PURCHASE AND SALE AGREEMENT BETWEEN TIER TECHNOLOGIES, INC. and INFORMATIX, INC. June 9, 2008
Exhibit
2.1
BETWEEN
TIER
TECHNOLOGIES, INC.
and
INFORMATIX,
INC.
June
9, 2008
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TABLE OF
CONTENTS
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Page
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ARTICLE
I ASSET
PURCHASE
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1
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1.1 Purchase
and Sale of Assets; Assumptions of Liabilities
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1
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1.2 Purchase
Price
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1
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1.3 The
Closing
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2
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1.4 Post-Closing
Adjustment
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3
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1.5 Earn-Out
Payments
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5
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1.6 Consents
to Assignment
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7
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1.7 Further
Assurances
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8
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1.8 Allocation
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8
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ARTICLE
II REPRESENTATIONS
AND WARRANTIES OF THE SELLER
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8
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2.1 Organization,
Qualification and Corporate Power
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8
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2.2 Authority
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9
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2.3 Noncontravention
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9
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2.4 Financial
Statements
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10
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2.5 Books
and Records
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10
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2.6 Absence
of Certain Changes
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10
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2.7 Undisclosed
Liabilities
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11
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2.8 Tax
Matters
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11
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2.9 Tangible
Personal Property; Title to Acquired Assets
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11
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2.10 Owned
Real Property
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12
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2.11 Leased
Real Property
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12
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2.12 Intellectual
Property
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12
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2.13 Contracts
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14
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2.14 Entire
Business
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16
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2.15 Litigation
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17
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2.16 Employment
Matters
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17
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2.17 Employee
Benefits
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17
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TABLE OF
CONTENTS
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Page
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2.18 Environmental
Matters
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20
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2.19 Legal
Compliance
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20
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2.20 Permits
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20
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2.21 Inventory
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21
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2.22 Accounts
Receivable
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21
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2.23 Solvency
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21
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2.24 Processing
Agreement Rates
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21
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2.25 Full
Disclosure
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21
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ARTICLE
III REPRESENTATIONS
AND WARRANTIES OF THE BUYER
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21
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3.1 Organization
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21
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3.2 Authority
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21
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3.3 Noncontravention
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22
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3.4 Litigation
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22
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3.5 Financing
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22
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3.6 Solvency
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22
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3.7 Due
Diligence by the Buyer
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23
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ARTICLE
IV PRE-CLOSING
COVENANTS
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23
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4.1 Closing
Efforts
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23
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4.2 Replacement
of Guarantees and Letters of Credit
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23
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4.3 Operation
of Business
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23
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4.4 Access
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25
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4.5 Exclusivity
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25
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4.6 Notifications
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26
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4.7 Schedules
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26
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4.8 Agreement
with Respect to ACH and Credit Card Charges
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26
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ARTICLE
V CONDITIONS
PRECEDENT TO CLOSING
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26
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5.1 Conditions
to Obligations of the Buyer
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26
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TABLE OF
CONTENTS
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Page
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5.2 Conditions
to Obligations of the Seller
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27
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ARTICLE
VI INDEMNIFICATION
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29
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6.1 Indemnification
by the Seller
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29
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6.2 Indemnification
by the Buyer
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30
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6.3 Claims
for Indemnification
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30
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6.4 Survival
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31
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6.5 Limitations
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31
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6.6 Treatment
of Indemnification Payments
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33
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6.7 Rights
of Setoff
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33
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ARTICLE
VII TAX
MATTERS
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33
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7.1 Transfer
Taxes; Prorations
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33
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7.2 Refunds
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33
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ARTICLE
VIII TERMINATION
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34
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8.1 Termination
of Agreement
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34
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8.2 Effect
of Termination
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34
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ARTICLE
IX EMPLOYEE
MATTERS
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35
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9.1 Offer
of Employment; Continuation of Employment
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35
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9.2 401(k)
Plan Matters
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35
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9.3 Employment
Related Liabilities
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35
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9.4 Compensation;
Employee Benefits; Severance Plans
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35
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9.5 Welfare
Plans
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36
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9.6 Accrued
Personal, Sick or Vacation Time
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36
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ARTICLE
X OTHER
POST-CLOSING COVENANTS
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36
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10.1 Access
to Information; Record Retention; Cooperation
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36
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10.2 Covenant
Not to Compete
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38
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10.3 Non-Solicitation
Covenant
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38
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10.4 Seller
Guarantees
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38
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TABLE OF
CONTENTS
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Page
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10.5 Use
of names for Transition Period
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39
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10.6
Use of Retained Marks in Transferred Technology
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39
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10.7 Collection
of Accounts Receivable; Transition
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40
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10.8 Payment
of Assumed Liabilities and Excluded Liabilities
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40
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ARTICLE
XI DEFINITIONS
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40
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ARTICLE
XII MISCELLANEOUS
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52
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12.1 Press
Releases and Announcements
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52
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12.2 No
Third Party Beneficiaries
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52
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12.3 Action
to be Taken by Affiliates
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52
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12.4 Entire
Agreement
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52
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12.5
Succession and Assignment
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52
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12.6 Notices
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53
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12.7 Amendments
and Waivers
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53
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12.8 Severability
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53
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12.9 Expenses
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54
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12.10 Specific
Performance
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54
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12.11 Governing
Law
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54
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12.12 Submission
to Jurisdiction
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54
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12.13 Bulk
Transfer Laws
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54
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12.14
Construction
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54
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12.15 Waiver
of Jury Trial
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55
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12.16 Incorporation
of Exhibits and Schedules
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55
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12.17 Counterparts
and Facsimile Signature
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55
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12.18 Source
Code and Documentation
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55
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TABLE OF CONTENTS
Page
Disclosure
Schedule
Schedules:
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Schedule
1.1(b)
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Excluded
Assets
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Schedule
1.1(d)
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Excluded
Liabilities
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Schedule
5.1(f)(i)
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Required
Third Party Consents and Governmental
Filings
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Schedule
5.1(f)(ii)
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Non-Required
Third Party Consents and Governmental
Filings
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Exhibits:
Exhibit A
– Form of ▇▇▇▇
of Sale and Assignment
Exhibit
B
– Form of
Intellectual Property Assignment
Exhibit
C
– Form of
Assumption Agreement
Exhibit
D
– Form of
Transition Services Agreement
Exhibit
E
– Purchase Price
Allocation
v
This
PURCHASE AND SALE AGREEMENT (the “Agreement”) is
entered into as of June 9, 2008 between Tier Technologies, Inc., a Delaware
corporation (the “Seller”), and
Informatix, Inc., a California corporation (the “Buyer”). The
Seller and the Buyer are sometimes referred to herein individually as a “Party” and
collectively as the “Parties.”
INTRODUCTION
1. The
Seller is engaged, among other matters, in the Business.
2. The
Buyer desires to purchase from the Seller, and the Seller desires to sell to the
Buyer, the assets of the Seller relating exclusively or primarily to the
Business (other than assets excluded pursuant hereto), subject to the assumption
of certain related liabilities and upon the terms and subject to the conditions
set forth herein.
3. Capitalized
terms used in this Agreement shall have the meanings ascribed to them in Article
XI.
NOW,
THEREFORE, in consideration of the representations, warranties, covenants and
agreements contained in this Agreement and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Parties agree as
follows:
ARTICLE
I
ASSET
PURCHASE
1.1 Purchase and Sale of Assets;
Assumption of Liabilities.
(a) Transfer of
Assets. On the basis of the representations, warranties,
covenants and agreements and subject to the satisfaction or waiver of the
conditions set forth in this Agreement, at the Closing, the Seller shall sell,
convey, assign, transfer and deliver to the Buyer, and the Buyer shall purchase
and acquire from the Seller, all of the Seller’s right, title and interest in
and to the Acquired Assets, free and clear of any Encumbrances.
(b) Excluded
Assets. Notwithstanding anything to the contrary in this
Agreement, the Acquired Assets shall not include any of the Excluded
Assets.
(c) Assumed
Liabilities. On the basis of the representations, warranties,
covenants and agreements and subject to the satisfaction or waiver of the
conditions set forth in this Agreement, at the Closing, the Buyer shall assume
and agree to pay, perform and discharge when due the Assumed
Liabilities.
(d) Excluded
Liabilities. Notwithstanding anything to the contrary in this
Agreement, the Assumed Liabilities shall not include the Excluded
Liabilities.
1.2 Purchase
Price. In consideration for the sale and transfer of the
Acquired Assets, the
Buyer
shall at the Closing assume the Assumed Liabilities as provided in Section
1.1(d), shall pay to the Seller the Closing Payment in cash in immediately
available funds, and agrees to
-1-
1.3 The
Closing.
(a) Time and
Location. The Closing shall take place on the Closing Date at
a time and place to be mutually agreed upon by the Parties.
(b) Actions at the
Closing.
At
the Closing:
(i) the
Seller shall deliver (or cause to be delivered) to the Buyer the various
certificates, instruments and documents required to be delivered under Section
5.1;
(ii) the
Buyer shall deliver (or cause to be delivered) to the Seller the various
certificates, instruments and documents required to be delivered under Section
5.2;
(iii) the
Seller shall execute and deliver a ▇▇▇▇ of sale and assignment for all of the
Acquired Assets in the form attached hereto as Exhibit A (“▇▇▇▇ of
Sale”);
(iv) the
Seller shall execute and deliver one or more assignments of the Intellectual
Property Assets in the form or forms attached hereto as Exhibit B (“IP
Assignments”);
(v) the
Seller and the Buyer shall execute and deliver such other instruments of
conveyance as the Buyer may reasonably request in order to effect the sale,
transfer, conveyance and assignment to the Buyer of valid ownership of the
Acquired Assets, each in form and substance reasonably satisfactory to Buyer and
its legal counsel;
(vi) the
Buyer shall execute and deliver to the Seller an Assumption Agreement in
substantially the form attached hereto as Exhibit
C;
(vii) the
Buyer and the Seller shall execute and deliver a Transition Services Agreement
in substantially the form attached hereto as Exhibit D;
(viii) the
Buyer and the Seller shall execute and deliver such other instruments as the
Seller may reasonably request in order to effect the assumption by the Buyer of
the Assumed Liabilities, each in form and substance reasonably satisfactory to
Seller;
(ix) the
Seller shall transfer to the Buyer copies of all books and records, files and
other data within the possession of the Seller relating to the Acquired Assets
and reasonably necessary for the continued operation of the Business by the
Buyer, in a format reasonably acceptable to the Buyer, and without limiting the
generality of formats that are reasonably acceptable, books, records, files, and
other data that are delivered electronically in WORD, EXCEL or PDF formats, or
on paper shall be deemed to be acceptable to the Buyer;
(x) the
Buyer shall pay to the Seller the Closing Payment in cash by wire
transfer
of immediately available funds into an account designated by the
Seller;
-2-
(xi) the
Buyer shall deliver the Estimated Adjustment Payment to the escrow agent by wire
transfer of immediately available funds;
(xii) the
Seller shall deliver to the Buyer, or otherwise put the Buyer in possession and
control of, all of the Acquired Assets of a tangible nature owned by the Seller;
and
(xiii) the
Parties shall execute and deliver to each other a cross-receipt evidencing the
transactions referred to above.
1.4 Post-Closing
Adjustment. The Closing Payment shall be subject to adjustment
after the Closing Date as follows:
(a) Within
30 days after the Closing Date, the Seller shall prepare and deliver to the
Buyer (i) the Closing Statement and (ii) an unaudited balance sheet of the
Business as of the Closing Date (the "Closing Balance Sheet"). Each
of the Closing Statement and the Closing Balance Sheet shall be prepared in
accordance with GAAP and on a consistent basis with the accounting principles,
practices, procedures, policies and methods that were employed in the
preparation of the Most Recent Balance Sheet.
(b) The Buyer shall deliver
to the Seller, within 30 days after delivery by the Seller to the Buyer of the
Closing Statement, either a notice indicating that the Buyer accepts the Closing
Statement or a statement describing the Buyer’s objections to the Closing
Statement, which statement of objections shall describe in detail the specific
nature and amount of each objection and shall state in detail all bases upon
which the Buyer believes the Closing Statement is not in conformity with the
requirements set forth in Section 1.4(a). During such 30-day period
Seller shall, and shall cause its accountants, to respond reasonably to any
inquiries from Buyer related to the Closing Working Capital Amount and the
Closing Statement. If the Buyer delivers to the Seller a notice
accepting the Closing Statement, or the Buyer does not deliver a written
objection to the Closing Statement within such 30-day period, then, effective as
of either the date of delivery of such notice of acceptance or as of the close
of business on such 30th day,
the Closing Statement shall be deemed to be accepted by the Buyer.
(c) If
the Buyer timely objects to the Closing Statement, such objections shall be
resolved as follows:
(i) The
Buyer and the Seller shall first use reasonable efforts to resolve such
objections.
(ii) If
the Buyer and the Seller are able to resolve such objections within 30 days
after delivery to the Seller of such statement of objections, the Buyer and the
Seller shall, within 30 days after delivery of such statement of objections,
jointly prepare and sign a statement setting forth the Closing Working Capital
Amount, which amount shall reflect the resolution of objections agreed to by the
Buyer and the Seller.
(iii) If
the Buyer and the Seller do not reach a resolution of all objections set forth
on the Buyer’s statement of objections within 30 days after delivery of such
statement of
objections,
the Buyer and the Seller shall, within 30 days after the expiration of such
30-day period, (A) jointly prepare and sign a statement setting forth (1) those
objections
(if any)
-3-
(iv) The
Buyer and the Seller shall jointly submit to the Neutral Accountant, within five
(5) Business Days after the date of the engagement of the Neutral Accountant (as
evidenced by the date of the engagement agreement), a copy of the Closing
Statement, a copy of the statement of objections delivered by the Buyer to the
Seller, and the joint statement referred to in Section 1.4(c)(iii)(A)
above. Each of the Buyer and the Seller shall submit to the Neutral
Accountant (with a copy delivered to the other Party on the same day), within 30
days after the date of the engagement of the Neutral Accountant, a memorandum
(which may include supporting exhibits) setting forth their respective positions
on the Unresolved Objections. Each of the Buyer and the Seller may
(but shall not be required to) submit to the Neutral Accountant (with a copy
delivered to the other Party on the same day), within 45 days after the date of
the engagement of the Neutral Accountant, a memorandum responding to the initial
memorandum submitted to the Neutral Accountant by the other
Party. Unless requested by the Neutral Accountant in writing, neither
the Buyer nor the Seller may present any additional information or arguments to
the Neutral Accountant, either orally or in writing.
(v) The
Buyer and the Seller shall instruct the Neutral Accountant that (A) the scope of
its review and authority shall be limited to resolving the Unresolved
Objections, (B) in resolving the Unresolved Objections, it shall determine an
appropriate value for each Closing Statement item that is the subject of an
Unresolved Objection, which value shall be equal to one of, or between, the
values proposed by the Seller in the Closing Statement and by the Buyer in its
statement of objections, and (C) issue a ruling which sets forth the resolution
of each Unresolved Objection and includes a statement setting forth the Closing
Working Capital Amount, reflecting the Neutral Accountant’s resolution of the
Unresolved Objections.
(vi) The
resolution by the Neutral Accountant of the Unresolved Objections shall be
conclusive and binding upon the Buyer and the Seller. The Buyer and
the Seller agree that the procedure set forth in this Section 1.4(c) for
resolving disputes with respect to the Closing Statement shall be the sole and
exclusive method for resolving any such disputes; provided that this provision
shall not prohibit any Party from instituting litigation to enforce the ruling
of the Neutral Accountant.
(vii) The
Buyer and the Seller shall share equally the fees and expenses of the Neutral
Accountant for its services under this Section 1.4(c).
(d) If
the Closing Working Capital Amount as shown on the Final Closing Statement is
less than the Target Working Capital Amount, the Closing Payment shall be
reduced by such deficiency and the Seller shall pay to the Buyer, by wire
transfer or other delivery of immediately available funds, within three Business
Days after the date on which the Final Closing Statement is finally determined
pursuant to this Section 1.4, an amount equal to such deficiency. If
the Closing Working Capital Amount as shown on the Final Closing Statement
exceeds the Target Working Capital Amount, the Closing Payment shall be
increased by such excess amount and the Buyer shall pay to the Seller an amount
equal to such excess (the “Adjustment Payment”). The Estimated
Adjustment Payment shall be paid into an escrow
-4-
1.5 Earn-Out
Payments. As additional consideration for the Acquired Assets,
the Seller may be entitled to certain Earn-Out Payments as set forth below,
payable ninety (90) days after the end of each of Fiscal Year 2008, Fiscal Year
2009, and Fiscal Year 2010, as applicable, unless the Seller delivers
a notice of objection under Section 1.5(g), in which case the applicable
Earn-Out Payment shall be payable 30 days after resolution of the dispute under
Section 1.5(h)(ii) or 1.5(h)(v), as applicable:
(a) If
the 2008 Actual Revenues equal or exceed the 2008 Target, the 2008 Payment
Amount shall be $1 million. If the 2008 Actual Revenues are less than
100% of the 2008 Target but equal to or greater than 50% of the 2008 Target, the
2008 Payment Amount shall be determined by multiplying $1 million by a fraction,
the numerator of which is the 2008 Actual Revenues and the denominator of which
is the 2008 Target. If the 2008 Actual Revenues are less than 50% of
the 2008 Target, there shall be no 2008 Payment Amount.
