EXHIBIT 2.2
MARCH 31, 2005
BUSINESS TRANSFER AGREEMENT
BETWEEN
INDIA SWITCH COMPANY PRIVATE LIMITED
AND
EFUNDS INTERNATIONAL INDIA PRIVATE LIMITED
AND
CLASSIC PAYMENT SOLUTIONS AND SERVICES PRIVATE LIMITED
[STAMP PAPER] [1000 RS.]
BUSINESS TRANSFER AGREEMENT
This Business Transfer Agreement (hereinafter known as the "Agreement") is
entered into in Chennai, the 31st day of March 2005 by and between:
INDIA SWITCH COMPANY PRIVATE LIMITED, a company incorporated under the laws of
India and having its registered office at 5, Mezzanine Floor, Thapar House,
43-44 ▇▇▇▇▇▇▇▇ Road, Egmore, Chennai 600 008 (hereinafter referred to as "ISC"
which expression shall, unless it is repugnant to the context or meaning
thereof, include its successors and permitted assigns);
AND
EFUNDS INTERNATIONAL INDIA PRIVATE LIMITED, a company incorporated under the
laws of India and having its registered office at ▇-▇▇, ▇.▇.▇.▇.-▇, ▇▇▇ ▇▇▇▇▇ -
110 049 (hereinafter referred to as "EFUNDS" which expression shall, unless it
is repugnant to the context or meaning thereof, include its successors and
permitted assigns);
AND
CLASSIC PAYMENT SOLUTIONS AND SERVICES PRIVATE LIMITED, a company incorporated
under the laws of India and having its registered office at ▇-▇▇, ▇.▇.▇.▇.-▇,
▇▇▇ ▇▇▇▇▇ - 110 049 (hereinafter referred to as the "PURCHASER" which expression
shall, unless it is repugnant to the context or meaning thereof, include its
successors and permitted assigns).
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(ISC, eFunds and the Purchaser are hereinafter also individually and
collectively referred to as "PARTY" or "PARTIES" respectively)
WHEREAS:
A. ISC is engaged in the business of providing (a) automated teller machines
("ATM") with or without infrastructural facilities under outsourcing,
managed services and processing arrangements which include ATM
maintenance, terminal driving and terminal health monitoring (b)
transaction processing comprising the processing of electronic debit and
credit transactions through networks including gateway processing to
national and international networks; (c) switch processing services to
enable shared electronic transactions between financial institutions; (d)
shared networks (e.g. "BANCS") through which financial institutions can
participate to pursue processing services and (e) debit card production
and issuance fulfillment (the "BUSINESS").
B. ISC has agreed to sell and transfer, and the Purchaser has agreed to
purchase and acquire the ISC Transferred Business (as defined
hereinafter), as a going concern on a slump sale basis for a lump sum
consideration upon and subject to the terms and conditions set forth
herein. The Purchaser shall, prior to the Closing Date, be a wholly owned
subsidiary of eFunds, which in turn is an indirectly held wholly owned
subsidiary of eFunds Inc., a public listed company incorporated in the
United States of America.
NOW THEREFORE in consideration of the mutual promises hereinafter set forth, the
Parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement, unless repugnant or contrary to the context hereof, the
following terms when capitalized, shall have the meaning assigned herein
when used in this Agreement. When not capitalized, such words shall be
attributed their ordinary meaning.
"ACCOUNTING STANDARDS" means the Accounting Standards issued by the
Institute of Chartered Accountants of India;
"AFFILIATE" means with respect to any Person (as defined hereinafter), any
other Person directly or indirectly controlling, controlled by or under
common control with such first Person. For purposes of this definition,
the term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management of that Person whether
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through ownership of voting securities, by contract or otherwise;
"AGREEMENT" means this Business Transfer Agreement including all
annexures, schedules and exhibits attached hereto or incorporated in it by
reference and also includes all subsequent amendments and modifications to
this Agreement, if any;
"ASSUMED NET CURRENT ASSET VALUE" shall have the meaning assigned to it in
Article 2.2.1;
"BENEFIT PLANS" means all provident fund, gratuity, medical insurance,
leave encashment and other similar funds or benefits, if any, created and
or maintained by ISC with respect to the Transferred Employees (as defined
hereinafter) and as detailed in ANNEXURE A hereof;
"BUSINESS DAY" means any day, which is not (a) a day when principal
commercial banks in Chennai are closed for business; or (b) a day which is
notified as a holiday under the Indian Negotiable Instruments Act, 1881
and pursuant to such notification principal commercial banks in Chennai
are dosed for business;
"CLOSING" means the consummation of the transfer of the ISC Transferred
Business from ISC to the Purchaser as contemplated by this Agreement, and
specifically as contemplated by Article 3.2 hereof;
"CLOSING PAYMENT" has the meaning assigned to it in Article 2.1.2 hereof;
"CLOSING DATE" means the date on which the Closing takes place;
"CLOSING NET CURRENT ASSET AMOUNT" shall have the meaning assigned to in
Article 2.2.2 (i);
"CONTINGENT AMOUNT" means the amount(s) defined in Article 2.1.5 hereof
and calculated and paid in accordance with ANNEXURE O;
"EFFECTIVE DATE" means the date of execution of this Agreement;
"EXCLUDED LIABILITIES" has the meaning assigned to it in Article 2.1.8
hereof;
"FINANCIAL STATEMENTS" has the meaning assigned to it in Article 4 (e) (1)
hereof;
"GOVERNMENTAL BODY" means any national, regional or local government, any
governmental, semi-governmental, administrative, regulatory, or judicial
body, department, commission, authority, tribunal, agency, central bank or
other entity with jurisdiction over the transactions contemplated
hereunder, exercising executive, legislative, judicial, regulatory or
administrative functions of government;
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"INTELLECTUAL PROPERTY" means the trademarks, copyright and entitlement to
use third party software relating to the ISC Transferred Business
(including any software developed by ISC's Affiliates for use in the ISC
Transferred Business) and more particularly identified in ANNEXURE B
hereof, which licenses, trademarks and copyright shall be transferred to
or assigned in favour of the Purchaser;
"ISC ASSUMED LIABILITIES" means the liabilities of ISC which shall be
transferred to the Purchaser on the Closing Date, consisting of secured
loans, outstandings in relation to ATMs acquired on lease, the ISC Assumed
Current Liabilities (as defined hereinafter), the ISC Assumed Benefit Plan
Liabilities (as defined hereinafter) only as listed in ANNEXURE C. It
shall also include all liabilities in relation to the ISC Transferred
Business, whether current, contingent or otherwise, accruing and arising
after the Closing Date and only to the extent the liability relates to the
conduct of the ISC Transferred Business after the Closing Date including
under the Contracts (as defined hereinafter) novated in favour of the
Purchaser at the Closing. In no event do ISC Assumed Liabilities include
Excluded Liabilities;
"ISC ASSUMED BENEFIT PLAN LIABILITIES" means the liabilities of ISC in
respect of the Benefit Plans of the Transferred Employees;
"ISC ASSUMED CURRENT LIABILITIES" means all current liabilities and
obligations of ISC including sundry creditors, sundry deposits, advance
subscriptions and provisions and payables relating exclusively to the
Business, loans, borrowings & claims, accrued liabilities to Transferred
Employees which are incurred in accordance with the terms of employment,
and taxes accrued but unpaid (excluding overdue and / or unaccounted
taxes) all of the above as specifically identified in ANNEXURE C. For the
purposes of this definition, it is clarified that the term "ISC Assumed
Current Liabilities" shall not include any liability, which is not
identified at ANNEXURE C hereof and shall specifically exclude the
Excluded Liabilities.
"ISC TRANSFERRED ASSETS" means all of the tangible and intangible assets,
excluding cash, used in or otherwise related to the ISC Transferred
Business on the Closing Date, including the following:
(a) All movable properties comprising the following ("MOVABLE ASSETS"):
(i) current assets related to the ISC Transferred Business
including inventories, receivables and other current assets
("CURRENT ASSETS") as set out in ANNEXURE D hereof;
(ii) All electrical and office equipment, apparatus, machinery,
computers and accessories and other miscellaneous fixed assets
related to the ISC Transferred Business more particularly
described in ANNEXURE E hereof;
(iii) All fixtures, related to the ISC Transferred Business more
particularly described in ANNEXURE F;
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(b) All books, records, ledgers, documents and files or other similar
information used primarily in the conduct of the ISC Transferred
Business, including vendor lists, customer lists, mailing lists,
warranty information, catalogs, promotion literature, advertising
materials, brochures, standard forms of documents, manuals of
operations or business procedures, research materials, personnel
records, and all other relevant data and information (collectively
referred to as "RECORDS");
(c) All agreements and/ or contracts, purchase orders, sale orders, and
instruments used or held for use primarily in the operation or
conduct of the ISC Transferred Business and to which ISC is a party
identified in ANNEXURE G hereto, including but not limited to
contracts for lease of car, machinery, equipment, sale by ISC of
goods or performance by ISC of services, contracts for sale and
distribution of products, (collectively referred to as "CONTRACTS");
(d) All leased lands and premises including structure and other
improvements constructed thereon relating to the ISC Transferred
Business ("LEASED PREMISES") identified in ANNEXURE H leased to ISC
by the lessors ("LANDLORDS") under existing lease agreements
("LEASES" or "LEASE DEEDS");
(e) All Intellectual Property.
