EX-10 2 jd10-10ex10_1.txt 10.1 EXHIBIT 10.1 EXECUTION COPY -------------- ================================================================================ SECURITIES PURCHASE AGREEMENT by and among COMVERSE, INC., AS PURCHASER, CSG SOFTWARE, INC., CSG AMERICAS HOLDINGS, INC., CSG NETHERLANDS BV, CSG TECHNOLOGY LIMITED, THE COMPANIES TO BE ACQUIRED and CSG SYSTEMS INTERNATIONAL, INC. and CSG NETHERLANDS CV, ACTING THROUGH ITS GENERAL PARTNER, CSG INTERNATIONAL HOLDINGS, LLC AS SELLERS _______________ Dated as of October 6, 2005 ================================================================================ TABLE OF CONTENTS Page ARTICLE I DEFINITIONS.......................................................................1 1.1 Certain Definitions...................................................................1 1.2 Terms Defined Elsewhere in this Agreement.............................................8 1.3 Other Definitional and Interpretive Matters..........................................11 ARTICLE II SALE AND PURCHASE OF SECURITIES, PURCHASE PRICE; CLOSING.........................12 2.1 Sale and Purchase of Securities......................................................12 2.2 Purchase Price.......................................................................12 2.3 Severance Adjustment Amount..........................................................12 2.4 Payment of Purchase Price............................................................13 2.5 Purchase Price Adjustment............................................................13 2.6 Closing Date.........................................................................16 2.7 Seller Deliveries on the Closing Date................................................16 2.8 Joint Deliveries on Closing Date.....................................................17 ARTICLE III REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLERS...........................17 3.1 Organization and Qualification.......................................................17 3.2 Authorization; Binding Effect........................................................18 3.3 Non-Contravention; Consents..........................................................18 3.4 Ownership and Transfer of Securities.................................................19 3.5 Litigation...........................................................................19 3.6 Public Filings.......................................................................19 3.7 Financial Advisors...................................................................20 ARTICLE IV REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANIES AND SUBSIDIARIES........20 4.1 Organization and Qualification.......................................................20 4.2 Subsidiaries.........................................................................21 4.3 Authorization; Binding Effect........................................................21 4.4 Non-Contravention; Consents..........................................................22 4.5 Title to Property; Principal Equipment; Sufficiency of Assets........................23 TABLE OF CONTENTS (CONTINUED) PAGE 4.6 Permits, Licenses....................................................................23 4.7 Real Estate..........................................................................23 4.8 Compliance With Laws; Litigation.....................................................24 4.9 Business Employees...................................................................24 4.10 Contracts............................................................................27 4.11 Environmental Matters................................................................28 4.12 Financial Statements; Undisclosed Liabilities; Absence of Changes....................28 4.13 Intellectual Property................................................................32 4.14 Brokers..............................................................................33 4.15 Certain Tax Matters..................................................................34 4.16 Receivables..........................................................................37 4.17 Customers............................................................................37 4.18 Capitalization.......................................................................37 4.19 Corporate Records....................................................................39 4.20 Insurance............................................................................39 4.21 Related Party Transaction............................................................39 4.22 Intentionally Omitted................................................................40 4.23 Certain Payments.....................................................................40 4.24 Certain Governmental Matters.........................................................40 4.25 No Other Representations or Warranties...............................................40 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................40 5.1 Organization and Good Standing.......................................................41 5.2 Authorization of Agreement...........................................................41 5.3 Conflicts; Consents of Third Parties.................................................41 5.4 Litigation...........................................................................42 5.5 Investment Intention.................................................................42 5.6 Financial Advisors...................................................................42 5.7 Financing............................................................................42 5.8 Inspections; No Other Representations................................................42 ii TABLE OF CONTENTS (CONTINUED) PAGE ARTICLE VI COVENANTS........................................................................43 6.1 Access to Information; Confidentiality...............................................43 6.2 Conduct of the Business Pending the Closing..........................................44 6.3 Third Party Consents.................................................................48 6.4 Governmental Consents and Approvals..................................................48 6.5 Further Assurances...................................................................50 6.6 Non-Solicitation and Confidentiality.................................................50 6.7 Preservation of Records..............................................................52 6.8 Publicity............................................................................52 6.9 Use of Name..........................................................................52 6.10 Related-Party Transactions with Non-Management Affiliates............................54 6.11 Monthly Financial Statements.........................................................54 6.12 Notification of Certain Matters......................................................55 6.13 Employees............................................................................55 6.14 Certain Tax Matters..................................................................58 6.15 Sellers' Deliverables................................................................59 6.16 Releases.............................................................................60 6.17 Earnout Obligations..................................................................60 ARTICLE VII CONDITIONS TO CLOSING............................................................61 7.1 Conditions Precedent to Obligations of Purchaser and the Sellers.....................61 7.2 Conditions Precedent to Obligations of Purchaser.....................................62 7.3 Conditions Precedent to Obligations of the Sellers...................................63 ARTICLE VIII INDEMNIFICATION..................................................................64 8.1 Survival of Representations and Warranties...........................................64 8.2 Indemnification......................................................................65 8.3 Indemnification Procedures...........................................................67 8.4 Limitations on Indemnification for Breaches of Representations and Warranties........68 iii TABLE OF CONTENTS (CONTINUED) PAGE ARTICLE IX TAX MATTERS......................................................................71 9.1 Tax Indemnification by the Sellers...................................................71 9.2 Tax Indemnification by Purchaser.....................................................72 9.3 Preparation of Tax Returns and Payment of Taxes......................................72 9.4 Straddle Period Tax Allocation.......................................................73 9.5 Tax Audits and Indemnification Procedures............................................74 9.6 Termination of Tax Allocation Agreements.............................................74 9.7 Carrybacks...........................................................................74 9.8 338 Elections........................................................................75 9.9 Transfer Taxes.......................................................................76 9.10 Disputes.............................................................................76 9.11 Treatment of Indemnity Payments......................................................76 9.12 Time Limits..........................................................................76 9.13 Exclusivity..........................................................................77 9.14 Purchaser Covenants..................................................................77 9.15 Refunds and Tax Benefits.............................................................77 9.16 Cooperation on Tax Matters...........................................................77 ARTICLE X TERMINATION......................................................................78 10.1 Termination of Agreement.............................................................78 10.2 Procedure Upon Termination...........................................................79 10.3 Effect of Termination................................................................79 ARTICLE XI MISCELLANEOUS....................................................................79 11.1 Expenses.............................................................................79 11.2 Specific Performance.................................................................79 11.3 Submission to Jurisdiction; Consent to Service of Process; Waiver of Jury Trial......79 11.4 Entire Agreement; Amendments and Waivers.............................................80 11.5 Governing Law........................................................................81 11.6 Notices..............................................................................81 11.7 Severability.........................................................................82 11.8 Binding Effect; Assignment...........................................................82 11.9 Non-Recourse.........................................................................82 11.10 Counterparts.........................................................................83 iv SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT, dated October 6, 2005 (the "Agreement"), by and among Comverse, Inc., a Delaware corporation ("Purchaser"), CSG Software, Inc., a Delaware corporation ("CSG Software"), CSG Americas Holdings, Inc., a Delaware corporation ("CSG Holdings"), CSG Netherlands BV, a company organized under the laws of the Netherlands ("CSG Netherlands") and CSG Technology Limited, a company organized under the laws of Bermuda ("CSG Technology" and, together with CSG Software, CSG Holdings and CSG Netherlands, the "Companies"), CSG Systems International, Inc., a Delaware corporation ("CSG"), and CSG Netherlands CV, a partnership with limited liability organized under the laws of The Netherlands ("CSG Netherlands CV" and, together with CSG, the "Sellers"), with CSG Netherlands CV acting through its general partner, CSG International Holdings, LLC, a Delaware limited liability company ("CSG International"). W I T N E S S E T H: WHEREAS, the Sellers own (i) all of the issued and outstanding capital stock of each of CSG Software, CSG Holdings, CSG Netherlands and CSG Technology and (ii) nominal interests in certain Subsidiaries of the Companies (collectively, the "Securities"); WHEREAS, the Sellers desire to sell to Purchaser, and Purchaser desires to purchase from the Sellers, the Securities for the Purchase Price and upon the terms and conditions hereinafter set forth; and WHEREAS, certain terms used in this Agreement are defined in Section 1.1; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, the parties hereby agree as follows: ARTICLE I DEFINITIONS 1.1 Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1: "Affiliate" means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise. "Affiliated Group" means any affiliated group within the meaning of Section 1504 of the Code or any comparable or analogous group under applicable Law. "Aggregate Retention Amount" means the aggregate of all Retention Amounts. "Benefit Plan" means each Pension Plan, welfare plan and employment, bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock option, stock purchase, phantom stock, performance, retirement, thrift, savings, stock bonus, excess benefit, supplemental unemployment, paid time off, perquisite, fringe benefit, vacation, sick leave, severance, disability, death benefit, hospitalization, medical, dental, life insurance, welfare benefit or other plan, program or arrangement (whether written or unwritten), in each case, maintained or contributed to, or required to be maintained or contributed to, by any Seller, any Affiliate of the Sellers or any of the Companies or Subsidiaries for the benefit of any present or former directors, officers or employees of any of the Companies or Subsidiaries or the Business. "Business" means the businesses and operations of the Companies and Subsidiaries, including the Global Services and Software business and the Integrated Customer Management System business and excluding the FairPoint Business. "Business Day" means any day of the year on which national banking institutions in New York are open to the public for conducting business and are not required or authorized to close. "Business Employees" means the employees of the Sellers or their Affiliates (other than any of the Companies or Subsidiaries) who render services primarily in connection with the Business and whose names are set forth in the Side Letter, which also sets forth the length of service, position held, job location, annual base salary, commission eligibility, incentive plan target, work status (i.e., actively at work or on approved leave, stating the duration of such leave) and employer of each such Business Employee. "Cash" means the amount of cash, cash equivalents, and short-term investments, calculated in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements. "Cash Adjustment Amount" means the sum of (a) the amount payable, if any, by Purchaser if Purchaser elects to acquire the Excess Cash Amount calculated in accordance with Section 7.3(e), and (b) an amount equal to the lesser of (i) 70% of Closing Cash in excess of $1,100,000 and (ii) $4,410,000. "Code" means the Internal Revenue Code of 1986, as amended. 