Exhibit 2.1
ASSET PURCHASE AGREEMENT
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among
INTERCEPT, INC.,
a Georgia corporation
and
INTERCEPT BILLING COMPANY, LLC,
a Georgia limited liability company
and
INTERNET BILLING COMPANY, LTD.,
a Florida limited partnership
and
IBILL CALIFORNIA, LLC,
a California limited liability company
and
LIBERTY MERCHANT SERVICES, LLC,
a Florida limited liability company
and
IBILL TECHNOLOGIES LLC,
a Florida limited liability company
and
INTERNET BILLING CORP.,
a Florida corporation
and
IBILL CORP.,
a Delaware corporation
and
IBILL GAP, LLC,
a Florida limited liability company
and
CSR XXXXXXX.XXX, LLC,
a Florida limited liability company
March 19, 2001
TABLE OF CONTENTS
Page
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ARTICLE 0 - DEFINITIONS .............................................................. 2
ARTICLE 1 - SALE AND PURCHASE......................................................... 5
1.1 Included Assets...................................................... 5
1.2 Intent of the Parties................................................ 8
1.3 Title to and Transfer of Assets...................................... 9
1.4 Excluded Assets...................................................... 9
1.5 Additional Disclosure Regarding Assets of Subsidiaries............... 10
ARTICLE 2 - ASSUMPTION OF LIABILITIES BY THE PURCHASER................................ 11
2.1 Assumed Liabilities.................................................. 11
2.2 Liabilities Not Assumed.............................................. 11
Article 3 - CLOSING AND PURCHASE PRICE................................................ 13
3.1 Closing.............................................................. 13
3.2 Purchase Price....................................................... 13
3.3 Earnout.............................................................. 14
3.4 Fair Market Value of Assets.......................................... 14
3.5 Delivery of Disclosure Memoranda..................................... 14
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF THE SELLERS............................. 15
4.1 Entity Organization.................................................. 15
4.2 Entity Power; Authorization; Enforceable Obligations................. 16
4.3 No Conflict.......................................................... 16
4.4 Required Government Consents......................................... 16
4.5 Required Contract Consents........................................... 17
4.6 Financial Matters.................................................... 17
4.7 Absence of Changes................................................... 17
4.8 No Undisclosed Liabilities........................................... 19
4.9 Title to Tangible Property........................................... 19
4.10 Condition of Property and Systems.................................... 19
4.11 Inventory............................................................ 20
4.12 Contracts............................................................ 20
4.13 Intellectual Property................................................ 20
4.14 Leases............................................................... 22
4.15 Restrictions on Business Activities.................................. 22
4.16 Litigation........................................................... 22
4.17 Court Orders, Decrees, and Laws...................................... 22
4.18 Personnel and Compensation........................................... 23
4.19 Employee Benefit Plans and Arrangements.............................. 24
4.20 Insurance Policies................................................................... 25
4.21 Broker's or Finder's Fees............................................................ 25
4.22 Accounts Receivable.................................................................. 25
4.23 Vehicles............................................................................. 25
4.24 No Guarantees........................................................................ 25
4.25 Tax Matters.......................................................................... 26
4.26 Insurance............................................................................ 26
4.28 Customers and Suppliers.............................................................. 26
4.29 No Commitments Regarding Future Products............................................. 27
4.30 Disclosure........................................................................... 27
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF THE INTERCEPT PARTIES................................... 27
5.1 Corporate Existence.................................................................. 27
5.2 Corporate Power and Authorization.................................................... 27
5.3 No Conflict.......................................................................... 28
5.4 Broker's or Finder's Fees............................................................ 28
5.5 SEC Documents........................................................................ 28
5.6 Financial Statements................................................................. 28
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5.7 Litigation........................................................................... 28
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5.8 Compliance With Laws................................................................. 28
ARTICLE 6 - CONDUCT OF BUSINESS PRIOR TO CLOSING...................................................... 29
6.1 Financial Statements................................................................. 29
6.2 Working Capital...................................................................... 29
6.3 Maintenance of Assets and Business................................................... 29
6.4 Notice of Disputes................................................................... 29
6.5 No Action Without Consent............................................................ 29
6.6 Notice to Employees.................................................................. 31
6.7 Distributions Prior to Closing....................................................... 31
ARTICLE 7 - CONDITIONS TO CLOSING..................................................................... 31
7.1 Conditions to Obligations of Each Party to Close the Contemplated Transactions....... 31
7.2 Additional Conditions to Obligations of Sellers...................................... 32
7.3 Additional Conditions to Obligations of InterCept Parties............................ 32
ARTICLE 8 - ADDITIONAL AGREEMENTS..................................................................... 33
8.1 Cooperation.......................................................................... 33
8.2 Access............................................................................... 33
8.3 Interim Financials................................................................... 34
8.4 Records.............................................................................. 34
8.5 Use of Company Name.................................................................. 34
8.6 Expenses............................................................................. 34
8.7 Tax Matters.......................................................................... 35
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8.8 Casualty...................................................................... 35
8.9 Setoff........................................................................ 36
8.10 Confidentiality............................................................... 36
8.11 No Public Announcements....................................................... 37
8.12 Funds Received After Closing.................................................. 37
8.13 Acquisition Proposals......................................................... 37
8.14 Employment.................................................................... 37
8.15 Xxxx-Xxxxx Xxxxxx............................................................. 37
8.16 Non-Competition Agreements.................................................... 38
8.17 Termination of Sellers' 401(k) Plan........................................... 38
8.18 Duty of InterCept Parties Regarding Earnout Payments.......................... 38
8.19 Special Covenants of Parent................................................... 38
8.20 Certain Purchaser 401(k) Plan Service Credit.................................. 39
8.21 Additional Signing Date Deliveries............................................ 39
8.22 Additional Closing Deliveries................................................. 40
8.23 Audited Financial Statements.................................................. 41
8.24 Signing Date Document Delivery................................................ 41
8.25 Closing Date Document Delivery................................................ 41
8.26 Working Capital............................................................... 42
8.27 Debitpayments................................................................. 42
ARTICLE 9 - INDEMNIFICATION ................................................................... 42
9.1 Indemnification by iBill and iBill Corp....................................... 42
9.2 Indemnification by the Purchaser.............................................. 44
9.3 Notice of Claim............................................................... 44
9.4 Defense....................................................................... 44
9.5 Limitations................................................................... 45
9.6 Indemnification Exclusive Remedy.............................................. 46
9.7 Purchaser's and Parent's Obligations.......................................... 46
9.8 Exculpation................................................................... 46
ARTICLE 10 - TERMINATION ...................................................................... 47
10.1 Termination................................................................... 47
10.2 Break-up Fee.................................................................. 48
10.3 Effect of Termination......................................................... 48
ARTICLE 12 - MISCELLANEOUS .................................................................... 48
11.1 Contents of Agreement; Parties in Interest; etc............................... 48
11.3 Notices....................................................................... 49
11.4 Georgia Law to Govern......................................................... 50
11.5 No Benefit to Others.......................................................... 50
11.6 Headings, Gender.............................................................. 50
11.7 Schedules and Exhibits........................................................ 51
11.8 Severability.................................................................. 51
11.9 Counterparts.................................................................. 51
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11.10 Assistance of Counsel.................................................................. 51
11.11 Time of the Essence.................................................................... 51
11.12 Actions and Proceedings................................................................ 51
11.13 Execution by Facsimile................................................................. 51
11.14 Survival of Representations, Warranties, Covenants and Agreements...................... 51
11.15 Appointment of Designated Officials.................................................... 52
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement"), is made and entered
into this 19th day of March, 2002, by and among InterCept, Inc., a Georgia
corporation (the "Parent"); InterCept Billing Company, LLC, a Georgia limited
liability company (the "Purchaser"; the Parent and the Purchaser are sometimes
together referred to as the "InterCept Parties"); Internet Billing Company,
Ltd., a Florida limited partnership ("iBill"); iBill California, LLC, a
California limited liability company ("iBill CA"); Liberty Merchant Services,
LLC, a Florida limited liability company ("Liberty"); iBill Technologies LLC, a
Florida limited liability company ("iBill Technologies"); Internet Billing
Corp., a Florida corporation ("iBill Corp."); and iBill Corp., a Delaware
corporation ("iBill Corp. (Delaware)"); iBill GAP, LLC, a Florida limited
liability company ("iBill GAP"); and CSR Xxxxxxx.xxx, LLC, a Florida limited
liability company ("CSR"). iBill, iBill CA, Liberty, iBill Technologies, iBill
Corp. (although iBill Corp. is not selling, transferring or conveying any assets
under this Agreement), iBill Corp. (Delaware), iBill GAP, and CSR are
collectively referred to in this Agreement as the "Sellers." All of the Sellers
other than iBill and iBill Corp. are collectively referred to as the
"Subsidiaries." Capitalized terms used in this Agreement but not otherwise
defined shall have the meanings ascribed to them as set forth in the Definitions
section of this Agreement.
Recitals:
The Sellers are engaged in the business of providing various services
that enable, among other things, merchants to accept and process real-time
payments for goods and services over the Internet, as well as services related
to outsourced payment processing, transaction processing, risk management,
transaction security, fraud control, reporting tools, subscription,
accounting/bookkeeping services, shopping cart functionality, marketing, payment
options, interface, and back office management (collectively, the "Acquired
Business").
The Purchaser desires to purchase, and iBill desires to sell,
substantially all of the assets of iBill associated with the Acquired Business,
and the Sellers desire to transfer, and the Purchaser desires to assume,
substantially all of the liabilities of iBill arising in connection with the
Acquired Business, all upon the terms and conditions and subject to the limited
exceptions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, and agreements of the parties provided below, the parties
to this Agreement, intending to be legally bound, do hereby agree as follows:
Article 0
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
"Affiliates" of a particular Person means other Persons controlled by,
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controlling, or under common control with, such Person.
"Acquired Business" is defined in the first paragraph of the Recitals.
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"Acquisition Proposal" is defined in Section 8.13.
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"Assets" is defined in Section 1.1
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"Beneficiaries" is defined in Section 4.19.1.
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"Cash Payment" is defined in Section 3.2.
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"Chargeback" means a transaction processed by the Acquired Business
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that is revoked, denied, refunded, returned, protested, repudiated or otherwise
reversed, each in such a manner as to cause funds to be paid or returned to, or
set off by, the consumer, merchant, transaction processor, credit card company
(or association), bank or other Person involved in the transaction.
"Claim" is defined in Section 9.3.
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"Claimant" is defined in Section 9.3.
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"Closing" is defined in Section 3.1.
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"Closing Date" is defined in Section 3.1.
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"Closing Disclosure Memorandum" means the memorandum signed and
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delivered by the Sellers on the Closing Date containing the information required
to be disclosed under this Agreement as of the Closing Date.
"Confidential Information" means all information relating to the
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Acquired Business, the business (current or future) of the InterCept Parties,
any Affiliate of the InterCept Parties, which information is reasonably regarded
as confidential or being information not in the public domain including, without
limitation: all Inventions; technical data; research and development
information; business records, information and notes; products; "know-how";
Trade Secrets; engineering or other data; designs, specifications, processes and
formulae; manufacturing or planning procedures, techniques or information;
marketing plans, strategies and forecasts; business and product development
plans, strategies and forecasts; financial statements,
2
budgets, prices, costs and financial projections; accounting procedures or
financial information; names and details of consumers, customers, suppliers and
agents; employee details; and secret information; together with the possible or
likely function, purpose or application of that information whether in the
current activities of the InterCept Parties, the Sellers or any Affiliate of any
of them or fields to which the activities of the InterCept Parties, the Sellers
or any Affiliate of any of them may reasonably extend from time to time, any
part of or improvements to that information, and any recommendation, test or
report of the InterCept Parties, the Sellers or any Affiliate of any of them or
any consultant or agent in connection with that information; and whether such
information is oral, written, recorded or stored by electronic, magnetic,
electromagnetic or other form or process or otherwise in a machine readable
form, translated from the original form, recompiled, made into a compilation,
wholly or partially copied, modified, updated or otherwise altered, or
originated or obtained by, or coming into the possession, custody, control or
knowledge of the InterCept Parties, the Sellers or any Affiliate of any of them
either alone or jointly.
"Contemplated Transactions" is defined in Section 3.1.
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"Designated Official" initially means Xxxxx X. Xxxxxxxxx, or Xxxx X.
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Xxxxxxx if Xx. Xxxxxxx provides the Seller Designated Official notice that he is
to be considered the "Designated Official."
"Earnout Payments" is defined in Section 3.3.
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"Escrow" is defined in Section 3.2.
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"Escrow Agent" means First Union National Bank.
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"Escrow Agreement" is defined in Section 3.2.
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"Escrow Cash" is defined in Section 3.2.
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"Equity Rights" means subscriptions, options, warrants, calls,
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commitments, or agreements of any character calling for the transfer, purchase,
subscription, or issuance of any Shares of a Subsidiary.
"GAAP" means generally accepted accounting principles, consistently
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applied.
"Intellectual Property" is defined in Section 1.1.4.
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"Invention" means any invention, drawing, design, model, contrivance,
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structure, specification, improvement, discovery, creation, idea, concept,
formula, process and other work or contribution however developed, created, made
discovered or conceived, and whether or not patented or patentable (whether by
renewal or otherwise), protected by copyright, or otherwise protected or capable
of protection by law anywhere.
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"Laws" means federal state, local or foreign laws (including without
----
limitation, common law), treaties, judicial decisions, ordinances, regulations,
rules, judgments, orders, decrees, injunctions, judgments, permits, or
governmental restrictions.
"Litigation" shall mean, with respect to a Person, any claim, action,
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suit, proceeding, inquiry, hearing, arbitration, administrative proceeding, or
investigation.
"Loss" and "Losses" are defined in Section 9.1.
---- ------
"Material Adverse Effect" shall mean, with respect to any entity or
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group of entities, a material adverse effect on the business, operations,
assets, liabilities, financial condition, or results of operations of such
entity or group of entities taken as a whole, or on the ability of such entity
or group of entities to perform in all material respects its or their
obligations hereunder, or which would prevent or materially delay the
consummation of the Contemplated Transactions.
"Obligor" is defined in Section 9.3.
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"Parties" shall mean the InterCept Parties and the Sellers.
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"Person" means an individual, corporation, partnership, trust, limited
------
liability company, firm, governmental authority or body, association,
unincorporated organization, or any other entity.
"Plans" is defined in Section 4.19.1.
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"Purchase Documents" is defined in Section 11.1.
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"Purchase Price" is defined in Section 3.2.
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"Purchaser Indemnitees" is defined in Section 9.1.
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"Required Notice" is defined in Section 9.3.
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"Seller Designated Official" shall mean Xxxxxx X. Xxxxx, and in the
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event of the death or disability of Xxxxxx X. Xxxxx, Xxxx Xxxxxx. In each case,
the Seller Designated Official under this Agreement shall have all power and
authority to act for the Sellers hereunder (including without limitation Exhibit
3.3 relating to the Earnout Payments as incorporated by reference herein) and
under the Escrow Agreement.
"Seller Indemnitees" is defined in Section 9.2.
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"Sellers' Premises" means the real estate (including fixtures,
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buildings, and other
4
improvements thereon) leased or used by the Sellers at the addresses listed in
the Signing Date and Closing Disclosure Memoranda.
"Shares" shall mean any common or preferred stock, membership
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interests, limited partnership interests, equity, or other similar interest of
the Sellers, or any security convertible into Shares.
"Signing Date" means the date this Agreement is signed by all Parties.
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"Signing Date Disclosure Memorandum" means the memorandum signed and
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delivered by the Sellers on the Signing Date containing the information required
to be disclosed under this Agreement as of the Signing Date.
