EXHIBIT 10.1
EXECUTION COPY
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SECURITIES PURCHASE AGREEMENT
by and among
COMVERSE, INC.,
AS PURCHASER,
CSG SOFTWARE, INC.,
CSG AMERICAS HOLDINGS, INC.,
CSG NETHERLANDS BV,
CSG TECHNOLOGY LIMITED, THE COMPANIES TO BE ACQUIRED
and
CSG SYSTEMS INTERNATIONAL, INC. and CSG NETHERLANDS CV,
ACTING THROUGH ITS GENERAL PARTNER, CSG INTERNATIONAL
HOLDINGS, LLC
AS SELLERS
_______________
Dated as of October 6, 2005
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.......................................................................1
1.1 Certain Definitions...................................................................1
1.2 Terms Defined Elsewhere in this Agreement.............................................8
1.3 Other Definitional and Interpretive Matters..........................................11
ARTICLE II SALE AND PURCHASE OF SECURITIES, PURCHASE PRICE; CLOSING.........................12
2.1 Sale and Purchase of Securities......................................................12
2.2 Purchase Price.......................................................................12
2.3 Severance Adjustment Amount..........................................................12
2.4 Payment of Purchase Price............................................................13
2.5 Purchase Price Adjustment............................................................13
2.6 Closing Date.........................................................................16
2.7 Seller Deliveries on the Closing Date................................................16
2.8 Joint Deliveries on Closing Date.....................................................17
ARTICLE III REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLERS...........................17
3.1 Organization and Qualification.......................................................17
3.2 Authorization; Binding Effect........................................................18
3.3 Non-Contravention; Consents..........................................................18
3.4 Ownership and Transfer of Securities.................................................19
3.5 Litigation...........................................................................19
3.6 Public Filings.......................................................................19
3.7 Financial Advisors...................................................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANIES AND SUBSIDIARIES........20
4.1 Organization and Qualification.......................................................20
4.2 Subsidiaries.........................................................................21
4.3 Authorization; Binding Effect........................................................21
4.4 Non-Contravention; Consents..........................................................22
4.5 Title to Property; Principal Equipment; Sufficiency of Assets........................23
TABLE OF CONTENTS
(CONTINUED)
PAGE
4.6 Permits, Licenses....................................................................23
4.7 Real Estate..........................................................................23
4.8 Compliance With Laws; Litigation.....................................................24
4.9 Business Employees...................................................................24
4.10 Contracts............................................................................27
4.11 Environmental Matters................................................................28
4.12 Financial Statements; Undisclosed Liabilities; Absence of Changes....................28
4.13 Intellectual Property................................................................32
4.14 Brokers..............................................................................33
4.15 Certain Tax Matters..................................................................34
4.16 Receivables..........................................................................37
4.17 Customers............................................................................37
4.18 Capitalization.......................................................................37
4.19 Corporate Records....................................................................39
4.20 Insurance............................................................................39
4.21 Related Party Transaction............................................................39
4.22 Intentionally Omitted................................................................40
4.23 Certain Payments.....................................................................40
4.24 Certain Governmental Matters.........................................................40
4.25 No Other Representations or Warranties...............................................40
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................40
5.1 Organization and Good Standing.......................................................41
5.2 Authorization of Agreement...........................................................41
5.3 Conflicts; Consents of Third Parties.................................................41
5.4 Litigation...........................................................................42
5.5 Investment Intention.................................................................42
5.6 Financial Advisors...................................................................42
5.7 Financing............................................................................42
5.8 Inspections; No Other Representations................................................42
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TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE VI COVENANTS........................................................................43
6.1 Access to Information; Confidentiality...............................................43
6.2 Conduct of the Business Pending the Closing..........................................44
6.3 Third Party Consents.................................................................48
6.4 Governmental Consents and Approvals..................................................48
6.5 Further Assurances...................................................................50
6.6 Non-Solicitation and Confidentiality.................................................50
6.7 Preservation of Records..............................................................52
6.8 Publicity............................................................................52
6.9 Use of Name..........................................................................52
6.10 Related-Party Transactions with Non-Management Affiliates............................54
6.11 Monthly Financial Statements.........................................................54
6.12 Notification of Certain Matters......................................................55
6.13 Employees............................................................................55
6.14 Certain Tax Matters..................................................................58
6.15 Sellers' Deliverables................................................................59
6.16 Releases.............................................................................60
6.17 Earnout Obligations..................................................................60
ARTICLE VII CONDITIONS TO CLOSING............................................................61
7.1 Conditions Precedent to Obligations of Purchaser and the Sellers.....................61
7.2 Conditions Precedent to Obligations of Purchaser.....................................62
7.3 Conditions Precedent to Obligations of the Sellers...................................63
ARTICLE VIII INDEMNIFICATION..................................................................64
8.1 Survival of Representations and Warranties...........................................64
8.2 Indemnification......................................................................65
8.3 Indemnification Procedures...........................................................67
8.4 Limitations on Indemnification for Breaches of Representations and Warranties........68
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TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE IX TAX MATTERS......................................................................71
9.1 Tax Indemnification by the Sellers...................................................71
9.2 Tax Indemnification by Purchaser.....................................................72
9.3 Preparation of Tax Returns and Payment of Taxes......................................72
9.4 Straddle Period Tax Allocation.......................................................73
9.5 Tax Audits and Indemnification Procedures............................................74
9.6 Termination of Tax Allocation Agreements.............................................74
9.7 Carrybacks...........................................................................74
9.8 338 Elections........................................................................75
9.9 Transfer Taxes.......................................................................76
9.10 Disputes.............................................................................76
9.11 Treatment of Indemnity Payments......................................................76
9.12 Time Limits..........................................................................76
9.13 Exclusivity..........................................................................77
9.14 Purchaser Covenants..................................................................77
9.15 Refunds and Tax Benefits.............................................................77
9.16 Cooperation on Tax Matters...........................................................77
ARTICLE X TERMINATION......................................................................78
10.1 Termination of Agreement.............................................................78
10.2 Procedure Upon Termination...........................................................79
10.3 Effect of Termination................................................................79
ARTICLE XI MISCELLANEOUS....................................................................79
11.1 Expenses.............................................................................79
11.2 Specific Performance.................................................................79
11.3 Submission to Jurisdiction; Consent to Service of Process; Waiver of Jury Trial......79
11.4 Entire Agreement; Amendments and Waivers.............................................80
11.5 Governing Law........................................................................81
11.6 Notices..............................................................................81
11.7 Severability.........................................................................82
11.8 Binding Effect; Assignment...........................................................82
11.9 Non-Recourse.........................................................................82
11.10 Counterparts.........................................................................83
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT, dated October 6, 2005 (the
"Agreement"), by and among Comverse, Inc., a Delaware corporation ("Purchaser"),
CSG Software, Inc., a Delaware corporation ("CSG Software"), CSG Americas
Holdings, Inc., a Delaware corporation ("CSG Holdings"), CSG Netherlands BV, a
company organized under the laws of the Netherlands ("CSG Netherlands") and CSG
Technology Limited, a company organized under the laws of Bermuda ("CSG
Technology" and, together with CSG Software, CSG Holdings and CSG Netherlands,
the "Companies"), CSG Systems International, Inc., a Delaware corporation
("CSG"), and CSG Netherlands CV, a partnership with limited liability organized
under the laws of The Netherlands ("CSG Netherlands CV" and, together with CSG,
the "Sellers"), with CSG Netherlands CV acting through its general partner, CSG
International Holdings, LLC, a Delaware limited liability company ("CSG
International").
W I T N E S S E T H:
WHEREAS, the Sellers own (i) all of the issued and outstanding
capital stock of each of CSG Software, CSG Holdings, CSG Netherlands and CSG
Technology and (ii) nominal interests in certain Subsidiaries of the Companies
(collectively, the "Securities");
WHEREAS, the Sellers desire to sell to Purchaser, and Purchaser
desires to purchase from the Sellers, the Securities for the Purchase Price and
upon the terms and conditions hereinafter set forth; and
WHEREAS, certain terms used in this Agreement are defined in Section
1.1;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings specified in this Section 1.1:
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, and the term
"control" (including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise.
"Affiliated Group" means any affiliated group within the meaning of
Section 1504 of the Code or any comparable or analogous group under applicable
Law.
"Aggregate Retention Amount" means the aggregate of all Retention
Amounts.
"Benefit Plan" means each Pension Plan, welfare plan and employment,
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock option, stock purchase, phantom stock, performance,
retirement, thrift, savings, stock bonus, excess benefit, supplemental
unemployment, paid time off, perquisite, fringe benefit, vacation, sick leave,
severance, disability, death benefit, hospitalization, medical, dental, life
insurance, welfare benefit or other plan, program or arrangement (whether
written or unwritten), in each case, maintained or contributed to, or required
to be maintained or contributed to, by any Seller, any Affiliate of the Sellers
or any of the Companies or Subsidiaries for the benefit of any present or former
directors, officers or employees of any of the Companies or Subsidiaries or the
Business.
"Business" means the businesses and operations of the Companies and
Subsidiaries, including the Global Services and Software business and the
Integrated Customer Management System business and excluding the FairPoint
Business.
"Business Day" means any day of the year on which national banking
institutions in New York are open to the public for conducting business and are
not required or authorized to close.
"Business Employees" means the employees of the Sellers or their
Affiliates (other than any of the Companies or Subsidiaries) who render services
primarily in connection with the Business and whose names are set forth in the
Side Letter, which also sets forth the length of service, position held, job
location, annual base salary, commission eligibility, incentive plan target,
work status (i.e., actively at work or on approved leave, stating the duration
of such leave) and employer of each such Business Employee.
"Cash" means the amount of cash, cash equivalents, and short-term
investments, calculated in accordance with GAAP applied on a basis consistent
with the preparation of the Financial Statements.
"Cash Adjustment Amount" means the sum of (a) the amount payable, if
any, by Purchaser if Purchaser elects to acquire the Excess Cash Amount
calculated in accordance with Section 7.3(e), and (b) an amount equal to the
lesser of (i) 70% of Closing Cash in excess of $1,100,000 and (ii) $4,410,000.
"Code" means the Internal Revenue Code of 1986, as amended.
2
"Company Plan" means any Benefit Plan that is sponsored or maintained
by any Company or any of the Subsidiaries for the benefit of any present or
former directors, officers or employees of any Company or Subsidiary.
"Company Transaction Expenses" means, except as otherwise expressly
set forth in this Agreement (including Section 9.9), the aggregate amount of all
out-of-pocket fees and expenses, incurred by or on behalf of and to be paid by,
any of the Companies or Subsidiaries to the extent relating to the selling of
the Companies or otherwise relating to the negotiation, preparation or execution
of this Agreement or any documents or agreements contemplated hereby or the
performance or consummation of the transactions contemplated hereby, including
(A) any fees associated with filings required by the HSR Act or competition
filings to be made in foreign jurisdictions required to be paid in accordance
with Section 11.1 hereof; (B) any fees and expenses associated with obtaining
necessary or appropriate waivers, consents or approvals of any Governmental Body
or third parties on behalf of any of the Companies or any of the Subsidiaries
(other than as provided in Section 6.3), (C) any fees or expenses associated
with obtaining the release and termination of any Liens; (D) all brokers' or
finders' fees; (E) fees and expenses of counsel, advisors, consultants,
investment bankers, accountants, and auditors and experts; (F) all sale,
"stay-around," retention, or similar bonuses or payments to current or former
directors, officers, employees and consultants payable as a result of or in
connection with the transactions contemplated hereby (other than the Aggregate
Retention Amount and any severance obligations in respect of actions taken by
Purchaser); and (G) fees and expenses to the extent attributable to the
Reorganization.
"Contract" means any contract, agreement, indenture, note, bond,
mortgage, loan, instrument, lease, license, commitment or other arrangement,
understanding, undertaking, commitment or obligation, whether written or oral.
"CSG Common Stock" means the common stock, $0.01 par value per share,
of CSG.
"CSG Common Stock Closing Price" means a dollar amount equal to the
closing price per share of the CSG Common Stock on the NASDAQ Stock Market on
the trading day which is two (2) days immediately preceding the Closing Date.
"Environmental Law" means any Law in any way relating to the
protection of the environment or natural resources in connection with the
presence of, or any Remedial Action taken in relation to, a Hazardous Material
in the soil or any body of water, including but not limited to, any ground
water, surface water or aquifer, including the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. App. ss. 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean
Water Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et
seq.) the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the
Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.), as each has been
or may be amended and the regulations promulgated pursuant thereto and in each
case, as in effect on or prior to the Closing Date or, with respect to
representations and warranties made on the date hereof and as of the Closing, on
or prior to the date hereof and on or prior to the Closing Date.
3
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended.
"Escrow Account" means a separate account, set up pursuant to the
Escrow Agreement, where the Escrow Amount shall be held for disbursement by the
Escrow Agent.
"Escrow Amount" means the sum of (a) the amount of any additional
purchase price payable in respect of the Excess Cash Amount if Purchaser elects
to acquire the Excess Cash Amount under Section 7.3(e) calculated in accordance
with Section 7.3(e) and determined as if the Excess Cash Amount as of the
Closing Date equals (i) the Cash of the Companies and Subsidiaries as set forth
on the most recent unaudited monthly financial statements of the Companies and
Subsidiaries delivered to Purchaser pursuant to Section 6.11 prior to the
Closing Date less (ii) any Cash dividends paid by the Companies or Subsidiaries
to the Sellers and their Affiliates (other than the Companies and Subsidiaries)
since the date of such financial statement (the result of clauses (i) and (ii)
shall be referred to "Estimated Closing Cash") and (b) an amount equal to the
lesser of (i) 70% of Estimated Closing Cash in excess of $1,100,000 and (ii)
$4,410,000.
"FairPoint Business" means the service bureau business contract by
and among CSG Software, Inc. and FairPoint Communications, Inc.
"GAAP" means generally accepted accounting principles in the United
States as of the date hereof.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof, or
any court or arbitrator (public or private).
"Hazardous Material" means any substance, material or waste that is
regulated, classified, or otherwise characterized under or pursuant to any
Environmental Law as "hazardous," "toxic," "pollutant," "contaminant,"
"radioactive," or words of similar meaning or effect, including petroleum and
its by-products, asbestos, polychlorinated biphenyls, radon, mold and urea
formaldehyde insulation.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
4
"Indebtedness" of any Person means, without duplication, (i) the
principal, accreted value, accrued and unpaid interest, prepayment and
redemption premiums or penalties (if any), unpaid fees or expenses and other
monetary obligations in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable and other accrued current liabilities arising
in the Ordinary Course of Business (other than the current liability portion of
any indebtedness for borrowed money)); (iii) all obligations of such Person
under leases required to be capitalized in accordance with GAAP; (iv) all
obligations of such Person for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction; (v) all obligations
of such Person under interest rate or currency swap transactions (valued at the
termination value thereof); (vi) the liquidation value, accrued and unpaid
dividends; prepayment or redemption premiums and penalties (if any), unpaid fees
or expenses and other monetary obligations in respect of any redeemable
preferred stock of such Person; (vii) all obligations of the type referred to in
clauses (i) through (vi) of other Persons for the payment of which such Person
is responsible or liable, directly or indirectly, as obligor, guarantor, surety
or otherwise, including guarantees of such obligations; and (viii) all
obligations of the type referred to in clauses (i) through (vii) of other
Persons secured by (or for which the holder of such obligations has an existing
right, contingent or otherwise, to be secured by) any Lien on any property or
asset of such Person (whether or not such obligation is assumed by such Person).
"Intellectual Property" shall mean all of the rights arising from or
in respect of the following, whether protected, created or arising under the
Laws of the United States or any foreign jurisdiction: (A) patents, patent
applications, any reissues, reexaminations, divisionals, continuations,
continuations-in-part and extensions thereof; (B) trademarks, service marks,
trade names (whether registered or unregistered), service names, industrial
designs, brand names, brand marks, trade dress rights, Internet domain names,
identifying symbols, logos, emblems, signs or insignia, and including all
goodwill associated with the foregoing; (C) copyrights, whether registered or
unregistered (including copyrights in computer software programs), mask work
rights and registrations and applications therefor); (D) confidential and
proprietary information, or non-public know-how, trade secrets and information,
in each case excluding any rights in respect of any of the foregoing that
comprise or are protected by items listed in clauses (B) or (C) above; and (E)
all applications, registrations and permits related to any of the foregoing
clauses (A) through (D).
"IRS" means the Internal Revenue Service.
"Knowledge" means the knowledge after due inquiry of the individuals
set forth on Schedule 1.1.
"Law" means any foreign, federal, state or local law (including
common law), statute, code, ordinance, rule, regulation or Order.
5
"Legal Proceeding" means any judicial, administrative or arbitral
actions, suits, mediation, investigation, inquiry, proceedings or claims
(including counterclaims) by or before a Governmental Body.
"Liability" means any debt, loss, damage, adverse claim, fine,
penalty, liability or obligation (whether direct or indirect, known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, matured or
unmatured, determined or determinable, liquidated or unliquidated, or due or to
become due, and whether in contract, tort, strict liability or otherwise), and
including all costs and expenses relating thereto including all fees,
disbursements and expenses of legal counsel, experts, engineers and consultants
and costs of investigation.
"Lien" means, with respect to any property or asset, any lien,
pledge, mortgage, deed of trust, security interest, claim, lease, charge,
option, right of first refusal, easement, servitude, proxy, voting trust or
agreement, transfer restriction under any shareholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever in respect to any
property or asset.
"Material Adverse Effect" means any change, effect, event, occurrence
or state of facts that, individually or in the aggregate, is materially adverse
to (i) the business, assets, liabilities, properties, financial condition or
results of operations of the Business, taken as a whole or (ii) the ability of
each of the Sellers to consummate the transactions contemplated by this
Agreement or to perform their obligations under this Agreement or the Seller
Documents, other than, in the case of clause (i) above, any change, effect,
event, occurrence or state of facts (A) affecting the United States economy or
the economies of other jurisdictions in which a material portion of the Business
is conducted or (B) affecting the billing and customer care industry in general.
"Non-Transferred Employees" means the Business Employees who are
identified in the Transfer Notice as employees whose employment is not to be
transferred to any Company or Subsidiary in accordance with Section 6.13 of this
Agreement.
"Order" means any order, injunction, judgment, doctrine, decree,
ruling, writ, assessment or arbitration award of a Governmental Body.
"Ordinary Course of Business" means the ordinary and usual course of
Business through the date hereof consistent with past practice.
"Permits" means any approvals, authorizations, consents, licenses,
permits or certificates of a Governmental Body.
"Permitted Exceptions" means (i) all defects, exceptions,
restrictions, easements, rights of way and encumbrances disclosed in policies of
title insurance which have been delivered to Purchaser; (ii) liens for current
Taxes, assessments or other governmental charges not yet delinquent or the
amount or validity of which is being contested in good faith by appropriate
proceedings, provided an appropriate reserve has been established therefor in
6
the Financial Statements in accordance with GAAP; (iii) mechanics', carriers',
workers', and repairers' Liens arising or incurred in the Ordinary Course of
Business that are not material to the business, operations or financial
condition of the property of the Companies or Subsidiaries so encumbered and
that are not resulting from a breach, default or violation by any of the
Sellers, Companies or Subsidiaries of any Contract or Law; and (iv) zoning,
entitlement and other land use and environmental regulations by any Governmental
Body, provided that such regulations have not been violated.
"Person" means any individual, corporation, limited liability
company, partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Body or other entity.
"Release" means any release, spill, emission, leaking, pumping,
poring, injection, deposit, dumping, emptying, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment, or into or out of
any property.
"Remedial Action" means all actions including any capital
expenditures undertaken to (i) clean up, remove, treat or in any other way
address any Hazardous Material; (ii) prevent the Release or threat of Release,
or minimize the further Release of any Hazardous Material so it does not migrate
or endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; (iii) perform pre-remedial studies and investigations or
post-remedial monitoring and care; or (iv) correct a condition of noncompliance
with Environmental Laws.
"Retention Amount" means, with respect to each outstanding (a)
unvested option to purchase CSG Common Stock held by a Continuing Employee or
(b) each share of restricted CSG Common Stock subject to vesting held by a
Continuing Employee, in each case that will vest or restrictions associated
therewith will lapse within one calendar year of the Closing Date, the product
of (i) the number of shares of CSG Common Stock subject to such unvested option
or the number of shares of restricted CSG Common Stock, (ii) the CSG Common
Stock Closing Price less, in the case of options, the applicable exercise price
associated therewith, if any, and (iii) a fraction, the numerator of which is
the number of days during such vesting period that have elapsed since the grant
date or most recent anniversary thereof and the denominator of which is 365.
"Securities Act" means the Securities Act of 1933, as amended.
"Side Letter" means that certain letter from CSG to Purchaser dated
as of the date hereof setting forth the matters expressly contemplated herein.
"Subsidiary" means any Person of which (i) a majority of the
outstanding share capital, voting securities or other equity interests are
owned, directly or indirectly, by any Company or (ii) any Company is entitled,
directly or indirectly, to appoint a majority of the board of directors, board
of managers or comparable body of such Person.
7
"Tax" or "Taxes" means (i) any and all federal, state, local or
foreign taxes or other like charges, fees, imposts, levies or assessments,
including, without limitation, all net income, gross receipts, capital, sales,
use, ad valorem, value added, transfer, franchise, profits, inventory, capital
stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes and customs
duties, (ii) all interest, penalties, fines, additions to tax or additional
amounts imposed by any Taxing Authority in connection with any item described in
clause (i) and (iii) any liability in respect of any items described in clauses
(i) or (ii) payable by reason of Contract, assumption, transferee liability,
operation of Law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or
successor thereof of any analogous or similar provision under Law) or otherwise.
"Taxing Authority" means the IRS and any other Governmental Body
responsible for the administration of any Tax.
"Tax Return" means any return, report or statement required to be
filed with respect to any Tax (including any elections, declarations, schedules
or attachments thereto, and any amendment thereof) including any information
return, claim for refund, amended return or declaration of estimated Tax, and
including, where permitted or required, affiliated, combined, consolidated or
unitary returns for any group of entities that includes the Company or any of
the Subsidiaries.
1.2 Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, the following terms have meanings set forth in the sections
indicated:
Term Section
---- -------
1936 Act 4.15(u)
1997 Act 4.15(u)
2005 Annual Bonus 6.13(c)
Accrued Days 6.13(b)
Agreement Recitals
Ancillary Agreements 7.1(d)
Antitrust Division 6.4(a)
Antitrust Laws 6.4(b)
Arbiter 2.5(c)
Basket 8.4(a)
BSNL 8.2(a)(viii)
Business Intellectual Property 4.13(b)(ii)
Cap 8.4(b)
Closing 2.6
Closing Cash 2.5(a)
Closing Cash Statement 2.5(b)
Closing Net Assets Statement 2.5(b)
Closing Date 2.6
Closing Working Capital 2.5(a)
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Term Section
---- -------
Closing Working Capital Statement 2.5(b)
Companies Recitals
Company Documents 4.3(a)
Company Marks 6.9(a)
Confidential Information 6.6(b)
Confidentiality Agreement 6.1(b)
Continuing Employee 6.13(a)
Corporate 4.12(a)(ii)
CSG Recitals
CSG Australia 4.9(h)(i)
CSG Holdings Recitals
CSG Holdings Common Stock 4.18(b)
CSG International Recitals
CSG Netherlands Recitals
CSG Netherlands CV Recitals
CSG Netherlands Common Stock 4.18(c)
CSG Software Recitals
CSG Software Common Stock 4.18(a)
CSG Technology Recitals
CSG Technology Common Stock 4.18(d)
Da Vinci Obligations 6.17
Distribution Agreement 7.1(d)
employee pension benefit plan 4.9(b)
Escrow Agent 7.1(e)
Escrow Agreement 7.1(e)
Estimated Closing Cash 1.1(Definition of
Escrow Amount)
Excess Cash Amount 7.3(e)
excess parachute payment 4.9(b)
Exchange Act 3.6(a)
Financial Statements 4.12(a)
Foreign Plan 4.9(c)
FTC 6.4(a)
Government Contract 4.24
Included Current Assets 2.5(a)
Included Current Liabilities 2.5(a)
Loss 8.2(a)
Losses 8.2(a)
Marked Assets 6.9(b)(iii)
Material Contract 4.10
Net Assets Statement 4.12(a)(ii)
New Hire 6.2(b)(v)
Pension Plan 4.9(b)
Personal Property Leases 4.5(b)
9
Term Section
---- -------
Plan 4.9(h)(iii)
Pre-Closing Taxable Period 9.1
Post-Closing Taxable Period 9.2
Purchase Price 2.2
Purchase Price Decrease 2.5(d)
Purchase Price Increase 2.5(d)
Purchaser Recitals
Purchaser Documents 5.2
Purchaser Indemnified Parties 8.2(a)
Purchaser Material Adverse Effect 5.1
Purchaser's Savings Plan 6.13(d)
Purchaser Special Representations 8.1
Real Property Lease 4.7(a)
Real Property Leases 4.7(a)
Registered Intellectual Property 4.13(a)
Related Persons 4.21
Relocation and Tuition Benefits 6.13(b)
Reorganization 6.2(c)
Required Consents 4.4(b)
SEC 3.6(a)
SEC Documents 3.6(a)
Section 338(h)(10) Election 9.8(b)(i)
Securities Recitals
Seller Documents 3.2(a)
Seller Indemnified Parties 8.2(b)
Seller Name 6.9(b)(i)
Seller Required Consents 3.3(b)
Seller Special Representations 8.1
Seller Statute of Limitation Representation 8.1
Sellers Recitals
Severance Amount Shortfall 2.3
Severance Notice 6.13(a)
SGAA 4.9(h)(iii)
Straddle Period 9.4
Survival Period 8.1
Target Working Capital 2.5(a)(ii)
Tax Benefit 8.4(f)
Tax Claim 9.5(a)
Termination Date 10.1(a)
Third Party Claim 8.3(b)
Title IV Plan 4.9(b)
TRA 4.9(b)
Transfer Notice 6.13(a)
Transferred Business Employees 6.13(a)
Transition Services Agreement 7.1(c)
Working Capital Adjustments 2.5(a)
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1.3 Other Definitional and Interpretive Matters.