2 "Company Plan" means any Benefit Plan that is sponsored or maintained by any Company or any of the Subsidiaries for the benefit of any present or former directors, officers or employees of any Company or Subsidiary. "Company Transaction Expenses" means, except as otherwise expressly set forth in this Agreement (including Section 9.9), the aggregate amount of all out-of-pocket fees and expenses, incurred by or on behalf of and to be paid by, any of the Companies or Subsidiaries to the extent relating to the selling of the Companies or otherwise relating to the negotiation, preparation or execution of this Agreement or any documents or agreements contemplated hereby or the performance or consummation of the transactions contemplated hereby, including (A) any fees associated with filings required by the HSR Act or competition filings to be made in foreign jurisdictions required to be paid in accordance with Section 11.1 hereof; (B) any fees and expenses associated with obtaining necessary or appropriate waivers, consents or approvals of any Governmental Body or third parties on behalf of any of the Companies or any of the Subsidiaries (other than as provided in Section 6.3), (C) any fees or expenses associated with obtaining the release and termination of any Liens; (D) all brokers' or finders' fees; (E) fees and expenses of counsel, advisors, consultants, investment bankers, accountants, and auditors and experts; (F) all sale, "stay-around," retention, or similar bonuses or payments to current or former directors, officers, employees and consultants payable as a result of or in connection with the transactions contemplated hereby (other than the Aggregate Retention Amount and any severance obligations in respect of actions taken by Purchaser); and (G) fees and expenses to the extent attributable to the Reorganization. "Contract" means any contract, agreement, indenture, note, bond, mortgage, loan, instrument, lease, license, commitment or other arrangement, understanding, undertaking, commitment or obligation, whether written or oral. "CSG Common Stock" means the common stock, $0.01 par value per share, of CSG. "CSG Common Stock Closing Price" means a dollar amount equal to the closing price per share of the CSG Common Stock on the NASDAQ Stock Market on the trading day which is two (2) days immediately preceding the Closing Date. "Environmental Law" means any Law in any way relating to the protection of the environment or natural resources in connection with the presence of, or any Remedial Action taken in relation to, a Hazardous Material in the soil or any body of water, including but not limited to, any ground water, surface water or aquifer, including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.) the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.), as each has been or may be amended and the regulations promulgated pursuant thereto and in each case, as in effect on or prior to the Closing Date or, with respect to representations and warranties made on the date hereof and as of the Closing, on or prior to the date hereof and on or prior to the Closing Date. 3 "ERISA" means the Employment Retirement Income Security Act of 1974, as amended. "Escrow Account" means a separate account, set up pursuant to the Escrow Agreement, where the Escrow Amount shall be held for disbursement by the Escrow Agent. "Escrow Amount" means the sum of (a) the amount of any additional purchase price payable in respect of the Excess Cash Amount if Purchaser elects to acquire the Excess Cash Amount under Section 7.3(e) calculated in accordance with Section 7.3(e) and determined as if the Excess Cash Amount as of the Closing Date equals (i) the Cash of the Companies and Subsidiaries as set forth on the most recent unaudited monthly financial statements of the Companies and Subsidiaries delivered to Purchaser pursuant to Section 6.11 prior to the Closing Date less (ii) any Cash dividends paid by the Companies or Subsidiaries to the Sellers and their Affiliates (other than the Companies and Subsidiaries) since the date of such financial statement (the result of clauses (i) and (ii) shall be referred to "Estimated Closing Cash") and (b) an amount equal to the lesser of (i) 70% of Estimated Closing Cash in excess of $1,100,000 and (ii) $4,410,000. "FairPoint Business" means the service bureau business contract by and among CSG Software, Inc. and FairPoint Communications, Inc. "GAAP" means generally accepted accounting principles in the United States as of the date hereof. "Governmental Body" means any government or governmental or regulatory body thereof, or political subdivision thereof, whether federal, state, local or foreign, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private). "Hazardous Material" means any substance, material or waste that is regulated, classified, or otherwise characterized under or pursuant to any Environmental Law as "hazardous," "toxic," "pollutant," "contaminant," "radioactive," or words of similar meaning or effect, including petroleum and its by-products, asbestos, polychlorinated biphenyls, radon, mold and urea formaldehyde insulation. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 4 "Indebtedness" of any Person means, without duplication, (i) the principal, accreted value, accrued and unpaid interest, prepayment and redemption premiums or penalties (if any), unpaid fees or expenses and other monetary obligations in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable and other accrued current liabilities arising in the Ordinary Course of Business (other than the current liability portion of any indebtedness for borrowed money)); (iii) all obligations of such Person under leases required to be capitalized in accordance with GAAP; (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction; (v) all obligations of such Person under interest rate or currency swap transactions (valued at the termination value thereof); (vi) the liquidation value, accrued and unpaid dividends; prepayment or redemption premiums and penalties (if any), unpaid fees or expenses and other monetary obligations in respect of any redeemable preferred stock of such Person; (vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons for the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise, including guarantees of such obligations; and (viii) all obligations of the type referred to in clauses (i) through (vii) of other Persons secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person). "Intellectual Property" shall mean all of the rights arising from or in respect of the following, whether protected, created or arising under the Laws of the United States or any foreign jurisdiction: (A) patents, patent applications, any reissues, reexaminations, divisionals, continuations, continuations-in-part and extensions thereof; (B) trademarks, service marks, trade names (whether registered or unregistered), service names, industrial designs, brand names, brand marks, trade dress rights, Internet domain names, identifying symbols, logos, emblems, signs or insignia, and including all goodwill associated with the foregoing; (C) copyrights, whether registered or unregistered (including copyrights in computer software programs), mask work rights and registrations and applications therefor); (D) confidential and proprietary information, or non-public know-how, trade secrets and information, in each case excluding any rights in respect of any of the foregoing that comprise or are protected by items listed in clauses (B) or (C) above; and (E) all applications, registrations and permits related to any of the foregoing clauses (A) through (D). "IRS" means the Internal Revenue Service. "Knowledge" means the knowledge after due inquiry of the individuals set forth on Schedule 1.1. "Law" means any foreign, federal, state or local law (including common law), statute, code, ordinance, rule, regulation or Order. 5 "Legal Proceeding" means any judicial, administrative or arbitral actions, suits, mediation, investigation, inquiry, proceedings or claims (including counterclaims) by or before a Governmental Body. "Liability" means any debt, loss, damage, adverse claim, fine, penalty, liability or obligation (whether direct or indirect, known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, matured or unmatured, determined or determinable, liquidated or unliquidated, or due or to become due, and whether in contract, tort, strict liability or otherwise), and including all costs and expenses relating thereto including all fees, disbursements and expenses of legal counsel, experts, engineers and consultants and costs of investigation. "Lien" means, with respect to any property or asset, any lien, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, proxy, voting trust or agreement, transfer restriction under any shareholder or similar agreement, encumbrance or any other restriction or limitation whatsoever in respect to any property or asset. "Material Adverse Effect" means any change, effect, event, occurrence or state of facts that, individually or in the aggregate, is materially adverse to (i) the business, assets, liabilities, properties, financial condition or results of operations of the Business, taken as a whole or (ii) the ability of each of the Sellers to consummate the transactions contemplated by this Agreement or to perform their obligations under this Agreement or the Seller Documents, other than, in the case of clause (i) above, any change, effect, event, occurrence or state of facts (A) affecting the United States economy or the economies of other jurisdictions in which a material portion of the Business is conducted or (B) affecting the billing and customer care industry in general. "Non-Transferred Employees" means the Business Employees who are identified in the Transfer Notice as employees whose employment is not to be transferred to any Company or Subsidiary in accordance with Section 6.13 of this Agreement. "Order" means any order, injunction, judgment, doctrine, decree, ruling, writ, assessment or arbitration award of a Governmental Body. "Ordinary Course of Business" means the ordinary and usual course of Business through the date hereof consistent with past practice. "Permits" means any approvals, authorizations, consents, licenses, permits or certificates of a Governmental Body. "Permitted Exceptions" means (i) all defects, exceptions, restrictions, easements, rights of way and encumbrances disclosed in policies of title insurance which have been delivered to Purchaser; (ii) liens for current Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings, provided an appropriate reserve has been established therefor in 6 the Financial Statements in accordance with GAAP; (iii) mechanics', carriers', workers', and repairers' Liens arising or incurred in the Ordinary Course of Business that are not material to the business, operations or financial condition of the property of the Companies or Subsidiaries so encumbered and that are not resulting from a breach, default or violation by any of the Sellers, Companies or Subsidiaries of any Contract or Law; and (iv) zoning, entitlement and other land use and environmental regulations by any Governmental Body, provided that such regulations have not been violated. "Person" means any individual, corporation, limited liability company, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity. "Release" means any release, spill, emission, leaking, pumping, poring, injection, deposit, dumping, emptying, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, or into or out of any property. "Remedial Action" means all actions including any capital expenditures undertaken to (i) clean up, remove, treat or in any other way address any Hazardous Material; (ii) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material so it does not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations or post-remedial monitoring and care; or (iv) correct a condition of noncompliance with Environmental Laws. "Retention Amount" means, with respect to each outstanding (a) unvested option to purchase CSG Common Stock held by a Continuing Employee or (b) each share of restricted CSG Common Stock subject to vesting held by a Continuing Employee, in each case that will vest or restrictions associated therewith will lapse within one calendar year of the Closing Date, the product of (i) the number of shares of CSG Common Stock subject to such unvested option or the number of shares of restricted CSG Common Stock, (ii) the CSG Common Stock Closing Price less, in the case of options, the applicable exercise price associated therewith, if any, and (iii) a fraction, the numerator of which is the number of days during such vesting period that have elapsed since the grant date or most recent anniversary thereof and the denominator of which is 365. "Securities Act" means the Securities Act of 1933, as amended. "Side Letter" means that certain letter from CSG to Purchaser dated as of the date hereof setting forth the matters expressly contemplated herein. "Subsidiary" means any Person of which (i) a majority of the outstanding share capital, voting securities or other equity interests are owned, directly or indirectly, by any Company or (ii) any Company is entitled, directly or indirectly, to appoint a majority of the board of directors, board of managers or comparable body of such Person. 