assets no longer used in the business of the Borrower, sold in
a commercially reasonable manner, for value.
(p) Pari Passu Ranking. The Borrower will not take, or permit any action to
be taken, or suffer to exist any event, which results or would result in
the amounts due or to become due hereunder ceasing to rank pari passu,
equally, and rateably with all other unsubordinated obligations of the
Borrower.
(q) Payment of Taxes and Claims. The Borrower will pay and discharge
before the same become delinquent:
(i) all material taxes, assessments and governmental charges or levies
imposed upon it or upon its assets; and
(ii) all lawful claims which, if unpaid, might become a lien upon its
assets, except for any such tax or claim which is being contested
in good faith by proper proceedings with appropriate reserves
having been set aside.
(r) No Dividends. The Borrower shall not declare or pay any dividends,
purchase, redeem or retire or otherwise acquire for value any of the Borrower's
capital stock now or hereafter outstanding or, except in the ordinary course of
its business, make any loans or advances to any entity, including without
limitation, the Guarantor or any affiliate of the Borrower or the Guarantor.
(s) Amalgamation. The Borrower shall, as soon as possible after completion
of the transactions and agreements under the Share Purchase Agreement,
amalgamate with Newco pursuant to the laws of Canada and shall cause Amalco to
(i) execute such acknowledgements, assumptions, or other
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agreements as shall be reasonably required by the Bank to ensure that Amalco
shall be bound by this Agreement, (ii) provide a certificate of a senior officer
of Amalco setting forth the specimen signatures of the individuals authorized to
sign documents referred to in (i) above, and (iii) provide an opinion of counsel
to Amalco addressed to the Bank, in a format acceptable to the Bank.
ARTICLE 8
CONDITIONS PRECEDENT
8.01 Conditions Precedent to Effectiveness of Agreement. This agreement
shall become effective upon the fulfillment of the following conditions
precedent:
(a) the conditions precedent set forth in Section 8.02 have been
fulfilled or have been waived by the Bank;
(b) the parties shall have entered into, and all conditions precedent
to the transaction contemplated by, the Share Purchase Agreement
shall have been satisfied or waived;
(c) the Borrower has filed the Articles of Amalgamation to form
Amalco, which Articles of Amalgamation will not become effective
until after the purchase by the Borrower of the Shares;
(d) the Bank and its counsel shall be satisfied that all necessary
approvals, acknowledgments and consents have been given and all
relevant laws have been complied with as concerns all agreements
and transactions referred to herein; and
(e) the Bank has received, in form and substance satisfactory to the
Bank,
(i) certificates of a senior officer of each of the Obligors
setting forth specimen signatures of the individuals
authorized to sign this agreement, and the documents
referred to in Section 7.01(s), certified copies of the
resolutions or other corporate proceedings of the Obligors
authorizing the transactions under this Agreement and other
corporate and factual matters relevant to the transactions
under this Agreement;
(ii) an opinion of counsel to the Borrower, addressed to the
Bank, in the form annexed hereto as Appendix "C"
(iii) the Guarantee and an opinion of counsel to the Guarantor,
addressed to the Bank, in the form annected hereto as
Appendix "D".
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(iv) an opinion of United States counsel to the Bank, addressed
to the Bank, in the form annexed hereto as Appendix "E".
8.02 Conditions Precedent to All Credit. The obligation of the Bank to
extend credit hereunder by means of drawdown, rollover or conversion from one
type of credit availment to another is subject to fulfillment of the following
conditions precedent on the date such credit is extended:
(a) no Default has occurred and is continuing or would arise as a
result of such extension of credit; and
(b) the representations and warranties of the Borrower contained in
Section 6.01, the representations and warranties of the Guarantor
contained in Article V of the Guarantor Credit Agreement, and the
representations of the Guarantor contained in the Guarantee shall
be true and correct in all material respects on and as of the date
such credit is obtained as if such representations and warranties
were made on such date, except to the extent they refer to filings
made by the Guarantor with the United States Securities and
Exchange Commission ("SEC"), in which case they shall be deemed
amended to include all filings made by the Guarantor with the SEC
to the date hereof.
8.03 Waiver. The terms and conditions of Section 8.02 are inserted for the
sole benefit of the Bank and the Bank may waive them in whole or in part, with
or without terms or conditions, in respect of any extension of credit, without
prejudicing the Bank's right to assert them in whole or in part in respect of
any other extension of credit.
ARTICLE 9
DEFAULT AND REMEDIES
9.01 Events of Default. Upon the occurrence of any one or more of the
following events:
(a) the non-payment of any amount due hereunder within three Banking
Days after notice of non-payment has been given to the Borrower by
the Bank;
(b) the permanent suspension of substantially all of the operations of
the Borrower;
(c) the Borrower shall (i) become insolvent or generally not pay its
debts as such debts become due, (ii) admit, in writing, its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; (iii) file a notice of
intention to file a
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proposal under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors; (iv) institute or have
instituted against it any proceeding seeking:
(i) to adjudicate it a bankrupt or insolvent,
(ii) a liquidation, winding-up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its
debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or
(iii) the entry of any order for relief or the appointment of a
receiver, trustee or custodian for it or for any substantial
part of its assets,
and, in the case of any such proceeding instituted against it (but
not instituted by it) the proceedings have not been discharged
within 30 days from the commencement of such proceedings;
(d) any representation or warranty made by the Borrower in this
agreement or any representation and warranty made by the Guarantor
in the Guarantor Credit Agreement or any information furnished in
writing to the Bank by the Borrower or by the Guarantor proves to
have been incorrect in any material respect when made or
furnished;
(e) the breach or failure of due observance or performance by the
Borrower of any covenant or provision of this agreement, other
than those heretofore dealt with in this Section 9.01, or of any
other document, agreement or instrument delivered pursuant hereto
or referred to herein which is not remedied by the Borrower within
ten Banking Days after the earlier of (i) the time that the
Borrower becomes aware of the default or (ii) the time of the
giving of notice from the Bank to the Borrower of the occurrence
of such breach;
(f) if there shall be an action, suit, inquiry, claim or proceeding
against or affecting the Borrower before any governmental,
parliament, legislature, regulatory authority, agency, commission,
board or court or before any private arbitrator, mediator or
referee which in any case or in the aggregate would reasonably be
expected to result in the inability of the Borrower to perform its
obligations hereunder;
(g) if a receiver, receiver manager, liquidator or other person with
like powers is appointed with respect to, or if an encumbrancer
takes possession of any substantial part of the properties or
assets of the Borrower and such encumbrancer continues to be in
possession thereof for a period of thirty (30) days;
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(h) if one or more final judgments or orders for the payment of money
in excess of $1,000,000 be rendered against the Borrower which is
not appealed or discharged within 30 days from the imposition of
such judgment;
(i) if an event or condition shall occur which constitutes an event of
default under any other agreement or instrument relating to
indebtedness of the Borrower exceeding $1,000,000 or which would
permit the acceleration of such indebtedness;
(j) if an Event of Default (as defined in the Guarantor Credit
Agreement) shall occur under the Guarantor Credit Agreement, it
being agreed that if the Guarantor Credit Agreement provides that
a specified event of default may not occur until a period of time
has elapsed following the giving of notice by the Agent (under and
as defined in the Guarantor Credit Agreement) then such notice may
be provided by the Bank, for the purpose of this Agreement;
(k) if the Guarantor shall breach any of the Financial Covenants and
such breach shall continue unremedied for a period of 20 days,
whether or not the lenders under the Guarantor Credit Agreement
shall have waived compliance with such Financial Covenants and
whether or not such lenders shall have agreed that such default
shall not be an Event of Default;
(l) if the Guarantor shall breach any of the representations,
warranties or, covenants set out in the Guarantee (and in the case
of a breach of the representations, warranties or covenants set
out in the Guarantor Credit Agreement which are incorporated by
reference in the Guarantee, such breach constitutes an Event of
Default under the Guarantor Credit Agreement) including without
limitation, if the indebtedness and liability of the Guarantor
under the Guarantee shall no longer rank pari passu, equally, and
rateably with all of the present and future indebtedness and
liability of the Guarantor;
(m) if the Guarantor shall no longer directly or indirectly, own a
majority of the issued and outstanding voting shares of the
Borrower;
(n) if all or any part of the Guarantee is invalid, unenforceable or
terminated in any respect, or if the Guarantor denies all or any
of its obligations under the Guarantee,
then, without limitation to the Bank's rights and remedies at law or in equity,
the right of the Borrower to obtain any further credit hereunder and all of the
obligations of the Bank hereunder to extend such further credit shall
automatically terminate and the Bank may, by notice to the Borrower, declare all
indebtedness of the Borrower to the Bank pursuant to this agreement (including
the present value of
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the face amount of all Bankers' Acceptances issued and outstanding hereunder
based on their respective maturity dates, the present value to be calculated
using a discount rate equal to the yield of bills of exchange accepted by the
Bank and having a similar maturity date) to be immediately due and payable
whereupon all such indebtedness shall immediately become and be due and payable
without further demand or other notice of any kind, all of which are expressly
waived by the Borrower. Upon the payment by the Borrower to the Bank of the
present value of the face amount of all Bankers' Acceptances issued and
outstanding hereunder, the Borrower shall have no further liability to the Bank
with respect to such Bankers' Acceptances.
9.02 Automatic Acceleration. If the Borrower is adjudged or declared
bankrupt or insolvent or any of the proceedings referred in the event of default
set out at Section 9.01(c) above shall be voluntarily instituted by the
Borrower, or the Borrower indicates its consent to, approval of, or
acquiescence in, any such proceeding for it or for any substantial part of its
property, or consents to the appointment of any receiver or trustee (which
events shall be included in the list of events of default set out above), then,
without limiting the Bank's rights and remedies at law, equity, or otherwise
under this Agreement, all indebtedness of the Borrower to the Bank in connection
with the agreement will be automatically accelerated and will be required to be
paid by the Borrower, without the necessity of notice or otherwise and, any
right of the Borrower to any further utilization the Credit Facility shall
automatically terminate.
9.03 Remedies Cumlative. The rights and remedies of the Bank under this
Agreement are cumlative and are in addition to and not in substitution for any
other rights or remedies provided by law.
ARTICLE 10
MISCELLANEOUS
10.01 Waivers and Amendments. No failure or delay by the Bank in exercising
any right hereunder shall operate as a waiver of such right nor shall any single
or partial exercise of any power or right hereunder preclude its further
exercise or the exercise of any other power or right. Any waiver by the Bank of
the strict observance, performance or compliance with any term, covenant or
condition of this agreement is not a waiver of any subsequent default and any
indulgence by the Bank with respect to any failure to strictly observe, perform
or comply with any term, covenant or condition of this agreement is not a waiver
of the entire term, covenant or condition or any subsequent default. Any term,
covenant, agreement or condition of this agreement may only be amended with the
consent of the Borrower and the Bank or compliance therewith may only be waived
(either generally or in a particular instance and either retroactively or
prospectively) by the Bank.
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10.02 Notices. All notices and other communications provided for herein
shall be in writing and shall be personally delivered to an officer or other
responsible employee of the addressee or sent by telefacsimile or other direct
written electronic means, charges prepaid, at or to the applicable addresses or
telefacsimile numbers, as the case may be, set opposite the party's name on a
signature page hereof or at or to such other address or addresses or
telefacsimile number or numbers as either party hereto may from time to time
designate to the other party in such manner. Any communication which is
personally delivered as aforesaid shall be deemed to have been validly and
effectively given on the date of such delivery if such date is a Banking Day and
such delivery was made during normal business hours of the recipient; otherwise,
it shall be deemed to have been validly and effectively given on the Banking Day
next following such date of delivery. Any communication which is transmitted by
telefacsimile or other direct written electronic means as aforesaid shall be
deemed to have been validly and effectively given on the date of transmission if
such date is a Banking Day and such transmission was made during normal business
hours of the recipient; otherwise, it shall be deemed to have been validly and
effectively given on the Banking Day next following such date of transmission.
10.04 Successors and Assigns. This agreement shall enure to the benefit of
and shall be binding upon the parties hereto and their respective successors and
permitted assigns.
10.05 Assignment. Neither this agreement nor the benefit thereof may be
assigned by the Borrower. The rights and obligations of the Bank hereunder may
be assigned or participated by the Bank in whole or in part without the prior
written consent of the Borrower provided that, prior to the occurence of an
Event of Default:
(a) in the case of any such assignment, the assignee must be a
resident of Canada for the purposes of the Income Tax Act
(Canada); and
(b) no such assignment or participation shall impose any liabilities
or obligations on the Borrower or the Guarantor other than those
owed to the Bank by the Borrower and the Guarantor under this
agreement and the Guarantee.
10.06 Entire Agreement. This agreement and the agreements referred to herein
and delivered pursuant hereto constitute the entire agreement between the
parties hereto relating to the Credit Facility and supersede any prior
agreements, undertakings, declarations, representations and understandings, both
written and verbal, in respect of the subject matter hereof.
10.07 Foreign Currency Obligations. The Borrower shall make payment of all
amounts owing hereunder in the currency (the "Original Currency") in which the
Borrower is required to pay such obligation. If the Borrower makes payment
relative to any obligation to the Bank in a currency (the
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Other Currency") other than the Original Currency (whether voluntarily or
pursuant to an order or judgment of a court or tribunal of any jurisdiction)
such payment shall constitute a discharge of the Borrower's liability hereunder
in respect of such obligation only to the extent of the amount of the Original
Currency which the Bank is able to purchase at its main branch in the
jurisdiction where the loans to the Borrower are recorded, with the amount it
receives on the date of receipt in accordance with its normal practice. If the
amount of the Original Currency which the Bank is able to purchase is less than
the amount of such currency originally due to the Bank in respect to the
relevant obligation, the Borrower shall indemnify and save the Bank harmless
from and against any loss or damage arising as a result of such deficiency.
This indemnity shall constitute an obligation contained in this Agreement, shall
give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by the Bank and shall continue in full
force and effect notwithstanding any judgment or order in respect of any amount
due hereunder or under any judgment or order.
IN WITNESS WHEREOF the parties hereto have executed this Agreement.
THE TORONTO-DOMINION BANK
P.O. Box 1
Toronto Dominion Centre
55 King St. West & Bay St.
9th Floor, TD Tower
Toronto, Ontario
M5K 1A2
Attention: Manager
Credit Administration
Telefax: (416) 982-6630
Telephone: (416) 982-7671
c.c. TD New York
By:
---------------------------------------
Title:
------------------------------------
By:
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Title:
------------------------------------
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GUARANTEE AGREEMENT
TO: THE TORONTO-DOMINION BANK
WHEREAS CERIDIAN CANADA LTD. (hereinafter called the "BORROWER") is a wholly
owned subsidiary of CERIDIAN CORPORATION (hereinafter called the "GUARANTOR");
AND WHEREAS THE TORONTO-DOMINION BANK (hereinafter called the "BANK") has
established and may in the future establish one or more credit facilities in
favour of the Borrower;
AND WHEREAS, as security for the payment of the full amount of all of the
present and future indebtedness and liability of the Borrower to the Bank, the
Guarantor has agreed to guarantee payment of the Borrower's indebtedness and
liability to the Bank on the terms and subject to the conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the Guarantor hereby covenants to and for the benefit of the Bank
as follows:
GUARANTEE
Guarantee
1.01 The Guarantor hereby unconditionally, absolutely and irrevocably
guarantees the due and punctual and complete payment and satisfaction when due
(whether at stated maturity, by acceleration or otherwise), and at all times
thereafter, of all the Guaranteed Liabilities which are or may become at any
time and from time to time owing or payable by the Borrower to the Bank or which
remain owing and unpaid to the Bank. "Guaranteed Liabilities" means the
indebtedness, liabilities and obligations of the Borrower to the Bank, howsoever
incurred, present and future, direct and indirect, whether as principal or as
surety, absolute and contingent, matured and unmatured, at any time and from
time to time existing or arising under or by virtue of or otherwise in
connection with any credit facility made available by the Bank to the Borrower,
including without limitation, indebtedness and liability for or in connection
with any swap transaction, foreign exchange transaction, bankers acceptance,
direct and indirect loans and advances, and in each case, including all
interest, commissions, costs, charges, legal fees and expenses which may be
incurred in respect of such indebtedness and liability, and in each case,
whether or not any such indebtedness, liabilities or obligations are discharged,
stayed or otherwise affected, except to the extent such indebtedness,
liabilities or obligations are fully discharged by full, irrevocable and final
payment.
<PAGE>
- 2 -
PAYMENT
Payment
2.01 The Guarantor agrees to make immediate payment to the Bank of all
Guaranteed Liabilities then payable to the Bank upon receipt of a demand for
payment therefor by the Bank to the Guarantor in writing.
Taxes and Set Off by Guarantor
2.02. All payments to be made by the Guarantor hereunder shall be made without
set-off or counterclaim. In addition, the Guarantor shall make all payments to
the Bank hereunder, free and clear of, and without deduction, or withholding
for, or on account of, any tax levied by any country or subdivision thereof,
including any taxing authority of Canada or the United States of America
(whether Federal, State, Provincial or municipal; other than on account of any
tax on the Bank's general income, and other than on account of any capital or
franchise taxes, whether imposed under the laws of the jurisdiction of the Bank,
the Guarantor, or otherwise). If the Guarantor is required by any applicable
law, rule or regulation to make any deduction or withholdings for or on account
of any such tax, then the Guarantor will:
(a) promptly notify the Bank of such requirement;
(b) pay to the relevant authorities the full amount required to be deducted
or withheld (including the full amount paid by the Guarantor to the Bank
hereunder), promptly upon the earlier of determining that such deduction
is required or receiving notice that such amount has been assessed
against the Bank;
(c) promptly forward to the Bank an official receipt (or a certified copy),
or other documentation acceptable to the Bank, evidencing such payment
to such authorities; and
(d) pay to the Bank, in addition to the payment to which the Bank is
otherwise entitled, such additional amount as is necessary to ensure
that the net amount actually received and retained by the Bank (free and
clear of such tax, whether assessed against the Guarantor or the Bank)
will equal the full amount the Bank would have received had no such
deduction or withholding been required or taxed and assessed.
The Guarantor will promptly pay to the Bank the amount of any liability
(including, without limitation, any related liability for penalties and
interest) assessed directly against the Bank by reason of the failure or delay
of the Guarantor to deduct or withhold or pay any tax as foresaid.
<PAGE>
- 3 -
OBLIGATIONS ABSOLUTE
Obligations Absolute
3.01 The Guarantor unconditionally and irrevocably waives each and every
defense which, under principles of guarantee or suretyship law, would otherwise
operate to impair or diminish such liability; and nothing whatever except actual
full payment and performance to the Bank of the Guaranteed Liabilities (and all
other debts, obligations and liabilities of Guarantor under this Agreement)
shall operate to discharge the Guarantor's liability hereunder. The obligations
of the Guarantor hereunder are and shall be absolute and unconditional and any
monies or amounts expressed to be owing or payable by the Guarantor hereunder
which may not be recoverable from the Guarantor on the footing of a guarantee
shall be recoverable from the Guarantor as a primary obligor and principal
debtor in respect thereof.
Obligations Continuing
3.02 The obligations of the Guarantor hereunder shall be continuing and shall
remain in full force and effect so long as the Bank continues to deal with the
Borrower or until all the Guaranteed Liabilities have been paid and satisfied in
full. The obligations of the Guarantor hereunder shall not be satisfied,
reduced or discharged by any intermediate payment or satisfaction of the whole
or any part of the principal, interest, fees and other monies or amounts which
may at any time be or become owing or payable to the Bank by the Borrower.
3.03 The obligations of the Guarantor hereunder shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
which would otherwise have reduced the obligations of the Guarantor hereunder
(whether such payment shall have been by or on behalf of the Borrower or by or
on behalf of the Guarantor) is rescinded or reclaimed from the Bank upon the
insolvency, bankruptcy, liquidation or reorganization of the Borrower or the
Guarantor or otherwise, all as though such payment had not been made.
Obligations Not Affected
3.04 The obligations of the Guarantor hereunder shall not be affected or
impaired by any act, omission, matter or thing whatsoever, occurring before,
upon or after any demand for payment hereunder (and whether or not known to the
Guarantor or the Bank) which, but for this provision, might constitute a whole
or partial defense to a claim against the Guarantor hereunder or might operate
to release or otherwise exonerate the Guarantor from any of its obligations
hereunder or otherwise affect such obligations, whether occasioned by default of
the Bank or otherwise, including:
(a) any limitation of status or power, disability, incapacity or other
circumstance relating to the Borrower or any other person, including any
insolvency, bankruptcy, liquidation,
<PAGE>
- 4 -
reorganization, readjustment, composition, dissolution, winding-up or
other proceeding involving or affecting the Borrower or any other
person;
(b) any irregularity, defect, unenforceability or invalidity in respect of
any indebtedness or other obligation of the Borrower or any other person
under any credit agreement or any other document or instrument;
(c) any failure of the Borrower, whether or not without fault on its part,
to perform or comply with any of the provisions of any credit agreement
or to give notice thereof to the Guarantor;
(d) the taking or enforcing or exercising or the refusal or neglect to take
or enforce or exercise any right or remedy from or against the Borrower
or any other person or their respective assets or the release or
discharge of any such right or remedies;
(e) the granting of time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Borrower or
any other person;
(f) any amendment, variation, modification, supplement or replacement of any
credit agreement or any other document or instrument;
(g) any change in the ownership, control, name, objects, businesses, assets,
capital structure or constitution of the Borrower or the Guarantor;
(h) any merger or amalgamation of the Borrower or the Guarantor with any
person or persons;
(i) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction or by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, any
of the Guaranteed Liabilities or the obligations of the Guarantor under
this Guarantee; and
(j) any other circumstance that might otherwise constitute a legal or
equitable discharge or defense of the Borrower under any credit
agreement or of the Guarantor in respect of its guarantee hereunder.
Indemnity. As a separate and alternative stipulation, the Guarantor
unconditionally and irrevocably agrees that any sum expressed to be payable by
the Borrower under any credit facility established by the Bank in favour of the
Borrower but which is for any reason not recoverable from the Guarantor on the
basis of a guarantee shall nevertheless be recoverable from it on the basis of
an indemnity and shall be paid by it to the Bank on demand.
<PAGE>
- 5 -
Waiver
3.05 Without in any way limiting the provisions of Section 3.04 hereof, the
Guarantor hereby waives notice of acceptance hereof, notice of any liability of
the Guarantor hereunder, notice or proof of reliance by the Bank upon the
obligations of the Guarantor hereunder, and the diligence, presentment, demand
for payment on the Borrower, protest, notice of dishonour or non-payment of any
of the Guaranteed Liabilities, or other notice or formalities to the Borrower of
any kind whatsoever. The Guarantor further hereby waives any requirement that
the Bank take, protect, secure, perfect or insure any security interest or lien
or any property subject thereto or exhaust any right or take any action against
the Borrower or any other person or entity or any collateral.
No Obligation to Take Action Against Borrower
3.06 This is a guarantee of payment, and not of collection. The Bank shall
not have any obligation to enforce any rights or remedies or to take any other
steps against the Borrower or any other person or any property of the Borrower
or any other person before the Bank is entitled to demand payment and
performance by the Guarantor of its liabilities and obligations under this
Guarantee, and the Guarantor hereby waives all benefit of discussion. The
obligations of the Guarantor hereunder are independent of the Guaranteed
Liabilities and a separate action or actions may be brought and prosecuted
against the Guarantor to enforce this Guarantee, irrespective of whether any
action is brought against the Borrower or whether the Borrower is joined in any
such action or actions.
Dealing with the Borrower and Others
3.07 The Bank, without releasing, discharging, limiting or otherwise
affecting in whole or in part the Guarantor's obligations and liabilities
hereunder and without the consent of or notice to the Guarantor may,
(a) grant time, renewals, extensions, compromises, concessions, waivers,
releases, discharges and other indulgences to the Borrower or any other
person;
(b) take or abstain from taking securities or collateral from the Borrower
or from perfecting securities or collateral of the Borrower;
(c) release, discharge, compromise, realize, enforce or otherwise deal with
or do any act or thing in respect of (with or without consideration) any
and all collateral, mortgages or other security given by the Borrower or
any third party with respect to the obligations or matters contemplated
by any credit agreement;
<PAGE>
- 6 -
(d) accept compromises or arrangements from the Borrower;
(e) apply all monies at any time received from the Borrower or from
securities upon such part of the Guaranteed Liabilities as the Bank may
see fit or change any such application in whole or in part from time to
time as the Bank may see fit; and
(f) otherwise deal with, or waive or modify their right to deal with, the
Borrower and all other persons and securities as the Bank may see fit.
GUARANTOR COVENANTS
4.01 (a) The Guarantor hereby covenants and agrees that all of the Guarantor
Terms and Conditions are hereby incorporated in this Guarantee by reference,
mutatis mutandis, and made an integral part of this Guarantee. The Guarantor
Terms and Conditions shall be construed in such manner so that it is as if they
had originally been made in the Bank's favour and made in connection with, and
to induce the extension of, the credit facilities extended by the Bank to the
Borrower.
4.01 (b) Subject to section 4.01(c) hereof, the Bank agrees that the
Guarantor shall not be in default of its obligations hereunder to comply with
the Guarantor Terms and Conditions, until the occurrence of an Event of Default
(as defined in the Guarantor Credit Agreement); it being agreed that if the
Guarantor Credit Agreement provides that a specified event of default may not
occur until a period of time has elapsed following the giving of notice by the
Agent (under and as defined in the Guarantor Credit Agreement) then such notice
may be provided by the Bank, for the purpose of this Guarantee.
4.01 (c) Notwithstanding section 4.01(b), the Guarantor shall be in default
of its obligations to comply with the Guarantor Terms and Conditions if the
Guarantor shall breach any of the Financial Covenants and such breach shall
continue unremedied for a period of 20 days, whether or not the lenders under
the Guarantor Credit Agreement shall have waived compliance with such Financial
Covenants and whether or not such lenders shall have agreed that such default
shall not be an Event of Default.
"Guarantor Terms and Conditions" means the terms and conditions, (including
without limitation, the representations, warranties, affirmative covenants,
negative covenants, financial covenants and Events of Default) included in the
Guarantor Credit Agreement.
"Guarantor Credit Agreement" means, at any particular time :
(i) initially the Amended and Restated Credit Agreement dated as of December
12, 1995, Amended and Restated as of July 31, 1997, among the Guarantor, Bank of
America National Trust and Savings
<PAGE>
- 7 -
Association, as Agent, and The Financial Institutions parties thereto, as such
Credit Agreement has been amended and compliance with a certain financial
covenant therein has been waived pursuant to a Waiver and First Amendment to
Credit Agreement dated December 2, 1997, among the parties thereto;
(ii) if the Guarantor Credit Agreement as defined in clause (i) above is
amended, restated, supplemented, replaced or reduced when the Bank is a lender
thereunder then, subject to (iv) below in this definition, the "Guarantor Credit
Agreement" shall mean the Guarantor Credit Agreement as defined in clause (i)
hereof, as so amended, restated, supplemented, replaced or reduced;
(iii) if the Bank shall no longer be a lender under the Guarantor Credit
Agreement, or if the Guarantor Credit Agreement shall be cancelled, terminated,
or otherwise extinguished, then the "Guarantor Credit Agreement" shall be the
Guarantor Credit Agreement as defined in clause (i) or (ii) hereof, subject to
(iv) below in this defintion, that existed immediately prior to the time that
the Bank ceased to be a lender thereunder, or that existed immediately prior to
the time that the Guarantor Credit Agreement was cancelled, terminated or
otherwise extinguished, as the case may be; and
(iv) notwithstanding the foregoing, at all times the Financial Covenants shall
be the Financial Covenants which exist at the date of this Agreement, unless the
Bank has specifically consented in writing to a waiver, amendment, modification,
restatement, replacement, or elimination of the Financial Covenants (including
the defined terms as utilized therein).
"Financial Covenants" means the financial covenants (including the defined terms
as utilized therein) contained in sections 7.01, 7.09 and 7.10 of the Guarantor
Credit Agreement, as "Guarantor Credit Agreement" is defined in clause (i) of
the definition of Guarantor Credit Agreement, and subject to modification,
waiver, replacement or elimination solely as provided in clause (iv) of the
definition of Guarantor Credit Agreement.
4.01 (d) For greater certainty, the parties agree that any amendments,
supplements, modifications, restatements, or replacements, or the elimination of
the Financial Covenants (including the defined terms as utilized therein) shall
not be incorporated in this Guarantee by reference unless the Bank has
specifically consented to such amendments, supplements, modifications,
restatements, replacements, or elimination, in writing.
<PAGE>
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Reporting
4.02 The Guarantor will provide to the Bank such notices, financial
statements and other information which is required to be provided under the
Guarantor Credit Agreement, in the same manner and within the same time periods,
as set out in the Guarantor Credit Agreement. To the extent that the Guarantor
shall have provided such notices, financial statements and other information to
the Bank in the Bank's capacity as a lender under the Guarantor Credit
Agreement, the Guarantor shall be deemed to have satisfied its obligations to
provide information under this section of the Guarantee. For greater certainty,
it is agreed that the Guarantor's obligation to provide such information shall
continue even if clause (ii) or (iii) of the definition of Guarantor Credit
Agreement is applicable.
Ownership
4.03 The Guarantor will, at all times, continue to own, directely or
indirectly, the majority of the issued and outstanding voting shares in the
capital stock of the Borrower.
Pari Passu
4.04 The Guarantor hereby covenants that:
(i) its obligations under this Guarantee shall, at all times hereafter, rank
pari passu, equally, and ratably with all of the indebtedness and liability of
the Guarantor under the Guarantor Credit Agreement, and
(ii) its obligations under this Guarantee shall, at all times hereafter, rank
pari passu, equally and ratably with all of the other present and future
unsubordinated indebtedness and liability of the Guarantor, except that this
clause 4.04(ii) shall not restrict the creation of Permitted Liens as "Permitted
Liens" is defined in the Guarantor Credit Agreement and as "Guarantor Credit
Agreement" is defined in clause (i) of the definition of Guarantor Credit
Agreement hereunder.
GUARANTOR REPRESENTATIONS
5.01 The Guarantor hereby represents and warrants that:
(a) its obligations under this Guarantee rank pari passu, equally and
ratably with all of its other unsubordinated indebtedness and liability
outstanding at the date hereof;
(b) the execution, delivery and performance of this Guarantee by the
Guarantor are within the corporate powers of the Guarantor, have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the stockholders of the Guarantor which has not
<PAGE>
- 9 -
been obtained, (ii) violate any provision of the articles of incorporation or
by-laws of the Guarantor or of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Guarantor or any subsidiary of the Guarantor; (iii)
require the consent or approval of, or filing or registration with, any
governmental body, agency or authority, or (iv) result in a breach of or
constitute a default under, or result in the imposition of any lien, charge or
encumbrance upon any property of the Guarantor or any subsidiary of the
Guarantor pursuant to, any indenture or other agreement or instrument under
which the Guarantor or any subsidiary of the Guarantor is a party or by which it
or any of its properties may be bound or affected, and
(c) this Guarantee, when executed and delivered, will constitute the legal,
valid and binding obligation of the Guarantor enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforceability of creditors' rights generally or by
equitable principles relating to enforceability.
MISCELLANEOUS
Amendment, Etc.
6.01 No amendment, modification or waiver of any provision of this Guarantee
or consent to any departure by the Guarantor or any other person from any
provision of this Guarantee will in any event be effective unless it is signed
by the Guarantor and the Bank.
Assignment, Transfer and Participation
6.02 The Guarantor hereby consents to any assignment or transfer of, or any
grant of the participation in, any rights, benefits or obligations of, the Bank
in respect of this Guarantee.
6.03 Notwithstanding the provisions of Section 6.02, the Guarantor, shall
upon request made by an assignee of the Bank, execute and deliver such
assurances as may be reasonably requested by such assignee to confirm its
entitlement to the rights and benefits hereunder so assigned and transferred to
it and the liability of the Guarantor to the assignee hereunder.
Foreign Currency Obligations
6.04 The Guarantor shall make payment of all amounts guaranteed hereunder in
the currency (the "Original Currency") in which the Borrower is required to pay
such obligation. If the Guarantor makes payment relative to any obligation to
the Bank in a currency (the "Other Currency") other than the Original Currency
(whether voluntarily or pursuant to an order or judgment of a court or tribunal
of
<PAGE>
- 10 -
any jurisdiction) such payment shall only constitute a discharge of the
Guarantor's liability hereunder in respect of such obligation only to the extent
of the amount of the Original Currency which the Bank is able to purchase at its
main branch in the jurisdiction where the loans to the Borrower are recorded,
with the amount it receives on the date of receipt in accordance with its normal
practice. If the amount of the Original Currency which the Bank is able to
purchase is less than the amount of such currency originally due to the Bank in
respect to the relevant obligation, the Guarantor shall indemnify and save the
Bank harmless from and against any loss or damage arising as a result of such
deficiency. This indemnity shall constitute an obligation contained in this
Guarantee, shall give rise to a separate and independent cause of action, shall
apply irrespective of any indulgence granted by the Bank and shall continue in
full force and effect notwithstanding any judgment or order in respect of any
amount due hereunder or under any judgment or order.
Applicable Law
6.05 This Guarantee shall be conclusively deemed to be a contract made under,
and shall for all purposes be governed by, and construed and interpreted in
accordance with, the laws of Ontario, in effect from time to time, excluding any
choice of law rules that may direct the application of the laws of another
jurisdiction, without prejudice to or limitation of any other rights or remedies
available under the laws of any jurisdiction, where property or assets of the
Guarantor may be found.
Jurisdiction
6.06 The Guarantor and the Bank hereby irrevocably agree that any suits,
actions or proceedings arising out of or in connection with this Guarantee
(collectively "Proceedings") may be brought in any court in the Province of
Ontario and each submits and attorns to the non-exclusive jurisdiction of each
such court.
6.07 The Guarantor and the Bank hereby irrevocably waive any objections which
they may have now or hereafter to the laying of the venue of any Proceedings in
any court referred to in paragraph (a) and any claim that any such Proceedings
have been brought in any inconvenient forum and further irrevocably agree that a
judgment in any Proceedings brought in any such court shall be conclusive and
binding upon the Guarantor or the Bank, as the case may be, and may be enforced
in any courts to the jurisdiction of which such parties may be subject by
Proceedings upon such judgment.
6.08 Nothing contained in this Section 6 shall limit the right of the Bank to
take Proceedings against the Guarantor in any other court of competent
jurisdiction nor shall the taking of Proceedings in one or more jurisdictions
preclude the taking of Proceedings in any other jurisdiction, whether
concurrently or not.
<PAGE>
- 11 -
6.09 The Guarantor hereby irrevocably:
(i) appoints the Borrower as its agent for service of process in the
Province of Ontario in connection with any Proceedings in the
Province of Ontario and consents to process being served in any
Proceedings in the Province of Ontario by delivering or
transmitting a true copy thereof to the Borrower at its address;
(ii) agrees that service in accordance with the provisions of clause
6.09 (i) shall be deemed in every respect effective service of
process upon the Guarantor in any such Proceedings and shall, to
the fullest extent permitted by law, be taken and be held to be
valid personal service upon the personal delivery to the
Guarantor; and
(iii) consents generally to the fullest extent permitted by law in
respect of any Proceedings to the giving of any relief and the
issue of any process in connection with such Proceedings
including the making, enforcement or execution against any
property whatsoever (irrespective of its use or intended use) of
any order or judgment which may be made or given in such
Proceedings.
6.10 THE GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS GUARANTEE, THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE ACTIONS OF THE GUARANTOR OR THE BANK IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF.
Costs and Expenses
6.11 The Guarantor shall pay on demand by the Bank any and all costs, fees
and expenses, including outside legal costs and expenses, incurred by the Bank:
(i) in having its outside counsel review and provide legal opinions in
connection with the Guarantee, (but in no event shall such costs, fees and
expenses to be paid by Guarantor pursuant to this section and the costs, fees
and expenses to be paid by the Borrower pursuant to section 7.01 (e) of the
credit agreement entered into by the Bank and the Borrower on the date hereof
exceed $20,000 Cdn.), and
(ii) in connection with enforcing any of its rights and remedies under this
Guarantee.
<PAGE>
- 12 -
No Waiver, Cumulative Remedies
6.12 No failure to exercise and no delay in exercising, on the part of the
Bank, any right, remedy, power or privilege hereunder or under any credit
agreement, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder or under any credit
agreement preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein and under any credit agreement are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
Waiver of Rights of Subrogation, Reimbursement, Etc.
6.13 Until full, final, and irrevocable payment in full of the Guaranteed
Liabilities and until any commitment of the Bank to extend financial
accommodation to the Borrower is permenently cancelled, the Guarantor hereby
irrevocably waives any claim or other rights that it may now or hereafter
acquire against the Borrower that arise from the existence, payment, performance
or enforcement of the Guaranteed Liabilities under this Guarantee or any credit
agreement, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Bank against the Borrower or any
collateral, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including the right to take or receive from the
Borrower, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim, remedy or right.
If any amount shall be paid to the Guarantor in violation of the preceding
sentence at any time prior to the later of the payment in full of the Guaranteed
Liabilities and all other amounts payable under this Guarantee and the
termination of any commitment, such amount shall be held in trust for the
benefit of the Bank and shall forthwith be paid to the Bank to be credited and
applied to the Guaranteed Liabilities and all other amounts payable under this
Guarantee, whether matured or unmatured, in accordance with the terms of any
credit agreement, or to be held as collateral for any Guaranteed Liabilities or
other amounts payable under this Guarantee thereafter arising. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements provided by the Bank to the Borrower, and that the
waiver, set forth in this Section 6.13, is knowingly made in contemplation of
such benefits.
Guarantee in Addition to Other Obligations
6.14 The obligations of the Guarantor under this Agreement are in addition to
and not in substitution for any other obligations of the Guarantor to the Bank
in relation to any credit agreement and any guarantees or security at any time
held by or for the benefit of the Bank.
<PAGE>
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Stay of Acceleration
6.15 If acceleration of the time for payment of any amount payable by the
Borrower in respect of the obligations guaranteed is stayed upon the insolvency,
bankruptcy or reorganization of the Borrower or any moratorium affecting the
payment of the obligations of the Borrower guaranteed hereby, all such amounts
otherwise subject to acceleration shall nonetheless be payable by the Guarantor
hereunder automatically and without any requirement for any demand by the Bank.
Entire Agreement
6.16 This Guarantee, including all documents contemplated hereby, constitutes
the entire agreement between the parties with respect to the subject matter and
supersedes all prior negotiations, undertakings, representations and
understandings.
Severability
6.17 Any provision of this Guarantee which is prohibited or unenforceable in
any jurisdiction shall not invalidate the remaining provisions and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Successors and Assignees
6.18 This Agreement shall be binding upon and enure to the benefit of the
Guarantor and the Bank and its respective successor and permitted assignees,
except that the Guarantor may not assign any of its obligations hereunder
without the express prior written consent of the Bank.
