-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
SVNwT5+OEBQycOb438ziBX1gGGbN0+Yur17M0mEISFrwLO2Y7v8kq/Tom08ZqV+C
ruc8k4Vwj3OZEHFPqPzuqA==
<SEC-DOCUMENT>0001047469-98-012029.txt : 19980330
<SEC-HEADER>0001047469-98-012029.hdr.sgml : 19980330
ACCESSION NUMBER: 0001047469-98-012029
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 29
CONFORMED PERIOD OF REPORT: 19971231
FILED AS OF DATE: 19980327
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CERIDIAN CORP
CENTRAL INDEX KEY: 0000109758
STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571]
IRS NUMBER: 520278528
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-01969
FILM NUMBER: 98576046
BUSINESS ADDRESS:
STREET 1: 8100 34TH AVE S
CITY: MINNEAPOLIS
STATE: MN
ZIP: 55425
BUSINESS PHONE: 6128538100
FORMER COMPANY:
FORMER CONFORMED NAME: CONTROL DATA CORP /DE/
DATE OF NAME CHANGE: 19920703
FORMER COMPANY:
FORMER CONFORMED NAME: COMMERCIAL CREDIT CO
DATE OF NAME CHANGE: 19680910
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<DESCRIPTION>FORM 10-K
<TEXT>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------------------------
FORM 10-K
--------------------------------------
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended DECEMBER 31, 1997
Commission File Number 1-1969
CERIDIAN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 52-0278528
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
8100 34th Avenue South
Minneapolis, Minnesota 55425
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Telephone No.: (612) 853-8100
------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS: NAME OF EACH EXCHANGE ON WHICH REGISTERED:
Common stock, par value $.50 ---- New York Stock Exchange, Inc.; The Chicago
Stock Exchange; and The Pacific Exchange
Has the Registrant (1) filed all reports required by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months and
(2) been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
Ceridian as of February 28, 1998 was $3,357,966,810.
The shares of Ceridian common stock outstanding as of February 28, 1998 were
72,375,214.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1997 Annual Report to Stockholders of Registrant: Parts I & II
Portions of the Proxy Statement for Annual Meeting of Stockholders, May 22,
1998: Parts III and IV
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
CERIDIAN CORPORATION
PART I
THE INFORMATION CONTAINED IN THIS REPORT INCLUDES FORWARD-LOOKING
STATEMENTS, BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS, THAT INVOLVE RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE EXPRESSED IN THE FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS KNOWN TO
CERIDIAN THAT COULD CAUSE SUCH MATERIAL DIFFERENCES ARE IDENTIFIED IN THE
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION" UNDER THE CAPTION "CAUTIONARY FACTORS THAT COULD AFFECT FUTURE
RESULTS" ON PAGE 11 OF CERIDIAN'S 1997 ANNUAL REPORT TO STOCKHOLDERS, WHICH IS
INCORPORATED BY REFERENCE INTO PART II, ITEM 7 OF THIS REPORT.
ITEM 1. BUSINESS.
Ceridian Corporation ("Ceridian"), known as Control Data Corporation until
June 1992, was founded in 1957 and is incorporated in Delaware. The principal
executive office of Ceridian is located at 8100 34th Avenue South, Minneapolis,
Minnesota 55425, telephone (612) 853-8100.
As a result of the December 31, 1997 sale of Computing Devices
International, Ceridian's defense electronics business, Ceridian now operates
exclusively in the information services industry. Ceridian's information
services businesses, which consist of its Human Resource Services businesses
("HRS"), its Comdata subsidiary and its Arbitron division, provide products and
services to customers in the human resources, trucking and electronic media
markets. These businesses collect, manage and analyze data and process
transactions on behalf of customers, report information resulting from such
activities to customers, and provide customers with related software
applications and services. The technology-based products and services of these
businesses are typically provided through long-term customer relationships that
result in a high level of recurring revenue.
HUMAN RESOURCE SERVICES.
The businesses comprising HRS offer a broad range of services and software
designed to help employers more effectively manage their work forces and
information that is integral to human resource processes. HRS' revenue for the
years 1995, 1996 and 1997 was $412.2 million, $490.3 million and $578.6 million,
respectively.
MARKETS. The market for human resource services covers a comprehensive
range of information management and employer/employee assistance services and
software. These products and services include transaction-oriented
administrative services and software products, in areas such as payroll
processing, tax filing and benefits administration, as well as management
support software and services, in areas such as skills management, regulatory
compliance, employee training and employee assistance.
The market for these products and services is expected to continue to grow
as organizations seek not only to reduce costs and improve productivity by
outsourcing administrative services and further automating internal processes,
but also to adapt to the increasing scope and complexity of laws and regulations
governing businesses and increasingly complicated work-life issues faced by
employers and employees. Continuing growth in multinational companies
increasingly makes providing human resource services a global opportunity.
Ceridian classifies employers in the human resource services market into
three categories: small (fewer than 100 employees), medium (100 to 10,000
employees) and large (over 10,000
2
<PAGE>
employees). Smaller employers in the human resource services market tend to
be relatively more price sensitive, to require less customization or
flexibility in product and service offerings, and to switch more readily from
one provider to another. Medium- and large-sized employers' human resource
management needs tend to be more complex, and therefore often require more
customization and flexibility in products and services, greater integration
among data processing systems and a greater variety of products and services.
Ceridian believes, however, that with regard to any size employer, a
provider of a transaction-based service such as payroll processing is
afforded attractive opportunities to complement that core service with
additional products and services that are natural adjuncts to that core
service and potentially important factors in revenue growth.
PRODUCTS AND SERVICES. HRS' human resource management products and
services include payroll processing services and software, tax filing services,
human resource information software, benefits administration software, time and
attendance systems, and applications to give employees and managers direct
access to human resources information. These products and services are provided
in the United States, the United Kingdom and Canada through Ceridian Employer
Services. Payroll processing and tax filing services accounted for about
three-fourths of HRS' 1997 revenue, with about 90% of 1997 payroll processing
and tax filing revenue derived from the United States.
Payroll processing in the United States consists primarily of preparing and
furnishing employee payroll checks, direct deposit advices and supporting
journals and summaries, but does not involve the handling or transmission of
customer payroll funds. Ceridian also supplies quarterly and annual social
security, Medicare, and federal, state and local income tax withholding reports
required to be filed by employers and employees. Payroll tax filing consists
primarily of collecting funds for federal, state and local employment taxes from
customers based on payroll information provided, remitting funds collected to
the appropriate taxing authorities, filing applicable returns, and handling
regulatory correspondence and amendments. Payroll-related services are
typically priced on a fee-per-item-processed basis.
Revenue from payroll tax filing services in the United States also includes
investment income earned by Ceridian from tax filing deposits temporarily held
pending remittance on behalf of customers to taxing authorities. Customer
deposits are held in a fiduciary capacity in a tax filing trust established by
Ceridian. The trust invests primarily in high quality collateralized short-term
investments, top tier commercial paper, U.S. Treasury and Agency securities, AAA
rated asset-backed securities and corporate securities rated A3/A- or better.
The duration of investments is carefully managed to meet the liquidity needs of
the trust. About two-thirds of 1997 tax filing revenue and about 14% of HRS'
total 1997 revenue was attributable to such investment income. Due to the
significance of this investment income, HRS' quarterly revenue and profitability
fluctuate as a result of changes in interest rates and in the amount of tax
filing deposits held. Because the volume of payroll items processed increases
in the first and fourth quarters of each year in connection with employers'
year-end reporting requirements, and because the amount of tax filing deposits
also tends to be greatest in the first quarter, HRS' revenue and profitability
tend to be greater in those quarters.
Payroll processing in the United States is conducted using Ceridian's
proprietary "Signature" software at 31 district offices located throughout
the United States, all of which are linked in a nationwide network.
Ceridian's payroll system allows customers to input their own payroll data
via personal computers, transmit the data on-line to Ceridian for processing,
retrieve reports and data files from Ceridian and print reports and, in
certain instances, payroll checks or direct deposit advices on site.
Customers can also input payroll data by telephone or batch transmittal, with
payroll checks and related reports prepared by Ceridian at one of its
district processing centers. Ceridian's payroll processing system also
interfaces with both customer and third-party transaction processing systems
to facilitate services such as direct deposit of payroll.
3
<PAGE>
Ceridian's tax filing services are provided not only to employers who utilize
Ceridian's payroll processing service, but also to local and regional payroll
processors.
Ceridian provides human resource information systems (HRIS) software that
runs in either Windows (-) or DOS environments and serves as a "front-end" to
Ceridian's Signature payroll processing system, allowing customers to utilize
a common database for both payroll and HRIS purposes. This enables the
customer to create a single database of employee information for on-line
inquiry, updating and reporting in payroll and other areas important to human
resource administration and management, such as employee data tracking,
government compliance, compensation analysis and benefits administration.
As a result of its February 1997 acquisition of FLX Corporation, Ceridian
also provides HRIS software for Microsoft operating environments that
incorporates open, industry standard technology, is scalable from standalone
applications to full client/server configurations, and can be utilized with
an existing interface as a front-end for Ceridian's payroll processing and
tax filing services. Ceridian expects to introduce during 1998 versions of
this software that will enable it to serve as a fully integrated front-end to
the Signature payroll processing system, as well as an Internet/intranet
version which will enable employees and managers to view and modify various
types of human resources information on-line.
Through a cooperative relationship with Humanic Design Corporation,
Ceridian is authorized to resell Humanic's client/server HRIS software for
Oracle operating environments in connection with Ceridian's payroll
processing services. Because of the importance of being able to integrate
Ceridian's payroll processing and tax-filing systems with other systems and
applications utilized by customers and potential customers, particularly
third-party HRIS applications, Ceridian has also developed interfaces to
exchange employee-related information between Ceridian's payroll system and
the HRIS systems of vendors such as Oracle Corporation and PeopleSoft Inc.
In August 1997, Ceridian announced it was terminating development of its
CII payroll processing software system, which had been intended to be a
successor to the Signature system primarily for larger payroll processing
customers with more complex processing needs. Beta tests of the CII system had
revealed that the costs associated with installing and processing payrolls for
large numbers of customers with the system would be higher than previously
anticipated, and that significant further investment would be required. As a
result, Ceridian determined that the CII system would not provide an adequate
return on its investment and decided, in light of continuing customer
satisfaction with and enhancements being made to the Signature system and
increased functionality included in HRIS software front-ends to the Signature
system, to terminate the CII development. In connection with this decision,
Ceridian terminated a technology services agreement with IBM Global Services
under which IBM was to have provided centralized computer processing services
utilizing the CII software.
In recent years, Ceridian has expanded its payroll processing and HRIS
software businesses outside of the United States through acquisitions.
Approximately 8% of HRS' 1997 revenue was obtained from customers outside of the
U.S. Ceridian's Centre-file Limited subsidiary, acquired in 1995, provides
mainframe-based payroll processing services and HRIS software in the United
Kingdom. Centre-file's services do not involve the handling or transmission of
customer payroll funds.
In January 1998, Ceridian's Canadian subsidiary purchased the payroll
processing business of the Toronto-Dominion Bank, which had fiscal 1997 revenue
of approximately $22 million. In March 1998, Ceridian purchased the Comcheq
payroll processing business of the Canadian Imperial Bank of Commerce, which had
1997 revenue of approximately $55 million.
- ---------------------------
- - "Windows" is a trademark of Microsoft Corporation.
<PAGE>
Comcheq processes payrolls on a decentralized basis in its branch offices
utilizing a proprietary, PC-based system. Both of these Canadian payroll
businesses collect payroll and payroll tax amounts from customers and remit
tax amounts to applicable governmental authorities and make direct deposits
of payroll amounts to employees' bank accounts. As a result, revenue from
payroll processing services in Canada also includes investment income
received from temporarily holding these amounts. Ceridian expects that these
amounts will be invested in a similar fashion as comparable amounts in the
U.S. About 26% of the 1997 revenue of these Canadian businesses was
attributable to such investment income.
For large employers with complex information management needs that prefer
to have all aspects of their human resource management systems in-house,
Ceridian's Tesseract subsidiary provides mainframe-based payroll processing,
HRIS and benefits administration software, as well as consulting services. For
small employers located in the mid-Atlantic states, Ceridian's MiniData
subsidiary provides payroll processing, tax filing, unemployment compensation
management and related services. Ceridian also provides advanced time and
attendance software, including a client/server version which complements a
wide variety of HRIS and payroll systems, and a series of inter-related
software applications that allow employees and managers direct access to
employment-related information through telephones, touch screen kiosks,
personal computers and Internet/intranet technologies.
HRS also includes businesses that provide a variety of employee
assistance, work-life balance, management support and training products and
services. Ceridian Performance Partners provides services to help
organizations address workplace effectiveness issues and improve employee
recruitment, retention and productivity and reduce absenteeism. Staff
consultants provide confidential assistance 24 hours a day to customers'
employees to help them address issues ranging from everyday matters to crisis
situations. Supporting these consultants are research and product
specialists who provide specialized expertise in areas such as
parenting/child care, elder care, adult disabilities, addiction disorders,
mental health and financial, legal, managerial/supervisory and
education/schooling issues.
Ceridian's Usertech subsidiary provides customized end-user training and
support programs to organizations implementing new systems. Services
provided by Usertech include classroom and computer-based training,
print-based and on-line user guides and reference, and marketing
communications programs. Usertech's Information Learning Systems division
provides employee benefits knowledge base software that provides answers to
employee questions about their benefits and runs on company intranets and in
call centers.
Ceridian's Resumix subsidiary provides skills management software (and
related hardware) that employs image processing and knowledge base and database
technologies to enable organizations to manage large volumes of incoming resume
data to identify qualified candidates for hire and match them with available
staffing needs, and to manage the skills of an existing work force by matching
current employees with new jobs or projects. Resumix also provides a software
product that enables customers to link their Resumix systems with commercial
recruiting sites on the Internet.
SALES AND MARKETING. Payroll processing, tax filing and human resource
management software and services are marketed in the U.S. through a direct sales
force operating through about three dozen offices located throughout the U.S.
Marketing relationships have been established with banks, accounting firms and
insurance companies pursuant to which these products and services are offered to
the business clients of these entities. The most significant source of customer
leads for these transaction-based products and services are referrals from
existing customers and from the marketing relationships previously noted. The
other HRS businesses, including operations in the United Kingdom and Canada,
utilize their own direct
5
<PAGE>
sales forces. Customer leads for the products and services of these
businesses are generally obtained through referrals, trade shows, product
demonstration seminars and direct sales efforts.
HRS' customer base covers a wide range of industries and markets, and no
single customer represented more than 1% of HRS' 1997 revenue. HRS' products
and services are provided under written license or service agreements, with
contracts for repetitive services generally terminable upon relatively short
notice.
The HRS businesses have utilized cooperative marketing relationships with
other companies offering products or services that complement those of the HRS
businesses as well as informal marketing alliances with human resource
consulting firms, and are exploring similar cooperative arrangements with other
software, insurance and human resource services providers. HRS is also seeking
to further integrate and coordinate the sales and marketing efforts of its
businesses and to sell a greater variety of its products and services to the
customers of its various businesses.
COMPETITION. The human resource services industry is highly competitive.
Competition comes from national, regional and local third party transaction
processors, as well as from software companies, consulting firms and internally
developed and operated systems and software.
The majority of all payroll processing and tax filing in the U.S., Canada
and the United Kingdom is supported in-house, with the remainder supported by
third party providers. In the U.S., Automatic Data Processing, Inc. ("ADP") is
the largest third party provider, with Ceridian and Paychex, Inc. ("Paychex")
comprising the other two large, national providers. ADP serves all sizes of
employers, while Paychex focuses on small employers. Other third party payroll
and tax filing providers are generally regional and local competitors, although
larger, national providers of benefits administration or 401(k) processing
services may contemplate expansion into outsourced payroll processing. In both
the United Kingdom and Canada, Ceridian's respective subsidiaries are the
largest outsourced payroll processing providers in terms of revenue, in each
case competing with several other national providers, including a subsidiary of
ADP, and local providers. Competition in both the payroll processing and HRIS
software areas also comes from a number of large, national software companies
that provide both payroll processing software for in-house processing as well as
HRIS software, often in conjunction with other enterprise management software
applications.
Apart from payroll processing and tax filing services, HRS' businesses
generally compete with a variety of national and regional application software
companies, training companies, consulting firms and human resource services
providers. Generally, the market for these products and services is evolving
and is not dominated by a small number of competitors.
Currently, the principal competitive factors in the human resource services
industry are performance, price, functionality, ease and flexibility of use,
customer support and industry standard technology architecture. HRS believes
that the ability to integrate human resource management software applications
with customers' other in-house applications, and the ability to provide
client/server-based solutions are becoming increasingly important competitive
factors. While HRS believes its businesses are able to compete effectively in
the overall human resource services market, their continued ability to compete
effectively will depend in large measure on their ability to timely develop and
implement new technology, particularly that which incorporates industry standard
architecture and client/server-based solutions.
7
<PAGE>
COMDATA.
Ceridian's Comdata subsidiary provides transaction processing and decision
support services to the trucking industry. Comdata's revenue from products and
services provided to the trucking industry for the years 1995, 1996 and 1997 was
$156.2 million, $173.7 million and $197.8 million, respectively. On January 17,
1998, Comdata sold its gaming services business to First Data Corporation in
exchange for First Data's NTS transportation services business and cash.
Comdata expects that the operations of NTS, which are being integrated with
Comdata, will generate 1998 revenue of approximately $28 million for Comdata.
MARKETS. The trucking industry encompasses both long haul fleets and
local fleets. Private fleets, which are part of larger companies that have
significant shipping needs, predominate in the local fleet segment, but play
a lesser role in the long haul fleet segment. Common carriers, which provide
trucking services to companies that do not have fleets of their own,
predominate in the long haul fleet segment, which is comprised of
less-than-truckload and truckload components. The less-than-truckload
component, which involves trucks that make multiple stops to load and unload,
is characterized by large capital requirements and a relatively high degree
of consolidation. The truckload component, which involves the transportation
of full loads directly from shipper to final destination without going
through any sorting terminals, is highly fragmented and, Comdata believes, is
growing at the expense of the less-than-truckload component.
The majority of Comdata's trucking company customers are common carriers
serving the truckload component of the long haul segment. Many of these
carriers do not employ their drivers, but instead contract with individual
owner-operators. Such owner-operators usually settle their expenses with the
common carrier after the completion of each trip. Drivers for truckload
carriers often spend weeks on the road at a time, creating a number of unique
conditions and business opportunities. Truckload carriers are challenged to
monitor and control fuel purchases, provide driver services to aid in
recruitment and improve retention, obtain necessary licenses and permits, and
effectively manage the routing and logistics of such long-distance trips.
SERVICES. Comdata provides services to trucking companies, truck stops and
truck drivers in the long haul segment of the trucking industry, and is seeking
to expand its service offerings to the local fleet segment.
TRUCKING COMPANY SERVICES. Comdata provides trucking companies and their
drivers with a variety of funds transfer services, most commonly initiated
through the use of Comdata's proprietary Comchek-Registered Trademark- card,
which is used in a manner similar to an ordinary credit card. Comdata's funds
transfer system is designed to enable truck drivers to obtain funding for
purchases and cash advances at truck stops and other locations en route to their
destination. Drivers may use the Comchek card to purchase fuel, lodging and
other approved items, obtain cash advances from ATM machines or through the use
of Comchek drafts, make long distance phone calls and make direct deposits of
pay, settlements (for non-employee owner-operators) or trip advances to personal
bank accounts. In 1997, Comdata processed approximately 45 million funds
transfer transactions involving approximately $7.2 billion for the trucking
industry.
Use of the Comchek card allows the trucking company customer greater
control over its expenses by allowing it to set limits on the use of the cards,
such as by designating locations where the cards may be used, the frequency with
which they may be used, phone numbers which may be called and the amount of
authorized use. Use of a Comchek card also enables Comdata to capture and
provide to trucking company customers (usually within 24 hours after the
completion of a given trip) transaction and trip-related information that
greatly enhances a customer's ability to track and plan fuel purchases and other
trip expenses and settle with
7
<PAGE>
drivers. Comdata can also provide trucking companies with a Windows-based
software application that provides trucking companies with on-line access to
Comdata's computer system for data on fuel purchases and other trip
information, and facilitates pre- and post-trip planning functions.
Use of a Comchek card typically generates a Comchek draft, which is payable
through a Comdata bank account. Comdata funds the underlying transaction when
the truck stop (or other payee) negotiates the draft by depositing it in its
bank account. Comdata bills the trucking company for the amount of the draft
plus a portion of the service fee, and collects from the truck stop the balance
of the service fee. The trucking company remits payment to Comdata by wire
transfer or check, typically within six days, although trucking companies may be
billed by Comdata in advance for all funds transfers authorized for any purpose
in connection with a particular trip.
Approximately 18% of Comdata's funds transfer revenue is derived from
transactions that do not involve the Comchek card. When a truck driver makes a
request at a truck stop for a funds transfer, Comdata verifies that the driver's
company has established sufficient credit. Upon presentation of valid
identification, the truck stop obtains an authorization number from Comdata and
issues a Comchek draft, which is handled in the manner described earlier.
Comdata also provides the previously described information gathering and
processing services in connection with fueling transactions which Comdata does
not fund, but instead are billed directly by the truck stop to the trucking
company. Fees for these "direct bill" transactions are substantially lower.
Comdata also provides fuel price tracking reports and management within a
network of truck stops, including cost/plus fuel purchase programs.
Comdata's Transceiver-Registered Trademark- division determines the permits
needed for a designated trip, truck and load, purchases those permits on behalf
of the customer and delivers them by facsimile machine to a truck stop where
they can be picked up by the driver. Comdata also provides certain regulatory
compliance services, such as processing and auditing of driver trip logs,
reporting of fuel taxes, annual licensing and motor vehicle registration
verification. Vehicle escort services for oversized loads are also provided.
Comdata offers a computerized shipment interchange system to help trucking
companies find loads for their return trips, thereby reducing empty backhauls.
By making specific shipment information available to customers on a subscription
basis, available shipments can be matched with available cargo space on a
nationwide basis. Comdata generates and delivers invoices on behalf of trucking
companies to their customers, and also purchases trucking company freight bills
in addition to providing necessary invoicing. As a result of agreements with
two major long-distance telecommunications providers, Comdata offers to its
trucking company customers long distance telecommunications services at volume
discount rates that might not otherwise be available to such customers.
TRUCK STOP SERVICES. Comdata maintains a national network of 24-hour
independent truck stop service centers which have point-of-sale devices and
other computer equipment to facilitate communication with Comdata's database
and operations centers. The service centers act as Comdata's agents pursuant
to a service center agreement, and typically also offer the funds transfer
services of other companies.
Comdata's merchant services division provides fueling centers with
PC-based, point of sale systems which automate the various transactions that
occur at a fuel purchase desk, systems which enable customers to transact
card-based fuel purchases at the fuel pump, UPC scanning devices, and truck
stop management software. These Trendar systems accept many types of fuel
purchase cards currently used by drivers. Comdata also makes long distance
telecommunications services available to truck stops at volume discount
rates, and provides an
8
<PAGE>
800 number phone service and prepaid long distance phone cards to truck stops
for resale to their customers.
DRIVER RELATIONS SERVICES. In order to assist trucking company
customers in attracting and retaining drivers, Comdata makes available to
trucking company employees and independent drivers the employee assistance
services of Ceridian Performance Partners, and provides additional driver
relations services such as a monthly audio magazine and audio tapes for
drivers, and an electronic mail services to drivers through kiosks placed in
truck stops.
LOCAL FUELING. In August 1997, Comdata acquired the remaining equity
interest in International Automated Energy Systems, Inc. ("IAES"), a provider
of fuel management and payment systems for local transportation fleets. IAES
provides local fleet operators with VISA (+) cards for their drivers' fuel
purchases that offer the fleet operators transaction control and trip-related
information gathering features similar to those of the Comchek card. IAES
has not yet achieved significant revenue, and is seeking to increase the
number of fuel purchase cards issued and the number of sales outlets that
accept the cards.
SALES AND MARKETING. Comdata markets its services to the trucking
industry through a direct sales force operating in various cities throughout
the U.S., and through a centralized tele-sales operation. Comdata has
contracts with approximately 17,000 long haul trucking companies, ranging in
size from those with several thousand trucks to those with fewer than five
trucks. Comdata also has relationships with approximately 8,000 fueling
locations. Contracts with trucking companies generally range up to three
years in duration, while contracts with service centers are typically one or
two years in duration. No single customer represented more than 2% of
Comdata's 1997 revenue from services to the trucking industry. Comdata is
seeking to emphasize the selling of a greater variety of its products and
services to its existing customers.
COMPETITION. The principal competitive factors relevant to funds
transfers in the trucking industry are marketing efforts, pricing,
reliability of computer and communications systems, and time required to
effect transactions. The major credit and debit card companies are
significant competitors of Comdata in that they make cash available to, and
facilitate purchases of fuel and other products by, holders of their cards on
a nationwide basis. Several other companies also offer similar funds
transfer services. In addition, truckstops often negotiate directly with
trucking companies for a direct billing relationship. Certain of Comdata's
competitors also operate or franchise nationwide truckstop chains. In
addition, Comdata competes with service centers (such as truckstops) that
offer similar products and services. Comdata also faces increasing
competition in the funds transfer area from ATMs that participate in national
networks.
While the majority of permitting and legalization services continue to
be performed in-house, at least one other nationwide company and several
regional companies provide permit services similar to those provided by
Comdata. Competition in this market is influenced by price, the expertise of
personnel and the ease with which permits may be ordered and received.
Comdata believes that its competitive strengths include (i) its ability
to provide services to trucking companies and drivers at a large number of
locations in the continental United States and Canada, (ii) its ability to
offer a variety of services, frequently tailored to an individual customer's
needs, (iii) its proprietary databases regarding funds transfers and fuel
purchases, and (iv) its long-term experience and concomitant relationships in
the trucking industry.
NETWORK AND DATA PROCESSING OPERATIONS. Comdata's principal
communications center for its funds transfer business is located near its
corporate headquarters with a secondary center
- ---------------------------
(+) "VISA" is a trademark of Visa International Service Association.
9
<PAGE>
located in Dallas, Texas. WorldCom is the primary supplier of
telecommunications services to Comdata pursuant to an agreement whose term
expires in 2003. Substantially all of Comdata's internal data processing
functions, including its payment processing systems, are provided by IBM
pursuant to an agreement for systems operations services that expires in
April 2005.
REGULATION. Many states require persons engaged in the business of
selling or issuing payment instruments (such as the Comchek draft) or in the
business of transmitting funds to obtain a license from the appropriate state
agency. In certain states, Comdata is required to post bonds or other
collateral to secure its obligations to its customers in those states.
Comdata believes that it is currently in compliance in all material respects
with the regulatory requirements applicable to its business. The failure to
comply with the requirements of any particular state could have a material
adverse effect on Comdata's business in that state.
ARBITRON.
Arbitron provides media and marketing information to broadcasters
(primarily in radio), advertising agencies, advertisers and, through a joint
venture, newspapers. Arbitron's revenue for the years 1995, 1996 and 1997
was $137.2 million, $153.1 million and $165.2 million, respectively.
MARKETS. Significant consolidation of radio station ownership has
occurred in the U.S. in recent years, which has tended to intensify
competition within the radio industry and to intensify competition between
radio and other forms of media for advertising dollars. At the same time,
audiences have become more fragmented as a result of greatly increased
programming choices and entertainment/media options. As a result,
advertisers increasingly seek to tailor advertising strategies to target
specific demographic groups through specific media, and the audience
information needs of radio broadcasters, advertising agencies and advertisers
have correspondingly become more complex. Increased competition and more
complex information requirements have heightened the need of radio
broadcasters for improved information management systems and more
sophisticated means to analyze such information. In addition, there is a
growing demand for quality radio audience information internationally from
global advertisers, U.S. broadcasters who have acquired broadcasting
interests in other countries, and an increasing number of private commercial
broadcasters in other countries.
These trends also affect other media. As the importance of reaching
niche audiences with targeted marketing strategies increases, broadcasters,
publishers, advertising agencies and advertisers increasingly require that
information regarding exposure to advertising be provided on a more
individualized basis and that such information be coupled with information
regarding shopping patterns and purchaser behavior. The need for purchase
data information may create opportunities for innovative approaches to
satisfy these information needs, particularly as technological advances
increase the alternatives available to advertisers for reaching potential
customers, including the possibilities of interactive communication.
SERVICES. Arbitron is a leading provider of radio audience measurement
information in the U.S. Arbitron estimates audience size and demographics in
the U.S. for local radio stations, and reports this and related data to its
customers. This information is used by radio stations to price and sell
advertising time and by advertising agencies and large corporate advertisers
in purchasing advertising time. Arbitron's proprietary data regarding radio
audience size and demographics is provided to customers through multi-year
license agreements. Arbitron uses listener diaries to gather radio listening
data from sample households in the 267 local markets for which it currently
provides radio ratings. Respondents mail the diaries to Arbitron's
processing center where Arbitron compiles periodic audience measurement
estimates. During the past three years, Arbitron has increased its survey
frequency so that all markets are measured at least twice each year, and
major markets are measured four times per year, and has taken actions
10
<PAGE>
toward increasing sample size, average response rates and the representation
of specific demographic groups.
Arbitron also provides software applications that give customers access
to Arbitron's database, and enable them to more effectively analyze and
understand that information and develop target marketing strategies.
Arbitron is also developing applications to enable customers to link
information provided by Arbitron's database with information from other
databases (such as product purchasing behavior) so as to enable customers to
further refine sales strategies and compete more effectively for advertising
dollars. The radio audience measurement service and related software sales
represented 83% of Arbitron's total 1997 revenue.
In November 1997, Arbitron acquired Continental Research, a United
Kingdom-based company that provides media, advertising, financial and
telecommunications research services in the United Kingdom and Europe.
Continental Research had 1997 revenue of $6.9 million. Arbitron expects to
utilize Continental Research to submit a bid for the United Kingdom radio
industry audience research contract being put out for tender during 1998 by
the Radio Joint Audience Research organization, and to explore other audience
measurement and market research opportunities in the United Kingdom and
Europe.
Arbitron also provides measurements of consumer retail behavior and
media usage in 243 local markets throughout the U.S. Arbitron's Scarborough
Research Partnership joint venture provides information regarding
product/service usage and media usage in 60 large U.S. markets, utilizing a
sample of consumers in the relevant markets to measure product and service
purchases. This information is provided twice each year to newspapers, radio
and television broadcasters, cable systems, advertisers and advertising
agencies in the form of the Scarborough Report. Arbitron has the exclusive
right to market the Scarborough Report to radio broadcasters and cable
systems. Arbitron has also developed and introduced in 43 mid-sized U.S.
markets its RetailDirect service, which is a locally oriented, purchase data
research service. The service, which utilizes diaries and telephone surveys,
provides a profile of the broadcast audience in terms of local media, retail
and consumer preferences so that local radio and television broadcasters and
cable systems will have information that helps them develop targeted sales
and programming strategies. Arbitron's Qualitative Diary service collects
consumer and media usage information from Arbitron radio diary keepers in 140
smaller U.S. markets.
Arbitron is exploring possible cooperative arrangements that would
facilitate the expansion of its radio audience measurement service into
selected international markets, provide additional software applications to
radio broadcasters and advertisers, and develop measurement products for the
Internet. Arbitron is also developing a passive, personalized electronic
measurement device to record broadcast listening or viewing for purposes of
audience measurement and verification that advertisements have been
broadcast.
SALES AND MARKETING. As of December 31, 1997, Arbitron provided its
radio audience measurement and related services to approximately 3,000 radio
stations and about 2,200 advertising agencies nationwide under contracts that
vary in length from one to seven years. Arbitron markets its products and
services through a direct sales force operating through offices in six cities
around the U.S. Reflecting the consolidation that has occurred in the radio
broadcasting industry, Arbitron's ten largest customers represented about 48%
of its 1997 revenue from radio audience measurement services and related
software sales.
Although the industry consolidation that has led to the increased
concentration of Arbitron's customer base could put pressure on the pricing
of Arbitron's radio ratings service, it has also contributed to an increase
in the number of stations subscribing for the ratings service, as stations
have become Arbitron customers upon their acquisition by a larger
broadcasting group. It has also been Arbitron's experience that stations
which are part of a larger broadcasting
11
<PAGE>
group have been somewhat more likely to purchase analytical software
applications and other services in addition to the ratings service.
COMPETITION. Arbitron competes with other providers of radio audience
measurement services, one of which utilizes a different survey methodology
than Arbitron and the other of which is a relatively new entrant into the
market. Arbitron also competes with other providers of applications software,
qualitative data and proprietary qualitative studies used by broadcasters,
cable systems, advertising agencies and advertisers.
DIVESTITURES
Ceridian's defense electronics business, Computing Devices
International, was sold to General Dynamics Corporation on December 31, 1997.
Computing Devices has facilities in the U.S., Canada and the United Kingdom,
and provides mission-critical electronics, software, systems integration and
information management for defense and other government agencies and
commercial customers in selected markets. Computing Devices' revenue for the
years 1995, 1996 and 1997 was $509.5 million, $553.0 million and 589.5
million, respectively. Computing Devices is shown as a discontinued
operation in Ceridian's year-end 1997 consolidated financial statements.
Comdata's gaming services business, which was sold in January 1998,
provided cash advance services to gaming patrons in casinos, racetracks and
other gaming locations through the use of credit cards and debit services
employing automated teller machines and similar devices. Revenue for this
business for the years 1995, 1996 and 1997 was $117.9 million, $125.5 million
and $133.2 million, respectively.
ADDITIONAL INFORMATION
PATENTS AND TRADEMARKS. Ceridian owns or is licensed under a number of
patents which relate to its products and are of importance to its business.
Certain of Ceridian's products and services are marketed under federally
registered trademarks which are helpful in creating recognition in the
marketplace. However, Ceridian believes that none of its businesses is
materially dependent upon any particular patent, license or trademark, or any
particular group of patents, licenses or trademarks.
BACKLOG. Although Ceridian's businesses are typically characterized by
long-term customer relationships that result in a high level of recurring
revenue, a substantial portion of the customer contracts utilized by these
businesses are terminable by the customers upon relatively short notice
periods, including contracts that have been extended beyond their original
terms. In addition, the period between the time a customer agrees to use a
Ceridian service and the time the service begins is generally relatively
short. For these reasons, Ceridian does not believe that meaningful backlog
information can be provided for its businesses.
RESEARCH AND DEVELOPMENT. The table below sets forth the amount of
research and development expenses for Ceridian's continuing operations for
the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
---- ---- ----
(Dollars in millions)
<S> <C> <C> <C>
Research and development $59.6 $52.5 $38.2
Percent of revenue 5.5% 5.6% 4.6%
</TABLE>
12
<PAGE>
Ceridian's research and development efforts are generally described
earlier in this Item in the description of Ceridian's businesses, and in Part
II, Item 7 of this report.
EMPLOYEES. As of December 31, 1997, Ceridian and its subsidiaries
employed approximately 8,000 people on a full- or part-time basis. None of
Ceridian's employees are covered by a collective bargaining agreement.
EXECUTIVE OFFICERS OF THE REGISTRANT. The executive officers of
Ceridian as of March 1, 1998, are as follows:
<TABLE>
<CAPTION> Executive
Name (Age) Position Officer Since
---------- -------- -------------
<S> <C> <C>
Lawrence Perlman (59) Chairman, President and Chief 1980
Executive Officer
John R. Eickhoff (57) Executive Vice President and 1989
Chief Financial Officer
Loren D. Gross (52)
Vice President and Corporate 1993
Controller
Tony G. Holcombe (42) Vice President, and President of 1997
Comdata Holdings Corporation
Carl O. Keil (56) Vice President, and President of 1997
Ceridian Employer Services
Stephen B. Morris (54) Executive Vice President, and 1992
President of Arbitron
Gary M. Nelson (46) Vice President and General Counsel 1997
Ronald L. Turner (51) Executive Vice President, Operations 1993
</TABLE>
The executive officers of Ceridian are elected by the Board of Directors
and serve at the pleasure of the Board of Directors and the Chief Executive
Officer. They are customarily elected each year at the meeting of the Board
of Directors held in conjunction with the annual meeting of stockholders.
Lawrence Perlman has been President and Chief Executive Officer of
Ceridian since January 1990, and was appointed Chairman in November 1992. He
is a director of Seagate Technology, Inc., The Valspar Corporation and
Computer Network Technology Corporation. Mr. Perlman has been a director of
Ceridian since 1985.
John R. Eickhoff has been Executive Vice President and Chief Financial
Officer of Ceridian since May 1995, and was Vice President and Chief
Financial Officer of Ceridian from June 1993 to May 1995. Mr. Eickhoff was
Vice President and Corporate Controller of Ceridian from July 1989 to June
1993.
Loren D. Gross has been Vice President and Corporate Controller of
Ceridian since July 1993. Mr. Gross was Assistant Corporate Controller of
Ceridian from March 1987 to July 1993.
Tony G. Holcombe has been Vice President of Ceridian and President of
its Comdata Holdings Corporation subsidiary since May 1997. Mr. Holcombe was
President and Chief
13
<PAGE>
Executive Officer of National Processing, Inc., which provides transaction
processing services and customized processing solutions, from October 1994 to
March 1997, and was Executive Vice President, Corporate Services for National
Processing from 1991 through 1994.
Carl O. Keil has been Vice President of Ceridian and President of
Ceridian Employer Services since April 1997. Mr. Keil was President and
Chief Executive Officer of EduServ Technologies, Inc., which originates,
services, and securitizes student loans, from March 1992 to January 1997;
Executive Vice President and Chief Operating Officer of International
Telecharge, Inc., which provides telecommunications and operator services,
from January 1991 to March 1992; and Senior Vice President of Marketing for
the Employer Services Group of Automatic Data Processing, Inc. from August
1987 to January 1991.
Stephen B. Morris has been Executive Vice President of Ceridian and
President of its Arbitron division since January 1996. Mr. Morris was Vice
President of Ceridian and President of Arbitron from December 1992 to January
1996. He was President and Chief Executive Officer of Vidcode, Inc., which
electronically monitors, verifies and reports the broadcast of television
commercials, from August 1990 to December 1992; and Director and co-founder
of Spectra Marketing Systems, a micro-marketing firm, from March 1987 to
March 1992. Prior to that time, he spent seventeen years at General Foods
Corporation, the last three as General Manager/President of the Maxwell House
Division.
Gary M. Nelson has been Vice President and General Counsel of Ceridian
since August 1997. From 1983 to July 1997, Mr. Nelson was a partner in the
Oppenheimer Wolff & Donnelly law firm.
Ronald L. Turner has been Executive Vice President, Operations of
Ceridian since March 1997. Mr. Turner was an Executive Vice President of
Ceridian and President of its Computing Devices International division from
January 1996 to March 1997. Mr. Turner was Vice President of Ceridian and
President of Computing Devices International from January 1993 to January
1996. Mr. Turner was President and Chief Executive Officer, GEC-Marconi
Electronics Systems Corporation, a defense electronics company, from March
1987 to January 1993. Mr. Turner is a director of FLIR Systems, Inc. and BTG,
Inc.
14
<PAGE>
ITEM 2. PROPERTIES.
At February 14, 1998, Ceridian's principal production and office
facilities were located in the metropolitan areas of Minneapolis, Minnesota;
Atlanta, Georgia; Columbia, Maryland; New York, New York; Fountain Valley and
San Francisco, California; Brentwood, Tennessee; St. Louis, Missouri; Toronto
and Montreal, Canada; and London, England.
The following table summarizes the usage and location of Ceridian's
facilities as of February 14, 1998:
<TABLE>
<CAPTION>
FACILITIES
(In thousands of square feet)
<CAPTION>
Type of Property Interest U.S. Non-U.S. Worldwide
------------------------- ----- -------- ---------
<S> <C> <C> <C>
Owned 29 15 44
Leased 2,933 102 3,035
----- -------- ---------
Total Square Feet 2,962 117 3,079
----- -------- ---------
<CAPTION>
Utilization
-----------
<S> <C> <C> <C>
Office, Computer Center & 2,111 117 2,228
Other
Vacant/Idle 71 -- 71
Leased or Subleased to Others 780 -- 780
----- -------- ---------
Total Square Feet 2,962 117 3,079
----- -------- ---------
</TABLE>
The 3.1 million square feet of aggregate space reflects a decrease of
1.1 million square feet from February 14, 1997 due to the sale of Computing
Devices International. Space subject to assigned leases is not included in
the table above, and Ceridian remains secondarily liable under all such
leases. As of December 31, 1997, these assigned leases involved 1.1 million
square feet of space and future rental obligations totaling $15.8 million.
The principal elements of these amounts are 0.4 million square feet and $1.8
million related to the spin-off of Control Data Systems, Inc. and 0.6 million
square feet and $12.6 million related to the 1989 sale of Imprimis Technology
Incorporated to Seagate Technology, Inc. Ceridian does not anticipate any
material nonperformance by the assignees of these leases.
No facilities owned by Ceridian or its subsidiaries are subject to any
major encumbrances. Ceridian believes that the facilities it currently
utilizes in its continuing operations are adequate for their intended
purposes, are adequately maintained and are reasonably necessary for current
and anticipated output levels of those businesses.
ITEM 3. LEGAL PROCEEDINGS.
Information regarding legal proceedings involving Ceridian and its
subsidiaries is incorporated herein by reference from Note N, LEGAL MATTERS,
on page 36 of Ceridian's 1997 Annual Report to Stockholders. Note N is part
of the consolidated financial statements contained in Ceridian's 1997 Annual
Report to Stockholders, which are attached hereto as Exhibit 13.03.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of Ceridian's stockholders during
the fourth quarter 1997.
15
<PAGE>
PART II
All information incorporated by reference into Items 5 through 8 below
is contained in the financial portions of Ceridian's 1997 Annual Report to
Stockholders (the "Annual Report"), which are filed with this Report as
Exhibits 13.01 through 13.04.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Ceridian's common stock, par value $.50 per share, is listed and trades
on the New York Stock Exchange as well as on the Chicago Stock Exchange and
The Pacific Exchange. The following table sets forth the high and low sales
prices for a share of Ceridian's common stock on the New York Stock Exchange.
<TABLE>
<CAPTION>
1997 1996
---------------------- ------------------------
High Low High Low
<S> <C> <C> <C> <C>
1st Quarter $42.50 $32.25 $46.875 $37.00
2nd Quarter 43.625 29.50 54.875 42.50
3rd Quarter 45.625 32.125 51.375 41.625
4th Quarter 47.75 35.25 53.125 39.00
</TABLE>
The number of holders of record of Ceridian common stock on February 28,
1998 was 14,125. No dividends have been declared or paid on the Ceridian's
common stock since 1985. Although Ceridian is not contractually precluded
from paying dividends on its common stock, it has no present intention of
paying such dividends.
ITEM 6. SELECTED FINANCIAL DATA.
See "Selected Five-Year Data" on the inside front cover of the Annual
Report, which is attached to the Report as Exhibit 13.01 and incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 6 through 13 of the Annual Report, which is
attached to this Report as Exhibit 13.02 and incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Ceridian's consolidated financial statements described in Item 14.(a)1 of
this Report are attached to this Report as Exhibit 13.03 and are incorporated
herein by reference. As for certain required supplementary financial
information, see "Supplementary Quarterly Data (Unaudited)" on page 37 of the
Annual Report, which is attached to this Report as Exhibit 13.04 and
incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
16
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
See information regarding the directors and nominees for director of
Ceridian under the heading "Nominees for Director" on pages 2 and 3 of the Proxy
Statement for the Annual Meeting of Stockholders, May 22, 1998 (the "Proxy
Statement"), which is incorporated herein by reference.
See the information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934 under the heading "Section 16(a) Beneficial
Ownership Reporting Compliance" on page 22 of the Proxy Statement, which is
incorporated herein by reference.
Information regarding the executive officers of Ceridian is on pages 13 and
14 of this Report, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
See information under the headings "Directors' Compensation" on page 5 of
the Proxy Statement and "Executive Compensation" on pages 13 through 19 of the
Proxy Statement, all of which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
See information under the heading "Share Ownership Information" on pages
20 and 21 of the Proxy Statement, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
17
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) 1. FINANCIAL STATEMENTS OF REGISTRANT
Ceridian's consolidated financial statements included in its 1997 Annual
Report to Stockholders, which are attached to this Report as Exhibit 13.03
and have been incorporated by reference into Part II, Item 8 of this Report,
are listed below (with the corresponding page numbers in the 1997 Annual
Report to Stockholders):
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Report of Management------------------------------------- 14
Independent Auditors' Report----------------------------- 15
Consolidated Statements of
Operations for the years ended
December 31, 1997, 1996 and 1995------------------------- 16
Consolidated Balance Sheets as of
December 31, 1997 and 1996------------------------------- 17
Consolidated Statements of Cash Flows
for the years ended
December 31, 1997, 1996 and 1995------------------------- 18
Notes to Consolidated Financial Statements for
the three years ended December 31, 1996------------------ 19-36
</TABLE>
(A) 2. FINANCIAL STATEMENT SCHEDULES OF REGISTRANT
Attached to this Report on pages 25 through 27 is Financial Statement
Schedule II - "Ceridian Corporation and Subsidiaries Valuation and Qualifying
Accounts," together with the Independent Auditors' report thereon.
(A) 3. EXHIBITS
The following is a complete list of Exhibits filed or incorporated by
reference as part of this Report.
EXHIBIT DESCRIPTION
2.01 Asset Purchase Agreement dated as of November 3, 1997 by and between
Ceridian Corporation and General Dynamics Corporation (exhibits and
schedules omitted) (incorporated by reference to Exhibit 2.1 to
Ceridian's Current Report on Form 8-K dated December 31, 1997 (File
No. 1-1969)).
18
<PAGE>
2.02 Closing Agreement dated as of December 31, 1997 between and among
Ceridian Corporation, General Dynamics Corporation, General Dynamics
Information Systems, Inc. and CDI Acquisition Company (exhibits and
schedules omitted) (incorporated by reference to Exhibit 2.2 to
Ceridian's Current Report on Form 8-K dated December 31, 1997 (File
No. 1-1969)).
2.03 Exchange Agreement, dated as of January 17, 1998, among First Data
Corporation, Integrated Payment Systems Inc., NTS, Inc., First Data
Financial Services, L.L.C., Ceridian Corporation, Comdata Network,
Inc. and Permicom Permits Services, Inc. (exhibits and schedules
omitted).
2.04 Share Purchase Agreement, dated as of January 26, 1998, among The
Toronto-Dominion Bank, Business Windows Inc., 3454916 Canada Inc.,
Ceridian Corporation, Ceridian Canada Ltd. and Ceridian Canada
Holdings, Inc. (exhibits and schedules omitted).
2.05 Agreement for the Purchase and Sale of Certain of the Assets of
Comcheq Services Limited, dated as of March 10, 1998, among the
Canadian Imperial Bank of Commerce, Comcheq Services Limited and
Ceridian Canada Ltd. (exhibits and schedules omitted) (incorporated
by reference to Exhibit 2.1 to Ceridian's Current Report on Form 8-K
dated March 10, 1998 (File No. 1-1969)).
3.01 Restated Certificate of Incorporation of Ceridian Corporation
(incorporated by reference to Exhibit 4.01 to Ceridian's Registration
Statement on Form S-8 (File No. 33-54379)).
3.02 Certificate of Amendment of Restated Certificate of Incorporation of
Ceridian Corporation (incorporated by reference to Exhibit 3 to
Ceridian's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996 (File No. 1-1969))
3.03 Bylaws of Ceridian Corporation, as amended (incorporated by reference
to Exhibit 3.01 to Ceridian's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993 (File No. 1-1969))
10.01* Amended and Restated Executive Employment Agreement between Ceridian
Corporation and Lawrence Perlman, dated as of November 8, 1996
(incorporated by reference to Exhibit 10.01 to Ceridian's Annual
Report on Form 10-K for the year ended December 31, 1996 (File
No. 1-1969)).
10.02* Executive Employment Agreement between Ceridian Corporation and
Ronald L. Turner, dated as of July 1, 1997.
10.03* Executive Employment Agreement between Ceridian Corporation and
Stephen B. Morris, dated as of July 1, 1997.
10.04* Executive Employment Agreement between Ceridian Corporation and John
R. Eickhoff, dated as of July 1, 1997.
10.05* Executive Employment Agreement between Ceridian Corporation and Carl
O. Keil, dated as of October 22, 1997.
- ---------------------
(*) Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Report.
19
<PAGE>
10.06* Executive Employment Agreement between Ceridian Corporation and Ronald
James, dated as of January 1, 1996 (incorporated by reference to
Exhibit 10.05 to Ceridian's Annual Report on Form 10-K for the year
ended December 31, 1996 (File No. 1-1969)).
