Item
1.01 Entry into a Material Definitive Agreement
On
August 5, 2009 Bottomline Technologies (de), Inc., a Delaware corporation (the
“Company”) entered into an Asset Purchase Agreement (the “Purchase Agreement”)
with Bank of America N.A. (the “Bank”), pursuant to which the Company has agreed
to purchase substantially all of the assets and related operations of the Bank’s
PayMode business (the “Asset Purchase”). In connection with the Purchase, the
Company and the Bank have agreed to enter into a Services Agreement (the
“Services Agreement”) pursuant to which the Company will provide PayMode
services to the Bank and the Bank’s customers for a initial term of five years,
subject to renewal for successive three-year periods, on terms and conditions
further described below.
Asset
Purchase Agreement
Under
the terms of the Purchase Agreement, the Bank will sell to the Company the
Bank’s PayMode electronic payments business, including the vendor network,
application software, intellectual property rights and other assets, properties
and rights used exclusively or primarily in the PayMode business. The
Purchase Agreement provides that the Company will pay the Bank a cash purchase
price of $17,000,000 and issue the Bank a warrant to purchase 1,000,000 shares
of common stock of the Company at a purchase price of $8.50 per
share.
The
warrant will have a term of 10 years and will provide that, subject to certain
exceptions, the Bank may not sell shares issued to it upon exercise of the
warrant in an amount in excess of 200,000 shares per month or transfer the
warrant other than to Bank affiliates for a period of one year from the date the
warrant is issued. The Company and the Bank will also enter into a Registration
Rights Agreement, pursuant to which the Bank may request that the Company file a
registration statement with respect to the warrant shares. The Bank
may request such filing to become effective on or after the one year anniversary
of the closing of the Asset Purchase.
The
Purchase Agreement contains customary covenants, representations and warranties
by the Bank and the Company, including operating covenants by the Bank covering
the period after the signing of the Purchase Agreement and prior to the closing
of the Asset Purchase. These covenants include a requirement that the Bank not
solicit proposals relating to alternative transactions or enter into
discussions, provide confidential information or enter into any agreement in
connection with proposals for alternative transactions with respect to the
PayMode business. The Purchase Agreement also contains customary provisions
providing that each party will indemnify the other for breaches of such party’s
representations, warranties and covenants set forth in the Purchase Agreement
and certain related agreements, as well as for certain other
liabilities. Subject to certain exceptions, each party’s liability
with respect to those indemnification obligations relating to breaches of
representations and warranties shall not exceed $8,500,000, and neither party
will be obligated to indemnify the other in such circumstances for individual
damages totaling $25,000 or less, or for the first $200,000 of such
indemnifiable damages incurred.
The
Company and the Bank currently expect to complete the Asset Purchase in
September 2009. The obligation of each party to consummate the Asset
Purchase is subject to the satisfaction or waiver of customary closing
conditions including, with respect to the Company’s obligation to close,
conditions relating to retention of employees and the availability of transition
services.
The
Purchase Agreement contains non-compete provisions prohibiting the Company from
offering any PayMode products to specified Bank customers during the initial
term of the Services Agreement or to certain designated financial institutions
for a period of two years after closing. These non-compete obligations will
cease in the event the Services Agreement is terminated by the Company due to a
material uncured breach by the Bank, insolvency of the Bank or an attempt by the
Bank to assign the Services Agreement in violation of its terms, or by the Bank
for convenience.
The
board of directors of the Company has unanimously approved the Asset Purchase
and the Purchase Agreement.
The
foregoing description of the Asset Purchase and the Purchase Agreement is not
complete and is qualified in its entirety by reference to the Purchase
Agreement, which the Company expects to file as an Exhibit to its Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 2009. The Company
intends to request confidential treatment for certain exhibits to the Purchase
Agreement, including the Services Agreement.
Services
Agreement
In
connection with the Purchase Agreement, the Company and the Bank
have agreed to enter into a Services Agreement pursuant to which the
Company will provide PayMode services to the Bank and its customers,
including customary maintenance and support services. The Bank will
pay the Company an annual subscription fee plus other specified variable fees
for the services. The Company will deliver enhancements to the system
used to provide the PayMode services and related infrastructure and the
enhancements will have a specified minimum value over the initial term of the
Services Agreement. A specified set of enhancements to the system
used to provide the PayMode services must be delivered within designated
timeframes, certain of which will be available exclusively to the Bank and its
customers for specified periods.
The
Services Agreement has an initial term of five years, to be followed, unless
notice of non-renewal is given by either Party, by successive three-year
renewal periods, subject to customary termination events, including the
Bank’s right to terminate for convenience, in which case it will pay a
specified variable termination fee to the Company. Should the Services
Agreement terminate, the Bank may elect to continue to pay for and receive the
PayMode services for up to two years.
Item 8.01. Other
Events
On August 5, 2009, the Company issued a press
release announcing its entry into the Purchase Agreement. The description of the
press release set forth under this “Item 8.01. Other Events” is qualified
in its entirety by reference to the press release, a copy of which is attached
to this Current Report on Form 8-K as Exhibit 99.1 and incorporated herein
by reference.
Item
9.01. Financial Statements and Exhibits
(d) Exhibits
See
Exhibit Index attached
hereto.