(a) Unless otherwise expressly provided, for purposes of this
Agreement, the following rules of interpretation shall apply:
Calculation of Time Period. When calculating the period of time
before which, within which or following which any act is to be done or step
taken pursuant to this Agreement, the date that is the reference date in
calculating such period shall be excluded. If the last day of such period is a
non-Business Day, the period in question shall end on the next succeeding
Business Day.
Dollars. Any reference in this Agreement to $ shall mean U.S.
dollars.
Exhibits/Schedules. The Exhibits and Schedules to this Agreement are
hereby incorporated and made a part hereof and are an integral part of this
Agreement. All Exhibits and Schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein. Any capitalized terms used in any Schedule or Exhibit but not otherwise
defined therein shall be defined as set forth in this Agreement.
Gender and Number. Any reference in this Agreement to gender shall
include all genders, and words imparting the singular number only shall include
the plural and vice versa.
Headings. The provision of a Table of Contents, the division of this
Agreement into Articles, Sections and other subdivisions and the insertion of
headings are for convenience of reference only and shall not affect or be
utilized in construing or interpreting this Agreement. All references in this
Agreement to any "Section" are to the corresponding Section of this Agreement
unless otherwise specified.
Herein. The words such as "herein," "hereinafter," "hereof," and
"hereunder" refer to this Agreement as a whole and not merely to a subdivision
in which such words appear unless the context otherwise requires.
Including. The word "including" or any variation thereof means
"including, without limitation" and shall not be construed to limit any general
statement that it follows to the specific or similar items or matters
immediately following it.
11
(b) The obligation of a party to use reasonable commercial efforts to
accomplish an objective means that the obligated party is required to make a
diligent, reasonable and good faith effort to accomplish the applicable
objective. Such obligation, however, does not require any unreasonable
expenditure of funds or incurrence of Liability on the part of the obligated
party (in each case, in the context of the expenditure to be made or Liability
to be incurred); provided, however, that the foregoing shall not require that
the obligated party act in a manner that would be contrary to normal commercial
practices in order to accomplish the objective. The fact that the objective is
or is not actually accomplished is no indication that the obligated party did or
did not in fact utilize its reasonable commercial efforts in attempting to
accomplish the objective.
(c) The parties hereto have participated jointly in the negotiation
and drafting of this Agreement and, in the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as jointly
drafted by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.
(d) For purposes of this Agreement, references to documents made
available to Purchaser from the Sellers and/or the Companies shall be deemed to
include only those documents made available, or indicated as made available, in
the online data room maintained by Sellers' counsel prior to October 5, 2005.
ARTICLE II
SALE AND PURCHASE OF SECURITIES, PURCHASE PRICE; CLOSING
2.1 Sale and Purchase of Securities. Upon the terms and subject to
the conditions contained herein, on the Closing Date, each Seller agrees to sell
to Purchaser, free and clear of any and all Liens, and Purchaser agrees to
purchase from each Seller, the Securities owned by such Seller and listed on
Exhibit A hereto.
2.2 Purchase Price. The aggregate purchase price to be paid by
Purchaser for the Securities shall be an amount in cash equal to $251,000,000
(a) less (i) the Aggregate Retention Amount and (ii) any Company Transaction
Expenses unpaid as of the Closing Date and (b) subject to adjustment as provided
in Section 2.3 (the "Purchase Price"), subject to further adjustment as provided
in Section 2.5.
2.3 Severance Adjustment Amount. If the aggregate of the severance
for the Non-Transferred Employees is less than $3,000,000, the Purchase Price
shall be reduced by the amount of such difference (the "Severance Amount
Shortfall"). For purposes hereof, the amount of severance for each
Non-Transferred Employee shall be equal to the lesser of (a) the amount of
severance for such Non-Transferred Employee reflected in Exhibit E of the Side
Letter and (b) the amount of severance for such Non-Transferred Employee
determined under the applicable severance policy of the Sellers in effect as of
the date hereof (other than the individuals set forth on Schedule 2.3, which
individuals shall not be considered for purposes of aggregation) and set forth
in the Severance Notice.
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2.4 Payment of Purchase Price. The Side Letter sets forth the
Retention Amount for each Continuing Employee determined (a) as if the Closing
Date were November 30, 2005, (b) assuming that all Business Employees are
Transferred Business Employees and (c) assuming that the CSG Common Stock
Closing Price is $21.70. The Aggregate Retention Amount shall be determined
utilizing the information set forth in the Side Letter and making only necessary
adjustments to contemplate the actual Closing Date, the actual CSG Common Stock
Closing Price, the actual Non-Transferred Employees, any termination of such
rights triggered as a result of the termination of employment of the holder
thereof, any further acceleration of vesting of such options to acquire CSG
Common Stock or shares of CSG Common Stock subject to restrictions, in each
case, in accordance with the Side Letter and the inclusion of additional
Business Employees engaged by the Sellers and their Affiliates (other than the
Companies and Subsidiaries) in the Integrated Customer Management System
business; provided that the aggregate value of the unvested options to acquire
CSG Common Stock (based upon the spread between an assumed stock market price of
$21.70 per share and the exercise price per share) and CSG Common Stock subject
to restrictions (based on a stock market price of $21.70 per share) held by such
additional Business Employees shall not exceed $250,000. The Sellers shall,
within 10 Business Days after the date hereof, provide Purchaser an updated
Exhibit A to the Side Letter solely to reflect the inclusion of additional
Business Employees engaged by the Sellers and their Affiliates (other than the
Companies and Subsidiaries) in the Integrated Customer Management System
business. Two (2) Business Days prior to the Closing Date, the Sellers and
Purchaser shall agree, in good faith, upon the Escrow Amount and the amount of
adjustments to the Purchase Price contemplated by clause (a) of Section 2.2. On
the Closing Date, Purchaser shall pay the Purchase Price, as so calculated, to
the Sellers in the percentages set forth in a letter to be delivered by the
Sellers to Purchaser at least three (3) days prior to Closing by wire transfer
of immediately available funds into accounts designated in such letter. On the
Closing Date, Purchaser shall pay the Escrow Amount to the Escrow Agent in cash
payable by wire transfer of immediately available funds for deposit into the
Escrow Account.
2.5 Purchase Price Adjustment.
(a) Closing Working Capital. Following the Closing, the Purchase
Price shall be adjusted as provided herein in the event that (i) Closing Working
Capital is less than the Target Working Capital, (ii) Purchaser elects to
acquire the Excess Cash Amount by paying the amount calculated in accordance
with Section 7.3(e) or (iii) the Cash of the Companies and Subsidiaries as of
the Closing Date (the "Closing Cash") exceeds $1,100,000. "Target Working
Capital" shall be negative $21,000,000. "Closing Working Capital" means (A) the
combined Included Current Assets of the Companies and Subsidiaries, less (B) the
combined Included Current Liabilities of the Companies and Subsidiaries, plus
(C) the sum of Working Capital Adjustments, all determined as of the opening of
business on the Closing Date. "Included Current Assets" means current assets of
13
the Companies and Subsidiaries, as defined under, and determined in accordance
with, GAAP applied using the same accounting methods, practices, principles,
policies and procedures, with consistent classifications, judgments and
valuation and estimation methodologies that were used in the preparation of the
audited consolidated financial statements of CSG and its subsidiaries for the
most recent fiscal year end as if such accounts were being prepared and audited
as of a fiscal year end. "Included Current Liabilities" means current
liabilities of the Companies and Subsidiaries as defined under, and determined
in accordance with, GAAP applied using the same accounting methods, practices,
principles, policies and procedures, with consistent classifications, judgments
and valuation and estimation methodologies that were used in the preparation of
the audited consolidated financial statements of CSG and its subsidiaries for
the most recent fiscal year end as if such accounts were being prepared and
audited as of a fiscal year end. "Working Capital Adjustments" means the sum of
the following adjustments: (A) a negative adjustment equal to the amount of Cash
of the Companies and Subsidiaries, (B) a negative adjustment equal to
$2,500,000, which is related to a predetermined adjustment for the allowance for
doubtful accounts, (C) a negative adjustment equal to the excess of (1) the full
amount of unpaid 2005 incentive bonus compensation for Continuing Employees
expected to be accrued as of December 31, 2005 over (2) the amount of accrued
but unpaid 2005 incentive bonus compensation for Continuing Employees reflected
in the Included Liabilities, (D) a negative adjustment equal to the non-current
deferred revenue of the Companies and Subsidiaries, (E) a negative adjustment of
$5,000,000 in respect of a reserve for Taxes (it being understood and agreed
that Included Current Liabilities will not otherwise include any reserve for
income Tax contingencies determined in accordance with Statement of Financial
Accounting Standards No. 5), and (F) the Closing Working Capital Statement shall
not reflect (whether or not it would otherwise reflect) any asset or Liability
in respect of any Tax resulting from, arising out of or based on the sale of the
Securities hereunder, including any Tax arising as a result of the Section
338(h)(10) Election (as defined in Section 9.8) and any income or franchise Tax
payable to any Tax Authority with respect to which the Company or Subsidiary has
filed or will file an affiliated, consolidated, combined or unitary Tax Return
with a Seller or any of their Affiliates to the extent that such Tax is required
to be paid by the Sellers or any of their Affiliates (other than the Companies
or Subsidiaries) under applicable Law. All components of Closing Working Capital
shall be calculated after taking into account the actions taken pursuant to
Section 6.10, excluding the FairPoint Business and excluding any intercompany
accounts receivable or accounts payable between the Companies and Subsidiaries,
on the one hand, and CSG and its subsidiaries (other than the Companies and
Subsidiaries), on the other. Schedule 2.5(a) provides an illustrative example of
the calculations of Closing Working Capital derived from the unaudited
consolidated financial statements of CSG and its subsidiaries as of June 30,
2005.
(b) Closing Net Assets Statement. Within 60 days following the
Closing Date, Purchaser shall deliver to the Sellers an unaudited combined
statement of net assets of the Companies and Subsidiaries (exclusive of the
assets and Liabilities of the FairPoint Business) as of the opening of business
on the Closing Date (the "Closing Net Assets Statement"), a statement of Closing
Working Capital derived from the Closing Net Assets Statement (the "Closing
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Working Capital Statement") and a statement of the Closing Cash, the Excess Cash
Amount and the resulting Cash Adjustment Amount, if any, derived from the
Closing Net Assets Statement (the "Closing Cash Statement"). Schedule 2.5(b)
provides an illustrative example of the calculations of the Cash Adjustment
Amount derived from the unaudited consolidated financial statements of CSG and
its subsidiaries as of June 30, 2005. The Closing Net Assets Statement shall be
derived from the unaudited financial statements of CSG and its subsidiaries
prepared in accordance with GAAP applied using the same accounting methods,
practices, principles, policies and procedures, with consistent classifications,
judgments and valuation and estimation methodologies that were used in the
preparation of the audited consolidated financial statements for CSG and its
subsidiaries for the most recent fiscal year end as if such Closing Net Assets
Statement was as of a fiscal year end.
(c) Acceptance of Statements; Dispute Procedures. The Closing Net
Assets Statement, the Closing Working Capital Statement and the Closing Cash
Statement delivered by Purchaser to the Sellers shall be conclusive and binding
upon the parties unless the Sellers, within 30 days after delivery to the
Sellers of the Closing Net Assets Statement, the Closing Working Capital
Statement and the Closing Cash Statement, notify Purchaser in writing that the
Sellers dispute any of the amounts set forth therein, specifying the nature of
the dispute and the basis therefor. The parties shall in good faith attempt to
resolve any dispute and, if the parties so resolve all disputes, the Closing Net
Assets Statement, the Closing Working Capital Statement and the Closing Cash
Statement, as amended to the extent necessary to reflect the resolution of the
dispute, shall be conclusive and binding on the parties. If the parties do not
reach agreement in resolving the dispute within 20 days after notice is given by
the Sellers to Purchaser pursuant to the second preceding sentence, the parties
shall submit the dispute to a mutually satisfactory partner in the New York City
office of the accounting firm of PricewaterhouseCoopers or, if no partner at
such firm will act, to a partner at such other nationally recognized independent
accounting firm which is mutually agreeable to the parties (who shall not have
any material relationship with Purchaser or Seller) (the "Arbiter") for
resolution. If the parties cannot agree on the selection of a partner at an
independent accounting firm to act as Arbiter, the parties shall request the
American Arbitration Association to appoint such a partner, and such appointment
shall be conclusive and binding on the parties. Promptly, but no later than 20
days after acceptance of his or her appointment as Arbiter, the Arbiter shall
determine (it being understood that in making such determination, the Arbiter
shall be functioning as an expert and not as an arbitrator), based solely on
written submissions by Purchaser and the Seller, and not by independent review,
only those issues in dispute and shall render a written report as to the
resolution of the dispute and the resulting computation of the Closing Working
Capital and the Cash Adjustment Amount which shall be conclusive and binding on
the parties. All proceedings conducted by the Arbiter shall take place in The
City of New York. In resolving any disputed item, the Arbiter (x) shall be bound
by the provisions of this Section 2.5 and (y) may not assign a value to any item
15
greater than the greatest value for such item claimed by either party or less
than the smallest value for such item claimed by either party. The fees, costs
and expenses of the Arbiter shall be allocated to and borne by Purchaser and the
Sellers based on the inverse of the percentage that the Arbiter's determination
(before such allocation) bears to the total amount of the items in dispute as
originally submitted to the Arbiter. For example, should the items in dispute
total in amount to $1,000 and the Arbiter awards $600 in favor of the Seller's
position, 60% of the costs of its review would be borne by Purchaser and 40% of
the costs would be borne by the Seller.
(d) Payment. Upon final determination of Closing Working Capital as
provided in Section 2.5(c) above, if Closing Working Capital is less than Target
Working Capital, the Purchase Price shall be decreased by the excess (the
"Purchase Price Decrease") of Target Working Capital over the Closing Working
Capital. Upon final determination of the Cash Adjustment Amount, if any, as
provided in Section 2.5(c) above, the Purchase Price shall be increased by the
Cash Adjustment Amount, if any, (the "Purchase Price Increase"). If the Purchase
Price Decrease exceeds the Purchase Price Increase, the Sellers shall promptly
pay to Purchaser the amount of such excess no later than five (5) Business Days
after such final determination, together with interest thereon from the Closing
Date to the date of payment thereof at the "prime" rate, as announced by The
Wall Street Journal, Eastern Edition, from time to time to be in effect,
calculated based on a 365 day year and the actual number of days elapsed, and
all amounts in the Escrow Account shall be released to Purchaser. If the
Purchase Price Increase exceeds the Purchase Price Decrease, Purchaser shall
promptly pay to the Sellers in the percentages set forth in the letter
referenced in Section 2.4 the amount of such excess no later than five (5)
Business Days after such final determination, together with interest thereon
from the Closing Date to the date of payment thereof at the "prime" rate,
calculated as set forth in the immediately preceding sentence. Any payment to be
made by Purchaser to the Sellers pursuant to this Section 2.5(d) will first be
made as a payment from the Escrow Account and any amounts remaining in the
Escrow Account thereafter shall be released to Purchaser.
2.6 Closing Date. The consummation of the sale and purchase of the
Securities provided for in Section 2.1 hereof (the "Closing") shall take place
at the offices of Weil, Gotshal & ▇▇▇▇▇▇ LLP located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (or at such other place as the parties may designate in
writing) at 10:00 a.m. (New York City time) on a date to be specified by the
parties (the "Closing Date"), which date shall be no later than the second
Business Day after the satisfaction or waiver of the conditions set forth in
Article VIII (other than conditions that by their nature are to be satisfied at
Closing, but subject to the satisfaction or waiver of those conditions at such
time), unless another time, date or place is agreed to in writing by the parties
hereto.
2.7 Seller Deliveries on the Closing Date. At the Closing, the
Sellers shall deliver or cause each Company to deliver, as applicable, to
Purchaser:
(a) Copies of resolutions, certified by the Secretary of each Company
and an authorized person of the Seller, respectively, as to the authorization of
this Agreement and all of the transactions contemplated hereby.
16
(b) Copies of the releases from Affiliates of each Company, pursuant
to Section 6.10.
(c) Certificates from the Sellers representing the Securities, duly
endorsed in blank or accompanied by transfer powers and with all requisite
transfer tax stamps attached and otherwise sufficient to transfer the Securities
to Purchaser free and clean of all Liens other than Permitted Exceptions;
(d) Certificates of good standing dated not more than five (5)
Business Days prior to the Closing Date with respect to each Company issued by
the Secretary of State of jurisdiction of organization for such Company and for
each state in which such Company is qualified to do business as a foreign
corporation; and
(e) An affidavit of non-foreign status of CSG that complies with
Section 1445 of the Code and an affidavit of CSG International that none of the
Securities being sold by CSG Netherlands CV is a "U.S. real property interest"
within the meaning of Section 1445.
2.8 Joint Deliveries on Closing Date. At the Closing, the Purchaser
and the Sellers shall deliver to each other their respective portions of:
(a) The fully-executed Transition Services Agreement;
(b) The fully-executed Distribution Agreement; and
(c) The fully-executed Escrow Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLERS
The Sellers, jointly and severally, hereby represent and warrant to
Purchaser that:
3.1 Organization and Qualification. CSG is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and carry on its business as now conducted. CSG
Netherlands CV is a partnership with limited liability duly organized, validly
existing and in good standing under the Laws of The Netherlands and, acting
through its general partner, CSG International, has all requisite power and
authority to own, lease and operate its properties and carry on its business as
now conducted. CSG International is a limited liability company duly organized,
validly existing and in good standing under the Laws of the State of Delaware
and has all requisite limited liability company power and authority to own,
lease and operate its properties and carry on as business as now conducted.
17
3.2 Authorization; Binding Effect.
(a) Each Seller has all requisite corporate power and authority to
execute, perform and deliver this Agreement and each other agreement, document,
or instrument or certificate contemplated by this Agreement or otherwise to be
executed by such Seller in connection with the consummation of the transactions
contemplated by this Agreement (the "Seller Documents") and to effect and
consummate the transactions contemplated hereby and thereby, and the execution,
delivery and performance of this Agreement and the Seller Documents have been
duly authorized by all requisite corporate action.
(b) This Agreement has been duly executed and delivered by each
Seller and this Agreement is, and the Seller Documents, when duly executed and
delivered by such Seller will be, valid and legally binding obligations of such
Seller, enforceable against such Seller in accordance with their respective
terms, except to the extent that enforcement of the rights and remedies created
hereby and thereby may be affected by bankruptcy, reorganization, moratorium,
insolvency and similar Laws of general application affecting the rights and
remedies of creditors and by general equity principles.
3.3 Non-Contravention; Consents.
(a) Assuming that all Seller Required Consents have been obtained,
the execution, delivery and performance of this Agreement by each Seller and the
Seller Documents by such Seller and the consummation of the transactions
contemplated hereby and thereby do not and will not: (i) result in a breach or
violation of any provision of such Seller's charter, by-laws, partnership
agreement, limited liability operating agreement or similar organizational
documents, (ii) violate or result in a breach under any provision of any
mortgage, deed of trust, conveyance to secure debt, note, loan, indenture, lien,
lease, agreement, instrument, order, judgment, decree or other arrangement or
commitment to which such Seller is a party or by which such Seller or any of its
assets are bound or (iii) violate any applicable Law or Order or Permit by which
such Seller or its assets are bound other than, in the case of clauses (ii) and
(iii), any such violation, breach, defaults, acceleration or cancellation of
obligations or rights that, individually or in the aggregate, has not had or
would not reasonably be expected to have a material adverse effect on the
Seller.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, or notice to any Person is required to be obtained,
made or taken by the Sellers, Companies or Subsidiaries in connection with the
execution and delivery of this Agreement or the Seller Documents by any Seller
or for the consummation of the transactions contemplated hereby or thereby by
any Seller, except for (i) any filings required to be made under any Antitrust
Laws and (ii) the items set forth in Schedule 3.3(b) (items (i) and (ii) being
referred to herein as the "Seller Required Consents").
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3.4 Ownership and Transfer of Securities. Each Seller is the record
and beneficial owner of the Securities indicated as being owned by such Seller
on Exhibit A, free and clear of any and all Liens, and such Securities
constitute all of the outstanding equity interests of the Companies; provided,
however, that CSG International as general partner of CSG Netherlands CV holds
legal title to CSG Technology and CSG Netherlands on behalf of, and for the
benefit of, CSG Netherlands CV. Each Seller, and with regard to CSG Netherlands
CV, acting through its general partner of CSG International, has the power and
authority to sell, transfer, assign and deliver the Securities owned by it as
provided in this Agreement, and such delivery will convey to Purchaser good and
marketable title to such Securities, free and clear of any and all Liens.
3.5 Litigation. Except as set forth in Schedule 3.5, there is no
Legal Proceeding pending or, to the Knowledge of the Seller, threatened against
any Seller or to which any Seller is otherwise a party relating to this
Agreement, the Seller Documents or the transactions contemplated hereby or
thereby.
3.6 Public Filings.
(a) CSG has filed with the Securities and Exchange Commission (the
"SEC") all forms, reports, schedules, statements, exhibits and other documents
required to be filed under the Exchange Act of 1934, as amended (the "Exchange
Act"), or the Securities Act, (collectively, the "SEC Documents"). As of its
filing date or, if amended, as of the date of the last such amendment, each SEC
Document, to the extent that it relates to the Companies, Subsidiaries or the
Business, fully complied with the applicable requirements of the Exchange Act
and the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. As of its filing date, or, if amended, as of
the date of the last such amendment, each SEC Document filed pursuant to the
Exchange Act did not contain any untrue statement of a material fact or omit to
state any material fact with respect to the Companies, Subsidiaries or the
Business necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. None of the Companies
or Subsidiaries is or has been required to file any forms, reports or other
documents with the SEC. All of the audited consolidated financial statements and
unaudited consolidated interim financial statements included in the SEC
Documents, to the extent that they relate to the Companies, Subsidiaries or the
Business (i) have been prepared from, are in accordance with and accurately
reflect the books and records of CSG and its consolidated subsidiaries, (ii)
fully comply with the applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto (including Regulation
S-X), (iii) were prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto and
except, in the case of the unaudited interim statements, as may be permitted
under the Exchange Act with respect to Quarterly Reports on Form 10-Q, and (iv)
fairly present, in all material respects, the consolidated financial position
and the consolidated results of operations and cash flows (subject, in the case
19
of unaudited interim financial statements, to normal year end adjustments) of
CSG and its consolidated subsidiaries as of the dates and for the periods
referred to therein. The reports of CSG's independent auditors regarding CSG's
consolidated financial statements in the SEC filings, to the extent they relate
to the Companies, Subsidiaries or the Business, have not been withdrawn,
supplemented or modified, and none of CSG or any of its subsidiaries has
received any communication from its independent auditors concerning any such
withdrawal, supplement or modification. CSG has provided to Purchaser copies of
all issued auditors' reports, letters to management regarding accounting
practices and systems of internal controls, and all responses to such letters
from management, in each case to the extent relating to the Companies, the
Subsidiaries or the Business, whether the same are issued to CSG or any of its
subsidiaries.
(b) CSG has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 under the Exchange Act) with
respect to the Companies, Subsidiaries and the Business; such disclosure
controls and procedures are designed to ensure that material information
relating to the Companies, Subsidiaries and the Business is made known to CSG's
principal executive officer and its principal financial officer by others within
those entities; and, to the Knowledge of the Sellers, such disclosure controls
and procedures are effective in timely alerting CSG's principal executive
officer and its principal financial officer to material information required
under the Exchange Act to be included in CSG's periodic reports with respect to
the Companies, the Subsidiaries and the Business.
3.7 Financial Advisors. Except as set forth on Schedule 3.7, no
Person has acted, directly or indirectly, as a broker, finder or financial
advisor for any Seller, Company or Subsidiary in connection with the
transactions contemplated by this Agreement and no Person is or will be entitled
to any fee or commission or like payment in respect thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANIES AND SUBSIDIARIES
The Sellers, jointly and severally, hereby represent and warrant to
Purchaser that:
4.1 Organization and Qualification.
Each of CSG Software and CSG Holding is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now conducted. CSG Technology is
a corporation duly organized, validly existing and in good standing under the
laws of Bermuda and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now conducted. CSG
Netherlands BV is a limited liability company duly organized, validly existing
and in good standing under the laws of the Netherlands and has all requisite
20
power and authority to own, lease and operate its properties and to carry on its
business as now conducted. Each Company is duly qualified or authorized to do
business as a foreign corporation and is in good standing under the laws of each
jurisdiction in which it owns or leases real property and each other
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization, except where the
failure to be so qualified, authorized or in good standing, individually or in
the aggregate, has not had, nor would reasonably be expected to have, a Material
Adverse Effect.