7 "Tax" or "Taxes" means (i) any and all federal, state, local or foreign taxes or other like charges, fees, imposts, levies or assessments, including, without limitation, all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes and customs duties, (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Taxing Authority in connection with any item described in clause (i) and (iii) any liability in respect of any items described in clauses (i) or (ii) payable by reason of Contract, assumption, transferee liability, operation of Law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof of any analogous or similar provision under Law) or otherwise. "Taxing Authority" means the IRS and any other Governmental Body responsible for the administration of any Tax. "Tax Return" means any return, report or statement required to be filed with respect to any Tax (including any elections, declarations, schedules or attachments thereto, and any amendment thereof) including any information return, claim for refund, amended return or declaration of estimated Tax, and including, where permitted or required, affiliated, combined, consolidated or unitary returns for any group of entities that includes the Company or any of the Subsidiaries. 1.2 Terms Defined Elsewhere in this Agreement. For purposes of this Agreement, the following terms have meanings set forth in the sections indicated: Term Section ---- ------- 1936 Act 4.15(u) 1997 Act 4.15(u) 2005 Annual Bonus 6.13(c) Accrued Days 6.13(b) Agreement Recitals Ancillary Agreements 7.1(d) Antitrust Division 6.4(a) Antitrust Laws 6.4(b) Arbiter 2.5(c) Basket 8.4(a) BSNL 8.2(a)(viii) Business Intellectual Property 4.13(b)(ii) Cap 8.4(b) Closing 2.6 Closing Cash 2.5(a) Closing Cash Statement 2.5(b) Closing Net Assets Statement 2.5(b) Closing Date 2.6 Closing Working Capital 2.5(a) 8 Term Section ---- ------- Closing Working Capital Statement 2.5(b) Companies Recitals Company Documents 4.3(a) Company Marks 6.9(a) Confidential Information 6.6(b) Confidentiality Agreement 6.1(b) Continuing Employee 6.13(a) Corporate 4.12(a)(ii) CSG Recitals CSG Australia 4.9(h)(i) CSG Holdings Recitals CSG Holdings Common Stock 4.18(b) CSG International Recitals CSG Netherlands Recitals CSG Netherlands CV Recitals CSG Netherlands Common Stock 4.18(c) CSG Software Recitals CSG Software Common Stock 4.18(a) CSG Technology Recitals CSG Technology Common Stock 4.18(d) Da Vinci Obligations 6.17 Distribution Agreement 7.1(d) employee pension benefit plan 4.9(b) Escrow Agent 7.1(e) Escrow Agreement 7.1(e) Estimated Closing Cash 1.1(Definition of Escrow Amount) Excess Cash Amount 7.3(e) excess parachute payment 4.9(b) Exchange Act 3.6(a) Financial Statements 4.12(a) Foreign Plan 4.9(c) FTC 6.4(a) Government Contract 4.24 Included Current Assets 2.5(a) Included Current Liabilities 2.5(a) Loss 8.2(a) Losses 8.2(a) Marked Assets 6.9(b)(iii) Material Contract 4.10 Net Assets Statement 4.12(a)(ii) New Hire 6.2(b)(v) Pension Plan 4.9(b) Personal Property Leases 4.5(b) 9 Term Section ---- ------- Plan 4.9(h)(iii) Pre-Closing Taxable Period 9.1 Post-Closing Taxable Period 9.2 Purchase Price 2.2 Purchase Price Decrease 2.5(d) Purchase Price Increase 2.5(d) Purchaser Recitals Purchaser Documents 5.2 Purchaser Indemnified Parties 8.2(a) Purchaser Material Adverse Effect 5.1 Purchaser's Savings Plan 6.13(d) Purchaser Special Representations 8.1 Real Property Lease 4.7(a) Real Property Leases 4.7(a) Registered Intellectual Property 4.13(a) Related Persons 4.21 Relocation and Tuition Benefits 6.13(b) Reorganization 6.2(c) Required Consents 4.4(b) SEC 3.6(a) SEC Documents 3.6(a) Section 338(h)(10) Election 9.8(b)(i) Securities Recitals Seller Documents 3.2(a) Seller Indemnified Parties 8.2(b) Seller Name 6.9(b)(i) Seller Required Consents 3.3(b) Seller Special Representations 8.1 Seller Statute of Limitation Representation 8.1 Sellers Recitals Severance Amount Shortfall 2.3 Severance Notice 6.13(a) SGAA 4.9(h)(iii) Straddle Period 9.4 Survival Period 8.1 Target Working Capital 2.5(a)(ii) Tax Benefit 8.4(f) Tax Claim 9.5(a) Termination Date 10.1(a) Third Party Claim 8.3(b) Title IV Plan 4.9(b) TRA 4.9(b) Transfer Notice 6.13(a) Transferred Business Employees 6.13(a) Transition Services Agreement 7.1(c) Working Capital Adjustments 2.5(a) 10 1.3 Other Definitional and Interpretive Matters. (a) Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply: Calculation of Time Period. When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day. Dollars. Any reference in this Agreement to $ shall mean U.S. dollars. Exhibits/Schedules. The Exhibits and Schedules to this Agreement are hereby incorporated and made a part hereof and are an integral part of this Agreement. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein shall be defined as set forth in this Agreement. Gender and Number. Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa. Headings. The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to any "Section" are to the corresponding Section of this Agreement unless otherwise specified. Herein. The words such as "herein," "hereinafter," "hereof," and "hereunder" refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires. Including. The word "including" or any variation thereof means "including, without limitation" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it. 11 (b) The obligation of a party to use reasonable commercial efforts to accomplish an objective means that the obligated party is required to make a diligent, reasonable and good faith effort to accomplish the applicable objective. Such obligation, however, does not require any unreasonable expenditure of funds or incurrence of Liability on the part of the obligated party (in each case, in the context of the expenditure to be made or Liability to be incurred); provided, however, that the foregoing shall not require that the obligated party act in a manner that would be contrary to normal commercial practices in order to accomplish the objective. The fact that the objective is or is not actually accomplished is no indication that the obligated party did or did not in fact utilize its reasonable commercial efforts in attempting to accomplish the objective. (c) The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. (d) For purposes of this Agreement, references to documents made available to Purchaser from the Sellers and/or the Companies shall be deemed to include only those documents made available, or indicated as made available, in the online data room maintained by Sellers' counsel prior to October 5, 2005. ARTICLE II SALE AND PURCHASE OF SECURITIES, PURCHASE PRICE; CLOSING 2.1 Sale and Purchase of Securities. Upon the terms and subject to the conditions contained herein, on the Closing Date, each Seller agrees to sell to Purchaser, free and clear of any and all Liens, and Purchaser agrees to purchase from each Seller, the Securities owned by such Seller and listed on Exhibit A hereto. 2.2 Purchase Price. The aggregate purchase price to be paid by Purchaser for the Securities shall be an amount in cash equal to $251,000,000 (a) less (i) the Aggregate Retention Amount and (ii) any Company Transaction Expenses unpaid as of the Closing Date and (b) subject to adjustment as provided in Section 2.3 (the "Purchase Price"), subject to further adjustment as provided in Section 2.5. 2.3 Severance Adjustment Amount. If the aggregate of the severance for the Non-Transferred Employees is less than $3,000,000, the Purchase Price shall be reduced by the amount of such difference (the "Severance Amount Shortfall"). For purposes hereof, the amount of severance for each Non-Transferred Employee shall be equal to the lesser of (a) the amount of severance for such Non-Transferred Employee reflected in Exhibit E of the Side Letter and (b) the amount of severance for such Non-Transferred Employee determined under the applicable severance policy of the Sellers in effect as of the date hereof (other than the individuals set forth on Schedule 2.3, which individuals shall not be considered for purposes of aggregation) and set forth in the Severance Notice. 12 2.4 Payment of Purchase Price. The Side Letter sets forth the Retention Amount for each Continuing Employee determined (a) as if the Closing Date were November 30, 2005, (b) assuming that all Business Employees are Transferred Business Employees and (c) assuming that the CSG Common Stock Closing Price is $21.70. The Aggregate Retention Amount shall be determined utilizing the information set forth in the Side Letter and making only necessary adjustments to contemplate the actual Closing Date, the actual CSG Common Stock Closing Price, the actual Non-Transferred Employees, any termination of such rights triggered as a result of the termination of employment of the holder thereof, any further acceleration of vesting of such options to acquire CSG Common Stock or shares of CSG Common Stock subject to restrictions, in each case, in accordance with the Side Letter and the inclusion of additional Business Employees engaged by the Sellers and their Affiliates (other than the Companies and Subsidiaries) in the Integrated Customer Management System business; provided that the aggregate value of the unvested options to acquire CSG Common Stock (based upon the spread between an assumed stock market price of $21.70 per share and the exercise price per share) and CSG Common Stock subject to restrictions (based on a stock market price of $21.70 per share) held by such additional Business Employees shall not exceed $250,000. The Sellers shall, within 10 Business Days after the date hereof, provide Purchaser an updated Exhibit A to the Side Letter solely to reflect the inclusion of additional Business Employees engaged by the Sellers and their Affiliates (other than the Companies and Subsidiaries) in the Integrated Customer Management System business. Two (2) Business Days prior to the Closing Date, the Sellers and Purchaser shall agree, in good faith, upon the Escrow Amount and the amount of adjustments to the Purchase Price contemplated by clause (a) of Section 2.2. On the Closing Date, Purchaser shall pay the Purchase Price, as so calculated, to the Sellers in the percentages set forth in a letter to be delivered by the Sellers to Purchaser at least three (3) days prior to Closing by wire transfer of immediately available funds into accounts designated in such letter. On the Closing Date, Purchaser shall pay the Escrow Amount to the Escrow Agent in cash payable by wire transfer of immediately available funds for deposit into the Escrow Account. 