Notice
6.19 Any notice or demand to or upon the Guarantor and any notice to be
provided to the Bank, to be effective, shall be in writing or by telecopy,
telegraph or telex, and shall not be effective until received and shall be
addressed as follows:
CERIDIAN CORPORATION
Attention: John H. Grierson
Vice President & Treasurer
8100 - 34th Avenue South
Minneapolis, Minn. 55425-1640
U.S.A.
Telephone: (612) 853-5265
Fax: (612) 853-3932
<PAGE>
- 14 -
THE TORONTO-DOMINION BANK
Attention: Corporate and Investment Banking Group
Vice President
P.O. Box 1
Toronto-Dominion Centre
M5K 1A2
Telephone: (416) 944-
Fax: (416) 944-5630
Counterparts
6.20 This Guarantee and the acceptance thereof may be executed in any number
of separate counterparts and all said counterparts taken together shall be
deemed to constitute one and the same instrument.
Consequential Damages
6.21 THE GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO
CLAIM OR RECOVER FROM THE BANK ANY CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES.
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly executed
and delivered by its proper and duly authorized officers as of January 30, 1998.
CERIDIAN CORPORATION
By: /s/John H. Grierson
Title: Vice President & Treasurer
By: /s/John A. Haveman
Title: Vice President & Secretary
THE TORONTO-DOMINION BANK
By:
Title:
<PAGE>
CREDIT AGREEMENT
THIS AGREEMENT made as of the 2nd day of March, 1998.
BETWEEN:
CANADIAN IMPERIAL BANK OF COMMERCE,
a Canadian chartered bank
(herein called the "Bank"),
- and -
CERIDIAN CANADA LTD., a corporation incorporated
under the laws of Canada
(herein called the "Borrower").
WHEREAS the Borrower has requested the Bank to establish (i) a
revolving credit facility to be used to finance the acquisition by the Borrower
of the Bank's Payroll Business, (ii) an operating facility due 364 days after
the date hereof for general corporate purposes, and (iii) a demand VISA
corporate expense account for the Borrower's corporate expense account purposes;
AND WHEREAS the Bank is willing to provide such credit facilities to
the Borrower for the aforementioned purposes and upon the terms and conditions
contained herein;
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the
mutual covenants and agreements herein contained and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties hereto covenant and agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINED TERMS. The defined terms set forth in Appendix "A" shall for
all purposes of this agreement, or any amendment hereto, have the respective
meanings set forth therein unless the context otherwise specifies or requires or
unless otherwise defined herein.
1.2 APPLICABLE LAW. This agreement and all documents delivered pursuant
hereto shall be governed by and construed and interpreted in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein and
the parties hereto do hereby attorn to the non-exclusive jurisdiction of the
courts of the Province of Ontario.
<PAGE>
-2-
1.3 AMOUNT OF CREDIT. Any reference herein to the amount of credit
outstanding shall mean, at any particular time:
(a) in the case of a Prime Rate Loan, the principal amount thereof;
(b) in the case of a LIBO Loan or Base Rate Canada Loan, the Canadian
Dollar Equivalent of the principal amount of such Loan;
(c) in the case of a Bankers' Acceptance, the face amount of the Bankers'
Acceptance;
(d) in the case of a Letter of Credit, the principal amount of the Letter
of Credit;
(e) in the case of all outstanding Forward Exchange Contracts, the "at
risk" amount (determined in accordance with Section 2(d) of Appendix
"F"); and
(f) in the case of a VISA Credit, the principal amount thereof, whether
utilized or not.
1.4 CANADIAN DOLLARS. All amounts referred to herein shall refer to
lawful currency of Canada, unless otherwise stated.
1.5 APPENDICES. The following are the Appendices annexed hereto,
incorporated by reference and deemed to be part hereof:
Appendix "A" - Defined Terms
Appendix "B" - Drawdown/Conversion/Prepayment/Rollover Notice
Appendix "C" - Opinion of Canadian Counsel to the Borrower and
Guarantor
Appendix "D" - Opinion of In-house Counsel to the Guarantor
Appendix "E" - Opinion of United States Counsel to the Bank
Appendix "F" - Letter of Credit, Forward Exchange Contracts and
Swap Contracts
ARTICLE 2
CREDIT FACILITIES
2.1 ESTABLISHMENT OF CREDIT FACILITIES. Subject to the terms and
conditions hereof, the Bank hereby establishes in favour of the Borrower the
following credits:
(a) a revolving term credit facility ("Facility A") in the amount of the
Facility A Limit;
(b) a 364 day committed operating facility ("Facility B") in the amount of
the Facility B Limit; and
<PAGE>
-3-
(c) a demand VISA corporate expense account ("Facility C") in the amount
of the Facility C Limit.
ARTICLE 3
GENERAL PROVISIONS RELATING TO CREDITS
3.1 TYPES OF CREDIT AVAILMENTS. The Borrower may obtain credit under the
Credits as follows:
(a) Facility A is available by way of one or more Prime Rate Loans, Base
Rate Canada Loans, LIBO Loans (subject in all cases to availability)
and Bankers' Acceptances;
(b) Facility B is available by way of one or more Prime Rate Loans by way
of overdraft in the Designated Account, Base Rate Canada Loans by way
of overdraft in the Designated Account, LIBO Loans (subject in all
cases to availability), Bankers' Acceptances, Letters of Credit and
Forward Exchange Contracts; and
(c) Facility C is available by way of VISA Credit.
3.2 SWAP AVAILABILITY. Upon request of the Borrower, the Bank will, on a
best efforts basis, arrange Swap Contracts to fix interest rates.
3.3 LOAN ADVANCES AND PAYMENTS. Each Loan advance hereunder shall be made
prior to 12:00 noon (Toronto time) on the relevant date by deposit to the
Designated Account. Each bill of exchange which is to become a Bankers'
Acceptance shall be presented and stamped in accordance with Section 4.4.
Letters of Credit shall be issued on the terms of, and in accordance with,
Section 1 of Appendix "F" and Forward Exchange Contracts and Swap Contracts
shall be entered into on the terms of, and in accordance with, Section 2 of
Appendix "F". The Bank shall be entitled to withdraw the amount of any payment
due to it hereunder from the Designated Account on the day specified for
payment.
3.4 (a) BANKERS' ACCEPTANCES. To facilitate the drawing of Bankers'
Acceptances hereunder, the Borrower shall execute and deliver to the Bank a
supply of bills of exchange executed by the Borrower, which the Bank shall hold
in safekeeping. The Bank shall not be responsible for its failure to accept a
bill of exchange as required hereunder if the cause of the failure is, in whole
or in part, due to the failure of the Borrower to provide such bills of exchange
to the Bank on a timely basis. The Bank agrees to use its best efforts to
advise the Borrower in a timely manner when it requires additional executed
bills of exchange. If executed but incomplete bills of exchange are delivered
to the Bank, the Bank may complete the same on behalf of the Borrower following
receipt of a drawdown notice from the Borrower pursuant to Section 3.7 herein
requesting the Bank to accept bills of exchange.
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(b) EXECUTION OF ACCEPTANCES. Bills of exchange of the Borrower to be
accepted as Bankers' Acceptances hereunder shall be signed by a duly authorized
officer or duly authorized officers of the Borrower. Notwithstanding that any
person whose signature appears on any pre-signed Acceptance as one of such
officers may no longer be an authorized signatory for the Borrower at the date
of issuance of a Bankers' Acceptance, such signature shall nevertheless be valid
and sufficient for all purposes as if such authority had remained in force at
the time of such issuance and any such Bankers' Acceptance so signed shall be
binding on the Borrower.
(c) NO OBLIGATION TO PURCHASE. The Bank shall not be obligated to
purchase or discount any Bankers' Acceptances. The Borrower shall be
responsible for arranging the purchase or discounting of any such Bankers'
Acceptances by a money market dealer or the Bank, and if a money market dealer
is used to facilitate settlement, the details of such purchase or discounting
shall be advised promptly by the Borrower to the Bank, by telephone or facsimile
transmission.
3.5 TIMING OF CREDIT AVAILMENTS. No Bankers' Acceptance or LIBO Loan may
mature on a day which is not a Banking Day or have an Interest Period which
would exceed the Facility A or Facility B Maturity Date, as applicable. Letters
of Credit and Forward Exchange Contracts may not have a term extending beyond
the Facility B Maturity Date.
3.6 EVIDENCE OF INDEBTEDNESS. The Bank shall open and maintain accounts
wherein the Bank shall record the amount of outstanding credit and each payment
on account of such credit by appropriate entries, including each payment of
principal and interest on account of each Loan, each Bankers' Acceptance
accepted and cancelled and all other amounts becoming due to and being paid to
the Bank hereunder, including Stamping Fees. The Bank's accounts constitute, in
the absence of manifest error, prima facie evidence of the indebtedness of the
Borrower to the Bank pursuant to this agreement.
3.7 NOTICE PERIODS. Each notice of a drawdown, rollover or conversion
from one type of credit availment to another hereunder shall be irrevocable and
shall be given to the Bank in the forms attached hereto as Appendix "B":
(a) prior to 10:30 a.m. (Toronto time) on the third Banking Day prior to
the date of a drawdown of, rollover of, conversion into, conversion
of, prepayment of or repayment of a LIBO Loan;
(b) prior to 10:30 a.m. (Toronto time) on the second Banking Day prior to
the date of drawdown or conversion into a Bankers' Acceptance, Letter
of Credit or Forward Exchange Contract;
(c) prior to 10:30 a.m. (Toronto time) on the first Banking Day prior to
the date of a drawdown of, conversion into, conversion of, prepayment
of or repayment of a Prime Rate Loan in a principal amount exceeding
Cdn. $10,000,000 or a Base Rate Canada Loan in a principal amount
exceeding U.S. $10,000,000, provided that no drawdown notice is
required for a Prime Rate Loan or a Base Rate Canada Loan by way of
overdraft under Facility B; and
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(d) prior to 10:30 a.m. (Toronto time) on the Banking Day of any other
drawdown, rollover, conversion, prepayment or repayment.
3.8 ABSENCE OF INSTRUCTIONS. In the absence of written notice from the
Borrower within the appropriate time periods referred to herein, a maturing LIBO
Loan shall be automatically converted into a Base Rate Canada Loan and a
maturing Bankers' Acceptance shall be automatically converted into a Prime Rate
Loan.
3.9 REIMBURSEMENT OBLIGATION. The Bank shall, on the maturity date of a
Bankers' Acceptance, pay to the holder thereof the face amount of such Bankers'
Acceptance and the Borrower shall fully reimburse the Bank on such date for the
amount of any such payment. In the event that the Bank is the holder of any
Bankers' Acceptance on the maturity date applicable thereto, the Borrower shall
pay to the Bank the face amount of such Bankers' Acceptance.
ARTICLE 4
INTEREST AND FEES
4.1 INTEREST RATES. The Borrower shall pay to the Bank interest and fees
on the outstanding principal amount of each Advance from time to time, at the
rate per annum equal to the following rates or equal to the following fees, as
the case may be:
(a) in the case of each Prime Rate Loan, the Prime Rate;
(b) in the case of each Base Rate Canada Loan, the Alternate Base Rate
Canada;
(c) in the case of each LIBO Loan, the LIBO Rate plus 47.5 basis points;
(d) in the case of Banker's Acceptances, the Stamping Fee at 47.5 basis
points per annum; and
(e) in the case of each Letter of Credit, 47.5 basis points per annum of
the amount of the Letter of Credit, payable in advance.
4.2 CALCULATION AND PAYMENT OF INTEREST.
(a) Interest on the outstanding principal amount from time to time of each
Loan and on the amount of overdue interest thereon from time to time shall
accrue from day to day (both before and after maturity and as well after as
before judgment) and shall be calculated on the basis of the actual number of
days elapsed divided by the actual number of days in the year in the case of a
Prime Rate Loan and Base Rate Canada Loan or divided by 360 in the case of a
LIBO Loan.
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(b) Accrued interest shall be paid,
(i) in the case of interest on Prime Rate Loans and Base Rate Canada
Loans, monthly in arrears on the last Banking Day of each
calendar month; and
(ii) in the case of interest on LIBO Loans, on the last day of the
applicable Interest Period.
(c) The Borrower shall pay to the Bank, upon demand by the Bank, the
administrative fees and charges quoted by the Bank from time to time in
respect of any amendments to Letters of Credit requested by the Borrower.
4.3 GENERAL INTEREST RULES.
(a) For the purposes hereof, whenever interest is calculated on the basis
of a year of 360 days, each rate of interest determined pursuant to such
calculation expressed as an annual rate for the purposes of the Interest Act
(Canada) is equivalent to such rate as so determined multiplied by the actual
number of days in the calendar year in which the same is to be ascertained and
divided by 360.
(b) Following the occurrence of an Event of Default, the Borrower shall
pay interest on amounts outstanding (as well after as before judgment) at the
rate per annum, calculated and compounded monthly, which is equal to the Prime
Rate plus 2%. Such interest on overdue amounts shall become due and be paid on
demand made by the Bank.
4.4 STAMPING FEES. Upon the acceptance of any draft of the Borrower
pursuant hereto, the Borrower shall pay to the Bank, in advance, the Stamping
Fee calculated at the rate per annum, on the basis of the actual number of days
in the year, equal to 47.5 basis points per annum on the face amount of such
Bankers' Acceptance for its term, being the actual number of days in the period
commencing on the date of acceptance of the Borrower's draft and ending on but
excluding the maturity date of the Bankers' Acceptance.
4.5 STAND-BY FEE. On the first Banking Day of each month commencing April
1, 1998, and on the Facility A and Facility B Maturity Date, as applicable, the
Borrower shall pay to the Bank, in arrears, a Stand-by Fee calculated on the
basis of a year of 365 days or 366 days in the case of a leap year at 12.5 basis
points per annum, on the daily average of the unused portion of Facilities A and
B, such fee to accrue daily from, and including the first day of the previous
month (or the date hereof, if later) to and including the last day of the
previous month, and in the case of the final payment, up to the Facility A and
Facility B Maturity Date, as applicable.
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4.6 ARRANGEMENT FEE. The Bank acknowledges receipt of $25,000
representing a non-refundable arrangement fee in consideration of the Bank
issuing the committed offer to finance dated February 12, 1998. On the date of
execution and delivery of this agreement, the Borrower shall pay to the Bank a
further $75,000 non-refundable arrangement fee in consideration of the Bank
establishing the Credits.
ARTICLE 5
REPAYMENTS AND PREPAYMENTS
5.1 FACILITY A. The Borrower will repay all amounts outstanding under
Facility A on or before the Facility A Maturity Date, or earlier if the Bank
demands repayment following the occurrence of an Event of Default.
5.2 FACILITY B.
(a) REPAYMENT. The Borrower will repay all amounts outstanding under
Facility B on or before the Facility B Maturity Date, or earlier if the Bank
demands repayment following the occurrence of an Event of Default.
(b) ANNUAL REVIEW. Facility B is subject to annual review by the Bank,
with the first review being done on the anniversary of the date hereof. The
Bank may terminate Facility B on any such annual review notwithstanding
compliance by the Borrower with any or all of the provisions of this agreement
or the Bank may, in its sole discretion, agree to extend Facility B for an
additional 364 days.
5.3 FACILITY C. The Borrower acknowledges and agrees that Facility C is
established at the pleasure of the Bank and that the Bank reserves the right to
cancel Facility C in whole or in part at any time (whether or not demand is made
at such time) and to demand immediate repayment of any and all amounts
outstanding under Facility C at any time, at the sole discretion of the Bank and
notwithstanding compliance by the Borrower with any or all of the provisions of
this agreement.
5.4 REPAYMENTS OF CREDIT EXCESS. The Borrower shall also repay to the
Bank automatically, and without the necessity of demand, the Credit Excess under
any of the Credits from time to time, whether such Credit Excess results from
the calculation by the Bank each day of the Canadian Dollar Equivalent of
amounts outstanding in U.S. dollars or otherwise.
5.5 PREPAYMENTS. The Borrower shall be entitled to prepay all or any
portion of the amount outstanding under the Credits, provided that:
(i) any partial prepayment in respect of LIBO Loans or Bankers'
Acceptances is in an amount equal to U.S.$100,000 or Cdn.$100,000, as
applicable, or any whole multiple thereof;
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(ii) in the case of a LIBO Loan or Bankers' Acceptance, the Bank receives
two Banking Days prior written notice of such prepayment in the form
attached hereto as Appendix "B" which notice shall be irrevocable and
the Borrower shall be bound to prepay in accordance with such notice;
(iii) if the Borrower pays a LIBO Loan prior to expiry of the Interest
Period applicable to that LIBO Loan the Borrower will pay to the Bank
all interest accrued on the amount thereof, together with all costs
and expenses of reemploying the amounts so repaid and the Borrower
will comply with paragraph 7.1(i) in connection with such prepayment;
(iv) Bankers' Acceptances may not be repaid prior to the expiry of the
Interest Period of such Bankers' Acceptance;
(v) a Letter of Credit may not be cancelled prior to its expiry date
unless the original thereof is delivered by the beneficiary to the
Bank with a request for cancellation thereof (at which time a pro rata
portion of the applicable Letter of Credit fee shall be refunded to
Borrower); and
(vi) in the case of a Forward Exchange Contract or a Swap Contract, the
Borrower shall pay concurrently with any early termination any
breakage costs (as determined by the Bank in accordance with its usual
practice) incurred by the Bank as a result of such early termination.
5.6 REVOLVING. Amounts borrowed under the Credits may be repaid at any
time in accordance with Sections 5.4 and 5.5 hereof and amounts repaid may be
reborrowed from time to time in accordance with the provisions hereof.
5.7 CANCELLATION. The Borrower may permanently cancel all or any portion
of Facilities A, B or C upon 30 days prior written notice to the Bank.
5.8 WITHHOLDING TAX. All payments made by the Borrower to the Bank will
be made free and clear of all present and future taxes (excluding the Bank's
income or capital taxes), withholdings or deductions of whatever nature. If
these taxes, withholdings or deductions are required by applicable law and are
made, the Borrower, shall, as a separate and independent obligation, pay to the
Bank all additional amounts as shall fully indemnify the Bank from any such
taxes, withholding or deduction.
5.9 WAIVER OF SET-OFF. The Borrower agrees to make all payments due
hereunder without set-off or counterclaim. In addition, the Borrower shall make
all payments hereunder free and clear of, and without deduction for, any amount
owed to the Borrower or the Guarantor by the Bank, pursuant to or in connection
with, the Asset Purchase Agreement, or otherwise in connection with the purchase
by the Borrower of the Assets. The Borrower hereby waives any right to set-off
any and all amounts owing to the Borrower or the Guarantor by the Bank against
any and all amounts owing by the Borrower to the Bank.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES. To induce the Bank to enter into this
agreement, the Borrower hereby represents and warrants to the Bank as follows
and acknowledges and confirms that the Bank is relying upon such representations
and warranties in extending credit hereunder:
(a) STATUS AND POWER. The Borrower is a corporation duly incorporated and
organized and validly subsisting under the laws of Canada and is duly
qualified, registered or licensed in all jurisdictions where such
qualification, registration or licensing is required to the extent
that it is material. The Borrower has all requisite corporate
capacity, power and authority to own, hold under licence or lease its
properties, to carry on its business as now conducted and to otherwise
enter into, and carry out the transactions contemplated by, this
agreement.
(b) AUTHORIZATION AND ENFORCEMENT OF DOCUMENTS. All necessary action,
corporate or otherwise, has been taken to authorize the execution,
delivery and performance of this agreement by the Borrower and the
Borrower has duly executed and delivered this agreement. This
agreement is a legal, valid and binding obligation of the Borrower,
enforceable against the Borrower by the Bank in accordance with its
terms.
(c) COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of this agreement and the consummation of the transactions
contemplated herein do not and will not conflict with, result in any
breach or violation of, or constitute a default under, the terms,
conditions or provisions of the constating documents or by-laws of the
Borrower or of any law, regulation, judgment, decree or order binding
on or applicable to the Borrower or by which the Borrower benefits or
to which any of its property is subject or of any material agreement,
lease, licence, permit or other instrument to which the Borrower is a
party or is otherwise bound or by which the Borrower benefits or to
which any of its property is subject and do not require the consent or
approval of any other party or any governmental body, agency or
authority.
(d) LITIGATION. There are no actions, suits, inquiries, claims or
proceedings pending or, to the knowledge of the Borrower, threatened
against or affecting the Borrower before any government, parliament,
legislature, regulatory authority, agency, commission, board or court
or before any private arbitrator, mediator or referee which in any
case or in the aggregate may result in any material adverse change in
the ability of the Borrower to perform its obligations under this
agreement.
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(e) COMPLIANCE WITH LAWS. The Borrower is not in violation of any
mortgage, franchise, licence, judgment, decree, order, statute, rule
or regulation relating in any way to the Borrower, to the operation of
its business or to its property or assets where such violation might
reasonably be expected to result in a material adverse change in the
business, financial condition or operations of the Borrower.
(f) TAXES. All of the remittances required to be made by the Borrower to
the federal, provincial and municipal governments have been made and
are currently up to date. Without limiting the foregoing, all
employee source deductions (including income taxes, unemployment
insurance and Canada pension plan), sales taxes (both provincial and
federal), corporate income taxes, payroll taxes and workmen's
compensation dues are currently paid and up to date, except for such
taxes which are being contested in good faith by proper proceedings
with appropriate reserves having been set aside.
(g) ENVIRONMENTAL.
(i) The condition and use of all of the Borrower's properties and any
prior use by the Borrower of such properties is in material
compliance with all applicable environmental, health and safety
laws and standards.
(ii) None of the Borrower's properties, or any part thereof, is
subject to any remedial control, action, direction, order, or
investigation (which is material) by the Ministry of the
Environment or any authority having jurisdiction over matters
involving the environment.
(h) AUTHORIZED AND ISSUED CAPITAL. A majority of the issued and
outstanding voting shares in the capital of the Borrower are
registered in the name of the Guarantor or one of its wholly-owned
subsidiaries.
(i) TITLE TO ASSETS. The Borrower owns its assets free from all Liens
except Permitted Liens.
(j) FINANCIAL STATEMENTS.
The audited financial statements for the Guarantor last delivered to
the Bank present fairly its financial position in all material
respects, as of the date shown on such financial statements, and have
been prepared in accordance with generally accepted accounting
principles, consistently applied. Since such date no material adverse
change in the business or financial position, operation, property or
assets of the Borrower or the Guarantor has occurred, other than has
been disclosed in writing to the Bank and in filings with the United
States Securities and Exchange Commission prior to the date hereof
relating to (i) charges incurred by the Guarantor in the third and
fourth quarters of 1997; (ii) the sale of Guarantor's defense
electronics business and (iii) the repurchase by the Guarantor of its
stock.
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(k) GUARANTOR.
The address of the Guarantor's corporate head office and chief
executive office and the office at which the Guarantor's primary
corporate and business records are maintained is 8100 34th Avenue
South, Minneapolis, MN, USA 55438.
6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Borrower contained in Section 6.1 shall
survive the execution and delivery of this agreement notwithstanding any
investigation made at any time by or on behalf of the Bank and shall be deemed
to be repeated on the date of each Advance hereunder.
ARTICLE 7
COVENANTS
7.1 COVENANTS. The Borrower hereby covenants and agrees with the Bank
that, so long as any amount is outstanding hereunder or so long as the Bank
shall have any commitment hereunder, unless the Bank otherwise expressly
consents in writing:
(a) PUNCTUAL PAYMENT. The Borrower will pay all amounts outstanding
hereunder and all interest thereon and all fees and other amounts
required to be paid by it hereunder in the manner and at the times
specified hereunder.
(b) FINANCIAL REPORTING. The Borrower shall furnish the Bank with the
following statements, reports and certificates:
(i) within 120 days after the end of each fiscal year of the
Borrower, copies of the Borrower's annual financial statements
with respect thereto;
(ii) upon delivery of the financial statements, a certificate of a
senior officer of the Borrower certifying that no Default related
to the Borrower has occurred and is continuing; and
(iii) such other statements, reports and information as the Bank may
reasonably request from time to time.
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(c) CORPORATE EXISTENCE. The Borrower shall maintain its corporate
existence in good standing and shall not take part in any dissolution,
reorganization, amalgamation, merger or any similar proceeding or
arrangement without the Bank's prior written consent, not to be
unreasonably withheld.
(d) MATERIAL ADVERSE CHANGE. The Borrower shall promptly notify the Bank
of any material adverse change in the financial condition of the
Borrower or in the ability of the Borrower to satisfy its obligations
hereunder.
(e) COSTS AND EXPENSES. The Borrower shall pay all reasonable costs,
fees, and expenses, (including travel expenses and those of legal
counsel) incurred by the Bank (i) for services rendered by outside
counsel in connection with the preparation of this agreement and the
Guarantee and with the establishment of the Credits (but in no event
shall such costs, fees and expenses to be paid by Borrower pursuant to
this clause (i) and the costs, fees and expenses to be paid by
Guarantor pursuant to Section 6.11(i) of the Guarantee exceed
Cdn.$25,000); and (ii) in connection with the enforcement of this
agreement and the collection of amounts outstanding hereunder and
outstanding under the Guarantee.
(f) NOTICE OF DEFAULT. The Borrower shall promptly notify the Bank of the
occurrence of any Default or Event of Default and shall concurrently
deliver to the Bank a detailed statement of a senior officer of the
Borrower of the steps, if any, being taken to cure or remedy such
Default or Event of Default.
(g) NEGATIVE PLEDGE. Other than Permitted Liens, the Borrower will not
create, issue, incur, assume or permit to exist any security interest,
lien, charge or other encumbrance of any kind on or in respect of any
of its assets or undertakings.
(h) CHANGE OF CIRCUMSTANCES. If the introduction or adoption of any law,
regulation, guideline, request or directive (whether or not having the
force of law) of any governmental authority, central bank or
comparable agency or any change therein or in the application thereof
to the Borrower or to the Bank or in the interpretation or
administration thereof or any compliance by the Bank therewith shall
impose or require any reserve, special deposit requirements or tax
(excluding taxes measured with reference to the net income or capital
of the Bank), shall establish an appropriate amount of capital to be
maintained by the Bank or shall impose any other requirement or
condition which results in an increased cost to the Bank of extending
or maintaining a credit or obligation hereunder or reduces the amount
received or receivable by the Bank with respect to the Credits under
this agreement or reduces the Bank's effective return hereunder or on
its capital or causes the Bank to make any payment or to forego any
return based on any amount received or receivable hereunder, then,
provided that there has been notification to the Borrower by the Bank,
the Borrower shall pay to the Bank such amounts as shall fully
compensate the Bank for all such increased costs, reductions, payments
or foregone returns which accrue after the 100th day following such
notification. The Bank shall notify the Borrower of any actual
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increased or imposed costs, reductions, payments or foregone returns
forthwith on becoming aware of same and shall concurrently provide to
the Borrower a certificate of an officer of the Bank setting forth the
amount of compensation to be paid to the Bank and the basis for the
calculation of such amount.
(i) INDEMNITY. Upon notice from the Bank (which notice shall be
accompanied by a detailed calculation of the amount to be paid by the
Borrower), the Borrower shall pay to the Bank such amount or amounts
as will compensate the Bank for any loss, cost or expense incurred by
it in the liquidation or redeposit of any funds acquired by the Bank
to fund or maintain any portion of a LIBO Loan as a result of:
(i) the failure of the Borrower to borrow or make repayments on the
dates specified under this agreement or in any notice from the
Borrower to the Bank; or
(ii) the repayment or prepayment of any amounts on a day other than
the payment dates prescribed herein.
(j) EXISTENCE AND CONDUCT OF BUSINESS. The Borrower shall maintain its
existence in good standing and do or cause to be done all things
necessary to keep in full force and effect all rights, franchises,
licenses, contracts and agreements which are necessary to own its
assets and carry on its business. The Borrower will maintain its
assets in good repair and working condition and will carry on only the
type of businesses carried on by the Guarantor at the date hereof.
The Borrower shall conduct its business in such a manner so as to
comply in all material respects with all applicable laws and
regulations.
(k) FURTHER ASSURANCES. The Borrower shall, at the Bank's request, and at
the Borrower's expense, perform such acts as may be necessary or
advisable to carry out the intent of this agreement.
(l) LITIGATION, ETC. The Borrower shall give the Bank prompt written
notice of any material litigation involving the Borrower or proceeding
which might reasonably be considered to materially adversely affect
the Borrower's financial status or the operation of its business.
(m) INSURANCE. The Borrower shall maintain in force with reputable
insurers insurance with respect to losses of or damage to its assets
from such risks, casualties and contingencies and of such types and in
such amounts and subject to such deductible amounts as are customary
in the case of persons engaged in the same or similar business with
similar assets.
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(n) RIGHTS OF INSPECTION. At any reasonable time and from time to time
upon reasonable prior notice, which in any event shall not be less
than three Banking Days, the Borrower will, within the limits of its
powers and the law, permit the Bank or any authorized representative
thereof, at the expense of the Bank, to inspect its assets and
properties and to examine and make copies of any financial information
in its possession relating to its records and books of account. In
exercising the Bank's rights under this Section, the Bank will take
all reasonable steps to minimize the disruption to the ordinary course
of operation of the Borrower's business.
(o) NO SALE. The Borrower will not, sell, assign, transfer, convey, or
otherwise dispose of or permit or acquiesce in the sale, assignment,
transfer, conveyance or other disposition of its assets other than in
the ordinary course of business and other than the sale of obsolete
assets or assets no longer used in the business of the Borrower, sold
in a commercially reasonable manner, for value.
(p) PARI PASSU RANKING. The Borrower will not take, or permit any action
to be taken, or suffer to exist any event, which results or would
result in the amounts due or to become due hereunder ceasing to rank
pari passu, equally, and rateably with all other unsubordinated
obligations of the Borrower.
(q) PAYMENT OF TAXES AND CLAIMS. The Borrower will pay and discharge
before the same become delinquent:
(i) all material taxes, assessments and governmental charges or
levies imposed upon it or upon its assets; and
(ii) all lawful claims which, if unpaid, might become a lien upon its
assets,
except for any such tax or claim which is being contested in good
faith by proper proceedings with appropriate reserves having been set
aside.
(r) NO DIVIDENDS. The Borrower shall not declare or pay any dividends,
purchase, redeem or retire or otherwise acquire for value any of the
Borrower's capital stock now or hereafter outstanding or, except in
the ordinary course of its business, make any loans or advances to any
entity, including without limitation, the Guarantor or any affiliate
of the Borrower or the Guarantor.
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ARTICLE 8
CONDITIONS PRECEDENT
8.1 CONDITIONS PRECEDENT TO EFFECTIVENESS OF AGREEMENT. This agreement
shall become effective upon the fulfillment of the following conditions
precedent:
(a) the conditions precedent set forth in Section 8.2 shall have been
fulfilled or have been waived by the Bank;
(b) the Borrower shall have delivered to the Bank an executed copy of the
Asset Purchase Agreement and such documents referred to therein as the
Bank shall have requested, each of which shall be in a form approved
by the Bank and all conditions precedent to the transaction
contemplated by the Asset Purchase Agreement shall have been satisfied
or waived;
(c) the Bank and its counsel shall be satisfied that all necessary
approvals, acknowledgments and consents have been given and all
relevant laws have been complied with as concerns all agreements and
transactions referred to herein;
(d) the Bank shall have received, in form and substance satisfactory to
the Bank,
(i) the Guarantee;
(ii) certificates of a senior officer of each of the Obligors setting
forth specimen signatures of the individuals authorized to sign
this agreement, certified copies of the resolutions or other
corporate proceedings of the Obligors authorizing the
transactions under this agreement and other corporate and factual
matters relevant to the transactions under this agreement;
(iii) an opinion of Canadian counsel to the Borrower and the Guarantor,
addressed to the Bank, in the form annexed hereto as Appendix
"C";
(iv) an opinion of in-house counsel to the Guarantor, addressed to the
Bank, in the form annexed hereto as Appendix "D"; and
(v) an opinion of United States counsel to the Bank, addressed to the
Bank, in the form annexed hereto as Appendix "E";
(e) the Borrower shall have delivered to the Bank an executed copy of the
share purchase agreement dated as of January 26, 1998 among The
Toronto-Dominion Bank, the Borrower, the Guarantor, Business Windows
Inc., 3454916 Canada Inc. and Ceridian Canada Holdings, Inc.; and
<PAGE>
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(f) the Guarantor shall have injected cash equity of at least
Cdn.$95,000,000 into the Borrower for the purpose of acquiring the
payroll business of the Bank and The Toronto-Dominion Bank.
8.2 CONDITIONS PRECEDENT TO ALL CREDIT. The obligation of the Bank to
extend credit hereunder by means of drawdown, rollover or conversion from one
type of credit availment to another is subject to fulfillment of the following
conditions precedent on the date such credit is extended:
(a) no Default has occurred and is continuing or would arise as a result
of such extension of credit; and
(b) the representations and warranties of the Borrower contained in
Section 6.1, the representations and warranties of the Guarantor
contained in Article V of the Guarantor Credit Agreement, and the
representations of the Guarantor contained in the Guarantee shall be
true and correct in all material respects on and as of the date such
credit is obtained as if such representations and warranties were made
on such date, except to the extent they refer to filings made by the
Guarantor with the United States Securities and Exchange Commission
("SEC"), in which case they shall be deemed amended to include all
filings made by the Guarantor with the SEC to the date hereof.
8.3 WAIVER. The terms and conditions of Section 8.2 are inserted for the
sole benefit of the Bank and the Bank may waive them in whole or in part, with
or without terms or conditions, in respect of any extension of credit, without
prejudicing the Bank's right to assert them in whole or in part in respect of
any other extension of credit.
ARTICLE 9
DEFAULT AND REMEDIES
9.1 EVENTS OF DEFAULT. Upon the occurrence of any one or more of the
following events:
(a) the non-payment of any amount due hereunder within three Banking Days
after notice of non-payment has been given to the Borrower by the
Bank;
(b) the permanent suspension of substantially all of the operations of the
Borrower;
(c) the Borrower shall (i) become insolvent or generally not pay its debts
as such debts become due, (ii) admit, in writing, its inability to pay
its debts generally, or shall make a general assignment for the
benefit of creditors; (iii) file a notice of intention to file a
proposal under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors; (iv) institute or have instituted
against it any proceeding seeking:
<PAGE>
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(i) to adjudicate it a bankrupt or insolvent,
(ii) a liquidation, winding-up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or
(iii) the entry of any order for relief or the appointment of a
receiver, trustee or custodian for it or for any substantial part
of its assets,
and, in the case of any such proceeding instituted against it (but not
instituted by it) the proceedings have not been discharged within 30
days from the commencement of such proceedings;
(d) any representation or warranty made by the Borrower in this agreement
or any representation and warranty made by the Guarantor in the
Guarantor Credit Agreement or any information furnished in writing to
the Bank by the Borrower or by the Guarantor proves to have been
incorrect in any material respect when made or furnished;
(e) the breach or failure of due observance or performance by the Borrower
of any covenant or provision of this agreement, other than those
heretofore dealt with in this Section 9.1, or of any other document,
agreement or instrument delivered pursuant hereto or referred to
herein which is not remedied by the Borrower within ten Banking Days
after the earlier of (i) the time that the Borrower becomes aware of
the default or (ii) the time of the giving of notice from the Bank to
the Borrower of the occurrence of such breach;
(f) if there shall be an action, suit, inquiry, claim or proceeding
against or affecting the Borrower before any governmental, parliament,
legislature, regulatory authority, agency, commission, board or court
or before any private arbitrator, mediator or referee which in any
case or in the aggregate would reasonably be expected to result in the
inability of the Borrower to perform its obligations hereunder;
(g) if a receiver, receiver manager, liquidator or other person with like
powers is appointed with respect to, or if an encumbrancer takes
possession of any substantial part of the properties or assets of the
Borrower and such encumbrancer continues to be in possession thereof
for a period of thirty (30) days;
<PAGE>
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(h) if one or more final judgments or orders for the payment of money in
excess of $1,000,000 be rendered against the Borrower which is not
appealed or discharged within 30 days from the imposition of such
judgment;
(i) if an event or condition shall occur which constitutes an event of
default under any other agreement or instrument relating to
indebtedness of the Borrower exceeding $1,000,000 or which would
permit the acceleration of such indebtedness;
(j) if an Event of Default (as defined in the Guarantor Credit Agreement)
shall occur under the Guarantor Credit Agreement, it being agreed that
if the Guarantor Credit Agreement provides that a specified event of
default may not occur until a period of time has elapsed following the
giving of notice by the Agent (under and as defined in the Guarantor
Credit Agreement) then such notice may be provided by the Bank, for
the purpose of this agreement;
(k) if the Guarantor shall breach any of the Financial Covenants and such
breach shall continue unremedied for a period of 20 days, whether or
not the lenders under the Guarantor Credit Agreement shall have waived
compliance with such Financial Covenants and whether or not such
lenders shall have agreed that such default shall not be an Event of
Default under the Guarantor Credit Agreement;
(l) if the Guarantor shall breach any of the representations, warranties
or, covenants set out in the Guarantee (and in the case of a breach of
the representations, warranties or covenants set out in the Guarantor
Credit Agreement which are incorporated by reference in the Guarantee,
such breach constitutes an Event of Default under the Guarantor Credit
Agreement) including without limitation, if the indebtedness and
liability of the Guarantor under the Guarantee shall no longer rank
pari passu, equally, and rateably with all of the present and future
indebtedness and liability of the Guarantor;
(m) if the Guarantor shall no longer directly or indirectly own a majority
of the issued and outstanding voting shares of the Borrower; or
(n) if all or any part of the Guarantee is invalid, unenforceable or
terminated in any respect, or if the Guarantor denies all or any of
its obligations under the Guarantee,
then, without limitation to the Bank's rights and remedies at law or in equity,
the right of the Borrower to obtain any further credit hereunder and all of the
obligations of the Bank hereunder to extend such further credit shall
automatically terminate and the Bank may, by notice to the Borrower, declare all
indebtedness of the Borrower to the Bank pursuant to this agreement (including
the present value of the face amount of all Bankers' Acceptances issued and
outstanding hereunder based on their respective maturity dates, the present
value to be calculated using a discount rate equal to the yield of bills of
exchange accepted by the Bank and having a similar maturity date and the
principal amount of all Letters of Credit) to be immediately due and payable
whereupon all such indebtedness shall immediately become and be due and payable
without further demand or other notice of any kind, all of which are expressly
waived by the
<PAGE>
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Borrower. Upon the payment by the Borrower to the Bank of the present value of
the face amount of all Bankers' Acceptances issued and outstanding hereunder,
the Borrower shall have no further liability to the Bank with respect to such
Bankers' Acceptances.