"Social" refers to employment-related obligations of the Sellers,
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including all actual or contingent liabilities relating to unemployment, health,
injury, death and retirement as well as any and all items of a similar nature.
"Taxes" means all forms of levies, taxes, customs and other duties
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normally deemed to be of a fiscal or customs nature, including (a) all taxes
levied, imposed or assessed under the Code, or any other statute, rule,
ordinance or Law, in the United States or elsewhere; (b) taxes in the nature of
sales tax, consumption tax, value added tax, payroll tax, group tax,
undistributed profits tax, fringe benefits tax, recoupment tax, withholding tax,
land tax, water rates, municipal rates, stamp duties, gift duties or other
state, territorial, provincial or municipal charges or impositions levied,
imposed or collected by any governmental body; and (c) any additional tax,
interest, penalty, charge, fee or other amount of any kind assessed, charged or
imposed in relation to the non-, late, short or incorrect payment of the same or
the failure to file any return.
"Trade Secrets" means any information of the InterCept Parties, the
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Sellers, or an Affiliate of any of them (including but not limited to technical
or non-technical data, a formula, a pattern, a compilation, a program, a device,
a method, a technique, a drawing, a process, financial data, financial plans,
product plans, or a list of actual or potential customers or suppliers) which
(x) derives economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by, other persons who
can obtain economic value from its disclosure or use, and (y) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
ARTICLE 1
SALE AND PURCHASE
1.1 Included Assets Upon the terms and subject to the conditions of
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this Agreement, the Purchaser agrees to purchase, accept, and acquire from
iBill, and iBill agrees to sell, transfer, assign, convey, and deliver to the
Purchaser, at the Closing, all right, title, and interest in and to all of the
assets, real, personal, and mixed, tangible or intangible, used directly or
indirectly in or
5
otherwise relating to the Acquired Business as owned or held by iBill, except as
expressly excluded by Section 1.4 below. Subject to such express exclusion and
qualification, the foregoing rights and assets are collectively referred to as
the "Assets" in this Agreement. Without in any way limiting the generality of
the foregoing, the Assets shall include all of iBill's right, title, and
interest in and to the following, wherever located:
1.1.1 All of iBill's service, license, marketing and other
similar agreements and sales contracts used directly or indirectly in or
otherwise relating primarily to the Acquired Business (the "License
Agreements"), including, without limitation, the License Agreements disclosed in
Schedule 1.1.1.
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1.1.2 All of iBill's fixed assets, goods, equipment and other
property used directly or indirectly in or otherwise relating primarily to the
Acquired Business (the "Equipment"), including, without limitation, the
Equipment disclosed in Schedule 1.1.2 (but excluding the Vehicles as defined
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below).
1.1.3 All inventories of iBill and all goods and supplies, in
each case to the extent used directly or indirectly in or otherwise relating
primarily to the Acquired Business (the "Inventory").
1.1.4 The entire right, title and interest of iBill in connection
with the conduct of the Acquired Business or used by iBill in connection with
the conduct of the Acquired Business in, to, or under (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all Inventions (whether patentable or not),
invention disclosures, improvements, Trade Secrets, proprietary information,
know-how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all domain names, uniform resource locators and other names and
locators associated with the Internet; (v) all industrial designs and any
registrations and applications therefor; (vi) all trade names, logos, common law
trademarks and service marks, trademark and service xxxx registrations and
applications therefore; (vii) all databases and data collections and all rights
therein; (viii) iBill's customer lists pertaining to the Acquired Business; (ix)
all moral and economic rights of authors and inventors, however denominated, (x)
any computer software and databases, whether owned or licensed, and (xi) any
similar or equivalent rights to any of the foregoing (as applicable) used
directly or indirectly or relating to the Acquired Business (collectively, as
such is used in and/or relates to the business of the Acquired Business as
currently conducted or as proposed to be conducted by the Sellers, the
"Intellectual Property"), including, without limitation, the Intellectual
Property listed on Schedule 1.1.4.
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1.1.5 All office furniture and fixtures of iBill used directly or
indirectly in or otherwise relating primarily to the Acquired Business (the
"Office Furniture"), including, without limitation, the Office Furniture
disclosed on Schedule 1.1.5.
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6
1.1.6 The entire leasehold, rental, or other interest arising
under or pursuant to leases of:
(A) real property, including buildings, structures, and
other improvements located thereon, fixtures contained therein, and
appurtenances thereto, and easements and other rights relative thereto;
(B) equipment, including computer hardware and associated
telecommunications equipment, media, and tools;
(C) office furniture; and
(D) other personalty;
in each case as used directly or indirectly in or otherwise
relating primarily to the Acquired Business (the "Leases"); as of the Signing
Date, the Leases consist of all leases disclosed in Schedule 1.1.6.
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1.1.7 All contracts, agreements, licenses, commitments,
arrangements, and permissions, whether written or oral, entered into in
connection with or otherwise relating to the Acquired Business, including all
non-competition, non-solicitation, work-for-hire, confidentiality and similar
types of covenants and agreements with the Sellers' former employees and with
the Sellers' employees who do not become employees of the Intercept Parties at
or after Closing (the "General Contracts"), which items are disclosed in
Schedule 1.1.7, to the extent not otherwise classified as License Agreements or
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Leases.
1.1.8 All business and marketing records, including accounting
and operating records, asset ledgers, inventory records, reports, budgets,
personnel and payroll records of employees of iBill to be employed by the
Purchaser, customer lists, supplier lists, information and data respecting
leased or owned equipment, correspondence and mailing lists, advertising
materials and brochures, and other business records used directly or indirectly
in or otherwise relating primarily to the Acquired Business or the Assets, in
whatever form they exist (the "Business Records"). (Purchaser shall retain the
Business Records in accordance with Section 8.4(b) below.)
1.1.9 All governmental approvals, authorizations, certifications,
consents, variances, permissions, licenses, and permits to or from, or filings,
notices, or recordings to or with, federal, state, and/or local governmental
authorities as well as states and jurisdictions outside of the U.S. (the
"Authorizations"), directly or indirectly relating primarily to the Acquired
Business, but subject, as to the reassignability to the Purchaser, to the
procurement of the Required Government Consents (as defined in this Agreement),
if any. As of the Signing Date, the Authorizations consist of the items
disclosed in Schedule 1.1.9.
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1.1.10 All claims iBill may have against any person relating to
or arising from the Assets or the Acquired Business, including rights to
recoveries for damages or defective goods and to refunds ("Seller Claims"), but
not including any Seller Claims under or in connection with the Excluded Assets.
1.1.11 Sufficient Assets at Closing such that the Working Capital
(as defined in Section 8.26) will not be less than negative ($8,400,000).
1.1.12 All accounts, trade accounts receivable and all notes,
negotiable instruments, bonds and other evidences of indebtedness of and rights
to receive payments arising out of sales occurring in the conduct of the
Acquired Business, including any rights of iBill with respect to any third party
collection procedures or any other actions or proceedings that have been
commenced in connection therewith (the "Accounts Receivable"), including, but
not limited to, the Accounts Receivable disclosed in Schedule 1.1.12.
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1.1.13 All prepaid expenses, including but not limited to rents,
credits and security deposits paid by iBill, relating to the Acquired Business
(the "Prepaid Expenses"), including but not limited to, the items listed in
Schedule 1.1.13.
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1.1.14 [Intentionally Omitted].
1.1.15 All security deposits deposited by or on behalf of iBill.
1.1.16 All technical and descriptive materials relating to the
maintenance or use of the Assets (including the Intellectual Property) or
otherwise relating to the Acquired Business (the "Technical Documentation").
1.1.17 [Intentionally Omitted].
1.1.18 All Shares held by iBill in the Subsidiaries and in any
other Person, including, without limitation, Interactive Payments LLC, a Florida
limited liability company ("Interactive") and Certidigm, LC, a Florida limited
liability company ("Certidigm"). (See Schedule 4.1.4 for the identity and
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material terms of iBill's ownership of Shares of the Subsidiaries, Interactive,
and Certidigm.)
1.2 Intent of the Parties. Although the Schedules to this Agreement
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are intended to be complete, to the extent any rights or assets of iBill relate
exclusively to the Acquired Business or are otherwise necessary for the
ownership and use of the Assets and the conduct of the Acquired Business, but
are not properly itemized or do not appear in the applicable Schedules where
required, then, unless this Agreement otherwise provides directly for the
Purchaser to provide for or obtain such rights or assets in a different way or
unless such rights or assets are specifically included in Excluded Assets, the
general language of Section 1.1 shall govern, and such rights and assets shall
nonetheless be deemed transferred to the Purchaser at Closing.
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1.3 Title to and Transfer of Assets. iBill agrees to convey to the
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Purchaser fee simple, good, marketable and unencumbered title to all of the
Assets, free of all Liens other than Permitted Liens, by appropriate documents
of transfer and sale, including such bills of sale, endorsements and
assignments, and other good and sufficient instruments of bargain and sale, in
such form as shall be approved and deemed appropriate by legal counsel for the
Purchaser. "Lien" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale contract, title retention contract or other contract to
give any of the foregoing, and "Permitted Lien" means (a) any Lien for taxes not
yet due or delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance with
generally accepted accounting principles, (b) any statutory Lien arising in the
ordinary course of business by operation of Law with respect to a liability that
is not yet due or delinquent, (c) any minor imperfection of title or similar
Lien which individually or in the aggregate with other such Liens does not
materially impair the value of the property subject to such Lien or the use of
such property in the conduct of the Acquired Business, and (d) Liens associated
with the Leases disclosed in Schedule 1.1.6.
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1.4 Excluded Assets. Notwithstanding the foregoing, the Assets shall
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not include any of the following:
1.4.1 certificates and articles of incorporation and
organization, minute books, stock books, tax returns, books of account or other
records having to do with the corporate, limited partnership or limited
liability company organization, as applicable, of iBill Corp., iBill,
Interactive, Debitpayments and Certidigm;
1.4.2 the rights that accrue or will accrue to the Sellers under
this Agreement or any other agreement between iBill and the Purchaser entered
into on or after the date hereof;
1.4.3 the rights to any of iBill's claims for any federal, state,
local, or foreign tax refunds;
1.4.4 except as provided in Section 1.1.11, the deposits, deposit
accounts, and investments plus all other cash, cash equivalents, deposits,
deposit accounts, and investments arising from the Acquired Business on or prior
to the Closing Date (including any amounts owed to iBill by employees as a
result of the exercise of employee options);
1.4.5 all insurance and reinsurance, surety, bonding, or
indemnity policies, binders, or contracts, and the benefits of any prior
insurance coverage to the extent still available, as established or obtained
with respect to the Acquired Business or the Assets on or prior to the Closing
Date, or thereafter if acquired by iBill, and related claims and refunds; and
1.4.6 all refunds of Chargeback penalties actually paid by
Sellers whether (i) directly or (ii) indirectly by indemnification of the
InterCept Parties pursuant to this Agreement,
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which indemnification shall not (x) reduce the Maximum Indemnity (as defined in
Section 9.5.2), or (y) be subject to the Basket (as defined in Section 9.5.1) to
card associations prior to or in respect of periods prior to Closing;
1.4.7 the Purchase Price (including the Cash Payment and the
Earnout Payments);
1.4.8 Any actual or potential cause of action against any of
iBill's processing providers or other vendors by reason of any act or omission
which may have resulted in iBill suffering a Chargeback penalty for activities
occurring prior to Closing;
1.4.9 Any actual or potential cause of action against any of
Purchaser's processing providers or other vendors by reason of any act or
omission which may have resulted in the Purchaser suffering a Chargeback penalty
for activities occurring prior to Closing, and for which the Sellers have either
paid the Chargeback penalty or indemnified the Intercept Parties;
1.4.10 Any right to recover from (or pass through to) merchants,
consumers, or other Persons any Chargeback penalties suffered by iBill for
activities occurring prior to Closing;
1.4.11 Any right to recover from (or pass through to) merchants,
consumers, or other Persons any Chargeback penalties suffered by Purchaser for
activities occurring prior to Closing, and for which the Sellers have either
paid the Chargeback penalty or indemnified the Intercept Parties;
1.4.12 the other assets, properties or rights disclosed in
Schedule 1.4 (collectively, the "Excluded Assets").
------------
1.5 Additional Disclosure Regarding Assets of Subsidiaries. (a) The
------------------------------------------------------
Parties acknowledge that the Purchaser is purchasing, as part of the Assets, all
of the Shares that iBill owns in each of the Subsidiaries, and that the
Subsidiaries are not separately selling their assets to the Purchaser.
Nonetheless, each of the Schedules required under Section 1.1 shall disclose,
under an appropriate heading identifying the applicable Subsidiary, any asset of
any Subsidiary that would be required to be disclosed on such Schedule if it
were an asset owned directly by iBill. Except as expressly stated otherwise in
this Agreement, those assets of the Subsidiaries shall be deemed to be part of
the "Assets" for purposes of the representations and warranties in this
Agreement as the context reasonably requires so as to give the InterCept Parties
the full benefit of those representations and warranties even though the assets
of the Subsidiaries are not being directly transferred to the Purchaser.
(b) For the avoidance of doubt, no part of the Purchase Price
(including the Cash Payment and the Earnout Payments) shall inure to the
Subsidiaries and the entirety of the same shall be payable solely to iBill.
10
ARTICLE 2
ASSUMPTION OF LIABILITIES BY THE PURCHASER
2.1 Assumed Liabilities. At and after the Closing, and subject to the
-------------------
express exclusions disclosed in Section 2.2, the Purchaser shall assume and pay
in a timely fashion and be responsible for the obligations and liabilities of
iBill that arise out of the Acquired Business or the Assets (the "Assumed
Liabilities"). Without limitation of the preceding sentence, and notwithstanding
anything in Section 2.2 to the contrary, the Assumed Liabilities shall include
iBill's (i) ordinary course payables and accrued expenses; (ii) customer funds,
deposits and reserves; (iii) liabilities for which reserves have been
established; (iv) obligations under the License Agreements, Leases and General
Contracts arising after the Closing; (v) all Chargebacks, revocations and
refunds associated with electronic payments processed by or on behalf the
Acquired Business resulting from payments occurring prior to Closing (subject to
indemnification set forth in Section 9.1.7); and (vi) the additional items
identified on Schedule 2.1.
