EXHIBIT 2.4
STOCK PURCHASE AGREEMENT
among
SPS PAYMENT SYSTEMS, INC.,
as
SELLER,
ALLIANCE DATA SYSTEMS CORPORATION,
as
PURCHASER, and
SPS COMMERCIAL SERVICES, INC. and ADS NETWORK SERVICES, INC.,
as SUBSIDIARIES.
June 8, 1999
TABLE OF CONTENTS
PAGE
ARTICLE I. PURCHASE AND SALE OF SHARES 1
1.1 Purchase and Sale of Shares 1
1.2 Payment of Purchase Price 1
1.3 Post-Closing Purchase Price Adjustment 2
1.4 Closing 3
1.5 AFCC's, Seller's and the Subsidiaries'Deliveries to Purchaser 3
1.6 Purchaser's Deliveries to Seller 3
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF SELLER 4
2.1 Authority 4
2.2 No Conflicts; Consents 4
2.3 Organization and Standing 5
2.4 Capital Stock of the Subsidiaries 5
2.5 Subsidiaries'Equity Interests 6
2.6 Business Premises 6
2.7 Litigation 7
2.8 Taxes 7
2.9 Benefit Plans 9
2.10 Employee and Employee Relations 9
2.11 Compliance, Licenses and Permits 10
2.12 Takeover Statutes 10
2.13 Contracts in Full Force and Effect 10
2.14 Brokers, Finders, etc. 11
2.15 Insurance 11
2.16 Tangible Personal Property 12
2.17 Intentionally Omitted 12
2.18 Guaranties 12
2.19 Powers of Attorney 12
2.20 Intellectual Property 12
2.21 Warranties and Warranty Claims 15
2.22 Officers and Directors 15
2.23 Books and Records 16
2.24 Certain Payments 16
2.25 Bank Accounts 16
2.26 Year 2000 16
2.27 Service Xxxxxx 00
2.28 Financial Statements 17
2.29 Inventory 18
2.30 Accounts Receivable 18
2.31 Customers and Suppliers 19
2.32 Relationships with Related Persons 19
2.33 Disclosure 19
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PAGE
2.34 Absence of Certain Changes; Conduct of Business 20
2.35 Undisclosed Liabilities 21
2.36 Conduct of the Business 21
2.37 No Other Representations or Warranties 21
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PURCHASER 22
3.1 Organization and Standing 22
3.2 Authority 22
3.3 No Conflicts; Consents 22
3.4 Financial Ability to Perform 23
3.5 Absence of Certain Changes or Events 23
3.6 No Other Representations or Warranties 23
ARTICLE IV. COVENANTS OF SELLER AND THE SUBSIDIARIES 23
4.1 Access 23
4.2 Ordinary Conduct 23
4.3 Assets of ADS Network 24
4.4 Assets of Commercial Services 24
4.5 Assumed Liabilities 25
4.6 Hired Employee Solicitation and Employment 25
4.7 Non-Competition by the AFCC Group 25
4.8 Consents; Assignability 26
4.9 No Solicitation 26
4.10 Records Retention 26
4.11 Cease Use of Marks 27
4.12 Confidentiality 27
4.13 Cooperation Regarding Financial Statements 27
4.14 Financial Statements and Reports 28
4.15 Tax Elections 28
4.16 Supplements to Schedules 28
ARTICLE V. EMPLOYEES AND EMPLOYEE MATTERS 29
5.1 Employment 29
5.2 Hired Employee Benefits 29
5.3 Employment and Employee Benefits 29
5.4 No Employment Agreements 30
5.5 Employee Benefit Plans Coverage 30
5.6 Employee Service Credit 30
5.7 Pre-Existing Condition Exclusions 31
5.8 Medical and Dental 31
5.9 Accrued Vacation Days 32
5.10 401(k) Plans 32
5.11 Employee Withholding and Reporting 33
5.12 Withdrawal from Plans 33
5.13 Employment - No Third Party Rights 33
5.14 Seller Assistance 33
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PAGE
5.15 WARN Act 33
5.16 FleetShare Employees 33
ARTICLE VI. COVENANTS OF PURCHASER 34
6.1 Regulatory Conditions 34
6.2 Certain Understandings 34
6.3 Commonly-Available Third Party Software Programs 34
6.4 Confidentiality 35
ARTICLE VII. MUTUAL COVENANTS 35
7.1 Consummation of the Transactions 35
7.2 Publicity 35
7.3 Antitrust Notification 36
7.4 Confidentiality Prior to Closing 36
7.5 Employee, Customer, Vendor and Supplier Notification 36
7.6 Further Assurances 36
7.7 Cure for Breach Between Purchaser and Seller of
Certain Representations, Warranties and Covenants 36
7.8 Revenues and Expenses 38
7.9 Post-Closing Reimbursement for Year 2000 Costs 38
ARTICLE VIII. CONDITIONS TO CLOSING 40
8.1 Each Party's Obligations 40
8.2 Seller's and the Subsidiaries'Obligations 40
8.3 Purchaser's Obligations 41
8.4 Frustration of Closing Conditions 43
ARTICLE IX. TAX MATTERS 43
9.1 Tax Matters 43
ARTICLE X. TERMINATION 43
10.1 Termination Events 43
10.2 Information and Confidentiality 43
10.3 Remedies for Termination 44
10.4 Abandonment 44
ARTICLE XI. INDEMNIFICATION 44
11.1 Survival of Representations and Warranties 44
11.2 Indemnification by Seller 44
11.3 Indemnification by Purchaser 45
11.4 Conditions of Indemnification Relating to Third Party Claims 45
11.5 Conditions of Indemnification Relating to Claims that are not
Third Party Claims 46
11.6 Limitations on Indemnification 47
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PAGE
ARTICLE XII. DISPUTE RESOLUTION 48
12.1 Negotiation 48
12.2 Mediation 48
12.3 Provisional Remedies 48
ARTICLE XIII. MISCELLANEOUS 48
13.1 No Third-Party Beneficiaries 48
13.2 Amendment or Waiver 49
13.3 Headings 49
13.4 Counterparts 49
13.5 Assignment 49
13.6 Notices 49
13.7 Entire Agreement 50
13.8 Severability 50
13.9 Schedules 50
13.10 Governing Law 50
13.11 Expenses 50
13.12 Remedies for Breach 51
Table of Schedules and Exhibits v
Table of Definitions vii
iv
TABLE OF SCHEDULES AND EXHIBITS
Schedule 2.2 Conflicts, Consents
Schedule 2.4 Warrants, Options, etc.
Schedule 2.6(a) Riverwoods Lease Documents
Schedule 2.7 Litigation
Schedule 2.8(b) State Where Tax Returns Required
Schedule 2.8(c) Extension of Tax Statutes of Limitations and Tax Sharing Agreements
Schedule 2.8(d) Exceptions to Required Tax Returns
Schedule 2.8(e) Joint Ventures, Partnerships and Other Arrangements
Schedule 2.10 Employee Incentive, Bonus Obligations
Schedule 2.11 License Exceptions
Schedule 2.13(a) List of Contracts Related to Business
Schedule 2.13(b) Parties Terminating Agreements
Schedule 2.13(c) Agreements Not Valid
Schedule 2.16 Equipment Liens and Taxes
Schedule 2.18 Outstanding Guaranties Issued by Subsidiaries
Schedule 2.19 Powers of Attorney Issued by Subsidiaries
Schedule 2.20(a) Software Products
Schedule 2.20(d) Encumbrances on Intellectual Property Assets
Schedule 2.20(e) Patents
Schedule 2.20(f) Marks
Schedule 2.20(g) Copyrights
Schedule 2.20(i) Software Products Sold or Licensed to Third Parties
Schedule 2.20(k) Internet Assets
Schedule 2.21 Product /Services Warranties to Third Parties
Schedule 2.22 Officers and Directors of Subsidiaries
Schedule 2.28(b) Pro Forma Income Statements of the Business
Schedule 2.30 FleetShare Accounts Receivable
Schedule 2.31 Material Customers
Schedule 2.32 Related Persons
Schedule 2.34 Conduct of Business
Schedule 2.35 Undisclosed Liabilities
Schedule 2.36 Excluded Assets
Schedule 3.3 Conflicts or Consents Needed
Schedule 4.2 Ordinary Conduct Exceptions
Schedule 4.2(c) Contracts not to be Terminated, Etc.
Schedule 4.3 Assets Transferred to ADS Network
Schedule 4.4 Commercial Services Assets
Schedule 4.5(a) ADS Network Assumed Obligations
Schedule 4.5(b) Commercial Services Assumed Obligations
Schedule 5.1 Employees
Schedule 5.2 Severance Pay Formula and Definition of Termination for Cause
Schedule 5.14 Payroll Data
Schedule 5.16 FleetShare Employees
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Exhibit A Form of Interim Services Agreement
Exhibit B Form of Xxxx Lease
Exhibit C Form of Riverwoods Sublease
Exhibit D Form of Services Agreement
Exhibit E Form of Assumption Agreement
Exhibit F Form of Tax Cooperation and Indemnification Agreement
Exhibit G Form of Master Agreement for Systems Operations Services
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TABLE OF DEFINITIONS
SECTION
Accounts.......................................................................................................2.30
Active Employees................................................................................................5.1
ADS Network................................................................................................Preamble
ADS Network Assumed Obligations.................................................................................4.5
AFCC............................................................................................................1.5
AFCC Group......................................................................................................4.6
AFCC Letter Agreement..........................................................................................13.7
Affiliate.......................................................................................................3.3
Agreement..................................................................................................Preamble
Assumed Liabilities.............................................................................................4.5
Assumption Agreement....................................................................................1.5(g); 4.5
Audit........................................................................................................2.8(a)
Balance Sheet...............................................................................................2.28(a)
Benefit Plans...................................................................................................2.9
Business...................................................................................................Recitals
Business Records...............................................................................................4.10
Claims.........................................................................................................11.2
Closing.........................................................................................................1.4
Closing Balance Sheet........................................................................................1.3(a)
Closing Date....................................................................................................1.4
COBRA........................................................................................................5.8(c)
Code.........................................................................................................2.8(a)
Commercial Services........................................................................................Preamble
Commercial Services Retained Obligations........................................................................4.5
Confidentiality Agreement...................................................................................4.12(c)
Contracts...................................................................................................2.13(a)
Controlled Group ...............................................................................................2.9
Critical Asset..................................................................................................7.7
Critical Remediation............................................................................................7.9
Copyrights..................................................................................................2.20(b)
Date Handling..................................................................................................2.26
Disputed Matters................................................................................................7.9
DOJ.............................................................................................................7.3
Employees.......................................................................................................5.1
Encumbrances....................................................................................................1.1
ERISA...........................................................................................................2.9
FleetShare Accounts Receivable.................................................................................2.30
FleetShare Business........................................................................................Recitals
FleetShare Employees...........................................................................................5.16
FleetShare Services Termination Date...........................................................................5.16
FMLA............................................................................................................5.1
Former Employee.................................................................................................5.1
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FTC.............................................................................................................7.3
GAAP.........................................................................................................1.3(a)
Governmental Entity.............................................................................................2.2
Xxxx Lease...........................................................................................1.5(g); 2.6(b)
Group........................................................................................................2.8(a)
Hired Employees ................................................................................................5.1
HSR Act.........................................................................................................1.4
IBM Contract.................................................................................................1.5(g)
Inactive Employees..............................................................................................5.1
Indemnified Party...........................................................................................11.4(a)
Indemnifying Party..........................................................................................11.4(a)
Intellectual Property Assets................................................................................2.20(b)
Independent Consultant..........................................................................................7.9
Interim Balance Sheet.......................................................................................2.28(a)
Interim Services Agreement...................................................................................1.5(g)
Internet Assets.............................................................................................2.20(k)
Inventory......................................................................................................2.29
IRS..........................................................................................................2.8(a)
Legal Requirements..............................................................................................2.4
Liabilities....................................................................................................11.2
Marks.......................................................................................................2.20(b)
Master Agreement ............................................................................................1.5(g)
Material Adverse Effect.........................................................................................2.2
Material Customer..............................................................................................2.31
Material Interest..............................................................................................2.32
Network Services Business..................................................................................Recitals
Patents.....................................................................................................2.20(b)
Permit..........................................................................................................2.2
Person..........................................................................................................2.5
Plan...........................................................................................................2.26
Post-Closing Remediation........................................................................................7.9
Post-Closing Testing............................................................................................7.9
Post Closing Testing Costs......................................................................................7.9
Prior Service...................................................................................................5.6
Project Costs...................................................................................................7.9
Proprietary Software Products...............................................................................2.20(i)
Purchase Price..................................................................................................1.2
Purchaser..................................................................................................Preamble
Purchaser's Basket..........................................................................................11.6(c)
Purchaser's 401(k) Plan.........................................................................................5.6
Related Person.................................................................................................2.32
Representatives................................................................................................4.12
Riverwoods Lease.....................................................................................1.5(g); 2.6(a)
Riverwoods Sublease..................................................................................1.5(g); 2.6(a)
Seller.....................................................................................................Preamble
Seller's Basket.............................................................................................11.6(b)
viii
Seller's DCA.................................................................................................5.8(d)
Seller's FSA.................................................................................................5.8(d)
Seller's 401(k) Plans..........................................................................................5.10
Services Agreement...........................................................................................1.5(g)
Shares.....................................................................................................Recitals
Software Products...........................................................................................2.20(a)
SPS Retained Liabilities........................................................................................4.5
Subsidiary or Subsidiaries.................................................................................Recitals
Tax or Taxes.................................................................................................2.8(a)
Tax Return...................................................................................................2.8(a)
Third Party Claims.............................................................................................11.4
Trade Secrets...............................................................................................2.20(b)
Transaction Documents...........................................................................................6.2
Treasury Regulations.........................................................................................2.8(a)
WARN Act.......................................................................................................5.15
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of June 8, 1999 (this
"Agreement"), is by and among SPS Payment Systems, Inc., a Delaware
corporation ("Seller"), Alliance Data Systems Corporation, a Delaware
corporation ("Purchaser"), SPS Commercial Services, Inc., a Delaware
corporation ("Commercial Services"), and ADS Network Services, Inc., a
Delaware corporation ("ADS Network").
RECITALS
A. Seller, through its Network Services Division, is engaged
in the business of conducting the electronic processing of point-of-sale
transactions including POS device management, authorization, data capture,
reporting and routing for settlement of credit and debit transactions and
selling and providing servicing support for various POS equipment
(collectively, the "Network Services Business"). Seller, through its
Commercial Services subsidiary, is engaged in the business of operating a
fleetcard service including new account processing, customer service,
collections, accounts receivable, receivables financing, statement
production, remittance, and fleet management reporting (collectively, the
"FleetShare Business"). Prior to the Closing, Seller will have transferred
all of the assets it uses primarily to conduct the Network Services Business
and certain of the liabilities of the Network Services Business and the
FleetShare Business (collectively, the "Business") to ADS Network and
Commercial Services (collectively, the "Subsidiaries"). At Closing, the
Subsidiaries will own and operate the Business.
B. Seller owns all of the issued and outstanding shares of
capital stock of the Subsidiaries (collectively, the "Shares").
C. Purchaser desires to purchase from Seller, and Seller
desires to sell to Purchaser, the Shares upon the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF SHARES . Upon the terms and subject to
the conditions contained herein, on the Closing Date (as hereinafter
defined), Seller will sell, convey, transfer, assign and deliver to Purchaser
the Shares free and clear of all security interests, liens, adverse claims,
charges and encumbrances (collectively, the "Encumbrances"), and Purchaser
will purchase the Shares from Seller.
1.2 PAYMENT OF PURCHASE PRICE . On the Closing Date Purchaser
shall deliver to Seller by electronic wire transfer to a bank account
designated in writing by Seller at least two business days
1
prior to the Closing Date, in immediately available funds, the sum of
$170,000,000, subject to adjustment as specified in Section 1.3 below (as
adjusted, the "Purchase Price").
1.3 POST-CLOSING PURCHASE PRICE ADJUSTMENT .
(a) PREPARATION OF CLOSING BALANCE SHEET. As soon as
practicable following the Closing Date, but in no event later than 30 days
after the Closing, Seller shall deliver to Purchaser a balance sheet of the
Business as of the Closing Date (the "Closing Balance Sheet") prepared in
accordance with generally accepted accounting principles ("GAAP")
consistently applied without giving effect to the transfer of assets to the
Subsidiaries or the sale of Stock contemplated by this Agreement. The Closing
Balance Sheet or explanatory notes shall identify as separate items the
following: (i) the value of the Inventory (as hereinafter defined) and (ii)
the value of the FleetShare Accounts Receivable (as hereinafter defined) and
all allowances for doubtful accounts relating thereto. The Closing Balance
Sheet shall be accompanied by a certificate signed by an officer of Seller
certifying (i) that as of December 31, 1998, $3,919,487 was the amount of the
FleetShare Accounts Receivable net of all reserves, (ii) the reserves for the
FleetShare Accounts Receivable as of that date represented 1.047% of the
FleetShare Accounts Receivable, (iii) that as of December 31, 1998, $844,648
was the amount of the Inventory of the Business, and (iv) that the Closing
Balance Sheet and the certification of the FleetShare Accounts Receivable and
the Inventory described in (i) and (iii) of this sentence: (x) were prepared
in accordance with GAAP consistently applied, subject to normal recurring
year end adjustments (which will not individually or in the aggregate have a
Material Adverse Effect (as hereinafter defined)) and the absence of notes
and (y) fairly reflects the assets and liabilities of the Business as of
December 31, 1998 or the Closing Date, respectively. In the event that
Purchaser shall disagree with amounts specified on the Closing Balance Sheet
for the FleetShare Accounts Receivable, reserves related thereto or the
Inventory, Purchaser shall notify Seller of the matters with which it
disagrees within 15 days of Purchaser's receipt of the Closing Balance Sheet
and the parties shall use their best efforts to promptly resolve any
differences. If the parties are unable to resolve any disagreements that they
may have within 30 days following Purchaser's giving of notice of its
disagreement to Seller, then Seller and Purchaser shall use the dispute
resolution mechanism established in Article XII.
(b) POST-CLOSING ADJUSTMENTS TO THE PURCHASE PRICE. The amounts
shown for the FleetShare Accounts Receivable less related reserves and the
Inventory of the Business on the Closing Balance Sheet shall be compared to
the comparable items as set forth below. If the amount shown for FleetShare
Accounts Receivable on the Closing Balance Sheet less allowance for doubtful
accounts (calculated by multiplying the amount shown for FleetShare Accounts
Receivable (gross of reserves) on the Closing Balance Sheet by 1.047%) is
larger than $3,919,487, Purchaser shall pay the excess to Seller. If the
reverse is true, Seller shall pay the difference to Purchaser. If the amount
shown for Inventory on the Closing Balance Sheet is larger than $844,648,
Purchaser shall pay the excess to Seller. If the reverse is true, Seller
shall pay the difference to Purchaser. In the event Seller shall owe
Purchaser for one line item and Purchaser shall owe Seller for the other, the
payments may be offset and the party owing the balance shall pay such amount
to the other. All undisputed amounts shall be made by check or wire transfer
within 10 days of the delivery of the Closing Statement. All disputed amounts
will be paid by check or wire transfer within 10 days of the parties'
ultimate agreement upon the amounts of FleetShare Accounts Receivable and
Inventory as shown on the Closing Balance Sheet.
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1.4 CLOSING . Upon the terms and subject to the conditions
hereof, the closing of the transactions contemplated hereby (the "Closing")
shall take place at Dallas, Texas on July 1, 1999, or three (3) business days
after expiration or early termination of the waiting period under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), whichever is later, or such other place and/or time as Seller and
Purchaser may agree (the "Closing Date").
1.5 AFCC'S, SELLER'S AND THE SUBSIDIARIES' DELIVERIES TO
PURCHASER . At Closing, Associates First Capital Corporation, a Delaware
corporation ("AFCC"), Seller and the Subsidiaries shall deliver to Purchaser
the instruments and items set forth below:
(a) Stock certificates representing the Shares, registered in
the name of Seller, duly endorsed in blank or accompanied by duly executed
stock powers;
(b) A certificate of Seller and each Subsidiary's Secretary or
an Assistant Secretary certifying resolutions adopted by the Board of
Directors of Seller and each Subsidiary authorizing and approving the
execution, delivery and performance of this Agreement and the other documents
to be delivered by Seller and such Subsidiary in connection with this
Agreement and, in the case of Seller, the transfer of the Shares to Purchaser
pursuant to this Agreement;
(c) The written resignations of the directors of the
Subsidiaries, effective upon Closing;
(d) The stock books, stock ledgers, minute books, and corporate
seals of the Subsidiaries;
(e) All Certificates of AFCC's, Seller's and the Subsidiary's
officers required under or in connection with this Agreement;
(f) Any updates of Schedules pursuant to Section 4.16, which
shall be dated as of a date not more than two days prior to the Closing Date
and certified by Seller's and each Subsidiary's Secretary or an Assistant
Secretary;
(g) Duly executed Interim Services Agreement, Xxxx Lease,
Riverwoods Sublease, Services Agreement, Assumption Agreement, Tax
Cooperation and Indemnification Agreement and Master Agreement for Systems
Operations Services (the "Master Agreement") relating to the IBM Contract (as
defined in the Master Agreement), which documents shall be in the forms
attached hereto as Exhibits A, B, C, D, E, F, and G respectively; and
(h) All other documents, certificates, instruments, agreements
and writings required to be delivered by AFCC, Seller or either Subsidiary on
or before the Closing Date pursuant to this Agreement.