2.5 Purchase Price Adjustment. (a) Closing Working Capital. Following the Closing, the Purchase Price shall be adjusted as provided herein in the event that (i) Closing Working Capital is less than the Target Working Capital, (ii) Purchaser elects to acquire the Excess Cash Amount by paying the amount calculated in accordance with Section 7.3(e) or (iii) the Cash of the Companies and Subsidiaries as of the Closing Date (the "Closing Cash") exceeds $1,100,000. "Target Working Capital" shall be negative $21,000,000. "Closing Working Capital" means (A) the combined Included Current Assets of the Companies and Subsidiaries, less (B) the combined Included Current Liabilities of the Companies and Subsidiaries, plus (C) the sum of Working Capital Adjustments, all determined as of the opening of business on the Closing Date. "Included Current Assets" means current assets of 13 the Companies and Subsidiaries, as defined under, and determined in accordance with, GAAP applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the audited consolidated financial statements of CSG and its subsidiaries for the most recent fiscal year end as if such accounts were being prepared and audited as of a fiscal year end. "Included Current Liabilities" means current liabilities of the Companies and Subsidiaries as defined under, and determined in accordance with, GAAP applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the audited consolidated financial statements of CSG and its subsidiaries for the most recent fiscal year end as if such accounts were being prepared and audited as of a fiscal year end. "Working Capital Adjustments" means the sum of the following adjustments: (A) a negative adjustment equal to the amount of Cash of the Companies and Subsidiaries, (B) a negative adjustment equal to $2,500,000, which is related to a predetermined adjustment for the allowance for doubtful accounts, (C) a negative adjustment equal to the excess of (1) the full amount of unpaid 2005 incentive bonus compensation for Continuing Employees expected to be accrued as of December 31, 2005 over (2) the amount of accrued but unpaid 2005 incentive bonus compensation for Continuing Employees reflected in the Included Liabilities, (D) a negative adjustment equal to the non-current deferred revenue of the Companies and Subsidiaries, (E) a negative adjustment of $5,000,000 in respect of a reserve for Taxes (it being understood and agreed that Included Current Liabilities will not otherwise include any reserve for income Tax contingencies determined in accordance with Statement of Financial Accounting Standards No. 5), and (F) the Closing Working Capital Statement shall not reflect (whether or not it would otherwise reflect) any asset or Liability in respect of any Tax resulting from, arising out of or based on the sale of the Securities hereunder, including any Tax arising as a result of the Section 338(h)(10) Election (as defined in Section 9.8) and any income or franchise Tax payable to any Tax Authority with respect to which the Company or Subsidiary has filed or will file an affiliated, consolidated, combined or unitary Tax Return with a Seller or any of their Affiliates to the extent that such Tax is required to be paid by the Sellers or any of their Affiliates (other than the Companies or Subsidiaries) under applicable Law. All components of Closing Working Capital shall be calculated after taking into account the actions taken pursuant to Section 6.10, excluding the FairPoint Business and excluding any intercompany accounts receivable or accounts payable between the Companies and Subsidiaries, on the one hand, and CSG and its subsidiaries (other than the Companies and Subsidiaries), on the other. Schedule 2.5(a) provides an illustrative example of the calculations of Closing Working Capital derived from the unaudited consolidated financial statements of CSG and its subsidiaries as of June 30, 2005. (b) Closing Net Assets Statement. Within 60 days following the Closing Date, Purchaser shall deliver to the Sellers an unaudited combined statement of net assets of the Companies and Subsidiaries (exclusive of the assets and Liabilities of the FairPoint Business) as of the opening of business on the Closing Date (the "Closing Net Assets Statement"), a statement of Closing Working Capital derived from the Closing Net Assets Statement (the "Closing 14 Working Capital Statement") and a statement of the Closing Cash, the Excess Cash Amount and the resulting Cash Adjustment Amount, if any, derived from the Closing Net Assets Statement (the "Closing Cash Statement"). Schedule 2.5(b) provides an illustrative example of the calculations of the Cash Adjustment Amount derived from the unaudited consolidated financial statements of CSG and its subsidiaries as of June 30, 2005. The Closing Net Assets Statement shall be derived from the unaudited financial statements of CSG and its subsidiaries prepared in accordance with GAAP applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the audited consolidated financial statements for CSG and its subsidiaries for the most recent fiscal year end as if such Closing Net Assets Statement was as of a fiscal year end. (c) Acceptance of Statements; Dispute Procedures. The Closing Net Assets Statement, the Closing Working Capital Statement and the Closing Cash Statement delivered by Purchaser to the Sellers shall be conclusive and binding upon the parties unless the Sellers, within 30 days after delivery to the Sellers of the Closing Net Assets Statement, the Closing Working Capital Statement and the Closing Cash Statement, notify Purchaser in writing that the Sellers dispute any of the amounts set forth therein, specifying the nature of the dispute and the basis therefor. The parties shall in good faith attempt to resolve any dispute and, if the parties so resolve all disputes, the Closing Net Assets Statement, the Closing Working Capital Statement and the Closing Cash Statement, as amended to the extent necessary to reflect the resolution of the dispute, shall be conclusive and binding on the parties. If the parties do not reach agreement in resolving the dispute within 20 days after notice is given by the Sellers to Purchaser pursuant to the second preceding sentence, the parties shall submit the dispute to a mutually satisfactory partner in the New York City office of the accounting firm of PricewaterhouseCoopers or, if no partner at such firm will act, to a partner at such other nationally recognized independent accounting firm which is mutually agreeable to the parties (who shall not have any material relationship with Purchaser or Seller) (the "Arbiter") for resolution. If the parties cannot agree on the selection of a partner at an independent accounting firm to act as Arbiter, the parties shall request the American Arbitration Association to appoint such a partner, and such appointment shall be conclusive and binding on the parties. Promptly, but no later than 20 days after acceptance of his or her appointment as Arbiter, the Arbiter shall determine (it being understood that in making such determination, the Arbiter shall be functioning as an expert and not as an arbitrator), based solely on written submissions by Purchaser and the Seller, and not by independent review, only those issues in dispute and shall render a written report as to the resolution of the dispute and the resulting computation of the Closing Working Capital and the Cash Adjustment Amount which shall be conclusive and binding on the parties. All proceedings conducted by the Arbiter shall take place in The City of New York. In resolving any disputed item, the Arbiter (x) shall be bound by the provisions of this Section 2.5 and (y) may not assign a value to any item 15 greater than the greatest value for such item claimed by either party or less than the smallest value for such item claimed by either party. The fees, costs and expenses of the Arbiter shall be allocated to and borne by Purchaser and the Sellers based on the inverse of the percentage that the Arbiter's determination (before such allocation) bears to the total amount of the items in dispute as originally submitted to the Arbiter. For example, should the items in dispute total in amount to $1,000 and the Arbiter awards $600 in favor of the Seller's position, 60% of the costs of its review would be borne by Purchaser and 40% of the costs would be borne by the Seller. (d) Payment. Upon final determination of Closing Working Capital as provided in Section 2.5(c) above, if Closing Working Capital is less than Target Working Capital, the Purchase Price shall be decreased by the excess (the "Purchase Price Decrease") of Target Working Capital over the Closing Working Capital. Upon final determination of the Cash Adjustment Amount, if any, as provided in Section 2.5(c) above, the Purchase Price shall be increased by the Cash Adjustment Amount, if any, (the "Purchase Price Increase"). If the Purchase Price Decrease exceeds the Purchase Price Increase, the Sellers shall promptly pay to Purchaser the amount of such excess no later than five (5) Business Days after such final determination, together with interest thereon from the Closing Date to the date of payment thereof at the "prime" rate, as announced by The Wall Street Journal, Eastern Edition, from time to time to be in effect, calculated based on a 365 day year and the actual number of days elapsed, and all amounts in the Escrow Account shall be released to Purchaser. If the Purchase Price Increase exceeds the Purchase Price Decrease, Purchaser shall promptly pay to the Sellers in the percentages set forth in the letter referenced in Section 2.4 the amount of such excess no later than five (5) Business Days after such final determination, together with interest thereon from the Closing Date to the date of payment thereof at the "prime" rate, calculated as set forth in the immediately preceding sentence. Any payment to be made by Purchaser to the Sellers pursuant to this Section 2.5(d) will first be made as a payment from the Escrow Account and any amounts remaining in the Escrow Account thereafter shall be released to Purchaser. 2.6 Closing Date. The consummation of the sale and purchase of the Securities provided for in Section 2.1 hereof (the "Closing") shall take place at the offices of Weil, Gotshal & Manges LLP located at 767 Fifth Avenue, New York, New York 10153 (or at such other place as the parties may designate in writing) at 10:00 a.m. (New York City time) on a date to be specified by the parties (the "Closing Date"), which date shall be no later than the second Business Day after the satisfaction or waiver of the conditions set forth in Article VIII (other than conditions that by their nature are to be satisfied at Closing, but subject to the satisfaction or waiver of those conditions at such time), unless another time, date or place is agreed to in writing by the parties hereto. 2.7 Seller Deliveries on the Closing Date. At the Closing, the Sellers shall deliver or cause each Company to deliver, as applicable, to Purchaser: (a) Copies of resolutions, certified by the Secretary of each Company and an authorized person of the Seller, respectively, as to the authorization of this Agreement and all of the transactions contemplated hereby. 16 (b) Copies of the releases from Affiliates of each Company, pursuant to Section 6.10. (c) Certificates from the Sellers representing the Securities, duly endorsed in blank or accompanied by transfer powers and with all requisite transfer tax stamps attached and otherwise sufficient to transfer the Securities to Purchaser free and clean of all Liens other than Permitted Exceptions; (d) Certificates of good standing dated not more than five (5) Business Days prior to the Closing Date with respect to each Company issued by the Secretary of State of jurisdiction of organization for such Company and for each state in which such Company is qualified to do business as a foreign corporation; and (e) An affidavit of non-foreign status of CSG that complies with Section 1445 of the Code and an affidavit of CSG International that none of the Securities being sold by CSG Netherlands CV is a "U.S. real property interest" within the meaning of Section 1445. 2.8 Joint Deliveries on Closing Date. At the Closing, the Purchaser and the Sellers shall deliver to each other their respective portions of: (a) The fully-executed Transition Services Agreement; (b) The fully-executed Distribution Agreement; and (c) The fully-executed Escrow Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES RELATING TO THE SELLERS The Sellers, jointly and severally, hereby represent and warrant to Purchaser that: 3.1 Organization and Qualification. CSG is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and carry on its business as now conducted. CSG Netherlands CV is a partnership with limited liability duly organized, validly existing and in good standing under the Laws of The Netherlands and, acting through its general partner, CSG International, has all requisite power and authority to own, lease and operate its properties and carry on its business as now conducted. CSG International is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all requisite limited liability company power and authority to own, lease and operate its properties and carry on as business as now conducted. 17 3.2 Authorization; Binding Effect. (a) Each Seller has all requisite corporate power and authority to execute, perform and deliver this Agreement and each other agreement, document, or instrument or certificate contemplated by this Agreement or otherwise to be executed by such Seller in connection with the consummation of the transactions contemplated by this Agreement (the "Seller Documents") and to effect and consummate the transactions contemplated hereby and thereby, and the execution, delivery and performance of this Agreement and the Seller Documents have been duly authorized by all requisite corporate action. (b) This Agreement has been duly executed and delivered by each Seller and this Agreement is, and the Seller Documents, when duly executed and delivered by such Seller will be, valid and legally binding obligations of such Seller, enforceable against such Seller in accordance with their respective terms, except to the extent that enforcement of the rights and remedies created hereby and thereby may be affected by bankruptcy, reorganization, moratorium, insolvency and similar Laws of general application affecting the rights and remedies of creditors and by general equity principles. 