------------
2.2 Liabilities Not Assumed. The Purchaser shall not assume or be
-----------------------
responsible for any of the following liabilities or obligations (the "Excluded
Liabilities"):
2.2.1 any product liability or similar claim for injury to
person, business or property, regardless of when made or asserted, which arises
out of or is based upon any express or implied representation, warranty,
agreement, or guarantee made by iBill, or alleged to have been made by iBill, or
which is imposed or asserted to be imposed by operation of Law, in connection
with any service performed or product sold or leased by or on behalf of the
Sellers on or prior to the Closing, including without limitation any claim
relating to any product delivered in connection with the performance of such
service and any claim seeking recovery for consequential damages, lost revenue
or income;
2.2.2 Taxes or other assessments (A) payable with respect to the
operation of the Acquired Business or ownership of the Assets by iBill on or
prior to the Closing, or from other properties or operations of iBill unrelated
to the Acquired Business or the Assets, or (B) incident to or arising as a
consequence of the negotiation or consummation by the Sellers of this Agreement
and the transactions contemplated hereby;
2.2.3 any liability or obligation under or in connection with the
Excluded Assets;
2.2.4 any liability or obligation of iBill or iBill Corp. of any
kind, known or unknown, contingent or otherwise, resulting from any other
covenant, agreement, or indemnity of iBill or iBill Corp. in this Agreement or
the other Purchase Documents and instruments to be executed and delivered by
them;
2.2.5 any liability or obligation resulting from violations of
any Laws applicable to the Acquired Business or the Assets by iBill or iBill
Corp. prior to the Closing Date or from
11
infringement of third-party rights or interests with respect to the Acquired
Business prior to the Closing Date;
2.2.6 any employee liabilities relating to present and past
employees of the Acquired Business with respect to wages, Plans, Beneficiaries,
programs, policies, commitments and other benefit entitlements established or
existing on or prior to Closing (whether or not such liabilities are accrued or
payable at Closing, and whether or not such liabilities are contingent in
nature), including:
(A) any liability or obligation for workers' compensation;
(B) any current or future liabilities to employees
retiring on, before, or after the Closing, and their dependents (excluding
employees employed by the Purchaser after the Closing and who subsequently
retire);
(C) any current or future liabilities for benefits that
may have been accrued or earned by any employees associated with the Acquired
Business on or before Closing under any Plans relating to service prior to the
Closing Date;
(D) any current or future liabilities for claims incurred
prior to Closing and related expenses with respect to any employees associated
with the Acquired Business under any welfare or disability Plans established or
existing at or prior to Closing, regardless of when filed with the Purchaser,
the Sellers, or the claims administrator for any such Plan;
(E) any retrospective premium on pension, savings, thrift,
or profit-sharing plan contribution relating to any employees associated with
the Acquired Business incurred or accrued prior to the Closing Date, regardless
of when invoiced or recorded;
(F) any monetary liability for retention bonuses, vacation
obligations, or severance payments that may arise at any time in favor of any of
the Sellers' employees or independent contractors under any Plan, program,
policy, commitment, or any other benefit entitlement, written, oral or
otherwise, provided such monetary liability relates to periods of employment
prior to the Closing; and
(G) any liability or obligation under the Consolidated
Omnibus Budget Reconciliation Act ("COBRA") with respect to any employees or
independent contractors of Sellers;
2.2.7 any Litigation (as defined in this Agreement) pending or
threatened against the Sellers or the Assets, if the cause of action or
activities giving rise to such litigation arise or accrue prior to the Closing
Date, including, but not limited, to those matters listed in Schedule 4.16;
-------------
2.2.8 any liability or obligation of the Sellers arising or
incurred in connection
12
with the negotiation, preparation and execution of this Agreement and the
transactions contemplated hereby and fees and expenses of counsel, accountants,
brokers and other experts employed by the Sellers;
2.2.9 any liability or obligation of the Sellers, arising or
accruing prior to the Closing Date, under any Law or any agreement with any
governmental authority or other third party, relating to the environment, human
health, and safety or to pollutants, contaminants, wastes, or chemicals or any
toxic, radioactive, ignitable, corrosive, reactive, or otherwise hazardous
substances, wastes, or materials;
2.2.10 any liability or obligation for indebtedness for borrowed
money or evidenced by bonds or notes (including accrued interest and fees with
respect thereto) and any guarantee of the foregoing liability or any other
obligation of any other Person; and
2.2.11 any liability for penalties imposed by reason of so-called
excess Chargebacks that occurred during periods prior to the Closing.
ARTICLE 3
CLOSING AND PURCHASE PRICE
3.1 Closing. The closing (the "Closing") of the transactions
-------
contemplated by this Agreement and the Purchase Documents (the "Contemplated
Transactions") shall take place as soon as practicable, and in no event later
than five business days after the satisfaction or waiver of each of the
conditions set forth in Article 7 below, or at such other time as the parties
agree (the "Closing Date"). At and after the Closing, without further
consideration but not as a condition to Closing, each of the parties hereto
shall take all such other action and shall procure or execute, acknowledge, and
deliver all such further certificates, conveyance instruments, consents, and
other documents as the other parties or their counsel may reasonably request (a)
to vest in the Purchaser, and perfect and protect the Purchaser's right, title,
and interest in, the Assets and the Acquired Business, (b) to effect the
Purchaser's assumption, payment or discharge of all Assumed Liabilities, and (c)
to ensure more effectively the compliance of each party with its agreements,
covenants, warranties, and representations under this Agreement. The Closing
shall take place at the offices of Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.,
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000, or at such other
location as the parties agree.
3.2 Purchase Price. The aggregate purchase price (the "Purchase
--------------
Price") consideration for all of the Assets shall be (a) $112,000,000 in cash or
other immediately available funds (the "Cash Payment"), and (b) the Earnout
Payments, if any, payable under Section 3.3 below. On the Closing Date, the
Parent shall pay the Cash Payment on behalf of the Purchaser as follows:
(a) $101,400,000 to, or as directed by, iBill, subject to a
credit equal to 1/2 of
13
the Xxxx-Xxxxx-Xxxxxx Act application fees paid by the Intercept Parties as
provided in Section 8.15;
(b) $5,600,000 (which amount may be subject to a credit as
provided in the following paragraph) to the Escrow Agent, which shall hold such
cash (the "General Escrow Cash") in escrow (the "General Escrow") pursuant to
the terms of an escrow agreement in the form of Exhibit 3.2(b) attached hereto
--------------
(the "Escrow Agreement"), which shall be executed concurrently with this
Agreement; and
(c) $5,000,000 to the Escrow Agent which shall hold such cash
(the "Special Escrow Cash") in escrow (the "Special Escrow") pursuant to the
terms of the Escrow Agreement.
The General Escrow Cash and the Special Escrow Cash shall collectively be
referred to as the "Escrow Cash," and the General Escrow and the Special Escrow
(and the Setoff Escrow as defined in Section 8.9) shall collectively be referred
to as the "Escrow." On the Signing Date the InterCept Parties, iBill, iBill
Corp., and the Escrow Agent have entered into that certain Break-up Fee Escrow
Agreement in the form of Exhibit 3.2(c) attached hereto (the "Break-up Fee
--------------
Escrow Agreement"), pursuant to which the Parent has placed the Break-up Fee of
$5,000,000 into escrow with the Escrow Agent. On the Closing Date, the Escrow
Agent shall transfer into the General Escrow the Break-up Fee (less expenses of
the Escrow Agent) and interest accrued thereon, which aggregate amount shall be
credited towards the General Escrow Cash so that the General Escrow Cash equals
$5,600,000 at Closing.
3.3 Earnout. In addition to the Cash Payment, and subject to Setoff
-------
as described below, the InterCept Parties, jointly and severally, shall pay
iBill the payments described in Exhibit 3.3 (the "Earnout Payments"). To the
-----------
extent that the InterCept Parties deposit Setoff Escrow Cash pursuant to Section
8.9 (or the parties mutually agree to a Setoff amount pursuant to Section 8.9),
distribution of the portion of the Earnout Payments withheld as Setoff shall
otherwise be governed in accordance with Section 8.9.
3.4 Fair Market Value of Assets. The Purchase Price shall be
---------------------------
allocated among the Assets acquired hereunder as disclosed in Schedule 3.4.
------------
After the Closing, each of iBill, iBill Corp., and the Purchaser hereby
covenants and agrees that it shall make consistent use of the allocation, fair
market value, and useful lives specified in Schedule 3.4 for all Tax purposes
------------
and in all filings, declarations, and reports with the Internal Revenue Service
("IRS") in respect thereof, including the reports required to be filed under
Section 1060 of the Internal Revenue Code of 1986, as amended, and all
regulations and rulings related thereto. The Purchaser shall prepare and deliver
IRS Form 8594 to the Sellers within 45 days after the Closing Date. In any
proceeding, hearing, inquiry, or investigation related to the determination of
any Taxes, neither the InterCept Parties nor the Sellers shall contend or
represent that such allocations is not a correct allocation.
3.5 Delivery of Disclosure Memoranda. Prior to the execution and
--------------------------------
delivery of this
14
Agreement, the Sellers shall have delivered to the InterCept Parties a draft
Signing Date Disclosure Memorandum. The Sellers shall sign and deliver to the
InterCept Parties a final Signing Date Disclosure Memorandum on the Signing
Date. On the Closing Date, the Sellers shall sign and deliver a final Closing
Disclosure Memorandum to the InterCept Parties. The Closing Disclosure
Memorandum shall clearly identify any changes from the Signing Date Disclosure
Memorandum.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby represent and warrant, jointly and severally, to
the InterCept Parties, except as set forth on the applicable Disclosure
Memorandum attached hereto, each of which exceptions shall specifically identify
the relevant subsection hereof to which it relates, as follows:
4.1 Entity Organization.
-------------------
4.1.1 iBill Corp. is a corporation duly incorporated, validly
existing and in good standing under the Laws of Florida. iBill is a limited
partnership duly organized and validly existing and in good standing under the
Laws of Florida. Each of the Subsidiaries is duly organized, validly existing
and in good standing under the Laws of its state of organization as shown on the
first page of this Agreement.
4.1.2 The Sellers have the corporate, limited liability company,
or partnership power and authority, as applicable, to operate and conduct the
Acquired Business and to own and lease all of their properties and assets
related to the Acquired Business.
4.1.3 Each of the Sellers is duly qualified or licensed to do
business and is in good standing under the Laws of each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, other than in such jurisdictions where the failure
to be so qualified to do business or in good standing (individually or in the
aggregate) would not have a Material Adverse Effect on such Seller.
4.1.4 Schedule 4.1.4 discloses all of the entities either wholly
--------------
or partially owned by Sellers, including Sellers' percentage ownership of such
entities. Except as disclosed in Schedule 4.1.4, iBill owns all of the issued
--------------
and outstanding Shares of each Subsidiary. Except as disclosed on Schedule
--------
4.1.4, no Share of any Subsidiary is or may become required to be issued by
-----
reason of any Equity Rights and there are no contracts by which any Subsidiary
is bound to issue additional Shares or Equity Rights. Except as disclosed in
Schedule 4.1.4, there are no contracts by which any Seller is or may be bound to
--------------
transfer any Shares of any Subsidiary. Except as disclosed in Schedule 4.1.4,
--------------
there are no contracts relating to the rights of any Seller to vote or to
dispose of any Shares of any Subsidiary. All of the Shares of each Subsidiary
held by iBill are fully paid and nonassessable under the
15
applicable Law of the jurisdiction in which such Subsidiary is organized and are
owned by iBill free and clear of any Lien. Except as set forth in Schedule
--------
4.1.4, neither iBill nor iBill Corp. owns or controls, directly or indirectly,
-----
any Shares in any corporation, company, association, partnership, joint venture,
or other entity.
4.1.5 Schedule 4.1.5 sets forth copies of the articles of
--------------
incorporation, bylaws and other organizational or operating agreements, if any,
of each Seller.
4.2 Entity Power; Authorization; Enforceable Obligations. The Sellers
----------------------------------------------------
have the power and authority (including full corporate, limited liability
company or partnership power and authority, as applicable) to execute and
deliver the Purchase Documents and to consummate the Contemplated Transactions.
The Sellers have taken all necessary corporate, limited liability company, or
limited partnership action, including all action required by their respective
boards of directors, boards of managers, or general partner, and by the holders
of Shares, to authorize the execution and delivery of the Purchase Documents and
the consummation of the Contemplated Transactions, and the execution and
delivery of the Purchase Documents and the consummation of the Contemplated
Transactions is in fact duly authorized by the Sellers. The Purchase Documents
constitute the legal, valid, and binding obligations of the Sellers, enforceable
against the Sellers in accordance with their terms and conditions, except as
such enforcement may be subject to or limited by bankruptcy, insolvency,
reorganization, moratorium or other similar Laws now or hereafter in effect
affecting creditors' rights generally, and by general principles of equity.
4.3 No Conflict. Except as disclosed in Schedule 4.3, neither the
----------- ------------
execution and delivery of the Purchase Documents, nor the consummation of the
Contemplated Transactions, will (a) violate any Law (subject, however, to
compliance with the matters identified in Sections 4.4 and 8.15, below)
applicable to the Sellers, the Acquired Business, or the Assets, (b) violate or
conflict with any provision of any articles of association, articles of
organization, articles of incorporation, limited liability company agreement,
operating agreement, partnership agreement, charter, bylaw or other governing or
organizational instrument of the Sellers, or (c) conflict with, result in the
breach of, or constitute a default under any mortgage, lease, indenture,
license, instrument, trust, contract, agreement, or other commitment or
arrangement to which any Seller is a party or by which the Sellers or any of the
Assets are bound, except where such violation, conflict, breach or default would
not have a Material Adverse Effect on the Acquired Business or the Assets.
4.4 Required Government Consents. Except as identified in Section
----------------------------
8.15 below, or as listed in Schedule 4.4 (such scheduled items, together with
------------
required filings and approvals under the Xxxx-Xxxxx-Xxxxxx Act, being referred
to in this Agreement as the "Required Government Consents"), no approval,
authorization, certification, consent, variance, permission, license, or permit
to or from, or notice, filing, or recording to or with any government or
governmental authority is necessary for the execution and delivery of the
Purchase Documents by the Sellers or the consummation by the Sellers of the
Contemplated Transactions, or the ownership and use of the Assets and the
conduct of the Acquired Business (including, to the Sellers' knowledge, by the
16
Purchaser, assuming such ownership and use is the same as the ownership and use
by the Sellers). Nothing herein is intended to relieve the Purchaser of its
obligation to secure in its own name and have in force such permits, licenses,
qualifications and other dispensations or approvals that are required by any
governmental authority for Purchaser to conduct the Acquired Business.
4.5 Required Contract Consents. Except as disclosed in Schedule 4.5 (such
-------------------------- ------------
scheduled items being referred to in this Agreement as the "Required Contract
Consents"), no approval, authorization, consent, permission, or waiver to or
from, or notice, filing, or recording to or with, any Person that is a party to
a contract or agreement with the Sellers is necessary for (a) the execution and
delivery of the Purchase Documents by the Sellers or the consummation by the
Sellers of the Contemplated Transactions; (b) the transfer and assignment to the
Purchaser at Closing (either directly or through the Subsidiaries if such a
change in control of the Subsidiaries would be deemed such a transfer and
assignment) of the Leases, License Agreements, or General Contracts; or (c) the
ownership and use of the Assets and the conduct of the Acquired Business
(including, to the Sellers' knowledge, by the Purchaser, assuming such ownership
and use is substantially the same as the ownership and use by the Sellers).
4.6 Financial Matters. The audited combined balance sheets of the Sellers
-----------------
as of December 31, 1999 and 2000 and the related audited combined statements of
operations and cash flow for the periods ending December 31, 1999 and 2000, and
the unaudited combined balance sheet of the Sellers as of December 31, 2001 and
the related unaudited combined statements of operations and cash flow for the
period ending December 31, 2001 (the "Financial Statements") are true, complete,
and correct in all material respects and fairly present the combined financial
position of the Sellers as of the respective dates thereof and the results of
their operations for the respective periods thereof. The Financial Statements
were prepared in accordance with GAAP (except, with respect to the unaudited
Financial Statements, for the absence of footnotes).