9.2 AUTOMATIC ACCELERATION. If the Borrower is adjudged or declared
bankrupt or insolvent or any of the proceedings referred in the event of default
set out at Section 9.1(c) above shall be voluntarily instituted by the Borrower,
or the Borrower indicates its consent to, approval of, or acquiescence in, any
such proceeding for it or for any substantial part of its property, or consents
to the appointment of any receiver or trustee (which events shall be included in
the list of events of default set out above), then, without limiting the Bank's
rights and remedies at law, equity, or otherwise under this agreement, all
indebtedness of the Borrower to the Bank in connection with the agreement will
be automatically accelerated and will be required to be paid by the Borrower,
without the necessity of notice or otherwise and, any right of the Borrower to
any further utilization of the Credits shall automatically terminate.
9.3 REMEDIES CUMULATIVE. The rights and remedies of the Bank under this
agreement are cumulative and are in addition to and not in substitution for any
other rights or remedies provided by law.
ARTICLE 10
MISCELLANEOUS
10.1 WAIVERS AND AMENDMENTS. No failure or delay by the Bank in exercising
any right hereunder shall operate as a waiver of such right nor shall any single
or partial exercise of any power or right hereunder preclude its further
exercise or the exercise of any other power or right. Any waiver by the Bank of
the strict observance, performance or compliance with any term, covenant or
condition of this agreement is not a waiver of any subsequent default and any
indulgence by the Bank with respect to any failure to strictly observe, perform
or comply with any term, covenant or condition of this agreement is not a waiver
of the entire term, covenant or condition or any subsequent default. Any term,
covenant, agreement or condition of this agreement may only be amended with the
consent of the Borrower and the Bank and compliance therewith may only be waived
(either generally or in a particular instance and either retroactively or
prospectively) by the Bank.
10.2 NOTICES. All notices and other communications provided for herein
shall be in writing and shall be personally delivered to an officer or other
responsible employee of the addressee or sent by telefacsimile or other direct
written electronic means, charges prepaid, at or to the applicable addresses or
telefacsimile numbers, as the case may be, set opposite the party's name on a
signature page hereof or at or to such other address or addresses or
telefacsimile number or numbers as either party hereto may from time to time
designate to the other party in such manner. Any communication which is
personally delivered as aforesaid shall be deemed to have been validly and
effectively given on the date of such delivery if such date is a Banking Day and
such delivery was made during normal business hours of the recipient; otherwise,
it shall be deemed to have been validly and effectively given on the Banking Day
next following such date of delivery. Any communication which is transmitted by
telefacsimile or other direct written electronic means as aforesaid shall be
deemed to have been validly and effectively given on the
<PAGE>
-20-
date of transmission if such date is a Banking Day and such transmission was
made during normal business hours of the recipient; otherwise, it shall be
deemed to have been validly and effectively given on the Banking Day next
following such date of transmission.
10.3 INDEMNITY.
(a) GENERAL INDEMNITY. The Borrower shall pay, defend, indemnify, and
hold the Bank and its officers, directors, employees, counsel and agents (each
an "Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses or disbursements (including cleanup costs and engineering
consulting costs in respect of environmental claims and legal fees on a
solicitor and client basis) of any kind or nature whatsoever (collectively,
"Costs") with respect to the execution, delivery, enforcement, performance and
administration of this agreement or the Guarantee, or the transactions
contemplated hereby and thereby and with respect to any investigation,
litigation or proceeding (including any insolvency proceeding, environmental
claim or appellate proceeding) related to this agreement or the Loans or the use
of the proceeds thereof, whether or not any Indemnified Person is a party
thereto (all of the foregoing, collectively, the "Indemnified Liabilities");
provided, however, that the Borrower shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities arising from the
gross negligence or wilful misconduct of, or breach of this agreement by, such
Indemnified Person. For certainty, the Borrower shall have no obligation
hereunder with respect to Costs arising in respect of the Asset Purchase
Agreement or the transactions contemplated thereby, and the provisions of this
Agreement shall not in any way lessen the Bank's obligations of indemnification
under the Asset Purchase Agreement.
(b) SURVIVAL. The obligations in this Section 10.3 shall survive payment
of all other indebtedness hereunder and cancellation of the Credits.
10.4 SUCCESSORS AND ASSIGNS. This agreement shall enure to the benefit of
and shall be binding upon the parties hereto and their respective successors and
permitted assigns.
10.5 ASSIGNMENT. Neither this agreement nor the benefit thereof may be
assigned by the Borrower. Prior to the occurrence of a Default, the rights and
obligations of the Bank hereunder may be assigned or participated by the Bank in
whole or in part with the prior written consent of the Borrower (which consent
not to be unreasonably withheld). At any time following the occurrence of a
Default, the rights and obligations of the Bank hereunder may be assigned or
participated by the Bank in whole or in part without the consent of or notice to
the Borrower. For the purposes of any such assignment or participation, the
Bank may disclose, on a confidential basis, to a potential participant,
transferee or assignee such information about the Borrower and the Guarantor as
the Bank may see fit.
<PAGE>
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10.6 ENTIRE AGREEMENT. This agreement and the agreements referred to
herein and delivered pursuant hereto constitute the entire agreement between the
parties hereto relating to the Credits and supersede any prior agreements,
undertakings, declarations, representations and understandings, both written and
verbal, in respect of the subject matter hereof.
10.7 FOREIGN CURRENCY OBLIGATIONS. The Borrower shall make payment of all
amounts owing hereunder in the currency (the "Original Currency") in which the
Borrower is required to pay such obligation. If the Borrower makes payment
relative to any obligation to the Bank in a currency (the "Other Currency")
other than the Original Currency (whether voluntarily or pursuant to an order or
judgment of a court or tribunal of any jurisdiction) such payment shall
constitute a discharge of the Borrower's liability hereunder in respect of such
obligation only to the extent of the amount of the Original Currency which the
Bank is able to purchase at its main branch in the jurisdiction where the loans
to the Borrower are recorded, with the amount it receives on the date of receipt
in accordance with its normal practice. If the amount of the Original Currency
which the Bank is able to purchase is less than the amount of such currency
originally due to the Bank in respect to the relevant obligation, the Borrower
shall indemnify and save the Bank harmless from and against any loss or damage
arising as a result of such deficiency. This indemnity shall constitute an
obligation contained in this agreement, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by the Bank and shall continue in full force and effect notwithstanding any
judgment or order in respect of any amount due hereunder or under any judgment
or order.
IN WITNESS WHEREOF the parties hereto have executed this agreement.
CANADIAN IMPERIAL BANK OF COMMERCE
Commerce Court West, 3rd Floor
Toronto, Ontario, M5L 1A2
Attention: Managing Director
Corporate Finance
Telefax: (416) 980-7377
By:
-------------------------------
Title:
-----------------------------
By:
-------------------------------
Title:
----------------------------
<PAGE>
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CERIDIAN CANADA LTD.
3500 Steeles Avenue East
Tower 2-Level
Markham, Ontario L3R 2Z1
Attention: President
Telefax: 905-982-6853
cc: Ceridian Corporation
8100 - 34th Avenue South
Minneapolis, Minnesota 53425
Attention: Treasurer
By:
-------------------------------
Title:
----------------------------
By:
-------------------------------
Title:
----------------------------
<PAGE>
GUARANTEE AGREEMENT
TO: CANADIAN IMPERIAL BANK OF COMMERCE
WHEREAS Ceridian Canada Ltd. (hereinafter called the "Borrower") is a
wholly owned indirect subsidiary of Ceridian Corporation (hereinafter called the
"Guarantor");
AND WHEREAS Canadian Imperial Bank of Commerce (hereinafter called the
"Bank") has established and may in the future establish one or more credit
facilities in favour of the Borrower;
AND WHEREAS, as security for the payment of the full amount of all of
the present and future indebtedness and liability of the Borrower to the Bank,
the Guarantor has agreed to guarantee payment of the Borrower's indebtedness and
liability to the Bank on the terms and subject to the conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the Guarantor hereby covenants to and for the benefit of
the Bank as follows:
GUARANTEE
Guarantee
1.01 The Guarantor hereby unconditionally, absolutely and irrevocably
guarantees the due and punctual and complete payment and satisfaction when due
(whether at stated maturity, by acceleration or otherwise), and at all times
thereafter, of all the Guaranteed Liabilities which are or may become at any
time and from time to time owing or payable by the Borrower to the Bank or which
remain owing and unpaid to the Bank. "Guaranteed Liabilities" means the
indebtedness, liabilities and obligations of the Borrower to the Bank, howsoever
incurred, present and future, direct and indirect, whether as principal or as
surety, absolute and contingent, matured and unmatured, at any time and from
time to time existing or arising under or by virtue of or otherwise in
connection with any credit facility made available by the Bank to the Borrower,
including without limitation, indebtedness and liability for or in connection
with any swap transaction, foreign exchange transaction, bankers acceptance,
LIBO loans, direct and indirect loans and advances, and in each case, including
all interest, commissions, costs, charges, legal fees and expenses which may be
incurred in respect of such indebtedness and liability, and in each case,
whether or not any such indebtedness, liabilities or obligations are discharged,
stayed or otherwise affected, except to the extent such indebtedness,
liabilities or obligations are fully discharged by full, irrevocable and final
payment.
<PAGE>
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PAYMENT
Payment
2.01 The Guarantor agrees to make immediate payment to the Bank of all
Guaranteed Liabilities then payable to the Bank upon receipt of a demand for
payment therefor by the Bank to the Guarantor in writing.
Taxes and Set Off by Guarantor
2.02 All payments to be made by the Guarantor hereunder shall be made
without set-off or counterclaim. In addition, the Guarantor shall make all
payments to the Bank hereunder, free and clear of, and without deduction, or
withholding for, or on account of, any tax levied by any country or subdivision
thereof, including any taxing authority of Canada or the United States of
America (whether Federal, State, Provincial or municipal; other than on account
of any tax on the Bank's general income, and other than on account of any
capital or franchise taxes, whether imposed under the laws of the jurisdiction
of the Bank, the Guarantor, or otherwise). If the Guarantor is required by any
applicable law, rule or regulation to make any deduction or withholdings for or
on account of any such tax, then the Guarantor will:
(a) promptly notify the Bank of such requirement;
(b) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount paid by the Guarantor
to the Bank hereunder) promptly upon the earlier of determining that
such deduction is required or receiving notice that such amount has
been assessed against the Bank;
(c) promptly forward to the Bank an official receipt (or a certified
copy), or other documentation acceptable to the Bank, evidencing such
payment to such authorities; and
(d) pay to the Bank, in addition to the payment to which the Bank is
otherwise entitled, such additional amount as is necessary to ensure
that the net amount actually received and retained by the Bank (free
and clear of such tax, whether assessed against the Guarantor or the
Bank) will equal the full amount the Bank would have received had no
such deduction or withholding been required or taxed and assessed.
The Guarantor will promptly pay to the Bank the amount of any liability
(including, without limitation, any related liability for penalties and
interest) assessed directly against the Bank by reason of the failure or delay
of the Guarantor to deduct or withhold or pay any tax as foresaid.
<PAGE>
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OBLIGATIONS ABSOLUTE
Obligations Absolute
3.01 The Guarantor unconditionally and irrevocably waives each and every
defense which, under principles of guarantee or suretyship law, would otherwise
operate to impair or diminish such liability; and nothing whatever except actual
full payment and performance to the Bank of the Guaranteed Liabilities (and all
other debts, obligations and liabilities of Guarantor under this Agreement)
shall operate to discharge the Guarantor's liability hereunder. The obligations
of the Guarantor hereunder are and shall be absolute and unconditional and any
monies or amounts expressed to be owing or payable by the Guarantor hereunder
which may not be recoverable from the Guarantor on the footing of a guarantee
shall be recoverable from the Guarantor as a primary obligor and principal
debtor in respect thereof.
Obligations Continuing
3.02 The obligations of the Guarantor hereunder shall be continuing and
shall remain in full force and effect so long as the Bank continues to deal with
the Borrower or until all the Guaranteed Liabilities have been paid and
satisfied in full. The obligations of the Guarantor hereunder shall not be
satisfied, reduced or discharged by any intermediate payment or satisfaction of
the whole or any part of the principal, interest, fees and other monies or
amounts which may at any time be or become owing or payable to the Bank by the
Borrower.
3.03 The obligations of the Guarantor hereunder shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
which would otherwise have reduced the obligations of the Guarantor hereunder
(whether such payment shall have been by or on behalf of the Borrower or by or
on behalf of the Guarantor) is rescinded or reclaimed from the Bank upon the
insolvency, bankruptcy, liquidation or reorganization of the Borrower or the
Guarantor or otherwise, all as though such payment had not been made.
Obligations Not Affected
3.04 The obligations of the Guarantor hereunder shall not be affected or
impaired by any act, omission, matter or thing whatsoever, occurring before,
upon or after any demand for payment hereunder (and whether or not known to the
Guarantor or the Bank) which, but for this provision, might constitute a whole
or partial defense to a claim against the Guarantor hereunder or might operate
to release or otherwise exonerate the Guarantor from any of its obligations
hereunder or otherwise affect such obligations, whether occasioned by default of
the Bank or otherwise, including:
(a) any limitation of status or power, disability, incapacity or other
circumstance relating to the Borrower or any other person, including
any insolvency, bankruptcy, liquidation, reorganization, readjustment,
composition, dissolution, winding-up or other proceeding involving or
affecting the Borrower or any other person;
<PAGE>
-4-
(b) any irregularity, defect, unenforceability or invalidity in respect of
any indebtedness or other obligation of the Borrower or any other
person under any credit agreement or any other document or instrument;
(c) any failure of the Borrower, whether or not without fault on its part,
to perform or comply with any of the provisions of any credit
agreement or to give notice thereof to the Guarantor;
(d) the taking or enforcing or exercising or the refusal or neglect to
take or enforce or exercise any right or remedy from or against the
Borrower or any other person or their respective assets or the release
or discharge of any such right or remedies;
(e) the granting of time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Borrower or
any other person;
(f) any amendment, variation, modification, supplement or replacement of
any credit agreement or any other document or instrument;
(g) any change in the ownership, control, name, objects, businesses,
assets, capital structure or constitution of the Borrower or the
Guarantor;
(h) any merger or amalgamation of the Borrower or the Guarantor with any
person or persons;
(i) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction or by any present or future action of
any governmental authority or court amending, varying, reducing or
otherwise affecting, or purporting to amend, vary, reduce or otherwise
affect, any of the Guaranteed Liabilities or the obligations of the
Guarantor under this Guarantee; and
(j) any other circumstance that might otherwise constitute a legal or
equitable discharge or defense of the Borrower under any credit
agreement or of the Guarantor in respect of its guarantee hereunder.
Indemnity. As a separate and alternative stipulation, the Guarantor
unconditionally and irrevocably agrees that any sum expressed to be payable by
the Borrower under any credit facility established by the Bank in favour of the
Borrower but which is for any reason not recoverable from the Guarantor on the
basis of a guarantee shall nevertheless be recoverable from it on the basis of
an indemnity and shall be paid by it to the Bank on demand.
<PAGE>
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Waiver
3.05 Without in any way limiting the provisions of Section 3.04 hereof, the
Guarantor hereby waives notice of acceptance hereof, notice of any liability of
the Guarantor hereunder, notice or proof of reliance by the Bank upon the
obligations of the Guarantor hereunder, and the diligence, presentment, demand
for payment on the Borrower, protest, notice of dishonour or non-payment of any
of the Guaranteed Liabilities, or other notice or formalities to the Borrower of
any kind whatsoever. The Guarantor further hereby waives any requirement that
the Bank take, protect, secure, perfect or insure any security interest or lien
or any property subject thereto or exhaust any right or take any action against
the Borrower or any other person or entity or any collateral.
No Obligation to Take Action Against Borrower
3.06 This is a guarantee of payment, and not of collection. The Bank shall
not have any obligation to enforce any rights or remedies or to take any other
steps against the Borrower or any other person or any property of the Borrower
or any other person before the Bank is entitled to demand payment and
performance by the Guarantor of its liabilities and obligations under this
Guarantee, and the Guarantor hereby waives all benefit of discussion. The
obligations of the Guarantor hereunder are independent of the Guaranteed
Liabilities and a separate action or actions may be brought and prosecuted
against the Guarantor to enforce this Guarantee, irrespective of whether any
action is brought against the Borrower or whether the Borrower is joined in any
such action or actions.
Dealing with the Borrower and Others
3.07 The Bank, without releasing, discharging, limiting or otherwise
affecting in whole or in part the Guarantor's obligations and liabilities
hereunder and without the consent of or notice to the Guarantor may,
(a) grant time, renewals, extensions, compromises, concessions, waivers,
releases, discharges and other indulgences to the Borrower or any
other person;
(b) take or abstain from taking securities or collateral from the Borrower
or from perfecting securities or collateral of the Borrower;
(c) release, discharge, compromise, realize, enforce or otherwise deal
with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security
given by the Borrower or any third party with respect to the
obligations or matters contemplated by any credit agreement;
(d) accept compromises or arrangements from the Borrower;
<PAGE>
-6-
(e) apply all monies at any time received from the Borrower or from
securities upon such part of the Guaranteed Liabilities as the Bank
may see fit or change any such application in whole or in part from
time to time as the Bank may see fit; and
(f) otherwise deal with, or waive or modify their right to deal with, the
Borrower and all other persons and securities as the Bank may see fit.
GUARANTOR COVENANTS
4.01 (a) The Guarantor hereby covenants and agrees that all of the Guarantor
Terms and Conditions are hereby incorporated in this Guarantee by
reference, mutatis mutandis, and made an integral part of this
Guarantee. The Guarantor Terms and Conditions shall be construed in
such manner so that it is as if they had originally been made in the
Bank's favour and made in connection with, and to induce the extension
of, the credit facilities extended by the Bank to the Borrower.
(b) Subject to section 4.01(c) hereof, the Bank agrees that the Guarantor
shall not be in default of its obligations hereunder to comply with
the Guarantor Terms and Conditions, until the occurrence of an Event
of Default (as defined in the Guarantor Credit Agreement); it being
agreed that if the Guarantor Credit Agreement provides that a
specified event of default may not occur until a period of time has
elapsed following the giving of notice by the Agent (under and as
defined in the Guarantor Credit Agreement) then such notice may be
provided by the Bank for the purpose of this Guarantee.
(c) Notwithstanding section 4.01(b), the Guarantor shall be in default of
its obligations to comply with the Guarantor Terms and Conditions if
the Guarantor shall breach any of the Financial Covenants and such
breach shall continue unremedied for a period of 20 days, whether or
not the lenders under the Guarantor Credit Agreement shall have waived
compliance with such Financial Covenants and whether or not such
lenders shall have agreed that such default shall not be an Event of
Default.
"Guarantor Terms and Conditions" means the terms and conditions,
(including without limitation, the representations, warranties, affirmative
covenants, negative covenants, financial covenants and Events of Default)
included in the Guarantor Credit Agreement.
"Guarantor Credit Agreement" means, at any particular time:
(i) the Amended and Restated Credit Agreement dated as of December 12,
1995, Amended and Restated as of July 31, 1997, among the Guarantor,
Bank of America National Trust and Savings Association, as Agent, and
The Financial Institutions parties thereto, as such Credit Agreement
has been amended and compliance with a certain financial covenant
therein has been waived pursuant to a Waiver and First Amendment to
Credit Agreement dated December 2, 1997, among the parties thereto;
<PAGE>
-7-
(ii) if the Guarantor Credit Agreement as defined in clause (i) above is
amended, restated, supplemented, replaced or reduced, or any waiver is
given thereunder or any requirement thereunder is eliminated and
either the Bank consents in writing or all of the financial
institutions that are parties to the Guarantor Credit Agreement
consent in writing to such amendment, restatement, supplement,
replacement, reduction, waiver or elimination then, the "Guarantor
Credit Agreement" shall mean the Guarantor Credit Agreement as
defined in clause (i) hereof, as so amended, restated, supplemented,
replaced, reduced, waived or eliminated;
(iii) if the Guarantor Credit Agreement shall be cancelled, terminated, or
otherwise extinguished, then the "Guarantor Credit Agreement" shall be
the Guarantor Credit Agreement, as defined in clause (i) or (ii)
hereof, that existed immediately prior to the time that the Guarantor
Credit Agreement was cancelled, terminated or otherwise extinguished,
as the case may be.
"Financial Covenants" means the financial covenants (including the
defined terms as utilized therein) contained in sections 7.01, 7.09 and 7.10 of
the Guarantor Credit Agreement.
(d) For greater certainty, the parties agree that any amendments,
supplements, modifications, restatements, or replacements, or the
elimination of any of the Guarantor Terms and Conditions (including
any defined terms as utilized therein) shall not be incorporated in
this Guarantee by reference unless the Bank has specifically consented
to such amendments, supplements, modifications, restatements,
replacements, or elimination, in writing.
Reporting
4.02 The Guarantor will provide to the Bank such notices, financial
statements and other information which is required to be provided under the
Guarantor Credit Agreement, in the same manner and within the same time periods,
as set out in the Guarantor Credit Agreement.
Ownership
4.03 The Guarantor will, at all times, continue to own, directly or
indirectly, the majority of the issued and outstanding voting shares in the
capital stock of the Borrower.
<PAGE>
-8-
Pari Passu
4.04 The Guarantor hereby covenants that:
(i) its obligations under this Guarantee shall, at all times hereafter,
rank pari passu, equally, and ratably with all of the indebtedness and
liability of the Guarantor under the Guarantor Credit Agreement and
the Guarantor agrees that, in the event that it grants any security to
the financial institutions which are party to the Guarantor Credit
Agreement (the "Financial Institutions") or any agent acting on behalf
of the Financial Institutions, the Guarantor will grant security to
the Bank which shall correspond in scope and nature and rank pari
passu, equally and ratably with such security; and
(ii) its obligations under this Guarantee shall, at all times hereafter,
rank pari passu, equally and ratably with all of the other present and
future unsubordinated indebtedness and liability of the Guarantor and
the Guarantor agrees that, in the event that it grants any security to
any other present or future unsubordinated creditor, the Guarantor
will grant security to the Bank which shall correspond in scope and
nature and rank pari passu, equally and ratably with such security,
except that this clause 4.04(ii) shall not restrict the creation of
Permitted Liens as "Permitted Liens" is defined in the Guarantor
Credit Agreement and as "Guarantor Credit Agreement" is defined in
clause (i) of the definition of Guarantor Credit Agreement hereunder.
Negative Pledge
4.05 The Guarantor will not create, issue, incur, assume or permit to exist
any security interest, lien, charge or other encumbrance of any kind in respect
of the capital stock of the Borrower.
GUARANTOR REPRESENTATIONS
5.01 The Guarantor hereby represents and warrants that:
(a) its obligations under this Guarantee rank pari passu, equally and
ratably with all of its other unsubordinated indebtedness and
liability outstanding at the date hereof;
(b) the execution, delivery and performance of this Guarantee by the
Guarantor are within the corporate powers of the Guarantor, have been
duly authorized by all necessary corporate action and do not and will
not (i) require any consent or approval of the stockholders of the
Guarantor which has not been obtained, (ii) violate any provision of
the articles of incorporation or by-laws of the Guarantor or of any
law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to the
Guarantor or any subsidiary of the Guarantor; (iii) require the
consent or approval of, or filing or registration with, any
governmental body, agency or authority, or (iv) result in a
<PAGE>
-9-
breach of or constitute a default under, or result in the imposition
of any lien, charge or encumbrance upon any property of the Guarantor
or any subsidiary of the Guarantor pursuant to, any indenture or other
agreement or instrument under which the Guarantor or any subsidiary of
the Guarantor is a party or by which it or any of its properties may
be bound or affected, and
(c) this Guarantee, when executed and delivered, will constitute the
legal, valid and binding obligation of the Guarantor enforceable in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency or similar laws affecting the
enforceability of creditors' rights generally or by equitable
principles relating to enforceability.
MISCELLANEOUS
Amendment, Etc.
6.01 No amendment, modification or waiver of any provision of this
Guarantee or consent to any departure by the Guarantor or any other person from
any provision of this Guarantee will in any event be effective unless it is
signed by the Guarantor and the Bank.
Assignment, Transfer and Participation
6.02 The Guarantor hereby consents to any assignment or transfer of,
or any grant of the participation in, any rights, benefits or obligations of,
the Bank in respect of this Guarantee.
6.03 Notwithstanding the provisions of Section 6.02, the Guarantor, shall
upon request made by an assignee of the Bank, execute and deliver such
assurances as may be reasonably requested by such assignee to confirm its
entitlement to the rights and benefits hereunder so assigned and transferred to
it and the liability of the Guarantor to the assignee hereunder.
Foreign Currency Obligations
6.04 The Guarantor shall make payment of all amounts guaranteed hereunder
in the currency (the "Original Currency") in which the Borrower is required to
pay such obligation. If the Guarantor makes payment relative to any obligation
to the Bank in a currency (the "Other Currency") other than the Original
Currency (whether voluntarily or pursuant to an order or judgment of a court or
tribunal of any jurisdiction) such payment shall only constitute a discharge of
the Guarantor's liability hereunder in respect of such obligation only to the
extent of the amount of the Original Currency which the Bank is able to purchase
at its main branch in the jurisdiction where the loans to the Borrower are
recorded, with the amount it receives on the date of receipt in accordance with
its normal practice. If the amount of the Original Currency which the Bank is
able to purchase is less than the amount of such currency originally due to the
Bank in respect to the relevant obligation, the Guarantor shall indemnify and
save the Bank harmless from and against any loss or damage arising as a result
of such deficiency. This indemnity shall constitute an obligation contained in
this Guarantee, shall give rise to a separate and independent cause of
<PAGE>
-10-
action, shall apply irrespective of any indulgence granted by the Bank and shall
continue in full force and effect notwithstanding any judgment or order in
respect of any amount due hereunder or under any judgment or order.
Applicable Law
6.05 This Guarantee shall be conclusively deemed to be a contract made
under, and shall for all purposes be governed by, and construed and interpreted
in accordance with, the laws of Ontario, in effect from time to time, excluding
any choice of law rules that may direct the application of the laws of another
jurisdiction, without prejudice to or limitation of any other rights or remedies
available under the laws of any jurisdiction, where property or assets of the
Guarantor may be found.
Jurisdiction
6.06 The Guarantor and the Bank hereby irrevocably agree that any suits,
actions or proceedings arising out of or in connection with this Guarantee
(collectively "Proceedings") may be brought in any court in the Province of
Ontario and each submits and attorns to the non-exclusive jurisdiction of each
such court.
6.07 The Guarantor and the Bank hereby irrevocably waive any objections
which they may have now or hereafter to the laying of the venue of any
Proceedings in any court referred to in Section 6.06 and any claim that any such
Proceedings have been brought in any inconvenient forum and further irrevocably
agree that a judgment in any Proceedings brought in any such court shall be
conclusive and binding upon the Guarantor or the Bank, as the case may be, and
may be enforced in any courts to the jurisdiction of which such parties may be
subject by Proceedings upon such judgment.
6.08 Nothing contained in this Section 6 shall limit the right of the Bank
to take Proceedings against the Guarantor in any other court of competent
jurisdiction nor shall the taking of Proceedings in one or more jurisdictions
preclude the taking of Proceedings in any other jurisdiction, whether
concurrently or not.
6.09 The Guarantor hereby irrevocably:
(i) appoints the Borrower as its agent for service of process in the
Province of Ontario in connection with any Proceedings in the Province
of Ontario and consents to process being served in any Proceedings in
the Province of Ontario by delivering or transmitting a true copy
thereof to the Borrower at its address;
(ii) agrees that service in accordance with the provisions of clause 6.09
(i) shall be deemed in every respect effective service of process upon
the Guarantor in any such Proceedings and shall, to the fullest extent
permitted by law, be taken and be held to be valid personal service
upon the personal delivery to the Guarantor; and
(iii) consents generally to the fullest extent permitted by law in respect
of any
<PAGE>
-11-
Proceedings to the giving of any relief and the issue of any process
in connection with such Proceedings including the making, enforcement
or execution against any property whatsoever (irrespective of its use
or intended use) of any order or judgment which may be made or given
in such Proceedings.
6.10 THE GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS GUARANTEE, THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE ACTIONS OF THE GUARANTOR OR THE BANK IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF.
Costs and Expenses
6.11 The Guarantor shall pay on demand by the Bank any and all costs, fees
and expenses, including outside legal costs and expenses, incurred by the Bank:
(i) in having its outside counsel review and provide legal opinions in
connection with the preparation of the Guarantee, (but in no event
shall such costs, fees and expenses to be paid by Guarantor pursuant
to this section and the costs, fees and expenses to be paid by the
Borrower pursuant to section 7.1(e) of the credit agreement entered
into by the Bank and the Borrower on the date hereof exceed $25,000
Cdn.), and
(ii) in connection with enforcing any of its rights and remedies under this
Guarantee.
No Waiver, Cumulative Remedies
6.12 No failure to exercise and no delay in exercising, on the part of the
Bank, any right, remedy, power or privilege hereunder or under any credit
agreement, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder or under any credit
agreement preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein and under any credit agreement are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
Waiver of Rights of Subrogation, Reimbursement, Etc.
6.13 Until full, final, and irrevocable payment in full of the Guaranteed
Liabilities and until any commitment of the Bank to extend financial
accommodation to the Borrower is permanently cancelled, the Guarantor hereby
irrevocably waives any claim or other rights that it may now or hereafter
acquire against the Borrower that arise from the existence, payment, performance
or enforcement of the Guaranteed Liabilities under this Guarantee or any credit
agreement, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Bank against the Borrower or any
collateral, whether or not such claim, remedy or right arises in equity
<PAGE>
-12-
or under contract, statute or common law, including the right to take or receive
from the Borrower, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment or security on account of such claim,
remedy or right. If any amount shall be paid to the Guarantor in violation of
the preceding sentence at any time prior to the later of the payment in full of
the Guaranteed Liabilities and all other amounts payable under this Guarantee
and the termination of any commitment, such amount shall be held in trust for
the benefit of the Bank and shall forthwith be paid to the Bank to be credited
and applied to the Guaranteed Liabilities and all other amounts payable under
this Guarantee, whether matured or unmatured, in accordance with the terms of
any credit agreement, or to be held as collateral for any Guaranteed Liabilities
or other amounts payable under this Guarantee thereafter arising. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements provided by the Bank to the Borrower, and that the
waiver, set forth in this Section 6.13, is knowingly made in contemplation of
such benefits.
Guarantee in Addition to Other Obligations
6.14 The obligations of the Guarantor under this Agreement are in addition
to and not in substitution for any other obligations of the Guarantor to the
Bank in relation to any credit agreement and any guarantees or security at any
time held by or for the benefit of the Bank.
Stay of Acceleration
6.15 If acceleration of the time for payment of any amount payable by the
Borrower in respect of the obligations guaranteed is stayed upon the insolvency,
bankruptcy or reorganization of the Borrower or any moratorium affecting the
payment of the obligations of the Borrower guaranteed hereby, all such amounts
otherwise subject to acceleration shall nonetheless be payable by the Guarantor
hereunder automatically and without any requirement for any demand by the Bank.
Entire Agreement
6.16 This Guarantee, including all documents contemplated hereby,
constitutes the entire agreement between the parties with respect to the subject
matter and supersedes all prior negotiations, undertakings, representations and
understandings.
Severability
6.17 Any provision of this Guarantee which is prohibited or unenforceable
in any jurisdiction shall not invalidate the remaining provisions and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Successors and Assignees
6.18 This Agreement shall be binding upon and enure to the benefit of the
Guarantor and the Bank and its respective successor and permitted assignees,
except that the Guarantor may not assign any of its obligations hereunder
without the express prior written consent of the Bank.
<PAGE>
-13-
Notice
6.19 Any notice or demand to or upon the Guarantor and any notice to be
provided to the Bank, to be effective, shall be in writing or by telecopy,
telegraph or telex, and shall not be effective until received and shall be
addressed as follows:
Ceridian Corporation
8100 - 34th Avenue South
Minneapolis, Minn. 55425-1640
U.S.A.
Telephone: (612) 853-5265
Fax: (612) 853-3932
Attention: John H. Grierson, Vice President & Treasurer
Canadian Imperial Bank of Commerce
Commerce Court West, 3rd Floor
Toronto, Ontario
M5L 1A2
Telephone: (416) 980-3394
Fax: (416) 980-7377
Attention: Managing Director, Corporate Finance
<PAGE>
-14-
Counterparts
6.20 This Guarantee and the acceptance thereof may be executed in any
number of separate counterparts and all said counterparts taken together shall
be deemed to constitute one and the same instrument.
Consequential Damages
6.21 THE GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO
CLAIM OR RECOVER FROM THE BANK ANY CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES.
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly
executed and delivered by its proper and duly authorized officers as of March 2,
1998.
CERIDIAN CORPORATION
By: /s/J. R. Eickhoff
Name J. R. Eickhoff
Title: Executive V.P. & Chief Financial
Officer
By: /s/John A. Haveman
Name John A. Haveman
Title: Vice President & Secretary
CANADIAN IMPERIAL BANK OF COMMERCE
By:
Name
Title:
By:
Name
Title:
<PAGE>
Exhibit 10.30
December 16,1997
Mr. Bil Lien, Project Executive
IBM Global Services
5301 Maryland Way
Brentwood TN 37027
Dear Bil:
In connection with that certain Letter dated November 27, 1996 (the
"Termination Letter") from Crispin D. Crosswy of Comdata Network, Inc.
("Comdata") to Mr. Bil Lien of Integrated Systems Solutions Corporation
("ISSC"), n.k.a. International Business Machines Corporation ("IBM"),
pursuant to which Comdata provided formal notification to ISSC that it
intended to terminate for convenience on or before June 30, 1999, that
certain Amended and Restated Agreement for Systems Operations Services dated
August 29, 1995 (the "Agreement"), by and between ISSC and Comdata, pursuant
to Section 10.1 of the Agreement, I am writing this letter (this "Letter") to
request IBM's approval of Comdata's revocation of the Termination letter.
Therefore, notwithstanding anything in the Termination Letter or any other
correspondence or communication prior to the date hereof to the contrary, by
executing below EBM and Comdata agree that Comdata shall be deemed to have
not provided any notification to IBM of its intention to terminate the
Agreement.
If IBM is in agreement with the terms of this Letter, please evidence such
approval by causing the enclosed copy of this letter to be executed and
returned to me.
If you have any questions or concerns regarding this Letter, please do not
hesitate to contact me at any time.
Very truly ,yours,
/s/Tony Holcombe
Tony Holcombe
President and Chief Executive Officer
AGREED TO AND ACCEPTED AS OF
THE DATE SET FORTH ABOVE
INTERNATIONAL BUSINESS MACHINES CORPORATION
By: /s/William S. Lien
William S. Lien
Title: Project Executive
<PAGE>
December 16, 1997
Mr. Tony Holcombe, President and CEO
Comdata Network, Inc.
5301 Maryland Way
Brentwood TN 37027
Dear Tony:
We are very pleased to have the opportunity to continue the Comdata/IBM
Global Services relationship, and to further expand our involvement by
providing new services across several additional areas. Our mutual intent is
to incorporate any necessary modifications and additions into our existing
agreement. The key elements of our proposal are detailed in the attachment
to this letter. They represent the products and services that have been
discussed with you and Mr. David Wolverton, Senior Vice President of
Operations, and are intended to guide our future discussions.
Our proposal is based upon our current understanding of Comdata's
requirements, and may be subject to modifications upon completion of our due
diligence process, which will begin when confidentiality restrictions
regarding this proposal end.
By signing below, we mutually confirm our intent to enter into an expanded
agreement based upon the terms and conditions set forth in that certain
Amended and Restated Agreement for Systems Operations Services dated as of
August 29, 1995 ("Agreement"), along with the elements of our proposal set
forth in the attachment and such other terms and conditions as shall be
mutually agreed upon during or following the due diligence period. It is our
mutual understanding that this new arrangement between Comdata and IBM Global
Services shall be evidenced by a written amendment to the Agreement. Each of
us hereby agree to work in good faith to finalize, execute, and deliver the
amendment contemplated hereby no later than Friday, February 27, 1998.
Please indicate your concurrence with the above by signing in the space
provided below.
Sincerely,
/s/Bill
William S. Lien
Attachment
/s/Tony Holcombe
Tony Holcombe
President, Comdata
<PAGE>
Provisions for Contract Supplement
Additional Services
IBM Global Services will assume responsibility for the following functions,
currently performed by Comdata:
Application Development and Maintenance (ADM). IBM Global Services
will consolidate TIC, Trendar, and Payload development and maintenance
functions into the IBM Global Services function. In addition, IBM
will be responsible for the authoring of Functional Specification
Documents (FSDs) for all application development work to be performed
by IBM Global Services.
Quality Assurance. IBM Global Services will perform the quality
assurance and security administration functions of Comdata's current
Quality Programs department.
Network Services. IBM Global Services will manage and perform the
in-scope functions of Comdata's current Network Services department.
Operations. IBM Global Services will acquire and install a CMOS R44
4-engine processor, and will relocate the Sun, AS/400, RS/6000, TIC,
and Tendar systems (as appropriate) to IBM's LaVergne facility, where
IBM Global Services will operate these systems on behalf of Comdata.
Project Management. Most development projects will be managed by the
Application Development organization, working with the designated
focal point for the Comdata line of business organization. The
processes established for increasing or decreasing the ADM resource
pool will apply to project management services.
The specific responsibilities of Comdata and IBM Global Services are detailed
on the following pages, and are subject to a due diligence verification and
potential adjustment.
Archco - a recent Comdata acquisition - is specifically excluded from this
letter of intent; however, it is the intention of the parties to work toward
the inclusion of Archco ADM and Operations in the amendment contemplated
hereby.
[Schedules entitled "Application Development," "Quality Programs" and "Network
Services" not included]
December 16, 1997
<PAGE>
Application Development
The table below shows the Comdata and IEBM Global Services responsibilities
for Phases 3, 4 and 5 of Comdata's Product Management Process.
IBM Global Services proposes to add application development and maintenance
(ADM) responsibilities for the TIC, Trendar, and PayLoad applications.
SCHEDULES PERTAINING TO APPLICATION DEVELOPMENT, QUALITY PROGRAMS AND NETWORK
SERVICES OMITTED.
<PAGE>
Operations
IBM Global Services will add systems administration and systems operations
responsibilities for the TIC and Trendar platforms.
In addition, IBM Global Services proposes to relocate - as appropriate - the
AS/400, RS/6000, Sun, TIC, and Trendar platforms to IBM's Data Center in
LaVergne. Comdata is responsible for all costs related to the relocation
- -including any fit-up and environmentals at IBM facilities - as well as any
telecommunication facilities and equipment required to facilitate the remote
operation. Comdata maintains financial responsibility for hardware,
software, maintenance, and consumables for the Comdata-owned platforms (Sun,
TIC, and Trendar). Comdata will provide all required documentation and
operations training for Comdata platforms to enable IBM Global Services to
assume operational responsibilities.