"ISC TRANSFERRED BUSINESS" means the Business of ISC, as a going concern,
including the ISC Transferred Assets, the Transferred Employees and the
ISC Assumed Liabilities;
"LENDERS" means the lenders of ISC listed in ANNEXURE I:
"LIEN" means liens, interests, restrictions, claims, charges, mortgages,
pledges, security interests and encumbrances of every kind, whether
written or oral and whether or not relating in any way to credit or to the
borrowing of money;
"LOAN AGREEMENTS" or "LOANS" means all loan agreements between ISC and the
Lenders more particularly described at ANNEXURE I:
"NET CURRENT ASSETS" means Current Assets less the ISC Assumed Current
Liabilities;
"NET CURRENT ASSETS CLOSING ACCOUNT" shall have the meaning assigned to it
in Article 2.2.2;
"ORDINARY COURSE" means the ordinary and normal course of the ISC's
Business that is consistent with its past practice and business policies
in respect of the Business.
"PERMITS" means all consents, approvals and registrations that are
required to carry on the ISC Transferred Business;
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"PERSON" shall mean any individual, firm, company, joint venture,
association, partnership, trust, unincorporated organisation or other
entity (whether having separate legal personality and identity or not)
including a government entity or a political sub-division or an agency or
instrumentality thereof;
"PURCHASE PRICE" shall have the meaning assigned to it in Article 2.1;
and,
"TRANSFERRED EMPLOYEES" means the employees of ISC listed at ANNEXURE J
whose employment shall be transferred to the Purchaser, with effect from
the Closing Date.
1.2 Interpretation
In this Agreement, (unless repugnant or contrary to the context hereof):
(a) reference to the singular includes a reference to the plural and
vice versa, and reference to any gender includes a reference to the
other gender;
(b) reference to an individual shall include his legal representative,
successor, legal heir, executor and administrator and reference to
natural persons shall include bodies corporate and vice versa;
(c) reference to statutory provisions shall be construed as meaning and
including references also to any amendment or re-enactment (whether
before or after the date of this Agreement) for the time being in
force and to all statutory instruments or orders made pursuant to
statutory provisions;
(d) references to any statute or regulation made using a commonly used
abbreviation, shall be construed as a reference to the title of the
statute or regulation;
(e) the terms "hereof", "herein", "hereby", "hereto" and derivative or
similar words refer to this entire Agreement;
(f) the term "including" means "including, but not limited to";
(g) the headings and sub-headings hereto are inserted only for reference
to the provisions hereof and shall not affect the construction of
such provisions;
(h) information contained in the relevant Annexures hereto have been
updated until February 28, 2005 and shall be further updated
immediately prior to Closing; and
(i) Any word or phrase defined in the body of this Agreement as opposed
to being defined in Article 1.1 above shall have the meaning
assigned to it in such definition throughout this Agreement, unless
the contrary is expressly stated or the contrary clearly appears
from the context.
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ARTICLE 2
TRANSFER OF BUSINESS AND PURCHASE PRICE
2.1 TRANSFER OF BUSINESS
2.1.1 Upon the terms and subject to the conditions of this Agreement, ISC agrees
to sell and transfer to the Purchaser and the Purchaser hereby agrees to
purchase and acquire from ISC, on the Closing Date, all of the right,
title and interest in the ISC Transferred Business as a going concern and
on a slump sale basis. In consideration of the sale, transfer, assignment,
conveyance and delivery by ISC of the ISC Transferred Business at Closing,
the Purchaser shall pay to ISC the Purchase Price, comprising of an amount
of Rupees 76,56,25,000 (Rupees Seventy Six Crores Fifty Six Lakhs Twenty
Five Thousand Only (the "INITIAL PAYMENT") and the Contingent Amount in
accordance with the terms of this Agreement.
2.1.2 On the Closing Date, the Purchaser shall pay to ISC an amount of Rupees
67,81,25,000 (Rupees Sixty Seven Crores Eighty One Lakhs and Twenty
Thousand Only) (the "CLOSING PAYMENT"), being the Initial Payment less
Rupees 8,75,00,000 (Rupees Eight Crores and Seventy Lakhs Only) (the
"HOLDBACK AMOUNT"), by certified or cashiers cheque or wire transfer of
immediately available funds to an account or accounts identified in
writing by ISC prior to the Closing Date. Simultaneously, the Holdback
Amount shall be remitted by the Purchaser into the Escrow Account, which
amount shall be held in escrow by the Escrow Agent for the benefit of ISC
in accordance with the Escrow Agreement.
2.1.3 Incidental to the aforesaid sale, ISC hereby also agrees and undertakes to
initiate and complete all steps required for the transfer of the ISC
Transferred Business as aforesaid, including the following:
(a) wherever transferable, all licenses, registrations, or permits
standing in the name of ISC for or in relation to the ISC
Transferred Business shall be transferred in accordance with the
procedures prescribed by law;
(b) the Movable Assets shall be transferred by delivery of possession;
(c) the Contracts shall be novated in favour of the Purchaser on terms
satisfactory to the Purchaser ("NOVATION AGREEMENTS");
(d) the Lease Deeds shall be novated in favour of the Purchaser on terms
satisfactory to the Purchaser;
(e) Intellectual Property shall be transferred to the Purchaser on terms
satisfactory to the Purchaser.
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2.1.4 On the Closing Date, subject to the fulfillment of the conditions
precedent at Article 7 of the Agreement, the Purchaser shall accept,
assume and agree to pay, perform or otherwise discharge, in accordance
with their respective terms and subject to the respective conditions in
this Agreement, the ISC Assumed Liabilities.
2.1.5 CONTINGENT AMOUNT
(a) The Purchaser shall pay to ISC the Contingent Amount, determined in
accordance with this Article 2.1.5 in the event that the Purchaser
achieves or exceeds the following revenue (which shall be determined
and accounted for in accordance with the Accounting Standards)
targets during the period between the Closing Date and the first
anniversary of the Closing Date (the "EARN OUT PERIOD"): (i) if
revenue is less than Rupees 21,87,50,000, then no Contingent Amount
shall be payable; (ii) if revenue is equal to Rupees 21,87,50,000,
the Contingent Amount payable shall be Rupees 5,68,75,000; (iii) if
revenue is equal to or exceeds Rupees 46,81,25,000, the Contingent
Amount payable shall be Rupees 10,93,75,000; and (iv) if the revenue
exceeds Rupees 21,87,50,000 but is less than Rupees 46,81,25,000,
the Contingent Amount payable shall be as set out in ANNEXURE O
hereto. The payment of the Contingent Amount by the Purchaser to ISC
shall be guaranteed by an irrevocable unconditional corporate
guarantee (in form and substance acceptable to ISC) provided by
eFunds to ISC on or prior to the Closing Date. Notwithstanding
anything to the contrary contained in this Agreement or elsewhere,
the obligation of the Purchaser to make payment of the Contingent
Amount to ISC shall be absolute and the Purchaser shall not be
entitled to exercise any right of set off, counterclaim or deduction
in relation to the Contingent Amount.
(b) The Purchaser undertakes to ensure that the ISC Transferred Business
is conducted in good faith during the Earn Out Period with a view to
maximize the revenue generated during such period. The Purchaser
further undertakes not to commit any act or omission in the conduct
of the Business post the Closing Date that may affect the Contingent
Amount including by way of postponement or deferral of any revenue
and to recognize the same during the Earn Out Period, provided
however that the Purchaser shall not be required to undertake any
act or omission outside its ordinary and customary policies and
procedures to achieve the aforesaid. Any suggestions made in writing
by ISC in relation to the conduct of the ISC Transferred Business by
the Purchaser during the Earn Out Period shall be considered by the
Purchaser in good faith.
Purchaser shall consult with ISC on any price reduction it wishes to
extend to existing customers of the ISC Transferred Business, which
could materially impact the revenues during the Earn Out Period. The
amount of any such reduction in revenue during the Earn Out Period
shall be calculated by multiplying the difference between the two
rates times the number of billable days during the Earn Out Period
for each ATM affected.
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The total amount of the above reductions to revenues during the Earn
Out Period shall be added to the revenues actually achieved from the
specific customer(s) affected for purposes of computing the total
revenues against which the Contingent Payment shall be made.
For the purposes of the above adjustment, it is expressly agreed
that any price reduction agreed to between ISC and the Bank of India
prior to the execution of this Agreement, pursuant to extension or
amendment of the agreements dated August 31,2001 and October 28,2003
between ISC and the Bank of India shall be added to the revenues
actually received from the Bank of India under aforesaid agreement
with the Bank of India provided that any increase in the Bank of
India revenue hereunder shall not exceed Rupees 1,09,37,500.
The Purchaser shall provide to ISC, monthly statements in relation
to revenues achieved by the ISC Transferred Business, the order
backlog and such other relevant information as may be reasonably
requested by ISC. ISC shall, at its own cost, be entitled to
undertake an audit (by an internationally recognized audit firm) of
the information provided to it at the end of the Earn Out Period.