1.6 PURCHASER'S DELIVERIES TO SELLER . At Closing, Purchaser
shall deliver to Seller, or cause the delivery to Seller of, the following
instruments and items:
(a) The Purchase Price;
3
(b) A certificate of Purchaser's Secretary or an Assistant
Secretary certifying resolutions of the Board of Directors of Purchaser
authorizing and approving the execution, delivery, and performance of this
Agreement;
(c) All certificates of Purchaser's officers required under or
in connection with this Agreement;
(d) Duly executed Interim Services Agreement, Xxxx Lease,
Riverwoods Sublease, Services Agreement, Tax Cooperation and Indemnification
Agreement and Master Agreement in the forms attached hereto as Exhibits A, B,
C, D, F and G respectively; and
(e) All other documents, certificates, instruments, agreements
and writings required to be delivered by the Purchaser on or before the
Closing Date pursuant to this Agreement.
ARTICLE II
ARTICLE REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
2.1 AUTHORITY . Seller and each Subsidiary have the corporate
power and authority to execute this Agreement and all documents, instruments
and agreements required to be executed by Seller or either Subsidiary
pursuant hereto and to consummate the transactions contemplated hereby or
thereby. Prior to Closing, the execution and delivery of this Agreement and
all documents, instruments and agreements required to be executed by Seller
or either Subsidiary pursuant hereto or thereto, and the performance by
Seller or either Subsidiary of its obligations hereunder or thereunder, have
been duly authorized by the respective Board of Directors of Seller and the
Subsidiaries and no further corporate action is necessary on the part of
Seller or either Subsidiary. This Agreement and all documents, instruments
and agreements required to be executed by Seller or either Subsidiary
pursuant hereto have been duly executed and delivered by Seller and the
Subsidiaries and constitute valid and legally binding obligations of Seller
and the Subsidiaries, enforceable against them in accordance with their
respective terms subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium (whether general or
specific) and similar laws relating to creditors' rights generally, and
general principles of equity regardless of whether such enforcement is sought
in a proceeding in equity or at law.
2.2 NO CONFLICTS; CONSENTS . Except as set forth on Schedule
2.2, neither the execution and delivery of this Agreement by Seller or either
Subsidiary, nor the execution and delivery of any other documents,
instruments and agreements required to be executed and delivered by Seller or
either Subsidiary pursuant hereto, nor the consummation of the transactions
contemplated hereby or thereby will conflict with, or result in any violation
of or default (with or without notice or lapse of time, or both) under, or
give rise to a right of first refusal, right of termination, cancellation or
acceleration or similar right relating to any obligation or to loss of a
benefit under any provision of (a) the respective certificates of
incorporation or by-laws of Seller or either Subsidiary, (b) any note, bond,
mortgage, indenture, deed of trust, license, lease, contract, commitment,
agreement or
4
arrangement to which Seller or either Subsidiary is a party or by which any
of them or any of their respective properties or assets is bound or (c) any
judgment, order or decree, or statute, law, ordinance, rule or regulation,
applicable to Seller or either Subsidiary or any of their respective
properties or assets, in the case of (b) and (c) above, except for any such
conflict, violation, default or right which would not reasonably be expected
to have a material adverse effect on the business, assets, financial
condition, or results of operations of the Subsidiaries taken as a whole (a
"Material Adverse Effect"). No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing (each, a "Permit")
with, any Federal, state, local or foreign government or any court of
competent jurisdiction, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, or other
regulatory or self-regulatory body or association (each, a "Governmental
Entity") is required to be obtained or made by Seller or the Subsidiaries in
connection with the consummation of the transactions contemplated hereby
other than (x) compliance with and filings under the HSR Act, (y) as set
forth on Schedule 2.2, and (z) with respect to the Network Services Business,
those the failure of which to make or obtain would not have a Material
Adverse Effect.
2.3 ORGANIZATION AND STANDING . Each of Seller and the
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Seller and each
of the Subsidiaries has all requisite corporate power and authority to carry
on its respective business as presently conducted and to own, lease and
operate its respective properties and assets as currently owned, leased and
operated, and each is duly qualified to do business and is in good standing
in each jurisdiction in which the properties owned, leased or operated by it,
or where the nature of the business conducted by it, make such qualification
necessary, except where the failure to so qualify or be in good standing
would not have a Material Adverse Effect.
2.4 CAPITAL STOCK OF THE SUBSIDIARIES . The authorized capital
stock of ADS Network consists of 1,000 shares of common stock, par value $.01
per share, of which 1,000 shares are duly authorized and validly issued and
outstanding, fully paid and nonassessable and are owned by Seller free and
clear of any Encumbrances. The authorized capital stock of Commercial
Services consists of 1,000 shares of capital stock, par value $.01 per share,
of which 1,000 shares are duly authorized and validly issued and outstanding,
fully paid and nonassessable and are owned by Seller free and clear of any
Encumbrances. Except for the Shares, there are no shares of capital stock or
other equity securities of either Subsidiary outstanding. None of the Shares
have been issued in violation of any orders, constitutions, laws, ordinances,
principles of common law, regulations, rules, statutes and treaties
(collectively, "Legal Requirements"), or in violation of, or are subject to,
any purchase option, call, right of first refusal or preemptive, subscription
or similar right. Except as set forth on Schedule 2.4, there are no
outstanding warrants, options, rights, agreements, convertible or
exchangeable securities or other commitments (other than this Agreement) (a)
pursuant to which Seller or either Subsidiary, is or may become obligated to
issue, sell, purchase, return or redeem any shares of capital stock or other
securities of such Subsidiary or (b) that give any Person (as hereinafter
defined) the right to receive any benefits or rights similar to any rights
enjoyed by or accruing to the holders of shares of capital stock of such
Subsidiary. Upon delivery to Purchaser at the Closing of certificates
representing the Shares, duly endorsed by Seller for transfer to Purchaser,
and upon Seller's receipt of the Purchase Price, Purchaser will acquire title
to the Shares, free and clear of any Encumbrances. No legend (other than a
restricted securities legend) or other reference to any purported Encumbrance
appears upon any certificate representing equity securities of either
Subsidiary.
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2.5 SUBSIDIARIES' EQUITY INTERESTS . The Subsidiaries do not
own, directly or indirectly, any capital stock of or other equity interests
in any corporation, partnership, limited liability partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or any other entity (collectively, together with any individual,
"Person").
2.6 BUSINESS PREMISES .
(a) Seller is a party to a lease (the "Riverwoods Lease")
covering the premises at 0000 Xxxx Xxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000,
which is used, in part, in connection with the Business. Schedule 2.6(a)
contains a complete and accurate list of the Riverwoods Lease, all amendments
thereto, and all other material documents relating to the Riverwoods Lease,
true copies of which documents have been previously made available to
Purchaser. Except as set forth in Schedule 2.6(a), (i) the Riverwoods Lease
is in full force and effect, constitutes the legal, valid and binding
obligation of, and is enforceable against, Seller and, to the knowledge of
Seller, each other Person that is a party thereto, in accordance with its
terms, (ii) Seller has not received any written notice from the lessor under
the Riverwoods Lease of the termination thereof, and (iii) there is no
default (including any failure by Seller to make timely payments to the
lessor in accordance with the terms of the Riverwoods Lease) or event which,
with notice or lapse of time, or both, would constitute a default on the part
of Seller (nor, to the knowledge of Seller, on the part of any other party
thereto). Seller will have entered into a written sublease with ADS Network
in the form attached hereto as Exhibit C (the "Riverwoods Sublease") covering
the portion of the Riverwoods, Illinois premises used in connection with the
Business, effective as of the Closing Date. At Closing, the Riverwoods
Sublease will be in full force and effect. Seller will have transferred to
ADS Network at Closing, good and valid title to the leasehold estate in the
premises demised under the Riverwoods Sublease free and clear of any
Encumbrance. The Riverwoods Sublease will cover substantially all the
properties that Seller and the Subsidiaries currently use to operate the
Business (other than the Xxxx Lease, defined below, and off-site storage
facilities). The Riverwoods, Illinois premises is not, to the knowledge of
Seller subject to: any requisition, closing or demolition order; any notice
of enforcement orders, abatement notices or declarations given by a
Governmental Entity that has not been complied with; any order or agreement
with a planning authority regulating use or development thereof which would
have a material adverse effect on the Business currently conducted on that
property; or any material dispute with any Person relating to the property or
its use. The Riverwoods Lease complies, and the Riverwoods Sublease will
comply, with all material and applicable Governmental Entity Legal
Requirements.
(b) Seller owns the premises located at 000 Xxxxxx Xxxxx, Xxxx,
Xxxxxxxxx 00000, which is used in connection with the Business, and Seller
has the right and power to lease all or part of such premises. Seller will
have entered into a lease with ADS Network in the form attached hereto as
Exhibit B (the "Xxxx Lease") covering the Xxxx, Tennessee premises used in
connection with the Business, effective as of the Closing Date. At Closing,
the Xxxx Lease will be in full force and effect. Seller will have transferred
to ADS Network at Closing, good and valid title to the leasehold estate in
the premises demised under the Xxxx Lease free and clear of any Encumbrance.
The Xxxx Lease will cover substantially all the properties that Seller and
the Subsidiaries currently use to operate the Business (other than the
Riverwoods Sublease, defined above, and off-site storage facilities). The
Gray, Tennessee premises is not, to the knowledge of Seller, subject to: any
requisition, closing or demolition order; any notice of enforcement orders,
abatement notices or declarations given by a
6
Governmental Entity that has not been complied with; any order or agreement
with a planning authority regulating use or development thereof which would
have a material adverse effect on the Business currently conducted in that
property; or any material dispute with any Person relating to the property or
its use. The Xxxx Lease will comply with all material and applicable Legal
Requirements.
2.7 LITIGATION . Except as disclosed on Schedule 2.7, there is
no suit, action or proceeding pending or, to the knowledge of Seller or
either Subsidiary, threatened against Seller relating to the Business, or
against either Subsidiary. There is no judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against Seller or
either Subsidiary which has had or is reasonably likely to have a Material
Adverse Effect.
2.8 TAXES .
(a) For purposes of this Agreement, (i) "Tax" or "Taxes" shall
mean all taxes, charges, fees, levies or other assessments, however
denominated, including, without limitation, income, profits, gross receipts,
excise, property, sales, withholding, social security, occupation, use,
service, license, payroll, franchise, transfer and recording taxes, fees and
charges, including estimated taxes, imposed by the United States or any other
federal, territorial, state, local or other taxing authority (domestic or
foreign), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties
or additional amounts attributable to, or imposed upon, or with respect to
any such taxes, charges, fees, levies or other assessments; (ii) "Tax Return"
shall mean any return, report or other document or information required to be
supplied to a taxing authority in connection with Taxes; (iii) "IRS" shall
mean the United States Internal Revenue Service; (iv) "Treasury Regulations"
shall mean the Treasury Regulations promulgated under the Code; (v) "Group"
shall mean, individually and collectively, (A) the Subsidiaries, (B) Seller,
(C) AFCC, and (D) any individual, trust, corporation, partnership or any
other entity as to which either one or both of the Subsidiaries is liable for
Taxes incurred by such individual or entity either (x) as a transferee, (y)
pursuant to Treasury Regulations Section 1.1502-6, or (z) pursuant to any
other provision of federal, territorial, state, local or foreign law or
regulation; (vi) "Audit" shall mean any audit or inquiry, assessment of
Taxes, reassessment of Taxes, or other examination by any taxing authority or
any judicial or administrative proceedings or appeal of such proceedings; and
(vii) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(b) In the last five years, the only jurisdictions where the
Subsidiaries have filed (or had filed on their behalf) any income Tax Returns
are with the Federal government of the United States and with those States
set forth on Schedule 2.8(b).
(c) As of the date hereof and at Closing, except as set forth
on Schedule 2.8(c): (i) all Tax Returns required to be filed by or on behalf
of the members of the Group with respect to any period ending on or prior to
the date hereof or the Closing Date, as the case may be, have been duly filed
on a timely basis and such Tax Returns are true, complete and correct in all
material respects; (ii) all Taxes shown to be payable on such Tax Returns or
on subsequent assessments with respect thereto have been paid in full on a
timely basis; (iii) there are no liens for Taxes upon any shares of the stock
or assets of the Subsidiaries, except for statutory liens for current Taxes
not yet due; (iv) the Subsidiaries have complied in all respects with all
applicable laws, rules and regulations relating to the payment and
withholding of Taxes except where the failure to so comply would not
7
have a Material Adverse Effect; and have, within the time and the manner
prescribed by law, withheld from and paid over to the proper Governmental
Entities all amounts required to be so withheld and paid over under
applicable laws; (v) there are no Audits or other administrative proceedings
or court proceedings pending with regard to any Taxes or Tax Returns of the
Subsidiaries, and neither Seller nor the Subsidiaries have received notice of
any pending Audits or proceedings, in each case, except those which would not
have a Material Adverse Effect; (vi) there are no outstanding written
requests, agreements, consents or waivers to extend the statutory period of
limitations applicable to the assessment of any Taxes or deficiencies against
any of the Subsidiaries; (vii) none of the Subsidiaries is a party to any
agreement providing for the allocation or sharing of Taxes; and (viii) no
power of attorney has been executed by any of the Subsidiaries with respect
to any matter relating to Taxes which is currently in force.
(d) TAX RETURNS FURNISHED. Purchaser has been furnished by
Seller or the Subsidiaries true and correct copies, as such may exist, of (i)
relevant portions of income tax audit reports, statements of deficiencies,
closing or other agreements received by the Subsidiaries or on behalf of the
Subsidiaries relating to Taxes, and (ii) all federal, state and local income
or franchise Tax Returns for the Subsidiaries for all periods ending after
1993. Except as set forth on Schedule 2.8(d), each Subsidiary has never been
a member of an affiliated group filing consolidated returns other than as a
group of which AFCC, the Subsidiaries and Seller were the only members.
Neither one of the Subsidiaries does business or derives income from any
state, local, territorial or foreign taxing jurisdiction other than those for
which all Tax Returns for all periods ending after 1993 have been furnished
to Purchaser. No claim has ever been made in writing to AFCC, Seller or any
Subsidiary by a taxing authority in a jurisdiction where the Subsidiaries do
not file Tax Returns that either entity is or may be subject to taxation by
that jurisdiction.
(e) TAX ELECTIONS AND SPECIAL TAX STATUS. As of the date hereof
and at Closing, except as set forth on Schedule 2.8(e): (i) neither of the
Subsidiaries is a party to any safe harbor lease within the meaning of
Section 168(f)(8) of the Code as in effect prior to amendment by the Tax
Equity and Fiscal Responsibility Act of 1982; (ii) neither of the
Subsidiaries has entered into any compensatory agreements with respect to the
performance of services which payment thereunder would result in a
nondeductible expense to the Subsidiaries pursuant to Section 280G of the
Code; (iii) none of the assets of either of the Subsidiaries is "tax exempt
use property" within the meaning of Section 168(h) of the Code; (iv) none of
the assets of either of the Subsidiaries is property which is required to be
treated as being owned by any other Person pursuant to the so-called "safe
harbor lease" provisions of former Section 168(f)(8) of the Code; (v) none of
the assets of either of the Subsidiaries directly or indirectly secures any
debt, the interest on which is tax-exempt pursuant to Section 103(a) of the
Code; (vi) neither Subsidiary has any liability for the Taxes of any Person
(other than such Subsidiary) either (A) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), (B) as a
transferee or successor, (C) by contract, or (D) otherwise; (vii) Seller is
not and will not be a "foreign person" (as that term is defined in Section
1445 of the Code); (viii) neither of the Subsidiaries has a permanent
establishment in any foreign country, as defined in any applicable Tax treaty
or convention between the United States of America and such foreign country;
(ix) except as set forth in Schedule 2.8(e), neither of the Subsidiaries is a
party to any joint venture, partnership, or other arrangement or contract
which could be treated as a partnership for federal income Tax purposes; and
(x) neither Subsidiary owns shares of stock or
8
other equity ownership interests in any corporation or other entity taxable
as an association for federal income tax purposes.
(f) SECTION 338 ELECTION. AFCC has the authority to make a
joint election under Code Section 338(h)(10) and similar state elections with
respect to the purchase of the Shares of the Subsidiaries by Purchaser as
contemplated by this Agreement.
2.9 BENEFIT PLANS . For purposes of this Agreement, "Benefit
Plans" means each bonus, incentive compensation, deferred compensation,
pension, profit-sharing, retirement, stock purchase, stock option or other
stock-based compensation, severance or termination benefits, supplemental
unemployment benefits, salary continuation, salary in lieu of notice,
hospitalization or other medical, life or other insurance plan or retiree
medical or retiree life insurance plan relating to Seller's and the
Subsidiaries' businesses, employees, officers or directors, including any
policy, plan, program or agreement that provides for the payment of similar
benefits including all plans that are "employee welfare benefit plans" or
"employee pension benefit plans" as such terms are defined in Sections 3(1)
and 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") maintained, sponsored or contributed to by Seller, either
Subsidiary, any Affiliate (as hereinafter defined) of them or any member of
their Controlled Group or under which Seller, either Subsidiary, any
Affiliate of them or any member of their Controlled Group has any present or
future obligations or liability on behalf of the Employees, Former Employees
or their dependents or beneficiaries. For purposes of this Agreement,
"Controlled Group" shall mean with respect to Seller and the Subsidiaries,
each Person which together with Seller and the Subsidiaries is treated as a
single employer under Sections 414(b), (c), (m) and (o) of the Code. The
Subsidiaries do not have any employees.
All contributions made or required to be made by the Subsidiaries
under any Benefit Plan meet the requirements for deductibility under the Code
in all material respects, and all contributions that are required to have
been made or to be made by the Subsidiaries prior to the Closing have been
made or will be made prior to the Closing.
Neither Subsidiary has sponsored or contributed to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA). No event or
condition has occurred in connection with which either Subsidiary is or could
be subject to any material Liability or any Encumbrance or lien with respect
to any Benefit Plan under ERISA, the Code or any other applicable law or
under any agreement or arrangement pursuant to or under which either
Subsidiary is required to indemnify any Person against such liability.
2.10 EMPLOYEE AND EMPLOYEE RELATIONS .
Except as set forth on Schedule 2.10, neither Subsidiary is
a to or subject to, or directly or indirectly liable under, any incentive,
bonus or commission plan or similar arrangement or understanding for the
benefit of any current or former officer, director or employee of Seller or
either Subsidiary or any deferred compensation, severance, retention or
employment contract or similar arrangement or understanding with any such
officer, director or employee (whether written or oral), that is not
terminable at will by Seller or either Subsidiary and that in any event could
result in liability of or an obligation against Purchaser or either
Subsidiary following the Closing. Except as set forth
9
on Schedule 2.10 or as otherwise expressly provided in this Agreement, no
officer, director or employee of Seller or either Subsidiary shall be
entitled to any severance pay or retention pay or bonus from Purchaser or
either Subsidiary solely as a result of the consummation of the transactions
contemplated hereby.
2.11 COMPLIANCE, LICENSES AND PERMITS . Seller and its
Subsidiaries each has complied in all material respects with all Legal
Requirements including, without limitation, all consumer protection laws and
regulations. Except as set forth on Schedule 2.11, Seller and the
Subsidiaries each has all Permits necessary to permit Seller and the
Subsidiaries to conduct the Business as now being conducted, other than such
Permits which, individually or in the aggregate, with respect to the Network
Services Business, if not obtained, would not have a Material Adverse Effect.
Except as set forth on Schedule 2.11, each such Permit is in good standing
and there is no proceeding pending or, to the Seller's and each Subsidiary's
knowledge, threatened, to revoke or limit any of them.
2.12 TAKEOVER STATUTES . No "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute or regulation
enacted under state or federal laws in the United States applicable to Seller
or either Subsidiary is applicable to the transaction contemplated hereby
(including, without limitation, Section 203 of the General Corporation Law of
the State of Delaware).
2.13 CONTRACTS IN FULL FORCE AND EFFECT .
(a) Schedule 2.13(a) sets forth a complete and accurate list of
each contract or agreement relating to the Business as to which the
Subsidiaries will be bound by or subject to at Closing as a result of
Sections 4.3, 4.4, and 4.5:
(i) pursuant to which Seller or either Subsidiary has been
engaged by any other Person to provide any products or services in
connection with the Business;
(ii) pursuant to which Seller or either Subsidiary purchases
or otherwise acquires any products or services from any other Person in
connection with the Business with an annualized anticipated expense of
more than $25,000;
(iii) pursuant to which Seller or either Subsidiary leases any
of the assets used by Seller or either Subsidiary to operate the
Business;
(iv) that contains covenants or other provisions limiting the
freedom of Seller to compete with the Business, or limiting the freedom
of either Subsidiary to compete in any line of business or with any
Person or in any area;
(v) pursuant to which Seller or either Subsidiary licenses
(either as a licensor or licensee), obtains or possesses any rights
with respect to, or that otherwise relates to, Intellectual Property
Assets (as defined below);
(vi) evidencing or relating to any Encumbrance on any asset
used by Seller or either Subsidiary to operate the Business;
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(vii) evidencing or relating to any employment, consulting,
bonus, commission, severance, non-compete or confidentiality agreement
or arrangement (or any other agreement with Employees or consultants);
or
(viii) that would have a Material Adverse Effect in the event
of termination or default of the contract or agreement (the contracts
and agreements listed in (i) - (viii) collectively, the "Contracts").
At Closing, the Subsidiaries will hold all of Seller's rights, title and
interests under the Contracts.
(b) Seller and the Subsidiaries will make available to
Purchaser a complete and accurate copy of each Contract as presently in
effect, and, except as listed Schedule 2.13(b), neither Seller nor either
Subsidiary has received any written notice from any party to any such
Contract of the termination or threatened termination thereof.