Project Management
IBM Global Services will provide project management for all development
projects, using resources from the ADM resource baseline. The processes
established for increasing or decreasing the ADM resource pool will apply to
project management services.
December 16, 1997
<PAGE>
Service Baselines
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Current Baseline Baseline ARC RRC
Baseline Hours Hours cost/hour cost/hour
Hours 1998 1999-2005*
ADM & Quality 81,400 109,150 136,900 TBD TBD
Assurance Network 0 27,000 27,000 TBD TBD
Services
</TABLE>
*Baseline hours for year 2005 will be
determined on a pro rata basis.
Pricing
In recognition of IBM Global Services' investments in the Comdata technical
environment, Comdata will make a one-time payment of $8,208,000 to IBM Global
Services by the end of December, 1997 to restructure the Agreement.
IBM Global Services will modify the Annual Services Base Charge in the
existing contract to account for: the additional services; a change in the
COLA factor from 90% to 70%; and a restructuring to reflect capital
investments made since 1991.
<TABLE>
<CAPTION>
($ in millions) Contract Year
'98 '99 '00 '01 '02 '03 '04 '05
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Services 19.847 21.347 21.347 21.347 21.347 21.347 21.347 7.116
Base Charge
Termination Charge 10.2 8.6 7.5 6.7 6.1 5.3 4.2 0
</TABLE>
The use of the November 1997 CMOS R44 processor upgrade as described herein,
the ongoing license fees set forth in Schedule F-3 of the Agreement, and the
use of base DB2 licenses for that platform are included in the Annual
Services Base Charge. COLA will be applied to all charges, including- ARCs
and RRCs.
In addition to the restructuring fee and the Annual Services Base Charge,
Comdata will be responsible for the one-time charges (e.g., license upgrade
fees, cabling, etc.) associated with the CMOS R44 implementation (estimated
at $450,000) as well as one-time and ongoing costs associated with the
relocation of the specified platforms to IBM's LaVergne facility.
The Annual Services Base Charge is subject to change as we define the new
service baselines and ARC/RRC structure.
December 16, 1997
<PAGE>
Flexibility - Mainframe
IBM Global Services will work with Comdata to identify a modified baseline
structure which allows for adjustments based on changes in variable costs
due to changes in workload. This structure will be applied to mainframe
CPU, DASD, and Tape resources beginning on January 1, 1999.
The following terms will apply to calendar year 1998 processing:
1. Additional Resource Charges (ARCS) will not be applied unless
actual usage exceeds the capacity of the CMOS R44 (4 engine,
171 MIPS) processor or the existing DASD and tape resources.
2. Reduced Resource Charges (RRCS) will not be applied until a
service baseline is established.
3. RRCs will not apply to the first 20% of reduced usage below the
baseline (the "deadband").
4. For reduced usage between 20% below the service baseline and 50%
below the service baseline, IIBM Global Services will share any
net actual savings with Comdata on a 50/50 basis.
With respect to establishing a modified baseline structure, the following
schedule will guide our activities:
1/15/98 IBM Global Services installs the tools required to gather performance
data.
2/15/98 IBM Global Services proposes a schedule of performance metrics to
Comdata.
03/l/98 Comdata and IBM Global Services agree on the definition of performance
metrics as part of the contract supplement.
03/l/98
05/l/98 IBM Global Services gathers performance data.
05/15/98 IBM Global Services proposes a methodology and fee schedule for
reduced resource charges and additional resource charges based on
baseline resource usage.
The following table is a sample ARC/RRC structure which will serve as a
framework for establishing specific Comdata terms. Each of the metrics will
have an established baseline which will be used to calculate the ARC/RRC
adjustments.
<TABLE>
<CAPTION>
SAMPLE
<S> <C> <C> <C> <C> <C> <C> <C>
Additional Resource Contract Year
Charges (ARCS) &
Reduced Resource 1998 1999 2000 2001 2002 2004 2005
Charges (RRCS)
CPU MIPS
($ per CPU MIPS) -
DASD
($ per gigabyte)
Tape
(per tape mount)
(per tape stored)
</TABLE>
December 16, 1997
<PAGE>
The following discussion is a representative sample of usage-based charges:
Resource Categories and Measurement Methodology
When "Customer" and IBM mutually agree upon the methodology and fee schedule
for RRC and ARC charges, and monthly thereafter, using the processes and
procedures described in the Procedures Manual, IBM Global Services will
measure, track and report usage of Resource Units in the categories: Host
CPU, DASD, and Tape.
Additional Resource Charges and Reduced Resource Credits
"Customer's" increased or decreased usage of the resource categories may
result in either an ARC or RRC; provided, however, that the usage is not
within the defined "deadbands". After the completion of each month during
the Term, starting with the first full month after the Commencement Date or
as otherwise specified in this Schedule, IBM Global Services will calculate
ARCs and RRCs as follows.
Calculation of ARCS:
IBM Global Services will compare the measurement of RUs actually used
during the applicable period, (the "Measurement RUs"), with the Baseline
for that category. There will be no increase of the charges otherwise
payable to IBM Global Services for such period unless the actual
measurement of RUs used for that period exceeds the Baseline for that
category for such period, in which case the "customer" will pay IBM Global
Services an ARC equal to the product of the ARC Rate for the applicable
category (as set forth in the Supplement) multiplied by the difference
between the measurement of RUs for that category actually used and the
Baseline.
ARC = (Measurement RUs - Baseline) x ARC Rate
RRCs
In addition, there will be no reduction of the charges otherwise payable to
IBM Global Services for such period unless the actual measurement of RUs
used during that period falls below xx percent of the Baseline, for that
category for such period, in which case IBM Global Services will give
"customer" an RRC against current or future charges (or, if no future
charges will be due, make payment to "customer") equal to the product of
the RRC Rate for the applicable category (as set forth in the Supplement)
multiplied by the difference between the measurement of RUs for the
category actually used and xx percent of the Baseline for that category.
RRCs will only apply to the first xx% of decreased RUs.
RRC = [{(Baseline x xx%) - Measurement RUs} x RRC Rate]
December 16, 1997
<PAGE>
Flexibility - Skills
ARC rates and RRC rates will be determined for each applicable level of skill
for Application Development, Quality Assurance, Project Management, and
Network Services. ARCs and RRCs will be administered within a mutually
agreeable process which is consistent with Attachment I entitled "ARC/RRC
Philosophy". Resource Reductions will be subject to a ninety day notice
provision, unless modified by mutual agreement. Upon notification by Comdata
of a Resource Reduction, IBM will apply its best efforts to reduce costs as
soon as practical within the notice period.
Separate ARC and RRC rate schedules will be developed for IBM Global Services
employees and subcontractors. The subcontractor ARC rate will be cost plus
twenty (20) percent.
The following schedule will guide our activities:
1/31/98 IBM Global Services and Comdata agree upon the process used to
administer ARC and RRC activities.
2/28/98 IBM Global Services establishes ARC rates, RRC rates, and a
recommended steady state floor for Application Development, Network
Services and Quality Assurance.
December 16, 1997
<PAGE>
Assumptions
- - The expanded agreement will be structured as an amendment to the 1995
contract. Except as may be provided herein, all terms and conditions of
the 1995 agreement apply.
- - Comdata withdraws its November 26, 1996 notice of intention to
terminate with concurrence from IBM Global Services.
- - Comdata has canceled the ISP project, and will not require support for
the Pyramid platform and the Seer migration project.
- - Comdata will provide all hardware, software, and other equipment, and
maintenance required to perform the New Scope functions contained herein.
Comdata will provide such hardware, software, etc. for transitioned
functions and any incremental resources. The Comdata user organizations
will perform User Acceptance Testing, and will authorize promotion of new
programs to the production environment.
- - IBM Global Services will manage Comdata's current Network Services
subcontractors and other I.T. subcontractors. Comdata retains financial
responsibility for those subcontractors.
- - All Comdata application development, network services, quality
assurance, systems operations, and project management will be offered to
IBM Global Services at ARC rates. Specialized skills not available in the
permanent resource pool may be provided at higher rates, subject to the
mutual agreement of the parties.
- - Resources within the Agreement may be utilized for Year 2000 readiness
activities, pursuant to specific Year 2000 terms. Any incremental
resources or funding requirements for Year 2000 readiness remain Comdata
responsibilities.
- - The security administration function currently in Comdata's Quality
Programs area is assumed to be in scope.
- - The Process Quality function currently in Comdata's Quality Programs
area is assumed to be out of scope.
- - The telephone bill accounts payable function in Comdata's Network
Services area is assumed to be out of scope.
- - There is no change to the current Dallas scope. All new
responsibilities are limited to Brentwood and LaVergne. We assume that
there are no remote resource requirements. Comdata will reimburse IBM
Global Services for actual travel expenses for travel to other Comdata
locations.
- - Items not specifically included in scope are assumed to be out of
scope.
December 16, 1997
<PAGE>
Exhibit 10.32
CONFIDENTIAL INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND IS BEING FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH OMISSIONS IN
THIS DOCUMENT ARE INDICATED BY THE REFERENCE
"[CONFIDENTIAL INFORMATION OMITTED]".
WILMAX UNIVERSAL-TM- TSA#CTS-970801
TELECOMMUNICATIONS SERVICES AGREEMENT
This TELECOMMUNICATIONS SERVICES AGREEMENT (hereinafter referred to
as the "Agreement" or the "TSAI) is entered into as of the 1st day of
September 1997 , by and between WORLDCOM NETWORK SERVICES, INC. d/b/a WilTel,
a Delaware corporation, with its principal office at One Williams Center,
Tulsa, Oklahoma, 74172 ("WilTel") and COMDATA NETWORK, INC., a Maryland
corporation, with its principal office at 5301 Maryland Way, Brentwood, TN
37027("CNI") and COMDATA TELECOMMUNICATIONS SERVICES, INC., a Delaware
corporation and a wholly owned subsidiary of CNI, with its principal office
at 5301 Maryland Way, Brentwood, TN 37027 ("CTSI"). CNI and CTSI are
hereinafter collectively referred to as Customer".
WITNESSETH:
WilTel agrees to provide and Customer agrees to accept switched
telecommunications services ("Switched Services") and other associated
services (collectively the "Services"), (i) as described in the Sevice
Schedules identified herewith, (ii) subject to the terms and conditions
contained in this Agreement, including without limitation those terms and
conditions contained in the Program Enrollment Terms ("PET") which are
attached hereto and incorporated herein by reference, and (iii) in conformity
with each Service Request (described below) which is accepted hereunder.
In the event of a conflict between the terms of this Agreement, the
PET, the Service Schedule and the Service Request(s), the following order of
precedence will prevail: (1) PET, (2) Service Schedule, (3) the Agreement,
and (4) Service Request(s).
NOW, THEREFORE, in consideration of the above premises and other
good aria valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Applicable Terms.
(A) Service Term. This Agreement shall commence as of the Effective
Date set forth in the PET and shall be subject to the "Service Term"
as described therein (which Service Term shall include any automatic
extensions). Customer shall be liable for all charges associated with
actual usage of the Service in question during the Service Term and
any extension thereof.
(B) PET. The PET, as subscribed to by the parties, shall set forth
the Discount Schedule applicable to Switched Service charges due under
this Agreement, Customer's Minimum Monthly Commitment, if
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<PAGE>
any, and other information necessary to provide the Service under this
Agreement.
(C) Start of Service. WilTel's obligation to provide and customer's
obligation to accept and pay for non-usage sensitive charges for
Service shall be binding to the extent provided for in this Agreement
upon the submission of an acceptable Service Request to WilTel by
Customer. Customer's obligation to pay for usage sensitive charges for
Switched Services shall commence with respect to any Service as of the
earlier of (i) the "Requested Service Date" set forth in each Service
Request, or (ii) the date the Service in question is made available to
Customer and used ("Start of Service"). Start of Service for
particular Services shall be further described in the Service Schedule
relevant to the Switched Service in question.
(D) Service Schedules Services to be provided under this Agreement
shall be described in the WilTel Service Schedule which is subscribed
to by authorized representatives of WilTel and Customer (collectively
referred to as the "Service Schedules") . Each Service Schedule shall
become a part of this Agreement to the extent that it describes the
particular services therefor, specific terms and other information
necessary or appropriate for WilTel to provide such Service(s) to
Customer.
(E) Service Requests. Customer's requests to initiate or cancel
Services shall be described in an appropriate WilTel Service Request
("Service Requests"). Service Requests may consist of machine
readable tapes, facsimiles or other means approved by WilTel.
Further, Service Requests shall specify all reasonable information,
as determined by WilTel, necessary or appropriate for WilTel to
provide the Service(s) in question, which shall include without
limitation, the type, quantity and end point(s) (when necessary) of
circuits comprising a Service Interconnection as described in the
applicable Service Schedules, or automatic number identification
("ANI") information relevant to the Service(s), the Requested Service
Date, and charges, if any, relevant to the Services described in the
Service Request. After WilTel's receipt and verification of a valid
Service Request for SWITCHED Service (as defined in the Service
Schedule) requiring a change in the primary interexchange carrier
("PIC") , WilTel agrees to (i) submit the ANI(s) relevant to such
Service Requests to the following local exchange carriers ("LECs")
(with which WilTel currently has electronic interface capabilities)
within ten (10) days: Ameritech, Bell Atlantic, BellSouth, Nynex,
Pacific Bell, Southwestern Bell, US West, GTE and United, and
(ii) submit the ANI(s) relevant to such Service Requests to those LECs
with which WilTel does not have electronic interface capabilities
within a reasonable time.
2. Cancellation.
(A) Cancellation Charge. At any time after the Effective Date,
Customer may cancel this Agreement if Customer provides written
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<PAGE>
notification thereof to WilTel not less than thirty (30) days prior to
the effective date of cancellation. In such case (or in the event
WilTel terminates this Agreement as provided in Section 8), Customer
shall pay to WilTel all charges for Service provided through the
effective date of such cancellation plus a cancellation charge (the
"Cancellation Charge") equal to one hundred percent (100%) of the
Minimum Monthly Commitment, if any, (as described in the PET) that
would have become due for the unexpired portion of the Term.
(B) Liquidated Damages. It is agreed that WilTel's damages in the
event Customer cancels Service shall be difficult or impossible to
ascertain. The provision for a cancellation charge in Subsection 2(A)
above is intended, therefore, to establish liquidated damages in the
event of a cancellation and is not intended as a penalty.
(C) Cancellation Without Charge Notwithstanding anything to the
contrary contained in Subsection 2(A) above, Customer may cancel
this Agreement without incurring any cancellation charge if (i) WilTel
fails to provide a network as warranted in Section 9 below; (ii)
WilTel fails to deliver call detail records promptly based on the
frequency selected by Customer (i.e., monthly, weekly or daily); or
(iii) WilTel fails to submit ANI(s) relevant to such Service Requests
to the LECs within the time period described in Subsection 1(E) above.
Provided, however, Customer must give WilTel written notice of any
such default and an opportunity to cure such default within five (5)
days of the notice. In the event WilTel fails to cure any such
default within the five-day period on m ore than three (3) occasions
within any six (6) month period, Customer may cancel this Agreement
without incurring any cancellation charge.
3. Customer's End Users.
End User Customer will obtain and upon WilTel's request provide
WilTel (within two (2) business days of the date of the request) a
written Letter of Agency ("LOA") acceptable to WilTel (or with any
other means approved by the Federal Communications Commission
("FCC")], for each ANI indicating the consent of the end users of
Customer ("End Users") to be served by Customer and transferred (by
way of change of such End User's designated PIC) to the WilTel
network prior to order processing. Each LOA will provide, among
other things, that the End Users have consented to the transfer
being performed by Customer or Customer's designee. when
applicable, Customer will be responsible for notifying End Users,
in writing (or by any other means approved by the FCC) that (i) a
transfer charge will be reflected on their LEC bill for effecting a
change in their primary interexchange carrier, (ii) the entity name
under which their interstate, intrastate and/or operator services
will be billed (if different from Customer), and (iii) the
"primary" telephone number(s) to be used for maintenance and
questions concerning their long distance service and/or billing.
Customer agrees to send WilTel a copy of the documentation Customer
uses to satisfy the above requirements promptly upon request of
WilTel. WilTel may change the
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<PAGE>
foregoing requirements for Customer's confirming orders and/or for
notifying End Users regarding the transfer charge at any time in
order to conform with applicable FCC and state regulations.
Provided, however, Customer will be solely responsible for ensuring
that the transfer of End Users to the WilTel network conforms with
applicable FCC and state regulations, including without limitation
the regulations established by the FCC with respect to verification
of orders for long distance service generated by telemarketing as
promulgated in 47 C.F.R., Part 64, Subpart K, Section 64.1100 or
any successor regulations).
(B) Transfer Charges/Disputed Transfers. Customer agrees that it
is responsible for (i) all charges incurred by WilTel to change the
PIC of End Users to the WilTel network, (ii) all charges incurred
by WilTel to change End Users back to their previous PIC arising
from disputed transfers to the WilTel network plus an
administrative charge equal to twenty percent (20%) of such
charges, and (iii) any other damages suffered by or awards against
WilTel resulting from disputed transfers.
(C) Excluded ANIs. WilTel has the right to reject any ANI
supplied by Customer for any of the following reasons: (i) WilTel
is not authorized to provide or does not provide long distance
services in the particular jurisdiction in which the ANI is
located, (ii) a particular ANI submitted by Customer is not in
proper form, (iii) Customer is not certified to provide long
distance services in the jurisdiction in which the ANI is located,
(iv) Customer is in default of this Agreement, (v) Customer fails
to cooperate with WilTel in implementing reasonable verification
processes determined by WilTel to be necessary or appropriate in
the conduct of business, or (vi) any other circumstance reasonably
determined by WilTel which could adversely affect WilTel's
performance under this Agreement or WilTel's general ability to
transfer its other customers or other end users to the WilTel
network, including without limitation, WilTel's ability to
electronically effect PIC changes with the LECS. In the event
WilTel rejects an ANI, WilTel will notify Customer as soon as
possible of its decision specifically describing the rejected ANI
and the reason(s) for rejecting that ANI, and will not incur any
further liability under this Agreement with regard to that ANI.
Further, any ANI requested by Customer for Switched Service may be
deactivated by WilTel if no Switched Service billings relevant
thereto are generated in any three (3) consecutive calendar
month/billing periods. WilTel will be under no obligation to
accept ANIs within the three (3) full calendar month period
preceding the scheduled expiration of the Term.
D. Records. Customer will maintain documents and records
("Records") supporting Customer's re-sale of Switched Service,
including, but not limited to, appropriate and valid LOAs from End
Users for a period of not less than 12 months or such other longer
period as may be required by applicable law, rule or regulation.
Customer shall indemnify WilTel for any costs, charges or expenses
incurred by WilTel arising from disputed PIC selections involving
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<PAGE>
Switched Service to be provided to Customer for which customer
cannot produce an appropriate LOA relevant to the ANI and PIC
charge in question, or when WilTel is- not reasonably satisfied
that the validity of a disputed LOA has been resolved.
Customer Service. Customer will be solely responsible for billing
the End Users and providing the End Users with customer service.
Customer agrees to immediately notify WilTel in the event an End
User notifies Customer of problems associated with the Service,
including without limitation, excess noise, echo, or loss of
Service.
4. Customer's Responsibilities.
(A) Expedite Charges. In the event Customer requests expeditious
Service and/or changes to Service Orders and Wilel agrees to such
request, WilTel will pass through the charges assessed by any
supplying parties (e.g., local access providers) involved at the
same rate to Customer. WilTel may further condition its
performance of such request upon Customer's payment of additional
charges to WilTel.
(B) Fraudulent Calls. Customer shall indemnify and hold WilTel
harmless from all costs, expenses, claims or actions arising from
fraudulent calls of any nature which may comprise a portion of the
Service to the extent that the party claiming the call(s) in
question to be fraudulent is (or had been at the time of the call)
an End User of the Service through Customer or an end user of the
Service through Customer's distribution channels. Customer shall
not be excused from paying WilTel for Service provided to Customer
or any portion thereof on the basis that fraudulent calls comprised
a corresponding portion of the Service. In the event WilTel
discovers fraudulent calls being made (or reasonably believes
fraudulent calls are being made), nothing contained herein shall
prohibit WilTel from taking immediate action (without notice to
Customer) that is reasonably necessary to prevent such fraudulent
calls from taking place, including without limitation, denying
Service to particular ANIs or terminating service to or from
specific locations.
5. Charges and Payment Terms.
(A) Payment. WilTel billings for Service are made on a monthly basis
(or such other basis as may be mutually agreed to by the
parties) following Start of Service. Subject to Subsection
5(D) below, Service shall be billed at the rates as described
in the PET, and Service Requests, as the case may be.
Discounts, if any, applicable -to the rates for certain
Switched Services are also set forth in the PET. Customer
will pay each WilTel invoice in full for Switched Service
within thirty (30) days of the invoice date set forth on each
WilTel invoice to Customer ("Due Date"). -If payment is not
received by WilTel on or before the Due Date, Customer shall
also pay a late fee in the amount of the lesser of one and
one-half
Page 5 of 14
<PAGE>
percent (1 1/2%) of the unpaid balance of the Service charges
per month or the maximum lawful rate under applicable state law.
(B) Definitions Time of day rate periods (including WilTel
Recognized National Holidays) will be as described in WilTel's
F.C.C. Tariff No. 5.
(C) Taxes. Customer acknowledges and understands that WilTel
computes all charges herein exclusive of any applicable federal,
state or local use, excise, gross receipts, sales and privilege
taxes, duties, fees or similar liabilities (other than general
income or property taxes) , whether charged to or against WilTel or
Customer because of the Service furnished to Customer ("Additional
Charges") . Customer shall pay such Additional Charges in addition
to all other charges provided for herein.
(D) Modification of Charges. WilTel reserves the right to
eliminate Service offerings, modify charges and/or add charges for
Service offerings (which charge modifications shall not exceed
then-current generally available WilTel charges for comparable
services), upon not less than sixty (60) days prior notice to
Customer, which notice will state the effective date for the charge
modification. In the event WilTel notifies Customer of the
elimination of a Service offering and/or an increase in the
charges, Customer may terminate this Agreement, without incurring a
cancellation charge only with respect to the Service offering
affected by the increase in charges. In order to cancel that
offering, Customer must notify WilTel, in writing, at least thirty
(30) days prior to the effective date of the increase in charges.
Further, in the event Customer cancels its subscription to a
Switched Service offering as described in this Subsection 5(D),
WilTel and Customer agree to negotiate in good faith concerning
Customer's Minimum Monthly Commitment, if any, described in the PET.
(E) Billing Disputes. Notwithstanding the foregoing, late fees
shall apply (but shall not be due and payable for a period of sixty
(60) days following the Due Date therefor) for amounts reasonably
disputed by Customer, provided Customer: (i) pays all undisputed
charges on or before the Due Date, (ii) presents a written
statement of any billing discrepancies to WilTel in reasonable
detail on or before the Due Date of the invoice in question, and
(iii) negotiates in good faith with WilTel for the purpose of
resolving such dispute within said sixty (60) day period. In the
event such dispute is resolved in favor of WilTel, Customer agrees
to pay WilTel the disputed amounts together with any applicable
late fees within ten (10) days of the resolution. In the event
such dispute is resolved in favor of Customer, customer will
receive a credit for the disputed charges in question and the
applicable late fees. In the event the dispute can not be resolved
within such sixty (60) day period (unless WilTel has agreed in
writing to extend such period) all disputed amounts together with
late fees shall become due and payable, and this provision shall
not be construed to prevent Customer from
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<PAGE>
pursuing any available legal remedies. WilTel shall not be
obligated. to consider any Customer notice of billing discrepancies
which are received by WilTel more than sixty (60) days following
the Due Date of the invoice in question.
(F) Suspense of Service. In the event charges due pursuant to
WilTel's invoice are not paid in full by the Due Date, WilTel shall
have the right, after giving Customer ten (10) days prior notice,
to suspend all or any portion of the Service to Customer
("Suspension Notice") until such time (designated by WilTel in its
Suspension Notice) as Customer has paid in full all charges then
due to WilTel, including any late fees. Following such payment,
WilTel shall reinstitute Service to Customer only when Customer
provides WilTel with satisfactory assurance of Customer's ability
to pay for Service (i.e., a deposit, letter of credit or other
means acceptable to WilTel) and customer's advance payment of the
cost of reinstituting Service If Customer fails to make the
required payment by the date set forth in the Suspension Notice,
Customer will be deemed to have canceled the Service suspended
effective as of the date of suspension. Such cancellation shall not
relieve Customer for payment of applicable cancellation charges as
described in Section 2.
6. Credit. Customer's execution of this Agreement signifies
Customer's acceptance of WilTel's initial and continuing credit approval
procedures and policies. WilTel reserves the right to withhold initiation or
full implementation of Service under this Agreement pending WilTel's initial
satisfactory credit review and approval thereof which may be conditioned upon
terms specified by WilTel, including, but not limited to, security for
payments due hereunder in the form of a cash deposit or other means. WilTel
reserves the right to modify its requirements, if any, with respect to any
security or other assurance provided by Customer for payments due hereunder
in light of Customer's actual usage when compared to projected usage levels
upon which any security or assurance requirement was based.
7. Creditworthiness. If at any time there is a material adverse
change in Customer's creditworthiness, then in addition to any other remedies
available to WilTel, WilTel may elect, in its sole discretion, to exercise
one or more of the following remedies: (i) cause Start of Service for Service
described in a previously executed Service Request to be .withheld; (ii)
cease providing Service pursuant to a Suspension Notice; (iii) decline to
accept a Service Request or other requests from Customer to provide Service
which WilTel may otherwise be obligated to accept and/or (iv) condition its
provision of Service or acceptance of a Service Request on Customer's
assurance of payment which shall be a deposit or such other means to
establish reasonable assurance of payment. An adverse material change in
Customer's creditworthiness shall include, but not be limited to: (i)
Customer's default of its obligations to WilTel under this or any other
agreement with WilTel; (ii) failure of Customer to make full payment of
charges due hereunder on or before the Due Date on three (3) or more
occasions during any period of twelve (12) or fewer months or Customer's
failure to make such payment on or before the Due Date in any two (2)
consecutive months; (iii) acquisition of Customer (whether in whole or by
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<PAGE>
majority or controlling interest) by an entity which is insolvent, which is
subject to bankruptcy or insolvency proceedings, which owes past due amounts
to WilTel or any entity affiliated with WilTel or which is a materially
greater credit risk than Customer; or, (iv) customer's being subject to or
having filed for bankruptcy or insolvency proceedings or the legal insolvency
of Customer.
8. Remedies for Breach. for In the event Customer is in breach of
this Agreement, including without limitation, failure to pay charges due
hereunder by the date stated in the Suspension Notice described in Subsection
5 (F) , WilTel shall have the right, after giving Customer five (5) days
prior notice, and in addition to foreclosing any security interest WilTel may
have, to (i) terminate this Agreement; (ii) withhold billing information from
Customer; and/or (iii) contact the End Users (for whom calls are originated
and terminated solely over facilities comprising the WilTel network) directly
and bill such End Users directly until such time as WilTel has been paid in
full for the amount owed by Customer. If Customer fails to make payment by
the date stated in the Suspension Notice and WilTel, after giving Customer
five (5) days prior notice, terminates this Agreement as provided in this
Section 8, such termination shall not relieve Customer for payment of
applicable cancellation charges as described in Section 2 above.
9. Warranty. WilTel will use reasonable efforts under the
circumstances to maintain its overall network quality. The quality of
Service provided hereunder shall be consistent with telecommunications common
carrier industry standards, government regulations and sound business
practices. WILTEL MAKES NO OTHER WARRANTIES ABOUT THE SERVICE PROVIDED
HEREUNDER, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.
10. Liability; General Indemnity; Reimbursement.
(A) Limited Liability. IN NO EVENT WILL EITHER PARTY HERETO BE
LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL, LOSSES OR DAMAGES, INCLUDING WITHOUT LIMITATION,
LOSS OF REVENUE, LOSS OF CUSTOMERS OR CLIENTS, LOSS OF GOODWILL OR
LOSS OF PROFITS ARISING IN ANY MANNER FROM THIS AGREEMENT AND THE
PERFORMANCE OR NONPERFORMANCE OF OBLIGATIONS HEREUNDER.
(B) General Indemnity. In the event parties other than Customer
(e.g., Customer's End Users) shall have use of the Service through
Customer, then Customer agrees to forever indemnify and hold
WilTel, its affiliated companies and any third-party provider or
operator of facilities employed in provision of the Service
harmless from and against any and all claims, demands, suits,
actions, losses, damages, assessments or payments which those
parties may assert arising out of or relating to any defect in the
service.
C. Reimbursement. Customer agrees to reimburse WilTel for all
reasonable costs and expenses incurred by WilTel due to
WilTel's direct participation (either as a party or witness)
in any
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<PAGE>
administrative, regulatory or criminal proceeding concerning
Customer if WilTel's involvement in said proceeding is based
solely on WilTel's provision of Services to Customer.
11. Force Majeure. If WilTel's performance of this Agreement or any
obligation hereunder is prevented, restricted or interfered with-by causes
beyond its reasonable control including, but not limited to, acts of God,
fire, explosion, vandalism, cable cut, storm or other similar occurrence, any
law, order, regulation, direction, action or request of the United States
government, or state or local governments, or of any department, agency,
commission, court, bureau, corporation or other instrumentality of any one or
more such governments, or of any civil or military authority, or by national
emergency, insurrection, riot, war, strike, lockout or work stoppage or other
labor difficulties, or supplier failure, shortage, breach or delay, then
WilTel shall be excused from such performance on a day-to-day basis to the
extent of such restriction or interference. WilTel shall use reasonable
efforts under the circumstances to avoid or remove such causes or
nonperformance and shall proceed to perform with reasonable dispatch whenever
such causes are removed or cease.
12. State Certification. Customer warrants that in all jurisdictions
in which it provides long distance services that require certification, it
has obtained the necessary certification from the appropriate governmental
authority. Further, if required by WilTel, Customer agrees to provide proof
of such certification acceptable to WilTel. In the event Customer is
prohibited, either on a temporary or permanent basis, from conducting its
telecommunications operations in a given state, Customer shall immediately
notify WilTel by facsimile, and (ii) send written notice to WilTel within
twenty-four (24) hours of such prohibition.
13. Interstate/Intrastate Service. Except with respect to Switched
Service specifically designated as intrastate Service or international
service, the rates provided to Customer in a Service Schedule are applicable
only to Switched Service if such Service is used for carrying interstate
telecommunications (i.e., Service subject to FCC jurisdiction). WilTel shall
not be obligated to provide Switched Service with end points within a single
state or Switched Service which originates/terminates at points both of which
are situated within a single state. In those states where WilTel is
authorized to provide intrastate service (i.e., telecommunications
transmission services subject to the jurisdiction of state regulatory
authorities), WilTel will, at its option, provide intrastate Service pursuant
to applicable state laws, regulations and applicable tariff, if any, filed by
WilTel with state regulatory authorities as required by applicable law.
14. Authorized Use of WilTel Name. Without WilTel's prior written
consent, Customer shall not (i) refer to itself as an authorized
representative of WilTel whenever it refers to the Services in promotional,
advertising or other materials, or (ii) use WilTel's logos, trade marks,
service marks, or any variations thereof in any of its promotional,
advertising or other materials. Additionally, Customer shall provide to
WilTel for its prior review and written approval, all promotions,
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<PAGE>
advertising or other materials or activity using or displaying WilTel' s name
or the. Services to be provided by WilTel. Customer agrees to change or
correct, at Customer's expense, any such material or activity which WilTel,
in its sole judgment, determines to be inaccurate, misleading or otherwise
objectionable. Customer is explicitly authorized to only use the following
statements in its sales literature: (i) "Customer utilizes the WilTel
network", (ii) "Customer utilizes WilTel's facilities", "WilTel provides only
the network facilities", and (iv) "WilTel is our network services provider".
15. Notices. Notices under this Agreement shall be in writing and
delivered to the person identified below at the offices of the parties as
they appear below or as otherwise provided for by proper notice hereunder.
Customer shall notify WilTel in writing if Customer's billing address is
different than the address shown below. The effective date for any notice
under this Agreement shall be the date of actual receipt of such notice by
the appropriate party, notwithstanding the date of mailing.
If to WilTel: WorldCom Network Services, Inc.
One Williams Center, 28th Flr
Tulsa, OK 74172
Attn: Carrier Sales Dept.
If to Customer: Comdata Network, Inc.
5301 Maryland Way
Brentwood, TN 37207
Attn: Charles Isdell
Telephone No. (615) 370-7215
Fax No.: (615) 370-7485
Comdata Telecommunications Services, Inc.
5301 Maryland Way
Brentwood, TN 37207
Attn: Charles Isdell
Telephone No.: (615) 370-7215
Fax No.: (615) 370-7485
16. No-Waiver. No term or provision of this Agreement shall be
deemed waived and no breach or default shall be deemed excused unless such
waiver or consent shall be in writing and signed by the party claimed to have
waived or consented. A consent to waiver of or excuse f or a breach or
default by either party, whether express or implied, shall not constitute a
consent to, waiver of, or excuse for any different or subsequent breach or
default.
17. Partial Invalidity; Government Action.
(A) Partial Invalidity. If any part of any provision of this
Agreement or any other agreement, document or writing given
pursuant to or in connection with this Agreement shall be invalid
or unenforceable under applicable law, rule or regulation, that
part shall be ineffective to the extent of such invalidity only,
without
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<PAGE>
in any way affecting the remaining parts of that provision or the
remaining provisions of this Agreement. In such event, Customer
and WilTel will negotiate in good -faith with respect to any such
invalid or unenforceable part to the extent necessary to render
such part valid and enforceable.
(B) Government Action. Upon thirty (30) days prior notice, either
party shall have the right, without liability to the other, to
cancel an affected portion of the Service if any material rate or
term contained herein and relevant to the affected Service is
substantially changed (to the detriment of the terminating party)
or found to be unlawful or the relationship between the parties
hereunder is found to be unlawful by order of the highest court of
competent jurisdiction to which the matter is appealed, the FCC, or
other local, state or federal government authority of competent
jurisdiction.
18. Exclusive Remedies. Except as otherwise specifically provided for
herein, the remedies set forth in this Agreement comprise the exclusive
remedies available to either party at law or in equity.
19. Use of Service. Upon WilTel's acceptance of a Service Request
hereunder, WilTel will provide the Service specified therein to Customer upon
condition that the Service shall not be used for any unlawful purpose. The
provision of Service will not create a partnership or joint venture between
the parties or result in a joint communications service offering to any third
parties, and WilTel and Customer agree that this Agreement, to the extent it
is subject to FCC regulation, is an inter-carrier agreement which is not
subject to the filing requirements of Section 211(a) of the Communications
Act of 1934 (47 U.S.C. Section 211(a)) as implemented in 47 C.F.R. Section
43.51.
20. Choice of Law; Forum.
(A) Law. This Agreement shall be construed under the laws of the
State of Oklahoma without regard to choice of law principles.
(B) Forum. Any legal action or proceeding with respect to this
Agreement may be brought in the Courts of the State of Oklahoma in
and for the County of Tulsa or the United States of America for the
Northern District of Oklahoma. By execution of this Agreement,
both Customer and WilTel hereby submit to such jurisdiction, hereby
expressly waiving whatever rights may correspond to either of them
by reason of their present or future domicile. In furtherance of
the foregoing, Customer and WilTel hereby agree to service by U.S.
Mail at the notice addresses referenced in Section 15. Such service
shall be deemed effective upon the earlier of actual receipt or
seven (7) days following the date of posting.
Page 11 of 14
<PAGE>
21. Proprietary Information
(A) Confidential Information. The parties understand and agree
that the terms and conditions of this Agreement, all documents
referenced (including invoices to Customer for Service provided
hereunder)- herein, communications between the parties regarding
this Agreement or the Service to be provided hereunder (including
price quotes to Customer for any Service proposed to be provided or
actually provided hereunder) , as well as such information relevant
to any other agreement between the parties (collectively,
"Confidential Information"), are confidential as between Customer
and WilTel.
(B) Limited Disclosure. A party shall not disclose Confidential
Information unless subject to discovery or disclosure pursuant to
legal process, or to any other party other than the directors,
officers, and employees of a party or a party's agents including
their respective brokers, lenders, insurance carriers or bona fide
prospective purchasers who have specifically agreed in writing to
nondisclosure of the terms and conditions hereof. Any disclosure
hereof required by legal process shall only be made after providing
the non-disclosing party with notice thereof in order to permit the
non-disclosing party to seek an appropriate protective order or
exemption. Violation by a party or its agents of the foregoing
provisions shall entitle the non-disclosing party, at its option,
to obtain injunctive relief without a showing of irreparable harm
or injury and without bond.
(C) Press Releases. The parties further agree that any press
release, advertisement or publication generated by a party
regarding this Agreement, the Service provided hereunder or in
which a party desires to mention the name of the other party or the
other party's parent or affiliated company(ies) , will be submitted
to the non-publishing party for its written approval prior to
publication.
(D) Survival of Confidentiality. The provisions of this Section
21 will be effective as of the date of this Agreement and remain in
full force and effect for a period which will be the longer of (i)
one (1) year following the date of this Agreement, or (ii) one (1)
year from the termination of all Service hereunder.
22. Successors and Assigment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors or
assigns, provided, however, that Customer shall not assign or transfer its
rights or obligations under this Agreement without the prior written consent
of WilTel, which consent shall not be unreasonably withheld, and further
provided that any assignment or transfer without such consent shall be void.
Page 12 of 14
<PAGE>
23 General.
(A) Survival of Terms. The terms and provisions contained in this
Agreement that by their sense and context are intended to survive
the performance thereof by the parties hereto shall so survive the
completion of performance and termination of this Agreement,
including, without limitation, provisions for indemnification and
the making of any and all payments due hereunder.
(B) Headings. Descriptive headings in this Agreement are for
convenience only and shall not affect the construction of this
Agreement.
(C) Industry Terms. Words having well-known technical or trade
meanings shall be so construed, and all listings of items shall not
be taken to be exclusive, but shall include other items, whether.
similar or dissimilar to those listed, as the context reasonably
requires.
(D) Rule of Construction. No rule of construction requiring
interpretation against the drafting party hereof shall apply in the
interpretation of this Agreement.
24. Entire Agreement. This Agreement consists of (i) all the terms and
conditions contained herein, and, (ii) all documents incorporated herein
specifically by reference. This Agreement constitutes the complete and
exclusive statement of the understandings between the parties and supersedes
all proposals and prior agreements (oral or written) between the parties
relating to Service provided hereunder. No subsequent agreement between the
parties concerning the Service shall be effective or binding unless it is
made in writing and subscribed to by authorized representatives of Customer
and WilTel.
Page 13 of 14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this WilMAX
UNIVERSAL-TM-" Telecommunications Services Agreement on the date first
written above.