(c) The Contingent Payment, if and to the extent payable in terms of
Article 2.1.5 (a) above, shall be made by the Purchaser to ISC by
certified or cashier cheques or wire transfer of immediately
available funds within a period of 30 days from the expiry of the
Earn Out Period.
2.1.6 HOLD BACK
(a) The Holdback Amount shall be remitted into the Escrow Account in
accordance with Article 2.1.2 above.
(b) On completion of two (2) years from the Closing Date and within 14
days thereof, the Purchaser shall pay to ISC, Rupees 4,37,50,000 of
the Holdback Amount less any amounts for liquidated Costs or a
mutually agreed reasonable estimate in relation to outstanding
claims (the "UNRESOLVED CLAIMS") which have arisen but have not been
settled pursuant to Article 10 hereof. On completion of three (3)
years from the Closing Date and within 14 days thereof, the
Purchaser shall pay to ISC the balance of the Holdback Amount less
any amounts for liquidated Costs or a mutually agreed reasonable
estimate in relation to outstanding claims (the "UNRESOLVED CLAIMS")
which have arisen but have not been settled pursuant to Article 10
hereof. Upon the expiry of five (5) years, any Unresolved Claims
shall, as soon as feasible and in any event not exceeding sixty (60)
days from the expiry of such five (5) year period, be settled
through mutual agreement between the Parties acting reasonably and
such part of the remaining Holdback Amount less the amount for which
the Unresolved Claim(s) have been settled shall be released by the
Escrow Agent to ISC. Failing mutual
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agreement in the aforesaid period, the Escrow Agent shall in any
event release the remaining Holdback Amount to ISC.
2.1.7 BANK GUARANTEE
On the Closing Date, ISC shall provide a bank guarantee to the Purchaser
in relation to the indemnity obligations of ISC in terms of Article 10
hereof in form and substance acceptable to the Purchaser acting reasonably
(the "BANK GUARANTEE"), which Bank Guarantee shall be effective from the
Closing Date for a period of three years therefrom. Upon the expiry of
three years from the Closing Date, the Bank Guarantee shall automatically
terminate and the Purchaser shall not be entitled to raise any claim
thereon. The maximum amount payable under the Bank Guarantee shall not:
(a) during the period between the Closing Date until the expiry of one
year therefrom, exceed Rupees 13,12,50,000; (b) upon the expiry of one
year from the Closing Date but prior to the expiry of two years therefrom,
exceed Rupees 8,75,00,000; and (b) upon the expiry of two years from the
Closing Date but prior to the expiry of three years therefrom, exceed
Rupees 4,37,50,000.
The Purchaser shall be entitled to invoke the Bank Guarantee in relation
to a Cost only in accordance with the procedure set out in Article 10.
2.1.8 Notwithstanding anything to the contrary herein contained or implied, it
is expressly agreed and declared that the Purchaser shall not assume or be
obligated to pay, perform or otherwise assume or discharge any liabilities
of ISC which relate to the period on or before the Closing Date
(regardless of whether they arise before on or after the Closing) whether
direct or indirect, whether known or unknown, absolute or contingent
whether or not arising from the ISC Transferred Business or the operation
thereof ("PRIOR PERIOD LIABILITY") that are not ISC Assumed Liabilities
(collectively the "EXCLUDED LIABILITIES"), including:
(a) Any Loans or Liens;
(b) Any liability of ISC for any statutory levies including income tax,
sales tax, service tax stamp duty or other like kind amounts which
relate to a period or event(s) on or preceding the Closing Date and/
or liabilities pertaining to claims against ISC or any judgment,
order, decree, ruling or charge, or any action, suit, grievance,
arbitration, proceeding, hearing or investigation of, in, or before
any Governmental Body or before any arbitrator, relating to any
alleged or actual act or omission occurring or alleged or actual
condition existing on or prior to the Closing (whether the liability
accrues or arises before, on or after the Closing and including any
liabilities relating to breach of Contracts or Leases prior to or by
reason of the Closing);
(c) Any contingent liability relating to the activities of the ISC
Transferred Business agreed to be sold and transferred under or
pursuant to this Agreement up to the Closing Date;
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(d) Any liability relating to the shareholders or purported shareholders
of ISC arising from the Parties entering into this Agreement or
otherwise including liability relating to claims by Capven Limited,
ACI (India) Inc., ACI Worldwide Inc. USA, Tandem Computers
International Inc. and/or Financial Software & Systems Private
Limited;
The Excluded Liabilities shall be and remain the liabilities of ISC and
shall not be transferred by ISC to the Purchaser or deemed to be assumed
by the Purchaser under or pursuant to this Agreement. In the event the
Purchaser, on account of Excluded Liabilities, is required by law to incur
any liability, ISC shall be liable to reimburse such amount in accordance
with Article 10 below. Provided that nothing contained herein shall cast
an obligation upon ISC to bear any liabilities in relation to the ISC
Transferred Business arising from the conduct of the ISC Transferred
Business on and from the Closing Date, which liabilities shall be solely
to the account of the Purchaser.
2.2 ADJUSTMENT TO CLOSING PAYMENT
2.2.1 The Purchase Price has been agreed to between the Parties on the basis
that the Net Current Assets as of the Closing Date will be Zero ("ASSUMED
NET CURRENT ASSET VALUE"). For the purpose of computing the Net Current
Assets under this Article 2.2, the amount outstanding from ISC on account
of assets acquired on lease shall be excluded from Current Liabilities
provided that the relevant leased assets are carried under fixed assets.
2.2.2 Determination of Net Current Assets:
(i) On the Closing Date, ISC shall provide to the Purchaser an inventory
of the Current Assets as well as an estimate of the aggregate value
of the Net Current Assets of live ISC Transferred Business (the "
NET CURRENT ASSETS CLOSING ACCOUNTS"). The Net Current Assets
Closing Accounts will show ISC's estimate of the value of each Net
Current Assets category as at the Closing Date (the "CLOSING NET
CURRENT ASSET AMOUNT").
(ii) At the option of the Purchaser, on or soon after the Closing Date,
but not later than 5 days from the Closing Date, the Parties shall
jointly conduct an inventory of the Net Current Assets and based
thereon, within a period of fifteen (15) days from the Closing Date,
confirm the information contained in the Net Current Assets Closing
Accounts to determined the Closing Net Current Asset Amount.
(iii) In the event that the Parties are unable to agree on the Closing Net
Current Asset Amount within thirty (30) days after the Closing Date,
the Parties shall appoint - Price WaterhouseCoopers (Chennai) to
resolve the dispute (the "INDEPENDENT ACCOUNTANT"). The Independent
Accountant shall deliver a report setting out the Closing Net
Current Asset Amount to the Parties within thirty (30) days of his
appointment. The Independent Accountant
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shall act as an expert and not as an arbitrator and any decision
made by the Independent Accountant shall be binding on the Parties.
(iv) In order to assist the Independent Accountant in the preparation of
his report, each of the Purchaser and ISC severally agree that it
shall:
(a) disclose to the Independent Accountant all relevant facts and
information in its possession; and
(b) promptly give to the Independent Accountant, all information,
assistance and access to books of account, documents, files
and papers which he may require.
The Independent Accountant shall be entitled (to the extent he
considers it appropriate) to rely on information provided or made
available by any of the Parties.
(v) The fees and expenses of the Independent Accountant shall be borne
equally by the Purchaser and ISC. Such fees and expenses shall be
paid within thirty (30) days of the decision of the Independent
Accountant being notified in writing to the Parties.
2.2.3 If the Closing Net Current Asset Amount determined as per Article 2.2.2 is
less than zero, ISC shall pay such difference to the Purchaser, within
fourteen (14) days of the Parties mutually agreeing on the Net Current
Assets Closing Account. Provided that if an Independent Accountant is
appointed in accordance with Article 2.2.2 (iii) then the payment as
aforesaid shall be made within fourteen (14) days of the Independent
Accountant intimating the Closing Net Current Asset Amount to the Parties.
2.2.4 If the Closing Net Current Asset Amount determined as per Article 2.2.2 is
higher than zero, then the excess shall be paid by the Purchaser to ISC
within fourteen (14) days of the Parties mutually agreeing on the Closing
Net Current Asset Amount. Provided that if an Independent Accountant is
appointed in accordance with Article 2.2.2 (iii), then the payment as
aforesaid shall be made within fourteen (14) days of the Independent
Accountant intimating the Closing Net Current Asset Amount to the Parties.
2.3 eFunds agrees, acknowledges and confirms that upon its execution of this
Agreement, its liability under or pursuant to this Agreement in respect of
obligations of the Purchaser in terms of this Agreement shall be joint and
several with the Purchaser and that ISC shall be entitled, in its absolute
discretion, to enforce its rights and remedies under this Agreement or
otherwise at law against either the Purchaser or eFunds.