(b) If
the 2009 Actual Revenues equal or exceed the 2009 Target, the 2009 Payment
Amount shall be $1 million. If the 2009 Actual Revenues are less than
100% of the 2009 Target but equal to or greater than 50% of the 2009 Target, the
2009 Payment Amount shall be determined by multiplying $1 million by a fraction,
the numerator of which is the 2009 Actual Revenues and the denominator of which
is the 2009 Target. If the 2009 Actual Revenues are less than 50% of
the 2009 Target, there shall be no 2009 Payment Amount.
(c) If
the 2010 Actual Revenues equal or exceed the 2010 Target, the 2010 Payment
Amount shall be $1 million. If the 2010 Actual Revenues are less than
100% of the 2010 Target but equal to or greater than 50% of the 2010 Target, the
2010 Payment Amount shall be determined by multiplying $1 million by a fraction,
the numerator of which is the 2010
-5-
(d) Notwithstanding
anything to the contrary in Section 1.5(b) above, the Buyer shall receive a
credit of $200,000 (the “Earn-Out Credit”) towards the Earn-Out Payment for
Fiscal Year 2009 so that the Earn-Out Payment for Fiscal Year 2009 shall be
calculated net of the Earn-Out Credit.
(e) The
Earn-Out Payment for each such fiscal year shall be calculated on a separate
basis, with no excess over a fiscal year’s target revenues being carried forward
into subsequent fiscal year or carried back into a prior fiscal
year.
(f) Within
60 days after the end of each such fiscal year, the Buyer shall prepare and
deliver to the Seller a statement showing the amount of the 2008 Actual
Revenues, the 2009 Actual Revenues, and the 2010 Actual Revenues, as applicable,
with such supporting detail as the Seller may reasonably request (each, a
“Revenue Statement”). The Revenue Statements shall be calculated in
accordance with GAAP. Upon the written request of the Seller
delivered to the Buyer not later than 30 days after delivery of a Revenue
Statement to the Seller, the Buyer shall obtain a certification by independent
accountants as to the accuracy of the Revenue Statement. Seller shall
pay all costs and fees of such independent accountants associated with providing
such certification.
(g) The
Seller shall deliver to the Buyer, within 30 days after delivery by the Buyer to
the Seller of the Revenue Statement, either a notice indicating that the Seller
accepts the Revenue Statement or a statement describing the Seller’s objections
to the Revenue Statement, which statement of objections shall describe in detail
the specific nature and amount of each objection and shall state in detail all
bases upon which the Seller believes the Revenue Statement is not in conformity
with the requirements set forth in Section 1.5(f). If the Seller
delivers to the Buyer a notice accepting the Revenue Statement, or the Seller
does not deliver a written objection to the Revenue Statement within such 30-day
period, then, effective as of either the date of delivery of such notice of
acceptance or as of the close of business on such 30th day, the Revenue
Statement shall be deemed to be accepted by the Seller.
(h) If
the Seller objects to the Revenue Statement within the 30-day period provided in
Section 1.5(g), such objections shall be resolved as follows:
(i) The
Buyer and the Seller shall first use reasonable efforts to resolve such
objections.
(ii) If
the Buyer and the Seller are able to resolve such objections within 15 days
after delivery to the Buyer of such statement of objections, they shall evidence
such agreement in writing and the Buyer shall pay to the Seller the applicable
Earn-Out Payment, if any, within 5 Business Days.
(iii) If
the Buyer and the Seller do not reach a resolution of such objections within
such 15-day period, the Buyer and the Seller shall, within 15 days after the
expiration of such 15-day period, jointly engage the Neutral Accountant to
resolve the matter.
-6-
(iv) The
Buyer and the Seller shall jointly submit to the Neutral Accountant, within 5
Business Days after the date of the engagement of the Neutral Accountant (as
evidenced by the date of the engagement agreement), a copy of the Revenue
Statement and a copy of the statement of objections delivered by the Seller to
the Buyer. Each of the Buyer and the Seller shall submit to the
Neutral Accountant (with a copy delivered to the other Party on the same day),
within 30 days after the date of the engagement of the Neutral Accountant, a
memorandum (which may include supporting exhibits) setting forth their
respective positions on the matter. Each of the Buyer and the Seller
may (but shall not be required to) submit to the Neutral Accountant (with a copy
delivered to the other Party on the same day), within 45 days after the date of
the engagement of the Neutral Accountant, a memorandum responding to the initial
memorandum submitted to the Neutral Accountant by the other
Party. Unless requested by the Neutral Accountant in writing, neither
the Buyer nor the Seller may present any additional information or arguments to
the Neutral Accountant, either orally or in writing.
(v) The
Neutral Accountant shall then determine the applicable amount of revenues and
issue a ruling in writing. The resolution by the Neutral Accountant
shall be conclusive and binding upon the Buyer and the Seller, and the Buyer
shall pay to the Seller the amount of the Earn-Out Payment, if any, as
determined by the Neutral Accountant within 5 Business Days of the issuance of
such determination. The Buyer and the Seller agree that the procedure
set forth in this Section 1.5 for resolving disputes with respect to the Revenue
Statements shall be the sole and exclusive method for resolving any such
disputes; provided that this provision shall not prohibit any Party from
instituting litigation to enforce the ruling of the Neutral
Accountant.
(vi) The
Buyer and the Seller shall share equally the fees and expenses of the Neutral
Accountant for its services under this Section 1.5(h).
1.6 Consents to
Assignment. Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign or
transfer any contract, lease, authorization, license or permit, or any claim,
right or benefit arising thereunder or resulting therefrom, if an attempted
assignment or transfer thereof, without the consent of a third party thereto
would constitute a breach thereof. If Deferred Consent is not
obtained, or if an attempted assignment or transfer thereof would be ineffective
or would affect the rights thereunder so that the Buyer would not receive all
such rights, then, in each such case, (a) the Deferred Item shall be withheld
from sale pursuant to this Agreement without any reduction in the Closing
Payment, (b) from and after the Closing, the Seller and the Buyer will
cooperate, in all reasonable respects, to obtain such Deferred Consent as soon
as practicable after the Closing, provided that the Seller shall not be required
to make any payments or agree to any material undertakings in connection
therewith, and (c) until such Deferred Consent is obtained, the Seller and the
Buyer will cooperate, in all reasonable respects, to provide to the Buyer the
benefits under the Deferred Item to which such Deferred Consent relates (with
the Buyer entitled to all the gains, revenues, income and benefits and
responsible for all the losses, Taxes, liabilities and/or obligations
thereunder). In particular, in the event that any such Deferred
Consent is not obtained prior to the Closing, then the Buyer and the Seller
shall enter into such arrangements (including subleasing or subcontracting if
permitted) to provide to the Parties the economic and operational equivalent of
obtaining such Deferred Consent and assigning or transferring such contract,
lease, authorization, license or permit, including enforcement for the benefit
of the Buyer of all claims or rights arising thereunder, and the performance
by
the Buyer of the
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1.7 Further
Assurances. At any time and from time to time after the
Closing Date, as and when requested by any Party and at such Party’s expense,
the other Party shall promptly execute and deliver, or cause to be executed and
delivered, all such documents, instruments and certificates and shall take, or
cause to be taken, all such further or other actions as are necessary to
evidence and effectuate the transactions contemplated by this
Agreement.
1.8 Allocation. The
Parties shall allocate the Purchase Price among the Acquired Assets for all
purposes (including financial, accounting and Tax purposes) in accordance with
the allocation schedule attached hereto as Exhibit E, and shall
file, and shall cause their Affiliates to file, all Tax Returns and statements,
forms and schedules in connection therewith in a manner consistent with such
allocation schedule, and shall take no position contrary thereto unless required
to do so by applicable Tax laws.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE SELLER
The
Seller represents and warrants to the Buyer that the statements contained in
this Article II are true and correct as of the date hereof, except as set forth
in the Disclosure Schedule. The Disclosure Schedule shall be arranged
in sections and subsections corresponding to the numbered and lettered sections
and subsections contained in this Article II. The disclosures in any
section or subsection of the Disclosure Schedule shall qualify other sections
and subsections in this Article II to the extent it is reasonably clear from a
reading of the disclosure that such disclosure is applicable to such other
sections and subsections. The inclusion of any information in the
Disclosure Schedule (or any update thereto) shall not be deemed to be an
admission or acknowledgment, in and of itself, that such information is required
by the terms hereof to be disclosed, is material to the Business, has resulted
in or would result in a Business Material Adverse Effect, or is outside the
Ordinary Course of Business. For purposes of this Agreement, the
phrase “to the knowledge of the Seller” or any phrase of similar import shall
mean and be limited to either the actual knowledge of the following
individuals: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇.
2.1 Organization, Qualification
and Corporate Power. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to conduct business under the laws of each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities, in each case as they relate exclusively to
the Business, makes such qualification necessary. The Disclosure
Schedule contains a complete and accurate list of each jurisdiction in which
Seller is qualified to do business as a foreign corporation with respect to the
Business, and such jurisdictions constitute all jurisdictions where the
character of the properties owned, leased or operated by it
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2.2 Authority. The
Seller has all requisite corporate power and authority to execute and deliver
this Agreement and the Ancillary Agreements to which it will be a party and to
perform its obligations hereunder and thereunder. The execution and
delivery by the Seller of this Agreement and such Ancillary Agreements and the
consummation by the Seller of the transactions contemplated hereby and thereby
have been validly authorized by all necessary corporate action on the part of
the Seller. No consent or vote of the Seller’s shareholders is
required for the execution and delivery by the Seller of this Agreement or any
Ancillary Agreement. This Agreement has been, and such Ancillary
Agreements will be, validly executed and delivered by the Seller and, assuming
this Agreement and each such Ancillary Agreement constitute the valid and
binding obligation of the Buyer, constitutes or will constitute a valid and
binding obligation of the Seller, enforceable against the Seller in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other similar
laws relating to or affecting the rights of creditors generally and by equitable
principles, including those limiting the availability of specific performance,
injunctive relief and other equitable remedies and those providing for equitable
defenses.
2.3 Noncontravention. Neither
the execution and delivery by the Seller of this Agreement or the Ancillary
Agreements, nor the consummation or performance by the Seller of the
transactions contemplated hereby or thereby, will, directly or indirectly (with
or without notice or lapse of time):
(a) conflict
with or violate any provision of (i) the Certificate of Incorporation or bylaws
of the Seller or (ii) any resolution adopted by the Board of Directors, any
committee thereof, or the shareholders of the Seller;
(b) require
on the part of the Seller any filing with, or any permit, authorization, consent
or approval of, any Governmental Entity;
(c) conflict
with, result in a breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of obligations under,
create in any party the right to terminate or modify, or require any notice,
consent or waiver under, any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness or Encumbrance to which the Seller is a party or by
which the Seller is bound or to which any of its assets is subject;
(d) violate
any order, writ, injunction or decree specifically naming, or statute, rule or
regulation applicable to the Seller or any of or its properties or assets;
or
(e) result
in the imposition or creation of any Encumbrance upon or with respect to any of
the Acquired Assets.
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2.4 Financial
Statements. The Disclosure Schedule includes copies of the
Financial Statements, and an aging of accounts receivable as of May 31, 2008 and
an aging accounts payable as of April 30, 2008. The Financial
Statements are true, complete and correct in all material respects, have been
prepared in accordance with GAAP and fairly present, in all material respects,
the financial condition and results of operations of the Business as of the
respective dates thereof and for the periods referred to therein in accordance
with GAAP; provided, however, that the Financial Statements (i) do not include
footnotes, (ii) for fiscal years 2005 and 2006, do not include corporate
overhead, (iii) for fiscal year 2007, includes as corporate overhead only
corporate allocations for sales and marketing costs, costs of divesting
activities, and legal costs, and (iv) for fiscal year 2008 includes as corporate
overhead only costs of divesting activities. The Financial Statements
have been and will be prepared from and are in accordance with the accounting
records of the Seller. The Disclosure Schedule fairly presents all
inter-company transactions having a material effect on the
Business.
2.5 Books and
Records. The books of account and other financial records of
Seller pertaining to the Business and the Acquired Assets, all of which have
been made available to Buyer, are complete and correct and represent actual,
bona fide transactions and have been maintained in accordance with sound
business procedures.
2.6 Absence of Certain
Changes. Between the Balance Sheet Date and the date of this
Agreement, the Seller has conducted the Business in the Ordinary Course of
Business, and there have not been any changes in the financial condition,
results of operations, or prospects of the Business or any changes in the
Business, the Acquired Assets, or the Assigned Contracts, except for any changes
that would not reasonably be expected to result in a Business Material Adverse
Effect. Except as set forth on the Disclosure Schedule, between the
Balance Sheet Date and the date of this Agreement, the Seller has not taken any
of the following actions (or permitted any of the following events to occur)
with respect to the Business, including any employees who work in the
Business:
(a) sold,
assigned or transferred any portion of the Acquired Assets in a single
transaction or series of related transactions in an amount in excess of $10,000,
except in the Ordinary Course of Business;
(b) suffered
any extraordinary losses (whether or not covered by insurance) material to the
Business;
(c) granted
or amended any rights to severance benefits, “stay pay” or termination pay to
any officer or other employee of the Business or increased benefits payable or
potentially payable to any such officer or other employee of the Business under
any previously existing severance benefits, “stay-pay” or termination pay
arrangements, in each case except for obligations that will not constitute an
Assumed Liability;
(d) made
any capital expenditures or commitments therefor in an amount in excess of
$10,000, except in the Ordinary Course of Business;
(e) acquired
any operating business, whether by merger, stock purchase or asset purchase,
except for any such business that did not become part of the
Business;
(f) incurred
or guaranteed any indebtedness for borrowed money;
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(g) entered
into any Employment Agreement, compensation agreement or deferred compensation
agreement (or any amendment to any such existing agreement) with any officer or
other employee of the Business;
(h) materially
amended the terms of any existing Business Benefit Plan, except as required by
law and as disclosed on the Disclosure Schedule;
(i) materially
changed its accounting principles, methods or practices;
(j) cancelled
or waived any claims or rights with a value to the Seller in excess of
$10,000;
(k) sold,
leased or otherwise disposed of any asset or property of the Business with a
value in excess of $10,000 outside the Ordinary Course of Business or created
any Encumbrance on any asset or property of the Business with a value in excess
of $10,000;
(l) made
any payment (except in the Ordinary Course of Business) or increase in any
bonuses, salaries or other compensation to any Business Employee or entered into
any employment, severance or similar contract with any Business Employee;
or
(m) entered
into any agreement or commitment with respect to any of the matters referred to
in paragraphs (a) through (l) of this Section 2.6.
2.7 Undisclosed
Liabilities. The Business does not have any Liability (and, to
the knowledge of the Seller, there is no action, suit, proceeding, hearing, or
investigation, charge, complaint, claim or demand against the Seller that
relates to the Business or the Acquired Assets giving rise to any Liability),
except for (a) Liabilities shown on the Most Recent Balance Sheet,
(b) Liabilities that have arisen since the Balance Sheet Date in the
Ordinary Course of Business in an aggregate amount not greater than $50,000,
(c) those specifically set forth on the Disclosure Schedule, and (d) the
Excluded Liabilities.
2.8 Tax
Matters. The Seller has filed all material Tax Returns that it
was required to file (separately or as part of a consolidated, combined or
unitary group) and all such Tax Returns were correct and complete in all
material respects to the extent they relate to the Business. The
Seller has paid (or had paid on its behalf) all Taxes that have or may have
become due for all periods covered by the Tax Returns or otherwise, pursuant to
any assessment received by the Seller, as well as all Taxes for which a Tax
Return is not required to be filed. There are no Encumbrances on or
with respect to any of the Acquired Assets that arose in connection with any
failure (or alleged failure) to pay any Taxes, and to the knowledge of the
Seller there is no basis for assertion of any claims attributable to Taxes that,
if adversely determined, would result in any Encumbrance on or with respect to
any of the Acquired Assets. All Taxes that relate to the Business
that the Seller is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Entity.
2.9 Tangible Personal Property;
Title to Acquired Assets. The Seller has good title to, a
valid
leasehold interest in or a valid license or right to use, all of the tangible
personal property reflected on the Most Recent Balance Sheet (other than
property sold, consumed or otherwise disposed of in the Ordinary Course of
Business since the Balance Sheet Date), free and
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2.10 Owned Real
Property. The Seller does not own any real property that is
used exclusively or primarily in the Business.
2.11 Leased Real
Property. The Disclosure Schedule lists the Seller Real Estate
Leases and describes all Leased Real Property. The Seller has made
available to the Buyer complete and accurate copies of the Seller Real Estate
Leases (as amended to date). With respect to each such
Lease:
(a) the
Lease is a valid and binding obligation of Seller and, to the knowledge of the
Seller, each other party to such Lease;
(b) neither
the Seller nor, to the knowledge of the Seller, any other party to the Lease is
in breach or default and, to the knowledge of the Seller, no event has occurred
which, with notice or lapse of time or both, would constitute a breach or
default or permit termination, modification or acceleration
thereunder;
(c) the
Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the leasehold or subleasehold of the
Lease;
(d) no
party to the Lease has repudiated any provision thereof;
(e) to
the knowledge of the Seller, there are no disputes or oral agreements in effect
as to the Lease; and
(f) all
facilities leased thereunder are supplied with utilities and other services
necessary for the operation by the Seller of such facilities.
2.12 Intellectual
Property.