WORLDCOM NETWORK SERVICES, INC. COMDATA NETWORK, INC.
d/b/a WilTel
By: By: /s/Tony Holcombe
(Signature) (Signature)
Tony Holcombe
(Print Name) (Print Name)
President & CEO
(Title) (Title)
COMDATA TELECOMMUNICATIONS
SERVICES, INC.
By: /s/Charles S. Isdell
(Signature)
Sr. V.P. - G.M.
(Title)
Page 14 of 14
<PAGE>
AMENDMENT NO. 1
This Amendment No. 1 (the "Amendment") is made as of the lst day
of September, 1997 (the "Effective Date") by and between Comdata Network,
Inc. and its wholly-owned subsidiary, Comdata Telecommunications Services,
Inc. (collectively referred to as the "Customer") and WorldCom Network
Services, Inc. d[b/a WilTel ("WilTel"), to those certain Program Enrollment
Terms (the "PET") to that certain WilMAX UNIVERSAL Telecommunications
Services Agreement (TSA#CTS-970801) made by and between Customer and WilTel
dated as of September 1, 1997 (the "TSA"). In the event of any conflict
between the terms of the TSA, the PET or the Service Schedule and the terms
of this Amendment No. 1, the terms of this Amendment No. 1 shall control.
The TSA (along with the PET and the Service Schedule) and this Amendment No.
1 shall collectively be referred to as the "Agreement".
The parties agree for good and valuable consideration, intending
legally to be bound, as follows:
A. CUSTOMER'S COMMITMENT. The parties agree to substitute
Subsection 4(A) of the PET to read in its entirety as follows:
(A) Commencing as of September 1, 1997, and continuing through
the end of the Service Term (including any extensions thereto)
(the "Commitment Period"), Customer agrees to maintain, on a
take-or-pay basis, Monthly Revenue of at least $1,083,333
("Customer's Minimum Revenue Commitment").
B. OTHER PROVISIONS. Except as specifically amended or modified
herein, the terms and conditions of the Agreement will remain in full force
and effect throughout the Service Term and any extensions thereof.
IN WITNESS WHEREOF the parties have entered into this Amendment
No. 1 on the date first written above.
WORLDCOM NETWORK SERVICES, INC. COMDATA NETWORK, INC.
d/b/a WilTel
By: By: /s/Michael W. Sheridan
Print Name: Print Name: Michael W. Sheridan
Tide: Title: Senior Vice President
COMDATA TELECOMMUNICATIONS
SERVICES, INC.
By: /s/Charles S. Isdell
Title: Sr. V.P. - G.M.
CONFIDENTIAL
Page 1 of 1
<PAGE>
WILMAX UNIVERSAL-TM-
PROGRAM ENROLLMENT TERMS
These Program Enrollment Terms (the "PET") are made as of the 1st day of
September, 1997 (the "Effective Date"), by and between WorldCom Network
Services, Inc. d/b/a WilTel ("WilTel") and Comdata Network, Inc., and it wholly-
owned subsidiary, Comdata Telecommunications Services, Inc. (collectively
referred to as "Customer") and are a part of their agreement for switched
services, more particularly identified as TSA#CTS-970801 (the "Agreement"). In
accordance with the Agreement, charges to Customer for Service obtained
thereunder shall be subject to the Discount Schedule set forth below and the
Agreement shall also be subject to the terms and conditions set forth herein.
1. PRIOR AGREEMENT: The parties acknowledge that there currently exists that
certain WorldCom Communications Agreement dated as of December 1, 1994,
including that certain amendment thereto dated July 31, 1996 (collectively,
the "Prior Agreement") between WorldCom, Inc. d/b/a LDDS WorldCom (WilTells
parent company) and Comdata Telecommunications Services, Inc. and Comdata
Network, Inc. As of the Effective Date, the parties agree that (i) the
Prior Agreement shall be canceled in its entirety and of no further force
or effect and the parties shall be released from all liability thereunder
with the exception of certain accrued obligations arising under the Prior
Agreement such as the payment of money or the application of credits
accruing prior to the Effective Date and provisions intended to survive
termination, such as limitation of liability, indemnification and
confidentiality, (ii) all Service currently being provided Customer under
the Prior Agreement will be provisioned and maintained by WilTel taking
into account the terms and conditions of this PET.
2. SERVICE TERM: The Service Term shall commence as of the Effective Date
stated above and shall continue through and include January 22, 2003. Upon
the expiration of the Service Term, the service in question will continue
to be provided pursuant to the same terms and conditions as are then in
effect (including without limitation, the applicable rates and discounts
then in effect), subject to termination by either party upon one hundred
and twenty (20) days prior written notice to the other party.
3. DISCOUNT:
(A) Commencing with the Effective Date and continuing through the end of
the Service Term (including any extensions thereto), Customer's discount
(the "Discount") will be as determined under this Subsection 3(A) taking
into account any increase, as described in Subsection 3(B) below. The
Discount is based on the number of months contained in the Service Term
divided by 12. If the number of months is less than 12, the month-to-month
(MTM) discounts shall apply; if the product of the division is equal to or
greater than 1 but less than 2, the 1-Year discounts shall apply; if the
Page 1 of 16 CONFIDENTIAL
<PAGE>
product of the division is equal to or greater than 2 but less than 3, the
2-Year discounts shall apply; and, if the product of the division is equal
to or greater than 3, the 3-Year discounts apply. Throughout the Service
Term including any applicable extensions thereto, Customer will
automatically receive the next higher discount when Customer's eligible
Monthly Revenue reaches the next level.
SERVICE TERM
Monthly Revenue(a) MTM 1-YR 2-YR 3-YR
[confidential information omitted]
(a) For purposes of this Agreement, "Monthly Revenue" will include all of
Customer' s gross measured and per call Switched Service charges (i.e.,
Directory Assistance and both Domestic and International) plus (i) three
(3) times Customer's first $300,000 recurring monthly Private Line
Interexchange Service charges (i.e., both Domestic and International) from
WilTel, (ii) two (2) times Customer's second $300,000 recurring monthly
Private Line Interexchange Service charges (i.e., both Domestic and
International) from WilTel, and (iii) Customer's recurring monthly Private
Line Interexchange Service charges (i.e., both Domestic and International)
from WilTel in excess of $600,000. Monthly Revenue shall exclude any pro
rata charges, access charges, ancillary or special feature charges, such
as, authorization codes or CDR Tapes, or any other charges other than those
identified by the relevant WilTel invoice as Monthly Recurring
Interexchange service charges or Switched Service charges.
(b) If Customer's Monthly Revenue is less than $10,000, Customer must
maintain at least one (1) DS-1 circuit comprising a Service Interconnection
as defined in the Service Schedule with respect to TERMINATION Service
and/or 800 ORIGINATION Service.
B. If Customer's Minimum Commitment (as described in Section 4 below) is
equal to or greater than $50,000, all of the percentages shown in the
Discount Schedule above will be increased by the following amounts based on
Customer's Minimum Commitment.
If Customer's Minimum The applicable percentages
Commitment is at least will be increased by
[confidential information omitted]
Page 2 of 16 CONFIDENTIAL
<PAGE>
Example: Assume Customer's Minimum commitment is $250,000 and the Service
Term is twenty-four (24) months. Commencing with the Effective Date and
continuing through the end of the Service Term (including any applicable
extensions thereto), Customer's applicable discount percentage will be
[confidential information omitted].
4. CUSTOMER'S MINIMUM REVENUE COMMITMENT:
(A) Commencing as of September 1, 1997, and continuing through the end of
the' Service Term Including any extensions thereto) (the "Commitment
Period"), Customer agrees to maintain, on a take-or-pay basis, Monthly
Revenue of at least $1,300,000 ("Customer's Minimum Revenue Commitment").
In the event Customer is not maintaining TERMINATION Service or 800
ORIGINATION Service but is maintaining other Services from WilTel hereunder
(e.g., SWITCHED ACCESS Service, DEDICATED ACCESS Service or TRAVEL CARD
Service), Customer's Minimum Revenue Commitment will be the greater of (i)
$10,000, or (ii) the amount stated above.
(B) Provided Customer's cumulative Monthly Revenue (as that term is
defined in Subsection 3(A) above) from WilTel under this Agreement
commencing with the Effective Date is at least $45,000,000 (i.e., in the
aggregate), Customer may elect to terminate Customer's Minimum Revenue
Commitment described in Subsection 4(A) above by providing WilTel written
notice ("'Customer Notice"). In such event, commencing with the first day
of the first full month following at least thirty (30) days after WilTel
receives the Customer Notice (the "Commitment Termination Date"), (i)
Customer's Minimum Revenue Commitment shall terminate and will no longer be
in force or effect, and (ii) for the remainder of the Service Term
Customer's Discount will determined under the Discount Schedule described
in Subsection 3(A) above based on a 3-YR Service Term without taking into
account any increase under Subsection 3(B) above.
(C) In the event there is a substantial change in the regulatory
environment of Customer's business, including without limitation the
banking, gaming and telecommunications environments, which substantially
prohibits Customer's performance under this Agreement, WorldCom agrees to
negotiate with Customer in good faith concerning the reduction of
Customer's Minimum Revenue Commitment as described in Subsection 4(A)
above. Further, in the event there is a substantial technological change
in the telecommunications industry and based on the purchase of a new
product or offering Customer's rates for Services hereunder would be
significantly reduced, WilTel agrees to negotiate with Customer concerning
the purchase of such product or offering and the
Page 3 of 16 CONFIDENTIAL
<PAGE>
reduction of Customer's Minimum Revenue Commitment, provided WilTel
continues to receive the same percentage of Customer' s traffic after such
reduction as it did prior to such technological change. Finally, in the
event Customer completely ceases providing telecommunications services,
WilTel agrees to reduce Customer's Minimum Revenue Commitment by an amount
equal to the product obtained by multiplying (i) the previous three (3)
months' average Monthly Revenue for services purchased by Customer under
this Agreement which are attributable to Customer by (ii) twelve (12).
5. DEFICIENCY CHARGE: In the event Customer does not maintain Customer's
Minimum Revenue Commitment in any month during the Commitment Period, then
for those month(s) only, Customer will pay WilTel the difference between
Customer's Minimum Revenue Commitment and Customer's actual Monthly Revenue
as described in Section 3 (the "Deficiency Charge"). The Deficiency Charge
will be due at the same time payment is due for Service provided to
Customer, or immediately in an amount equal to Customer's Minimum Revenue
Commitment for the unexpired portion of the Service Term if WilTel
terminates the Agreement based on Customer's default.
6. APPLICATION OF DISCOUNTS:
(A) After determining Customer's applicable discount percentage under
Section 3 above, the applicable percentage will be applied to Monthly
Revenues comprised of Customer's Interstate (including Alaska, Hawaii, the
United States Virgin Islands and Puerto Rico unless otherwise noted herein)
measured usage charges (which includes 1+ and 800 usage, whether switched
access or dedicated access or travel card usage).
(B) During the Service Term of the Agreement, accumulated credits derived
from the applicable Discounts will be applied in arrears commencing with
the first day of the month following the Effective Date, that is, will be
applied to Customer's measured usage charges for the preceding month (the
"Discount Period"). The initial Discount Period shall include any partial
calendar month following Start of Service, or such other time basis as may
be mutually determined by the parties.
(C) Each Discount will result in the application of a credit obtained
during the Discount Period to the WilTel invoice to Customer relevant to
the billed measured Switched Service for the calendar month next following
the completion of each Discount Period, provided Customer has paid
undisputed charges (including any late fees, if applicable) for that month
and has not otherwise been subject to a Suspension Notice in accordance
with the Agreement. Failure of Customer to comply with the foregoing
provision shall entitle WilTel to withhold any credit due Customer for the
Discount Period in question until such charges (including late fees) have
been paid in full.
Page 4 of 16 CONFIDENTIAL
<PAGE>
7 RATES:
(A) TERMINATION Service
(i) Interstate Rates Per Minute
[confidential information omitted] without regard to time of
day, within the 48 contiguous United States except with respect
to termination in the SUPERSAVER LATAs described below.
(ii) Interstate Extended Rates Per Minute
SEE the DEDICATED ACCESS Service Extended Rates described in
Subsection 6(D) below.
(iii) Interstate SUPERSAVER Rates Per Minute
[confidential information omitted] without regard to time of
day. These rates are only available and only apply to
Interstate TERMINATION Service calls to the SUPERSAVER LATAs set
forth on Schedule 1 attached hereto (i.e., Intrastate
TERMINATION Service calls will not be subject to SUPERSAVER
Rates).
(iv) Intrastate Rates Per Minute [confidential information omitted]
SEE the DEDICATED ACCESS Service Intrastate rates shown on
Schedule 2 attached hereto.
(v) International (excluding Canada and Mexico) Rates Per Minute
[confidential information omitted]
SEE the DEDICATED ACCESS Service International rates shown on
Schedule 5 attached hereto. (Note: The applicable "Rate Plan"
will be as determined under Section 7 below.)
(vi) Canada and Mexico Rate Per Minute [confidential information
omitted].
SEE the DEDICATED ACCESS Service Canada and Mexico rates shown
on Schedule 3 attached hereto.
(B) 800 ORIGINATION Service
(i) Interstate Rates Per Minute
[confidential information omitted] without regard to time of
day, within the 48 contiguous United States except with respect
to origination in the SUPERSAVER LATAs described below.
(ii) Interstate Extended Rates Per Minute
SEE the DEDICATED ACCESS Service rates described in Subsection
6(d) below.
Page 5 of 16 CONFIDENTIAL
<PAGE>
(iii) Interstate SUPERSAVER Rates Per Minute
[confidential information omitted] without regard to time of day
These rates are only available and only apply to Interstate 800
ORIGINATION Service calls from the SUPERSAVER LATAs set forth on
Schedule 1 attached hereto (i.e., Intrastate 800 ORIGINATION
Service calls will not be subject to SUPERSAVER Rates).
(iv) Intrastate Rates Per Minute [confidential information omitted]
SEE DEDICATED ACCESS Service Intrastate Rates shown on
Schedule 2 attached hereto.
(v) Canada Rates Per Minute [confidential information omitted]
SEE the DEDICATED ACCESS Service Mexico and Canada rates shown
on Schedule 3 attached hereto.
(C) SWITCHED ACCESS Service
(i) Interstate Rates Per Minute
[confidential information omitted] Day/Nonday within the 48
contiguous United States.
(ii) Interstate (1+) Extended Rates Per Minute
[confidential information omitted] Day, [confidential
information omitted] Nonday from the 48 contiguous United States
to Hawaii.
[confidential information omitted] Day, [confidential
information omitted] Nonday from the 48 contiguous United States
to Alaska, Puerto Rico and the United States Virgin Islands.
[confidential information omitted] Day, [confidential
information omitted] Nonday from Hawaii to the 48 contiguous
United States.
See the SWITCHED ACCESS Service (1+) Rates shown on Schedule 3
for calls from Hawaii to Canada and Mexico and Schedule 8 for
Calls from Hawaii to certain International locations.
(iii) Interstate (800) Extended Rates Per Minute confidential
information omitted].]
[confidential information omitted] Day, [confidential
information omitted] Nonday from Hawaii to the 48 contiguous
United States.
[confidential information omitted] Day, [confidential
information omitted] Nonday from Alaska to the 48 contiguous
United States.
[confidential information omitted] Day, [confidential
information omitted] Nonday from Puerto Rico to the 48
contiguous United States.
[confidential information omitted].Day, [confidential
information omitted] Nonday from the United States Virgin
Islands to the 48 contiguous United States.
Page 6 of 16 CONFIDENTIAL
<PAGE>
(iv) Intrastate Rates Per Minute [confidential information omitted]
SEE the SWITCHED ACCESS Service Intrastate rates shown on
Schedule 2 attached hereto.
(v) International (excluding Canada and Mexico) Rates Per Minute
[confidential information omitted]
SEE the SWITCHED ACCESS Service International rate shown on
Schedule 4 attached hereto. [Note: The applicable "Rate Plan"
will be as determined under Section 7 below.]
(vi) Canada and Mexico Rates Per Minute [confidential information
omitted]
SEE the SWITCHED ACCESS Service Canada and Mexico rates shown on
Schedule 3 attached hereto.
(C) DEDICATED ACCESS Service
(i) Interstate Rates Per Minute
[confidential information omitted] Day/Nonday within the 48
contiguous United States.
(ii) Interstate (1+) Extended Rates Per Minute [confidential
information omitted] Day, [confidential information omitted]
Nonday from the 48 contiguous United States to Hawaii.
[confidential information omitted] Day, [confidential
information omitted] Nonday from the 48 contiguous United States
to Alaska, Puerto Rico and the United States Virgin Islands.
(iii) Interstate (800) Extended Rates Per Minute [confidential
information omitted]
[confidential information omitted] Day,
[confidential information omitted] Nonday from Hawaii to the 48
contiguous United States.
[confidential information omitted] Day,
[confidential information omitted] Nonday from Alaska to the 48
contiguous United States.
[confidential information omitted] Day,
[confidential information omitted] Nonday from Puerto Rico to
the 48 contiguous United States.
[confidential information omitted] Day,
[confidential information omitted] Nonday from the United States
Virgin Islands to the 48 contiguous United States.
(iv) Intrastate Rates Per Minute [confidential information omitted]
SEE the DEDICATED ACCESS Service Intrastate rates shown on
Schedule 2 attached hereto.
Page 7 of 16 CONFIDENTIAL
<PAGE>
International (excluding Canada and Mexico) Rates Per Minute
[confidential information omitted]
SEE the DEDICATED ACCESS Service International rates shown on
Schedule 5 attached hereto. (Note: The applicable "Rate Plan"
will be as determined under Section 7 below.]
(vi) Canada and Mexico Rates Per Minute [confidential information
omitted]
SEE the DEDICATED ACCESS Service Canada and Mexico rates shown
on Schedule 3 attached hereto.
(D) TRAVEL CARD Service:
(i) Basic Interstate TRAVEL CARD Service Rates Per Minute
[confidential information omitted] Day/Nonday within the 48
contiguous United States.
(ii) Basic Intrastate TRAVEL CARD Service Rates per Minute
[confidential information omitted]
SEE the SWITCHED ACCESS Service Intrastate rates shown on
Schedule 2 attached hereto.
(iii) Basic International (excluding Canada and Mexico) TRAVEL CARD
Service Rates Per Minute [confidential information omitted]
SEE the SWITCHED ACCESS Service International rates shown on
Schedule 4 attached hereto. [Note: The applicable "Rate Plan"
will be as determined under Section 7 below.] International
TRAVEL CARD Service calls from the 48 contiguous United States
to International locations (excluding only Canada) are subject
to a surcharge of [confidential information omitted] per call.
(iv) Basic Canada TRAVEL CARD Service Rates Per Minute [confidential
information omitted]
[confidential information omitted] Day, [confidential
information omitted] Nonday from the 48 contiguous United States
to Canada. TRAVEL CARD Service calls from the 48 contiguous
United States to Canada are subject to a surcharge of
[confidential information omitted] per call.
[confidential information omitted] Day, [confidential
information omitted] Nonday from Canada to the 48 contiguous
United States. TRAVEL CARD Service calls from Canada to the
domestic United States are subject to a surcharge of
[confidential information omitted] per call.
Page 8 of 16 CONFIDENTIAL
<PAGE>
(v) Basic Mexico TRAVEL CARD Service Rates Per Minute [confidential
information omitted]
SEE the SWITCHED ACCESS Service Mexico rates shown on
Schedule 3 attached hereto. TRAVEL CARD Service calls from the
48 contiguous United States to Mexico are subject to a surcharge
of [confidential information omitted] per call.
(vi) Enhanced TRAVEL CARD Service Pricing (Note: Enhanced features to
TRAVEL CARD Service are available at the rates shown on Schedule
6 attached hereto.) [confidential information omitted]
(F) Directory Assistance
(i) Interstate Rate Per Call [confidential information omitted]
(ii) Intrastate Rate Per Call [confidential information omitted]
8. INTERNATIONAL SERVICE:
(A) Commencing with the Effective Date, with respect to calls originating
in the continental United States and terminating to an International
location (excluding Puerto Rico, the United States Virgin Islands, Canada
and Mexico), unless Customer has elected an International Sub-Commitment as
described in Subsection (B) below, Customer's International rates will be
deemed to correspond with the level of applicable charges shown on Schedule
4 and Schedule 5, both of which are attached hereto and incorporated herein
by reference based on twenty-five percent (25%) of Customer's Minimum
Revenue Commitment described in Section 3 above (rounded down to the
nearest International Revenue Level) taking into account the International
Rate periods shown on Schedule 7, which is also attached hereto and made a
part hereof. In the event (i) Customer's Service Term is Month-to-Month,
or (ii) Customer's Minimum Revenue Commitment is less than $200,000,
Customer's International rates willcorrespond with the applicable level of
"Base International Rates" shown on Schedule 4 and Schedule 5. With respect
to TERMINATION Service and 800 ORIGINATION Service calls, Customer's
International rates will be the applicable DEDICATED ACCESS Service rates.
Example: Assume Customer's Commitment is $750,000. Customer's
applicable International rates would be deemed to correspond with the
$100,000 level [25% x 750,000 = 187,500, rounded down to the nearest
level].
(B) Commencing with the Effective Date and continuing through the end of
the Service Term including any applicable extensions thereto
("International Commitment Period"), Customer agrees to maintain, on a
take-or-pay basis, International Monthly Revenue (as described herein) of
at least (check one of the following) ("Customer's International Sub-
Commitment") [NOTE: If none of the boxes below are checked, Customer will
be deemed to have elected an International Sub-Commitment of $0]:
Page 9 of 16 CONFIDENTIAL
<PAGE>
[confidential information omitted]
For purposes of this Agreement, Customer's "International Monthly Revenue,,
will be comprised of all of Customer's gross (ie., prior to the application
of discounts) measured and per call Switched Service charges (i.e.,
Directory Assistance and both Domestic and International) associated with a
call to an International location (excluding Puerto Rico, the United States
Virgin Islands, Canada and Mexico).
(C) At any time during the Service Term of this Agreement, Customer may
modify Customer's International Sub-Commitment ("Customer's Modified
International Sub-Commitment) for the remainder of the International
Commitment Period by notifying WilTel in writing. Commencing with the
first day of the month following at least thirty (30) days after WilTel
receives the notice described herein, (i) Customer's Modified International
Sub-Commitment will be effective, and (ii) customer's International rates
will correspond with the applicable rates shown on Schedule 4 and Schedule
5 based on Customer's Modified International Sub-Commitment.
(D) In the event Customer does not maintain Customer's International Sub-
Commitment (or Customer's Modified International Sub-Commitment, if
applicable) in any month during the International Commitment Period, then
for those month(s) only, Customer will pay WilTel the difference between
the greater of (i) Customer's International Sub-Commitment (or Customer's
Modified International Sub-Commitment) and Customer's actual International
Monthly Revenue as defined above (the "International Deficiency Charge"),
or (ii) the Deficiency Charge calculated under Section 4 above. If
applicable, the International Deficiency Charge will be due at the same
time payment is due for Service provided to Customer, or immediately in an
amount equal to Customer's International Sub-Commitment for the unexpired
portion of the International Commitment Period if WilTel terminates this
Agreement based on Customer's default.
9. SERVICE REQUESTS: The parties agree to substitute Subsection l(E) of the
TSA to read in its entirety as follows:
(E) Service Requests. Customer's requests to initiate or cancel Services
shall be described in an appropriate WilTel Service Request ("Service
Requests"). Service Requests may consist of machine readable tapes,
facsimiles or other means approved by WilTel. Further, Service Requests
shall specify all reasonable information, as determined by WilTel,
necessary or appropriate for WilTel to provide the Service(s) in question,
which shall include without limitation, the type, quantity and end point(s)
(when necessary) of circuits comprising a Service Interconnection as
described in the applicable Service Schedules, or automatic number
identification ("ANI") information relevant to the Service(s), the
Requested Service Date, and charges, if any, relevant to the Services
described in the Service Request. After WilTel's receipt and verification
Page 10 of 16 CONFIDENTIAL
<PAGE>
of a valid Service Request for SWITCHED Service (as defined in the Service
Schedule) requiring a change in the primary interexchange carrier ("PIC"),
WilTel agrees to (i) submit the ANI(S) relevant to such Service Requests to
the following local exchange carriers ("LECs") (with which WilTel currently
has electronic interface capabilities) within two (2) business days:
Ameritech, Bell Atlantic, BellSouth, Nynex, Pacific Bell, Southwestern
Bell, US West, GTE and United, and (ii) submit the ANIs relevant to such
Service Requests to those LECs (which shall include any independent local
exchange companies (ILECS) with which WilTel does not have electronic
interface capabilities within five (5) business days.
10. CANCELLATION: The parties agree to substitute Section 2 of the TSA to read
in its entirety as follows:
2. Cancellation.
(A) Cancellation Charge. Subject to Customer's right to terminate
this Agreement as described in Subsection 2(C) and 2(D) below, at any
time after the Effective Date, Customer may cancel this Agreement
(i.e., for convenience) if Customer provides written notification
thereof to WilTel not less than thirty (30) days prior to the
effective date of cancellation. In such case (or in the event WilTel
terminates this Agreement as provided in section 8), Customer shall
pay to WilTel all charges for Service provided through the effective
date of cancellation plus a cancellation charge (the "Cancellation
Charge") equal to twelve and one-half percent (12 1/2%) of the average
of the last twelve (12) months Monthly Revenue times the number of
full months remaining in the Service Term.
(B) Liquidated Damages. It is agreed that WilTel's damages in the
event Customer cancels Service shall be difficult or impossible to
ascertain. The provision for a cancellation charge in Subsection 2(A)
above or Subsection 2(D) below is intended, therefore, to establish
liquidated damages in the event of a cancellation charge and are not
intended as a penalty.
(C) Cancellation Without Charge. Notwithstanding anything to the
contrary contained in Subsection 2(A) above and subject to Subsections
2(D) and 2(E) below, Customer may cancel this Agreement without
incurring any cancellation charge if (i) WilTel fails to provide a
network as warranted in Section 9 below; (ii) WilTel fails to deliver
call detail records promptly based on the frequency selected by
Customer (i.e., monthly, weekly or daily); or (iii) WilTel fails to
submit ANI(S) relevant to such Service Requests to the LECs within the
time period described in Subsection l(E) above. Provided, however,
Customer must give WilTel written notice of any such default and an
opportunity to cure such default within five (5) days of the notice.
In the event WilTel fails to cure any such default within the five-day
period on
Page 11 of 16 CONFIDENTIAL
<PAGE>
more than three (3) occasions within any six (6) month period,
Customer may cancel this Agreement without incurring any cancellation
charge.
(D) Termination Due to Change in Control. In the event that (i)
there is a change in control of Customer such that Customer is
acquired or purchased, whether by stock purchase, asset purchase,
merger or otherwise, and such acquisition or purchase is approved by
the appropriate regulatory authorities ("Customer Acquisition
Purchase") and (ii) pursuant to such Customer Acquisition/Purchase,
Customer obtains access to an alternate rate plan which results in an
overall savings over current charges paid to WilTel pursuant to this
Agreement, WilTel may make such adjustments to the rates contained
herein to provide an equivalent overall savings. In the event that
WilTel does not make such adjustment, then Customer may, at its
election, within sixty (60) days after such Customer
Acquisition/Purchase, terminate this Agreement upon ten (10) days
prior written notice to WilTel without incurring further liability to
WilTel.
11. TRANSFER CHARGES: The parties agree to substitute Subsection 3(B) of the
TSA to read in its entirety as follows:
(E) Transfer Charges/Disputed Transfers. Customer agrees that it is
responsible for (i) all charges incurred by WilTel to change the PIC
of End Users to the WilTel network, (ii) all charges incurred by
WilTel to change End Users back to their previous PIC arising from
disputed transfers to the WilTel network plus an administrative charge
equal to [confidential information omitted] of such charges, and (iii)
any other damages suffered by or awards against WilTel resulting from
disputed transfers unless such charges or damages are due solely to
the actions or omissions of WilTel.
12. EXCLUDED ANIS: The parties agree to substitute the second sentence of
Subsection 3 (C) of the TSA to read in its entirety as follows:
In the event WilTel rejects an ANI, WilTel will notify Customer as soon as
possible (but in no event later than three (3) days) of its decision
specifically describing the rejected ANI and the reason(s) for rejecting
that ANI, and will not incur any further liability under this Agreement
with regard to that ANI.
13. RECORDS: The parties agree to substitute the first sentence of Subsection
3(D) of the TSA to read in its entirety as follows:
Customer will maintain documents and records ("Records") supporting
Customer's re-sale of Switched Service, including, but not limited to,
appropriate and valid LOAS, if applicable, from End Users for a period of
not less than twelve (12) months or such other longer period as may be
required by applicable law, rule or regulation.
Page 12 of 16 CONFIDENTIAL
<PAGE>
14. CUSTOMER SERVICE: The parties agree to substitute the last sentence of
Subsection 3 (E) of the TSA to read in its entirety as follows:
Customer agrees to immediately notify WilTel in the event an End User
notifies Customer of problems associated with the Service, including
without limitation, excess noise, echo, or loss of Service, and WilTel
agrees to respond to such problem(s) as it would in the normal course of
its business.
15. CUSTOMER RESPONSIBILITIES: The parties agree to substitute Subsection 4(B)
of the TSA to read in its entirety as follows:
(B) Fraudulent Calls. Customer shall indemnify and hold WilTel harmless
from all costs, expenses, claims or actions arising from fraudulent calls
of any nature which may comprise a portion of the Service to the extent
that the party claiming the call(s) in question to be fraudulent is (or had
been at the time of the call) an End User of the Service through Customer
or an end user of the Service through Customer's distribution channels,
except to the extent fraud was caused solely by WilTel's gross negligence
or willful misconduct. Customer shall not be excused from paying WilTel
for Service provided to Customer or any portion thereof on the basis that
fraudulent calls comprised a corresponding portion of the Service. In the
event WilTel discovers fraudulent calls being made (or reasonably believes
fraudulent calls are being made), nothing contained herein shall prohibit
WilTel from taking immediate action (without notice to Customer) that is
reasonably necessary to prevent such fraudulent calls from taking place,
including without limitation, denying Service to particular ANIs or
terminating Service to or from specific locations.
16. CHARGES AND PAYMENT TERMS: The parties agree to substitute Subsections 5
(A) and 5 (D) of the TSA to read in their entirety as follows:
(A) Payment. WilTel billings for Service are made on a monthly basis (or
such other basis as may be mutually agreed to by the parties) following
Start of Service. Subject to Subsection S(D) below, Service shall be
billed at the rates as described in the PET, and Service Requests, as the
case may be. Discounts, if any, applicable to the rates for certain
Switched Services are also set forth in the PET. Customer will pay each
WilTel invoice in full for Switched Service within forty-five (45) days of
the invoice date set forth on each WilTel invoice to Customer ("Due Date")
of payment is not received by WilTel on or before the Due Date, Customer
shall also pay a late fee in the amount of the lesser of one and one-half
percent (1 1/2%) of the unpaid balance of the Service charges per month or
the maximum lawful rate under applicable state law.
(D) Modification of Charges. WilTel reserves the right to eliminate
Service offerings, modify charges and/or add charges for Service offerings
(which charge modifications shall not exceed then-current generally
available WilTel charges for comparable services), upon not less than sixty
(60) days prior notice to Customer, which notice will state the effective
date for the
Page 13 of 16 CONFIDENTIAL
<PAGE>
charge modification or service modification. In the event WilTel notifies
Customer of the elimination of a Service offering and/or an increase in the
charges, Customer may terminate this Agreement, without incurring a
cancellation charge only with respect to the Service offering affected by
the increase in charges. In order to cancel that offering, Customer must
notify WilTel, in writing, at least fifteen (15) days prior to the
effective date of the increase in charges. Further, in the event Customer
cancels its subscription to a Switched Service offering as described in
this Subsection 5(D), WilTel and Customer agree to negotiate in good faith
concerning the decrease of Customer's Minimum Monthly Commitment, if any,
described in the PET.
17. REMEDIES FOR BREACH: The parties agree to substitute the first sentence of
Section 8 of the TSA to read in its entirety as follows:
In the event Customer fails to pay any amount due hereunder for Services
rendered by WilTel or is in material breach of this Agreement, including
without limitation, failure to pay charges due hereunder by the date stated
in the Suspension Notice described in Subsection 5(F), WilTel shall have
the right, after giving Customer five (5) days prior notice, and in
addition to foreclosing any security interest WilTel may have, to (i)
terminate this Agreement, (ii) withhold billing information from Customer;
and/or (iii) contact the End Users (for whom calls are originated and
terminated solely over facilities comprising the WilTel network) directly
and bill such End Users directly until such time as WilTel has been paid in
full for the amount owed by Customer.
18. STATE CERTIFICATION: The parties agree to substitute Section 12 of the TSA
to read in its entirety as follows:
12. State Certification. Customer warrants that in all jurisdictions
in which it provides long distance services that require certification and
in which it uses the WilTel network, it has obtained the necessary
certification from the appropriate governmental authority. urther, if
required by WilTel, Customer agrees to provide proof of such certification
reasonably acceptable to WilTel. In the event Customer is prohibited,
either on a temporary or permanent basis, from conducting its
telecommunications operations in a given state, Customer shall (i)
immediately notify WilTel by facsimile, and (ii) send written notice to
WilTel within twenty-four (24) hours of such prohibition.
19. AUHTORIZED USE OF WILTEL NAME: The parties agree to substitute the second
sentence of Section 14 of the TSA to read in its entirety as follows:
Additionally, Customer shall provide to WilTel for its prior review and
written approval, all promotions, advertising or other materials or
activity using or displaying WilTel's name.
Page 14 of 16 CONFIDENTIAL
<PAGE>
20. CHOICE OF LAW; FORUM: The parties agree to substitute Section 20 of the TSA
to read in its entirety as follows:
20. Choice of Law; Forum.
(A) Law. This Agreement shall be construed under (i) the laws of the
State of Oklahoma without regard to choice of law principals; (ii) if
applicable, the Communications Act 1934, as amended; and (iii) if
applicable, relevant decisions of the Federal Communications
Commission.
(B) Forum. Any legal action or proceeding with respect to this
Agreement may be brought in (i) the Courts of the State of Oklahoma in
and for the County of Tulsa or the United States of America for the
Northern District of Oklahoma, or (ii) the Courts of the State of
Tennessee in and for the County of Davidson or the United States of
America for the Middle District of Tennessee. By execution of this
Agreement, both Customer and WilTel hereby submit to such
jurisdiction, hereby expressly waiving whatever rights may correspond
to either of them by reason of their present or future domicile. In
furtherance of the foregoing, Customer and WilTel hereby agree to
service by U.S. Mail at the notice addresses referenced in Section 15.
Such service shall be deemed effective upon the earlier of actual
receipt or seven (7) days following the date of posting.
21. PRESS RELEASES: The parties agree to substitute Subsection 21(C) of the TSA
to read in its entirety as follows:
(C) Press Release. Except to the extent specifically allowed
under Section 14, the parties further agree that any press release,
advertisement or publication generated by a party regarding this Agreement
or in which a party desires to mention the name of the other party or the
other party' s parent or affiliated companies), will be submitted to the
non-publishing party for its written approval prior to publication.
22. RULE OF CONSTRUCTION: The parties agree to delete Subsection 23(D) in its
entirety.
23. MISCELLANEOUS:
(A) WilTel agrees to waive the [confidential information omitted] charge
for Daily CDRs described in Subsection 9(D) of the Service Schedule.
(B) WilTel agrees to waive the [confidential information omitted] charge
for every Customer requested billed telephone number (whether verified or
non-verified) described in Section 15 of the Service Schedule.
(C) In the event WilTel withdraws or otherwise cancels any tariff
referenced in this Agreement, whether in whole or in part and whether
voluntarily or by reason of any statute, rule or order of any governmental
unit or regulatory body, the referenced terms or provision then in effect
as of the date of withdrawal or
Page 15 of 16 CONFIDENTIAL
<PAGE>
cancellation shall remain in full force or effect subject to modification
as may be mutually agreed to by the parties.
24. REQUIREMENTS: During the Service Term, Customer agrees to purchase from
WilTel under this Agreement at least seventy percent (70%) of Customer's
internal corporate traffic, and Customer's resale traffic. For purposes of
this Section 23, WilTel agrees to exclude (i) that volume of traffic
provided through services to Customer as of December 1, 1994, by ETS, an
AT&T aggregator, and (ii) that volume of traffic attributable to any
subsidiary or other business unit of Customer acquired on or after
October 16, 1995.
IN WITNESS WHEREOF, the parties have executed these WilMAX UNIVERSAL-TM-
Program Enrollment Terms on the date first written above.
WORLDCOM NETWORK SERVICES, INC. COMDATA NETWORK, INC.
d/b/a WilTel
By: By: /s/Tony Holcombe
(Signature) (Signature)
Tony Holcombe
(Print Name) (Print Name)
President & CEO
(Title) (Title)
COMDATA TELECOMMUNICATIONS
SERVICES, INC.
By: /s/Charles S. Isdell
(Signature)
(Print Name)
Sr. V.P. - G.M.
(Title)
ATTACHMENTS:
Schedule 1 SUPERSAVER LATAs
Schedule 2 Intrastate Rates
Schedule 3 Canada and Mexico Rates; Canada and Mexico Rates from
Hawaii
Schedule 4 SWITCHED ACCESS Service International Rates
Schedule 5 DEDICATED ACCESS Service International Rates
Schedule 6 ENHANCED TRAVEL CARD Service Rates
Schedule 7 International Rate Periods
Schedule 8 Switched International Rates 1+ from Hawaii
Page 16 of 16 CONFIDENTIAL
<PAGE>
INSIDE FRONT COVER OF ANNUAL REPORT
EXHIBIT 13.01: SELECTED FIVE-YEAR DATA
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share data)
- ------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE $ 1,074.8 $ 942.6 $ 823.5 $ 691.5 $ 648.5
- ------------------------------------------------------------------------------------------------------------------
Earnings (Loss) from continuing operations (1) $ 35.4 $ 135.5 $ 59.2 $ 64.6 $ (269.8)
Gain and earnings from
discontinued operations (2) 437.0 46.4 38.3 33.1 26.1
Extraordinary loss (3) -- -- (38.9) -- (8.4)
NET EARNINGS (Loss) $ 472.4 $ 181.9 $ 58.6 $ 97.7 $ (252.1)
- ------------------------------------------------------------------------------------------------------------------
EARNINGS (Loss) PER COMMON SHARE (4)
BASIC
Continuing operations $ 0.45 $ 1.80 $ 0.70 $ 0.78 $ (4.19)
Net earnings (loss) $ 6.02 $ 2.49 $ 0.69 $ 1.29 $ (3.92)
DILUTED
Continuing operations $ 0.45 $ 1.67 $ 0.74 $ 0.83 $ (4.19)
Net earnings (loss) $ 5.92 $ 2.25 $ 0.73 $ 1.25 $ (3.92)
Shares used in calculations (in thousands)
Basic 78,418 67,920 66,135 65,825 64,452
Diluted 79,741 80,969 79,736 78,010 64,452
- ------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets $ 1,243.3 $ 1,016.6 $ 905.6 $ 816.0 $ 695.9
Debt obligations $ 3.0 $ 138.2 $ 201.5 $ 222.3 $ 231.5
Stockholders' equity (deficit) (5) $ 588.3 $ 346.3 $ 150.0 $ 86.9 $ (8.9)
- ------------------------------------------------------------------------------------------------------------------
EQUITY (DEFICIT) PER COMMON SHARE (6) $ 7.96 $ 4.34 $ (1.28) $ (2.23) $ (3.74)
Common shares outstanding at end of
year (in thousands) 73,942 79,768 67,277 66,723 65,503
- ------------------------------------------------------------------------------------------------------------------
NUMBER OF EMPLOYEES AT END OF YEAR 8,000 7,700 7,100 6,400 6,600
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Certain prior year amounts have been restated to separately present amounts
related to discontinued operations.