3.3 Non-Contravention; Consents. (a) Assuming that all Seller Required Consents have been obtained, the execution, delivery and performance of this Agreement by each Seller and the Seller Documents by such Seller and the consummation of the transactions contemplated hereby and thereby do not and will not: (i) result in a breach or violation of any provision of such Seller's charter, by-laws, partnership agreement, limited liability operating agreement or similar organizational documents, (ii) violate or result in a breach under any provision of any mortgage, deed of trust, conveyance to secure debt, note, loan, indenture, lien, lease, agreement, instrument, order, judgment, decree or other arrangement or commitment to which such Seller is a party or by which such Seller or any of its assets are bound or (iii) violate any applicable Law or Order or Permit by which such Seller or its assets are bound other than, in the case of clauses (ii) and (iii), any such violation, breach, defaults, acceleration or cancellation of obligations or rights that, individually or in the aggregate, has not had or would not reasonably be expected to have a material adverse effect on the Seller. (b) No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to any Person is required to be obtained, made or taken by the Sellers, Companies or Subsidiaries in connection with the execution and delivery of this Agreement or the Seller Documents by any Seller or for the consummation of the transactions contemplated hereby or thereby by any Seller, except for (i) any filings required to be made under any Antitrust Laws and (ii) the items set forth in Schedule 3.3(b) (items (i) and (ii) being referred to herein as the "Seller Required Consents"). 18 3.4 Ownership and Transfer of Securities. Each Seller is the record and beneficial owner of the Securities indicated as being owned by such Seller on Exhibit A, free and clear of any and all Liens, and such Securities constitute all of the outstanding equity interests of the Companies; provided, however, that CSG International as general partner of CSG Netherlands CV holds legal title to CSG Technology and CSG Netherlands on behalf of, and for the benefit of, CSG Netherlands CV. Each Seller, and with regard to CSG Netherlands CV, acting through its general partner of CSG International, has the power and authority to sell, transfer, assign and deliver the Securities owned by it as provided in this Agreement, and such delivery will convey to Purchaser good and marketable title to such Securities, free and clear of any and all Liens. 3.5 Litigation. Except as set forth in Schedule 3.5, there is no Legal Proceeding pending or, to the Knowledge of the Seller, threatened against any Seller or to which any Seller is otherwise a party relating to this Agreement, the Seller Documents or the transactions contemplated hereby or thereby. 3.6 Public Filings. (a) CSG has filed with the Securities and Exchange Commission (the "SEC") all forms, reports, schedules, statements, exhibits and other documents required to be filed under the Exchange Act of 1934, as amended (the "Exchange Act"), or the Securities Act, (collectively, the "SEC Documents"). As of its filing date or, if amended, as of the date of the last such amendment, each SEC Document, to the extent that it relates to the Companies, Subsidiaries or the Business, fully complied with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. As of its filing date, or, if amended, as of the date of the last such amendment, each SEC Document filed pursuant to the Exchange Act did not contain any untrue statement of a material fact or omit to state any material fact with respect to the Companies, Subsidiaries or the Business necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. None of the Companies or Subsidiaries is or has been required to file any forms, reports or other documents with the SEC. All of the audited consolidated financial statements and unaudited consolidated interim financial statements included in the SEC Documents, to the extent that they relate to the Companies, Subsidiaries or the Business (i) have been prepared from, are in accordance with and accurately reflect the books and records of CSG and its consolidated subsidiaries, (ii) fully comply with the applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto (including Regulation S-X), (iii) were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto and except, in the case of the unaudited interim statements, as may be permitted under the Exchange Act with respect to Quarterly Reports on Form 10-Q, and (iv) fairly present, in all material respects, the consolidated financial position and the consolidated results of operations and cash flows (subject, in the case 19 of unaudited interim financial statements, to normal year end adjustments) of CSG and its consolidated subsidiaries as of the dates and for the periods referred to therein. The reports of CSG's independent auditors regarding CSG's consolidated financial statements in the SEC filings, to the extent they relate to the Companies, Subsidiaries or the Business, have not been withdrawn, supplemented or modified, and none of CSG or any of its subsidiaries has received any communication from its independent auditors concerning any such withdrawal, supplement or modification. CSG has provided to Purchaser copies of all issued auditors' reports, letters to management regarding accounting practices and systems of internal controls, and all responses to such letters from management, in each case to the extent relating to the Companies, the Subsidiaries or the Business, whether the same are issued to CSG or any of its subsidiaries. (b) CSG has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 under the Exchange Act) with respect to the Companies, Subsidiaries and the Business; such disclosure controls and procedures are designed to ensure that material information relating to the Companies, Subsidiaries and the Business is made known to CSG's principal executive officer and its principal financial officer by others within those entities; and, to the Knowledge of the Sellers, such disclosure controls and procedures are effective in timely alerting CSG's principal executive officer and its principal financial officer to material information required under the Exchange Act to be included in CSG's periodic reports with respect to the Companies, the Subsidiaries and the Business. 3.7 Financial Advisors. Except as set forth on Schedule 3.7, no Person has acted, directly or indirectly, as a broker, finder or financial advisor for any Seller, Company or Subsidiary in connection with the transactions contemplated by this Agreement and no Person is or will be entitled to any fee or commission or like payment in respect thereof. ARTICLE IV REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANIES AND SUBSIDIARIES The Sellers, jointly and severally, hereby represent and warrant to Purchaser that: 4.1 Organization and Qualification. Each of CSG Software and CSG Holding is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted. CSG Technology is a corporation duly organized, validly existing and in good standing under the laws of Bermuda and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now conducted. CSG Netherlands BV is a limited liability company duly organized, validly existing and in good standing under the laws of the Netherlands and has all requisite 20 power and authority to own, lease and operate its properties and to carry on its business as now conducted. Each Company is duly qualified or authorized to do business as a foreign corporation and is in good standing under the laws of each jurisdiction in which it owns or leases real property and each other jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification or authorization, except where the failure to be so qualified, authorized or in good standing, individually or in the aggregate, has not had, nor would reasonably be expected to have, a Material Adverse Effect. 4.2 Subsidiaries. Schedule 4.2 sets forth the name of each Subsidiary and, with respect to each Subsidiary, the jurisdiction in which it is incorporated or organized, the jurisdictions, if any, in which it is qualified to do business, the number of shares of its authorized capital stock (if any), the number and class of shares or other equity interests thereof duly issued and outstanding, the names of all stockholders or other equity owners and the number of shares of stock owned by each stockholder or the amount of equity owned by each equity owner. Each Subsidiary is a duly organized and validly existing corporation, partnership or other entity in good standing under the laws of the jurisdiction of its incorporation or organization and is duly qualified or authorized to do business and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification or authorization, except where the failure to be so qualified, authorized or in good standing, individually or in the aggregate, has not had, nor would reasonably be expected to have, a Material Adverse Effect. Each Subsidiary has all requisite corporate or entity power and authority to own its properties and carry on its business as presently conducted. The outstanding shares of capital stock or other equity interests (if any) of each Subsidiary are validly issued, fully paid and non-assessable and were not issued in violation of any purchase or call option, right of first refusal, subscription right, preemptive right or any similar right. All such shares or other equity interests (if any) represented as being owned by any of the Companies or Subsidiaries are owned by them free and clear of any and all Liens, except as set forth in Schedule 4.2. There is no existing option, warrant, call, right or Contract to which any Subsidiary is a party requiring, and there are no convertible securities of any Subsidiary outstanding which upon conversion would require, the issuance of any shares of capital stock or other equity interests of any Subsidiary or other securities convertible into shares of capital stock or other equity interests of any Subsidiary. No Company owns, directly or indirectly, any capital stock or equity securities of any Person other than the Subsidiaries. Except as set forth on Schedule 4.2 and to the Knowledge of the Sellers and the Companies, there are no contractual restrictions on the ability of the Subsidiaries to make distributions of cash to their respective equity holders. 4.3 Authorization; Binding Effect. (a) Each Company has all requisite corporate power and authority to execute, perform and deliver this Agreement and each other agreement, document, or instrument or certificate contemplated by this Agreement or to be executed by such Company in connection with the transactions contemplated by this Agreement (collectively, the "Company Documents") and to effect and consummate the transactions contemplated hereby and thereby, and the execution, delivery and performance of this Agreement and the Company Documents have been duly authorized by all requisite corporate action. 21 (b) This Agreement has been duly executed and delivered by each Company and this Agreement is, and the Company Documents, when duly executed and delivered by each Company will be, valid and legally binding obligations of such Company, enforceable against such Company, as applicable, in accordance with their respective terms, except to the extent that enforcement of the rights and remedies created hereby and thereby may be affected by bankruptcy, reorganization, moratorium, insolvency and similar Laws of general application affecting the rights and remedies of creditors and by general equity principles. 4.4 Non-Contravention; Consents. (a) Assuming that all Required Consents have been obtained, the execution, delivery and performance of this Agreement and the Company Documents by each Company that will be a party thereto and the consummation of the transactions contemplated hereby and thereby do not and will not: (i) result in a breach or violation of any provision of such Company's charter, by-laws or similar organizational documents, (ii) violate or result in a breach of or constitute an occurrence of default under any provision of, result in the acceleration or cancellation of any right or obligation or a loss of any benefit to which such Company or any of the Subsidiaries of the Company is entitled under, or give rise to a right by any party to terminate, cancel, rescind or amend any right or obligation under, any mortgage, deed of trust, conveyance to secure debt, note, loan, indenture, lien, lease, agreement, instrument, order, judgment, decree or other arrangement or commitment to which such Company or any of the Subsidiaries of the Company is a party or by which such Company, any of the Subsidiaries or such Company's or any of the Subsidiaries' assets are bound, (iii) violate any applicable Law or Order or Permit by which such Company or any of the Subsidiaries or such Company's or any of the Subsidiaries' assets are bound or (iv) result in the imposition of any Lien, other than Permitted Exceptions, upon any of the assets or properties of such Company or any of the Subsidiaries, other than, in the case of clauses (ii), (iii) and (iv), any such violation, breach, default, acceleration or cancellation of obligations or rights that, individually or in the aggregate, has not had, nor would reasonably be expected to have, a Material Adverse Effect. (b) No consent, approval, Order, Permit or authorization of, or registration, declaration or filing with, or notice to any Person is required to be obtained, made or taken by any Company or Subsidiary in connection with the execution and delivery of this Agreement or the Company Documents by any Company that will be a party thereto or for the consummation of the transactions contemplated hereby or thereby by any Company, except for (i) any filings required to be made under any Antitrust Laws, (ii) the items set forth in Schedule 4.4(b) (items (i) and (ii) being referred to herein as the "Required Consents") and (iii) such consents, approvals, orders, authorizations, registrations, declarations or filings the failure of which to be obtained or made, individually or in the aggregate, has not had, nor would reasonably be expected to have, a Material Adverse Effect. 