(a) The
Disclosure Schedule lists all of the Business Intellectual Property that is
material to the Business as currently conducted. The Seller owns or
has the right to use pursuant to license, sublicense, agreement, or permission
all Intellectual Property used in the performance of the Assigned Contracts and
in the operation of the Business as currently conducted (collectively, the
“Business Intellectual
Property”). Except for items identified on the Disclosure
Schedule as “non-transferable,” each item of Business Intellectual Property
owned or used by the Seller prior to the Closing hereunder will be owned or
available for use by the Buyer on identical terms and conditions immediately
subsequent to the Closing. The Seller has taken all commercially
reasonable actions and has used its reasonable best efforts to maintain and
protect its ownership rights in each item of Business Intellectual Property that
it owns. The Seller has complied, in all material respects, with any
restrictions or required protections under any licenses, sublicenses, agreements
or permissions relating to Business Intellectual Property of any third party
used in the operation of the Business as currently conducted.
(b) The
Seller has not, with respect to the Business, infringed upon, violated,
interfered with, misused, or misappropriated any Intellectual Property rights of
third parties, and the
Seller
has not, with respect to the Business, received any charge, complaint, claim,
demand,
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(c) Section
2.12(c) of the Disclosure Schedule identifies each issued patent or pending
patent application, patent invention disclosure, issued copyright registration
or pending copyright application, issued trademark registration or pending
trademark application, or other registration or application with respect to the
Business Intellectual Property, if any, that has been made by or issued to the
Seller, and identifies each material license, agreement, or other permission
that the Seller has granted to any third party with respect to any of the
Business Intellectual Property. Section 2.12(c) of the Disclosure
Schedule also identifies each trade name or unregistered trademark owned and
currently being used by the Seller in connection with the conduct of the
Business. Except as identified in Section 2.12(c) of the Disclosure
Schedule, with respect to each item of Business Intellectual
Property:
(i) the
Seller’s right, title, and interest in and to the items are free and clear of
any Encumbrances or other restriction;
(ii) the
item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge of infringement, violation, interference, misuse, or
misappropriation;
(iii) no
action, suit, proceeding, hearing, investigation, charge of infringement,
violation, interference, misuse, or misappropriation, complaint, claim, or
demand is currently pending and, to the knowledge of the Seller, no action,
suit, proceeding, hearing, investigation, charge, complaint, claim or demand has
been threatened, which challenges the legality, validity, enforceability, use,
or ownership of the item;
(iv) no
royalties, or other payments are payable by the Seller to any other person by
reason of the ownership, sale, license or use of the item;
(v) the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not breach, violate or conflict with
any instrument or agreement governing any Business Intellectual Property and
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any Business Intellectual Property or in any way
impair the right of the Buyer to use, sell, license or dispose of or to bring
any action for the infringement, violation, interference, misuse, or
misappropriation of any such Business Intellectual Property or any portion
thereof; and
(vi) to
the knowledge of the Seller, there are no existing facts or circumstances that
would render any Business Intellectual Property of the Seller invalid or
unenforceable in any material respects.
(d) Section
2.12(d) of the Disclosure Schedule identifies each item of material Business
Intellectual Property that any third party owns and that the Seller uses
pursuant to license, sublicense, agreement, or permission, except for shrinkwrap
or click wrap licenses for commercial off-the-shelf end-user application
software licenses. With respect to each item of Business Intellectual
Property
required to be identified in Section 2.12(d) of the Disclosure
Schedule:
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(i) To
the knowledge of the Seller, the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable and in full force and
effect, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to creditors’ rights generally and general
equitable principles;
(ii) to
the knowledge of the Seller, no party to the license, sublicense, agreement, or
permission covering the item is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(iii) to
the knowledge of the Seller, no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof; and
(iv) the Seller has not
granted any sublicense or similar right with respect to the license, sublicense,
agreement, or permission.
(e) The
Seller has a current license to use all of the software used in the Business
(other than software owned by the Seller to be transferred to the Buyer as part
of the Acquired Assets), and all such licenses are transferable to the
Buyer. No computer included in the Acquired Assets contains any
unlicensed software.
2.13 Contracts.
(a) The
Disclosure Schedule lists all of the following Assigned Contracts:
(i) any
agreement (or group of related agreements with the same party) that involves the
performance of services or delivery of goods or materials by the Seller of an
amount or value in excess of $25,000;
(ii) any
agreement (or group of related agreements with the same party) that involves the
performance of services or delivery of goods or materials to the Seller of an
amount or value in excess of $25,000;
(iii) any
agreement (or group of related agreements with the same party) that was not
entered into in the Ordinary Course of Business that involves expenditures or
receipts in excess of $25,000;
(iv) any
agreement for the acquisition by the Seller of any operating business, whether
by merger, stock purchase or asset purchase, except for any such business which
did not or will not become part of the Business;
(v) any
agreement establishing a partnership or joint venture;
(vi) any
agreement (or group of related agreements with the same party) under which it
has created, incurred, assumed or guaranteed (or may create, incur, assume or
guarantee)
indebtedness
the outstanding balance of which is more than $25,000 or under which an
Encumbrance has been imposed on any of its assets, tangible or intangible,
relating to the Business;
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(vii) any
agreement that prohibits the Business from freely engaging in business anywhere
in the world;
(viii) any
Employment Agreement involving the officers or employees of the Business (a)
that causes the employment of such officer or employee not to be at-will
employment or (b) that provides severance benefits to such officer or
employee;
(ix) any
agreement involving capital expenditures in excess of $25,000;
(x) any
severance, “stay pay” or termination agreement with any officer or other
employee of the Business; and
(xi) any
amendment, supplement or modification (whether oral or written) in respect of
any of the foregoing;
provided, however, that no
agreement referred to in clauses (i) through (ix) above need be disclosed unless
either (A) the Business currently has, or may in the future have, any rights or
obligations thereunder or (b) the Liability for performance thereunder will be
included in the Assumed Liabilities (except as otherwise provided in this
Agreement).
(b) The
Seller has made available to the Buyer a complete and accurate copy of each
Assigned Contract. Each Assigned Contract is a valid and binding
obligation of the Seller and, to the knowledge of the Seller, is a valid,
binding and enforceable obligation of the other party thereto, in full force and
effect. Except as set forth on the Disclosure Schedule, each Assigned
Contract is assignable by the Seller without the consent of any other
person. Seller is, and at all times has been, in compliance with all
applicable terms and requirements of Assigned Contracts, except to the extent
such noncompliance would not reasonably be expected to have a Business Material
Adverse Effect.
(c) To
the knowledge of the Seller, no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene, conflict with or
result in a breach of, or give the Seller or other person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or payment under, or to cancel, terminate or modify, any
Assigned Contract; provided, however, that the Buyer acknowledges that the
Government Contracts may be terminated by the applicable Governmental Entity at
any time; further provided that such acknowledgement does not relieve the Seller
of the obligation of disclosure hereunder of any default, event of default, or
breach by the Seller of any such Government Contract. The Disclosure
Schedule lists all of the Government Contracts.
(d) No
event has occurred or circumstance exists under or by virtue of any Assigned
Contract that (with or without notice or lapse of time) would cause the creation
of any Encumbrance affecting any of the Acquired Assets.
(e) Seller
is currently in compliance in all material respects with each Assigned
Contract. There are no renegotiations of, attempts to renegotiate or
outstanding rights to renegotiate any material amounts paid or payable to the
Seller under any Assigned Contracts and no person has made
written
demand for such renegotiation. The Seller has not received any
indication by any customer or supplier of the Seller of an intention to
discontinue or change the terms of its relationship with the Seller or not to
conduct business with the Buyer after the
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(f) The
Seller has received a change order approved and executed by the State of
Michigan that relieves the Seller of the obligation to pay to the state interest
earned on unspent debit card funds.
(g) With
respect to any Government Contract, to the knowledge of the Seller, the Seller
has not been notified or has not otherwise become aware of any actual or alleged
violation or breach of any statute, regulation, representation, certification,
disclosure obligation, contract term, condition, clause, provision or
specification by the Seller that could reasonably be expected to result in
Liability or affect payments under any Government Contract, or adversely affect
the award of Government Contracts, or eligibility for such award, to the Seller
or to the Buyer as the assignee of such Government Contract.
(h) With
respect to the Business, the Seller is not a party to any litigation, pending or
threatened, or, to the knowledge of the Seller, the subject of any
investigation, pending or threatened, that could reasonably be expected to give
rise to a (i) Liability under the False Claims Act, the Anti Kickback Act, the
▇▇▇▇ Anti Lobbying Amendment, federal election law, the bribery and gratuities
laws, revolving door laws, the Foreign Corrupt Practices Act, the Procurement
Integrity Act, export control laws, money laundering laws, anti terrorism laws,
the GSA Price Reductions clause, the Service Contract Act, the Covenant Against
Contingent Fees, or, where and as applicable, the Federal Acquisition Regulation
cost principles or the Cost Accounting Standards, or (ii) a price adjustment or
other Liability under the Truth in Negotiations Act, the GSA clauses relating to
the submission of cost or pricing data or information other than pricing data,
the GSA Price Reductions clause, or the GSA Industrial Funding Fee
clause. To the knowledge of the Seller, there exist no reasonable
grounds for a claim of any Liability against the Seller, with respect to the
Business, as a result of defective “cost or pricing data” or “information other
than cost or pricing data” submitted to any Governmental Authority, prime
contractor, or higher-tier subcontractor. Except as set forth in
Section 2.13(h) of the Disclosure Schedule, the Seller is not currently a party
to any claim or other dispute involving a Government Contract. The
Seller has not at any time received any written or oral notice of any proposed
or actual suspension, debarment or similar disqualification with respect to
Government Contracts against the Seller or any of its officers or
employees. The Seller has not received written or oral notice of,
otherwise learned of or undergone, and is not undergoing any proposed or actual
administrative, civil or criminal investigation, or indictment relating to any
Government Contract, and, to the knowledge of the Seller, no such civil or
criminal investigation, indictment or review is threatened or
planned.
2.14 Entire
Business. Except for the Excluded Assets, any Deferred Items
and any services to be provided pursuant to the Transition Services Agreement,
the Acquired Assets are, when utilized by a labor force substantially similar to
that employed by the Seller in connection with the Business on the date hereof,
adequate to conduct the Business in all material respects as currently conducted
and to perform the Assigned Contracts in accordance with the terms
thereof. Except as set forth in the Disclosure Schedule, the Acquired
Assets (a) constitute all of the assets, tangible and intangible, of any nature
whatsoever, used in the operation of the Business as currently conducted and
necessary to perform the Assigned Contracts in accordance with the terms
thereof, and (b) include all of the operating
assets
of the Business. Except as set forth in
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2.15 Litigation. Section
2.15 of the Disclosure Schedule sets forth each instance in which the Seller,
with respect to the Business or the Acquired Assets, (a) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (b) is a
party or, to the knowledge of the Seller, is threatened to be made a party to
any action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. Except as set forth in Section
2.15 of the Disclosure Schedule, to the knowledge of the Seller, there is no
basis for any such action, suit, proceeding, hearing, or investigation to be
brought or threatened against the Seller. To the knowledge of the Seller, no
executive or key employee of any of the Seller is a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any arbitrator that
would in any material way adversely affect his or her ability to perform his or
her employment duties.
2.16 Employment
Matters.
(a) The
Disclosure Schedule contains a list, as of the date of this
Agreement, of all Business Employees, along with the position and the
annual rate of compensation of each such person and whether each such person is
an exempt or non-exempt employee. Each current Business Employee has
entered into a non-disclosure agreement with the Seller. A copy or
form of the Seller’s standard form of non-disclosure agreement has previously
been delivered to the Buyer. The Disclosure Schedule contains a list
of all Business Employees who are a party to a non-competition agreement with
the Seller. None of the Business Employees is currently on leave
except for those identified on the Disclosure Schedule as being on
leave.
(b) The
Seller is not a party to or bound by any collective bargaining agreement
relating to the Business, nor has the Seller, with respect to the Business, at
any time experienced, (i) since January 1, 2001, any strikes, claims of
unfair labor practices or other collective bargaining disputes, or
(ii) since January 1, 2005, any material grievances.
(c) The
Seller has complied in all material respects, with respect to the Business and
the Business Employees, with all applicable law relating to employment
practices, terms and conditions of employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, the payment of social
security and similar Taxes and occupational safety and health. The
Seller is not liable for the payment of any Taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the foregoing
legal requirements.
2.17 Employee
Benefits.
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(a) The
Disclosure Schedule contains a complete and accurate list of all Business
Benefit Plans. Complete and accurate copies of all Business
Benefit Plans and all related trust agreements, insurance contracts and
summary plan descriptions have been made available to the Buyer. Each
such Business Benefit Plan has been maintained, funded, and administered in
accordance with the applicable requirements of ERISA, the Code, and other
applicable laws.
(b) The
Business Benefit Plans that are intended to be qualified under
Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Business Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income Taxes under Sections 401(a) and 501(a), respectively, of the Code,
or the period for obtaining such a determination letter has not yet
closed. All required reports and descriptions (including annual
reports (IRS Form 5500), summary annual reports, and summary plan descriptions)
have been timely filed and/or distributed in accordance with the applicable
requirements of ERISA and the Code with respect to each such Business Benefit
Plan. The requirements of COBRA have been met with respect to each
such Business Benefit Plan which is an employee welfare benefit plan subject to
COBRA. All contributions (including all employer contributions and
employee salary reduction contributions) that are due have been made within the
time period prescribed by ERISA to each such Business Benefit Plan that is an
Employee Pension Benefit Plan and all contributions for any period ending on or
before the Closing Date that are not yet due have been made to each such
Employee Pension Benefit Plan or accrued in accordance with the past custom and
practice of the Seller. All premiums or other payments for all
periods ending on or before the Closing Date have been paid with respect to each
such Business Benefit Plan which is an employee welfare benefit plan (as defined
under Section 3(1) of ERISA).
(c) Neither
the Seller nor any ERISA Affiliate has ever maintained or been required to
contribute to any Employee Benefit Plan subject to Title IV of ERISA or to any
Multiemployer Plan.
(d) No
act or omission has occurred and no condition exists with respect to any
Business Benefit Plan maintained by the Seller, any of its Affiliates or any
ERISA Affiliate that would subject the Buyer to any fine, penalty, Tax or
liability of any kind imposed under ERISA or the Code.
(e) There
are no unfunded obligations under any Business Benefit Plan providing welfare
benefits after termination of employment to any Business Employee (or to any
beneficiary of any such employee), excluding continuation of health coverage
required to be continued under Section 4980B of the Code or other similar
applicable laws.
(f) There
have been no prohibited transactions with respect to any Business Benefit Plan
maintained by the Seller or any Affiliate that has or could reasonably be
expected to result in a material liability of the Seller. To the
knowledge of the Seller, no fiduciary has any liability for breach of fiduciary
duty or any other failure to act or comply in connection with the administration
or investment of the assets of any such Business Benefit Plan. No
action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such Business Benefit Plan
(other than routine claims for benefits) is pending or, to the knowledge of the
Company, threatened.
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(g) None
of the Seller or any of its Affiliates, nor any other member of the same
controlled group of organizations within the meaning of Section 414(b), (c), (m)
or (o) of the Code as the Seller, maintains or contributes to, has any
obligation to contribute to, or within the preceding five years has contributed
to or been required to contribute to, or has any material liability under or
with respect to any Employee Benefit Plan that is subject to Title IV of ERISA
or Section 412 of the Code, including any Multiemployer Plan.
(h) Neither
the Seller nor any Affiliate maintains or contributes to, or within the
preceding five years has contributed to or been required to contribute to, any
Employee Benefit Plan providing medical, health, or life insurance for current
or future retired or terminated employees, their spouses, or their dependents
(other than in accordance with Part 6 of Subtitle B of Title 1 of ERISA and Code
Sec. 4980B or applicable state insurance laws).
(i) Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will, with respect to any Employee Benefit Plan
or any contract described in Section 2.13 of this Agreement other than the
Employment Security Agreements listed in the Disclosure Schedule (i) with the
exception of paid time off, result in any payment becoming due to any Employee
under such Business Benefit Plan or contract, (ii) increase any benefits
otherwise payable under such Business Benefit Plan or contract, or (iii) result
in the acceleration of the time of payment or vesting of any such benefits under
such Business Benefit Plan or contract.
(j) There
is no material pending or threatened legal proceeding relating to any Employee
Benefit Plan, nor is there any basis for any such Proceeding. Neither
Seller nor any fiduciary of an Employee Benefit Plan has engaged in a
transaction with respect to any Employee Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, could subject the
Seller or the Buyer to a tax or penalty imposed by either Section 4975 of the
code or Section 502(1) of ERISA or a violation of Section 406 of
ERISA. The consummation of the transactions contemplated by this
Agreement will not result in the potential assessment of a tax or penalty under
Section 4975 of the Code or Section 502(1) of ERISA nor result in a violation of
Section 406 of ERISA.
(k) Seller
has maintained workers’ compensation coverage as required by applicable state
law through purchase of insurance and not by self-insurance or
otherwise.
(l) The
consummation of the transactions contemplated by this Agreement will not, with
the exception of the subsequent action by the Buyer under the Employment
Security Agreements identified on the Disclosure Schedule, accelerate the time
of vesting or the time of payment, or increase the amount, of compensation due
to any director, employee, officer, former employee or former officer of the
Seller. There are no contracts or arrangements providing for payments
that could subject any person to liability for tax under Section 4999 of the
Code.