(c) Except as expressly set forth in Schedule 2.13(c), all
Contracts are valid and binding, and are in full force and effect and are
enforceable against Seller or the Subsidiaries in accordance with their terms
and, to the knowledge of Seller and either Subsidiary, are enforceable
against the other parties thereto, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws of general applicability affecting creditors' rights and by
general equitable principles. Neither Seller nor either Subsidiary has
received notice of any pending or threatened bankruptcy, insolvency or
similar proceeding with respect to any party to such agreements except as
disclosed on Schedule 2.13(c). Except as set forth in Schedule 2.13(c), each
of the Contracts may be assigned by Seller to ADS Network or Commercial
Services without the consent or approval of any other Person and, upon
consummation of the transactions contemplated by this Agreement and by the
other documents, instruments and agreements required to be executed and
delivered by Seller or either Subsidiary pursuant hereto, will remain in full
force and effect and will not create a right of any other Person that is a
party thereto to terminate such Contract based upon such transactions.
2.14 BROKERS, FINDERS, ETC. Except for Xxxxxxx Xxxxx Xxxxxx
Inc., Seller is not subject to any valid claim of any broker, investment
banker, finder or other intermediary in connection with the transactions
contemplated by this Agreement. Neither Subsidiary has or will pay any costs
or expenses including, without limitation, investment advisors, brokers,
accountant and attorneys' fees, for services rendered as a result of or in
connection with the preparation, negotiation, execution or performance of
this Agreement. Any such costs and expenses incurred by either Subsidiary
shall be paid by Seller.
2.15 INSURANCE . Seller and/or the Subsidiaries are and, until
Closing, will be covered by the policies of insurance (including fidelity
bonds) that, in respect of amounts, types and risks insured, management
reasonably believes to be adequate for the Business (which policies are in
full force and effect). Upon request, Seller and the Subsidiaries shall
provide to Purchaser copies of such insurance policies.
2.16 TANGIBLE PERSONAL PROPERTY . Except as listed in Schedule
2.16 and except for liens for Taxes not yet due and payable, Seller or either
Subsidiary currently owns or leases, and at Closing
11
the Subsidiaries will own or lease, free and clear of all Encumbrances, all
tangible personal property which Seller and the Subsidiaries use primarily to
conduct the Business as presently conducted. Such tangible personal property
has been and will be maintained in good condition (ordinary wear and tear
excepted) as to permit Seller and each Subsidiary to conduct the Business as
presently conducted.
2.17 INTENTIONALLY OMITTED .
2.18 GUARANTIES . Except as set forth on Schedule 2.18, no
Subsidiary is a guarantor or is otherwise liable for any liability or
obligation (including indebtedness) of any other Person.
2.19 POWERS OF ATTORNEY . Schedule 2.19 contains a complete and
accurate list of each power of attorney granted to any Person by either
Subsidiary or by Seller with regard to the Business.
2.20 INTELLECTUAL PROPERTY .
(a) The term "Software Products" means the currently
distributed versions and all earlier and predecessor versions, and
versions presently in development, of computer programs developed by
Seller or one of the Subsidiaries relating to the Business as listed on
Schedule 2.20(a), which term also includes source and object code
versions and associated documentation, and all other computer programs
(other than miscellaneous commonly-available third-party software) used
primarily in connection with the Business.
(b) The term "Intellectual Property Assets" includes:
(i) the name "FleetShare" and all fictional business
names, trading names, registered and unregistered trademarks,
service marks, and applications therefor owned, used or licensed
by Seller or either Subsidiary primarily in connection with the
Business excluding any name using "SPS" or any derivation thereof
(collectively, "Marks");
(ii) all patents, patent applications, provisional
patent applications, continuations, continuations in part, and
inventions and discoveries that may be patentable owned or
licensed by Seller or either Subsidiary primarily in connection
with the Business (collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works, including the Software Products, owned by
Seller or either Subsidiary primarily in connection with the
Business (collectively, "Copyrights");
(iv) the Software Products;
(v) all rights in mask works owned by Seller or
either Subsidiary primarily in connection with the Business;
(vi) all know-how, trade secrets, confidential or
proprietary INFORMATION, customer lists, technical information,
data, process technology, plans, drawings, and
12
blue prints owned or licensed (whether as licensee or licensor)
by Seller or either Subsidiary primarily in connection with
Business (collectively, "Trade Secrets"); and
(vii) all Internet domain names and other computer user
identifiers and any rights in and to web sites, including rights
in and to any text, graphics, audio and video files or other code
incorporated in such sites owned by or licensed to Seller or
either Subsidiary used primarily in connection with the Business
(collectively, "Internet Assets").
(c) Schedule 2.13(a) contains a complete and accurate list of
all Contracts relating to the Intellectual Property Assets except for any
license implied by the sale of a product and perpetual, paid-up licenses for
commonly-available third-party software programs under which Seller or either
Subsidiary is the licensee. Except as set forth on Schedule 2.20(c), there
are no outstanding and, to Seller's and each Subsidiary's knowledge, no
threatened disputes or disagreements with respect to any such Contract. All
commonly-available third-party software programs used in connection with the
Business are installed on computer equipment that is, or will be at Closing,
owned by a Subsidiary, pursuant to valid and existing software licenses to
Seller.
(d) One or more of the Subsidiaries is, or will be at Closing,
the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all Encumbrances other than
those identified in Schedule 2.20(d), and either or both of the Subsidiaries
has, or will have, the right to use and license others to use all of the
Intellectual Property Assets. All former and current employees of Seller and
of each Subsidiary involved in the Business who participated in the creation
of any Intellectual Property Asset did so in the normal course and scope of
his or her employment by Seller or the Subsidiaries, and his or her work
product is considered "work made for hire." No independent contractor was
used by Seller or either Subsidiary in the creation of any Intellectual
Property Asset unless such contractor first executed a written contract with
Seller or the Subsidiaries providing that all work created by the contractor
was "work made for hire," and that all right, title, and interest in and to
such work would be assigned without reservation to Seller or the
Subsidiaries, as the case may be. No employee of Seller or either Subsidiary
involved in the Business has entered into any Contract that restricts or
limits in any way the scope or type of work in which the employee may be
engaged or requires the employee to transfer, assign, or disclose information
concerning his or her work to anyone other than Seller or the Subsidiaries.
(e) Schedule 2.20(e) contains a complete and accurate list and
summary description of all patent registrations and patent applications. All
of the issued Patents are currently in compliance with formal legal
requirements (including payment of filing, examination, and maintenance fees
and proofs of working or use), are valid and enforceable, and are not subject
to any maintenance fees or taxes or actions falling due within ninety days
after the Closing Date. No patent registration or application has been or is
now involved in any interference, infringement, reissue, reexamination, or
opposition proceeding. To Seller's knowledge, there is no potentially
interfering or infringing patent or patent application of any third party. To
Seller's knowledge, no Patent is infringed or has been challenged or
threatened as to its validity or enforceability in any way. Seller does not
have knowledge of any act constituting inequitable conduct in the procurement
or maintenance of any Patent. The Software Products can be manufactured,
distributed and used without infringement of any patent or other proprietary
right of any Person. Neither Seller nor either
13
Subsidiary has committed any act with respect to any Patent which may
constitute patent misuse or may otherwise render a patent registration
unenforceable.
(f) Schedule 2.20(f) contains a complete and accurate list and
summary description of all Marks that have been registered or for which
application for registration has been made. All Marks that have been
registered with the United States Patent and Trademark Office are currently
in compliance with all formal legal requirements (including the timely
post-registration filing of affidavits of use and incontestability and
renewal applications), are valid and enforceable, and are not subject to any
maintenance fees, Taxes, or actions falling due within ninety days after the
Closing Date. No Xxxx that has been registered or applied for has been or is
now involved in or threatened with any opposition, invalidation, or
cancellation proceeding and, to Seller's knowledge, no such action is
threatened with the respect to any of the Marks. To Seller's knowledge, there
is no potentially interfering or infringing registered or common law
trademark, service xxxx, trademark application, or service xxxx application
of any third party. To Seller's knowledge, no Xxxx is infringed or has been
challenged or threatened in any way. The Marks can be used in the Business
and to identify the Subsidiaries' goods and services without infringing any
trademark, service xxxx or trade name right of any Person, and without
violating any anti-dilution law.
(g) Schedule 2.20(g) contains a complete and accurate list and
summary description of the Copyright registrations. No Copyright is infringed
or, to Seller's and each Subsidiary's knowledge, has been challenged or
threatened in any way. The creation of the Software Products did not involve
the copying, reproduction or adaptation of any pre-existing work in which
Seller or one of the Subsidiaries was not the copyright owner except to the
extent authorized by the copyright owner. The Software Products can be
copied, and copies of the Software Products can be manufactured, distributed
and used by Seller and the Subsidiaries and their customers and licensees
without infringing any copyright of any Person and without violating any
contractual restriction by which Seller or either Subsidiary is bound.
(h) With respect to each Trade Secret, the documentation, as
such exists, relating to such Trade Secret is current, accurate, and
sufficient in detail and content to identify and explain it and to allow its
full and proper use without reliance on the knowledge or memory of any
individual. Seller and each Subsidiary have used commercially reasonable
efforts to document the Trade Secrets, and have taken all commercially
reasonable precautions to protect the secrecy, confidentiality, and value of
the Trade Secrets. Seller and one or more of the Subsidiaries has good title
and an absolute (but not necessarily exclusive) right to use the Trade
Secrets, and at Closing one or more of the Subsidiaries will have good title
and an absolute (but not necessarily exclusive) right to use the Trade
Secrets. To Seller's knowledge, the Trade Secrets have not been used,
divulged, or appropriated either for the benefit of any Person (other than
one or more of the Subsidiaries) or to the detriment of either Subsidiary. No
Trade Secret is subject to any adverse claim or has been challenged or
threatened in any way.
(i) Seller and the Subsidiaries have provided or will provide
to Purchaser true and accurate copies of the source code versions of all
Software Products developed or owned by Seller or either of the Subsidiaries
(collectively, "Proprietary Software Products"), including, with respect to
each Proprietary Software Product, documentation of previous versions of such
product and materials and information evidencing when, by whom and how each
version of such product was
14
created, including drafts, flow charts, written documents, manuals and other
materials produced during the creation of such Proprietary Software Product
that is sufficient to utilize such Proprietary Software Product. Except as
identified in Schedule 2.20(i), no copies of any of the Proprietary Software
Products have been sold or licensed to any Person. No Person, other than
Seller or a Subsidiary, is in possession of a source code version of any of
the Proprietary Software Products, and at Closing no Person, other than a
Subsidiary, will be in possession of a source code version of any of the
Proprietary Software Products. All copies of all the Proprietary Software
Products distributed have been distributed in object code format subject to
written licenses which restrict the use of the Proprietary Software Products
and forbid copying, decompiling, revision or reverse engineering of the
Proprietary Software Products. All licensees of Software Products are in full
compliance with all the terms of their licenses. All copies of the
Proprietary Software Products licensed or sold to third parties substantially
conform to all published specifications therefor and all technical and other
written materials provided by Seller or either Subsidiary to a licensee or
purchaser in connection with the respective Proprietary Software Product.
Except as identified in Schedule 2.20(i), the Proprietary Software Products
contain no material operating defects and, to Seller's knowledge, the other
Software Products contain no material operating defects.
(j) At Closing, the Subsidiaries will have adequate programming
and operations to meet existing commitments of the Business relating to the
Software Products.
(k) Schedule 2.20(k) contains a complete and accurate list of
the Internet Assets. Seller does not know of any dispute with any trademark
or service xxxx claimant or registrant concerning use of any domain name
listed on Schedule 2.20(k), nor has any Internet domain name registering
administration organization, including Network Solutions, Inc., delivered any
notice to Seller or either of the Subsidiaries demanding that it change or
discontinue use of any domain name listed on Schedule 2.20(k). Seller and the
Subsidiaries have licenses allowing the reproduction and display on all
Internet sites listed on Schedule 2.20(k) of the graphical material
(including maps, trademarks, service marks, drawings photographs and scans),
audio, video and textual material appearing on such Internet sites. Seller
and the Subsidiaries are not aware of any graphics, words or phrases used on
any Internet sites listed on Schedule 2.20(k), including in meta-tags and
meta-descriptions or other indexing features of such Internet sites, or any
hyperlinks including on any such Internet sites, which would infringe or
dilute the xxxx of another, which would defame or disparage any Person or
which would violate the rights or privacy or publicity of another.
2.21 WARRANTIES AND WARRANTY CLAIMS . Schedule 2.21 lists and
accurately summarizes all product and service warranties made by or on behalf
of Seller or either Subsidiary in connection with the Business. Schedule 2.21
lists and accurately summarizes all warranty claims received by Seller or
either Subsidiary relating to the Business for the two year period ending
December 31, 1998, and the three-month period ending March 31, 1999. Neither
Seller nor either Subsidiary has knowledge of any basis for any product or
service warranty, product liability or similar claims against Seller or
either Subsidiary relating to the Business.
2.22 OFFICERS AND DIRECTORS . Schedule 2.22 contains a complete
and accurate list of the officers and directors of each Subsidiary.
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2.23 BOOKS AND RECORDS . The books of account, minute books,
stock record books, and other records of Seller and each Subsidiary relating
to the Business, all of which have been made available to Purchaser, are
complete and correct and have been maintained in accordance with sound
business practices, including the maintenance of an adequate system of
internal controls. Such minute books of each Subsidiary contain accurate and
complete records of all formal meetings held of, and corporate action taken
by, the stockholders, the Boards of Directors, and committees of the Boards
of Directors of the relevant Subsidiary. No meeting of any such stockholders,
Board of Directors, or committee has been held at which any corporate action
was taken for which minutes have not been prepared and are not contained in
such minute books. At the Closing, all of the books and records referred to
in this Section 2.23 will be in the possession of the relevant Subsidiary.
2.24 CERTAIN PAYMENTS . Neither Seller nor either Subsidiary or
any director, officer, agent, or employee of Seller or either Subsidiary, or
any other Person associated with or acting for or on behalf of Seller or
either Subsidiary, has, in connection with the Business, directly or
indirectly (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, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of either Subsidiary, or (iv)
in violation of any Legal Requirement, or (b) established or maintained any
fund or asset relating to the Business that has not been recorded in the
books and records of Seller or the relevant Subsidiary.
2.25 BANK ACCOUNTS . The only bank or securities account
maintained by or on behalf of either Subsidiary or the Business is Commercial
Services' account number 0000000 at 1st Chicago. The only Persons authorized
to sign on behalf of Commercial Services with respect to such bank account
are D. Xxxxxxx Xxxxxxxx, Xxxx X. Xxxxxxxx, Xxxxxxxxxxx X. Xxxxxx, Xxxxxxx X.
Xxxxx, Xxxx X. Xxxxxx and Xxx X. Xxxxxxx.
2.26 YEAR 2000 . As used in this Agreement, the term "Date
Handling" means the consistent and accurate: (i) handling of date data
before, during or after January 1, 2000; (ii) processing, providing,
receiving, calculating, comparing and sequencing of date data before, during
or after January 1, 2000; and (iii) responding to two-digit year date data in
a manner that resolves any ambiguity as to the 20th and 21st centuries.
(a) PLAN. Seller and the Subsidiaries have developed a
detailed, comprehensive plan and time line for addressing on a timely basis
their ability for proper Date Handling relating to the Business (the "Plan").
Schedule 2.26 is a complete and accurate copy of the Plan. The Plan has been
approved by Seller's senior management. Seller reasonably believes that: (i)
the Plan addresses all aspects of potential improper Date Handling associated
with the Business; (ii) the Plan is capable of being completely implemented,
in a timely manner, in accordance with its time line; (iii) currently, Seller
has, and, immediately prior to the Closing, the Subsidiaries will have, an
adequate number of employees with the necessary expertise and experience to
continue to implement the Plan, on a timely basis, in accordance with its
time line; and (iv) the Plan includes contingency plans in the event of
failure of any system, application or equipment (whether theirs or a third
party's) due to improper Date Handling, which contingency plans Seller
reasonably believes are feasible and allow (after
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implementation of contingency plans) the uninterrupted and unimpaired
operation of the Business in the event of any such failure.
(b) IMPLEMENTATION OF THE PLAN. Seller and the Subsidiaries
have implemented, and will through Closing continue to implement, the Plan in
accordance with the Plan's requirements and time line. At Closing, Seller
reasonably believes Seller and the Subsidiaries will have progressed in all
material respects in the implementation of the Plan to the corresponding
milestone required by the Plan's time line for the Closing Date. On or prior
to Closing Seller will notify Purchaser of the status of the Plan including
any remaining remediation and testing of any improper Date Handling with
regard to the remaining portion of the Business's systems, applications and
equipment. In implementing the Plan, Seller is making due inquiry and will
through Closing continue to make due inquiry of all of the suppliers, vendors
and third-party trading partners of the Business regarding the status of such
other Persons' efforts to address improper Date Handling. Seller and the
Subsidiaries are in the process of coordinating, and will through Closing
continue to coordinate, with such other Persons in such Person's efforts to
remediate any improper Date Handling by the systems, applications and
equipment of such other Persons which may affect the Business. Seller and the
Subsidiaries have, or by Closing will have, notified each of the customers of
the Business of: (i) the necessity for each customer to participate in
testing for proper Date Handling the interface and connections between the
respective systems, applications and equipment of Seller and the Subsidiaries
relating to the Business, on one hand, and the customer, on the other hand;
(ii) the necessity for each customer to require its third-party service
providers relating to the Business to likewise participate in such testing;
(iii) the time line for such testing; and (iv) the consequences of results
from such testing indicating that a customer's or any of its third-party
service provider's systems, applications or equipment does not accommodate
proper Date Handling. On or prior to the Closing Seller will notify Purchaser
of the status of its dealings with its customers, including a more detailed
report with respect to any Business customer whose 1998 revenue with respect
to the Business was $1 million or greater.
(c) Seller reasonably believes that if the Plan is completely
implemented in accordance with the Plan's time line, all of the systems,
applications and equipment owned or operated by Seller or Commercial Services
for the Business and affected by any improper Date Handling will be
identified and remedied before any such system, application or equipment will
cause any interruption or impairment of the operations of the Business.
2.27 SERVICE LEVELS . The Business is, and will at Closing be,
capable of performing at levels of service that meet in all material respects
all contractual service level requirements relating to the Business, or, to
the extent there are no such requirements, at a level of service that meets
in all material respects the levels of service performed by the Business
since November 1, 1998.
2.28 FINANCIAL STATEMENTS .
(a) Seller has delivered to Purchaser: (i) its unaudited
consolidated balance sheet as at December 31, 1998 (the "Balance Sheet") and
the related unaudited consolidated statement of income for the year then
ended; and (ii) its unaudited consolidated balance sheet as at March 31, 1999
(the "Interim Balance Sheet") and the related unaudited consolidated
statement of income for the three months then ended, including in each case
the notes thereto. Such financial statements and
17
notes fairly present the financial condition and the results of operations of
Seller as at the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP, subject, in the case of
the interim financial statements, to normal recurring year-end adjustments
(which will not, individually or in the aggregate, have a Material Adverse
Effect) and the absence of notes. The financial statements referred to in
this Section 2.28(a) reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes
to such financial statements. Except for the entities included in the
consolidated financial statements, GAAP does not require the financial
statements of any other Person to be included in the financial statements of
Seller.
(b) Attached as Schedule 2.28(b) are: (i) pro forma statements
of income of the Business for each of the fiscal years ending December 31,
1994 through 1998; and (ii) a pro forma statement of income for the Business
for the three months ending March 31, 1999. Such pro forma financial
statements fairly present in all material respects the results of operations
of the Business, as at the respective dates of and for the periods referred
to in such pro forma financial statements, all in accordance with GAAP,
subject, in the case of the interim pro forma financial statements, to normal
recurring year-end adjustments (which will not, individually or in the
aggregate, have a Material Adverse Effect) and the absence of notes. The pro
forma financial statements referred to in this Section 2.28(b) reflect the
consistent application of such accounting principles throughout the periods
involved. The assumptions used in the preparation of the pro forma financial
statements of the Business are reasonable and appropriate to give pro forma
effect in all material respects to the transactions or circumstances
described therein. No financial statements of any Person, other than of
Seller and the Subsidiaries, are required by GAAP to be included in the pro
forma financial statements of the Business.
2.29 INVENTORY . All inventories of products held for sale or
lease or under customer orders for purchase or lease by Seller or either
Subsidiary relating to the Business (collectively the "Inventory") consists
in all material respects of a quality usable and salable in the ordinary
course of business. All Inventory has been and will be recorded at cost. At
Closing there will be, in all material respects consistent with historical
demand, sufficient Inventory on hand to enable the Subsidiaries to continue
to conduct the Business as it is being conducted at the time this Agreement
is executed, and to supply in all material respects, their customers with the
products and services they have ordered.
2.30 ACCOUNTS RECEIVABLE . Schedule 2.30 (which, upon the
agreement of the parties, may be delivered in commonly readable electronic
format) contains a complete and accurate list of all accounts receivable of
Seller and each Subsidiary relating to the FleetShare Business (collectively,
the "FleetShare Accounts Receivable") as of April 30, 1999 and as of a date
that is no more than two days prior to the Closing Date, as the case may be,
which list sets forth the aging of such FleetShare Accounts Receivable. With
respect to all commercial credit card accounts (the "Accounts") and related
FleetShare Accounts Receivable: (a) such Accounts Receivable represent valid
obligations arising from sales actually made or services actually performed
in the ordinary course of business; (b) there is no contest, claim or, to the
knowledge of Seller or either Subsidiary, right of set-off, under any
contract with any obligor of a FleetShare Account Receivable relating to the
amount or validity of such FleetShare Account Receivable; (c) all
underwriting and origination of Accounts were performed in accordance with
the then applicable written policies and procedures of Commercial Services;
(d) each of the FleetShare Accounts Receivable and Accounts and the interest
rates, fees
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and charges in connection therewith comply, and have at all times in all
material respects complied with, all Legal Requirements; (e) each Account,
FleetShare Account Receivable and the related cardholder agreement is the
legal, valid and binding obligation of the cardholder-obligor and any
guarantor named therein and each is enforceable and legally collectible in
accordance with its terms under all applicable Legal Requirements, and, to
Seller's and Commercial Services' knowledge, is subject to no defense, offset
or counterclaim, subject to applicable bankruptcy, reorganization,
insolvency, moratorium (whether general or specific) and similar laws
relating to creditor rights generally, and general principles of equity
regardless of whether such enforcement is sought in a proceeding in equity or
at law; (f) each FleetShare Account Receivable is free and clear of any and
all Encumbrances incurred or existing by, through or on behalf of, or in
favor of any Person; and (g) each cardholder agreement constitutes the
agreement of Commercial Services and the cardholder, and Commercial Services
has made no amendment, modification or supplement to any cardholder agreement
which is not reflected in writing in such agreement.