10.07* Form of Amendment to Executive Employment Agreement (applicable to
agreement between Ceridian and Ronald James filed as Exhibit 10.06)
(incorporated by reference to Exhibit 10.06 to Ceridian's Annual
Report on Form 10-K for the year ended December 31, 1996 (File
No. 1-1969)).
10.08* Severance Compensation Agreement, dated as of November 29, 1994,
between Comdata Holdings Corporation and George L. McTavish
(incorporated by reference to Exhibit 10.05 to Ceridian's Annual
Report on Form 10-K for the year ended December 31, 1995 (File
No. 1-1969)).
10.09* Amendment No. 1 to Severance Compensation Agreement, dated as of
January 31, 1996, among Ceridian Corporation, Comdata Holdings
Corporation and George L. McTavish (incorporated by reference to
Exhibit 10.06 to Ceridian's Annual Report on Form 10-K for the year
ended December 31, 1995 (File No. 1-1969)).
10.10* Revision to Amendment No. 1 to Severance Compensation Agreement, dated
as of July 28, 1997, among Ceridian Corporation, Comdata Holdings
Corporation and George L. McTavish.
10.11* Ceridian Corporation 1993 Long-Term Incentive Plan (Amended and
Restated as of May 14, 1997) (incorporated by reference to Appendix A
to Ceridian's Proxy Statement for Annual Meeting of Stockholders, May
14, 1997 (File No. 1-1969)).
10.12* Form of Ceridian Corporation Employee Non-Statutory Stock Option Award
Agreement (under 1993 Long-Term Incentive Plan).
10.13* Form of Ceridian Corporation Performance-Based Stock Option Award
Agreement (under the 1993 Long-Term Incentive Plan).
10.14* Form of Ceridian Corporation Performance Restricted Stock Award
Agreement (under the 1993 Long-Term Incentive Plan) (incorporated by
reference to Exhibit 10.17 to Ceridian's Annual Report on Form 10-K
for the year ended December 31, 1996 (File No. 1-1969)).
10.15* Ceridian Corporation 1990 Long-Term Incentive Plan (1992 Restatement)
(as amended through October 21, 1994) (incorporated by reference to
Exhibit 10.12 to Ceridian's Annual Report on Form 10-K for the year
ended December 31, 1994 (File No. 1-1969)).
10.16* Description of the Ceridian Corporation Annual Executive Incentive
Plan.
10.17* Ceridian Corporation Benefit Equalization Plan, as amended (effective
generally as of January 1, 1994) (incorporated by reference to Exhibit
10.14 to Ceridian's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 1-1969)).
- ------------------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Report.
20
<PAGE>
10.18* Ceridian Corporation Employees' Benefit Protection Trust Agreement,
dated as of December 1, 1994, between Ceridian Corporation and First
Trust National Association (incorporated by reference to Exhibit 10.15
to Ceridian's Annual Report on Form 10-K for the year ended December
31, 1994 (File No. 1-1969)).
10.19* Ceridian Corporation Deferred Compensation Plan (incorporated by
reference to Exhibit 10.16 to Ceridian's Annual Report on Form 10-K
for the year ended December 31, 1994 (File No. 1-1969)).
10.20* First Declaration of Amendment to Ceridian Corporation Deferred
Compensation Plan (incorporated by reference to Exhibit 10.15 to
Ceridian's Annual Report on Form 10-K for the year ended December 31,
1996 (File No. 1-1969)).
10.21* Ceridian Corporation 1993 Non-Employee Director Stock Plan
(incorporated by reference to Exhibit 2 to Ceridian's Proxy Statement
for Annual Meeting of Stockholders, May 12, 1993 (File No. 1-1969)).
10.22* Ceridian Corporation 1996 Director Performance Incentive Plan (As
amended through December 15, 1997).
10.23* Form of Indemnification Agreement between Ceridian Corporation and its
Directors (incorporated by reference to Exhibit 10.16 to Ceridian's
Annual Report on Form 10-K for the year ended December 31, 1996 (File
No. 1-1969)).
10.24 Amended and Restated Credit Agreement, dated as of July 31, 1997,
among Ceridian Corporation, Bank of America National Trust and Savings
Association as Agent, and the Financial Institutions Parties Thereto
(exhibits and schedules omitted) (incorporated by reference to Exhibit
10.1 to Ceridian's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 (File No. 1-1969)).
10.25 Waiver and First Amendment to Credit Agreement, dated as of
December 2, 1997, among Ceridian Corporation, Bank of America
National Trust and Savings Association as Agent, and the Financial
Institutions Parties Thereto.
10.26 Credit Agreement, dated as of January 30, 1998, between The
Toronto-Dominion Bank and Ceridian Canada Ltd. (exhibits and
schedules omitted).
10.27 Guarantee Agreement, dated as of January 30, 1998, between Ceridian
Corporation and The Toronto-Dominion Bank.
10.28 Credit Agreement, dated as of March 2, 1998, between the Canadian
Imperial Bank of Commerce and Ceridian Canada Ltd. (exhibits and
schedules omitted).
10.29 Guarantee Agreement, dated as of March 2, 1998, between Ceridian
Corporation and the Canadian Imperial Bank of Commerce.
10.30 Letter Agreement dated as of December 16, 1997, between Comdata
Network, Inc. and International Business Machines Corporation
pertaining to the Amended and Restated Agreement for Systems
Operations Services dated May 1, 1995 between Comdata Network, Inc.
and Integrated Systems Solutions Corporation n.k.a. International
Business Machines Corporation (exhibits and schedules omitted).
- ------------------------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Report.
21
<PAGE>
10.31 Amended and Restated Agreement for Systems Operations Services dated
May 1, 1995 between Comdata Network, Inc. and Integrated Systems
Solutions Corporation n.k.a. International Business Machines
Corporation (exhibits and schedules omitted) (incorporated by
reference to Exhibit 10.20 to Ceridian's Annual Report on Form 10-K
for the year ended December 31, 1995 (File No. 1-1969)).
10.32 Telecommunications Services Agreement, dated as of September 1, 1997,
among WorldCom Network Services, Inc. d.b.a. WilTel, Comdata Network,
Inc. and Comdata Telecommunications Services, Inc., including Program
Enrollment Terms, as amended (exhibits and schedules omitted).
13.01 Selected Five-Year Data (inside front cover of Ceridian's 1997 Annual
Report to Stockholders).
13.02 Management's Discussion and Analysis of Results of Operations and
Financial Condition (pages 6 through 13 of Ceridian's 1997 Annual
Report to Stockholders).
13.03 Consolidated Financial Statements of Ceridian Corporation (pages 14
through 36 of Ceridian's 1997 Annual Report to Stockholders).
13.04 Supplementary Quarterly Data (Unaudited) (page 37 of Ceridian's 1997
Annual Report to Stockholders).
21. Subsidiaries of Ceridian
23.01 Consent of Independent Auditors - KPMG Peat Marwick LLP
23.02 Consent of Independent Auditors - Arthur Andersen LLP
24. Power of Attorney
27. Financial Data Schedule
If requested, Ceridian will provide copies of any of the exhibits listed
above upon payment of its reasonable expenses in furnishing such exhibits.
Ceridian will provide to the Securities and Exchange Commission, upon
request, any exhibit or schedule to any of the foregoing exhibits which has
not been filed. Neither Ceridian nor its subsidiaries has outstanding as of
the date of this Report any securities authorized pursuant to long-term debt
instruments.
(B) REPORTS ON FORM 8-K
Ceridian filed no reports on Form 8-K during the quarter ended December
31, 1997. On January 15, 1998, Ceridian did, however, file a report on Form
8-K dated December 31, 1997, which reported in "Item 2: Acquisition or
Disposition of Assets" the closing of the sale by Ceridian of its defense
electronics business, Computing Devices International ("CDI"), to General
Dynamics Corporation. Included in Item 7 of that Report was a pro forma
condensed consolidated balance sheet of Ceridian as of September 30, 1997
(assuming the sale of CDI took place on that date), and pro forma condensed
consolidated statements of operations for Ceridian for the nine months ended
September 30, 1997 and for the years 1996 and 1995 (assuming in each case the
sale of CDI took place on January 1, 1995).
On January 20, 1998, Ceridian filed a report on Form 8-K dated January
19, 1997, reporting under Item 5 important factors known to Ceridian that
could cause Ceridian's actual
22
<PAGE>
results in 1998 to differ materially from any forward-looking statements made
by Ceridian. This filing was made for purposes of the safe harbor provided
for forward-looking statements by Section 21E of the Securities Exchange Act
of 1934, as amended. On January 29, 1998, Ceridian filed a report on Form
8-K dated January 27, 1997, reporting under Item 5 thereof that Ceridian had
announced its results of operations for the quarter and year ended December
31, 1997, and attached as an exhibit to that report a copy of the press
release by which those results had been announced.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, as of March 27,
1998.
CERIDIAN CORPORATION
By /S/ Lawrence Perlman
-----------------------------------------
Lawrence Perlman
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated as of March 27, 1998.
/S/ Lawrence Perlman /S/ J.R. Eickhoff
- ------------------------------------- ----------------------------------
Lawrence Perlman J. R. Eickhoff
Chairman, President and Chief Executive Vice President and Chief
Executive Officer (Principal Financial Officer
Executive Officer) and Director (Principal Financial Officer)
/S/ Loren D. Gross
- --------------------------------------
Loren D. Gross
Vice President and Corporate
Controller (Principal Accounting
Officer)
*/S/ Ruth M. Davis */S/ George R. Lewis
- ------------------------------------- ----------------------------------
Ruth M. Davis, Director George R. Lewis, Director
*/S/ Charles Marshall
- ------------------------------------- ----------------------------------
Robert H. Ewald, Director Charles Marshall, Director
*/S/ Richard G. Lareau */S/ Carole J. Uhrich
- ------------------------------------- ----------------------------------
Richard G. Lareau, Director Carole J. Uhrich, Director
*/S/ Ronald T. Lemay */S/ Richard W. Vieser
- ------------------------------------- ----------------------------------
Ronald T. LeMay, Director Richard W. Vieser, Director
*/S/ Paul S. Walsh
----------------------------------
Paul S. Walsh, Director
/S/ John A. Haveman
- -------------------------------------
*By: John A. Haveman, Attorney-in-fact
24
<PAGE>
SCHEDULE II
CERIDIAN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
Restructure and Discontinued Operations Reserves
<TABLE>
<CAPTION>
Employer
Services
Arbitron TV Consolidation Other Total
<S> <C> <C> <C> <C>
Reserve Balance 12/31/94 $ 11.1 $ 12.4 $ 64.8 $ 88.3
Cash Payments (3.9) (0.7) (13.6) (18.2)
Other Non-cash Items 0.3 0.3
Reserve Balance 12/31/95 $ 7.5 $ 11.7 $ 51.2 $ 70.4
Cash Payments (1.6) (2.6) (10.7) (14.9)
Other Non-cash Items (1) (0.5) 0.2 1.7 1.4
Reserve Balance 12/31/96 $ 5.4 $ 9.3 $ 42.2 $ 56.9
Cash Payments (1.1) (3.2) (16.8) (21.1)
Other Non-cash Items (0.5) 0.3 0.2 --
Reserve Balance 12/31/97 $ 3.8 $ 6.4 $ 25.6 $ 35.8
</TABLE>
(1) Primarily proceeds from sale of idled assets which have been reclassified
as cash inflow from investing activities.
25
<PAGE>
SCHEDULE II (CONT.)
CERIDIAN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
<TABLE>
<CAPTION>
Allowance for Doubtful Accounts Receivable Year Ended December 31,
1997 1996(1) 1995(1)
------ ------- -------
<S> <C> <C> <C>
Balance at beginning of year $ 11.2 $ 11.7 $ 11.1
Additions charged to costs and expenses 7.9 5.4 6.3
Write-offs and other adjustments (2) (8.6) (5.9) (5.7)
Balance at end of year $ 10.5 $ 11.2 $ 11.7
</TABLE>
(1) Restated to remove discontinued operations.
(2) Other adjustments include balances removed as a result of sales of
businesses.
26
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
THE BOARD OF DIRECTORS AND STOCKHOLDERS
CERIDIAN CORPORATION:
Under date of January 27, 1998, we reported on the consolidated
balance sheets of Ceridian Corporation and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of operations and cash flows
for each of the years in the three-year period ended December 31, 1997, as
contained in Ceridian's 1997 Annual Report to Stockholders. Our report refers
to a report of other auditors with respect to the 1995 statements of operations
and cash flows of Comdata Holdings Corporation. These consolidated financial
statements and our report thereon are incorporated by reference in the Annual
Report on Form 10-K for the year 1997. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule as listed in the accompanying index
(see Item 14.(a)2.). This financial statement schedule is the responsibility of
Ceridian's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, based on our audits and the report of other auditors,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole presents fairly, in all
material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 27, 1998
27
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.03
<SEQUENCE>2
<DESCRIPTION>EXHIBIT 2.03
<TEXT>
<PAGE>
EXCHANGE AGREEMENT
Dated as of January 17, 1998
Among
FIRST DATA CORPORATION,
INTEGRATED PAYMENT SYSTEMS INC.,
NTS, INC.,
FIRST DATA FINANCIAL SERVICES, L.L.C.,
CERIDIAN CORPORATION,
COMDATA NETWORK, INC.
and
PERMICOM PERMITS SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . 1
1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
EXCHANGE . . . . . . . . . . . . . . . . . . 15
2.1. Exchange of Gaming Business for the NTS Business and Cash. . . . . . . . . . 15
2.2. Purchased Gaming Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3. Excluded Gaming Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.4. Assumed Gaming Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.5. Excluded Gaming Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 19
2.6. Purchased NTS Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.7. Excluded NTS Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.8. Assumed NTS Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.9. Excluded NTS Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE III
CASH ADJUSTMENT. . . . . . . . . . . . . . . . 24
3.1. Determination of Transferred Cash. . . . . . . . . . . . . . . . . . . . . . 24
3.2. Transferred Cash Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . 25
3.3. Determination of Gaming Receivables Adjustment . . . . . . . . . . . . . . . 25
3.4. Determination of NTS Receivables Adjustment. . . . . . . . . . . . . . . . . 27
3.5. Net Receivables Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IV
CLOSING . . . . . . . . . . . . . . . . . . 30
4.1. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.2. Delivery of Promissory Notes . . . . . . . . . . . . . . . . . . . . . . . . 30
4.3. FDC's, IPS', NTS' and FDFS' Additional Deliveries. . . . . . . . . . . . . . 30
4.4. Ceridian's, Comdata's and Permicom's Additional Deliveries . . . . . . . . . 33
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CERIDIAN AND COMDATA. . . . . . . 35
5.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.2. Subsidiaries and Investments . . . . . . . . . . . . . . . . . . . . . . . . 36
5.3. Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.5. Operations Since the Gaming Balance Sheet Date . . . . . . . . . . . . . . . 38
5.6. No Finder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.7. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.8. Availability of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.9. Governmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
-i-
<PAGE>
5.10. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.11. Real Property Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.12. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.13. Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.14. Personal Property Leases. . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.15. Intellectual Property; Software . . . . . . . . . . . . . . . . . . . . . . 44
5.16. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.17. Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.18. Employees and Related Agreements; ERISA . . . . . . . . . . . . . . . . . . 47
5.19. Employee Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.20. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.21. Status of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.22. No Violation, Litigation or Regulatory Action . . . . . . . . . . . . . . . 50
5.23. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.24. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.25. Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.26. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.27. Estimated Closing Date Gaming Special Report. . . . . . . . . . . . . . . . 51
5.28. Estimated Amount of Transferred Cash. . . . . . . . . . . . . . . . . . . . 51
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FDC, IPS AND NTS. . . . . . . . 52
6.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.2. Subsidiaries and Investments . . . . . . . . . . . . . . . . . . . . . . . . 53
6.3. Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.5. Operations Since the NTS Balance Sheet Date. . . . . . . . . . . . . . . . . 55
6.6. No Finder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.7. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.8. Availability of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.9. Governmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.10. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.11. Real Property Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.12. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.13. Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.14. Personal Property Leases. . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.15. Intellectual Property; Software . . . . . . . . . . . . . . . . . . . . . . 60
6.16. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.17. Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.18. Employees and Related Agreements; ERISA . . . . . . . . . . . . . . . . . . 63
6.19. Employee Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.20. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.21. Status of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
-ii-
<PAGE>
6.22. No Violation, Litigation or Regulatory Action . . . . . . . . . . . . . . . 66
6.23. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.24. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.25. Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.26. Bank Accounts; Powers of Attorney . . . . . . . . . . . . . . . . . . . . . 67
6.27. Estimated Closing Date NTS Special Report . . . . . . . . . . . . . . . . . 67
ARTICLE VII
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . 67
7.1. Covenant Not to Compete or Solicit Business by FDC, IPS, NTS and FDFS. . . . 67
7.2. Solicitation of Employees. . . . . . . . . . . . . . . . . . . . . . . . . . 69
7.3. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
7.4. Employees and Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 74
7.5. Collection of Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.6. Release of NonCompetition Provisions . . . . . . . . . . . . . . . . . . . . 81
7.7. Waiver of Exclusivity Obligations of Western Union Agents. . . . . . . . . . 81
7.8. NTS Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.9. Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.10. Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.11. Certain Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.12. Termination of FlashCash License. . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE VIII
INDEMNIFICATION. . . . . . . . . . . . . . . . 84
8.1. Indemnification by Ceridian. . . . . . . . . . . . . . . . . . . . . . . . . 84
8.2. Indemnification by FDC . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.3. Notice of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.4. Third-Person Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
8.5. Indemnification Payments Net of Insurance Recovery . . . . . . . . . . . . . 90
ARTICLE IX
GENERAL PROVISIONS . . . . . . . . . . . . . . . 90
9.1. Survival of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 90
9.2. Confidential Nature of Information . . . . . . . . . . . . . . . . . . . . . 90
9.3. No Public Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
9.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
9.5. Successors and Assigns; Third Party Beneficiaries. . . . . . . . . . . . . . 92
9.6. Access to Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
9.7. Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . . . . . . . 94
9.8. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.9. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.10. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
9.11. Partial Invalidity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
-iii-
<PAGE>
9.12. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 95
9.13. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
9.14. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
9.15. Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Schedules Description
- --------- -----------
<S> <C>
1.1 Gaming Agreed Accounting Principles
1.2 Gaming Armored Cars
1.3 Gaming ATM Machines
1.4 Gaming Booths
1.5 Gaming Vaults
1.6 IPS Agreed Accounting Principles
1.7 Gaming Bank Accounts
2.3 Comdata Excluded Assets
2.6 NTS Transferred Bank Accounts
2.7 IPS Excluded Assets
4.2(A) Comdata Bank Account Information
4.2(B) NTS Bank Account Information
5.2(A) Subsidiaries of Comdata
5.2(B) Capital Structure of the Gaming Subsidiary
5.3 Comdata Exceptions to Execution and Delivery
5.4 Gaming Business Financial Statements
5.5(A) Changes since Gaming Balance Sheet Date
5.5(B) Exceptions to Ordinary Course Since Gaming Balance Sheet Date
5.7 Gaming Business Taxes
5.8(A) Availability of Gaming Business Assets
5.8(B) Material Services Provided by Comdata
5.9 Gaming Business Governmental Permits
5.11(A) Gaming Business Leased Real Property
5.11(B) Exceptions to Title of Gaming Business Leased Real Property
5.11(C) Encumbrances on Gaming Business Leased Real Property
5.13(A) Gaming Business Personal Property
5.13(B) Gaming Business Personal Property Title Exceptions
5.14 Gaming Business Personal Property Lease
5.15(A) Gaming Intellectual Property
5.15(B) Gaming Software
5.15(C) Agreements Relating to Gaming Intellectual Property
5.15(D) Ownership of Gaming Intellectual Property
5.15(E) Validity and Enforceability of Gaming Business Intellectual
Property
5.15(F) Limitations on Gaming Business Intellectual Property
5.15(G) Limitations on Gaming Business Owned Software
5.15(H) Intellectual Property Agents, Consultants and Contractors
5.17 Gaming Business Exceptions to Title
5.18(A) Gaming Business Employee Agreements
5.18(C) Gaming Business Severance Plans
5.19(A) Gaming Business Compliance with Labor Laws
5.19(B) Gaming Business Conflicts of Interest
5.20 Gaming Business Contracts
5.21 Status of Gaming Agreements
-v-
<PAGE>
5.22 Gaming Business Litigation
5.23 Gaming Business Environmental Matters
5.24 Gaming Business Insurance
5.25 Gaming Business Customers
5.26 Gaming Bank Accounts
5.27 Estimated Closing Date Gaming Special Report
5.28 Estimated Amount of Transferred Cash
6.2(A) Subsidiaries of NTS; Organization
6.2(B) Capital Structure of the NTS Subsidiary
6.3 FDC Exceptions to Execution and Delivery
6.4 NTS Financial Statements
6.5(A) Changes since NTS Balance Sheet Date
6.5(B) Exceptions to Ordinary Course since NTS Balance Sheet Date
6.7 NTS Taxes
6.8(A) Availability of NTS Assets
6.8(B) Material Services Provided by IPS
6.9 NTS Governmental Permits
6.11(A) NTS Leased Real Property
6.11(B) Exceptions to Title of NTS Leased Real Property
6.11(C) Encumbrances on NTS Leased Real Property
6.13(A) NTS Personal Property
6.13(B) NTS Personal Property Title Exceptions
6.14 NTS Personal Property Lease
6.15(A) NTS Intellectual Property
6.15(B) NTS Software
6.15(C) Agreements Relating to NTS Intellectual Property
6.15(D) Ownership of NTS Intellectual Property
6.15(E) Validity and Enforceability of NTS Intellectual Property
6.15(F) Limitations on NTS Intellectual Property
6.15(G) Limitations on NTS Business Owned Software
6.15(H) Intellectual Property Agents, Consultants and Contractors
6.16 NTS Intellectual Property
6.17 NTS Exceptions to Title
6.18(A) NTS Business Employee Agreements
6.18(C) NTS Business Severance Plans
6.19(A) NTS Compliance with Labor Laws
6.19(B) NTS Conflicts of Interest
6.20 NTS Contracts
6.21 Status of NTS Agreements
6.22 NTS Litigation
6.23 NTS Environmental Matters
6.24 NTS Insurance
6.25 NTS Customers
6.26 NTS Bank Accounts
6.27 Estimated Closing Date NTS Special Report
-vi-
<PAGE>
7.4(A) NTS Employees
7.4(B) Comdata Employees
</TABLE>
-vii-
<PAGE>
Exhibits Description
- -------- -----------
Exhibit A Comdata Instrument of Assignment
Exhibit B Comdata Instrument of Assumption
Exhibit C NTS Instrument of Assignment
Exhibit D FDFS Instrument of Assumption
Exhibit E Services and Processing Agreement
Exhibit F Gaming Business Transition Services Agreement
Exhibit G NTS Business Transition Services Agreement
Exhibit H NTS State of Maryland Articles of Transfer
Exhibit I Intentionally Omitted
Exhibit J NTS Canadian Instrument of Assignment
Exhibit K NTS Canadian Instrument of Assumption
Exhibit L Comdata Canadian Instrument of Assignment
Exhibit M Comdata Canadian Instrument of Assumption
-viii-
<PAGE>
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT, dated as of January 17, 1998 (this "AGREEMENT"),
among First Data Corporation, a Delaware corporation ("FDC"), Integrated Payment
Systems Inc., a Delaware corporation and a wholly owned subsidiary of FDC
("IPS"), NTS, Inc., a Maryland corporation and wholly owned subsidiary of IPS
("NTS"), First Data Financial Services, L.L.C., a Delaware limited liability
company and wholly-owned subsidiary of IPS ("FDFS"), Ceridian Corporation, a
Delaware corporation ("CERIDIAN"), Comdata Network, Inc., a Maryland corporation
and an indirect, wholly owned subsidiary of Ceridian ("COMDATA"), and Permicom
Permits Services, Inc., an Ontario corporation and wholly owned subsidiary of
Comdata ("PERMICOM").
W I T N E S S E T H:
WHEREAS, Comdata, through its Gaming Services Division, is engaged in
the Gaming Business, as hereinafter defined;
WHEREAS, NTS is engaged in the NTS Business, as hereinafter defined;
WHEREAS, pursuant to this Agreement, NTS is conveying the NTS Business
(except the NT Canada Shares which NTS is conveying to Permicom) and a specified
amount of cash to Comdata in exchange for the Gaming Business; and
WHEREAS, NTS' rights to receive the Gaming Business pursuant to this
Agreement have been transferred to FDFS (by a distribution from NTS to IPS and
IPS' subsequent contribution of such rights to FDFS).
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed among FDC, IPS, NTS, FDFS,
Ceridian, Comdata and Permicom as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS. In this Agreement, the following terms have the
meanings specified or referred to in this SECTION 1.1 and shall be equally
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"ACTIVELY EMPLOYED" shall mean any employee who (i) is actually
performing services on the Closing Date; (ii) is on company-approved vacation or
other company-approved absence of less than 14 day duration; or (ii) is on
Statutorily Protected Leave.
<PAGE>
"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"AGREED ADJUSTMENTS" has the meaning specified in SECTION 3.1(c).
"AGREED GAMING ADJUSTMENTS" has the meaning specified in
SECTION 3.3(c).
"AGREED NTS ADJUSTMENTS" has the meaning specified in SECTION 3.4(c).
"AGREED RATE" means the fluctuating prime or corporate base rate of
interest published by, and as in effect from time to time of, Citibank, N.A., or
if that rate is no longer published, the interest rate designated as the prime
rate as published from time to time in the "Money Rates" section of THE WALL
STREET JOURNAL.
"ALLOCATION SCHEDULE" has the meaning set forth in SECTION 7.3(f).
"ARMORED CAR CASH" means the cash in the Gaming Armored Cars.
"ASSOCIATE" means, with respect to any Person (i) a corporation or
organization of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities, (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity and (iii) any relative or spouse of such Person,
or any relative of such spouse, who has the same home as such Person or who is a
director or officer of the person or any of its parents or subsidiaries.
"ASSUMED GAMING LIABILITIES" shall mean the liabilities described in
SECTION 2.4, but excluding the liabilities described in SECTION 2.5.
"ASSUMED NTS LIABILITIES" has the meaning specified in SECTION 2.8,
but excluding the liabilities described in SECTION 2.9.
"ATM CASH" means the cash in the Gaming ATM Machines.
"BANK ACCOUNT CASH" means the cash in the Gaming Bank Accounts.
"BOOTH CASH" means the cash in the Gaming Booths designated on
SCHEDULE 1.4 as "Booths Funded by Comdata" and as "Comdata Cash Provided for
Float".
"CASHCALL INC. SHARES" means all of the issued and outstanding shares
of capital stock of the Gaming Subsidiary.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Sections 9601 ET SEQ., any amendments thereto, any
successor statutes, and any regulations promulgated thereunder.
-2-
<PAGE>
"CERIDIAN GROUP MEMBER" means Ceridian, Comdata and their respective
Affiliates and their respective successors and assigns.
"CLAIM NOTICE" has the meaning specified in SECTION 8.3(a).
"CLOSING" means the following actions effected pursuant to the terms
of this Agreement: of (i) the transfer of the NT Canada Shares from NTS to
Permicom; (ii) the delivery by Permicom to NTS of the Permicom Note; (iii) the
transfer of the Purchased Gaming Assets from Comdata to FDFS; (iv) the transfer
of the Purchased NTS Assets (except the NT Canada shares) from NTS to Comdata;
and (v) the delivery by NTS of the NTS Note to Comdata. The actions referred to
in clauses (i) and (ii) shall be effected simultaneously, following which the
actions referred to in clauses (iii), (iv) and (v) shall be effected
simultaneously.
"CLOSING DATE" means the date hereof.
"CLOSING DATE GAMING SPECIAL REPORT" has the meaning specified in
SECTION 3.3(e).
"CLOSING DATE NTS SPECIAL REPORT" has the meaning specified in
SECTION 3.4(e).
"COBRA" means Sections 601 through 609 of ERISA.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMDATA ANCILLARY AGREEMENTS" means all agreements, instruments and
documents being or to be executed and delivered by Ceridian, Comdata or any of
their respective Affiliates under this Agreement or in connection herewith.
"COMDATA COLLECTION REPORT" has the meaning specified in SECTION 7.5.
"COMDATA EFFECTIVE DATE" has the meaning specified in SECTION
7.4(a)(iii).
"COMDATA EMPLOYEES" has the meaning specified in SECTION 7.4(a)(ii).
"COMDATA INSTRUMENT OF ASSIGNMENT" means the Instrument of Assignment
in the form of EXHIBIT A.
"COMDATA INSTRUMENT OF ASSUMPTION" means the Instrument of Assumption
in the form of EXHIBIT B.
"COMDATA PAYMENT INSTRUMENT" means a check or draft (such as a
Comchek-Registered Trademark- draft), which is (i) issued by Comdata or an
Affiliate thereof; (ii) drawn on a bank account of Comdata or an Affiliate
thereof; and (iii) used to effect a Gaming Business transaction at a Gaming
Establishment.
-3-
<PAGE>
"COMDATA PENSION PLANS" has the meaning specified in SECTION
7.4(c)(i).
"COMDATA WELFARE PLANS" has the meaning specified in SECTION
7.4(b)(ii).
"CONTAMINANT" means any waste, pollutant, hazardous or toxic substance
or waste, petroleum, petroleum-based substance or waste, special waste, or any
constituent of any such substance or waste.
"COPYRIGHTS" means United States and foreign copyrights, copyrightable
works, and maskworks, whether registered or unregistered, and pending
applications to register the same.
"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"E&Y" means Ernst & Young, LLP, independent public accountants.
"ENCUMBRANCE" means any lien (statutory or other), claim, charge,
security interest, mortgage, deed of trust, pledge, hypothecation, assignment,
easement, conditional sale or other title retention agreement, defect in title,
covenant, preference, priority or security agreement or preferential arrangement
of any kind or nature, and any easement, encroachment, covenant, restriction,
right of way or other restrictions of any kind.
"ENVIRONMENTAL ENCUMBRANCE" means an Encumbrance in favor of any
Governmental Body for (i) any liability under any Environmental Law, or (ii)
damages arising from, or costs incurred by such Governmental Body in response
to, a Release or threatened Release of a Contaminant into the environment.
"ENVIRONMENTAL LAW" means all Requirements of Laws derived from or
relating to all federal, state and local laws or regulations relating to or
addressing the environment, health or safety, including but not limited to
CERCLA, OSHA and RCRA and any state equivalent thereof.
"ENVIRONMENTAL PROPERTY TRANSFER ACTS" means any applicable
Requirements of Laws that for environmental reasons conditions, restricts,
prohibits or requires any notification or disclosure with respect to the direct
or indirect transfer, sale, lease or closure of any property, including any so-
called "Environmental Cleanup Responsibility Acts" or "Responsible Property
Transfer Acts."
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCHEAT LAWS" means all applicable Requirements of Law relating to
unclaimed property, escheat and similar federal and state statutes.
-4-
<PAGE>
"ESTIMATED AMOUNT OF TRANSFERRED CASH" has the meaning specified in
SECTION 5.28.
"ESTIMATED CLOSING DATE GAMING SPECIAL REPORT" has the meaning
specified in SECTION 5.27.
"ESTIMATED CLOSING DATE NTS SPECIAL REPORT" has the meaning specified
in SECTION 6.27.
"EXCLUDED COMDATA SUBSIDIARIES" means Comdata Network, Inc. of
California, Comdata Telecommunications Services, Inc. and Permicom.
"EXCLUDED GAMING ASSETS" has the meaning specified in SECTION 2.3.
"EXCLUDED GAMING LIABILITIES" has the meaning specified in SECTION
2.5.
"EXCLUDED NTS ASSETS" has the meaning specified in SECTION 2.7.
"EXCLUDED NTS LIABILITIES" has the meaning specified in SECTION 2.9.
"FDC" has the meaning specified in the first paragraph of this
Agreement.
"FDC GROUP" means any "affiliated group" (as defined in SECTION
1504(a) of the Code without regard to the limitations contained in SECTION
1504(b) of the Code) that includes FDC.
"FDC GROUP MEMBER" means FDC, NTS, IPS and FDFS and their respective
Affiliates and their respective successors and assigns.
"FDFS" has the meaning specified in the first paragraph of this
Agreement.
"FDFS EFFECTIVE DATE" has the meaning specified in SECTION 7.4(a)(iv).
"FDFS INSTRUMENT OF ASSUMPTION" means the Instrument of Assumption in
the form of EXHIBIT D.
"FDT" means First Data Technologies, Inc. a Delaware corporation and
wholly owned subsidiary of FDC.
"GAMING ACCOUNTING REPORT" has the meaning specified in
SECTION 3.3(e).
"GAMING AGREED ACCOUNTING PRINCIPLES" means generally accepted
accounting principles consistently applied; PROVIDED, HOWEVER, that, with
respect to any matter as to which there is more than one generally accepted
accounting principle, Gaming Agreed Accounting Principles means the generally
accepted accounting principles applied in the preparation of the
-5-
<PAGE>
Gaming Balance Sheet included in SCHEDULE 5.4; PROVIDED FURTHER that,
notwithstanding the foregoing, Gaming Agreed Accounting Principles shall include
the accounting policies and be subject to the exceptions described in
SCHEDULE 1.1; and PROVIDED FURTHER that, for purposes of the Gaming Agreed
Accounting Principles, no known adjustments for items or matters, regardless of
the amount thereof, shall be deemed to be immaterial.
"GAMING AGREEMENTS" has the meaning specified in SECTION 5.21.
"GAMING AMOUNTS" means the Gaming Receivables and the Gaming
Liabilities.
"GAMING ARMORED CARS" means the armored cars holding cash pertaining
to the Gaming Business listed on SCHEDULE 1.2.
"GAMING ATM MACHINES" means the ATM machines listed on SCHEDULE 1.3.
"GAMING BALANCE SHEET" means the unaudited balance sheet of the Gaming
Business as of September 30, 1997 included in SCHEDULE 5.4.
"GAMING BANK ACCOUNTS" means the Bank Accounts listed on SCHEDULE 1.7.
"GAMING BALANCE SHEET DATE" means September 30, 1997.
"GAMING BOOTHS" means the on-floor Comdata booth operations listed on
SCHEDULE 1.4.
"GAMING BUSINESS" means the business of Comdata's Gaming Services
Division on the date hereof in providing the following financial and certain
information services related thereto to Gaming Establishments: (a) credit card
cash advance services, (b) debit services providing for withdrawals, balance
inquiries and similar transactions effected through an automated teller machine
or point-of-sale device and tied to an account, (c) operations of financial
services booths located on the premises of Gaming Establishments, (d) certain
development and marketing activities related to a cashless gaming system for use
in slot machines and similar gaming devices by gaming patrons at a Gaming
Establishment, (e) marketing services to Gaming Establishments for products and
services offered by Persons other than Comdata, such as certain services offered
by Western Union Financial Services, Inc., (f) a single system financial
services authorization platform to be utilized by Gaming Establishments known as
C.O.I.N.S.-TM- ("Casino Operations Information System") and (g) certain
marketing and information services related to the foregoing, including, without
limitation, the Financial Marketing System database and related systems. In
addition, the Gaming Business shall include any of the services provided
pursuant to the Master Agreement dated as of April 14, 1997 by and between
Comdata and ITT Sheraton Corporation.
"GAMING BUSINESS GOVERNMENTAL PERMITS" has the meaning specified in
SECTION 5.9.
-6-
<PAGE>
"GAMING BUSINESS LEASED REAL PROPERTY" has the meaning specified in
SECTION 5.11.
"GAMING BUSINESS OWNED SOFTWARE" has the meaning specified in
SECTION 5.15.
"GAMING BUSINESS PROPERTY" means any real or personal property, plant,
building, facility, structure, underground storage tank, equipment or unit, or
other asset owned, leased or operated by Comdata and used in the Gaming
Business.
"GAMING BUSINESS TRANSITION SERVICES AGREEMENT" means the Transition
Services Agreement in the form of Exhibit F.
"GAMING EQUALIZATION CASH AMOUNT" means the amount of cash, if any,
designated as "Gaming Equalization Cash" on SCHEDULE 5.27
"GAMING ESTABLISHMENT" means any locations at which wagering or gaming
activities are the primary business conducted. Notwithstanding any other
provision in this Agreement to the contrary, the parties acknowledge and agree
that a truck stop facility or a gasoline station shall not, under any
circumstance, be construed or interpreted to be a Gaming Establishment.
"GAMING LIABILITIES" means the liabilities listed on the Closing Date
Gaming Special Report.
"GAMING RECEIVABLES" means the receivables listed on the Closing Date
Gaming Special Report.
"GAMING RECEIVABLES ADJUSTMENT" shall equal:
(i) if the sum of the Gaming Receivables and the Gaming Equalization
Cash Amount is equal to the Gaming Liabilities, zero;
(ii) if the sum of the Gaming Receivables and the Gaming Equalization
Cash Amount is greater than the Gaming Liabilities, the amount of such
excess; and
(iii) if the sum of the Gaming Receivables and the Gaming
Equalization Cash Amount is less than the Gaming Liabilities, the amount of
such shortfall (represented as a negative number).
"GAMING SUBSIDIARY" means Cashcall Systems Inc., a Canadian
corporation.
"Gaming Subsidiary Excluded Assets" has the meaning specified in
SECTION 2.3.
"GAMING SUBSIDIARY EXCLUDED LIABILITIES" has the meaning specified in
SECTION 2.5.
-7-
<PAGE>
"GAMING VAULTS" means the bank vaults holding cash pertaining to the
Gaming Business listed on SCHEDULE 1.5.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or other
governmental authority or regulatory body.
"INDEMNIFICATION EXPENSES" means any and all expenses incurred in
connection with investigating, defending or asserting any claim, action, suit or
proceeding incident to any matter indemnified against hereunder (including,
without limitation, court filing fees, court costs, arbitration fees or costs,
witness fees, and reasonable fees and disbursements of legal counsel,
investigators, expert witnesses, consultants, accountants and other
professionals).
"INITIAL AMOUNT" means (a) the sum of (i) $65,400,000.00, (ii) the
Estimated Amount of Transferred Cash and (iii) the NTS Equalization Cash Amount
(which is a negative amount), less (b) the Gaming Equalization Cash Amount
(which is a positive amount).
"INTELLECTUAL PROPERTY" means Copyrights, Patent Rights, Trademarks
and Trade Secrets and all agreements, contracts, licenses, sublicenses,
assignments and indemnities which relate or pertain to any of the foregoing.
"IPS" has the meaning specified in the first paragraph of this
Agreement.
"IPS ANCILLARY AGREEMENTS" means all agreements, instruments and
documents being or to be executed and delivered by FDC, IPS, NTS or FDFS or
their respective Affiliates under this Agreement or in connection herewith.
"IPS PENSION PLANS" has the meaning specified in SECTION 7.4(c)(i).
"IPS WELFARE PLANS" has the meaning specified in SECTION 7.4(b)(ii).
"IRS" means the Internal Revenue Service.
"LOSSES" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges.
"MATERIAL ADVERSE EFFECT" means any condition, circumstance, change or
effect (or any development that, insofar as can be reasonably foreseen, would
result in any condition, circumstance, change or effect) that is materially
adverse to the assets, business, financial condition, results of operations or
prospects of the Gaming Business or NTS Business, as the case may be.
"NET AMOUNT OF GAMING RECEIVABLES" has the meaning specified in
SECTION 7.5.
"NET AMOUNT OF NTS RECEIVABLES" has the meaning specified in SECTION
7.5.
-8-
<PAGE>
"NET RECEIVABLES ADJUSTMENT" shall mean the amount, if any, paid by
any party pursuant to SECTION 3.5.
"NOTICE TO DEFEND" has the meaning specified in SECTION 8.4(b)(i).
"NT CANADA SHARES" means all the issued and outstanding shares of
capital stock of the NTS Subsidiary.
"NTS" has the meaning specified in the first paragraph of this
Agreement.
"NTS ACCOUNTING REPORT" has the meaning specified in SECTION 3.4(d).
"NTS AGREED ACCOUNTING PRINCIPLES" means generally accepted accounting
principles consistently applied, PROVIDED that, with respect to any matter as to
which there is more than one generally accepted accounting principle, NTS Agreed
Accounting Principles means the generally accepted accounting principles applied
in the preparation of the NTS Balance Sheet included in SCHEDULE 6.4; PROVIDED
FURTHER that, notwithstanding the foregoing, NTS Agreed Accounting Principles
shall include the accounting policies and be subject to the exceptions described
in SCHEDULE 1.6; and PROVIDED FURTHER that, for purposes of the NTS Agreed
Accounting Principles, no known adjustments for items or matters, regardless of
the amount thereof, shall be deemed to be immaterial.
"NTS AGREEMENTS" has the meaning specified in SECTION 6.21.
"NTS AMOUNTS" means the NTS Receivables and the NTS Liabilities.
"NTS BALANCE SHEET" means the unaudited balance sheet of NTS as of
September 30, 1997 included in SCHEDULE 6.4.
"NTS BALANCE SHEET DATE" means September 30, 1997.
"NTS BUSINESS" means the business of NTS on the date hereof in
providing the following products and services to trucking companies, truck
stops, vehicle fleets, service stations and others engaged in the transportation
industry wherever located: (i) credit, debit and funds transfer services for
the purchase of fuel, equipment and repairs and other services and products
generally necessary or appropriate in connection with the operation of a
trucking company, truck stop, fleet or service station, (ii) cash advance,
driver settlement and payroll services for those engaged in the transportation
industry, (iii) load identification and matching services, (iv) long distance
telecommunications and telephone card services, (v) factoring and financing
services, (vi) legalization services for the transportation industry, including,
permits, motor vehicle licensing and renewals, fuel tax reporting and
assistance, driver log auditing and driver safety programs, (vii) pilot car
services, (viii) in-route communications and (ix) information and data capture
services related to the foregoing. Notwithstanding the foregoing, or any other
provision in this Agreement to the contrary, the parties acknowledge and agree
that the NTS Business shall
-9-
<PAGE>
not include the products and services currently contemplated to be marketed
under the name "Transpay."
"NTS BUSINESS TRANSITION SERVICES AGREEMENT" means the Transition
Services Agreement in the form of EXHIBIT G.
"NTS COLLECTION REPORT" has the meaning specified in SECTION 7.5.
"NTS COMPUTER FACILITY" means the office space, raised floor area,
embossing facility, mailroom and other facilities which accommodate the computer
and telecommunications operations and equipment and are located principally on
the 1st floor and (G)arden level of the West Tower of the facility at 6000 and
6100 Western Place, Fort Worth, Texas 76107.
"NTS EMPLOYEES" has the meaning specified in SECTION 7.4(a)(i).
"NTS EQUALIZATION CASH AMOUNT" means the amount of cash, if any,
designated as "NTS Equalization Cash" on SCHEDULE 6.27.
"NTS GOVERNMENTAL PERMITS" has the meaning specified in SECTION 6.9.
"NTS INSTRUMENT OF ASSIGNMENT" means the Instrument of Assignment in
the form of Exhibit C.
"NTS LEASED REAL PROPERTY" has the meaning specified in SECTION 6.11.
"NTS LIABILITIES" means the liabilities listed on the Closing Date NTS
Special Report.
"NTS NOTE" has the meaning specified in SECTION 2.1.
"NTS OWNED SOFTWARE" has the meaning specified in SECTION 6.15.
"NTS PAYMENT INSTRUMENT" means any check or draft (such as an NTS
draft, and EDS draft or an ULTRANS draft) which is (i) issued by NTS or an
Affiliate thereof; (ii) drawn on a bank account of NTS or an Affiliate thereof;
and (iii) used to transfer funds for the payment of a purchase, cash advance or
settlement transaction with a vendor/merchant, client or client employee.
"NTS PROPERTY" means any real or personal property, plant, building,
facility, structure, underground storage tank, equipment or unit, or other asset
owned, leased or operated by NTS or the NTS Subsidiary.
"NTS RECEIVABLES" means the receivables listed on the Closing Date NTS
Special Report.
-10-
<PAGE>
"NTS RECEIVABLES ADJUSTMENT" shall equal:
(i) if the sum of the NTS Receivables and the NTS Equalization Cash
Amount is equal to the NTS Liabilities, zero;
(ii) if the sum of the NTS Receivables and the NTS Equalization Cash
Amount is greater than the NTS Liabilities, the amount of such excess; and
(iii) if the sum of the NTS Receivables and the NTS Equalization Cash
Amount is less than the NTS Liabilities, the amount of such shortfall
(represented as a negative number).
"NTS SUBSIDIARIES" means any corporation, partnership, limited
liability company, joint venture or other entity in which NTS (a) owns, or at
any relevant time owned, directly or indirectly, 50% or more of the outstanding
voting or equity interests or (b) is a general partner.
"NTS SUBSIDIARY" means National Truckers Service Canada, Inc., a
Canadian corporation.
"NTS SUBSIDIARY EXCLUDED ASSETS" has the meaning specified in
SECTION 2.7.
"NTS SUBSIDIARY EXCLUDED LIABILITIES" has the meaning specified in
SECTION 2.9.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
SECTIONS 651 ET SEQ., any amendment thereto, any successor statute, and any
regulations promulgated thereunder as well as any similar state or local laws.
"PATENT RIGHTS" means United States and foreign patents, patent
applications, continuations, continuations-in-part, divisions, reissues, patent
disclosures, inventions (whether or not patentable) or improvements thereto.
"PENSION PLAN" means any employee pension benefit plan, as such term
is defined in SECTION 3(2) of ERISA.
"PERMICOM NOTE" has the meaning specified in SECTION 2.1.
"PERMITTED ENCUMBRANCES" means (a) liens for taxes and other
governmental charges and assessments arising in the ordinary course of business
which are not yet due and payable, (b) liens of landlords and liens of carriers,
warehousemen, mechanics and materialmen and other like liens arising in the
ordinary course of business for sums not yet due and payable and (c) other liens
or imperfections on property which are not material in amount, do not interfere
with and are not violated by, the consummation of the transactions contemplated
by this
-11-
<PAGE>
Agreement and do not impair the marketability of, or materially detract from the
value of or materially impair the existing use of, the property affected by such
lien or imperfection.
"PERSON" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY CLOSING DATE GAMING SPECIAL REPORT" has the meaning
specified in SECTION 3.3(a)(i).
"PRELIMINARY CLOSING DATE NTS SPECIAL REPORT" has the meaning
specified in SECTION 3.4(a)(i).
"PRELIMINARY GAMING ACCOUNTING REPORT" has the meaning specified in
SECTION 3.3(a)(iii).
"PRELIMINARY GAMING AMOUNTS" has the meaning specified in
SECTION 3.3(a)(i).
"PRELIMINARY GAMING LIABILITIES" has the meaning specified in
SECTION 3.3(a)(i).
"PRELIMINARY GAMING RECEIVABLES" has the meaning specified in
SECTION 3.3(a)(i).
"PRELIMINARY GAMING RECEIVABLES ADJUSTMENT" has the meaning specified
in SECTION 3.3(a)(ii).
"PRELIMINARY NTS ACCOUNTING REPORT" has the meaning specified in
SECTION 3.4(a)(iii).
"PRELIMINARY NTS AMOUNTS" has the meaning specified in
SECTION 3.4(a)(i).
"PRELIMINARY NTS LIABILITIES" has the meaning specified in
SECTION 3.4(a)(i).
"PRELIMINARY NTS RECEIVABLES" has the meaning specified in
SECTION 3.4(a)(i).
"PRELIMINARY NTS RECEIVABLES ADJUSTMENT" has the meaning specified in
SECTION 3.4(a)(ii).
"PRELIMINARY TRANSFERRED CASH STATEMENT" has the meaning specified in
SECTION 3.1(a).
"PURCHASED GAMING ASSETS" shall mean the assets and properties
described in SECTION 2.2, but excluding the assets and properties described in
SECTION 2.3.
"PURCHASED NTS ASSETS" has the meaning specified in SECTION 2.6.
-12-
<PAGE>
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
SECTIONS 6901 ET SEQ., and any successor statute, and any regulations
promulgated thereunder.
"REMEDIAL ACTION" means actions required to (i) clean up, remove,
treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threatened Release or minimize the
further Release of Contaminants or (iii) investigate and determine if a remedial
response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and local
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body (including, without limitation, those
pertaining to employment, wage and hour, electrical, building, zoning,
environmental and occupational safety and health requirements, the Bank Secrecy
Act and Money Laundering and Control Act and the rules and regulations
promulgated thereunder, and all laws governing or regulating gambling or gaming)
or common law.
"RESTRICTED COMDATA PARTIES" has the meaning specified in SECTION
7.2(a).
"RESTRICTED FDC PARTIES" has the meaning specified in SECTION 7.2(b).