(m) Except
for the continuation coverage requirements of COBRA, the Seller has no
obligations or potential liability for benefits to employees, former employees
or their respective dependents following termination of employment or retirement
under any of the Employee Benefit Plans that are employee welfare benefit
plans.
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(n) The
consummation of the transactions contemplated by this Agreement will not result
in an amendment, modification or termination of any of the Employee Benefit
Plans. No written or oral representations have been made to any
employee or former employee of the Seller promising or guaranteeing any employer
payment or funding for the continuation of medical, dental, life or disability
coverage for any period of time beyond the end of the current plan year (except
to the extent of coverage required under COBRA). No written or oral
representations have been made to any employee or former employee of the Seller
concerning the employee benefits of the Buyer.
2.18 Environmental
Matters.
(a) Except
as described or identified in the Disclosure Schedule:
(i) the
operations of the Business, including at the Leased Real Property, are in
compliance with applicable Environmental Laws in all material
respects;
(ii) there
is no pending civil or criminal litigation, written notice of violation or
formal administrative proceeding, investigation or claim relating to any
Environmental Law involving any of the Leased Real Property, any property
formerly owned or operated by the Business or the operations of the
Business;
(iii) the
Seller has those permits, licenses and approvals required under Environmental
Law to operate the Business; and
(iv) no
Materials of Environmental Concern have been Released by the Business, including
at any Leased Real Property, in violation of applicable Environmental
Law.
(b) The
Parties agree that the only representations and warranties of the Seller herein
as to any Environmental Matters or any other obligation or liability with
respect to Matters of Environmental Concern are those contained in this
Section 2.18. Without limiting the generality of the foregoing,
the Buyer specifically acknowledges that the representations and warranties
contained in Section 2.19 and 2.20 do not relate to Environmental
Matters.
2.19 Legal
Compliance. With respect to the Business, the Seller is in
compliance with all applicable laws (including rules and regulations thereunder)
of any federal, state or foreign government, or any Governmental Entity,
currently in effect with respect to the Business. The Seller has not
received written notice of any pending action, suit, proceeding, hearing,
investigation, claim, demand or notice relating to the Business alleging any
failure to so comply.
2.20 Permits. The
Seller has all Permits necessary for the lawful conduct and the operation of the
Business as currently conducted and the performance of the Assigned
Contracts. All such Permits are in full force and effect, and no
suspension or cancellation of any of such items are pending or, to the knowledge
of the Seller, threatened. The Disclosure Schedule lists all Permits
required for the lawful conduct and the operation of the Business as currently
conducted and the performance of the Assigned Contracts. Each Permit
listed in the Disclosure Schedule is in full force and effect and the Seller is
not in violation of or default under any Permit and no suspension or
cancellation of any such Permit has
been
threatened in writing.
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2.21 Inventory. All
inventory of the Seller pertaining to the Business reflected on the Most Recent
Balance Sheet is usable and saleable in the Ordinary Course of Business, except
for excess and obsolete items and items of below-standard quality, all of which
have been written-off or written-down to net realizable value on the Most Recent
Balance Sheet. All inventories not written-off have been priced at
the lower of cost or market value.
2.22 Accounts
Receivable. All accounts receivable of the Business arose from
bona fide transactions relating to the sale of goods or the provision of
services in the Ordinary Course of Business. All accounts receivable
that are reflected on the Financial Statements or on the accounting records of
Seller as of the Closing Date represent or will represent valid obligations
arising from sales actually made or services actually performed by the Seller in
the Ordinary Course of Business. To the knowledge of the Seller,
there is no contest, claim, defense or right of set off, other than returns in
the Ordinary Course of Business of Seller, under any contract with any account
debtor of an account receivable relating to the amount or validity of such
account receivable.
2.23 Solvency. The
Seller is not now insolvent and will not be rendered insolvent by any of the
transactions contemplated by this Agreement. As used in this section,
"insolvent" means that the sum of the debts and other probable Liabilities of
the Seller exceeds the present fair saleable value of Seller's
assets. Immediately after giving effect to the consummation of the
transactions contemplated hereby the Seller will be able to pay its Liabilities
as they become due in the usual course of its business.
2.24 Processing Agreement
Rates. The rates set forth in the Processing Agreement are no
greater than those that have heretofore been charged to the Business as
reflected on the Financial Statements.
2.25 Full
Disclosure. The representations and warranties contained in
this Article II do not contain any untrue statement of fact or omit to state any
fact necessary in order to make the statements and information contained in this
Article II not misleading.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
The
Buyer represents and warrants to the Seller that the statements contained in
this Article III are true and correct as of the date hereof.
3.1 Organization. The
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of California.
3.2 Authority. The
Buyer has all requisite corporate power and authority to execute and deliver
this Agreement and the Ancillary Agreements to which it will be a party and to
perform its obligations hereunder and thereunder. The execution and
delivery by the Buyer of this Agreement and such Ancillary Agreements and the
consummation by the Buyer of the transactions contemplated hereby and thereby
have been validly authorized by all necessary corporate action on the part of
the Buyer. This Agreement has been, and such Ancillary Agreements
will be, validly executed and
delivered
by the Buyer and, assuming the execution and delivery by the Seller of this
Agreement and each such Ancillary Agreement, constitutes or will constitute a
valid and binding obligation of the Buyer, enforceable against the Buyer in
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3.3 Noncontravention. Neither
the execution and delivery by the Buyer of this Agreement or of the Ancillary
Agreements to which the Buyer will be a party, nor the consummation by the Buyer
of the transactions contemplated hereby or thereby, will:
(a) conflict
with or violate any provision of the Articles of Incorporation or bylaws of the
Buyer;
(b) require
on the part of the Buyer any filing with, or permit, authorization, consent or
approval of, any Governmental Entity, except for any filing, permit,
authorization, consent or approval which if not obtained or made would not
reasonably be expected to result in a Buyer Material Adverse
Effect;
(c) conflict
with, result in a breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of obligations under,
create in any party any right to terminate or modify, or require any notice,
consent or waiver under, any contract or agreement to which the Buyer is a party
or by which the Buyer is bound; or
(d) violate
any order, writ, injunction or decree specifically naming, or statute, rule or
regulation applicable to, the Buyer or any of its properties or
assets.
3.4 Litigation. There
are no actions, suits, claims or legal, administrative or arbitratorial
proceedings pending against, or, to the Buyer’s knowledge, threatened against,
the Buyer which would adversely affect the Buyer’s performance under this
Agreement or the consummation of the transactions contemplated by this
Agreement.
3.5 Financing. The
Buyer has, and at the Closing will have, sufficient sources of financing in
order to consummate the transactions contemplated by the Agreement and to
fulfill its obligations hereunder, including without limitation payment to the
Seller of the Closing Payment at the Closing.
3.6 Solvency. Immediately
after giving effect to the transactions contemplated by this Agreement and the
closing of any financing to be obtained by the Buyer or any of its Affiliates in
order to effect the transactions contemplated by this Agreement, the Buyer shall
be able to pay its debts as they become due and shall own property having a fair
saleable value greater than the amounts required to pay its debts (including a
reasonable estimate of the amount of all contingent
liabilities). Immediately after giving effect to the transactions
contemplated by this Agreement and the closing of any financing to be obtained
by the Buyer or any of its Affiliates in order to effect the transactions
contemplated by this Agreement, the Buyer shall have adequate capital to carry
on its business. No transfer of property is being made and no
obligation is being incurred in connection with the transactions contemplated by
this Agreement and the closing of any financing to be obtained by the Buyer or
any of its Affiliates in order to effect the transactions contemplated by this
Agreement with the intent to hinder, delay or defraud either present or future
creditors of the Buyer.
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3.7 Due Diligence by the
Buyer. The Buyer acknowledges that the representations and
warranties of the Seller set forth in Article II, including the Disclosure
Schedule (and any updates thereto), constitute the sole and exclusive
representations and warranties of the Seller to the Buyer in connection with the
transactions contemplated hereby, and the Buyer acknowledges and agrees that the
Seller is not making any representation or warranty whatsoever, express or
implied, beyond those expressly given in this Agreement. The Buyer
further acknowledges and agrees that any cost estimates, projections or other
predictions that may have been provided to the Buyer or any of its employees,
agents or representatives are not representations or warranties of the Seller or
any of its Affiliates.
ARTICLE
IV
PRE-CLOSING
COVENANTS
4.1 Closing
Efforts. Subject to the terms hereof, each of the Parties
shall use reasonable commercial efforts to take all actions and to do all things
reasonably necessary or advisable to consummate the transactions contemplated by
this Agreement, including using reasonable commercial efforts to: (i) obtain all
Third Party Consents, (ii) effect all Governmental Filings and (iii) otherwise
comply in all material respects with all applicable laws and regulations in
connection with the consummation of the transactions contemplated by this
Agreement. Each Party shall bear its own out-of-pocket costs
associated with obtaining such Third Party Consents. Each of the
Parties shall promptly notify each of the other Parties of any fact, condition
or event known to it that would reasonably be expected to prohibit, make
unlawful or delay the consummation of the transactions contemplated by this
Agreement.
4.2 Replacement of Guarantees
and Letters of Credit. The Buyer shall arrange, prior to the
Closing, for replacement arrangements reasonably satisfactory to the Seller
(which shall include a full and complete release of the Seller and its
Affiliates) with respect to Seller Guarantees existing as of the Closing Date
and disclosed and described on the Disclosure Schedule.
4.3 Operation of
Business.
(a) Except
as contemplated by this Agreement, during the period from the date of this
Agreement until the Closing Date, the Seller shall use reasonable commercial
efforts to conduct the operations of the Business in the ordinary
course. Without limiting the generality of the foregoing, prior to
the Closing, the Seller shall not, without the written consent of the
Buyer:
(i) sell,
assign or transfer any portion of the Acquired Assets in a single transaction or
series of related transactions in an amount in excess of $10,000, except for
sales in the Ordinary Course of Business and sales, assignments or transfers of
assets not used or useful in the Business;
(ii) incur
or guarantee any indebtedness for borrowed money relating exclusively or
primarily to the Business;
(iii) grant
any rights to severance benefits, “stay pay” or termination pay to
any
Business Employee or increase the compensation or other benefits payable or
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(iv) make
any capital expenditures or commitments therefor relating exclusively or
primarily to the Business in an amount in excess of $10,000 in the aggregate,
except in the Ordinary Course of Business or in accordance with the Business’
capital expenditure budget included in the Disclosure Schedule;
(v) acquire
any operating business, whether by merger, stock purchase or asset purchase
(except for any such business which will not become part of the
Business);
(vi) enter
into any Employment Agreement, compensation agreement or deferred compensation
agreement (or any amendment to any such existing agreement) with any Business
Employee;
(vii) materially
amend the terms of any existing Business Benefit Plan, except as required by law
and as disclosed on the Disclosure Schedule;
(viii) materially
change its accounting principles, methods or practices insofar as they relate to
the Business;
(ix)
enter
into any contract or agreement relating exclusively or primarily to the Business
outside the Ordinary Course of Business; or
(x)
agree
in writing or otherwise to take any of the foregoing actions.
(b) Notwithstanding
the limitations set forth in paragraph (a) above, the Seller shall be permitted
to (i) accept capital contributions and loans from any of the Seller’s
Affiliates, none of which shall be included in the Assumed Liabilities, and (ii)
use any and all cash, cash equivalents and other short term liquid investments
of the Business to make dividends, distributions or other payments to the
Seller’s Affiliates.
(c) During
the period from the date of this Agreement until the Closing Date, the Seller
shall, with respect to the Business:
(i) use
its reasonable best efforts, with respect to the Business, to keep available the
services of its employees and agents and maintain its relations and good will
with suppliers, customers, landlords, creditors, employees, agents and others
having business relationships with it;
(ii) confer
with the Buyer prior to implementing operational decisions of a material
nature;
(iii) otherwise
confer with the Buyer by telephone or email on a weekly basis concerning the
status of its business, operations and finances;
(iv) make
no material changes in personnel at the level of supervisor,
manager
or higher without prior consultation with the Buyer;
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(v) maintain
the Acquired Assets in a state of repair and condition that is consistent with
the requirements and normal conduct of the Business; and
(vi) continue
in full force and effect the insurance coverage under the policies.
4.4 Access.
(a) The
Seller shall permit the representatives of the Buyer to have access (at
reasonable times, on reasonable prior written notice and in a manner so as not
to interfere with the normal business operations of the Business) to the
premises, properties, financial and accounting records, contracts, and other
records and documents, of or pertaining to the Business. The Seller
shall furnish the Buyer with copies of all contracts, Governmental
Authorizations, books and records related to the Business and such other
relevant data and information as the Buyer may reasonably request, and otherwise
cooperate and assist, to the extent reasonably requested by the Buyer, with
Buyer’s investigation of the properties, assets, and financial condition of the
Business. Notwithstanding the foregoing, the Seller shall not be
obligated (i) to provide any information, documents or access to any person
unless the Buyer is responsible, pursuant to the terms of the Confidentiality
Agreement, for the use and disclosure of any information obtained by such person
from the Seller, or such person enters into a confidentiality agreement with the
Seller on terms that are substantially the same as those set forth in the
Confidentiality Agreement or (ii) to provide any information, documents or
access that would (A) violate the provisions of any applicable laws or
regulations (including without limitation those relating to security clearance
or export controls) or any confidentiality agreement to which it is a party or
(B) cause the loss of the attorney-client privilege with respect
thereto. Prior to the Closing, the Buyer and its representatives
shall not contact or communicate with the employees, customers and suppliers of
the Seller in connection with the transactions contemplated by this Agreement,
except with the prior written consent of the Seller.
(b) The
Buyer and the Seller acknowledge and agree that the Confidentiality Agreement
remains in full force and effect and that information provided by the Seller or
any of the Seller’s Affiliates to the Buyer pursuant to this Agreement prior to
the Closing shall be treated in accordance with the Confidentiality
Agreement. If this Agreement is terminated prior to the Closing, the
Confidentiality Agreement shall remain in full force and effect in accordance
with its terms. If the Closing occurs, the Confidentiality Agreement,
insofar as it covers information relating exclusively or primarily to the
Business, shall terminate effective as of the Closing, but shall remain in
effect insofar as it covers other information disclosed thereunder or relates to
other matters.
(c) Notwithstanding
any provision of this Agreement to the contrary, the Buyer and its
representatives shall not have any access at any time prior to the Closing to
any information regarding pending or proposed bids for new contracts or
subcontracts or any related information where the Buyer or an Affiliate of the
Buyer also has submitted or intends to submit a bid for such contract or
subcontract.
4.5 Exclusivity. The
Seller, its Affiliates and each of their respective officers, directors,
employees,
representatives and agents shall not (i) initiate, solicit or encourage any
inquiry, proposal, offer or discussion with, or provide any non-public
information to, any party
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4.6 Notification. Between
the date of this Agreement and the Closing, the Seller shall promptly notify
Buyer in writing if it becomes aware of (a) any fact or condition that causes or
constitutes a breach of any of the Seller’s representations and warranties made
as of the date of this Agreement or (b) the occurrence after the date of this
Agreement of any fact or condition that would or be reasonably likely to (except
as expressly contemplated by this Agreement) cause or constitute a breach of any
such representation or warranty had that representation or warranty been made as
of the time of the occurrence of, or the Seller’s discovery of, such fact or
condition. Should any such fact or condition require any change to
the Disclosure Schedule, the Seller shall promptly deliver to the Buyer a
supplement to the Disclosure Schedule specifying such change. Such
delivery shall not affect any rights of Buyer under Section 5.1(a) and 8.1(c)
hereof. During the same period, the Seller also shall promptly notify
Buyer of the occurrence of any event that may make the satisfaction of the
conditions in Article V impossible or unlikely.
4.7 Schedules. The
Seller shall be entitled to submit to the Buyer, from time to time between the
date hereof and 7:00 p.m. EDT on June 26, 2008, written updates to the
Disclosure Schedule and other Schedules hereto disclosing any events or
developments that occurred or any information learned after the date
hereof. The Seller’s representations and warranties contained in this
Agreement shall be construed for all purposes of this Agreement (including
without limitation Section 5.1 and Article VI) in accordance with the Disclosure
Schedule and other Schedules hereto, as so updated; provided that the Buyer
shall have the right to terminate this Agreement as a result of any such update
to the Disclosure Schedule and other Schedules hereto to the extent provided in
Section 8.1(c); and further provided that Schedules 5.1(f)(i) and 5.1(f)(ii) may
not be updated without the written consent of the Buyer.
4.8 Agreement with Respect to
ACH and Credit Card Charges. Immediately prior to the Closing,
the Seller shall execute an agreement applicable to the Business with Official
Payments Corporation, a subsidiary of the Seller, in a form approved by the
Buyer in writing, which agreement shall be assumed by the Buyer in connection
with the Closing, pursuant to which the Seller shall process credit card and ACH
transactions on behalf of the Business after the Closing (the “Processing
Agreement”) at the rates set forth therein.