2.31 CUSTOMERS AND SUPPLIERS . Except to the extent set forth in
Schedule 2.31, there has not been any adverse change in the business
relationship of Seller or either Subsidiary with any customer listed on
Schedule 2.31 (a "Material Customer") or with any supplier and no Material
Customer or supplier has notified Seller or either Subsidiary in writing or
otherwise that they have canceled or otherwise terminated or threatened in
writing or otherwise to cancel or otherwise terminate, their relationship
with Seller or either Subsidiary nor, to Seller's and each Subsidiary's
knowledge, has there been any material dispute with any Material Customer or
supplier.
2.32 RELATIONSHIPS WITH RELATED PERSONS . For purposes of this
Agreement, the term "Related Person" as used with regard to an entity means
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person; (b) any Person that holds a direct or indirect
beneficial ownership of voting securities or other voting interests
representing at least 10% of the outstanding voting power of a Person or
equity securities or other equity interests representing at least 10% of the
outstanding equity securities or equity interests ("Material Interest") in
such specified Person; (c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity); (d) any Person in which such specified Person holds a Material
Interest; and (e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity). As of
the Closing Date, neither Seller nor any Related Person of Seller or of
either Subsidiary has, or will have, any interest in any property (whether
real, personal, or mixed and whether tangible or intangible), used primarily
in the operation of the Business, except for the various arrangements between
Seller and the Subsidiaries expressly contemplated by this Agreement. Except
for such arrangements, neither Seller nor any Related Person of Seller or of
either Subsidiary is, or has owned (of record or as a beneficial owner) an
equity interest or any other financial or profit interest in, an entity that
has had business dealings or a material financial interest in any transaction
with either Subsidiary other than business dealings or transactions conducted
in the ordinary course of business with either Subsidiary at substantially
prevailing market prices and on substantially prevailing market terms. Except
as expressly contemplated by the provisions of this Agreement or as set forth
in Schedule 2.32, neither Seller nor any Related Person of Seller or of
either Subsidiary is a party to any contract with, or has any claim or right
against, either Subsidiary.
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2.33 DISCLOSURE . No representation or warranty of Seller or
either Subsidiary contained in this Agreement and no statement contained in
any certificate or schedule furnished or to be furnished by or on behalf of
Seller or either Subsidiary to Purchaser or any of its representatives hereto
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary in light of the circumstances
under which it was or will be made, in order to make the statements herein or
therein not misleading or necessary in order to fully and finally provide the
information required to be provided in any such document, certificate or
schedule. There is no fact known to Seller or either Subsidiary that has
specific application to Seller or either Subsidiary (other than general
economic or industry conditions) and that materially adversely affects or, as
far as Seller and each Subsidiary can reasonably foresee, materially
threatens, the assets, business, prospects, financial condition, or results
of operations of the Business or either Subsidiary that has not been set
forth in this Agreement or the related schedules.
2.34 ABSENCE OF CERTAIN CHANGES; CONDUCT OF BUSINESS . Except as
contemplated by the parties in connection with the creation of ADS Network
and the transfer of the Business from Seller to the Subsidiaries pursuant to
the provisions of this Agreement, or as set forth in Schedule 2.34, since
December 31, 1998:
(a) Seller and each Subsidiary have conducted the Business only
in the ordinary course, consistent with past practice, and there has not
occurred or arisen any event, individually or in the aggregate, having, or
which, insofar as reasonably can be foreseen, in the future is likely to
have, a Material Adverse Effect on the business, operations, properties,
prospects, assets, or condition of either Subsidiary or the Business;
(b) there has been no change in either Subsidiary's authorized
or issued shares; no grant of any option or right to purchase shares of
either Subsidiary; no issuance of any security convertible into such shares;
no grant of any registration rights; no purchase, redemption, retirement, or
other acquisition by either Subsidiary of any shares; and no declaration or
payment of any dividend or other distribution or payment in respect of shares;
(c) there has been no amendment to any of the original
certificates of incorporation or bylaws or similar documents of either
Subsidiary;
(d) except in the ordinary course of business, there has been
no payment or increase by Seller or either Subsidiary relating to the
Business of any bonuses, salaries, or other compensation to any shareholder,
director, officer, or employee or entry into any employment, severance, or
similar contract with any director, officer, or employee involved in the
Business;
(e) there has been no damage to or destruction or loss of any
asset or property of Seller or either Subsidiary relating to the Business,
whether or not covered by insurance, materially and adversely affecting the
properties, assets, business, financial condition, or prospects of the
relevant Subsidiary or the Business;
(f) there has been no entry into, termination of, or receipt of
notification of termination of any joint venture, credit, or similar
agreement involving Seller or either Subsidiary relating to the Business;
20
(g) there has been no termination or breach of, or receipt of
notice of termination of any vendor contract or any Material Customer
contract, by or to Seller or either Subsidiary relating to the Business;
(h) there has been no sale (other than sales of inventory in
the ordinary course of business), lease, or other disposition of any material
asset or property of Seller or any Subsidiary relating to the Business, or
Encumbrance on any material asset or property of Seller or either Subsidiary
relating to the Business, including the sale, license, or other disposition
of any of the Intellectual Property Assets;
(i) there has been no cancellation or waiver of any claims or
rights with a value to Seller or either Subsidiary with regard to the
Business in excess of $100,000;
(j) there has been no material change in the accounting methods
used by Seller or either Subsidiary with regard to the Business;
(k) there has been no acquisition by merger or consolidation
with, or purchase of a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire any assets
that are material, individually or in the aggregate, to the Subsidiaries or
the Business; and
(l) there has been no agreement, whether oral or written, by
Seller or either Subsidiary with regard to the Business to do any of the
foregoing.
2.35 UNDISCLOSED LIABILITIES . Except as set forth in
Schedule 2.35, there are no Liabilities with respect to:
(a) Seller, except (i) as and to the extent set forth on the
Interim Balance Sheet, (ii) as incurred in connection with the transactions
contemplated, or as provided, by this Agreement or (iii) as incurred since
the date of the Interim Balance Sheet to the extent such Liabilities, when
aggregated, do not decrease the net worth of Seller to less than
$170,000,000; or
(b) the Business or either Subsidiary, except (i) as incurred
in connection with the transactions contemplated, or as provided, by this
Agreement or (ii) as incurred in the ordinary course of business and
consistent with past practice and not in violation of Section 2.34.
2.36 CONDUCT OF THE BUSINESS . Schedule 2.36 lists all of the
assets, whether tangible or intangible, and all other rights, title and
interests that are used by Seller or the Subsidiaries to conduct the Business
as conducted by Seller and the Subsidiaries immediately prior to the Closing
that will not be possessed by the Subsidiaries after the Closing.
2.37 NO OTHER REPRESENTATIONS OR WARRANTIES . Except for the
representations and warranties contained in this Article II, neither Seller
nor any other person makes any other express or implied representation or
warranty on behalf of Seller.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
3.1 ORGANIZATION AND STANDING. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware.
3.2 AUTHORITY. Purchaser has all requisite corporate power and
authority to execute this Agreement and all documents, instruments and
agreements required to be executed by Purchaser pursuant hereto and to
consummate the transactions contemplated hereby. The execution and delivery
of the Agreement and all documents, instruments and agreements required to be
executed by Purchaser hereto, and the performance by Purchaser of its
obligations hereunder have been duly authorized by all necessary action on
the part of Purchaser (including requisite stockholder approval, if
necessary). This Agreement has been duly executed and delivered by Purchaser
and, assuming the due execution and delivery hereof by Seller and the
Subsidiaries, constitutes a valid and legally binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms
(subject, as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium (whether general or specific) and
similar laws relating to creditors' rights generally, and general principles
of equity (regardless of whether such enforcement is sought in a proceeding
in equity or at law)).
3.3 NO CONFLICTS; CONSENTS. Except as set forth on Schedule 3.3,
neither the execution and delivery of this Agreement by Purchaser, nor the
consummation of the transactions contemplated hereby will conflict with, or
result in any violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under any
provision of (a) the certificate of incorporation or by-laws of Purchaser,
(b) any note, bond, mortgage, indenture, deed of trust, license, lease,
contract, commitment, agreement or arrangement to which Purchaser is a party
or by which it or any of its properties or assets is bound or (c) any
judgment, order or decree, or statute, law, ordinance, rule or regulation,
applicable to Purchaser or any of its properties or assets, in the case of
(b) and (c) except for any such conflict, violation, default or right which
would not reasonably be expected to have a material adverse effect on the
business, assets, financial condition, or results of operations of Purchaser
and its Affiliates taken as a whole. No Permit of, or registration,
declaration or filing with, any Governmental Entity is required to be
obtained or made by Purchaser or in connection with the consummation of the
transactions contemplated hereby other than (x) compliance with and filings
under the HSR Act, (y) as set forth on Schedule 3.3 hereto and (z) those the
failure of which to make or obtain would not materially affect the ability of
Purchaser to consummate the transactions contemplated hereby. As used herein,
the term "Affiliate" shall mean, as to any specified Person, any other Person
that directly or indirectly through one or more intermediaries, controls or
is controlled by, or under common control with such specified Person. For the
purpose of this definition, "control," when used with respect to any
specified Person, means the power to direct or cause the direction of the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "controlling" and "controlled" shall have meanings correlative to the
foregoing.
22
3.4 FINANCIAL ABILITY TO PERFORM. At Closing Purchaser will have
sufficient funds available (through existing credit arrangements or
otherwise) to purchase all the Shares and to pay all of its fees and expenses
related to the transactions contemplated by this Agreement.
3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. There has not occurred or
arisen any event or events which is reasonably likely to prevent or delay in
any material respect the consummation of any of the transactions contemplated
by this Agreement.
3.6 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article III, neither
Purchaser nor any other Person makes any other express or implied
representation or warranty on behalf of Purchaser.
ARTICLE IV
COVENANTS OF SELLER AND THE SUBSIDIARIES
Seller and each Subsidiary covenants and agrees with Purchaser as
follows:
4.1 ACCESS. Prior to the Closing, at Purchaser's expense, Seller
and the Subsidiaries: (a) shall give Purchaser and its officers, employees,
representatives, counsel and accountants reasonable access, during normal
business hours and upon reasonable notice, to the assets, personnel,
properties, financial statements, contracts, books, records, working papers
and other relevant information pertaining to the Subsidiaries or the
Business; (b) shall furnish to Purchaser and its officers, employees,
representatives, counsel and accountants such financial and operating data
and other information with respect to the Subsidiaries or the Business as
Purchaser shall from time to time reasonably request; and (c) shall provide
reasonable accommodations during normal business hours at each of its
locations for up to three employees of Purchaser at a time, and shall allow
such employees of Purchaser reasonable access to facilities and personnel of
Seller or the Subsidiaries for purposes of monitoring the operation of the
Business; provided, however, that such access shall be in a manner that does
not unreasonably interfere with the normal operation of the Business.
4.2 ORDINARY CONDUCT. Except as set forth on Schedule 4.2 or
otherwise permitted by the terms of this Agreement, from the date hereof to
the Closing, Seller and the Subsidiaries shall (i) cause the Business to be
conducted in the ordinary course in substantially the same manner as
presently conducted and shall make all reasonable efforts consistent with
past practices to preserve their relationships with customers and others with
whom Seller or either Subsidiary deals, and (ii) maintain in effect all
insurance relating to the Business as to which the Seller or either
Subsidiary is a beneficiary, including any directors and officers insurance.
Except as set forth on Schedule 4.2 or otherwise permitted by the terms of
this Agreement, from the date hereof until the Closing, neither Seller (with
respect to the Business) nor either Subsidiary shall do any of the following
without the written consent of Purchaser (which consent will not be
unreasonably withheld):
(a) enter into or amend any agreement, contract or other arrangement
(or series of related agreements, contracts or other arrangements) by which
the Subsidiaries or any of their properties or assets are bound which (i) as
to any service contract with a customer, does not provide for a xxxx-up of at
least one cent over the applicable incremental cost per transaction, (ii) has
23
annualized anticipated expenses to the Subsidiaries in excess of $100,000,
(iii) is not terminable by Seller or the Subsidiaries, as the case may be, by
notice of not more than 60 days for an aggregate cost of less than $100,000,
or (iv) is otherwise not in the ordinary course of business and consistent
with past practices of the Business;
(b) sell any of the Shares or any other shares of capital stock of
either Subsidiary;
(c) terminate, breach, modify or amend any Contract listed on
Schedule 4.2(c) to the extent such would have an adverse effect on the
Business;
(d) mortgage or otherwise subject to any Encumbrance any assets or
interests of the Business, other than in the ordinary course of business and
consistent with past practice provided such Encumbrance will be released on
or prior to Closing;
(e) enter into any Contract that contains any provision that, solely
as a result of the consummation of the transactions contemplated by this
Agreement, would (assuming that the other party's consent or approval is not
obtained, to the extent required) result in any penalty, additional payments
or forfeiture that would be payable or sufferable by a Subsidiary at or after
the Closing Date;
(f) solicit or induce any Employee not to become a Hired Employee;
(g) hold in the Subsidiaries any assets or liabilities other than
those related to the Business or operate any business in the Subsidiaries
other than the Business;
(h) take any action that would, or could reasonably be expected to,
result in (i) any of the representations and warranties of Seller or either
Subsidiary set forth in this Agreement that are qualified as to materially
becoming untrue, (ii) any of such representations and warranties of Seller or
either Subsidiary that are not so qualified becoming untrue in any material
respect, or (iii) any of the conditions set forth in Article VIII not being
satisfied; or
(i) agree, whether in writing or otherwise, to do any of the
foregoing.
4.3 ASSETS OF ADS NETWORK. On the Closing Date, Seller shall
transfer to ADS Network all of Seller's rights, title and interest in each of
assets listed in Schedule 4.3; provided, however, Purchaser may direct Seller
to transfer all or part of the assets listed in Schedule 4.3 to Commercial
Services, and Seller shall comply with such directions unless Seller has
previously transferred the relevant assets to ADS Network or the transfer of
the assets as directed will have a material adverse effect on Seller.
4.4 ASSETS OF COMMERCIAL SERVICES. On or before the Closing Date,
each of the assets listed in Schedule 4.4 will be among the assets of
Commercial Services, and Seller shall have no further right, title or
interest in such assets; provided, however, if any such assets are not owned
by Commercial Services at the time this Agreement is executed, Purchaser may
direct Seller to transfer all or part of such assets to ADS Network, unless
Seller has previously transferred the relevant assets
24
to Commercial Services or the transfer of the assets as directed will have a
material adverse effect on Seller.
4.5 ASSUMED LIABILITIES. On or before the Closing Date, ADS Network
shall assume the obligations of Seller relating to the Network Services
Business to the extent, and only to the extent, (a) listed on Schedule 4.5(a)
(collectively, the "ADS Network Assumed Obligations") or (b) provided in the
Tax Cooperation and Indemnification Agreement. On or before the Closing Date,
pursuant to an assumption agreement substantially in the form attached hereto
as Exhibit E (the "Assumption Agreement"), Commercial Services shall assign
to Seller and Seller shall assume all obligations and liabilities, known or
unknown, of Commercial Services other than the obligations of Commercial
Services listed on Schedule 4.5(b) (the obligations retained by Commercial
Services, the "Commercial Services Retained Obligations"; and the ADS Network
Assumed Obligations and the Commercial Services Retained Obligations
collectively, the "Assumed Liabilities"). Neither Seller nor either
Subsidiary shall cause or permit either Subsidiary to assume or incur any
obligation or liability other than the ADS Network Assumed Obligations and
the Commercial Services Retained Obligations. On or before the Closing Date,
Seller shall retain or assume all obligations and liabilities associated with
the Business other than the Assumed Liabilities (collectively, the "SPS
Retained Liabilities").
4.6 HIRED EMPLOYEE SOLICITATION AND EMPLOYMENT. For a period of two
(2) years from and after the Closing Date, neither Seller, AFCC nor any of
their Affiliates (the "AFCC Group") will without Purchaser's prior written
consent solicit or employ the Employees other than Hired Employees (as
hereinafter defined) whose employment with the Subsidiaries or Purchaser is
thereafter terminated by Purchaser or the Subsidiaries or as to which
Purchaser or the Subsidiaries shall consent in writing.
4.7 NON-COMPETITION BY THE AFCC GROUP. For a period of five years
following the Closing Date, the AFCC Group shall refrain from engaging in any
business which competes with the Network Services Business. With respect to
the FleetShare Business, for a period of five years following the Closing
Date, the AFCC Group shall not intentionally target or directly solicit any
customer of the FleetShare Business as of the Closing Date to offer or
provide a private label fleetcard. Notwithstanding the foregoing, the AFCC
Group shall be entitled to acquire as part of a strategic business
acquisition (but not to develop on its own) a business that competes with the
Network Services Business so long as such acquired business is not primarily
engaged in the business of electronic processing of point-of-sale
transactions (e.g., such acquired business derives less than fifty percent of
its total revenues and less than fifty percent of its net income from such
business). In the event the AFCC Group determines to divest itself of any
such acquired business that is engaged in the business of electronic
processing of point-of-sale transaction, a member of the AFCC Group shall
give notice in writing to Purchaser of its intention to sell such business.
Purchaser and its Affiliates shall have a right of first refusal for a period
of 60 days thereafter to purchase such business from the AFCC Group on such
terms and conditions as shall be agreed upon between the parties.
4.8 CONSENTS; ASSIGNABILITY.
(a) Seller shall use commercially reasonable efforts to obtain
consents to the assignment of, or change of control under, the Contracts
listed on Schedule 2.2. Purchaser shall use all commercially reasonable
efforts to assist Seller in that endeavor.
25
(b) If a Material Customer raises a colorable objection to the
assignment of its Contract, by operation of law or otherwise, based on the
form or structure of the transfers of the Business contemplated by this
Agreement, and Seller receives notice of such objection within ninety (90)
days from the date this Agreement is executed: (i) if the Material Customer
Contract is terminated, Seller agrees to reimburse Purchaser for any losses
in revenues to be suffered by Purchaser according to the following formula:
thirty percent (30%) of the Material Customer's 1998 revenue will be
multiplied by 11, or (ii) if revenues on a per transaction basis under a
Material Customer's Contract are reduced, Seller shall reimburse Purchaser
for any losses in revenues to be suffered by Purchaser as follows: the amount
of the per unit reduction shall be multiplied times the Material Customer's
transaction volume for the calendar month prior to the reduction, and such
amount shall be multiplied times the number of months remaining in the term
of the Material Customer's Contract. Any such amount shall be payable to
Purchaser by Seller within 10 days of Seller's receipt of notice of any such
objection.
4.9 NO SOLICITATION. From the date hereof through the Closing Date,
no member of the AFCC Group and none of their officers, directors,
stockholders, members, partners, employees and agents not to, directly or
indirectly, solicit or negotiate with, or provide any non-public information
relating to the Business or the Subsidiaries or afford access to the
properties, books and records of Seller or the Subsidiaries to any third
party that may be considering an acquisition of the Business or the
Subsidiaries or a substantial portion thereof, or otherwise cooperate in any
way with or assist or participate in, or facilitate or encourage any attempt
by any Person to do or seek any of the foregoing. The AFCC Group will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations by or on behalf of the AFCC Group with any
parties conducted heretofore with respect to any of the foregoing. The AFCC
Group shall each immediately notify Purchaser (a) after receipt by any member
of the AFCC Group of any offer or indication that any Person is considering
making an offer for any such acquisition, which notice shall include the
terms and conditions of such offer or indication, and (b) upon receipt by any
member of the AFCC Group of any request for non-public information relating
to Business or the Subsidiaries or for access to the properties, books or
records of Seller or the Subsidiaries with respect to the Business or the
Subsidiaries from any Person that may be considering any such acquisition.
4.10 RECORDS RETENTION. The AFCC Group (a) shall preserve and keep
the books, records, files and accounting records of Seller and the
Subsidiaries relating to the Business that are not transferred to or in the
possession of the Subsidiaries at the date of Closing (the "Business
Records") for periods prior to the Closing Date for a period of the longer of
the retention period under applicable Legal Requirements or the retention
period provided under the document retention policy of AFCC or Seller, as the
case may be and (b) shall make such books, records, files and accounting
records available to Purchaser and its Affiliates, and shall permit Purchaser
and its Affiliates to make copies thereof, upon request by Purchaser, which
request will not unreasonably be denied. Seller shall undertake reasonable
measures to preserve in good order the Business Records retained by it.
4.11 CEASE USE OF MARKS. From and after the Closing Date, Seller
shall refrain, and shall cause its Affiliates to refrain, from using the
Marks, the Internet Assets and all other Intellectual Property Assets.
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4.12 CONFIDENTIALITY.