2.4 The Purchaser agrees to take all necessary steps to ensure the appointment
of ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ to the office of a non-executive chairman and
member of the advisory board of the Purchaser. It is agreed between the
Parties that the term of
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office of ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall terminate upon the expiry of one year
from the Closing provided that ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be entitled to
terminate his association with the Purchaser earlier by providing seven
(7) days written notice to the Purchaser. The Parties agree that the
Purchaser shall have the unilateral right to terminate the term of office
of ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ in the event his conduct is against the interest of
the Purchaser or he commits an act which is in non compliance with the
code of conduct of the Purchaser including without limitation criminal
misconduct and the like. Subject to applicable law, ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
shall, at his sole discretion, determine the quantum of his time and
efforts to be utilized in his capacity as non-executive chairman including
his participation in meetings of the advisory board of the Purchaser. It
is agreed between the parties that ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall not be
compensated for either of the above positions, although his reasonable out
of pocket expenses incurred in the performance of his duties will be
compensated. It is further agreed between the Parties that ▇▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ shall not be entitled to exercise any rights or power with respect
to operation and management of the ISC Transferred Business without the
prior written approval of the Purchaser.
ARTICLES 3
CLOSING AND PAYMENTS
3.1 CLOSING
The Closing shall take place at Chennai no later than 5 Business Days from
the date of the fulfillment of the terms and conditions hereof that are
required to be fulfilled prior to the Closing.
3.2 ACTIONS AT CLOSING
3.2.1 On the Closing Date, ISC shall:
(a) Transfer, by delivery of possession to the Purchaser, of all Movable
Assets by actual and /or constructive delivery;
(b) Deliver the following to the Purchaser, in form and substance
satisfactory to the Purchaser:
(i) documents, including permissions for transfer of software
licenses, if any, required from any Person for transfer of the
ISC Transferred Assets to the Purchaser, free and clear of all
Liens but subject to such Liens that may subsist on account of
the ISC Assumed Liabilities;
(ii) Written consents from counter parties for the novation of the
Contracts in favour of the Purchaser in place of ISC with
effect from the Closing Date. It being clarified that the
novation agreements shall be executed within a period of 30
days from the Closing Date with the exception of the
agreements with the Bank of India, Karnataka Bank and United
Bank of India, the novation agreements for which shall be
13
executed on or before the Closing and delivered to Purchaser
at Closing with effect from and subject to Closing (failing
which, this condition precedent shall be deemed to have been
fulfilled if written consent for novation including as to the
form of novation is obtained from Bank of India, Karnataka
Bank and/or United Bank of India);
(iii) Written consents from the Landlords for the novation of the
Leases in favour of the Purchaser in place of ISC with effect
from the Closing Date. It being clarified that, with the
exception of the main premises lease for the operations / data
centre in Mumbai, which shall be novated on or before the
Closing with effect from and subject to Closing (failing
which, this condition precedent shall be deemed to have been
fulfilled if written consent for novation including as to the
form of novation shall be obtained from the lessor) and
delivered to the Purchaser at Closing, the novation agreements
shall be executed within a period of 30 days from the Closing
Date. For the avoidance of doubt, it is clarified that the
main premises lease for the operations / data centre in
Chennai is not being transferred pursuant to this Agreement
and the Purchaser shall ensure that all Transferred Employees
and ISC Transferred Assets based or located in such premises
are shifted to alternate premises (arrangements in relation to
which shall have been made by the Purchaser at least five
Business Days prior to Closing) within a period of 15 days
after the Closing Date.
(iv) the originals or copies of the Records, provided that such
Records are within the control of ISC;
(v) Written consent from the all the Lenders of ISC who have
provided secured loans (as listed in ANNEXURE C) for the
novation of such loans with the Purchaser in place of ISC from
the Closing Date along with a written confirmation from the
relevant Lenders as to the cost of prepayment/foreclosure;
(vi) Income Tax clearance certificate from the Income Tax
Department under section 281 of the Income Tax Act;
(vii) Written consent from First Leasing Company of India Limited
for the novation of the financial leases entered into by ISC
with it in relation to ATMs with the Purchaser assuming the
rights and obligations of ISC under such leases;
(viii) Certified copy of the minutes of the board of directors
meeting of ISC approving the transfer of the ISC Transferred
Business in favour of the Purchaser as contemplated herein and
all such documents required to effect the transfer of the ISC
Transferred Business in favour of the purchaser as
contemplated herein;
14
(ix) Evidence, in a form satisfactory to the Purchaser, that ISC
has extended its Service Level Agreement on outsourcing of
ATMs with United Bank of India dated January 6, 2004;
(x) Written consent from the relevant licensors for the
novation/assignment of the Intellectual Property in favour of
the Purchaser in place of ISC with effect from the Closing
Date.
(xi) A duly executed Bank Guarantee as referred to in Article 2.1.7
hereof shall be provided to the Purchaser by ISC.
(xii) A written opinion from ISC's legal counsel, Amarchand &
Mangaldas & ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Co., in the form set out in
ANNEXURE R hereto (which is to be agreed prior to Closing).
(xiii)Officer's certificate in the form set out in ANNEXURE S duly
executed by ▇▇▇▇▇▇ ▇▇▇▇▇▇ in his capacity as Chairman and
Managing Director of ISC.
3.2.2 The Purchaser agrees that the completion of the conditions set forth in
Article 3.2.1 above shall require the joint effort of ISC and the
Purchaser and undertakes to provide all reasonable assistance required by
the ISC to ensure fulfillment of such conditions. Additionally, on the
Closing Date, a duly executed corporate guarantee as referred to in
Article 2.1.5 (a) hereof shall be provided by eFunds to ISC.
3.2.3 Concurrent with the fulfillment of the actions or deliveries by or on
behalf of ISC in terms of Article 3.2.1 hereof, the Purchaser shall
(a) transfer the Closing Payment to ISC's account;
(b) take into its employment as from Closing Date all the Transferred
Employees upon terms and conditions of employment which are no less
favorable taken as a whole than those applicable to them immediately
prior to the Closing Date;
(c) arrange for the Holdback Amount to be placed in escrow with the
Escrow Agent in terms of the Escrow Agreement. The Escrow Agreement
shall be executed on or prior to the Closing Date and all costs in
relation to such escrow arrangement shall be borne by the Purchaser.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ISC
Subject to the disclosures made during the course of the due diligence exercise
undertaken by the Purchaser in relation to ISC and its business and specifically
set out in ANNEXURE T (DISCLOSURE SCHEDULE), ISC hereby represents and warrants
to Purchaser as follows:
15
(a) ORGANIZATION
ISC is a corporation duly organized and validly existing under the laws of
India and has all relevant corporate power and authority necessary to (i)
conduct its Business as currently conducted, and (ii) execute, deliver and
perform this Agreement and consummate the transactions contemplated
hereby. This Agreement constitutes valid and binding obligations of ISC,
enforceable against ISC in accordance with the terms hereof.
(b) AFFILIATES
ANNEXURE P sets forth for each Affiliate of ISC, its name and jurisdiction
of incorporation.
(c) COMPLIANCE WITH LAWS
ISC has, substantially complied with and is currently in substantial
compliance with all laws, ordinances, regulations, orders and
administrative guidance applicable to the ISC Transferred Business.
(d) NO BREACH
The execution and delivery of this Agreement and consummation of the
transactions contemplated hereby will not conflict with or result in the
breach or violation of any of the terms or conditions of, or constitute
(or with notice or lapse of time or both would constitute) a default
under, (i) the Memorandum of Association or Articles of Association of
ISC, (ii) any instrument, contract or other agreement to which ISC is a
party or by or to which it or any of its assets or properties is bound or
subject, including any Loans, Leases, or Contracts, or (iii) any statute,
law, regulation, order, judgment or decree of any court or Governmental
Body.
(e) ABSENCE OF CHANGE
1. The following financial statements, referred to collectively
hereafter, as the "FINANCIAL STATEMENTS" were made available to the
Purchaser for review prior to Closing: (i) audited balance sheet as
at March 31, 2002, audited balance sheet as at March 31,2003,
audited balance sheet as at March 31,2004 and unaudited balance
sheet as at August 31,2004 and (ii) unaudited balance sheet as at
December 31, 2004 ("MOST RECENT BALANCE SHEET DATE"). (The Financial
Statements in clause (i) of this Article 4(e)(l), collectively, the
"HISTORICAL FINANCIAL STATEMENT" and the Financial Statement in
clause (ii) of this Article 4(e)(l), the "MOST RECENT BALANCE
SHEET") Each Financial Statement has been prepared in accordance
with the Accounting Standards (except for normal year end
adjustments) and on a basis consistent with ISC's past accounting
practices and fairly presents in all material respects, the
financial condition of ISC as of such dates and the results of ISC's
operations for the periods specified. The Most Recent Balance Sheet
has been derived
16
from the Historical Financial Statements and fairly presents in all
material respects ISC's prospective financial position as of such
date.