ARTICLE
V
CONDITIONS
PRECEDENT TO CLOSING
5.1 Conditions to Obligations of
the Buyer. The obligation of the Buyer to consummate the
transactions to be consummated at the Closing is subject to the satisfaction (or
waiver by the Buyer) of the following conditions:
(a) the
representations and warranties of the Seller set forth in Article II that
do not
contain
a materiality qualifier or limitation shall have been true and correct in all
material respects as of the date of this Agreement and shall be true and correct
in all material respects as of the Closing Date as if made as of the Closing
Date, except for those representations and
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(b) the
representations and warranties of the Seller set forth in Article II that
contain a materiality qualifier or limitation shall be true and correct as of
the Closing Date as if made as of the Closing Date, except for those
representations and warranties that address matters only as of a particular date
(which shall be true and correct as of such date);
(c) the
Seller shall have performed or complied in all material respects with the
agreements and covenants required to be performed or complied with by it under
this Agreement as of or prior to the Closing;
(d) no
action, suit or proceeding shall be pending by or before any Governmental Entity
seeking to prevent consummation of the transactions contemplated by this
Agreement and no judgment, order, decree, stipulation or injunction enjoining or
preventing the consummation of the transactions contemplated by this Agreement
shall be in effect;
(e) the
Seller shall have delivered to the Buyer the Seller Certificate;
(f) the
Seller shall have (i) obtained all Third Party Consents and Governmental
Authorizations and effected all Governmental Filings listed in Schedule 5.1(f)(i)
and (ii) obtained any other Third Party Consent and Governmental Authorizations
and effected any other Governmental Filing which, if not obtained or effected,
and after giving effect to Section 1.6, would reasonably be expected to result
in a material adverse effect on the ability of the Buyer to operate the Business
(it being understood that the failure to obtain or effect any or all of the
Third Party Consents and Governmental Filings listed in Schedule 5.1(f)(ii)
would not reasonably be expected to result in such a material adverse effect);
and
(g) the
Buyer shall have received such other customary certificates (such as
certificates of good standing of the Seller in its jurisdiction of incorporation
and certificates as to the incumbency of officers and the adoption of
authorizing resolutions) as it shall reasonably request in connection with the
Closing; and
(h) The
Processing Agreement shall have been executed by the Seller and Official
Payments Corporation.
(i) Financing
arrangements sufficient for the Buyer to consummate the transactions
contemplated by this Agreement shall remain available and in full force and
effect.
(j) The
Buyer and the Seller shall have entered into a written agreement with a third
party escrow holder with respect to the escrow referred to in Section 1.4 of
this Agreement.
5.2 Conditions to Obligations of
the Seller. The obligation of the Seller to consummate the
transactions to be consummated at the Closing is subject to the satisfaction (or
waiver by the Seller) of the following conditions:
(a) the
representations and warranties of the Buyer set forth in Article III that
do not contain a materiality qualifier or limitation shall have been true and
correct in all material
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(b) the
representations and warranties of the Buyer set forth in Article III that
contain a materiality qualifier or limitation shall be true and correct as of
the Closing Date as if made as of the Closing Date, except for those
representations and warranties that address matters only as of a particular date
(which shall be true and correct as of such date);
(c) the
Buyer shall have performed or complied in all material respects with its
agreements and covenants required to be performed or complied with by it under
this Agreement as of or prior to the Closing;
(d) no
action, suit or proceeding shall be pending by or before any Governmental Entity
seeking to prevent consummation of the transactions contemplated by this
Agreement and no judgment, order, decree, stipulation or injunction enjoining or
preventing consummation of the transactions contemplated by this Agreement shall
be in effect;
(e) the
Buyer shall have delivered to the Seller the Buyer Certificate;
(f) for
each Seller Guarantee existing as of the Closing, the Buyer shall have either
(i) effected replacement arrangements, in accordance with Section 4.2,
reasonably satisfactory to the Seller, or (ii) delivered to the Seller an
irrevocable standby letter of credit in favor of the Seller in an annual amount
equal to the amount of such Seller Guarantee, issued by a bank rated A or better
by Standard & Poor’s, in form and substance reasonably satisfactory to the
Seller;
(g) the
Seller shall have (i) obtained all Third Party Consents and Governmental
Authorizations and effected all Governmental Filings listed in Schedule 5.1(f)(i)
and (ii) obtained any other Third Party Consent and Governmental Authorizations
and effected any other Governmental Filing which, if not obtained or effected,
and after giving effect to Section 1.6, would reasonably be expected to result
in a material adverse effect on the ability of the Buyer to operate the Business
(it being understood that the failure to obtain or effect any or all of the
Third Party Consents and Governmental Filings listed in Schedule 5.1(f)(ii)
would not reasonably be expected to result in such a material adverse effect);
and
(h) the
Seller shall have received such other customary certificates (such as a
certificate of good standing of the Buyer in its jurisdiction of incorporation
and certificates as to the incumbency of officers and the adoption of
authorizing resolutions) as it shall reasonably request in connection with the
Closing.
(i) the
Buyer and the Seller shall have entered into a written agreement with a third
party escrow holder with respect to the escrow referred to in Section 1.4 of
this Agreement.
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ARTICLE
VI
INDEMNIFICATION
6.1 Indemnification by the
Seller. Subject to the terms and conditions of this Article
VI, the Seller shall indemnify and hold harmless the Buyer and its
Representatives (collectively, the “Buyer Indemnified
Persons”) from the entirety of Adverse Consequences that the Buyer
Indemnified Persons may suffer arising from or in connection with:
(a) any
breach of a representation or warranty of the Seller contained in this Agreement
or any Ancillary Agreement;
(b) any
failure by the Seller to perform any covenant or agreement contained in this
Agreement or any Ancillary Agreement;
(c) any
Excluded Liabilities;
(d) any
Liability arising out of the ownership or operation of the Acquired Assets or
performance of the Assigned Contracts prior to the Closing other than the
Assumed Liabilities;
(e) any
services provided by the Seller prior to the Closing;
(f) the
following matters disclosed in the Disclosure Schedule: (i) failure of the
Seller to have obtained a surety or performance bond with respect to the Alabama
SDU contract or the Minnesota SDU contract referred to in Section 2.7 of the
Disclosure Schedule or under any other Assigned Contract; and (ii) any claims by
Open Scan Technologies, Inc. of infringement of its intellectual property
rights, as referred to in Section 2.12 of the Disclosure Schedule;
(g) any
Employee Benefit Plan established or maintained by the Seller or any Affiliate,
including, without limitation, any claims by former employees of the Seller
arising under the self-insured medical and dental plans of the
Seller;
(h) any
claim by any employee of the Seller based on acts or omissions occurring prior
to the Closing;
(i) any
claim by any broker, finder, or investment banker retained by or on behalf of
the Seller;
(j) the
Release of any Materials of Environmental Concern by the Seller, the presence of
any Materials of Environmental Concern on the Closing Date on or at any of the
Leased Real Property, or the breach of any Environmental Law by
Seller;
(k) any
failure of the Seller to have obtained any money transmitter licenses required
in connection with the operation of the Business and the performance of the
Assigned Contracts; or
(l) any
claims arising out of or related to the matters referred to in the first
paragraph under Item 3, “Legal Proceedings,” of the Seller’s current Form
10-K.
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6.2 Indemnification by the
Buyer. Subject to the terms and conditions of this Article VI,
the Buyer shall indemnify and hold harmless the Seller and its Representatives
(collectively, the “Seller Indemnified Persons”) from the entirety of Adverse
Consequences that the Seller Indemnified Parties may suffer arising from or in
connection with:
(a) any
breach of a representation or warranty of the Buyer contained in this Agreement
or any Ancillary Agreement;
(b) any
failure by the Buyer to perform any covenant or agreement contained in this
Agreement or any Ancillary Agreement;
(c) any
Assumed Liabilities;
(d) any
claim by or on behalf of any broker, finder, or investment banker retained by or
on behalf of the Buyer;
(e) any
Liability arising out of the ownership or operation of the Acquired Assets or
performance of the Assigned Contracts after the Closing;
(f) any
services provided by the Buyer after the Closing; or
(g) any
claim by any employee of the Buyer based on acts or omissions occurring after
the Closing.
6.3 Claims for
Indemnification.
(a) Third-Party
Claims. All claims for indemnification made under this
Agreement resulting from, related to or arising out of a third-party claim
against an Indemnified Party shall be made in accordance with the following
procedures. An Indemnified Party shall give prompt written
notification to the Indemnifying Party of the commencement of any action, suit
or proceeding relating to a third-party claim for which indemnification may be
sought or, if earlier, upon the assertion of any such claim by a third
party. Such notification shall include a description in reasonable
detail (to the extent known by the Indemnified Party) of the facts constituting
the basis for such third-party claim and the amount of the Adverse Consequences
claimed. Within 15 days after delivery of such notification, the
Indemnifying Party may, upon written notice thereof to the Indemnified Party,
assume control of the defense of such action, suit, proceeding or claim with
counsel reasonably satisfactory to the Indemnified Party. If the
Indemnifying Party does not assume control of such defense, the Indemnified
Party shall control such defense. The Party not controlling such
defense may participate therein at its own expense; provided that if the
Indemnifying Party assumes control of such defense and the Indemnified Party
reasonably concludes, based on advice from counsel, that the Indemnifying Party
and the Indemnified Party have conflicting interests with respect to such
action, suit, proceeding or claim, the reasonable fees and expenses of counsel
to the Indemnified Party solely in connection therewith shall be considered
Adverse Consequences for purposes of this Agreement; provided, however, that in no
event shall the Indemnifying Party be responsible for the fees and expenses of
more than one counsel for all Indemnified Parties. The Party
controlling such defense shall keep the other Party advised
of
the status of such action, suit, proceeding or claim and the defense thereof and
shall consider recommendations made by the other Party with respect
thereto. The Indemnified Party shall not agree to any settlement of
such action, suit, proceeding
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(b) Procedure for
Claims. An Indemnified Party wishing to assert a claim for
indemnification under this Article VI shall deliver to the Indemnifying Party a
Claim Notice. Within 15 days after delivery of a Claim Notice, the
Indemnifying Party shall deliver to the Indemnified Party a written response in
which the Indemnifying Party shall: (i) agree that the Indemnified Party is
entitled to receive all of the Claimed Amount (in which case such response shall
be accompanied by a payment by the Indemnifying Party to the Indemnified Party
of the Claimed Amount, by check or by wire transfer), (ii) agree that the
Indemnified Party is entitled to receive the Agreed Amount (in which case such
response shall be accompanied by a payment by the Indemnifying Party to the
Indemnified Party of the Agreed Amount, by check or by wire transfer), or
(iii) contest that the Indemnified Party is entitled to receive any of the
Claimed Amount. If the Indemnifying Party in such response contests
the payment of all or part of the Claimed Amount, the Indemnifying Party and the
Indemnified Party shall use good faith efforts to resolve such
dispute. If such dispute is not resolved within 60 days following the
delivery by the Indemnifying Party of such response, the Indemnifying Party and
the Indemnified Party shall each have the right to submit such dispute to a
court of competent jurisdiction in accordance with the provisions of Section
12.12.
6.4 Survival. The
representations and warranties of the Seller and the Buyer set forth in this
Agreement shall survive the Closing and the consummation of the transactions
contemplated hereby and continue until 18 months after the Closing Date, at
which time they shall expire; provided that the Critical Representations shall
survive the Closing and the consummation of the transactions contemplated hereby
and continue until the seventh anniversary of the Closing Date. The
covenants and agreements of the Parties shall survive indefinitely, without
limitation, except those for which a period of performance is expressly provided
for herein, which covenants and agreements shall survive until the lapse of the
specified period. No such termination shall affect the rights of a
Party in respect of any claim made by such Party in a writing received by
another Party prior to the expiration of any such survival
period. The waiver of any condition based upon the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification,
reimbursement or other remedy based upon such representations, warranties,
covenants and obligations.
6.5 Limitations.
(a) Notwithstanding
anything to the contrary contained in this Agreement, the following limitations
shall apply to indemnification claims under this Agreement:
(i) the
Seller shall be liable with respect to claims under Section 6.1(a) if the
aggregate Adverse Consequences exceed Fifty Thousand Dollars ($50,000) at which
point the Seller shall be liable for such Adverse Consequences from the first
dollar of Adverse Consequences; provided that this Section 6.5(a)(i) shall not
apply to breaches of the Critical
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(ii) the
aggregate liability of the Seller for all Adverse Consequences under Section
6.1(a) shall not exceed an amount equal to twenty five-percent (25%) of the
Adjusted Closing Payment; provided that this Section 6.5(a)(ii) shall not apply
to breaches of the Critical Representations;
(iii) the
Buyer shall not be entitled to make any claim for indemnification with respect
to any matter to the extent the Closing Payment has been adjusted to reflect
such matter pursuant to Section 1.4; and
(iv) the
amount of any Adverse Consequences for which a Party is entitled to
indemnification as provided under this Article VI shall be calculated net
of any accruals, reserves or provisions therefor reflected in the Final Closing
Statement.
(b) For
purposes of this Article VI, including for purposes of determining the amount of
Adverse Consequences resulting therefrom, all qualifications and exceptions
contained herein in any representation or warranty relating to materiality or
Business Material Adverse Effect shall be disregarded.
(c) In
no event shall any Indemnifying Party be responsible or liable for any Adverse
Consequences or other amounts under this Article VI that are consequential, in
the nature of lost profits, special or punitive or otherwise not actual
damages. Each Party shall (and shall cause its Affiliates to) use
reasonable commercial efforts to pursue all legal rights and remedies available
in order to minimize the Adverse Consequences for which indemnification is
provided to it under this Article VI.
(d) The
amount of Adverse Consequences recoverable by an Indemnified Party under this
Article VI with respect to an indemnity claim shall be reduced by the amount of
any payment received by such Indemnified Party (or an Affiliate thereof), with
respect to the Adverse Consequences to which such indemnity claim relates, from
an insurance carrier. An Indemnified Party shall use reasonable
commercial efforts to pursue, and to cause its Affiliates to pursue, all
insurance claims to which it may be entitled in connection with any damages it
incurs, and the Parties shall cooperate with each other in pursuing insurance
claims with respect to any damages or any indemnification obligations with
respect to damages. If an Indemnified Party (or an Affiliate)
receives any insurance payment in connection with any claim for damages for
which it has already received an indemnification payment from the Indemnifying
Party, it shall pay to the Indemnifying Party, within 30 days of receiving such
insurance payment, an amount equal to the excess of (A) the amount previously
received by the Indemnified Party under this Article VI with respect to such
claim plus the amount of the insurance payments received, over (B) the amount of
damages with respect to such claim which the Indemnified Party has become
entitled to receive under this Article VI.
(e) Except
with respect to claims for equitable relief, including specific performance,
made with respect to breaches of any covenant or agreement contained in this
Agreement or the Ancillary Agreements, the rights of the Indemnified Parties
under this Article VI and under Article VII shall be the sole and exclusive
remedies of the Indemnified
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(f) No
limitations on indemnification in this Agreement, whether with respect to the
time for asserting a claim or as to any limits on the amount of Adverse
Consequences, shall apply in the case of fraud.
6.6 Treatment of Indemnification
Payments. All indemnification payments made under this
Agreement shall be treated by the Parties as an adjustment to the Adjusted
Closing Payment; provided that such indemnification payments shall not affect
the calculation of the maximum aggregate liability of the Seller under Section
6.5(a)(ii).
6.7 Right of
Setoff. Upon notice to the Seller specifying the basis
therefor, the Buyer may set off any amount to which it may be entitled under
this Article VI against amounts otherwise payable under Sections 1.4 or 1.5
hereof. Neither the exercise nor the failure to exercise such right
of setoff will constitute an election of remedies or limit the Buyer in any
manner in the enforcement of any other remedies that may be available to
it.
6.8 Indemnity Not Limited to
Third-Party Claims. The Parties agree and acknowledge that
claims for indemnification under this Agreement are not limited to third-party
claims but also include direct claims by the Parties against each
other.
ARTICLE
VII
TAX
MATTERS
7.1 Transfer Taxes;
Prorations.
(a) Each
of the Seller and Buyer shall be responsible for the payment of 50% of any
transfer, sales, use, stamp, conveyance, value added, recording, registration,
documentary, filing and other non-Income Taxes and administrative fees
(including, without limitation, notary fees) arising in connection with the
consummation of the transactions contemplated by this Agreement.
(b) Any
and all real property Taxes, personal property Taxes, assessments, and similar
Taxes applicable to the Acquired Assets that are payable for any taxable period
that includes but does not end on the Closing Date shall be apportioned based on
the number of days of such taxable period up to and including the Closing Date
and the number of days of such taxable period after the Closing
Date. The Seller shall timely pay the proportionate amount of any
such Taxes that is attributable to the portion of the taxable period ending on
the Closing Date.
7.2 Refunds.
(a) The
Seller shall be entitled to any refunds (including any interest paid thereon) or
credits of Taxes with respect to the Business for which Seller is liable under
this Article VII.
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(b) The
Buyer and/or its Affiliates, as the case may be, shall be entitled to all other
refunds (including any interest paid thereon) or credits of Taxes with respect
to the Business.
(c) The
Buyer shall forward to or reimburse the Seller for any such refunds (including
any interest paid thereon) or credits due the Seller after receipt thereof, and
the Seller shall promptly forward to the Buyer or reimburse the Buyer for any
such refunds (including any interest paid thereon) or credits due the Buyer
after receipt thereof.