4.7 Absence of Changes. Except for the execution and delivery of this
------------------
Agreement and the transactions to take place pursuant hereto on or prior to the
Closing Date, since the date of the most recent Financial Statements (December
31, 2001), except as disclosed in Schedule 4.7, there has not occurred, between
------------
the date of the most recent Financial Statements and the date hereof, any of the
following:
4.7.1 (a) any increase in the salary, wages or other compensation of
any employee of Sellers whose annual salary is, or after giving effect to such
change would be, $100,000 or more; (b) any establishment or modification of (A)
targets, goals, pools or similar provisions in respect of any fiscal year under
any Plan or any employment-related contract or other compensation arrangement
with or for such employees or (B) salary ranges, increase guidelines or similar
provisions in respect of any Plan or any employment-related contract or other
compensation arrangement with or for such employees; or (c) any adoption,
entering into or becoming bound by any Plan, employment-related contract or
collective bargaining agreement, or amendment, modification or termination
(partial or complete) of any Plan, employment-related contract or collective
bargaining agreement, except to the extent required by applicable Law;
17
4.7.2 (a) any incurrences by the Sellers of indebtedness with respect
to the conduct of the Acquired Business in an aggregate principal amount
exceeding $100,000 (net of any amounts discharged during such period), or (b)
any voluntary purchase, cancellation, prepayment or complete or partial
discharge in advance of a scheduled payment date with respect to, or waiver of
any right of either Seller under, any indebtedness of or owing to either Seller
with respect to the conduct of the Acquired Business, except for ordinary course
write-offs of trade receivables (such term excluding Chargebacks) that would not
individually or in the aggregate cause a Material Adverse Effect;
4.7.3 any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the plant, real or personal
property or equipment of the Sellers used or held for use in the conduct of the
Acquired Business in an aggregate amount exceeding $100,000;
4.7.4 any material change in (a) any pricing, investment, accounting,
financial reporting, inventory, credit, allowance or tax practice or policy of
the Acquired Business; or (b) any method of calculating any bad debt,
contingency or other reserve of the Acquired Business for accounting, financial
reporting or tax purposes;
4.7.5 (a) any acquisition or disposition of any assets and properties
used or held for use in the conduct of the Acquired Business, other than
Inventory in the ordinary course of business consistent with past practice and
other acquisitions or dispositions not exceeding in either case $100,000 in the
aggregate; or (b) any creation or incurrence of a Lien (other than Permitted
Liens) on any assets and properties used or held in the conduct of the Acquired
Business;
4.7.6 any entering into, amendment, modification, termination (partial
or complete) or granting of a waiver under or giving any consent with respect to
any General Contract, Lease or License Agreement that is required (or had it
been in effect on the date hereof would have been required) to be disclosed
under Section 1.1 above;
4.7.7 any capital expenditures or commitments for additions to
property, plant or equipment used or held for use in the conduct of the Acquired
Business constituting capital assets in an aggregate amount exceeding $100,000;
4.7.8 any transaction with any officer or director of the Sellers or
any associate of any such officer or director (a) outside the ordinary course of
business consistent with past practice or (b) other than on an arm's-length
basis (other than transfers of ownership in Sellers among certain owners of
Sellers and certain officers and directors of Sellers or associates of the
same);
4.7.9 any labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
18
4.7.10 the commencement or notice or threat of commencement of any
lawsuit or proceeding against or, to the Sellers' knowledge, investigation of
any Seller or its affairs;
4.7.11 any amendments or changes to the articles of incorporation,
bylaws, operating agreements, partnership agreements and similar governing
documents of any Seller;
4.7.12 any declaration, setting aside, or payment of a dividend or
other distribution in respect to the equity of any Seller, or any direct or
indirect redemption, purchase or other acquisition by any Seller of any of its
capital stock or other equity, other than ordinary course distributions of prior
year earnings;
4.7.13 any issuance or sale by any Seller of any of its shares of
capital stock or other equity securities, or securities exchangeable,
convertible or exercisable therefor, or of any other of its securities;
4.7.14 any change in pricing, fees or royalties set or charged by any
Seller to its customers or licensees or in pricing, fees or royalties set or
charged by persons who have licensed Intellectual Property to any Seller;
4.7.15 any other transaction involving or development affecting the
Acquired Business or the Assets outside the ordinary course of business
consistent with past practice; or
4.7.16 any entering into of a contract to do or engage in any of the
foregoing after the Signing Date.
4.8 No Undisclosed Liabilities. The Sellers have no material obligations
--------------------------
or liabilities of any nature (matured or unmatured, fixed or contingent) other
than (i) those set forth or adequately provided for in the Financial Statements
of the Sellers as of December 31, 2001 (the "12-31-01 Financial Statements") or
as disclosed Schedule 4.8, (ii) those incurred in the ordinary course of
------------
business and not required to be set forth in the 12-31-01 Financial Statements
under GAAP, (iii) those incurred in the ordinary course of business since the
12-31-01 Financial Statements or as disclosed Schedule 4.8 and consistent with
------------
past practice, and (iv) those incurred in connection with the execution of this
Agreement.
4.9 Title to Tangible Property. The Purchaser at Closing shall obtain
--------------------------
good and marketable title to all of the tangible Assets free and clear of all
material Liens whatsoever, except for the Leases disclosed in Schedule 1.1.6 and
--------------
Permitted Liens.
4.10 Condition of Property and Systems.
---------------------------------
4.10.1 Substantially all of the tangible Assets are in good operating
order, condition, and repair, ordinary wear and tear excepted, and are suitable
for use in the Acquired Business in the ordinary course, as presently operated.
In the aggregate, the tangible Assets not
19
complying with the foregoing representation do not have a Material Adverse
Effect.
4.10.2 The Sellers' transaction and data processing systems are
adequate to conduct the Acquired Business as presently conducted by the Sellers,
provided that the foregoing representation and warranty shall not be deemed to
limit in any way the representations and warranties of the Sellers in Section
4.13 below.
4.11 Inventory. All Inventory is of usable quality and includes no material
---------
amount of obsolete or discontinued items or items that cannot be used by the
Purchaser in the Acquired Business in the ordinary course, consistent with past
practices and uses.
4.12 Contracts. The License Agreements listed in Schedule 1.1.1, the Leases
--------- --------------
described in Schedule 1.1.6, and the General Contracts disclosed in Schedule
-------------- --------
1.1.7 constitute all material contracts, agreements, licenses, and other
-----
commitments and arrangements of the Sellers in effect as of the Closing Date and
included in the Assets. All such contracts are valid, binding, and enforceable
in accordance with their terms and are in full force and effect. There are no
existing defaults by the Sellers under any such contracts and no act, event, or
omission has occurred that, whether with or without notice, lapse of time, or
both, would constitute a default thereunder.
4.13 Intellectual Property.
---------------------
4.13.1 The Sellers own, or are licensed or otherwise possess legally
enforceable rights to use, all Intellectual Property used in the Acquired
Business. To the extent that any Intellectual Property is licensed (or jointly
owned), such status is expressly noted in Schedule 1.1.4 and Schedule 1.1.1,
otherwise all Intellectual Property is owned by Sellers.
4.13.2 Schedule 1.1.4 and Schedule 1.1.1 of the applicable Disclosure
-------------- --------------
Schedule list (i) all patents and patent applications and all registered and
unregistered trademarks, trade names and service marks, registered and
unregistered copyrights, maskworks, and software included as part of the
Intellectual Property, (ii) all licenses, sublicenses and other agreements as to
which any Seller is a party and is authorized or permitted to use such
Intellectual Property Rights, (iii) all licenses, sublicenses and other
agreements as to which any Seller is a party and pursuant to which any Seller is
authorized to use any third party patents, trademarks or copyrights, including
software ("Third Party Intellectual Property Rights") which are incorporated in,
are, or form a part of any product or service offering of any Seller to conduct
the business of the Acquired Business, and (iv) the Intellectual Property listed
in clause (i), in which Sellers may have only a partial or joint interest (as
such partial or joint interest is expressly noted in the schedules). Schedule
--------
1.1.4 does not, and need not, include or describe Intellectual Property of a
-----
generalized nature such as know how and goodwill, but such Intellectual Property
is nonetheless being conveyed to Purchaser. To the best of Sellers' knowledge,
the Sellers are not in violation of any license, sublicense, or agreement
described in Schedule 1.1.1 or Schedule 1.1.4 of the applicable Disclosure
-------------- --------------
Schedule. Except as set forth in Schedules 1.1.1 or 1.1.4, the execution and
delivery of this Agreement by the Sellers and the consummation of the
Contemplated Transactions will not cause Sellers to be in violation or
20
default under any such license, sublicense, or agreement relating either to (a)
the Sellers' Intellectual Property or (b) Third Party Intellectual Property
Rights used by the Sellers in the Acquired Business, nor will the execution and
delivery of this Agreement entitle any other party to any such license,
sublicense, or agreement to terminate or modify such license, sublicense, or
agreement. Except for any nonexclusive license listed on Schedule 1.1.1 or
--------------
Schedule 1.1.4 as described in clause (iii) of the first sentence of this
--------------
Section 4.13.2, and except for any jointly owned Intellectual Property listed on
Schedule 1.1.4 as described in clause (iv) of the first sentence of this Section
--------------
4.13.2, the Sellers are the sole and exclusive owners or licensees of all right,
title and interest in and to (free and clear of any Liens, except for Permitted
Liens), the Intellectual Property, and the Sellers have the sole and exclusive
rights to the use thereof or the material covered thereby in connection with the
services or products in respect of which Intellectual Property is being used.
4.13.3 Except as disclosed in Schedule 4.13.4 or Schedule 4.16, to
--------------- -------------
Sellers' knowledge, there is no unauthorized use, disclosure, infringement or
misappropriation of any Intellectual Property rights of any Seller, or
misappropriation of any Trade Secret material owned by any Seller, by any third
party, including any former employee of any Seller. No Seller has entered into
any agreement to indemnify any other person against any charge of infringement
of its Intellectual Property, other than as provided for in any indemnification
provisions contained in its purchase orders arising in the ordinary course of
business.
4.13.4 All patents, registered and unregistered trademarks and service
marks, and all registered and unregistered copyrights held by the Sellers are to
the best of Seller's knowledge valid and existing. Seller has not received any
written notice of any assertion or claim (nor, to Sellers' knowledge is there
any basis therefor) challenging the validity of any Intellectual Property of the
Sellers. Except as described in Schedule 4.13.4 or Schedule 4.16, no Seller has
--------------- -------------
been sued in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, copyrights or violation
of any Trade Secret or other proprietary right of any third party. Except for
any alleged claims set forth in Schedule 4.16, to the best knowledge of the
Sellers, neither the current conduct of the Acquired Business nor the
contemplated continuation in the same business activities, including the use of
the Intellectual Property Rights, infringe or will infringe or conflict with,
any licenses, trademarks, service marks, trade names, patents, industrial
models, or copyright of any third party. No trade secret is believed by Sellers
to be misappropriated. Except as described on Schedule 4.13.4, Seller has not
---------------
received written notice that any third party is challenging the ownership of any
of the Seller's Intellectual Property Rights, or the validity of Sellers'
Intellectual Property, and the Sellers have no knowledge of any basis for such a
challenge or claim. Except as described in Schedule 4.13.4 or Schedule 4.16, no
--------------- -------------
Seller has brought any action, suit, or proceeding for infringement of
Intellectual Property or breach of any license or agreement involving its
Intellectual Property Rights against any third party. There are no pending or,
to any Sellers' knowledge, threatened interference proceedings or
re-examinations involving any patents or patent applications of the Sellers,
except for any such action commenced by the Sellers. To the Sellers' knowledge,
there is no breach or violation of or threatened or actual loss of rights under
any license agreement to which any Seller is a
21
party.
4.13.5 (Intentionally Omitted)
4.13.6 Except as described on Schedule 4.13.4, each Seller has taken
---------------
reasonable steps to protect and preserve the confidentiality of its Confidential
Information. Except as described on Schedule 4.13.4, iBill and iBill
---------------
Technologies each have a policy requiring each employee, consultant, and
independent contractor to execute proprietary information and confidentiality
agreements substantially in the Seller's standard forms. All current and former
employees, consultants and independent contractors of iBill and iBill
Technologies who generate or have access to Confidential Information have
executed such an agreement. Except as relates to the causes of action described
in Schedule 4.13.4, all use by, or disclosure or appropriation to, a third party
---------------
of Confidential Information owned by the Sellers has been memorialized by an
agreement between one or more Sellers and such third party. All use by, or
disclosure or appropriation to, the Sellers of Confidential Information not
owned by a Seller has been licensed and memorialized by an agreement between one
or more Sellers and the owner of such Confidential Information.
4.14 Leases. The Leases disclosed in Schedule 1.1.7 constitute all material
------ --------------
leasing or rental contracts, agreements, and other commitments and arrangements
in effect as of the Signing Date and included in the Assets. All Leases are
valid, binding, and enforceable in accordance with their terms and are in full
force and effect. To the knowledge of the Sellers, except for any Required
Contract Consents, there are no existing defaults by the Sellers thereunder and
no act, event, or omission has occurred that, whether with or without notice,
lapse of time, or both, would constitute a default thereunder.
4.15 Restrictions on Business Activities. There is no agreement, judgment,
-----------------------------------
injunction, order or decree binding upon any Seller that has or could reasonably
be expected to have the effect of prohibiting or materially impairing any
current or future business practice of such Seller, any acquisition of property
by such Seller or the overall conduct of business by the Sellers as currently
conducted or as proposed to be conducted by the Sellers. No Seller has entered
into an agreement under which such Seller is restricted from selling, licensing
or otherwise distributing any of its products to any class of customers, in any
geographic area, during any period of time or in any segment of the market.
4.16 Litigation. Except as disclosed on Schedule 4.16, no Litigation is
---------- -------------
pending, or, to the knowledge of the Sellers, any threatened against the
Sellers, present or former directors, officers, or employees, affecting,
involving, or relating to the Acquired Business or any of the Assets, or that
could prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to have a
Material Adverse Effect on the Sellers.
4.17 Court Orders, Decrees, and Laws.
-------------------------------
22
4.17.1 Compliance With Laws. There is no outstanding or, to the
--------------------
knowledge of the Sellers, threatened order, writ, injunction, or decree of any
court, governmental agency, or arbitration tribunal against the Sellers
affecting, involving, or relating in an adverse manner to the Acquired Business
or the Assets. The Sellers have complied with, and are not in violation of, any
Laws affecting, involving, or relating to the Acquired Business or the Assets,
except for such violations or failures to comply as could not reasonably be
expected to have a Material Adverse Effect on the Acquired Business or the
Assets, and the Sellers have received no notices of any such alleged violation.
4.17.2 Adequacy of Authorizations. The Authorizations constitute all
--------------------------
approvals, authorizations, certifications, consents, variances, permissions,
licenses, or permits to or from, or filings, notices, or recordings to or with,
U.S. or non-U.S., federal, state, or local governmental authorities that are
required for the ownership and use of the Assets and the conduct of the Acquired
Business under all applicable Laws. The Sellers are in compliance with all
material terms and conditions of such required Authorizations. All of the
Authorizations are in full force and effect, and, to the Sellers' knowledge, no
suspension or cancellation of any of them is being threatened, nor will any of
the Authorizations be affected by the consummation of the transactions described
in this Agreement, except to the extent any such Authorizations are assignable
or transferable only upon receipt of the Required Government Consents. Nothing
herein is intended to relieve Purchaser of its obligation to secure in its own
name and have in force such permits, licenses, qualifications and other
dispensations or approvals that are required by any governmental authority for
Purchaser to conduct the Acquired Business.
4.17.3 Environmental Matters. The operations of the Sellers forming a
---------------------
part of the Acquired Business comply, and have complied, in all material
respects with all applicable Laws relating to pollution or protection of the
environment ("Environmental Laws"). The Sellers have not received any notice of
any pending or threatened investigation, proceeding or claim with respect to the
Acquired Business or the Assets to the effect that the Sellers are or may be
liable to any person or entity, or responsible or potentially responsible for
the costs of any remedial or removal action or other cleanup costs, as a result
of noncompliance with any Environmental Laws. To the knowledge of the Sellers,
there is no past or present action, activity, condition or circumstance that
could be expected to give rise to any such liability on the part of the Sellers
to any person or entity or for any such cleanup costs.
4.18 Personnel and Compensation.
--------------------------
4.18.1 List of Personnel. Schedule 4.18.1 of the Disclosure Memorandum
----------------- ---------------
contains a true and complete list of the names and current compensation levels
of (a) all salaried or annual employees and (b) all independent contractors
and/or consultants (excluding vendors and suppliers) involved in the Acquired
Business.