(a) The AFCC Group covenants and agrees that all confidential
information regarding Purchaser or any of its Affiliates provided to AFCC,
Seller or the Subsidiaries or any of their directors, officers, employees,
consultants, agents, advisors, Affiliates or representatives (collectively
"Representatives") by Purchaser, its agents or representatives, whether
furnished before or after the date of this Agreement, shall be kept
confidential by the AFCC Group and its Representatives. Except with the prior
written consent of Purchaser, neither the AFCC Group nor its Representatives
will disclose any such information. The AFCC Group and its Representatives
shall not use this confidential information for any purpose other than to
evaluate Purchaser as a prospective party to the transactions contemplated
under this Agreement. Upon written request by Purchaser, the AFCC Group and
its Representatives, will promptly deliver to Purchaser all documents and
other matters furnished by Purchaser containing confidential information,
together with all copies thereof in the possession of the AFCC Group or any
of its Representatives.
(b) The AFCC Group covenants and agrees that following the Closing,
all Trade Secrets will be the property of the Subsidiaries unless otherwise
required by law. From and after the Closing Date, the AFCC Group: (i) shall
use their reasonable best efforts and exercise utmost diligence to protect
and safeguard all of such Trade Secrets; (ii) shall not, directly or
indirectly, use, sell, license, publish, disclose or otherwise transfer or
make available to others any of such Trade Secrets; (iii) without the prior
written consent of Purchaser, shall not, directly or indirectly, disclose any
of such Trade Secrets; and (iv) it shall not, directly or indirectly, use for
its own benefit or for the benefit of another, any of such Trade Secrets. It
is expressly understood, however, that the obligations in the preceding
sentence shall not apply to any information that was or becomes available to
the public on a non-confidential basis or was or becomes available to the
public on a non-confidential basis from a third party who is not bound to
Seller, either Subsidiary or Purchaser to keep such information confidential.
In addition, AFCC and Seller covenant and agree that after Closing, without
the prior written consent of Purchaser or unless as a result of a Legal
Requirement, the AFCC Group will not disclose the economic terms of this
Agreement.
(c) The parties acknowledge and agree that, at Closing, that certain
Confidentiality Agreement dated January 20, 1999 between Purchaser and AFCC
(the "Confidentiality Agreement") shall terminate and be of no further force
or effect.
4.13 COOPERATION REGARDING FINANCIAL STATEMENTS. In connection with
any filings to be made by Purchaser or its Affiliates under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
with respect to or as a result of the transactions contemplated by this
Agreement, AFCC and Seller agree that the AFCC Group shall (i) use
commercially reasonable efforts to provide to Purchaser and its Affiliates
the financial and other information and documents pertaining to the Business
(as such may be in the possession or control of the AFCC Group) that
Purchaser and its Affiliates will be required by applicable SEC rules and
regulations to be included in its filings, (ii) use commercially reasonable
efforts to cause the accountants for the AFCC Group to deliver such consents
and reports in and provide access to files and work papers in connection
therewith (as such may be subject to the AFCC Group's control) as Purchaser
and its Affiliates may reasonably request and (iii) generally use
commercially reasonable efforts to cooperate with Purchaser and its
Affiliates in connection therewith. Purchaser acknowledges that prior to
27
October 1998 Seller was not owned by AFCC or its Affiliates. As a result, to
the extent that the AFCC Group currently does not possess or does not have
access to any information and documents requested by Purchaser or its
Affiliates under this Section 4.13, the AFCC Group will use commercially
reasonable efforts to assist Purchaser in Purchaser's efforts to cause the
prior owners of Seller to comply with the terms of this Section 4.13. Nothing
in this Section 4.13 is intended to require the AFCC Group to create at the
expense of the AFCC Group documents and/or records which do not exist as of
the Closing. To the extent the AFCC Group does not possess, but has the right
of access to any information or documentation requested by Purchaser or its
Affiliates under this Section 4.13, the AFCC Group will, at Purchaser's
expense, obtain such information and documents on behalf of Purchaser.
4.14 FINANCIAL STATEMENTS AND REPORTS. As promptly as practicable
after each month or fiscal quarter ending between the date hereof and the
Closing Date, but in no event later than 15 days after the end of each month
or and 30 days after the end of each quarter, as the case may be, Seller and
the Subsidiaries shall deliver to Purchaser true and correct copies of the
unaudited pro forma statements of operations of the Business as of and for
the month or the quarter, as the case may be, then ended, prepared in
accordance with GAAP and which shall present fairly, in all material
respects, the results of operations of the Business for and during the period
then ended, subject to normal and recurring year-end audit and quarter-end
adjustments.
As promptly as practicable, Seller and the Subsidiaries will deliver
to Purchaser true and complete copies of such other material financial
statements, reports or analyses as may be prepared or received by Seller or
either Subsidiary between the date hereof and the Closing Date as relates to
the Business.
4.15 TAX ELECTIONS. No new elections with respect to Taxes, or any
changes in current elections with respect to Taxes, affecting the
Subsidiaries after the Closing shall be made without the prior consent of
Purchaser.
4.16 SUPPLEMENTS TO SCHEDULES. Prior to Closing, Seller and the
Subsidiaries shall provide to Purchaser, as of a date that is within two days
prior to the Closing Date, updated Schedules. If any such supplement or
amendment shall include any matter which would result in a failure to satisfy
the condition set forth in Section 8.3(a) and is unacceptable to Purchaser,
Purchaser may deem the condition set forth in Section 8.3(a) not to be
satisfied.
ARTICLE V
EMPLOYEES AND EMPLOYEE MATTERS
5.1 EMPLOYMENT. Effective as of the Closing, Purchaser or the
Subsidiaries (a) shall offer to employ each employee of the Business listed
on Schedule 5.1 as updated upon request and finally at Closing (collectively,
the "Employees") who is actively at work on the Closing (collectively, the
"Active Employees"), and (b) shall offer to employ any Employee who is not
actively at work on the Closing Date due to approved leave of absence,
short-term illness or injury (including those Employees who are absent due to
illness or injury for a period of less than 10 days), military leave or
layoff with recall rights or reemployment rights under the Family and Medical
Leave Act (the
28
"FMLA") or any other applicable law (collectively, the "Inactive Employees")
upon the conclusion of their leave or layoff. In addition, any Employee who
is not actively at work on the Closing Date due to a short-term absence
(including due to vacation, holiday, jury duty or bereavement leave) in
accordance with applicable policies of Seller shall be deemed to be an Active
Employee provided such Employee returns to active employment in accordance
with such policies. Active Employees who immediately following the Closing
become employed by Purchaser or either Subsidiary and Inactive Employees, to
the extent that they later become employed by Purchaser or either Subsidiary
prior to January 1, 2000, shall be referred to collectively as "Hired
Employees." Seller makes no representation as to whether any Employee will
accept employment with Purchaser or the Subsidiaries after Closing. For
purposes hereof, an Employee who has terminated employment for any reason
prior to, as of, or in connection with, the Closing (including by reason of
resignation, retirement, short-term or long-term disability, workers'
compensation, personal leaves of absence (other than leaves of absence under
FMLA) as of the Closing) shall be referred to as a "Former Employee."
5.2 HIRED EMPLOYEE BENEFITS. Except as expressly set forth in this
Section 5.2, nothing in this Agreement shall prohibit or limit Purchaser's or
either Subsidiary's right on or after the Closing Date, at any time and from
time to time, to modify, amend or terminate any salary and wages payable or
benefit provided to any Hired Employee, or to terminate the employment of any
Hired Employee at any time for any reason. The employment of the Hired
Employees shall be subject to all of the Purchaser's practices and policies,
including its policy of employment-at-will. Notwithstanding the above, (a) as
of the Closing Date Purchaser or a Subsidiary shall employ the Hired
Employees at the same base salary and base wages in effect as of Closing Date
as known by Purchaser, and (b) until October 15, 1999, Purchaser or the
Subsidiaries shall provide for the payment of severance pay (and not
benefits) to any Hired Employee whose employment is terminated by Purchaser
or a Subsidiary (other than for cause or total and permanent disability) in
amounts determined in accordance with Seller's severance policies. For this
purpose, Schedule 5.2 sets forth the formula for determining the amount of
severance pay due upon termination by Purchaser and defines what constitutes
termination for cause.
5.3 EMPLOYMENT AND EMPLOYEE BENEFITS.
(a) Seller and its Affiliates (other than the Subsidiaries) shall be
liable for all employment claims, benefit claims and obligations in respect
of Hired Employees, Former Employees, and their respective eligible
dependents and beneficiaries, that arise prior to or on the Closing Date.
Purchaser shall be liable for employment claims, benefit claims and
obligations in respect of only Hired Employees and their respective
dependents and beneficiaries that arise after the Closing Date; provided
further that Purchaser shall not be liable for any such employment claims,
benefit claims or obligations that arise or are payable with respect to
Inactive Employees prior to the date such Inactive Employees become employed
by Purchaser, or any such employment claims, benefit claims or obligations
with respect to any Inactive Employees who do not become employed by
Purchaser in accordance with this Section 5.3, all of which employment
claims, benefit claims and obligations shall remain with Seller.
(b) AFCC and Seller, on a joint and several basis, shall be liable
for and indemnify and hold Purchaser, the Subsidiaries and their Affiliates
harmless from and against all claims, losses,
29
liabilities, damages, deficiencies, judgments, assessments, fines,
settlements, costs or expenses, including without limitation, attorneys' fees
by Purchaser, either of the Subsidiaries and/or their Affiliates, arising out
of, resulting from, or relating to: (i) the employee benefits and the
employee benefit plans (as the term is defined in Section 3(3) of ERISA)
which have been or are maintained, sponsored or contributed to by AFCC,
Seller, either of the Subsidiaries (with respect to periods prior to Closing
only), or any member of their Controlled Group; (ii) post-employment
benefits, including but not limited to retiree medical, retiree life and
retiree accidental death and disability benefits for current and former
Employees of Seller, either Subsidiary (with respect to periods prior to
Closing only), and each member of Seller's Controlled Group; (iii) any
requirement to provide any Employee of Seller or either of the Subsidiaries,
any spouse or dependent of any such Employee, and each member of Seller's
Controlled Group on or prior to the Closing Date with continuation coverage
under the requirements of Sections 601-609 of ERISA, or Section 4980B of the
Code with respect to any "qualifying event" as defined in Section 4980B(f)(3)
of the Code; and (iv) any other liabilities retained or assumed by Seller
under the terms of this Article V relating to employees or employee benefits.
The conditions to indemnification contained in Sections 11.4 and 11.5 shall
apply to any claim for indemnification under this Section 5.3(b).
5.4 NO EMPLOYMENT AGREEMENTS. Seller represents there are no
written or oral employment agreements with any of the Employees that will
survive Closing.
5.5 EMPLOYEE BENEFIT PLANS COVERAGE. Except as otherwise provided
herein, on and after the Closing Date (or on such other date as may be
determined under the terms of the Interim Services Agreement), Purchaser
shall provide the Hired Employees with the employee benefits and paid
time-off plans generally provided to other employees of Purchaser, subject to
the terms and conditions of Purchaser's plans.
5.6 EMPLOYEE SERVICE CREDIT. Purchaser and the Subsidiaries shall
cause Purchaser's employee benefit plans and any fringe benefit plans in
existence on the Closing Date, including vacation programs and policies, to
the extent such plans may cover Hired Employees on or after the Closing Date,
to recognize for all purposes (except as noted below for the ADS 401(k) and
Retirement Savings Plan ("Purchaser's 401(k) Plan")) the service of each
Hired Employee with Seller and the Subsidiaries and the service of each Hired
Employee with all other prior employers prior to the Closing Date, but only
to the extent such service shall have previously been credited by Seller or
its Affiliates to such Hired Employee under any employee benefit or fringe
benefit plans of Seller or its Affiliates (such periods of time,
collectively, "Prior Service"). Such Prior Service credit shall be calculated
by using the original hire date of such Hired Employee as credited by Seller
or its Affiliates as known by Purchaser. Notwithstanding anything herein to
the contrary, Hired Employees will receive Prior Service credit under
Purchaser's 401(k) Plan solely for purposes of eligibility for participation.
The Closing Date will be used as the original hire date to determine service
credit under Purchaser's 401(k) Plan for purposes of vesting of benefits and
service related contributions.
5.7 PRE-EXISTING CONDITION EXCLUSIONS. If a Hired Employee or
eligible dependent shall have satisfied the pre-existing condition exclusion
period under Seller's or its Affiliates' welfare benefit plans, Purchaser
shall waive application of any additional waiting period or preexisting
condition exclusion under Purchaser's comparable plans; provided, however,
Seller acknowledges that certain benefits provided under Purchaser's
long-term disability plan may be
30
reduced in the event the Hired Employee fails to satisfy Purchaser's
long-term disability plan's pre-existing condition exclusion eligibility
requirement.
5.8 MEDICAL AND DENTAL.
(a) MEDICAL AND DENTAL PLANS GENERALLY. Seller and its Affiliates
(other than the Subsidiaries) shall be responsible in accordance with their
applicable welfare benefit plans for all medical and dental claims for
expenses incurred on or prior to the Closing Date by Hired Employees and
their dependents subject to Section 5.8. Purchaser shall be responsible in
accordance with its applicable welfare plans (or under the terms of the
Interim Services Agreement) for all medical and dental claims made by Hired
Employees and their dependents for expenses incurred after the Closing Date.
A medical or dental claim otherwise covered under Seller's or Purchaser's
applicable welfare benefit plan (or under the terms of the Interim Services
Agreement) shall be deemed incurred when the services giving rise to the
claim are rendered (regardless of when such claim is billed by the service
provider or submitted by the Hired Employee).
(b) DEDUCTIBLES. All charges and expenses of such Hired Employees
and their eligible dependents which were applied to the deductible and
out-of-pocket maximums under Seller's or its Affiliates' welfare benefit
plans during the plan year of Seller in which the Closing Date falls shall be
credited toward any deductible and out-of-pocket maximum applicable in the
plan year of Purchaser in which the Closing Date falls; provided, however,
that the foregoing shall be applicable to any Hired Employee and eligible
dependents only to the extent such Hired Employee provides an explanation of
benefits satisfactory to the administrator of such plan reflecting amounts
paid or accrued prior to the Closing Date.
(c) COBRA. Seller shall be responsible for satisfying obligations
under Section 601 ET. SEQ. of ERISA and the rules and regulations promulgated
thereunder and Section 4980B of the Code ("COBRA"), and to provide COBRA
continuation coverage to or with respect to any Employee or Former Employee
of Seller or the Subsidiaries, or to any COBRA "qualified beneficiary" of any
such Employee or Former Employee, with respect to any COBRA "qualifying
event" occurring on or prior to the Closing Date, including any COBRA
"qualifying event" resulting from the Closing. Purchaser or, with respect to
the period after the Closing, the Subsidiaries shall be responsible for
satisfying all requirements of COBRA with respect to any Hired Employee or
COBRA "qualified beneficiary" of a Hired Employee for any COBRA "qualifying
event" which occurs after the Closing Date.
(d) CAFETERIA PLAN. Effective as of the Closing Date (but with any
transfer of funds and/or accounts to occur on such other date as may be
determined under the terms of the Interim Services Agreement), Purchaser and
the Subsidiaries shall allow Hired Employees to participate in Purchaser's so
called "cafeteria" plans by (i) continuing to apply for the then current
fiscal year all elections (including benefit elections and salary reduction
elections) made by Hired Employees under Seller's or its Affiliates' flexible
spending account plan ("Seller's FSA") and Seller's or its Affiliates'
dependent care assistance plan ("Seller's DCA") for the then current fiscal
year, and (ii) giving credit for all unused amounts credited for the then
current fiscal year for each Hired Employee as of the Closing Date under
Seller's FSA and Seller's DCA; provided, however, that Purchaser's obligation
to allow Hired Employees to participate is contingent upon (i) receipt from
Seller, Seller's FSA or
31
Seller's DCA, in cash, of amounts equal to the unused credit amounts in each
Hired Employee's accounts in Seller's FSA and Seller's DCA, without any
netting of credit and debit amounts in different individual Seller FSA and
Seller DCA accounts, and (ii) with respect to any Hired Employee, such Hired
Employee has provided a new salary reduction election to Purchaser and such
election does not revoke or adversely change his or her salary reduction
election. Seller or its Affiliates shall retain all assets and liabilities of
Seller's DCA and Seller's FSA accounts for the Hired Employees for all claims
for benefits incurred on or before the Closing Date.
5.9 ACCRUED VACATION DAYS. Purchaser and the Subsidiaries shall,
through the end of the calendar year that includes the Closing Date, honor
all unused vacation days accrued by Hired Employees as of the Closing Date
under the respective programs and policies of Seller and its Subsidiaries
which were applicable to Hired Employees immediately prior to the Closing
Date. Effective as of January 1 of the year after becoming a Hired Employee,
each Hired Employee will be subject to the terms and conditions of
Purchaser's vacation programs and policies.
5.10 401(k) PLANS. Each Hired Employee eligible to participate in
any 401(k) plan for the benefit of the employees of Seller or the
Subsidiaries as of the Closing (collectively, "Seller's 401(k) Plans") shall
become eligible to participate in the Purchaser's 401(k) Plan upon
fulfillment of the minimum age and service conditions of Purchaser's 401(k)
Plans. Each Hired Employee shall receive credit for all Prior Service with
Seller only for purposes of eligibility (but not for vesting or service
related contributions) under Purchaser's 401(k) Plan. Effective as of the
Closing Date, (a) each Hired Employee shall cease active participation in
Seller's 401(k) Plans, (b) to the extent required by the terms of Seller's
401(k) Plans, Seller shall make any contributions to Seller's 401(k) Plans
due in respect of Hired Employees relating to periods on or prior to the
Closing Date in accordance with the terms of Seller's 401(k) Plans, and (c)
Seller shall cause all Hired Employees who are participants in such plan to
become 100 percent vested in their account balances under Seller's 401(k)
Plans as of the Closing Date. Neither Purchaser nor the Subsidiaries will
assume, or receive transfers of, benefits or liabilities accrued with respect
to Hired Employees under Seller's 401(k) Plans. To the extent not
inconsistent with the qualification requirements of the Code, Seller agrees
that the account balances of all Hired Employees under Seller's 401(k) Plans
shall be distributed or available for rollover as soon as administratively
feasible after the Closing Date. "Eligible rollover distributions," as
defined in Section 402(c)(4) of the Code, of Hired Employees who decide to
roll over such distributions into Purchaser's 401(k) Plan will be accepted by
Purchaser's 401(k) Plan provided Purchaser is satisfied Seller's 401(k) Plans
are tax-qualified plan under the Code.
5.11 EMPLOYEE WITHHOLDING AND REPORTING. Purchaser and Seller agree
that they will follow the "standard procedure" set forth in Section 4 of Rev.
Proc. 96-60 promulgated by the Internal Revenue Service with respect to
reporting of wages and other compensation. Purchaser agrees to furnish
Seller's Forms W-2 to Hired Employees to the extent such Forms W-2 are timely
forwarded by Seller to Purchaser so that any Legal Requirement for such
distribution is satisfied.
5.12 WITHDRAWAL FROM PLANS . Prior to the Closing Date, Seller shall
cause the Subsidiaries to withdraw from any employee benefit plans as defined
in Section 3(3) of ERISA or arrangements maintained by Seller or any of its
Affiliates in which any of the Subsidiaries is a participating employer as of
the Closing Date, in the manner, if any, that such plan or arrangement
specifies for withdrawal
32
of a participating employer. Seller shall be liable for any liability, cost
or expense which arise as a result of Seller or the Subsidiaries' withdrawal
from such plans.
5.13 EMPLOYMENT - NO THIRD PARTY RIGHTS. Nothing in this Agreement,
express or implied, shall confer upon any employee of Seller, Purchaser, the
Subsidiaries, or any of their Affiliates or any legal representatives thereof
or any collective bargaining agent any rights or remedies, including any
right to employment, or continued employment for any specific period. Nothing
in this Agreement, express or implied, shall be deemed to confer upon any
Person (or any beneficiary) any rights under or with respect to any plan,
program, or arrangement described in or contemplated by this Agreement, and
each Person (or any beneficiary) shall be entitled to look only to the
express terms of any such plan, program, or agreement. Nothing in this
Agreement, express or implied, shall create a third-party beneficiary
relationship or otherwise confer any benefit, entitlement, or right upon any
Person other than the parties to this Agreement and their respective
corporate Affiliates.
5.14 SELLER ASSISTANCE. As soon as practicable after execution of
this Agreement, Seller shall provide Purchaser with a download file from
Seller's payroll records of the data listed on Schedule 5.14.
5.15 WARN ACT. Seller shall be responsible for providing notices
for any "plant closing" or "mass layoff," as defined in the Worker Adjustment
and Retraining Notification Act (the "WARN Act"), 29 U.S.C. Section 2101 ET
SEQ., up to and including the Closing Date. After the Closing Date, Purchaser
or the Subsidiaries shall be responsible for providing notice for any "plant
closing" or "mass layoff" to Hired Employees in accordance with the WARN Act.