(1) Includes 1997 FAS 109 income tax benefit of $175.0, as described in Note
E, 1997 unusual losses of $307.6, as described in Note C, 1995 pooling
expenses of $29.7, and in 1993 a restructuring loss of $67.0 and the
write-off of $230.3 of Comdata goodwill and other intangibles.
(2) Includes 1997 gain on sale of $386.3 and earnings from operations of
Computing Devices International as described in Note B.
(3) Relates to the early retirement of debt.
(4) For further information on the calculation of earnings per share, see
Note D.
(5) The Company does not pay cash dividends on its common stock. For
information regarding the 1996 conversion of preferred stock, see Note G.
(6) Computed by reducing stockholders' equity by the liquidation value of
outstanding preferred stock ($236.0 at December 31, 1995, 1994 and 1993) and
dividing by the number of outstanding common shares at the end of the year.
Assuming that any outstanding convertible preferred stock was converted to
common stock, the equity per common share would have been $1.93 and $1.13 at
December 31, 1995 and 1994, respectively.
STATEMENTS REGARDING CERIDIAN CORPORATION CONTAINED IN THIS ANNUAL REPORT, IN
OTHER CERIDIAN FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, IN PRESS
RELEASES AND OTHER CERIDIAN PUBLICATIONS, AND MADE BY CERIDIAN MANAGEMENT
THAT ARE NOT HISTORICAL IN NATURE, PARTICULARLY THOSE THAT UTILIZE
TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECTS," "ANTICIPATES," "BELIEVES" OR
"PLANS," ARE FORWARD-LOOKING STATEMENTS BASED ON CURRENT EXPECTATIONS AND
ASSUMPTIONS AND ENTAIL VARIOUS RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN SUCH
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS KNOWN TO CERIDIAN THAT COULD
CAUSE SUCH MATERIAL DIFFERENCES ARE DISCUSSED UNDER THE CAPTION "CAUTIONARY
FACTORS THAT COULD AFFECT FUTURE RESULTS" ON PAGE 11 OF THIS ANNUAL REPORT.
<PAGE>
PAGE 6 OF ANNUAL REPORT
EXHIBIT 13.02: MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
INTRODUCTION
On December 31, 1997, Ceridian Corporation completed the sale of its defense
electronics business, Computing Devices International ("CDI"), to General
Dynamics Corporation. As a result, CDI is shown as a discontinued operation
in Ceridian's consolidated statements of operations, meaning that CDI's
revenue, costs and expenses are not shown and its net earnings for all
periods are included under the "Discontinued operations" caption. For
additional information regarding CDI's results of operations, see Note B,
DISCONTINUED OPERATIONS AND EXTRAORDINARY LOSS, to the consolidated financial
statements. Certain continuing corporate overhead costs previously allocated
to and reported as general and administrative expenses of CDI have been
reclassified to Ceridian's continuing operations in the consolidated
financial statements. In the discussion that follows, the term "Ceridian"
refers only to Ceridian's continuing operations unless the context clearly
indicates otherwise.
RESULTS OF OPERATIONS
For 1997, Ceridian reported net earnings of $472.4 million, or $5.92 per
diluted share of common stock, on revenue of $1,074.8 million, compared to
net earnings in 1996 of $181.9 million, or $2.25 per diluted share, on
revenue of $942.6 million. Earnings from continuing operations in 1997 were
$35.4 million, compared to 1996 earnings from continuing operations of $135.5
million. For 1995, Ceridian reported net earnings of $58.6 million, or $0.73
per diluted share, on revenue of $823.5 million, and earnings from continuing
operations of $59.2 million.
Included in the 1997 net earnings are earnings and a gain totaling
$437.0 million from discontinued operations, representing an after tax gain
of $386.3 million from the sale of CDI and CDI's 1997 net earnings of $50.7
million. Included in 1997 earnings from continuing operations are a $175.0
million income tax benefit under FAS 109 (see "Taxes and Net Operating Loss
Carryforwards" below), fourth quarter unusual charges of $144.6 million,
third quarter charges of $150.0 million related to the termination of the CII
software development project, and a first quarter charge of $13.0 million
related to the settlement of age discrimination litigation. Included in the
1995 results is a $38.9 million extraordinary loss, or $0.49 per diluted
share, resulting from the refinancing of certain debt of Comdata following
its acquisition by Ceridian in December 1995, $29.4 million of expenses
associated with the acquisition of Comdata and $9.5 million of Comdata
balance sheet adjustments recorded at the time of its acquisition.
The fourth quarter 1997 charges of $144.6 million consist of $87.5
million of asset write-offs and $57.1 million in accrued liabilities, and are
discussed in greater detail in Note C, SUPPLEMENTARY DATA TO STATEMENTS OF
OPERATIONS, to the consolidated financial statements. These fourth quarter
1997 charges are expected to reduce future operating costs by approximately
$12 million in 1998 (including $5 million in the payroll processing business)
and lesser amounts thereafter, primarily due to reduced amortization and
depreciation, facilities expense and compensation expense.
As a result of Ceridian's 1997 recognition under FAS 109 of the future
tax benefits of its net operating loss carryforwards, its operating results
beginning in 1998 will be reported on a fully taxed basis, which Ceridian
expects will involve an effective tax rate of approximately 37%. The impact
of this change together with the unusual 1995 and 1997 items discussed above
will make comparisons between Ceridian's results in 1998 with its results
from continuing operations during 1995-1997 difficult. In an effort to
facilitate such comparisons, Ceridian has utilized certain pro forma
adjustments to calculate revised earnings figures for its continuing
operations for the years 1995-1997 that it believes will offer more
meaningful comparability to its future results. The most significant of
these pro forma adjustments include removal of the FAS 109 tax benefit from
1997, tax effecting earnings in all periods at an assumed rate of 37%,
removing all 1997 charges discussed above, removing from 1995 the
extraordinary loss and the Comdata acquisition expenses and balance sheet
adjustments, and assuming that CDI was sold at the beginning of each of the
years for net proceeds approximately equal to the difference between CDI's
revenue for that year and the approximately $100 million of CDI cash in
Canada, and that those net proceeds were invested at 5.5% per annum. On this
basis, Ceridian estimates that its net earnings and earnings per share would
have been as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Net Earnings ($ in millions) $ 123.8 $ 104.6 $ 82.9
EPS (diluted) $ 1.55 $ 1.29 $ 1.04
- ------------------------------------------------------------------------
</TABLE>
The following table sets forth revenue for the last three years for
Ceridian's principal businesses.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Years ended December 31,
- ---------------------------------------------------------------------------------------------------
(Dollars in millions) 1997 1996 1995
change change
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ARBITRON $ 165.2 7.9% $ 153.1 11.6% $ 137.2
Human Resource Services 578.6 18.0% 490.3 19.0% 412.2
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Years ended December 31,
- ---------------------------------------------------------------------------------------------------
(Dollars in millions) 1997 1996 1995
change change
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Comdata Transportation Services 197.8 13.9% 173.7 11.1% 156.2
Comdata Gaming Services (1) 133.2 6.1% 125.5 6.5% 117.9
Total Revenue $ 1,074.8 14.0% $ 942.6 14.5% $ 823.5
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Sold to First Data Corporation in exchange for its NTS Transportation
Services division and cash in January 1998.
<PAGE>
PAGE 7 OF ANNUAL REPORT
The following table sets forth Ceridian's gross profit, expenses and
certain other items in the consolidated statements of operations as a percentage
Ceridian's total revenue for the periods indicated.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Years ended December 31,
- ---------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue 100.0% 100.0% 100.0%
Gross profit 50.9% 51.5% 51.4%
Operating expenses:
Selling, general & administrative 28.7% 30.2% 31.6%
Research & development 5.5% 5.6% 4.6%
Other expense (income) 28.8% -- 4.0%
Total operating expenses 63.0% 35.8% 40.2%
Earnings (loss) before interest and taxes (12.1%) 15.7% 11.2%
Interest income (expense) (0.8%) (0.7%) (2.6%)
Earnings (loss) before income taxes (12.9%) 15.0% 8.6%
Income tax provision (benefit) (16.2%) 0.6% 1.4%
Earnings from continuing operations 3.3% 14.4% 7.2%
Earnings and gain from discontinued operations 40.7% 4.9% 4.6%
Extraordinary loss -- -- 4.7%
Net earnings 44.0% 19.3% 7.1%
- ---------------------------------------------------------------------------------------------
</TABLE>
1997 COMPARED WITH 1996
REVENUE. Revenue growth in HRS was 18.0%, but after adjusting for
acquisitions made during 1996 and 1997 (see Note K, INVESTING ACTIVITY, to the
consolidated financial statements), HRS' revenue growth was 13.6%. The greatest
rates of internal growth in HRS involved U.S. payroll tax filing services,
software sales, particularly skills management and time and attendance software,
and employee assistance services. Revenue in 1997 also benefited from a 1.1
percentage point increase in the retention rate for payroll and tax filing
customers. Interest income from tax filing deposits, which represents about
two-thirds of tax filing revenue, increased 21.5%, about three-fourths due to
increased business volume, and about one-fourth due to the earlier collection by
Ceridian of such deposits in anticipation of the implementation of IRS
electronic funds transfer regulations that reduce by one day the period of time
certain tax filing deposits may be held. Because the general implementation of
these regulations was delayed until the end of 1997, Ceridian's 1997 revenue
benefited accordingly, but the benefit will not continue into 1998.
Revenue from Comdata's transportation services business increased 13.9%,
but after adjusting for acquisitions during 1996 and 1997, transportation
services revenue grew 7.0%. The internal revenue growth in transportation,
particularly during the second half of 1997, was primarily due to a 5.5%
increase in the level of funds transfer transactions and increased sales of
prepaid phone cards and Trendar fuel desk automation systems, reflecting
favorable conditions in the trucking industry generally and increased success
on Comdata's part in winning new accounts. Partially offsetting this revenue
growth was a 26.4% decrease in revenue from unmatched transportation
transactions, from $8.2 million to $6.0 million. Comdata's revenue from
gaming services increased 6.1% overall, but decreased 1.9% after adjusting
for a 1997 acquisition. The revenue performance in gaming was primarily due
to an accelerating decline during the year in the number of credit card cash
advance transactions over year earlier levels, largely reflecting increased
use of lower fee sources of cash such as ATM machines and increasing
competitive pressures that have resulted in reduced pricing and the loss of
certain customers. Also contributing to the revenue decrease from credit
card cash advance transactions was an increase in the average merchant
discount fee on such transactions (which is netted against revenue).
Partially offsetting these factors was increased revenue from ATM
transactions, reflecting both transaction growth and price increases.
Revenue from unmatched transactions in gaming services decreased 16.4%, from
$8.6 million to $7.2 million. Comdata remains subject to an examination as
to whether its treatment of unmatched transactions complies with state
unclaimed property laws (see Note N, LEGAL MATTERS, to the consolidated
financial statements).
<PAGE>
Arbitron's revenue in 1997 was 7.9% greater than in 1996. After
adjusting for a $3.4 million revenue increase in 1996 due to a change in the
revenue recognition policy of the Scarborough Research Partnership and for
the acquisition of Continental Research in the fourth quarter 1997,
Arbitron's revenue increased 10.0% from 1996 to 1997. Revenue from sales of
radio ratings and analytical software, which comprises about 83% of
Arbitron's revenue, increased 8.4%, reflecting an increased number of
subscribers for ratings services and analytical software applications, price
escalators in multi-year customer contracts, and generally favorable pricing
in connection with renewal contracts. The increase in the number of stations
that are Arbitron customers reflects a high level of both contract renewals
and new business during 1997, due in large measure to consolidation in the
radio broadcasting industry, as larger broadcasting groups tend to utilize
Arbitron's services to a greater degree. Since consolidation within the
radio broadcasting industry in the U.S. is unlikely to continue at the rate
experienced in 1996 and 1997, Arbitron's rate of revenue growth from radio
ratings in the U.S. is expected to moderate. Also contributing to the revenue
increase was increased sales of the Scarborough Report, particularly to radio
and cable broadcasters.
<PAGE>
PAGE 8 OF ANNUAL REPORT
COSTS AND EXPENSES. Ceridian's gross profit margin decrease from 1996
to 1997 reflected a decrease in Comdata that was largely offset by increases
in Arbitron and HRS. The decrease in Comdata was primarily due to increased
agent commissions paid to gaming locations, reflecting competitive pressures;
to revenue mix, as much of Comdata's revenue growth was attributable to
product and service offerings and acquisitions that tend to have lower gross
margins than Comdata's core funds transfer business; and to higher data
processing costs. The gross margin increase in Arbitron primarily reflected
revenue growth as well as additional costs in 1996 resulting from the change
in SRP's revenue recognition policy. This increase in Arbitron was offset in
part by 1997 increases in costs associated with data collection, reflecting
an expanded number of markets measured and actions to maintain the level of
survey responses. The gross margin improvement in HRS primarily reflects
revenue growth overall, efforts to reduce production costs in payroll
processing, and revenue mix, with higher rates of revenue growth in higher
gross margin software businesses such as Resumix.
The decrease in Ceridian's selling, general and administrative ("SG&A")
expenses expressed as a percentage of revenue from 1996 to 1997 was due in
large measure to a decrease in compensation expense associated with
Ceridian's performance restricted stock plan. Also contributing to the
reduction in SG&A expenses as a percentage of revenue was a sizeable decrease
in selling expense as a percentage of revenue in HRS, reflecting revenue
growth, lower marketing expense and efforts to better focus and coordinate
sales efforts. Partially offsetting these improvements was an increase in
Comdata's SG&A expenses as a percentage of revenue, primarily reflecting
increased amortization of goodwill and other intangibles and increased
administrative expenses related to recent acquisitions.
Although Ceridian's research and development ("R&D") expenses increased
proportionately with its revenue increase from 1996 to 1997, virtually all of
the increase in such expenses occurred in the fourth quarter 1997. During
the first nine months of 1997, R&D expenses had decreased as a percentage of
revenue, primarily reflecting the consolidation of Tesseract with the U.S.
payroll processing business and the resulting discontinuance of certain R&D
efforts. In the fourth quarter of 1997, R&D expenses increased substantially
in HRS, reflecting the development of upgrades and enhancements to existing
payroll processing software, the development of a new data processing system
for the tax-filing business, and efforts to make data processing systems
year-2000 compliant. R&D expenses also increased modestly during 1997 as a
percentage of revenue in Arbitron and Comdata, largely reflecting Arbitron's
development software upgrades and increased applications development in
Comdata.
Because many computer programs and embedded logic devices utilize two
digits rather than four to define the applicable year, they may fail to
properly recognize date sensitive information when the year changes to 2000.
This could result in major system failures or miscalculations. Ceridian has
been conducting a comprehensive review of its products and systems to
identify those that could be affected by this "year 2000" issue, and is
assessing the amount and expense of programming and other efforts required to
remediate or replace the affected products and systems and to upgrade or
migrate customers to compliant versions of products. Ceridian's goal is to
complete substantially all required remediation and replacement efforts by
the end of 1998, thereby making 1999 available for fully testing the systems
in normal operating environments, implementing changes across the customer
base, and making any further refinements that may be needed. In addition,
Ceridian is communicating with customers, suppliers, governmental agencies
and others who have systems with which Ceridian's systems communicate to
identify any potential year 2000 problems and Ceridian's exposure to such
problems. While certain Ceridian systems are currently year 2000 compliant,
future modifications to or replacements of software and hardware in the
majority of Ceridian's systems will be required. A portion of these
remediation and replacement efforts are expected to occur incidentally to
system upgrades and replacements that were otherwise planned, such as ongoing
projects involving the payroll tax filing system, aspects of Arbitron's radio
ratings processing system and certain internal MIS systems with the majority
of the associated costs to be capitalized and amortized (see "Financial
Condition" on page 10) and the balance included in Ceridian's R&D expense
budget.
For the remainder of Ceridian's non-compliant systems and product
offerings, Ceridian will incur year 2000 remediation and testing costs during
1998 that are currently estimated to be approximately $20 million, and which
are being expensed as incurred. Additional and potentially significant year
2000 costs will be incurred during 1999 for the previously described
testing and implementation efforts. These 1998 and 1999 costs are not
expected to have a material effect on Ceridian's financial position or
results of operations in any one period, in part because they represent the
re-deployment of existing technology resources. These cost estimates are,
however, subject to potentially significant estimation uncertainties that
could cause actual results to differ materially from what has been discussed
(see "Cautionary Factors That Could Affect Future Results - Required Year
2000 Conversion Efforts" on page 12).
Ceridian's other expense in 1997 includes the previously described
fourth quarter charges of $144.6 million, the $150.0 million of charges
related to termination of the CII project,
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PAGE 9 OF ANNUAL REPORT
and the $13.0 million charge to settle age discrimination litigation. Of
these charges, $223.4 million were attributable to HRS, $41.0 million to
Comdata, $5.0 million to Arbitron and $38.2 million were not attributed to
any business unit. Also included in other expense in 1997 is the minority
partner's share of the earnings of the Scarborough partnership.
EARNINGS (LOSS) BEFORE INTEREST AND TAXES. As a result of the $307.6
million of charges discussed in the previous paragraph, Ceridian reported a
loss before interest and taxes for 1997 of $129.7 million. Excluding these
charges, Ceridian would have reported 1997 earnings before interest and taxes
("EBIT") of $178.0 million, or 16.6% of revenue, representing an increase of
20.4% over 1996 EBIT of $147.9 million, or 15.7% of revenue. Computed on
that basis, EBIT as a percentage of revenue increased for HRS and Arbitron,
but decreased for Comdata.
INTEREST INCOME AND EXPENSE. The increase in interest expense from 1996
to 1997 reflected significant borrowings by Ceridian during the fourth
quarter 1997 to repurchase shares of its common stock, while the decrease in
interest income reflected lower levels of cash during 1997.
TAXES AND NET OPERATING LOSS CARRYFORWARDS. Ceridian utilized $512.2
million of its net operating loss carryforwards for U.S. federal income tax
purposes ("NOLs") to offset the taxable gain from the sale of CDI (except for
$14.6 million in alternative minimum tax) and other taxable income during
1997. As a result, Ceridian had $437.9 million of NOLs remaining as of
December 31, 1997, which will be available to offset regular taxable U.S.
income during the carryforward period (through 2008). At December 31, 1997,
Ceridian also had $187.9 million of expenses for financial statement
reporting purposes which are expected to be deductible for federal income tax
purposes in future taxable years. If unused, Ceridian's NOLs would begin to
expire in 2004.
In the fourth quarter 1997, Ceridian recognized the future tax benefits
of its remaining NOLs and future tax deductions as income of $175.0 million
for accounting purposes in accordance with FAS 109, having determined that it
was more likely than not that it would generate future U.S. taxable income
over a reasonable period of time in an amount sufficient to utilize those
NOLs and future tax deductions. The application of FAS 109 also resulted in
the balance sheet presence at December 31, 1997 of Ceridian's net deferred
tax asset of $199.5 million (generally representing the application of a
federal tax rate of 35% to Ceridian's remaining NOLs and future tax
deductions), after elimination of a valuation allowance previously applied to
fully reserve this asset. Although Ceridian's operating results will
hereafter be reported on a fully taxed basis, its cash actually utilized for
tax payments is expected to be approximately 3-4% of pre-tax earnings as the
deferred tax asset is utilized.
Although Section 382 of the Internal Revenue Code contains complex rules
that place an annual limit on the amount of NOLs that a company may utilize
after an "ownership change," Ceridian does not expect, given the reduction in
the amount of its NOLs, the time when they would begin to expire and the
level of its market capitalization, that the imposition of any such annual
limit, if it were to occur, would have a material adverse effect on its
ability to utilize the NOLs.
1996 COMPARED WITH 1995
REVENUE. About half of the 19.0% revenue growth in HRS was due to
acquisitions made during 1996 and to a full year's revenue from the
Centrefile business, purchased in October 1995. Adjusting for these
acquisitions, HRS' revenue increased 9.2% from 1995 to 1996. Revenue growth
computed on this basis from U.S. payroll processing and tax filing services
was 8.5%, largely reflecting expansion of the payroll customer base, price
increases and a higher percentage of payroll customers also purchasing tax
filing services. Revenue growth from tax filing services was restrained
somewhat by a decrease in the average annual yield on tax filing deposits
from 5.95% in 1995 to 5.74% in 1996, although average invested tax filing
balances increased 12.7%. Revenue growth adjusted for acquisitions in the
other HRS businesses in the U.S. was 14.8% from 1995 to 1996, primarily
reflecting revenue growth in the User Technology, Performance Partners and
Resumix businesses that was partially offset by decreased revenue in
Tesseract.
Revenue growth from Comdata's transportation services business was
11.1%, but after adjusting for 1996 acquisitions and the net effect of the
1995 acquisition of Trendar, transportation services revenue increased 6.6%.
The internal revenue growth from transportation services included
substantially increased sales of Trendar systems, a 7.5% increase in funds
transfer transactions with little change in the average revenue per
transaction, and increased sales of telecommunications services. Partially
offsetting these factors was reduced revenue from permit services, primarily
due to consolidation of permit requirements among states, resulting in fewer
permits to be processed. Comdata's 6.5% revenue growth in gaming services was
primarily attributable to the expansion of Comdata's ATM network and
resulting growth in the number of ATM cash advance transactions, the
introduction of surcharges on ATM transactions, a price increase on credit
card cash advance transactions during 1996, and an increase in the average
size of such transactions. Revenue growth from gaming services slowed during
1996, reflecting slower growth in the gaming industry generally, increased
use of lower fee sources of cash such as ATM machines, and an increase in the
merchant discount rate on
<PAGE>
PAGE 10 OF ANNUAL REPORT
credit card cash advances, which is netted against revenue. Comdata's
revenue from unmatched transactions increased from $14.2 million in 1995 to
$16.8 million in 1996, primarily due to an increase in transaction volume.
Arbitron's revenue increased 11.6% from 1995 to 1996, but after
adjusting for the impact of the previously discussed Scarborough revenue
recognition change, Arbitron's revenue increased 8.9%. Revenue from sales of
radio audience measurement services and analytical software increased 7.6%,
reflecting an increased number of subscribers for ratings services and
analytical software applications, due in part to consolidation in the radio
broadcasting industry, and price escalators in multi-year customer contracts.
Increased sales of the Scarborough Report also contributed to Arbitron's
revenue increase.
COSTS AND EXPENSES. Ceridian's gross margin was little changed from
1995 to 1996, as an increase in HRS was essentially offset by decreases in
Comdata and Arbitron. The gross margin increase in HRS was due principally
to process improvements that led to a decrease in regulatory charges for
certain penalties and interest absorbed by Ceridian's tax filing operation.
Comdata's increase in costs as a percentage of revenue was due largely to
higher data processing costs, the increase in the merchant discount rate on
credit card cash advances, an increase in agent commissions paid to gaming
locations, and revenue mix. The gross margin decrease in Arbitron reflected
additional costs resulting from the change in SRP's revenue recognition
policy, increased costs resulting from utilizing a larger sample size in
providing radio audience measurements, and efforts required to transition SRP
from annual to semiannual reporting.
The decrease from 1995 to 1996 in Ceridian's SG&A expenses as a
percentage of revenue reflected a decrease in selling expense as a percentage
of revenue that was partly offset by a percentage increase in general and
administrative expenses. The decrease in selling expense as a percentage of
revenue was primarily attributable to HRS, due largely to a 1996 change in
the timing of sales commission recognition. The increase in general and
administrative expense as a percentage of revenue was primarily attributable
to acquisitions in HRS and Comdata made during late 1995 and 1996, the
amortization of goodwill and intangibles associated with those acquisitions,
and HRS's increased amortization of capitalized software. The increase in
general and administrative expenses was, however, restrained by lower
compensation expense during 1996 associated with the Company's performance
restricted stock plan and lower than anticipated health and casualty
insurance costs.
The increase from 1995 to 1996 in Ceridian's research and development
expenses as a percentage of revenue was primarily attributable to HRS,
reflecting development of upgrades and enhancements to existing payroll
processing, tax filing and resume tracking software as well as expenditures
related to a since discontinued effort by Tesseract to develop a
client/server version of its proprietary human resource information
management software.
The most significant factor in the decrease in Ceridian's other expenses
from 1995 to 1996 was the $29.4 million of expenses associated with the 1995
acquisition of Comdata. Apart from those expenses, other expense in 1995 and
1996 primarily consisted of Arbitron's partner's share of SRP's earnings.
EARNINGS BEFORE INTEREST AND TAXES. Ceridian's EBIT increased $55.7
million, or 60.3%, from 1995 to 1996, from 11.2% of revenue to 15.7% of
revenue. Apart from the $29.4 million of Comdata acquisition expenses and
$9.5 million of Comdata balance sheet adjustments, Ceridian's EBIT would have
been 15.9% of revenue in 1995 and would have increased $16.7 million, or
12.7%, from 1995 to 1996. Computed on that basis, EBIT as a percentage of
revenue increased for Arbitron, but decreased for Comdata and HRS.
INTEREST INCOME AND EXPENSE. The $19.8 million decrease in interest
expense from 1995 to 1996 reflected lower levels of debt and lower interest
rates, primarily as a result of the December 1995 refinancing of Comdata's
debt. The $5.0 million decrease in interest income primarily reflected lower
levels of cash and short-term investments in 1996.
TAX PROVISION. The decrease in Ceridian's income tax provision from
$11.5 million in 1995 to $5.7 million in 1996 represented a reduction in the
Company's effective tax rate from 16.3% to 4.0%. This reduction reflected
Ceridian's ability to utilize its NOLs to offset Comdata's income after its
acquisition in December 1995.
FINANCIAL CONDITION
During 1997, operating cash flows provided $114.6 million of cash,
compared to $171.4 million in 1996 and $120.5 million in 1995. The most
significant factors influencing the amount of cash utilized during 1997 in
connection with working capital items were a $54.4 million increase in trade
and other receivables, principally in Comdata and HRS, a $26.5 million
decrease in drafts and settlements payable, and a $70.6 million increase in
other current assets and liabilities. The receivables increase in HRS
reflected increased business volume as well as delayed billings in the tax
filing business following a billing system conversion. The receivables
increase in Comdata primarily reflected business growth and the introduction
of a factoring service to complement its invoicing service for trucking
companies. The decrease in drafts payable was attributable to Comdata's
gaming business, with drafts payable relating to the large volume of weekend
transactions in that business typically clearing on Wednesday (1996 ended on
a Tuesday, 1997 on a Wednesday). The largest 1997 cash
<PAGE>
PAGE 11 OF ANNUAL REPORT
outlay associated with restructuring reserves was $11 million associated with
the age discrimination litigation settlement. The increase in other current
assets and liabilities is due principally to 1997 unusual charges remaining
unpaid at year end.
Investing activities provided $484.7 million of cash during 1997,
reflecting the proceeds from the sale of CDI. Uses of cash for investing
activities during 1997 included $82.0 million in expenditures for capital
equipment, software and development costs, including $37.1 million for the
CII project and for Comdata's in-house transaction processing system prior to
the decisions to terminate those projects. The $30.0 million of cash
utilized for acquisitions primarily involved Comdata's purchase of a provider
of cash advance services to gaming patrons (see Note K, INVESTING ACTIVITY,
to the consolidated financial statements). In January 1998, Ceridian's
Canadian subsidiary purchased the payroll processing business of the
Toronto-Dominion Bank for $35.0 million cash, of which $28.2 million was
borrowed from the seller. This borrowing is guaranteed by Ceridian and
effectively incorporates the terms and conditions of Ceridian's U.S.
revolving credit facility. Ceridian also announced in January 1998 the
signing of a letter of intent to purchase the payroll processing business of
the Canadian Imperial Bank of Commerce. Ceridian expects its Canadian
subsidiary to obtain seller financing of a portion of this transaction on
comparable terms and conditions.
Ceridian's expenditures for capital assets and software presently
planned for 1998 total approximately $58 million, with about three-fourths of
that amount involving HRS. Planned expenditures for 1998 include replacement
of the data processing system for the tax-filing business, equipment to
expand and improve service delivery capabilities in HRS, upgrades to portions
of Arbitron's radio ratings processing system, and routine replacements and
upgrades for existing equipment.
Financing activities utilized $402.4 million of cash during 1997,
primarily reflecting the payment of $279.8 million to repurchase shares of
Ceridian's common stock. In addition, at December 31, 1997, Ceridian was
obligated to pay an additional $17.2 million in connection with stock
repurchases for which the settlement date had not yet occurred (see Note G,
STOCKHOLDERS' EQUITY, to the consolidated financial statements). During
1997, Ceridian repurchased 7.6 million shares of its stock at an average
price of $39.16 per share. During January and February 1998, Ceridian
purchased an additional 1.8 million shares of its stock for $83.3 million,
and had authorizations remaining to purchase an additional 3.9 million
shares. During the course of 1997, Ceridian made payments of $144.3 million
on its outstanding debt, including repaying all amounts outstanding under its
domestic revolving credit facility, under three supplemental six month
promissory notes given to three of the banks that are parties to the
revolving credit facility, and under certain debt obligations assumed as a
result of acquisitions. Borrowings under that facility and the supplemental
notes had reached $390.0 million during the fourth quarter 1997 as Ceridian
used loan proceeds in anticipation of proceeds from the sale of CDI to
repurchase its stock.
In July 1997, Ceridian concluded a $250 million revolving credit
facility with a commercial bank syndicate. The credit facility is unsecured
and has a final maturity of July 31, 2002. The full amount of the credit
facility may be utilized for revolving loans and up to $75 million of the
credit facility may be used to obtain standby letters of credit. The pricing
of the credit facility for both loans and letters of credit is determined
based on Ceridian's senior unsecured debt ratings. At December 31, 1997,
there were no revolving loans and $2.9 million in letters of credit
outstanding under the facility. The credit facility was amended effective
December 2, 1997 to accommodate the fourth quarter charges recorded by
Ceridian, the sale of Comdata's gaming business and the borrowings in
connection with the acquisition of the Canadian payroll businesses. Terms of
the credit facility as amended are summarized in Note J, FINANCING
ARRANGEMENTS, to the consolidated financial statements. At December 31,
1997, Ceridian was in compliance with all covenants contained in the credit
facility as amended.
Ceridian's liquidity needs are expected to be met from existing cash
balances, cash flow from operations, borrowings under the credit facility and
borrowings by foreign subsidiaries. Ceridian expects to utilize cash from
these sources to make additional purchases of its stock from time to time
when such purchases are accretive to earnings, and to make acquisitions. As
a result of the sale of CDI and recent stock repurchases,
pooling-of-interests accounting treatment for future acquisitions will not be
available to Ceridian for a period of time.
CAUTIONARY FACTORS THAT COULD AFFECT FUTURE RESULTS
Ceridian's future results of operations and the forward-looking
statements contained in this Annual Report, in other Ceridian filings with
the Securities and Exchange Commission, in press releases and other Ceridian
publications, and made by Ceridian management involve a number of risks and
uncertainties that could cause actual results to differ materially from those
expressed in such forward-looking statements. Important factors known to
Ceridian that could cause such material differences are discussed in the
following paragraphs.
INTEREST RATE CHANGES AND INVESTMENT INCOME FROM TAX FILING DEPOSITS.
Ceridian's payroll tax-filing business derives the majority of its revenue
and earnings from the investment of tax filing deposits temporarily held
pending remittance on
<PAGE>
PAGE 12 OF ANNUAL REPORT
behalf of customers to tax filing authorities. Ceridian receives this
investment income in lieu of additional fees that would otherwise be payable
by tax filing customers. During 1997, the average balance of these deposits
was $1,376 million, the average yield was 5.84%, and the resulting revenue to
Ceridian was $80.4 million. Changes in interest rates will affect Ceridian's
revenue and earnings from this source, are difficult to predict and could be
significant. Ceridian has sought to lessen the impact of interest rate
decreases by entering into a series of interest rate collar transactions,
currently with an average floor rate of 5.4% and average cap rate of 7.4%
(see Note M, COMMITMENTS AND CONTINGENCIES, to the consolidated financial
statements). While Ceridian has contracted to replace two of these collar
transactions, each in the notional amount of $100 million, that will expire
during 1998, the floor and cap rates applicable to the replacement collars
will be lower than those of the expiring collars, and the replacement collars
will be subject to an early maturity date if the reference rate falls below a
specified level. There can be no assurance as to the terms on which Ceridian
would be able to replace future collars, or add additional collars if tax
filing deposit balances increase.
EFFORTS TO ENTER LOCAL FUELING MARKET. During 1997, Ceridian's Comdata
subsidiary acquired the remaining equity interest in International Automated
Energy Systems ("IAES"), a provider of fuel management and payment systems
for local transportation fleets, to complement the products and services
Comdata currently provides to the long-haul trucking industry. IAES has had
a history of operating losses, and to date has not achieved widespread market
acceptance of its fuel purchase card. In addition, it must transition to a
replacement issuing bank for IAES fuel purchase cards during 1998, and it
faces competition from its former issuing bank and others. There can be no
assurance that the IAES products and services will achieve the desired level
of market acceptance, that IAES will be able to transition to a replacement
card issuing bank without significant disruption to its business and
thereafter compete effectively, or that Comdata will achieve the projected
levels of revenue and earnings from these products in 1998 and beyond.
ABILITY TO INCREASE REVENUE FROM CROSS-SELLING EFFORTS AND NEW PRODUCTS.
A portion of Ceridian's expected revenue growth in 1998, particularly in the
transportation services and human resources businesses, is attributable to
the selling of additional products and services to the existing customer base
and the planned introduction of new or enhanced product and service
offerings. The degree to which Ceridian is successful in these efforts
depends on a variety of factors, including product and service selection,
effective sales and marketing efforts, the level of market acceptance and the
avoidance of difficulties or delays in development or introduction. There
can be no assurance that Ceridian will achieve its revenue growth objectives
from cross-selling efforts and new products.
ABILITY TO IMPROVE OPERATING MARGINS IN HUMAN RESOURCE SERVICES. In
addition to anticipated revenue growth, Ceridian's ability to improve profit
margins in its HRS businesses depends on factors such as the degree to which
and the speed with which Ceridian is able to increase operational
efficiencies and reduce operating costs in those businesses, and the level of
customer retention in those businesses (see "Customer Retention" below).
Delays or difficulties in implementing process improvements, such as those
designed to reduce printing, telecommunication and customer service costs,
and in consolidating various functions could adversely affect the timing or
effectiveness of cost reduction and margin improvement efforts. In addition,
difficulties in effectively assimilating recent and future acquisitions could
also adversely impact operating costs in HRS.
CUSTOMER RETENTION. In providing human resource services, and
particularly payroll processing and tax filing services, Ceridian incurs
installation and conversion costs in connection with new customers that must
be recovered before the contractual relationship provides incremental profit.
The longer Ceridian is able to retain a customer, the more profitable that
contract is likely to be to Ceridian. As Ceridian provides human resource
services to larger customers, the per customer cost of installation and
conversion increases on a relative basis, and the time period such customers
must be retained to enable Ceridian to achieve an acceptable return from the
contracts lengthens. If Ceridian were unable to achieve, on average, an
acceptable retention period for these larger customers, it could have an
adverse impact on Ceridian's earnings.
EFFECTING SYSTEM UPGRADES AND CONVERSIONS. Ceridian is currently in or
is about to begin the process of transitioning to new data processing systems
and/or software in several of its business units, including systems that
process customer data, such as in the payroll tax-filing business, and
internal management information systems. The successful implementation of
these new systems is critical to the effective delivery of products and
services and the efficient operation of Ceridian's businesses. Problems or
delays with the installation or initial operation of the new systems could
disrupt or increase costs in connection with the delivery of services and
with operations planning, financial reporting and management, and thus could
have a material adverse effect on Ceridian's business and results of
operations.
REQUIRED YEAR 2000 CONVERSION EFFORTS. As described on page 8, Ceridian
has undertaken a comprehensive program designed to ensure that necessary
replacement, remediation, testing and implementation efforts are completed in
a timely fashion to make its computer and other electronic systems year 2000
compliant. The cost of such efforts during the next two years could increase
significantly beyond that currently
<PAGE>
PAGE 13 OF ANNUAL REPORT
estimated by Ceridian due to factors such as the availability of consultants,
the rate and magnitude of related labor and consulting costs, the successful
identification of all aspects of systems that require remediation or
replacement, the extent of testing required, and the success of third parties
with whom Ceridian regularly deals in addressing their year 2000 issues.
Moreover, if necessary remediation, replacement, testing and implementation
efforts cannot be completed before the year 2000, resulting system failures
could have a material adverse impact on Ceridian's ability to conduct its
business, and consequently on its financial position and results of
operations. In addition, there can be no assurance that a failure to timely
effect year 2000 compliance by a third party with whom Ceridian regularly
deals would not have an adverse effect on Ceridian's systems and operations.
CONSOLIDATION IN RADIO BROADCASTING INDUSTRY. Consolidation in the
radio broadcasting industry could put pressure on the pricing of Arbitron's
radio ratings service, from which Arbitron derives a substantial majority of
its total revenue. While Ceridian has sought to avoid or minimize price
concessions in contract negotiations, and has experienced some success in
offsetting the revenue impact of any concessions by providing ratings to
additional stations within a radio group and by providing additional software
and other services, there can be no assurance as to the degree to which it
will be able to continue to do so.
ABILITY TO ADAPT TO CHANGING TECHNOLOGY. A provider of information
management and data processing services such as Ceridian must adapt and
respond to technological advances offered by competitors and technological
requirements of customers in order to maintain and improve upon its
competitive position. For example, Ceridian believes that enhancements to its
Signature payroll processing system that are planned and under development,
such as improving the interface between Signature and certain widely-utilized
human resource information management systems, and increasing the features
and functionality of Ceridian's human resource information management
offerings will be important factors in achieving continuing market acceptance
for Ceridian's payroll processing and related products and services.
However, there can be no assurance that new products and product enhancements
can be developed and released within the time frames and at costs envisioned
by Ceridian, particularly if Ceridian must divert technological resources to
year 2000 remediation efforts. Significant delays, difficulties or added
costs in introducing new products or enhancements, either through internal
development, acquisitions or cooperative relationships with other companies,
could have a material adverse effect on the market acceptance of Ceridian's
products and services and the results of operations of Ceridian's businesses
generally.