"RESTRICTED TRUCKING ACTIVITIES" means (i) cash advance, factoring,
financing or in-cab communication services or products that are marketed
exclusively to the trucking industry or the usefulness of which is limited to
the trucking industry, (ii) legalization services for the trucking industry,
including permitting and licensing (and renewal thereof), fuel tax reporting and
assistance, driver log auditing and driver safety programs, (iii) pilot car
services for the trucking industry, and (iv) load matching services for the
trucking industry.
"SELECTED ACCOUNTING FIRM" means a major independent public accounting
firm (other than E&Y or KPMG Peat Marwick) which shall have been selected by the
joint decision of FDC and Ceridian.
"SERVICES AND PROCESSING AGREEMENT" means the Services and Processing
Agreement in the form of EXHIBIT E.
"SOFTWARE" means computer software programs and software systems,
including, without limitation, all databases, compilations, tool sets,
compilers, higher level or "proprietary" languages, related documentation and
materials, whether in source code, object code or human readable form.
"STATUTORILY PROTECTED LEAVE" shall mean any leave (i) pursuant to the
Family and Medical Leave Act; (ii) pursuant to a military leave of absence under
circumstances entitling the employee to return to his or her position or (iii)
pursuant to taking sick days or in the case of Transferring Comdata Employees,
those on short term disability leave.
-13-
<PAGE>
"STRADDLE PERIOD" means any taxable year or period beginning before
and ending after the Closing.
"TAX" (and, with correlative meaning, "TAXES") means any federal,
state, local or foreign income, gross receipts, property, sales, use, license,
excise, franchise, employment, payroll, withholding, alternative or add-on
minimum, ad valorem, value added, transfer or excise tax, or any other tax,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, imposed by any governmental
authority.
"TAX RETURN" means any return, report or similar statement required to
be filed with respect to any Tax (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
"THIRD-PERSON CLAIM" has the meaning specified in SECTION 8.4.
"TRADEMARKS" means United States, state and foreign trademarks,
service marks, logos, trade dress and trade names (including all assumed or
fictitious names under which the party is conducting business or has within the
past five years conducted business), whether registered or unregistered, and
pending applications to register the foregoing.
"TRADE SECRETS" means confidential ideas, trade secrets, know-how,
concepts, methods, processes, formulae, reports, data, customer lists, mailing
lists, business plans, or other proprietary information.
"TRANSFERRED CASH" means the sum of the ATM Cash, the Armored Car
Cash, the Booth Cash, the Bank Account Cash and the Vault Cash.
"TRANSFERRED CASH STATEMENT" has the meaning specified in
SECTION 3.1(b).
"TRANSFERRING COMDATA EMPLOYEES" has the meaning specified in SECTION
7.4(a)(iv).
"TRANSFERRING NTS EMPLOYEES" has the meaning specified in SECTION
7.4(a)(iii).
"UNRESOLVED GAMING OBJECTIONS" has the meaning specified in
SECTION 3.3(d).
"UNRESOLVED NTS OBJECTIONS" has the meaning specified in
SECTION 3.4(d).
"VAULT CASH" means the cash in the Gaming Vaults.
"WARN" means the Workers Adjustment and Retraining Notification Act.
"WELFARE PLAN" means any employee welfare benefit plan, as such term
is defined in SECTION 3(1) of ERISA.
-14-
<PAGE>
ARTICLE II
EXCHANGE
2.1. EXCHANGE OF GAMING BUSINESS FOR THE NTS BUSINESS AND CASH. As
more specifically provided herein, on the date hereof (immediately following the
acquisition provided for in the last sentence of this SECTION 2.1) Comdata is
(a) conveying and transferring to FDFS, free and clear of all Encumbrances
(except Permitted Encumbrances), the Purchased Gaming Assets and (b) assuming
the NTS Liabilities in exchange for (i) the simultaneous conveyance and transfer
by NTS to Comdata of the Purchased NTS Assets (excluding the NT Canada Shares
which are being conveyed and transferred to, and purchased by, Permicom), free
and clear of all Encumbrances (other than Permitted Encumbrances), (ii) the
simultaneous assumption by FDFS of the Gaming Liabilities and (iii) NTS'
delivery to Comdata of a promissory note of NTS in the principal amount and in a
form mutually acceptable to Comdata and NTS (the "NTS NOTE") equal to the
Initial Amount. The parties hereto agree to use their respective best efforts
to determine the fair market value of the NTS Business within twelve months of
Closing, which value shall in no event be less than $55 million or greater than
$65 million. The Initial Amount shall be subject to adjustment as provided in
Article III hereof. Simultaneously with the execution of this Agreement,
Permicom shall acquire the NT Canada Shares from NTS in exchange for Permicom's
delivery to NTS of a promissory note of Permicom in the principal amount of
$400,000 (US) and in a form mutually acceptable to Permicom and NTS (the
"PERMICOM NOTE").
2.2. PURCHASED GAMING ASSETS. The Purchased Gaming Assets shall
consist of all assets and properties of Ceridian or Comdata of every kind and
description, wherever located, real, personal or mixed, tangible or intangible,
heretofore used in connection with the Gaming Business, including, without
limitation, all right, title and interest of Ceridian or Comdata in, to and
under:
(a) all of the assets reflected on the Gaming Balance Sheet, except
those disposed of or converted into cash after the Gaming Balance Sheet
Date in the ordinary course of business;
(b) all notes and accounts receivable generated by the Gaming
Business;
(c) all inventory used in the Gaming Business (other than any blank,
unissued Comdata Payment Instruments);
(d) to the extent assignable, the Gaming Business Governmental
Permits listed in SCHEDULE 5.9;
(e) the Gaming Business Leased Real Property and leasehold
improvements listed or described in SCHEDULE 5.11(A) except to the extent
such Gaming Business Leased Real Property is (i) provided to FDFS pursuant
to the Gaming Business Transition Services Agreement or (ii) listed on
SCHEDULE 2.3;
-15-
<PAGE>
(f) the machinery, equipment, vehicles, furniture and other personal
property listed or referred to in SCHEDULES 1.2, 1.3, 1.4, 1.5, 1.7 or
SCHEDULE 5.13(A) except to the extent the use of such machinery, equipment,
vehicles, furniture and other property is (i) provided to NTS pursuant to
the Gaming Business Transition Services Agreement or (ii) listed on
SCHEDULE 2.3;
(g) the personal property leases listed in SCHEDULE 5.14, except to
the extent the use of such personal property leases are (i) provided to
FDFS pursuant to the Gaming Business Transition Services Agreement or (ii)
listed on SCHEDULE 2.3;
(h) the Copyrights, Patent Rights and Trademarks (and all goodwill
associated therewith), and the agreements, contracts, licenses,
sublicenses, assignments and indemnities, listed in SCHEDULE 5.15(A),
together with the licenses and other agreements with third parties related
thereto;
(i) the Gaming Business Owned Software listed in SCHEDULE 5.15 (B),
together with the licenses and other agreements with third parties related
thereto;
(j) all Trade Secrets and other proprietary or confidential
information used in or relating to the Gaming Business except those Trade
Secrets or other proprietary or confidential information which are used in
or relates to any other business of Ceridian or its Affiliates;
(k) the agreements listed in SCHEDULE 5.18(A);
(l) the contracts, agreements or understandings listed or described
in SCHEDULE 5.20 and all other contracts related to the Gaming Business to
which Ceridian, Comdata or the Gaming Subsidiary is a party that are
customary for companies engaged in the same line of business as the Gaming
Business;
(m) all books and records (including all data and other information
stored on discs, tapes or other media) of Comdata relating exclusively to
the assets, properties, business and operations of the Gaming Business and,
if requested, copies of all books and records (including all data and other
information stored on discs, tapes or other media) which are used in
connection with, (but not exclusively related to) the assets, properties,
business and operations of the Gaming Business, PROVIDED, HOWEVER, that
only such portions of such books and records relating to the Gaming
Business will be provided;
(n) Ceridian's and Comdata's interest in and to all telephone, telex
and telephone facsimile numbers and other directory listings utilized
primarily in connection with the Gaming Business;
(o) all of the Cashcall Inc. Shares;
(p) the Transferred Cash;
-16-
<PAGE>
(q) all personal property, Intellectual Property and agreements
relating to the "COINS" product;
(r) all personal property, Intellectual Property and agreements
relating to the "QuickPlay" product;
(s) all personal property, Intellectual Property and agreements
relating to the Financial Marketing System product; and
(t) all the Gaming Bank Accounts.
2.3. EXCLUDED GAMING ASSETS. Notwithstanding the provisions of
SECTION 2.2, the Purchased Gaming Assets shall not include the following (herein
referred to as the "EXCLUDED GAMING ASSETS"):
(a) all cash, bank deposits and cash equivalents except the
Transferred Cash (it being understood that the Gaming Equalization
Cash is reflected in the Initial Amount);
(b) the name "Comdata" and "Comchek" or any related or similar trade
names, trademarks, service marks or logos to the extent the same
incorporate the name "Comdata" and "Comchek" or any variation thereof;
(c) Ceridian's and Comdata's rights, claims or causes of action
against third parties relating to the assets, properties, business or
operations of the Gaming Business which may arise in connection with the
discharge by Ceridian or Comdata of the Excluded Gaming Liabilities;
(d) all contracts of insurance;
(e) all corporate minute books and stock transfer books and the
corporate seal of Comdata;
(f) Comdata's rights under the lease agreements referred to in point
7 on SCHEDULE 5.11(A);
(g) except to the extent provided in SECTION 7.4, Comdata's employee
benefit agreements, plans or arrangements listed in SCHEDULE 5.18(A) or
otherwise maintained by Comdata or the Gaming Subsidiary on behalf of
persons employed by Comdata or the Gaming Subsidiary;
(h) all shares of capital stock of each of the Excluded Comdata
Subsidiaries;
-17-
<PAGE>
(i) all refunds of any Tax to which Ceridian or Comdata is entitled
pursuant to SECTION 7.3; and
(j) the assets listed on SCHEDULE 2.3;
(k) that certain agreement among Comdata Network, Inc., Service Data
Corporation and SDC Enterprises, Inc. dated as of May 15, 1997;
(l) that certain agreement among Comdata, Concord Computing
Corporation and EFS National Bank dated as of April 30, 1996, as amended
and the Marketing Rights Agreement executed in connection therewith; and
(m) that certain Acquisition Agreement between Comdata and Western
Union Financial Services dated March 23, 1994.
With respect to any assets that were owned on the date preceding the date hereof
by the Gaming Subsidiary and that would have constituted Excluded Gaming Assets
if owned by Comdata (the "GAMING SUBSIDIARY EXCLUDED ASSETS"), Comdata shall,
immediately prior to the Closing, cause the Gaming Subsidiary to convey,
transfer and deliver, without any representation or warranty (express or
implied), to Comdata such assets and the Gaming Subsidiary Excluded Assets shall
be deemed to be Excluded Gaming Assets for purposes of this Agreement.
2.4. ASSUMED GAMING LIABILITIES. The Assumed Gaming Liabilities
shall consist of:
(a) all liabilities of the Gaming Business reflected in the Closing
Date Gaming Special Report as a dollar amount;
(b) all liabilities and obligations of Ceridian and Comdata to be
paid or performed after the date hereof under (i) the Gaming Agreements and
(ii) any contracts related to the Gaming Business to which Ceridian,
Comdata or the Gaming Subsidiary is a party that are customary for
companies engaged in the same line of business as the Gaming Business,
except in each case, to the extent such liabilities and obligations, (A)
but for a breach or default by Ceridian, Comdata or the Gaming Subsidiary,
would have been paid, performed or otherwise discharged on or prior to the
date hereof or to the extent the same arise out of any such breach or
default and (B) are not reflected on the Closing Date Gaming Special Report
and are not taken into account as a deduction in connection with the
determination of the Gaming Receivables Adjustment pursuant to SECTION 3.3;
and
(c) all liabilities in respect of Taxes for which FDC, IPS, NTS or
FDFS is liable pursuant to SECTION 7.3.
2.5. EXCLUDED GAMING LIABILITIES. Notwithstanding the provisions of
SECTION 2.4, the Assumed Gaming Liabilities shall not include the following
(herein referred to as the "EXCLUDED GAMING LIABILITIES"):
-18-
<PAGE>
(a) any liabilities in respect of Taxes for which Comdata or Ceridian
is liable pursuant to SECTION 7.3;
(b) any intercompany payables and other liabilities or
obligations of the Gaming Business to Comdata, Ceridian or any of
their respective Affiliates;
(c) any costs and expenses incurred by Comdata, Ceridian or the
Gaming Subsidiary incident to the negotiation and preparation of this
Agreement and their respective performance and compliance with the
agreements and conditions contained herein;
(d) any liabilities or obligations in respect of any Excluded Gaming
Assets;
(e) any liabilities in respect of the claims or proceedings
described in SCHEDULE 5.22;
(f) accrued liabilities of any kind required to be reflected on the
Closing Date Gaming Special Report prepared in accordance with the Gaming
Agreed Accounting Principles which were not reflected thereon as a dollar
amount;
(g) any liabilities and obligations related to, associated with or
arising out of (i) the occupancy, operation, use or control of any of the
Gaming Business Property on or prior to the date hereof or (ii) the
operation of the Gaming Business on or prior to the date hereof, in each
case incurred or imposed by any Environmental Law (including, without
limitation, any Release of any Contaminant on, at or from (1) the Gaming
Business Property, including, without limitation, all facilities,
improvements, structures and equipment thereon, surface water thereon or
adjacent thereto and soil or groundwater thereunder, or any conditions
whatsoever on, under or in the vicinity of such real property or (2) any
real property or facility owned by a third Person to which Contaminants
generated by the Gaming Business were sent prior to the date hereof);
(h) any product liability or claims for injury to person or property,
regardless of when made or asserted, relating to products manufactured,
distributed or sold by the Gaming Business or services performed by the
Gaming Business on or prior to the date hereof;
(i) any liabilities relating to Escheat Laws or the failure to file
reports, or to pay or turn over amounts due, thereunder which pertain to
(A) any Gaming Business transaction initiated prior to the Closing Date or
(B) any Gaming Business transactions for which a Comdata Payment Instrument
is issued during the twelve month period following Closing; and
(j) any liabilities arising under that certain Processing and Related
Services Agreement among Comdata, Concord Computing Corporation and EFS
National Bank
-19-
<PAGE>
dated as of April 30, 1996, as amended and the Marketing Rights Agreement
executed in connection therewith.
In order that the Gaming Subsidiary shall not be responsible in any respect for
any liabilities or obligations that would constitute Excluded Gaming Liabilities
in the case of Comdata, Comdata shall assume and agree to pay, perform and
discharge such liabilities and obligations of the Gaming Subsidiary (the "GAMING
SUBSIDIARY EXCLUDED LIABILITIES") and all Gaming Subsidiary Excluded Liabilities
shall be deemed to constitute Excluded Gaming Liabilities for purposes of this
Agreement.
2.6. PURCHASED NTS ASSETS. The Purchased NTS Assets shall consist of
all assets and properties of NTS of every kind and description, wherever
located, real, personal or mixed, tangible or intangible, heretofore used in
connection with the NTS Business, including, without limitation, all right,
title and interest of NTS in, to and under:
(a) all of the assets reflected on the NTS Balance Sheet, except
those disposed of or converted into cash after the NTS Balance Sheet Date
in the ordinary course of business;
(b) all notes and accounts receivable generated by the NTS Business;
(c) all inventory used in the NTS Business;
(d) to the extent assignable, the NTS Business Governmental Permits
listed in SCHEDULE 6.9;
(e) the NTS Business Leased Real Property and leasehold improvements
listed or described in SCHEDULE 6.11(A) except to the extent such NTS
Leased Real Property is (i) provided to Comdata pursuant to the NTS
Business Transition Services Agreement or (ii) is listed on SCHEDULE 2.7;
(f) the machinery, equipment, vehicles, furniture and other personal
property listed or referred to in SCHEDULE 6.13(A) except to the extent the
use of such machinery, equipment, vehicles, furniture and other property is
(i) provided to Comdata pursuant to the NTS Business Transition Services
Agreement or (ii) is listed on SCHEDULE 2.7;
(g) the personal property leases listed in SCHEDULE 6.14 except to
the extent the use of such personal property leases are (i) provided to
Comdata pursuant to the NTS Business Transition Services Agreement or (ii)
is listed on SCHEDULE 2.7;
(h) the Copyrights, Patent Rights and Trademarks (and all goodwill
associated therewith), the name "NTS," and the agreements, contracts,
licenses, sublicenses, assignments and indemnities, listed in SCHEDULE
6.15(A) except to the extent such Copyrights, Patent Rights and Trademarks
are (i) licensed or sublicensed to Comdata
-20-
<PAGE>
pursuant to the NTS Business Transition Services Agreement or (ii) is
listed on SCHEDULE 2.7;
(i) the NTS Business Owned Software listed in SCHEDULE 6.15(B) except
to the extent such NTS Business Owned Software is (i) licensed or
sublicensed to Comdata pursuant to the NTS Business Transition Services
Agreement or (ii) is listed on SCHEDULE 2.7;
(j) all Trade Secrets and other proprietary or confidential
information used in or relating to the NTS Business except those Trade
Secrets or other proprietary or confidential information which is used in
or relates to any other business of FDC or its Affiliates;
(k) the agreements listed in SCHEDULE 6.18(A);
(l) the contracts, agreements or understandings listed or described
in SCHEDULE 6.20 and all other contracts related to the NTS Business to
which FDC, IPS or NTS or the NTS Subsidiary is a party that are customary
for companies engaged in the same line of business as the NTS Business;
(m) all books and records (including all data and other information
stored on discs, tapes or other media) of FDC, IPS or NTS relating
exclusively to the assets, properties, business and operations of the NTS
Business and, if requested, copies of all books and records (including all
data and other information stored on discs, tapes or other media) which are
used in connection with, (but not exclusively related to) the assets,
properties, business and operations of the NTS Business, PROVIDED, HOWEVER,
that only the portions of such books and records relating to the NTS
Business will be provided;
(n) FDC's, IPS' and NTS' interest in and to all telephone, telex and
telephone facsimile numbers and other directory listings utilized primarily
in connection with the NTS Business;
(o) all of the NT Canada Shares;
(p) all of the bank accounts listed on SCHEDULE 2.6; and
(q) all of the blank, unissued NTS Payment Instruments.
2.7. EXCLUDED NTS ASSETS. Notwithstanding the provisions of
SECTION 2.6, the Purchased NTS Assets shall not include the following (herein
referred to as the "EXCLUDED NTS ASSETS"):
(a) all cash, bank deposits and cash equivalents (except for
that cash listed as a receivable on the Estimated NTS Special Report)
(it being understood that the NTS Equalization Cash is reflected in
the Initial Amount);
-21-
<PAGE>
(b) the names "IPS," "Western Union," "Greenback," "Transpay" or any
related or similar trade names, trademarks, service marks or logos to the
extent the same incorporate the name "IPS," "Western Union", "Greenback,"
"Transpay" or any variation thereof;
(c) FDC's and IPS' rights, claims or causes of action against third
parties relating to the assets, properties, business or operations of the
NTS Business which may arise in connection with the discharge by FDC or IPS
of the Excluded NTS Liabilities;
(d) all contracts of insurance;
(e) all corporate minute books and stock transfer books and the
corporate seal of IPS and NTS;
(f) FDC's and IPS' rights under the lease agreement described in
SCHEDULE 6.11(A);
(g) except to the extent provided in SECTION 7.4, NTS' employee
benefit agreements, plans or arrangements listed in SCHEDULE 6.18(A) or
otherwise maintained by IPS, NTS or the NTS Subsidiary on behalf of persons
employed by IPS, NTS or the NTS Subsidiary;
(h) all refunds of any Tax to which FDC or IPS is entitled pursuant
to SECTION 7.3;
(i) the assets listed on SCHEDULE 2.7;
(j) that certain agreement between PHH Corporation and IPS dated as
of February 12, 1996;
(k) that certain agreement between Electronic Data Systems
Corporation and IPS dated as of August 13, 1996; and
(l) all assets and agreements relating to the NTS Computer Facility.
With respect to any assets that were owned on the date preceding the date hereof
by the NTS Subsidiary and that would have constituted Excluded NTS Assets if
owned by NTS (the "NTS SUBSIDIARY EXCLUDED ASSETS"), NTS shall, immediately
prior to the Closing, cause the NTS Subsidiary to convey, transfer and deliver,
without any representation or warranty (express or implied), to NTS such assets
and the NTS Subsidiary Excluded Assets shall be deemed to be Excluded NTS Assets
for purposes of this Agreement.
2.8. ASSUMED NTS LIABILITIES. The Assumed NTS Liabilities shall
consist of:
(a) all liabilities of the NTS Business reflected in the Closing Date
NTS Special Report as a dollar amount;
-22-
<PAGE>
(b) all liabilities and obligations of NTS to be paid or performed
after the date hereof under (i) the NTS Agreements and (ii) all other
contracts related to the NTS Business to which FDC, IPS, NTS or the NTS
Subsidiary is a party that are customary for companies engaged in the same
line of business as the NTS Business, except in each case, to the extent
such liabilities and obligations, (A) but for a breach or default by FDC,
IPS, NTS or the NTS Subsidiary, would have been paid, performed or
otherwise discharged on or prior to the date hereof or to the extent the
same arise out of any such breach or default and (B) are not reflected on
the Closing Date NTS Special Report and are not taken into account as a
deduction in connection with the determination of the NTS Receivables
Adjustment pursuant to SECTION 3.4;
(c) all liabilities in respect of Taxes for which Comdata is liable
pursuant to SECTION 7.3.
(d) all liabilities pursuant to any NTS Payment Instrument issued on
or after the Closing Date.
2.9. EXCLUDED NTS LIABILITIES. Notwithstanding the provisions of
SECTION 2.8, the Assumed NTS Liabilities shall not include the following (herein
referred to as the "EXCLUDED NTS LIABILITIES"):
(a) any liabilities in respect of Taxes for which FDC, IPS, NTS, FDFS
or is liable pursuant to SECTION 7.3;
(b) any intercompany payables and other liabilities or
obligations of the NTS Business to IPS, FDC, FDFS or any of their
respective Affiliates;
(c) any costs and expenses incurred by IPS, FDC, NTS, the NTS
Subsidiary or FDFS incident to the negotiation and preparation of this
Agreement and their respective performance and compliance with the
agreements and conditions contained herein;
(d) any liabilities or obligations in respect of any Excluded NTS
Assets;
(e) any liabilities in respect of the claims or proceedings
described in SCHEDULE 6.22;
(f) accrued liabilities of any kind required to be reflected on the
Closing Date NTS Special Report prepared in accordance with the NTS Agreed
Accounting Principles which were not reflected thereon as a dollar amount;
(g) any liabilities and obligations related to, associated with or
arising out of (i) the occupancy, operation, use or control of any of the
NTS Property on or prior to the date hereof or (ii) the operation of the
NTS Business on or prior to the date hereof, in each case incurred or
imposed by any Environmental Law (including, without limitation, any
Release of any Contaminant on, at or from (1) the NTS Property, including,
without
-23-
<PAGE>
limitation, all facilities, improvements, structures and equipment thereon,
surface water thereon or adjacent thereto and soil or groundwater
thereunder, or any conditions whatsoever on, under or in the vicinity of
such real property or (2) any real property or facility owned by a third
Person to which Contaminants generated by the NTS Business were sent prior
to the date hereof);
(h) any product liability or claims for injury to person or property,
regardless of when made or asserted, relating to products manufactured,
distributed or sold by the NTS Business or services performed by the NTS
Business on or prior to the date hereof; and
(i) any liabilities relating to Escheat Laws or the failure to file
reports, or to pay or turn over amounts due, thereunder which pertain to
any NTS Business transaction initiated prior to the Closing Date.
In order that the NTS Subsidiary shall not be responsible in any respect for any
liabilities or obligations that would constitute Excluded NTS Liabilities in the
case of NTS, NTS shall assume and agree to pay, perform and discharge such
liabilities and obligations of the NTS Subsidiary (the "NTS SUBSIDIARY EXCLUDED
LIABILITIES") and all NTS Subsidiary Excluded Liabilities shall be deemed to
constitute Excluded NTS Liabilities for purposes of this Agreement.
ARTICLE III
CASH ADJUSTMENT
3.1. DETERMINATION OF TRANSFERRED CASH. (a) As promptly as
practicable (but not later than 60 business days) after the date hereof, IPS
shall prepare and deliver to Comdata a detailed statement (with appropriate work
papers attached) setting forth the amount of Transferred Cash as of 11:59 p.m.
central time on the date hereof (the "PRELIMINARY TRANSFERRED CASH STATEMENT").
(b) Promptly following receipt of the Preliminary Transferred Cash
Statement, Comdata may review the same and, within 60 days after the date of
such receipt, may deliver to IPS a certificate (signed by its chief financial
officer or its chief accounting officer) setting forth its objections, if any,
to the Preliminary Transferred Cash Statement, together with a summary of the
reasons therefor and calculations which, in its view, are necessary to eliminate
any such objections. In the event Comdata does not so object within such 60-day
period, the Preliminary Transferred Cash Statement shall be final and binding as
the "TRANSFERRED CASH STATEMENT" for purposes of this Agreement, but shall not
limit the representations, warranties, covenants and agreements of the parties
set forth elsewhere in this Agreement.
(c) In the event Comdata so objects within such 60-day period, IPS
and Comdata shall use their reasonable efforts to resolve by written agreement
(the "AGREED ADJUSTMENTS") any differences as to the Preliminary Transferred
Cash Statement and, in the event Comdata and IPS
-24-
<PAGE>
so resolve any such differences, the Preliminary Transferred Cash Statement as
adjusted by the Agreed Adjustments shall be final and binding as the Transferred
Cash Statement for purposes of this Agreement, but shall not limit the
representations, warranties, covenants and agreements of the parties set forth
elsewhere in this Agreement.
(d) In the event any objections raised by Comdata are not resolved by
Agreed Adjustments within the 60-day period next following such 60-day period,
then IPS and Comdata shall submit the objections that are then unresolved to the
Selected Accounting Firm and the Selected Accounting Firm shall be directed by
Comdata and IPS to resolve the unresolved objections as promptly as reasonably
practicable and to deliver written notice to each of Comdata and IPS setting
forth its resolution of the disputed matters. The Preliminary Transferred Cash
Statement, after giving effect to any Agreed Adjustments and to the resolution
of disputed matters by the Selected Accounting Firm, shall be final and binding
as the Transferred Cash Statement, for purposes of this Agreement but shall not
limit the representations, warranties, covenants and agreements of the parties
set forth elsewhere in this Agreement.
(e) The parties hereto shall make available to Comdata, IPS and, if
applicable, the Selected Accounting Firm, such books, records and other
information (including work papers) as any of the foregoing may reasonably
request to prepare or review the Preliminary Transferred Cash Statement or any
matters submitted to the Selected Accounting Firm. The fees and expenses of the
Selected Accounting Firm hereunder shall be paid 50% by Comdata and 50% by IPS.
3.2. TRANSFERRED CASH ADJUSTMENT. As promptly as practicable (but
not later than five business days) after the determination of the Transferred
Cash Statement pursuant to SECTION 3.1 that is final and binding as set forth
therein:
(i) if the aggregate amount of cash set forth in the Transferred
Cash Statement exceeds the Estimated Amount of Transferred Cash, NTS
shall pay to Comdata, by wire transfer of immediately available funds
to such bank account of Comdata as Comdata shall designate in writing
to NTS, an amount equal to such excess, plus interest on such excess
from the date hereof to the date of payment thereof at the Agreed
Rate; or
(ii) if the Estimated Amount of Transferred Cash exceeds the
aggregate amount of cash set forth in the Transferred Cash Statement,
Comdata shall pay to NTS, by wire transfer of immediately available
funds to such bank account of NTS as NTS shall designate in writing to
Comdata, an amount equal to such excess, plus interest on such excess
from the date hereof to the date of payment thereof at the Agreed
Rate.
3.3. DETERMINATION OF GAMING RECEIVABLES ADJUSTMENT. (a) As promptly
as practicable (but not later than sixty days) after the date hereof, IPS shall:
-25-
<PAGE>
(i) prepare, in accordance with the Gaming Agreed Accounting
Principles, a written report (the "Preliminary Closing Date Gaming Special
Report") which shall fairly present the amounts of the gaming receivables
and gaming liabilities, in each case, as of 11:59 p.m. central time on the
date hereof and of the type reflected as such in the Preliminary Closing
Date Gaming Special Report (the amounts of the gaming receivables and the
gaming liabilities as so reflected being referred to respectively herein as
the "PRELIMINARY GAMING RECEIVABLES" and the "PRELIMINARY GAMING
LIABILITIES" and collectively as the "PRELIMINARY GAMING AMOUNTS".)
(ii) calculate the Gaming Receivables Adjustment in accordance with
the provisions of this Agreement, based on the Preliminary Closing Date
Gaming Special Report and assuming for such purposes that the Preliminary
Gaming Amounts constitute the Gaming Amounts (the "PRELIMINARY GAMING
RECEIVABLES ADJUSTMENT"); and
(iii) deliver to Comdata the Preliminary Closing Date Gaming Special
Report and a certificate setting forth the Preliminary Gaming Receivables,
the Preliminary Gaming Liabilities and the Preliminary Gaming Receivables
Adjustment, together with the supporting calculations in reasonable detail
(collectively, the "PRELIMINARY GAMING ACCOUNTING REPORT").
(b) Promptly following such delivery of the Preliminary Gaming
Accounting Report, Comdata shall have the opportunity to review the Preliminary
Closing Date Gaming Special Report and the Preliminary Gaming Receivables
Adjustment. Not later than 60 days after the date of such receipt, Comdata may
deliver to IPS a certificate (signed by an officer of Comdata) setting forth its
objections to the Preliminary Closing Date Gaming Special Report, the
Preliminary Gaming Receivables, the Preliminary Gaming Liabilities or the
Preliminary Gaming Receivables Adjustment as set forth in the Preliminary Gaming
Accounting Report, together with a summary of the reasons therefor and
calculations which, in its view, are necessary to eliminate such objections. If
Comdata does not so object within such 60-day period, the Preliminary Closing
Date Gaming Special Report, the Preliminary Gaming Receivables, the Preliminary
Gaming Liabilities and the Preliminary Gaming Receivables Adjustment set forth
in the Preliminary Gaming Accounting Report shall be final and binding as the
Closing Date Gaming Special Report, the Gaming Receivables, the Gaming
Liabilities and the Gaming Receivables Adjustment, respectively, for purposes of
this Agreement but shall not limit the representations, warranties, covenants
and agreements of the parties set forth elsewhere in this Agreement.
(c) If Comdata so objects within such 60-day period, IPS and Comdata
shall use their reasonable efforts to resolve by written agreement (the "AGREED
GAMING ADJUSTMENTS") any differences as to the Preliminary Closing Date Gaming
Special Report, the Preliminary Gaming Receivables, the Preliminary Gaming
Liabilities and the Preliminary Gaming Receivables Adjustment and, if IPS and
Comdata so resolve any such differences, the Preliminary Closing Date Gaming
Special Report, the Preliminary Gaming Receivables, the Preliminary Gaming
Liabilities and the Preliminary Gaming Receivables Adjustment set forth in the
Preliminary Gaming Accounting Report as adjusted by the Agreed Gaming
Adjustments shall be final and binding as the Closing Date Gaming Special
Report, the Gaming Receivables, the Gaming
-26-
<PAGE>
Liabilities, and the Gaming Receivables Adjustment, respectively, for purposes
of this Agreement but shall not limit the representations, warranties, covenants
and agreements of the parties set forth elsewhere in this Agreement.
(d) If any objections raised by Comdata are not resolved by Agreed
Gaming Adjustments within the 60-day period next following such 60-day period,
then IPS and Comdata shall submit the objections that are then unresolved (the
"UNRESOLVED GAMING OBJECTIONS") to the Selected Accounting Firm and such
Selected Accounting Firm shall be directed by IPS and Comdata to resolve the
Unresolved Gaming Objections (based solely on the presentations by IPS and
Comdata as to whether any disputed matter had been determined in a manner
consistent with the Agreed Gaming Accounting Principles) as promptly as
reasonably practicable and to deliver written notice to each of IPS and Comdata
setting forth its resolution of the disputed matters. The Preliminary Closing
Date Gaming Special Report, the Preliminary Gaming Receivables, the Preliminary
Gaming Liabilities and the Preliminary Gaming Receivables Adjustment, after
giving effect to any Agreed Gaming Adjustments and to the resolution of disputed
matters by the Selected Accounting Firm, shall be final and binding as the
Closing Date Gaming Special Report, the Gaming Receivables, the Gaming
Liabilities, and the Gaming Receivables Adjustment, respectively, for purposes
of this Agreement but shall not limit the representations, warranties, covenants
and agreements of the parties set forth elsewhere in this Agreement. Any
determinations by the Selected Accounting Firm shall be final and binding on the
parties hereto. Comdata and IPS shall each be responsible for all fees of their
respective accountants and all expenses incurred by such respective firms in
connection with any settlement proceeding. The fees and expenses of the
Selected Accounting Firm incurred in connection with such settlement proceeding
shall be paid fifty (50%) percent by IPS and fifty (50%) percent by Comdata.
(e) Upon final determination pursuant to this SECTION 3.3 of the
Closing Date Gaming Special Report, the Gaming Amounts and the Gaming
Receivables Adjustment, IPS shall deliver to Comdata a report setting forth the
Closing Date Gaming Special Report, the Gaming Amounts, and the Gaming
Receivables Adjustment (the "GAMING ACCOUNTING REPORT").
(f) IPS and Comdata shall make available to one another and the
Selected Accounting Firm, as the case may be, such books, records and other
information (including work papers) as such Person may reasonably request during
the review of the Preliminary Gaming Accounting Report or the preparation of the
Gaming Accounting Report.
3.4. DETERMINATION OF NTS RECEIVABLES ADJUSTMENT. (a) As promptly as
practicable (but not later than sixty days) after the date hereof, Comdata
shall:
(i) prepare, in accordance with the NTS Agreed Accounting Principles,
a written report (the "Preliminary Closing Date NTS Special Report") which
shall fairly present the amounts of the NTS receivables and NTS
liabilities, in each case, as of 11:59 p.m. central time on the date hereof
and of the type reflected as such in the Preliminary Closing Date NTS
Special Report (the amounts of the NTS receivables, and the NTS liabilities
so reflected being referred to respectively herein as the "PRELIMINARY NTS
RECEIVABLES" and the "PRELIMINARY NTS LIABILITIES" and collectively as the
"PRELIMINARY NTS AMOUNTS".)
-27-
<PAGE>
(ii) calculate the NTS Receivables Adjustment in accordance with the
provisions of this Agreement, based on the Preliminary Closing Date NTS
Special Report and assuming for such purposes that the Preliminary NTS
Amounts constitute the NTS Amounts (the "PRELIMINARY NTS RECEIVABLES
ADJUSTMENT"); and
(iii) deliver to IPS the Preliminary Closing Date NTS Special Report
and a certificate setting forth the Preliminary NTS Receivables, the
Preliminary NTS Liabilities and the Preliminary NTS Receivables Adjustment,
together with the supporting calculations in reasonable detail
(collectively, the "PRELIMINARY NTS ACCOUNTING REPORT").
(b) Promptly following such delivery of the Preliminary NTS
Accounting Report, IPS shall have the opportunity to review the Preliminary
Closing Date NTS Special Report and the Preliminary NTS Receivables Adjustment.
Not later than 60 days after the date of such receipt, IPS may deliver to
Comdata a certificate (signed by an officer of IPS) setting forth its objections
to the Preliminary Closing Date NTS Special Report, the Preliminary NTS
Receivables, the Preliminary NTS Liabilities or the Preliminary NTS Receivables
Adjustment as set forth in the Preliminary NTS Accounting Report, together with
a summary of the reasons therefor and calculations which, in its view, are
necessary to eliminate such objections. If IPS does not so object within such
60-day period, the Preliminary Closing Date NTS Special Report, the Preliminary
NTS Receivables, the Preliminary NTS Liabilities and the Preliminary NTS
Receivables Adjustment set forth in the Preliminary NTS Accounting Report shall
be final and binding as the Closing Date NTS Special Report, the NTS
Receivables, the NTS Liabilities and the NTS Receivables Adjustment,
respectively, for purposes of this Agreement but shall not limit the
representations, warranties, covenants and agreements of the parties set forth
elsewhere in this Agreement.
(c) If IPS so objects within such 60-day period, Comdata and IPS
shall use their reasonable efforts to resolve by written agreement (the "AGREED
NTS ADJUSTMENTS") any differences as to the Preliminary Closing Date NTS Special
Report, the Preliminary NTS Receivables, the Preliminary NTS Liabilities and the
Preliminary NTS Receivables Adjustment and, if Comdata and IPS so resolve any
such differences, the Preliminary Closing Date NTS Special Report, the
Preliminary NTS Receivables, the Preliminary NTS Liabilities and the Preliminary
NTS Receivables Adjustment set forth in the Preliminary NTS Accounting Report as
adjusted by the Agreed NTS Adjustments shall be final and binding as the Closing
Date NTS Special Report, the NTS Receivables, the NTS Liabilities, and the NTS
Receivables Adjustment, respectively, for purposes of this Agreement but shall
not limit the representations, warranties, covenants and agreements of the
parties set forth elsewhere in this Agreement.
(d) If any objections raised by IPS are not resolved by Agreed NTS
Adjustments within the 60-day period next following such 60-day period, then
Comdata and IPS shall submit the objections that are then unresolved (the
"UNRESOLVED NTS OBJECTIONS") to the Selected Accounting Firm and such Selected
Accounting Firm shall be directed by Comdata and IPS to resolve the Unresolved
NTS Objections (based solely on the presentations by Comdata and IPS as to
whether any disputed matter had been determined in a manner consistent with the
Agreed NTS Accounting Principles) as promptly as reasonably practicable and to
deliver written notice to each
-28-
<PAGE>
of Comdata and IPS setting forth its resolution of the disputed matters. The
Preliminary Closing Date NTS Special Report, the Preliminary NTS Receivables,
the Preliminary NTS Liabilities and the Preliminary NTS Receivables Adjustment,
after giving effect to any Agreed NTS Adjustments and to the resolution of
disputed matters by the Selected Accounting Firm, shall be final and binding as
the Closing Date NTS Special Report, the NTS Receivables, the NTS Liabilities,
and the NTS Receivables Adjustment, respectively, for purposes of this Agreement
but shall not limit the representations, warranties, covenants and agreements of
the parties set forth elsewhere in this Agreement. Any determinations by the
Selected Accounting Firm shall be final and binding on the parties hereto. IPS
and Comdata shall each be responsible for all fees of their respective
accountants and all expenses incurred by such respective firms in connection
with any settlement proceeding. The fees and expenses of the Selected
Accounting Firm incurred in connection with such settlement proceeding shall be
paid fifty (50%) percent by IPS and fifty (50%) percent by Comdata.
(e) Upon final determination pursuant to this SECTION 4.4 of the
Closing Date NTS Special Report, the NTS Amounts and the NTS Receivables
Adjustment, Comdata shall deliver to IPS a report setting forth the Closing Date
NTS Special Report, the NTS Amounts and the NTS Receivables Adjustment (the "NTS
ACCOUNTING REPORT").
(f) IPS and Comdata shall make available to one another and the
Selected Accounting Firm, as the case may be, such books, records and other
information (including work papers) as such Person may reasonably request during
the review of the Preliminary NTS Accounting Report or the preparation of the
NTS Accounting Report.
3.5. NET RECEIVABLES ADJUSTMENT. Promptly (but not later than five
business days) after the later of (i) the determination of the Gaming
Receivables Adjustment pursuant to SECTION 3.3 that is final and binding as set
forth therein or (ii) the determination of the NTS Receivables Adjustment
pursuant to SECTION 3.4 that is final and binding as set forth therein:
(a) if the Gaming Receivables Adjustment exceeds the NTS Receivables
Adjustment, NTS shall pay to Comdata, by wire transfer of immediately available
funds to such bank account of Comdata as Comdata shall designate in writing to
NTS, an amount equal to such excess, plus interest on such excess from the date
hereof to the date of payment thereof at the Agreed Rate; or
(b) if the NTS Receivables Adjustment exceeds the Gaming Receivables
Adjustment, Comdata shall pay to NTS, by wire transfer of immediately available
funds to such bank account of NTS as NTS shall designate in writing to Comdata
an amount equal to such excess, plus interest on such excess from the date
hereof to the date or payment thereof at the Agreed Rate.
-29-
<PAGE>
ARTICLE IV
CLOSING
4.1. CLOSING. The Closing shall be consummated on January 16, 1998
at the offices of Sidley & Austin, One First National Plaza, Chicago, Illinois.
At the Closing, the parties shall effect the deliveries contemplated by SECTIONS
4.3 and 4.4. As soon as practicable thereafter, NTS and Comdata shall file with
the Department of Assessments and Taxation of the State of Maryland Articles of
Transfer in the form of EXHIBIT H. For all purposes of this Agreement, the
Closing shall be deemed effective as of 11:59 p.m. central time on the date
hereof (it being understood that the transfer of the NT Canada Shares from NTS
to Permicom shall be deemed to have occurred immediately prior to the transfer
of the Purchased NTS Assets to Comdata).
4.2. DELIVERY OF PROMISSORY NOTES. Simultaneously with the execution
hereof, Permicom shall deliver to NTS the Permicom Note, following which NTS
shall deliver to Comdata the NTS Note.
4.3. FDC's, IPS', NTS' AND FDFS' ADDITIONAL DELIVERIES.
Simultaneously with the execution hereof, FDC, IPS, NTS and FDFS shall deliver
to Comdata, Ceridian and Permicom all the following:
(a) A copy of the Certificate of Incorporation of FDC certified as of
a recent date by the Secretary of State of the State of Delaware;
(b) Certificate of Good Standing of FDC issued as of a recent date by
the Secretary of State of the State of Delaware;
(c) Certificate of the secretary or an assistant secretary of FDC,
dated the date hereof, in form and substance reasonably satisfactory to
Comdata, as to (i) no amendments to the Certificate of Incorporation of FDC
since a specified date; (ii) the by-laws of FDC; (iii) the resolutions of
the Board of Directors of FDC authorizing the execution and performance of
this Agreement and the transactions contemplated hereby; and (iv)
incumbency and signatures of the officers of FDC executing this Agreement
and any IPS Ancillary Agreement;
(d) A copy of the Certificate of Incorporation of IPS certified as of
a recent date by the Secretary of State of the State of Delaware;
(e) Certificate of Good Standing of IPS issued as of a recent date by
the Secretary of State of the State of Delaware;
(f) Certificate of the secretary or an assistant secretary of IPS,
dated the date hereof, in form and substance reasonably satisfactory to
Comdata, as to (i) no amendments to the Certificate of Incorporation of IPS
since a specified date; (ii) the by-laws of IPS; (iii) the resolutions of
the Board of Directors of IPS authorizing the execution and
-30-
<PAGE>
performance of this Agreement and the transactions contemplated hereby; and
(iv) incumbency and signatures of the officers of IPS executing this
Agreement and any IPS Ancillary Agreement;
(g) A copy of the Certificate of Incorporation of NTS certified as of
a recent date by the Secretary of State of the State of Maryland;
(h) Certificate of good standing of NTS issued as of a recent date by
the Secretary of State of the State of Maryland;
(i) Certificate of the secretary or an assistant secretary of NTS,
dated the date hereof, in form and substance reasonably satisfactory to
Comdata, as to (i) no amendments to the Certificate of Incorporation of NTS
since a specified date; (ii) the by-laws of NTS; (iii) the resolutions of
the Board of Directors of NTS and sole stockholder authorizing the
execution and performance of this Agreement and the transactions
contemplated hereby; and (iv) incumbency and signatures of the officers of
NTS executing this Agreement and any IPS Ancillary Agreement;
(j) Certificate of Good Standing of NTS Subsidiary issued as of a
recent date by Ministry of Consumer and Commercial Relations;
(k) Certificate of the secretary or an assistant secretary of NTS
Subsidiary dated the date hereof, in form and substance reasonably
satisfactory to Comdata, as to (i) no amendments to the Charter of NTS
Subsidiary since a specified date and (ii) the by-laws of the NTS
Subsidiary;
(l) Certificate of the secretary or assistant secretary of FDFS dated
the date hereof, in form and substance reasonably satisfactory to Comdata
as to (i) no amendments to the certificate of formation of FDFS since a
specified date;
(m) The FDFS Instrument of Assumption pursuant to which FDFS shall
assume and agree to discharge the Assumed Gaming Liabilities in accordance
with their respective terms and subject to the respective conditions
thereof duly executed by FDFS;
(n) The NTS Instrument of Assignment pursuant to which NTS shall
transfer and assign (i) the Purchased NTS Assets (except the NT Canada
Shares) to Comdata and (ii) the NT Canada Shares to Permicom, duly executed
by NTS;
(o) a stock certificate representing the NT Canada Shares,
accompanied by a duly executed and witnessed stock power, transferring the
NT Canada Shares to Permicom;
(p) Certificates of title or origin (or like documents) with respect
to any vehicles or other equipment included in the Purchased NTS Assets for
which a certificate of title or origin is required in order to transfer
title;
-31-
<PAGE>
(q) All consents, waivers or approvals obtained by FDC, IPS, FDFS,
NTS or the NTS Subsidiary with respect to the Purchased NTS Assets or the
consummation of the transactions contemplated by this Agreement;
(r) The Gaming Business Transition Services Agreement duly executed
by IPS, FDT and FDFS;
(s) The NTS Business Transition Services Agreement duly executed by
NTS, IPS and FDT;
(t) The Services and Processing Agreement duly executed by IPS and
FDT;
(u) All consents, waivers or approvals obtained by FDC, IPS, NTS,
FDFS or the NTS Subsidiary with respect to the consummation of the
transactions contemplated by this Agreement;
(v) A signed resignation by each of the directors and officers of the
NTS Subsidiary;
(w) All minute books and stock ledgers of the NTS Subsidiary;
(x) An assignment, in recordable form, with respect to each of the
leases of real estate described in SCHEDULE 6.11, duly executed by NTS and
in form and substance reasonably satisfactory to Comdata;
(y) Such other bills of sale, assignments and other instruments of
transfer or conveyance as Comdata may reasonably request or as may be
otherwise necessary to evidence and effect the sale, transfer, conveyance
and delivery of the Purchased NTS Assets (except the NT Canada Shares) to
Comdata and the NT Canada Shares to Permicom.
(z) A receipt evidencing receipt of the Cashcall Inc. Shares duly
executed by FDFS;
(aa) The NTS Canadian Instrument of Assignment pursuant to which the
NTS Subsidiary shall transfer and assign the NTS Subsidiary Excluded Assets
to NTS duly executed by NTS; and
(ab) The NTS Canadian Instrument of Assumption pursuant to which NTS
shall assume and agree to discharge the NTS Subsidiary Excluded Liabilities
of the NTS Subsidiary duly executed by NTS.
In addition to the above deliveries, FDC, IPS, NTS and the NTS Subsidiary shall
take all steps and actions including the delivery of such other bills of sale,
deeds, endorsements, assignments and other good and sufficient instruments of
conveyance and transfer, as Ceridian, Comdata or
-32-
<PAGE>
Permicom may reasonably request or as may otherwise be necessary to put Comdata
in control and possession of the Purchased NTS Assets (except the NT Canada
Shares) and Permicom in control and possession of the NT Canada Shares.
4.4. CERIDIAN'S, COMDATA'S AND PERMICOM'S ADDITIONAL DELIVERIES.
Simultaneously with the execution hereof, Ceridian, Comdata or Permicom shall
deliver to FDC, IPS, NTS and FDFS all the following:
(a) A copy of Ceridian's Certificate of Incorporation certified as of
a recent date by the Secretary of State of the State of Delaware;
(b) Certificate of Good Standing of Ceridian issued as of a recent
date by the Secretary of State of the State of Delaware;
(c) Certificate of the secretary or an assistant secretary of
Ceridian, dated the date hereof, in form and substance reasonably
satisfactory to FDC, as to (i) no amendments to the Certificate of
Incorporation of Ceridian since a specified date; (ii) the by-laws of
Ceridian; (iii) the resolutions of the Board of Directors of Ceridian
authorizing the execution and performance of this Agreement and the
transactions contemplated hereby; and (iv) incumbency and signatures of the
officers of Ceridian executing this Agreement and any Comdata Ancillary
Agreement;
(d) A copy of the Certificate of Incorporation of Comdata certified
as of a recent date by the Secretary of State of the State of Maryland;
(e) Certificate of good standing of Comdata issued as of a recent
date by the Secretary of State of the State of Maryland;
(f) Certificate of the secretary or an assistant secretary of
Comdata, dated the date hereof, in form and substance reasonably
satisfactory to FDC, as to (i) no amendments to the Certificate of
Incorporation of Comdata since a specified date; (ii) the by-laws of
Comdata; (iii) the resolutions of the Board of Directors of Comdata
authorizing the execution and performance of this Agreement and the
transactions contemplated hereby; and (iv) incumbency and signatures of the
officers of Comdata executing this Agreement and any Comdata Ancillary
Agreement;
(g) Certificate of Good Standing of Gaming Subsidiary issued as of a
recent date by the Ministry of Consumer and Commercial Relations.