ARTICLE VIII
TERMINATION
8.1 Termination of
Agreement. The Parties may terminate this Agreement prior to
the Closing as provided below:
(a) the
Parties may terminate this Agreement by mutual written consent;
(b) the
Buyer may terminate this Agreement by giving written notice to the Seller in the
event the Seller is in material breach of any representation, warranty, covenant
or agreement contained in this Agreement, and such breach, individually or
in combination with any other such breach, (i) would cause the conditions set
forth in Section 5.1(a), Section 5.1(b), or Section 5.1(c) not to be satisfied
and (ii) is not cured within ten (10) Business Days following delivery by the
Buyer to the Seller of written notice of such breach;
(c) the
Buyer may terminate this Agreement, in its sole discretion, in the event the
Seller provides an update to the Disclosure Schedule or any other Schedule
hereto pursuant to Section 4.6 by giving written notice to the Seller within
five (5) Business Days of such update.
(d) the
Seller may terminate this Agreement by giving written notice to the Buyer in the
event the Buyer is in breach of any representation, warranty, covenant or
agreement contained in this Agreement, and such breach, individually or in
combination with any other such breach, (i) would cause the conditions set forth
in Section 5.2(a), Section 5.2(b), or Section 5.2(c) not to be
satisfied and (ii) is not cured within ten (10) Business Days following delivery
by the Seller to the Buyer of written notice of such breach;
(e) the
Buyer may terminate this Agreement by giving written notice to the Seller if the
Closing shall not have occurred on or before June 30, 2008 by reason of the
failure of any condition precedent under Section 5.1 (unless the failure results
exclusively or primarily from a breach by the Buyer of any representation,
warranty, covenant or agreement contained in this Agreement); and
(f) the
Seller may terminate this Agreement by giving written notice to the Buyer if the
Closing shall not have occurred on or before June 30, 2008 by reason of the
failure of any condition precedent under Section 5.2 (unless the failure results
exclusively or primarily from a breach by the Seller of any representation,
warranty, covenant or agreement contained in this Agreement).
8.2 Effect of
Termination. If any Party terminates this Agreement pursuant
to Section 8.1, all obligations of the Parties hereunder shall terminate without
any liability of any Party to
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ARTICLE
IX
EMPLOYEE
MATTERS
9.1 Offer of Employment;
Continuation of Employment. The Buyer shall (i) offer
employment commencing on the Closing Date to all Business Employees, including
those listed on Section 2.16 of the Disclosure Schedule as being on reduced work
schedules but excluding those Business Employees on an approved leave of absence
of any kind (“Leave Employees”), on the terms set forth in Section 9.4, (ii)
recognize employee years of service with the Seller for each New Business
Employee solely for purposes of the Buyer’s paid time off policies (i.e., years
of service as an employee of the Seller to be treated as the equivalent of years
of service with the Buyer) and (iii) assume the Employment Security Agreements
listed in Section 2.3 of the Disclosure Schedule for any Business Employee who
becomes a New Business Employee. The Seller shall retain each Leave
Employee on its payroll until such time as he or she is able to return to
work. The Seller shall not extend the leave of any Leave Employee
beyond its current approved date. The Buyer shall offer each Leave
Employee who wishes to return to work at the end of his or her approved leave
period employment on the terms set forth in Section 9.4.
9.2 401(k) Plan
Matters. The Buyer shall take no action to prevent direct or
indirect rollovers by Business Employees who become New Business Employees of
their vested interest in the Seller’s 401(k) Plan to the Buyer’s existing
defined contribution plan qualified under Section 401 of the Code.
9.3 Employment Related
Liabilities. From and after the Closing the Buyer shall be
liable for any claims by any New Business Employee for claims arising out of the
employment of such New Business Employee by the Buyer, including claims arising
out of termination of such employment by the Buyer. The Seller shall
at all times remain liable for any claims by any Business Employee arising out
the employment of such Business Employee by the Seller, including claims arising
out of the termination of such employment by the Seller.
9.4 Compensation; Employee
Benefits; Severance Plans. The Buyer shall provide each New
Buyer Employee with a base salary not less than the base salary provided to such
person by the Seller immediately prior to the Closing as shown on the Disclosure
Schedule, for a period after the Closing and ending no earlier than twelve (12)
months after the Closing Date or any earlier termination of the employment of
such New Business Employee. The Buyer shall offer each New Business
Employee the right to participate in Buyer Plans, including any Buyer Plans that
are “employee welfare benefit plans” (as defined in Section 3(1) of ERISA), that
are no less favorable to each such New Business Employee than those provided by
the Buyer to its other similarly situated employees, for a period after the
Closing ending no earlier than twelve (12) months after the Closing Date or any
earlier termination of the employment of such New Business
Employee. Notwithstanding the foregoing,
nothing
in this Agreement shall prevent the Buyer from terminating the employment of any
New Business Employee in any lawful manner, including termination for cause, for
bona fide business reasons, or otherwise.
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9.5 Employer Group Medical
Plan. With respect to any employer group medical plan that
will cover the New Business Employees, the Buyer shall use its commercially
reasonable efforts to cause the insurance carrier for such plan to waive any
pre-existing condition limitations or actively-at-work requirements; provided
that the Buyer shall not be required to incur any additional costs or expenses
in connection with such efforts, including the payment of higher insurance
premiums.
9.6 Accrued Personal, Sick or
Vacation Time. With respect to any accrued but unused paid
time off to which any New Buyer Employee is entitled pursuant to the PTO
Policies, the Buyer shall assume the liability for such accrued paid time off
and allow such New Buyer Employee to use such accrued paid time off in
accordance with the Buyer’s paid time off policies; provided, however, that the
Buyer shall retain the right to require approval of the timing of any vacation
or other planned time off in accordance with the Buyer’s employment policies;
and provided, further, that notwithstanding anything to the contrary in the
Buyer’s policies regarding paid time off, the Buyer shall be liable for and pay
in cash an amount equal to such number of hours of paid time off as was accrued
as of the Closing Date and disclosed in writing to the Buyer not later than ten
(10) Business Days after the Closing Date to any New Buyer Employee whose
employment with the Buyer terminates for any reason subsequent to the Closing
Date.
ARTICLE
X
OTHER
POST-CLOSING COVENANTS
10.1 Access to Information;
Record Retention; Cooperation.
(a) Access to
Information. Subject to compliance with contractual
obligations and applicable laws and regulations regarding classified information
and security clearance, following the Closing, each Party shall afford to each
other Party and to such Party’s authorized accountants, counsel and other
designated representatives during normal business hours in a manner so as to not
unreasonably interfere with the conduct of business (i) reasonable access and
duplicating rights to all Information within the possession or control of such
Party and (ii) reasonable access to the personnel of such
Party. Requests may be made under this Section 10.1(a) solely for
financial reporting and accounting matters, preparing financial statements,
preparing, reviewing and analyzing the Closing Statement, resolving any
differences between the Parties with respect to the Closing Statement, preparing
and filing of any Tax Returns, prosecuting any claims for refund, defending any
Tax claims or assessment, preparing securities law or securities exchange
filings, prosecuting, defending or settling any litigation or insurance claim,
performing obligations under this Agreement and the Ancillary Agreements, and
all other proper business purposes.
(b) Preparation of the Seller
Financial Statements. Without limitation of the provisions of
Section 10.1(a), following the Closing, the Buyer shall provide to the Seller
all information relating to the Business reasonably required for the Seller to
prepare the (i) Closing Statement and (ii) financial statements of the Seller
and its Affiliates. In connection with the preparation of (i) the
Closing Statement and (ii) such financial statements, the Buyer shall provide
the Seller (and its auditors) with full access to the Business, its financial
management and any accountant’s work papers,
and
all financial books, accounts and records relating to the Business.
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(c) Reimbursement. A
Party making Information or personnel available to another Party under Section
10.1 shall be entitled to receive from such other Party, upon the presentation
of invoices therefor, payments for such amounts relating to supplies,
disbursements and other out-of-pocket expenses, as may reasonably be incurred in
making such Information or personnel available; provided, however, that no such
reimbursements shall be required for the salary or cost of fringe benefits or
similar expenses pertaining to employees or other service providers of the
providing Party.
(d) Retention of
Records. Except as may otherwise be required by law or agreed
to in writing by the Parties, each Party shall use reasonable commercial efforts
to preserve, until six years after the Closing Date, all Information in its
possession or control pertaining to the Business prior to the
Closing. Notwithstanding the foregoing, in lieu of retaining any
specific Information, any Party may offer in writing to the other Party to
deliver such Information to the other Party, and if such offer is not accepted
within 90 days, the offered Information may be disposed of at any
time.
(e) Confidentiality. Each
Party shall hold, and shall use reasonable commercial efforts to cause their
respective Affiliates, consultants and advisors to hold, in strict confidence
all Information concerning the other furnished to it by the other Party or their
representatives pursuant to this Section 10.1 (except to the extent that
such Information (i) is or becomes generally available to the public other than
as a result of any action or inaction by the receiving Party, (ii) was within
the possession of the receiving Party prior to it being furnished to the
receiving Party by or on behalf of the disclosing Party pursuant hereto,
provided that the source of such information was not bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to any person or entity with respect to such information, or
(iii) is or becomes available on a non-confidential basis to the receiving Party
from a source other than the disclosing Party, provided that the source of such
information was not bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to any person or
entity with respect to such information), and each Party shall not release or
disclose such Information to any other person, except its auditors, attorneys,
financial advisors, bankers and other consultants and advisors, unless compelled
to disclose such Information by judicial or administrative process or by other
requirements of law or so as not to violate the rules of any stock exchange;
provided, however, that in the
case of disclosure compelled by judicial or administrative process, the
receiving Party shall (to the extent permitted by applicable law) notify the
disclosing Party promptly of the request and the documents requested thereby so
that the disclosing Party may seek an appropriate protective order or other
appropriate remedy. If, in the absence of a protective order or other
remedy or the receipt of a waiver hereunder, a Party is, in the written opinion
of its counsel, compelled to disclose any Information to any tribunal or other
entity or else stand liable for contempt or suffer other censure or penalty,
such Party may so disclose the Information without liability hereunder; provided, however, that, such
Party gives written notice to the other Party or Parties of the information to
be disclosed (including copies of the relevant portions of the relevant
documents) as far in advance of its disclosure as is practicable, uses all
reasonable efforts to limit any such disclosure to the precise terms of such
requirement and cooperates with the disclosing Party to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded to such information by the tribunal or other entity. The
provisions of this Agreement shall not apply to or restrict the Buyer’s use of
any trade secrets or other confidential
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10.2 Covenant Not to
Compete. During the Noncompetition Period, the Seller shall
not (and shall cause each Noncompetition Party not to), directly or indirectly
(i) engage in the Restricted Business, (ii) use, develop or purchase any
software product with the same or similar functionality of the Kids1st or VIPRS
software programs, or (iii) otherwise compete against the Buyer in the
Business. Notwithstanding the foregoing, no Noncompetition Party
shall be prohibited from:
(a) continuing
to engage in any type of business conducted by any Noncompetition Party as of
the date hereof that is not part of the Business or provide the same kind of
products or services as those provided by the Business or selling products or
services that are under development by any Noncompetition Party as of the date
hereof that are not part of or intended for use in the Restricted
Business;
(b) purchasing
products or services from, or selling products or services to, or otherwise
engaging in a subcontracting or commercial relationship with, an entity that is
engaged in the Restricted Business; provided that such purchases or sales do not
cause the Seller or any Noncompetition Party to engage or participate in the
Restricted Business;
(c) performing
its contractual obligations under the existing agreements listed in Section
10.2(c) of the Disclosure Schedule;
(d) acquiring
or owning less than 2% (by voting power) of the outstanding capital stock of any
publicly-traded company which is engaged in the Restricted Business;
or
(e) performing
its obligations under this Agreement and the Ancillary Agreements, including
without limitation the Transition Services Agreement.
10.3 Non-Solicitation
Covenant. During the Non-Competition Period, the Seller shall
not (and shall cause each Noncompetition Party not to) directly or indirectly
solicit or seek to hire any Business Employee who accepts employment with the
Seller or encourage any such Business Employee to terminate his or her
employment with the Buyer; provided that the Seller shall not be prohibited from
hiring any such person if (i) such person contacts the Seller on the person’s
own initiative and without any prior breach of the foregoing covenant with
respect to such person; (ii) such person responds to a general solicitation of
employment not directed specifically towards some or all of the Buyer’s
employees; or (iii) the Buyer has terminated such person’s employment without
any prior breach of the foregoing covenant with respect to such
person.
10.4 Seller
Guarantees. If any Seller Guarantee is not replaced and
released as of the Closing as provided in Section 4.2, the Buyer shall fulfill
all obligations of the Seller and/or its Affiliates under such Seller Guarantees
and shall reimburse the Seller and its Affiliates for all premiums, payments and
other carrying costs of such Seller Guarantee attributable to or for periods
after the Closing Date, within five (5) business days after receipt of invoices
therefor. In the event that after the Closing Date the Seller or an
Affiliate is required to reimburse a letter of credit issuer for any drawing
under a Seller Guarantee, or is required to make any payment under a Seller
Guarantee (other than carrying costs as
provided
above), then the Buyer shall reimburse
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10.5 Use of Name for Transition
Period.
(a) Following
the Closing, except as otherwise provided herein, the Buyer shall have no rights
to use any Retained Marks and will not hold itself out as having any
affiliations with the Seller.
(b) Notwithstanding
the provisions of Section 10.5(a), for a period of 180 days after the Closing
Date, the Buyer may:
(i) utilize
sales promotional aids, literature and other printed material of the Business,
provided such material clearly and prominently displays the following statement
or a statement of similar import, the form of which shall be approved by the
Seller: “[the Buyer product name], formerly a product of Tier Technologies,
Inc.” Promptly following the Closing Date, the Buyer will implement a
plan to eliminate the use of all such material within such 180 day
period;
(ii) continue
to use the Retained Marks for 180 days following the Closing Date on inventories
existing on the Closing Date, provided that the products in such inventories are
not modified or enhanced in any manner; and
(iii) disclose
to its customers and potential customers that it is conducting the Business as a
successor to the Seller from and after the Closing Date.
(c) The
licenses to use the Retained Marks set forth in this Section 10.5 shall not
prohibit the Seller or any of its Affiliates from using the Retained Marks (or
any similar name or logo) during the term of the respective license or
thereafter in any manner. The Buyer agrees that its use of the
Retained Marks shall be consistent with the past practices of the Seller and its
direct and indirect Subsidiaries in connection with their business and
operations and, with respect to such use, the Buyer shall adhere to
substantially similar quality standards to which the Seller and its direct and
indirect Subsidiaries adhered immediately prior to the Closing.
10.6 Use of Retained Marks in
Transferred Technology. The Seller and the Buyer will
cooperate and use reasonable commercial efforts to provide to the Buyer for
inclusion in its web site, as promptly as practicable following the Closing, all
text, images and other content contained in all web sites relating exclusively
or primarily to the Business maintained by the Seller (or its Affiliates), all
of which, excluding the Retained Marks, shall be deemed to be included in the
Acquired Assets. Subject to the provisions of Section 10.5
hereof, prior to including any such text, images or other content in its web
site, the Buyer shall remove all references to the Retained Marks from any such
text, images or other content. The Seller (or its Affiliates) shall
retain ownership of all domain names employing the name “Tier” and neither the
Buyer nor any of its Affiliates shall have any right or license to any such
domain name. To the extent the Business utilized any internet
protocol address space allocated to the Seller, such internet protocol address
space shall remain the property of the Seller, and no rights or licenses are
granted to the Buyer with respect thereto.
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10.7 Collection of Accounts
Receivable; Transition. The Seller agrees that it shall
forward promptly to the Buyer any monies, checks or instruments received by the
Seller after the Closing with respect to the accounts receivable purchased by
the Buyer from the Seller pursuant to this Agreement, and take any and all
actions reasonably requested by the Buyer to assist and facilitate in the
collection of such accounts receivable. The Seller hereby authorizes
the Buyer to endorse and cash any checks or instruments payable or endorsed to
the Seller or its order which are received by the Buyer and which relate to
accounts receivable purchased by the Buyer from the Seller. The Seller will not
take any action that is designed or intended to have the effect of discouraging
any lessor, licensor, customer, supplier, or other business associate of the
Business from maintaining the same business relationships with the Buyer after
the Closing as it maintained with the Seller and the Business prior to the
Closing. During the Noncompetition Period, the Seller will refer all
customer inquiries relating to the Business to the Buyer.
10.8 Payment of Assumed
Liabilities and Excluded Liabilities. In the event that the
Seller (or an Affiliate thereof) inadvertently pays or discharges, after the
Closing, any Assumed Liabilities, the Buyer shall reimburse the Seller or
Affiliate for the amount so paid or discharged within 30 days of being presented
with written evidence of such payment or discharge. In the event that
the Buyer (or an Affiliate thereof) inadvertently pays or discharges, after the
Closing, any Excluded Liabilities, the Seller shall reimburse the Buyer or
Affiliate for the amount so paid or discharged within 30 days of being presented
with written evidence of such payment or discharge.
ARTICLE
XI
DEFINITIONS
For
purposes of this Agreement, each of the following terms shall have the meaning
set forth below.
“2008 Actual Revenues”
shall mean the revenues recognized by the Buyer during Fiscal Year 2008 from the
Buyer’s performance of the Assigned Contracts and any Extension Contracts after
the Closing.
“2009 Actual Revenues”
shall mean the revenues recognized by the Buyer during Fiscal Year 2009 from the
Buyer’s performance of the Assigned Contracts and any Extension Contracts after
the Closing.
“2010 Actual Revenues”
shall mean the revenues recognized by the Buyer during Fiscal Year 2010 from the
Buyer’s performance of the Assigned Contracts and any Extension Contracts after
the Closing.