4.2 Subsidiaries. Schedule 4.2 sets forth the name of each Subsidiary
and, with respect to each Subsidiary, the jurisdiction in which it is
incorporated or organized, the jurisdictions, if any, in which it is qualified
to do business, the number of shares of its authorized capital stock (if any),
the number and class of shares or other equity interests thereof duly issued and
outstanding, the names of all stockholders or other equity owners and the number
of shares of stock owned by each stockholder or the amount of equity owned by
each equity owner. Each Subsidiary is a duly organized and validly existing
corporation, partnership or other entity in good standing under the laws of the
jurisdiction of its incorporation or organization and is duly qualified or
authorized to do business and is in good standing under the laws of each
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization, except where the
failure to be so qualified, authorized or in good standing, individually or in
the aggregate, has not had, nor would reasonably be expected to have, a Material
Adverse Effect. Each Subsidiary has all requisite corporate or entity power and
authority to own its properties and carry on its business as presently
conducted. The outstanding shares of capital stock or other equity interests (if
any) of each Subsidiary are validly issued, fully paid and non-assessable and
were not issued in violation of any purchase or call option, right of first
refusal, subscription right, preemptive right or any similar right. All such
shares or other equity interests (if any) represented as being owned by any of
the Companies or Subsidiaries are owned by them free and clear of any and all
Liens, except as set forth in Schedule 4.2. There is no existing option,
warrant, call, right or Contract to which any Subsidiary is a party requiring,
and there are no convertible securities of any Subsidiary outstanding which upon
conversion would require, the issuance of any shares of capital stock or other
equity interests of any Subsidiary or other securities convertible into shares
of capital stock or other equity interests of any Subsidiary. No Company owns,
directly or indirectly, any capital stock or equity securities of any Person
other than the Subsidiaries. Except as set forth on Schedule 4.2 and to the
Knowledge of the Sellers and the Companies, there are no contractual
restrictions on the ability of the Subsidiaries to make distributions of cash to
their respective equity holders.
4.3 Authorization; Binding Effect.
(a) Each Company has all requisite corporate power and authority to
execute, perform and deliver this Agreement and each other agreement, document,
or instrument or certificate contemplated by this Agreement or to be executed by
such Company in connection with the transactions contemplated by this Agreement
(collectively, the "Company Documents") and to effect and consummate the
transactions contemplated hereby and thereby, and the execution, delivery and
performance of this Agreement and the Company Documents have been duly
authorized by all requisite corporate action.
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(b) This Agreement has been duly executed and delivered by each
Company and this Agreement is, and the Company Documents, when duly executed and
delivered by each Company will be, valid and legally binding obligations of such
Company, enforceable against such Company, as applicable, in accordance with
their respective terms, except to the extent that enforcement of the rights and
remedies created hereby and thereby may be affected by bankruptcy,
reorganization, moratorium, insolvency and similar Laws of general application
affecting the rights and remedies of creditors and by general equity principles.
4.4 Non-Contravention; Consents.
(a) Assuming that all Required Consents have been obtained, the
execution, delivery and performance of this Agreement and the Company Documents
by each Company that will be a party thereto and the consummation of the
transactions contemplated hereby and thereby do not and will not: (i) result in
a breach or violation of any provision of such Company's charter, by-laws or
similar organizational documents, (ii) violate or result in a breach of or
constitute an occurrence of default under any provision of, result in the
acceleration or cancellation of any right or obligation or a loss of any benefit
to which such Company or any of the Subsidiaries of the Company is entitled
under, or give rise to a right by any party to terminate, cancel, rescind or
amend any right or obligation under, any mortgage, deed of trust, conveyance to
secure debt, note, loan, indenture, lien, lease, agreement, instrument, order,
judgment, decree or other arrangement or commitment to which such Company or any
of the Subsidiaries of the Company is a party or by which such Company, any of
the Subsidiaries or such Company's or any of the Subsidiaries' assets are bound,
(iii) violate any applicable Law or Order or Permit by which such Company or any
of the Subsidiaries or such Company's or any of the Subsidiaries' assets are
bound or (iv) result in the imposition of any Lien, other than Permitted
Exceptions, upon any of the assets or properties of such Company or any of the
Subsidiaries, other than, in the case of clauses (ii), (iii) and (iv), any such
violation, breach, default, acceleration or cancellation of obligations or
rights that, individually or in the aggregate, has not had, nor would reasonably
be expected to have, a Material Adverse Effect.
(b) No consent, approval, Order, Permit or authorization of, or
registration, declaration or filing with, or notice to any Person is required to
be obtained, made or taken by any Company or Subsidiary in connection with the
execution and delivery of this Agreement or the Company Documents by any Company
that will be a party thereto or for the consummation of the transactions
contemplated hereby or thereby by any Company, except for (i) any filings
required to be made under any Antitrust Laws, (ii) the items set forth in
Schedule 4.4(b) (items (i) and (ii) being referred to herein as the "Required
Consents") and (iii) such consents, approvals, orders, authorizations,
registrations, declarations or filings the failure of which to be obtained or
made, individually or in the aggregate, has not had, nor would reasonably be
expected to have, a Material Adverse Effect.
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4.5 Title to Property; Principal Equipment; Sufficiency of Assets.
(a) Except as set forth on Schedule 4.5(a), the Companies and the
Subsidiaries have good and marketable title to, or valid and enforceable
leasehold interests in, all items of tangible personal property used or held for
use in connection with the Business as currently conducted, free and clear of
any and all Liens, other than the Permitted Exceptions. All such items of
tangible personal property which, individually or in the aggregate, are material
to the operation of the business of the Company and the Subsidiaries are in
adequate operating condition, in light of their age, for the purposes for which
they are currently being used.
(b) Schedule 4.5(b) sets forth all leases of tangible personal
property involving annual payments in excess of $100,000 ("Personal Property
Leases") relating to tangible personal property used to any significant extent
in the Business or to which any Company or any of the Subsidiaries is a party or
by which the properties or assets of any Company or any of the Subsidiaries is
bound. The Sellers have made available to Purchaser true, correct and complete
copies of the Personal Property Leases, together with all amendments,
modifications or supplements thereto. Each of the Personal Property Leases is
valid, binding and enforceable against each Company or Subsidiary party thereto
and, to the Knowledge of the Companies and the Sellers, the other parties
thereto in accordance with its terms.
4.6 Permits, Licenses. Except as set forth on Schedule 4.6, there are
no material Permits necessary for or used by any Company or Subsidiary to
operate or conduct its business as currently operated or conducted.
4.7 Real Estate.
(a) Schedule 4.7(a) sets forth a complete list of all real property
and interests in real property leased or subleased by the Company and the
Subsidiaries (individually, a "Real Property Lease" and collectively, the "Real
Property Leases"). Except as set forth on Schedule 4.7(a), the Real Property
Leases constitute all interests in real property used, occupied or held for use
to any significant extent in the operation of the Business as currently
conducted. All of the real property and buildings, fixtures and improvements
thereon are in adequate condition for their current use and operation. The
Sellers have made available to Purchaser true, correct and complete copies of
the Real Property Leases, together with all amendments, modifications or
supplements, if any, thereto.
(b) Each of the Real Property Leases is valid, binding and
enforceable against each Company or Subsidiary party thereto and, to the
Knowledge of the Companies and the Sellers, the other parties thereto in
accordance with its terms. Each Real Property Lease is in full force and effect
and no Company or Subsidiary has violated and, to the Knowledge of the Companies
and the Sellers, no landlord thereunder has waived any of the material terms or
23
conditions of any Real Property Lease and all the material covenants to be
performed by any Company or Subsidiary and, to the Knowledge of the Companies
and the Sellers, the landlord under each such Real Property Lease have been
performed in all material respects.
4.8 Compliance With Laws; Litigation.
(a) Each Company and Subsidiary is in compliance with all applicable
Laws (including Environmental Laws) and all Orders and Permits of or from
Governmental Bodies, except for instances of noncompliance or possible
noncompliance that, individually or in the aggregate, have not had, nor would
reasonably be expected to have, a Material Adverse Effect.
(b) Except as set forth on Schedule 4.8(b), there is no Legal
Proceeding pending or, to the Knowledge of the Sellers and the Companies,
threatened against (i) any of the Companies or Subsidiaries, (ii) any Affiliate
of the Companies or Subsidiaries with respect to the Business, (iii) any Company
Plan (or assets, plan sponsor, plan administrator or plan fiduciary thereof) or
(iv) to the Knowledge of the Companies or the Sellers, any of the officers,
directors or employees of any of the Companies, the Subsidiaries, the Sellers or
their subsidiaries with respect to activities relating the Business. Except as
set forth on Schedule 4.8(b), no Company or Subsidiary (nor any Affiliate of a
Company or Subsidiary on behalf thereof) is engaged in any legal action to
recover monies due or for damages sustained with respect to the Business.
4.9 Business Employees.
(a) The Side Letter accurately sets forth (i) the information
referenced in Section 2.4,(ii) a complete and accurate list of all Business
Employees, as of the date hereof, setting forth the name, date of employment,
position held, job location, annual base salary, sales commission eligibility,
incentive plan target, work status (i.e., actively at work, disabled or on
approved leave, stating the duration of such leave) and employer of each such
Business Employee and (iii) as of the date hereof, a complete and accurate list
of all employees of the Companies or Subsidiaries whose services are not
primarily dedicated to the Business as of the date hereof, setting forth the
name, date of employment, position held, job location, annual base salary, sales
commission eligibility, incentive plan target, work status (i.e., actively at
work, disabled or on approved leave, stating the duration of such leave) and
employer of each such employee.
(b) Schedule 4.9(b)(i) sets forth a correct and complete list of all
Benefit Plans other than those which involve Liabilities of the Companies and
Subsidiaries of less than $25,000 individually and $100,000 in the aggregate,
and identifies each such Benefit Plan which is a Company Plan. Each Benefit Plan
has been operated in material compliance with its terms and all applicable Laws,
including ERISA to the extent applicable. Each Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA ("Pension
Plan") and is intended to be qualified under Section 401(a) of the Code, has
24
received a favorable determination letter from the Internal Revenue Service with
respect to "TRA" (as defined in Section 1 of Rev. Proc. 93-39), and Seller is
not aware of any circumstances likely to result in revocation of any such
favorable determination letter. None of the Seller, its Affiliates, Companies or
Subsidiaries provides or is obligated to provide any life insurance or health
benefits, including prescription drugs (whether or not insured), to any
individual after his or her termination of employment or service with any
Company or Subsidiary or the Business, except as may be required under Section
4980B of the Code and at the expense of the individual or the individual's
beneficiary. None of the Benefit Plans is a Pension Plan subject to Title IV of
ERISA ("Title IV Plan"), and neither any of the Companies nor any of the
Subsidiaries has any obligation (contingent or otherwise) with respect to any
Title IV Plan. Except as set forth in the Side Letter, as updated in accordance
with Section 6.15(b)(i), no current or former director, officer, employee or
independent contractor of any of the Companies, the Subsidiaries, or the
Business will become entitled to bonus, retirement, severance, job security or
similar benefit or enhanced benefits (including acceleration of vesting or
exercise of an incentive award), finders fee, commission or similar payment as a
result of the transactions contemplated hereby. No amount that could be received
(whether in cash, property or vesting of property) as a result of the
consummation of the transactions contemplated by this Agreement by any officer,
director, employee or independent contractor of any of the Companies, the
Subsidiaries or the Business, who is a "disqualified individual" (as defined in
proposed Treasury Regulation Section 1.280G-1), would be characterized as an
"excess parachute payment" (as defined in Section 280G of the Code). The
transactions contemplated by this Agreement are not transactions described in
Section 4069 or 4212(c) of ERISA.
(c) With respect to each Benefit Plan described in Section 4(b)(4) of
ERISA (each, a "Foreign Plan"): (i) all contributions and other payments
required by Law or by the terms of such Foreign Plan have been made or, if
applicable, accrued in accordance with normal accounting practices; (ii) the
fair market value of the assets of each funded Foreign Plan, the Liability of
each insurer for any Foreign Plan funded through insurance or the book reserve
established for any Foreign Plan, together with any accrued contributions, is
sufficient to procure or provide for the accrued benefit obligations, as of the
Closing Date, with respect to all current or former participants in such plan
according to the actuarial assumptions and valuations most recently used to
determined employer contributions to such Foreign Plan, and no transaction
contemplated by this Agreement shall cause the assets or insurance obligations
to be less than such benefit obligations; and (iii) each Foreign Plan required
to be registered has been registered and has been maintained in good standing
with applicable regulatory authorities.
(d) Except as set forth on Schedule 4.9(d), with respect to any of
the Companies, the Subsidiaries or the Business, there is not currently pending
or existing and, to the Knowledge of the Companies and the Sellers, there is not
threatened, (i) any strike or other industrial action, including slowdown, work
to rule, picketing or work stoppage, (ii) any application for certification of a
25
collective bargaining agent or (iii) union organizing activity with respect to
any employees of any of the Companies, the Subsidiaries or the Business. Except
as set forth on Schedule 4.9(d), none of the employees of any of the Companies,
the Subsidiaries or the Business is covered by any union, collective bargaining
or other similar labor agreement.
(e) None of the Companies nor Subsidiaries has been issued with or is
subject to a contribution notice or financial support direction issued by the UK
Pensions Regulator in accordance with its powers under Sections 38 and 51 of the
Pensions Act 2004 and none of the Companies or Subsidiaries nor any Person
connected with or associated with any of the Companies or Subsidiaries, has
committed any act or failure to act which could fall within subsection (5) of
Section 38 of the Pensions ▇▇▇ ▇▇▇▇.
(f) None of the Companies nor Subsidiaries has at any time sponsored,
contributed towards or participated in any defined benefit pension plan for
current or former employees in the UK or has any Liability with respect to any
such arrangement.
(g) CSG SILICON IBERIA has not performed any Collective Termination
of Employment/Dismissals in the last four (4) years.
(h) Superannuation.
(i) CSG Australia Pty. Limited ("CSG Australia") is not a party
to any agreement or arrangement with any union or industrial
organization in respect of superannuation benefits for any of the
employees or sub-contractors of CSG Australia.
(ii) CSG Australia has complied with its obligations under
agreements with its employees and sub-contractors in respect of
superannuation benefits in Australia.
(iii) Except as set forth on Schedule 4.9(h)(iii), CSG Australia
is only obliged to make employer contributions to the Optimum
Superannuation Master Plan ("Plan") on behalf of each of its employees
and sub-contractors at nine per cent per annum of their respective
superannuation salaries (including base salary and incentive plan
payments) in accordance with the Superannuation Guarantee
(Administration) Act 1992 (Cth) ("SGAA") and other associated Acts and
Regulations and an additional contribution of 1% of superannuation
salaries.
(iv) CSG Australia solely contributes to, and has an obligation
to make payments to superannuation funds providing accumulation
benefits to their employees and sub-contractors.
(v) After the Closing, the Sellers will provide Purchaser with
information reasonably required by Purchaser and otherwise provide
Purchaser with reasonable assistance in relation to the superannuation
contribution arrangements CSG Australia has in place as at closing.
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(vi) There is no contract or arrangement between CSG Australia
and the trustee of the Plan with respect to CSG Australia's
participation in the Plan.
(vii) To the best of Knowledge, the Plan has satisfied all
relevant laws governing superannuation funds in Australia, and in
particular, has been a complying superannuation fund within the
meaning of the Superannuation Industry (Supervision) ▇▇▇ ▇▇▇▇ (Cth)
and has otherwise been administered and managed by the trustee company
in a manner that complies with the Superannuation Industry
(Supervision) ▇▇▇ ▇▇▇▇ (Cth).
(viii) As at Closing, no returns are or will be liable to be
lodged under the SGAA or any associated legislation and no penalties,
fines or charges are or will be payable under any such legislation in
respect of any superannuation-related obligations.
4.10 Contracts.
Schedule 4.10 contains a complete and accurate list of the following
Contracts: (a) for the sale of any material assets of any Company or Subsidiary
other than in the Ordinary Course of Business, (b) for joint ventures or
partnerships (constituting legally binding arrangements), (c) containing
covenants of any Company or Subsidiary not to compete in any line of business or
with any Person in any geographical area or covenants of any other Person not to
compete with any Company or Subsidiary in any line of business or in any
geographical area, (d) relating to the acquisition (by merger, purchase of stock
or assets or otherwise) by any Company or Subsidiary of any operating business
related to the Business, (e) customer agreements or agreements licensing to any
third person Business Intellectual Property which contain most favored nations
clauses and (f) for material non-employee sales representative or
distributorship arrangements. Each Contract referred to on Schedule 4.10 and
each Contract which will require over the remaining full term thereof payments
by or to the Companies or the Subsidiaries of more than $250,000 (each, a
"Material Contract") is valid, binding and enforceable against the applicable
Company or Subsidiary and, to the Knowledge of the Companies and Sellers, the
other parties thereto in accordance with its terms. Except as set forth on
Schedule 4.10 and to the Knowledge of the Companies and the Sellers, none of the
Sellers, Companies or Subsidiaries has received any notice that it is in default
under, or in breach of, or is otherwise delinquent in, performance under any
Material Contract and each of the other parties thereto has performed all
obligations required to be performed by such party under, and is not in default
under, any Material Contract and no event has occurred that, with notice or
lapse of time, or both, would constitute such a default, except for breaches,
failures of performance or defaults that, individually or in the aggregate, have
not had, nor would not reasonably be expected to have, a Material Adverse
Effect. True and correct copies (redacted as to the name of the other party or
parties thereto other than a Company or Subsidiary if required by
confidentiality provisions thereunder) of each Material Contract listed on
Schedule 4.10 have been made available to Purchaser.
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4.11 Environmental Matters.
(a) There are no Legal Proceedings pending, or to the Knowledge of
the Companies and the Sellers, threatened against any Company or Subsidiary
which assert any claim or seek any Remedial Action in connection with any
Environmental Law, except for those which, individually or in the aggregate, has
not had, nor would reasonably be expected to have, a Material Adverse Effect;
(b) Except for those matters that, individually or in the aggregate,
have not had, nor would reasonably be expected to have, a Material Adverse
Effect, none of the owned, operated or leased property of any Company or
Subsidiary is subject to any on-going investigation by, Order from or agreement
with any Person relating to (i) any Environmental Law or (ii) any Remedial
Action;
(c) To the Knowledge of the Companies and the Sellers, no Company or
Subsidiary is subject to any Legal Proceeding or Order, judgment, or settlement
alleging or addressing a violation of, or Liability under, any Environmental Law
or with respect to any Remedial Action or Release or threatened Release of a
Hazardous Material that, individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect;
(d) To the Knowledge of the Companies and the Sellers, no Company or
Subsidiary has received, any written notice to the effect that it is or may be
liable to any Person as a result of the Release or threatened Release of a
Hazardous Material, except for any such notices relating to matters that,
individually or in the aggregate, have not had, nor would reasonably be expected
to have, a Material Adverse Effect.
(e) The transactions contemplated by this Agreement are not subject
to the requirements of any state environmental transfer statutes.
4.12 Financial Statements; Undisclosed Liabilities; Absence of
Changes.
(a) Schedule 4.12 contains true and complete copies of the following
financial statements of the Companies and Subsidiaries (the "Financial
Statements"):
(i) the unaudited combined statement of net assets of the
Companies and Subsidiaries (exclusive of the assets and Liabilities of
the FairPoint Business and Corporate assets and Liabilities related to
the Business) and the unaudited combined statement of pre-tax results
of operations of the Companies and Subsidiaries (exclusive of the
revenues and expenses associated with the FairPoint Business and
including the Corporate expenses related to the Business) for the year
ended December 31, 2004; and
28
(ii) the unaudited combined statement of net assets of the
Companies and Subsidiaries (exclusive of the assets and Liabilities of
the FairPoint Business and the Corporate assets and Liabilities
related to the Business) as of June 30, 2005 (such statement of net
assets being referred to as the "Net Assets Statement") and the
unaudited combined statement of pre-tax results of operations of the
Companies and Subsidiaries (exclusive of the revenues and expenses
associated with the FairPoint Business and including Corporate
expenses related to the Business) for the six-month period ended June
30, 2005. For purposes hereof, "Corporate" means the assets,
Liabilities and expenses related to the Business Employees and certain
activities related to the Business that are not recorded in the books
and records of the Companies and Subsidiaries.
(b) The Financial Statements referred to in clause (i) of Section
4.12(a) were derived from the audited consolidated financial statements of CSG
and its subsidiaries prepared in accordance with GAAP for the year ended
December 31, 2004 and the Financial Statements referred to in clause (ii) of
Section 4.12(a) were derived from the unaudited consolidated financial
statements of CSG and its subsidiaries prepared in accordance with GAAP for the
six (6) months ended June 30, 2005. The Financial Statements were prepared on
the basis of the books and records of the Companies, the Subsidiaries and, to
the extent applicable, the Sellers (in each case, as of the date of such
Financial Statements) and present fairly, in all material respects, the net
assets (exclusive of the assets and Liabilities of the FairPoint Business and
the Corporate assets and Liabilities related to the Business) of the Companies
and Subsidiaries as of the date thereof and the results of their pre-tax
operations (excluding the revenues and expenses associated with the FairPoint
Business and including Corporate expenses relating to the Business) for each of
the periods then ended. With respect to each Contract of the Business as to
which revenue is recognized on a percentage of completion or proportional
performance accounting basis as reflected in the Financial Statements, the
estimated work completed to date used by the Sellers in their accounting
conclusions represents the best estimate of the Companies and Subsidiaries of
the work completed under such Contract as compared with the entire amount of
work required under such Contract.
(c) Except as set forth on Schedule 4.12(c), none of the Companies
nor any of the Subsidiaries has any Liability of any kind whatsoever (whether
known or unknown and whether accrued, absolute or contingent) and there is no
existing condition, situation or set of circumstances that would reasonably be
expected to result in any such Liability, except for (a) Liabilities shown on
the Net Assets Statement, (b) Liabilities which have arisen since the date of
the Net Asset Statement in the Ordinary Course of Business consistent with past
practices and which, individually or in the aggregate, have not had, nor would
reasonably be expected to have, a Material Adverse Effect or (c) Liabilities
under Contracts that do not arise from a breach or default thereunder.
29
(d) All books, records and accounts of the Companies and Subsidiaries
are accurate and complete, in all material respects, and are maintained in all
material respects in accordance with good business practice and all applicable
Laws. The Companies and Subsidiaries maintain systems of internal accounting
controls sufficient to provide reasonable assurances that: (i) transactions are
executed in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit the preparation of financial
statements in conformity with GAAP and to maintain accountability for assets and
(iii) access to assets is permitted only in accordance with management's general
or specific authorization.
(e) Schedule 4.12(e) sets forth (i) all significant deficiencies
identified to CSG by its auditors in the design or operation of internal
controls which could adversely affect the ability to record, process, summarize
and report financial data relating to the Business, (ii) any material weaknesses
identified to CSG by its auditors in internal controls relating to the Business
and (iii) the Knowledge of the Companies and the Sellers, any fraud, whether or
not material, that involves management or other employees who have a significant
role in the internal controls with respect to the Business.
(f) Since December 31, 2004, the Companies and Subsidiaries have
conducted their respective businesses only in the Ordinary Course of Business
and, since such date, there has not been any effect, occurrence, development or
state of circumstances or facts (including any damage, destruction or other
casualty loss (whether or not covered by insurance) affecting any Company or
Subsidiary) which, individually or in the aggregate, has had, or would be
reasonably expected to have, a Material Adverse Effect. Without limiting the
generality of the foregoing and except as set forth on Schedule 4.12(f) and,
with respect to clause (iii) below, except as expressly provided for in this
Agreement, since December 31, 2004:
(i) there has not been any damage, destruction or loss, whether
or not covered by insurance, with respect to the property and assets
of any Company or Subsidiary having a replacement cost of more than
$250,000 for any single loss or $500,000 for all such losses;
(ii) there has not been any declaration, setting aside or payment
of any dividend or other distribution in respect of any shares of
capital stock or other equity interests of any Company or any
repurchase, redemption, reduction or other acquisition by any Company
or Subsidiary of any outstanding shares of capital stock or other
securities of, or other ownership interest in, any Company or any
Subsidiary;
(iii) there has not been any (x) employment, change in control,
transaction or sale bonus, deferred compensation, severance,
retirement, consulting, managerial services or other similar agreement
entered into with any current or former director, officer, employee or
independent contractor of the Business or any Company or Subsidiary
(or any amendment to any such existing agreement other than as may be
required by applicable Law), (y) grant of any severance or termination
pay to any current or former director, officer, employee or
independent contractor of the Business or any Company or Subsidiary
30
other than pursuant to existing plans, agreements or arrangements or
(z) change in compensation or other benefits payable to any current or
former director, officer, employee or independent contractor of the
Business or any Company or Subsidiary, other than the inclusion of any
such individual under the standard terms of a Benefit Plan covering
employees of the Business or any Company or Subsidiary generally or
promotion, merit or cost-of-living increases in base salary, in each
case in the Ordinary Course of Business;
(iv) there has not been any labor dispute involving employees of
any Company, any of the Subsidiaries, or the Business, other than
routine individual grievances, or any activity or proceeding by a
labor union or representative thereof to organize any employees of any
Company, any of the Subsidiaries, or the Business, which employees
were not subject to a collective bargaining agreement at the date of
the most recent Financial Statements, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to
employees of any Company, any of the Subsidiaries, or the Business;
(v) no Company or Subsidiary has entered into any material
transaction or Material Contract other than in the Ordinary Course of
Business;
(vi) no Company or Subsidiary has failed to promptly pay and
discharge material current liabilities except where disputed in good
faith by appropriate proceedings;
(vii) no Company or Subsidiary has made any loans, advances or
capital contributions to, or investments in, any Person (except to
Affiliates of the Sellers or Companies in the Ordinary Course of
Business) or paid any fees or expenses to the Sellers (except in the
Ordinary Course of Business) or any director, officer, partner,
stockholder or Affiliate of the Seller (other than advancement to or
reimbursement of travel and similar expenses for employees);
(viii) no Company or Subsidiary has (A) mortgaged, charged,
pledged or subjected to any Lien (other than Permitted Exceptions) any
of its material assets, or (B) acquired any assets or sold, assigned,
transferred, conveyed, leased or otherwise disposed of any assets of
any Company or Subsidiary, except, in the case of clause (B), for
assets acquired, sold, assigned, transferred, conveyed, leased or
otherwise disposed of in the Ordinary Course of Business;
(ix) no Company or Subsidiary has canceled or compromised any
material debt or claim or amended, canceled, terminated, relinquished,
waived or released any Material Contract or right except in the
Ordinary Course of Business and which, in the aggregate, would not be
expected to be material to the Companies and the Subsidiaries taken as
a whole;
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(x) no Company or Subsidiary has made or committed to make any
capital expenditures or capital additions in excess of $500,000
individually or $2,500,000 in the aggregate for all of the Companies
and Subsidiaries;
(xi) no Company or Subsidiary has issued, created, incurred,
assumed, guaranteed, endorsed or otherwise become liable or
responsible with respect to (whether directly, contingently, or
otherwise) any material Indebtedness;
(xii) no Company or Subsidiary has granted any material license
or sublicense of any rights under or with respect to any Intellectual
Property except in the Ordinary Course of Business;
(xiii) no Company or Subsidiary has instituted or settled any
Legal Proceeding resulting in a payment or loss of revenue in excess
of $100,000 in the aggregate; and
(xiv) none of the Companies or the Seller has agreed, committed,
arranged or entered into any understanding to do anything set forth in
this Section 4.12(f).