5.16 FLEETSHARE EMPLOYEES. Schedule 5.16 lists each employee of the
FleetShare Business as of the date of this Agreement (the "FleetShare
Employees"). Such Schedule shall be updated as of the date of Closing and as
of the date of the termination of the services rendered by Seller under the
terms of the Interim Services Agreement relating to the FleetShare
Receivables (such date, the "FleetShare Services Termination Date"). Pending
the FleetShare Services Termination Date, Seller shall use its best efforts
to retain, shall not grant any compensation increase to, and shall not enter
into any contract or arrangement for the benefit of any FleetShare Employee
other than in the ordinary course of business consistent with Seller's past
practices. Effective as of FleetShare Services Termination Date, Purchaser or
the Subsidiaries shall offer to employ each FleetShare Employee who is
actively at work on the FleetShare Services Termination Date on the terms
specified in this Article V. For purposes of applying the provisions of this
Agreement to the FleetShare Employees, (a) the FleetShare Employees shall be
deemed to be Employees, (b) FleetShare Employees who become employed by
Purchaser or either Subsidiary shall become Hired Employees, (c) any former
employees of the FleetShare Business shall be deemed to be Former Employees
and (d) all references to provisions becoming effective as of the Closing
shall become effective with respect to any FleetShare Employee as of the
FleetShare Services Termination Date. As soon as practicable after the
Subsidiaries have given notice to Seller of the termination of the Services
under the Interim Services Agreement that relate to the FleetShare Business,
Seller shall provide Purchaser with a download file from Seller's payroll
records of the data listed on Schedule 5.14 with respect to all FleetShare
Employees.
ARTICLE VI
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COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller as follows:
6.1 REGULATORY CONDITIONS. To the extent required by any regulatory
authority as a condition to approval of the purchase and sale of the Shares
or the other transactions contemplated hereby, Purchaser shall take such
reasonable action as may be required in order to comply with any such
requirement.
6.2 CERTAIN UNDERSTANDINGS. Purchaser acknowledges that, except as
expressly set forth in this Agreement or in any other document or certificate
to be delivered by Seller or either Subsidiary or any other party in
connection herewith (collectively, the "Transaction Documents"), (a) neither
Seller nor any other Person has made any representation or warranty, express
or implied, as to the accuracy or completeness of any information regarding
the Subsidiaries, including but not limited to projections, estimates,
budgets, forecasts and other information relating to the Subsidiaries, (b)
neither Seller nor any other Person will be subject to any liability to
Purchaser or any other Person resulting from the distribution to Purchaser,
or the use of, any such information, and (c) SELLER EXPRESSLY DISCLAIMS ANY
WARRANTIES OF MERCHANTABILITY AND WARRANTIES OF SUITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO THE TANGIBLE ASSETS OF THE BUSINESS.
Purchaser acknowledges that, should the Closing occur, Purchaser will acquire
the Subsidiaries' businesses without any representation or warranty of any
kind, express or implied, except for such representations and warranties as
are expressly set forth in this Agreement or in any Transaction Document.
6.3 COMMONLY-AVAILABLE THIRD PARTY SOFTWARE PROGRAMS. After
Closing, to the extent commonly-available third party Software Programs are
installed on computer equipment owned by either of the Subsidiaries which, by
the terms of the license related thereto, cannot be transferred to the
Subsidiaries, or only may be transferred with additional payments, Purchaser
will either license such software programs at Purchaser's expense or delete
such software programs from such computer equipment.
6.4 CONFIDENTIALITY. After the Closing, Purchaser covenants and
agrees that all confidential information regarding Seller or any of its
Affiliates (other than the Subsidiaries) provided to Purchaser or any of its
Representatives by Seller or its Representatives, whether furnished before or
after the date of this Agreement, which does not relate to the Business shall
be kept confidential by Purchaser and its Representatives. Except with the
prior written consent of Seller, neither Purchaser nor its Representatives
will disclose any such information. It is expressly understood, however, that
the obligations in the preceding sentence shall not apply to any information
that was or becomes available to the public on a non-confidential basis or
was or becomes available to the public on a non-confidential basis from a
third party who is not bound to Seller to keep such information confidential.
Upon written request by Seller, Purchaser and its Representatives will
promptly deliver to Seller all documents and other matters furnished by
Seller containing confidential information which does not relate to the
Business together with all copies thereof in the possession of Purchaser or
its Representatives.
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ARTICLE VII
MUTUAL COVENANTS
7.1 CONSUMMATION OF THE TRANSACTIONS. Subject to the terms and
conditions of this Agreement, each party hereto shall use its best efforts
consistent with applicable Legal Requirements to cause the Closing to occur.
AFCC, Seller and the Subsidiaries and each of their respective directors,
officers and representatives shall file and agree to cooperate with Purchaser
in filing, and Purchaser and its directors, officers and representatives
shall, file and agree to cooperate with AFCC, Seller and the Subsidiaries in
filing, any necessary applications, reports or other documents with, giving
any notices to, and seeking any consents from, any court, administrative
agency or commission or other Governmental Entities and all third parties as
may be required by AFCC, Seller or either Subsidiary, on the one hand, and
Purchaser, on the other hand, in connection with the consummation of the
transactions contemplated by this Agreement and the performance by the
Subsidiaries of the Business after such consummation, and in seeking
necessary consultation with and prompt favorable action by any such
Governmental Entity or third party.
7.2 PUBLICITY. The parties hereto agree that, notwithstanding the
terms of the Confidentiality Agreement, from the date of the execution and
delivery of this Agreement through the Closing, no public release or
announcement concerning the transactions contemplated hereby shall be issued
by any party hereto without the prior consent of (a) Purchaser in the case of
a release or an announcement by AFCC, Seller, the Subsidiaries or any of
their Affiliates, or (b) Seller in the case of a release or an announcement
by Purchaser (in each case which consent shall not be unreasonably withheld),
except as such release or announcement may be required by law or the rules or
regulations of any United States or foreign securities exchange, in which
case the party required to make the release or announcement shall allow the
other party reasonable time to comment on such release or announcement in
advance of such issuance. After the date hereof and prior to Closing, the
parties hereto shall not make any comments or statements with respect to the
transactions contemplated hereby to any third party (including, without
limitation, members of the news media, securities analysts and employees of
AFCC, Seller, the Subsidiaries, or any of their Affiliates, or Purchaser or
any of its subsidiaries) without the prior consent of Purchaser, on the one
hand, or Seller, on the other hand, as the case may be; provided, however,
that the provisions of this Section 7.2 shall not apply to communications by
Seller or Purchaser to any Governmental Entity in connection with obtaining
any consents or approvals required for the consummation of the transactions
contemplated hereby or to any other communications pursuant to Section 7.5.
7.3 ANTITRUST NOTIFICATION. AFCC and Seller shall on the one hand,
and Purchaser, on the other, shall, as promptly as practicable, file with the
United States Federal Trade Commission (the "FTC") and the United States
Department of Justice (the "DOJ") the notification and report form, if any,
required for the transactions contemplated hereby and any supplemental
information requested in connection therewith pursuant to the HSR Act. Any
such notification and report form and supplemental information shall be in
substantial compliance with the requirements of the HSR Act. AFCC, Seller and
the Subsidiaries shall furnish to Purchaser, and Purchaser shall furnish to
Seller, such necessary information and reasonable assistance as may be
requested in connection with the preparation of any filing or submission
which is necessary under the HSR Act. Each of AFCC and Seller shall keep
Purchaser reasonably informed, and Purchaser shall keep Seller reasonably
informed,
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of the status of any communications with, and any inquiries or requests for
additional information from, the FTC and the DOJ and shall comply promptly
with any such inquiry or request.
7.4 CONFIDENTIALITY PRIOR TO CLOSING. Prior to Closing, the
Confidential Agreement shall continue to apply, except to the extent that any
of the provisions of the Confidentiality Agreement are inconsistent with this
Agreement in which case the terms of this Agreement shall govern and
supersede such provisions. In addition, the parties hereto agree not to
disclose (without the consent of the other parties under the terms of Section
7.2) the nature and terms of this Agreement to a third party, unless such
disclosure is required by law.
7.5 EMPLOYEE, CUSTOMER, VENDOR AND SUPPLIER NOTIFICATION. From the
date hereof through the Closing Date, Seller and the Subsidiaries shall
cooperate with Purchaser to jointly notify employees, customers, vendors and
suppliers of the Business regarding the pending transactions contemplated
under this Agreement in a mutually agreed upon manner, and Seller and the
Subsidiaries shall use commercially reasonable efforts to cooperate in
Purchaser's efforts to employ the Employees and to negotiate retention
agreements with key employees.
7.6 FURTHER ASSURANCES. From time to time, as and when reasonably
requested by another party hereto, a party hereto shall execute and deliver,
or cause to be executed and delivered, all such documents and instruments and
shall take, or cause to be taken, all such further acts or other actions as
such other party may reasonably deem necessary or desirable to consummate the
transactions contemplated by this Agreement.
7.7 CURE FOR BREACH BETWEEN PURCHASER AND SELLER OF CERTAIN
REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) If any party discovers that, pursuant to Sections 4.3, 4.4 or
4.5, additional assets of the Business should have been transferred to either
Subsidiary or additional liabilities should have been assumed by either
Subsidiary or by Seller, as the case may be, the party discovering such
omission promptly shall notify the other affected parties. A party
purportedly in breach of such covenants by its failure to transfer any such
asset or assume any such liability relating to such breach shall have an
opportunity, in the absence of a Third Party Claim relating to such breach,
to cure such omission as provided in this Section 7.7.
(b) With regard to any asset which was not transferred to either
Subsidiary pursuant to Sections 4.3 or 4.4, the absence of which results in
any interruption or impairment to the Business that results or could
reasonably be expected to result in a Material Adverse Effect (a "Critical
Asset"), Seller shall as promptly as possible, and in no event more than five
days after receipt of the written notice provided for herein, transfer the
Critical Asset to the appropriate Subsidiary. If Seller is unable or
unwilling to transfer the Critical Asset to the appropriate Subsidiary within
such period, Seller shall, at its own cost and expense, use its utmost best
efforts to provide or otherwise arrange for the provision of appropriate
replacement assets or services in order to completely remediate the
interruption or other impairment resulting from the absence of the Critical
Asset.
(c) With regard to any asset which was not transferred to either
Subsidiary pursuant to Sections 4.3 or 4.4, and which is not a Critical
Asset, Seller shall as promptly as possible,
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and in no event more than 30 days after receipt of the written notice
provided for herein, transfer such asset to the appropriate Subsidiary. If
Seller is unable or unwilling to transfer such asset to the appropriate
Subsidiary within such period, Seller shall, at its own cost and expense, use
its best efforts to provide or otherwise arrange for the provision of
appropriate replacement assets or services to remediate the interruption or
other impairment resulting from the absence of the asset.
(d) If any party discovers that an asset or right, title and
interest that should have been listed on Schedule 2.36, was not so listed,
the party discovering such omission promptly shall notify the other affected
parties. Seller shall, at its own cost and expense, use commercially
reasonable efforts to provide or otherwise arrange for the provision of
appropriate replacement assets or services to remediate the interruption or
other impairment resulting from the absence of the asset or right, title and
interest. Purchaser shall take all commercial reasonable efforts to mitigate
any damage or loss resulting from such omission.
(e) With regard to any obligation or liability which was not assumed
by either Subsidiary or by Seller, as the case may be, pursuant to Section
4.5, the party notified of such omission shall as promptly as possible, and
in no event more than five days after receipt of the written notice provided
for herein, cause the obligation or liability to be assumed in accordance
with Section 4.5. The party assuming such obligation or liability shall, at
its own cost and expense, use its best efforts to satisfy or assume such
obligation or liability directly without the other party being obligated to
satisfy such obligation or liability.
(f) Seller shall promptly upon demand reimburse the affected
Subsidiary for all reasonable costs and expenses incurred by such Subsidiary
in connection with any efforts to remediate the interruption or other
impairment resulting from the absence of any asset from Schedule 4.3,
Schedule 4.4 or Schedule 2.36 or from the failure to assume any SPS Retained
Liability, and Seller shall indemnify for, and hold the affected Subsidiary
harmless from, any Claims arising out of such circumstances.
(g) If any purported failure to transfer any asset or to assume
liability pursuant to Sections 4.3, 4.4 or 4.5 is timely cured in the manner
provided in this Section 7.7, in the absence of a third party Claim, there
shall be deemed to have been no breach of the covenants contained in Section
4.3, 4.4 or 4.5 or of the representations and warranties affected by such
covenants (consisting of those representations and warranties contained in
Sections 2.16, 2.20, and 2.36 that represent that the assets transferred are
all the assets used primarily to conduct the Business or, in the case of
Section 2.36, all the assets relating to the Business not being transferred)
and that, as between Seller and Purchaser, in the absence of a third party
Claim, there shall be no additional remedy for such purported breach. If
Third Party Claim shall arise out any matter described in this Section 7.7,
the parties acknowledge that Purchaser and the Subsidiaries shall have
indemnification rights for any such breach in accordance with Article XI.
7.8 REVENUES AND EXPENSES. The parties intend and agree that (a) all
revenue of the Business prior to Closing shall belong to Seller, (b) all
revenue of the Business on or after the Closing shall belong to the
Subsidiaries, (c) all expenses of the Business that occurred prior to the
Closing (other than Taxes) shall be the liability of and shall be timely paid
by Seller, including all expenses of the Subsidiaries that occurred prior to
the Closing, (d) all expenses of the Business that
37
occurred on or after the Closing (other than Taxes) shall be the liability of
and shall be timely paid by the Subsidiaries unless any such expense shall
not constitute an Assumed Liability and (e) Seller shall be liable for and
shall timely pay all SPS Retained Liabilities. The allocation of Taxes
between Seller and Purchaser shall be governed by the provisions of the Tax
Cooperation and Indemnification Agreement. In the event either party shall
receive revenues of the other, such revenues shall promptly be paid to the
other party. In the event one party shall receive invoices for expenses or
demands relating to obligations of the other party, such party shall promptly
forward such invoices or demands to the other party.
7.9 POST-CLOSING REIMBURSEMENT FOR YEAR 2000 COSTS. The parties
desire to expedite implementation of the Plan and to set forth certain
agreements regarding allocation of certain costs and liabilities between them
about Year 2000 Date Handling.
(a) Prior to Closing, Seller covenants to continue to implement the
Plan in accordance with the Plan's requirements and time line. After Closing,
as part of implementation of the Plan, Seller acknowledges Purchaser intends
to conduct additional testing of the systems, applications and equipment of
the Business and its interfaces with the customers, vendors and third party
trading partners of the Business (the "Post-Closing Testing"). Seller agrees
to reimburse Purchaser or the Subsidiaries for all Post-Closing Testing Costs
to the extent conducted by Purchaser on or before December 31, 1999 up to
$200,000; provided, however, that such reimbursement obligation shall be
reduced by any unexpended amount as of the Closing Date of the $550,000
currently budgeted under the Plan for 1999. For purposes of this Agreement,
"Post-Closing Testing Costs" shall mean all commercially reasonable project
costs incurred by Purchaser or the Subsidiaries to conduct the Post-Closing
Testing including, but not limited to, all independent consultant and
employee time and related expenses and all Y2K Project Support under the
Interim Services Agreement. In the event the Closing is delayed beyond July
1, 1999, Seller agrees to consult with Purchaser to identify and use
reasonable commercial efforts to carry out the testing that Purchaser
intended to implement as the Post-Closing Testing.
(b) If the Post-Closing Testing reveals that any additional
remediation, re-testing and implementation of remediation plans is necessary
for proper Date Handling with respect to the Proprietary Software Programs of
Business (the "Post-Closing Remediation"), Purchaser shall be entitled to
undertake such Post-Closing Remediation and Seller shall to reimburse
Purchaser and the Subsidiaries for all Project Costs relating to such
Post-Closing Remediation incurred on or before December 31, 1999. For
purposes of this Agreement, "Project Costs" shall mean all commercially
reasonable project costs to renovate and remediate the Proprietary Software
Products of the Business for proper Date Handling, including all of those
relating to the renovation, repair, replacement, re-testing and
implementation costs, such as independent consultant and employee time and
related expenses and all Y2K Project Support costs incurred under the Interim
Services Agreement.
(c) Purchaser shall report to Seller promptly (i) when, in
aggregate, any Post-Closing Remediation Costs exceed $100,000 and/or (ii)
when the Post-Closing Testing has been completed. Such reports shall provide
in reasonable detail the matters requiring Post-Closing Remediation, the
results of the testing and Purchaser's reasonable expectation, based on
current information, of additional Post-Closing Remediation Costs.
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(d) Purchaser shall notify Seller promptly in the event Purchaser
reasonably expects any Post-Closing Remediation project to exceed $50,000 or
when a project which was not expected to exceed such amount is revised to be
reasonably expected to exceed such amount (a "Critical Remediation"). Within
48 hours of such notice Seller agrees to meet with Purchaser for the purpose
of discussing the problem identified, the anticipated means of remediating
such problem and an estimate of the Project Costs. Within 24 hours after such
meeting, Seller shall notify Purchaser whether Seller consents to the project
relating to such Critical Remediation, which consent Seller agrees may not be
unreasonably withheld. In the event Seller is unwilling or unable to meet
such schedule, Seller waives any rights to object to the Critical
Remediation. Purchaser shall be entitled to pursue any Critical Remediation
notwithstanding the fact that Seller withholds its consent. However, any
disputed matters relating to the Critical Remediation shall be resolved in
accordance with Section 7.9(f).
(e) Each month Purchaser shall provide Seller with a written
invoice, specifying in detail the Post-Closing Testing Costs and Project
Costs during the preceding month and the total cost therefor. Within 30 days
following the date of receipt of each invoice, Seller shall pay to Purchaser
any undisputed invoiced amounts.
(f) Any specific remediation efforts and costs approved in advance
by Seller, including those under Section 7.9(d), or those matters as to which
Seller has waived its rights, may not be disputed. If Seller disputes any
other matters, which disputes shall be limited to the commercial
reasonableness of any Post-Closing Remediation, the scope of any Post-Closing
Remediation or the amount of any Post-Closing Testing Costs or Project Costs
(the matters in dispute, the "Disputed Matters"), Seller shall deliver to
Purchaser, within 10 days from the date Seller receives notice of the matter
which constitutes the Disputed Matter, a written statement identifying the
Disputed Matters and providing a detailed explanation of its objections. If
the parties cannot resolve all disputes under this Section 7.9 in a mutually
satisfactory manner on or before January 15, 2000, the disputes shall be
finally adjudicated by an independent consultant whose business involved Date
Handling and who is mutually acceptable to the parties (the "Independent
Consultant"). The Independent Consultant will review the Disputed Matters for
commercial reasonableness, and shall make such other investigations as the
Independent Consultant may deem necessary in order to ascertain the whether
such matters were commercially reasonable. Pending the Independent
Consultant's final determination, Seller shall pay the amounts not in dispute
to Purchaser, subject to any adjustment as required to give effect to the
Independent Consultant's final determination. Seller shall pay to Purchaser
any amounts determined by the Independent Consultant to be owed with respect
to the Disputed Matters. If the Disputed Matters are determined to be
substantially correct, Seller shall pay Purchaser all costs incurred in
engaging the Independent Consultant. If the Project Costs are not
substantially correct, Purchaser shall pay to Seller all costs incurred in
engaging the Independent Consultant. For purposes of this Agreement,
"substantially correct" shall mean that the amount of the costs invoiced by
Purchaser relating to the Disputed Matters varied no more than five percent
from the Independent Consultant's final determination of such costs.
(g) The parties do not intend that the remedies granted to Purchaser
and the Subsidiaries in this Section 7.9 to preclude any other remedies that
Purchaser or the Subsidiaries may have with respect to improper Date Handling
according to the representations and warranties contained in
39
Section 2.26, but Purchaser and the Subsidiaries agree that Seller shall not
be liable twice for the same damages suffered by Purchaser or the
Subsidiaries.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 EACH PARTY'S OBLIGATIONS. The respective obligations of each
party hereto to effect the transactions contemplated hereby is subject to the
satisfaction or waiver as of the Closing of the following conditions:
(a) No statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other order shall
have been enacted, entered, promulgated, enforced or issued by any
Governmental Entity and no other legal restraint or prohibition preventing
consummation of any of the transactions contemplated by this Agreement shall
be in effect;
(b) The waiting period under the HSR Act, if applicable to the
transactions contemplated hereunder, shall have expired or been terminated;
and
(c) In all material respects, the parties hereto shall have filed
all applications, reports or other documents, given all notices, met all
requirements, received all consents and approvals, satisfied any and all
conditions of approval and all applicable waiting periods shall have expired
in connection with the consummation of the transactions contemplated hereby.
(d) IBM CONTRACT. Seller shall have extended the term of the IBM
Contract (as defined in the Interim Services Agreement) to June 30, 2000 and
shall have obtained IBM's consent for the parties to enter into the Master
Agreement, and all other conditions precedent to such extension of such term
and to the entering into the Master Agreement shall have been satisfied.
8.2 SELLER'S AND THE SUBSIDIARIES' OBLIGATIONS. The obligations of
Seller and the Subsidiaries to effect the transactions contemplated hereby is
subject to the satisfaction (or waiver by Seller) as of the Closing of the
following additional conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES, COMPLIANCE WITH
COVENANTS. The representations and warranties of Purchaser made in this
Agreement qualified as to materiality shall be true and correct, and those
not so qualified shall be true and correct in all material respects, as of
the date hereof and as of the time of the Closing as though made as of such
time, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties
qualified as to materiality 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). Purchaser shall have duly performed, complied with and
satisfied in all material respects all covenants, agreements and conditions
required by this Agreement to be performed, complied with or satisfied by it
by the time of the Closing. Purchaser shall have delivered to Seller a
certificate dated the Closing Date and signed by an officer of Purchaser
confirming the foregoing.
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(b) ABSENCE OF LITIGATION, INJUNCTION. There shall not be
threatened, instituted or pending any suit, action, investigation, inquiry or
other proceeding by or before any court or Governmental Entity requesting an
order, judgment or decree (except those in which Seller is a plaintiff
directly or derivatively) which, in the reasonable judgment of Seller, would,
if issued, be reasonably likely to restrain or prohibit the consummation of
the transactions contemplated hereby or require rescission of this Agreement
or such transactions or result in material damages to Seller, and there shall
not be in effect any injunction, writ, preliminary restraining order or any
order of any nature issued by a court or Governmental Entity of competent
jurisdiction directing that the transactions contemplated hereby not be
consummated as so provided or any statute, rule or regulation enacted or
promulgated that makes consummation of the transactions contemplated hereby
illegal.