4.18.2 Employee Relations. There is no labor strike, dispute,
------------------
slowdown, stoppage, or similar activity pending or, to the knowledge of the
Sellers, threatened against the Sellers pertaining to the Acquired Business or
the employees involved in the Acquired Business.
23
Except as described in Schedule 4.18.2 or Schedule 4.16, there are no charges,
--------------- -------------
investigations, administrative proceedings, or formal complaints of
discrimination (including discrimination based upon sex, age, marital status,
race, national origin, sexual preference, handicap or veteran status) pending
or, to the knowledge of the Sellers, threatened before the Equal Employment
Opportunity Commission or any federal, state, or local agency or court against
the Sellers pertaining to the Acquired Business or the employees of the Acquired
Business, and, to the knowledge of the Sellers, no basis for any such charge,
investigation, administrative proceeding, or complaint exists.
4.19 Employee Benefit Plans and Arrangements.
---------------------------------------
4.19.1 List of Plans and Obligations. The employee benefit plans and
-----------------------------
arrangements set forth in Schedule 4.19 is a complete and accurate list and
-------------
description of all plans, arrangements, agreements, commitments, promises and
other obligations of the Sellers, including but not limited to pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, sick leave without compensation, bonus and
other incentive plans, every medical, vision, dental and other health plan,
every life insurance plan and every other written or unwritten employee program,
arrangement, agreement or understanding, commitment or method of contribution or
compensation, whether formal or informal, whether funded or unfunded, and other
obligations under which the Sellers have been, are or will be obligated to
provide benefits to any current or former Employee, retiree, director,
independent contractor, shareholder, officer, consultant or other beneficiary,
or dependent, spouse or other family member or beneficiary of such Employee,
retiree, director, independent contractor, shareholder, officer, consultant, or
other beneficiary of the Sellers, whether during their employment with the
Sellers or after the termination of such employment (the "Plans" and the
"Beneficiaries," respectively).
4.19.2 Compliance. All of the Plans have been maintained, funded and
----------
administered in compliance, in all respects, with all applicable Laws, including
but not limited to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Internal Revenue Code of 1986, as amended, and all
regulations and rulings related thereto. There are no penalties, interest, or
Taxes related to the Plans due to any federal or state authority.
4.19.3 No Liabilities or Obligations. Except as reflected on the
-----------------------------
Financial Statements, the Sellers have no liabilities or obligations to any
Beneficiaries, governmental authorities, or any other parties arising out of or
relating to the Plans.
4.19.4 [Intentionally Omitted]
4.19.5 No Multi-Employer or Certain Other Plans. None of the Plans is
----------------------------------------
a multi-employer plan, as defined in Section 3(37) of ERISA, or is subject to
Title IV of ERISA or Code section 412; and no Seller or affiliate of any Seller
has or has had any liability or
24
other obligation in connection with any such multi-employer plan, or plan which
is or was subject to Title IV of ERISA or Code section 412.
4.20 Insurance Policies. Except as set forth on Schedule 4.20, there are no
------------------ -------------
pending material claims against insurance established or obtained with respect
to the Acquired Business by the Sellers as to which insurers have denied
liability or are defending under any reservation of rights, and, to the
knowledge of the Sellers, there exists no material claim under such insurance
that has not been properly filed by the Sellers.
4.21 Broker's or Finder's Fees. Except as set forth on Schedule 4.21, the
------------------------- -------------
Sellers have not incurred, nor will they incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement or any
transaction contemplated hereby. iBill and iBill Corp. shall be solely
responsible for the fees and expenses of any party listed in Schedule 4.21.
-------------
4.22 Accounts Receivable. Except as set forth in Schedule 4.22, the
------------------- -------------
Accounts Receivable on the 12-31-01 Financial Statements have arisen in the
ordinary course of business consistent with past practice in the aggregate
recorded amounts thereof, net of any applicable reserve reflected in the
12-31-01 Financial Statements. Except as set forth in Schedule 4.22, the
-------------
Accounts Receivable set forth on the Closing Date Balance Sheet (as defined in
Section 8.26) will be collectible in the ordinary course of business consistent
with past practice in the aggregate recorded amounts thereof, net of any
Chargebacks and the applicable reserve reflected in the Closing Date Balance
Sheet. If and to the extent that the Accounts Receivable are less than the
amount set forth on the Closing Date Balance Sheet, then the Loss for purposes
of Article 9 shall be calculated as follows: First, the amount of such shortfall
shall be reduced by the amount of any Chargebacks. Second, the amount so
obtained shall be multiplied by 12.5%. Third, the product obtained as described
in the preceding sentence shall be reduced by the applicable reserve reflected
in the Closing Date Balance Sheet, to the extent such reserve has not previously
been exhausted.
4.23 Vehicles. There are no motor vehicles owned or leased by the Sellers
--------
and used or held for use in the conduct of the Acquired Business.
4.24 No Guarantees. Except as set forth in Schedule 4.24, none of the
------------- -------------
liabilities of the Acquired Business or of the Sellers incurred in connection
with the conduct of the Acquired Business is guaranteed by or subject to a
similar contingent obligation of any other Person, nor has either Seller
guaranteed or become subject to a similar contingent obligation in respect of
any liabilities of any customer, supplier or other Person to whom either Seller
sells goods or provides services in the conduct of the Acquired Business or with
whom such Seller otherwise has significant business relationships in the conduct
of the Acquired Business.
25
4.25 Tax Matters.
-----------
4.25.1 Tax and Social Returns. The Sellers have correctly and timely
----------------------
(a) filed all Tax and Social returns required to be filed in the manner required
by Tax and Social authorities, (b) responded to information requested by said
authorities and (c) made all Tax and Social payments at due dates.
4.25.2 Other Matters. Except as set forth in Schedule 4.25: (a) none
------------- -------------
of the Sellers is, to the best of its knowledge, subject to income tax in
countries other than those where it is registered; (b) if the Seller is
established in a country where value added tax is applicable, the Seller is duly
registered as an entity subject to such Tax, or to the best of its knowledge is
not subject to such Tax; (c) to the best of Sellers' knowledge, no Seller has
entered into any transaction which could be disregarded or recharacterized for
Tax or Social purposes on the grounds that it aimed at the avoidance of Tax or
Social obligations; and (d) no Seller has received written notice that it is the
subject matter of any inquiry, investigation or audit relating to Tax or Social
matters or of any proposed audit.
4.25.3 Tax and Social Audits. Schedule 4.25 sets forth the conclusions
--------------------- -------------
of any Tax or Social audit or reassessment made during any period not yet
completely time barred by applicable statutes of limitation.
4.25.4 Returns Furnished. Schedule 4.25 contains true and complete
----------------- -------------
copies of (a) income tax audit reports, statements of deficiencies or audit
response letters relating to Taxes, if any, and (b) all tax returns for the
Sellers for all periods since January 1, 2000.
4.26 Insurance The Sellers have policies of insurance and bonds of the type
---------
and in amounts customarily carried by persons conducting businesses or owning
assets similar to those of the Sellers. There is no material claim pending under
any of such policies or bonds as to which coverage has been questioned, denied
or disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Sellers are
otherwise in compliance with the terms of such policies and bonds. The Sellers
have no knowledge of any threatened termination of, or material premium increase
with respect to, any of such policies.
4.27 [Intentionally Omitted.]
4.28 Customers and Suppliers. Except as disclosed in Schedule 4.28, no
----------------------- -------------
customer that individually accounted for more than 2% of the Sellers' aggregate
gross revenues during the 12-month period preceding the Signing Date, and no
supplier of the Sellers, has cancelled or otherwise terminated, or made any
written threat to the Sellers to cancel or otherwise terminate its relationship
with the Sellers, or has at any time on or after December 31, 2001 decreased
materially its services or supplies to the Sellers in the case of any such
supplier, or its usage of the services or products of the Sellers in the case of
such customer, and to the Sellers' knowledge, no such supplier or customer
intends to cancel or otherwise terminate its
26
relationship with the Sellers or to decrease materially its services or supplies
to the Sellers or its usage of the services or products of the Sellers, as the
case may be. The Sellers have not knowingly breached, so as to provide a benefit
to the Sellers that was not intended by the parties, any agreement with, or
engaged in any fraudulent conduct with respect to, any customer or supplier of
the Sellers.
4.29 No Commitments Regarding Future Products. The Sellers have made no
----------------------------------------
sales to customers that are contingent upon providing future enhancements of
existing products or services, to add features not presently available on
existing products or services, or to otherwise enhance the performance of its
existing products or services (other than beta or similar arrangements pursuant
to which the Sellers' customers from time to time test or evaluate products or
services) which enhancement imposes a binding legal obligation upon Sellers to
provide the same without further cost or charge to the customer. The products or
services the Sellers have delivered to customers substantially comply with
published specifications for such products and services, and the Sellers have
not received material complaints from customers about its products or services
that remain unresolved. Schedule 4.29 of the applicable disclosure schedule
-------------
accurately sets forth a complete list of products and services in development
(exclusive of mere enhancements to and additional features for existing products
and services).
4.30 Disclosure. No representation, warranty, or statement made by the
----------
Sellers in the Purchase Documents contains or will contain any untrue statement
or omits or will omit to state any fact necessary to make the statements
contained in this Agreement or in those Purchase Documents, under the
circumstances in which they were made, not materially misleading. The Sellers
have disclosed to the Purchaser all facts known or reasonably available to the
Sellers that are material to the financial condition, operation, or prospects of
the Acquired Business, and to the Assets and the Assumed Liabilities.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE INTERCEPT PARTIES
The Purchaser and the Parent hereby represent and warrant to the Sellers as
follows:
5.1 Corporate Existence. The Parent is a corporation duly organized,
-------------------
validly existing and in good standing under the Laws of the State of Georgia.
The Purchaser is a limited liability company duly organized, validly existing,
and in good standing under the Laws of the State of Georgia. The Parent and the
Purchaser have the corporate power and authority, as applicable, to own and
operate their businesses.
5.2 Corporate Power and Authorization. Each of the InterCept Parties has
---------------------------------
the power, authority, and legal right to execute and deliver this Agreement and
the other Purchase Documents and to perform its obligations hereunder and
thereunder. The execution, delivery, and performance of this Agreement by the
InterCept Parties have been duly authorized by all
27
necessary corporate or other similar action. This Agreement and the Purchase
Documents constitute the legal, valid, and binding obligations of the InterCept
Parties, enforceable against the InterCept Parties in accordance with their
terms and conditions, except as such enforcement may be subject to or limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
fraudulent transfer, or other similar Laws now or hereafter in effect affecting
creditors' rights generally, and by general principles of equity.
5.3 No Conflict. Neither the execution and delivery of this Agreement and
-----------
the other Purchase Documents, nor the consummation of the transactions
contemplated hereby or thereby, will (1) violate any Law (subject, however, to
compliance with the matters identified in Section 8.15 below) applicable to the
InterCept Parties, (2) violate or conflict with any provision of any governing
or organizational instrument of the InterCept Parties, or (3) conflict with,
result in the breach of, or constitute a default under any mortgage, lease,
indenture, license, instrument, trust, contract, agreement, or other commitment
or arrangement to which either of the InterCept Parties is a party or by which
either of the InterCept Parties or any of their assets are bound, except where
such violation, conflict, breach or default would not have a Material Adverse
Effect on the InterCept Parties.
5.4 Broker's or Finder's Fees. Except for the engagement of Xxxxxxxxx
-------------------------
Xxxxxxxx, Inc., neither the Parent nor the Purchaser has authorized any person
to act as broker, finder, or in any other similar capacity in connection with
the Contemplated Transactions. Purchaser shall be solely responsible for the
fees and expenses of Xxxxxxxxx Xxxxxxxx, Inc.
5.5 SEC Documents. Parent has filed all forms, reports and documents
-------------
required to be filed by it with the Securities and Exchange Commission ("SEC")
as of the date hereof, including without limitation, annual reports (Form 10-K)
and definitive proxy statements for annual shareholder meetings (collectively,
the "SEC Documents").
5.6 Financial Statements. The financial statements of the InterCept
--------------------
Parties, including the notes thereto, included in the SEC Documents (the
"InterCept Financial Statements"), complied as to form in all material respects
with GAAP throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto). There has been no material
change in the InterCept Parties' accounting policies except as described in the
notes to the InterCept Financial Statements.
5.7 Litigation. No Litigation is pending, or, to the knowledge of the
----------
InterCept Parties, threatened against the InterCept Parties, present or former
directors, officers, or employees, affecting, involving, or relating to the
Contemplated Transactions or the Purchase Documents, or that could prevent,
enjoin, or materially alter or delay any of the transactions contemplated by
this Agreement.
5.8 Compliance With Laws. There is no outstanding or, to the knowledge of
--------------------
the InterCept Parties, threatened order, writ, injunction, or decree of any
court, governmental agency, or arbitration tribunal against the InterCept
Parties affecting, involving, or relating to the
28
Contemplated Transactions. The InterCept Parties have complied with, and are not
in violation of, any Laws affecting, involving, or relating to the Contemplated
Transactions, and the InterCept Parties have received no notices of any such
alleged violation.
ARTICLE 6
CONDUCT OF BUSINESS PRIOR TO CLOSING
Pending the Closing, the Sellers will operate and conduct the Acquired
Business diligently and only in accordance with reasonable prior practices and
pursuant to the direction and supervision of the Designated Official, and will
not make or institute any changes in methods of purchase, sale, lease,
management, accounting or operation except with the prior written consent of the
Designated Official, and the Sellers will use their reasonable best efforts to
preserve intact their present business organization, keep available the services
of their officers and employees and preserve their relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, to the end that its goodwill and ongoing businesses shall be
unimpaired at the Closing Date. Pursuant thereto and not in limitation of the
foregoing:
6.1 Financial Statements. The Sellers shall maintain their financial
--------------------
statements in accordance with GAAP.
6.2 Working Capital. The Sellers shall manage their working capital,
---------------
including cash, receivables, other current assets, trade payables and other
current liabilities, in a profitable manner consistent with reasonable past
practices, including by selling services in an orderly and prudent manner and
paying outstanding obligations, trade accounts and other indebtedness as they
come due.
6.3 Maintenance of Assets and Acquired Business. The Sellers shall
-------------------------------------------
maintain the Assets in their present state of repair (ordinary wear and tear
excepted) and continue to fulfill their contractual obligations in accordance
with their respective terms. The Sellers shall continue to operate the Acquired
Business in the fashion it was operated in before the Signing Date and shall
continue to make all payments and meet all obligations and liabilities in the
ordinary course of business.
6.4 Notice of Disputes. The Seller Designated Official shall promptly
------------------
advise the Designated Official in writing of the details of any disputes,
claims, actions, suits or proceedings pertaining to or which might otherwise
adversely affect the Acquired Business, or the affairs, assets or contracts of
the Sellers.