4.13 Intellectual Property.
(a) Schedule 4.13(a) sets forth a complete and correct list of
registered copyrights, service marks, trademarks, domain names, and patents,
together with registrations and applications for registration therefor, owned by
any Company or Subsidiary and material to the Business (collectively, the
"Registered Intellectual Property").
(b) Except as set forth in Schedule 4.13(b):
(i) The operation of the Business by the Companies and the
Subsidiaries does not (and will not, upon consummation of the
transactions contemplated by this Agreement) infringe, misappropriate,
or otherwise violate any Intellectual Property rights of any third
Person. There is no Legal Proceeding pending against, and, to the
Knowledge of the Companies and the Sellers, no claim or threat
received in writing against, any Company or Subsidiary (i)
challenging, or seeking to deny or restrict any Intellectual Property
rights of any Company or Subsidiary or (ii) alleging that the
operation of the Business misappropriates, infringes or otherwise
violates any Intellectual Property rights of any third party. To the
Knowledge of the Companies and the Sellers, no Seller, Company or
Subsidiary has received a written offer within the past three (3)
years from any Person to license rights under a patent in connection
with the operation of the Business.
32
(ii) The Companies and Subsidiaries own or have a valid right to
use all copyrights, service marks, trademarks, domain names, patents
and other Intellectual Property material to and used in the Business
(the "Business Intellectual Property"). As of the Closing Date and
except as disclosed to Purchaser in accordance with Section 6.15(a) by
the date required therein, the consummation of the transactions
contemplated by this Agreement will not alter, impair or extinguish
any Business Intellectual Property or the Purchaser's right to use any
of the Business Intellectual Property. None of the Business
Intellectual Property which is owned by the Companies and Subsidiaries
has been adjudged invalid or unenforceable in whole or part.
(iii) One or more of the Companies or Subsidiaries holds all
right, title and interest in and to all Business Intellectual Property
owned by any Company or Subsidiary, free and clear of any Lien, except
as would not reasonably be expected to have a Material Adverse Effect.
(iv) To the Knowledge of the Companies and the Sellers, the
Companies and Subsidiaries have taken reasonable steps to maintain the
confidentiality of all confidential information in their respective
possession. To the Knowledge of the Companies and the Sellers, there
is no infringement of the Business Intellectual Property by any third
party. It is the policy of the Companies and Subsidiaries that
employees execute agreements assigning all Intellectual Property
created in the course of their employment to the relevant Company or
Subsidiary and, to the Knowledge of the Companies and the Sellers, all
employees of the Companies and Subsidiaries who make material
contributions to the Intellectual Property activities have executed
such agreements.
(c) Intentionally omitted.
(d) To the Knowledge of the Companies and the Subsidiaries, each of
the Intellectual Property Contracts with the vendors or with respect to the
products set forth on Schedule 4.13(c) is in full force and effect and is the
legal, valid and binding obligation of the applicable Company and/or Subsidiary,
enforceable against the applicable Company and/or Subsidiary thereto in
accordance with its terms. No Company or Subsidiary is in default in any
material respect under any such Contracts with respect to Intellectual Property
rights, nor, to the Knowledge of the Companies and the Sellers, is any other
party to any such Intellectual Property Contract in default thereunder, and no
event has occurred that with the lapse of time or the giving of notice or both
would constitute a default thereunder. No party to any of such Intellectual
Property Contracts has exercised any termination rights with respect thereto.
(e) To the Knowledge of the Sellers, the Companies and Subsidiaries
have taken reasonable steps to preserve and maintain records relating to the
Business Intellectual Property.
4.14 Brokers. Other than as set forth on Schedule 3.7, no broker,
investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of any of the Companies or Subsidiaries.
33
4.15 Certain Tax Matters.
(a) Except as set forth on Schedule 4.15(a), all material Tax Returns
required to be filed by or on behalf of each of the Companies and Subsidiaries
or any Affiliated Group of which each of the Companies and Subsidiaries is or
was a member have been duly and timely filed with the appropriate Taxing
Authority (after giving effect to any valid extensions of time in which to make
such filings), and all such material Tax Returns are true, complete and correct
in all material respects.
(b) Except as set forth on Schedule 4.15(b), each of the Companies
and Subsidiaries (or any Affiliated Group of which each of the Companies and
Subsidiaries is or was a member at or prior to the Closing) has timely paid (or
there has been paid on their behalf) all Taxes shown as due and payable on the
Tax Returns that have been filed. With respect to any period for which material
Tax Returns have not yet been filed or for which material Taxes are not yet due
or owing, each of the Companies and the Subsidiaries has made due and sufficient
accruals for material Taxes on their books and records through the end of the
last period for which the Company and the Subsidiaries ordinarily record items
on their books. All required estimated Tax payments sufficient to avoid any
material underpayment penalties or interest have been made by or on behalf of
each of the Companies and Subsidiaries.
(c) Except as set forth on Schedule 4.15(c), the Companies and
Subsidiaries have complied in all material respects with all applicable Laws
relating to the payment and withholding of Taxes and have duly and timely
withheld and paid over to the appropriate Taxing Authority all material amounts
required to be so withheld and paid under all applicable Laws or accrued such
amounts in their financial statements.
(d) Purchaser has received true and complete copies of all U.S.
federal income Tax Returns of each of the Companies and Subsidiaries relating to
the taxable periods since 2002.
(e) Schedule 4.15(e) lists all types of material Tax Returns
currently filed by or on behalf of each of the Companies and Subsidiaries. No
claim has been made by a Taxing Authority in a jurisdiction where any of the
Companies or Subsidiaries does not file Tax Returns such that they are or may be
subject to taxation by that jurisdiction.
(f) Except as set forth on Schedule 4.15(f), all material
deficiencies asserted or assessments made as a result of any examinations by any
Taxing Authority of the Tax Returns of, or including, the Companies or
Subsidiaries have been fully paid, and there are no other audits or
investigations by, or disputes with, any Taxing Authority in progress, nor to
Seller's Knowledge has the Seller, any of the Companies or Subsidiaries received
notice from any Taxing Authority that it intends to conduct such an audit or
34
investigation. Except as set forth in Schedule 4.15(f), no issue has been raised
by any Taxing Authority in any prior examination of the Companies or
Subsidiaries which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for any subsequent
taxable period.
(g) Except as set forth on Schedule 4.15(g), none of the Companies or
the Subsidiaries nor any other Person on their behalf has (i) agreed to or is
required to make any adjustments pursuant to Section 481(a) of the Code or any
similar provision of Law or has to Seller's Knowledge, received written notice
from any Taxing Authority proposing any such adjustment, or has any application
pending with any Taxing Authority requesting permission for any changes in
accounting methods that relate to any of the Companies or Subsidiaries, (ii)
executed or entered into a closing agreement pursuant to Section 7121 of the
Code or any similar provision of Law with respect to any of the Companies or
Subsidiaries, (iii) requested any extension of time within which to file any Tax
Return, which Tax Return has since not been filed, (iv) granted any extension of
the period for the assessment or collection of Taxes, which period (after giving
effect to such extension) has not yet expired, or (v) other than in the Ordinary
Course of Business, granted to any Person any power of attorney that is
currently in force with respect to any Tax matter.
(h) Except as set forth on Schedule 4.15(h), none of the Companies or
Subsidiaries (i) is a party to any tax sharing, allocation, indemnity or similar
agreement or arrangement (whether or not written) pursuant to which it will have
any obligation to make any payments after the Closing, (ii) is subject to any
private letter ruling of the IRS or comparable rulings of any Taxing Authority
and (iii) has constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualifying for tax-free treatment under Section 355 of the
Code (A) in the two years prior to the date of this Agreement or (B) in a
distribution which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the transactions contemplated by this Agreement.
(i) Except as set forth on Schedule 4.15(i), none of the Companies or
Subsidiaries has ever been a member of any consolidated, combined, affiliated or
unitary group of corporations for any Tax purposes other than a group of which
any Affiliate of a Seller is the common parent.
(j) None of the Companies or Subsidiaries has participated in, or
cooperated with, an international boycott within the meaning of Section 999 of
the Code or any similar provision of Law.
(k) None of the Companies or Subsidiaries has participated in a
"listed transaction" within the meaning of Treasury Regulations Section
1.6011-4(c)(3)(i)(A) or any similar provision of Law.
35
(l) Except as set forth on Schedule 4.15(l), none of the Companies or
Subsidiaries is currently a party to a "gain recognition agreement," as such
term is defined in Treasury Regulations Section 1.367(a)-8 or any similar
provision of Law.
(m) Subject to the elections referred to in Section 6.2(c), Schedule
4.15(m) hereto contains a complete and accurate listing of each of the Companies
and Subsidiaries formed under the non-U.S. law indicating, in each case, whether
such Company or Subsidiary is classified (within the meaning of Treasury
Regulations Sections 301.7701-1 through 301.7701-3) as a corporation, a
partnership or disregarded entity for U.S. tax purposes.
(n) There are no Liens, except for Permitted Exceptions, as a result
of any unpaid Taxes upon any of the assets of any of the Companies or
Subsidiaries.
(o) Except as set forth on Schedule 4.15(o), there is no taxable
income of any of the Companies or Subsidiaries that will be reportable in a
taxable period beginning after the Closing Date that is attributable to a
transaction (such as an installment sale) that occurred prior to the Closing.
(p) Except as set forth on Schedule 4.15(p), each of the Companies
and Subsidiaries has disclosed on its federal income Tax Returns all positions
taken therein that could give rise to substantial understatement of federal
income tax within the meaning of Section 6662 of the Code.
(q) Except as set forth on Schedule 4.15(q), since December 31, 2004,
(i) there has not been any material change by any Company or Subsidiary in
accounting or Tax reporting principles, methods or policies, and (ii) no Company
or Subsidiary has made or rescinded any material election relating to Taxes or
settled or compromised any material claim relating to Taxes.
(r) In the event the Sellers cause CSG International or any Affiliate
to distribute cash or assets to CSG Netherlands, such distribution will qualify
for the "participation exemption" under the tax Law of the Netherlands.
(s) To the extent applicable, there are no circumstances existing
which could result in the application of section 17, section 78, section 79, or
sections 80 to 80.04 of the Income Tax Act (Canada), or any equivalent provision
under applicable Canadian provincial law, to the Companies or Subsidiaries.
(t) Except for CSG Systems Canada Corp., the Companies and
Subsidiaries are not "Taxable Canadian Property" within the meaning of
subsection 248(1) of the Income Tax Act (Canada).
(u) At Closing, CSG Australia will not have a franking deficit (as
provided for in section 160APJ of the Income Tax Assessment Act of 1936
(Commonwealth of Australia) (the "1936 Tax Act") or section 205-40(2) of the
Income Tax Assessment Act of 1997 (Commonwealth of Australia) (the "1997 Tax
Act") nor, if CSG Australia were to have received immediately before Closing the
amount of any refund of Tax which CSG Australia expects to receive after Closing
in respect of any period up to Closing, would the refund result in CSG Australia
having a franking deficit at Closing.
36
(v) CSG Australia is an exempting entity under Australian Law.
(w) The share capital account of the Companies or Subsidiaries are
not tainted share capital accounts within the meaning of Division 7B of Part
IIIAA of the 1936 Tax Act (Australia) or any similar provision of Law and the
Companies or Subsidiaries have not taken any action that might cause the
Companies' or Subsidiaries' share capital account to become a tainted share
capital account, nor has an election been made at any time to untaint the
Companies' or Subsidiaries' share capital account.
(x) The sale of the Securities will not result in the application of
Subdivision 104-J of the 1997 Tax Act (Australia) to the Companies or
Subsidiaries.
4.16 Receivables. Except as set forth in Schedule 4.16, all billed
and unbilled accounts receivable of the Companies and the Subsidiaries set forth
in the Net Assets Statement (i) have arisen from bona fide transactions by
applicable Company or Subsidiary in the Ordinary Course of Business and
represent bona fide claims against debtors for sales and other charges and (ii)
are not subject to discount except for normal cash and immaterial trade
discounts in the Ordinary Course of Business.
4.17 Customers. None of the customers of the Companies and
Subsidiaries which individually accounted for more than 5% of the gross revenues
of the Companies and Subsidiaries relating to the Business during the year ended
December 31, 2004 has terminated or indicated in writing that it intends to
terminate any agreement with any Company or Subsidiary.
4.18 Capitalization.
(a) The authorized capital stock of CSG Software consists of 3,000
shares of common stock, $0.001 par value per share (the "CSG Software Common
Stock"). As of the date hereof, there are 1,000 shares of CSG Software Common
Stock issued and outstanding and 0 shares of CSG Software Common Stock are held
by CSG Software as treasury stock. All of the issued and outstanding shares of
CSG Software Common Stock were duly authorized for issuance and are validly
issued, fully paid and non-assessable and were not issued in violation of any
purchase or call option, right of first refusal, subscription right, preemptive
right or any similar rights. All of the outstanding shares of CSG Software
Common Stock are owned of record by the Sellers.
(b) The authorized capital stock of CSG Holdings consists of 3,000
shares of common stock, $1.00 par value per share (the "CSG Holdings Common
Stock"). As of the date hereof, there are 3,000 shares of CSG Holdings Common
Stock issued and outstanding and 0 shares of CSG Holdings Common Stock are held
by CSG Holdings as treasury stock. All of the issued and outstanding shares of
37
CSG Holdings Common Stock were duly authorized for issuance and are validly
issued, fully paid and non-assessable and were not issued in violation of any
purchase or call option, right of first refusal, subscription right, preemptive
right or any similar rights. All of the outstanding shares of CSG Holdings
Common Stock are owned of record by the Seller.
(c) The authorized capital stock of CSG Netherlands BV consists of 5
shares of common stock, (euro)20,000 par value per share (the "CSG Netherlands
Common Stock"). As of the date hereof, there is 1 share of CSG Netherlands
Common Stock issued and outstanding and 0 shares of CSG Netherlands Common Stock
are held by CSG Netherlands BV as treasury stock. All of the issued and
outstanding shares of CSG Netherlands Common Stock were duly authorized for
issuance and are validly issued, fully paid and non-assessable and were not
issued in violation of any purchase or call option, right of first refusal,
subscription right, preemptive right or any similar rights. All of the
outstanding shares of CSG Netherlands Common Stock are owned of record by the
Sellers
(d) The authorized capital stock of CSG Technology consists of 12,000
shares of common stock, $1.00 par value per share (the "CSG Technology Common
Stock"). As of the date hereof, there are 12,000 shares of CSG Technology Common
Stock issued and outstanding and 0 shares of CSG Technology Common Stock are
held by CSG Technology as treasury stock. All of the issued and outstanding
shares of CSG Technology Common Stock were duly authorized for issuance and are
validly issued, fully paid and non-assessable and were not issued in violation
of any purchase or call option, right of first refusal, subscription right,
preemptive right or any similar rights. All of the outstanding shares of CSG
Technology Common Stock are owned of record by the Sellers.
(e) There is no existing option, warrant, call, right or Contract to
which the Sellers, any Company or Subsidiary is a party requiring, and there are
no securities of any Company outstanding which upon conversion or exchange would
require, the issuance, sale or transfer of any additional shares of capital
stock or other equity securities of any Company or other securities convertible
into, exchangeable for or evidencing the right to subscribe for or purchase
shares of capital stock or other equity securities of any Company. Except as set
forth in Schedule 4.18(e), there are no obligations, contingent or otherwise, of
any Company or Subsidiary to (i) repurchase, redeem or otherwise acquire any
shares of capital stock or other equity interests of any Subsidiary, or (ii)
provide material funds to, or make any material investment in (in the form of a
loan, capital contribution or otherwise), or provide any guarantee with respect
to the obligations of, any Person. Except as set forth on Schedule 4.18(e),
there are no outstanding stock appreciation, phantom stock, profit participation
or similar rights with respect to any Company or any of the Subsidiaries. There
are no bonds, debentures, notes or other indebtedness of any Company or any of
the Subsidiaries having the right to vote or consent (or, convertible into, or
exchangeable for, securities having the right to vote or consent) on any matters
on which stockholders (or other equityholders) of any Company or any of the
Subsidiaries may vote. Except as set forth on Schedule 4.18(c), there are no
voting trusts, irrevocable proxies or other Contracts or understandings to which
any Company, Subsidiary or Seller is a party or is bound with respect to the
voting or consent of any shares or the equity interests of any Subsidiary.
38
4.19 Corporate Records.
(a) Each Company has made available to Purchaser true, correct and
complete copies of the certificates of incorporation (each certified by the
Secretary of State or other appropriate official of the applicable jurisdiction
of organization) and by-laws or comparable organizational documents of such
Company and each of the Subsidiaries of such Company in each case as amended and
in effect on the due date hereof, including all amendments thereto.
(b) The minute books of each Company and Subsidiary previously made
available to Purchaser contain true, correct and complete, in all material
respects, records of all meetings and accurately reflect all other corporate
action of the stockholders and board of directors (including committees thereof)
of the Companies and Subsidiaries. The stock certificate books, the stock
transfer ledgers and, where applicable, the public deed of title of ownership of
the Companies and the Subsidiaries previously made available to Purchaser are
true, correct and complete. All stock transfer taxes levied, if any, or payable
with respect to all transfers of shares or equity interests of the Companies and
the Subsidiaries prior to the date hereof have been paid and appropriate
transfer tax stamps affixed.
4.20 Insurance. Set forth in Schedule 4.20 is a list of all insurance
policies and all fidelity bonds held by or applicable to any Company or
Subsidiary setting forth, in respect of each such policy, the policy name,
policy number, carrier, term, type and amount of coverage and annual premium.
Except as set forth on Schedule 4.20, there are no material claims under the
insurance policies and all fidelity bonds held by or applicable to any Company
or Subsidiary. Excluding insurance policies that have expired and been replaced
in the Ordinary Course of Business, no insurance policy has been cancelled
within the last two (2) years and, to the Knowledge of the Companies or the
Sellers, no threat has been made to cancel any insurance policy of any of the
Companies or Subsidiaries during such period. No event has occurred, including
the failure by any Company or any of the Subsidiaries to give any notice or
information or any of the Companies or Subsidiaries giving any inaccurate or
erroneous notice or information, which limits or impairs the rights of any of
the Companies or Subsidiaries under any insurance policies.
4.21 Related Party Transaction. No employee, officer, director,
stockholder or partner of any of the Companies or Subsidiaries, any member of
his or her immediate family or any of their respective Affiliates ("Related
Persons") (i) owes any amount to any of the Companies or Subsidiaries nor do any
of the Companies or Subsidiaries owe any amount to, or has any of the Companies
or Subsidiaries committed to make any loan or extend or guarantee credit or
provide security to or for the benefit of, any Related Person, (ii) is involved
39
in any business arrangement or other relationship with any of the Companies or
Subsidiaries (whether written or oral), (iii) owns any property or right,
tangible or intangible, that is used by any of the Companies or Subsidiaries,
(iv) has any claim or cause of action against any of the Companies or
Subsidiaries or (v) owns any direct or indirect interest of any kind in (other
than the direct or indirect ownership of less than 5% of the equity securities
of any publicly traded company), or controls or is a director, officer, employee
or partner of, or consultant to, or lender to or borrower from or has the right
to participate in the profits of, any Person which is a competitor, supplier,
customer, landlord, tenant, creditor or debtor of any Company or Subsidiary.
Schedule 4.21 sets forth an accurate and complete list of the officers and
directors of each Company and Subsidiary.
4.22 Intentionally Omitted.
4.23 Certain Payments. None of the Companies, the Subsidiaries or the
Sellers nor, to the Knowledge of the Companies or the Sellers, any director,
officer, employee, or other Person associated with or acting on behalf of any of
them, has directly or indirectly, in violation of any Law or policy of the
Companies, the Subsidiaries or the Sellers, (a) made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to any
Person, private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business for any Company
or Subsidiary, (ii) to pay for favorable treatment for business secured by any
Company or Subsidiary or (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Company or Subsidiary, or
(b) established or maintained any fund or asset with respect to any Company or
Subsidiary that has not be recorded in the books and records of the Companies
and Subsidiaries.
4.24 Certain Governmental Matters. No Company or Subsidiary is party
to any Government Contract. "Government Contract" means any prime contract with
a U.S. Governmental Body.
4.25 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article 4, none of the Sellers
or any Affiliate of the Sellers makes any representations or warranties, and
Sellers hereby disclaim any other representations or warranties, whether made by
the Sellers or any Affiliate of the Sellers, or any of their respective
officers, directors, employees, agents or representatives, with respect to the
execution and delivery of this Agreement or any Seller Document, the
transactions contemplated hereby or the Companies and the Subsidiaries,
notwithstanding the delivery or disclosure to Purchaser or its representatives
of any documentation or other information with respect to any one or more of the
foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Sellers that:
40
5.1 Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, and Purchaser has all requisite corporate power and authority to carry
on its business as currently conducted and to own or lease and operate its
properties. Purchaser is duly qualified to do business and is in good standing
as a foreign corporation (in any jurisdiction that recognizes such concept) in
each jurisdiction where the ownership or operation of its assets or the conduct
of its business requires such qualification, except where the failure to be so
qualified or in good standing, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the ability of
Purchaser to perform its obligations under this Agreement and the Purchaser
Documents (a "Purchaser Material Adverse Effect").
5.2 Authorization of Agreement. Purchaser has all requisite corporate
power and authority to execute and deliver this Agreement and each other
agreement, document, instrument or certificate contemplated by this Agreement or
to be executed by Purchaser in connection with the consummation of the
transactions contemplated hereby and thereby (the "Purchaser Documents") and to
effect the transactions contemplated hereby and thereby, and the execution,
delivery and performance of this Agreement and the Purchaser Documents have been
duly authorized by all requisite corporate action. This Agreement has been duly
executed and delivered by Purchaser and this Agreement is, and the Purchaser
Documents, when duly executed and delivered by Purchaser, will be, valid and
legally binding obligations of Purchaser, enforceable against it in accordance
with their respective terms, except to the extent that enforcement of the rights
and remedies created hereby and thereby may be affected by bankruptcy,
reorganization, moratorium, insolvency and similar Laws of general application
affecting the rights and remedies of creditors and by general equity principles.
5.3 Conflicts; Consents of Third Parties.
(a) The execution, delivery and performance of this Agreement and the
Purchaser Documents by Purchaser and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) result in a breach or
violation of any provision of Purchaser's charter or by-laws, (ii) violate or
result in a breach of or constitute an occurrence of default under any provision
of, result in the acceleration or cancellation of any obligation or to a loss of
any benefit to which Purchaser is entitled under, or give rise to a right by any
party to terminate or amend its obligations under, any mortgage, deed of trust,
conveyance to secure debt, note, loan, indenture, lien, lease, agreement,
instrument, order, judgment, decree or other arrangement or commitment to which
Purchaser is a party or by which it or its assets or properties are bound, (iii)
violate any applicable Law or Permit by which Purchaser or its assets are bound
or (iv) result in the imposition of any Lien upon any of the assets or
properties of Purchaser other than, in the case of clauses (ii) and (iii), any
such violation, breach, default, acceleration or cancellation of obligations or
rights that, individually or in the aggregate, would not reasonably be expected
to have a Purchaser Material Adverse Effect.