2. Since the Most Recent Balance Sheet Date:
(i) there has been no event or circumstance which has occurred or
developed that has resulted or could reasonably be expected to
result in a Material Adverse Effect on the ISC Transferred
Business; and
(ii) except as disclosed in writing to the Purchaser prior to the
Closing Date, ISC has conducted the ISC Transferred Business
in the Ordinary Course of Business, nor has it, other than in
the Ordinary Course of Business:
(A) suffered any material theft, damage, destruction or loss
of or to any property or properties owned or used by ISC
in the Business, whether or not covered by insurance;
(B) made any change in or amended or terminated any existing
Benefit Plans or adopted any new Benefit Plan or
provisioned to do any of the foregoing or made any
commitment or incurred any liability to any labour union
or employee association;
(C) terminated the employment of any Transferred Employee or
received any notice of any impending resignation by any
such Transferred Employee.
3. On and from the date of execution of this Agreement, ISC undertakes
to: (a) consult the Purchaser in relation to all material decisions
pertaining to the operation of the ISC Transferred Business; and (b)
obtain the prior written consent of the Purchaser, not to be
reasonably withheld in the best interests of the ISC Transferred
Business, for the implementation of any decision in relation to the
ISC Transferred Business which is outside the Ordinary Course of
Business.
(f) LOANS, ACTIONS AND PROCEEDINGS
(i) ISC has not taken any loans or borrowings of any kinds with respect
to the ISC Transferred Business other than the Loans;
(ii) Except as disclosed by ISC in ANNEXURE K, ISC is not a party to, and
to ISC's best knowledge after reasonable inquiry has not received
any notice in relation to any litigation or judicial, administrative
or arbitration proceedings. There are no outstanding orders,
judgments, injunctions, assessments, awards or decrees of any court,
Governmental Body or arbitration tribunal against ISC in connection
with the ISC Transferred Business.
17
(g) TITLE TO ASSETS
ISC has valid title (or leasehold interest with respect to capital leases)
to all of the ISC Transferred Assets, free and clear of all Liens.
(h) INVENTORIES
Annexure L contains a list of the addresses of all establishments in which
all of the Inventory including inventories lying with ISC is located as of
the Effective Date. Each item of inventory is in working condition subject
to normal wear and tear and is usable in the Ordinary Course of Business,
and none of such items has been pledged or otherwise given as collateral.
(i) MACHINERY
ANNEXURE E hereto contains a complete list of all the machinery and
equipment (including office equipment and fixtures) as of the date hereof
which belong to the ISC Transferred Business. Each item of machinery and
equipment is in working order subject to normal wear and tear, is
currently capable of doing the work for which it is intended to be used
by the ISC Transferred Business and meets all relevant safety regulations.
(j) ATMS
The ATMs owned or leased by ISC are equipped and function according to all
applicable laws and regulations, network, network sponsor and bank
regulations, requirements and rules and ISC is under no obligation with
respect to its customers or suppliers for any current or pending upgrades,
including compliance upgrades, relating to ATMs owned, leased or supplied
by ISC. As at the Closing, 166 ATMs require upgrades in order to comply
with 3DES standards in India. ANNEXURE U sets out the identifying number
and location of each ATM owned or leased by ISC as at the Closing.
(k) REAL PROPERTY
ISC does not own any real property. The Leased Premises constitute
substantially all of the real property used or occupied by ISC. The Leased
Premises are sufficient for the conduct of the Business as now conducted
by ISC.
The Leases are in full force and effect in all material respects, and ISC
holds a valid and existing leasehold interest under each of the Leases for
the term set forth in ANNEXURE H. ISC has delivered to the Purchaser
complete and accurate copies of each of the Leases, and none of the Leases
has been modified in any material respect, except to the extent that such
modifications are disclosed by the copies delivered to Purchaser.
18
ISC is not in default in any material respect, and to the best knowledge
of ISC no circumstances exist which, if unremedied, would, either with or
without notice or the passage of time or both, result in such default
under any of the Leases. To the best knowledge of ISC, no other party to
any of the Leases is in default thereof.
(1) CONTRACTS
ANNEXURE G contains a complete list, as of the date hereof, of all
Contracts. ISC has delivered to the Purchaser complete copies of all of
the Contracts. All of the Contracts are in full force and effect and
binding on the parties thereto in accordance with their terms and no
condition exists which with notice or lapse of time or both would
constitute default under the Contracts.
(m) PERMITS
ANNEXURE M hereto contains a complete list, as of the date hereof, of all
Permits. ISC has delivered to Purchaser complete and accurate copies of
all of the Permits. All of the Permits are in full force and effect and
ISC has materially complied with all the terms and conditions of the
Permits. Except for the Permits, there are no material permits that are
necessary for the lawful ownership or use of the ISC Transferred Assets or
operation of the ISC Transferred Business. All such Permits, approvals or
authorisations are valid and have not been revoked or modified in any
manner.
(n) BENEFIT PLANS
ANNEXURE J lists each Transferred Employee. As of the Closing Date, all
amounts required to be paid by ISC to the Transferred Employees including
under the Benefit Plans until the Closing Date have been paid or provided
for. The said amounts are based on actual or, as the case may be,
actuarial valuation that have caused to be conducted by ISC.
(o) SUPPLIERS AND CUSTOMERS
To the best of its knowledge, ISC is not aware that any of its suppliers
or customers intends to cancel or otherwise modify its relationship with
ISC other than in the Ordinary Course of Business.
(p) TRANSFERRED EMPLOYEES
ANNEXURE J contains a description of job titles, job responsibilities, age
and the date of joining, and a break up of the remuneration rate paid by
ISC as of the Closing Date, including monthly salary, bonus, allowance or
other compensation of each of the Transferred Employees.
(i) Except as disclosed in writing by ISC to the Purchaser:-
(a) ISC is neither a party to nor has negotiated, or has any
obligations
19
under, any agreement, collective bargaining or otherwise, with
any party, with respect to any matter relating to compensation
or working conditions of any of the employees of ISC or with
respect to recognising or bargaining with any labour
organisation, as of the date hereof;
(b) ISC has not been charged or threatened with a charge of any
unfair labour practice or other violation of applicable
national, state, territorial, or local labour or labour
related laws specifically with respect to the ISC Transferred
Business; and
(c) There are no existing or threatened labour strikes, slowdowns,
disputes, grievances, disturbances or agitations relating to
the ISC Transferred Business.
(q) INSURANCE
ANNEXURE N hereto sets forth a complete and accurate description of all
policies of fire, casualty, liability, vehicular or other insurance held
by or on behalf of ISC relating to the ISC Transferred Business. The
originals thereof shall be made available to the Purchaser and shall be
duly endorsed in favour of the Purchaser. Such policies are in full force
and effect in relation to the ISC Transferred Business. ISC is not in
default with respect to any provision contained in any such policy, and
has not failed to give any notice or to present any claim under any such
policy in due and timely fashion.
(r) TAXES AND RETURNS
ISC has withheld from all payments made by it, or otherwise collected, all
amounts in respect of taxes levies or like kind amounts required to be
withheld therefrom or collected by it prior to the date hereof, and has
remitted same to the appropriate Governmental Body within the required
time periods including the filing of periodical returns in connection
therewith.
It is agreed that the transaction contemplated in this Agreement is not
subject to tax withholding under any Indian governmental regulation.
To the knowledge of ISC, no claim has ever been made by a Governmental
Body in respect of taxes levies, or other like kind assessments in a
jurisdiction where ISC does not file tax returns but that ISC is or may be
subject to tax, levies or other like kind assessments within such
jurisdiction.
(s) FULL DISCLOSURE
ISC is not aware of any fact that ISC has not disclosed to Purchaser that
materially adversely affects or is reasonably likely to materially
adversely affect, the assets, properties, business, operations or
conditions (financial or otherwise) of the ISC Transferred Business or the
ability of ISC to perform this Agreement.
20
(t) INTELLECTUAL PROPERTY
ANNEXURE B sets out an accurate and complete list of all Intellectual
Property used in the conduct of the ISC Transferred Business. ISC owns and
possesses all right, title and interest in and to, or possesses the valid
right to use, the Intellectual Property. ISC has not received any notice
of infringement or misappropriation from any third party with respect to
the Intellectual Property and to the knowledge of ISC, ISC is not
currently infringing on the intellectual property of any other person. On
Closing, Purchaser will be entitled to use all software developed by
Affiliates of ISC for and as used by the ISC Transferred Business prior to
the Closing Date, on a perpetual and royalty-free basis.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Purchaser hereby represents and warrants to ISC as follows:
(a) ORGANISATION
Purchaser is a company duly organised, validly existing and in good
standing under the laws of India and has all corporate power and authority
necessary to execute, deliver and perform this Agreement and consummate
the transactions contemplated hereby. Purchaser has taken or will take all
actions necessary for execution, delivery and performance of this
Agreement by the Purchaser under applicable law and this Agreement
constitutes valid and binding obligations of Purchaser, enforceable
against Purchaser in accordance with the terms hereof.
(b) COMPLIANCE WITH LAWS
Purchaser has complied with and is currently in substantial compliance
with all laws, ordinances, regulations, orders and administrative guidance
applicable to it.
(c) NO BREACH
The execution and delivery of this Agreement and consummation of the
transactions contemplated hereby will not conflict with or result in the
breach or violation of any of the terms or conditions of, or constitute
(or with notice or lapse of time or both would constitute) a default
under, (i) the Memorandum of Association or Articles of Association of
Purchaser, (ii) any instrument, contract or other agreement to which
Purchaser is a party or by or to which it or any of its assets or
properties is bound or subject, or (iii) any statute, law, regulation,
order, judgment or decree of any court of Governmental Body.