6.5 No Action Without Consent. The Sellers shall not take any of the
-------------------------
following actions after the date of this Agreement without the prior written
consent of the InterCept Parties, which consent may be given by the Designated
Official:
6.5.1 sell, assign, transfer, or otherwise dispose of any of the
assets of the
29
Sellers except in the ordinary course of business consistent with reasonable
past practices;
6.5.2 subject any asset of the Sellers to any Lien other than a
Permitted Lien;
6.5.3 affect the carrying value of any existing liability or enter
into any arrangement to assume liabilities (except as required in the ordinary
course of business);
6.5.4 purchase or commit to purchase any capital asset for a price
exceeding $100,000;
6.5.5 enter into any leasing arrangement that would require scheduled
payments of greater than $100,000 in the aggregate;
6.5.6 enter into or modify any contractual arrangement, or increase
or announce any increase of any salaries, wages, or benefits, of any director,
officer, or manager with directors or with respect to officers that could result
in the Sellers, or the Purchaser after Closing, incurring additional liability
in excess of $25,000 with respect to any one person;
6.5.7 increase or announce any increase of any salaries, wages, or
benefits of any employees, except as required in the ordinary course of
business; such as anniversary date salary or wage increases consistent with
reasonable past practice;
6.5.8 hire, commit to hire or terminate any employee that could
result in the Sellers, or the Purchaser after Closing, incurring additional
liability in excess of $100,000 in the aggregate;
6.5.9 amend any of the corporate, limited liability company, or
limited partnership documents under which any of the Sellers is organized and
governed;
6.5.10 incur, assume or guarantee any obligation or liability for
borrowed money, or exchange, refund or renew any outstanding indebtedness in
such a manner as to reduce the principal amount of such indebtedness and
increase the interest rate or balance outstanding;
6.5.11 cancel any debts owed to the Sellers;
6.5.12 amend or terminate any material agreement, including any
employee benefit plan (except as otherwise contemplated by this Agreement) or
any insurance policy, in force on the date hereof;
6.5.13 solicit or entertain any offer for, or sell or agree to sell,
or participate in any business combination with respect to, any of the Shares;
6.5.14 make any changes in accounting methods, principles, or
practices;
30
6.5.15 enter into any material contract or commitment that, if it had
been entered into before the Signing Date, would have been required to be
disclosed in the Signing Date Disclosure Memorandum;
6.5.16 transfer to any person or entity any rights to its Intellectual
Property except for the grant of non-exclusive licenses to third parties in the
ordinary course of business;
6.5.17 enter into or amend any agreements pursuant to which any other
party is granted exclusive marketing or other exclusive rights of any type or
scope with respect to any of its products, services, or technology;
6.5.18 commence a lawsuit other than (i) for the routine collection of
bills, (ii) in such cases where it in good faith determines that failure to
commence suit would result in the material impairment of a valuable aspect of
its business, provided that it consults with the Designated Official prior to
the filing of such a suit, or (iii) for a breach of this Agreement; or
6.5.19 do any act, omit to do any act or permit any act within its
control that will cause a breach or untruth of any warranty or obligation
contained in this Agreement or any obligations contained in any contract.
Neither Parent, any of its Affiliates, nor any Designated Official shall
incur any liability to the Sellers arising out of, related to or in connection
with the Designated Official's approval or disapproval of the Acquired Business
under the authority of this Agreement.
6.6 Notices to Employees The Sellers shall give all notices and other
--------------------
information required to be given to the employees of the Sellers, any collective
bargaining unit representing any group of employees of the Sellers, and any
applicable government authority under the WARN Act, the National Labor Relations
Act, the Internal Revenue Code, COBRA, and other applicable Law in connection
with the Contemplated Transactions. The InterCept Parties acknowledge that
notice is not being given under the WARN Act in reliance upon the Purchaser's
compliance with its obligations under Section 8.14.
6.7 Distributions Prior to Closing. iBill shall be permitted to make
------------------------------
distributions to its partners prior to Closing, subject to maintaining
sufficient Assets as set forth in Section 1.1.11.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to Obligations of Each Party to Close the Contemplated
-----------------------------------------------------------------
Transactions. The respective obligations of each Party to this Agreement to
------------
consummate and
effect this Agreement and the Contemplated Transactions shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, by agreement of
all the parties hereto:
7.1.1 No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or prohibition preventing the consummation of the
Contemplated Transactions shall be in effect, nor shall any proceeding brought
by an administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending;
nor shall there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Contemplated
Transactions, which makes the consummation of the Contemplated Transactions
illegal. In the event an injunction or other order shall have been issued, each
party agrees to use its reasonable diligent efforts to have such injunction or
other order lifted.
7.1.2 All applicable waiting periods under the Xxxx-Xxxxx-Xxxxxx Act
(if applicable to the Contemplated Transactions) shall have expired or been
terminated and no objection shall have been made by the Federal Trade Commission
(the "FTC") or the United States Department of Justice (the "DOJ").
7.2 Additional Conditions to Obligations of Sellers Each of the
-----------------------------------------------
obligations of the Sellers to be performed under this Agreement shall be subject
to the satisfaction (or waiver by the Sellers) at or prior to the Closing Date
of each of the following conditions:
7.2.1 The InterCept Parties shall have delivered to the Sellers a
certificate dated the Closing Date in the form attached hereto as Exhibit 7.2.1.
-------------
7.2.2 The InterCept Parties shall have delivered or caused to be
delivered to the Sellers an assignment and assumption agreement (the "Xxxx of
Sale") substantially in the form attached hereto as Exhibit 7.2.2.
-------------
7.2.3 The InterCept Parties shall have paid the Cash Payment to the
Sellers and the Escrow Agent, as applicable, as provided in Section 3.2.
7.3 Additional Conditions to Obligations of InterCept Parties Each of the
---------------------------------------------------------
obligations of the InterCept Parties to be performed under this Agreement shall
be subject to the satisfaction (or waiver by the InterCept Parties) at or prior
to the Closing Date of each of the following conditions:
7.3.1 The Sellers shall have delivered to the InterCept Parties a
certificate dated the Closing Date in the form attached hereto as Exhibit 7.3.1.
-------------
Solely for purposes of satisfying the conditions of Closing, the InterCept
Parties agree to accept the certificate described in this subsection at its face
value.
32
7.3.2 The Sellers shall have delivered or caused to be delivered
(or previously delivered) to the InterCept Parties the Xxxx of Sale.
Article 8
ADDITIONAL AGREEMENTS
8.1 Cooperation. The InterCept Parties on the one hand, and the Sellers
-----------
on the other hand, shall cooperate fully with each other and their respective
employees, legal counsel, accountants and other representatives and advisers in
connection with the steps required to be taken as part of their respective
obligations under this Agreement both before and after the Closing; and shall,
at any time and from time to time after the Closing, upon the request of the
other, do, execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney, receipts, acknowledgments,
acceptances and assurances as may be reasonably required to satisfy and perform
the obligations of such party hereunder, and to allow the InterCept Parties to
operate the Acquired Business after Closing in the manner in which it was
operated before the Closing.
8.2 Access.
------
8.2.1 Before the Closing, the Sellers shall (i) provide the
InterCept Parties and their designees (officers, counsel, accountants,
actuaries, and other authorized representatives) with such information as they
may from time to time reasonably request with respect to the Sellers, the
Acquired Business and the Contemplated Transactions; (ii) provide the InterCept
Parties and their designees complete access to the books, records, offices,
personnel, counsel, accountants and actuaries of the Sellers as the InterCept
Parties and their designees may from time to time reasonably request; and (iii)
permit the InterCept Parties and their designees to make such inspections of the
Sellers' Premises and Seller Properties as the InterCept Parties may request.
All inspections and reviews shall be made under such supervision or other
procedures as Sellers shall deem reasonably fit to require. No such
investigation shall limit or modify in any way the obligations of the Sellers
with respect to any breach, inaccuracy or untruth of the representations,
warranties, covenants, or agreements contained in this Agreement.
8.2.2 Before the Closing, the InterCept Parties shall (i) provide
the Sellers and their designees (officers, counsel, accountants, actuaries, and
other authorized representatives) with such information as they may from time to
time reasonably request with respect to the InterCept Parties and the
Contemplated Transactions; (ii) provide the Sellers and their designees complete
access to the books, records, offices, personnel, counsel, accountants and
actuaries of the InterCept Parties as the Sellers and their designees may from
time to time reasonably request; and (iii) permit the Sellers and their
designees to make such inspections of the InterCept Parties' premises and
properties as the Sellers may request. All inspections and reviews shall be made
under such supervision or other procedures as the InterCept Parties shall
33
deem reasonably fit to require. No such investigation shall limit or modify in
any way the obligations of the InterCept parties with respect to any breach,
inaccuracy or untruth of the representations, warranties, covenants, or
agreements contained in this Agreement. Any information so furnished by the
InterCept Parties or their designees shall be true, current and complete in all
respects and shall not contain any untrue statement of a fact or omit to state a
fact required to be stated therein or necessary to make the statements therein
not misleading.
8.3 Interim Financials. As promptly as practicable after each regular
------------------
monthly accounting period after January 31, 2002, and prior to the Closing Date,
the Sellers shall deliver to the InterCept Parties periodic financial reports in
the form which the Sellers customarily prepare for internal purposes and,
unaudited statements of the financial position of the Sellers as of the last day
of each monthly accounting period and statements of income and cash flow of the
Sellers for the period then ended.
8.4 Records.
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8.4.1 The Sellers shall provide to the InterCept Parties and their
designees, as soon as is reasonably practicable after the Closing, copies of any
and all files, records or other data in their possession or under their control
in respect of or relating to the day to day operations of the Acquired Business.
8.4.2 After the Closing, the InterCept Parties and their designees
shall hold the Business Records and all other material received from the Sellers
pursuant to Section 8.4.1 above, for a period consistent with the InterCept
Parties' record retention policies and practices (but in all events for a period
of not less than four years). The Sellers and their designated representatives
shall be provided with reasonable access thereto, during normal business hours
and on at least three days prior written notice, to enable them to review and/or
make copies (at the Sellers' expense) of the same in connection with the (i)
preparation of tax returns or the administration of other tax matters, (ii) the
preparation of financial statements, (iii) the adjudication or settlement of any
dispute (whether connected to this Agreement or otherwise) or (iv) any other
reasonable business purpose specified by the Sellers in such notice.
8.5 Use of Name. Both parties acknowledge and agree that, following the
-----------
Closing, the InterCept Parties and their designees shall have full right title
and interest in and to the legal names of the Sellers.
8.6 Expenses. Whether or not the expenses are incurred before or after
--------
the Closing, and except as otherwise expressly provided in this Agreement or
another Purchase Document, each of the expenses incurred by the InterCept
Parties and the Sellers in connection with the authorization, preparation,
execution and performance of this Agreement, including without limitation all
fees, commissions, and expenses of agents, representatives, counsel,
accountants, investment bankers, brokers and finders, shall be paid by the party
that incurred such expenses.
34
8.7 Tax Matters.
-----------
8.7.1 iBill and iBill Corp. shall pay all Taxes arising from or
relating to the Contemplated Transactions if any, due as a result of the
purchase, sale or transfer of the Assets in accordance herewith whether imposed
by Law on the Sellers, the Purchaser, or the Parent, and the Sellers shall
indemnify, reimburse and hold harmless the InterCept Parties in respect of the
liability for payment of or failure to pay any such Taxes or the filing of or
failure to file any reports required in connection therewith.
8.7.2 The InterCept Parties shall file and control any returns
required to be filed in connection with the operation of the Acquired Business
by the Sellers after the Closing Date or required to be filed by the
Subsidiaries after the Closing Date. iBill and iBill Corp. shall file and
control any returns required to be filed in connection with the operation of the
Acquired Business through the Closing Date.
8.7.3 The InterCept Parties on the one hand, and iBill and iBill
Corp. on the other hand, agree to give prompt notice to each other of any
proposed adjustment to Taxes for periods during all or part of which Sellers
owned the Acquired Business or other proceedings involving the Sellers for such
periods. In connection with any such audit or other proceeding, the InterCept
Parties, upon the Seller Designated Official's request and at its expense, shall
provide the Seller Designated Official copies of all notices, correspondence,
demands, assessments and other documents generated in connection with such audit
or other proceeding, all of which information shall remain subject to Section
8.10 below. The Seller Designated Official shall also have the right to discuss
the status of such audit or other proceeding with the InterCept Parties'
representatives and, with the prior written consent of the InterCept Parties,
with the applicable taxing authorities involved. All of such activities by the
Seller Designated Official shall be conducted in a manner so as not to adversely
impact the best interests of the InterCept Parties.
8.7.4 The InterCept Parties on the one hand, and iBill and iBill
Corp. on the other hand, agree to furnish or cause to be furnished to each
other, upon request, such information and assistance (including access to books
and records) relating to the Sellers as is reasonably necessary for the
preparation of any return, claim for refund or audit, and the prosecution or
defense of any claim, suit or proceeding relating to any proposed adjustment.
8.8 Casualty. The Sellers shall bear the risk of any loss or damage or
--------
destruction to any of the assets of the Sellers from fire, casualty or other
causes (each a "Casualty") at all times prior to the Closing. Upon the
occurrence of any Casualty prior to the Closing, the Seller Designated Official
shall immediately notify the InterCept Parties of the same in writing, stating
with particularity the extent of loss or damage incurred, the cause thereof, and
the extent to which restoration, replacement, and repair of such assets lost or
destroyed will be reimbursed under any insurance policy with respect thereto.
Subject to the termination provisions set forth in Section 10.1, the occurrence
of a Casualty shall not affect the Parties' obligations to close the
Contemplated Transactions otherwise hereunder. If the Parties
35
consummate the Closing and acquire such assets in their "then" condition, the
Sellers shall assign to the InterCept Parties all rights under any insurance
claim covering the loss and pay over to the InterCept Parties any proceeds under
any such insurance policy theretofore received by the Sellers with respect
thereto.
8.9 Setoff. In addition, through March 31, 2004, the InterCept Parties
------
shall have the right to setoff (a "Setoff") any amount payable to the InterCept
Parties (or any Affiliate of the InterCept Parties) by iBill and iBill Corp.
pursuant to Article 9 hereof (provided the InterCept Parties complied with the
notice of Claim provisions set forth in Section 9.3), against any Earnout
Payment that may be payable by the InterCept Parties to the Sellers; provided,
however, that, absent a written agreement between the Parties evidencing a
mutually agreed upon Setoff amount and manner of satisfaction of such Setoff
amount, the InterCept Parties shall first deposit the proposed Setoff amount
with the Escrow Agent (the "Setoff Escrow"; the cash deposited in the Setoff
Escrow is referred to as the "Setoff Escrow Cash") and then notify the Sellers
of such Setoff in writing with a copy of such written notice to be delivered to
the Escrow Agent concurrently with the Setoff Escrow Cash. Except with respect
to (i) claims for Losses that are not subject to the Maximum Indemnity as
provided in Section 9.5.2 and (ii) amounts held in or paid out of the Special
Escrow, in no event shall the aggregate Setoff amounts actually received or
retained (whether through the Setoff Escrow or upon written agreement between
the Parties to withhold all or part of an Earnout Payment in lieu of actual
payment) by the InterCept Parties (or any Affiliate of the InterCept Parties)
under this Section 8.9 exceed the Maximum Indemnity minus the sum of (a) the
amount then held in the General Escrow plus (b) all amounts previously paid to
the Purchaser Indemnitees (as defined in Article 9) out of the General Escrow,
out of the Setoff Escrow, or through any other arrangements for indemnification
by iBill or iBill Corp. Management and final distribution of all Setoff Escrow
Cash deposited with the Escrow Agent shall be governed in accordance with the
Escrow Agreement. Notwithstanding anything in this Section 8.9 to the contrary,
the Intercept Parties shall only be entitled to Setoff amounts payable to the
InterCept Parties (or any Affiliate of the InterCept Parties) by iBill and iBill
Corp. pursuant to Article 9 hereof if such Setoff amounts exceed the General
Escrow Cash then held in the Escrow Fund, and then only to the extent of such
excess.