41
(b) No consent, approval, Order, Permit or authorization of, or
registration, declaration or filing with, or notice to, or other action by, any
Person is required to be obtained, made or taken by Purchaser in connection with
the execution and delivery of this Agreement and the Purchaser Documents or the
consummation of the transactions contemplated hereby or thereby by Purchaser,
except for (i) any filings required to be made under any Antitrust Law and (ii)
such consents, approvals, orders, authorizations, registrations, declarations or
filings the failure of which to be obtained or made, individually or in the
aggregate, would not reasonably be expected to have a Purchaser Material Adverse
Effect.
5.4 Litigation. There are no Legal Proceedings pending or, to the
knowledge of Purchaser, threatened against Purchaser or to which Purchaser is
otherwise a party relating to this Agreement, the Purchaser Documents or the
transactions contemplated hereby and thereby.
5.5 Investment Intention. Purchaser is acquiring the Securities for
its own account, for investment purposes only and not with a view to the
distribution (as such term is used in Section 2(11) of the Securities Act
thereof). Purchaser (either alone or together with its advisors) has sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluation the merits and risks of its investment in the Securities and is
capable of bearing the economic risks of such investment. Purchaser understands
that the Securities have not been registered under the Securities Act and cannot
be sold unless subsequently registered under the Securities Act or an exemption
from such registration is available.
5.6 Financial Advisors. Except as set forth on Schedule 5.6, no
Person has acted, directly or indirectly, as a broker, finder or financial
advisor for Purchaser in connection with the transactions contemplated by this
Agreement and no Person is entitled to any fee or commission or like payment in
respect thereof.
5.7 Financing. As of the date hereof, Purchaser has or prior to the
Closing Date will have access to, sufficient cash, available lines of credit or
other sources of immediately available funds to enable it to make payment of the
Purchase Price and any other amounts to be paid hereunder.
5.8 Inspections; No Other Representations. Purchaser (a) is an
informed and sophisticated purchaser, and has engaged expert advisors,
experienced in the evaluation and purchase of companies such as the Company and
Subsidiaries as contemplated hereunder and (b) has undertaken such investigation
and has been provided with and has evaluated such documents and information as
it has deemed necessary to enable it to make an informed and intelligent
decision with respect to the execution, delivery and performance of this
Agreement, it being understood that nothing contained in this Section 5.8 shall
limit or restrict any of the representations and warranties of the Sellers
contained in this Agreement or any Seller Document.
42
ARTICLE VI
COVENANTS
6.1 Access to Information; Confidentiality.
(a) Each Seller and Company shall, and shall cause the Subsidiaries
to, afford to Purchaser and its accountants, counsel, financial advisors and
other representatives, reasonable access, during normal business hours upon
reasonable notice throughout the period prior to the Closing, to the properties
and facilities (including all owned or leased real property and the buildings,
structures, fixtures, appurtenances and improvements erected, attached or
located thereon) of the Business, books, financial information (including
working papers and data related to the Business, internal audit reports, and
"management letters" from accountants with respect to the internal controls of
the Companies or Subsidiaries or otherwise related to the Business, Contracts
and records of the Companies and Subsidiaries or otherwise related to the
Business and, during such period, shall furnish promptly such information
concerning the businesses, properties and personnel of the Companies and
Subsidiaries or otherwise related to the Business as Purchaser shall reasonably
request; provided, however, that such investigation shall not unreasonably
disrupt the Sellers', the Companies' or the Subsidiaries' business and
operations. Notwithstanding the foregoing, Purchaser shall not have access to
personnel records of the Company and Subsidiaries relating to individual
performance or evaluation records, medical histories or other information which
in the Sellers' good faith opinion would result in noncompliance of any
applicable Law by any Seller, Company or Subsidiary, or the disclosure of which
could subject any Seller, Company or Subsidiary to Liability. The Companies
shall authorize and direct the managers and employees of the Subsidiaries to
discuss matters involving the operations and business of any of the Companies or
Subsidiaries, as the case may be, with representatives of Purchaser.
(b) All nonpublic information provided to, or obtained by, Purchaser
with respect to the Companies, Subsidiaries and the Business in connection with
the transactions contemplated hereby shall be "Confidential Information" for
purposes of the Confidentiality Agreement dated March 3, 2005 among Purchaser
and CSG Systems, Inc., a subsidiary of CSG, as amended (the "Confidentiality
Agreement"), the terms of which shall continue in force until the Closing and
shall terminate and be of no further force and effect from and after the
Closing; provided that the parties hereto may, upon providing the other parties
with prior written notice, disclose such information as may be necessary in
connection with seeking necessary consents and approvals as contemplated hereby.
Notwithstanding the foregoing, the Companies and Subsidiaries shall not be
required to disclose any information if such disclosure would contravene any
applicable Law. No information provided to or obtained by Purchaser pursuant to
this Section 6.1 shall limit or otherwise affect the remedies available
hereunder to Purchaser (including Purchaser's right to seek indemnification
pursuant to Article VIII or IX), or the representations or warranties of, or the
conditions to the obligations of, the parties hereto.
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6.2 Conduct of the Business Pending the Closing.
(a) Except as otherwise expressly provided in this Agreement or with
the prior written consent of Purchaser, between the date hereof and the Closing,
(1) the Sellers shall, with respect to the Business, and (2) the Companies
shall, and the Companies shall cause the Subsidiaries to:
(i) conduct the Business only in the Ordinary Course of Business;
(ii) use their commercially reasonable efforts to (A) preserve
the present business operations, organization (including officers and
employees) and goodwill of the Business and (B) preserve the present
relationships with Persons having business dealings with the Business
(including customers and suppliers);
(iii) maintain (A) all of the assets and properties of, or used
in, the Business, in each case, in their current condition, ordinary
wear and tear excepted, and (B) insurance upon all of the properties
and assets referred to in clause (A) above in such amounts and of such
kinds substantially comparable to that in effect on the date of this
Agreement;
(iv) (A) maintain the books, accounts and records of the
Companies and Subsidiaries and those otherwise related to the Business
in the Ordinary Course of Business, (B) continue to collect accounts
receivable and pay accounts payable related to the Business utilizing
normal procedures and without discounting or accelerating payment of
such accounts, and (C) comply in all material respects with all
contractual and other obligations of the Companies and Subsidiaries
and those otherwise binding upon the Business;
(v) comply in all material respects with the capital expenditure
plan of the Companies and Subsidiaries for the fiscal years 2005 and
2006, including substantially making such capital expenditures in the
amounts and at the times set forth in such plan; and
(vi) comply in all material respects with all applicable Laws.
(b) Without limiting the generality of the foregoing, except as
otherwise expressly provided in this Agreement or with the prior written consent
of Purchaser, (1) the Sellers shall not, with respect to the Business, and (2)
the Companies shall not, and the Companies shall cause the Subsidiaries not to:
(i) declare, set aside, make or pay any dividend or other
distribution in respect of the capital stock of, or other ownership
interests in, any of the Companies or Subsidiaries or repurchase,
redeem or otherwise acquire any outstanding shares of the capital
stock or other securities of, or other ownership interests in, any of
the Companies or Subsidiaries;
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(ii) transfer, issue, sell, pledge, encumber or dispose of any
shares of capital stock or other securities of, or other ownership
interests in, any of the Companies or Subsidiaries or grant options,
warrants, calls or other rights to purchase or otherwise acquire
shares of the capital stock or other securities of, or other ownership
interests in, any of the Companies or Subsidiaries;
(iii) effect any recapitalization, reclassification, stock split,
combination or like change in the capitalization of any of the
Companies or Subsidiaries, or amend the terms of any outstanding
securities of any Company or Subsidiary;
(iv) amend the certificate of incorporation or by-laws or
equivalent organizational or governing documents of any of the
Companies or Subsidiaries;
(v) except as otherwise provided in Section 6.13, administer
their employee vacation and paid time off policy, including
year-to-year carryover allowances, other than in accordance with the
Ordinary Course of Business with respect to employees of any of the
Company or Subsidiaries and Business Employees and will not (A)
increase the rate of compensation or benefits for any current or
former director, officer, employee or independent contractor of any of
the Companies or Subsidiaries or Business Employee, or otherwise enter
into or alter any employment, change in control, transaction or sale
bonus, deferred compensation, severance, retirement, consulting or
managerial services agreement with respect to any current or former
director, officer, employee or independent contractor of any of the
Companies or Subsidiaries or Business Employee, except for normal
promotion, merit or cost-of-living increases to non-executive
employees or independent contractors, the hiring of new employees
(each a "New Hire") with a maximum of $175,000 in total annual target
compensation (including bonus) but exclusive of commissions and value
of Benefit Plans and in each case in the Ordinary Course of Business,
or (B) establish, adopt, enter into or modify any collective
bargaining agreement or compensation or benefit plan, in each case
covering any current or former director, officer, employee or
independent contractor of any of the Companies or Subsidiaries or
Business Employee, other than amendments that would not increase costs
on Purchaser, amendments to Benefit Plans required by Law or
implementation of Benefit Plans to replace a similar terminating
Benefit Plan on substantially the same terms as such terminating
Benefit Plan;
(vi) except for letters of credit, performance bonds or
guarantees and inter-company Indebtedness, provided or incurred, as
the case may be, each in the Ordinary Course of Business, (A) issue,
create, incur, assume, guarantee, endorse or otherwise become liable
or responsible with respect to (whether directly, contingently or
otherwise) any Indebtedness or (B) modify the terms of any
Indebtedness or other Liability;
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(vii) subject to any Lien or otherwise encumber or, except for
Permitted Exceptions, permit, allow or suffer to be encumbered, any of
the properties or assets (whether tangible or intangible) of, or used
in, the Business;
(viii) except as set forth on Schedule 6.2(b)(viii), acquire any
material properties or assets or sell, assign, license, transfer,
convey, lease or otherwise dispose of any of the material properties
or assets of, or used in, the Business other than in the Ordinary
Course of Business;
(ix) enter into or agree to enter into any merger or
consolidation with any corporation or other entity, engage in any new
line of business, invest in, make a loan, advance or capital
contribution to, or otherwise acquire the securities, of any other
Person;
(x) cancel or compromise any debt or claim or waive or release
any material right of any of the Companies or Subsidiaries, except in
the Ordinary Course of Business;
(xi) other than as set forth in the capital expenditure plan on
the Companies and the Subsidiaries for the fiscal years 2005 and 2006,
enter into any commitment for capital expenditures of the Companies
and Subsidiaries in excess of $100,000 for any individual commitment
and $250,000 for all commitments in the aggregate;
(xii) introduce any material change with respect to the operation
of the Business, including any material change in the types, nature,
composition or quality of its products or services, or, other than in
the Ordinary Course of Business, make any change in product
specifications or terms of distributions of such products or change
its discount, allowance or return policies or grant any discount,
allowance or return terms for any customer or supplier not in
accordance with such policies;
(xiii) enter into any transaction or enter into or modify any
Material Contract which by reason of its size, nature or otherwise is
not in the Ordinary Course of Business;
(xiv) except for transfers of cash pursuant to normal cash
management practices in the Ordinary Course of Business, make any
investments in or loans to, or pay any fees or expenses to, or enter
into or modify any Contract with any Related Persons;
(xv) make a material change in its accounting or Tax reporting
principles, methods or policies;
(xvi) make, change or revoke any election concerning Taxes or Tax
Returns, change an annual accounting period, enter into any closing
agreement with respect to Taxes, settle or compromise any Tax claim or
assessment or obtain or enter into any Tax ruling, in each case, if
taking such action would materially affect the Taxes of any of the
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Companies or Subsidiaries after the Closing Date or prepare or file
any material Tax Return (or any amendment thereof) unless such Tax
Return shall have been prepared in a manner consistent with past
practice except as required by Law;
(xvii) enter into any Contract, understanding or commitment that
restrains, restricts, limits or impedes the ability of any Company or
Subsidiary to compete with or conduct any business or line of business
in any geographic area or solicit the employment of any persons (other
than as provided for in this Agreement);
(xviii) terminate, amend, restate, supplement or waive any rights
under any (A) Material Contract, Real Property Lease, Personal
Property Lease or Licensed Intellectual Property, other than in the
Ordinary Course of Business or (B) Permit;
(xix) settle or compromise any pending or threatened Legal
Proceeding or any claim or claims for, or that would result in a loss
of revenue of, an amount that could, individually or in the aggregate,
reasonably be expected to be greater than $100,000;
(xx) change or modify its credit, collection or payment policies,
procedures or practices, including acceleration of collections or
receivables (whether or not past due) or fail to pay or delay payment
of payables or other liabilities; or
(xxi) agree to do anything (or omit from doing anything solely in
respect of clause (B)) (A) prohibited by this Section 6.2, (B) which
the Sellers or the Companies knew or would reasonably be expected to
have known would make any of the representations and warranties of the
Sellers in this Agreement or any of the Seller Documents or Company
Documents untrue or incorrect in any material respect or could result
in any of the conditions to the Closing not being satisfied or (C)
that would have, or would be reasonably expected to have, a Material
Adverse Effect.
(c) Notwithstanding any other provision of this Agreement except the
final sentence of this Section 6.2(c), neither the Reorganization nor any aspect
thereof shall (1) constitute a breach of any representation, warranty, covenant
or agreement hereunder or (2) give rise to any claim for indemnification
hereunder (other than pursuant to Section 8.2(a)(v) and Section 9.1(ii)).
"Reorganization" means (i) the extraction of Cash by the Sellers and their
Affiliates from the Companies and Subsidiaries, by dividend or other means, and
any related actions including conversion of CSG International Limited to an
unlimited liability company (and any related change in ownership thereof among
the Companies and Subsidiaries and related assumption of Liabilities thereof),
(ii) elections under Treasury Regulation Sections 301.7701-1(3)(c) to treat
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certain Subsidiaries as disregarded entities and (iii)(A) the transfer to, and
assumption by, any Company or Subsidiary of assets or properties (including
contract rights and other intangible assets) and related Liabilities of the
Sellers or their Affiliates (other than the Companies or Subsidiaries), which
(1) are used or primarily related to the Business or (2) are set forth on
Schedule 6.2(c) and (B) the transfer by the Companies and Subsidiaries to, and
assumption by, the Sellers and any of their Affiliates (other than the Companies
and Subsidiaries) of any and all assets or properties (including contractual
rights or other intangible assets) and related Liabilities which are not used to
any significant extent in the Business, including the FairPoint Business.
Notwithstanding the foregoing, the Sellers shall not take or omit to take, or
cause or permit any of the Companies or Subsidiaries to take or omit to take,
any action in connection with the Reorganization that would impair or adversely
affect in any material respect the operations of the Business after the Closing,
it being understood that (x) the extraction of Cash from the Company and
Subsidiaries shall not be deemed to impair or adversely affect such operations
unless the same affects the ability to satisfy immediate Cash needs (such as
payroll) or to satisfy performance bonds or similar commitments at or after
Closing (and such condition did not exist prior the taking of actions
contemplated by clause (i) of the definition of Reorganization) and (y) the
conversion contemplated by clause (i) of the definition of Reorganization and
the elections contemplated by clause (ii) of the definition of Reorganization
shall not be deemed to impair or adversely affect such operations.
6.3 Third Party Consents. The Sellers and Companies shall use, and
the Companies shall cause the Subsidiaries to use, their commercially reasonable
efforts to obtain at the earliest practicable date all consents, waivers and
approvals from, and provide all notices to, all Persons that are not
Governmental Bodies, which consents, waivers, approvals and notices are required
to consummate the transactions contemplated by this Agreement or the absence of
which would result in (a) a Liability to any Company or Subsidiary or (b) the
loss of any material benefit to which any Company or Subsidiary is entitled
under, any Material Contract, including the consents, waivers, approvals and
notices referred to in Sections 3.3(b) and 4.4(b) hereof (except for such
matters covered by Section 6.4). All such consents, waivers, approvals and
notices shall be in writing and reasonably satisfactory to Purchaser, and
executed counterparts of such consents, waivers and approvals shall be delivered
to Purchaser promptly after receipt thereof, and copies of such notices shall be
delivered to Purchaser promptly after the making thereof. Notwithstanding
anything to the contrary in this Agreement, neither Purchaser nor any of its
Affiliates (which for purposes of this sentence shall include the Companies)
shall be required to pay any amounts in connection with obtaining any consent,
waiver or approval other than as set forth in the Side Letter.
6.4 Governmental Consents and Approvals.
(a) Each of Purchaser, the Sellers and the Companies shall use, and
the Companies shall cause each of the Subsidiaries to use, their commercially
reasonable efforts to obtain at the earliest practical date all waivers, Permits
and declarations from, make all filings with, and provide all notices to, all
Governmental Bodies which are required to consummate the transactions
contemplated by this Agreement, including such waivers, Orders, Permits,
declarations, filings and notices that are referred to in Sections 3.3(b) and
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4.4(b). Without limiting the foregoing, Purchaser, the Sellers and the Companies
shall (i) make all filings required of each of them or any of their respective
Subsidiaries or Affiliates under the HSR Act or other Antitrust Laws with
respect to the transactions contemplated hereby as promptly as practicable and,
in any event, within ten (10) Business Days after the date of this Agreement in
the case of all filings required under the HSR Act and within four (4) weeks in
the case of all other filings required by other Antitrust Laws, (ii) promptly
comply with any request under the HSR Act or other Antitrust Laws for additional
information, documents, or other materials received by each of them or any of
their respective Subsidiaries or Affiliates from the U.S. Federal Trade
Commission (the "FTC"), the Antitrust Division of the U.S. Department of Justice
(the "Antitrust Division") or any other Governmental Body in respect of such
filings or such transactions, and (iii) cooperate with each other in connection
with any such filing (including, to the extent permitted by applicable Law,
providing copies of all such documents to the non-filing parties prior to filing
and considering all reasonable additions, deletions or changes suggested in
connection therewith) and in connection with resolving any investigation or
other inquiry of any of the FTC, the Antitrust Division or other Governmental
Body under any Antitrust Law with respect to any such filing or any such
transaction. Each such party shall use commercially reasonable efforts to
furnish to each other party hereto all information required for any application
or other filing to be made pursuant to any applicable Law in connection with the
transactions contemplated by this Agreement. Each such party shall promptly
inform the other parties hereto of any oral communication with, and provide
copies of written communications with, any Governmental Body regarding any such
filings or any such transaction and permit the other party to review in advance
any proposed communication by such party to any Governmental Body. No party
hereto shall independently participate in any formal meeting with any
Governmental Body in respect of any such filings, investigation, or other
inquiry without giving the other parties hereto prior notice of the meeting and,
to the extent permitted by such Governmental Body, the opportunity to attend
and/or participate. Subject to applicable Law, the parties hereto shall consult
and cooperate with one another in connection with the matters described in this
Section 6.4, including in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto relating to proceedings under the
HSR Act or other Antitrust Laws.
(b) Each of Purchaser, the Sellers and the Companies shall use
commercially reasonable efforts to resolve such objections, if any, as may be
asserted by any Governmental Body with respect to the transactions contemplated
by this Agreement under any Law, including the HSR Act, the ▇▇▇▇▇▇▇ Act, as
amended, the ▇▇▇▇▇▇▇ Act, as amended, the Federal Trade Commission Act, as
amended, that is designed to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade (collectively, the
"Antitrust Laws"). In connection therewith, if any Legal Proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as in violation of any Law, Purchaser, the
49
Sellers and the Companies shall, subject to the mutual agreement of CSG and
Purchaser, cooperate and use commercially reasonable efforts to contest and
resist any such Legal Proceeding, and to have vacated, lifted, reversed, or
overturned any decree, judgment, injunction or other order whether temporary,
preliminary or permanent, that is in effect and that prohibits, prevents, or
restricts consummation of the transactions contemplated by this Agreement,
including by pursuing all available avenues of administrative and judicial
appeal. Each of the parties shall enter into such mutual agreement unless, in
its reasonable judgment, the taking of the action in question is not in its
business interests. Each of Purchaser, the Sellers and the Companies shall use
commercially reasonable efforts to take such action as may be required to cause
the expiration of the notice periods under the HSR Act or other Antitrust Laws
with respect to such transactions as promptly as possible after the execution of
this Agreement. Notwithstanding anything to the contrary in this Agreement,
neither Purchaser nor any of its Affiliates (which for purposes of this sentence
shall include the Companies and Subsidiaries) shall be required, in connection
with the matters covered by this Section 6.4, (i) to hold separate (including by
trust or otherwise) or divest any of their respective businesses, product lines
or assets or (ii) to agree to any limitation on the operation or conduct of the
Business.
6.5 Further Assurances. Subject to, and not in limitation of, Section
6.4, each of the Companies, the Sellers and Purchaser shall use its commercially
reasonable efforts to (i) take, or cause to be taken, all actions necessary or
appropriate to consummate the transactions contemplated by this Agreement and
(ii) cause the fulfillment at the earliest practicable date of all of the
conditions to its respective obligations to consummate the transactions
contemplated by this Agreement. The Sellers and Purchaser agree, and the Sellers
prior to Closing, and Purchaser, after the Closing, agree to cause each Company
and Subsidiary, to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be necessary
or desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
6.6 Non-Solicitation and Confidentiality.
(a) For a period of eighteen (18) months from and after the Closing
Date, the Sellers shall not, and shall cause their respective directors,
officers, employees and Affiliates not to, directly or indirectly cause,
solicit, induce or encourage any employees of the Companies or Subsidiaries or
any employee of Purchaser or its Affiliates (which, for these purposes, includes
the Companies and Subsidiaries) engaged primarily in the Business prior to the
Closing to leave such employment or hire, employ or otherwise engage any such
individual (other than through generalized searches for employees through media
advertisements, employment firms or otherwise that are not focused on Persons
employed by Purchaser or any of its Affiliates or their successors); provided,
however, that should a Transferred Employee elect not to accept employment with
Purchaser, such Transferred Employee may, with the consent of Purchaser, which
consent shall not be unreasonably withheld, maintain his or her employment with
Seller; provided, further, that such Transferred Employee shall be made
available to Purchaser and its Affiliates as a consultant for a period of up to
six (6) months following the Closing as needed by Purchaser at cost (calculated
as a percentage of base salary assuming a 40-hour work week) to be paid by
Purchaser. This restriction shall not apply to any Transferred Business Employee
whose employment with Purchaser or its successor is terminated by Purchaser or
its successor after the Closing
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(b) From and after the Closing Date, the Sellers shall not and shall
cause their officers and Affiliates not to, directly or indirectly, disclose,
reveal, divulge or communicate to any Person other than authorized officers,
directors and employees of Purchaser or its Affiliates (which for this purpose
shall include the Companies and Subsidiaries) or use or otherwise exploit for
its own benefit or for the benefit of anyone other than Purchaser, any
Confidential Information (as defined below). The Sellers shall not have any
obligation to keep confidential (or cause their officers, directors or
Affiliates to keep confidential) any Confidential Information if and to the
extent disclosure thereof is specifically required by applicable Law or is
generally required to reply to a request by a Governmental Authority; provided,
however, that in the event disclosure is requested or required by a Governmental
Authority (by requests for information or documents or subpoenas), the Sellers
shall, to the extent reasonably possible, provide Purchaser with prompt notice
of such requirement prior to making any disclosure so that Purchaser may seek an
appropriate protective order. For purposes of this Section 6.6(b), "Confidential
Information" means any information with respect to any of the Companies or
Subsidiaries or otherwise primarily used in connection with the Business,
including methods of operation, customer lists, products, prices, fees, costs,
technology, inventions, trade secrets, know-how, software, marketing methods,
plans, personnel, suppliers, competitors, markets or other specialized
information or proprietary matters. "Confidential Information" does not include,
and there shall be no obligation hereunder with respect to, information that (i)
is generally available to the public on the date of this Agreement, (ii) becomes
generally available to the public other than as a result of a disclosure not
otherwise permissible hereunder, (iii) although related to the Companies or
Subsidiaries and/or primarily used in connection with the Business, is also used
by the Sellers or their Affiliates (other than the Companies or Subsidiaries)
prior to the Closing Date or (iv) is otherwise required as expressly provided in
the Ancillary Agreements.
(c) The covenants and undertakings contained in this Section 6.6
relate to matters which are of a special, unique and extraordinary character and
a violation of any of the terms of this Section 6.6 will cause irreparable
injury to Purchaser or any Seller, as applicable, the amount of which will be
impossible to estimate or determine and which cannot be adequately compensated.
Accordingly, the remedy at law for any breach of this Section 6.6 will be
inadequate. Therefore, Purchaser or any Seller, as applicable, will be entitled
to a temporary and permanent injunction, restraining order or other equitable
relief from any court of competent jurisdiction in the event of any breach of
this Section 6.6 without the necessity of proving actual damage or posting any
bond whatsoever. The rights and remedies provided by this Section 6.6 are
cumulative and in addition to any other rights and remedies which Purchaser or
any Seller, as applicable, may have hereunder or at law or in equity.
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(d) The parties hereto agree that, if any court of competent
jurisdiction determines that a specified time period or any other relevant
feature of this Section 6.6 is unreasonable, arbitrary or against public policy,
then the maximum enforceable period of time, geographical area, business
limitation or other relevant feature which is determined by such court to be
reasonable, not arbitrary and not against public policy may be enforced against
the applicable party.
6.7 Preservation of Records. Subject to Section 9.16 and any
retention requirements relating to the preservation of Tax records, the Sellers
and Purchaser agree that each of them shall (and shall cause the Companies and
Subsidiaries to) preserve and keep the records held by them relating to the
respective businesses of the Companies and Subsidiaries for a period of seven
(7) years from the Closing Date and shall make such records and personnel
available to the other as may be reasonably required by such party in connection
with, among other things, any insurance claims by, legal proceedings against or
governmental investigations of the Purchaser, any of the Sellers, Companies or
Subsidiaries or any of their Affiliates or in order to enable the Sellers or
Purchaser to comply with their respective obligations under this Agreement and
each other agreement, document or instrument contemplated hereby or thereby. In
the event the Sellers or Purchaser wishes to destroy (or permit to be destroyed)
such records after that time, such party shall first give 60 days prior written
notice to the other and such other party shall have the right at its option and
expense, upon prior written notice given to such party within that 60 day
period, to take possession of the records within 30 days after the date of such
notice.