(h) Certificate of the secretary or an assistant secretary of Gaming
Subsidiary dated the date hereof, in form and substance reasonably
satisfactory to FDC, as to (i) no amendments to the Charter of Gaming
Subsidiary since a specified date and (ii) the by-laws of Gaming
Subsidiary;
-33-
<PAGE>
(i) Certificate of the secretary or an assistant secretary of
Permicom dated the date hereof, in form and substance reasonably
satisfactory to FDC, as to (i) no amendments to the Charter of Permicom
since a specified date and (ii) the by-laws of Permicom;
(j) The Comdata Instrument of Assumption pursuant to which Comdata
shall assume and agree to discharge the Assumed NTS Liabilities in
accordance with their respective terms and subject to the respective
conditions thereof duly executed by Comdata;
(k) The Comdata Instrument of Assignment pursuant to which Comdata
shall transfer and assign the Purchased Gaming Assets to FDFS duly executed
by Comdata;
(l) Certificates of title or origin (or like documents) with respect
to any vehicles or other equipment included in the Purchased Gaming Assets
for which a certificate of title or origin is required in order to transfer
title;
(m) All consents, waivers or approvals obtained by Ceridian, Comdata
or the Gaming Subsidiary with respect to the Purchased Gaming Assets or the
consummation of the transactions contemplated by this Agreement;
(n) A stock certificate representing the Cashcall Inc. Shares,
accompanied by a duly executed and witnessed stock power transferring the
Cashcall Inc. Shares to FDFS;
(o) The Gaming Business Transition Services Agreement duly executed
by Comdata;
(p) The NTS Business Transition Services Agreement, duly executed by
Comdata;
(q) The Services and Processing Agreement duly executed by Comdata;
(r) All consents, waivers or approvals obtained by Comdata or the
Gaming Subsidiary with respect to the consummation of the transactions
contemplated by this Agreement;
(s) A signed resignation by each of the directors and officers of the
Gaming Subsidiary;
(t) All minute books and stock ledgers of the Gaming Subsidiary;
(u) An assignment, in recordable form, with respect to each of the
leases of real estate described in SCHEDULE 6.11, duly executed by Ceridian
or Comdata and in form and substance reasonably satisfactory to FDFS;
(v) Such other bills of sale, assignments and other instruments of
transfer or conveyance as FDFS may reasonably request or as may be
otherwise necessary to
-34-
<PAGE>
evidence and effect the sale, assignment, transfer, conveyance and delivery
of the Purchased Gaming Assets to FDFS;
(w) A receipt evidencing receipt of the NT Canada Shares, duly
executed by Permicom;
(x) A receipt evidencing receipt of the Initial Amount duly executed
by Comdata.
(y) The Comdata Canadian Instrument of Assignment pursuant to which
the Gaming Subsidiary shall transfer and assign the Gaming Subsidiary
Excluded Assets to Comdata; and
(z) The Comdata Canadian Instrument of Assumption pursuant to which
Comdata shall assume and agree to discharge the Gaming Subsidiary Excluded
Liabilities of the Gaming Subsidiary.
In addition to the above deliveries, Ceridian, Comdata and the Gaming Subsidiary
shall take all steps and actions, including the delivery of such other bills of
sale, deeds, endorsements, assignments, and other good and sufficient
instruments of conveyance and transfer, as IPS, FDC, NTS or FDFS may reasonably
request or as may otherwise be necessary to put FDFS in actual possession or
control of the Purchased Gaming Assets.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CERIDIAN AND COMDATA
As an inducement to FDC, IPS, NTS and FDFS to enter into this
Agreement and to consummate the transactions contemplated hereby, Ceridian,
Comdata and Permicom represent and warrant to FDC, IPS, NTS and FDFS and agree
as follows:
5.1. ORGANIZATION. (a) Ceridian is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Ceridian is duly qualified to transact business as a foreign corporation and is
in good standing in all jurisdictions except where the absence of such
qualification would not have a Material Adverse Effect. No other jurisdiction
has demanded, requested or otherwise indicated that Ceridian is required so to
qualify on account of the ownership or leasing of the Purchased Gaming Assets or
the conduct of the Gaming Business. Ceridian has full power and authority to
own or lease and to operate and use the Purchased Gaming Assets and to carry on
the Gaming Business as now conducted.
True and complete copies of the certificate of incorporation and all
amendments thereto and of the By-laws, as amended to date, of Ceridian have been
delivered to IPS.
(b) Comdata is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland. Comdata is duly
qualified to transact business as a
-35-
<PAGE>
foreign corporation and is in good standing in all jurisdictions except where
the absence of such qualification would not have a Material Adverse Effect. No
other jurisdiction has demanded, requested or otherwise indicated that Comdata
is required so to qualify on account of the ownership or leasing of the
Purchased Gaming Assets or the conduct of the Gaming Business. Except as set
forth on SCHEDULE 5.22, Comdata has full power and authority to own or lease and
to operate and use the Purchased Gaming Assets and to carry on the Gaming
Business as now conducted.
True and complete copies of the certificate of incorporation and all
amendments thereto and of the By-laws, as amended to date, of Comdata have been
delivered to IPS.
(c) The Gaming Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to transact business as a foreign
corporation and is in good standing in all jurisdictions except where the
absence of such qualification would not have a Material Adverse Effect and no
other jurisdiction has demanded, requested or otherwise indicated that the
Gaming Subsidiary is required so to qualify. The Gaming Subsidiary has full
power and authority to own or lease and to operate and use its properties and
assets and to carry on its business as now conducted.
True and complete copies of the certificate or articles of
incorporation and all amendments thereto, the By-laws, as amended to date, and
the stock ledger of the Gaming Subsidiary have been delivered to IPS.
(d) Permicom is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction.
5.2. SUBSIDIARIES AND INVESTMENTS. (a) Except for the Gaming
Subsidiary and as set forth in SCHEDULE 5.2(A), neither Ceridian or Comdata
directly or indirectly, (i) owns, of record or beneficially, any outstanding
voting securities or other equity interests in any corporation, partnership,
joint venture or other entity which is involved in or relates to the Gaming
Business or (ii) controls any corporation, partnership, limited liability
company, joint venture or other entity which is involved in or relates to the
Gaming Business.
(b) SCHEDULE 5.2(B) sets forth with respect to the Gaming Subsidiary
on the date hereof the number of authorized, issued and outstanding shares of
capital stock of each class, the number of issued shares of capital stock held
as treasury shares and the number of shares of capital stock unissued and
reserved for any purpose. Except as set forth in SCHEDULE 5.2(B) and except for
this Agreement, there are no agreements, arrangements, options, warrants, calls,
rights or commitments of any character relating to the issuance, sale, purchase
or redemption of any shares of capital stock of the Gaming Subsidiary. All of
the outstanding shares of capital stock of the Gaming Subsidiary are validly
issued, fully paid and nonassessable and, except as set forth in
SCHEDULE 5.2(B), are owned by Comdata of record and beneficially free from all
Encumbrances of any kind.
-36-
<PAGE>
5.3. AUTHORITY. (a) Ceridian has full power and authority to
execute, deliver and perform this Agreement. The execution, delivery and
performance of this Agreement by Ceridian has been duly authorized and approved
by Ceridian's board of directors and does not require any further authorization
or consent of Ceridian or its stockholders. This Agreement has been duly
authorized, executed and delivered by Ceridian and is the legal, valid and
binding obligation of Ceridian enforceable in accordance with its terms, and
upon execution and delivery by Ceridian will be a legal, valid and binding
obligation of Ceridian enforceable in accordance with its terms,
and each of the Comdata Ancillary Agreements has been duly authorized by
Ceridian and upon execution and delivery by Ceridian will be a legal, valid and
binding obligation of Ceridian enforceable in accordance with its terms.
(b) Comdata has full power and authority to execute, deliver and
perform this Agreement and all of the Comdata Ancillary Agreements. The
execution, delivery and performance of this Agreement and the Comdata Ancillary
Agreements by Comdata have been duly authorized and approved by Comdata's board
of directors and sole stockholder and do not require any further authorization
or consent. This Agreement has been duly authorized, executed and delivered by
Comdata and is the legal, valid and binding obligation of Comdata enforceable in
accordance with its terms, and each of the Comdata Ancillary Agreements has been
duly authorized by Comdata and upon execution and delivery by Comdata will be a
legal, valid and binding obligation of Comdata enforceable in accordance with
its terms.
(c) Permicom has full power and authority to execute, deliver and
perform this Agreement. The execution, delivery and performance of this
Agreement by Permicom have been duly authorized and approved by Permicom's board
of directors and sole stockholder and do not require any further authorization
or consent of Permicom or its stockholder. This Agreement has been duly
authorized, executed and delivered by Permicom and is the legal, valid and
binding obligation of Permicom enforceable in accordance with its terms.
(d) Except as set forth in SCHEDULE 5.3, neither the execution and
delivery of this Agreement or any of the Comdata Ancillary Agreements or the
consummation of any of the transactions contemplated hereby or thereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof or
thereof will:
(i) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, (1) the charter or By-laws of Ceridian, Comdata, the Gaming
Subsidiary or Permicom; (2) any Gaming Agreement, (3) any other material
note, instrument, agreement, mortgage, lease, license, franchise, permit or
other authorization, right, restriction or obligation to which Ceridian,
Comdata, the Gaming Subsidiary or Permicom is a party or any of the
Purchased Gaming Assets is subject or by which Ceridian, Comdata, the
Gaming Subsidiary or Permicom is bound, (4) any Court Order to which
Ceridian, Comdata, the Gaming Subsidiary or Permicom is a party or any of
the Purchased Gaming Assets is subject or by which Ceridian, Comdata, the
Gaming Subsidiary or Permicom is bound, or (5) any Requirements of Laws
affecting
-37-
<PAGE>
Ceridian, Comdata, the Gaming Subsidiary, Permicom or the Purchased Gaming
Assets; or
(ii) require the approval, consent, authorization or act of, or the
making by Ceridian, Comdata, the Gaming Subsidiary, Permicom or the Gaming
Business of any declaration, filing or registration with, any Person.
(e) With respect to the transactions contemplated by this Agreement,
Comdata is not required, pursuant to the Maryland General Corporation Law, to
file Articles of Transfer with the Department of Assessments and Taxation of the
State of Maryland or otherwise take any action pursuant to Sections 3-105, 3-107
or 3-110 of the Maryland General Corporation Law.
5.4. FINANCIAL STATEMENTS. SCHEDULE 5.4 contains (i) the unaudited
balance sheet of the Gaming Business as of December 31, 1996 and the related
statements of income and cash flows for the year then ended and (ii) the
unaudited balance sheet of the Gaming Business as of September 30, 1997 and the
related statements of income and cash flows for the nine months then ended.
Except as set forth therein, such balance sheets and statements of income and
cash flow have been prepared in conformity with generally accepted accounting
principles consistently applied, and such balance sheets and related statements
of income and cash flow present fairly the financial position and results of
operations and cash flow of the Gaming Business as of their respective dates and
for the respective periods covered thereby.
5.5. OPERATIONS SINCE THE GAMING BALANCE SHEET DATE. (a) Except as
set forth in SCHEDULE 5.5(A) or SCHEDULE 5.22, and except as due to changes in
the general economic environment, since the Gaming Balance Sheet Date, there has
been:
(i) no material adverse change in the Purchased Gaming Assets, the
Gaming Business or the operations, liabilities, profits, or condition
(financial or otherwise) of the Gaming Business, and no fact or condition
exists or is contemplated or, to the knowledge of Comdata or the Gaming
Subsidiary, threatened which might reasonably be expected to cause such a
change in the future; and
(ii) no damage, destruction, loss or claim, whether or not covered by
insurance, or condemnation or other taking adversely affecting any of the
Purchased Gaming Assets or the Gaming Business.
(b) Except as set forth in SCHEDULE 5.5(B), since the Gaming Balance
Sheet Date, Comdata and the Gaming Subsidiary conducted the Gaming Business only
in the ordinary course and in conformity with past practice. Without limiting
the generality of the foregoing, since the Gaming Balance Sheet Date, except as
set forth in such Schedule, Comdata has not, in respect of the Gaming Business,
and the Gaming Subsidiary has not:
(i) sold, leased (as lessor), transferred or otherwise disposed of
(including any transfers from the Gaming Business to Ceridian, Comdata or
any of their respective Affiliates), or mortgaged or pledged, or imposed or
suffered to be imposed any
-38-
<PAGE>
Encumbrance (other than a Permitted Encumbrance) on, any of the assets
reflected on the Gaming Balance Sheet or any assets acquired by the Gaming
Business after the Gaming Balance Sheet Date, except for inventory and
minor amounts of personal property sold or otherwise disposed of for fair
value in the ordinary course of the Gaming Business;
(ii) canceled any debts owed to or claims held by the Gaming Business
(including the settlement of any claims or litigation) or waived any other
rights held by the Gaming Business other than in the ordinary course of the
Gaming Business consistent with past practice;
(iii) paid any claims against the Gaming Business (including the
settlement of any claims and litigation against the Gaming Business or the
payment or settlement of any obligations or liabilities of the Gaming
Business) other than in the ordinary course of business consistent with
past practice;
(iv) created, incurred or assumed, or agreed to create, incur or
assume, any indebtedness for borrowed money in respect of the Gaming
Business (other than money borrowed or advances from Ceridian, Comdata or
any of their respective Affiliates in the ordinary course of the Gaming
Business consistent with past practice) or entered into, as lessee, any
capitalized lease obligations (as defined in Statement of Financial
Accounting Standards No. 13);
(v) accelerated or delayed collection of notes or accounts receivable
generated by the Gaming Business in advance of or beyond their regular due
dates or the dates when the same would have been collected in the ordinary
course of the Gaming Business consistent with past practice;
(vi) delayed or accelerated payment of any account payable or other
liability of the Gaming Business beyond or in advance of its due date or
the date when such liability would have been paid in the ordinary course of
the Gaming Business consistent with past practice;
(vii) acquired any real property or undertaken or committed to
undertake capital expenditures exceeding $10,000 in the aggregate;
(viii) made, or agreed to make, any payment of cash or distribution
of assets to Ceridian, Comdata or any of their respective Affiliates (other
than cash realized upon collection of receivables generated in the ordinary
course of the Gaming Business);
(ix) instituted any increase in any compensation payable to any
officer or employee of Comdata or the Gaming Subsidiary with respect to the
Gaming Business (other than changes made in accordance with normal
compensation practices and consistent with past compensation practices) or
in any profit-sharing, bonus, incentive, deferred compensation, insurance,
pension, retirement, medical, hospital, disability,
-39-
<PAGE>
welfare or other benefits made available to officers or employees of
Comdata or the Gaming Subsidiary with respect to the Gaming Business;
(x) made any change in (A) the accounting principles and practices
used by Comdata or the Gaming Subsidiary from those applied in the
preparation of the Gaming Balance Sheet and the related statements of
income and cash flow for the period then ended or (B) the charge-off
policies applicable to accounts receivable;
(xi) entered into or become committed to enter into any other material
transaction except in the ordinary course of business;
(xii) amended the Gaming Subsidiary's certificate of incorporation or
by-laws;
(xiii) issued, granted, sold or encumbered any shares of the Gaming
Subsidiary's capital stock or other securities; issued, granted, sold or
encumbered any security, option, warrant, put, call, subscription or other
right of any kind, fixed or contingent, that directly or indirectly calls
for the acquisition, issuance, sale, pledge or other disposition of any
shares of its capital stock or other securities or make any other changes
in the equity capital structure of the Gaming Subsidiary;
(xiv) made any material change in the operations of the Gaming
Business or any expenditure in respect of the Gaming Business which
shall exceed $50,000 in the aggregate;
(xv) made any capital expenditure with respect to the Gaming
Business or entered into any contract or commitment therefor which
shall exceed $50,000 in the aggregate;
(xvi) entered into any contract, agreement, undertaking or
commitment which would have been required to be set forth in
SCHEDULE 5.20 if in effect on the date hereof or entered into any
contract which requires the consent or approval of any third party to
consummate the transactions contemplated by this Agreement; or made
any material modification to any existing, material Gaming Agreement
or to any Gaming Business Governmental Permits, other than changes
made in good faith to cure document deficiencies; or
(xvii) entered into any contract for the purchase, lease (as
lessee) or other occupancy of real property to be used by the Gaming
Business or any option to extend a lease listed in SCHEDULE 5.11(A).
5.6. NO FINDER. Neither Comdata, any Affiliate thereof nor any
Person acting on behalf of the foregoing has paid or become obligated to pay any
fee or commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
-40-
<PAGE>
5.7. TAXES. Except as set forth in SCHEDULE 5.7, (i) Ceridian and
Comdata have, in respect of the Gaming Business and the Purchased Gaming Assets,
and the Gaming Subsidiary has filed all Tax Returns which are required to be
filed and Ceridian, Comdata and the Gaming Subsidiary have paid all Taxes which
have become due pursuant to such Tax Returns or pursuant to any assessment which
has become payable; (ii) all such Tax Returns are complete and accurate and
disclose all Taxes required to be paid in respect of the Gaming Business, the
Purchased Gaming Assets and the Gaming Subsidiary; (iii) all such Tax Returns
relating to United States federal income Taxes have been examined by the
relevant taxing authority or the period for assessment of the Taxes in respect
of which such Tax Returns were required to be filed has expired; (iv) there is
no action, suit, investigation, audit, claim or assessment pending or proposed
or threatened with respect to Taxes of the Gaming Business, the Purchased Gaming
Assets or the Gaming Subsidiary; (v) none of Ceridian, Comdata or the Gaming
Subsidiary has waived or been requested to waive any statute of limitations in
respect of Taxes associated with the Gaming Business, the Purchased Gaming
Assets or the Gaming Subsidiary which waiver is currently in effect; (vi) all
monies required to be withheld by Comdata or the Gaming Subsidiary (including
from employees of the Gaming Business for income Taxes and social security and
other payroll Taxes) have been collected or withheld, and either paid to the
respective taxing authorities, set aside in accounts for such purpose, or
accrued, reserved against and entered upon the books of the Gaming Business;
(vii) Comdata is properly treated as the owner, for all federal, state, local
and other income Tax purposes, of all property of which it is the lessor; (viii)
no change in Tax accounting method which would affect the Gaming Subsidiary
after the Closing has been made, agreed to, requested or required with respect
to its assets or operations; (ix) all tax sharing arrangements and tax
indemnity arrangements relating to the Gaming Subsidiary (other than this
Agreement) will terminate prior to the Closing and the Gaming Subsidiary will
have no liability thereunder on or after the Closing; (x) the Gaming Subsidiary
is not a party to any agreement relating to a foreign sales corporation within
the meaning of Section 922 of the Code; (xi) there are no pending claims for
refund of any Tax attributable to the Gaming Subsidiary (including refunds of
Taxes allocable to the Gaming Subsidiary with respect to any consolidated,
combined, unitary, fiscal unity or similar Tax Returns; (xii) each asset with
respect to which the Gaming Subsidiary claims depreciation, amortization or
similar expense for Tax purposes is owned for Tax purposes by the Gaming
Subsidiary under applicable Tax law; (xiii) the Gaming Subsidiary has always
been properly classified as a corporation for United States federal income Tax
purposes;(xiv) there are no outstanding rulings of, or requests for rulings
with, any Tax authority expressly addressed to the Gaming Subsidiary (or to an
Affiliate of any Gaming Subsidiary) that are, or if issued would be, binding
upon the Gaming Subsidiary for any taxable year or period beginning after the
Closing; (xv) the Gaming Subsidiary (or any Affiliates of the Gaming Subsidiary
with respect to the Gaming Subsidiary) has not, in a manner that would be
binding on the Gaming Subsidiary for a taxable year or period beginning after
the Closing executed, become subject to or entered into any closing agreement
pursuant to Section 7121 of the Code or any similar or predecessor provision
thereof under the Code or other applicable Tax Law; (xvi) the Gaming Subsidiary
has not made and is not subject to any election under Section 341(f) of the
Code; (xvii) no "industrial development bonds" within the meaning of Section 103
of the United States Internal Revenue Code of 1954, as amended and in effect
prior to the enactment of the United States Tax Reform Act of 1986, "private
activity bonds" within the meaning of Section 141 of the Code or other tax
exempt financing have been used to finance any of the assets of the
-41-
<PAGE>
Gaming Subsidiary, whether leased or owned; (xviii) the Gaming Subsidiary has
not made or is not bound by any election under Section 197 of the Code; (xix)
Ceridian has not and will not file for the year in which the Closing occurs a
consolidated federal income tax return with the Gaming Subsidiary; (xx) all
material elections with respect to Taxes affecting the Gaming Subsidiary as of
the date hereof are set forth in SCHEDULE 5.7; (xxi) no amount with respect to
any outlay or expense that is deductible for the purpose of computing income
under the Canadian Income Tax Act has been owing by the Gaming Subsidiary for
longer than two years to any person with whom the Gaming Subsidiary was not
dealing at arms' length at the time of the outlay or expense was incurred or for
more than 180 days after the end of the taxation year in which the outlay or
expense was incurred in the case of a superannuation or pension benefit, a
retiring allowance, salary, wages or other remuneration with respect to any
office or employment; and (xxii) there are no circumstances which exist and
would result, or which have existed and have resulted, in Section 80 of the
Canadian Income Tax Act applying to the Gaming Subsidiary.
5.8. AVAILABILITY OF ASSETS. (a) Except as set forth in SCHEDULE
5.8(A) and except for the Excluded Gaming Assets, the Purchased Gaming Assets
constitute all the assets, services and properties used in or necessary for the
Gaming Business as currently configured (including, but not limited to, all
books, records, computers and computer programs and data processing systems) and
are in good condition (subject to normal wear and tear) and serviceable
condition and are suitable for the uses for which intended.
(b) SCHEDULE 5.8(B) sets forth a description of all material services
provided by Comdata or any Affiliate of Comdata, other than those services to be
provided pursuant to the Gaming Business Transition Services Agreement, to the
Gaming Business utilizing either (i) assets not included in the Purchased Gaming
Assets or (ii) employees not listed in SCHEDULE 7.4(B) and the manner in which
the costs of providing such services have been allocated to the Gaming Business.
5.9. GOVERNMENTAL PERMITS. Except as set forth in SCHEDULE 5.9,
Comdata or the Gaming Subsidiary owns, holds or possesses all licenses,
franchises, permits, privileges, immunities, approvals and other authorizations
from a Governmental Body which are necessary to entitle it to own or lease,
operate and use the Purchased Gaming Assets and to carry on and conduct the
Gaming Business substantially as currently conducted (herein collectively called
"GAMING BUSINESS GOVERNMENTAL PERMITS"), except for such Governmental Permits as
to which the failure to so own, hold or possess would not have a material
adverse effect on the Purchased Gaming Assets, the Gaming Business or the
operations, liabilities, profits, prospects or condition (financial or
otherwise) of the Gaming Business. SCHEDULE 5.9 sets forth a list and brief
description of each Gaming Business Governmental Permit. Complete and correct
copies of all of the Gaming Business Governmental Permits have heretofore been
delivered by Comdata to IPS.
Except as set forth in SCHEDULE 5.9, (i) Comdata or the Gaming
Subsidiary has fulfilled and performed its obligations under each of the Gaming
Business Governmental Permits, and, to the knowledge of Comdata or the Gaming
Subsidiary, no event has occurred or condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would constitute a breach
or default under any such Gaming Business Governmental Permit or which permits
or,
-42-
<PAGE>
after notice or lapse of time or both, would permit revocation or termination of
any such Gaming Business Governmental Permit, or which might adversely affect
the rights of Comdata or the Gaming Subsidiary under any such Gaming Business
Governmental Permit; (ii) no notice of cancellation, of default or of any
dispute concerning any Gaming Business Governmental Permit, or of any event,
condition or state of facts described in the preceding clause, has been received
by, or is known to, Comdata or the Gaming Subsidiary; and (iii) each of the
Gaming Business Governmental Permits is valid, subsisting and in full force and
effect.
5.10. REAL PROPERTY. Neither Comdata (in respect of the Gaming
Business) or the Gaming Subsidiary (a) owns any real property or (b) holds any
options to acquire real property.
5.11. REAL PROPERTY LEASES. SCHEDULE 5.11(A) sets forth a list and
brief description of each lease or similar agreement (showing the parties
thereto, annual rental, and the location of the real property covered by and the
space occupied under, such lease or other agreement) under which (i) Comdata (in
respect of the Gaming Business) or the Gaming Subsidiary is lessee of, or holds,
uses or operates, any real property owned by any third Person (the "GAMING
BUSINESS LEASED REAL PROPERTY") or (ii) Comdata (in respect of the Gaming
Business) or the Gaming Subsidiary is lessor of any of the Gaming Business
Leased Real Property. Except as set forth in SCHEDULE 5.11(B), Comdata or the
Gaming Subsidiary has the right to quiet enjoyment of all the Gaming Business
Leased Real Property described in SCHEDULE 5.11(A) for the full term of each
such lease or similar agreement (and any renewal option) relating thereto, and
the leasehold or other interest of Comdata or the Gaming Subsidiary in such
Gaming Business Leased Real Property is not subject or subordinate to any
Encumbrance except for Permitted Encumbrances. Except as set forth on
SCHEDULE 5.11(C), and except for Permitted Encumbrances, there are no agreements
or other documents governing or affecting the occupancy or tenancy of any of the
Gaming Business Leased Real Property by Comdata or the Gaming Subsidiary or by
any Person other than Comdata or the Gaming Subsidiary. Complete and correct
copies of any instruments evidencing Encumbrances, commitments for the issuance
of title insurance, title opinions, surveys and appraisals in Comdata's or the
Gaming Subsidiary's possession and any policies of title insurance currently in
force and in the possession of Comdata or the Gaming Subsidiary with respect to
each such parcel of Gaming Business Leased Real Property have heretofore been
delivered by Comdata to IPS.
5.12. CONDEMNATION. To the knowledge of Comdata or the Gaming
Subsidiary neither the whole nor any part of any real property leased, used or
occupied by Comdata or the Gaming Subsidiary in connection with the Gaming
Business is subject to any pending suit for condemnation or other taking by any
public authority and no such condemnation or other taking is threatened or
contemplated.
5.13. Personal Property. SCHEDULE 5.13(A) contains a detailed list
of all machinery, equipment, vehicles, furniture and other personal property
owned by Comdata having an original cost of $10,000 or more and used in or
relating to the Gaming Business. Except as set forth in SCHEDULE 5.13(B),
Comdata or the Gaming Subsidiary has good and marketable title to all of the
Purchased Gaming Assets free and clear of all Encumbrances, except for Permitted
Encumbrances.
-43-
<PAGE>
5.14. PERSONAL PROPERTY LEASES. SCHEDULE 5.14 contains a brief
description of each lease or other agreement or right, whether written or oral
(including in each case the annual rental, the expiration date thereof and a
brief description of the property covered), under which Comdata or the Gaming
Subsidiary is lessee of, or holds or operates, any machinery, equipment, vehicle
or other tangible personal property owned by a third Person and used in or
relating to the Gaming Business, except for any such lease, agreement or right
that is terminable by Comdata or the Gaming Subsidiary without penalty or
payment on notice of 30 days or less, or which involves the payment by Comdata
or the Gaming Subsidiary of rentals of less than $5,000 per year.
5.15. INTELLECTUAL PROPERTY; SOFTWARE. (a) SCHEDULE 5.15(A)
contains a list and description (showing in each case any product, device,
process, service, business or publication covered thereby, the registered or
other owner, expiration date and number, if any) of all Copyrights, Patent
Rights and Trademarks owned by, licensed to or used by Comdata or the Gaming
Subsidiary in connection with the conduct of the Gaming Business.
(b) SCHEDULE 5.15(B) contains a list and description (showing in each
case any owner, licensor or licensee) of all Software owned by, licensed to or
used by Comdata or the Gaming Subsidiary in the conduct of the Gaming Business,
provided that SCHEDULE 5.15(B) does not list Software licensed to Comdata or the
Gaming Subsidiary that is commercially available and subject to "shrink-wrap" or
"click on" license agreements.
(c) SCHEDULE 5.15(C) contains a list and description (showing in each
case the parties thereto) of all agreements, contracts, licenses, sublicenses,
assignments and indemnities which relate to (i) any Copyrights, Patent Rights or
Trademarks listed in SCHEDULE 5.15(A), (ii) any Trade Secrets owned by, licensed
to or used by Comdata or the Gaming Subsidiary in connection with the conduct of
the Gaming Business or (iii) any Software listed in SCHEDULE 5.15(B).
(d) Except as disclosed in SCHEDULE 5.15(D), Comdata or the Gaming
Subsidiary either: (i) owns the entire right, title and interest in and to the
Intellectual Property and Software included in the Purchased Gaming Assets, free
and clear of any Encumbrance; (ii) has the perpetual, royalty-free right to use
the same or (iii) in the case of third party vendor Software, has the ability to
transfer such Software without the necessity of obtaining consents or the
payment of fees.
(e) Except as disclosed in SCHEDULE 5.15(E): (i) all Copyrights,
Patent Rights and Trademarks, including registrations therefor, identified in
SCHEDULE 5.15(A) as being owned by Comdata or the Gaming Subsidiary are valid
and in force, and all patent applications with respect to Patent Rights and all
applications to register any unregistered Copyrights and Trademarks so
identified are pending and in good standing, all without challenge of any kind;
(ii) the Intellectual Property owned by Comdata or the Gaming Subsidiary and
included in the Purchased Gaming Assets is valid and enforceable; (iii) Comdata
or the Gaming Subsidiary has the sole and exclusive right to bring actions for
infringement or unauthorized use of the Intellectual Property and Software owned
by Comdata or the Gaming Subsidiary and included in the Purchased Gaming Assets,
and to the knowledge of Comdata or the Gaming Subsidiary, there is no basis for
any such
-44-
<PAGE>
action; (iv) Comdata or the Gaming Subsidiary has taken all actions reasonably
necessary to protect the Copyrights, Trademarks, Software, Patent Rights or
Trade Secrets included in the Purchased Gaming Assets, including by pursuing
registration where necessary; and (v) neither Comdata or the Gaming Subsidiary
is in breach of any agreement affecting any of the Intellectual Property and
Software included in the Purchased Gaming Assets, and has not taken any action
which would impair or otherwise adversely affect its rights in the Intellectual
Property and Software included in the Purchased Gaming Assets. Correct and
complete copies of: (x) registrations for all registered Copyrights, Patent
Rights and Trademarks identified in SCHEDULE 5.15(A) as being owned by Comdata
or the Gaming Subsidiary; and (y) all pending applications to register
unregistered Copyrights, Patent Rights and Trademarks identified in
SCHEDULE 5.15(A) as being owned by Comdata or the Gaming Subsidiary (together
with any subsequent correspondence or filings relating to the foregoing) have
heretofore been delivered by Comdata to IPS.
(f) Except as set forth in SCHEDULE 5.15(F), (i) to the knowledge of
Comdata or the Gaming Subsidiary, no infringement of any Intellectual Property
Right of any other Person has occurred or results in any way from the operations
of the Gaming Business as previously or currently conducted; (ii) no claim of
any infringement of any Intellectual Property Right of any other Person has been
made or asserted in respect of the operations of the Gaming Business; (iii)
neither Comdata or the Gaming Subsidiary has received notice that any claim of
invalidity of any Copyright, Trademark or Patent Right, Software or Trade Secret
has been made; (iv) no proceedings are pending or, to the knowledge of Comdata
or the Gaming Subsidiary, threatened which challenge the validity, ownership or
use of any of the Gaming Business Intellectual Property; and (v) neither Comdata
or the Gaming Subsidiary has had notice of, or knowledge of any basis for, a
claim against Comdata or the Gaming Subsidiary that the operations, activities,
products, software, equipment, machinery or processes of the Gaming Business
infringe any Intellectual Property Right of any other Person.
(g) Except as disclosed in SCHEDULE 5.15(G): (i) the Software used
in the Gaming Business (the "GAMING BUSINESS OWNED SOFTWARE") is not subject to
any transfer, assignment, source code escrow agreement, reversion, site,
equipment, or other operational limitations; (ii) Comdata or the Gaming
Subsidiary has maintained and protected the Gaming Business Owned Software
(including, without limitation, all source code and system specifications) with
appropriate proprietary notices (including, without limitation, the notice of
copyright in accordance with the requirements of 17 U.S.C. Section 401),
confidentiality and non-disclosure agreements and such other measures as are
reasonably necessary to protect the proprietary, trade secret or confidential
information contained therein; (iii) the Gaming Business Owned Software is
protectable under applicable copyright law and has not been forfeited to the
public domain and has been registered with the U.S. Copyright Office or is
eligible for registration; (iv) Comdata or the Gaming Subsidiary has copies of
all releases or separate versions of the Gaming Business Owned Software so that
the same may be subject to registration in the United States Copyright Office;
(v) Comdata or the Gaming Subsidiary has complete and exclusive right, title and
interest in and to the Gaming Business Owned Software; (vi) Comdata or the
Gaming Subsidiary has developed the Gaming Business Owned Software through its
own efforts and for its own account without the aid or use of any consultants,
agents, independent contractors or Persons (other than
-45-
<PAGE>
Persons that are employees of Comdata or the Gaming Subsidiary); (vii) to the
knowledge of Comdata or the Gaming Subsidiary, the Gaming Business Owned
Software does not infringe any Intellectual Property Right of any other Person;
(viii) any Gaming Business Owned Software includes the source code, system
documentation, statements of principles of operation and schematics, as well as
any pertinent commentary and explanation used for the development, maintenance,
implementation and use thereof, so that a trained computer programmer could
develop, maintain, enhance, modify, support, compile and use all releases or
separate versions of the same that are currently subject to maintenance
obligations by Comdata or the Gaming Subsidiary; and (ix) there are no
agreements or arrangements in effect with respect to the marketing,
distribution, licensing or promotion of the Gaming Business Owned Software by
any other Person.
(h) Except as disclosed in SCHEDULE 5.15(H), all agents, consultants
or contractors who have contributed to or participated in the creation or
development of any Intellectual Property or Software on behalf of Comdata or the
Gaming Subsidiary or any predecessor in interest thereto either: (i) is a party
to a "work-for-hire" agreement under which Comdata or the Gaming Subsidiary is
deemed to be the original owner/author of all property rights therein; or (ii)
has executed an assignment or an agreement to assign in favor of Comdata or the
Gaming Subsidiary (or such predecessor in interest, as applicable) of all right,
title and interest in such material.
(i) Except as expressly provided herein, FDFS acknowledges and agrees
that the conveyance of the Purchased Gaming Assets from Comdata to FDFS does not
result in any express or implied license or other rights to FDFS or any third
person under any patent rights of Comdata or its Affiliates or under any patent
rights of any third parties licensed to Comdata or its Affiliates whether by
implication, estoppel or otherwise. All such express or implied licenses or
other rights are hereby expressly excluded and disclaimed.
5.16. ACCOUNTS RECEIVABLE. All accounts receivable of the Gaming
Business have arisen from bona fide transactions by Comdata or the Gaming
Subsidiary in the ordinary course of the Gaming Business. All accounts
receivable are good and collectible in the ordinary course of business at the
aggregate recorded amounts thereof, net of any allowance for doubtful accounts;
and all accounts receivable to be reflected in the Closing Date Gaming Special
Report will be good and collectible in the ordinary course of business at the
aggregate recorded amounts thereof, net of any allowance for doubtful accounts,
which allowance will be determined on a basis consistent with the basis used in
determining the allowance for doubtful accounts reflected in the Gaming Balance
Sheet.
5.17. TITLE TO PROPERTY. Comdata or the Gaming Subsidiary has good
and marketable title to all of the Purchased Gaming Assets, free and clear of
all Encumbrances, except for Permitted Encumbrances and except as set forth in
SCHEDULE 5.17. Upon delivery to FDFS on the date hereof of the instruments of
transfer contemplated by Section 4.4, Comdata will thereby transfer to FDFS good
and marketable title to the Purchased Gaming Assets, subject to no Encumbrances,
except for Permitted Encumbrances.
-46-
<PAGE>
5.18. EMPLOYEES AND RELATED AGREEMENTS; ERISA. (a) Except as
described in SCHEDULE 5.18(A), neither Comdata or the Gaming Subsidiary is, with
respect to the Gaming Business, a party to or bound by any oral or written:
stock option, stock purchase, bonus or other incentive plan or agreement.
(b) Except as described in SCHEDULE 5.18(B), Comdata does not
maintain, and is not required to contribute to, any "employee pension benefit
plan" (as such term is defined in Section 3(2) of ERISA) or "Welfare Benefit
Plan" (as such term is defined in Section 3(1) of ERISA), on behalf of any
employees or former employees of the Gaming Business. None of Comdata's ERISA
Benefit Plans is a "multiemployer plan" as defined in Section 3(37) of ERISA, or
is or has been subject to Sections 4063 or 4064 of ERISA. Comdata has complied
with the healthcare continuation requirements of Section 601, ET. SEQ., of ERISA
with respect to employees of the Gaming Business and their spouses, former
spouses and dependents.
(c) SCHEDULE 5.18(C) hereto sets forth a true, correct and complete
copy of each severance plan, policy or practice in effect immediately prior to
Closing Date with respect to Transferring Comdata Employees.
5.19. EMPLOYEE RELATIONS. (a) Except as set forth in
SCHEDULE 5.19(A), Comdata and the Gaming Subsidiary have complied in respect of
the Gaming Business with all applicable laws, rules and regulations which relate
to prices, wages, hours, discrimination in employment, occupational safety and
health, and collective bargaining and are not liable for any arrears of wages or
any taxes, penalties or damages for failure to comply with any of the foregoing.
Comdata (in respect of the Gaming Business) and the Gaming Subsidiary are in
compliance with the requirements of WARN and all similar state and local
statutes, laws and regulations and have no liabilities pursuant to any of them.
Comdata believes that its relations with the employees of the Gaming Business
are satisfactory and are not likely to lead to collective bargaining efforts.
Neither Comdata nor the Gaming Subsidiary is a party to, and the Gaming Business
is not affected by or, to the knowledge of Comdata or the Gaming Subsidiary,
threatened with, any dispute or controversy with a union or with respect to
unionization or collective bargaining involving the employees of the Gaming
Business. Neither Comdata, the Gaming Subsidiary nor the Gaming Business is
materially affected by any dispute or controversy with a union or with respect
to unionization or collective bargaining involving any supplier or customer of
the Gaming Business. SCHEDULE 5.19(A) sets forth a description of any union
organizing or election activities involving any non-union employees of the
Gaming Business which have occurred since January 1, 1996 or, to the knowledge
of Comdata or the Gaming Subsidiary, are threatened as of the date hereof.
-47-
<PAGE>
(b) Except as set forth in SCHEDULE 5.19(B), since January 1, 1996,
the Gaming Business has not, directly or indirectly, purchased, leased from
others or otherwise acquired any material property or obtained any material
services from, or sold, leased to others or otherwise disposed of any material
property or furnished any material services to (except with respect to
remuneration for services rendered as a director, officer or employee of the
Gaming Business), in the ordinary course of business or otherwise, (i) any
Person who is an officer or director of Comdata or the Gaming Subsidiary or
(ii) any Associate of any person referred to in clause (i) above. Except as set
forth in SCHEDULE 5.19(B), the Gaming Business does not owe any amount in excess
of $10,000 to, or have any contract with or commitment to, Comdata or any
director, officer or employee of Comdata or the Gaming Subsidiary (other than
for compensation for current services not yet due and payable and reimbursement
of expenses arising in the ordinary course of business) and none of such Persons
owes any amount in excess of $10,000 to the Gaming Business.
(c) Neither the Gaming Business nor any officer, employee or agent or
other person acting on its behalf has, directly or indirectly, since January 1,
1993, given or agreed to give any gift or similar benefit (other than with
respect to bona fide payments for which adequate consideration has been given)
to any customer, supplier, governmental employee or other person who is or may
be in a position to help or hinder the business of the Gaming Business (or
assist the Gaming Business in connection with any actual or proposed
transaction) (i) which might subject the Gaming Business to any damage or
penalty in any civil, criminal or governmental litigation or proceeding,
(ii) which, if not continued in the future, would have an adverse effect on the
assets, business, operations or prospects of the Gaming Business or which would
subject the Gaming Business to suit or penalty in any private or governmental
litigation or proceeding, (iii) for any of the purposes described in Section
162(c) of the Code, or (iv) for establishment or maintenance of any concealed
fund or concealed bank account.
5.20. CONTRACTS. Except as set forth in SCHEDULE 5.20 or any other
SCHEDULE hereto, Comdata is not, with respect to the Gaming Business, and the
Gaming Subsidiary is not a party to or bound by:
(i) any contract for the purchase, sale or lease of real property;
(ii) any contract for the purchase of goods or services by Comdata or
the Gaming Subsidiary which involved the payment of more than $50,000 in
1997;
(iii) any contract for the purchase, licensing or development of
software to be used by the Gaming Business except for Software that is
available in consumer retail stores and subject to "shrink-wrap" license
agreements;
(iv) any consignment, distributor, dealer, manufacturers
representative, sales agency, advertising representative or advertising or
public relations contract except to the extent such contract is cancelable
without penalty within 30 days;
-48-
<PAGE>
(v) any guarantee of the obligations of customers, suppliers,
officers, directors, employees, Affiliates or others except to the extent
such contract is cancelable without penalty within 30 days;
(vi) any agreement which provides for, or relates to, the incurrence
by the Gaming Business of debt for borrowed money (including, without
limitation, any interest rate or foreign currency swap, cap, collar, hedge
or insurance agreements, or options or forwards on such agreements, or
other similar agreements for the purpose of managing the interest rate
and/or foreign exchange risk associated with its financing);
(vii) any contract not made in the ordinary course except to the
extent such contract is cancelable without penalty within 30 days; or
(viii) any other contract, agreement, commitment, understanding or
instrument which is material to the Gaming Business and which involves the
payment of more than $50,000.
5.21. STATUS OF CONTRACTS. Except as set forth in SCHEDULE 5.21 or
in any other Schedule hereto, each of the leases, contracts and other agreements
listed in SCHEDULES 5.11(A), 5.14, 5.15(A), 5.18(C) and 5.20 (collectively, the
"GAMING AGREEMENTS") constitutes a valid and binding obligation of the parties
thereto and is in full force and effect and (except as set forth in SCHEDULE 5.3
and except for those Gaming Agreements which by their terms will expire prior to
the date hereof or are otherwise terminated prior to the date hereof in
accordance with the provisions hereof) to the knowledge of Comdata or the Gaming
Subsidiary, may be transferred to FDFS pursuant to this Agreement and will
continue in full force and effect thereafter, in each case without breaching the
terms thereof or resulting in the forfeiture or impairment of any rights
thereunder and without the consent, approval or act of, the payment of any
transfer or similar fee, or the making of any filing with, any other party.
Comdata and the Gaming Subsidiary have fulfilled and performed their obligations
under each of the Gaming Agreements, and neither Comdata or the Gaming
Subsidiary is in, or alleged to be in, breach or material default under, nor is
there or is there alleged to be any basis for termination of, any of the Gaming
Agreements and to the knowledge of Comdata or the Gaming Subsidiary, no other
party to any of the Gaming Agreements has breached or committed a material
default thereunder, and to the knowledge of Comdata or the Gaming Subsidiary, no
event has occurred and no condition or state of facts exists which, with the
passage of time or the giving of notice or both, would constitute such a default
or breach by Comdata, the Gaming Subsidiary or by any such other party. Comdata
is not currently renegotiating any of the Gaming Agreements or paying liquidated
damages in lieu of performance thereunder.
-49-
<PAGE>
5.22. NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as set
forth in SCHEDULE 5.22:
(i) the Purchased Gaming Assets and the operation of the Gaming
Business complies with all applicable Requirements of Laws and Court
Orders;
(ii) Comdata and the Gaming Subsidiary have complied with all
Requirements of Laws and Court Orders which are applicable to the Purchased
Gaming Assets or the Gaming Business;
(iii) there are no lawsuits, claims, suits, proceedings or
investigations pending or, to the knowledge of Comdata or the Gaming
Subsidiary, threatened against or affecting Comdata or the Gaming
Subsidiary in respect of the Purchased Gaming Assets or the Gaming Business
nor, to the knowledge of Comdata or the Gaming Subsidiary, is there any
basis for any of the same, and there are no lawsuits, suits or proceedings
pending in which Comdata is the plaintiff or claimant and which relate to
the Purchased Gaming Assets or the Gaming Business;
(iv) there is no action, suit or proceeding pending or, to the
knowledge of Comdata or the Gaming Subsidiary, threatened which questions
the legality or propriety of the transactions contemplated by this
Agreement; and
(v) to the knowledge of Comdata or the Gaming Subsidiary, no
legislative or regulatory proposal or other proposal for the change in any
Requirements of Law or the interpretation thereof has been adopted or is
pending which could adversely affect the Gaming Business.
5.23. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 5.23:
(a) the operations of the Gaming Business are, and have been, in
compliance with, and the Gaming Business is not the subject of any judicial or
administrative proceedings or settlements involving alleged violations of or
liability under, Environmental Laws.
(b) no property now or previously owned or operated by the Gaming
Business is under investigation by any Governmental Body or requires remedial
action under any applicable Environmental Laws to address any Contaminant.
5.24. INSURANCE. SCHEDULE 5.24 sets forth a list and brief
description (including nature of coverage, limits, deductibles, premiums and the
loss experience for the most recent five years with respect to each type of
coverage) of all policies of insurance maintained, owned or held by Comdata or
the Gaming Subsidiary on the date hereof with respect to the Purchased Gaming
Assets or the Gaming Business. Comdata and the Gaming Subsidiary have complied
with each such insurance policies and have not failed to give any notice or
present any claim thereunder in a due and timely manner. Comdata or the Gaming
Subsidiary has delivered to FDFS correct and
-50-
<PAGE>
complete copies of the most recent inspection reports, if any, received from
insurance underwriters as to the condition of the Purchased Gaming Assets.
5.25. CUSTOMERS AND SUPPLIERS. Set forth in SCHEDULE 5.25 hereto is
a list of names and addresses of the fifteen largest customers for (i) the year
ended December 31, 1996 and (ii) the period from January 1, 1997 through
November 30, 1997 (measured by dollar volume of net revenue in each case) of
Comdata or the Gaming Subsidiary in respect of the Gaming Business and the
percentage of the Gaming Business which each such customer represents or
represented. Except as set forth in SCHEDULE 5.25, there exists no actual or to
the knowledge of Comdata or the Gaming Subsidiary, threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship of Comdata or the Gaming Subsidiary with any customer or group of
customers listed in SCHEDULE 5.25, or whose purchases individually or in the
aggregate are material to the operations of the Gaming Business, and to the
knowledge of Comdata or the Gaming Subsidiary, there exists no present or future
condition or state of facts or circumstances involving customers, suppliers or
sales representatives which Comdata or the Gaming Subsidiary can now reasonably
foresee would materially adversely affect the Gaming Business or prevent the
conduct of the Gaming Business after the consummation of the transactions
contemplated by this Agreement in essentially the same manner in which such
business has heretofore been conducted.
5.26. BANK ACCOUNTS. SCHEDULE 5.26 sets forth a complete and correct
list of all bank accounts and safe deposit boxes related to the Gaming Business
and the individuals authorized to sign or otherwise act with respect thereto as
of the date hereof and a complete and correct list of all Persons holding a
general or special power of attorney related to the Gaming Business granted by
Comdata and a complete and correct copy thereof.
5.27. ESTIMATED CLOSING DATE GAMING SPECIAL REPORT. SCHEDULE 5.27
contains Comdata's bona fide, good faith estimate of the Closing Date Gaming
Special Report (the "ESTIMATED CLOSING DATE GAMING SPECIAL REPORT").
5.28. ESTIMATED AMOUNT OF TRANSFERRED CASH. SCHEDULE 5.28 contains
Comdata's bona fide, good faith estimate of the amount of cash in each of the
Gaming ATM Machines, the Gaming Vaults, Gaming Armored Cars, the Gaming Bank
Accounts and Gaming Booths (identified by geographical location) as of 11:59
p.m. central time on the date hereof and the aggregate amount of such cash in
each case, together with supporting calculations in reasonable detail (the
"ESTIMATED AMOUNT OF TRANSFERRED CASH").