8.10 Confidentiality. The InterCept Parties on the one hand and the
---------------
Sellers on the other hand shall hold in trust and confidence all Confidential
Information about the other and shall not make any copies of, distribute, or use
any such Confidential Information except as necessary to prepare for the
completion of the Contemplated Transactions. After the Closing, neither the
InterCept Parties on the one hand nor iBill and iBill Corp. on the other hand
shall make any unauthorized disclosure of Confidential Information about the
other for a period of five years. If the Contemplated Transactions do not occur,
then each such party, upon the first request in writing from the other, shall
return to the other all Confidential Information in its possession, without
retaining any copies thereof, and neither the InterCept Parties on the one hand
nor iBill and iBill Corp. on the other hand shall make any unauthorized
disclosure of Confidential Information about the other for a period of five
years from the Signing Date. Notwithstanding the foregoing, any party may
disclose Confidential Information to the extent
36
disclosure is mandated by the legal requirements of such party, the Nasdaq Stock
Market, or the SEC, as well as to professional advisors, directors and senior
executives as reasonably necessary. This Agreement may also be disclosed to
third parties if reasonably necessary to secure consents or approvals to
consummate the Contemplated Transactions. The parties will cooperate to draft a
press release for the announcement of this Agreement as soon as possible after
the execution of this Agreement by all parties. The provisions of this Section
8.10 are cumulative with the provisions of (a) the mutual nondisclosure
agreement previously signed by the Parent and iBill dated January 17, 2002, and
(b) the Confidential Disclosure Agreement dated March 2, 2002 previously signed
by iBill, iBill Corp., the Parent and Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
8.11 No Public Announcements. Except as provided in Section 8.10, without
-----------------------
the prior consent of the other Parties, neither the InterCept Parties on the one
hand, nor the Sellers on the other hand, shall make any press release or other
public disclosure, or make any statement to any customer, supplier, employee or
other person with regard to the Contemplated Transactions.
8.12 Funds Received After Closing.
----------------------------
8.12.1 Any and all funds received by iBill or iBill Corp. after
Closing in respect of the Acquired Business, other than the Purchase Price
(including the Cash Payment and the Earnout Payments) and the Excluded Assets
(or amounts received in respect thereof) shall be remitted to the InterCept
Parties immediately upon receipt.
8.12.2 Any and all funds received by the InterCept Parties after
Closing in respect of the Excluded Assets (or amounts received in respect
thereof) shall be remitted to the Sellers immediately upon receipt.
8.13 Acquisition Proposals. Prior to the Closing or termination of this
---------------------
Agreement, the Sellers shall not, and shall not permit any officer, manager,
member, partner, limited partner, director, employee or agent of the Sellers or
any Affiliate thereof (a) solicit, initiate or encourage submission of proposals
or offers, or accept any offers, from any person relating to any acquisition or
purchase of all or a material amount of the assets of, or any equity interest
in, or any merger, consolidation or business combination with, any of the
Sellers (an "Acquisition Proposal"), or (b) participate in any discussions or
negotiations regarding, or furnish to any other Person any information with
respect to, or otherwise cooperate in any way with or assist, facilitate or
encourage any Acquisition Proposal by any other Person.
8.14 Employment. The InterCept Parties agree to provide offers of
----------
employment to substantially all of the employees of iBill at substantially
similar levels of compensation except that the compensation of the key
management of iBill shall be individually negotiated.
8.15 Xxxx-Xxxxx Xxxxxx. As soon as reasonably practicable following the
-----------------
execution of this Agreement by the Parties, but in no event later than two
business days following the
37
Signing Date, the Parties shall cooperate and use commercially reasonable
efforts with respect to the preparation and filing of the required
Xxxx-Xxxxx-Xxxxxx Act applications and related materials with the FTC and the
DOJ. The Parent shall pay the total application fees associated with such
application and upon Closing shall reduce the Cash Payment by one-half of the
application fees associated with such application. Each of the Parties shall
also file any supplemental information requested or required by the FTC or the
DOJ in connection therewith. Any such notification and report form and
supplemental information shall be in compliance with the requirements of the
Xxxx-Xxxxx Xxxxxx Act. Each of the Parties shall also assist the other to
facilitate such other Party's preparation of any required filing or submission.
The Parties shall keep each other apprised of the status of any communications,
inquiries, or requests for additional information, addressed to the party that
filed the notification and report form as an acquired or acquiring person, from
the FTC or the DOJ and shall comply or cause its respective filing person to
promptly comply with any such inquiry request. Each of the Sellers and the
Purchaser shall use commercially reasonable efforts to obtain any clearance or
early terminations under the Xxxx-Xxxxx Xxxxxx Act for the transaction
contemplated by this Agreement.
8.16 Non-Competition Agreements. On or before the Closing Date, the
--------------------------
Parties will cause certain directors of iBill Corp. and employees of the Sellers
to execute and deliver the Non-Competition Agreements to the InterCept Parties
as contemplated by Section 8.21.1.
8.17 Termination of Sellers' 401(k) Plan. The governing body of each
-----------------------------------
Seller shall by resolution prior to the Closing Date terminate any Plan intended
to meet the requirements of Section 401(k) of the Code, effective as of the day
prior to the Closing Date. As soon as practicable after the Closing Date, the
Sellers shall request, in respect of each such Plan, a favorable IRS
determination letter concerning each such Plan's termination, pursuant to one or
more appropriately filed Treasury Forms 5310.
8.18 Cooperation re COBRA Obligations. After the Closing, each of the
--------------------------------
Sellers shall promptly provide to the Parent, the Purchaser, or any of their
Affiliates, as they may request, such written, electronic, and other information
and data that is connected in any way with any "successor employer"
COBRA-related liability or other obligation which may or does apply to the
Parent, the Purchaser or any of their Affiliates after the Closing in respect of
any Seller's employees or former employees, or their respective spouses, former
spouses, or dependents.
8.19 Special Covenants of Parent.
---------------------------
8.19.1 The Parent unconditionally guarantees full and prompt payment
and performance of all of the Purchaser's obligations under this Agreement and
all Purchase Documents.
8.19.2 The Parent will comply with all of the Earnout Payment
covenants set forth on Exhibit 3.3, subject to applicable provisions of this
Agreement and the Escrow
38
Agreement.
8.20 Certain Purchaser 401(k) Plan Service Credit. The Purchaser shall
--------------------------------------------
provide service credit under the 401(k) plan adopted by Purchaser to each
individual who is an employee of a Seller on the Closing Date and who is hired
on the Closing Date by the Purchaser as part of the Contemplated Transactions
(each, a "Transferred Employee") for an applicable Transferred Employee's
service with such Seller, solely for purposes of eligibility to participate
under the Purchaser's 401(k) plan; provided, however, that the Purchaser shall
not be required to provide such service credit under Purchaser's 401(k) plan to
the extent either (i) the applicable Seller is unable to provide documentation,
information, and data satisfactory to the Purchaser appropriately evidencing
each Transferred Employee's service for the Seller, or (ii) providing such
service credit to an applicable Transferred Employee under Purchaser's 401(k)
plan might or would violate an applicable "qualification" provision of the Code
as applied to such 401(k) plan.
8.21 Additional Signing Date Deliveries
----------------------------------
8.21.1 Concurrent with the execution and delivery of this Agreement,
the Sellers have delivered or caused to be delivered to the InterCept Parties
all of the following documents:
(A) the Break-up Fee Escrow Agreement;
(B) the Escrow Agreement;
(C) the opinions of Broad and Xxxxxx, L.L.C. and Levenfeld
Xxxxxxxxxx, L.L.C., counsel to the Sellers, dated the Signing Date in the forms
attached hereto as Exhibit 8.21.1(C);
-----------------
(D) Non-Competition Agreements, which shall by their terms
not be enforceable until and unless the Closing occurs, in the form of Exhibit
-------
8.21.1(D) attached hereto, from the following persons: Xxxxxx X. Xxxxx and Xxxx
---------
Cherry;
(E) an Employment Agreement, which shall by its terms not be
enforceable until and unless the Closing occurs, in the form of Exhibit
-------
8.21.1(E) attached hereto, from Xxxxxxx X. Xxxxxx;
--------
(F) certified copies of (i) the resolution of iBill signed
by the its general partner, iBill Corp., approving the execution and delivery of
the Purchase Documents and the consummation of the Contemplated Transactions,
and (ii) resolutions of the board of directors of iBill Corp, certified as true
and correct by its President, approving the execution and delivery of the
Purchase Documents and the consummation of the Contemplated Transactions.
8.21.2 Concurrent with the execution and delivery of this Agreement,
the InterCept Parties have delivered or caused to be delivered to the Sellers
all of the following:
39
(A) the Break-up Fee Escrow Agreement, including payment of
the $5,000,000 Break-up Fee deposit to the Escrow Agent;
(B) the Escrow Agreement;
(C) resolutions of the InterCept Parties, certified by an
appropriate officer, to the effect that the execution and delivery of this
Agreement by the InterCept Parties shall have been duly authorized by the board
of directors or other governing body of each InterCept Party; and
(D) an opinion of Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx,
L.L.P., counsel to the InterCept Parties, dated the Signing Date, in the form
attached hereto as Exhibit 8.21.2(D).
-----------------
8.21.3 Concurrent with the execution and delivery of this Agreement,
the Escrow Agent has delivered to the Parties the following documents:
(A) the Break-up Fee Escrow Agreement; and
(B) the Escrow Agreement.
8.22 Additional Closing Deliveries. In addition to the items listed in
-----------------------------
Article 7 that are required at Closing, the Parties shall also deliver at
Closing the items listed in this Section 8.22; provided, however, that the
delivery of such items at the Closing shall not be a condition to the Parties'
respective obligations under this Agreement to Close; instead, the Parties shall
be entitled to indemnification (except with respect to Section 8.22.1(C)) as
provided in Article 9 for any damages they suffer as a result of the failure to
deliver such items.
8.22.1 At the Closing, the Sellers shall deliver or cause to be
delivered to the InterCept Parties the following documents or shall have
complied with the following covenants, as applicable:
(A) copies of all Required Contract Consents obtained by
them before Closing (the Parties recognize that it is impractical to obtain
consents on a timely basis for all contracts or agreements and agree to attend
to such matters with dispatch following the Closing to the extent that consents
could not be acquired prior to Closing, it being understood, however, that the
Sellers do not warrant that all consents can or will be obtained, and the same
shall not be a condition to closing);
(B) letters from Broad and Xxxxxxx, L.L.C. and Levenfeld
Xxxxxxxxxx, L.L.C., counsel to the Sellers, dated the Closing Date, to the
effect that the opinion letter of such counsel previously delivered on the
Signing Date is true and correct on and as of the Closing Date;
40
(C) Non-Competition Agreement for Xxxxxxx X. Xxxxxx, in the
form mutually acceptable to the parties;
(D) the actions, agreements, or deliveries required under
Section 8.3, 8.16, and 8.17.
8.22.2 At the Closing, the InterCept Parties shall deliver or cause
to be delivered to the Sellers a letter of Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx,
L.L.P., counsel to the InterCept Parties, dated the Closing Date, to the effect
that the opinion of such counsel previously delivered on the Signing Date are
true and correct on and as of the Closing Date
8.23 Audited Financial Statements. Prior to Closing, Sellers shall have
----------------------------
delivered to the InterCept Parties, if available, an audited combined balance
sheet of the Sellers as of December 31, 2001 and the related audited combined
statements of operations and cash flow for the one year period ending December
31, 2001(the "Audited 12-31-01 Financial Statements"), which shall be
substantially the same form as the unaudited 12-31-01 Financial Statements
previously delivered to the InterCept Parties (in which event the
representations and warranties in Section 4.6 shall be deemed to apply to such
financial statements, which shall be deemed to be Financial Statements under
this Agreement). If the Audited 12-31-01 Financial Statements are not delivered
prior to Closing, the Sellers shall deliver them to the InterCept Parties no
later than 30 days after Closing, and if they are not delivered within such
period, the InterCept Parties may select and retain an internationally
recognized auditing firm to conduct an audit of the Sellers for the period
ending December 31, 2001. The Sellers shall reasonably cooperate with the
InterCept Parties and their auditors in their efforts to conduct the audit
commissioned by the InterCept Parties as described above, and they shall
indemnify the InterCept Parties for all reasonable costs and expenses incurred
by the InterCept Parties to conduct such audit.
8.24 Signing Date Document Delivery. Although the Parties contemplate that
------------------------------
this Agreement and the other Purchase Documents will be delivered separately in
counterparts on the Signing Date, they agree that this Agreement and the other
Purchase Documents required to be delivered on the Signing Date shall not be
deemed to be delivered, effective, and enforceable unless and until iBill on one
hand and the Parent on the other hand have received, via facsimile with
originals to follow by reputable overnight courier delivered within two business
days of the Signing Date, executed counterparts of the documents that are
required to be signed by the Parties and copies of all other Purchase Documents
that are required to be delivered on such date and the Parent has paid the
Break-up Fee (as defined in Section 10.2) into escrow.
8.25 Closing Date Document Delivery. Although the Parties contemplate that
------------------------------
certain other Purchase Documents will be delivered separately in counterparts on
the Closing Date, they agree such Purchase Documents required to be delivered on
the Closing Date shall not be deemed to be delivered, effective, and enforceable
unless and until iBill on one hand and the Parent on the other hand have
received, via facsimile with originals to follow by reputable overnight courier
for delivery within two business days of the Closing Date, executed counterparts
of the documents that are required to be signed by the Parties and copies of all
other Purchase Documents that are
41
required to be delivered on such date and the Parent has paid the cash specified
hereunder into escrow and to the Sellers, as applicable.
8.26 Working Capital. Following the Closing, the books of iBill and the
---------------
Subsidiaries shall be closed, and the Purchaser shall prepare, with the
assistance of iBill and iBill Corp. as needed and appropriate, a balance sheet
(the "Closing Date Balance Sheet") of iBill and the Subsidiaries as of the time
immediately prior to Closing prepared in accordance with GAAP (and consistent
with iBill's and the Subsidiaries' accounting practices utilized to prepare the
12-31-01 Financial Statements) and accurately reflecting the "Working Capital"
of iBill and the Subsidiaries, and the assets and liabilities of the Acquired
Business. "Working Capital" means the total current assets of iBill and the
Subsidiaries minus the total liabilities of iBill and the Subsidiaries all
determined in accordance with GAAP (and consistent with iBill's and the
Subsidiaries' accounting practices utilized to prepare the 12-31-01 Financial
Statements). The Sellers represent and warrant that there will be no Excluded
Assets included within the total current assets of iBill and the Subsidiaries on
the Closing Date Balance Sheet. The Purchaser shall deliver the Closing Date
Balance Sheet and its calculation of the Working Capital to iBill and iBill
Corp. no later than 30 days after the Closing. The extent, if any, to which the
Working Capital is less than negative ($8,400,000) on the Closing Date shall be
considered a Loss (as defined in Section 9.1) for which the Parent and the
Purchaser shall be entitled to indemnification under Article 9.