6.8 Publicity.
(a) None of the Purchaser, the Sellers or the Companies shall issue
any press release or public announcement concerning this Agreement or the
transactions contemplated hereby without obtaining the prior written approval of
the other parties hereto, which approval will not be unreasonably withheld or
delayed, unless disclosure is otherwise required by applicable Law or by the
applicable rules of any stock exchange on which Purchaser or its Affiliates or
CSG lists securities, provided that, to the extent required by applicable Law or
by the applicable rules of any stock exchange, the party intending to make such
release shall (i) promptly notify the other parties, and (ii) use its
commercially reasonable efforts consistent with such applicable Law to consult
with the other parties with respect to the text thereof and (iii) cooperate with
the other parties to narrow the scope of the disclosure required to be made.
(b) Each of Purchaser, the Sellers and the Companies agrees that the
terms of this Agreement shall not be disclosed or otherwise made available to
the public and that copies of this Agreement shall not be publicly filed or
otherwise made available to the public, except where such disclosure,
availability or filing is required by applicable Law or the applicable rules of
any stock exchange.
6.9 Use of Name.
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(a) The Sellers hereby agree that upon the Closing, Purchaser, the
Companies and Subsidiaries shall have the sole right to the use of any service
marks, trademarks, trade names, d/b/a names, fictitious names, identifying
symbols, logos, emblems, signs or insignia used in the Business, including any
name or ▇▇▇▇ confusingly similar thereto and the marks listed on Schedule
4.13(a), other than the Seller Name (collectively, the "Company Marks").
Schedule 6.9 sets forth a complete and correct list of the trade names and
fictitious names included in the Company Marks currently used in the Business as
of the date hereof. The Sellers shall not, and shall not permit their respective
Affiliates to, use the names set forth on Schedule 6.9 or any variation or
simulation thereof or any of the Company Marks from and after the Closing. The
Sellers shall, and shall cause each their Affiliates to, immediately after the
Closing, cease to hold themselves out as having any affiliation with the
Companies or Subsidiaries, unless as otherwise provided for in this Agreement or
the Ancillary Agreements. In furtherance thereof, as promptly as practicable but
in no event later than 120 days following the Closing Date, the Sellers shall
remove, strike over or otherwise obliterate all Company Marks from all materials
held by, or under the control of, the Sellers and their post-closing Affiliates,
including any vehicles, business cards, schedules, stationery, packaging
materials, displays, signs, promotional materials, manuals, forms, computer
software and other materials. The Sellers shall not be obligated to change the
Company Marks on goods in the hands of dealers, distributors, representatives,
agents and customers at the time of the expiration of the 120 day time period
set forth above, provided such goods have been shipped or distributed in the
Ordinary Course of Business prior to Closing.
(b) Purchaser and the Sellers hereby further agree as follows:
(i) as soon as reasonably practicable, but in any event no later
than 120 days after the Closing Date, Purchaser shall and shall cause
the Companies and Subsidiaries to, remove the "CSG" ▇▇▇▇ (the "Seller
Name") and any other emblem, ▇▇▇▇, insignia, trademark, design or logo
previously or currently used by the Sellers or any of their Affiliates
that is not part of the Business Intellectual Property being
transferred to Purchaser from all buildings, offices and signs of the
Business;
(ii) as soon as reasonably practicable using Purchaser's
reasonable commercial efforts, but in any event no longer than 180
days after the Closing Date, Purchaser shall cease using the Seller
Name in all invoices, letterhead, advertising and promotional
materials, office forms and business cards;
(iii) as soon as reasonably practicable using Purchaser's
reasonable commercial efforts, but in any event no later than 180 days
after the Closing Date, Purchaser shall cease using the Seller Name in
external electronic databases, web sites, product instructions,
packaging (except as provided below) and other materials, printed or
otherwise (all such materials, together with buildings, offices and
signs of the Business described in clause (i) above, "Marked Assets");
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(iv) Purchaser shall not be obligated to change the Seller Name
of goods in the hands of dealers, distributors, representatives,
agents and customers at the time of the expiration of a time period
set forth in Section 6.9(b)(i) and (iii) above provided such goods
have been shipped or distributed in the Ordinary Course of Business.
(v) Purchaser shall have the right to use the Seller Name in
advertising that was placed by Seller, any Company or Subsidiary prior
to the Closing; provided that Purchaser shall make commercially
reasonable efforts to discontinue the use of Seller Name in the
advertising after the Closing Date; provided, further, that Purchaser
shall not use Seller Name in any advertising 120 days after the
Closing Date.
(vi) The Sellers hereby grants to Purchaser a limited right to
use Seller's Name and associated trademarks, designs and logos with
regard to the Marked Assets during the periods specified in clauses
(i), (ii) and (iii) above.
(vii) In no event shall Purchaser or any Affiliate of Purchaser
advertise or hold itself out as a Seller or an Affiliate of a Seller
after the Closing Date.
6.10 Related-Party Transactions with Non-Management Affiliates. On or
prior to the Closing Date, the Companies and Subsidiaries shall (a) terminate
all Contracts with the Sellers or any of their respective Affiliates (other than
(i) those Contracts set forth on Schedule 6.10, (ii) Contracts between the
Companies and Subsidiaries, (iii) Contracts between the Companies and
Subsidiaries, on the one hand, and their respective officers and employees, on
the other hand, and (iv) Contracts the continuation of which Purchaser has
approved in writing); (b) deliver releases executed by such Affiliates with whom
the Companies have terminated such Contracts pursuant to this Section 6.10
providing that no further payments are due, or may become due, under or in
respect of any such terminated Contacts; (c) deliver to the Sellers and their
Affiliates (other than the Companies and the Subsidiaries) executed releases
providing that no further payments are due, or may become due, under or in
respect of any such terminated Contracts; provided that in no event shall any of
the Companies or Subsidiaries pay any fee or otherwise incur any expense or
financial exposure with respect to any such termination or release; and (d)
extinguish any payables or receivables of the Companies or Subsidiaries to or
from the Sellers or any of their post-Closing Affiliates.
6.11 Monthly Financial Statements. As soon as reasonably practicable,
but in no event later than 20 days after the end of each calendar month during
the period from the date hereof to the Closing, the Sellers shall provide
Purchaser with (i) unaudited monthly financial statements and (ii) operating or
management reports (in the form prepared by the Sellers or the Companies in the
Ordinary Course of Business) of the Companies and Subsidiaries for such
preceding month.
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6.12 Notification of Certain Matters. The Sellers shall give notice
to Purchaser and Purchaser shall give notice to the Seller, as promptly as
reasonably practicable upon becoming aware of (a) any fact, change, condition,
circumstance, event, occurrence or non-occurrence that has caused or is
reasonably likely to cause any representation or warranty in this Agreement made
by it to be untrue or inaccurate in any material respect at any time after the
date hereof and prior to the Closing, (b) any material failure on its part to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder or (c) the institution of or the threat of
institution of any Legal Proceeding against any of the Companies, the
Subsidiaries or the Sellers related to this Agreement or the transactions
contemplated hereby; provided that the delivery of any notice pursuant to this
Section 6.12 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice, or the representations or
warranties of, or the conditions to the obligations of, the parties hereto.
6.13 Employees.
(a) The Side Letter sets forth the severance payable to each Business
Employee if such Business Employee were a Non-Transferred Employee who will be
severed by the Sellers and their Affiliates (other than the Companies and
Subsidiaries) following the Closing Date and in connection with the transactions
contemplated by this Agreement. Between the date hereof and the Closing, the
Sellers shall promptly notify Purchaser in writing of (i) any offer of
employment to any New Hire in accordance with Section 6.2(b)(v), indicating for
each, the name, start date, position, job location, base salary, commission
eligibility and incentive plan target and (ii) the termination of the employment
or commencement of any disability or leave of absence of any Business Employee,
indicating, where relevant, the term of any such approved leave of absence. Not
less than 20 Business Day prior to the scheduled Closing, the Sellers shall
deliver to Purchaser updates to Exhibits B, C, D and E of the Side Letter but
only to the extent that such updated information, together with the information
provided in clause (ii) of the preceding sentence, would not be complete and
accurate as of such date. Not less than 15 days prior to the scheduled Closing,
Purchaser shall, in compliance with applicable Law, identify in writing all
Business Employees to be transferred to a Company or Subsidiary and indicating
the applicable transferee Company or Subsidiary for each such Business Employee
(the "Transfer Notice"). Not less than 10 days prior to the scheduled Closing,
the Sellers shall, or shall cause their applicable Affiliates (other than the
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Companies and Subsidiaries) to, transfer all such Business Employees so
identified by Purchaser in accordance with this Section 6.13(a) but excluding
any such U.S. employees on long-term disability (the "Transferred Business
Employees"), and the Sellers shall cause the transferee Companies and
Subsidiaries to employ such Transferred Business Employees. Not less than 10
days prior to the scheduled Closing, the Sellers shall notify Purchaser in
writing, with respect to each Non-Transferred Employee, the severance to which
each such employee would be entitled upon being severed by the Sellers
calculated in accordance with the severance policy set forth in Schedule 6.13(b)
(the "Severance Notice"). Not less than 10 days prior to the scheduled Closing,
the Sellers shall cause each applicable Company or Subsidiary to transfer all
employees whose services are not primarily dedicated to the Business, including
all such employees who have rights of employment on return from any leave or
other absence, and the Sellers shall, or shall cause their applicable Affiliates
(other than the Companies and Subsidiaries) to, employ such employees. The
Sellers and Purchaser intend that the transactions contemplated by this
Agreement shall not constitute an event entitling any Transferred Business
Employee to severance benefits. Immediately following the Closing Date,
Purchaser shall cause each Company and each Subsidiary to continue the
employment of each of their respective employees, including the Transferred
Business Employees (each, a "Continuing Employee"); provided, however, that any
U.S. employee of a Company or Subsidiary who as of the Closing Date is not
actively at work as a result of long-term disability shall not be a Continuing
Employee unless and until such employee presents himself or herself to return to
work within 180 days after the Closing Date. Subject to applicable Law, nothing
in this Section 6.13 shall limit the right of the Companies and Subsidiaries to
dismiss any of their employees at any time and for any reason and to change the
terms and conditions of their employment (including compensation and employee
benefits provided to them).
(b) For a period of one (1) year after the Closing, Purchaser shall
cause the applicable Company or the Subsidiary to provide to each Continuing
Employee (i) annualized salary equal to 100% of the annualized base salary
provided to such Employee by Seller, Company or Subsidiaries immediately prior
to Closing, and (ii) a bonus opportunity and benefits provided to similarly
situated employees of Purchaser. Purchaser shall provide or shall cause to be
provided to any U.S. Continuing Employee whose employment is terminated during
the six (6) month period following the Closing a severance payment calculated in
accordance with the severance policy set forth in Schedule 6.13(b). In addition
to any severance payments that may be due, if any Continuing Employee is
terminated after the Closing, Purchaser will provide or cause to be provided
100% of the 2005 Annual Bonus that such Continuing Employee would have been
entitled to if they had been employed as of the bonus payment date to the extent
accrued and not yet paid. With respect to the Continuing Employees, each
employee medical, dental, vision care and prescription drug plan, program,
policy and arrangement of Purchaser shall waive any pre-existing condition
exclusion (to the extent such exclusion was waived under the corresponding
Benefit Plan) and any proof of insurability and shall recognize, for purposes of
satisfying any deductibles, co-pays and out-of-pocket maximums during the
calendar year in which the Closing occurs, any payment made towards deductibles,
co-pays and out-of-pocket maximums for such calendar year under the
corresponding Benefit Plan. The Sellers agree to transfer the cafeteria plan
accounts and experience of Continuing Employees (to the extent applicable) to
substantially equivalent plans that exist or will be established by Purchaser.
The Sellers and Purchaser agree to determine the terms and conditions of such
transfer. All service by a Continuing Employee with the Seller, including
service with predecessor employers that was recognized by the Sellers and their
Affiliates, shall be recognized by Purchaser for purposes of vacation
entitlement and participation and vesting (but not for purposes of benefit
accrual) under the benefits of Purchaser, including any defined benefit or
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defined contribution pension plans, welfare benefit plans and severance plans of
Purchaser to the same extent such service was recognized under the corresponding
Benefit Plan. Purchaser will continue to provide relocation assistance to those
Continuing Employees receiving it as of the Closing Date and tuition assistance
to those Continuing Employees who are receiving such benefits as of the Closing
Date for the academic session then in effect (the "Relocation and Tuition
Benefits") to the extent set forth in Schedule 6.13(b)(i). With respect to
Continuing Employees who are on international assignment as of the Closing Date,
Purchaser will provide the benefits provided under CSG's international assignee
program as in effect as of Closing, including repatriation upon completion of
assignment, completion bonuses, Tax equalization and Tax Return preparation.
Purchaser shall assume, or shall cause the applicable Company or Subsidiary to
retain, all Liabilities with respect to, and honor the vacation, personal days
and floating holidays accrued but unused by, each Continuing Employee as of the
Closing, and Purchaser or any Company or Subsidiary (as the case may be) shall
be solely liable for such accruals to the extent accrued on the most recent
Financial Statements (the "Accrued Days").
(c) Purchaser shall make and be responsible for the payment of all
accrued but unpaid incentive compensation of each Continuing Employee for the
2005 calendar year (the "2005 Annual Bonus").
(d) Purchaser shall cause the tax-qualified defined contribution plan
established or maintained by Purchaser ("Purchaser's Savings Plan") to accept
eligible rollover distributions (as defined in Section 402(c)(4) of the Code)
from U.S. Continuing Employees with respect to any account balances distributed
to them on or as of the Closing Date by the CSG Incentive Savings Plan.
Rollovers of outstanding loans under the CSG Incentive Savings Plan shall be
permitted. The distribution and rollover described herein shall comply with
applicable Law and each party shall make all filings and take any actions
required of such party under applicable Law in connection therewith. Purchaser
and the Sellers agree that U.S. Continuing Employees who are participants in the
CSG Incentive Savings Plan who elect to roll over their outstanding loans
thereunder to Purchaser's Savings Plan shall inform the plan administrator of
the CSG Incentive Savings Plan by a predetermined date to be mutually agreed
upon by Purchaser and the Sellers, and the Sellers shall cause the recordkeeper
for the CSG Incentive Savings Plan to provide a data file to the plan
administrator of Purchaser's Savings Plan in a format identified by such plan
administrator that includes all such participants who have elected to roll over
their outstanding loans. No rollovers of outstanding loans under the CSG
Incentive Savings Plan shall be accepted by Purchaser's Savings Plan from
individual participants who have not made the election by the predetermined
date.
(e) The Sellers shall be responsible for and shall defend, indemnify
and hold harmless Purchaser for any failure to provide health continuation
coverage (including any penalties, excise taxes or interest resulting from the
failure to provide continuation coverage) required by Section 4980B of the Code
(i) with respect to each current or former employee of the Sellers, their
Affiliates, Companies or Subsidiaries other than the Continuing Employees, due
to qualifying events whenever occurring, (ii) with respect to each Continuing
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Employee, due to qualifying events which occur on or before the Closing Date,
and (iii) with respect to each U.S. employee of a Company or Subsidiary who as
of the Closing Date is not actively at work as a result of long-term disability,
due to qualifying events which occur before the date such employee presents
himself or herself to return to work in accordance with Section 6.13(a).
Purchaser shall be responsible for and shall defend, indemnify and hold harmless
the Sellers for any failure to provide health continuation coverage (including
any penalties, excise taxes or interest resulting from the failure to provide
continuation coverage) required by Section 4980B of the Code with respect to
each Continuing Employee due to qualifying events which occur after the Closing
Date. The Sellers shall be responsible for providing any applicable COBRA
notices to any Business Employee in respect of events occurring prior to such
Business Employee's transfer to a Company or Subsidiary in accordance with
Section 6.13(a).
(f) Nothing in this Section 6.13 will be or be deemed to be for the
benefit of or enforceable by, any Person who is not a party hereto, including,
without limitation, any director, officer, employee or independent contractor of
any Seller, Company or Subsidiary or their respective affiliates. Furthermore,
nothing in this Section 6.13 will be or be deemed to be an amendment of a
Benefit Plan.
(g) To the extent that the rights and obligations of the employees of
the Companies, Subsidiaries or the Business and their respective employers
(whether in respect of any Benefit Plan), are regulated by applicable Law and/or
any collective bargaining agreement, the Sellers and Purchaser shall fully
cooperate (and the Sellers shall cause the relevant Companies and Subsidiaries
to fully cooperate with Purchaser) for the purpose of ensuring that such Laws
and collective bargaining agreements are fully complied with at all times up to
the Closing Date, and at any time thereafter in respect of the transactions
contemplated in this Agreement. After Closing, the Sellers will provide
Purchaser with information reasonably required by Purchaser and otherwise will
provide Purchaser with reasonable assistance in relation to the Company Plans,
including any superannuation contribution arrangements (excluding the funding of
such arrangements), any of the Companies and Subsidiaries have in place as at
Closing
(h) At or prior to the Closing Date, the Sellers shall cause CSG
Software to terminate the CSG Software, Inc. Wealth Accumulation Plan and to pay
promptly the account balances thereunder to the participants therein in
accordance with the terms thereof.
6.14 Certain Tax Matters. The Sellers shall use their reasonable best
efforts to file, or caused to be filed, all Tax Returns due (taking into account
any available extensions of time to file) on or before the Closing Date. CSG
Netherlands shall use its reasonable best efforts to file a request for a ruling
from the appropriate Tax Authority in the Netherlands that dividends paid to CSG
Netherlands qualify for the participation exemption as soon as practicable, it
being understood that CSG Netherlands currently intends to file a request for
such a ruling on or before October 14, 2005.
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6.15 Sellers' Deliverables. Sellers shall, (a) not later than October
21, 2005, deliver to Purchaser (i) a complete and correct list of any and all
Contracts under which any Business Intellectual Property would be altered,
impaired or extinguished, or the right of any of the Companies or Subsidiaries
to use any Business Intellectual Property would be altered, impaired or
extinguished, in each case as a result of the consummation of the transactions
contemplated by this Agreement, which list shall specify with respect to each
such Contract (A) the names of the parties thereto, (B) the date thereof, (C)
the specific product or products of the Business to which it relates and (D) the
specific provision or provisions thereof that required such Contract to be
included on such list and (ii) a paper copy of each provision referred to in
clause (D) above (together with a notation indicating the Contract from which
such provisions was copied), (b) within 30 days after the date hereof, deliver
to Purchaser, (i) a complete and correct list of bonus, severance, retention or
other similar payments that are required to be paid to, and benefits (including
stock options, restricted stock and other incentive awards) that will vest with
respect to, employees of the Sellers, the Companies and the Subsidiaries,
arising out of the consummation of the transactions contemplated hereby (either
alone or in combination with another event), together with any documentation as
requested by Purchaser to conduct any excess parachute payment (as defined in
Section 280G of the Code) analysis, (ii) a complete and correct list of the
Contracts which are required to be terminated in accordance with Section 6.10
hereof, (iii) a complete and correct list of the names and locations of all
banks in which any Company or Subsidiary has accounts or safe deposit boxes and
the names of all persons authorized to draw thereon or to have access thereto,
(iv) a complete and correct of list of the powers of attorney to act on behalf
of any Company or Subsidiary, other than those powers of attorney maintained in
the Ordinary Course of Business with respect to the performance of ministerial
acts, (v) true and complete copies of all state, local and foreign income or
franchise Tax Returns of each of the Companies and Subsidiaries relating to the
taxable periods since 2002 and (vi) any Tax audit report issued within the last
three years relating to any Taxes due from or with respect to each of the
Companies and Subsidiaries and (c) within 60 days after the date hereof, deliver
to Purchaser, (i) a complete and correct list of Contracts to which any Company
or any Subsidiary is a party that (A) grant any Intellectual Property rights or
licenses to or from the Companies or Subsidiaries that are material to the
operation of the Business, except for non-exclusive rights to commercial
software and/or other products generally available on a non-discriminatory
basis, (B) contain a covenant not to compete or otherwise limit such party's
ability to use or exploit fully any of its Intellectual Property rights in the
operation of the Business or (C) contain covenants (other than in Contracts with
customers) not to solicit or hire any person with respect to employment or
covenants of any other Person not to solicit or hire any person with respect to
employment and (ii) with respect to each of the Benefit Plans identified on
Schedule 4.9(b)(i), true and complete copies of the most recent summary plan or
other written description thereof, and, with respect to each Benefit Plan that
is a Company Plan, the following (A) the most recent plan document and related
trust documents and insurance contracts, and all amendments thereto, (B) the
most recent Form 5500 and attached schedules filed with the Internal Revenue
Service, (C) the most recent financial statement and actuarial valuation, and
59
(D) the most recent Internal Revenue Service determination letter. The Sellers
shall have made available to Purchaser, within 60 days after the date hereof,
true, correct and materially complete copies of each Contract set forth on the
list required to be delivered pursuant to clause (c)(i) above, together with all
amendments, modifications or supplements thereto. In addition, Sellers shall,
within 60 days after the Closing, deliver to Purchaser, (x) a combined income
statement of the Companies and Subsidiaries for the most recently completed
calendar year derived from the audited consolidated financial statements of CSG
and its subsidiaries prepared in accordance with GAAP for such year ended and
(y) and an unaudited combined income statement of the Companies and Subsidiaries
for the period from January 1 of the year in which the Closing occurs through
the Closing Date derived from the unaudited consolidated financial statements of
CSG and its subsidiaries prepared in accordance with GAAP for such period.
6.16 Releases.
(a) The Sellers and Companies shall, at or prior to Closing, make
arrangements reasonably satisfactory to Purchaser for Lien releases and other
documents reasonably requested by Purchaser prior to the Closing such that (i)
all Liens on the assets or properties of the Companies or Subsidiaries that are
not Permitted Exceptions and (ii) any and all Liens on any shares or other
equity interests represented as being owned by any of the Companies or
Subsidiaries shall, in each case, be satisfied, terminated and discharged on or
prior to the Closing Date.
(b) As of Closing, Purchaser shall cooperate with the Sellers and use
its reasonable commercial efforts to release the Sellers and their Affiliates
(other than the Companies and Subsidiaries) from any Contract where (A) any
Company or any Subsidiary is a counterparty to such Contract, (B) the Sellers or
any of their Affiliates (other than the Companies or Subsidiaries) has
guaranteed the performance of such Contract and such guarantee is non-assignable
to Purchaser and (C) the substance of such Contract is primarily related to the
Business ("Sellers Guaranteed Contract").
(c) The Sellers and Companies shall, at or prior to the Closing,
cause any and all Indebtedness of the Companies and Subsidiaries (other than
Indebtedness solely, between or among any of the Companies and/or Subsidiaries)
to be satisfied, discharged or otherwise extinguished except for Indebtedness
under performance bonds, letters of credit or similar instruments which are
disclosed in writing by Sellers to Purchaser in reasonable detail prior to the
closing, which written disclosure shall make specific reference to this Section
6.16(c).
6.17 Earnout Obligations. From and after the Closing, the Sellers and
their Affiliates (other than the Companies and Subsidiaries) shall be
responsible and make all payments related to the "Revenue Earn Out Amount"
required to be made by the Companies or Subsidiaries under that certain Stock
Purchase Agreement, dated December 20, 2002, among CSG Systems Canada Corp., a
Nova Scotia Unlimited Liability Company, Davinci Technologies Inc., an Ontario
Corporation, the Stockholders of Davinci Technologies Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇, as
Stockholders' Representative (the "Da Vinci Obligations"), solely to the extent
such Da Vinci Obligations arise and are directly attributable to products and
services sold to new or existing customers of the Business to the extent that
such products and services are of the nature and type sold in connection with
the Business prior to the Closing Date and, in no event, on a stand-alone basis.
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ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions Precedent to Obligations of Purchaser and the Sellers.
The obligations of each of Purchaser and the Sellers to consummate the
transactions contemplated by this Agreement are subject to the fulfillment, on
or prior to the Closing Date, of each of the following conditions precedent:
(a) no Legal Proceedings shall have been instituted or threatened or
claim or demand made against any of the Sellers, Companies or Subsidiaries, or
Purchaser by a Governmental Body seeking to restrain or prohibit, or to obtain
substantial damages with respect to, the consummation of the transactions
contemplated hereby, and there shall not be in effect any Order by a
Governmental Body of competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated hereby;
(b) the waiting period under the HSR Act shall have expired or early
termination shall have been granted and the Seller, the Companies or
Subsidiaries shall have obtained or made any other consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Body required to be obtained or made by it in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby; provided, however, that such consents, approvals, orders,
authorizations, registrations or filings shall only be deemed conditions
precedent to the obligations of the Sellers or Purchaser to consummate the
transactions contemplated by this Agreement to the extent that the absence of
any such consents, approvals, orders, authorizations, registrations or filings
shall result, with respect to the Sellers, in a material Liability to the
Sellers and, with respect to Purchaser, in a material Liability to the Companies
and Subsidiaries;
(c) Purchaser and CSG shall have executed and delivered a Transition
Services Agreement with respect to the services and common space set forth on
Exhibit B attached hereto in a form mutually agreed to by Purchaser and the
Seller (the "Transition Services Agreement");
(d) Purchaser and CSG shall have executed and delivered the
Intellectual Property and License Agreement in the form attached hereto as
Exhibit C (the "Distribution Agreement" and, together with the Transition
Services Agreement, the "Ancillary Agreements"); and
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(e) Purchaser, the Sellers and an escrow agent reasonably acceptable
to Purchaser and the Sellers (the "Escrow Agent") shall have executed and
delivered an Escrow Agreement in a form reasonably acceptable to Purchaser and
the Sellers (the "Escrow Agreement").