22 4.5 Title to Property; Principal Equipment; Sufficiency of Assets. (a) Except as set forth on Schedule 4.5(a), the Companies and the Subsidiaries have good and marketable title to, or valid and enforceable leasehold interests in, all items of tangible personal property used or held for use in connection with the Business as currently conducted, free and clear of any and all Liens, other than the Permitted Exceptions. All such items of tangible personal property which, individually or in the aggregate, are material to the operation of the business of the Company and the Subsidiaries are in adequate operating condition, in light of their age, for the purposes for which they are currently being used. (b) Schedule 4.5(b) sets forth all leases of tangible personal property involving annual payments in excess of $100,000 ("Personal Property Leases") relating to tangible personal property used to any significant extent in the Business or to which any Company or any of the Subsidiaries is a party or by which the properties or assets of any Company or any of the Subsidiaries is bound. The Sellers have made available to Purchaser true, correct and complete copies of the Personal Property Leases, together with all amendments, modifications or supplements thereto. Each of the Personal Property Leases is valid, binding and enforceable against each Company or Subsidiary party thereto and, to the Knowledge of the Companies and the Sellers, the other parties thereto in accordance with its terms. 4.6 Permits, Licenses. Except as set forth on Schedule 4.6, there are no material Permits necessary for or used by any Company or Subsidiary to operate or conduct its business as currently operated or conducted. 4.7 Real Estate. (a) Schedule 4.7(a) sets forth a complete list of all real property and interests in real property leased or subleased by the Company and the Subsidiaries (individually, a "Real Property Lease" and collectively, the "Real Property Leases"). Except as set forth on Schedule 4.7(a), the Real Property Leases constitute all interests in real property used, occupied or held for use to any significant extent in the operation of the Business as currently conducted. All of the real property and buildings, fixtures and improvements thereon are in adequate condition for their current use and operation. The Sellers have made available to Purchaser true, correct and complete copies of the Real Property Leases, together with all amendments, modifications or supplements, if any, thereto. (b) Each of the Real Property Leases is valid, binding and enforceable against each Company or Subsidiary party thereto and, to the Knowledge of the Companies and the Sellers, the other parties thereto in accordance with its terms. Each Real Property Lease is in full force and effect and no Company or Subsidiary has violated and, to the Knowledge of the Companies and the Sellers, no landlord thereunder has waived any of the material terms or 23 conditions of any Real Property Lease and all the material covenants to be performed by any Company or Subsidiary and, to the Knowledge of the Companies and the Sellers, the landlord under each such Real Property Lease have been performed in all material respects. 4.8 Compliance With Laws; Litigation. (a) Each Company and Subsidiary is in compliance with all applicable Laws (including Environmental Laws) and all Orders and Permits of or from Governmental Bodies, except for instances of noncompliance or possible noncompliance that, individually or in the aggregate, have not had, nor would reasonably be expected to have, a Material Adverse Effect. (b) Except as set forth on Schedule 4.8(b), there is no Legal Proceeding pending or, to the Knowledge of the Sellers and the Companies, threatened against (i) any of the Companies or Subsidiaries, (ii) any Affiliate of the Companies or Subsidiaries with respect to the Business, (iii) any Company Plan (or assets, plan sponsor, plan administrator or plan fiduciary thereof) or (iv) to the Knowledge of the Companies or the Sellers, any of the officers, directors or employees of any of the Companies, the Subsidiaries, the Sellers or their subsidiaries with respect to activities relating the Business. Except as set forth on Schedule 4.8(b), no Company or Subsidiary (nor any Affiliate of a Company or Subsidiary on behalf thereof) is engaged in any legal action to recover monies due or for damages sustained with respect to the Business. 4.9 Business Employees. (a) The Side Letter accurately sets forth (i) the information referenced in Section 2.4,(ii) a complete and accurate list of all Business Employees, as of the date hereof, setting forth the name, date of employment, position held, job location, annual base salary, sales commission eligibility, incentive plan target, work status (i.e., actively at work, disabled or on approved leave, stating the duration of such leave) and employer of each such Business Employee and (iii) as of the date hereof, a complete and accurate list of all employees of the Companies or Subsidiaries whose services are not primarily dedicated to the Business as of the date hereof, setting forth the name, date of employment, position held, job location, annual base salary, sales commission eligibility, incentive plan target, work status (i.e., actively at work, disabled or on approved leave, stating the duration of such leave) and employer of each such employee. (b) Schedule 4.9(b)(i) sets forth a correct and complete list of all Benefit Plans other than those which involve Liabilities of the Companies and Subsidiaries of less than $25,000 individually and $100,000 in the aggregate, and identifies each such Benefit Plan which is a Company Plan. Each Benefit Plan has been operated in material compliance with its terms and all applicable Laws, including ERISA to the extent applicable. Each Benefit Plan that is an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA ("Pension Plan") and is intended to be qualified under Section 401(a) of the Code, has 24 received a favorable determination letter from the Internal Revenue Service with respect to "TRA" (as defined in Section 1 of Rev. Proc. 93-39), and Seller is not aware of any circumstances likely to result in revocation of any such favorable determination letter. None of the Seller, its Affiliates, Companies or Subsidiaries provides or is obligated to provide any life insurance or health benefits, including prescription drugs (whether or not insured), to any individual after his or her termination of employment or service with any Company or Subsidiary or the Business, except as may be required under Section 4980B of the Code and at the expense of the individual or the individual's beneficiary. None of the Benefit Plans is a Pension Plan subject to Title IV of ERISA ("Title IV Plan"), and neither any of the Companies nor any of the Subsidiaries has any obligation (contingent or otherwise) with respect to any Title IV Plan. Except as set forth in the Side Letter, as updated in accordance with Section 6.15(b)(i), no current or former director, officer, employee or independent contractor of any of the Companies, the Subsidiaries, or the Business will become entitled to bonus, retirement, severance, job security or similar benefit or enhanced benefits (including acceleration of vesting or exercise of an incentive award), finders fee, commission or similar payment as a result of the transactions contemplated hereby. No amount that could be received (whether in cash, property or vesting of property) as a result of the consummation of the transactions contemplated by this Agreement by any officer, director, employee or independent contractor of any of the Companies, the Subsidiaries or the Business, who is a "disqualified individual" (as defined in proposed Treasury Regulation Section 1.280G-1), would be characterized as an "excess parachute payment" (as defined in Section 280G of the Code). The transactions contemplated by this Agreement are not transactions described in Section 4069 or 4212(c) of ERISA. (c) With respect to each Benefit Plan described in Section 4(b)(4) of ERISA (each, a "Foreign Plan"): (i) all contributions and other payments required by Law or by the terms of such Foreign Plan have been made or, if applicable, accrued in accordance with normal accounting practices; (ii) the fair market value of the assets of each funded Foreign Plan, the Liability of each insurer for any Foreign Plan funded through insurance or the book reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations, as of the Closing Date, with respect to all current or former participants in such plan according to the actuarial assumptions and valuations most recently used to determined employer contributions to such Foreign Plan, and no transaction contemplated by this Agreement shall cause the assets or insurance obligations to be less than such benefit obligations; and (iii) each Foreign Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities. (d) Except as set forth on Schedule 4.9(d), with respect to any of the Companies, the Subsidiaries or the Business, there is not currently pending or existing and, to the Knowledge of the Companies and the Sellers, there is not threatened, (i) any strike or other industrial action, including slowdown, work to rule, picketing or work stoppage, (ii) any application for certification of a 25 collective bargaining agent or (iii) union organizing activity with respect to any employees of any of the Companies, the Subsidiaries or the Business. Except as set forth on Schedule 4.9(d), none of the employees of any of the Companies, the Subsidiaries or the Business is covered by any union, collective bargaining or other similar labor agreement. (e) None of the Companies nor Subsidiaries has been issued with or is subject to a contribution notice or financial support direction issued by the UK Pensions Regulator in accordance with its powers under Sections 38 and 51 of the Pensions Act 2004 and none of the Companies or Subsidiaries nor any Person connected with or associated with any of the Companies or Subsidiaries, has committed any act or failure to act which could fall within subsection (5) of Section 38 of the Pensions Act 2004. (f) None of the Companies nor Subsidiaries has at any time sponsored, contributed towards or participated in any defined benefit pension plan for current or former employees in the UK or has any Liability with respect to any such arrangement. (g) CSG SILICON IBERIA has not performed any Collective Termination of Employment/Dismissals in the last four (4) years. (h) Superannuation. (i) CSG Australia Pty. Limited ("CSG Australia") is not a party to any agreement or arrangement with any union or industrial organization in respect of superannuation benefits for any of the employees or sub-contractors of CSG Australia. (ii) CSG Australia has complied with its obligations under agreements with its employees and sub-contractors in respect of superannuation benefits in Australia. (iii) Except as set forth on Schedule 4.9(h)(iii), CSG Australia is only obliged to make employer contributions to the Optimum Superannuation Master Plan ("Plan") on behalf of each of its employees and sub-contractors at nine per cent per annum of their respective superannuation salaries (including base salary and incentive plan payments) in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cth) ("SGAA") and other associated Acts and Regulations and an additional contribution of 1% of superannuation salaries. (iv) CSG Australia solely contributes to, and has an obligation to make payments to superannuation funds providing accumulation benefits to their employees and sub-contractors. (v) After the Closing, the Sellers will provide Purchaser with information reasonably required by Purchaser and otherwise provide Purchaser with reasonable assistance in relation to the superannuation contribution arrangements CSG Australia has in place as at closing. 26 (vi) There is no contract or arrangement between CSG Australia and the trustee of the Plan with respect to CSG Australia's participation in the Plan. (vii) To the best of Knowledge, the Plan has satisfied all relevant laws governing superannuation funds in Australia, and in particular, has been a complying superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth) and has otherwise been administered and managed by the trustee company in a manner that complies with the Superannuation Industry (Supervision) Act 1993 (Cth). (viii) As at Closing, no returns are or will be liable to be lodged under the SGAA or any associated legislation and no penalties, fines or charges are or will be payable under any such legislation in respect of any superannuation-related obligations. 