(d) TRANSFERRED EMPLOYEES
The Purchaser will offer employment to Transferred Employees on the same
terms
21
as are applicable to them on the Closing Date. The Purchaser will set up
Benefit Funds that correspond to ISC's Provident, Gratuity and
Superannuation Trust Funds, to which all such transferable funds set up by
ISC in respect of the Transferred Employees will be transferred to the
Purchaser upon the Purchaser establishing corresponding funds and
obtaining necessary approval from the concerned authorities.
(e) ACTIONS AND PROCEEDINGS
The Purchaser hereby warrants that (i) it is not a party to and not
threatened with any litigation or judicial, administrative or arbitration
proceedings; or (ii) there are no outstanding orders, judgments,
injunctions, awards or decrees of any court, Governmental Body or
arbitration tribunal against the Purchaser, that would prevent it from
entering into this Agreement or consummating the transactions contemplated
herein.
The Purchaser hereby warrants that, to its knowledge, no investigation by
any Governmental Body or agency is pending or threatened which may involve
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as a party in his capacity as the non executive
chairman of the Purchaser.
(f) DUE DILIGENCE
eFunds and the Purchaser have conducted and completed a business,
technical, financial, accounting and legal due diligence in relation to
ISC and the ISC Transferred Business to their satisfaction.
(g) ADEQUATE FUNDS
eFunds has and shall ensure prior to the Closing Date that the Purchaser
has made adequate arrangements or has adequate funds for the payment of
the Purchase Price. eFunds shall ensure that the Purchaser becomes its
wholly owned subsidiary as soon as practicable upon execution of this
Agreement and in any event, by no later than May 31, 2005.
ARTICLE 6
COVENANTS
(a) FULFILLMENT OF CONDITIONS PRECEDENT
The Parties shall use commercially reasonable efforts to fulfill the
conditions set out in Articles 7 and 8 relating to their respective
obligations to consummate the Closing. Where required by law or rules of
procedure, the Parties shall also make joint applications.
22
(b) ACCESS TO INFORMATION AND FACILITIES
Prior to the Closing and subject to Article 12 hereunder, ISC shall give
the Purchaser and the Purchaser's representatives access during normal
business hours to all of the Contracts and Records pertaining to the ISC
Transferred Business. ISC shall make the Transferred Employees available
to Purchaser and its representatives as Purchaser and its representatives
shall from time to time reasonably request.
Provided that ISC would not be required to provide such information, the
provision of which would constitute a breach of confidentiality
obligations applicable to ISC under law or any contractual arrangement.
(c) TAX MATTERS
After the Closing, the Parties shall make available to each other such
records as either Party may require for the preparation of any tax returns
or other similar governmental reports or forms required to be filed by
either Party and such records as either Party may require for the defence
of any audit, examination, administrative appeal or litigation of any such
tax return or other similar governmental report or form.
(d) NON-COMPETE FOR ISC
(i) During the 3 year period following the Closing Date (the "RESTRICTED
PERIOD") ISC, Capven, its successors or assigns shall not, either
directly or indirectly through its Affiliates, majority owners,
associates or group companies engage in any of the activities
comprising the Business as of the Closing Date. In addition, ISC
shall not, during the Restricted Period, engage in extensions of the
Business which are agreed to be:
(A) the formation of a "White Label" ATM Network involving the
deployment, outsourcing or processing of ATMs or other
customer-activated payment devices implemented on behalf of
itself or for any entity other than Purchaser; and
(B) the business of providing Merchant Acquiring Program
outsourcing, terminal driving or processing support for any
entity acting as Acquirer for POS and other customer-activated
devices however configured or connected to the POS/Merchant
Services processing platform.
(ii) The above restrictions shall apply regardless of whether they are
provided by ISC and, or Capven to the Indian market from a presence
outside of India or whether ISC uses its presence in India to
provide services to customers outside of India. Additionally, during
the Restricted Period, ISC and, or Capven will not solicit the
Transferred Employees for the purposes of engaging their employment.
23
(iii) For the avoidance of doubt, it is hereby agreed that nothing
contained in this Agreement shall prevent or restrict ISC, Capven or
their associates, affiliates or owners from carrying on any or all
of the following activities:
(A) sale, lease or sale on hire-purchase of ATMs, ATM-related
hardware and operating software; security products;
(B) the sale, lease or sale on hire-purchase of POS terminals,
related hardware and operating software; provision of ATM
maintenance, health monitoring and content management except
that these services may not be solicited for ATMs contracted
with ISC prior to Closing, or for those ATMs added on to those
existing contracts post-Closing or from a customer of ISC as
of Closing, without consent of Purchaser;
(C) maintenance services for POS terminals and related hardware
and software;
(D) sale and support of plastic cards (but not including their
production and issuance under outsourcing arrangements as
performed in the Business); development, sale and/or licensing
of HMA Data / HMA Starware's proprietary software;
(E) the business currently carried on by HMA Starware of licensing
and support of Oasis 1ST switches, card related solutions and
other such business; and
(F) any other business whether or not related to the foregoing,
which was not part of ISC Transferred Business or agreed to be
extensions of the Business as of Closing.
(iv) During the Restricted Period, Purchaser shall offer to ISC or its
Affiliates the rights of first refusal for Second Line Maintenance
(SLM) for ATMs implemented or under contract for future
implementation on an outsourcing basis under ISC contracts with
customers as of the Closing Date, and for ATMs supplied by ISC or
its Affiliates in the future to Purchaser, Purchaser Affiliate, or
any other Affiliate of the Purchaser in India in the event of such
entity seeking to engage a third party service provider for such
service. Purchaser shall also offer to ISC or its Affiliates the
rights of first refusal for the supply of Triton Automated Teller
Machines and Cash Dispensers and other self service devices where
these are qualified for consideration provided that ISC or its
Affiliate is an authorized distribution channel for those devices at
the time of the transaction.
(v) Reciprocally, ISC and its Affiliates shall, during the Restricted
Period, provide the Purchaser with a right of first refusal for
third party processing and networking solutions that may be required
by them in relation to the
24
deployment of ATMs, Cash Dispensers, Self-Service Terminals, POS
terminals or other electronic transaction devices, and for the
production and supply of plastic cards as may be required by ISC or
its Affiliates.
(vi) The Parties agree that these rights of first refusal for both
Parties as mentioned in this Agreement are intended to enhance
opportunities for mutual benefit by enabling them to work together
and are subject to each party meeting the requirements of
functionality, adherence to Service Level Agreements, preferential
pricing reflecting competitive market conditions, and customer
requirements which may apply in each instance.
(e) ISC shall, with respect to the ISC Transferred Business, during the period
between the date of execution of this Agreement and the Closing Date:
(i) properly and accurately prepare and file all national, state,
territorial, local and other tax returns and reports required to be
filed by all applicable statutes, laws and regulations (including
the Income Tax Act of 1961);
(ii) pay in full all national, state, territorial, local and other taxes,
including all interests, penalties, and assessments, which shall or
may be due and payable;
(iii) be liable for all the taxes including all interests, penalties and
assessments with respect to the assets or activities of ISC, prior
to the Closing Date, irrespective of when such amounts are due and
payable; and
(iv) fully and completely comply with all tax withholding provisions in
accordance with the applicable, national, state, territorial and
local law including filing all proper and accurate national, state,
territorial, and local returns for all periods for which returns
were due, income tax and other wage withholdings and all the other
amounts shown thereon to be due and payable concerning the employees
of ISC.
(f) The Purchaser covenants that it shall obtain all licenses, permits and
consents required by it (as listed in ANNEXURE V hereto) to carry on the
ISC Transferred Business immediately upon the same being transferred in
terms of this Agreement.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER
All obligations of Purchaser under this Agreement are subject to the
satisfaction, prior to or on the Closing Date, of each of the following
conditions, any one or more of which may be waived by Purchaser:
(a) ISC's representations and warranties contained in or made pursuant to this
Agreement shall be true and correct as of Effective Date, and shall be
true and correct as of the Closing Date as though such representations and
warranties were made again on and as of such time;
25
(b) ISC shall have delivered to Purchaser, the documents required in Article
3.2.1.
(c) i) No injunction or restraining order shall be in effect which forbids
or enjoins the consummation of the transactions contemplated by this
Agreement or the transfer of the ISC Transferred Business to
Purchaser, and no governmental regulations shall have been enacted
which prohibit, restrict or delay the consummation of the
transactions contemplated by this Agreement or the transfer of the
ISC Transferred Business to the Purchaser; and
ii) No action or proceeding by any Governmental Body or other Person or
entity shall have been instituted or threatened which (a) might have
an material adverse effect on the business, operations, assets,
liabilities, or cash flows of the ISC Transferred Business or (b)
could enjoin, restrain or prohibit, or could result in substantial
damages in respect of, any provision of this Agreement or the
consummation of the transactions contemplated hereby or any
integration of the ISC Transferred Business with that of Purchaser
and its Affiliates.