7.2 Conditions Precedent to Obligations of Purchaser. The obligation
of Purchaser to consummate the transactions contemplated by this Agreement is
subject to the fulfillment, on or prior to the Closing Date, of each of the
following conditions precedent (any or all of which may be waived by Purchaser
in whole or in part to the extent permitted by applicable Law):
(a) the representations and warranties of the Sellers qualified as to
materiality or Material Adverse Effect shall be true and correct, and those not
so qualified shall be true and correct in all material respects (other than the
representations and warranties contained in (i) the first sentence of Section
3.1 (Organization and Qualification), (ii) Section 3.4 (Ownership and Transfer
of Securities), (iii) Section 3.7 (Financial Advisors), (iv) the first sentence
of Section 4.1 (Organization and Qualification), (v) Section 4.2 (Subsidiaries),
(vi) Section 4.14 (Brokers), (vii) Section 4.18 (Capitalization), (viii) Section
4.22 (Related Party Transactions) and (ix) Section 4.24 (Certain Payments),
which representations and warranties shall be true and correct), in each case,
as of the date of this Agreement and as of the Closing as though made at and as
of the Closing, except to the extent such representations and warranties
expressly speak as of an earlier date (in which case such representations and
warranties qualified as to materiality or Material Adverse Effect shall be true
and correct, and those not so qualified shall be true and correct in all
material respects, on and as of such earlier date);
(b) the Sellers and the Companies shall have performed and complied
in all material respects with all obligations and agreements required in this
Agreement to be performed or complied with by them on or prior to the Closing
Date;
(c) there shall not have been or occurred any event, change,
occurrence or circumstance that, individually or in the aggregate with any such
events, changes, occurrences or circumstances, has had, or would reasonably be
expected to have, a Material Adverse Effect since the date of this Agreement;
(d) Purchaser shall have received a certificate signed by the Seller,
in form and substance reasonably satisfactory to Purchaser, dated the Closing
Date, to the effect that each of the conditions specified above in Sections
7.2(a)-(c) have been satisfied in all respects.
(e) Purchaser shall have received the written resignations and
release of claims to fees or expenses of each of the directors and officers of
the Companies and Subsidiaries identified by Purchaser prior to Closing, each in
form and substance reasonably satisfactory to Purchaser;
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(f) no Legal Proceedings shall have been instituted or threatened or
claim or demand made against Purchaser by a Governmental Body, and there shall
not be in effect any Order by a Governmental Body of competent jurisdiction, in
each case, seeking to require divestiture by Purchaser or any of its Affiliates
of any material amount of the assets and properties of the Companies or
Subsidiaries;
(g) the Sellers, the Companies or Subsidiaries shall have obtained
those consents, waivers and approvals which are in order for the Companies and
Subsidiaries to have continued use of their software licenses on the same terms
and conditions as prior to the Closing, other than those consents, waiver and
approvals with respect to software licenses, the absence of which would not
have, or would not reasonably be expected to have, a Material Adverse Effect,
each in a form satisfactory to Purchaser and copies thereof shall have been
delivered to Purchaser; and
(h) Purchaser shall have received the items listed in Section 2.7;
7.3 Conditions Precedent to Obligations of the Sellers. The
obligation of the Sellers to consummate the transactions contemplated by this
Agreement is subject to the fulfillment, prior to or on the Closing Date, of
each of the following conditions precedent (any or all of which may be waived by
the Sellers in whole or in part to the extent permitted by applicable Law):
(a) the representations and warranties of Purchaser set forth in this
Agreement qualified as to materially and Purchaser Material Adverse Effect shall
be true and correct, and those not so qualified shall be true and correct in all
material respects, in each case, as of the date of this Agreement and as of the
Closing as though made at and as of the Closing, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties qualified as to materially and
Purchaser Material Adverse Effect shall be true and correct, and those not so
qualified shall be true and correct in all material respects, on and as of such
earlier date);
(b) Purchaser shall have performed and complied in all material
respects with all obligations and agreements required by this Agreement to be
performed or complied with by Purchaser on or prior to the Closing Date;
(c) The Sellers shall have received a certificate signed by
Purchaser, in form and substance reasonably satisfactory to Seller, dated the
Closing Date, to the effect that each of the conditions in Sections 7.3(a) and
(b) have been satisfied in all respects;
(d) The Sellers shall have received all documents it may reasonably
request relating to the existence of Purchaser and the authority for Purchaser
for this Agreement, all in form and substance reasonably satisfactory to
Purchaser;
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(e) The Companies and Subsidiaries shall have an aggregate of no more
than $7,400,000 of Cash on hand; provided, however, that the condition contained
in this Section 7.3(e) shall have no force or effect unless the Sellers shall
have used their reasonable best efforts to extract Cash from the Companies and
Subsidiaries (including a willingness to incur normal withholding or similar
Taxes in connection therewith) and, provided further, if the condition contained
in this Section 7.3(e) shall not have previously been satisfied, Purchaser shall
have the right and option (but not the obligation) to cause such condition to be
satisfied by (i) at any time following the date hereof, agreeing in writing to
pay to the Sellers, in accordance with Section 2.5(d), 100% of the excess of the
Cash remaining in the Companies and Subsidiaries over $7,400,000 as of the
Closing Date (the "Excess Cash Amount"), (ii) after the date that is 60 days
following the date hereof, agreeing in writing to pay to the Sellers, in
accordance with Section 2.5(d), 90% of the Excess Cash Amount or (iii) after the
date that is 100 days following the date hereof, agreeing in writing to pay to
the Sellers, in accordance with Section 2.5(d), 75% of the Excess Cash Amount.
(f) The actions contemplated by clause (iii) of the definition of
Reorganization shall have been effected in compliance with Section 6.2(c).
ARTICLE VIII
INDEMNIFICATION
8.1 Survival of Representations and Warranties. The representations
and warranties of the parties contained in this Agreement, any certificate
delivered pursuant hereto or any Seller Document, Company Document or Purchaser
Document shall survive the Closing through and including the 18 month
anniversary of the Closing Date; provided, however, that the representations and
warranties (a) of the Sellers set forth in Sections 3.1 (Organization and
Qualification), 3.2 (Authorization; Binding Effect), 3.4 (Ownership and Transfer
of Securities), 3.7 (Financial Advisors), 4.1 (Organization and Qualification),
4.2 (Subsidiaries), 4.3 (Authorization; Binding Effect), 4.18 (Capitalization)
and 4.14 (Brokers) (collectively, the "Seller Special Representations"), shall
survive the Closing indefinitely, (b) of the Sellers set forth in Section 4.9(b)
(Business Employees) and Sections 4.15(g)(i) and 4.15(o) (Certain Tax Matters)
(the "Seller Statute of Limitations Representation") shall survive the Closing
until 90 days following the expiration of the applicable statute of limitations
with respect to the particular matter that is the subject matter thereof, (c) of
the Sellers set forth in Section 4.15 (Certain Tax Matters) (except with respect
to those representations specifically referenced in clause (b) of this Section
8.1) shall survive until the Closing and (d) of Purchaser set forth in Sections
5.1 (Organization and Good Standing), 5.2 (Authorization of Agreement) and 5.6
(Financial Advisors) (collectively, the "Purchaser Special Representations")
shall survive the Closing indefinitely (in each case, the "Survival Period");
provided, however, that any obligations under Sections 8.2(a)(i) and 8.2(b)(i)
shall not terminate with respect to any Losses as to which the Person to be
indemnified shall have given notice (stating in reasonable detail the basis of
the claim for indemnification) to the indemnifying party in accordance with
Section 8.3(a) before the termination of the applicable Survival Period.
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8.2 Indemnification.
(a) Subject to Sections 8.1 and 8.4 hereof and in addition to the
indemnification obligations set forth in Article IX, the Sellers hereby, jointly
and severally, agree to indemnify and hold Purchaser and its Affiliates
(including the Companies and Subsidiaries) and their respective directors,
officers, employees, stockholders, agents, attorneys, representatives,
successors and assigns (collectively, the "Purchaser Indemnified Parties")
harmless from and against, and pay to the applicable Purchaser Indemnified
Parties the amount of, any and all losses, Liabilities, claims, obligations,
deficiencies, demands, judgments, damages, interest, fines, penalties,
assessments, awards, costs and expenses (including reasonable costs of
investigation and defense and reasonable attorneys' and other professionals'
fees), whether or not involving a third party claim (individually, a "Loss" and,
collectively, "Losses") actually suffered:
(i) based upon, attributable to or resulting from the failure of
any of the representations or warranties made by the Sellers in this
Agreement or in any Seller Document or Company Document to be true and
correct at and as of the date hereof and at and as of the Closing
Date;
(ii) based upon, attributable to or resulting from the breach of
any covenant or other agreement on the part of the Sellers or (prior
to the Closing) the Companies under this Agreement or any Seller
Document or Company Document;
(iii) based upon, attributable to or resulting from any Company
Transaction Expenses incurred prior to the Closing Date to the extent
that the amount of such Company Transaction Expenses exceeds the
amount of Company Transaction Expenses used for purposes of Section
2.2; and
(iv) based upon, attributable to or resulting from the Da Vinci
Obligations;
(v) costs and Liabilities incurred by the Companies and the
Subsidiaries in connection with, or associated with, the
Reorganization, to the extent not paid, reflected in the Included
Current Liabilities or otherwise satisfied prior to the Closing Date,
other than Liabilities (which do not constitute Included Current
Liabilities) assumed as described in clause (iii)(A) of the definition
of Reorganization;
(vi) based upon, attributable to or resulting from the FairPoint
Business other than as expressly required in the Distribution
Agreement;
(vii) based upon, attributable to, resulting from, arising from
or relating to (A) any Benefit Plan unless otherwise expressly
provided in this Agreement other than a Company Plan, (B) any
Non-Transferred Employee, (C) any current or former employee or
independent contractor of Seller, any of its Affiliates, any Company
or any Subsidiary whose services are or were not primarily dedicated
to the Business; or
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(viii) subject to Section 8.4(j), based upon, attributable to or
resulting from any failure by CSG or any of its subsidiaries
(including the Companies and Subsidiaries) to deliver prior to the
Closing Date all licenses and sublicenses required by, or any delay in
the performance by CSG or any of its subsidiaries (including the
Companies and Subsidiaries) prior to the Closing Date of, their
obligations under the provisions of (A) Purchase Order No.
IT/PO/006/2005-06 issued by Bharat ▇▇▇▇▇▇▇ ▇▇▇▇▇ Ltd. to CSG
International dated as of May 17, 2005 order dated May 2005 with
Bharat ▇▇▇▇▇▇▇ ▇▇▇▇▇ Ltd. ("BSNL") and (B) Purchase Order No.
IT/PO/005/2005-06 issued by BSNL to CSG Systems India Pvt. Ltd. dated
as of May 17, 2005, including those referenced in the letter dated
July 1, 2005 from BSNL to CSG International.
Notwithstanding the foregoing and solely with respect to this Article
VIII, there shall be excluded from "Losses" hereunder, and there shall
be no indemnification by Sellers hereunder in respect of, any item to
the extent of the amount of any Liability or reserve reflected in the
Closing Working Capital Statement in respect thereof.
(b) Subject to Sections 8.1 and 8.4, Purchaser hereby agrees to
indemnify and hold the Sellers and their Affiliates, agents, attorneys,
representatives, successors and permitted assigns (collectively, the "Seller
Indemnified Parties") harmless from and against, and pay to the applicable
Seller Indemnified Parties the amount of any and all Losses:
(i) based upon, attributable to or resulting from the failure of
any of the representations or warranties made by Purchaser in this
Agreement or in any Purchaser Document to be true and correct at the
date hereof and as of the Closing Date;
(ii) based upon, attributable to or resulting from the breach of
any covenant or other agreement on the part of Purchaser under this
Agreement or any Purchaser Document; and
(iii) based upon, attributable to or resulting from any claim by
a third party who is a party to a Seller Guaranteed Contract except in
the event and to the extent that such third party claim is based upon,
attributable to, or results from a breach of any representation or
warranty of the Sellers contained in this Agreement or in any Seller
Document.
(c) The right to indemnification or any other remedy based on
representations, warranties, covenants and agreements in this Agreement, or any
Seller Documents, Company Document or Purchaser Document shall not be affected
by any investigation conducted at any time, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
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and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of, or compliance with, any such representation, warranty,
covenant or agreement. The waiver of any condition based on the accuracy of any
such representation or warranty, or on the performance of or compliance with any
such covenant or agreements, will not affect the right to indemnification or any
other remedy based on such representations, warranties, covenants and
agreements.
8.3 Indemnification Procedures.
(a) A claim for indemnification for any matter not involving a third
party claim may be asserted by notice to the party from whom indemnification is
sought; provided, however, that failure to so notify the indemnifying party
shall not preclude the indemnified party from any indemnification which it may
claim in accordance with this Article VIII except to the extent such failure
shall have adversely prejudiced the indemnifying party.
(b) In the event that any Legal Proceedings shall be instituted or
that any claim or demand shall be asserted by any third party in respect of
which indemnification may be sought under Section 8.2 hereof (regardless of the
limitations set forth in Section 8.4) (a "Third Party Claim"), the indemnified
party shall promptly cause written notice of the assertion of any Third Party
Claim of which it has knowledge which is covered by this indemnity to be
forwarded to the indemnifying party. The failure of the indemnified party to
give reasonably prompt notice of any Third Party Claim shall not release, waive
or otherwise affect the indemnifying party's obligations with respect thereto
except to the extent that the indemnifying party can demonstrate actual loss and
prejudice as a result of such failure. Subject to the provisions of this Section
8.3, the indemnifying party shall have the right, at its sole expense, to be
represented by counsel of its choice, which must be reasonably satisfactory to
the indemnified party, and to defend against, negotiate, settle or otherwise
deal with any Third Party Claim which relates to any Losses indemnified against
hereunder. If the indemnifying party elects to defend against, negotiate, settle
or otherwise deal with any Third Party Claim which relates to any Losses
indemnified by it hereunder, it shall within 30 days of the indemnified party's
written notice of the assertion of such Third Party Claim (or sooner, if the
nature of the Third Party Claim so requires) notify the indemnified party of its
intent to do so; provided, that the indemnifying party must conduct the defense
of the Third Party Claim actively and diligently thereafter in order to preserve
its rights in this regard. If the indemnifying party elects not to defend
against, negotiate, settle or otherwise deal with any Third Party Claim which
relates to any Losses indemnified against hereunder, fails to notify the
indemnified party of its election as herein provided or contests its obligation
to indemnify the indemnified party for such Losses under this Agreement, the
indemnified party may defend against, negotiate, settle or otherwise deal with
such Third Party Claim at its own expense. If the indemnified party defends any
Third Party Claim, then the indemnifying party shall reimburse the indemnified
party for the expenses of defending such Third Party Claim upon submission of
periodic bills. If the indemnifying party shall assume the defense of any Third
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Party Claim, the indemnified party may participate, at his or its own expense,
in the defense of such Third Party Claim; provided, however, that such
indemnified party shall be entitled to participate in any such defense with
separate counsel at the expense of the indemnifying party if (i) so requested by
the indemnifying party to participate or (ii) in the reasonable opinion of
counsel to the indemnified party, a conflict or potential conflict exists
between the indemnified party and the indemnifying party that would make such
separate representation advisable; and provided, further, that the indemnifying
party shall not be required to pay for more than one such counsel for all
indemnified party in connection with any Third Party Claim. The parties hereto
agree to provide reasonable access to the other to such documents and
information as may be reasonably requested in connection with the defense,
negotiation or settlement of any such Third Party Claim. Notwithstanding
anything in this Section 8.3 to the contrary, neither the indemnifying party nor
the indemnified party shall, without the written consent of the other party,
settle or compromise any Third Party Claim or permit a default or consent to
entry of any judgment unless the claimant or claimants and such party provide to
such other party an unqualified release from all Liability in respect of the
Third Party Claim. If the indemnifying party makes any payment on any Third
Party Claim, the indemnifying party shall be subrogated, to the extent of such
payment, to all rights and remedies of the indemnified party to any insurance
benefits or other claims of the indemnified party with respect to such Third
Party Claim.
(c) After any final decision, judgment or award shall have been
rendered by a Governmental Body of competent jurisdiction and the expiration of
the time in which to appeal therefrom, or a settlement shall have been
consummated, or the indemnified party and the indemnifying party shall have
arrived at a mutually binding agreement, in each case with respect to a Third
Party Claim hereunder, the indemnified party shall forward to the indemnifying
party notice of any sums due and owing by the indemnifying party pursuant to
this Agreement with respect to such matter and the indemnifying party shall pay
all of such remaining sums so due and owing to the indemnified party by wire
transfer of immediately available funds within five (5) Business Days after the
date of such notice.
8.4 Limitations on Indemnification for Breaches of Representations
and Warranties.
(a) An indemnifying party shall not have any Liability under Section
8.2(a)(i), or Section 8.2(b)(i) hereof unless the aggregate amount of Losses
incurred by the indemnified parties and indemnifiable thereunder based upon,
attributable to or resulting from the failure of any of the representations or
warranties to be true and correct exceeds three-fourths percent (0.75%) of the
Purchase Price (the "Basket") and, in such event, the indemnifying party shall
be required to pay the amount of all such Losses in excess of the Basket;
provided that the Basket limitation shall not apply to Losses related to the
failure to be true and correct of any of the representations and warranties set
forth in the Seller Special Representations, the Seller Statute of Limitations
Representation and the Purchaser Special Representations. In addition, the
indemnified party shall have no recourse under this Article for any individual
items where the Loss relating thereto is less than $25,000; provided, however,
that such items shall be aggregated for purposes of determining whether the
Basket has been exceeded in accordance with the first sentence of this Section
8.4(a).
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(b) Neither the Sellers nor Purchaser shall be required to indemnify
any Person under Section 8.2(a)(i) or 8.2(b)(i) for an aggregate amount of
Losses exceeding thirty percent (30%) of the Purchase Price (the "Cap") in
connection with Losses related to the failure to be true and correct of any of
the representations or warranties of the Sellers or Purchaser in Articles III,
IV and V, respectively; provided that there shall be no Cap with respect to
Losses related to the failure to be true and correct of any of the
representations or warranties contained in the Seller Special Representations,
the Seller Statute of Limitations Representation and the Purchaser Special
Representations.
(c) For purposes of determining the failure of any representations or
warranties to be true and correct, the breach of any covenants and agreements,
and calculating Losses hereunder, any materiality or Material Adverse Effect
qualifications in the representations and warranties shall be disregarded.
(d) No action taken by the Sellers, the Companies or the Subsidiaries
in compliance with Section 6.2(c) shall be considered for purposes of
determining the whether any representations or warranties are true and correct
at Closing.
(e) The representation and warranty contained in Section 4.13(b)(i)
shall be deemed to be qualified by the phrase "To the Knowledge of the Sellers
and the Companies" at the beginning thereof solely for purposes of determining
whether the Sellers shall have Liability for Losses, subject to the other terms
and conditions of this Article VIII, arising from the infringement,
misappropriation or other violation of Intellectual Property rights of any third
party that occurs before or after the Closing in accordance with the example set
forth below. For purposes of clarity, the following example is provided: if the
Sellers and the Companies had no Knowledge of a violation of the Intellectual
Property rights of a third party and it is ultimately determined that such
rights were violated and $100 of Losses (calculated in accordance with the
balance of this Article VIII) resulted therefrom, $40 of which were attributable
to pre-Closing violations and $60 of which were attributable to post-Closing
violations, the Sellers would be responsible only for that portion of the Losses
attributable to pre-Closing violations which would amount to $40 of such Losses.
To the extent that any infringement, misappropriation or other violation of
Intellectual Property rights of any third party occurs from and after the
Closing solely as a result of modifications to the Intellectual Property made by
Purchaser, the Sellers shall have no obligation to provide indemnification under
this Article VIII.
(f) The amount of the indemnifying party's Liability under this
Agreement shall be net of any amounts recovered by the indemnified party under
applicable insurance policies and other savings that have been realized by, the
indemnified party. If an indemnifying party's obligation under Section 8.2 or
Article IX arises in respect of an adjustment which makes allowable to the
indemnified party, any of its Affiliates or, in the case of the Purchaser,
effective upon the Closing, any Company or Subsidiary any deduction,
69
amortization, exclusion from income or other allowance (a "Tax Benefit") which
would not, but for such adjustment, be allowable, then any payment by the
indemnifying party to the indemnified party shall be an amount equal to (x) the
amount otherwise due but for this subsection (d), minus (y) the present value of
the Tax Benefit multiplied by the maximum federal or state, as the case may be,
corporate Tax rate in effect at the time the relevant adjustment is made or, in
the case of a credit, by 100 percent. The present value referred to in the
preceding sentence shall be determined using a discount rate equal to the
mid-term applicable federal rate in effect at the time the relevant adjustment
is made and assuming that the Tax Benefit will be used at the earliest date or
dates allowable by applicable Law; provided, however, that if the Tax Benefit
constitutes an increase in basis of nondepreciable, nonamortizable property, it
shall be taken into account only when actually realized prior to the expiration
of the period provided for in Section 9.12.
(g) Notwithstanding anything to the contrary elsewhere in this
Agreement, no party shall, in any event, be liable to any other Person for any
consequential, incidental, indirect, special or punitive damages of such other
Person, including loss of future revenue, income or profits, diminution of value
or loss of business reputation or opportunity relating to the breach or alleged
breach hereof; provided, that the foregoing shall not be construed to preclude
recovery by the indemnified party in respect of Losses directly incurred from
Third Party Claims. The Sellers and Purchaser shall each take commercially
reasonable actions to mitigate their damages.
(h) From and after the Closing, except in the event of fraud (in
which case the parties shall be entitled to exercise all of their rights, and
seek all damages available to them, under law or equity) the sole and exclusive
remedy for any breach or failure to be true and correct, or alleged breach or
failure to be true and correct, of any representation or warranty or any
covenant or agreement in this Agreement, shall be indemnification in accordance
with this Article VIII. In furtherance of the foregoing, the parties hereby
waive, to the fullest extent permitted by applicable Law, any and all other
rights, claims and causes of action (including rights of contributions, if any)
known or unknown, foreseen or unforeseen, which exist or may arise in the
future, that it may have against the Sellers or Purchaser, as the case may be,
arising under or based upon any federal, state or local Law (including any such
Law relating to environmental matters or arising under or based upon any
securities Law, common Law or otherwise). Notwithstanding the foregoing, this
Section 8.4(g) shall not operate to interfere with or impede the operation of
the provisions of Article IX or Article II providing for the (i) resolution of
certain disputes relating to the Purchase Price between the parties and/or by an
Arbiter and (ii) limit the rights of the parties to seek equitable remedies
(including specific performance or injunctive relief).
(i) The Sellers shall have no right of contribution or other recourse
against the Companies or Subsidiaries or their respective directors, officers,
employees, Affiliates, agents, attorneys, representatives, assigns or successors
for any Third Party Claims asserted by Purchaser Indemnified Parties, it being
acknowledged and agreed that the covenants and agreements of the Companies are
solely for the benefit of the Purchaser Indemnified Parties.
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(j) Purchaser Indemnified Parties shall be responsible for 25% of all
Losses under Section 8.2(a)(viii) up to $1,300,000 on a proportional basis, such
that the Sellers shall indemnify Purchase Indemnified Parties for 75% of Losses
covered by Section 8.2(a)(viii) up to $1,300,000 and 100% of Losses in excess
thereof.
ARTICLE IX
TAX MATTERS
9.1 Tax Indemnification by the Sellers. The Sellers hereby agree to
be jointly and severally liable for and to indemnify and hold the Purchaser
Indemnified Parties harmless from and against, and pay to the applicable
Purchaser Indemnified Parties the amount of, any and all Losses in respect of
(i) all Taxes of each of the Companies and Subsidiaries (or any predecessor
thereof) (A) for any taxable period ending on or before the close of business on
the Closing Date ("Pre-Closing Taxable Period"), and (B) for the portion of any
Straddle Period ending at the close of business on the Closing Date (determined
as provided in Section 9.4); (ii) any and all Taxes imposed on the Companies and
the Subsidiaries as a result of the Reorganization; (iii) any and all Taxes
imposed on any of the Companies or Subsidiaries as a result of having been
before the Closing Date a member of an affiliated, consolidated, combined or
unitary group, by reason of liability under Treasury Regulations Section
1.1502-6, Treasury Regulations Section 1.1502-78 (or any predecessor or
successor thereof or any analogous or similar provision under state, local or
foreign Law); (iv) the failure of the Sellers to perform any covenant contained
in this Agreement with respect to Taxes; (v) any Taxes resulting from, arising
out of or based on the Section 338(h)(10) Election (as defined in Section 9.8);
(vi) the failure of any of the representations and warranties of the Sellers
contained in Sections 4.15(g)(i) and 4.15(o) to be true and correct in all
respects (determined without regard to any qualification related to materiality
contained therein); and (vii) any failure by the Sellers to timely pay any and
all Taxes required to be borne by the Sellers pursuant to Section 9.9; provided,
however, that the Sellers shall have no obligation pursuant to this Section 9.1
if such Loss is attributable to or resulting from any action described in
Section 9.14 hereof; and provided, further, that the Sellers shall be obligated
to make payments pursuant to this Section 9.1 only to the extent that the
cumulative amount that would otherwise be payable by the Sellers pursuant to
this Section 9.1 (notwithstanding this proviso) exceeds (x) the aggregate amount
of the provisions for Tax Liabilities (including any Tax Liabilities reflected
in the Included Current Liabilities as well as the $5,000,000 figure in respect
of Tax reserves referred to as a Working Capital Adjustment) reflected on the
Closing Working Capital Statement minus (y) the cumulative amount of any payment
made by Purchaser pursuant to Section 9.2(ii) hereof.