(c) SPECIFIED ITEMS. Purchaser shall have delivered the items to be
delivered to Seller pursuant to Section 1.6.
8.3 PURCHASER'S OBLIGATIONS. The obligations of Purchaser to effect
the transactions contemplated hereby is subject to the satisfaction (or
waiver by Purchaser) as of the Closing of the following additional conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES, COMPLIANCE WITH
COVENANTS. The representations and warranties of Seller and the Subsidiaries
made in this Agreement qualified as to materiality shall be true and correct,
and those not so qualified shall be true and correct in all material
respects, as of the date hereof and as of the time of the Closing as though
made as of such time, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties qualified as to materiality 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), and except that the
representations and warranties contained in Section 2.36 shall be true and
correct in all respects or Seller shall have undertaken in writing to cure
any known breaches that are the subject matter of Section 7.7 in accordance
with Section 7.7. Except to the extent such covenants relate to the period
after Closing, the covenants of the AFCC Group made in this Agreement
qualified as to materiality shall have been duly performed, complied with and
satisfied, and those not so qualified shall have been duly performed,
complied with and satisfied in all material respects, as of the time of the
Closing, except that the covenants contained in Sections 4.3, 4.4, and 4.5
shall have been duly performed, complied with and be satisfied in all
respects or Seller shall have undertaken in writing to cure any known
breaches that are the subject matter of Section 7.7 in accordance with
Section 7.7. The AFCC Group shall have duly performed, complied with and
satisfied in all material respects all other agreements and conditions
required by this Agreement to be performed, complied with or satisfied by the
AFCC Group by the time of the Closing. The AFCC Group shall have delivered to
Purchaser a certificate dated the Closing Date and signed by an officer of
AFCC, Seller and the Subsidiaries confirming the foregoing.
(b) ABSENCE OF LITIGATION, INJUNCTIONS. There shall not be
threatened, instituted or pending any suit, action, investigation, inquiry or
other proceeding by or before any court or governmental or other regulatory
or administrative agency or commission requesting an order, judgment or
decree (except those in which Purchaser is a plaintiff directly or
derivatively) which, in the reasonable judgment of Purchaser would, if
issued, be reasonably likely to restrain or prohibit the
41
consummation of the transactions contemplated hereby or require rescission of
this Agreement or such transactions or result in material damages to
Purchaser, if the transactions contemplated hereby are consummated, and there
shall not be in effect any injunction, writ, preliminary restraining order or
any order of any nature issued by a court or governmental agency of competent
jurisdiction directing that the transactions contemplated hereby not be
consummated as so provided or any statute, rule or regulation enacted or
promulgated that makes consummation of the transactions contemplated hereby
illegal.
(c) TERMINATION OF INTRACOMPANY AGREEMENTS. Each Subsidiary shall
have terminated each contract, agreement or understanding between any of
them, on one hand, and any member of the AFCC Group (other than the
Subsidiaries), on the other hand, relating to either Subsidiary or the
Business; provided, however, that nothing in this Section 8.3(c) is intended
to affect the Transaction Documents.
(d) INTERCOMPANY DEBTS. At or immediately prior to the Closing, each
Subsidiary shall have discharged in full any and all amounts due from such
Subsidiary to any member of the AFCC Group and each member of the AFCC Group
(other than the Subsidiaries) shall have discharged in full any and all
amounts due to each Subsidiary, in each case that are outstanding at the
Closing Date.
(e) SPECIFIED ITEMS. AFCC, Seller and the Subsidiaries shall have
delivered the items to be delivered to Purchaser pursuant to Section 1.5.
(f) CONSENT TO SUBLEASE. Seller shall have taken all actions
necessary to receive the consent of NOVUS Credit Services, Inc. as the
landlord under the Riverwoods Lease to the Sublease.
8.4 FRUSTRATION OF CLOSING CONDITIONS. No party to this Agreement
may rely on the failure of any condition set forth in this Article VIII if
such failure was caused by such party's failure to act in good faith or to
use its best efforts to cause the Closing to occur.
ARTICLE IX.
TAX MATTERS
9.1 TAX MATTERS. Certain tax matters which are the subject matter
of the Tax Cooperation and Indemnification Agreement shall be governed by the
Tax Cooperation and Indemnification Agreement to be executed by the parties
thereto.
42
ARTICLE X.
TERMINATION
10.1 TERMINATION EVENTS. Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(a) by mutual written consent of the Seller and Purchaser;
(b) by either Seller or Purchaser if the Closing does not occur on
or prior to October 15, 1999; provided, however, that the right to terminate
this Agreement pursuant to this Section 10.1(b) shall not be available to any
party hereto, if it has failed to perform any of its obligations under this
Agreement, which failure has resulted in a failure of any of the conditions
of Article VIII; or
(c) by either Seller or Purchaser if any Governmental Entity shall
have issued a judgment, order or decree or taken any other action permanently
enjoining, restraining or otherwise prohibiting any of the transactions
contemplated by this Agreement, and such judgment, order or decree or other
action shall have become final and nonappealable.
10.2 INFORMATION AND CONFIDENTIALITY. In the event of any
termination pursuant to this Article X, written notice thereof setting forth
the reasons therefor shall promptly be given to the other parties and the
transactions contemplated by this Agreement shall be terminated, without
further action by any party. If the transactions contemplated by this
Agreement are terminated as provided herein: (a) Purchaser shall return all
documents and other materials received from Seller and the Subsidiaries
relating to the transactions contemplated hereby, whether so obtained before
or after the execution hereof, to Seller; and (b) all confidential
information received by Purchaser with respect to the business of Seller and
the Subsidiaries shall be treated in accordance with the Confidentiality
Agreement, which shall remain in full force and effect notwithstanding the
termination of this Agreement.
10.3 REMEDIES FOR TERMINATION. In the event that this Agreement is
terminated due to the intentional breach of a representation, warranty,
covenant or condition by the breaching party, then the non-breaching party
shall be entitled to pursue, exercise and enforce any and all remedies,
rights, powers and privileges available at law or in equity including the
recovery of its actual expenses incurred in the negotiation and execution of
this Agreement.
10.4 ABANDONMENT. If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in this Article
X, this Agreement shall become void and of no further force or effect, except
for the provisions of (a) Section 7.4 relating to confidentiality, (b)
Section 7.2 relating to publicity, (c) this Article X and (d) Section 13.11
relating to certain expenses. In addition, upon termination of this
Agreement, Network Services shall promptly change its name to a name that
does not include the initials "ADS." Nothing in this Article X shall be
deemed to release any party from any liability for any breach by such party
of the terms and provisions of this
43
Agreement or to impair the right of any party to compel specific performance
by any other party of its obligations under this Agreement.
ARTICLE XI
INDEMNIFICATION
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties in this Agreement and in any Schedule or
certificate delivered hereto shall survive the Closing for purposes of the
other party asserting claims for breaches of such representations and
warranties for eighteen months after Closing (except for (a) those
representations and warranties contained in Sections 2.1, 2.4, 2.8, 2.9 and
3.2, which shall survive the Closing for any applicable statute of
limitations periods and any extensions thereof, (b) the representations and
warranties contained in Section 2.36, which shall survive the Closing through
June 30, 2000, and (c) the representations and warranties contained in
Section 2.26, which shall survive the Closing through December 31, 1999). The
right of a party to indemnification, payment of damages or other remedy based
on a breach of the representations or warranties contained herein will not be
affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) by such party at any time, whether
before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of, or compliance with, any
such representation or warranty. The waiver of any condition based on the
accuracy of any representation or warranty will not affect the right to
indemnification, payment of damages or other remedy based on such
representations or warranties.
11.2 INDEMNIFICATION BY SELLER. Upon the terms and subject to the
conditions of this Article XI, Seller shall indemnify Purchaser, the
Subsidiaries, their Affiliates and each of their respective officers,
directors, employees and agents against and hold them harmless from any
losses, liabilities, claims, damages or expenses (including costs of
investigation and defense and reasonable legal fees and expenses) whether or
not involving a third-party claim (collectively, "Claims") suffered or
incurred by any such indemnified Person arising from, relating to or
otherwise in respect of (a) any and all obligations and liabilities, secured
or unsecured, whether absolute, accrued, contingent or otherwise, whether
known or unknown and whether or not due ("Liabilities") of Seller or the
Subsidiaries other than the Assumed Liabilities; (b) any breach of, or
inaccuracy in, any representation or warranty of Seller or Subsidiaries in
this Agreement (without giving effect to any supplement to the Schedules to
this Agreement) or any certificate, instrument or other document delivered
pursuant hereto or in connection herewith; (c) any breach of any covenant of
Seller or, with respect to the period prior to the Closing, the Subsidiaries,
contained in this Agreement; (d) any exercise or attempt to exercise any
right of refusal or similar right with respect to the sale of the
Subsidiaries, the Business or any portion thereof, including but not limited
to any such right described on Schedule 2.2; or (e) any claim of a breach of
a software license agreement as a result of the hiring of the FleetShare
Employees by the Subsidiaries.
11.3 INDEMNIFICATION BY PURCHASER. Upon the terms and subject to
the conditions of this Article XI, Purchaser shall indemnify Seller and each
of its officers, directors, employees and agents against and hold them
harmless from any Claims suffered or incurred by any such indemnified party
arising from, relating to or otherwise in respect of (a) the operations of
the Subsidiaries to the extent such Claims relate to an occurrence on or
after the Closing Date (except to the extent such Claims
44
are not Assumed Liabilities); and (b) any breach of, or inaccuracy in, any
representation or warranty of Purchaser contained in this Agreement (without
giving effect to any supplement to the Schedules to this Agreement) or any
certificate, instrument or other document delivered pursuant hereto or in
connection herewith.
11.4 CONDITIONS OF INDEMNIFICATION RELATING TO THIRD PARTY CLAIMS.
Subject to the provisions of this Article XI, the obligations and liabilities
of Seller, in the case of Section 11.2(a), (b), (d) and (e) and the
Purchaser, in the case of Section 11.3(b), with respect to Claims made by or
against third parties ("Third Party Claims"), shall be subject to the
following terms and conditions:
(a) The Person to whom such Third Party Claim relates (the
"Indemnified Party") will give the party from which indemnity is sought
hereunder (the "Indemnifying Party") prompt notice of such Third Party Claim,
which notice in any event shall be given to the Indemnifying Party within 10
days of the Indemnified Party first becoming aware of the facts and
circumstances that form the basis of such Third Party Claim; provided that
the omission so to promptly notify the Indemnifying Party with respect to a
Third Party Claim brought against or sought to be collected from such
Indemnified Party will not relieve the Indemnifying Party from any liability
which it may have to such Indemnified Party under Section 11.2 or 11.3 except
to the extent that such failure has materially prejudiced such Indemnifying
Party with respect to the defense of such Third Party Claim. The Indemnifying
Party shall have the right to control the defense of any such Third Party
Claim. Except as otherwise provided herein, the Indemnified Party shall have
the right to participate in (but not control) the defense of any Third Party
Claim and to retain its own counsel in connection therewith, but the fees and
expenses of any such counsel for the Indemnified Party shall be borne by the
Indemnified Party.
(b) If the Indemnifying Party, within a reasonable time after notice
of any such Third Party Claim, fails to assume the defense thereof, the
Indemnified Party shall (upon a subsequent 10 days' notice to the
Indemnifying Party) have the right to undertake the defense or, with the
consent of the Indemnifying Party, to undertake a compromise or settlement of
such Third Party Claim on behalf of and for the account and risk of the
Indemnifying Party, subject to the right of the Indemnifying Party to assume
the defense of such Third Party Claim at any time prior to the settlement,
compromise or final determination thereof. The Indemnifying Party shall not
be liable for any compromise or settlement of a Third Party Claim effected
without its written consent. During any period when the Indemnifying Party is
contesting any such Third Party Claim in good faith, the Indemnified Party
shall not pay, compromise or settle such Third Party Claim without the
Indemnifying Party's consent; provided that the Indemnified Party may
nonetheless pay, compromise or settle such Third Party Claim without such
consent during such period, in which event it shall, automatically and
without any further action on its part, waive any right (whether or not
pursuant to this Agreement) to indemnity in respect of all losses,
liabilities, damages or expenses relating to such Third Party Claim. If the
Indemnifying Party shall defend any such Third Party Claim until such Third
Party Claim shall be adjudicated by order, decree, ruling or other action,
then the Indemnifying Party shall have the right, in the exercise of its
exclusive discretion, to determine whether or not to appeal such adjudication.
(c) Anything in this Section 11.4 to the contrary notwithstanding,
the Indemnifying Party shall not, without the written consent of the
Indemnified Party (which consent shall not be
45
withheld unreasonably or delayed), settle or compromise any Third Party Claim
or consent to the entry of any judgment which imposes any future obligation
on the Indemnified Party or which does not include as an unconditional term
thereof the giving by the claimant and or plaintiff to the Indemnified Party
a release from all liabilities in respect of such Third Party Claim; provided
that, whether or not such a release is required to be obtained, the
Indemnifying Party shall remain liable to such Indemnified Party in
accordance with Section 11.2 or 11.3 in the event that a Third Party Claim is
subsequently brought against or sought to be collected from such Indemnified
Party.
(d) The Indemnified Party shall, and shall cause its Affiliates to,
provide the Indemnifying Party with such assistance (without charge) as may
reasonably be requested by the Indemnifying Party in connection with any
indemnification or defense provided for herein, including, without
limitation, providing the Indemnifying Party with such information, documents
and records and reasonable access to the services of and consultations with
such personnel of the Indemnified Party or its Affiliates as the Indemnifying
Party shall deem necessary (provided that such access shall not unreasonably
interfere with the performance of the duties performed by or responsibilities
of such personnel).
(e) The indemnification required by Section 11.2 or 11.3, as the
case may be, shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills with reasonable
documentation are received or Claims are actually incurred.
11.5 CONDITIONS OF INDEMNIFICATION RELATING TO CLAIMS THAT ARE NOT
THIRD PARTY CLAIMS. In the event any Indemnified Party should have a claim
against any Indemnifying Party under Section 11.2 or 11.3 that does not
involve a Third Party Claim being asserted against or sought to be collected
from such Indemnified Party, to the extent not otherwise cured pursuant to
Section 7.7, the Indemnified Party shall deliver notice of such claim with
reasonable promptness to the Indemnifying Party within the applicable time
period specified in Section 11.1. The failure by any Indemnified Party so to
notify the Indemnifying Party shall not relieve the Indemnifying Party from
any liability which it may have to such Indemnified Party under Section 11.2
or 11.3 except to the extent that the Indemnifying Party demonstrates that it
has been materially prejudiced by such failure. If the Indemnifying Party
disputes its liability with respect to such claim, the Indemnifying Party and
the Indemnified Party agree to proceed in good faith to negotiate a
resolution of such dispute and, if not resolved through negotiations, such
dispute will be resolved in accordance with Article XII.
11.6 LIMITATIONS ON INDEMNIFICATION. Any Claim brought under Section
11.2(b) or Section 11.3(b) is subject in each case to the following
limitations and restrictions:
(a) Claims may not be asserted any time after 11:59 p.m. on the date
on which a claim for a breach of the related representation and warranty
terminates as established in Section 11.1. A claim for indemnification for
which notice was given pursuant to Section 11.1 prior to the end of such
period shall survive until such claim is fully and finally determined.
(b) Claims made pursuant to Section 11.2(b) will be paid only to the
extent they exceed $2,000,000 (the "Seller's Basket"); provided, however,
that (i) once Seller's Basket has been exceeded, all amounts back to the
first dollar of claims shall be recoverable (ii) and the aggregate amount
recoverable pursuant to Section 11.2(b) shall in no event exceed $50,000,000.
46
Notwithstanding anything to the contrary in this Article XI, the limitations
and restrictions in this Section 11.6(b) shall not apply to any breach of the
representations and warranties contained in Sections 2.8 and 2.9 of this
Agreement.
(c) Claims made pursuant to Section 11.3(b) will be paid only to the
extent they exceed $2,000,000 (the "Purchaser's Basket"); provided, however,
that (i) once Purchaser's Basket has been exceeded, all the amounts back to
the first dollar of claims shall be recoverable and (ii) the aggregate amount
recoverable pursuant to Section 11.3(b) shall in no event exceed $50,000,000.
(d) The limitations contained in Sections 11.6(b) and 11.6(c) shall
not apply to any breach of a representation or warranty to the extent the
Person making such warranty had knowledge of such breach at any time prior to
the date on which such representation and warranty is made.
(e) Each Claim shall be reduced by the amount of any insurance
proceeds actually received in connection with such Claim. Each party
covenants to exercise its reasonable commercial efforts to collect insurance
proceeds under applicable insurance policies that are then in force if and to
the extent that such Claim relates to an event covered by such insurance
policies.
(f) The representations and warranties of Seller and the
Subsidiaries specifically enumerated in Section 11.2(b) for purposes of
determining whether a breach thereof has occurred that may entitle Purchaser
or any other Person to recover for any Claim under Section 11.2(b) shall not
be deemed qualified by any references to materiality (or variations thereof)
contained therein and any breaches thereof shall be determined without regard
to whether such breach constitutes a Material Adverse Effect.
(g) Following the Closing, the remedies provided in this Article XI
shall be the sole recourse of all parties hereto for all Claims relating to
breaches of representations and warranties, other than as may be provided for
elsewhere in this Agreement and other than for the willful misconduct of
Purchaser or Seller related to or arising, directly or indirectly, out of
this Agreement or the transactions contemplated hereby.
(h) Notwithstanding anything herein to the contrary, if a matter
which constitutes a breach of any representation or warranty by Seller or
(before Closing) either Subsidiary also meets the definition of a SPS
Retained Liability, then any limitations or restrictions imposed by this
Section 11.6 shall not be applicable to a claim against Seller for any such
SPS Retained Liability.
(i) All Claims described in Section 5.3 shall be governed by the
provisions of Article V and not by the provisions of this Article XI except
to the extent Article XI is expressly referenced. All Claims covered by the
Tax Cooperation and Indemnification Agreement shall be governed by the
provisions of such Tax Cooperation and Indemnification Agreement, and not by
the provisions of this Article XI.
47
ARTICLE XII
DISPUTE RESOLUTION
12.1 NEGOTIATION. In the event of any dispute, claim, question, or
disagreement arising from or relating to this Agreement or the breach
thereof, the parties hereto shall use their reasonable best efforts to settle
the dispute, claim, question, or disagreement. To this effect, a party who is
involved in the dispute shall provide written notice to the other parties
hereto, specifying in reasonable detail the factual background of the dispute
and the basis for the party's claim. Thereafter, the parties shall consult
and negotiate with each other in good faith and, recognizing their mutual
interests, attempt to reach a just and equitable solution satisfactory to the
parties. If the parties do not reach such solution within a period of sixty
(60) days, then the dispute will be handled according to Section 12.2 below.
12.2 MEDIATION. If any dispute, claim, question or disagreement
arising from or relating to this Agreement or the breach thereof cannot be
settled according to Section 12.1 above, the parties agree to endeavor first
to settle the dispute in an amicable manner by mediation administered by the
American Arbitration Association under its Commercial Mediation Rules before
resorting to any other remedy.
12.3 PROVISIONAL REMEDIES. Notwithstanding anything to the contrary
in this Article XII, either party may seek from a court any interim or
provisional relief that is necessary to protect the rights or property of
that party.
ARTICLE XIII
MISCELLANEOUS
13.1 NO THIRD-PARTY BENEFICIARIES. Except as otherwise provided in
Article XI which is for the benefit of, and enforceable by, the Indemnified
Parties, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns, and nothing herein expressed or implied shall give
or be construed to give to any Person, other than the parties hereto and such
assigns, any legal or equitable rights hereunder.
13.2 AMENDMENT OR WAIVER. No amendment, modification or waiver in
respect of this Agreement shall be effective unless it shall be in writing
and signed by the parties hereto.
13.3 HEADINGS. The headings contained in this Agreement, or in any
exhibit or schedule hereto and in the table of contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been
signed by each of the parties and delivered to the other parties.
48
13.5 ASSIGNMENT. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by any party hereto
(including by operation of law in connection with a merger, or sale of
substantially all the assets, or any dissolution, of any party hereto)
without the prior written consent of the other parties hereto; PROVIDED,
HOWEVER, that Purchaser may assign its rights hereunder, in whole or in part,
to an Affiliate of the Purchaser without the prior written consent of any
party hereto; PROVIDED FURTHER, however, that no assignment shall limit or
affect the assignor's obligations hereunder. Any attempted assignment in
violation of this Section 13.5 shall be void.
13.6 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by telecopy or sent, postage prepaid, by registered, certified
or express mail or overnight courier service and shall be deemed given when
so delivered by hand, or telecopied, or if mailed, three days after mailing
(one business day in the case of express mail or overnight courier service),
as follows:
if to Seller, or the Subsidiaries (before Closing)
SPS Payment Systems, Inc.
0000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Telecopy No: (000) 000-0000
Attention: General Counsel
with a copy to:
Associates First Capital Corporation
000 X. Xxxxxxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Attention: General Counsel
if to Purchaser, or the Subsidiaries (after Closing)
Alliance Data Systems Corporation
00000 Xxxxxxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Attention: President, Network Services
Division
with copies to:
Alliance Data Systems Corporation
000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxx 00000
Telecopy No.: (000) 000-0000
Attention: General Counsel
49
or such other address as any party may from time to time specify by written
notice to the other parties hereto.