4.10 Contracts. Schedule 4.10 contains a complete and accurate list of the following Contracts: (a) for the sale of any material assets of any Company or Subsidiary other than in the Ordinary Course of Business, (b) for joint ventures or partnerships (constituting legally binding arrangements), (c) containing covenants of any Company or Subsidiary not to compete in any line of business or with any Person in any geographical area or covenants of any other Person not to compete with any Company or Subsidiary in any line of business or in any geographical area, (d) relating to the acquisition (by merger, purchase of stock or assets or otherwise) by any Company or Subsidiary of any operating business related to the Business, (e) customer agreements or agreements licensing to any third person Business Intellectual Property which contain most favored nations clauses and (f) for material non-employee sales representative or distributorship arrangements. Each Contract referred to on Schedule 4.10 and each Contract which will require over the remaining full term thereof payments by or to the Companies or the Subsidiaries of more than $250,000 (each, a "Material Contract") is valid, binding and enforceable against the applicable Company or Subsidiary and, to the Knowledge of the Companies and Sellers, the other parties thereto in accordance with its terms. Except as set forth on Schedule 4.10 and to the Knowledge of the Companies and the Sellers, none of the Sellers, Companies or Subsidiaries has received any notice that it is in default under, or in breach of, or is otherwise delinquent in, performance under any Material Contract and each of the other parties thereto has performed all obligations required to be performed by such party under, and is not in default under, any Material Contract and no event has occurred that, with notice or lapse of time, or both, would constitute such a default, except for breaches, failures of performance or defaults that, individually or in the aggregate, have not had, nor would not reasonably be expected to have, a Material Adverse Effect. True and correct copies (redacted as to the name of the other party or parties thereto other than a Company or Subsidiary if required by confidentiality provisions thereunder) of each Material Contract listed on Schedule 4.10 have been made available to Purchaser. 27 4.11 Environmental Matters. (a) There are no Legal Proceedings pending, or to the Knowledge of the Companies and the Sellers, threatened against any Company or Subsidiary which assert any claim or seek any Remedial Action in connection with any Environmental Law, except for those which, individually or in the aggregate, has not had, nor would reasonably be expected to have, a Material Adverse Effect; (b) Except for those matters that, individually or in the aggregate, have not had, nor would reasonably be expected to have, a Material Adverse Effect, none of the owned, operated or leased property of any Company or Subsidiary is subject to any on-going investigation by, Order from or agreement with any Person relating to (i) any Environmental Law or (ii) any Remedial Action; (c) To the Knowledge of the Companies and the Sellers, no Company or Subsidiary is subject to any Legal Proceeding or Order, judgment, or settlement alleging or addressing a violation of, or Liability under, any Environmental Law or with respect to any Remedial Action or Release or threatened Release of a Hazardous Material that, individually or in the aggregate, has had, or would reasonably be expected to have, a Material Adverse Effect; (d) To the Knowledge of the Companies and the Sellers, no Company or Subsidiary has received, any written notice to the effect that it is or may be liable to any Person as a result of the Release or threatened Release of a Hazardous Material, except for any such notices relating to matters that, individually or in the aggregate, have not had, nor would reasonably be expected to have, a Material Adverse Effect. (e) The transactions contemplated by this Agreement are not subject to the requirements of any state environmental transfer statutes. 4.12 Financial Statements; Undisclosed Liabilities; Absence of Changes. (a) Schedule 4.12 contains true and complete copies of the following financial statements of the Companies and Subsidiaries (the "Financial Statements"): (i) the unaudited combined statement of net assets of the Companies and Subsidiaries (exclusive of the assets and Liabilities of the FairPoint Business and Corporate assets and Liabilities related to the Business) and the unaudited combined statement of pre-tax results of operations of the Companies and Subsidiaries (exclusive of the revenues and expenses associated with the FairPoint Business and including the Corporate expenses related to the Business) for the year ended December 31, 2004; and 28 (ii) the unaudited combined statement of net assets of the Companies and Subsidiaries (exclusive of the assets and Liabilities of the FairPoint Business and the Corporate assets and Liabilities related to the Business) as of June 30, 2005 (such statement of net assets being referred to as the "Net Assets Statement") and the unaudited combined statement of pre-tax results of operations of the Companies and Subsidiaries (exclusive of the revenues and expenses associated with the FairPoint Business and including Corporate expenses related to the Business) for the six-month period ended June 30, 2005. For purposes hereof, "Corporate" means the assets, Liabilities and expenses related to the Business Employees and certain activities related to the Business that are not recorded in the books and records of the Companies and Subsidiaries. (b) The Financial Statements referred to in clause (i) of Section 4.12(a) were derived from the audited consolidated financial statements of CSG and its subsidiaries prepared in accordance with GAAP for the year ended December 31, 2004 and the Financial Statements referred to in clause (ii) of Section 4.12(a) were derived from the unaudited consolidated financial statements of CSG and its subsidiaries prepared in accordance with GAAP for the six (6) months ended June 30, 2005. The Financial Statements were prepared on the basis of the books and records of the Companies, the Subsidiaries and, to the extent applicable, the Sellers (in each case, as of the date of such Financial Statements) and present fairly, in all material respects, the net assets (exclusive of the assets and Liabilities of the FairPoint Business and the Corporate assets and Liabilities related to the Business) of the Companies and Subsidiaries as of the date thereof and the results of their pre-tax operations (excluding the revenues and expenses associated with the FairPoint Business and including Corporate expenses relating to the Business) for each of the periods then ended. With respect to each Contract of the Business as to which revenue is recognized on a percentage of completion or proportional performance accounting basis as reflected in the Financial Statements, the estimated work completed to date used by the Sellers in their accounting conclusions represents the best estimate of the Companies and Subsidiaries of the work completed under such Contract as compared with the entire amount of work required under such Contract. (c) Except as set forth on Schedule 4.12(c), none of the Companies nor any of the Subsidiaries has any Liability of any kind whatsoever (whether known or unknown and whether accrued, absolute or contingent) and there is no existing condition, situation or set of circumstances that would reasonably be expected to result in any such Liability, except for (a) Liabilities shown on the Net Assets Statement, (b) Liabilities which have arisen since the date of the Net Asset Statement in the Ordinary Course of Business consistent with past practices and which, individually or in the aggregate, have not had, nor would reasonably be expected to have, a Material Adverse Effect or (c) Liabilities under Contracts that do not arise from a breach or default thereunder. 29 (d) All books, records and accounts of the Companies and Subsidiaries are accurate and complete, in all material respects, and are maintained in all material respects in accordance with good business practice and all applicable Laws. The Companies and Subsidiaries maintain systems of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management's general or specific authorization, (ii) transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP and to maintain accountability for assets and (iii) access to assets is permitted only in accordance with management's general or specific authorization. (e) Schedule 4.12(e) sets forth (i) all significant deficiencies identified to CSG by its auditors in the design or operation of internal controls which could adversely affect the ability to record, process, summarize and report financial data relating to the Business, (ii) any material weaknesses identified to CSG by its auditors in internal controls relating to the Business and (iii) the Knowledge of the Companies and the Sellers, any fraud, whether or not material, that involves management or other employees who have a significant role in the internal controls with respect to the Business. (f) Since December 31, 2004, the Companies and Subsidiaries have conducted their respective businesses only in the Ordinary Course of Business and, since such date, there has not been any effect, occurrence, development or state of circumstances or facts (including any damage, destruction or other casualty loss (whether or not covered by insurance) affecting any Company or Subsidiary) which, individually or in the aggregate, has had, or would be reasonably expected to have, a Material Adverse Effect. Without limiting the generality of the foregoing and except as set forth on Schedule 4.12(f) and, with respect to clause (iii) below, except as expressly provided for in this Agreement, since December 31, 2004: (i) there has not been any damage, destruction or loss, whether or not covered by insurance, with respect to the property and assets of any Company or Subsidiary having a replacement cost of more than $250,000 for any single loss or $500,000 for all such losses; (ii) there has not been any declaration, setting aside or payment of any dividend or other distribution in respect of any shares of capital stock or other equity interests of any Company or any repurchase, redemption, reduction or other acquisition by any Company or Subsidiary of any outstanding shares of capital stock or other securities of, or other ownership interest in, any Company or any Subsidiary; (iii) there has not been any (x) employment, change in control, transaction or sale bonus, deferred compensation, severance, retirement, consulting, managerial services or other similar agreement entered into with any current or former director, officer, employee or independent contractor of the Business or any Company or Subsidiary (or any amendment to any such existing agreement other than as may be required by applicable Law), (y) grant of any severance or termination pay to any current or former director, officer, employee or independent contractor of the Business or any Company or Subsidiary 30 other than pursuant to existing plans, agreements or arrangements or (z) change in compensation or other benefits payable to any current or former director, officer, employee or independent contractor of the Business or any Company or Subsidiary, other than the inclusion of any such individual under the standard terms of a Benefit Plan covering employees of the Business or any Company or Subsidiary generally or promotion, merit or cost-of-living increases in base salary, in each case in the Ordinary Course of Business; (iv) there has not been any labor dispute involving employees of any Company, any of the Subsidiaries, or the Business, other than routine individual grievances, or any activity or proceeding by a labor union or representative thereof to organize any employees of any Company, any of the Subsidiaries, or the Business, which employees were not subject to a collective bargaining agreement at the date of the most recent Financial Statements, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to employees of any Company, any of the Subsidiaries, or the Business; (v) no Company or Subsidiary has entered into any material transaction or Material Contract other than in the Ordinary Course of Business; (vi) no Company or Subsidiary has failed to promptly pay and discharge material current liabilities except where disputed in good faith by appropriate proceedings; (vii) no Company or Subsidiary has made any loans, advances or capital contributions to, or investments in, any Person (except to Affiliates of the Sellers or Companies in the Ordinary Course of Business) or paid any fees or expenses to the Sellers (except in the Ordinary Course of Business) or any director, officer, partner, stockholder or Affiliate of the Seller (other than advancement to or reimbursement of travel and similar expenses for employees); (viii) no Company or Subsidiary has (A) mortgaged, charged, pledged or subjected to any Lien (other than Permitted Exceptions) any of its material assets, or (B) acquired any assets or sold, assigned, transferred, conveyed, leased or otherwise disposed of any assets of any Company or Subsidiary, except, in the case of clause (B), for assets acquired, sold, assigned, transferred, conveyed, leased or otherwise disposed of in the Ordinary Course of Business; (ix) no Company or Subsidiary has canceled or compromised any material debt or claim or amended, canceled, terminated, relinquished, waived or released any Material Contract or right except in the Ordinary Course of Business and which, in the aggregate, would not be expected to be material to the Companies and the Subsidiaries taken as a whole; 31 (x) no Company or Subsidiary has made or committed to make any capital expenditures or capital additions in excess of $500,000 individually or $2,500,000 in the aggregate for all of the Companies and Subsidiaries; (xi) no Company or Subsidiary has issued, created, incurred, assumed, guaranteed, endorsed or otherwise become liable or responsible with respect to (whether directly, contingently, or otherwise) any material Indebtedness; (xii) no Company or Subsidiary has granted any material license or sublicense of any rights under or with respect to any Intellectual Property except in the Ordinary Course of Business; (xiii) no Company or Subsidiary has instituted or settled any Legal Proceeding resulting in a payment or loss of revenue in excess of $100,000 in the aggregate; and (xiv) none of the Companies or the Seller has agreed, committed, arranged or entered into any understanding to do anything set forth in this Section 4.12(f). 