-51-
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FDC, IPS AND NTS
As an inducement to Ceridian, Comdata and Permicom to enter into this
Agreement and to consummate the transactions contemplated hereby, FDC, IPS, NTS
and FDFS hereby represent and warrant to Ceridian, Comdata and Permicom and
agree as follows:
6.1. ORGANIZATION. (a) FDC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. FDC is
duly qualified to transact business as a foreign corporation and is in good
standing in all jurisdictions except where the absence of such qualification
would not have a Material Adverse Effect. No other jurisdiction has demanded,
requested or otherwise indicated that FDC is required so to qualify on account
of the ownership or leasing of the Purchased NTS Assets or the conduct of the
NTS Business. Except as set forth on SCHEDULE 6.22, FDC has full power and
authority to own or lease and to operate and use the Purchased NTS Assets and to
carry on the NTS Business as now conducted.
True and complete copies of the certificate of incorporation and all
amendments thereto and of the By-laws, as amended to date, of FDC have been
delivered to Comdata.
(b) IPS is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. IPS is duly qualified to
transact business as a foreign corporation and is in good standing in all
jurisdictions except where the absence of such qualification would not have a
Material Adverse Effect. No other jurisdiction has demanded, requested or
otherwise indicated that IPS is required so to qualify on account of the
ownership or leasing of the Purchased NTS Assets or the conduct of the NTS
Business. IPS has full power and authority to own or lease and to operate and
use the Purchased NTS Assets and to carry on the NTS Business as now conducted.
True and complete copies of the certificate of incorporation and all
amendments thereto and of the By-laws, as amended to date, of IPS have been
delivered to Comdata.
(c) NTS is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland. NTS is duly qualified to
transact business as a foreign corporation and is in good standing in all
jurisdictions except where the absence of such qualification would not have a
Material Adverse Effect. No other jurisdiction has demanded, requested or
otherwise indicated that NTS is required so to qualify. NTS has full power and
authority to own or lease and to operate and use its properties and assets and
to carry on its business as now conducted.
True and complete copies of the certificate or articles of
incorporation and all amendments thereto, of the By-laws, as amended to date,
and of the stock ledger of NTS have been delivered to Comdata.
-52-
<PAGE>
(d) The NTS Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to transact business as a foreign
corporation and is in good standing in all jurisdictions except where the
absence of such qualification would not have a Material Adverse Effect. No
other jurisdiction has demanded, requested or otherwise indicated that the NTS
Subsidiary is required so to qualify. The NTS Subsidiary has full power and
authority to own or lease and to operate and use its properties and assets and
to carry on its business as now conducted.
True and complete copies of the certificate or articles of
incorporation and all amendments thereto, the By-laws, as amended to date, and
the stock ledger of the NTS Subsidiary have been delivered to Comdata.
(e) FDFS is a limited liability company duly organized, validly
existing and in good standing under the laws of the state of Delaware.
6.2. SUBSIDIARIES AND INVESTMENTS. (a) Except for the NTS Subsidiary
and as set forth in SCHEDULE 6.2(A), neither FDC, IPS, NTS or the NTS Subsidiary
directly or indirectly, (i) owns, of record or beneficially, any outstanding
voting securities or other equity interests in any corporation, partnership,
joint venture or other entity which is involved in or relates to the NTS
Business or (ii) controls any corporation, partnership, limited liability
company, joint venture or other entity which is involved in or relates to the
NTS Business.
(b) SCHEDULE 6.2(B) sets forth with respect to the NTS Subsidiary on
the date hereof the number of authorized, issued and outstanding shares of
capital stock of each class, the number of issued shares of capital stock held
as treasury shares and the number of shares of capital stock unissued and
reserved for any purpose. Except as set forth in SCHEDULE 6.2(B) and except for
this Agreement, there are no agreements, arrangements, options, warrants, calls,
rights or commitments of any character relating to the issuance, sale, purchase
or redemption of any shares of capital stock of the NTS Subsidiary. All of the
outstanding shares of capital stock of the NTS Subsidiary are validly issued,
fully paid and nonassessable and, except as set forth in SCHEDULE 6.2(B), are
owned by NTS of record and beneficially free from all Encumbrances of any kind.
6.3. AUTHORITY. (a) FDC has full power and authority to execute,
deliver and perform this Agreement. The execution, delivery and performance of
this Agreement by FDC has been duly authorized and approved by FDC's board of
directors and does not require any further authorization or consent of FDC or
its stockholders. This Agreement has been duly authorized, executed and
delivered by FDC and is the legal, valid and binding obligation of FDC
enforceable in accordance with its terms, and upon execution and delivery by FDC
will be a legal, valid and binding obligation of FDC enforceable in accordance
with its terms, and each of the IPS Ancillary Agreements has been duly
authorized by FDC and upon execution and delivery by FDC will be a legal, valid
and binding obligation of FDC enforceable in accordance with its terms.
(b) IPS has full power and authority to execute, deliver and perform
this Agreement and all of the IPS Ancillary Agreements. The execution, delivery
and performance of
-53-
<PAGE>
this Agreement and the IPS Ancillary Agreements by IPS have been duly authorized
and approved by IPS' board of directors and do not require any further
authorization or consent of IPS or its stockholders. This Agreement has been
duly authorized, executed and delivered by IPS and is the legal, valid and
binding obligation of IPS enforceable in accordance with its terms, and each of
the IPS Ancillary Agreements has been duly authorized by IPS and upon execution
and delivery by IPS will be a legal, valid and binding obligation of IPS
enforceable in accordance with its terms.
(c) NTS has full power and authority to execute, deliver and perform
this Agreement and all of the IPS Ancillary Agreements. The execution, delivery
and performance of this Agreement and the IPS Ancillary Agreements by NTS have
been duly authorized and approved by NTS' board of directors and sole
stockholder and, except for filing the NTS State of Maryland Articles of
Transfer, do not require any further authorization or consent. This Agreement
has been duly authorized, executed and delivered by NTS and is the legal, valid
and binding obligation of NTS enforceable in accordance with its terms, and each
of the IPS Ancillary Agreements has been duly authorized by NTS and upon
execution and delivery by NTS will be a legal, valid and binding obligation of
NTS enforceable in accordance with its terms.
(d) FDFS has full power and authority to execute, deliver and perform
this Agreement. The execution, delivery and performance of this Agreement by
FDFS have been duly authorized and approved by FDFS' board of directors and sole
stockholder and do not require any further authorization or consent. This
Agreement has been authorized, executed and delivered by FDFS and is the legal,
valid and binding obligation of FDFS enforceable in accordance with its terms.
(e) Except as set forth in SCHEDULE 6.3, neither the execution and
delivery of this Agreement or any of the IPS Ancillary Agreements or the
consummation of any of the transactions contemplated hereby or thereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof or
thereof will:
(i) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, (1) the charter or By-laws of FDC, IPS, NTS, the NTS
Subsidiary or FDFS; (2) any NTS Agreement, (3) any other material note,
instrument, agreement, mortgage, lease, license, franchise, permit or other
authorization, right, restriction or obligation to which FDC, IPS, NTS, the
NTS Subsidiary or FDFS is a party or any of the Purchased NTS Assets is
subject or by which FDC, IPS, NTS, the NTS Subsidiary or FDFS is bound, (4)
any Court Order to which FDC, IPS, NTS, the NTS Subsidiary or FDFS is a
party or any of the Purchased NTS Assets is subject or by which FDC, IPS,
NTS, the NTS Subsidiary or FDFS is bound, or (5) any Requirements of Laws
affecting FDC, IPS, NTS, the NTS Subsidiary or FDFS or the Purchased NTS
Assets; or
(ii) require the approval, consent, authorization or act of, or the
making by FDC, IPS, NTS, the NTS Subsidiary, FDFS or the NTS Business of
any declaration, filing or registration with, any Person.
-54-
<PAGE>
6.4. FINANCIAL STATEMENTS. SCHEDULE 6.4 contains (i) the unaudited
balance sheet of NTS as of December 31, 1996 and the related statements of
income for the year then ended and (ii) the unaudited balance sheet of NTS as of
September 30, 1997 and the related statements of income for the nine months then
ended. Except as set forth therein, such balance sheets and statements of
income have been prepared in conformity with generally accepted accounting
principles consistently applied, and such balance sheets and related statements
of income and cash flow present fairly the financial position and results of
operations of NTS as of their respective dates and for the respective periods
covered thereby.
6.5. OPERATIONS SINCE THE NTS BALANCE SHEET DATE. (a) Except as set
forth in SCHEDULE 6.5(A) or SCHEDULE 6.22, and except as due to changes in the
general economic environment, since the NTS Balance Sheet Date, there has been:
(i) no material adverse change in the Purchased NTS Assets, the NTS
Business or the operations, liabilities, profits or condition (financial or
otherwise) of the NTS Business, and no fact or condition exists or is
contemplated or to the knowledge of IPS, NTS or the NTS Subsidiary
threatened which might reasonably be expected to cause such a change in the
future; and
(ii) no damage, destruction, loss or claim, whether or not covered by
insurance, or condemnation or other taking adversely affecting any of the
Purchased NTS Assets or the NTS Business.
(b) Except as set forth in SCHEDULE 6.5(B), since the NTS Balance
Sheet Date, NTS and the NTS Subsidiary have conducted the NTS Business only in
the ordinary course and in conformity with past practice. Without limiting the
generality of the foregoing, since the NTS Balance Sheet Date, except as set
forth in such Schedule, neither NTS or the NTS Subsidiary has:
(i) sold, leased (as lessor), transferred or otherwise disposed of
(including any transfers from NTS or the NTS Subsidiary to IPS, FDC or any
of their respective Affiliates), or mortgaged or pledged, or imposed or
suffered to be imposed any Encumbrance (other than a Permitted Encumbrance)
on, any of the assets reflected on the NTS Balance Sheet or any assets
acquired by NTS or the NTS Subsidiary after the NTS Balance Sheet Date,
except for inventory and minor amounts of personal property sold or
otherwise disposed of for fair value in the ordinary course of business
consistent with past practice;
(ii) canceled any debts owed to or claims held by NTS or the NTS
Subsidiary (including the settlement of any claims or litigation) or waived
any other rights held by NTS or the NTS Subsidiary other than in the
ordinary course of business consistent with past practice;
(iii) paid any claims against NTS or the NTS Subsidiary (including
the settlement of any claims and litigation against NTS or the NTS
Subsidiary or the payment or
-55-
<PAGE>
settlement of any obligations or liabilities of NTS or the NTS Subsidiary)
other than in the ordinary course of business consistent with past
practice;
(iv) created, incurred or assumed, or agreed to create, incur or
assume, any indebtedness for borrowed money (other than money borrowed or
advances from IPS, FDC or any of their respective Affiliates in the
ordinary course of business consistent with past practice) or entered into,
as lessee, any capitalized lease obligations (as defined in Statement of
Financial Accounting Standards No. 13);
(v) accelerated or delayed collection of notes or accounts receivable
in advance of or beyond their regular due dates or the dates when the same
would have been collected in the ordinary course of the NTS Business
consistent with past practice;
(vi) delayed or accelerated payment of any account payable or other
liability of NTS or the NTS Subsidiary beyond or in advance of its due date
or the date when such liability would have been paid in the ordinary course
of the NTS Business consistent with past practice;
(vii) acquired any real property or undertaken or committed to
undertake capital expenditures exceeding $10,000 in the aggregate;
(viii) made, or agreed to make, any payment of cash or distribution
of assets to FDC, IPS or any of their respective Affiliates (other than
cash realized upon collection of receivables generated in the ordinary
course of the NTS Business);
(ix) instituted any increase in any compensation payable to any
officer or employee of NTS or the NTS Subsidiary with respect to the NTS
Business (other than changes made in accordance with normal compensation
practices and consistent with past compensation practices) or in any
profit-sharing, bonus, incentive, deferred compensation, insurance,
pension, retirement, medical, hospital, disability, welfare or other
benefits made available to officers or employees of NTS or the NTS
Subsidiary with respect to the NTS Business;
(x) made any change in (A) the accounting principles and practices
used by NTS or the NTS Subsidiary from those applied in the preparation of
the NTS Balance Sheet and the related statements of income and cash flow
for the period then ended or (B) the charge-off policies applicable to
accounts receivable;
(xi) entered into or become committed to enter into any other
material transaction except in the ordinary course of business; or
(xii) amended its certificate of incorporation or by-laws;
(xiii) issued, granted, sold or encumbered any shares of its capital
stock or other securities; issued, granted, sold or encumbered any
security, option, warrant, put, call,
-56-
<PAGE>
subscription or other right of any kind, fixed or contingent, that directly
or indirectly calls for the acquisition, issuance, sale, pledge or other
disposition of any shares of its capital stock or other securities or make
any other changes in the equity capital structure of NTS or the NTS
Subsidiary;
(xiv) made any material change in the NTS Business or the operations
of NTS or the NTS Subsidiary or make any expenditure which shall exceed
$50,000 in the aggregate;
(xv) made any capital expenditure or entered into any contract
or commitment therefor which shall exceed $50,000 in the aggregate;
(xvi) entered into any contract, agreement, undertaking or
commitment which would have been required to be set forth in
SCHEDULE 6.20 if in effect on the date hereof or entered into any
contract which requires the consent or approval of any third party to
consummate the transactions contemplated by this Agreement; or made
any material modification to any existing material NTS Agreement or to
any NTS Governmental Permits, other than changes made in good faith to
cure document deficiencies; or
(xvii) entered into any contract for the purchase, lease (as
lessee) or other occupancy of real property to be used by the NTS
Business or any option to extend a lease listed in SCHEDULE 6.11(A).
6.6. NO FINDER. Neither NTS, any Affiliate thereof nor any Person
acting on behalf of the foregoing has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
6.7. TAXES. Except as set forth in SCHEDULE 6.7, (i) FDC, IPS and NTS
have, in respect of the NTS Business and the Purchased NTS Assets, and the NTS
Subsidiary has filed all Tax Returns which are required to be filed and FDC,
IPS, NTS and the NTS Subsidiary have paid all Taxes which have become due
pursuant to such Tax Returns or pursuant to any assessment which has become
payable; (ii) all such Tax Returns are complete and accurate and disclose all
Taxes required to be paid in respect of the NTS Business, the Purchased NTS
Assets and the NTS Subsidiary; (iii) all such Tax Returns relating to United
States federal income Taxes have been examined by the relevant taxing authority
or the period for assessment of the Taxes in respect of which such Tax Returns
were required to be filed has expired; (iv) there is no action, suit,
investigation, audit, claim or assessment pending or proposed or threatened with
respect to Taxes of the NTS Business, the Purchased NTS Assets or the NTS
Subsidiary; (v) none of FDC, IPS, NTS or the NTS Subsidiary has waived or been
requested to waive any statute of limitations in respect of Taxes associated
with the NTS Business, the Purchased NTS Assets or the NTS Subsidiary which
waiver is currently in effect; (vi) all monies required to be withheld by NTS or
the NTS Subsidiary (including from employees of the NTS Business for income
Taxes and social security and other payroll Taxes) have been collected or
withheld, and either paid to the respective taxing authorities, set aside in
accounts for such purpose, or accrued, reserved against and entered upon the
books of the NTS Business; (vii) NTS is properly treated as the owner, for
-57-
<PAGE>
all federal, state, local and other income Tax purposes, of all property of
which it is the lessor; (viii) no change in Tax accounting method which would
affect the NTS Subsidiary after the Closing has been made, agreed to, requested
or required with respect to its assets or operations; (ix) all tax sharing
arrangements and tax indemnity arrangements relating to the NTS Subsidiary
(other than this Agreement) will terminate prior to the Closing and the NTS
Subsidiary will have no liability thereunder on or after the Closing; (x) the
NTS Subsidiary is not a party to any agreement relating to a foreign sales
corporation within the meaning of Section 922 of the Code; (xi) there are no
pending claims for refund of any Tax attributable to the NTS Subsidiary
(including refunds of Taxes allocable to the NTS Subsidiary with respect to any
consolidated, combined, unitary, fiscal unity or similar Tax Returns; (xii) each
asset with respect to which the NTS Subsidiary claims depreciation, amortization
or similar expense for Tax purposes is owned for Tax purposes by the NTS
Subsidiary under applicable Tax law; (xiii) the NTS Subsidiary has always been
properly classified as a corporation for United States federal income Tax
purposes; (xiv) there are no outstanding rulings of, or requests for rulings
with, any Tax authority expressly addressed to the NTS Subsidiary (or to an
Affiliate of any NTS Subsidiary) that are, or if issued would be, binding upon
the NTS Subsidiary for any taxable year or period beginning after the Closing;
(xv) the NTS Subsidiary (or any Affiliates of the NTS Subsidiary with respect to
the NTS Subsidiary) has not, in a manner that would be binding on the NTS
Subsidiary for a taxable year or period beginning after the Closing executed,
become subject to or entered into any closing agreement pursuant to Section 7121
of the Code or any similar or predecessor provision thereof under the Code or
other applicable Tax Law; (xvi) the NTS Subsidiary has not made and is not
subject to any election under Section 341(f) of the Code; (xvii) no "industrial
development bonds" within the meaning of Section 103 of the United States
Internal Revenue Code of 1954, as amended and in effect prior to the enactment
of the United States Tax Reform Act of 1986, "private activity bonds" within the
meaning of Section 141 of the Code or other tax exempt financing have been used
to finance any of the assets of the NTS Subsidiary, whether leased or owned;
(xviii) the NTS Subsidiary has not made or is not bound by any election under
Section 197 of the Code; (xix) FDC has filed for the taxable year immediately
preceding the current taxable year and will file for the year in which the
Closing occurs a consolidated federal income tax return with the NTS Subsidiary;
(xx) all material elections with respect to Taxes affecting the NTS Subsidiary
as of the date hereof are set forth in SCHEDULE 6.7; (xxi) no amount with
respect to any outlay or expense that is deductible for the purpose of computing
income under the Canadian Income Tax Act has been owing by the NTS Subsidiary
for longer than two years to any person with whom the NTS Subsidiary was not
dealing at arms' length at the time of the outlay or expense was incurred or for
more than 180 days after the end of the taxation year which the outlay or
expense was incurred in the case of a superannuation or pension benefit, a
retiring allowance, salary, wages or other remuneration with respect to any
office or employment; and (xxii) there are no circumstances which exist and
would result, or which have existed and have resulted, in Section 80 of the
Canadian Income Tax Act applying to the NTS Subsidiary.
6.8. AVAILABILITY OF ASSETS. (a) Except as set forth in
SCHEDULE 6.8(A) and except for the Excluded NTS Assets, the Purchased NTS Assets
constitute all of the assets, services and properties used in, or necessary for,
the NTS Business as currently configured (including, but not limited to, all
books, records, computers and computer programs and data processing systems)
-58-
<PAGE>
and are in good condition (subject to normal wear and tear) and serviceable
condition and are suitable for the uses for which intended.
(b) SCHEDULE 6.8(B) sets forth a description of all material services
provided by FDC or IPS or any Affiliate of FDC or IPS, other than those services
to be provided pursuant to the NTS Business Transition Services Agreement, to
NTS or the NTS Subsidiary utilizing either (i) assets not included in the
Purchased NTS Assets or (ii) employees not listed in SCHEDULE 7.4(B) and the
manner in which the costs of providing such services have been allocated to NTS
or the NTS Subsidiary.
6.9. GOVERNMENTAL PERMITS. Except as set forth in SCHEDULE 6.9, NTS
or the NTS Subsidiary owns, holds or possesses all licenses, franchises,
permits, privileges, immunities, approvals and other authorizations from a
Governmental Body which are necessary to entitle it to own or lease, operate and
use the Purchased NTS Assets and to carry on and conduct the NTS Business
substantially as currently conducted (herein collectively called "NTS
GOVERNMENTAL PERMITS"), except for such Governmental Permits as to which the
failure to so own, hold or possess would not have a material adverse effect on
the Purchased NTS Assets, the NTS Business or the operations, liabilities,
profits, prospects or condition (financial or otherwise) of NTS or the NTS
Subsidiary. SCHEDULE 6.9 sets forth a list and brief description of each
Governmental Permit. Complete and correct copies of all of the NTS Governmental
Permits have heretofore been delivered by IPS to Comdata.
Except as set forth in SCHEDULE 6.9, (i) NTS or the NTS Subsidiary has
fulfilled and performed its obligations under each of the NTS Governmental
Permits and to the knowledge of IPS, NTS or the NTS Subsidiary, no event has
occurred or condition or state of facts exists which constitutes or, after
notice or lapse of time or both, would constitute a breach or default under any
such NTS Governmental Permit or which permits or, after notice or lapse of time
or both, would permit revocation or termination of any such NTS Governmental
Permit, or which might adversely affect the rights of NTS or the NTS Subsidiary
under any such NTS Governmental Permit; (ii) no notice of cancellation, of
default or of any dispute concerning any NTS Governmental Permit, or of any
event, condition or state of facts described in the preceding clause, has been
received by, or is known to, IPS, NTS or the NTS Subsidiary; and (iii) each of
the NTS Governmental Permits is valid, subsisting and in full force and effect.
6.10. REAL PROPERTY. Neither NTS nor the NTS Subsidiary (a) owns any
real property or (b) holds any options to acquire real property.
6.11. REAL PROPERTY LEASES. SCHEDULE 6.11(A) sets forth a list and
brief description of each lease or similar agreement (showing the parties
thereto, annual rental and the location of the real property covered by and the
space occupied under such lease or other agreement) under which NTS or the NTS
Subsidiary is lessee of, or holds, uses or operates, any real property owned by
any third Person (the "NTS LEASED REAL PROPERTY") or (ii) NTS or the NTS
Subsidiary is lessor of any of the NTS Leased Real Property. Except as set
forth in SCHEDULE 6.11(B), NTS or the NTS Subsidiary has the right to quiet
enjoyment of all the NTS Leased Real Property described in SCHEDULE 6.11(A) for
the full term of each such lease or similar
-59-
<PAGE>
agreement (and any renewal option) relating thereto, and the leasehold or other
interest of NTS or the NTS Subsidiary in such NTS Leased Real Property is not
subject or subordinate to any Encumbrance except for Permitted Encumbrances.
Except as set forth on SCHEDULE 6.11(C), and except for Permitted Encumbrances,
there are no agreements or other documents governing or affecting the occupancy
or tenancy of any of the NTS Leased Real Property by NTS or the NTS Subsidiary
by any Person other than NTS or the NTS Subsidiary. Complete and correct copies
of any instruments evidencing Encumbrances, commitments for the issuance of
title insurance, title opinions, surveys and appraisals in IPS's, NTS's or the
NTS Subsidiary's possession and any policies of title insurance currently in
force and in the possession of IPS, NTS or the NTS Subsidiary with respect to
each such parcel of NTS Leased Real Property have heretofore been delivered by
IPS to Comdata.
6.12. CONDEMNATION. To the knowledge of IPS, NTS or the NTS
Subsidiary neither the whole nor any part of any real property leased, used or
occupied by NTS or the NTS Subsidiary is subject to any pending suit for
condemnation or other taking by any public authority and no such condemnation or
other taking is threatened or contemplated.
6.13. PERSONAL PROPERTY. SCHEDULE 6.13(A) contains a detailed list
of all machinery, equipment, vehicles, furniture and other personal property
owned by NTS or the NTS Subsidiary having an original cost of $10,000 or more.
Except as set forth in SCHEDULE 6.13(B), NTS or the NTS Subsidiary has good and
marketable title to all the Purchased NTS Assets free and clear of all
Encumbrances, except for Permitted Encumbrances.
6.14. PERSONAL PROPERTY LEASES. SCHEDULE 6.14 contains a brief
description of each lease or other agreement or right, whether written or oral
(including in each case the annual rental, the expiration date thereof and a
brief description of the property covered), under which NTS or the NTS
Subsidiary is lessee of, or holds or operates, any machinery, equipment, vehicle
or other tangible personal property owned by a third Person, except for any such
lease, agreement or right that is terminable by NTS or the NTS Subsidiary
without penalty or payment on notice of 30 days or less, or which involves the
payment by NTS or the NTS Subsidiary of rentals of less than $5,000 per year.
6.15. INTELLECTUAL PROPERTY; SOFTWARE. (a) SCHEDULE 6.15(A)
contains a list and description (showing in each case any product, device,
process, service, business or publication covered thereby, the registered or
other owner, expiration date and number, if any) of all Copyrights, Patent
Rights and Trademarks owned by, licensed to or used by NTS or the NTS
Subsidiary.
(b) SCHEDULE 6.15(B) contains a list and description (showing in each
case any owner, licensor or licensee) of all Software owned by, licensed to or
used by NTS or the NTS Subsidiary, PROVIDED that SCHEDULE 6.15(B) does not list
Software licensed to NTS or the NTS Subsidiary that is commercially available
and subject to "shrink-wrap" or "click on" license agreements.
-60-
<PAGE>
(c) SCHEDULE 6.15(C) contains a list and description (showing in each
case the parties thereto) of all agreements, contracts, licenses, sublicenses,
assignments and indemnities which relate to (i) any Copyrights, Patent Rights or
Trademarks listed in SCHEDULE 6.15(A), (ii) any Trade Secrets owned by, licensed
to or used by NTS or the NTS Subsidiary or (iii) any Software listed in SCHEDULE
6.15(B).
(d) Except as disclosed in SCHEDULE 6.15(D), NTS or the NTS
Subsidiary either: (i) owns the entire right, title and interest in and to the
Intellectual Property and Software included in the Purchased NTS Assets, free
and clear of any Encumbrance; or (ii) has the perpetual, royalty-free right to
use the same or (iii) in the case of third party vendor Software, has the
ability to transfer such Software without the necessity of obtaining consents or
the payment of fees.
(e) Except as disclosed in SCHEDULE 6.15(E): (i) all Copyrights,
Patent Rights and Trademarks, including registration therefor, identified in
SCHEDULE 6.15(A) as being owned by NTS or the NTS Subsidiary are valid and in
force, and all patent applications with respect to Patent Rights and all
applications to register any unregistered Copyrights and Trademarks so
identified are pending and in good standing, all without challenge of any kind;
(ii) the Intellectual Property owned by NTS or the NTS Subsidiary is valid and
enforceable; (iii) NTS or the NTS Subsidiary has the sole and exclusive right to
bring actions for infringement or unauthorized use of the Intellectual Property
and Software owned by NTS or the NTS Subsidiary, and to the knowledge of IPS,
NTS or the NTS Subsidiary, there is no basis for any such action; (iv) NTS or
the NTS Subsidiary has taken all actions reasonably necessary to protect the
Copyrights, Trademarks, Software, Patent Rights or Trade Secrets included in the
Purchased NTS Assets, including by pursuing registration where necessary; and
(v) neither NTS or the NTS Subsidiary is in breach of any agreement affecting
any of the Intellectual Property and Software included in the Purchased NTS
Assets, and has not taken any action which would impair or otherwise adversely
affect its rights in the Intellectual Property and Software included in the
Purchased NTS Assets. Correct and complete copies of: (x) registrations for all
registered Copyrights, Patent Rights and Trademarks identified in
SCHEDULE 6.15(A) as being owned by NTS or the NTS Subsidiary; and (y) all
pending applications to register unregistered Copyrights, Patent Rights and
Trademarks identified in SCHEDULE 6.15(A) as being owned by NTS or the NTS
Subsidiary (together with any subsequent correspondence or filings relating to
the foregoing) have heretofore been delivered by IPS to Comdata.
(f) Except as set forth in SCHEDULE 6.15(F), (i) to the knowledge of
IPS, NTS or the NTS Subsidiary, no infringement of any Intellectual Property
Right of any other Person has occurred or results in any way from the operations
of NTS or the NTS Subsidiary as previously or currently conducted; (ii) no
claim of any infringement of any Intellectual Property Right of any other Person
has been made or asserted in respect of the operations of the NTS Business;
(iii) neither IPS, NTS or the NTS Subsidiary has received notice that any claim
of invalidity of any Copyright, Trademark or Patent Right, Software or Trade
Secret has been made; (iv) no proceedings are pending or, to the knowledge of
IPS, NTS or the NTS Subsidiary, threatened which challenge the validity,
ownership or use of any of the NTS Business Intellectual Property; and (v)
neither IPS, NTS or the NTS Subsidiary has had notice of, or knowledge of any
basis for,
-61-
<PAGE>
a claim against NTS or the NTS Subsidiary that the operations, activities,
products, software, equipment, machinery or processes of NTS or the NTS
Subsidiary infringe any Intellectual Property Right of any other Person.
(g) Except as disclosed in SCHEDULE 6.15(G): (i) the Software used
in the NTS Business (the "NTS OWNED SOFTWARE") is not subject to any transfer,
assignment, source code escrow agreement, reversion, site, equipment, or other
operational limitations; (ii) NTS or the NTS Subsidiary has maintained and
protected the NTS Owned Software (including, without limitation, all source code
and system specifications) with appropriate proprietary notices (including,
without limitation, the notice of copyright in accordance with the requirements
of 17 U.S.C. SECTION 401), confidentiality and non-disclosure agreements and
such other measures as are reasonably necessary to protect the proprietary,
trade secret or confidential information contained therein; (iii) the NTS Owned
Software is protectable under applicable copyright law and has not been
forfeited to the public domain and has been registered with the U.S. Copyright
office or is eligible for registration; (iv) NTS or the NTS Subsidiary has
copies of all releases or separate versions of the NTS Owned Software so that
the same may be subject to registration in the United States Copyright Office;
(v) NTS or the NTS Subsidiary has complete and exclusive right, title and
interest in and to the NTS Owned Software; (vi) NTS or the NTS Subsidiary has
developed the NTS Owned Software through its own efforts and for its own account
without the aid or use of any consultants, agents, independent contractors or
Persons (other than Persons that are employees of NTS or the NTS Subsidiary);
(vii) to the knowledge of IPS, NTS or the NTS Subsidiary, the NTS Owned Software
does not infringe any Intellectual Property Right of any other Person; (viii)
any NTS Owned Software includes the source code, system documentation,
statements of principles of operation and schematics, as well as any pertinent
commentary and explanation language used for the development, maintenance,
implementation and use thereof, so that a trained computer programmer could
develop, maintain, enhance, modify, support, compile and use all releases or
separate versions of the same that are currently subject to maintenance
obligations by NTS or the NTS Subsidiary; and (ix) there are no agreements or
arrangements in effect with respect to the marketing, distribution, licensing or
promotion of the NTS Owned Software by any other Person.
(h) Except as disclosed in SCHEDULE 6.15(H), all agents, consultants
or contractors who have contributed to or participated in the creation or
development of any Intellectual Property or Software on behalf of NTS or the NTS
Subsidiary or any predecessor in interest thereto either: (i) is a party to a
"work-for-hire" agreement under which NTS or the NTS Subsidiary is deemed to be
the original owner/author of all property rights therein; or (ii) has executed
an assignment or an agreement to assign in favor of NTS or the NTS Subsidiary
(or such predecessor in interest, as applicable) of all right, title and
interest in such material.
(i) Except as expressly provided herein, Comdata acknowledges and
agrees that the conveyance of the Purchased NTS Assets from NTS to Comdata does
not result in any express or implied license or other rights to Comdata or any
third person under any patent rights of NTS or its Affiliates or under any
patent rights of any third parties licensed to NTS or its Affiliates (including,
without limitation, any patent rights licensed to NTS or its Affiliates by
-62-
<PAGE>
Ronald A. Katz Technology Licensing, L.P.) whether by implication, estoppel or
otherwise. All such express or implied licenses or other rights are hereby
expressly excluded and disclaimed.
6.16. ACCOUNTS RECEIVABLE. All accounts receivable of NTS or the NTS
Subsidiary have arisen from bona fide transactions by NTS or the NTS Subsidiary
in the ordinary course of the NTS Business. All accounts receivable are good
and collectible in the ordinary course of business at the aggregate recorded
amounts thereof, net of any allowance for doubtful accounts; and all accounts
receivable to be reflected in the Closing Date NTS Special Report will be good
and collectible in the ordinary course of business at the aggregate recorded
amounts thereof, net of any allowance for doubtful accounts, which allowance
will be determined on a basis consistent with the basis used in determining the
allowance for doubtful accounts reflected in the NTS Balance Sheet.
6.17. TITLE TO PROPERTY. NTS or the NTS Subsidiary has good and
marketable title to all of the Purchased NTS Assets, free and clear of all
Encumbrances, except for Permitted Encumbrances and except as set forth in
SCHEDULE 6.17. Upon delivery to Comdata on the date hereof of the instruments
of transfer contemplated by SECTION 4.3, NTS will thereby transfer to Comdata
good and marketable title to the Purchased NTS Assets, subject to no
Encumbrances, except for Permitted Encumbrances.
6.18. EMPLOYEES AND RELATED AGREEMENTS; ERISA. (a) Except as
described in SCHEDULE 6.18(A), neither NTS or the NTS Subsidiary is, with
respect to the NTS Business, a party to or bound by any oral or written stock
option, stock purchase, bonus or other incentive plan or agreement;
(b) Except as described in SCHEDULE 5.19B), NTS does not maintain,
and is not required to contribute to, any "employee pension benefit plan" (as
such term is defined in Section 3(2) of ERISA) or "Welfare Benefit Plan" (as
such term is defined in Section 3(1) of ERISA), on behalf of any employees or
former employees of the NTS Business. None of NTS' ERISA Benefit Plans is a
"multiemployer plan" as defined in Section 3(37) of ERISA, or is or has been
subject to Sections 4063 or 4064 of ERISA. NTS has complied with the healthcare
continuation requirements of Section 601, ET. SEQ., of ERISA with respect to
employees of the NTS Business and their spouses, former spouses and dependents.
(c) SCHEDULE 6.18(C) hereto set forth a true, correct and complete
copy of each NTS severance plan, policy or practice in effect immediately prior
to the Closing Date with respect to Transferring NTS Employees.
6.19. EMPLOYEE RELATIONS. (a) Except as set forth in
SCHEDULE 6.19(A), NTS and the NTS Subsidiary have complied with all applicable
laws, rules and regulations which relate to prices, wages, hours, discrimination
in employment, occupational safety and health, and collective bargaining and are
not liable for any arrears of wages or any taxes, penalties or damages for
failure to comply with any of the foregoing. NTS and the NTS Subsidiary are in
compliance with the requirements of WARN and all similar state and local
statutes, laws and regulations and have no liabilities pursuant to any of them.
NTS believes that its relations with the employees of the
-63-
<PAGE>
NTS Business are satisfactory and are not likely to lead to collective
bargaining efforts. Neither NTS or the NTS Subsidiary is a party to or affected
by or, to the knowledge of IPS, NTS or the NTS Subsidiary, threatened with, any
dispute or controversy with a union or with respect to unionization or
collective bargaining involving the employees of NTS or the NTS Subsidiary.
Neither NTS nor the NTS Subsidiary is materially affected by any dispute or
controversy with a union or with respect to unionization or collective
bargaining involving any supplier or customer of NTS or the NTS Subsidiary.
SCHEDULE 6.19(A) sets forth a description of any union organizing or election
activities involving any non-union employees of NTS or the NTS Subsidiary which
have occurred since January 1, 1996 or, to the knowledge of IPS, NTS or the NTS
Subsidiary, are threatened as of the date hereof.
(b) Except as set forth in SCHEDULE 6.19(B), since January 1, 1996,
neither NTS or the NTS Subsidiary has directly or indirectly, purchased, leased
from others or otherwise acquired any material property or obtained any material
services from, or sold, leased to others or otherwise disposed of any material
property or furnished any material services to (except with respect to
remuneration for services rendered as a director, officer or employee of NTS or
the NTS Subsidiary), in the ordinary course of business or otherwise, (i) any
Person who is an officer or director of NTS or the NTS Subsidiary or (ii) any
Associate of any person referred to in clause (i) above. Except as set forth in
SCHEDULE 6.19(B), neither NTS or the NTS Subsidiary owes any amount in excess of
$10,000 to, or has any contract with or commitment to, IPS or any director,
officer or employee of NTS or the NTS Subsidiary (other than for compensation
for current services not yet due and payable and reimbursement of expenses
arising in the ordinary course of business) and none of such Persons owes any
amount in excess of $10,000 to NTS or the NTS Subsidiary.
(c) Neither NTS, the NTS Subsidiary or any officer, employee or agent
or other person acting on either of their behalf has, directly or indirectly,
since January 1, 1993, given or agreed to give any gift or similar benefit
(other than with respect to bona fide payments for which adequate consideration
has been given) to any customer, supplier, governmental employee or other person
who is or may be in a position to help or hinder the business of NTS or the NTS
Subsidiary (or assist NTS or the NTS Subsidiary in connection with any actual or
proposed transaction) (i) which might subject NTS or the NTS Subsidiary to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) which, if not continued in the future, would have an adverse
effect on the assets, business, operations or prospects of NTS or the NTS
Subsidiary or which would subject NTS or the NTS Subsidiary to suit or penalty
in any private or governmental litigation or proceeding, (iii) for any of the
purposes described in SECTION 162(c) of the Code, or (iv) for establishment or
maintenance of any concealed fund or concealed bank account.
6.20. CONTRACTS. Except as set forth in SCHEDULE 6.20 or any other
SCHEDULE hereto, neither NTS or the NTS Subsidiary is a party to or bound by:
(i) any contract for the purchase, sale or lease of real property;
-64-
<PAGE>
(ii) any contract for the purchase of goods or services by NTS or the
NTS Subsidiary which involved the payment of more than $50,000 in 1997;
(iii) any contract for the purchase, licensing or development of
software to be used by NTS or the NTS Subsidiary except for Software that
is available in consumer retail stores and subject to "shrink-wrap" license
agreements;
(iv) any consignment, distributor, dealer, manufacturers
representative, sales agency, advertising representative or advertising or
public relations contract except to the extent such contract is cancelable
without penalty within 30 days;
(v) any guarantee of the obligations of customers, suppliers,
officers, directors, employees, Affiliates or others except to the extent
such contract is cancelable without penalty within 30 days;
(vi) any agreement which provides for, or relates to, the incurrence
by NTS or the NTS Subsidiary of debt for borrowed money (including, without
limitation, any interest rate or foreign currency swap, cap, collar, hedge
or insurance agreements, or options or forwards on such agreements, or
other similar agreements for the purpose of managing the interest rate
and/or foreign exchange risk associated with its financing);
(vii) any contract not made in the ordinary course except to the
extent such contract is cancelable without penalty within 30 days; or
(viii) any other contract, agreement, commitment, understanding or
instrument which is material to NTS or the NTS Subsidiary and which
involves the payment of more than $50,000.
6.21. STATUS OF CONTRACTS. Except as set forth in SCHEDULE 6.21 or
in any other Schedule hereto, each of the leases, contracts and other agreements
listed in SCHEDULES 6.11(A), 6.14, 6.15(C), 6.18(A) and 6.20 (collectively, the
"NTS AGREEMENTS") constitutes a valid and binding obligation of the parties
thereto and is in full force and effect and (except as set forth in SCHEDULE 6.3
and except for those NTS Agreements which by their terms will expire prior to
the date hereof or are otherwise terminated prior to the date hereof in
accordance with the provisions hereof) to the knowledge of IPS, NTS or the NTS
Subsidiary, may be transferred to Comdata pursuant to this Agreement and will
continue in full force and effect thereafter, in each case without breaching the
terms thereof or resulting in the forfeiture or impairment of any rights
thereunder and without the consent, approval or act of, the payment of any
transfer or similar fee, or the making of any filing with, any other party. NTS
and the NTS Subsidiary have fulfilled and performed their obligations under each
of the NTS Agreements, and neither NTS or the NTS Subsidiary is in, or alleged
to be in, breach or material default under, nor is there or is there alleged to
be any basis for termination of, any of the NTS Agreements and to the knowledge
of IPS, NTS or the NTS Subsidiary, no other party to any of the NTS Agreements
has breached or committed a material default thereunder, and to the knowledge of
IPS, NTS or the NTS Subsidiary, no event has occurred and no condition or state
of facts exists which, with the passage
-65-
<PAGE>
of time or the giving of notice or both, would constitute such a default or
breach by NTS, the NTS Subsidiary or by any such other party. Neither NTS or
the NTS Subsidiary is currently renegotiating any of the NTS Agreements or
paying liquidated damages in lieu of performance thereunder.
6.22. NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as set
forth in SCHEDULE 6.22:
(i) the Purchased NTS Assets and the operation of the NTS Business
complies with all applicable Requirements of Laws and Court Orders;
(ii) NTS and the NTS Subsidiary have complied with all Requirements
of Laws and Court Orders which are applicable to the Purchased NTS Assets
or the NTS Business;
(iii) there are no lawsuits, claims, suits, proceedings or
investigations pending or, to the knowledge of IPS, NTS or the NTS
Subsidiary, threatened against or affecting NTS or the NTS Subsidiary nor,
to the knowledge of IPS, NTS or the NTS Subsidiary, is there any basis for
any of the same, and there are no lawsuits, suits or proceedings pending in
which NTS or the NTS Subsidiary is the plaintiff or claimant;
(iv) there is no action, suit or proceeding pending or, to the
knowledge of IPS, NTS or the NTS Subsidiary, threatened which questions the
legality or propriety of the transactions contemplated by this Agreement;
and
(v) to the knowledge of IPS, NTS or the NTS Subsidiary, no
legislative or regulatory proposal or other proposal for the change in any
Requirements of Law or the interpretation thereof has been adopted or is
pending which could adversely affect NTS or the NTS Subsidiary.
6.23. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 6.23:
(a) the operations of NTS and the NTS Subsidiary are, and have been,
in compliance with, and neither NTS or the NTS Subsidiary is the subject of any
judicial or administrative proceedings or settlements involving alleged
violations of or liability under, Environmental Laws.
(b) no property now or previously owned or operated by NTS or the NTS
Subsidiary is under investigation by any Governmental Body or requires remedial
action under any applicable Environmental Laws to address any Contaminant.
6.24. INSURANCE. SCHEDULE 6.24 sets forth a list and brief
description (including nature of coverage, limits, deductibles, premiums and the
loss experience for the most recent five years with respect to each type of
coverage) of all policies of insurance maintained, owned or held by NTS or the
NTS Subsidiary on the date hereof. NTS and the NTS Subsidiary have complied
with each such insurance policy and have not failed to give any notice or
present any claim
-66-
<PAGE>
thereunder in a due and timely manner. NTS or the NTS Subsidiary has delivered
to Comdata correct and complete copies of the most recent inspection reports, if
any, received from insurance underwriters as to the condition of the Purchased
NTS Assets.
6.25. CUSTOMERS. Set forth in SCHEDULE 6.25 hereto is (i) a list of
names and addresses of the five largest truck stop customers of the NTS Business
as measured by the total transaction volume of the NTS Business which each such
truck stop represents the period January 1, 1997 through November 30, 1997 and
(ii) a list of names and addresses of the 25 largest trucking customers
(measured by dollar volume of net revenues in each case) of the NTS Business and
the percentage of the NTS Business which each such customer represents. Except
as set forth in SCHEDULE 6.25, there exists no actual or to the knowledge of
IPS, NTS or the NTS Subsidiary, threatened termination, cancellation or
limitation of, or any modification or change in, the business relationship of
NTS and the NTS Subsidiary with any customer or group of customers listed in
SCHEDULE 6.25, or whose purchases individually or in the aggregate are material
to the operation of the NTS Business, and to the knowledge of IPS, NTS or the
NTS Subsidiary, there exists no present or future condition or state of facts or
circumstances involving customers, suppliers or sales representatives which IPS
or NTS can now reasonably foresee would materially adversely affect NTS or the
NTS Subsidiary (taken as a whole) or prevent the conduct of the NTS Business
after the consummation of the transactions contemplated by this Agreement in
essentially the same manner in which such business has heretofore been
conducted.
6.26. BANK ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 6.26 sets forth a
complete and correct list of all bank accounts and safe deposit boxes of NTS and
the NTS Subsidiary and the individuals authorized to sign or otherwise act with
respect thereto as of the date hereof and a complete and correct list of all
Persons holding a general or special power of attorney granted by NTS or the NTS
Subsidiary and a complete and correct copy thereof.
6.27. ESTIMATED CLOSING DATE NTS SPECIAL REPORT. SCHEDULE 6.27
contains IPS's bona fide, good faith estimate of the Closing Date NTS Special
Report (the "ESTIMATED CLOSING DATE NTS SPECIAL REPORT").
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. COVENANT NOT TO COMPETE OR SOLICIT BUSINESS BY FDC, IPS, NTS AND
FDFS. (a) In furtherance of the exchange of the Purchased Gaming Assets for the
Purchased NTS Assets and the Initial Amount hereunder, by virtue of the
transactions contemplated hereby and more effectively to protect the value and
goodwill of the Purchased Gaming Assets and the Purchased NTS Assets so
exchanged, FDC, IPS, NTS and FDFS, covenant and agree that, for a period ending
on the third anniversary of the date hereof, neither FDC, IPS, NTS, FDFS nor any
of their respective controlled Affiliates will:
-67-
<PAGE>
(i) directly or indirectly (whether as principal, agent,
independent contractor, partner or otherwise) own, manage, operate,
control, participate in, or otherwise carry on, a business engaged in
Restricted Trucking Activities anywhere in the U.S. and Canada (it
being understood by the parties hereto that the NTS Business is not
limited to any particular region and that such business may be engaged
in effectively from any location); or
(ii) induce or attempt to persuade any customer of NTS or the
NTS Subsidiary to terminate such business relationship in order to
enter into any such relationship on behalf of any other business
organization in competition with the NTS Business;
PROVIDED, HOWEVER, that nothing set forth in this SECTION 7.1(a) shall prohibit
FDC, IPS, NTS, FDFS or their respective Affiliates from (v) owning not in excess
of 5% in the aggregate of any class of capital stock of any corporation if such
stock is publicly traded and listed on any national or regional stock exchange
or on the NASDAQ national market system (w) purchasing, and following such
purchase, actively engaging in, any business that has a subsidiary, division,
group, franchise or segment that is engaged in any Restricted Trucking Activity,
so long as: (A) on the date of such purchase, not more than 20% of the
consolidated revenues of such business are derived from such Restricted Trucking
Activity and (B) such business divests itself of such subsidiary, division,
group, franchise or segment as soon as practicable after the date of such
purchase, PROVIDED, that with respect to any purchase intended to be accounted
for as a pooling of interests under GAAP or treated for federal income tax
purposes as a tax-free reorganization, no such divestiture shall be required
until, in the reasonable opinion of FDC, such divestiture would no longer
endanger the accounting of such purchase as a pooling of interests under GAAP or
the treatment for federal income tax purposes of such purchase as a tax-free
reorganization; (x) performing any services pursuant to the NTS Business
Transition Services Agreement; (y) the provision of payroll delivery services
or products (whether or not under the name "Transpay") or any products currently
contemplated by NTS to be offered under the name "Transpay" unrelated to the
Restricted Trucking Activities; and (z) except for the Restricted Trucking
Activities (to the extent not otherwise permitted by reason of the foregoing),
engaging in any other activity which may now or hereafter be provided by such
party.
(b) In addition, FDC, IPS, NTS and FDFS covenant and agree that
neither they nor any of their respective Affiliates will divulge or make use of
any Trade Secrets or other confidential information of the NTS Business in each
case relating exclusively to the Purchased NTS Assets other than to disclose
such secrets and information to Ceridian, Comdata or their respective
Affiliates.
(c) Nothing in this Agreement, including without limitation, SECTION
7.1(a), shall prevent any Affiliate of FDC from engaging in Restricted Trucking
Activities after such Affiliate ceases to be an Affiliate of FDC.
(d) In the event FDC, IPS, NTS, FDFS or any of their respective
Affiliates violates any of their respective obligations under this SECTION 7.1,
Ceridian or Comdata may
-68-
<PAGE>
proceed against it in law or in equity for such damages or other relief as a
court may deem appropriate. FDC, IPS, NTS and FDFS acknowledge that a violation
of this SECTION 7.1 may cause Ceridian or Comdata irreparable harm which may not
be adequately compensated for by money damages. FDC, IPS, NTS and FDFS
therefore agree that in the event of any actual or threatened violation of this
SECTION 7.1, Ceridian or Comdata shall be entitled, in addition to other
remedies that they may have, to a temporary restraining order and to preliminary
and final injunctive relief against FDC, IPS, NTS, FDFS or such Affiliate of
FDC, IPS, NTS or FDFS to prevent any violations of this SECTION 7.1, without the
necessity of posting a bond. The prevailing party in any action commenced under
this SECTION 7.1 shall also be entitled to receive reasonable attorneys' fees
and court costs.
(e) It is the intent and understanding of each party hereto that if,
in any action before any court or agency legally empowered to enforce this
SECTION 7.1, any term, restriction, covenant or promise in this SECTION 7.1 is
found to be unreasonable and for that reason unenforceable, then such term,
restriction, covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency.