13.7 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits hereto, together with the letter agreement from AFCC executed in
connection with the execution of this Agreement (the "AFCC Letter") and the
Confidentiality Agreement and all other documents or certificates executed by
the Parties in connection herewith and therewith contain the entire agreement
and understanding between the parties hereto with respect to the subject
matter hereof and thereof and supersede all prior agreements and
understandings relating to such subject matter.
13.8 SEVERABILITY. If any provision of this Agreement (or any
portion thereof) or the application of any such provision (or any portion
thereof) to any Person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, (a) a
suitable and equitable provision shall be substituted therefor in order to
carry out, so far as may be valid and enforceable, the intent and purpose of
such invalid or unenforceable provision and (b) the remainder of this
Agreement and the application of such provision to other Persons or
circumstances shall not be affected by such invalidity or unenforceability.
13.9 SCHEDULES. The inclusion of any matter in any schedule to this
Agreement shall be deemed to be an inclusion for all purposes of this
Agreement, including each representation and warranty to which it may relate,
but inclusion therein shall expressly not be deemed to constitute an
admission by Seller or Purchaser, or otherwise imply, that any such matter is
material or creates a measure for materiality for the purposes of this
Agreement.
13.10 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware
without regard to any conflicts of laws principles.
13.11 EXPENSES. Whether or not the transactions contemplated hereby
are consummated, and except as otherwise specifically provided in this
Agreement, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby by Seller and the Subsidiaries shall
be paid by Seller (and not the Subsidiaries) and all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby by Purchaser shall be paid by Purchaser.
13.12 REMEDIES FOR BREACH. It is possible that remedies at law may
be inadequate and, therefore, the parties hereto shall be entitled to
equitable relief including injunctive relief, specific performance or other
equitable remedies in addition to all of the remedies provided under this
Agreement or available to the parties under this Agreement at law or in
equity. Subject to the provisions of Article XII, no remedy made available by
this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to every other
remedy given under this Agreement or now or hereafter existing at law or in
equity.
[Remainder of page intentionally left blank]
50
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on their respective behalf, by their respective officers,
thereunto duly authorized, as of the day and year first above written.
SPS PAYMENT SYSTEMS, INC.
By: /S/ X. X. XXXXXXXX
----------------------------
Name: X. X. Xxxxxxxx
Title: President
ALLIANCE DATA SYSTEMS CORPORATION
By: /S/ XXXXXXX XXXXX
----------------------------
Name: Xxxxxxx Xxxxx
Title: Executive Vice President
SPS COMMERCIAL SERVICES, INC.
By: /S/ XXXXXXX X. XXXXXXX
----------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
ADS NETWORK SERVICES, INC.
By: /S/ XXXXXXX X. XXXXXXX
----------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
51
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
AMONG SPS PAYMENT SYSTEMS, INC., ALLIANCE DATA SYSTEMS
CORPORATION, SPS COMMERCIAL SERVICES, INC.
AND ADS NETWORK SERVICES, INC.
This First Amendment to Stock Purchase Agreement, dated as of July
12, 1999 (this "Amendment"), is by and among SPS Payment Systems, Inc., a
Delaware corporation ("Seller"), Alliance Data Systems Corporation, a
Delaware corporation ("Purchaser"), SPS Commercial Services, Inc., a Delaware
corporation ("Commercial Services"), and ADS Network Services, Inc., a
Delaware corporation ("ADS Network").
WHEREAS, on June 8, 1999, the parties to this Amendment entered into
a Stock Purchase Agreement (the "Original Agreement");
WHEREAS, the parties have determined to establish 12:01 a.m. July 1,
1999 as the effective time (the "Effective Time") for the transactions
contemplated by the Original Agreement for purposes of allocating revenue and
expenses among the parties (but not for purposes of otherwise allocating risk
and responsibility for any other benefits or Liabilities relating to
operation of the Business prior to the Closing, for example, for the right to
indemnification against third party claims for operation of the Business),
and therefore desire to amend the Original Agreement as set forth below;
NOW THEREFORE, for and in consideration of the mutual covenants
contained in this Amendment, the parties agree to the following amendments to
the Original Agreement:
1. Defined terms used in this Amendment shall have the meanings set forth
for such terms in the Original Agreement, except where the context
herein requires otherwise.
2. Section 1.2 of the Original Agreement shall be deleted and the
following shall replace Section 1.2 in its entirety: "1.2 PAYMENT OF
PURCHASE PRICE Section 1.2 of the Original Agreement shall be deleted
and the following shall replace Section 1.2 in its entirety:
1.2 PAYMENT OF PURCHASE PRICE. On July 13, 1999, Purchaser shall
deliver to Seller by electronic wire transfer to a bank account
designated in writing by Seller at least two business days prior
to the Closing Date, in immediately available funds, the sum of
$169,000,000, together with interest thereon at an annual rate of
5.8% from July 1, 1999 through July 13, 1999, subject to
adjustment as specified in Section 1.3 below (as adjusted, the
"Purchase Price"). The parties acknowledge that the Purchase
Price specified has been reduced by $1,000,000 to pay an
intercompany debt owed by Seller to Commercial Services as
required by Section 8.3(d)."
3. Section 1.3(a) of the Original Agreement shall be revised by deleting
the phrase "Closing Date" in the first and third sentences and
substituting the phrase "Effective Time" so that Section 1.3(a) shall
read in its entirety as follows:
52
"(a) PREPARATION OF CLOSING BALANCE SHEET. As soon as
practicable following the Closing Date, but in no event later than 30
days after the Closing, Seller shall deliver to Purchaser a balance
sheet of the Business as of the Effective Time (the "Closing Balance
Sheet") prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied without giving effect to the
transfer of assets to the Subsidiaries or the sale of Stock
contemplated by this Agreement. The Closing Balance Sheet or
explanatory notes shall identify as separate items the following: (i)
the value of the Inventory (as hereinafter defined) and (ii) the value
of the FleetShare Accounts Receivable (as hereinafter defined) and all
allowances for doubtful accounts relating thereto. The Closing Balance
Sheet shall be accompanied by a certificate signed by an officer of
Seller certifying (i) that as of December 31, 1998, $3,919,487 was the
amount of the FleetShare Accounts Receivable net of all reserves, (ii)
the reserves for the FleetShare Accounts Receivable as of that date
represented 1.047% of the FleetShare Accounts Receivable, (iii) that as
of December 31, 1998, $844,648 was the amount of the Inventory of the
Business, and (iv) that the Closing Balance Sheet and the certification
of the FleetShare Accounts Receivable and the Inventory described in
(i) and (iii) of this sentence: (x) were prepared in accordance with
GAAP consistently applied, subject to normal recurring year end
adjustments (which will not individually or in the aggregate have a
Material Adverse Effect (as hereinafter defined)) and the absence of
notes and (y) fairly reflects the assets and liabilities of the
Business as of December 31, 1998 or the Effective Time, respectively.
In the event that Purchaser shall disagree with amounts specified on
the Closing Balance Sheet for the FleetShare Accounts Receivable,
reserves related thereto or the Inventory, Purchaser shall notify
Seller of the matters with which it disagrees within 15 days of
Purchaser's receipt of the Closing Balance Sheet and the parties shall
use their best efforts to promptly resolve any differences. If the
parties are unable to resolve any disagreements that they may have
within 30 days following Purchaser's giving of notice of its
disagreement to Seller, then Seller and Purchaser shall use the dispute
resolution mechanism established in Article XII."
4. Section 1.4 of the Original Agreement shall be deleted and the
following shall replace Section in its entirety:
"1.4 CLOSING. Upon the terms and subject to the conditions
hereof, the closing of the transactions contemplated hereby (the
"Closing") shall take place at Dallas, Texas on July 12, 1999, unless
the parties receive a second request under the terms of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), in which case the Closing shall be at such other place
and/or time as Seller and Purchaser may agree (the "Closing Date")."
5. The first sentence of Section 2.30 of the Original Agreement shall be
revised by deleting the phrase "Closing Date" and substituting the
phrase "Effective Time" so that Section 2.30 shall read in its entirety
as follows:
"Schedule 2.30 (which, upon the agreement of the parties, may be
delivered in commonly readable electronic format) contains a complete
and accurate list of all accounts receivable of Seller and each
Subsidiary relating to the FleetShare Business (collectively, the
"FleetShare Accounts Receivable") as of April 30, 1999 and as of the
Effective Time, the later of which shall be delivered as of a date that
is no more than two days prior to
53
the Closing Date, which list sets forth the aging of such FleetShare
Accounts Receivable."
6. Sections 4.3 through 4.5 of the Original Agreement shall be deleted and
the following shall replace such Sections in their entirety:
"4.3 ASSETS OF ADS NETWORK. On the Closing Date, but
effective as of the Effective Time, Seller shall transfer to ADS
Network all of Seller's rights, title and interest in each of assets
listed in Schedule 4.3; provided, however, Purchaser may direct Seller
to transfer all or part of the assets listed in Schedule 4.3 to
Commercial Services, and Seller shall comply with such directions
unless Seller has previously transferred the relevant assets to ADS
Network or the transfer of the assets as directed will have a material
adverse effect on Seller.
"4.4 ASSETS OF COMMERCIAL SERVICES. On or before the Closing
Date, but effective as of the Effective Time, each of the assets listed
in Schedule 4.4 will be among the assets of Commercial Services, and
after the Closing Date, but effective as of the Effective Time, Seller
shall have no further right, title or interest in such assets;
provided, however, if any such assets are not owned by Commercial
Services at the time this Agreement is executed, Purchaser may direct
Seller to transfer all or part of such assets to ADS Network, unless
Seller has previously transferred the relevant assets to Commercial
Services or the transfer of the assets as directed will have a material
adverse effect on Seller.
"4.5 ASSUMED LIABILITIES. On or before the Closing Date, but
effective as of the Effective Time, ADS Network shall assume the
obligations of Seller relating to the Network Services Business to the
extent, and only to the extent, (a) listed on Schedule 4.5(a)
(collectively, the "ADS Network Assumed Obligations") or (b) provided
in the Tax Cooperation and Indemnification Agreement. On or before the
Closing Date, but effective as of the Effective Time, pursuant to an
assumption agreement substantially in the form attached hereto as
Exhibit E (the "Assumption Agreement"), Commercial Services shall
assign to Seller and Seller shall assume all obligations and
liabilities, known or unknown, of Commercial Services other than the
obligations of Commercial Services listed on Schedule 4.5(b) (the
obligations retained by Commercial Services, the "Commercial Services
Retained Obligations"; and the ADS Network Assumed Obligations and the
Commercial Services Retained Obligations collectively, the "Assumed
Liabilities"). Neither Seller nor either Subsidiary shall cause or
permit either Subsidiary to assume or incur any obligation or liability
other than the ADS Network Assumed Obligations and the Commercial
Services Retained Obligations. On or before the Closing Date, but
effective as of the Effective Time, Seller shall retain or assume all
obligations and liabilities associated with the Business other than the
Assumed Liabilities (collectively, the "SPS Retained Liabilities")."
7. Section 7.8 of the Original Agreement shall be deleted and the
following shall replace Section 7.8 in its entirety:
"7.8 REVENUES AND EXPENSES. The parties intend and agree
that effective after the Closing (a) all revenue of the Business prior to the
Effective Time shall belong to Seller, (b) all revenue of the Business on or
after the Closing Date shall belong to the Subsidiaries, (c)
54
all revenues of the Business that are the result of Interim Operations, as
hereinafter defined, reduced by any Interim Period Tax Burden, as hereinafter
defined, and increased by any Interim Period Tax Benefit, as hereinafter
defined, will be deemed to belong to and shall be paid over to the
Subsidiaries, (d) all expenses of the Business that occurred prior to the
Effective Time (other than Taxes, which shall be allocated based upon the
Closing Date and governed by the Tax Cooperation and Indemnification
Agreement) shall be the liability of and shall be timely paid by Seller,
including all expenses of the Subsidiaries that occurred prior to the
Effective Time, (e) all expenses of the Business that occurred on or after
the Effective Time (other than Taxes, which shall be allocated based upon the
Closing Date and governed by the Tax Cooperation and Indemnification
Agreement), shall be the liability of and shall be timely paid by the
Subsidiaries unless any such expense shall not constitute an Assumed
Liability, provided that the Subsidiaries shall not be responsible for and
shall not pay costs and expenses incurred during the Interim Period, as
hereinafter defined, outside of the ordinary course of the conduct of the
Business, including without limitation any costs and expenses related to the
transactions contemplated by this Agreement, and (f) Seller shall be liable
for and shall timely pay all SPS Retained Liabilities. For the limited
purpose of determining the Interim Period Tax Burden and any Interim Period
Tax Benefit, the taxable income or loss of the Business for the Interim
Period that are the result of Interim Operations ("Interim Period Results")
and the Taxes for the Interim Period that are the result of Interim
Operations shall be determined by application of the principles set forth in
Section 2.2(c) of the Tax Cooperation and Indemnification Agreement, as
reasonably interpreted and applied by the parties; provided that any income
taxes included in calculating the Interim Period Tax Burden and any Interim
Period Tax Benefit shall be determined by multiplying the Interim Period
Results by the highest marginal corporate income Tax rate in effect for such
Interim Period. Except for the limited purpose of determining the Interim
Period Tax Burden and any Interim Period Tax Benefit, the allocation of Taxes
between Seller and Purchaser shall be governed by the provisions of the Tax
Cooperation and Indemnification Agreement. For purposes of this Section 7.8,
"Interim Operations" means the ordinary and necessary operations of the
Business during the Interim Period and shall not include any transactions or
occurrences outside of the ordinary course of the conduct of the Business;
"Interim Period" means the period commencing with the Effective Time and
ending on the Closing Date; "Interim Period Tax Burden" means any Taxes
allocated to the Interim Period pursuant to this Section 7.8; and "Interim
Period Tax Benefit" means any reduction in Taxes realized by Seller or any of
its Affiliates as a result of net losses incurred from Interim Operations.
For purposes of allocating revenues and expenses for the Interim Period, the
parties intend that (a) any expenses for such period that are described as
services to be provided by Seller to the Subsidiaries after the Closing under
the terms of the Interim Services Agreement shall be calculated using the
pricing for such services under the Interim Services Agreement; for example,
notwithstanding that the Riverwoods Lease, the Sublease and the Interim
Services Agreement are entered into effective as of the Closing Date,
expenses for use of the premises under the Riverwoods Lease and the Sublease
shall be for the account of the Subsidiaries from the Effective Time and such
expenses shall be calculated using the amounts set forth for such services in
the Interim Services Agreement, and (b) notwithstanding that the Subsidiaries
are, under the terms of Article V, not hiring the Active Employees and are
not responsible for certain benefits with respect to Hired Employees until
the Closing Date, employee and employee benefit expenses, such as payroll and
other costs of employee benefits, of Seller from the Effective Time for
Employees who become Hired Employees shall be for the account of the
Subsidiaries. In the event either party shall receive revenues of the other,
such revenues shall promptly be paid to the other party. In the event one
party shall receive invoices for expenses or
55
demands relating to obligations of the other party, such party shall promptly
forward such invoices or demands to the other party."
8. The third sentence of Section 7.9(a) of the Original Agreement shall be
revised by deleting the phrase "Closing Date" and substituting the
phrase "Effective Time" so that the third sentence of Section 7.9(a)
reads in its entirety as follows:
"Seller agrees to reimburse Purchaser or the Subsidiaries for all
Post-Closing Testing Costs to the extent conducted by Purchaser on or
before December 31, 1999 up to $200,000; provided, however, that such
reimbursement obligation shall be reduced by any unexpended amount as
of the Effective Time of the $550,000 currently budgeted under the Plan
for 1999."
9. Section 8.1(d) of the Original Agreement shall be deleted and the
following shall replace Section 8.1(d) in its entirety:
"(f) IBM CONTRACT. Seller shall have extended the term of the
IBM Contract (as defined in the Interim Services Agreement) to June 30,
2000, and all other conditions precedent to such extension of such term
and to the entering into of the Master Agreement shall have been
satisfied."
10. Section 8.3(d) of the Original Agreement shall be deleted and the
following shall replace Section 8.3(d) in its entirety:
"(d) INTERCOMPANY DEBTS. At or immediately prior to
the Closing, but effective prior to the Effective Time, each Subsidiary
shall have discharged in full any and all amounts due from such
Subsidiary to any member of the AFCC Group and each member of the AFCC
Group (other than the Subsidiaries) shall have discharged in full any
and all amounts due to each Subsidiary, in each case that are
outstanding at the Closing Date. The parties acknowledge that the
$1,000,000 intercompany debt owed by Seller to Commercial Services has
been satisfied by the reduction of the Purchase Price referred to in
Section 1.2 as amended hereby."
11. Section 11.2 of the Original Agreement shall be amended by deleting the
word "or" in front of subpart "(e)" and inserting the following phrase
at the end of the sentence "or (f) any failure to obtain the consent of
IBM to the terms of the Master Agreement."
12. Exhibit E shall be amended to make the Assumption Agreement effective
as of the Effective Time as shown on the attached revised Exhibit E.
13. In all other respects, the Original Agreement shall remain in full
force and effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
56
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed on their respective behalf, by their respective officers,
thereunto duly authorized, as of the day and year first above written.
SPS PAYMENT SYSTEMS, INC.
By: /S/ Xxxxxxx X. Xxxxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
ALLIANCE DATA SYSTEMS CORPORATION
By: /S/ Xxxxxxx Xxxxx
------------------
Name: Xxxxxxx Xxxxx
Title: Executive Vice President
SPS COMMERCIAL SERVICES, INC.
By: /S/ Xxxxx Xxxxxxx
------------------
Name: Xxxxx Xxxxxxx
Title: President
ADS NETWORK SERVICES, INC.
By: /S/ Xxxxx Xxxxxxx
------------------
Name: Xxxxx Xxxxxxx
Title: President
57
ASSUMPTION AGREEMENT
This Assumption Agreement (the "Agreement") is entered into as of
July 12, 1999, by and between SPS Payment Systems, Inc., a Delaware
corporation ("SPS"), and SPS Commercial Services Inc., a Delaware corporation
and a wholly-owned subsidiary of SPS ("Commercial Services").
WHEREAS, SPS and Commercial Services are parties to that certain
Stock Purchase Agreement, dated June 8, 1999, by and among SPS, Commercial
Services, ADS Network Services, Inc. and Alliance Data Systems Corporation
(the "Stock Purchase Agreement");
WHEREAS, the Stock Purchase Agreement requires that Commercial
Services and SPS execute and deliver this Agreement at the Closing of the
Stock Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto intending to be legally bound hereby, agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined in this
Agreement will have the respective definitions set forth in the Stock
Purchase Agreement.
2. ASSIGNMENT. Commercial Services hereby assigns to SPS effective as
of 12:01 a.m. July 1, 1999 (the "Effective Time") all of Commercial Services'
right, title and interest in and to all obligations and liabilities of
Commercial Services, except for those listed in the attached Exhibit A (such
assigned obligations and liabilities, the "SPS Assumed Liabilities").
3. ACCEPTANCE OF ASSIGNMENT BY SPS; PERFORMANCE. SPS hereby accepts the
assignment from Commercial Services of the SPS Assumed Liabilities. Effective
as of the Effective Time, SPS hereby agrees to perform and discharge all such
obligations and liabilities, when and as the same become due.
4. AMENDMENT . No amendment, modification or waiver in respect to this
Agreement shall be effective unless it shall be in writing and signed by the
parties hereto.
5. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES . This Agreement,
including the documents referred to herein, (a) constitutes the entire
agreement between the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings relating to
such subject matter, and (b) is not intended to confer upon any Person other
than the parties hereto (and their permitted assigns) any rights or remedies.
6. ASSIGNMENT . Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned, in whole or in part,
by operation of law or otherwise, by any of the parties without the prior
written consent of the other party hereto; provided, however, that Commercial
Services may assign its rights hereunder, in whole or in part, to ADS
Alliance Data Systems, Inc. or any of its Affiliates without the prior
written consent of SPS. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by, the
parties and their respective successors and assigns.
7. GOVERNING LAW . This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without regard to
any conflicts of law principles.
8. IN WITNESS WHEREOF, SPS and Commercial Services have caused this
Agreement to be duly executed by their respective officers, thereunto duly
authorized, as of the date first written above.
SPS PAYMENT SYSTEMS, INC.
By:
----
Name:
Title:
SPS COMMERCIAL SERVICES, INC.
By:
----
Name:
Title:
EXHIBIT A
to the Assignment and Assumption Agreement
between SPS and Commercial Services
EXCEPTION TO THE SPS ASSUMED LIABILITIES
The SPS Assumed Liabilities consist of all obligations and liabilities of SPS
Commercial Services, Inc., EXCEPT the following:
(a) the obligations and liabilities of SPS Commercial Services,
Inc. for the period after July 12, 1999 (the "Closing Date")
to perform under the following contracts:
Alliance Energy Corp. FleetShare Agreement
A. T. Xxxxxxxx FleetShare Agreement
East Coast Oil Corp. FleetShare Agreement
Farm Stores, Inc. FleetShare Agreement
Fas Mart Convenience Stores, Inc. FleetShare Agreement
Gate Petroleum Company FleetShare Agreement
Junior Food Stores, Inc. FleetShare Agreement
Lil Champ Food Stores, Inc. FleetShare Agreement
Xxxxxx Oil USA, Inc. FleetShare Agreement
Summit Oil FleetShare Agreement
Volta Oil Co. FleetShare Agreement
Xxxxxxxx 66 Company FleetShare Agreement
Xxxxxxxx Oil Corporation FleetShare Agreement
; provided, however, that the FleetShare Receivables and
revenues and expenses relating to such contracts shall be
for the account of SPS Commercial Services, Inc. as of 12:01
a.m. July 1, 1999.
(b) all other liabilities and obligations for the period after the
Closing Date with respect to the operation of the FleetShare
Business except for the FleetShare Employees.