(d) eFunds shall have acquired Purchaser as a wholly owned subsidiary,
provided that this condition precedent shall expire on May 31,2005.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF ISC
All obligations of ISC under this Agreement are subject to the satisfaction,
prior to or on the Closing Date of each of the following conditions, which may
be waived by ISC.
(a) Purchaser shall have performed or complied with all covenants, agreements
and conditions required by this Agreement to have been performed or
complied with by it prior to or on the Closing Date;
(b) Purchaser's representations and warranties contained in or made pursuant
to this Agreement shall be true and correct as of Effective Date, and
shall be true and correct as of the Closing Date as though such
representations and warranties were made again on and as of such time;
(c) eFunds shall have provided to ISC a duly executed corporate guarantee in
accordance with Article 2.1.5 (a);
(d) All consents, permits and approvals which may be required in connection
with the performance by the Purchaser of its obligations under this
Agreement and the conduct of the ISC Transferred Business by the Purchaser
upon its transfer in terms of this Agreement shall have been obtained on
terms satisfactory to ISC; and
(e) The Purchaser shall have executed, and shall have caused the Escrow Agent
to execute, the Escrow Agreement in form and substance satisfactory to ISC
(which shall also be a party to the Escrow Agreement).
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ARTICLE 9
TERMINATION OF AGREEMENT
9.1 TERMINATION BY NOTICE
This Agreement may be terminated prior to the Closing by written notice
from the Party electing to terminate this Agreement to the other Party
hereto ("NOTICE"), as follows:
(a) At the election of Purchaser, if there has been a material breach of
any covenant, representation or warranty of ISC hereunder, and such
breach has not been remedied within thirty (30) days after ISC shall
have received a Notice from Purchaser, which termination shall take
effect as of the 30th day after receipt of the Notice;
(b) At the election of ISC, if there has been a material breach of any
covenant, representation or warranty of Purchaser hereunder, and
such breach has not been remedied within thirty (30) days after
Purchaser shall have received a Notice from ISC, which termination
shall take effect as of the 30th day after receipt of the Notice;
(c) At the election of either Party hereto, with effect as of the
receipt of the Notice by the other Party hereto, if any legal or
administrative proceedings is commenced or threatened by any
Governmental Body or other Person directed against the consummation
of the Closing of any of the transfers contemplated hereby and such
party hereto, acting solely on the basis of a legal opinion received
from a reputed senior counsel acceptable to both Parties, is advised
that it is impossible or materially adverse to it to proceed in view
of such legal or administrative proceeding or threat thereof;
(d) At the election of either Party hereto, with effect as of the
receipt of the Notice by the other Party hereto, if the Closing does
not occur on or before June 30, 2005, provided mat the right to
terminate this Agreement under this clause (d) shall not be
available to any Party whose failure to fulfill any obligation under
this Agreement has been the cause of or resulted in the failure of
the Closing to occur on or before such date. It being clarified that
a refusal by a third party, whose consent is required in terms of
this Agreement, to accord such consent shall not constitute a
failure on part of the Party responsible for obtaining such consent,
subject to such Party having undertaken reasonable efforts to obtain
such consent.
9.2 TERMINATION BY AGREEMENT
At any time on or prior to the Closing Date, the Parties hereto may
terminate this Agreement by mutual written consent, and such termination
shall take effect immediately unless the Parties shall agree otherwise.
Upon the slump sale contemplated by this Agreement being consummated, this
Agreement shall remain valid and binding for a period of three years from
the Closing Date and shall
27
automatically terminate thereafter.
9.3 EFFECT OF TERMINATION
If this Agreement is terminated pursuant to this Article 9, all
obligations of the Parties shall terminate, except for the obligations set
forth in this Article 9.3 and Article 10,11,12,15 and 16, which shall
survive the termination of this Agreement, and except that no such
termination shall relieve either Party from any liability accruing prior
to such termination.
In the event the transaction contemplated in this Agreement is not
consummated for any reason whatsoever, the Purchaser shall not, for a
period of two (2) years from the date of termination of this Agreement,
utilize any confidential information obtained by it from ISC for the
purposes of soliciting customers of ISC.
ARTICLE 10
INDEMNIFICATION
(a) ISC shall indemnify, save and hold harmless the Purchaser, and its
successors and assigns, officers, directors and employees and
representatives of Purchaser from and against any and all costs, losses,
claims, liabilities, damages, lawsuits, judgments and expenses (including
reasonable legal fees and court or other fees and costs) (collectively,
hereinafter the "COSTS") in connection with or arising out of any breach
of, or inaccuracy with respect to, any covenant or representation or
warranty or undertaking by ISC herein contained.
(b) The indemnity as aforesaid shall relate only to actual losses directly
incurred by the Purchaser. Any claim for indemnity pursuant to this
Section shall be made by the Purchaser by notice in writing to ISC.
Notwithstanding anything to the contrary contained in this Agreement, but
absent fraud, the liability of ISC to indemnify the Purchaser pursuant to
this Agreement shall under no circumstances exceed: (a) Rupees
26,25,00,000 in the aggregate from the Closing Date until the first
anniversary of the Closing Date; (b) Rupees 17,50,00,000 in the aggregate
during the period between the first and second anniversary of the Closing
Date; and (c) Rupees 8,75,00,000 in the aggregate between the second and
third anniversary.
(c) Provided that ISC shall not be liable for any Costs unless the aggregate
amount of all Costs exceeds Rupees 87,50,000 (the "THRESHOLD") (except for
liability on account of fraud and Prior Period Liability) after which ISC
shall be liable for all such Costs subject to the limitations contained in
this Article 10. Only individual costs of not less than Rupees 8,75,000
(the "DEMINIMIS AMOUNT") shall be taken into account for arriving at the
Threshold and the Purchaser shall not have any recourse to ISC for
individual costs less than Rupees 8,75,000. Provided that individual
claims of a like nature may be aggregated for the purposes of arriving at
the Deminimis Amount. The Purchaser, and its successors and assigns,
officers, directors and employees shall procure that all reasonable steps
are taken and all reasonable assistance is
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given to avoid or mitigate any losses, which in the absence of mitigation
might give rise to a liability in respect of any claim for indemnity.
(d) Where the Cost is on account of a third party claim (arising from the
breach of a representation, warranty, covenant or undertaking of or
provided by ISC under this Agreement) on the Purchaser, ISC shall, on a
quarterly basis, reimburse in arrears all reasonable costs incurred in
relation to the Purchaser's conduct of the defense (including any appeals)
against such claim provided that such defense and appeals are conducted in
a manner directed by ISC acting reasonably and in good faith and the claim
has been promptly notified by the Purchaser to ISC, together with all
relevant papers, within a period of 20 days, or lesser period if mandated
by the nature of the claim, of such claim being received by the Purchaser.
In such cases, ISC's liability to indemnify the Purchaser in respect of
the amount claimed by the relevant third party shall arise only upon such
claim being finally determined (by the relevant judicial authority) or
settled with the prior written consent of ISC.
(e) Purchaser shall indemnify, save and hold harmless ISC, and the successors
and assigns, officers, directors, employees and representatives of ISC
from and against any and all Costs in connection with or arising out of or
resulting from (a) any breach of any covenant or representation or
warranty of the Purchaser herein contained; and (b) the ISC Transferred
Business where such costs are related to or arising out of actions
performed or omitted by the Purchaser that occurred post Closing other
than Assumed Liabilities that are pre Closing, or incidents or '
occurrences that occurred post Closing, or labour disputes that occurred
post Closing.
(f) Any representation, warranty, undertaking or covenant that is the subject
of a claim or dispute asserted in writing prior to the expiry of three (3)
years from the Closing Date shall survive with respect to such claim or
dispute until the final resolution thereof. The representations and
warranties shall expire and the Purchaser shall not be entitled to submit
a claim for indemnification by ISC upon the expiry of the period of three
years from the Closing Date as set out hereinafter, unless submitted on or
by the expiry of such three-year period. Upon the expiry of the aforesaid
three year period, all claims for indemnity, irrespective of whether such
claims arise on account of the breach of a representation, warranty or
covenant contained in this Agreement, shall be deemed to have been waived
by the Purchaser unless it was submitted on or by the expiry of the three
year period as aforesaid.
(g) In the event of a claim for indemnity in relation to Cost(s) incurred by
Purchaser validly arising in accordance with the procedure set out in this
Article 10, the Purchaser shall first submit its claim in writing for
indemnity in relation to such Cost(s) to ISC. In the event of ISC failing
to make payment of such valid claim for indemnity for Cost(s) within a
period of 14 days of receipt of such claim, the following sequence shall
be adhered by the Purchaser in respect of the Cost(s), or such part
thereof, to the extent finally determined or settled with the concurrence
of ISC. : (i) the amount shall be withdrawn from Holdback Amount in escrow
in accordance with the terms of the Escrow Agreement; (iii) if withdrawal
as aforesaid from the Holdback Amount is insufficient to meet the Cost(s),
only then may the
29
amount be withdrawn under the Bank Guarantee.