7.2. SOLICITATION OF EMPLOYEES. (a) Prior to the first anniversary
of the date hereof, without the consent of FDC, none of Comdata, Ceridian or any
of their controlled Affiliates (the "RESTRICTED COMDATA PARTIES") shall solicit
or seek to hire any Transferred Comdata Employee; PROVIDED, HOWEVER, that the
foregoing shall not prevent any Restricted Comdata Party from hiring any such
person (i) who contacts such Restricted Comdata Party on his or her own
initiative without solicitation from any of the Restricted Comdata Parties, (ii)
in connection with general employment advertisements published in magazines,
journals, newspapers and other publications that are not targeted at the
Transferred Comdata Employees or (iii) who has been discharged by the Gaming
Business prior to any such solicitation.
(b) Prior to the first anniversary of the date hereof, without the
consent of Ceridian, none of FDC, IPS, NTS, FDFS or any of their controlled
Affiliates (the "RESTRICTED FDC PARTIES") shall solicit or seek to hire any
Transferred NTS Employee; PROVIDED, HOWEVER, that the foregoing shall not
prevent any Restricted FDC Party from hiring any such person (i) who contacts
such Restricted FDC Party on his or her own initiative without solicitation from
any of the Restricted FDC Parties, (ii) in connection with general employment
advertisements published in magazines, journals, newspapers and other
publications that are not targeted at the Transferred NTS Employees or (iii) who
has been discharged by the NTS Business prior to any such solicitation.
7.3. TAX MATTERS.
(a) Liability for Taxes.
(i) FDC TAXES. FDC shall be liable for and pay, and pursuant to
ARTICLE VIII (and subject to the limitations thereof) shall indemnify each
Ceridian Group Member against, all Taxes (A) applicable to the NTS Business, the
Purchased NTS Assets and the Assumed NTS Liabilities, in each case attributable
to taxable years or periods ending at the time
-69-
<PAGE>
of or prior to the Closing and, with respect to any Straddle Period, the portion
of such Straddle Period ending on and including the Closing, (B) imposed on the
NTS Subsidiary or for which the NTS Subsidiary may otherwise be liable for any
taxable year or period that ends on or before the Closing and, with respect to
any Straddle Period, the portion of such Straddle Period ending on and including
the Closing (including, without limitation, any Taxes imposed on the NTS
Subsidiary pursuant to Treas. Reg. SECTION 1.1502-6 or similar provision of
state, local, or foreign law or any Taxes imposed on the NTS Subsidiary as a
result of the termination of its election under Section 1504(d) of the Code),
(C) applicable to the Gaming Business, the Purchased Gaming Assets and the
Assumed Gaming Liabilities, in each case attributable to taxable years or
periods beginning after the Closing and, with respect to any Straddle Period,
the portion of such Straddle Period beginning after the Closing, and (D) imposed
on the Gaming Subsidiary or for which the Gaming Subsidiary may otherwise be
liable for any taxable year or period that begins after the Closing and, with
respect to any Straddle Period, the portion of such Straddle Period beginning
after the Closing. FDC shall be entitled to any refund of (or credit for)
Taxes for which FDC would be liable pursuant to this SECTION 7.3(a)(i).
(ii) CERIDIAN TAXES. Ceridian shall be liable for and pay, and
pursuant to ARTICLE VIII (and subject to the limitations thereof) shall
indemnify each FDC Group Member against, all Taxes (A) applicable to the Gaming
Business, the Purchased Gaming Assets and the Assumed Gaming Liabilities, in
each case attributable to taxable years or periods ending at the time of or
prior to the Closing and, with respect to any Straddle Period, the portion of
such Straddle Period ending on and including the Closing, (B) imposed on the
Gaming Subsidiary or for which the Gaming Subsidiary may otherwise be liable for
any taxable year or period that ends on or before the Closing and, with respect
to any Straddle Period, the portion of such Straddle Period ending on and
including the Closing (including, without limitation, any Taxes imposed on the
Gaming Subsidiary pursuant to Treas. Reg. SECTION 1.1502-6 or similar provision
of state, local or foreign law or any Taxes imposed on the Gaming Subsidiary as
a result of a termination of an election under Section 1504(d) of the Code), (C)
applicable to the NTS Business, the Purchased NTS Assets and the Assumed NTS
Liabilities, in each case attributable to taxable years or periods beginning
after the Closing and, with respect to any Straddle Period, the portion of such
Straddle Period beginning after the Closing, and (D) imposed on the NTS
Subsidiary or for which the NTS Subsidiary may otherwise be liable for any
taxable year or period that begins after the Closing and, with respect to any
Straddle Period, the portion of such Straddle Period beginning after the
Closing. Ceridian shall be entitled to any refund of (or credit for) Taxes for
which Ceridian would be liable pursuant to this SECTION 7.3(a)(ii).
(iii) STRADDLE PERIODS. For purposes of paragraphs (a)(i) and
(a)(ii), whenever it is necessary to determine the liability for Taxes for a
Straddle Period, the determination of the Taxes for the portion of the Straddle
Period ending on and including, and the portion of the Straddle Period beginning
after, the Closing shall be determined by assuming that the Straddle Period
consisted of two taxable years or periods, one which ended at the Closing and
the other which began immediately after the Closing, and items of income, gain,
deduction, loss or credit for the Straddle Period shall be allocated between
such two taxable years or periods on a "closing of the books basis" by assuming
that the books of the NTS Business or the Gaming Business, as the case may be,
were closed at the time of the Closing, PROVIDED, HOWEVER, that
-70-
<PAGE>
exemptions, allowances or deductions that are calculated on an annual basis,
such as the deduction for depreciation, shall be apportioned between such two
taxable years or periods on a daily basis.
(iv) OFFSET TO LIABILITY. If, as a result of any action, suit,
investigation, audit, claim, assessment or amended Tax Return, there is any
change after the date hereof in an item of income, gain, loss, deduction, credit
or amount of Tax that results in an increase in a Tax liability for which FDC
would otherwise be liable pursuant to paragraph (a)(i) of this SECTION 7.3, and
such change results in a decrease in the Tax liability of the NTS Subsidiary,
Ceridian or any Affiliate or successor of any thereof for any taxable year or
period beginning after the Closing or for the portion of any Straddle Period
beginning after the Closing, FDC shall not be liable pursuant to such paragraph
(a)(i) with respect to such increase to the extent of such decrease (and, to the
extent such increase in Tax liability is paid to a taxing authority by FDC or
any Affiliate thereof, Ceridian shall pay FDC an amount equal to such decrease).
If, as a result of any action, suit, investigation, audit, claim, assessment or
amended Tax Return, there is any change after the date hereof in an item of
income, gain, loss, deduction, credit or amount of Tax that results in an
increase in a Tax liability for which Ceridian would otherwise be liable
pursuant to paragraph (a)(ii) of this SECTION 7.3, and such change results in a
decrease in the Tax liability of the Gaming Subsidiary, FDC or any Affiliate or
successor thereof for any taxable year or period beginning after the Closing or
for the portion of any Straddle Period beginning after the Closing, Ceridian
shall not be liable pursuant to such paragraph (a)(ii) with respect to such
increase to the extent of such decrease (and, to the extent such increase in Tax
liability is paid to a taxing authority by Ceridian or any Affiliate thereof,
FDC shall pay Ceridian an amount equal to such decrease).
(v) TRANSFER TAXES. Notwithstanding anything herein to the
contrary, (A) Ceridian shall pay, and shall indemnify each FDC Group Member
against one-half of any real property transfer or gains Tax, sales Tax, use
Tax, stamp Tax, stock transfer Tax, or other similar Tax imposed on the
transactions contemplated by this Agreement and (B) FDC shall pay, and shall
indemnify each Ceridian Group Member against, one-half of any real property
transfer or gains Tax, sales Tax, use Tax, stamp Tax, stock Transfer Tax, or
other similar Tax imposed on the transactions contemplated by this Agreement.
(b) TAX RETURNS.
(i) FDC TAX RETURNS. FDC shall timely file or cause to be
timely filed when due (taking into account all extensions properly obtained) all
Tax Returns (A) attributable to the NTS Business, the Purchased NTS Assets or
the NTS Subsidiary for taxable years or periods ending on or before the Closing
and (B) attributable to the Gaming Business, the Purchased Gaming Assets or the
Gaming Subsidiary for taxable years or periods beginning after the Closing or
Straddle Periods. In each case FDC shall remit or cause to be remitted any
Taxes due in respect of such Tax Returns.
(ii) CERIDIAN TAX RETURNS. Ceridian shall timely file or cause
to be timely filed when due (taking into account all extensions properly
obtained) all Tax Returns (A)
-71-
<PAGE>
attributable to the Gaming Business, the Purchased Gaming Assets or the Gaming
Subsidiary for taxable years or periods ending on or before the Closing and (B)
attributable to the NTS Business, the Purchased NTS Assets or the NTS Subsidiary
for taxable years or periods beginning after the Closing or Straddle Periods.
In each case, Ceridian shall remit or cause to be remitted any Taxes due in
respect of such Tax Returns.
(iii) REMITTANCE. FDC or Ceridian shall pay the other party for
the Taxes for which FDC or Ceridian, respectively, is liable pursuant to
paragraph (a) of this SECTION 7.3 but which are payable with any Tax Return to
be filed by the other party pursuant to this paragraph (b) upon the written
request of the party entitled to payment, setting forth in detail the
computation of the amount owed by FDC or Ceridian, as the case may be, but in no
event earlier than 10 days prior to the due date for paying such Taxes.
(iv) AMENDED RETURNS. None of Ceridian or any Affiliate of
Ceridian shall (or shall cause or permit the NTS Subsidiary to) amend, refile or
otherwise modify (or grant an extension of any statute of limitation with
respect to) any Tax Return relating in whole or in part to the NTS Business, the
Purchased NTS Assets or the NTS Subsidiary with respect to any taxable year or
period ending on or before the Closing (or with respect to any Straddle Period)
without the prior written consent of FDC, which consent may not be unreasonably
withheld. None of FDC or any Affiliate of FDC shall (or shall cause the Gaming
Subsidiary to) amend, refile or otherwise modify (or grant an extension of any
statute of limitation with respect to) any Tax Return relating in whole or in
part to the Gaming Business, the Purchased Gaming Assets or the Gaming
Subsidiary with respect to any taxable year or period ending on or before the
Closing (or with respect to any Straddle Period) without the prior written
consent of Ceridian, which consent may not be unreasonably withheld.
(c) CONTEST PROVISIONS.
(i) CONTESTS INVOLVING PRE-CLOSING TAXES OF THE NTS BUSINESS,
THE PURCHASED NTS ASSETS OR THE NTS SUBSIDIARY. Ceridian shall promptly notify
FDC, in writing upon receipt by Ceridian, Comdata, any of their Affiliates, or
the NTS Subsidiary of written notice of any pending or threatened federal,
state, local or foreign Tax audits, examinations or assessments which might
affect the Tax liabilities for which FDC may be liable pursuant to paragraph
(a)(i) of this SECTION 7.3. FDC shall have the sole right to control any Tax
audit or administrative or court proceeding relating to the NTS Business, the
Purchased NTS Assets or the NTS Subsidiary for taxable periods ending on or
before the Closing, and to employ counsel of its choice at its expense. None
of Ceridian, any of its Affiliates, or the NTS Subsidiary may settle any Tax
claim for any Taxes for which FDC may be liable pursuant to paragraph (a)(i) of
this SECTION 7.3, without the prior written consent of FDC, which consent may
not be unreasonably withheld.
(ii) CONTESTS INVOLVING PRE-CLOSING TAXES OF THE GAMING BUSINESS
OR THE PURCHASED GAMING ASSETS. FDC shall promptly notify Ceridian in writing
upon receipt by FDC, FDFS, NTS, any of their Affiliates or the Gaming Subsidiary
of written notice of any pending or threatened federal, state, local or foreign
Tax audits, examinations or assessments which might
-72-
<PAGE>
affect the Tax liabilities for which Ceridian may be liable pursuant to
paragraph (a)(ii) of this SECTION 7.3. Ceridian shall have the sole right to
control any Tax audit or administrative or court proceeding relating to the
Gaming Business, the Purchased Gaming Assets or the Gaming Subsidiary for
taxable periods ending on or before the Closing, and to employ counsel of its
choice at its expense. None of FDC or any of its Affiliates may settle any Tax
claim for any Taxes for which Ceridian may be liable pursuant to paragraph
(a)(ii) of this SECTION 7.3, without the prior written consent of Ceridian,
which consent may not be unreasonably withheld.
(iii) STRADDLE PERIODS. In the case of a Straddle Period, the
party (the "Filing Party" responsible for filing (or causing to be filed) the
Tax Returns related to such Straddle Period pursuant to SECTION 7.3(b) shall
control any Tax audit or administrative or court proceeding relating to such
Straddle Period; PROVIDED, HOWEVER, that the other party (the "Non-Filing
Party") shall be entitled to participate at its expense in such proceeding to
the extent the Non-Filing Party is liable for Taxes relating to such Straddle
Period pursuant to SECTION 7.3(a) and, with the written consent of the Filing
Party, and at the Non-Filing Party's sole expense, may assume the entire control
of such audit or proceeding.
(d) ASSISTANCE AND COOPERATION. After the date hereof, each of FDC
and Ceridian shall (and cause their respective Affiliates to):
(i) assist the other party in preparing any Tax Returns which
such other party is responsible for preparing and filing in accordance with
paragraph (b) of this SECTION 7.3;
(ii) cooperate fully in preparing for any audits of, or disputes
with taxing authorities regarding, any Tax Returns relating to the NTS Business,
the Purchased NTS Assets, the NTS Subsidiary, the Gaming Business, the Purchased
Gaming Assets or the Gaming Subsidiary;
(iii) make available to the other and to any taxing authority as
reasonably requested all information, records, and documents relating to Taxes
of the NTS Business, the Purchased NTS Assets, the NTS Subsidiary, the NTS
Business, the Purchased NTS Assets, the Gaming Business, the Purchased Gaming
Assets or the Gaming Subsidiary;
(iv) timely sign and deliver such certificates or forms as may
be necessary or appropriate to establish an exemption from (or otherwise
reduce), or file Tax Returns or other reports with respect to, Taxes described
in paragraph (a)(v) of this SECTION 7.3 (relating to sales, transfer and similar
Taxes); and
(v) timely provide to the other powers of attorney or similar
authorizations necessary to carry out the purposes of this SECTION 7.3;
(e) The parties hereto agree to file all federal, state, local and
foreign Tax Returns in a manner consistent with the fair market values
identified in SECTION 2.1. Within 60 days following the date hereof or as soon
as is reasonably practicable, FDC and Ceridian shall negotiate
-73-
<PAGE>
and draft a schedule (the "ALLOCATION SCHEDULE") allocating such amounts among
the Purchased NTS Assets and the Purchased Gaming Assets. The Allocation
Schedule shall be consistent with the values set forth above and shall be
prepared in accordance with Section 1060 of the Code and the regulations
thereunder. FDC and Comdata each agrees that promptly upon receiving said
Allocation Schedule it shall return an executed copy thereof to the other party.
FDC and Comdata each agrees to file all federal, state, local and foreign Tax
Returns in accordance with the Allocation Schedule.
(f) REVENUE CANADA APPROVALS. FDC has filed, with respect to the
sale of the stock of the NTS Subsidiary by FDC, and Ceridian has filed, with
respect to the sale of the stock of the Gaming Subsidiary by Ceridian, a Notice
by a Non-Resident of Canada Concerning the Disposition or Proposed Disposition
of Taxable Canadian Property (the "FORM T2062") as required by Section 116 of
the Canadian INCOME TAX ACT and, in the case of Ceridian, Notice by a Non-
Resident of Quebec concerning the Disposition or Proposed Disposition of Taxable
Quebec Property (The "Form TP 1097") as required by Section 1097 of The Quebec
Taxation Act. The parties hereby agree that the good faith estimated value of
the purchase price allocable to the outstanding shares of capital stock of the
NTS Subsidiary is $571,000 (Canadian dollars) and the good faith estimated value
of the purchase price allocable to the outstanding shares of capital stock of
the Gaming Subsidiary, is $2,857,000 (Canadian dollars), subject to any post-
closing adjustments which are agreed to by the parties. Each of Ceridian and
FDC shall use commercially reasonable efforts to obtain from Revenue Canada a
certificate under Section 116 of the INCOME TAX ACT (Canada) and, in the case of
Ceridian, the equivalent certificate under the TAXATION ACT (Quebec) with a
"certificate limit" greater than or equal to the purchase price allocable to the
shares sold by it (the "Canadian Tax Certificate") within 30 days after the end
of the month during which the Closing occurs (the "Certificate Date"), and to
provide the purchaser of the shares with its copy of the Canadian Tax
Certificate forthwith. If the Canadian Tax Certificate is not obtained by the
seller and delivered to the purchaser by the Certificate Date, then the seller
will indemnify the purchaser and hold the purchaser harmless with respect to any
tax, penalties and interest which may be assessed against the purchaser under
the INCOME TAX ACT (Canada) or the TAXATION ACT (Quebec) by virtue of the
purchaser's failure to withhold and remit or pay any tax required to be remitted
or paid by the purchaser under subsection 116(5) of the INCOME TAX ACT (Canada)
or the equivalent provision of the TAXATION ACT (Quebec).
7.4. EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
(a) TRANSFERRING EMPLOYEES.
(i) NTS has listed on SCHEDULE 7.4(A) those employees of either NTS
or the NTS Subsidiary who NTS or the NTS Subsidiary intends to transfer to
Comdata and who are Actively Employed on the date hereof and whose duties
primarily relate to the NTS Business (collectively, the "NTS EMPLOYEES"). On
SCHEDULE 7.4(A), NTS shall designate separately those NTS Employees on a
Statutorily Protected Leave.
(ii) Comdata has listed on SCHEDULE 7.4(B) those employees of either
Comdata or the Gaming Subsidiary who Comdata intends to transfer to FDFS and who
are Actively Employed
-74-
<PAGE>
on the date hereof and whose duties primarily relate to the Gaming Business
(collectively, the "COMDATA EMPLOYEES"). On SCHEDULE 7.4(B), Comdata shall
designate separately those Comdata Employees on a Statutorily Protected Leave.
(iii) On the Closing Date, Comdata shall offer employment to each of
the NTS Employees. All such employees who do not decline Comdata's offer of
employment and actually perform services for Comdata on the Closing Date or who,
on the Closing Date, are on NTS approved absences or Statutorily Protected
Leaves and do not later decline Comdata's offer of employment and actually
perform services for Comdata on the next business day following the expiration
of such approved absence or Statutorily Protected Leave, are hereinafter
referred to as "TRANSFERRING NTS EMPLOYEES." The employment of the NTS
Employees with Comdata shall be considered effective and their employment by NTS
shall transfer to Comdata on the Closing Date, or in the case of employees on
NTS approved absences or Statutorily Protected Leaves, as of the date they first
perform services for Comdata (the "COMDATA EFFECTIVE DATE").
(iv) On the Closing Date, FDFS shall offer employment to each of the
Comdata Employees. All such employees who do not decline FDFS' offer of
employment and actually perform services for FDFS on the Closing Date or who, on
the Closing Date, are on Comdata approved absence or Statutorily Protected
Leaves and do not later decline FDFS' offer of employment and actually perform
services for FDFS on the next business day following the expiration of such
approved absence or Statutorily Protected Leave are hereinafter referred to as
"TRANSFERRING COMDATA EMPLOYEES." The employment of the Comdata Employees with
FDFS shall be considered effective and their employment by Comdata shall
transfer to FDFS on the Closing Date, or, in the case of employees on Comdata
approved absences or Statutorily Protected Leaves, as of the date they first
perform services for FDFS (the "FDFS EFFECTIVE DATE").
(v) NTS shall be responsible for paying out any earned, unused
vacation days of Transferring NTS Employees upon their termination of employment
with NTS and in accordance with NTS' vacation policy. In no event will Ceridian
or Comdata have any responsibility or liability for payment of any vacation or
sick days earned by a Transferring NTS Employee during his employment with NTS.
(vi) Comdata shall be responsible for paying out any earned, unused
vacation and sick days of Transferring Comdata Employees upon their termination
of employment with Comdata and in accordance with Comdata's vacation and sick
pay policy. In no event will FDC, IPS or FDFS have any responsibility or
liability for payment of any vacation or sick days earned by a Transferring
Comdata Employee during his employment with Comdata.
(vii) FDC, IPS and FDFS shall be solely liable for, and indemnify and
hold Ceridian and Comdata harmless from all claims, demands, costs or other
liabilities, including reasonable attorneys' fees, related to the employees
listed on SCHEDULE 7.4(A): (A) who do not become Transferring NTS Employees; (B)
to the extent such liability arises from any action, event or course of conduct
except for any action, event or course of conduct of Ceridian or Comdata
-75-
<PAGE>
that occurs prior to the Comdata Effective Date; or (C) to the extent such
liability arises under or relates to any employee benefit plan of FDC or IPS
except for any liability related to such plans with respect to any Transferred
NTS Employee arising during the transition period described in SECTION 7.4(a)(x)
below, which shall be the responsibility of Comdata.
(viii) Ceridian and Comdata shall be solely liable for, and indemnify
and hold FDC, IPS and FDFS harmless from all claims, demands, costs or other
liabilities, including reasonable attorneys' fees, related to the employees
listed on SCHEDULE 7.4(B): (A) who do not become Transferring Comdata Employees;
(B) to the extent such liability arises from any action, event or course of
conduct except for any action, event or course of conduct of FDC, IPS or FDFS
that occurs prior to the FDFS Effective Date; or (C) to the extent such
liability arises under or relates to any employee benefit plan of Ceridian or
Comdata except for any liability related to such plans with respect to any
Transferred Comdata Employee arising during the transition period described in
SECTION 7.4(b)(ix) below, which shall be the responsibility of FDC.
(ix) Comdata will, for administrative convenience only, allow the
Transferring Comdata Employees to remain on its payroll and welfare benefit
plans for a transition period of up to 30 days following the Closing Date. FDC,
IPS and FDFS shall reimburse Comdata for all direct costs associated with the
Transferring Comdata Employees remaining on its payroll and welfare benefit
plans during this transition period.
(x) FDC will, for administrative convenience only, allow the
Transferring NTS Employees to remain on its payroll and welfare benefit plans
for a transition period of up to 30 days following the Closing Date. Ceridian
and Comdata shall reimburse NTS for all direct costs associated with the
Transferring NTS Employees remaining on its payroll and welfare benefit plans
during this transition period.
(b) WELFARE PLANS.
(i) Except as otherwise required by the terms of any such plan, all
Transferring NTS Employees shall cease participation in any Welfare Plan
sponsored or maintained by FDC, IPS or NTS except for any transition period
provided for in SUBSECTION 7.4(a)(x) above. Except as otherwise required by the
terms of any such plan, all Transferring Comdata Employees shall cease
participation in any Welfare Plan sponsored or maintained by Ceridian or Comdata
except for any transition period provided for in SUBSECTION 7.4(a)(ix) above.
(ii) Commencing on the Comdata Effective Date, Transferring NTS
Employees shall be eligible for those Welfare Plans of Ceridian and Comdata in
effect for similarly situated existing employees of Comdata (collectively, the
"COMDATA WELFARE PLANS"). Transferring NTS Employees shall be credited for
their length of service with NTS and its Affiliates for all purposes under the
Comdata Welfare Plans, including eligibility. Any pre-existing condition
limitation under a Comdata Welfare Plan shall be waived for Transferring NTS
Employees and their eligible dependents. Commencing on the FDFS Effective Date,
Transferring Comdata Employees shall be eligible for those Welfare Plans of FDC
or IPS in effect for similarly situated existing employees of IPS (collectively,
the "IPS WELFARE PLANS"). Transferring Comdata Employees shall be credited
-76-
<PAGE>
for their length of service with Comdata and its Affiliates for all purposes
under the IPS Welfare Plans, including eligibility. Any pre-existing condition
limitation under an IPS Welfare Plan shall be waived for Transferring Comdata
Employees and their eligible dependents.
(iii) IPS shall be responsible for providing continuation coverage
to NTS Employees who do not become Transferred NTS Employees (and their covered
dependents) and Transferring NTS Employees (and their covered dependents) under
each of its applicable health plans with respect to all qualifying events under
COBRA and comparable state law which occur before the Comdata Effective Date.
Comdata shall be responsible for providing continuation coverage to Transferring
NTS Employees (and their covered dependents) under each of its applicable group
health plans with respect to all qualifying events under COBRA and comparable
state law which occur on or after the Comdata Effective Date. Comdata shall be
responsible for providing continuation coverage to Comdata Employees who do not
become Transferring Comdata Employees (and their covered dependents) and
Transferring Comdata Employees (and their covered dependents) under each of its
applicable group health plans with respect to all qualifying events under COBRA
and comparable state law which occur before the IPS Effective Date. IPS shall
be responsible for providing continuation coverage to Transferring Comdata
Employees (and their covered dependents) under each of its applicable group
health plans with respect to all qualifying events under COBRA and comparable
state law which occur on or after the IPS Effective Date.
(iv) Except as otherwise expressly provided in this SECTION 7.4(b),
IPS shall be liable for, and shall indemnify and hold each Ceridian Group Member
harmless from, all claims incurred by Transferring NTS Employees and other
current or former employees of IPS (and their covered dependents) under the IPS
Welfare Plans. Except as otherwise expressly provided in this SECTION 7.4(b),
Comdata shall be liable for, and shall indemnify and hold each FDC Group Member
harmless from, all claims incurred by Transferring Comdata Employees which occur
before the IPS Effective Date and other current or former employees of Comdata
(and their covered dependents) under the Comdata Welfare Plans.
(c) PENSION PLANS.
(i) As of the Comdata Effective Date, all Transferring NTS Employees
shall cease accruing benefits under any Pension Plan sponsored or maintained by
FDC, IPS or NTS (collectively, the "IPS PENSION PLANS"). As of the FDFS
Effective Date, all Transferring Comdata Employees shall cease accruing benefits
under any Pension Plan sponsored or maintained by Ceridian or Comdata
(collectively, the "COMDATA PENSION PLANS").
(ii) Commencing on the Comdata Effective Date, Transferring NTS
Employees shall be eligible for those Comdata Pension Plans in effect for
similarly situated existing employees of Comdata PROVIDED, HOWEVER, that
Transferring NTS Employees shall not be considered eligible for the Ceridian
Corporation Retirement Plan which is closed to new entrants. Transferring NTS
Employees shall be credited for their length of service with NTS and its
Affiliates for purposes of eligibility and vesting under the Comdata Pension
Plans. Commencing on the FDFS Effective Date, Transferring Comdata Employees
shall be eligible for those IPS Pension Plans in effect for
-77-
<PAGE>
similarly situated existing employees of IPS; provided, however, that
Transferring Comdata Employees shall not be considered eligible for the FDC
Retirement Plan, which is frozen. Transferring Comdata Employees shall be
credited for their length of service with Comdata and its Affiliates for
purposes of eligibility and vesting under the IPS Pension Plans.
(iii) Subject to the approval of the FDC Employee Benefits
Administration and Investment Committee, IPS shall cause the accounts of the
Transferring NTS Employees under IPS's 401(k) plan or plans to be fully vested
as of the Closing Date. Subject to the approval of the plan administrator,
Comdata shall cause the accounts of the Transferring Comdata Employees under
Ceridian's and Comdata's 401(k) plan or plans to be fully vested as of the
Closing Date. If IPS determines that it is unable to make distribution from its
401(k) plan or plans in connection with the transactions contemplated by this
Agreement pursuant to SECTION 401(k)(10) of the Code, it will provide notices of
such determination to Comdata. Thereafter, Comdata will promptly notify IPS
whenever a Transferring NTS Employee ceases to be employed with Comdata and its
Affiliates, including any such cessation that occurred before Comdata received
the notice. If Comdata determines that it is unable to make distributions from
its 401(k) plan or plans in connection with the transactions contemplated by
this Agreement pursuant to SECTION 401(k)(10) of the Code, it will provide
written notice of such determination to IPS. Thereafter, IPS will promptly
notify Comdata whenever a Transferring Comdata Employee ceases to be employed
with IPS and its Affiliates, including any such cessation that occurred before
IPS received the notice.
(d) OTHER BENEFITS.
(i) As of the Comdata Effective Date, the Transferring NTS Employees
shall be eligible for vacation, sick leave and all other compensation and
benefit programs not specifically addressed in SECTION 7.4(b) or (c) in effect
for similarly situated existing employees of Comdata and shall be credited for
their length of service with NTS and its Affiliates for all purposes under such
programs.
(ii) As of the FDFS Effective Date, the Transferring Comdata
Employees shall be eligible for vacation, sick leave and all other compensation
and benefit programs not specifically addressed in SECTION 7.4(b) or (c) in
effect for similarly situated existing employees of IPS and shall be credited
for their length of service with Comdata and its Affiliates for all purposes
under such programs.
(e) MISCELLANEOUS.
(i) During the 12-month period beginning at Closing, Comdata shall
follow the terms of a severance plan which covers each Transferring NTS Employee
and which is at least as favorable to each such Transferring NTS Employee as the
applicable NTS severance plan, policy or practice, to the extent it is described
on SCHEDULE 6.18(d) in effect immediately prior to Closing with respect to such
Transferring NTS Employee. During the 12-month period beginning at Closing,
FDFS shall follow the terms of a severance plan which covers each Transferring
Comdata Employee as the applicable Comdata severance plan, policy or practice,
to the extent it
-78-
<PAGE>
is described on SCHEDULE 5.18(d) in effect immediately prior to Closing with
respect to such transferring Comdata Employee.
(ii) IPS shall be responsible for compliance with the federal Worker
Adjustment and Retraining Notification Act ("WARN") and any similar applicable
state or local laws and assumes any liability for non-compliance with such laws
with respect to IPS' termination of any Transferring Comdata Employee. Comdata
shall be responsible for compliance with WARN and any similar applicable state
or local laws and assume any liability for non-compliance with such laws with
respect to Comdata's termination of any Transferring NTS Employee.
(f) IPS shall be liable for any workers' compensation or similar
workers' protection claims by Transferring NTS Employees originating prior to
the Comdata Effective Date and by Transferring Comdata Employees for occurrences
originating on or after the FDFS Effective Date. Comdata shall be liable for
any workers' compensation or similar workers' protection claims by Transferring
Comdata Employees originating prior to the FDFS Effective Date and by
Transferring NTS Employees for occurrences originating on or after the Comdata
Effective Date.
(g) No Transferring NTS Employee, Transferring Comdata Employee or
other current or former employee of NTS or Comdata (including any beneficiary or
dependent thereof), or any other person not a party to this Agreement, shall be
entitled to assert any claim hereunder.
7.5. COLLECTION OF RECEIVABLES. (a) From and after the Closing
Date, Comdata shall use reasonable efforts to collect the NTS Receivables
reflected in the Closing Date NTS Special Report generally in accordance with
the billing and collection practices presently applied by Comdata in the
collection of its accounts and notes receivable, except that with respect to any
particular NTS Receivable, Comdata shall be under no obligation to commence
litigation to effect collection and may make any concession or settlement which
in the good faith judgment of Comdata is commercially reasonable. In connection
with the collections by Comdata, if a payment is received from an account debtor
who has not designated the invoice being paid thereby, such payment shall be
applied to the earliest invoice outstanding with respect to indebtedness of such
account debtor reflected on the Closing Date NTS Special Report, except for
those invoices which are subject to a dispute to the extent of such dispute.
(b) Comdata shall, on or before the tenth business day of each
calendar month commencing with the second complete calendar month following the
Closing Date, deliver to NTS a written report ("NTS COLLECTION REPORT") of the
following information with respect to the NTS Receivables:
(i) The aggregate amount of the NTS Receivables (and the number of
accounts comprising such NTS Receivables); and
(ii) The aggregate amount of cash collections of the NTS Receivables
during the period from the Closing Date through the date of the NTS
Collection Report.
-79-
<PAGE>
(c) If Comdata has not collected, within 180 days after the Closing
Date, an amount equal to the excess of the NTS Receivables over the allowance
for doubtful accounts shown on the Closing Date NTS Special Report (such excess
being referred to herein as the "NET AMOUNT OF NTS RECEIVABLES"), then Comdata
shall have the right to require NTS to pay Comdata an amount, if positive, equal
to (i) the sum of (A) Net Amount of NTS Receivables and (B) all collection fees
incurred by Comdata (in accordance with SECTION 7.5(a)), MINUS (ii) the amount
collected in cash by Comdata during such 180 days period in respect of the NTS
Receivables; PROVIDED, HOWEVER, that concurrently with the payment by NTS of
such amount, Comdata shall reassign to NTS all such NTS Receivables together
with all security interests or other rights securing payment thereof; PROVIDED,
FURTHER, that, with respect to each NTS Receivable required to be so reassigned,
during the two-year period commencing on the 180th day after the date hereof
neither Comdata nor any of its Affiliates shall provide to the account debtor
relating to such NTS Receivable any services, goods or products relating to the
NTS Business. Notwithstanding the foregoing, Comdata will not be entitled to
require NTS to make any such payment with respect to the NTS Receivable referred
to in item 3 of SCHEDULE 1.6 until after (i) the third anniversary of the
Closing Date or (ii) if there is a payment default after the date hereof and
prior to such third anniversary, in respect of such NTS Receivable, in which
case the date of such default. If Comdata then elects to require such payment
with respect to such NTS Receivable, Comdata shall concurrently therewith
reassign to NTS such NTS Receivable together with all security interests or
other rights securing payment thereof; PROVIDED, HOWEVER, that prior to any such
payment and reassignment, Comdata shall have terminated the marketing services
agreement entered into with the account debtor relating to such NTS Receivable.
In addition, if Comdata so elects to require such payment, during the two-year
period commencing on such third anniversary, neither Comdata nor any of its
Affiliates shall provide to such account debtor any services, goods or products
relating to the NTS Business.
(d) If, after the Closing Date, NTS shall receive any remittance from
any account debtors with respect to the NTS Receivables (excluding any NTS
Receivable reassigned to NTS), NTS shall endorse such remittance to the order of
Comdata and forward it to Comdata immediately upon receipt thereof, and any such
amounts shall be deemed to have been collected by Comdata for purposes of this
SECTION 7.5.
(e) In the event Comdata shall receive any remittance from or on
behalf of any account debtor with respect to any Receivable after such NTS
Receivable has been reassigned to NTS, Comdata shall endorse such remittance to
the order of NTS and forward it to NTS immediately upon receipt thereof.
(f) From and after the Closing Date, FDFS shall use reasonable
efforts to collect the Gaming Receivables reflected in the Closing Date Gaming
Special Report generally in accordance with the billing and collection practices
presently applied by FDFS in the collection of its accounts and notes
receivable, except that with respect to any particular Gaming Receivable, FDFS
shall be under no obligation to commence litigation to effect collection and may
make any concession or settlement which in the good faith judgment of FDFS is
commercially reasonable. In connection with the collections by FDFS, if a
payment is received from an account debtor who has not designated the invoice
being paid thereby, such payment shall be applied to the earliest
-80-
<PAGE>
invoice outstanding with respect to indebtedness of such account debtor
reflected on the Closing Date Gaming Special Report, except for those invoices
which are subject to a dispute to the extent of such dispute.
(g) FDFS shall, on or before the tenth business day of each calendar
month commencing with the second complete calendar month following the Closing
Date, deliver to Comdata a written report ("COMDATA COLLECTION REPORT") of the
following information with respect to the Gaming Receivables:
(i) The aggregate amount of the Gaming Receivables (and the number of
accounts comprising such Gaming Receivables); and
(ii) The aggregate amount of cash collections of the Gaming
Receivables during the period from the Closing Date through the date of the
Comdata Collection Report.
(h) If FDFS has not collected, within 180 days after the Closing
Date, an amount equal to the excess of the Gaming Receivables over the allowance
for doubtful accounts shown on the Closing Date Gaming Special Report (such
excess being referred to herein as the "NET AMOUNT OF GAMING RECEIVABLES"), then
FDFS shall have the right to require Comdata to pay FDFS an amount, if positive,
equal to (i) the sum of (A) Net Amount of Gaming Receivables and (B) all
collection fees incurred by FDFS (in accordance with SECTION 7.5(f)), MINUS
(ii) the amount collected in cash by FDFS during such 180 day period in respect
of the Comdata Receivables; PROVIDED, HOWEVER, that concurrently with the
payment by Comdata of such amount, FDFS shall reassign to Comdata all such
uncollected Gaming Receivables.
(i) If, after the Closing Date, Comdata shall receive any remittance
from any account debtors with respect to the Gaming Receivables (excluding any
Gaming Receivable reassigned to Comdata), Comdata shall endorse such remittance
to the order of FDFS and forward it to FDFS immediately upon receipt thereof,
and any such amounts shall be deemed to have been collected by FDFS for purposes
of this SECTION 7.5.
(j) In the event FDFS shall receive any remittance from or on behalf
of any account debtor with respect to any Gaming Receivable after such Gaming
Receivable has been reassigned to Comdata, FDFS shall endorse such remittance to
the order of Comdata and forward it to Comdata immediately upon receipt thereof.
7.6. RELEASE OF NONCOMPETITION PROVISIONS. The parties agree that
the non-competition provisions included in this Article VII shall supersede,
replace, and be the sole source of any non-competition provisions between them
and their respective Affiliates as of the Closing Date to the extent relating to
the Gaming Business or the NTS Business.
7.7. WAIVER OF EXCLUSIVITY OBLIGATIONS OF WESTERN UNION AGENTS.
Ceridian and Comdata, on behalf of themselves and their Affiliates, hereby waive
any currently existing obligations of Western Union agents to utilize
exclusively the services of Comdata or any of its Affiliates with respect to the
receipt of wire money transfers.
-81-
<PAGE>
7.8. NTS NAME. On the Closing Date, NTS shall change its name to a
name not including "NTS."
7.9. SUBLEASE. With respect to NTS' current lease with respect to
the office buildings located at 6000 and 6100 Western Place, Fort Worth,
Texas 76107, Comdata hereby subleases from NTS, and NTS hereby subleases to
Comdata, those certain portions of the 8th floor in the East Tower and the 2nd
floor in the West Tower which are currently leased to NTS and the entire 9th
floor in the East Tower (the "SUBLEASED FLOORS") of the office buildings located
at 6000 and 6100 Western Place, Fort Worth, Texas 76107 for the period
commencing on the date hereof and ending on March 31, 2002 on the same terms and
conditions applicable to NTS with respect to the Subleased Floors. Comdata
shall be subject to all of the restrictions contained in such lease relating to
the Subleased Floors and any tenant thereof. Comdata shall pay to NTS (or such
other third party as may be consented to by NTS) all rents and other amounts
required to be paid by NTS or any of its Affiliates to any third party and all
other costs, charges or expenses incurred by NTS or any of its Affiliates, in
each case, in respect of the Subleased Floors. NTS shall provide Comdata with
periodic statements of any such amounts required to be paid. Any such payments
to NTS shall be made not later than the first business day of each calendar
month or, in the case of any other incurred costs, charges or expenses, not
later than 15 business days after notice is provided to Comdata of the amount
owing. Any such payments made by Comdata to any third party (with the consent
of NTS as aforesaid) shall be made not later than the date on which the payment
is due to such third party.
7.10. PRORATION. With respect to all third party charges (including,
without limitation, telephone and utility charges) other than Taxes incurred in
the ordinary course of business by the Gaming Business, the NTS Business or in
respect of the Purchased Gaming Assets or the Purchased NTS Assets that are
payable after the date hereof and that relate to a period that commenced prior
to the date hereof, it is the intent of the parties hereto that the pro-rated
portion thereof applicable to the period ending on or prior to the date hereof
shall be the responsibility of Comdata or NTS, respectively, except to the
extent such amount is recorded as a liability on the Closing Date Gaming Special
Report or the Closing Date NTS Special Report. Comdata or FDFS, as the case may
be, shall reimburse NTS or Comdata, respectively, for any portion of such
charges that is paid by one party that is the responsibility of the other party
in accordance with the term of this SECTION 7.10. Any receivables which are
incurred in the ordinary course of business by the Gaming Business, the NTS
Business or in respect of the Purchased Gaming Assets or the Purchased NTS
Assets that are collected after the date hereof and that relate to a period that
commenced prior to the date hereof, except to the extent that such amounts are
recorded as receivables on the Closing Date Gaming Special Report or the Closing
Date NTS Special Report, shall be treated in a similar manner.
7.11. CERTAIN CONSENTS. (a) Following the Closing, at the request
of FDFS, Comdata shall use commercially reasonable efforts (but which shall not
include the payment of fees by Comdata to any third party) to assist FDFS in
obtaining any consent of any third party which may be required in order to
assign any rights or other assets constituting Purchased Gaming Assets. If FDFS
is unable to obtain any such consent, or believes that an attempt to assign such
Purchased Gaming Asset would be ineffective or would adversely affect the
ability of FDFS to
-82-
<PAGE>
receive the asset in question, at the request of FDFS Comdata will cooperate
with FDFS in any commercially reasonable alternative arrangement designed to
provide FDFS the benefits that, with respect to such Purchased Gaming Assets,
were contemplated to be conferred on FDFS by this Agreement. If FDFS is unable
to obtain such consent, such Purchased Gaming Asset shall, at FDFS's election,
be deemed to have been excluded from the Purchased Gaming Assets conveyed to
FDFS hereunder and be deemed to have been an Excluded Gaming Asset for the
purposes of the Agreement, PROVIDED, HOWEVER, that to the extent any such
Purchased Gaming Asset would have been included on the Closing Date Gaming
Special Report if such consent had been obtained, it shall be included on the
Closing Date Gaming Special Report even in the absence of such consent; and
PROVIDED, FURTHER, that, notwithstanding any such election, the liabilities or
obligations of FDFS relating to such Purchased Gaming Asset shall, except to the
extent provided in SECTION 2.5 (other than SECTION 2.5(d)), be deemed to have
been an Assumed Gaming Liability for purposes of this Agreement. Notwithstanding
the foregoing, nothing in this Agreement shall be construed as an attempt to
assign any Purchased Gaming Asset in respect of which FDFS has made the an
election contemplated by the third sentence of this SECTION 7.11(a) without the
consent of the other party thereto.
(b) Following the Closing, at the request of Comdata, NTS shall use
commercially reasonable efforts (but which shall not include the payment of fees
by NTS to any third party) to assist Comdata in obtaining any consent of any
third party which may be required in order to assign any rights or other assets
constituting Purchased NTS Assets. If Comdata is unable to obtain any such
consent, or believes that an attempt to assign such Purchased NTS Asset would be
ineffective or would adversely affect the ability of Comdata to receive the
asset in question, at the request of Comdata NTS will cooperate with Comdata in
any commercially reasonable alternative arrangement designed to provide Comdata
the benefits that, with respect to such Purchased NTS Assets, were contemplated
to be conferred on Comdata by this Agreement. If Comdata is unable to obtain
such consent, such Purchased NTS Asset shall, at Comdata's election, be deemed
to have been excluded from the Purchased NTS Assets conveyed to Comdata
hereunder and be deemed to have been an Excluded NTS Asset for the purposes of
the Agreement, PROVIDED, HOWEVER, that to the extent any such Purchased NTS
Asset would have been included on the Closing Date NTS Special Report if such
consent had been obtained, it shall be included on the Closing Date NTS Special
Report even in the absence of such consent; and PROVIDED, FURTHER, that,
notwithstanding any such election, the liabilities or obligations of Comdata
relating to such Purchased NTS Asset shall, except to the extent provided in
SECTION 2.9 (other than SECTION 2.9(d)), be deemed to have been an Assumed NTS
Liability for purposes of this Agreement. Notwithstanding the foregoing, nothing
in this Agreement shall be construed as an attempt to assign any Purchased NTS
Asset in respect of which Comdata has made the an election contemplated by the
third sentence of this SECTION 7.11(b) without the consent of the other party
thereto.
7.12. TERMINATION OF FLASHCASH LICENSE. Comdata hereby relinquishes
and terminates any rights it may have under that certain License Agreement by
and between Western Union Financial Services, Inc. and Comdata dated as of
April 6, 1994.
-83-
<PAGE>
ARTICLE VIII
INDEMNIFICATION
8.1. INDEMNIFICATION BY CERIDIAN. (a) Ceridian agrees to indemnify
and hold harmless each FDC Group Member from and against any and all Losses and
Indemnification Expenses incurred by such FDC Group Member in connection with or
arising from:
(i) any breach by Ceridian or any of its Affiliates of any of their
respective covenants or agreements in this Agreement;
(ii) any failure of Ceridian or any of its Affiliates to perform any
of their respective obligations in this Agreement;
(iii) any breach of any warranty or the inaccuracy of any
representation of Ceridian or any of its Affiliates contained or referred
to in this Agreement or any certificate delivered by or on behalf of
Ceridian or any of its Affiliates pursuant hereto;
(iv) the failure of Comdata to comply with any applicable bulk sales
law, except that this clause shall not affect the obligation of FDFS to pay
and discharge the Assumed Gaming Liabilities;
(v) any Excluded Gaming Liability;
(vi) any recalls on or after the date hereof mandated by any
Governmental Body of the products manufactured, distributed or sold by the
Gaming Business on or prior to the date hereof; or
(vii) any obligations to provide parts and service on, or to repair
or replace, any products manufactured, distributed or sold by the Gaming
Business on or prior to the date hereof.
(b) Notwithstanding the foregoing SECTION 8.1(a), Ceridian shall be
required to indemnify and hold harmless under clauses (i), (ii) and (iii) of
SECTION 8.1(a) with respect to Losses and Indemnification Expenses incurred by
FDC Group Members only:
(i) to the extent that the aggregate amount of any and all
Losses and Indemnification Expenses exceeds $1,950,000; and
(ii) to the extent that the aggregate amount required to be paid by
Ceridian pursuant to SECTION 8.1(a)(i)-(iii) shall not exceed $22,550,000.
(c) Notwithstanding the limitations in SECTION 8.1(b);
-84-
<PAGE>
(i) the limitations in SECTION 8.1(b)(i)-(ii) shall not apply to
(A) any Losses or Indemnification Expenses incurred as result of
a failure to pay or discharge an Excluded Gaming Liability or any
obligation set forth in ARTICLE III, (B) any Losses or
Indemnification Expenses incurred as a result of inaccuracies of
the representations and warranties contained in SECTIONS 5.1,
5.2, 5.3(a)-(c), 5.6 and 5.7 and (C) any Losses and
Indemnification Expenses incurred as a result of a breach by
Comdata or Ceridian of their respective covenants and obligations
set forth in SECTIONS 7.3, 7.4, 7.5, 7.9, 7.10, 9.2 and 9.10; and
(ii) none of (A) any Losses or Indemnification Expenses incurred
as a result of a failure to pay or discharge an Excluded Gaming
Liability or any obligation set forth in ARTICLE III,
(B) any Losses or Indemnification Expenses incurred as a result
of inaccuracies of the representations and warranties contained
in SECTIONS 5.1, 5.2, 5.3(a)-(c), 5.6 and 5.7, and (C) any Losses
and Indemnification Expenses incurred as a result of a breach by
Comdata or Ceridian of their respective covenants and obligations
set forth in SECTIONS 7.3, 7.4, 7.5, 7.9, 7.10, 9.2 and 9.10,
shall be applied toward the amounts specified in SECTION
8.1(b)(i)-(ii).
(d) The indemnification provided for in this SECTION 8.1 shall
terminate 3 years after the date hereof (and no claims shall be made by any FDC
Group Member under this SECTION 8.1 thereafter), except that the indemnification
by Ceridian and its Affiliates shall continue as to:
(i) the obligations of Comdata under the Comdata Instrument of
Assignment, the Comdata Instrument of Assumption, the Comdata Canadian
Instrument of Assignment and the Comdata Canadian Instrument of Assumption,
as to which no time limitation shall apply;
(ii) the obligations of Comdata or Ceridian set forth in ARTICLE III,
the representations and warranties set forth in SECTIONS 5.1, 5.2,
5.3(a)-(c), 5.6, 5.7 and the covenants of Ceridian and its Affiliates set
forth in SECTIONS 7.3, 7.4, 7.5, 7.10, 9.2, 9.6, 9.10 and 9.13, as to all
of which no time limitation shall apply;
(iii) the covenants set forth in SECTION 7.2(a) as to which the
indemnification provided for in this SECTION 8.1 shall terminate one year
after the expiration of the period provided for therein; and
(iv) any Losses or Indemnification Expenses of which any FDC Group
Member has notified Ceridian or Comdata in accordance with the requirements
of SECTION 8.3 on or prior to the date such indemnification would otherwise
terminate in accordance with this SECTION 8.1, as to which the obligation
of Ceridian shall continue until the liability of Ceridian shall have been
determined pursuant to this ARTICLE VIII, and Ceridian shall have
-85-
<PAGE>
reimbursed all FDC Group Members for the full amount of such Losses and
Indemnification Expenses in accordance with this ARTICLE VIII.