“2008 Payment Amount”
shall mean the Earn-Out Payment for Fiscal Year 2008.
“2009 Payment Amount”
shall mean the Earn-Out Payment for Fiscal Year 2009.
“2010 Payment Amount”
shall mean the Earn-Out Payment for Fiscal Year 2010.
“2008 Target” shall
have the mean $23,071,621.
“2009 Target” shall
have the mean $22,788,646.
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“2010 Target” shall
have the mean $13,418,705.
“Acquired Assets”
shall mean all assets, properties and rights of the Seller of every kind,
nature, character and description, tangible and intangible, real, personal or
mixed, wherever located, existing as of the Closing which are utilized
exclusively or primarily by the Seller in the Business, including, without
limitation, the following assets, in each case to the extent owned by the Seller
as of the Closing and utilized exclusively or primarily in the
Business:
(a) all
accounts receivable and other receivables (including all rights of the Seller to
enforce the obligation to pay and to collect such accounts receivable and other
receivables), whether or not billed;
(b) all
inventory of raw materials, work in process, finished goods, office supplies,
maintenance supplies and packaging materials, together with spare parts and
supplies;
(c) all
computers, equipment, furniture, furnishings, fixtures, machinery and other
tangible personal property and all warranties and guarantees, if any, express or
implied, existing for the benefit of the Seller in connection therewith to the
extent transferable;
(d) the
leasehold interests to the Seller Leased Facilities, except as provided in
Section 1.6;
(e) the
Assigned Contracts, except as provided in Section 1.6
(f) all
Business Intellectual Property;
(g) all
technical information, trade secrets, technology, know-how, specifications,
designs, drawings and processes and quality control data, and other confidential
business information, including customer lists and vendor lists;
(h) all
Permits and Legal Permits, to the extent that such Permits and Legal Permits are
transferable;
(i) all
goods and services and all other economic benefits to be received subsequent to
the Closing arising out of prepayments and payments by the Seller prior to the
Closing;
(j) all
claims of the Seller against third parties relating to the Acquired Assets,
whether ▇▇▇▇▇▇ or inchoate, known or unknown, contingent or
noncontingent;
(k) rights
of the Seller under any non-competition agreements, non-solicitation, or similar
agreements with any Business Employees or former employees of the Seller in the
Business; and
(l) copies
of all books and records of the Business (other than stock record books),
accounts, ledgers, files, documents, correspondence, studies, reports and other
printed or written materials, subject to any restrictions imposed by applicable
law on the transfer of employee files and
other
similar materials.
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“Adjusted Closing
Payment” shall mean the Closing Payment as adjusted pursuant to Section
1.4.
“Adjustment Payment”
shall have the meaning set forth in Section 1.4(d).
“Adverse Consequences”
shall mean all actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders, decrees, rulings,
damages, environmental investigation and remedial costs, dues, penalties, fines,
costs, amounts paid in settlement, liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including court costs and reasonable attorneys’ fees
and expenses, to the extent insurance claims are made in respect thereof, any
resulting increases in premiums, and any reasonable costs, fees or other
expenses incurred by a Party arising out of the mitigation of any of
the foregoing, but shall not include lost or anticipated profits.
“Affiliate” shall have
the meaning assigned to it in Rule 12b-2 of the Securities and Exchange Act of
1934.
“Agreed Amount” shall
mean part, but not all, of the Claimed Amount.
“Agreement” shall have
the meaning set forth in the Preliminary Statement of this
Agreement.
“Ancillary Agreements”
shall mean the agreements and instruments referred to in clauses (iii) through
(viii) in Section 1.3(b) of this Agreement.
“Assigned Contracts”
shall mean (i) the Seller Real Estate Leases listed on Section 2.11 of the
Disclosure Schedule, (ii) the contracts or agreements listed on Section 2.13 of
the Disclosure Schedule and (iii) any agreement (or group of related agreements
with the same party) relating exclusively or primarily to the Business that (A)
involves the performance of services or delivery of goods or materials to the
Seller of an amount or value less than $25,000 per year and (B) is terminable by
the Seller (prior to the Closing) or the Buyer (after the Closing) within 90
days; provided,
however, that Assigned Contracts shall not include any contract listed on
Schedule 1.1(b) or 1.1(d).
“Assumed Liabilities”
shall mean the following liabilities and obligations of the Seller, in each case
to the extent related exclusively or primarily to the Business or the Acquired
Assets:
(a) all
liabilities reflected on the Most Recent Balance Sheet, except to the extent
satisfied prior to the Closing;
(b) all
current liabilities arising subsequent to the Balance Sheet Date arising in the
Ordinary Course of Business to the extent reflected in the calculation of the
Closing Working Capital Amount;
(c) all
liabilities and obligations under the Assigned Contracts and under the Seller
Real Estate Leases arising after the Closing, except as provided in Section
1.6;
(d) all
liabilities and obligations under the Legal Permits arising after the Closing
transferred
pursuant to Section 1.1(b);
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(e) all
liabilities and obligations in respect of the Business or the Acquired Assets
arising or incurred by the Buyer after the Closing;
(f) all
liabilities and obligations which arise on account of the sale of any goods and
services sold by the Buyer after the Closing;
(g) all
liabilities and obligations arising after the Closing out of the leasing or
operation by Buyer of any Leased Real Property;
(h) (i)
all liabilities and obligations in respect of employees or employee benefits
that are specifically assumed by the Buyer pursuant to Article IX, including all
liabilities and obligations under the Employment Security Agreements listed in
Section 2.3 of the Disclosure Schedule for any Business Employee who becomes a
New Business Employee, as provided in Section 9.1, and (ii) all liabilities and
obligations under the Employment Security Agreement for each employee subject to
an Employment Security Agreement to whom the Buyer made an offer of employment
(A) at a salary lower than such employee’s salary as shown on the Disclosure
Schedule or (B) that required such employee to relocate the employee’s principal
business office or principal place of residence more than 50 miles from such
employee’s current business office or principal place of residence;
(i) all
financial obligations (whether due and payable before or after the Closing) in
connection with the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Engagement Letters set forth on Section
2.13(a)(ii) of the Disclosure Schedule, true and correct copies of which letters
have been provided to the Buyer, to the extent such financial obligations are
included in the calculation of the Closing Working Capital Amount;
and
(j) all
liabilities and obligations arising out of or relating to Deferred Items to the
extent provided under Section 1.6.
“Balance Sheet Date”
shall mean April 30, 2008.
“Business” shall mean
the business of the Government Business Process Outsourcing segment of the
Seller.
“Business Day” shall
mean any day other than (i) a Saturday or Sunday or (ii) a day on
which banking institutions located in New York, New York are permitted or
required by law, executive order or governmental decree to remain
closed.
“Business Benefit
Plans” shall mean any Employee Benefit Plan maintained, or contributed
to, by the Seller, or any ERISA Affiliate for the benefit of Business Employees
(and their beneficiaries).
“Business Employees”
shall mean the employees of the Seller exclusively or primarily engaged in the
Business that are listed on the Disclosure Schedule.
“Business Intellectual
Property” shall have the meaning set forth in Section
2.12(a).
“Business Material Adverse
Effect” shall mean any change, effect or circumstance that (a) is
materially adverse to the business, financial condition or results of operations
of the
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“Buyer” shall have the
meaning set forth in the first paragraph of this Agreement.
“Buyer Certificate”
shall mean a certificate to the effect that each of the conditions specified in
clauses (a) through (c) (insofar as clause (c) relates to an action, suit or
proceeding involving, or a judgment, order, decree, stipulation or injection
against, the Buyer) of Section 5.2 is satisfied.
“Buyer Indemnified
Persons” shall have the meaning set forth in Section 6.1
hereof.
“Buyer Material Adverse
Effect” shall mean a material adverse effect on the ability of the Buyer
to consummate the transactions contemplated by this Agreement.
“Buyer Plans” shall
mean employee benefit plans, agreements, programs, policies and arrangements for
the benefit of each New Buyer Employee.
“Claimed Amount” shall
mean the amount of any Adverse Consequences claimed by an Indemnified
Party.
“Claim Notice” shall
mean a written notice which contains (i) a description and the Claimed Amount of
any Adverse Consequences incurred by the Indemnified Party, (ii) a statement
that the Indemnified Party is entitled to indemnification under Article VI and a
reasonable explanation of the basis therefor, and (iii) a demand for payment in
the amount of such Adverse Consequences.
“Closing” shall mean
the closing of the transactions contemplated by this Agreement.
“Closing Balance
Sheet” shall have the meaning set forth in Section 1.4(a).
“Closing Date” shall
mean June 30, 2008, or, if all of the conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (excluding the
delivery of any documents to be delivered at the Closing by any of the Parties,
it being understood that the occurrence of the Closing shall remain subject to
the delivery of such documents) have not been satisfied in full or waived by
such date, on such mutually agreeable later date as soon as practicable (but in
no event more than three Business Days) after the first date on which the
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (excluding the delivery of any documents to be delivered at
the Closing by any of the Parties, it being understood that the occurrence of
the Closing shall remain subject to the delivery of such documents) have been
satisfied or waived.
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“Closing Payment”
shall mean $8,000,000, subject to Section 1.4.
“Closing Receivables”
shall have the meaning set forth in Section 1.4(d).
“Closing Statement”
shall mean a statement calculating the Closing Working Capital Amount, which
shall include an aging of accounts receivable and accounts payable as of the
Closing Date.
“Closing Working Capital
Amount” shall mean the current assets less the current liabilities as
shown on the Closing Statement.
“COBRA” shall mean the
Consolidated Omnibus Budget Reconciliation Act of 1986.
“Code” shall mean the
Internal Revenue Code of 1986, as amended.
“Confidentiality
Agreement” shall mean the confidentiality letter agreement dated
May 18, 2007 between the Buyer and the Seller.
“Critical
Representations” provided that the representations and warranties of the
Seller contained in Sections 2.2, 2.8, and 2.18.
“Deferred Consent”
shall mean an agreement to assign or transfer any contract, lease,
authorization, license or permit, or any claim, right or benefit arising
thereunder or resulting therefrom, if an attempted assignment or transfer
thereof, without the consent of a third party thereto or of the issuing
Governmental Entity, as the case may be, would constitute a breach
thereof.
“Deferred Item” shall
mean the contract, lease, authorization, license or permit to which Deferred
Consent relates.
“Disclosure Schedule”
shall mean the disclosure schedule provided by the Seller to the Buyer on the
date hereof.
“Earn-Out Credit”
shall have the meaning set forth in Section 1.5(d) hereof.
“Employee Benefit
Plan” shall mean (a) any “employee pension benefit plan” (as defined in
Section 3(2) of ERISA) other than a Multiemployer Plan, (b) any “employee
welfare benefit plan” (as defined in Section 3(1) of ERISA), and (c) to the
extent applicable to more than one employee, any other written or oral plan,
agreement or arrangement involving compensation, including without limitation
insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation, or fringe benefits, but excluding any Employee Benefit Plan
required to be maintained or contributed to under foreign law.
“Employment Agreement”
shall mean any agreement for or with respect to employment, but shall not
include an offer letter or non-disclosure agreement.
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“Encumbrance” shall
mean any charge, claim, community or other marital property interest, condition,
equitable interest, lien (including any tax liens), option, pledge, security
interest, mortgage, right of way, easement, encroachment, servitude, right of
first option, right of first refusal or similar restriction, including any
restriction on use, voting (in the case of any security or equity interest),
transfer, receipt of income or exercise of any other attribute of
ownership.
“Environment” shall
mean any surface water, ground water, drinking water supply, land surface or
subsurface strata, or ambient air.
“Environmental Law”
shall mean any foreign, federal, state, provincial, or municipal statute, rule
or regulation as in effect on the Closing Date relating to the protection of the
Environment or occupational health and safety, including, without limitation,
any statute or regulation pertaining to (a) the presence, manufacture,
processing, use, treatment, storage, disposal, transportation, handling or
generation of Materials of Environmental Concern; (b) air, water and noise
pollution; (c) groundwater and soil contamination; or (d) the Release or
threatened Release of Materials of Environmental Concern to the
Environment.
“Environmental
Matters” shall mean any legal obligation or liability arising under
Environmental Law.
“ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate”
shall mean any entity which is a member of (a) a controlled group of
corporations (as defined in Section 414(b) of the Code), (b) a group
of trades or businesses under common control (as defined in Section 414(c)
of the Code), or (c) an affiliated service group (as defined under
Section 414(m) of the Code or the regulations under Section 414(o) of
the Code), any of which includes the Seller.
“Estimated Adjustment
Payment” shall mean (a) the lesser of (i) the working capital (current
assets less current liabilities) for the Acquired Assets and the Assumed
Liabilities on the latest balance sheet available at the Closing or (ii)
$2,300,000 minus (b) the Target Working Capital Amount; provided, however,
that the Estimated Adjustment Payment shall not be less than zero.
“Excluded Assets”
shall mean:
(a) all
cash and cash equivalents or similar investments, bank accounts, commercial
paper, certificates of deposit, Treasury bills and other marketable
securities;
(b) all
assets, properties or rights listed on, or arising under any contracts or
agreements listed on, Schedule
1.1(b);
(c) all
rights to insurance claims, related refunds and proceeds arising from or related
to the Excluded Assets and Excluded Liabilities;
(d) all
rights which accrue or will accrue to the benefit of the Seller under this
Agreement
or the Ancillary Agreements;
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(e) all
rights relating to refunds or recoupment of Taxes relating to all periods ending
on or prior to the Closing including rights under any legal or administrative
proceedings relating thereto, whether or not yet commenced;
(f) all
actions, claims, causes of action, rights of recovery, choses in action and
rights of setoff of any kind arising before, on or after the Closing relating to
the items set forth above or to any Excluded Liabilities; and
(g) all
books, records, accounts, ledgers, files, documents, correspondence, studies,
reports and other printed or written materials related exclusively or primarily
to any Excluded Assets or Excluded Liabilities.
“Excluded Liabilities”
shall mean:
(a) all
Liabilities and obligations relating exclusively or primarily to the Excluded
Assets;
(b) all
Liabilities and obligations for any Taxes for which the Seller is liable
pursuant to Article VII;
(c) all
Liabilities and obligations of the Seller in respect of employees or employee
benefits not specifically assumed by the Buyer hereunder;
(d) all
Liabilities and obligations of the Seller under the agreements listed on Schedule
1.1(d);
(e) all
Liabilities and obligations of the Seller under this Agreement and the Ancillary
Agreements;
(f) all
Liabilities and obligations of the Seller for costs and expenses incurred in
connection with this Agreement or the consummation of the transactions
contemplated by this Agreement (including without limitation any fees for
financial advisors engaged by or on behalf of the Seller) and liabilities
payable to the Seller, including, but not limited to, compensation, employee
benefits and similar items;
(g) all
Liabilities and obligations of the Seller under the Employment Security
Agreements to employees who do not accept an offer of employment with the Buyer;
provided,
however, that if any such offer of employment was (i) at a salary that is
lower than such employee’s salary as shown on the Disclosure Schedule or (ii)
requires such employee to relocate the employee’s principal business office or
principal place of residence more than 50 miles from such employee’s current
business office or principal place of residence, the Liabilities and obligations
under such employee’s Employment Security Agreement shall not be Excluded
Liabilities; and
(h) all
Liabilities of the Seller that are not Assumed Liabilities.
“Extension Contracts”
shall mean any extension, renewal, novation, option exercise or similar action
with respect to an Assigned Contract. For the avoidance of doubt, any
contract
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“Final Closing
Statement” shall mean the statement accepted (or deemed accepted) by the
Buyer pursuant to Section 1.4(b), prepared and signed pursuant to Section
1.4(c)(ii) or delivered by the Neutral Accountant pursuant to Section 1.4(c)(v),
as the case may be.
“Financial Statements”
shall mean (a) the unaudited balance sheets and statement of operations of the
Business as of and for the fiscal years ended 2005, 2006 and 2007 and (b) the
unaudited balance sheet and statement of operations of the business for the
seven-month period ended as of the Balance Sheet Date.
“Fiscal Year 2008”
shall mean the 12-month period ending September 30, 2008.
“Fiscal Year 2009”
shall mean the 12-month period ending September 30, 2009.
“Fiscal Year 2010”
shall mean the 12-month period ending September 30, 2010.
“GAAP” shall mean
United States generally accepted accounting principles.
“Governmental
Authorization” shall mean any consent, license, registration, or permit
issued, granted, or given by a Governmental Entity required for the assignment
to and performance by the Buyer of the Assigned Contracts and the Seller Real
Estate Leases.
“Governmental Entity”
shall mean any court, arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency.
“Governmental Filings”
shall mean all registrations, filings and notices with or to Governmental
Entities required for the assumption and performance of the Assigned Contracts
and the Seller Real Estate Leases by the Buyer.
“Government Contract”
shall mean any contract with respect to the Business that (a) is between the
Seller and a Governmental Entity or (b) is entered into by the Seller as a
subcontractor (at any tier) in connection with a contract between another entity
and a Governmental Entity.
“Income Taxes” shall
mean any taxes imposed upon or measured by net income.
“Indemnified Party”
shall mean the party entitled to indemnification under Article VI of this
Agreement.
“Indemnifying Party”
shall mean the party from whom indemnification is sought by the Indemnified
Party.
“Information” shall
mean all non-privileged records, books, contracts, instruments, documents,
correspondence, computer data and other data and information relating to the
Business.