4.13 Intellectual Property. (a) Schedule 4.13(a) sets forth a complete and correct list of registered copyrights, service marks, trademarks, domain names, and patents, together with registrations and applications for registration therefor, owned by any Company or Subsidiary and material to the Business (collectively, the "Registered Intellectual Property"). (b) Except as set forth in Schedule 4.13(b): (i) The operation of the Business by the Companies and the Subsidiaries does not (and will not, upon consummation of the transactions contemplated by this Agreement) infringe, misappropriate, or otherwise violate any Intellectual Property rights of any third Person. There is no Legal Proceeding pending against, and, to the Knowledge of the Companies and the Sellers, no claim or threat received in writing against, any Company or Subsidiary (i) challenging, or seeking to deny or restrict any Intellectual Property rights of any Company or Subsidiary or (ii) alleging that the operation of the Business misappropriates, infringes or otherwise violates any Intellectual Property rights of any third party. To the Knowledge of the Companies and the Sellers, no Seller, Company or Subsidiary has received a written offer within the past three (3) years from any Person to license rights under a patent in connection with the operation of the Business. 32 (ii) The Companies and Subsidiaries own or have a valid right to use all copyrights, service marks, trademarks, domain names, patents and other Intellectual Property material to and used in the Business (the "Business Intellectual Property"). As of the Closing Date and except as disclosed to Purchaser in accordance with Section 6.15(a) by the date required therein, the consummation of the transactions contemplated by this Agreement will not alter, impair or extinguish any Business Intellectual Property or the Purchaser's right to use any of the Business Intellectual Property. None of the Business Intellectual Property which is owned by the Companies and Subsidiaries has been adjudged invalid or unenforceable in whole or part. (iii) One or more of the Companies or Subsidiaries holds all right, title and interest in and to all Business Intellectual Property owned by any Company or Subsidiary, free and clear of any Lien, except as would not reasonably be expected to have a Material Adverse Effect. (iv) To the Knowledge of the Companies and the Sellers, the Companies and Subsidiaries have taken reasonable steps to maintain the confidentiality of all confidential information in their respective possession. To the Knowledge of the Companies and the Sellers, there is no infringement of the Business Intellectual Property by any third party. It is the policy of the Companies and Subsidiaries that employees execute agreements assigning all Intellectual Property created in the course of their employment to the relevant Company or Subsidiary and, to the Knowledge of the Companies and the Sellers, all employees of the Companies and Subsidiaries who make material contributions to the Intellectual Property activities have executed such agreements. (c) Intentionally omitted. (d) To the Knowledge of the Companies and the Subsidiaries, each of the Intellectual Property Contracts with the vendors or with respect to the products set forth on Schedule 4.13(c) is in full force and effect and is the legal, valid and binding obligation of the applicable Company and/or Subsidiary, enforceable against the applicable Company and/or Subsidiary thereto in accordance with its terms. No Company or Subsidiary is in default in any material respect under any such Contracts with respect to Intellectual Property rights, nor, to the Knowledge of the Companies and the Sellers, is any other party to any such Intellectual Property Contract in default thereunder, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default thereunder. No party to any of such Intellectual Property Contracts has exercised any termination rights with respect thereto. (e) To the Knowledge of the Sellers, the Companies and Subsidiaries have taken reasonable steps to preserve and maintain records relating to the Business Intellectual Property. 4.14 Brokers. Other than as set forth on Schedule 3.7, no broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of any of the Companies or Subsidiaries. 33 4.15 Certain Tax Matters. (a) Except as set forth on Schedule 4.15(a), all material Tax Returns required to be filed by or on behalf of each of the Companies and Subsidiaries or any Affiliated Group of which each of the Companies and Subsidiaries is or was a member have been duly and timely filed with the appropriate Taxing Authority (after giving effect to any valid extensions of time in which to make such filings), and all such material Tax Returns are true, complete and correct in all material respects. (b) Except as set forth on Schedule 4.15(b), each of the Companies and Subsidiaries (or any Affiliated Group of which each of the Companies and Subsidiaries is or was a member at or prior to the Closing) has timely paid (or there has been paid on their behalf) all Taxes shown as due and payable on the Tax Returns that have been filed. With respect to any period for which material Tax Returns have not yet been filed or for which material Taxes are not yet due or owing, each of the Companies and the Subsidiaries has made due and sufficient accruals for material Taxes on their books and records through the end of the last period for which the Company and the Subsidiaries ordinarily record items on their books. All required estimated Tax payments sufficient to avoid any material underpayment penalties or interest have been made by or on behalf of each of the Companies and Subsidiaries. (c) Except as set forth on Schedule 4.15(c), the Companies and Subsidiaries have complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes and have duly and timely withheld and paid over to the appropriate Taxing Authority all material amounts required to be so withheld and paid under all applicable Laws or accrued such amounts in their financial statements. (d) Purchaser has received true and complete copies of all U.S. federal income Tax Returns of each of the Companies and Subsidiaries relating to the taxable periods since 2002. (e) Schedule 4.15(e) lists all types of material Tax Returns currently filed by or on behalf of each of the Companies and Subsidiaries. No claim has been made by a Taxing Authority in a jurisdiction where any of the Companies or Subsidiaries does not file Tax Returns such that they are or may be subject to taxation by that jurisdiction. (f) Except as set forth on Schedule 4.15(f), all material deficiencies asserted or assessments made as a result of any examinations by any Taxing Authority of the Tax Returns of, or including, the Companies or Subsidiaries have been fully paid, and there are no other audits or investigations by, or disputes with, any Taxing Authority in progress, nor to Seller's Knowledge has the Seller, any of the Companies or Subsidiaries received notice from any Taxing Authority that it intends to conduct such an audit or 34 investigation. Except as set forth in Schedule 4.15(f), no issue has been raised by any Taxing Authority in any prior examination of the Companies or Subsidiaries which, by application of the same or similar principles, could reasonably be expected to result in a proposed deficiency for any subsequent taxable period. (g) Except as set forth on Schedule 4.15(g), none of the Companies or the Subsidiaries nor any other Person on their behalf has (i) agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of Law or has to Seller's Knowledge, received written notice from any Taxing Authority proposing any such adjustment, or has any application pending with any Taxing Authority requesting permission for any changes in accounting methods that relate to any of the Companies or Subsidiaries, (ii) executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of Law with respect to any of the Companies or Subsidiaries, (iii) requested any extension of time within which to file any Tax Return, which Tax Return has since not been filed, (iv) granted any extension of the period for the assessment or collection of Taxes, which period (after giving effect to such extension) has not yet expired, or (v) other than in the Ordinary Course of Business, granted to any Person any power of attorney that is currently in force with respect to any Tax matter. (h) Except as set forth on Schedule 4.15(h), none of the Companies or Subsidiaries (i) is a party to any tax sharing, allocation, indemnity or similar agreement or arrangement (whether or not written) pursuant to which it will have any obligation to make any payments after the Closing, (ii) is subject to any private letter ruling of the IRS or comparable rulings of any Taxing Authority and (iii) has constituted either a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (A) in the two years prior to the date of this Agreement or (B) in a distribution which could otherwise constitute part of a "plan" or "series of related transactions" (within the meaning of Section 355(e) of the Code) in conjunction with the transactions contemplated by this Agreement. (i) Except as set forth on Schedule 4.15(i), none of the Companies or Subsidiaries has ever been a member of any consolidated, combined, affiliated or unitary group of corporations for any Tax purposes other than a group of which any Affiliate of a Seller is the common parent. (j) None of the Companies or Subsidiaries has participated in, or cooperated with, an international boycott within the meaning of Section 999 of the Code or any similar provision of Law. (k) None of the Companies or Subsidiaries has participated in a "listed transaction" within the meaning of Treasury Regulations Section 1.6011-4(c)(3)(i)(A) or any similar provision of Law. 35 (l) Except as set forth on Schedule 4.15(l), none of the Companies or Subsidiaries is currently a party to a "gain recognition agreement," as such term is defined in Treasury Regulations Section 1.367(a)-8 or any similar provision of Law. (m) Subject to the elections referred to in Section 6.2(c), Schedule 4.15(m) hereto contains a complete and accurate listing of each of the Companies and Subsidiaries formed under the non-U.S. law indicating, in each case, whether such Company or Subsidiary is classified (within the meaning of Treasury Regulations Sections 301.7701-1 through 301.7701-3) as a corporation, a partnership or disregarded entity for U.S. tax purposes. (n) There are no Liens, except for Permitted Exceptions, as a result of any unpaid Taxes upon any of the assets of any of the Companies or Subsidiaries. (o) Except as set forth on Schedule 4.15(o), there is no taxable income of any of the Companies or Subsidiaries that will be reportable in a taxable period beginning after the Closing Date that is attributable to a transaction (such as an installment sale) that occurred prior to the Closing. (p) Except as set forth on Schedule 4.15(p), each of the Companies and Subsidiaries has disclosed on its federal income Tax Returns all positions taken therein that could give rise to substantial understatement of federal income tax within the meaning of Section 6662 of the Code. (q) Except as set forth on Schedule 4.15(q), since December 31, 2004, (i) there has not been any material change by any Company or Subsidiary in accounting or Tax reporting principles, methods or policies, and (ii) no Company or Subsidiary has made or rescinded any material election relating to Taxes or settled or compromised any material claim relating to Taxes. (r) In the event the Sellers cause CSG International or any Affiliate to distribute cash or assets to CSG Netherlands, such distribution will qualify for the "participation exemption" under the tax Law of the Netherlands. (s) To the extent applicable, there are no circumstances existing which could result in the application of section 17, section 78, section 79, or sections 80 to 80.04 of the Income Tax Act (Canada), or any equivalent provision under applicable Canadian provincial law, to the Companies or Subsidiaries. (t) Except for CSG Systems Canada Corp., the Companies and Subsidiaries are not "Taxable Canadian Property" within the meaning of subsection 248(1) of the Income Tax Act (Canada). (u) At Closing, CSG Australia will not have a franking deficit (as provided for in section 160APJ of the Income Tax Assessment Act of 1936 (Commonwealth of Australia) (the "1936 Tax Act") or section 205-40(2) of the Income Tax Assessment Act of 1997 (Commonwealth of Australia) (the "1997 Tax Act") nor, if CSG Australia were to have received immediately before Closing the amount of any refund of Tax which CSG Australia expects to receive after Closing in respect of any period up to Closing, would the refund result in CSG Australia having a franking deficit at Closing. 36 (v) CSG Australia is an exempting entity under Australian Law. (w) The share capital account of the Companies or Subsidiaries are not tainted share capital accounts within the meaning of Division 7B of Part IIIAA of the 1936 Tax Act (Australia) or any similar provision of Law and the Companies or Subsidiaries have not taken any action that might cause the Companies' or Subsidiaries' share capital account to become a tainted share capital account, nor has an election been made at any time to untaint the Companie