(e) Notwithstanding anything in this SECTION 8.1 to the contrary, Ceridian
shall not indemnify or hold any FDC Group Member harmless from or against any
Losses or Indemnification Expenses incurred by such FDC Group Member in
connection with or arising from any matter on SCHEDULE 8.1; it being understood
and agreed that any such Losses or Indemnification Expenses shall constitute
Excluded NTS Liabilities nothwithstanding anything to the contrary set forth in
SECTION 2.4 of this Agreement.
8.2. INDEMNIFICATION BY FDC. (a) FDC agrees to indemnify and hold
harmless each Ceridian Group Member from and against any and all Losses and
Indemnification Expenses incurred by such Ceridian Group Member in connection
with or arising from:
(i) any breach by FDC or any of its Affiliates of any of its
covenants or agreements in this Agreement;
(ii) any failure by FDC or any of its Affiliates to perform any of
their obligations in this Agreement;
(iii) any breach of any warranty or the inaccuracy of any
representation of FDC or any of its Affiliates contained or referred to in
this Agreement or in any certificate delivered by or on behalf of FDC;
(iv) the failure of NTS to comply with any applicable bulk sales law,
except that this clause shall not effect the obligation of Comdata to pay,
perform or discharge the Assumed NTS Liabilities; or
(v) any Excluded NTS Liabilities;
(vi) any recalls on or after the date hereof mandated by any
Governmental Body of the products manufactured, distributed or sold by the
NTS Business on or prior to the date hereof; or
(vii) any obligations to provide parts and service on, or to repair
or replace, any products manufactured, distributed or sold by the NTS
Business on or prior to the date hereof.
(b) Notwithstanding the foregoing SECTION 8.2(a), FDC shall be
required to indemnify and hold harmless under clauses (i), (ii) and (iii) of
SECTION 8.2(a) with respect to Losses and Indemnification Expenses incurred by
Ceridian Group Members only:
(i) to the extent that the aggregate amount of any and all
Losses and Indemnification Expenses exceeds $975,000; and
-86-
<PAGE>
(ii) to the extent that the aggregate amount required to be paid by
FDC pursuant to SECTION 8.2(a)(i)-(iii) shall not exceed $11,375,000.
(c) Notwithstanding the limitations in SECTION 8.2(b);
(i) the limitations in SECTION 8.2(b)(i)-(ii) shall not apply to
(A) any Losses or Indemnification Expenses incurred as result of
a failure to pay or discharge an Excluded NTS Liability or any
obligation set forth in ARTICLE III, (B) any Losses or
Indemnification Expenses incurred as a result of inaccuracies of
the representations and warranties contained in SECTIONS 6.1,
6.2, 6.3(a)-(c), 6.6, 6.7 and (C) any Losses and Indemnification
Expenses incurred as a result of a breach by FDC, IPS, NTS or
FDFS of their respective covenants and obligations set forth in
SECTIONS 7.3, 7.4, 7.5, 7.9, 7.10, 9.2 and 9.10;
(ii) the limitations SECTION 8.2(b)(i) shall not apply to Losses
and Indemnification Expenses incurred as a result of a breach by
FDC, IPS, NTS or FDFS of their respective covenants and
obligations set forth in SECTION 7.1;
(iii) none of (A) any Losses or Indemnification Expenses
incurred as a result of a failure to pay or discharge an Excluded
NTS Liability or any obligation set forth in ARTICLE III, (B) any
Losses or Indemnification Expenses incurred as a result of
inaccuracies of the representations and warranties contained in
SECTIONS 6.1, 6.2, 6.3(a)-(c), 6.6, 6.7, and (C) any Losses and
Indemnification Expenses incurred as a result of a breach by FDC,
IPS, NTS or FDFS of their respective covenants and obligations
set forth in SECTION 7.3, 7.4, 7.5, 7.9, 7.10, 9.2 and 9.10;
shall be applied toward the amounts specified in SECTION
8.2(b)(i)-(ii); and
(iv) the Losses and Indemnification Expenses incurred as a
result of a breach by FDC, IPS or NTS of their respective
covenants and obligations set forth in SECTION 7.1 shall not be
applied toward the amount specified in SECTION 8.2(b)(i).
(d) The indemnification provided for in this SECTION 8.2 shall
terminate 3 years after the date hereof (and no claims shall be made by any
Ceridian Group Member under this SECTION 8.2 thereafter), except that the
indemnification by FDC and its Affiliates shall continue as to:
(i) the obligations of NTS and FDFS under the NTS Instrument of
Assignment, the FDFS Instrument of Assumption, the NTS Canadian Instrument of
Assignment or the NTS Canadian Instrument of Assumption, as to which no time
limitation shall apply;
-87-
<PAGE>
(ii) the obligations of FDC or IPS set forth in ARTICLE III, the
representations and warranties set forth in SECTIONS 6.1, 6.2, 6.3(a)-(c),
6.6, 6.7 and the covenants of FDC and its Affiliates set forth in SECTIONS
7.3, 7.4, 7.5, 7.10, 9.2, 9.6, 9.10 and 9.13, as to all of which no time
limitation shall apply;
(iii) the covenants set forth in SECTIONS 7.1 and 7.2(b) as to which
the indemnification provided for in this SECTION 8.2 shall terminate one
year after the expiration of the respective periods provided for therein;
and
(iv) any Losses or Indemnification Expenses of which any Ceridian
Group Member has notified FDC or IPS in accordance with the requirements of
SECTION 8.3 on or prior to the date such indemnification would otherwise
terminate in accordance with this SECTION 8.2, as to which the obligation
of FDC shall continue until the liability of FDC shall have been determined
pursuant to this ARTICLE VIII, and FDC shall have reimbursed all Ceridian
Group Members for the full amount of such Losses and Indemnification
Expenses in accordance with this ARTICLE VIII.
(e) Notwithstanding anything in this SECTION 8.2 to the contrary, FDC
shall not indemnify or hold any Ceridian Group Member harmless from or against
any Losses or Indemnification Expenses incurred by such Ceridian Group Member in
connection with or arising from any matter on SCHEDULE 8.2, it being understood
and agreed that any such Losses or Indemnification Expenses shall constitute
Assumed NTS Liabilities notwithstanding anything to the contrary set forth in
SCHEDULE 2.4 of this Agreement.
8.3. NOTICE OF CLAIMS. Any FDC Group Member or Ceridian Group Member
(the "INDEMNIFIED PARTY") seeking indemnification hereunder shall give to the
party obligated to provide indemnification to such Indemnified Party (the
"INDEMNITOR") a notice (a "CLAIM NOTICE") describing in reasonable detail the
facts giving rise to any claim for indemnification hereunder and shall include
in such Claim Notice (if then known) the amount or the method of computation of
the amount of such claim, and a reference to the provision of this Agreement or
any other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is based; PROVIDED, HOWEVER, that a Claim Notice
in respect of any action at law or suit in equity by or against a third Person
as to which indemnification will be sought shall be given promptly after the
action or suit is commenced; and PROVIDED FURTHER that failure to give such
notice shall not relieve the Indemnitor of its obligations hereunder except to
the extent it shall have been prejudiced by such failure.
(b) After the giving of any Claim Notice pursuant hereto, the amount
of indemnification to which an Indemnified Party shall be entitled under this
ARTICLE VIII shall be determined: (i) by the written agreement between the
Indemnified Party and the Indemnitor; (ii) by a final judgment or decree of any
court of competent jurisdiction; or (iii) by any other means to which the
Indemnified Party and the Indemnitor shall agree. The judgment or decree of a
court shall be deemed final when the time for appeal, if any, shall have expired
and no appeal shall have been taken or when all appeals taken shall have been
finally determined. The Indemnified Party
-88-
<PAGE>
shall have the burden of proof in establishing the amount of Loss and
Indemnification Expense suffered by it.
8.4. THIRD-PERSON CLAIMS. (a) In order for an Indemnified Party to
be entitled to any indemnification provided for under this Agreement in respect
of, arising out of or involving a claim or demand made by any third Person
against the Indemnified Party (a "THIRD-PERSON CLAIM"), such Indemnified Party
shall give to an Indemnitor a Claim Notice relating to the Third-Person Claim
within 15 days after receipt by such Indemnified Party of written notice of the
Third-Person Claim; PROVIDED, HOWEVER, that failure to give such notice shall
not relieve an Indemnitor of its obligations hereunder except to the extent the
Indemnitor shall have been prejudiced by such failure (except that the
Indemnitor shall not be liable for any Indemnification Expenses incurred during
the period in excess of the initial 15 days in which the Indemnified Party
failed to give such notice) (it being understood that the Indemnified Party
shall use good faith efforts to notify the Indemnitor promptly upon receipt of
any oral or written notice of a Third-Person Claim). Thereafter, the
Indemnified Party shall deliver to the Indemnitor, within five business days
after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party relating to
the Third-Person Claim. Notwithstanding the foregoing, should an Indemnified
Party be physically served with a complaint with regard to a Third-Person Claim,
the Indemnified Party must notify an Indemnitor with a copy of the complaint
within five business days after receipt thereof and shall deliver to the
Indemnitor within seven business days after the receipt of such complaint copies
of notices and documents (including court papers) received by the Indemnified
Party relating to the Third-Person Claim; PROVIDED, HOWEVER, that failure to
give such notice shall not relieve the Indemnitor of its obligations hereunder
except to the extent the Indemnitor shall have been prejudiced by such failure.
(b) (i) In the event of a Third-Person Claim an Indemnitor shall have
the absolute right after the receipt of notice, at its option and at its own
expense, to be represented by counsel of its choice (which shall be satisfactory
to the Indemnified Party) and to defend any proceeding, claim, or demand which
relates to any Loss or Indemnification Expense indemnified against hereunder if
the Indemnitor gives written notice to the Indemnified Party of its intention to
defend a ("NOTICE TO DEFEND") within seven business days following receipt of
the Claim Notice. The Notice to Defend must also state that the Indemnitor
agrees to fully indemnify the Indemnified Party for the Third-Person Claim to
the extent provided for in this ARTICLE VIII; PROVIDED, HOWEVER, that the
Indemnified Party may participate in any such proceeding with counsel of its
choice and at its expense. The parties hereto agree to cooperate fully with
each other in connection with the defense, negotiation or settlement of any such
legal proceeding, claim or demand. To the extent an Indemnitor elects not to
defend such proceeding, claim or demand or fails to give a Notice to Defend
within such seven business-day period, and the Indemnified Party defends against
or otherwise deals with any such proceeding, claim or demand, the Indemnified
Party may retain counsel, at the expense of the Indemnitor to the extent
provided for in this ARTICLE VIII, and control the defense of such proceeding.
Neither the Indemnitor nor the Indemnified Party may settle any such proceeding
which settlement obligates the other party, pursuant to such settlement or this
ARTICLE VIII, to pay money, to perform obligations, to refrain
-89-
<PAGE>
from performing acts or to admit liability without the consent of the other
party which shall not be unreasonably withheld.
(ii) After any final judgment or award shall have been rendered by a
court, arbitration board or administrative agency of competent jurisdiction and
the time in which to appeal therefrom has expired, or a settlement shall have
been consummated, or the Indemnified Party and the Indemnitor shall arrive at a
mutually binding agreement with respect to each separate matter alleged to be
indemnified by an Indemnitor hereunder, the Indemnified Party shall forward to
the Indemnitor notice of any sums due and owing by it with respect to such
matter and the Indemnitor shall pay all of the sums so owing to the Indemnified
Party by wire transfer, certified or bank cashier's check within 30 days after
the date of such notice.
(iii) The Indemnified Party shall neither be required to refrain from
paying or satisfying any claim which the Indemnitor has not acknowledged in
writing its obligations to indemnify the Indemnified Party, provided that the
Indemnified Party shall have given notice of such claim to the Indemnitor in
accordance with SECTION 8.3 and 8.4, or which has matured by court judgment or
decree, unless appeal is taken thereafter and proper appeal bond posted by the
Indemnitor, nor shall the Indemnified Party be required to refrain from paying
or satisfying any Third-Person Claim after and to the extent that such
Third-Person Claim has resulted in an unstayed permanent injunction or other
similar equitable relief against the Indemnified Party (unless such claim shall
have been discharged or enforcement thereof stayed by the filing of a legally
permitted bond by the Indemnitor or otherwise, at its sole expense).
(c) If there shall be any conflicts between the provisions of this
SECTION 8.4 and SECTION 7.3(c) (relating to Tax Contests), the provisions of
SECTION 7.3(c) shall control with respect to Tax Contests.
8.5. INDEMNIFICATION PAYMENTS NET OF INSURANCE RECOVERY. In
calculating any Loss or Indemnification Expense there shall be deducted any
insurance recovery in respect thereof (and no right of subrogation shall accrue
hereunder to any insurer.) FDC and Ceridian agree to report each payment made
in respect of a Loss or Indemnification Expense as an adjustment to the Initial
Amount for income tax purposes.
ARTICLE IX
GENERAL PROVISIONS
9.1. SURVIVAL OF OBLIGATIONS. All representations, warranties,
covenants, agreements and obligations contained in this Agreement shall survive
the consummation of the transactions contemplated by this Agreement; PROVIDED,
HOWEVER, that, except as otherwise provided in ARTICLE VIII, the representations
and warranties contained in ARTICLES V and VI shall terminate on the third
anniversary of the date hereof (other than the representations and warranties
contained in SECTIONS 5.1, 5.2, 5.3, 5.6, 5.7, 6.1, 6.2, 6.3, 6.6 and 6.7, each
of which shall survive indefinitely). Except as otherwise provided herein, no
claim shall be made for the
-90-
<PAGE>
breach of any representation or warranty contained in ARTICLE V or VI or under
any certificate delivered with respect thereto under this Agreement after the
date on which such representations and warranties terminate as set forth in this
SECTION 9.1.
9.2. CONFIDENTIAL NATURE OF INFORMATION. Each party agrees that it
will treat in confidence all documents, materials and other information which it
shall have obtained regarding the other party during the course of the
negotiations leading to the consummation of the transactions contemplated
hereby, the investigation provided for herein and the preparation of this
Agreement and other related documents. Such documents, materials and
information shall not be communicated to any third Person (other than, in the
case of FDC or IPS, to its counsel, accountants, financial advisors or lenders,
and in the case of Ceridian or Comdata, to its counsel, accountants or financial
advisors or lenders). No other party shall use any confidential information in
any manner whatsoever except solely for the purpose of evaluating the
transactions contemplated herein; PROVIDED, HOWEVER, that (i) IPS, FDFS, and the
Gaming Subsidiary may use or disclose any confidential information included in
the Purchased Gaming Assets or otherwise reasonably related to the Gaming
Business or the Purchased Gaming Assets, and (ii) Comdata, the NTS Subsidiary
and Permicom may use or disclose any confidential information included in the
Purchased NTS Assets related or otherwise reasonably related to the NTS Business
or the Purchased NTS Assets. The obligation of each party to treat such
documents, materials and other information in confidence shall not apply to any
information which (a) is or becomes available to such party from a source other
than such party, (b) is or becomes available to the public other than as a
result of disclosure by such party or its agents, (c) is required to be
disclosed under applicable law or judicial process, but only to the extent it
must be disclosed, or (d) such party reasonably deems necessary to disclose to
obtain any of the consents or approvals contemplated hereby.
9.3. NO PUBLIC ANNOUNCEMENT. FDC and IPS and their Affiliates shall
not, without the approval of Ceridian, and Ceridian and Comdata and their
Affiliates shall not, without the approval of FDC, make any press release or
other public announcement concerning the transactions contemplated by this
Agreement; PROVIDED, HOWEVER, that any party may make a press release or other
public announcement; to the extent such party shall be so obligated by law or by
the rules of any stock exchange (in which case the other party shall be advised
and the parties shall use their reasonable best efforts to cause a mutually
agreeably release or announcement to be issued).
9.4. NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
(i) when delivered personally, (ii) if transmitted by facsimile when
confirmation of transmission is received, or (iii) if sent by registered or
certified mail return receipt requested or by private courier when received and
shall be addressed as follows:
-91-
<PAGE>
If to FDC, IPS, NTS or FDFS:
First Data Corporation
6200 S. Quebec
Englewood, Colorado 80111
Attention: General Counsel - Integrated Services Division
Facsimile: (303) 488-8631
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Frederick C. Lowinger
Facsimile: (312) 853-7036
If to Ceridian or Comdata, to:
Ceridian Corporation
8100 34th Avenue South
Minneapolis, MN 55425-1640
Attention: Executive Vice President, Operations
Facsimile: (612) 853-7272
with copies to:
Ceridian Corporation
8100 34th Avenue South
Minneapolis, MN 55425-1640
Attention: General Counsel
Facsimile: (612) 853-7272
Comdata Network, Inc.
5301 Maryland Way
Brentwood, TN 37027
Attention: President
Facsimile: (615) 370-7614
Comdata Network, Inc.
5301 Maryland Way
Brentwood, TN 37027
Attention: Chief Counsel
Facsimile: (615) 370-7614
-92-
<PAGE>
Carter R. Todd, Esq.
Stokes & Bartholomew, P.A.
424 Church Street, 28th Floor
Nashville, TN 37219
Facsimile: (615) 259-1470
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
9.5. SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. (a) The
rights of any party under this Agreement shall not be assignable by such party
hereto without the prior written consent of the other except that (i) any party
may assign its rights hereunder to any Affiliate; (ii) FDC may assign its rights
hereunder to a subsequent purchaser of substantially all of the assets of FDC,
IPS, NTS or FDFS; and (iii) Ceridian may assign its rights hereunder to a
subsequent purchaser of substantially all of the assets of Ceridian or Comdata.
Notwithstanding anything in this SECTION 9.5, FDFS may assign all of its rights
and obligations hereunder to any Affiliate of FDC, IPS, NTS or FDFS without the
prior written consent of Ceridian or Comdata, PROVIDED, HOWEVER, that
notification of such assignment is provided to Ceridian and Comdata and,
PROVIDED, FURTHER, that upon such assignment FDC shall remain liable to Ceridian
and Comdata for all its obligations under this Agreement. Notwithstanding
anything in this SECTION 9.5, Comdata may assign all of its rights and
obligations hereunder to any Affiliate of Comdata without the prior written
consent of FDC or its Affiliates, PROVIDED, HOWEVER, that notification of such
assignment is provided to FDC, IPS, NTS and FDFS and, PROVIDED, FURTHER, that
upon such assignment Ceridian shall remain liable to FDC, IPS, NTS and FDFS for
all of its obligations under this Agreement.
(b) Nothing contained in this Agreement or in any instrument or
document executed by any party in connection with the transactions contemplated
hereby shall create any rights in, or be deemed to have been executed for the
benefit of, any person or entity that is not a party hereto or a successor or
permitted assign of such a party.
9.6. ACCESS TO RECORDS. (a) For a period of six years after the date
hereof, Comdata and its representatives shall have reasonable access to all of
the books and records of the Gaming Business transferred to FDFS hereunder to
the extent that such access may reasonably be required by Comdata in connection
with matters relating to or affected by the operations of the Gaming Business
prior to the date hereof. Such access shall be afforded by FDFS upon receipt of
reasonable advance notice and during normal business hours. Comdata shall be
solely responsible for any costs or expenses incurred by it pursuant to this
SECTION 9.6(a). If FDFS shall desire to dispose of any of such books and
records prior to the expiration of such six-year period, FDFS shall, prior to
such disposition, give Comdata a reasonable opportunity, at Comdata's expense,
to segregate and remove such books and records as Comdata may select.
(b) For a period of six years after the date hereof, FDFS and its
representatives shall have reasonable access to all of the books and records
relating to the Gaming Business which Comdata or any of its Affiliates may
retain after the date hereof. Such access shall be afforded by Comdata and its
Affiliates upon receipt of reasonable advance notice and during
-93-
<PAGE>
normal business hours. FDFS shall be solely responsible for any costs and
expenses incurred by it pursuant to this SECTION 9.6(b). If Comdata or any of
its Affiliates shall desire to dispose of any of such books and records prior to
the expiration of such six-year period, Comdata shall, prior to such
disposition, give FDFS a reasonable opportunity, at FDFS' expense, to segregate
and remove such books and records as FDFS may select.
(c) For a period of six years after the date hereof, NTS and its
representatives shall have reasonable access to all of the books and records of
the NTS Business to the extent that such access may reasonably be required by
IPS in connection with matters relating to or affected by the operations of the
NTS Business prior to the date hereof. Such access shall be afforded by Comdata
upon receipt of reasonable advance notice and during normal business hours. NTS
shall be solely responsible for any costs or expenses incurred by it pursuant to
this SECTION 9.6(c). If Comdata shall desire to dispose of any of such books
and records prior to the expiration of such six-year period, Comdata shall,
prior to such disposition, give NTS a reasonable opportunity, at IPS' expense,
to segregate and remove such books and records as NTS may select.
(d) For a period of six years after the date hereof, Comdata and its
representatives shall have reasonable access to all of the books and records
relating to the NTS Business which NTS or any of its Affiliates may retain after
the date hereof. Such access shall be afforded by NTS and its Affiliates upon
receipt of reasonable advance notice and during normal business hours. Comdata
shall be solely responsible for any costs and expenses incurred by it pursuant
to this SECTION 9.6(d). If NTS or any of its Affiliates shall desire to dispose
of any of such books and records prior to the expiration of such six-year
period, NTS shall, prior to such disposition, give Comdata a reasonable
opportunity, at Comdata's expense, to segregate and remove such books and
records as Comdata may select.
9.7. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Exhibits
and Schedules referred to herein and the documents delivered pursuant hereto
contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all prior agreements,
understandings or letters of intent between or among any of the parties hereto.
This Agreement shall not be amended, modified or supplemented except by a
written instrument signed by an authorized representative of each of the parties
hereto.
9.8. INTERPRETATION. Article titles and headings to sections herein
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement. The Schedules
and Exhibits referred to herein shall be construed with and as an integral part
of this Agreement to the same extent as if they were set forth verbatim herein.
9.9. WAIVERS. Any term or provision of this Agreement may be waived,
or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement
-94-
<PAGE>
or any part hereof or the right of any party thereafter to enforce each and
every such provision. No waiver of any breach of this Agreement shall be held
to constitute a waiver of any other or subsequent breach.
9.10. EXPENSES. Each party hereto will pay all costs and expenses
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements and conditions contained herein
on its part to be performed or complied with, including the fees, expenses and
disbursements of its counsel and accountants.
9.11. PARTIAL INVALIDITY. Wherever possible, each provision hereof
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
9.12. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement, and
shall become binding when one or more counterparts have been signed by each of
the parties hereto and delivered to each of FDC and Ceridian.
9.13. FURTHER ASSURANCES. (a) From time to time following the date
hereof, Comdata shall, at FDFS' expense, execute and deliver, or cause to be
executed and delivered, to FDFS, such other instruments of conveyance and
transfer as FDFS may reasonably request or as may be otherwise necessary to more
effectively convey and transfer to, and vest in, FDFS and put FDFS in possession
of, any part of the Purchased Gaming Assets.
(b) From time to time following the date hereof, shall, at Comdata's
(or, in the case of the NT Canada Shares, Permicom) expense, execute and
deliver, or cause to be executed and delivered, to Comdata (or, in the case of
the NT Canada Shares, Permicom) such other instruments of conveyance and
transfer as Comdata (or, in the case of the NT Canada Shares, Permicom) may
reasonably request or as may be otherwise necessary to more effectively convey
and transfer to, and vest in, Comdata (or, in the case of the NT Canada Shares,
Permicom) and put Comdata (or, in the case of the NT Canada Shares, Permicom) in
possession of, the Purchased NTS Assets.
9.14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of Delaware.
-95-
<PAGE>
9.15. ATTORNEY'S FEES. In connection with any legal proceeding, suit
or action arising out of a dispute regarding the terms of this Agreement, the
party that is determined by the court or tribunal to have substantially
prevailed in such proceeding, suit or action shall be entitled to recover from
the other party thereto its reasonable costs, fees and expenses incurred in
connection with such legal proceeding, suit or action (including the reasonable
fees and expenses of its legal counsel and other professional advisors).
-96-
<PAGE>
ACCORDINGLY, the parties hereto have caused this Agreement to be
executed the day and year first above written.
FIRST DATA CORPORATION
/s/ Charles Fote
--------------------------------
By Charles Fote
-----------------------------
Its Executive Vice President
-----------------------------
INTEGRATED PAYMENT SYSTEMS INC.
/s/ Charles Fote
--------------------------------
By Charles Fote
-----------------------------
Its Authorized Representative
-----------------------------
NTS, INC.
/s/ Charles Fote
--------------------------------
By Charles Fote
-----------------------------
Its Authorized Representative
-----------------------------
FIRST DATA FINANCIAL SERVICES, L.L.C.
/s/ Charles Fote
--------------------------------
By Charles Fote
-----------------------------
Its Authorized Representative
-----------------------------
Signature Page 1
to
Exchange Agreement
dated January 17, 1998
<PAGE>
CERIDIAN CORPORATION
/s/ Gary M. Nelson
--------------------------------
By Gary M. Nelson
-----------------------------
Its Vice President
-----------------------------
COMDATA NETWORK, INC.
/s/ Gary M. Nelson
--------------------------------
By Gary M. Nelson
-----------------------------
Its Vice President
-----------------------------
PERMICOM PERMITS SERVICES, INC.
/s/ Gary M. Nelson
--------------------------------
By Gary M. Nelson
-----------------------------
Its Vice President
-----------------------------
Signature Page 2
to
Exchange Agreement
dated January 17, 1998
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.04
<SEQUENCE>3
<DESCRIPTION>EXHIBIT 2.04
<TEXT>
<PAGE>
Exhibit 2.04
CONFIDENTIAL INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND IS BEING FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH OMISSIONS
IN THIS DOCUMENT ARE INDICATED BY THE REFERENCE
"[CONFIDENTIAL INFORMATION OMITTED]".
SHARE PURCHASE AGREEMENT
THE TORONTO-DOMINION BANK
and
BUSINESS WIND0WS INC.
and
3454916 CANADA INC.
and
CERIDIAN CANADA LTD.
and
CERIDIAN CORPORATION
and
CERIDIAN CANADA HOLDINGS, INC.
JANUARY 26,1998
<PAGE>
TABLE OF CONTENTS
1. DEFINED TERMS AND SCHEDULES 2
1.1 Definitions 2
1.2 Additional Definitions 6
1.3 Exhibits and Schedules 7
1.4 Headings and Table of Contents 7
1.5 Gender and Number 7
1.6 Currency 7
1.7 Invalidity of Provisions 8
1.8 Entire Agreement 8
1.9 Waiver and Amendment 8
1.10 Generally Accepted Accounting Principles 8
1.11 Governing Law and Attornment 8
2. PURCHASE AND SALE 9
2.1 Purchase and Sale of Assets 9
2.2 Purchase and Sale of Shares 9
2.3 Excluded Contracts and Software 9
2.4 Ancillary Agreements 9
2.5 Deliveries 9
3. PURCHASE PRICE 10
3.1 Purchase Price 10
3.2 Adjustments 10
4. REPRESENTATIONS AND WARRANTIES OF THE BANK AND BW 11
4.1 Organization, Standing and Authority 11
4.2 Authorization 12
4.3 No Conflicting Agreements 12
4.4 Bank Consents 12
4.5 The Corporation 12
4.6 Authorization 13
4.7 Consents re: the Corporation 13
4.8 Title to Shares 13
4.9 Title to Payroll Assets 13
4.10 Legal Proceedings 13
4.11 No Option 14
4.12 Conduct of Payroll Business 14
4.13 Financial Information 14
4.14 Litigation 14
4.15 Payroll Client Contracts 14
4.16 Proprietary Payroll Software 15
<PAGE>
4.17 Labour Relations 15
(a) Employees 15
(b) Written or Oral Contracts 16
(c) Collective Agreements 16
(d) Liabilities to Employees 16
(e) Compliance with Laws 16
(f) No Changes 17
(g) Retiree Benefits 17
4.18 Payroll Trademarks 17
4.19 No Finder's Fee or Broker's Fee 18
4.20 Bank's Residence 18
4.21 Registration for Taxes 18
4.22 Plans 18
4.23 List of Customers 18
4.24 Undisclosed Liabilities 18
4.25 Operation of the Businesses 19
4.26 Product Defects 19
4.27 Organization, Standing and Authority of BW 19
4.28 BW Shares 19
4.29 BW Authorization 19
4.30 No Conflicting BW Agreements 19
4.31 BW Consents 20
4.32 Title to Assets 20
4.33 Legal Proceedings 20
4.34 No Option 20
4.35 Financial Information 20
4.36 Undisclosed Liabilities 21
4.37 Conduct of the HRMS Business 21
4.38 HRMS Litigation 21
4.39 HRMS Client Contracts 21
4.40 Proprietary HRMS Software 21
4.41 HRMS Trademarks 22
4.42 Labour Relations 23
4.43 No Finder's Fee or Broker's Fee 23
4.44 BW's Residence 23
4.45 BW Registration for Taxes 23
5. REPRESENTATIONS AND WARRANTIES OF CERIDIAN, CERIDIAN HOLDINGS AND
THE PURCHASER 23
5.1 Organization, Standing and Authorization 23
5.2 Authorization, Execution and Enforceability 23
5.3 No Conflicting Agreements 24
5.4 Consents 24
5.5 Legal Proceedings 24
5.6 Compliance with Laws 24
<PAGE>
5.7 No Bankruptcy Proceedings 24
5.8 Organization, Standing and Authorization 25
5.9 Authorization, Execution and Enforceability
re: Ceridian and Ceridian Holdings 25
5.10 No Conflicting Agreements 25
5.11 Consents 25
5.12 Legal Proceedings 26
5.13 Authorization, Execution and Enforceability re: the
Corporation 26
5.14 No Conflicting Agreements 26
5.15 Consents 26
5.16 Duly Licenced 26
5.17 Brokers' and Finders' Fees 27
5.18 Corporation Plans 27
6. SURVIVAL AND INDEMNIFICATION 27
6.1 Survival 27
6.2 Indemnification by Bank and BW 27
6.3 Software and Trademark Indemnification 28
6.4 Indemnification by the Purchaser 30
6.5 Indemnification for Claims Other Than
Third Party Claims 31
6.6 Indemnification against Third Party Claims 31
6.7 Expiry of Liability 33
6.8 Limit 33
7. COVENANTS 33
7.1 Covenants of the Bank and BW 33
(a) Reasonable Efforts to Maintain and Preserve 33
(b) Notice of Cessation in Ordinary Course 34
(c) Covenant Not to Compete 34
(d) Non-Solicitation 35
(e) Documents 36
(o Reasonable Assistance 36
7.2 Covenants of the Purchaser and the Corporation 36
(a) Documents 36
(b) Non-Solicitation 36
(c) Receivables 37
7.3 Other Covenants 37
(a) Employees 37
(b) Bank's Benefit Plans 41
(c) Pension Plan 43
(d) Competition Act/Investment Canada Act 43
(e) Confidentiality 43
(f) Consents Required in Contracts 44
(h) Trust Funds Under Administration 44
(i) Third Party Payments 44
(j) Transfer Agreement Fees 45
<PAGE>
(k) Returns 45
8. CONDITIONS OF CLOSING 45
8.1 For the Benefit of the Purchaser 45
(a) Representations and Warranties Remain Correct 46
(b) Compliance with Covenants 46
(c) No Actions or Proceedings 46
(d) Consents, Authorizations and Registrations 46
(e) Agreements 46
(f) Consents 47
8.2 For the Benefit of the Bank and BW 47
(a) Representations and Warranties Remain Correct 47
(b) Compliance with Covenants 48
(c) No Actions or Proceedings 48
(d) Consents, Authorizations and Registrations 48
(e) Documents 48
(o Approval 48
9. CLOSING 49
10. GENERAL PROVISIONS 49
10.1 Independent Contractors 49
10.2 Notices 49
10.3 Exclusion of Consequential Damages 50
10.4 Termination 50
10.5 Time of the Essence 51
10.6 Public Notices and Confidentiality 51
10.7 Year 2000 Estimates 51
10.8 Counterparts 51
10.9 No Assignment 51
10.10 Further Assurances 52
10.11 Language 52
10.12 Successors and Assigns 52
<PAGE>
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made as of the 26th day of January, 1998,
AMONG:
THE TORONTO-DOMINION BANK, a Canadian chartered bank,
(hereinafter called the "Bank"),
OF THE FIRST PART,
-and-
BUSINESS WINDOWS INC., a corporation existing under the laws of
Ontario
(hereinafter called "BW'),
OF THE SECOND PART,
- and -
3454916 CANADA INC., a corporation existing under the laws of
Canada,
(hereinafter called the "Corporation"),
OF THE THIRD PART,
-and-
CERIDIAN CANADA LTD., a corporation existing under the laws of
Canada,
(hereinafter called the "Purchaser"),
OF THE FOURTH PART,
- and -
CERIDIAN CORPORATION, a corporation existing under the laws of
Delaware,
(hereinafter called "Ceridian"),
OF THE FIFTH PART,
- and -
<PAGE>
- Page 2 -
CERIDIAN CANADA HOLDINGS, INC., a corporation existing under the laws of
Delaware,
(hereinafter called "Ceridian Holdings"),
OF THE SIXTH PART.
WHEREAS the Bank and BW own and operate the Payroll Business and the HRMS
Business;
AND WHEREAS effective as of the Effective Transfer Time, the Bank and BW
intend to sell to the Corporation and the Corporation intends to purchase the
Purchased HRMS Assets and the Purchased Payroll Assets, for valuable
consideration, upon and subject to the terms and conditions of the Transfer
Agreement;
AND WHEREAS upon the Effective Transfer Time, the Bank and BW shall be
the registered and beneficial owners of the Shares;
AND WHEREAS effective as of the Effective Time, the Bank and BW intend
to sell to the Purchaser and the Purchaser intends to purchase from the Bank
and BW all of the Shares, for valuable consideration, upon and subject to the
terms and conditions of this Agreement;
AND WHEREAS each of Ceridian and Ceridian Holdings is a party to this
Agreement for the purposes of guaranteeing the performance by the Corporation
(after the Effective Time) and the Purchaser of their obligations hereunder;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and agreements herein set out and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto covenant and agree as follows:
1. DEFINED TERMS AND SCHEDULES
1.1 Definitions - Where used herein, except where the context otherwise
requires, the following terms shall have the following meanings
respectively:
(a) "Absent Employees" means those employees of the Payroll Business
who are on Short-Term Disability, maternity leave, parental
leave, or other approved leave of absence (except Long-Term
Disability), as listed on Schedule 1.1(a);
(b) "Agreement" means this agreement and all schedules attached to
this agreement, in each case as they may be amended or
supplemented from time to time, and the
<PAGE>
Page 3 -
expressions "hereof', "herein", "hereto", "hereunder", "hereby"
and similar expressions refer to this agreement and, unless
otherwise indicated, references to articles and sections are to
"Articles" and "Sections" in this agreement;
(c) "Ancillary Agreements" means the Trademark Licence Agreement, the
Transitional Services Agreement and the Joint Sales and Marketing
Agreement;
(d) "Bank's Benefit Plans" means the benefit plans, arrangements,
agreements, programs, policies, or practices of the Bank set
forth in Schedule 1. I (d) hereto, and for greater certainty,
includes the Pension Plan;
(e) "Business Day" means a day other than a Saturday, Sunday or
statutory holiday in the Province of Ontario;
(f) "Closing" means the consummation and completion of the
purchase and sale by the Purchaser of the Shares and the
additional transactions and agreements provided hereunder;
(g) "Closing Date" means 10:00 a.m. Toronto time at the Closing Place
on January 30, 1998, or such other time and date as the parties
may agree upon in writing;
(h) "Closing Place" means the offices of Miller Thomson, 20 Queen
Street West, Suite 2500, Toronto, Ontario M5H 3 SI;
(i) "Designated Employees" means the employees of the Bank listed in
Schedule 4.17(a) hereto (which schedule includes Absent Employees
but excludes LTD Employees) whose employment will be continued
with the Corporation, as required pursuant to this Agreement;
(j) "Effective Date" means January 31, 1998 or such other date as the
parties may agree upon in writing, provided that in respect of
Absent Employees, the "Effective Date" means the date upon which
they commence employment with the Corporation;
(k) "Effective Time" means 12:02 a.m. (Toronto Time) on the Effective
Date, or such other time as the parties may agree upon in
writing, provided that in respect of Absent Employees, the
"Effective Time" means 12:01 a.m. on the date upon which they
commence employment with the Corporation;
(l) "Effective Transfer Time" means 12:01 a.m. (Toronto Time) on
the Effective Date, or such other time as the parties may agree
upon in writing;
<PAGE>
Page 4 -
(m) "HR/Architect" means the human resource management system of BW
which is operated under the trademark "HR/Architect";
(n) "HR/Foundation" means the human resource management system of BW
which is operated under the trademark "HR/Foundation";
(o) "HRMS Business" means the business of providing HRMS Services to
HRMS Clients carried on by BW as of the Closing Date;
(p) "HRMS Clients" mean Persons to whom BW provides HRMS Services as
of the Closing Date;
(q) "HRMS Services" means human resource management services provided
through the use of HR/Foundation and HR/Architect;
(r) "HRMS Trademarks" means "HR/Architect" and "HR/Foundation";
(s) "Joint Sales and Marketing Agreement" means the agreement dated
the .Effective Date between the Bank and the Corporation,
substantially in the form of .Exhibit "C" hereto;
(t) "Long-Term Disability" means the long-term disability plan of the
Bank applicable to employees of the Payroll Business;
(u) "LTD Employees" means the employees of the Payroll Business
collecting benefits from Long-Term Disability, all of whom are
listed on Schedule 1.I (u) hereto;
(v) "Mainframe Computer" means the host OS/390 processor owned by the
Bank and used in connection with, inter alia, the processing of
Payroll Services, and any replacement thereof,
(w) "Payflex" means the payroll processing services system of the
Bank which is operated under the trademarks "Payflex" and
"Paieflex";
(x) "Paymaster" means the payroll processing services system of the
Bank which is operated under the trademarks "Paymaster",
"Paiemaitre" and "Autopay";
(y) "PaymasterE" means the payroll processing services system of the
Bank which is operated under the name "PaymasterE";
<PAGE>
- Page 5 -
(z) "Payroll Business" means the business of providing Payroll
Services to Payroll Clients carried on by the Bank as of the
Closing Date;
(aa) "Payroll Clients" means Persons to whom the Bank provides Payroll
Services as of the Closing Date;
(bb) "Payroll Services" means payroll and payroll-related services,
including, without limitation, services processed through the use
of Payflex, Paymaster, PaymasterE, and Phone'n Pay, but excluding
payroll processed for employees of the Bank;
(cc) "Payroll Trademarks" means "Autopay", "Payflex", "Paieflex",
"Phone'n Pay", "PayLink", "Paymaster" and "Paiemaitre";
(dd) "Pension Plan" means The Pension Fund Society of The
Toronto-Dominion Bank established by the Bank, which is a
registered pension plan under the Income Tax Act (Canada) and the
Pension Benefits Standards Act (Canada) in which the Designated
Employees, among others, contribute to and accrue pension
benefits;
(ee) "Person" means an individual, partnership, joint venture,
association, corporation, trust, or a government or any
department or agency thereof. or any other entity;
(ff) "Phone'n Pay" means the payroll processing services system of the
Bank which is operated under the trademark "Phone'n Pay" and the
tradename "Paiedirect";
(gg) "Purchase Price" means the price payable by the Purchaser to the
Bank and BW for the Shares, as determined in accordance with the
provisions of Article 3 hereof;
(hh) "Shares" means 49,687,167 common shares of the Corporation, being
all of the issued and outstanding common shares of the
Corporation;
(ii) "Short-Term Disability" means the short-term disability plan of
the Bank applicable to employees of the Payroll Business;
(jj) "Taxes" means federal, provincial or municipal taxes, including,
without limitation, income, sales, goods and services, excise,
business, duties and other like charges and all penalties,
interest and fines with respect thereto, payable to any federal,
provincial, municipal, local or other government or governmental
agency, authority, board, bureau or commission, domestic or
foreign, and "Tax
<PAGE>
- Page 6 -
Legislation" means legislation pursuant to which Taxes may be
exigible or payable;
(kk) "Trademark Licence Agreement" means the trademark licence
agreement dated the Effective Date between the Bank and the
Corporation, substantially in the form of Exhibit "A" hereto,
pursuant to which each of the Corporation and the Bank is granted
a limited licence and right to use certain trademarks of the
other in connection with post-Closing products and promotional
materials of the HRMS Business and the Payroll Business;
(11) "Transaction Fees" means, with respect to the twelve-month period
ended October 31, 1997, the aggregate of. (i) (A) fees invoiced
by the Bank during such period with respect to payroll
transactions, maintenance, custom programming, implementation,
customer training, T4 and other regulatory form preparation, and
other similar transactions, and (B) interest income (with imputed
interest income calculated at a rate of 3.85% per annum on the
average daily cash balances of the Payroll Business), all with
respect to the Payroll Business, and (ii) fees invoiced by BW
during such period with respect to software sales, maintenance,
custom programming, implementation and customer training, and
other similar transactions, all with respect to the HRMS
Business;
(mm) "Transfer Agreement" means the asset transfer agreement to be
entered into between the Bank, BW and the Corporation, pursuant
to which, effective as of the Effective Transfer Time, the Bank
and BW shall transfer the Purchased HRMS Assets and the Purchased
Payroll Assets to the Corporation and the Corporation shall issue
all but one of the Shares to the Bank and BW and shall assume and
become liable for the Assumed HRMS Liabilities and the Assumed
Payroll Liabilities, substantially in the form of Exhibit "D"
hereto;
(nn) "Transferred Employees" means the Designated Employees who do not
reject the continued employment with the Corporation pursuant to
Article 7;
(oo) "Transition Period" has the meaning ascribed to it in the
Transitional Services Agreement; and
(pp) "Transitional Services Agreement" means the transitional services
agreement dated the Effective Date, between the Bank and the
Corporation, substantially in the form of Exhibit "B" hereto.
1.2 Additional Definitions - the terms "Assumed HRMS Liabilities",
"Assumed Payroll Liabilities", "HRMS Contracts", "Payroll Contracts",
"Excluded Contracts", "Excluded Software", "Payroll Clients",
"Purchased HRMS Assets", "Purchased Payroll Assets",
<PAGE>
- Page 7 -
"Proprietary Payroll Software" and "Proprietary HRMS
Software" shall have the meaning ascribed to them in the
Transfer Agreement.
1.3 Exhibits and Schedules - The following are the exhibits and schedules
annexed hereto which are incorporated by reference herein and are
deemed to be a part hereof:
Exhibits
"A" - Trademark Licence Agreement
"B" - Transitional Services Agreement
"C" - Joint Sales and Marketing Agreement
"D" - Transfer Agreement
Schedules
1. 1 (a) - Absent Employees
1. 1 (d) - Bank Benefit Plans
1. I (u) - LTD Employees
3.1 - Calculation of the Purchase Price
4.13 - Financial Information
4.15 - Material Non-Standard Payroll Contracts
4.16 - Year 2000
4.17(a) - Designated Employees
4.17(b) - Standard Bank Employment Contracts
4.17(f) - Plan Changes
4.17(g) - Retiree Benefits
4.24 - Undisclosed Liabilities
5.18 - Corporation Plans
8. 1 (f) - Material Contracts
10.7 - Year 2000 Estimates
1.4 Headings and Table of Contents - The inclusion of headings and a table
of contents in this Agreement is for convenience of reference only and
shall not affect the construction or interpretation of this Agreement.
1.5 Gender and Number - In this Agreement, unless the context otherwise
requires, words importing the singular include the plural and vice
versa and words importing gender include all genders.
1.6 Currency - Except where otherwise expressly provided, all amounts in
this Agreement are stated and shall be paid in Canadian currency.
<PAGE>
- Page 8 -
1.7 Invalidity of Provisions - Each of the provisions contained in this
Agreement is distinct and severable and a declaration of invalidity or
unenforceability of any such provision or part thereof by a court of
competent jurisdiction shall not affect the validity or enforceability
of any other provision of this Agreement. Any provision of this
Agreement which is illegal, prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such illegality, prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
1.8 Entire Agreement - This Agreement, the Ancillary Agreements and the
Transfer Agreement embody the entire agreement and understanding among
the parties hereto and supersede all prior agreements between such
parties in connection with the subject matter hereof Other than the
foregoing mentioned agreements, there are no representations,
warranties or covenants (including any that may be implied by statute)
and there are no agreements between the parties in connection with
such subject matter except as specifically set forth or referred to in
this Agreement. No reliance is placed on any warranty,
representation, opinion, advice or assertion of fact made by any party
hereto or its employees or agents, except to the extent that the same
has been reduced to writing and included as a term of this Agreement
or in any of the foregoing mentioned agreements. Accordingly, there
shall be no liability, either in tort or in contract, assessed in
relation to any such warranty, representation, opinion, advice or
assertion of fact, except to the extent aforesaid. Except as provided
in this Agreement, neither this Agreement nor any of the terms hereof
may be changed, waived, discharged or terminated otherwise than by an
instrument in writing signed by the party against which enforcement of
such change, waiver, discharge or modification is sought.
1.9 Waiver and Amendment - Except as expressly provided in this Agreement,
no amendment, waiver or termination of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No
waiver of any provision of this Agreement shall constitute a waiver of
any other provision nor shall any waiver of any provision of this
Agreement constitute a continuing waiver unless otherwise expressly
provided. No failure to enforce any provision hereof shall operate as
a waiver of such provision or of any other provision hereof.
1.10 Generally Accepted Accounting Principles - In this Agreement, except
to the extent otherwise expressly provided, references to "generally
accepted accounting principles" mean, for all principles stated in the
Handbook of the Canadian Institute of Chartered Accountants, such
principles so stated.
1.11 Governing Law and Attornment - This Agreement shall be governed by and
construed in accordance with the law of the Province of Ontario and
the federal law of Canada
<PAGE>
Page 9 -
applicable therein. The parties shall attorn to the non-exclusive
jurisdiction of the courts of the Province of Ontario.
2. PURCHASE AND SALE
2.1 Purchase and Sale of Assets - Subject to the terms and conditions
contained herein, the Bank, BW and the Corporation covenant and agree
to enter into the Transfer Agreement on the (,'losing Date, pursuant
to which, effective as of the Effective Transfer Time, the Bank and BW
shall sell, assign and transfer the Purchased Payroll Assets and the
Purchased HRMS Assets to the Corporation and the Corporation shall
purchase and acquire the Purchased Payroll Assets and the Purchased
HRMS Assets, in consideration for the issuance to the Bank and BW of
all of the Shares (less one common share of the Corporation issued to
the Bank prior to the Effective Transfer Time), and the Corporation
shall assume and become liable for the Assumed Payroll Liabilities and
the Assumed HRMS Liabilities on and after the Effective Transfer Time.
2.2 Purchase and Sale of Shares - Subject to the terms and conditions
contained herein, the Bank and BW covenant and agree to sell, assign
and transfer the Shares to the Purchaser, and the Purchaser covenants
and agrees to purchase and acquire the Shares, on the Closing Date but
with effect as of the Effective Time, in consideration for payment by
the Purchaser to the Bank and BW of the Purchase Price, subject to
adjustments, which shall be allocated between the Bank and BW in
accordance with Section 3. 1.
2.3 Excluded Contracts and Software - The Purchaser and the Corporation
acknowledge and agree that they have been notified of the nature and
purpose of the Excluded Contracts and the Excluded Software, the
services and functions of which the Bank shall make available to the
Corporation during the Transition Period, subject to the terms of the
Transitional Services Agreement. If from and after the end of the
Transition Period the Corporation requires goods and services of the
type provided under the Excluded Contracts, or software with
functionality of the type provided by the Excluded Software, the
Corporation shall be responsible, at its cost, and with the reasonable
cooperation of the Bank and BW, to establish its own contractual
relationships with the parties to the Excluded Contracts, or to make
alternative arrangements for the provision of the goods and services
that were provided to the Bank or BW pursuant to the Excluded
Contracts, and to separately licence, purchase or establish equivalent
software to the Excluded Software.
2.4 Ancillary Agreements - On Closing, the parties hereto covenant and
agree to enter into the Ancillary Agreements applicable to them.
2.5 Deliveries - Delivery of and access to substantially all of the
Purchased HRMS Assets and the Purchased Payroll Assets shall be made
by the Bank and BW to the Corporation
<PAGE>
- Page 10 -
on the Closing Date and delivery of and access to the remaining
Purchased HRMS Assets and Purchased Payroll Assets shall be made by
the Bank and BW to the Corporation as soon as reasonably practicable
after Closing.
3. PURCHASE PRICE
3.1 Purchase Price - The Purchase Price for the Shares shall be an amount
equal to $49,687,167, which is the aggregate of (i) $49,471,494, being
the product of 1.5 and the amount of the Transaction Fees, the
calculation of which is set forth in Schedule 3. 1;
(ii) $1, being the amount paid by the Bank as the subscription price
for one common share of the Corporation; and (iii) $215,672, being the
agreed Canadian dollar equivalent of US$150,000. The Purchase Price
shall be allocated as to $100,000 to BW, and the balance to the Bank.