ACQUISITION RISKS. Ceridian expects that it will continue to make
acquisitions of, investments in and strategic alliances with complementary
businesses, products and technologies to enable it to add products and
services for its core customer base and for adjacent markets, and to expand
each of its businesses geographically. However, implementation of this
strategy entails a number of risks, including entry into markets in which
Ceridian may have limited or no experience, diversion of management's
attention from Ceridian's core businesses, potential loss of key employees or
customers of the acquired businesses, additional year 2000 conversion
efforts, and difficulties in assimilating the operations and products of an
acquired business or in realizing projected efficiencies and cost savings.
For example, while Ceridian expects to realize significant cost savings in
connection with the acquisition of the NTS transportation services business,
there can be no assurance that those savings will be realized in the amounts
or within the time frame contemplated by Ceridian. In addition, as a result
of the CDI sale and recent stock repurchases, pooling-of-interests accounting
treatment for future acquisitions will likely not be available to Ceridian
for a period of time. To the extent Ceridian must utilize purchase
accounting for acquisitions, and given the financial characteristics of
information services businesses, it may be difficult for Ceridian to avoid
having acquisitions of such businesses be dilutive of earnings per share, and
Ceridian may possibly incur charges, such as for the write-off of in-process
research and development, as it acquires such businesses.
COMPETITIVE CONDITIONS. Because the markets Ceridian serves, such as
human resources and transportation, are large and attractive, new competitors
could decide to enter these markets, and thereby intensify the highly
competitive conditions that already exist. These new entrants could offer
new technologies (see "Ability to Adapt to Changing Technology" above) or a
different service model, or could treat transportation or human resource
services as one component of a larger product/service offering, thereby
enabling them to reduce prices on the transportation or human resources
component. Any of these or similar developments could have a material
adverse impact on Ceridian's business and results of operations.
OTHER FACTORS. Trade, monetary and fiscal policies, and political and
economic conditions may substantially change, with corresponding impacts on
the industries which Ceridian serves, particularly more economically
sensitive industries such as trucking. Such changes could also affect
employment levels, with a corresponding impact on Ceridian's payroll
processing and tax filing businesses. Ceridian's future operating results
may also be adversely affected by adverse judgments, settlements,
unanticipated costs or other effects of legal and administrative proceedings
now pending or that may be instituted in the future.
<PAGE>
EXHIBIT 13.03: CONSOLIDATED FINANCIAL STATEMENTS
PAGE 14 OF ANNUAL REPORT
REPORT OF MANAGEMENT AND
INDEPENDENT AUDITORS' REPORT
REPORT OF MANAGEMENT
The consolidated financial statements and other related financial information
of Ceridian published in this Annual Report were prepared by Company
management, which acknowledges its responsibility therefor. Such statements
and information were prepared in accordance with generally accepted
accounting principles and were necessarily based in part on reasonable
estimates, giving due consideration to materiality.
Ceridian maintains a system of internal controls which, in the opinion
of management, provides reasonable assurance that assets are adequately
safeguarded, that financial records accurately reflect all transactions and
can be relied upon in all material respects in the preparation of financial
statements, and that Ceridian's business is conducted in compliance with its
policy on business ethics. The control system is supported by written
policies and procedures, and its effectiveness is monitored by a regular
program of internal auditing.
Our independent auditors, KPMG Peat Marwick LLP, in their audit of
Ceridian's consolidated financial statements, considered the internal control
structure of the Company to gain a basic understanding of the accounting
system in order to design an effective and efficient audit approach, not for
the purpose of providing assurance on the system of internal control.
The Audit Committee, consisting of outside directors, is responsible to
the Board of Directors for reviewing the financial controls and reporting
practices and for recommending appointment of the independent auditors. The
committee meets periodically with representatives of the internal audit
department and the independent auditors, both with and without Ceridian
management being present.
Lawrence Perlman
Chairman, President and Chief Executive Officer
John R. Eickhoff
Executive Vice President and Chief Financial Officer
<PAGE>
PAGE 15 OF ANNUAL REPORT
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of Ceridian Corporation:
We have audited the accompanying consolidated balance sheets of Ceridian
Corporation and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations and cash flows for each of the
years in the three-year period ended December 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the statements of
operations and cash flows for the year ended December 31, 1995 of Comdata
Holdings Corporation, a wholly-owned subsidiary, which statements reflect
total revenues constituting 33 percent in 1995 of the related consolidated
totals. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the
statements of operations and cash flows for the year ended December 31, 1995
for Comdata Holdings Corporation, is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report
of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other
auditors, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ceridian
Corporation and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally
accepted accounting principles.
<PAGE>
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 27, 1998
<PAGE>
PAGE 16 OF ANNUAL REPORT
CONSOLIDATED STATEMENTS
OF OPERATIONS
<TABLE>
<CAPTION>
(Dollars in millions, except per share data)
--------------------------------------------
Years Ended December 31,
--------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenue $1,074.8 $ 942.6 $ 823.5
Cost of revenue 527.6 456.9 400.2
Gross profit 547.2 485.7 423.3
-------- -------- --------
OPERATING EXPENSES
Selling, general and administrative 308.0 285.1 260.4
Research and development 59.6 52.5 38.2
Other expense (income) 309.3 0.2 32.5
EARNINGS (LOSS) BEFORE INTEREST AND TAXES (129.7) 147.9 92.2
-------- -------- --------
Interest income 2.3 3.0 8.0
Interest expense (11.2) (9.7) (29.5)
EARNINGS (LOSS) BEFORE INCOME TAXES (138.6) 141.2 70.7
Income tax provision (benefit) (174.0) 5.7 11.5
EARNINGS FROM CONTINUING OPERATIONS 35.4 135.5 59.2
-------- -------- --------
Discontinued operations:
Gain on sale 386.3 -- --
Earnings from operations 50.7 46.4 38.3
Extraordinary loss -- -- (38.9)
NET EARNINGS $ 472.4 $ 181.9 $ 58.6
-------- -------- --------
BASIC EARNINGS PER SHARE
Continuing operations $ 0.45 $ 1.80 $ 0.70
Net earnings $ 6.02 $ 2.49 $ 0.69
DILUTED EARNINGS PER SHARE
Continuing operations $ 0.45 $ 1.67 $ 0.74
Net earnings $ 5.92 $ 2.25 $ 0.73
SHARES USED IN CALCULATIONS (IN THOUSANDS)
Basic 78,418 67,920 66,135
Diluted 79,741 80,969 79,736
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
PAGE 17 OF ANNUAL REPORT
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in millions, except per share data)
--------------------------------------------
December 31,
--------------------------------------------
1997 1996
-------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 268.0 $ 71.1
Trade and other receivables
Trade, less allowance of $10.5 and $11.2 277.1 222.2
Other 40.4 26.9
Total 317.5 249.1
Current portion of deferred income taxes 117.6 --
Net assets of discontinued operations -- 124.4
Other current assets 17.0 14.4
Total current assets 720.1 459.0
-------- --------
Investments and advances 8.7 9.7
Property, plant and equipment, net 79.6 77.3
Goodwill and other intangibles, net 244.3 272.0
Software and development costs, net 9.7 106.2
Prepaid pension cost 96.7 90.2
Deferred income taxes, less current portion 81.9 --
Other noncurrent assets 2.3 2.2
-------- --------
Total assets $1,243.3 $1,016.6
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt and current portion of
long-term obligations $ 2.2 $ 1.9
Accounts payable 57.8 28.9
Drafts and settlements payable 111.9 138.4
Customer advances 9.9 7.8
Deferred income 35.9 32.6
Accrued taxes 79.8 54.5
Employee compensation and benefits 66.1 58.0
Other accrued expenses 115.2 84.0
Total current liabilities 478.8 406.1
-------- --------
Long-term obligations, less current portion 0.8 136.3
Deferred income taxes -- 3.8
Restructure reserves, less current portion 30.8 42.0
Employee benefit plans 69.1 68.8
Deferred income and other noncurrent liabilities 75.5 13.3
-------- --------
STOCKHOLDERS' EQUITY
Common Stock, $.50 par, authorized 200,000,000
shares, issued 80,842,798 and 79,789,627 40.4 39.9
Additional paid-in capital 1,156.8 1,123.4
Accumulated deficit (326.6) (798.7)
Treasury common stock, 6,900,926 and 21,196 shares (271.0) (0.4)
Other stockholders' equity items (11.3) (17.9)
Total stockholders' equity 588.3 346.3
-------- --------
Total liabilities and stockholders' equity $1,243.3 $1,016.6
-------- --------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
PAGE 18 OF ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Dollars in millions, except per share data)
--------------------------------------------
Years Ended December 31,
--------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 472.4 $ 181.9 $ 58.6
Adjustments to reconcile net earnings to net
cash provided by (used for) operating activities:
</TABLE>
<TABLE>
<S> <C> <C> <C>
Earnings from discontinued operations (50.7) (46.4) (38.3)
Gain on sale of discontinued operations (386.3) -- --
Deferred income tax benefit (175.0) -- --
Extraordinary loss -- -- 38.9
Impairment loss from asset write-offs 204.4 -- --
Depreciation and amortization 60.9 57.4 49.3
Restructure reserves utilized (21.1) (14.9) (18.2)
Other (5.1) (7.7) 24.4
Decrease (Increase) in trade and other
receivables (54.4) 19.7 (47.0)
Increase (Decrease) in accounts payable 7.0 (15.2) 4.2
Increase (Decrease) in drafts and
settlements payable (26.5) (7.9) 34.2
Increase (Decrease) in employee
compensation and benefits 8.0 7.7 5.4
Increase (Decrease) in accrued taxes 10.4 3.5 (2.4)
Increase (Decrease) in other current
assets and liabilities 70.6 (6.7) 11.4
Net cash provided by (used for)
operating activities 114.6 171.4 120.5
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Expended for property, plant and equipment (44.2) (34.5) (41.0)
Expended for software and development costs (37.8) (46.3) (47.1)
Short-term investments -- -- 54.6
Proceeds from sales of businesses and assets 596.5 9.0 3.1
Expended for business acquisitions,
less cash acquired (30.0) (30.9) (68.7)
Collection of notes from asset sales 0.2 -- 10.0
Net cash provided by (used for)
investing activities 484.7 (102.7) (89.1)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Revolving credit and overdrafts, net (133.1) (60.0) 193.9
Retirement of public debt -- -- (244.4)
Borrowings of other debt -- -- 2.6
Repayment of other debt (11.2) (4.5) (7.3)
Preferred dividends -- (13.0) (13.0)
Repurchase of stock (279.8) (18.2) (6.8)
Proceeds from exercise of stock options
and other 21.7 30.2 13.7
Net cash provided by (used for)
financing activities (402.4) (65.5) (61.3)
-------- -------- --------
NET CASH FLOWS PROVIDED (USED) 196.9 3.2 (29.9)
Cash and equivalents at beginning of year 71.1 67.9 97.8
Cash and equivalents at end of year $ 268.0 $ 71.1 $ 67.9
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
INTEREST AND INCOME TAXES PAID (REFUNDED) 1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Interest paid $ 11.5 $ 10.0 $ 27.3
Income taxes paid $ 2.9 $ 2.1 $ 12.1
Income taxes refunded $ (0.1) $ (11.6) $ (1.8)
-------- -------- --------
</TABLE>
<PAGE>
PAGE 19 OF ANNUAL REPORT
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
For the three years ended December 31, 1997
INDEX TO NOTES
19 A. Accounting Policies
22 B. Discontinued Operations and Extraordinary Loss
23 C. Supplementary Data to Statements of Operations
24 D. Earnings Per Share
25 E. Income Taxes
26 F. Capital Assets
27 G. Stockholders' Equity
28 H. Retirement Plans
30 I. Stock Plans
32 J. Financing Arrangements
33 K. Investing Activity
34 L. Leasing Arrangements as Lessee
35 M. Commitments and Contingencies
36 N. Legal Matters
ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements of Ceridian Corporation ("Ceridian")
include the accounts of all majority owned subsidiaries.
As further discussed in Note B, Computing Devices International ("CDI"), a
division of Ceridian which formerly represented Ceridian's defense electronics
segment and substantially all of its non-U.S. operations, is presented as
discontinued operations.
Investments in other affiliated companies where Ceridian has significant
influence are accounted for by the equity method. Other investments are
accounted for by the cost method.
All material intercompany transactions have been eliminated from the
consolidated financial statements.
NEW ACCOUNTING PRONOUNCEMENTS
Effective for 1997, Ceridian implemented FAS 128, "Earnings Per Share" and FAS
129, "Disclosure of Information about Capital Structure." The effect of FAS 128
is described in Note D, "Earnings Per Share." FAS 129 incorporated several
existing disclosure requirements on capital structure into a single accounting
standard and had no effect on Ceridian's reporting.
FAS 130, "Reporting Comprehensive Income" is effective for Ceridian for all
periods reported after December 31, 1997. This standard prescribes a new way of
reporting and displaying the balances of and changes in certain equity accounts.
FAS 130 does not affect the measurement or accounting for these accounts.
Effective for the year ending December 31, 1998 and quarterly reporting
thereafter, FAS 131, "Disclosures about Segments of an Enterprise and Related
Information" replaces existing disclosure requirements for industry and
geographic segments with requirements for annual and quarterly disclosure of
information about reportable operating segments and certain geographic data. By
their nature, FAS 130 and 131 will, when implemented, have no effect on
Ceridian's reported operations or financial position, and Ceridian is
considering alternative presentations to meet the new requirements.
SEGMENT DATA AND RELATED INFORMATION
Ceridian operates predominately in the information services industry and in the
U.S. Ceridian's Information Services businesses collect, manage and analyze
data and process transactions on behalf of customers in the human resources,
transportation, gaming, and electronic media markets and report information
resulting from such activities to customers. The products and services provided
by these businesses address specific information management and transaction
processing needs of other businesses to enable them to operate more efficiently.
These products and services are typically provided through long-term customer
relationships that result in a high level of recurring revenue.
STOCK-BASED COMPENSATION
Ceridian adopted the disclosure-only provisions of FAS 123, "Accounting for
Stock-Based Compensation," effective for 1996, and these disclosures are
presented in Note I, "Stock Plans." Accordingly, Ceridian continues to account
for stock-based compensation under APB Opinion No. 25 and related
interpretations. Therefore, compensation expense is not recorded with respect
to Ceridian's fixed stock option and employee stock purchase plans, and
compensation expense for performance restricted awards is recorded based on the
stock price at time of vesting and for estimated future vesting.
<PAGE>
PAGE 20 OF ANNUAL REPORT
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CHANGES IN PRESENTATION
Prior year amounts have been restated to present continuing operations and
discontinued operations amounts separately. Additionally, certain prior year
amounts have been reclassified to conform to the current year's presentation.
CASH AND SHORT-TERM INVESTMENTS
Investments which are readily convertible to cash within three months of
purchase are classified in the balance sheet as cash equivalents.
Investments, if any, with longer maturities are considered available-for-sale
under FAS 115 and reported in the balance sheet as short-term investments.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost and depreciated for
financial statement purposes using straight-line and accelerated methods at
rates based on the estimated lives of the assets, which are generally as
follows:
- ------------------------------------------------------------------------------
Buildings 40 years
Building improvements 5-15 years
Machinery and equipment 3-8 years
Computer equipment 3-6 years
- ------------------------------------------------------------------------------
Repairs and maintenance are expensed as incurred. Gains or losses on
dispositions are included in results of operations.
EARNINGS (LOSS) PER SHARE
FAS 128, "Earnings Per Share," became effective to Ceridian for the year
ended December 31, 1997 and requires restatement of all earnings per share
amounts presented for prior periods. Further information is presented in
Note D.
GOODWILL AND OTHER INTANGIBLES
Goodwill, which represents the excess purchase price over the fair value of
net assets of businesses acquired, is assigned to operating units based on
the benefits derived from the acquisition and amortized on a straight-line
basis over the expected periods to be benefited, ranging up to 40 years.
Other intangible assets represent amounts assigned to intangible assets at
the time of a purchase acquisition and includes such items as customer lists
and bases, technology, covenants not to compete, trademarks and other rights.
Such costs are generally amortized on a straight-line basis over periods
ranging up to 7 years.
Recorded amounts are regularly reviewed and recoverability assessed. The
review considers factors such as whether the amortization of the goodwill and
other intangibles balance for each operating unit over its remaining life can
be recovered through forecasted undiscounted cash flows.
SOFTWARE AND DEVELOPMENT COSTS
Ceridian capitalizes purchased software which is ready for service and
software development costs incurred from the time technological feasibility
of the software is established until the software is ready for use to provide
processing services to customers. Research and development costs and other
computer software maintenance costs related to software development are
expensed as incurred. Software development costs are amortized using the
straight-line method over a maximum of three to five years or the expected
life of the product, whichever is less.
The carrying value of a software and development asset is regularly
reviewed by Ceridian, and a loss is recognized when the net realizable value
falls below the unamortized cost.
INCOME TAXES
The provision for income taxes is based on income recognized for financial
statement purposes and includes the effects of temporary differences between
such income and that recognized for tax return purposes. Ceridian and its
eligible subsidiaries file a consolidated U.S. federal income tax return.
Certain subsidiaries which are consolidated for financial reporting are not
eligible to be included in the consolidated U.S. federal income tax return
and separate provisions for income taxes have been determined for these
entities.
Except for selective dividends, Ceridian intends to reinvest the
unremitted earnings of its non-U.S. subsidiaries and postpone their
remittance indefinitely. Accordingly, no provision for U.S. income taxes was
required on such earnings during the three years ended December 31, 1997.
<PAGE>
PAGE 21 OF ANNUAL REPORT
REVENUE RECOGNITION
Services revenue is recognized when the services are performed and billable,
except for certain services provided by Comdata and the portion of tax filing
services revenue which is recognized as earned from the investment of
customer funds collected for payment of taxes due.
Revenue from Comdata funds transfer and regulatory permit services consists
of the transaction fees charged to customers. Such revenue does not include the
costs of goods and services for which funds are advanced by Comdata (e.g., fuel
purchased, permit provided or face amount of the Comchek purchased and cashed).
However, Comdata pays the issuing agent (e.g., truck stop or state agency) for
the full cost of the goods and services provided and, accordingly, bills the
customer for such cost as well as the transaction fee. As a result, Ceridian's
accounts receivable includes both the cost of the goods and services purchased
and the transaction fees. Ceridian's drafts and settlements payable includes
the amount due to the issuing agent for the cost of the goods and services.
Revenue is recognized for the amount of the transaction fee at the time the
goods and services are purchased.
Comdata is unable, in a very small percentage of its funds transfer
transactions, to match customer remittances with specific transactions or to
otherwise reconcile drafts, creating entries in its accounting system carried
as credits to accounts receivable or as drafts payable. This occurs
primarily because of large transaction volume, inaccurate data supplied by
customers, the failure of third parties involved to utilize proper data entry
procedures, and Comdata's multiple processing and accounting systems. It is
Comdata's policy to take the amount of such unmatched transactions into
revenue as earned for goods and services rendered if the transactions are not
definitively settled within a period of twelve months through the assertion
of valid claims or otherwise reconciled.
PAYROLL TAX FILING SERVICES
In connection with its payroll tax filing services, Ceridian collects funds
for payment of taxes due, holds such funds in trust until payment is due,
remits the funds to the appropriate taxing authority, files federal, state
and local tax returns, handles related regulatory correspondence and
amendments, and selectively absorbs regulatory charges for certain penalties
and interest. For such services, Ceridian derives its payroll tax filing
revenue from fees charged and from investment income it receives on tax
filing deposits temporarily held pending remittance on behalf of customers to
taxing authorities. The trust invests primarily in high quality
collateralized short-term investments or top tier commercial paper. The
trust also invests in U.S. Treasury and Agency securities, AAA rated
asset-backed securities and corporate securities rated A3/A- or better. The
amount of collected but unremitted funds varies significantly during the year
and averaged $1,376.1 in 1997, $1,151.1 in 1996 and $1,021.6 in 1995. The
amount of such funds at December 31, 1997 and 1996, was $1,697.0 and
$1,523.9, respectively.
TRANSLATION OF FOREIGN CURRENCIES
Local currencies have been determined to be functional currencies for
Ceridian's international operations. Foreign currency balance sheets are
translated at the end-of-period exchange rates and earnings statements at the
average exchange rates for each period. The resulting translation gains or
losses are recorded as "foreign currency translation adjustment" in the
stockholders' equity section of the balance sheet. Gains and losses from
translation of assets and liabilities denominated in other than the
functional currency of the operation are recorded in results of operations as
"other expense (income)."
<PAGE>
PAGE 22 OF ANNUAL REPORT
B. DISCONTINUED OPERATIONS AND EXTRAORDINARY LOSS
DISCONTINUED OPERATIONS
On December 31, 1997, Ceridian sold substantially all of the net assets of its
Computing Devices International division ("CDI"), which comprised its defense
electronics industry segment and included operations in the U.S., Canada and the
United Kingdom, to General Dynamics Corporation. As a result, the gain from
this sale of a segment of the business and the financial position, results of
operations and cash flows of CDI are separately presented as discontinued
operations, and eliminated from continuing operations amounts, in the
accompanying consolidated financial statements and notes. In determining the
gain from this sale of $386.3, cash proceeds of $600.0 were reduced by net
assets sold of $175.3, related income taxes of $14.6 and other costs and
adjustments of $23.8.
In preparing the CDI summary financial information in the accompanying
tables, certain general and administrative expenses for continuing Ceridian
corporate overhead costs that had previously been allocated to and reported
in the operating results of the defense electronics segment have been
reallocated to and reported in the results for continuing operations.
EXTRAORDINARY LOSS
In December 1995, Ceridian recorded an extraordinary loss of $38.9, or $0.49
per diluted share, due to early retirement of debt acquired in the Comdata
acquisition. The loss, which is net of an income tax benefit of $1.6,
includes $6.9 to write-off unamortized debt issue costs and $33.6 for the
direct costs of the tender offers and defeasance arrangements, premiums paid,
and interest expense related to the defeased amount.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Years Ended December 31,
- ------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS OF DISCONTINUED OPERATIONS 1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 589.5 $ 553.0 $ 509.5
Cost of revenue 455.3 428.0 400.1
Gross profit 134.2 125.0 109.4
Operating expenses 75.1 73.3 67.0
Interest income (net) 2.4 3.3 3.0
Earnings before income taxes 61.5 55.0 45.4
Income tax provision 10.8 8.6 7.1
Net earnings $ 50.7 $ 46.4 $ 38.3
Basic earnings per share $ 0.65 $ 0.69 $ 0.58
Diluted earnings per share $ 0.64 $ 0.58 $ 0.48
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
CONDENSED CONSOLIDATED STATEMENT OF NET ASSETS OF DISCONTINUED OPERATIONS AT
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
<S> <C>
Cash and equivalents $ 98.0
Trade and other receivables, net 132.9
</TABLE>
<TABLE>
<S> <C>
Inventories 43.2
Property, plant and equipment, net 51.7
Other assets 33.1
Total assets 358.9
Debt 5.9
All other liabilities 228.6
Net assets of discontinued operations $ 124.4
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 23 OF ANNUAL REPORT
C. SUPPLEMENTARY DATA TO STATEMENTS OF OPERATIONS
The 1997 unusual charges include $13.0 in first quarter in connection with
the settlement of age discrimination litigation, $150.0 in third quarter in
connection with the termination of the CII payroll processing software
development project, and $144.6 in fourth quarter, due principally to asset
write-offs. As a result of the age discrimination litigation settlement,
Ceridian paid $24.0, of which $11.0 had been charged to operations in prior
years. The largest portion of these charges relates to an aggregate
impairment loss from asset write-offs of $204.4 for those long-lived assets
or groups of assets where the sum of such estimated future cash flows
(undiscounted and without interest) is less than the carrying amount of such
assets or groups of assets, including attributed portions of unallocated
excess cost over net assets acquired. The amount of the impairment loss is
the excess of the carrying amount of the impaired asset over the fair value
of the asset. Generally, fair value represents the expected future cash
flows from the use of the asset or group of assets, discounted at a rate
commensurate with the risks involved.
In August 1997, Ceridian announced it was terminating the development of
the CII payroll processing software system because beta tests of the CII
system had revealed that the costs associated with installing and processing
payrolls for large numbers of customers with the system would be higher than
previously anticipated, and that significant further investment would be
required. As a result, Ceridian determined that the CII system would not
provide an adequate return on its investment and, in light of continuing
customer satisfaction with Ceridian's existing payroll processing system,
elected to terminate the CII development.
As a result of this action, Ceridian recorded non-recurring charges to
other expense (income) of $150.0 in third quarter 1997. These charges include
an impairment loss of $116.9 for the write-off of assets and related costs of
$33.1, of which $13.5 remained unpaid at December 31, 1997. The costs
largely relate to severance, contract termination penalties, unused
facilities and incremental costs to convert beta customers from the CII
system. The impairment loss consists of $104.6 of CII development costs and
$12.3 for the carrying value of an intangible asset related to the CII
development project and acquired as part of the acquisition of Tesseract.
The fourth quarter 1997 charges of $144.6 consist of $87.5 of asset
write-offs and $57.1 in accrued liabilities, of which $48.9 remained unpaid
at December 31, 1997. The asset write-offs include $48.3 of the remaining
goodwill and other intangible assets related to Ceridian's 1994 acquisition
of Tesseract Corporation, $16.5 generally involving goodwill and other
intangible assets related to several minor acquisitions and investments,
$11.7 of hardware and software in Comdata, primarily reflecting a decision to
discontinue efforts to bring Comdata's transaction processing systems
in-house, and a $11.0 loss on the sale of Comdata's gaming services business,
which closed in January 1998. The decision with regard to the Tesseract
goodwill and intangible assets primarily reflected significantly diminished
demand for mainframe-based payroll processing software provided by Tesseract
and decisions made during 1997 to discontinue certain development efforts,
such as a client/server front-end, related to the Tesseract software. The
accrued liabilities include $20.6 in excess facilities and severance costs,
primarily related to decisions to reduce employment levels and consolidate
various functions within Human Resource Services ("HRS"), and to close two of
Comdata's four call centers. They also include $36.5 in estimated costs and
provisions related to legal and administrative proceedings involving Ceridian
and to contract renegotiations, including the renegotiation of Comdata's
contract with an external data processing provider.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Years Ended December 31,
- ------------------------------------------------------------------------------------------
OTHER EXPENSE (INCOME) 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Foreign currency translation expense (income) $ 0.1 $ (1.4) $ --
Loss (Gain) on sale of assets 0.3 (0.4) 1.0
Unusual charges 307.6 -- --
Minority interest and equity in operations of affiliates 3.9 2.5 2.6
Pooling expense -- 0.1 29.7
Other expense (income) (2.6) (0.6) (0.8)
Total $ 309.3 $ 0.2 $ 32.5
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 24 OF ANNUAL REPORT
D. EARNINGS PER SHARE
FAS 128, "Earnings Per Share," became effective to Ceridian for the year
ended December 31, 1997 and requires restatement of all earnings per share
amounts presented for prior periods. Under the new standard, primary
earnings per share will no longer be presented. Basic earnings per share
will represent earnings, reduced by any dividends on preferred stock, divided
by the weighted average number of common shares outstanding for the reporting
period. Diluted earnings per share (formerly called "fully diluted") will
represent earnings divided by the sum of the weighted average number of
common shares outstanding plus shares derived from other potentially dilutive
securities. For Ceridian, potentially dilutive securities include "in the
money" fixed stock options and shares of restricted stock outstanding and,
prior to 1997, the amount of common shares which would be added by conversion
of the then-outstanding convertible preferred stock. The number of shares
added for stock options and restricted stock is determined by the treasury
stock method, which assumes exercise or vesting of these securities and the
use of any proceeds from these actions to repurchase a portion of these
shares at the average market price for the period. When the results of
continuing operations are a loss, other potentially dilutive securities will
not be included in the calculation of loss per share.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Years Ended December 31,
- ------------------------------------------------------------------------------------------
(Shares in thousands) 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Earnings from continuing operations $ 35.4 $ 135.5 $ 59.2
Preferred dividends -- (13.0) (13.0)
Applicable to common stock $ 35.4 $ 122.5 $ 46.2
Weighted average shares 78,418 67,920 66,135
- ------------------------------------------------------------------------------------------
EARNINGS PER SHARE FROM CONTINUING OPERATIONS $ 0.45 $ 1.80 $ 0.70
- ------------------------------------------------------------------------------------------
Net earnings $ 472.4 $ 181.9 $ 58.6
Preferred dividends -- (13.0) (13.0)
Applicable to common stock $ 472.4 $ 168.9 $ 45.6
Weighted average shares 78,418 67,920 66,135
- ------------------------------------------------------------------------------------------
NET EARNINGS PER SHARE $ 6.02 $ 2.49 $ 0.69
- ------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE
Earnings from continuing operations $ 35.4 $ 135.5 $ 59.2
Weighted average shares 78,418 67,920 66,135
Stock options 1,323 2,665 3,217
Conversion of preferred stock -- 10,384 10,384
Total dilutive shares 79,741 80,969 79,736
- ------------------------------------------------------------------------------------------
EARNINGS PER SHARE FROM CONTINUING OPERATIONS $ 0.45 $ 1.67 $ 0.74
- ------------------------------------------------------------------------------------------
Net earnings $ 472.4 $ 181.9 $ 58.6
Weighted average shares 78,418 67,920 66,135
Stock options 1,323 2,665 3,217
Conversion of preferred stock -- 10,384 10,384
Total dilutive shares 79,741 80,969 79,736
- ------------------------------------------------------------------------------------------
NET EARNINGS PER SHARE $ 5.92 $ 2.25 $ 0.73
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Antidilutive stock options excluded 2,746 293 171
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 25 OF ANNUAL REPORT
E. INCOME TAXES
Ceridian has U.S. net operating loss carryforwards and future tax deductions
of $437.9 and $187.9, respectively, which will be available to offset regular
taxable U.S. income during the carryforward period (through 2008). The tax
benefits of these items are reflected in the accompanying table of deferred
tax assets and liabilities. If not used, these carryforwards will begin to
expire in 2004.
Ceridian has periodically evaluated the need for a valuation allowance
against its deferred tax asset. As a result of the sale of CDI and other
positive business factors which occurred during the year, Ceridian believes
it is more likely than not that the deferred tax asset will be realized,
primarily from future earnings. Therefore, the valuation allowance against
the deferred tax asset of $427.6 as of December 31, 1996 was reduced to zero.
The resulting tax benefit was allocated $207.8 to continuing operations,
$191.2 to discontinued operations to offset taxes related to the sale and
earnings of CDI, and the remaining $28.6 related to stock option exercises
was included in paid-in capital.
<PAGE>
Under tax sharing agreements existing at the time of the disposition of
certain former operations of Ceridian, Ceridian remains subject to income tax
audits in various jurisdictions for the years 1985-1992. Ceridian considers
its tax accruals adequate to cover any U.S. and international tax
deficiencies not recoverable through deductions in future years.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
COMPONENTS OF EARNINGS AND TAXES
FROM CONTINUING OPERATIONS 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
EARNINGS BEFORE INCOME TAXES
U.S. $(134.1) $ 145.4 $ 71.0
International (4.5) (4.2) (0.3)
Total $(138.6) $ 141.2 $ 70.7
INCOME TAX PROVISION (BENEFIT)
Current
U.S. $ -- $ 2.7 $ 11.3
State and other 1.0 1.8 0.2
1.0 4.5 11.5
Deferred
U.S. 32.8 0.8 --
U.S. valuation reserve benefit (207.8) -- --
State and other -- 0.4 --
(175.0) 1.2 --
Total $(174.0) $ 5.7 $ 11.5
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
EFFECTIVE RATE RECONCILIATION 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory rate 35% 35% 35%
Income tax provision at
U.S. statutory rate $ (48.5) $ 49.4 $ 24.7
Alternative minimum tax -- 3.5 1.3
State income taxes, net 1.0 2.2 0.2
Goodwill 44.7 3.3 2.1
Benefit of net operating loss
carryforwards (175.0) (48.7) (20.2)
Other 3.8 (4.0) 3.4
- -------------------------------------------------------------------------------
Income tax provision (benefit) $(174.0) $ 5.7 $ 11.5
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TAX EFFECT OF ITEMS THAT COMPRISE A SIGNIFICANT PORTION
OF THE NET DEFERRED TAX ASSET AT DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
DEFERRED TAX ASSET
Net operating loss carryforwards $ 153.3
Restructuring and other accruals 62.2
Other 2.5
Total 218.0
DEFERRED TAX LIABILITY
Employment related accruals (14.0)
Other (4.5)
Total (18.5)
Net deferred tax asset $ 199.5
Current portion $ 117.6
Noncurrent portion 81.9
Net deferred tax asset $ 199.5
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 26 OF ANNUAL REPORT
F. CAPITAL ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
December 31,
- -------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
Land $ 1.5 $ 1.3
Machinery and equipment 185.7 166.7
Buildings and improvements 42.9 41.2
Construction in progress 4.3 1.6
234.4 210.8
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
December 31,
- -------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Accumulated depreciation (154.8) (133.5)
Property, plant and equipment, net $ 79.6 $ 77.3
- -------------------------------------------------------------------------------
GOODWILL AND OTHER INTANGIBLES
Goodwill $ 228.7 $ 238.2
Accumulated amortization (38.7) (37.1)
Goodwill, net 190.0 201.1
Other intangible assets 64.5 83.1
Accumulated amortization (10.2) (12.2)
Other intangibles, net 54.3 70.9
Goodwill and other intangibles, net $ 244.3 $ 272.0
- -------------------------------------------------------------------------------
SOFTWARE AND DEVELOPMENT COSTS
Purchased software $ 31.1 $ 23.4
CII development cost -- 83.6
Other software development cost 15.5 19.5
46.6 126.5
Accumulated amortization (36.9) (20.3)
Software and development costs, net $ 9.7 $ 106.2
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Years Ended December 31,
- -------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation and amortization
of property, plant and equipment $ 33.3 $ 31.5 $ 27.5
Amortization of goodwill 13.5 11.1 8.8
Amortization of other intangibles 7.6 6.3 3.4
Amortization of software and
development costs 10.6 11.0 9.1
Other amortization (4.1) (2.5) 0.5
Total $ 60.9 $ 57.4 $ 49.3
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 27 OF ANNUAL REPORT
G. STOCKHOLDERS' EQUITY
PREFERRED STOCK
Ceridian called for redemption, effective December 31, 1996, its outstanding
51/2% Cumulative Convertible Exchangeable Preferred Stock, par value $100 per
share (the "51/2% Preferred Stock") and the related 4,720,000 Depositary
Shares, each representing a one one-hundredth interest in a share of the
51/2% Preferred Stock. The redemption price for each Depositary Share was
$51.10 plus accrued and unpaid dividends. As a result of the call, holders
converted their Depositary Shares into shares of Ceridian common stock in
late December 1996 at a rate of 2.2 common shares for each Depositary Share.
Dividends on the 51/2% Preferred Stock for fourth quarter 1996 were paid to
holders of record notwithstanding the conversion. The calculation of 1996
diluted earnings per share is not affected by the conversion.
COMMON STOCK
During 1997, the amount of Ceridian common stock authorized by Ceridian's
board of directors to be repurchased was increased from 2 million to 14
million shares, and Ceridian greatly increased its repurchases in response.
As a result, 7,586,151 shares were repurchased during 1997 at an average cost
of $39.16 per share for a total cost of $297.0, of which $279.8 was paid in
1997. This expenditure was financed primarily through borrowing under
Ceridian's revolving credit facilities, which were repaid on December 31,
1997 from the proceeds of the sale of CDI, as discussed in Note J.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK, Shares Additional
- -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL Treasury Common Paid-In Accumulated Treasury
AND ACCUMULATED DEFICIT Outstanding Stock Issued Stock Capital Deficit Stock
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1994 66,722,779 113,530 66,836,309 $33.4 $1,073.9 $(998.7) $ (2.4)
- -----------------------------------------------------------------------------------------------------------------------------------
Repurchase of common shares (192,000) 192,000 (4.7)
Exercises of stock options 613,376 (168,267) 445,109 0.3 3.2 5.3
Restricted stock awards, net 94,327 (89,327) 5,000 13.8 0.2
Employee Stock Purchase Plan 38,954 38,954 1.4
Net earnings 58.6
Preferred stock dividends (13.0)
Comdata stock transactions 14.3
Dividends on Comdata stock (10.8)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1995 67,277,436 47,936 67,325,372 33.7 1,106.6 (963.9) (1.6)
- -----------------------------------------------------------------------------------------------------------------------------------
Repurchase of common shares (391,514) 391,514 (18.2)
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK, Shares Additional
- -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL Treasury Common Paid-In Accumulated Treasury
AND ACCUMULATED DEFICIT Outstanding Stock Issued Stock Capital Deficit Stock
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Exercises of stock options 1,680,655 (428,183) 1,252,472 0.6 6.3 19.1
Restricted stock awards, net (60,946) 66,250 5,304 1.1 (3.0)
Employee Stock Purchase Plan 174,139 (68,965) 105,174 3.1 3.3
Net earnings 181.9
Preferred stock dividends (13.0)
Preferred stock conversion 10,383,995 10,383,995 5.2 (0.5)
Acquisitions 685,524 12,644 698,168 0.4 5.9 (3.7)
Settlement of directors' retirement
benefits 19,142 19,142 0.9
- -----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1996 79,768,431 21,196 79,789,627 39.9 1,123.4 (798.7) (0.4)
- -----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE OF COMMON SHARES (7,586,151) 7,586,151 (297.0)
EXERCISES OF STOCK OPTIONS 747,178 (574,226) 172,952 0.1 (7.9) 21.7
TAX BENEFIT FROM STOCK OPTIONS 28.6
RESTRICTED STOCK AWARDS, NET (169,425) 172,625 3,200 0.7 (6.3)
EMPLOYEE STOCK PURCHASE PLAN 239,169 (177,612) 61,557 0.9 6.6
NET EARNINGS 472.4
Acquisitions 942,670 (127,208) 815,462 0.4 11.1 (0.3) 4.4
- -----------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 73,941,872 6,900,926 80,842,798 $40.4 $1,156.8 $(326.6) $(271.0)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Authorized but unissued or treasury common shares reserved for future
issuance as of December 31, 1997, included 9,058,077 shares for exercise of
stock options and future awards of stock-based compensation and 47,738 shares
for the Employee Stock Purchase Plan, as discussed in Note I.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
December 31,
- -------------------------------------------------------------------------------
OTHER STOCKHOLDERS' EQUITY ITEMS 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Foreign currency translation
adjustment $ 2.0 $ 0.4 $ (2.4)
Restricted stock awards (3.8) (12.0) (21.9)
Pension liability adjustment (9.5) (6.3) (5.2)
- -------------------------------------------------------------------------------
Total $(11.3) $(17.9) $(29.5)
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 28 OF ANNUAL REPORT
H. RETIREMENT PLANS
PENSION BENEFITS
Ceridian maintains a defined benefit pension plan for U.S. employees which
closed to new participants effective January 1, 1995. A virtually identical
plan for U.S. employees of Computing Devices International was assumed by the
purchaser of that division, and amounts in the accompanying tables do not
include that plan or any other retirement plan related to discontinued
operations. Assets of the Ceridian defined benefit plan consist principally
of equity securities, U.S. government securities, and other fixed income
obligations and do not include securities issued by Ceridian. Benefits under
the plan are calculated on maximum or career average earnings and years of
participation in the plan. Employees participate in this plan by means of
salary reduction contributions. Certain former employees are inactive
participants in the plan. There were no employer cash contributions to this
plan in 1997, but such contributions totaled $5.0 in each of 1996 and 1995.