ARTICLE 11
EXPENSES
Except as specifically provided below, each Party agrees to be responsible for
the payment of all expenses incurred by or on its behalf in connection with the
preparation, authorisation, execution and performance of this Agreement,
including all fees of counsel, accountants and consultants and any taxes or
similar levies due and payable by it in accordance with applicable law or
regulations in respect of such transfer(s). Provided however that all costs
associated with or related to the transfer of the ISC Transferred Business by
ISC to the Purchaser in terms of this Agreement, including but not limited to
software license transfer charges, stamp duty, registration charges, premium, if
any, payable for assignment of contracts including Leases,
prepayment/foreclosure charges if the Purchaser opts to prepay or foreclosure
any liabilities being transferred to it in terms of this Agreement, shall be
borne exclusively by the Purchaser..
ARTICLE 12
CONFIDENTIALITY
12.1 All information, other than the information acquired by the Purchaser as a
part of the ISC Transferred Business which shall be confidential
information of the Purchaser only, supplied by any Party to the others in
connection with this Agreement, as well as the contents of this Agreement
are confidential between the Parties, who will cause their employees,
consultants and agents to maintain such confidentiality.
12.2 Each Party also agrees that it shall not, without the other Party's prior
written consent, disclose or allow to be disclosed any such confidential
information to anyone, except to its relevant officers and employees and
then only to such extent as may be necessary for the performance of its
obligations under this Agreement. The Parties shall take all necessary
precautions to keep the confidential information secret and confidential
and to restrict its use in the manner provided herein.
The term "confidential information" as used hereto means: (a) any
information concerning the organisation, business, technology, trade
secrets, know-how, finance, transactions or affairs of the Parties hereto
or any of their respective Affiliates, directors, officers or employees
(whether conveyed in written, oral or in any other form and whether such
information is furnished before, on or after the date hereof), and (b) any
information or materials prepared by a Party that contains or otherwise
reflects, or is generated from, confidential information.
12.3 The above obligations shall not apply to information disclosed by any
Party to the others which:
(a) at the time of such disclosure is in the public domain;
(b) is required by court order or applicable law; or
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(c) is required for the purpose of enforcing this Agreement.
ARTICLE 13
SURVIVAL
(a) REPRESENTATIONS AND WARRANTIES
All representations and warranties made in this Agreement or pursuant
hereto, or in any certificate or other writing delivered pursuant hereto,
or in connection herewith, shall survive the Closing and shall remain in
effect for a period of 3 years after the Closing Date.
(b) Except as set out in Article 10(f), this Agreement and the provisions
hereof shall terminate three (3) years from the Closing Date.
Notwithstanding anything to the contrary hereunder, Articles 93, 10, 12,
13, 14.1, 15 and 16 shall survive expiry/termination of this Agreement.
ARTICLE 14
GENERAL
14.1 NOTICES
All notices required or permitted hereunder shall be in writing and in the
English language and shall be sent by internationally recognized courier
or by facsimile transmission addressed to the address of each Party set
forth below, or to such other address as such other Party shall have
communicated to the other Party. Notice shall be deemed to have been
served when received (and in the case of facsimile transmission, provided
that a confirming copy is sent to the other Party in accordance with the
non-facsimile notice delivery requirements)
If to ISC: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Chairman and Managing Director,
India Switch Company Private Limited.
5, Mezzanine Floor,
Thapar House,
43-44 ▇▇▇▇▇▇▇▇ Road,
Egmore,
Chennai - 600 008
If to the Purchaser: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇,▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇, ▇▇▇▇▇▇ - ▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇▇-▇▇▇▇▇▇
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14.2 ASSIGNMENT
Neither of the Parties hereto may assign its rights, benefits and
obligations in whole or in part hereunder without the prior written
consent of the other Party.
14.3 FURTHER ASSURANCE
Each of the Parties agrees to do all things reasonably within its power
which are necessary or desirable to give effect to the spirit and intent
of this Agreement. The Parties hereto shall, and shall use their
respective reasonable endeavours to procure that any necessary third
parties shall, do, execute and perform all such further deeds, documents,
assurances, acts and things as either of the Parties hereto may reasonably
request in order to carry the provisions of this Agreement into full force
and effect.
14.4 VARIATION
Any variation of this Agreement shall be mutually agreed in writing and
executed by or on behalf of each of Purchaser and ISC.
14.5 NO WAIVER
No waiver by any Party of any default with respect to any provision,
condition or requirement hereof shall be deemed to be a waiver of any
other provision, condition or requirement hereof. No delay or omission of
any Party to exercise any right hereunder on one occasion in any manner
shall impair the exercise of any such right on any other occasion.
14.6 COUNTERPARTS
The Parties may execute this Agreement in two or more counterparts (no one
of which need contain the signatures of all Parties), each of which shall
be an original and all of which together shall constitute one and the same
instrument.
ARTICLE 15
GOVERNING LAW
This Agreement shall be governed and construed in accordance with the laws of
India and the Parties agree to the exclusive jurisdiction of the Courts of
Mumbai.
ARTICLE 16
ARBITRATION AND DISPUTE RESOLUTION
16.1 The Parties hereto agree that they shall use all reasonable efforts to
resolve between themselves any disputes, controversy or claim arising out
of or relating to this Agreement, other than a dispute the resolution of
which is specifically provided for in this Agreement. In particular, the
Parties agree that discussions will be carried
32
out between senior level officers of the Parties within a maximum period
of forty-five (45) days from the date that written notice of the details
of the issue in dispute, controversy or claim shall have been given by one
Party to the other.
16.2 If the Parties fail to resolve the matter in accordance with the preceding
paragraph and within the period prescribed therein, all disputes arising
out of or in connection with this Agreement, including any question
regarding its existence, validity or termination, shall be referred to and
finally resolved by arbitration under the Arbitration and Conciliation
Act, 1996 including any modification or any enactment thereafter. The
arbitral tribunal shall consist of three arbitrators and each Party shall
be entitled to appoint one arbitrator each and the two appointed
arbitrators shall appoint the third arbitrator. The arbitration shall be
conducted in Mumbai in accordance with the Arbitration and Conciliation
Act, 1996, the relevant provisions of which are deemed to be incorporated
by reference into this Article. The language of the arbitration shall be
English. The decision of the arbitrator shall be final, binding and
incontestable and may be used as a basis for judgment thereon in India or
elsewhere.
ARTICLE 17
PARTNERSHIP
Nothing in this Agreement shall constitute a partnership between the Parties
hereto under applicable Indian laws.
ARTICLE 18
PLEDGING CREDIT
Nothing in this Agreement shall give either Party the right to pledge the credit
of or incur liabilities or obligations binding on the other Party.
ARTICLE 19
ENTIRE AGREEMENT
This Agreement along with the Exhibit and Annexures and Schedules hereto
represents the entire agreement as to the subject matter hereof, and supercedes
any prior understandings between the Parties on the subject matter hereof.
ARTICLE 20
FORCE MAJEURE
Neither Party shall be liable by reason of failure or delay in the performance
of its obligations under this Agreement if such failure or delay is caused by
acts of God, strikes, lockouts, war or any other cause beyond its control and
without its fault or negligence.
33
ARTICLE 21
INVALID PROVISIONS NOT TO INVALIDATE WHOLE AGREEMENT
In the event of any one or more of the provisions contained in this Agreement
being waived, modified or altered, none of the other provisions hereof shall in
any way be affected or impaired thereby. If any of the provisions of this
Agreement become invalid, illegal or unenforceable in any respects under any
applicable law, the validity, legality and enforceability of the remaining
provisions shall not in any way be effected or impaired. Where the provisions of
such applicable law may be waived they are hereby waived by the Parties to the
full extent permitted so that this Agreement shall be deemed to be valid and
binding and enforceable in accordance with its terms. If any provision of this
Agreement becomes invalid, the Parties agree to substitute such invalid
provision with a new provision which legally serves the purpose of the invalid
provision to the furthest possible extent.
IN WITNESS WHEREOF these presents together with the Exhibit and Annexures and
Schedules annexed and signed have been executed by the Parties as follows:
For and on behalf of For and on behalf of
India Switch Company eFunds International India Private
Private Limited Limited
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Designation: Chairman & Managing Director Designation: Director
For and on behalf of
Classic Payment Solutions and Services
Private Limited
/s/ Raman Sharma
Name: Raman Sharma
Designation: Director
34
LIST IDENTIFYING CONTENTS
OF OMITTED SCHEDULES
The following Exhibits and Schedules have been omitted from this Exhibit 2.2:
Annexure A Benefit Plans
Annexure B Intellectual Property
Annexure C Assumed Liabilities
Annexure D Current Assets
Annexure E Equipment
Annexure F Fixtures
Annexure G Contracts
Annexure H Leases
Annexure I Lenders
Annexure J Transferred Employees
Annexure K Litigation
Annexure L Inventory
Annexure M Permits
Annexure N Insurance
Annexure O Contingent Amount
Annexure P Affiliates
Annexure R Legal Opinion
Annexure S Officer's Certificate
Annexure T Disclosure Schedule
Annexure U ATMs
Annexure V Required Consents
The registrant will furnish supplementally a copy of any omitted Schedule or
Exhibit to the Securities and Exchange Commission upon the request of the
Commission.