The Purchase Price shall be subject to adjustments determined in
accordance with Section 3.2 and shall be payable by the Purchaser to
the Bank (on behalf of the Bank and BW) on the Closing Date by
certified cheque or bank draft of a Canadian chartered bank or by wire
transfer of immediately available funds to the Bank's account
designated by the Bank in writing to the Purchaser at least two
Business Days prior to the Closing Date.
3.2 Adjustments - The parties agree that the Purchase Price shall be
adjusted by those items properly subject to adjustment with respect to
the Payroll Business and the HRMS Business transferred pursuant to the
Transfer Agreement including, without limitation, (i) work-in-process
accrued up to the Effective Transfer Time, (ii) prepaid expenses
related to the HRMS Business and the Payroll Business, (iii)
contractual obligations of the Bank and BW which have been prepaid to
the Bank or BW or for which deposits have been submitted to the Bank
or BW and (iv) obligations or remittances with respect to the
Designated Employees including, without limitation, statutory vacation
pay, premiums for unemployment insurance, provincial health care
plans, employer health tax and Quebec and Canada Pension Plan, accrued
wages, salaries and bonuses, (collectively the "Adjustable Items"),
which shall be calculated and adjusted as of the Effective Date. The
principle of the adjustment procedure is that the Bank and BW are
entitled to the benefits of and are responsible for and shall pay all
applicable amounts relating to the foregoing for the period ending as
of the Effective Transfer Time, and the Corporation is entitled to the
benefits of and is responsible for and shall pay all applicable
amounts relating to the foregoing for the period commencing from and
after the Effective Transfer Time. To the extent that the Bank or BW
has paid amounts relating to the Adjustable Items, the benefit of
which will continue from and after the Effective Date, the Purchase
Price shall be adjusted in favour of the Bank or BW, as the case may
be, in the amount which is attributable to the HRMS Business or the
Payroll Business for the period following the Effective Transfer Time
and the benefit of which is receivable by the Corporation following
the Effective Transfer Time. To the extent that the Bank or BW has
received amounts relating to Adjustable Items which are properly
allocable to the HRMS Business
<PAGE>
- Page 11 -
or the Payroll Business from and after the Effective Transfer Time,
the Purchase Price shall be adjusted in favour of the Purchaser in the
amount which is attributable to the HRMS Business or the Payroll
Business for the period following the Effective Date.
An adjustment shall also be made between the parties, if necessary,
with respect to funds under administration, including funds held on
behalf of Payroll Clients pursuant to statutory trusts, to be
transferred by the Bank to the Corporation pursuant to Section 7.3(h),
in the event that an incorrect amount of such funds is transferred.
The parties agree to use reasonable efforts to determine and account
for any such adjustments prior to Closing. On or before 120 days
after the Closing Date, the parties shall co-operate to prepare a
statement of adjustments for Adjustable Items determined after the
Closing, and any required payments shall be made forthwith thereafter.
Adjustable Items determined after such period shall be itemized on a
case by case basis and any required payments shall be made forthwith
thereafter.
In the event that the parties are unable to agree on the amount of
adjustments for all Adjustable Items, adjustments shall be made
between the parties with respect to those of the Adjustable Items set
forth in the statement of adjustments that are not in dispute. With
respect to those of the Adjustable Items that are subject to a
dispute, in the event that the parties, acting reasonably, are unable
to reach agreement, the dispute shall be presented for determination
to a major national accounting firm as agreed by the Bank and the
Purchaser as soon as possible after the 120-day period after the
Closing Date referred to above. Such accounting firm shall act as an
expert and not an arbitrator, and the decision of the accounting firm
shall be conclusive and binding on the Bank and the Purchaser, and
shall be final and not subject to judicial review. It is the
intention of the parties hereto that the decision of the accounting
firm shall be enforced to the fullest extent permitted by applicable
law.
The apportionment of the fees and expenses of the accountant as
between the parties shall be the subject of determination by the
accountant.
4. REPRESENTATIONS AND WARRANTIES OF THE BANK AND BW
The Bank and BW jointly and severally represent and warrant to the Purchaser as
follows:
4.1 Organization, Standing and Authority - The Bank is a Canadian
chartered bank, validly existing under the laws of Canada. The Bank
has all requisite power and authority to execute and deliver this
Agreement, the Transfer Agreement and each of the Ancillary Agreements
and to perform its obligations hereunder and thereunder, and to
complete the transaction of purchase and sale contemplated hereunder
and thereunder.
<PAGE>
- Page 12 -
4.2 Authorization - The execution, delivery and performance by the Bank of
this Agreement, the Transfer Agreement and the Ancillary Agreements
have been duly authorized by all necessary corporate action of the
Bank, and all persons executing this Agreement, the Transfer Agreement
and the Ancillary Agreements on behalf of the Bank have been duly
authorized to do so by all necessary corporate action on the part of
the Bank. This Agreement has been, and each of the Transfer Agreement
and the Ancillary Agreements when executed by the Bank will be, duly
executed and delivered by the Bank. This Agreement constitutes, and
each of the Transfer Agreement and the Ancillary Agreements when
executed and delivered by the Bank will constitute, the legal, valid
and binding obligation of the Bank, enforceable against it in
accordance with their terms, except as enforceability thereof may be
limited by bankruptcy, insolvency, reorganization or similar laws of
general application, and equitable remedies that may be granted or
imposed by a court of competent jurisdiction.
4.3 No Conflicting Agreements - The execution and delivery by the Bank of
this Agreement and each of the Transfer Agreement and the Ancillary
Agreements and the performance by the Bank of its obligations
hereunder and thereunder do not and will not (i) result in or
constitute a default under, breach or violation of, or an event that
with notice or lapse of time or both would be a breach or violation
of, the organizational documents of the Bank, or any existing note,
bond, mortgage, indenture, deed of trust, licence, permit, lease, loan
agreement, contract or other agreement, instrument or arrangement to
which the Bank is a party or by the terms of which the Bank is or may
be bound or affected; or (ii) violate or contravene any law to which
it is subject.
4.4 Bank Consents - No consent, approval or authorization under any
material indenture, contract, instrument or other agreement (excluding
Payroll Contracts) to which the Bank is a party is required to be
obtained in connection with the execution, delivery and performance by
the Bank of this Agreement or any of the Ancillary Agreements. There
are no consents, approvals, permits or authorizations, declarations,
filings or registrations with, or notices to, any governmental or
regulatory authority required to be made or obtained by the Bank in
connection with the execution and delivery of this Agreement or any of
the Transfer Agreement or the Ancillary Agreements and the performance
of the transactions contemplated hereby or thereby, except for the
consent of the Office of the Superintendent of Financial Institutions
with respect to the temporary substantial investment of the Bank in
the Corporation.
4.5 The Corporation - The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of Canada. The
authorized capital of the Corporation consists solely of an unlimited
number of common shares. Effective as of the Effective Transfer Time,
the Shares shall be all of the issued and outstanding shares of the
Corporation and shall have been issued to the Bank and BW as fully
paid and nonassessable shares in the capital of the Corporation.
Immediately prior to the Effective
<PAGE>
- Page 13 -
Transfer Time, the Corporation shall have no active business, assets,
liabilities or employees.
4.6 Authorization - The execution, delivery and performance by the
Corporation of this Agreement and the Transfer Agreement have been or
will be duly authorized by all necessary corporate action of the
Corporation, and all persons executing this Agreement and the Transfer
Agreement on behalf of the Corporation have been or will be duly
authorized to do so by all necessary corporate action on the part of
the Corporation. This Agreement has been, and the Transfer Agreement
when executed by the Corporation will be, duly executed and delivered
by the Corporation. This Agreement constitutes, and the Transfer
Agreement when executed and delivered by the Corporation will
constitute, the legal, valid and binding obligation of the
Corporation, enforceable against it in accordance with its terms,
except as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws of general application, and
equitable remedies that may be granted or imposed by a court of
competent jurisdiction.
4.7 Consents re: the Corporation - No consent, approval or authorization
under any material indenture, contract, instrument or other agreement
to which the Corporation is a party or by which it is bound is
required to be obtained in connection with the execution, delivery and
performance by the Corporation of this Agreement or the Transfer
Agreement. There are no consents, approvals, permits or
authorizations, declarations, filings or registrations with, or
notices to, any governmental or regulatory authority required to be
made or obtained by the Corporation in connection with the execution
and delivery of this Agreement or the Transfer Agreement and the
performance of the transactions contemplated hereby or thereby.
4.8 Title to Shares - On Closing, the Bank and BW shall have good and
marketable title to the Shares free and clear of all liens, security
interests and other encumbrances, and shall have the full legal right,
power and authority to sell and transfer the Shares to the Purchaser.
4.9 Title to Payroll Assets - The Bank now is, and immediately prior to
the Effective Transfer Time the Bank will be, the sole registered and
beneficial owner of all right, title and interest in and to the
Purchased Payroll Assets, free and clear of claims, liens, security
interests, and other encumbrances. The Bank has the full legal right,
power and authority to sell, assign and transfer the Purchased
Pay-roll Assets to the Corporation effective as of the Effective
Transfer Time and has not assigned, licensed or otherwise conveyed
such rights, licenses or privileges to any other Person.
4.10 Legal Proceedings - There are no legal proceedings pending, and the
Bank and BW are not aware of any legal proceedings threatened or of
any circumstances which may reasonably be expected to give rise to
such proceedings, which in any way might interfere
<PAGE>
Page 14 -
with the sale or delivery of the Purchased Payroll Assets or the
Shares, or the consummation of any of the transactions contemplated
herein or under the Transfer Agreement or the Ancillary Agreements.
4.11 No Option - Except for the Corporation, no Person has any agreement or
option or any right or privilege (whether by law or by contract)
capable of becoming an agreement or option to acquire any of the
Purchased Payroll Assets. Except for the Purchaser, no Person has any
agreement or option or any right or privilege (whether by law or by
contract) capable of becoming an agreement or option to acquire any of
the Shares from the Bank
4.12 Conduct of Payroll Business - The Payroll Business has been conducted
since October 31, 1997 (the "Payroll Reference Date") in the ordinary
course, consistent with past practice. Since the Payroll Reference
Date, there has not been any change in the operation business, assets
or financial condition of the Payroll Business other than changes in
the ordinary course which have not individually or collectively had
any material adverse effect on the condition (financial or other),
results of operation, or assets of the Payroll Business and, since the
Payroll Reference Date, the Bank has not entered into any transaction
in connection with the Payroll Business not in the ordinary course of
the Payroll Business, other than this Agreement.
4.13 Financial Information - The financial information relating to the
Payroll Business provided by the Bank to the Purchaser and set forth
in Schedule 4.13 hereto has been prepared in accordance with generally
accepted accounting principles, consistently applied, and presents a
true and complete statement of the financial condition of the Payroll
Business for the fiscal periods stated therein.
4.14 Litigation - There is no suit, action, litigation, arbitration or
proceeding in progress, pending or threatened against or involving the
Payroll Business with the exception of the action commenced in Quebec
Superior Court by Jerry Radowitz, particulars of which have been
provided to the Purchaser, and there is not presently outstanding
against the Bank in respect of the Payroll Business any judgment,
decree, injunction or order of any court, governmental department,
agency or arbitrator.
4.15 Payroll Client Contracts - The Bank has delivered to the Purchaser a
true and correct copy of its standard contract terms incorporated in
Payroll Contracts entered into with Payroll Clients for the provision
of Payroll Services. Each of the Payroll Clients has entered into
such form of standard contract with the Bank or has been provided
Payroll Services consistent therewith or a variation thereto that is
not materially adverse to the Payroll Business. Schedule 4.15 sets
forth the material non-standard Payroll Contracts entered into with
Payroll Clients, copies of which have been made available to the
Purchaser.
<PAGE>
- Page 15 -
4.16 Proprietary Payroll Software -
(a) The Proprietary Payroll Software does not infringe any copyright,
patent, trademark, trade secret, or other intellectual property,
proprietary or other right of any third party.
(b) Schedule 1. 1(11) to the Transfer Agreement sets forth a complete
and accurate list of the Proprietary Payroll Software of the
Payroll Business. The Proprietary Payroll Software, together
with the other software to be made available to the Corporation
pursuant to the Transitional Services Agreement, constitutes all
of the material software used in the Payroll Business.
(c) The Proprietary Payroll Software:
(i) is complete in all respects and shall perform in
accordance with its data control manuals and user
manuals;
(ii) is free of all viruses, errors, defects and disabling
devices that would cause any component of the
Proprietary Payroll Software or of databases created
thereby to be erased, modified, deleted, damaged,
disabled or made inoperable or otherwise rendered
incapable of performing in accordance with its
published specifications; and
(iii) has been designed, developed, configured and
implemented in a good and workmanlike manner.
(d) Schedule 4.16 sets forth testing and other procedures conducted
with respect to the Paymaster (CPX) for verifying Year 2000
compliance, and also sets forth testing that has not yet been
conducted that would verify Year 2000 compliance for such
software. All other Proprietary Payroll Software is not Year
2000 compliant.
4.17 Labour Relations -
(a) Employees: Schedule 4.17(a) contains a true and complete list of
the Designated Employees, their titles and positions held as of
the date of this Agreement, their length of service with the
Bank, the locations of their employment and the material terms
and conditions of their employment or engagement, including their
current annual compensation, standard hours of work, commissions
and bonuses and their benefits and perquisites, and participation
in the Pension Plan and the other Bank's Benefit Plans.
<PAGE>
- Page 16 -
(b) Written or Oral Contracts: Except for standard Bank
employment/offer contracts (a copy of all standard versions of
which are attached as Schedule 4.17(b)), there are (i) no written
contracts of employment entered into with any Designated
Employees; (ii) no oral contracts of employment which provide
termination notice or pay in lieu of such notice or severance pay
to any of the Designated Employees in excess of termination
notice or pay in lieu of such notice or severance pay required by
applicable labour or employment standards law or at common law;
and (iii) no confidentiality, non-competition or nonsolicitation
contracts between the Bank and any Designated Employees.
There are no variations to any of the standard versions of
employment contracts attached as Schedule 4.17(b), entered into
by any of the Designated Employees, which are individually or in
the aggregate materially adverse to the Payroll Business.
(c) Collective Agreements: The Bank has not made any agreements with
any labour union or employee association in connection with the
Payroll Business or the HRMS Business nor made any commitments to
or conducted any negotiations with any labour union or employee
association with respect to any future agreements relating to the
Payroll Business or the HRMS Business. To the best knowledge of
the Bank, there have been no attempts to organize a trade union
or employee association for any employees of the Payroll Business
or the HRMS Business. There is no labour strike, employee
disturbance or work stoppage or slowdown pending or, to the best
knowledge of the Bank, threatened against the Bank with respect
to the Payroll Business or the HRMS Business.
(d) Liabilities to Employees: The Bank has no liability of any kind
to any Designated Employee except for compensation, commissions,
bonuses, and benefits and pensions payable to such Designated
Employee in the ordinary course of the Payroll Business or the
HRMS Business.
(e) Compliance with Laws: The Bank is in compliance (and shall be in
compliance immediately prior to the Effective Time) in all
material respects with all applicable laws, statutes,
regulations, rules and by-laws relating to the employment of
Designated Employees, including, without limiting the generality
of the foregoing, those related to wages, pay equity, hours of
work, collective bargaining and labour relations, occupational
health and safety, workers compensation, human rights, pension
benefits standards and labour and employment standards and is not
liable for any arrears of wages, assessments, penalties or other
sums for failure to comply with any of the foregoing.
<PAGE>
- Page 17 -
(f) No Changes: Except as disclosed in Schedule 4.17(f), with respect
to the Designated Employees, no commitment, express or implied,
has been made to change compensation or to change any benefit
under the Pension Plan or the other Bank's Benefit Plans or to
offer additional benefits.
(g) Retiree Benefits: Except as disclosed in Schedule 4.17(g), there
are no benefits promised to Designated Employees, applicable to
them, or their dependents upon the retirement of the Designated
Employees, other than in respect of the Pension Plan.
(h) No Vacation Accrual: As at January 31, 1998, none of the
Designated Employees shall have any accrued and unused vacation
for the period ended December 31, 1997.
4.18 Payroll Trademarks -
(a) The only trademarks used in connection with the Payroll Business
are the Payroll Trademarks and the trademarks of the Bank
licenced pursuant to the Trademark Licence Agreement;
(b) The Bank has the unrestricted right and has not licenced or
otherwise permitted any other Person to use the Payroll
Trademarks;
(c) The Bank has registered the Payroll Trademarks in the Canadian
Trademarks office;
(d) The Payroll Trademarks are in full force and effect and have not
been used or enforced or failed to be used or enforced in a
manner that would result in the abandonment, cancellation or
unenforceability of any right in the Payroll Trademarks;
(e) The Bank has no knowledge of any claim of adverse ownership or
invalidity or other opposition or conflict with any of the
Payroll Trademarks nor of any pending or threatened suit,
proceeding, claim, demand, action or investigation of any nature
or kind against the Bank relating to the Payroll Trademarks; and
(f) The Bank has no knowledge that any activity relating to the
conduct of the Payroll Business or the Payroll Trademarks
breaches, violates, infringes or interferes with any trademarks
or other intellectual property rights of any third party or
requires payment for the use of any trademarks or other
intellectual property rights of a third party.
<PAGE>
- Page 18 -
4.19 No Finder's Fee or Broker's Fee - No Person has, or as a result of any
of the transactions contemplated hereby will have, by reason of any
commitment of the Bank towards such Person, any right, interest or
valid claim against or upon Ceridian, Ceridian Holdings, the Purchaser
or the Corporation or any property of Ceridian, Ceridian Holdings, the
Purchaser or the Corporation for any commission, fee or other
compensation as broker or finder or for services in any similar
capacity.
4.20 Bank's Residence - The Bank is not a non-resident within the meaning
of that term as used in the Income Tax Act (Canada).
4.21 Registration for Taxes - The Bank is duly registered under Part IX of
the Excise Tax Act (Canada) under registration number 105255145 and
under the Quebec Sales Tax Act under registration number 100004293.
4.22 Plans - The Bank Benefit Plans are all of the benefit plans,
arrangements, agreements, programs, policies or practices, whether
oral or written, formal or informal, funded or unfunded (other than
governmental mandated benefits of general application) in which the
Designated Employees participate or are eligible to participate,
including but not limited to:
(i) retirement savings or pensions including, without
limitation, any registered retirement savings plan, or
supplemental pension or retirement plan;
(ii) stock option, hospitalization, health, dental,
disability, unemployment insurance, vacation pay,
severance pay, sick leave, club membership, company
car, company awards, company loans, consulting or other
similar compensation arrangements.
Summaries of the Bank Benefit Plans, copies of all material employee
communications relative to Bank Benefit Plans and copies of all work
permits and employment related government authorizations or permits
have been provided to the Purchaser.
4.23 List of Customers - The lists of HRMS Clients and Payroll Clients to
be delivered on Closing to the Purchaser pursuant to Article 8, shall
be complete and accurate lists.
4.24 Undisclosed Liabilities - Except as disclosed in Schedule 4.24 hereto
and except as incurred in the ordinary and usual course of the Payroll
Business, there is no outstanding indebtedness or liabilities or
obligations (whether accrued, absolute, contingent or otherwise) of
the Payroll Business of a nature customarily reflected or reserved
against in a balance sheet (including the notes thereto) prepared in
accordance with generally accepted accounting principles.
<PAGE>
Page 19 -
4.25 Operation of the Businesses - The Purchased Payroll Assets and the
Purchased HRMS Assets, together with the services to be provided by
the Bank to the Corporation under the Transitional Services Agreement,
are sufficient to operate the Payroll Business and the HRMS Business
as was conducted as of the Closing Date.
4.26 Product Defects - There are no defects in the products or services of
the Payroll Business heretofore or currently being distributed or sold
by the Payroll Business which would materially adversely affect the
performance and quality of such products and services, provided,
however, that this representation and warranty does not extend to any
aspect or component of the products or services of the Payroll
Business that are not defective as at the Effective Time but that
become defective after the Effective Time as a result of modifications
made to such products or services by the Corporation. There are no
express or implied warranties outstanding with respect to the products
or services of the Payroll Business except as imposed by law or as
described in the contracts referred to in Section 4.15.
4.27 Organization, Standing and Authority of BW - BW is a corporation
validly existing under the laws of Ontario, and it has all necessary
corporate power, authority and capacity to own its property and assets
and to carry on the HRMS Business as is presently conducted by it. BW
has all requisite power and authority to execute and deliver this
Agreement and the Transfer Agreement and to perform its obligations
hereunder and thereunder and to complete the transaction of purchase
and sale contemplated hereunder and thereunder.
4.28 BW Shares - All of the issued and outstanding shares of BW are owned
as of record and beneficially by the Bank. No options, warrants or
other rights to purchase shares or other securities of BW have been
authorized or agreed to be issued or are outstanding.
4.29 BW Authorization - The execution, delivery and performance by BW of
this Agreement and Transfer Agreement have been duly authorized by all
necessary corporate action of BW, and all persons executing such
agreements on behalf of BW have been duly authorized to do so by all
necessary corporate action on the part of BW. This Agreement and the
Transfer Agreement have been duly executed and delivered by BW and
constitute the legal, valid and binding obligations of BW, enforceable
against BW in accordance with their terms, except as enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or
similar laws of general application, and equitable remedies that may
be granted or imposed by a court of compete-.it jurisdiction.
4.30 No Conflicting BW Agreements - The execution and delivery by BW of
this Agreement and the Transfer Agreement and the performance by EW of
its obligations hereunder and thereunder does not and will not (i)
result in or constitute a default under, breach or violation of, or an
event that with notice or lapse of time or both would be a breach or
<PAGE>
- Page 20 -
violation of the organizational documents of BW, or any existing note,
bond, mortgage, indenture, deed of trust, licence, permit, lease, loan
agreement, contract or other agreement, instrument or arrangement to
which BW is a party or by the terms of which BW is or may be bound or
affected, or (ii) violate or contravene any law to which it is
subject.
4.31 BW Consents - No consent, approval or authorization under any material
indenture, contract, instrument or other agreement (excluding HRMS
Contracts) to which the Bank or BW is a party or by which they are
bound is required to be obtained in connection with the execution,
delivery and performance by BW of this Agreement and the Transfer
Agreement. There are no consents, approvals, permits or
authorizations, declarations, filings or registrations with, or
notices to, any governmental or regulatory authority required to be
made or obtained by BW in connection with the execution and delivery
of this Agreement and the Transfer Agreement and the performance of
the transactions contemplated hereby or thereby.
4.32 Title to Assets - BW now is and immediately prior to the Effective
Transfer Time will be (and the Bank, to the extent that it owns any of
the Purchased HRMS Assets now is and immediately prior to the
Effective Transfer Time will be) the sole registered and beneficial
owner of all right, title and interest in and to the Purchased HRMS
Assets, free and clear of claims, liens, security interests, and other
encumbrances. BW (and the Bank, to the extent that it owns any of the
Purchased HRMS Assets) has the full legal right, power and authority
to sell, assign and transfer the Purchased HRMS Assets to the
Corporation effective as of the Effective Transfer Time, and has not
assigned, licensed or otherwise conveyed such rights, licences or
privileges to any other Person.
4.33 Legal Proceedings - There are no legal proceedings pending and BW and
the Bank are not aware of any legal proceedings threatened or of any
circumstances which may reasonably be expected to give rise to such
proceedings which in any way might interfere with the sale or delivery
of the Purchased HRMS Assets, or the consummation of any of the
transactions contemplated herein.
4.34 No Option - Except for the Corporation, no Person has any agreement or
option or any right or privilege (whether by law or by contract)
capable of becoming an agreement or option to acquire any of the
Purchased HRMS Assets. Except for the Purchaser, no Person has any
agreement or option or any right or privilege (whether by law or by
contract) capable of becoming an agreement or option to acquire any of
the Shares from BW.
4.35 Financial Information - The financial information relating to the HPMS
Business provided to the Purchaser and set forth in Schedule 4.13
hereto has been prepared in accordance with generally accepted
accounting principles, consistently applied, and
<PAGE>
- Page 21 -
presents a true and complete statement of the financial condition of
the HRMS Business for the fiscal periods stated therein.
4.36 Undisclosed Liabilities - Except as disclosed in Schedule 4.24 hereto
and except as incurred in the ordinary and usual course of the HRMS
Business, there is no outstanding indebtedness or liabilities or
obligations (whether current, absolute, contingent or otherwise) of
the HRMS Business of a nature customarily reflected or reserved
against any balance sheet (including the notes thereto) prepared in
accordance with generally accepted accounting principles.
4.37 Conduct of the HRMS Business - The HRMS Business has been conducted
since October 31, 1997 (the "HRMS Reference Date") in the ordinary
course, consistent with past practice. Since the HRMS Reference Date,
there has not been any change in the operation, business, assets or
financial condition of the HRMS Business other than changes in the
ordinary course which have not individually or collectively had any
material adverse effect on the condition (financial or other), results
of operation, or assets of the HRMS Business, and since the HRMS
Reference Date, neither the Bank nor BW has entered into any
transaction in connection with the HRMS Business not in the ordinary
course of the HPMS Business, other than this Agreement.
4.38 HRMS Litigation - There is no suit, action, litigation, arbitration or
proceeding in progress, pending or threatened against or involving the
HRMS Business and there is not presently outstanding against BW or the
Bank in respect of the HRMS Business any judgment, decree, injunction
or order of any court, governmental department, agency or arbitrator.
4.39 HRMS Client Contracts - BW has delivered to the Purchaser a true and
correct copy of the standard contract terms incorporated in contracts
entered into between BW (or the Bank) and HRMS Clients for the
provision of HRMS Services. Each of the HRMS Clients has entered into
such form of standard contract with BW (or the Bank) or has been
provided services consistent therewith or with a variation thereto
that is not materially adverse to the HRMS Business.
4.40 Proprietary HRMS Software -
(a) The Proprietary HRMS Software does not infringe any copyright,
patent, trademark, trade secret, or other intellectual property,
proprietary or other right of any third party.
(b) The Phipps HR Interface software is the only Proprietary HRMS
Software of the HRMS Business.
<PAGE>
- Page 22 -
(c) The Proprietary HRMS Software:
(i) is complete in all respects and shall perform in
accordance with its scope documents and user manuals;
(ii) is free of all viruses, errors, defects and disabling
devices that would cause any component of the
Proprietary HRMS Software or of databases created
thereby to be erased, modified, deleted, damaged,
disabled or made inoperable or otherwise rendered
incapable of performing in accordance with its
published specifications; and
(iii) has been designed, developed, configured and
implemented in a good and workmanlike manner.
(d) The Proprietary HRMS Software is not year 2000 compliant.
4.41 HRMS Trademarks -
(a) The only trademarks used in connection with the HRMS Business are
the HRMS Trademarks and the trademarks of the Bank licenced
pursuant to the Trademark Licence Agreement;
(b) The Bank and BW have the unrestricted right and has not licenced
or otherwise permitted any other Person to use the HRMS
Trademarks;
(c) The Bank and BW have registered the HRMS Trademarks in the
Canadian Trademarks office;
(d) The HRMS Trademarks are in full force and effect and have not
been used or enforced or failed to be used or enforced in a
manner that would result in the abandonment, cancellation or
unenforceability of any right in the HRMS Trademarks;
(e) The Bank and BW have no knowledge of any claim of adverse
ownership or invalidity or other opposition or conflict with any
of the BRMS Trademarks nor of any pending or threatened suit,
proceeding, claim, demand, action or investigation of any nature
or kind against the Bank relating to the HRMS Trademarks; and
(f) The Bank and BW have no knowledge that any activity relating to
the conduct of the HRMS Business or the HRMS Trademarks breaches,
violates, infringes or interferes with any trademarks or other
intellectual property rights of any third
<PAGE>
- Page 23 -
party or requires payment for the use of any trademarks or other
intellectual property rights of another party.
4.42 Labour Relations - BW does not employ any employees for the HRMS
Business.
4.43 No Finder's Fee or Broker's Fee - No Person has, or as a result of any
of the transactions contemplated hereby will have, by reason of any
commitment of BW towards such Person, any right, interest or valid
claim against or upon Ceridian, Ceridian Holdings, the Purchaser or
the Corporation or any property of Ceridian, Ceridian Holdings, the
Purchaser or the Corporation for any commission, fee or other
compensation as broker or finder or for services in any similar
capacity.
4.44 BW's Residence - BW is not a non-resident within the meaning of that
term as used in the Income Tax Act (Canada).
4.45 BW Registration for Taxes - BW is duly registered under Part IX of the
Excise Tax Act (Canada) under registration number 139484307 and under
the Quebec Sales Tax Act under registration number 101772976 1.
5. REPRESENTATIONS AND WARRANTIES OF CERIDIAN, CERIDIAN HOLDINGS AND THE
PURCHASER
The Purchaser, Ceridian Holdings and Ceridian jointly and severally represent
and warrant to the Bank and BW as follows:
5.1 Organization, Standing and Authorization - The Purchaser is a
corporation, duly organized, validly existing and in good standing
under the laws of Canada. The Purchaser has all necessary power and
authority to own, lease or licence its property and to conduct its
business as now conducted. The Purchaser has the requisite power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder, and to consummate the transactions contemplated
hereby including, without limitation, the purchase of the Shares.
5.2 Authorization, Execution and Enforceability - The execution, delivery
and performance by the Purchaser of this Agreement have been duly
authorized by all necessary corporate action of the Purchaser, and no
further corporate action is required to be taken by the Purchaser in
order to execute, deliver and perform this Agreement. All persons
executing this Agreement on behalf of the Purchaser have been duly
authorized to do so by all necessary corporate action on the part of
the Purchaser. This Agreement has been duly executed and delivered by
the Purchaser and constitutes the legal, valid and binding obligation
of the Purchaser, enforceable against the Purchaser in accordance with
its terms, except as enforceability thereof may be limited by
bankruptcy, insolvency,
<PAGE>
- Page 24 -
reorganization or similar laws of general application, and equitable
remedies that may be granted or imposed by a court of competent
jurisdiction.
5.3 No Conflicting Agreements - The execution and delivery by the
Purchaser of this Agreement and the performance by the Purchaser of
its obligations hereunder does not and will not (i) result in or
constitute a default under, breach or violation of, or an event that
with notice or lapse of time or both would be a breach or violation
of, the organizational documents of the Purchaser, or any existing
note, bond, mortgage, indenture, deed of trust, licence, permit,
lease, loan agreement, contract or other agreement, instrument or
arrangement to which the Purchaser is a party or by the terms of which
the Purchaser is or may be bound or affected; or (ii) violate or
contravene any law to which it is subject.
5.4 Consents - No consent, approval or authorization under any material
indenture, contract, instrument or other agreement to which Ceridian
or the Purchaser is a party or by which either of them is bound is
required to be obtained in connection with the execution, delivery and
performance by the Purchaser of this Agreement. There are no
consents, approvals, permits or authorizations, declarations, filings
or registrations with, or notices to, any governmental or regulatory
authority required to be made or obtained by the Purchaser in
connection with the execution and delivery of this Agreement and the
performance of the transactions contemplated hereby or thereby, except
that Ceridian or the Purchaser will make appropriate filings under the
Investment Canada Act within 30 days following the Closing.
5.5 Legal Proceedings - There are no legal proceedings pending and
Ceridian and the Purchaser are not aware of any legal proceedings
threatened or of any circumstances which may reasonably be expected to
give rise to such proceedings against Ceridian which in any way might
interfere with the purchase of the Shares or the consummation of any
of the transactions contemplated under this Agreement.
5.6 Compliance with Laws - The Purchaser is not in default under or in
violation of any law, except for such defaults or violations that
would not, individually or in the aggregate, result in a material
adverse effect on the condition (financial or other) or prospects of
the Purchaser.
5.7 No Bankruptcy Proceedings - There are no bankruptcy, insolvency or
receivership proceedings outstanding against Ceridian, Ceridian
Holdings or the Purchaser and neither the Purchaser, Ceridian Holdings
nor Ceridian has made any assignment for the benefit of any creditors
and no execution or attachment has been levied against the Purchaser
on account of any liens or judicial process.
<PAGE>
- Page 25 -
5.8 Organization, Standing and Authorization - Each of Ceridian and
Ceridian Holdings is a corporation, duly organized, validly existing
and in good standing under the laws of Delaware. Each of Ceridian and
Ceridian Holdings has all necessary power and authority to own, lease
or licence its property and to conduct its business as now conducted
and has the requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder.
5.9 Authorization, Execution and Enforceability re: Ceridian and Ceridian
Holdings The execution, delivery and performance by Ceridian and
Ceridian Holdings of this Agreement have been duly authorized by all
necessary corporate action of Ceridian, and no further corporate
action is required to be taken by Ceridian or Ceridian Holdings in
order to execute, deliver and perform this Agreement. All persons
executing this Agreement on behalf of Ceridian and Ceridian Holdings
have been duly authorized to do so by all necessary corporate action
on the part of Ceridian. This Agreement has been duly executed and
delivered by Ceridian and Ceridian Holdings and constitutes the legal,
valid and binding obligation of Ceridian and Ceridian Holdings,
enforceable against them in accordance with its terms, except as
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or similar laws of general application, and equitable
remedies that may be granted or imposed by a court of competent
Jurisdiction.
5.10 No Conflicting Agreements - The execution and delivery by each of
Ceridian and Ceridian Holdings of this Agreement and the performance
by each of Ceridian and Ceridian Holdings of their obligations
hereunder do not and will not (i) result in or constitute a default
under, breach or violation of, or an event that with notice or lapse
of time or both would be a breach or violation of, the organizational
documents of Ceridian or Ceridian Holdings, or any existing note,
bond, mortgage, indenture, deed of trust, licence, permit, lease, loan
agreement, contract or other agreement, instrument or arrangement to
which Ceridian or Ceridian Holdings is a party or by the terms of
which Ceridian or Ceridian Holdings is or may be bound or affected; or
(ii) violate or contravene any law to which they are subject.
5.11 Consents - No consent, approval or authorization under any material
indenture, contract, instrument or other agreement to which either of
Ceridian or Ceridian Holdings is a party or by which either of them is
bound is required to be obtained in connection with the execution,
delivery and performance by Ceridian or Ceridian Holdings of this
Agreement. There are no consents, approvals, permits or
authorizations, declarations, filings or registrations with, or
notices to, any governmental or regulatory authority required to be
made or obtained by Ceridian or Ceridian Holdings in connection with
the execution and delivery of this Agreement and the performance of
the transactions contemplated hereby or thereby, except that Ceridian
or the Purchaser will make appropriate filings under the Investment
Canada Act within 30 days following the Closing.
<PAGE>
- Page 26 -
5.12 Legal Proceedings - There are no legal proceedings pending and neither
of Ceridian nor Ceridian Holdings is aware of any legal proceedings
threatened or of any circumstances which may reasonably be expected to
give rise to such proceedings against the Purchaser which in any way
might interfere with the entering into of this Agreement by Ceridian
or Ceridian Holdings or the performance of their obligations
hereunder.
5.13 Authorization, Execution and Enforceability re: the Corporation - The
execution, delivery and performance by the Corporation of the
Ancillary Agreements shall as of the Effective Date be duly authorized
by all necessary corporate action of the Corporation, and no further
corporate action shall be required to be taken by the Corporation in
order to execute, deliver and perform the Ancillary Agreement. All
persons executing the Ancillary Agreements on behalf of the
Corporation shall be duly authorized to do so by all necessary
corporate action on the part of the Corporation. The Ancillary
Agreements shall be duly executed and delivered by the Corporation and
shall constitute, the legal, valid and binding obligation of the
Corporation enforceable against the Corporation in accordance with its
terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws of general application, and
equitable remedies that may be granted or imposed by a court of
competent jurisdiction.
5.14 No Conflicting Agreements - The execution and delivery by the
Corporation of the Ancillary Agreements and the performance by the
Corporation of its obligations thereunder will not (i) result in or
constitute a default under, breach or violation of, or an event that
with notice or lapse of time or both would be a breach or violation
of, the organizational documents of the Corporation, or any existing
note, bond, mortgage, indenture, deed of trust, licence, permit,
lease, loan agreement, contract or other agreement, instrument or
arrangement to which Ceridian, Ceridian Holdings or the Purchaser may
be a party or by the terms of which Ceridian, Ceridian Holdings, the
Purchaser or the Corporation (following the Effective Time) may be
bound or affected; or (ii) violate or contravene any law to which
it is subject.
5.15 Consents - No consent, approval or authorization under any material
indenture, contract, instrument or other agreement to which Ceridian
or the Purchaser is a party or by which Ceridian, the Purchaser or the
Corporation (following the Effective Time) may be bound is required to
be obtained in connection with the execution, delivery and performance
by the Corporation of the Ancillary Agreements. There are no
consents, approvals, permits or authorizations, declarations, filings
or registrations with, or notices to, any governmental or regulatory
authority required to be made or obtained by the Corporation in
connection with the execution and delivery of the Ancillary Agreements
and the performance of the transactions contemplated hereby or
thereby.
5.16 Duly Licenced - Following the Closing, the Purchaser shall cause the
Corporation to be duly licenced, registered or qualified in each
jurisdiction in which it shall conduct the
<PAGE>
- Page 27 -
HRMS Business and the Payroll Business, to perform its obligations
under this
Agreement and the Ancillary Agreements, and to enable the HRMS
Business and Payroll Business to be conducted as it is now conducted,
and all such licences, registrations, and qualifications shall be
valid, subsisting and in good standing.
5.17 Brokers' and Finders' Fees - No Person has, or as a result of any of
the transactions contemplated hereby will have, by reason of any
commitment of Ceridian, Ceridian Holdings or the Purchaser towards
such Person, any right, interest or valid claim against or upon BW or
the Bank or any property of BW or the Bank for any commission, fee or
other compensation as broker or finder or for services in any similar
capacity.
5.18 Corporation Plans - Schedule 5.18 sets forth a list of benefits that
the Corporation will make available to the Transferred Employees on
and after the dates set out in Schedule 5.18, subject to regulatory
approval.
6. SURVIVAL AND INDEMNIFICATION
6.1 Survival - Except as specifically provided in this Agreement, the
representations, warranties and covenants set forth herein or in any
certificate or other document delivered pursuant hereto and the
obligations of the parties hereto with respect thereto shall survive
the Closing and shall continue in full force and effect, provided that
such representations, and warranties shall only survive for a period
of [confidential information omitted] from the Closing Date, except
with respect to (i) tax matters (which shall survive the Closing Date
and continue in full force and effect until, but not after,
[confidential information omitted] or (ii) the matters represented and
warranted in Sections 4.8, 4.9 and 4.32 [confidential information
omitted]. If prior to the expiry of the said period no claim shall
have been made hereunder with respect to any such matters, the parties
shall have no further liability hereunder with respect thereto. No
due diligence investigation by a party hereto shall have the effect of
waiving any representation or warranty in its favour by another party.
6.2 Indemnification by Bank and BW - Subject to Section 6.3, the Bank and
BW shall be jointly and severally liable to Ceridian, Ceridian
Holdings, the Purchaser and the Corporation and shall defend,
indemnify and hold harmless Ceridian, Ceridian Holdings the Purchaser
and the Corporation and their respective officers, directors,
shareholders and employees against any and all losses, liabilities,
damages, demands, claims, suits, actions, judgments, causes of action,
assessments, fines, costs or expenses including, without limitation,
interest, penalties and attorneys' and accounting fees, asserted
against, resulting to, imposed on or incurred or suffered by Ceridian,
Ceridian Holdings, the Purchaser or the Corporation, directly or
indirectly, as a result of or arising out of:
<PAGE>
- Page 28 -
(a) the breach of any agreement, covenant, or representation and
warranty of the Bank or BW contained in this Agreement, the
Transfer Agreement, the Ancillary Agreements, or in any document
required to be entered into by the Bank or BW in favour of the
Corporation, the Purchaser, Ceridian or Ceridian Holdings
hereunder;
(b) non-fulfilment of any agreement, covenant or obligation of the
Bank or BW contained in this Agreement, the Transfer Agreement,
the Ancillary Agreements or in any document required to be
entered into by the Bank or BW in favour of the Purchaser, the
Corporation, Ceridian or Ceridian Holdings hereunder;
(c) all claims brought by or in respect of any of the Designated
Employees resulting from matters arising and accruing prior to
the Effective Time and all claims brought by or in respect of any
of the LTD Employees resulting from matters arising and accruing
at any time, in respect of, without limitation, wages, salaries,
bonuses, commissions, vacation pay, holiday pay, severance pay,
termination notice or pay in lieu of such notice, termination
pay, pension and other employee benefits, income tax
withholdings, unemployment insurance, employer health tax and any
other federal or provincial employment legislation related to
employment matters, except for any matters for which the
Corporation has expressly assumed responsibility under the terms
of this Agreement, the Transfer Agreement or the Ancillary
Agreements; and
(d) non-compliance with applicable bulk sales legislation in
connection with the transactions contemplated by the Transfer
Agreement.
6.3 Software and Trademark Indemnification
(a) The Bank shall, at its own expense, defend or arrange for the
defence of, or settle any action brought or claim made against
Ceridian, Ceridian Holdings, the Purchaser or the Corporation
based on any allegation that (i) the Proprietary HRMS Software or
the Proprietary Payroll Software infringes any patent, copyright,
trade secret or any other intellectual property right in any
jurisdiction, or (ii) that the Payroll Trademarks or the HRMS
Trademarks infringe any trademarks or other intellectual property
rights of any other Person. The Bank shall be liable to and
shall indemnify and hold harmless Ceridian, Ceridian Holdings,
the Purchaser and the Corporation and their respective officers,
directors, shareholders and employees against any and all costs,
losses, liabilities, demands, claims, suits, actions, judgments,
assessments, causes of actions, fees and expenses and damages in
any such claim or action including, without limitation, interest,
penalties and attorney's and accounting fees asserted against,
resulting to, imposed on or incurred or suffered by Ceridian,
Ceridian Holdings,
<PAGE>
Page 29 -
the Purchaser or the Corporation directly or indirectly as a
result of or arising out of any of the aforementioned claims or
actions, provided that:
(i) Ceridian, Ceridian Holdings, the Purchaser and the
Corporation promptly notify the Bank when it receives
any notice of such claim or allegation of infringement;
(ii) Ceridian, Ceridian Holdings, the Purchaser and the
Corporation fully cooperate with the Bank in the
defence or settlement of such action; and
(iii) the Bank shall have sole control of the defence or
settlement of any such claim or action.
(b) The Bank shall not be liable for any infringement or claim
thereof based on any modifications to the Proprietary HRMS
Software or the Proprietary Payroll Software made by, or improper
use thereof by Ceridian, Ceridian Holdings, the Purchaser, the
Corporation, or any third party.
(c) In the event a successful claim of infringement (save and except
for a claim made under Section 6.3(b)) shall restrain Ceridian's,
Ceridian Holdings, the Purchaser's or the Corporation's use of
all or part of the Proprietary HRMS Software or the .Proprietary
Payroll Software, the Bank shall, at its expense, take one of the
following actions (the selection of which shall be in the sole
discretion of the .Bank):
(i) procure for Ceridian, Ceridian Holdings, the Purchaser
or the Corporation the right to continue using the
alleged infringing or misappropriated Proprietary HRMS
Software or the Proprietary Payroll Software at no cost
to Ceridian, Ceridian Holdings, the Purchaser or the
Corporation; or
(ii) replace or modify the Proprietary HRMS Software or the
Proprietary Payroll Software so that it becomes
non-infringing (with the reasonable assistance of the
Purchaser, provided that the services of the
Purchaser's SR&D personnel engaged to assist with this
process shall be paid by the Bank at reasonable per
them rates). The Bank agrees that such replacement or
modification will be equivalent to the original
Proprietary HRMS Software or the Proprietary Payroll
Software in functionality and performance as is
reasonably practicable, provided, however, that the
functionality and performance shall not be materially
changed or degraded.
<PAGE>
- Page 30 -
(d) The foregoing paragraphs of this Section 6.3 state the entire
liability of the Bank for any loss or damage whatsoever as a
result of the infringement of any intellectual property rights
and supersede, in the event of conflict with, any other provision
of this Agreement.
6.4 Indemnification by the Purchaser - Ceridian, Ceridian Holdings, the
Purchaser and the Corporation shall be jointly and severally liable to
the Bank and BW and shall defend, indemnify and hold harmless the Bank
and BW and their officers, directors, shareholders and employees
against any and all losses, liabilities, damages, demands, claims,
suits, actions, judgments, causes of action, assessments, fines, costs
or expenses including, without limitation, interest, penalties and
attorneys' and accounting fees, asserted against, resulting to,
imposed on, or incurred or suffered by the Bank and BW, directly or
indirectly, as a result of or arising out of-
(a) the breach of any agreement, covenant, representation or warranty
by the Purchaser, the Corporation, Ceridian or Ceridian Holdings
contained in this Agreement, the Transfer Agreement, the
Ancillary Agreements or in any document required to be entered
into by the Purchaser, Ceridian, Ceridian Holdings or the
Corporation in favour of the Bank or BW hereunder;
(b) any matter requiring indemnification by the Corporation in favour
of the Bank pursuant to subsection 12. 1 (b)(ii), (iii) and (iv)
of the Transitional Services Agreement;
(c) the non-fulfilment of any agreement, covenant or obligation of
the Purchaser or the Corporation contained in this Agreement, the
Transfer Agreement, the Ancillary Agreements or in any document
required to be entered into by the Purchaser, the Corporation,
Ceridian Holdings or Ceridian in favour of the Bank or BW
hereunder or thereunder, including, without limitation, the
assumption of the Assumed BRMS Liabilities and the Assumed
Payroll Liabilities;
(d) all claims brought by or in respect of any of the Transferred
Employees, resulting from matters arising and accruing on and
after the Effective Time, in respect of wages, salaries, bonuses,
commissions, vacation pay, holiday pay, severance pay,
termination notice or pay in lieu of such notice, termination
pay, pension and other employee benefits, income tax
withholdings, unemployment insurance, employer health tax and any
other federal or provincial employment legislation related to
employment matters, except for any matters for which the Bank has
expressly retained responsibility under the terms of this
Agreement, the Transfer Agreement or the Ancillary Agreements;
and
<PAGE>
- Page 31 -
(e) all liability of the Bank and BW for Taxes that may be assessed
upon them in connection with the transfer of the Purchased
Payroll Assets and the Purchased HRMS Assets pursuant to the
Transfer Agreement, but excluding income taxes payable by BW or
the Bank as a result of the disposition of the Purchased HRMS
Assets or Purchased Payroll Assets to the Corporation pursuant to
the Transfer Agreement.
6.5 Indemnification for Claims Other Than Third Party Claims - Following
receipt from a party hereto (the "Indemnified Party") of a written
notice of a claim for indemnification which has not arisen in respect
of a Third Party Claim (as defined in Section 6.6 below), the party or
parties in receipt of such notice (the "Indemnifying Party") shall
have thirty (30) Business Days to make such investigation of the
claim as the Indemnifying Party considers necessary or desirable.
For the purpose of such investigation, the Indemnified Party shall
make available to the Indemnifying Party the information relied upon
by the Indemnified Party to substantiate the claim. If the
Indemnified Party and the Indemnifying Party agree at or prior to the
expiration of such thirty (30) Business Days (or any mutually agreed
upon extension thereof) to the validity and amount of the claim, the
Indemnifying Party shall immediately pay to the Indemnified Party the
full agreed upon amount of the claim. If the Indemnified Party and
the Indemnifying Party do not reach agreement within such period
(or any mutually agreed upon extension thereof), such dispute shall
be resolved by any arbitration proceeding as may be agreed between
the Indemnified Party and the Indemnifying Party, or shall be subject
to resolution by proceedings to be commenced before a court of
competent jurisdiction.
6.6 Indemnification against Third Party Claims
Except as provided in Section 6.3,
(a) Promptly upon receipt by a party hereto (herein referred to as
the "Indemnitee") of notice of any claim by a third party (a
"Third Party Claim") in respect of which the Indemnitee proposes
to demand indemnification from another party or parties to this
Agreement (the "Indemnitor"), the lndemnitee shall give notice
(the "Notice") to that effect to the Indemnitor. The Notice
shall set forth the actual or estimated amount of the loss or
losses incurred or to possibly be incurred, and shall specify in
reasonable detail the items of loss or potential loss included in
the amount so stated, the date such matter occurred, the basis
for any anticipated loss or losses, and the nature of the
misrepresentation, breach of warranty or breach of covenant or
claim to which such items relate. The failure the give the
Notice on a timely basis shall not affect the Indemnitee's right
to indemnification hereunder except to the extent that the
Indemnitor is materially prejudiced thereby, subject to Section