Retirement plan funding amounts are based on independent consulting
actuaries' determination of the Employee Retirement Income Security Act of
1974 ("ERISA") funding requirements.
Ceridian and the plan were defendants in class action litigation in which
the plaintiffs alleged that the lump sum benefits they had received from the
plan had not been calculated correctly. In October 1997, settlement of this
litigation was approved by the U.S. District Court in Minnesota, and payment
by the plan of its share of the $51.8 settlement amount was made. The funded
status of the plan as shown in the accompanying table reflects the payment by
the plan of its share of this settlement amount.
Ceridian also sponsors a nonqualified supplemental retirement plan. The
projected benefit obligations at September 30, 1997 and 1996 for this plan
were $23.4 and $20.7, respectively, and the net periodic pension cost was
$2.3 for 1997, $2.2 for 1996, and $2.3 for 1995. The related intangible
asset included in prepaid pension cost was $3.3 at December 31, 1997 and 1996.
The cost recognized by Ceridian with respect to its defined contribution
retirement plans was $6.7 in 1997, $5.4 in 1996, and $3.6 in 1995.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUNDED STATUS OF DEFINED BENEFIT September 30,
- -------------------------------------------------------------------------------
RETIREMENT PLANS AT MEASUREMENT DATE 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of obligation:
Vested benefit obligation $ 524.2 $ 529.1
Accumulated benefit obligation $ 524.3 $ 529.2
Projected benefit obligation $ 542.7 $ 549.1
Plan assets at fair value 620.3 573.6
Plan assets in excess of projected
benefit obligation 77.6 24.5
Unrecognized net (gain) loss (3.5) 48.7
Prior service cost 16.0 19.5
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUNDED STATUS OF DEFINED BENEFIT September 30,
- -------------------------------------------------------------------------------
RETIREMENT PLANS AT MEASUREMENT DATE 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Unrecognized net (asset) liability 3.3 (5.8)
Net pension asset recognized
in the consolidated balance sheet $ 93.4 $ 86.9
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ASSUMPTIONS USED IN CALCULATIONS: 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.75% 7.75% 7.50%
Rate of salary progression 4.50% 4.50% 4.50%
Long-term rate of return on assets 9.50% 9.50% 9.00%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET PERIODIC PENSION COST (CREDIT) 1997 1996 1995
- -------------------------------------------------------------------------------
Service cost $ 1.7 $ 1.6 $ 1.3
Interest cost on projected
benefit obligation 42.6 40.0 40.0
Actual return on plan assets (132.8) (54.0) (82.7)
Net amortization and deferral 81.9 6.3 37.9
Total $ (6.6) $ (6.1) $ (3.5)
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 29 OF ANNUAL REPORT
POSTRETIREMENT BENEFITS
Ceridian provides health care and life insurance benefits for eligible
retired employees, including individuals who retired from operations of
Ceridian that were subsequently sold or discontinued. Ceridian sponsors
several health care plans in the U.S. for both pre- and post-age 65 retirees.
Company contributions to these plans differ for various groups of retirees
and future retirees. Most retirees outside the United States are covered by
governmental health care programs, and Ceridian's cost is not significant.
The following tables present the funded status and the components of the
net periodic postretirement benefit cost for the plans. Ceridian does not
prefund these costs. In 1997, funded status was affected by a reduction in
plan participants as a result of the sale of CDI. The resulting curtailment
gain of $3.4 was recognized in the gain on sale.
The assumed health care cost trend rate used in measuring the benefit
obligation is 11% pre-age 65 and 7% post-age 65 in 1997, declining at a rate
of 1% per year to an ultimate rate of 5.75% in 2003 pre-age 65 and 1999
post-age 65. A one percent increase in this rate in each year would increase
the benefit obligation at December 31, 1997 by $3.5 and the aggregate service
and interest cost for 1997 by $0.3. The weighted average discount rates used
in determining the benefit obligation at December 31, 1997 and 1996 are 7.0%
and 7.5%, respectively.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUNDED STATUS OF POSTRETIREMENT HEALTH CARE AND LIFE PLANS
- -------------------------------------------------------------------------------
December 31,
- -------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $38.4 $42.0
Fully eligible
active participants 4.5 3.6
Other active participants 5.6 7.3
48.5 52.9
Unrecognized net gain 3.1 3.1
Accrued benefits cost $51.6 $56.0
- -------------------------------------------------------------------------------
Current portion $ 6.0 $ 6.0
Noncurrent portion 45.6 50.0
Total $51.6 $56.0
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NET PERIODIC POSTRETIREMENT BENEFIT COST
- -------------------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 0.2 $0.2 $ 0.2
Interest cost 3.6 3.4 3.8
Other (0.7) 0.3 (1.0)
Net periodic
benefit cost $ 3.1 $3.9 $ 3.0
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 30 OF ANNUAL REPORT
I. STOCK PLANS
Amounts presented in this note to the consolidated financial statements
include amounts related to discontinued operations, unless otherwise stated.
During the three-year period ended December 31, 1997, Ceridian provided
stock-based compensation plans for directors, officers and other employees.
The 1996 Director Performance Incentive Plan authorizes the issuance of up to
125,000 shares in connection with awards of stock options and non-performance
restricted stock to non-employee directors of Ceridian. An annual grant of
an option to purchase 1,500 shares (2,000 shares beginning in 1998) is made
to each eligible director with such grants becoming fully exercisable six
months after the date of grant.
The exercise price of the options is the fair market value of the
underlying stock at the date of grant, and the options expire in ten years. A
one-time award of non-performance restricted shares is made to each outside
director when the director first joins the Board. The number of shares
awarded will have a fair market value equal to four times (2.5 times
beginning in 1998) the then current annual retainer paid to non-employee
directors. The restrictions on transfer will ordinarily lapse ratably over a
five-year period.
The 1993 Long-Term Incentive Plan as amended ("1993 LTIP") authorizes
the issuance until December 31, 1999 of up to 9,000,000 common shares in
connection with awards of stock options and restricted stock to executives
and other key employees.
Options remain outstanding under a predecessor plan subject to similar
terms. The 1994 Stock Option Plan authorizes the issuance of up to 500,000
common shares in connection with awards of stock options to key employees of
businesses acquired by Ceridian.
Stock options awarded under these plans generally vest annually over a
three-year period, have 10-year terms and have an exercise price that may not
be less than the fair market value of the underlying stock at the date of
grant.
Under the terms of the 1993 LTIP, senior executives were awarded
performance restricted shares, which have generally been eligible to vest in
installments during 1996, 1997 and 1998, provided the executive is still
employed by Ceridian on the vesting dates. Of these shares, 251,620 vested
during 1996 and 4,665 vested during 1997. Vesting occurs only to the extent
that the total return to holders of Ceridian common stock over two, three and
four year performance periods ending on April 30 in those years meets certain
prescribed levels as compared to other companies in the S&P 500.
Of the shares eligible to vest on any given date, generally 25% of the
shares would vest if Ceridian's total return to stockholders over the
performance period is at least at the 60th percentile of companies in the S&P
500, 50% would vest at the 75th percentile, and 100% would vest at the 90th
percentile. If the 60th percentile is not achieved, no shares would vest.
Shares which have not yet vested as of the end of the final performance
period in 1998 will be forfeited. The number of performance restricted
shares outstanding as of December 31, 1997 was 422,314.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
STOCK PLANS
- -----------------------------------------------------------------------------------------------------------------------------
Weighted-
Average
Option Price Available Exercise Price
Per Share Outstanding Exercisable for Grant of Outstanding
<S> <C> <C> <C> <C>
At December 31, 1994 $ 7.09 - $31.74 4,213,554 1,352,783 557,065
- -----------------------------------------------------------------------------------------------------------------------------
Authorized 3,000,000
Resumix conversion 1.77 - 35.40 104,642 32,448
Comdata conversion 10.52 - 30.04 1,083,136 584,248
Granted 24.13 - 45.50 1,049,282 (1,049,282)
Became exercisable 2.65 - 34.88 1,012,481
Exercised 1.77 - 26.38 (613,376) (613,376)
Canceled 2.65 - 41.25 (141,906) (1,481) 129,824
Expired 16.27 (3,574) (3,574)
Restricted stock, net (97,500)
- -----------------------------------------------------------------------------------------------------------------------------
At December 31, 1995 $ 1.77 - $45.50 5,691,758 2,363,529 2,540,107 $21.29
- -----------------------------------------------------------------------------------------------------------------------------
Authorized 125,000
EAS conversion 6.17 50,327 49,233
Granted 37.25 - 52.25 1,560,925 (1,560,925) 47.52
Became exercisable 2.65 - 47.25 1,119,502
Exercised 1.77 - 41.25 (1,680,655) (1,680,655) 14.11
Canceled 2.65 - 50.75 (317,242) (3,608) 269,628 31.38
Expired 21.05 - 21.06 (3,551) (3,551) (18,000) 21.05
Restricted stock, net 63,946
Directors' retirement (19,142)
Performance units (20,000)
- -----------------------------------------------------------------------------------------------------------------------------
At December 31, 1996 $ 1.77 - $52.25 5,301,562 1,844,450 1,380,614 $30.55
- -----------------------------------------------------------------------------------------------------------------------------
AUTHORIZED 3,000,000
GRANTED 30.63 - 44.75 2,252,750 (2,252,750) 40.25
BECAME EXERCISABLE 2.65 - 52.25 1,469,328
EXERCISED 2.65 - 44.75 (747,178) (747,178) 18.16
CANCELED 2.65 - 50.75 (676,790) (35,210) 631,191 42.25
EXPIRED 16.16 (6,747) (6,747) 16.16
RESTRICTED STOCK, NET 169,425
Performance units forfeited 6,000
- -----------------------------------------------------------------------------------------------------------------------------
At December 31, 1997 $ 1.77 - $52.25 6,123,597 2,524,643 2,934,480 $34.35
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 31 OF ANNUAL REPORT
The employee plans also provide for the accelerated exercisability of
options and the accelerated lapse of transfer restrictions on restricted
stock if a participant's employment terminates for specified reasons within
two years of a change of control of Ceridian.
In June 1995, Ceridian adopted the Employee Stock Purchase Plan ("ESPP")
which provides for the issuance of up to 500,000 shares of newly issued or
treasury common stock of Ceridian to eligible employees. The purchase price
of the stock to plan participants is 85% of the lesser of the fair market
value on either the first day or the last day of the applicable three-month
offering period.
The acquisitions of EAS Technologies in 1996 and Comdata and Resumix in
1995 resulted in the assumption by Ceridian of the stock option plans of
those companies and the conversion of stock options under those plans into
Ceridian stock options as indicated in the table on the previous page.
As reported in Note A, Ceridian adopted the disclosure-only provisions
of FAS 123 and continues to account for stock-based compensation as in prior
years. Therefore, no expense is recorded with respect to Ceridian's stock
option or employee stock purchase plans, and compensation expense of $(2.4)
in 1997, $7.2 in 1996, and $9.6 in 1995 was charged to continuing operations
in connection with restricted stock awards. Including discontinued
operations, the amounts would be $(0.8), $8.7 and $11.3 in the respective
years.
The following disclosure is provided with respect to the provisions of
FAS 123. Ceridian employs the Black-Scholes option pricing model for
determining the fair value of stock option grants, restricted stock awards
and ESPP purchases, as presented in an accompanying table. Weighted-average
exercise prices for 1997 and 1996 stock option activity and options
outstanding at December 31, 1997, 1996 and 1995 are included in the Stock
Plans table on the previous page. Further information on outstanding and
exercisable stock options by exercise price range as of December 31, 1997 is
disclosed in an accompanying table.
Ceridian is required to report the pro forma effect on net earnings and
earnings per share which would have resulted if the fair-value method of
accounting for stock-based compensation issued in those years had been
adopted. The application of the fair-value method would have resulted in the
determination of compensation cost for grants of stock options and purchases
under the ESPP and would have eliminated the repricing of unvested awards of
other equity instruments from the related compensation cost. Such
compensation cost would then be allocated to the related period of service.
The results of this calculation and the assumptions used appear in the
table above. Since 1995 stock option grants largely occurred in November and
are amortized forward over the expected lives, the pro forma effect on 1995
earnings will not be comparable with those in subsequent years.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
STOCK OPTION INFORMATION AS OF DECEMBER 31, 1997
- ---------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.77 - $14.75 847,334 4.41 $12.69 821,640 $12.67
$14.19 - $33.38 1,385,453 6.65 $23.21 1,004,630 $21.93
$33.63 - $40.00 1,343,972 9.60 $39.32 47,975 $36.23
$40.63 - $42.88 1,340,943 8.76 $42.18 267,852 $41.89
$43.00 - $52.25 1,205,895 8.77 $48.10 382,546 $48.46
- ---------------------------------------------------------------------------------------------
$ 1.77 - $52.25 6,123,597 7.80 $34.35 2,524,643 $25.33
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
WEIGHTED-AVERAGE FAIR VALUES OF GRANTS, AWARDS AND PURCHASES
- ---------------------------------------------------------------------------------------------
1997 1996
SHARES FAIR VALUE Shares Fair Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock options 2,252,750 $13.80 1,560,925 $13.46
Other equity instruments -- -- 86,000 $31.29
ESPP 239,169 $ 4.79 174,139 $ 4.41
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
PRO FORMA EFFECT OF FAIR VALUE ACCOUNTING 1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma compensation cost $ 9.9 $ 11.4 $ 1.2
Pro forma effect on earnings per share $ 0.12 $ 0.14 $ 0.02
WEIGHTED-AVERAGE ASSUMPTIONS
Expected lives in years 4-8 4-8 4-8
Expected volatility 32.7% 26.0% 26.0%
Expected dividend rate -- -- --
Risk-free interest rate 5.3% 6.0% 6.0%
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 32 OF ANNUAL REPORT
J. FINANCING ARRANGEMENTS
In July 1997, Ceridian concluded a $250.0 revolving credit facility with a
commercial bank syndicate. The credit facility is unsecured and has a final
maturity of July 31, 2002. The full amount of the credit facility may be
utilized for revolving loans and up to $75.0 of the credit facility may be
used to obtain standby letters of credit. The pricing of the credit facility
for both loans and letters of credit is determined based on Ceridian's senior
unsecured debt ratings. At December 31, 1997, there were no revolving loans
and $2.9 in letters of credit outstanding under the facility. The credit
facility was amended effective December 2, 1997 to accommodate certain third
and fourth quarter 1997 unusual charges recorded by Ceridian, the expected
sale of Comdata's gaming business and borrowings in connection with planned
acquisitions.
Under the terms of the credit facility as amended, Ceridian's
consolidated debt must not exceed its stockholders' equity as of the end of
any fiscal quarter, and the ratio of Ceridian's EBIT (the calculation of
which does not include most of Ceridian's fourth quarter 1997 charges or the
CII-related charges) to interest expense on a rolling four quarter basis must
be at least 2.75 to 1. At December 31, 1997, the ratio of consolidated debt
to stockholders' equity was .005 to 1, and the EBIT to interest expense ratio
was 15 to 1. The credit facility also limits liens, subsidiary debt,
contingent obligations, operating leases, minority equity investments and
divestitures. At December 31, 1997, Ceridian was in compliance with all
covenants contained in the credit facility as amended.
During the course of 1997, Ceridian made payments of $144.3 on its
outstanding debt, including repaying all amounts outstanding under its
domestic revolving credit facility, under three supplemental six month
promissory notes given to three of the banks that are parties to the
revolving credit facility, and certain debt obligations assumed as a result
of acquisitions.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
December 31,
- ------------------------------------------------------------------------------
DEBT OBLIGATIONS 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Revolving credit agreements and overdrafts $ 1.9 $ 135.0
Other long-term debt obligations 1.1 3.2
Total debt obligations 3.0 138.2
Less short-term debt and current portions
of long-term debt 2.2 1.9
Long-term obligations, less current portions $ 0.8 $ 136.3
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 33 OF ANNUAL REPORT
K. INVESTING ACTIVITY
On December 31, 1997, Ceridian sold its Computing Devices International
division. Further information on this transaction is provided in Note B. On
January 19, 1998, Ceridian sold its Comdata gaming services business to First
Data Corporation in exchange for First Data's NTS transportation services
business and $50.0 in cash.
During 1997, Ceridian acquired or invested in seven small businesses.
The three acquisitions associated with Comdata included a provider of cash
advance services to the gaming industry, a fuel management services provider
and the step acquisition of the remaining interest in International Automated
Energy Systems ("IAES"), a provider of fuel management and payment systems
for local trucking fleets. The two acquisitions associated with HRS included
a provider of human resources management and benefits software and a provider
of interactive, self-service applications to facilitate human resources
administration. Arbitron acquired a market research firm in the United
Kingdom and invested in a company that seeks to gather data regarding credit
card usage. With one exception, all the acquisitions were accounted for by
the purchase method. The aggregate consideration for these acquisitions and
investments consisted of $30.0 in cash, assumption of $8.6 of debt, and
942,670 shares of Ceridian's common stock. Goodwill recorded for these
transactions was $40.2. The 1996 revenue of the acquired operations was
approximately $30.6.
During 1996, Ceridian acquired or invested in nine small businesses,
using both the pooling and purchase methods of accounting. The six
acquisitions associated with HRS included providers of employee assistance
and work-life services, a payroll processor in the United Kingdom, a provider
of time and attendance software and providers of human resource management
software and expert systems. The two acquisitions associated with Comdata
included a provider of funds transfer and fuel purchase services and a
provider of permit and vehicle escort services to trucking companies.
Comdata also made a minority investment in IAES. The aggregate consideration
for these acquisitions and investments and related advances consisted of
$30.9 in cash and 698,168 shares of Ceridian's common stock. Ceridian's
financial statements prior to the date of these pooling acquisitions were not
restated because the aggregate effect for any period would not be material.
In 1995, Ceridian acquired Comdata and Resumix in subsidiary merger
transactions that resulted in the issuance of 20,472,176 and 849,010 shares
of Ceridian common stock, respectively. The mergers qualified as tax-free
reorganizations and were accounted for by the pooling-of-interests method.
Accordingly, Ceridian's financial statements were restated to include the
results of Comdata and Resumix as if the mergers had taken place on the first
day of the earliest reported period. In connection with the mergers,
Ceridian incurred $29.7 in pooling expenses, including fees for investment
bankers and legal firms in addition to other acquisition costs.
In purchase transactions during 1995, Ceridian acquired the assets of
the Centrefile personnel and payroll services business in the United Kingdom
for $52.1 in cash, and Comdata acquired the stock of Trendar Corporation,
which provides fuel desk automation systems, for $12.7 in cash and a $1.5
note which was paid in March 1996. Comdata also sold the net assets of its
retail services division, which provided check authorization and collection
services, for $3.5 in cash.
<PAGE>
PAGE 34 OF ANNUAL REPORT
L. LEASING ARRANGEMENTS AS LESSEE
Ceridian conducts a substantial portion of its operations in leased
facilities. Most such leases contain renewal options and require payments for
taxes, insurance, and maintenance. Ceridian remains secondarily liable for
future rental obligations related to assigned leases totaling $15.8 at
December 31, 1997. Ceridian does not anticipate any material non-performance
by the assignees of these leases, which principally involve Control Data
Systems, Inc. and Seagate Technology, Inc.
Virtually all leasing arrangements for equipment and facilities are
operating leases and the rental payments under these leases are charged to
operations as incurred. The amounts in the accompanying tables do not
include assigned leases or obligations recorded as liabilities.
The amounts of rental expense and sublease income for each of the three
years ended December 31, 1997 appear in the following table.
Future minimum noncancelable lease payments and related sublease income,
on operating leases existing at December 31, 1997 which have an initial term
of more than one year, are described in the following table.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
RENTAL EXPENSE 1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental expense $ 38.8 $ 39.2 $ 40.4
Sublease rental income (1.7) (1.6) (2.5)
Net rental expense $ 37.1 $ 37.6 $ 37.9
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FUTURE MINIMUM LEASE PAYMENTS
- ------------------------------------------------------------------------------
Sublease
Lease Rental
Payments Income Net
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $35.1 ($1.1) $34.0
1999 31.8 (1.1) 30.7
2000 27.5 (1.0) 26.5
2001 23.2 (1.0) 22.2
2002 14.8 (0.4) 14.4
Thereafter 40.0 -- 40.0
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 35 OF ANNUAL REPORT
M. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
In connection with the 1997 termination of its CII software development
project, Ceridian terminated a technology services agreement with IBM Global
Services ("IBM"), the successor to Integrated Systems Solutions Corporation
("ISSC"), under which IBM was to have provided centralized computer
processing services utilizing the CII software as required by Ceridian's
payroll processing business and recorded a charge of $6.1.
Comdata contracted with ISSC in 1991 for substantially all data
processing functions for a term of ten years. In 1995, the agreement was
amended (and extended to 2005) to change the minimum monthly payment to $1.6
in 1996 and $1.4 thereafter. The amount of expense incurred under this
contract was $17.6 in 1997, $16.0 in 1996, and $13.9 in 1995. In late 1997
the parties executed a letter of intent under which IBM will assume and
perform certain additional responsibilities and duties for and on behalf of
Comdata. In consideration of the revised terms, Comdata paid a fee of $8.2,
which is included in the fourth quarter 1997 unusual charges. The parties
are in the process of finalizing an agreement incorporating the terms of the
letter of intent discussed above. Under the terms of the new agreement it is
expected that the minimum monthly fee in 1998 will rise to $1.65.
Cancellation of the agreement for convenience in 1998 would require payment
of a termination fee of $10.2.
Under a Telecommunications Services Agreement with WorldCom, renewed in
1995 and amended in 1996, Comdata agreed to purchase a minimum of $13.0 of
long distance services and 80% of such services (as defined) up to $24.0 each
year until 2003. In September 1997, Comdata entered into a new
Telecommunications Services Agreement with WilTel (WorldCom's wholesale
services subsidiary) which replaced the WorldCom agreement. Under this new
Agreement, Comdata agreed to purchase a minimum of $1.1 of telecommunications
services each month until 2003; provided however, Comdata is able to
terminate its minimum commitment at such time as it has purchased an
aggregate of $45.0 in telecommunications services under this Agreement.
Cancellation of this Agreement for convenience would result in a cancellation
charge equal to 12.5% of the average monthly revenue during the last 12
months times the number of full months remaining in the term of such
Agreement. In 1997 purchases charged to expense under the old WorldCom
Agreement and the new WilTel Agreement amounted to $20.3. Purchases charged
to expense under the old WorldCom Agreement amounted to $22.5 in 1996 and
$18.5 in 1995.
INTEREST RATE COLLARS
During 1997, Ceridian maintained in effect an average notional amount of
collars of $733.4 for the purpose of hedging interest rate risk on invested
customer deposits held in its tax filing trust. The counterparties to these
arrangements are commercial banks with debt ratings of A or better. Under
current accounting standards, neither the collar arrangements nor the related
trust investments and offsetting liability to customers are reflected in
Ceridian's balance sheets. These arrangements, which do not require
collateral, provide for the banks to pay Ceridian the amount by which a
certain index of short-term interest rates falls below a specified floor
strike level. Alternatively, when that index exceeds a specified cap strike
level, Ceridian pays out the excess above the cap strike level.
At December 31, 1997, Ceridian had nine collar transactions in effect
with an aggregate notional amount of $800.0, remaining terms of 5 to 41
months, floor strike levels ranging from 5% to 6% (averaging 5.44%) and cap
strike levels ranging from 5.97% to 8.18% (averaging 7.41%). The risk of
accounting loss through non-performance by the counterparties under any of
these arrangements is considered negligible.
OTHER MATTERS
In connection with the spin-off of Control Data Systems, Ceridian agreed to
indemnify the U.S. Pension Benefit Guaranty Corporation ("PBGC") if the
Control Data Systems defined benefit pension plan is terminated in a distress
termination and the PBGC is unable to recover the full amount of any unfunded
benefit liabilities. The amount of this contingent liability decreased from
$12.0 to $8.0 on July 31, 1997 and will continue to decrease by $4.0 on each
of July 31, 1998 and 1999.
Ceridian monitors all such contingent liabilities and has established
reserves for those which it believes are probable of payment. With respect
to these contingent obligations, Ceridian believes that there is not a
material exposure to an accounting loss as of December 31, 1997.
<PAGE>
PAGE 36 OF ANNUAL REPORT
N. LEGAL MATTERS
SECURITIES LITIGATION
Ceridian and ten of its current and former executive officers have been named
as defendants in a consolidated class action complaint filed by five Ceridian
shareholders in U.S. District Court in Minnesota. The lawsuit arises out of
Ceridian's announcement, on August 26, 1997, that it had decided to terminate
further development of its CII payroll processing software system. The
plaintiffs, who purport to act on behalf of a class of purchasers of Ceridian
common stock during the period from January 23, 1996 to August 26, 1997,
allege that the defendants violated federal and state securities laws and
state consumer fraud laws by publicly disseminating false and misleading
statements regarding Ceridian and concealing adverse information about
Ceridian, with the effect of artificially inflating the market price of
Ceridian's common stock, and by selling Ceridian common stock while in
possession of material non-public information about Ceridian. The
consolidated complaint specifically alleges that the defendants provided
false and misleading information regarding the development of the CII system
and the positive impact that system would have on Ceridian's future
operations, concealed problems with the development of the CII system, and
improperly capitalized the costs of the CII development effort, thereby
overstating Ceridian's financial results during the development period. The
complaint does not specify an amount of damages claimed. Ceridian believes
that the complaints filed against it and the individual defendants are
without merit and will vigorously defend this action.
UNCLAIMED PROPERTY EXAMINATION
Comdata's services for the trucking and gaming industries have required it to
process millions of transactions annually over its network. In processing
these transactions, Comdata's management control and monitoring systems seek
to match customer remittances with individual transactions and to reconcile
individual drafts received for payment so as to prevent the unauthorized
payment of funds on behalf of a customer. Primarily because of the large
transaction volume, inaccurate data supplied by customers, the failure of
third parties involved in the transactions to utilize proper data entry
procedures, and Comdata's multiple processing and accounting systems, Comdata
is unable, in a very small percentage of these transactions, to match
customer remittances with specific transactions or to otherwise reconcile
drafts. This inability to match certain transactions or reconcile specific
drafts creates entries in Comdata's accounting system that may appear to
reflect amounts owed to third parties, but which may, in fact, simply reflect
items that do have offsetting (but unmatched) entries in Comdata's
accounting system, such as in bad debt write-off or charge-back accounts. It
is Comdata's policy to take the amount of such unmatched transactions into
revenue as earned for goods and services rendered if the transactions are not
definitively settled within a period of twelve months through the assertion
of valid claims or otherwise reconciled. It has been Comdata's experience
that an insignificant number of claims for unmatched transactions are
asserted after such twelve month period. The amount of unmatched
transactions included in Comdata's 1997, 1996 and 1995 revenue was $13.2
million, $16.8 million and $14.2 million, respectively.
In late 1996, Comdata was advised that the Unclaimed Property Division
of the State Street Bank and Trust Company of Boston has been retained by 48
states and the District of Columbia to examine Comdata's records and to
collect any applicable abandoned property on behalf of the governmental
entities. During 1997, State Street conducted several on-site examinations
at Comdata, and Comdata retained Ceridian's independent outside auditors to
assess its accounting, management control and monitoring systems as they
relate to unmatched transactions. The auditor's preliminary report to
Comdata, which was provided to State Street, concluded that the accounting
records which set forth the amounts of unmatched transactions taken into
revenue by Comdata do not supply reliable evidence that such amounts are owed
to third parties.
The extent of Comdata's potential liability, if any, to states under
unclaimed property laws or to customers with respect to such unmatched
transactions, or the impact of any future changes in Comdata's accounting
policies with respect to such transactions, is not presently determinable.
OTHER MATTERS
Ceridian is also involved in a number of other judicial and administrative
proceedings considered normal in the nature of its current and past
operations, including employment-related disputes, contract disputes and tort
claims. It is anticipated that final disposition of some of these
proceedings may not occur for several years. In the opinion of management,
the final disposition of these proceedings will not, considering the merits
of the claims and available reserves, have a material adverse effect on
Ceridian's financial position or results of operations.
<PAGE>
PAGE 37 OF ANNUAL REPORT
EXHIBIT 13.04: SUPPLEMENTARY QUARTERLY DATA
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in millions, except per share data)
- ----------------------------------------------------------------------------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
4TH 3RD 2ND 1ST 4th 3rd 2nd 1st
QUARTER QUARTER QUARTER QUARTER Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $282.5 $266.6 $261.8 $263.9 $251.3 $230.9 $226.2 $234.2
Cost of revenue 138.9 132.4 130.2 126.1 119.6 114.4 111.0 111.9
- ----------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 143.6 134.2 131.6 137.8 131.7 116.5 115.2 122.3
Selling, general and
administrative 73.5 79.8 79.2 75.5 78.5 69.0 68.5 69.1
Research and development 20.2 13.3 11.9 14.2 13.3 14.4 12.5 12.3
Other expense (income) (1) 144.4 150.4 1.0 13.5 (0.7) (0.7) 0.9 0.7
- ----------------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE
INTEREST AND TAXES (94.5) (109.3) 39.5 34.6 40.6 33.8 33.3 40.2
Interest income 0.9 0.4 0.5 0.5 0.8 0.5 0.8 0.9
Interest expense (5.1) (2.0) (2.0) (2.1) (2.2) (2.3) (2.3) (2.9)
- ----------------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE
INCOME TAXES (98.7) (110.9) 38.0 33.0 39.2 32.0 31.8 38.2
Income tax provision (benefit) (2) (174.8) (0.8) 1.0 0.6 2.5 0.5 1.4 1.3
- ----------------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) FROM
CONTINUING OPERATIONS 76.1 (110.1) 37.0 32.4 36.7 31.5 30.4 36.9
Discontinued operations (3)
Gain on sale 386.3 -- -- -- -- -- -- --
Earnings from operations 11.4 16.4 11.5 11.4 12.6 12.9 10.4 10.5
- ----------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $473.8 $ (93.7) $ 48.5 $ 43.8 $49.3 $ 44.4 $ 40.8 $ 47.4
- ----------------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE (4)
BASIC
Continuing operations $ 1.02 $ (1.39) $ 0.46 $ 0.41 $0.49 $ 0.42 $ 0.40 $ 0.50
Net earnings $ 6.34 $ (1.18) $ 0.60 $ 0.55 $0.67 $ 0.61 $ 0.55 $ 0.66
DILUTED
Continuing operations $ 1.00 $ (1.39) $ 0.45 $ 0.40 $0.45 $ 0.39 $ 0.38 $ 0.46
Net earnings $ 6.23 $ (1.18) $ 0.60 $ 0.54 $0.61 $ 0.55 $ 0.50 $ 0.59
SHARES USED IN CALCULATIONS
(IN THOUSANDS)
Basic 74,691 79,189 80,192 79,599 68,619 68,034 67,878 66,941
Diluted 76,052 79,189 81,450 81,015 81,312 80,777 81,018 80,506
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK - PER SHARE
Market price ranges (5)
High 473/4 455/8 435/8 421/2 531/8 513/8 547/8 467/8
Low 351/4 321/8 291/2 321/4 39 5/84 15/8 421/2 37 1/8
No cash dividends have been declared on common stock during the periods presented.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 1997 unusual charges of $144.6 in fourth quarter, $150.0 in third
quarter and $13.0 in first quarter.
(2) For information on the FAS 109 tax benefit from the reduction of the
deferred tax asset valuation reserve, see Note E.
(3) For information on discontinued operations, see Note B.
(4) For information on the calculation of basic and diluted earnings (loss) per
share, see Note D.
(5) From the New York Stock Exchange - Composite Transactions Listing.
<PAGE>
EXHIBIT 21
CERIDIAN CORPORATION
SUBSIDIARIES
MARCH 15, 1998
STATE OR
OTHER JURISDICTION
SUBSIDIARIES AND THEIR AFFILIATES: OF INCORPORATION
- ---------------------------------- -----------------
Archco, Inc. Minnesota
Atrium Empowerment, Inc. Ohio
(f/k/a Innovative Business & Training Solutions, Inc.)
Ceridian Canada Holdings, Inc. Delaware
Ceridian Canada Ltd. Canada
Ceridian Holdings U.K. Limited United Kingdom
Centre-file Limited (f/k/a Datacarrer Limited) United Kingdom
CSW Research Limited United Kingdom
Comdata Holdings Corporation Delaware
Comdata Network, Inc. Maryland
Cashcall Systems, Inc. Canada
Comdata Network Inc. of California California
Comdata Telecommunications Services, Inc. Delaware
Permicom Permits Services, Inc. Canada
EAS Technologies Inc. Delaware
FLX Corporation Pennsylvania
International Automated Energy Systems, Inc. Florida
Minidata Services, Inc. New Jersey
Partnership Group, Inc., The Pennsylvania
Resumix, Inc. California
Scarborough Research (General Partnership) Delaware
Tesseract Corporation California
User Technology Services Inc. New York
Certain subsidiaries, which in the aggregate would not constitute a significant
subsidiary, are omitted from this listing.
<PAGE>
EXHIBIT 23.01
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
of Ceridian Corporation:
We consent to incorporation by reference in Registration Statements Nos.
33-49601, 33-61551, 33-34035, 2-97570, 2-67753, 33-56833, 33-15920, 2-81865,
2-93345, 33-26839, 33-54379, 33-56325, 33-61001, 33-62319, 33-64913, 333-01793,
333-01887, 333-03661 and 333-28069 on Form S-8 of Ceridian Corporation and in
Registration Statement No. 33-56351 on Form S-4 of Ceridian Corporation of our
reports dated January 27, 1998. Such reports relate to the consolidated
financial statements and related financial statement schedule of Ceridian
Corporation and subsidiaries as of December 31, 1997 and 1996 and for each of
the years in the three-year period ended December 31, 1997 and are included or
incorporated by reference in the 1997 Annual Report on Form 10-K of Ceridian
Corporation.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 20, 1998
<PAGE>
EXHIBIT 23.02
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated January 20, 1996 on the consolidated financial statements of
Comdata Holdings Corporation incorporated by reference into Ceridian
Corporation's Form 10-K for the year ended December 31, 1997, and into Ceridian
Corporation's previously filed Registration File Nos. 33-49601, 33-61551,
33-34035, 2-97570, 2-67753, 33-56833, 33-15920, 2-81865, 2-93345, 33-26839,
33-54379, 33-56325, 33-61001, 33-62319, 33-64913, 333-01793, 333-01887,
333-03661, 333-28069 and 33-56351. It should be noted that we have not audited
any financial statements of Comdata Holdings Corporation subsequent to December
31, 1995 or performed any audit procedures subsequent to the date of our report.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Nashville, Tennessee
March 20, 1998
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned, a Director of
Ceridian Corporation (the "Company"), a Delaware corporation, do hereby make,
nominate and appoint JOHN R. EICKHOFF, GARY M. NELSON and JOHN A. HAVEMAN, and
each of them, to be my attorney in fact for three months from the date hereof,
with full power and authority to sign his name on Ceridian's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, to be filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended; provided that such Form 10-K is first reviewed by the Audit
Committee of the Board of Directors of Ceridian and by my attorney in fact; and
his name, when thus signed, shall have the same force and effect as though I had
manually signed such Form 10-K.
IN WITNESS WHEREOF, I have signed this Power of Attorney as of February 5,
1998.
/s Lawrence Perlman /s/ Charles Marshall
- ----------------------------------- ----------------------------------------
Lawrence Perlman Charles Marshall
/s/ Ruth M. Davis /s/ Carole J. Uhrich
- ----------------------------------- ----------------------------------------
Ruth M. Davis Carole J. Uhrich
/s/ Richard G. Lareau /s/ Richard W. Vieser
- ----------------------------------- ----------------------------------------
Richard G. Lareau Richard W. Vieser
/s/ George R. Lewis /s/ Paul S. Walsh
- ----------------------------------- ----------------------------------------
George R. Lewis Paul S. Walsh
/s/ Ronald T. Lemay
- -----------------------------------
Ronald T. Lemay
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 268,000
<SECURITIES> 0
<RECEIVABLES> 328,000
<ALLOWANCES> 10,500
<INVENTORY> 0
<CURRENT-ASSETS> 720,100
<PP&E> 234,400
<DEPRECIATION> 154,800
<TOTAL-ASSETS> 1,243,300
<CURRENT-LIABILITIES> 478,800
<BONDS> 800
40,400
0
<COMMON> 0
<OTHER-SE> 547,900
<TOTAL-LIABILITY-AND-EQUITY> 1,243,300
<SALES> 0
<TOTAL-REVENUES> 527,600
<CGS> 309,300
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 309,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,200
<INCOME-PRETAX> (138,600)
<INCOME-TAX> (174,000)
<INCOME-CONTINUING> 35,400
<DISCONTINUED> 437,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 472,400
<EPS-PRIMARY> 6.02
<EPS-DILUTED> 5.92
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 71,100 0
<SECURITIES> 0 0
<RECEIVABLES> 260,300 0
<ALLOWANCES> 11,200 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 459,000 0
<PP&E> 210,800 0
<DEPRECIATION> 133,500 0
<TOTAL-ASSETS> 1,016,600 0
<CURRENT-LIABILITIES> 406,100 0
<BONDS> 136,300 0
39,900 0
0 0
<COMMON> 0 0
<OTHER-SE> 306,400 0
<TOTAL-LIABILITY-AND-EQUITY> 1,016,600 0
<SALES> 0 0
<TOTAL-REVENUES> 942,600 823,500
<CGS> 0 0
<TOTAL-COSTS> 456,900 400,200
<OTHER-EXPENSES> 200 32,500
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,700 29,500
<INCOME-PRETAX> 141,200 70,700
<INCOME-TAX> 5,700 11,500
<INCOME-CONTINUING> 135,500 59,200
<DISCONTINUED> 46,400 38,300
<EXTRAORDINARY> 0 (38,900)
<CHANGES> 0 0
<NET-INCOME> 181,900 58,600
<EPS-PRIMARY> 2.49 0.69
<EPS-DILUTED> 2.25 0.73
</TABLE>