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9.2 Tax Indemnification by Purchaser. Except for any Taxes subject to
the Sellers' indemnification obligation under Section 9.1, Purchaser hereby
agrees to be liable for and to indemnify and hold the Seller Indemnified Parties
harmless from and against, and pay to the applicable Seller Indemnified Parties
the amount of, any and all Losses in respect of (i) all Taxes of each of the
Companies and the Subsidiaries (A) for any taxable period beginning after the
close of business on the Closing Date ("Post-Closing Taxable Period") and (B)
for the portion of any Straddle Period beginning after the close of business on
the Closing Date (determined as provided in Section 9.4); (ii) all Taxes imposed
on the Companies and Subsidiaries that would be subject to the Sellers'
indemnification obligation under Section 9.1, but for the final proviso of
Section 9.1; (iii) the failure of Purchaser to perform any covenant contained in
this Agreement with respect to Taxes; and (iv) any failure by Purchaser to pay
any and all Taxes required to be borne by Purchaser pursuant to Section 9.9.
9.3 Preparation of Tax Returns and Payment of Taxes.
(a) Where required or permitted by applicable Law, the Sellers shall
include the Companies and Subsidiaries, or cause the Companies and Subsidiaries
to be included in, and shall file or cause to be filed, (i) the United States
consolidated federal income Tax Returns of the Sellers for the taxable periods
(or portions thereof) of the Companies and Subsidiaries ending on or prior to
the Closing Date and (ii) where applicable, all other consolidated, combined or
unitary Tax Returns for the taxable periods (or portions thereof) of the
Companies and Subsidiaries ending on or prior to the Closing Date, and shall pay
any and all Taxes due with respect to the returns referred to in clause (i) or
(ii) of this Section 9.3(a), including but not limited to any liability due with
respect to any Section 338(h)(10) Election made pursuant to Section 9.8 hereof.
The Sellers shall also (and shall cause the Companies and Subsidiaries to)
timely file all other Tax Returns of or which include the Companies or any of
the Subsidiaries required to be filed (taking into account any extensions) on or
prior to the Closing Date and shall pay or cause to be paid any and all Taxes
shown as due thereon. All Tax Returns described in this Section 9.3(a) shall be
prepared in a manner consistent with prior practice unless a contrary treatment
is required by applicable Law.
(b) Purchaser shall cause to be prepared and timely filed all Tax
Returns (other than those Tax Returns described in Section 9.3(a)) required to
be filed by the Companies and Subsidiaries after the Closing Date and, subject
to the right to payment from the Sellers under Section 9.3(c), pay or cause to
be paid all Taxes shown as due thereon. To the extent any Taxes shown due on any
Tax Return described in this Section 9.3(b) are indemnifiable by the Seller,
such Tax Return shall be prepared in a manner consistent with prior practice
unless a contrary treatment is required by applicable Law, and Purchaser shall
provide (or cause the Companies and Subsidiaries to provide) the Sellers with
copies of such Tax Returns (or, in the case of Tax Returns that include
Purchaser or any Affiliate of Purchaser other than the Companies and
Subsidiaries, the portion of such Tax Returns relating to the Companies and the
Subsidiaries) at least 30 days prior to the due date for filing thereof
(including extensions) for the Seller's review and approval and the Sellers
72
shall have the right (at the Seller's expense) to review all work papers and
procedures used to prepare any such Tax Return. The Sellers and Purchaser shall
attempt in good faith to resolve any disagreements regarding such Tax Returns
prior to the due date for filing. In the event that the Sellers and Purchaser
are unable to resolve any dispute with respect to such Tax Return at least
fifteen (15) days prior to the due date for filing, such dispute shall be
resolved pursuant to Section 9.10, which resolution shall be binding on the
parties. Notwithstanding the foregoing, nothing contained in this Section 9.3
shall in any manner terminate, limit or adversely affect any right of the
Purchaser Indemnified Parties, the Sellers or the Companies and Subsidiaries to
receive indemnification pursuant to any provision in this Agreement.
(c) Not later than three (3) days prior to the due date for the
payment of Taxes (including extensions) on any Tax Returns which Purchaser has
the responsibility to file or cause to be filed pursuant to Section 9.3(b), the
Sellers shall pay to Purchaser an amount equal to that portion of the Taxes
shown on such return for which the Sellers have an obligation to indemnify the
Purchaser Indemnified Parties pursuant to the provisions of Section 9.1. No
payment pursuant to this Section 9.3(c) shall excuse the Sellers from their
indemnification obligations pursuant to Section 9.1 if the amount of Taxes as
ultimately determined (on audit or otherwise) for the periods covered by such
Tax Returns exceeds the amount of the Seller's payment under this Section
9.3(c).
9.4 Straddle Period Tax Allocation. The parties acknowledge that, for
federal income Tax purposes, the taxable year of the Companies and Subsidiaries
that are U.S. corporations will end as of the close of the Closing Date. With
respect to all other Taxes, the Sellers and Purchaser will, unless prohibited by
applicable Law, take such actions as may be required to close the taxable period
of the Companies and Subsidiaries as of the close of the Closing Date. In any
case where applicable Law does not permit any Company or Subsidiary to close its
taxable year as of the close of the Closing Date or in any case in which a Tax
is assessed with respect to a taxable period which includes the Closing Date
(but does not end on that day) (a "Straddle Period"), then Taxes, if any,
attributable to the taxable period of the Companies and Subsidiaries beginning
before and ending after the Closing Date shall be allocated (i) to the Sellers
for the period up to and including the Closing Date, and (ii) to Purchaser for
the period subsequent to the Closing Date. Any allocation of income or
deductions required to determine any Taxes attributable to any period beginning
before and ending after the Closing Date shall be made (A) in the case of income
Taxes or Taxes based on or related to income or receipts or any sales or use
Tax, by means of a closing of the books and records of the applicable Company or
Subsidiary as of the close of the Closing Date, provided that exemptions,
allowances or deductions that are calculated on an annual basis (including, but
not limited to, depreciation and amortization deductions) shall be allocated
between the period ending on the Closing Date and the period after the Closing
Date in proportion to the number of days in each such period and (B) in the case
of other Taxes, on a per diem basis. All determinations necessary to give effect
to the allocation set forth in the foregoing clause (A) shall be made in a
manner consistent with the past practice of the relevant Companies and the
Subsidiaries.
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9.5 Tax Audits and Indemnification Procedures.
(a) If notice of any legal proceeding with respect to Taxes of any of
the Companies or Subsidiaries (a "Tax Claim") shall be received by either the
Sellers or Purchaser for which the other party may reasonably be expected to be
liable pursuant to Section 9.1 or 9.2 respectively, the notified party, within
30 days after receipt of such written notice, shall notify such other party in
writing of such Tax Claim; provided, however, that the failure of the notified
party to give the other party notice as provided herein shall not relieve such
other party of its obligations under this Article IX except to the extent that
such other party is actually prejudiced thereby.
(b) Purchaser shall have the right, at the expense of the Sellers to
the extent such Tax Claim is subject to indemnification by the Sellers pursuant
to Section 9.1 hereof, to represent the interests of the Companies and
Subsidiaries in any Tax Claim (other than Tax Claims arising out of Tax Returns
referred to in Section 9.3(a) and Tax Claims relating exclusively to Pre-Closing
Tax Periods), provided that the Purchaser shall not settle any such claim
without the consent of the Seller, which consent shall not be unreasonably
withheld. If Purchaser elects to represent the interests of the Companies or
Subsidiaries with respect to any Tax Claim described in this Section 9.5(b), the
Sellers may, at their own expense, participate in the defense of such claim.
(c) The Sellers shall have the right to represent the Companies and
Subsidiaries with respect to any Tax Claim arising out of a Tax Return referred
to in Section 9.3(a) and any Tax Claim relating exclusively to a Pre-Closing Tax
Period; provided, however, if the result of such Tax Claim involves an issue
that recurs in taxable periods of the Companies or Subsidiaries ending after the
Closing Date or otherwise could materially adversely affect Purchaser or any of
the Companies or Subsidiaries for any taxable period ending after the Closing
Date, then there shall be no settlement with respect thereto without the consent
of Purchaser, which consent will not be unreasonably withheld.
(d) The Sellers may discharge, at any time, their indemnification
obligation under Section 9.1 by paying to the Purchaser the full amount at issue
and payable as of the date of such payment pursuant to Section 9.1, calculated
on the date of such payment.
9.6 Termination of Tax Allocation Agreements. Any and all Tax
allocation or Tax sharing agreements or other agreements or arrangements
relating to Tax matters between any of the Companies or Subsidiaries on the one
hand, and the Sellers or any of their Affiliates, on the other hand, shall be
terminated as of the Closing Date and, from and after the Closing Date, none of
the Companies, the Subsidiaries, the Sellers or any Affiliate of the Sellers
shall have any further rights or liabilities pursuant to any such agreement or
arrangement for any past or future period.
9.7 Carrybacks. Following the Closing Date, Purchaser, the Companies
and Subsidiaries shall, to the extent permissible under applicable Law, waive
the right to carryback any income Tax losses, credits or similar items
attributable to the Companies and Subsidiaries from a taxable period (or portion
thereof) beginning after the Closing Date to a taxable period beginning before
the Closing Date.
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9.8 338 Elections.
(a) Section 338(g) Election. The Sellers acknowledge that Purchaser
may make an election under Section 338(g) of the Code and any corresponding or
similar elections under state, local or foreign tax law with respect to any of
the Companies and Subsidiaries that is not a U.S. corporation. Purchaser shall
provide the Sellers with notice of any such election as required by the Treasury
Regulations under Section 338 of the Code.
(b) Section 338(h)(10) Election.
(i) CSG shall, or shall cause its Affiliates to (as the case may
be), join with Purchaser in making an election under Section
338(h)(10) of the Code and the Treasury Regulations and any
corresponding or similar elections under state, local or foreign tax
law (collectively, the "Section 338(h)(10) Election") with respect to
any of the Companies and Subsidiaries that is a U.S. corporation.
(ii) Subject to this Section 9.8, Purchaser shall be responsible
for the preparation and filing of all forms and documents required in
connection with the Section 338(h)(10) Election . In addition to the
Form 8023, the Sellers shall execute (or cause to be executed) and
deliver to Purchaser such additional documents or forms as are
reasonably requested to complete properly the Section 338(h)(10)
Election at least 30 days prior to the date such Section 338(h)(10)
Election is required to be filed.
(iii) Purchaser and the Sellers 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 the
Section 338(h)(10) Election and shall take no position contrary
thereto unless required to do so by applicable Law.
(iv) The parties agree that they shall retain Standard & Poor's
Corporate Value Consulting (at the expense of Purchaser except that
$25,000 of such expenses shall be paid by the Sellers) to (A) allocate
the Purchase Price and any other items that are treated as additional
purchase price among the Companies and Subsidiaries based on the fair
market value of their respective assets and liabilities and (B)
provide a separate fair market valuation of the Business Intellectual
Property owned by the Companies and Subsidiaries. Purchaser and the
Sellers shall allocate the Purchase Price in accordance with Standard
& Poor's Corporate Value Consulting's determinations and all Tax
Returns and reports filed by Purchaser, the Sellers, and their
respective Affiliates (including, but not limited to, Tax Returns
required by Treasury Regulations promulgated under Sections 338 and
1060 of the Code) shall be prepared consistently with such allocation.
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9.9 Transfer Taxes. All documentary, sales, use, value added,
transfer, stamp and similar Taxes, fees or governmental charges as levied by any
Governmental Body (including any interest and penalties) in connection with the
purchase and sale of stock or assets contemplated by this Agreement shall be
borne and paid equally by Purchaser and the Seller. Purchaser will file all
necessary Tax Returns with respect to such Taxes, fees or governmental charges,
and, if required by applicable law, the Sellers will, and will cause their
Affiliates to, join in the execution of any such Tax Returns. The Sellers and
Purchaser shall cooperate with each other and use reasonable efforts to obtain
any available mitigation, reduction or exemption for any such Taxes, fees or
governmental charges.
9.10 Disputes. Any dispute as to any matter covered by Article IX
shall be resolved by the Arbiter. The fees and expenses of the Arbiter shall be
borne one-half by the Sellers and one-half by Purchaser. If any dispute with
respect to a Tax Return is not resolved prior to the due date (including all
available extensions) of such Tax Return, such Tax Return shall be filed in the
manner which the party responsible for preparing such Tax Return deems correct;
provided, however, that if the Arbiter subsequently determines that the other
party's position with respect to the dispute is correct, such other party's
indemnification obligation with respect to such Tax Return pursuant to Section
9.1 or 9.2, as the case may be, shall not exceed the amount such other party
would have had to pay with respect to such Tax Return pursuant to Section 9.1 or
9.2, as the case may be, if such Tax Return had been prepared in the manner
proposed by such other party. If, as a result of the previous sentence, such
other party has paid an amount in excess of its indemnification obligation, the
party responsible for filing such Tax Return shall promptly pay to the other
party the amount of such excess.
9.11 Treatment of Indemnity Payments. The Sellers and Purchaser agree
to treat any indemnity payments made pursuant to Articles VIII and IX as an
adjustment to the Purchase Price for all income tax purposes. If,
notwithstanding the treatment required by the preceding sentence, any
indemnification payment under Article VIII or Article IX is finally determined
to be taxable to the party receiving such payment by any Taxing Authority, the
indemnifying party shall pay an amount that reflects the hypothetical Tax
consequences of the receipt of accrual of such payment , using the maximum
statutory rate (or rates, in the case of an item that affects more than one tax)
applicable to the recipient of such payment for the relevant year, reflecting
for example, the effect of deductions available for interest paid or accrued and
for Taxes such as state and local income Taxes.
9.12 Time Limits. Any claim for indemnity under this Article IX may
be made at any time prior to thirty (30) days after the expiration of the
applicable Tax statute of limitations with respect to the relevant taxable
period (including all periods of extension, whether automatic or permissive).
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9.13 Exclusivity. Except to the extent provided in Section 8.4(f),
the indemnification provided for in this Article IX shall be the sole remedy for
any claim in respect of Taxes, including any claim arising out of or relating to
a breach of Section 4.15. In the event of a conflict between the provisions of
this Article IX, on the one hand, and the provisions of Article VIII, on the
other, the provisions of this Article IX shall control.
9.14 Purchaser Covenants. Without the consent of the Sellers, which
consent shall not be unreasonably withheld, Purchaser covenants that it will not
cause or permit the Companies, the Subsidiaries or any Affiliate of Purchaser
(i) other than as contemplated by this Agreement, to take any action on the
Closing Date other than in the Ordinary Course of Business, including but not
limited to the distribution of any dividend or the effectuation of any
redemption that could give rise to any Tax liability or reduce any Tax asset of
the Sellers or their Affiliates or give rise to any loss of the Sellers or their
Affiliates under this Agreement, or (ii) except as required by Law, to amend any
Tax Return that includes all or any portion of a Pre-Closing Taxable Period,
take any position on any Tax Return, or enter into any agreement with any Taxing
Authority, that results in an increased Tax Liability of the Sellers or their
Affiliates (or a reduction of any Tax asset that would have otherwise been
retained by the Sellers or their Affiliates (other than the Companies and
Subsidiaries)) in respect of a Pre-Closing Taxable Period.
9.15 Refunds and Tax Benefits. Purchaser shall promptly pay or cause
to be paid to the Sellers all refunds of Taxes and interest thereon received by
Purchaser, any Affiliate of Purchaser, any Company or any Subsidiary
attributable to Taxes paid by the Sellers, any Company or any Subsidiary (or any
predecessor or Affiliate of the Seller) with respect to any taxable period (or
portion thereof) ending on or before the Closing Date, except to the extent that
such refunds are reflected in the calculation of Closing Working Capital. If, in
lieu of receiving any such refund, any Company or Subsidiary reduces a Tax
liability with respect to any taxable period (or portion thereof) beginning
after the Closing Date, or increases a Tax asset that can be carried forward to
any taxable period (or portion thereof) beginning after the Closing Date,
Purchaser shall promptly pay or cause to be paid to the Sellers the amount of
such reduction in Tax liability or the amount of any benefit resulting from such
increase in Tax assets, as the case may be.
9.16 Cooperation on Tax Matters. Purchaser and the Sellers agree to
furnish or cause to be furnished to each other, upon request, as promptly as
practicable, such information (including access to books and records) and
assistance relating to the Companies and Subsidiaries as is reasonably necessary
for the filing of any return (including any report required pursuant to Section
6043A of the Code and all Treasury Regulations promulgated thereunder), for the
preparation for any audit, and for the prosecution or defense of any claim, suit
or proceeding relating to any proposed adjustment. Purchaser and the Sellers
agree to retain or cause to be retained all books and records pertinent to the
Companies and the Subsidiaries until the applicable period for assessment under
applicable law (giving effect to any and all extensions or waivers) has expired,
and to abide by or cause the abidance with all record retention agreements
entered into with any Taxing Authority. Each Company agrees to give the Sellers
77
reasonable notice prior to transferring, discarding or destroying any such books
and records relating to Tax matters and, if the Sellers so request, the Company
shall allow the Sellers to take possession of such books and records. Purchaser
and the Sellers shall cooperate with each other in the conduct of any audit or
other proceedings involving the Company for any Tax purposes and each shall
execute and deliver such powers of attorney and other documents as are necessary
to carry out the intent of this subsection.
ARTICLE X
TERMINATION
10.1 Termination of Agreement. This Agreement may be terminated prior
to the Closing as follows:
(a) At the election of the Sellers or Purchaser on or after January
31, 2006 (such date, as it may be extended, the "Termination Date"), if the
Closing shall not have occurred by the close of business on such date, provided
that the terminating party is not in material default of any of its obligations
hereunder.
(b) by mutual written consent of the Sellers and Purchaser;
(c) by the Sellers or Purchaser if there shall be in effect a final
nonappealable Order of a Governmental Body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; it being agreed that, subject to the last
sentence of Section 6.4(b) hereof, the parties hereto shall promptly appeal any
adverse determination which is not nonappealable (and pursue such appeal with
reasonable diligence); provided, however, that the right to terminate this
Agreement under this Section 10.1(c) shall not be available to a party if such
Order was primarily due to the failure of such party to perform any of its
obligations under this Agreement;
(d) by Purchaser if the Sellers or any Company shall have breached or
failed to perform any of its representations, warranties, covenants or
agreements set forth in this Agreement, or if any representation or warranty of
the Sellers or any Company shall have become untrue, in either case such that
the conditions set forth in Sections 7.2(a) or 7.2(b) would not be satisfied and
such breach is incapable of being cured or, if capable of being cured, shall not
have been cured within thirty (30) days following receipt by the Sellers of
notice of such breach from Purchaser; or
(e) by the Sellers if Purchaser shall have breached or failed to
perform any of its representations, warranties, covenants or agreements set
forth in this Agreement, or if any representation or warranty of Purchaser shall
have become untrue, in either case such that the conditions set forth in
Sections 7.3(a) or 7.3(b) would not be satisfied and such breach is incapable of
being cured or, if capable of being cured, shall not have been cured within
thirty (30) days following receipt by Purchaser of notice of such breach from
the Seller.
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10.2 Procedure Upon Termination. In the event of termination and
abandonment by Purchaser or the Seller, or both, pursuant to Section 10.1,
written notice thereof shall forthwith be given to the other party or parties,
and this Agreement shall terminate, and the purchase of the Securities hereunder
shall be abandoned, without further action by Purchaser, the Companies or the
Seller.
10.3 Effect of Termination. In the event that this Agreement is
validly terminated as provided herein, then each of the parties shall be
relieved of their duties and obligations arising under this Agreement after the
date of such termination and such termination shall be without Liability to
Purchaser, the Sellers or any Company; provided, however, that the obligations
of the parties set forth in this Section 10.3, Article XI, Section 6.6(b) and
Section 6.8 hereof shall survive any such termination and shall be enforceable
hereunder; provided further, however, that nothing in this Section 10.3 shall
relieve Purchaser, the Sellers or any Company of any Liability for a breach of
this Agreement prior to the effective date of termination.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. Except as otherwise provided in this Agreement, the
Sellers and Purchaser shall each bear its own expenses incurred in connection
with the negotiation and execution of this Agreement and each other agreement,
document and instrument contemplated by this Agreement and the consummation of
the transactions contemplated hereby and thereby, it being understood that in no
event shall the Companies or Subsidiaries bear any of such costs and expenses.
Notwithstanding the foregoing, the Sellers and Purchaser shall each be
responsible for one-half of the filing fees lawfully payable to or at the
request of any Governmental Body in connection with this Agreement.
11.2 Specific Performance. The Sellers acknowledge and agree that a
breach of this Agreement would cause irreparable damage to Purchaser and that
Purchaser will not have an adequate remedy at law. Therefore, the obligations of
the Sellers under this Agreement, including the Sellers' obligation to sell the
Securities to Purchaser, shall be enforceable by a decree of specific
performance issued by any court of competent jurisdiction, and appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies shall, however, be cumulative and not exclusive and shall be in
addition to any other remedies which any party may have under this Agreement or
otherwise.
11.3 Submission to Jurisdiction; Consent to Service of Process;
Waiver of Jury Trial.
(a) The parties hereto hereby irrevocably submit to the non-exclusive
jurisdiction of any federal or state court located within the State of New York
over any dispute arising out of or relating to this Agreement or any of the
transactions contemplated hereby and each party hereby irrevocably agrees that
all claims in respect of such dispute or any suit, action proceeding related
79
thereto may be heard and determined in such courts. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of venue of any
such dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute. Each of the parties hereto agrees that a judgment
in any such dispute may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by
delivery of a copy thereof in accordance with the provisions of Section 11.6.
(c) THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION, OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT,
EQUITY, OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
11.4 Entire Agreement; Amendments and Waivers. This Agreement
(including the schedules and exhibits hereto), the Seller Documents, the
Purchaser Documents and the Side Letter represent the entire understanding and
agreement between the parties hereto with respect to the subject matter hereof
and can be amended, supplemented or changed, and any provision hereof can be
waived, only by written instrument making specific reference to this Agreement
signed by the party against whom enforcement of any such amendment, supplement,
modification or waiver is sought. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement contained herein. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach. No failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law.
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11.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and performed in such state.
11.6 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally by hand (with written confirmation of receipt), (ii) when sent by
facsimile (with written confirmation of transmission) or (iii) one Business Day
following the day sent by overnight courier (with written confirmation of
receipt), in each case at the following addresses and facsimile numbers (or to
such other address or facsimile number as a party may have specified by notice
given to the other party pursuant to this provision):
If to the Sellers, to:
CSG Systems International, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Senior Vice President and
General Counsel, Corporate Development
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser, to:
c/o Comverse Technology, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President of Legal and
General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
United Stated of America
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
11.7 Severability. If any term or other provision of this Agreement
is invalid, illegal, or incapable of being enforced by any law or public policy,
all other terms or provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
11.8 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity not a party to this
Agreement except as provided below. No assignment of this Agreement or of any
rights or obligations hereunder may be made by either the Sellers or Purchaser
(by operation of law or otherwise) without the prior written consent of the
other parties hereto and any attempted assignment without the required consents
shall be void; provided, however, that Purchaser may assign this Agreement and
any or all rights or obligations hereunder (including Purchaser's rights to
purchase the Securities and Purchaser's rights to seek indemnification
hereunder) to any Affiliate of Purchaser or any Person to which Purchaser or any
of its Affiliates proposes to sell all or substantially all of the assets
relating to the business of Purchaser. Upon any such permitted assignment, the
references in this Agreement to Purchaser shall also apply to any such assignee
unless the context otherwise requires.
11.9 Non-Recourse.
(a) No past, present or future director, officer, employee,
incorporator, member, partner, stockholder, Affiliate, agent, attorney or
representative of Purchaser shall have any Liability for any obligations or
liabilities of Purchaser under this Agreement or for any claim based on, in
respect of, or by reason of, the transactions contemplated hereby.
(b) No past, present or future director, officer, employee,
incorporator, member, partner, stockholder, Affiliate, agent, attorney or
representative of the Sellers shall have any Liability for any obligations or
liabilities of the Sellers under this Agreement or for any claim based on, in
respect of, or by reason of, the transactions contemplated hereby.
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11.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first written above.
COMVERSE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Director
CSG SYSTEMS INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Financial Officer
CSG NETHERLANDS CV, ACTING THROUGH ITS GENERAL
PARTNER, CSG INTERNATIONAL HOLDINGS, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Director
CSG SOFTWARE, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Director
CSG AMERICAS HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Director
CSG NETHERLANDS BV
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Director
CSG TECHNOLOGY LIMITED
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Director