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“Intellectual
Property” shall mean all patents, patent applications, registered
trademarks, trademark applications, domain names, rights to the content of
internet web sites and copyright registrations, know-how, confidential or
proprietary information, customer lists, software, technical information, data
that are owned or used by the Seller in the Business.
“Leased Real Property”
shall mean all material real property leased or subleased to the Seller and
included in the Acquired Assets.
“Leases” shall mean
any lease or sublease pursuant to which the Seller leases or subleases from
another party any real property that is used primarily or exclusively in the
Business.
“Legal Permits” shall
mean all licenses, permits or franchises issued by any Governmental Entity
relating to the development, use, maintenance or occupation of the Seller Leased
Facilities or the operations of the Business.
“Liabilities” shall
mean with respect to a Party any liability or obligation of such Party of any
kind, character or description, whether known or unknown, absolute or
contingent, accrued or unaccrued, disputed or undisputed, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined determinable or otherwise, and whether
or not the same is required to be accrued on the financials statements of such
Party.
“Materials of Environmental
Concern” shall mean any hazardous substance, pollutant or contaminant, as
those terms are defined under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, solid waste and hazardous
waste, as those terms are defined in the Federal Resource Conservation and
Recovery Act (as in effect on the date of this Agreement) and oil, petroleum and
petroleum products.
“Most Recent Balance
Sheet” shall mean the unaudited balance sheet of the Business as of the
Balance Sheet Date.
“Multiemployer Plan”
shall mean a “multiemployer plan” (as defined in Section 4001(a)(3) of
ERISA).
“Neutral Accountant”
shall mean Stonefield ▇▇▇▇▇▇▇▇▇, Inc.
“New Buyer Employees”
shall mean each Seller Business Employee who accepts the Buyer’s offer of
employment and who commences working with the Buyer on the Closing
Date.
“Noncompetition Party”
shall mean the Seller and any entity that is a Subsidiary of the Seller on or
after the date hereof while such entity is a Subsidiary of the
Seller.
“Noncompetition
Period” shall mean the period commencing on the Closing Date and
continuing until the three-year anniversary of the Closing Date.
“Off-Site Liabilities”
shall mean Environmental Matters resulting from any transportation,
treatment,
storage, disposal or Release, or the arrangement therefor, in connection
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“Ordinary Course of
Business” shall mean an action taken by a Party that (a) is consistent in
nature, scope and magnitude with the past practices of such Party and is taken
in the ordinary course of the normal, day-to-day operations of such Party; (b)
does not require authorization of the board of directors of such Party an does
not require any separate of special authorization of any nature; or (c) is
similar in nature, scope and magnitude to actions customarily taken, without any
separate or special authorization, in the ordinary course of the normal,
day-to-day operations of other persons that are in the same line of business as
such Party.
“Parties” shall mean
the Seller and the Buyer collectively.
“Permits” shall mean
all permits, licenses, orders, approvals, franchises or authorizations from any
Governmental Authority relating to the Business.
“PTO Policies” shall
mean the paid time off policies, including with respect to personal, sick or
vacation time applicable to each Business Employee immediately prior to the
Closing Date.
“Processing Agreement”
shall have the meaning set forth in Section 4.8.
“Purchase Price” shall
mean the Adjusted Closing Payment plus the Earn-Out Payments, if
any.
“Release” shall mean
any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, or disposing into the Environment
(including the abandonment or discarding of barrels, containers, and other
closed receptacles containing any Materials of Environmental
Concern).
“Representatives”
shall mean with respect to a particular person, any director, officer, manager,
employee, agent, consultant, advisor, accountant, financial advisor, legal
counsel or other representative of that person.
“Restricted Business”
shall mean the business of (i) processing and posting of child support payments
for governments and governmental agencies, (ii) matching of delinquent child
support or state tax obligors with financial institution assets, and (iii)
unless performed jointly by the Buyer and a Noncompetition Party, the electronic
child support check payment processing services and credit/debit card payment
processing services through Internet interfaces over the web, through
interactive telephone voice response systems (IVRs), or as a point of sale
interface (POS). For the avoidance of doubt, Restricted Business shall not
include the activities described in clause (iii) above if such services are
being solicited by a government agency independently from a procurement related
to the processing of and posting of child support payments for governmental
agencies.
“Retained Marks” shall
mean any trademarks, trade names, logos or any contraction, abbreviation or
simulation of the Seller that is not included within the Acquired
Assets.
“Revenue Statement”
shall have the meaning set forth in Section 1.5(f) hereof.
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“Securities Act” shall
mean the Securities Act of 1933, as amended.
“Seller” shall have
the meaning set forth in the first paragraph of this Agreement.
“Seller Certificate”
shall mean a certificate to the effect that each of the conditions specified in
clauses (a) through (c) (insofar as clause (c) relates to an action,
suit or proceeding involving, or a judgment, order, decree, stipulation or
injunction against, any Seller) of Section 5.1 is satisfied.
“Seller Guarantees”
shall mean all letters of credit, guarantees, performance bonds, covenants,
indemnities or similar assurance provided by the Seller or any of its Affiliates
relating exclusively or primarily to the Business that have been disclosed on
the Disclosure Schedule.
“Seller Indemnified
Persons” shall have the meaning set forth in Section 6.2
hereof.
“Seller Leased
Facilities” shall mean the leasehold interests to the facilities covered
by the Seller Real Estate Leases.
“Seller Real Estate
Leases” shall mean the real property leases or subleases described in
Section 2.11 of the Disclosure Schedule.
“Seller’s 401(k) Plan”
shall mean the defined contribution plan qualified under Section 401 of the Code
sponsored by the Parent.
“Subsidiary” shall
mean any corporation, partnership, trust, limited liability company or other
non-corporate business enterprise in which the Seller (or another Subsidiary)
holds stock or other ownership interests representing more than 50% of the
voting power of all outstanding stock or ownership interests of such
entity.
“Tangible Personal
Property” shall mean all machinery, equipment, tools, furniture, office
equipment, computer hardware, supplies, materials, vehicles and other items of
tangible personal property of every kind owned by Seller (wherever located and
whether or not carried on Seller’s books), together with any express or implied
warranty by the manufacturers or sellers or lessors of any item or component
part thereof and all maintenance records and other documents relating
thereto.
“Target Working Capital
Amount” shall mean $1,900,000.
“Taxes” shall mean all
taxes, including without limitation income, gross receipts, ad valorem,
value-added, excise, real property, personal property, sales, use, transfer,
withholding, employment, social security charges and franchise taxes imposed by
the United States of America or any state, local or foreign government, or any
agency thereof, or other political subdivision of the United States or any such
government, and any interest, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any tax or any
contest or dispute thereof.
“Taxing Authority”
shall mean any applicable governmental authority responsible for the imposition
of Taxes.
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“Tax Returns” shall
mean all reports, returns, declarations, statements, forms or other information
required to be supplied to a Taxing Authority in connection with
Taxes.
“Third Party Consents”
shall mean all waivers, permits, consents, approvals or other authorizations
from Governmental Entities and other third parties required for the assignment
to and performance by the Buyer of the Assigned Contracts and the Seller Real
Estate Leases.
“Unresolved
Objections” shall mean those objections to the Closing Statement that the
Buyer and the Seller did not resolve.
ARTICLE
XII
MISCELLANEOUS
12.1 Press
Releases and Announcements. After the Closing, the Parties may
issue a joint press release announcing the execution and delivery of this
Agreement, substantially in the form previously delivered to each
other. No Party shall issue (and each Party shall cause its
Affiliates not to issue) any other press release or public disclosure relating
to the subject matter of this Agreement without the prior written approval of
the other Party; provided, however, that any Party may make any public
disclosure it believes in good faith is required by law, regulation or stock
exchange rule (in which case the disclosing Party shall advise the other Party
and the other Party shall, if practicable, have the right to review such press
release or announcement prior to its publication).
12.2 No Third Party
Beneficiaries. This Agreement shall not confer any rights or
remedies upon any person other than the Parties and their respective successors
and permitted assigns and, to the extent specified herein, if any, their
respective Affiliates.
12.3 Action to be Taken by
Affiliates. The Parties shall cause their respective
Affiliates to comply with all of the obligations specified in this Agreement to
be performed by such Affiliates.
12.4 Entire
Agreement. This Agreement (including the documents referred to
herein) and the Confidentiality Agreement constitute the entire agreement
between the Buyer and the Seller. This Agreement (including the
documents referred to herein) supersedes any prior agreements or understandings
between the Buyer and the Seller and any representations or statements made by
or on behalf of the Seller or any of its Affiliates to the Buyer, whether
written or oral, with respect to the subject matter hereof, other than the
Confidentiality Agreement, and the parties hereto specifically disclaim reliance
on any such prior representations or statements to the extend not embodied in
this Agreement. The Confidentiality Agreement, insofar as it covers
information relating exclusively or primarily to the Business, shall terminate
effective as of the Closing, but shall remain in effect insofar as it covers
other information disclosed thereunder.
12.5 Succession and
Assignment. No Party may assign either this Agreement or any
of its rights, interests, or obligations hereunder without the prior written
approval of the Seller (in the case of an assignment by the Buyer) or the Buyer
(in the case of an assignment by the Seller), which written approval shall not
be unreasonably withheld or delayed. Notwithstanding the foregoing,
this
Agreement,
and all rights, interests and obligations hereunder, may be assigned, without
such consent, to any entity that acquires all or substantially all of a Party’s
business or
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12.6 Notices. All
notices, requests, demands, claims and other communications hereunder shall be
in writing. Any notice, request, demand, claim or other communication
hereunder shall be deemed duly delivered four business days after it is sent by
registered or certified mail, return receipt requested, postage prepaid, or one
business day after it is sent for next business day delivery via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
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If to the
Buyer:
▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇)
▇▇▇-▇▇▇▇
Attention:▇▇▇▇▇▇
▇. ▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇
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Copy to (which shall
not constitute notice):
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇)
▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
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If to the
Seller:
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Telecopy:
▇▇▇-▇▇▇-▇▇▇▇
Attention:
Chief Executive Officer
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Copy to (which shall
not constitute notice):
WilmerHale
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇ ▇▇▇
Telecopy:
617-526-5000
Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
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Any
Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which
notices, requests, demands, claims and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set
forth.
12.7 Amendments and
Waivers. The Parties may mutually amend or waive any provision
of this Agreement at any time. No amendment or waiver of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by all of the Parties. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
12.8 Severability. Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability of
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12.9 Expenses. Except
as otherwise specifically provided to the contrary in this Agreement, each of
the Parties shall bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
12.10 Specific
Performance. Each Party acknowledges and agrees that the other
Party would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each Party agrees that the other Party may
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the
matter.
12.11 Governing
Law. This Agreement and any disputes hereunder shall be
governed by and construed in accordance with the internal laws of the State of
Delaware without giving effect to any choice or conflict of law provision or
rule (whether of the State of Delaware or any other jurisdiction) that would
cause the application of laws of any jurisdiction other than those of the State
of Delaware.
12.12 Submission to
Jurisdiction. Each Party (a) submits to the exclusive
jurisdiction of any state or federal court sitting in the State of Delaware in
any action or proceeding arising out of or relating to this Agreement (except
for any actions under Section 12.10, in which case such case shall have
non-exclusive jurisdiction), (b) agrees that all claims in respect of such
action or proceeding may be heard and determined only in any such court, (c)
waives any claim of inconvenient forum or other challenge to venue in such
court, and (d) agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each Party agrees to
accept service of any summons, complaint or other initial pleading made in the
manner provided for the giving of notices in Section 12.6. Nothing in
this Section 12.12 however, shall affect the right of any Party to serve such
summons, complaint or initial pleading in any other manner permitted by
law.
12.13 Bulk Transfer
Laws. The Buyer acknowledges that the Seller will not comply
with the provisions of the bulk transfer laws of any jurisdiction in connection
with the transactions contemplated by this Agreement.
12.14 Construction.
(a) The
language used in this Agreement shall be deemed to be the language chosen by the
Parties to express their mutual intent, and no rule of strict construction shall
be applied against any Party.
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(b) Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.
(c) The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(d) Any
reference herein to an Article, section or clause shall be deemed to refer to an
Article, section or clause of this Agreement, unless the context clearly
indicates otherwise.
(e) All
references to “$”, “Dollars” or “US$” refer to currency of the United States of
America.
12.15 Waiver of Jury
Trial. To the extent permitted by applicable law, each Party
hereby irrevocably waives all rights to trial by jury in any action, proceeding
or counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this Agreement or the transactions contemplated hereby or the
actions of any Party in the negotiation, administration, performance and
enforcement of this Agreement.
12.16 Incorporation of Exhibits
and Schedules. The Exhibits and Schedules identified in this
Agreement are incorporated herein by reference and made a part
hereof.
12.17 Counterparts and Facsimile
Signature. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.
12.18 Source Code and
Documentation. The Seller shall deliver to the Buyer all
artifacts of the software development life cycle for Seller-owned software being
purchased by and transferred to the Buyer, including, without limitation, all
work product such as documentation, source code, test data, and all other
tangible items related to the software development life cycle, to the extent
that any of the foregoing artifacts such as documentation, source code, test
data, and other tangible items exist.
[Remainder
of page intentionally left blank]
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IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the date first
above written.
TIER
TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
Chief Executive Office
INFORMATIX,
INC.
By: /s/ ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
Title: President
[Signature
page to Purchase and Sale Agreement]
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The
following schedules to the Purchase and Sale Agreement are omitted from this
filing pursuant to Item 601(b)(2) of Regulation S-K:
Disclosure
Schedule
Schedule
1.1(b) Excluded
Assets
Schedule
1.1(d) Excluded
Liabilities
Schedule
5.1(f)(i) Required Third Party
Consents and Governmental Filings
Schedule
5.1(f)(ii) Non-Required Third Party
Consents and Governmental Filings
Exhibit
A – Form
of ▇▇▇▇ of Sale and Assignment
Exhibit
B
– Form
of Intellectual Property Assignment
Exhibit
C
– Form of
Assumption Agreement
Exhibit
D – Form
of Transition Services Agreement
Exhibit
E – Purchase
Price Allocation
The
registrant agrees to furnish supplementally a copy of any omitted schedule to
the Securities and Exchange Commission upon request.
AMENDMENT
NO. 1 TO PURCHASE AND SALE AGREEMENT
THIS
AMENDMENT NO. 1 TO PURCHASE AND SALE AGREEMENT (“Amendment”) is made
as of June 30, 2008 by and between Tier Technologies, Inc., a Delaware
corporation (the “Seller”), and
Informatix, Inc., a California corporation (the “Buyer”), and relates
to that certain Purchase and Sale Agreement dated June 9, 2008 (the “Agreement”) between
the Seller and the Buyer. Capitalized terms not otherwise defined
herein are used as defined in the Agreement.
For
good and valuable consideration, the Parties agree as follows:
1. The
Parties agree and acknowledge the Closing shall be deemed to occur at 11:59 p.m.
on June 30, 2008, subject to delivery on July 1, 2008 of the agreements,
instruments and other items required to be delivered at Closing pursuant to
Section 1.3 of the Agreement.
2. The
Parties agree and acknowledge that no Estimated Adjustment Payment shall be paid
into an escrow account under Section 1.4 of the
Agreement. Accordingly, all of Section 1.4(d) of the Agreement is
hereby deleted except for the first two sentences thereof.
3. Section
5.1(j) of the Agreement is hereby deleted in its entirety.
4. The
Parties agree that the following sums shall be held back by the Buyer from the
Closing Payment subject to receipt of the Governmental Authorization for the
contract listed next to such amount:
(a) $66,667
for Minnesota SDU;
(b) $42,167
for New Jersey FIDM;
(c) $31,500
for New York FIDM;
(d) $31,833
for Texas FIDM; and
(e) $43,667
for Kentucky (tax)
If
the applicable Governmental Authorization is received prior to one hundred
twenty (120) days after the Closing Date, the Buyer shall pay the corresponding
amount to the Seller not later than two (2) Business Days
thereafter. If any of the applicable Governmental Authorizations are
not received within one hundred twenty (120) days after the Closing Date, the
Buyer shall retain the corresponding amounts and there shall be a downward
adjustment of the Purchase Price equal to each such retained
amount.
5. The
Parties agree that notwithstanding the occurrence of the Closing, the Seller
shall continue to use commercially reasonable efforts to obtain all Third Party
Consents and Governmental Authorizations for all of the Assigned Contracts,
whether listed in Schedule 5.1(f)(i) or Schedule 5.1(f)(ii) of the Agreement,
including, without limitation, the Deferred Consents, and the Buyer shall give
the
Seller
all reasonable cooperation in connection therewith. The foregoing
shall not affect the obligations of the Parties under Section 1.6 of the
Agreement.
6. The
Parties agree that any commission or other agreements (other than the Employment
Security Agreements) entered into between the Seller or any Affiliate of Seller,
on the one hand, and any of the Business Employees, on the other hand, are not
Assigned Contracts, that the liabilities under such commission and other
agreements are Excluded Liabilities, and that the Seller is obligated under the
Agreement to defend and indemnify the Buyer against such liabilities, including,
without limitation, 6.1(c) of the Agreement.
7. Except
as specifically modified by this Amendment, the Agreement remains in full force
and effect.
IN
WITNESS WHEREOF, the Parties have executed this Amendment as of the date first
set forth above.
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TIER
TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇
Title: Senior Vice
President
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INFORMATIX,
INC.
By: /s/ ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇
Title: President
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