8.27 Debitpayments. The Parties agree to the terms contained in the term
-------------
sheet attached hereto as Exhibit 8.27 (the "Debitpayments Term Sheet")
------------
memorializing the understanding between the InterCept Parties and iBill with
respect to Xxxxxxxxxxxxx.xxx, LLC, a Tennessee limited liability company. The
Parties shall use their best efforts to enter into agreements setting forth in
detail the agreements described in the Debitpayments Term Sheet prior to
Closing, however, the execution of such agreements shall not be a condition to
Closing.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by iBill and iBill Corp. Each of iBill and iBill
---------------------------------------
Corp. shall indemnify, defend, and hold harmless the Purchaser and the Parent
and their, subsidiaries, successors and permitted assigns, and the directors,
officers, employees and agents of each (collectively, the "Purchaser
Indemnitees"), at, and at any time after (subject to Section 9.5.3), the
Closing, from and against any and all demands, claims, actions, or causes of
action, assessments, losses, damages, liabilities, costs, and expenses,
including reasonable fees and expenses of counsel, other expenses of
investigation, handling, and litigation, and settlement amounts, together with
interest and penalties (collectively, a "Loss" or "Losses"), asserted against,
resulting to, imposed upon, or incurred by the Purchaser Indemnitees, directly
or indirectly, by reason of, resulting from, incident to or arising in
connection with any of the following:
42
9.1.1 Breach of Obligation. Any breach of any representation,
--------------------
warranty, covenant or agreement of any of the Sellers contained in or made
pursuant to this Agreement and the other Purchase Documents, including the
agreements and other instruments contemplated hereby and thereby;
9.1.2 Scheduled Matters. Any demand, claim, or action by a party
-----------------
described in Schedule 9.1.2, any affiliate or licensee of such a party, or any
--------------
other Person claiming rights under the subject property arising from matters
disclosed in Schedule 9.1.2;
--------------
9.1.3 Excluded Liabilities. Any liabilities or obligations of any
--------------------
kind or nature whatsoever, whether accrued, absolute, contingent, or otherwise,
known or unknown, arising out of or in connection with any Excluded Liabilities,
or the conduct of the Acquired Business or the ownership or use of the Assets
prior to the Closing Date, except for the Assumed Liabilities;
9.1.4 Failure to Provide Items at Closing. Any failure to provide
-----------------------------------
the documents or comply with the covenants, as applicable, listed in Section
8.22.1;
9.1.5 Violations of Fraudulent Conveyance or Bulk Sales Laws. Any
------------------------------------------------------
failure to comply with any fraudulent conveyance or similar Laws relating to
notices to creditors, or with any applicable bulk sales Laws;
9.1.6 Fraud. Any fraud by any Seller in connection with the
-----
Purchase Documents or the Contemplated Transactions; or
9.1.7 Chargebacks in Excess of Reserve. Any liabilities or
--------------------------------
obligations arising from Chargebacks attributable to transactions made prior to
Closing to the extent they exceed "Client Funds," "Client Recoveries," and the
"Aggregate Allowance for Refunds" at Closing. For purposes of this Agreement,
(i) "Aggregate Allowance for Refunds" shall mean the sum of the reserves
maintained by the Sellers at Closing for Chargebacks as they relate to credit
card and check transaction processing; (ii) "Client Funds" shall mean all funds
of any merchants, consumers, or other Persons in the custody or possession of
the Acquired Business, which funds the Purchaser has the contractual right to
set off against amounts due in respect of Chargebacks; and "Client Recoveries"
shall mean amounts received by the Purchaser (net of associated out of pocket
collection costs) from the merchant, consumer or other Person with respect to
whom a Chargeback was made that are not Client Funds. The Purchaser shall (a)
maintain levels of Client Funds and Aggregate Allowance for Refunds in a
commercially reasonable manner on a case by case basis, and (b) pursue
commercially reasonable collection efforts for a period of 90 days in an attempt
to realize Client Recoveries. If the Sellers indemnify the Purchaser pursuant to
this Section 9.1.7, the Purchaser shall assign to the Sellers the right to seek
recovery from the merchants, consumers or other Persons with respect to whom the
indemnified Chargebacks were made.
43
9.2 Indemnification by the Purchaser. The Purchaser shall indemnify,
--------------------------------
defend, and hold harmless the Sellers, each director, officer, employee and
agent of the Sellers, and their respective heirs, successors, and permitted
assigns (collectively, the "Seller Indemnitees"), at, and at any time after, the
Closing, from and against any and all Losses asserted against, resulting to,
imposed upon, or incurred by the Seller Indemnitees, directly or indirectly, by
reason of, resulting from, incident to or arising in connection with any of the
following:
9.2.1 Breach of Obligation. Any breach of any representation,
--------------------
warranty, or agreement of the Parent or Purchaser contained in or made pursuant
to this Agreement or the other Purchase Documents, including the agreements and
other instruments contemplated hereby and thereby;
9.2.2 Assumed Liabilities. Any of the Assumed Liabilities;
-------------------
9.2.3 Post-Closing Operations. The ownership and operation of the
-----------------------
Assets and Acquired Business from and after the Closing Date; or
9.2.4 Fraud. Any fraud by either InterCept Party or their
-----
Affiliates in connection with the Purchase Documents or the Contemplated
Transactions.
9.3 Notice of Claim. The party entitled to indemnification hereunder
---------------
(the "Claimant") shall deliver to the Party from whom indemnification is sought
hereunder (the "Obligor") notice in writing (the "Required Notice") within 60
days of Claimant's discovery of any Loss in respect of which the right to
indemnification is sought under this Agreement, specifying in reasonable detail
the nature of the Loss, and, if known, the amount, or, if not known, an estimate
of the amount, of the liability arising therefrom (the "Claim"). Notwithstanding
the above, the failure to give Required Notice within such 60 day period shall
not result in the waiver or loss of any right to bring such Claim hereunder
after such period unless, and only to the extent that, the other Party is
actually prejudiced by such failure. The Claimant shall provide to the Obligor
as promptly as practicable thereafter information and documentation reasonably
requested by the Obligor to support and verify the claim asserted, provided
that, in so doing, it may condition any disclosure in the interest of preserving
privileges of importance in any foreseeable litigation.
9.4 Defense. If the facts pertaining to the Loss arise out of the
-------
claim of any third party (other than a member of the Purchaser Indemnitees or
the Seller Indemnitees, whichever is entitled to indemnification for such
matter) and indemnification is available by virtue of the circumstances of the
Loss, the Obligor must assume the defense or the prosecution thereof, including
the employment of counsel or accountants, at its cost and expense. If
representation of both the Obligor and the Claimant by such counsel would be
inappropriate due to actual or potential differing interests between the Obligor
and the Claimant in such proceeding (such as the availability of defenses to the
Claimant), the Claimant (together with all other indemnified parties which may
be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the reasonable fees and expenses to be paid by the
Obligor. The
44
Claimant shall have the right to determine and adopt (or, in the case of a
proposal by the Obligor, to approve) a settlement of such matter in its
reasonable discretion, except that the Claimant need not consent to any
settlement that (a) imposes any non-monetary obligation on the Claimant or (b)
the Obligor does not agree to pay in full. The Obligor shall not be liable for
any settlement of any such claim effected without its prior written consent.
Whether or not the Obligor chooses to so defend or prosecute such claim, all the
parties hereto shall cooperate in the defense or prosecution thereof and shall
furnish such records, information, and testimony, and attend such conferences,
discovery proceedings, hearings, trials, and appeals, as may be reasonably
requested in connection therewith.
9.5 Limitations. Notwithstanding anything in this Article 9 to the
-----------
contrary:
9.5.1 Basket. No indemnification or any other claim for damages
------
under this Agreement or any other Purchase Document shall be payable by the
applicable Party unless and until the aggregate total of all Losses suffered by
(a) the Purchaser Indemnitees, with respect to indemnification by iBill and
iBill Corp., or (b) the Seller Indemnitees with respect to indemnification by
the Purchaser, equal or exceed $720,000 (and in that event payable for Losses in
excess of $560,000) (the "Basket"). Claims against iBill and iBill Corp. for
Losses based on Excluded Liabilities under Section 9.1.3 (except for Losses
based upon Sections 2.2.1, 2.2.5, and 2.2.9, which shall be subject to the
Basket) or for which indemnification may be sought under Sections 8.22, 8.26,
9.1.2, 9.1.3, 9.1.4, 9.1.6, and 9.1.7 shall not be subject to the Basket.
9.5.2 Maximum Indemnity. In no event shall the liability of iBill
-----------------
and iBill Corp. under this Article 9 exceed an aggregate of $16,800,000 (the
"Maximum Indemnity"). Claims against the Sellers for Losses based on Excluded
Liabilities under Section 9.1.3 (except for Losses based upon Sections 2.2.1,
2.2.5 and 2.2.9, which shall be subject to the Maximum Indemnity) or for which
indemnification may be sought under Section 9.1.6 shall not be subject to any
indemnification limit, including the Maximum Indemnity, and shall not count
against the Maximum Indemnity. To the extent claims against the Sellers for
Losses arising under Section 9.1.2 are satisfied by funds retained in the
Special Escrow (or outside of the Special Escrow as provided in Section 9.9)
established to address Losses arising as a result of matters set forth in
Section 9.1.2, such Losses shall not count against the Maximum Indemnity.
9.5.3 Time of Assertion. No indemnification shall be payable by
-----------------
any party with respect to matters as to which it has not received notice from
the Claimant on or before the March 31, 2004, except that
(A) there shall be no limitation on the time during which
indemnification may be sought or obtained for (1) Losses based on Excluded
Liabilities or, insofar as a Claim may be asserted by the Sellers, Assumed
Liabilities; (2) any instance of fraud by any party of any provision of this
Agreement or any other instrument or agreement to be executed and delivered by
such party in connection with the transactions contemplated hereby, (3) any
breach of the representations and warranties contained in Sections 4.1 (Entity
Organization), 4.21 (Broker's or Finder's Fees), or 5.1 (Corporate Existence)
and the covenants and
45
agreements contained in Sections 8.1 (Cooperation), 8.6 (Expenses), and 8.7 (Tax
Matters);
(B) the limitation on the time during which indemnification may
be sought or obtained shall be sixty (60) days after the expiration of all
applicable statutes of limitation (including all periods of extension, whether
automatic or permissive) with respect to any breach of the representations and
warranties contained in Sections 4.19 (Employee Benefit Plans and Arrangements)
(insofar as they relate to ERISA or the Internal Revenue Code) and 4.25 (Tax
Matters);
(C) the limitation on the time during which indemnification may
be sought or obtained shall be extended if a Required Notice of a Claim shall
have been timely given under this Article 9 on or before the termination date
that would otherwise apply, until the related Claim for indemnification has been
satisfied or otherwise resolved as provided in this Article 9.
9.6 Indemnification Exclusive Remedy. In the absence of a fraud claim, and
--------------------------------
except for non-monetary equitable relief, if the Closing occurs, indemnification
pursuant to the provisions of this Article 9 shall be the sole and exclusive
remedy of the Parties for any breach of any representation or warranty contained
in this Agreement. All Losses for which iBill and iBill Corp. are obligated to
indemnify Purchaser and the Parent shall be satisfied solely out of the General
Escrow, the Setoff Escrow or the Special Escrow, as applicable. Notwithstanding
the foregoing, Losses for which iBill and iBill Corp. are obligated to indemnify
the Purchaser or the Parent that are based upon Excluded Liabilities under
Section 9.1.3 (except for Losses based upon Sections 2.2.1, 2.2.5, and 2.2.9,
which shall only be satisfied under an applicable escrow fund) or for which
indemnification may be sought under Section 9.1.6, shall be satisfied, in the
sole discretion of the Parent, from the General Escrow, the Setoff Escrow or
directly from iBill and iBill Corp., in immediately available funds paid to an
account specified by the Parent. All Losses for which the Purchaser or the
Parent is obligated to indemnify iBill and iBill Corp. shall be satisfied in
immediately available funds paid to an account specified by iBill.
9.7 Purchaser's and Parent's Obligations. Nothing in this Article 9 shall
------------------------------------
be construed in any way to limit the Purchaser's or the Parent's obligations to
pay the Purchase Price (including the Cash Payment and the Earnout Payments,
subject to set off rights set forth in Section 8.9) or discharge the Assumed
Liabilities in the manner set forth in this Agreement, and the Basket shall not
apply to such items.
9.8 Exculpation. Other than for any instance of fraud, nothing herein
-----------
contained shall be construed to create any liability to any person or entity
other than the Sellers on one hand and the InterCept Parties on the other hand.
Other than for any instance of fraud, (a) each of the InterCept Parties waives
any recourse, direct or indirect, against the partners (other than iBill Corp.,
the general partner of iBill), officers, employees and agents of iBill and the
shareholders, directors, officers, employees and agents of iBill Corp.; and (b)
each of the Sellers waives any recourse, direct or indirect, against the
shareholders (other than the Parent), directors, officers, employees and agents
of the InterCept Parties.
46
9.9 Assignment of Claim. If the Purchaser Indemnitees are fully
-------------------
indemnified for a claim arising under Section 9.1.2 (a "Special Claim") from (a)
the Special Escrow, and (b) iBill or iBill Corp if and to the extent that the
amount of the Special Claim exceeds the Special Escrow, then the Purchaser
Indemnitees shall assign to iBill and iBill Corp. all remaining rights of
further recovery associated with the Special Claim that the Purchaser
Indemnitees may have against any third parties. If iBill and iBill Corp. decline
to indemnify the Purchaser Indemnitees for the amount that the Special Claim
exceeds the Special Escrow, the Purchaser Indemnitees shall be indemnified for
such excess by reimbursement first from the General Escrow and then from the
Setoff Escrow, the amount of such excess shall not reduce the Maximum Indemnity,
and the Purchaser Indemnitees shall not be obligated to assign to iBill and
iBill Corp. all remaining rights of further recovery associated with the Special
Claim that the Purchaser Indemnitees may have against any third parties.
Article 10
TERMINATION
10.1. Termination. Notwithstanding any other provision of this Agreement,
-----------
this Agreement may be terminated and the Contemplated Transactions abandoned at
any time prior to the Closing Date:
10.1.1 By mutual written consent of the InterCept Parties, on the one
hand, and the Sellers, on the other hand;
10.1.2 By the InterCept Parties or the Sellers in the event that all
applicable waiting periods under the Xxxx-Xxxxx-Xxxxxx Act do not expire without
objection from the FTC and the DOJ; provided, however, that a Party's right to
terminate this Agreement for the event stated herein shall be subject to such
Party's compliance with the provisions of Section 8.15;
10.1.3 By the InterCept Parties if a Catastrophic Event occurs. A
"Catastrophic Event" shall be deemed to have occurred if any event affecting the
Sellers' business systems (including available backup systems) renders the
Sellers substantially incapable of conducting their business for any period of
at least five consecutive calendar days that ends during the period from the
Signing Date to the Closing Date;
10.1.4 By the InterCept Parties in their sole discretion upon payment
of the Break-up Fee (defined below) to iBill;
10.1.5 By the Sellers no earlier than 10 business days after the
cessation of a Catastrophic Event that caused postponement of the Target Closing
Date (as defined in Section 10.2);
47
10.1.6 By the Sellers no earlier than 15 business days after the
occurrence of a Catastrophic Event, if such Catastrophic Event has not ceased;
or
10.1.7 By the Sellers on or at any time after the date that the
Break-up Fee was due under Section 10.2, whether or not the Break-up Fee was
paid when due.
10.2 Break-up Fee. Upon the execution of this Agreement, the Purchaser has
------------
deposited with the Escrow Agent the sum of $5,000,000 (the "Break-up Fee") to be
paid to iBill in accordance with (i) this Section 10.2 and (ii) the Break-up Fee
Escrow Agreement. Except in the case of a termination pursuant to Sections
10.1.1, 10.1.2, 10.1.3, 10.1.5 or 10.1.6, in the event that the Closing does not
occur on or before the fifth business day after all of the conditions of
Sections 7.1 and 7.3 have been satisfied or waived by the InterCept Parties (the
"Target Closing Date"), then the Purchaser shall direct the Escrow Agent to
release and pay over the Break-up Fee to iBill. Notwithstanding anything to the
contrary in this Agreement, if any event affecting the Sellers' business systems
(including available backup systems) renders the Sellers substantially incapable
of conducting their business on or before the Target Closing Date, then (a) the
Target Closing Date shall be deferred to the date that is five business days
after the cessation of such service outage and (b) for so long as such service
outage continues, the total continuous time period of such service outage shall
be measured to determine whether such service outage will result in a
Catastrophic Event.
10.3 Effect of Termination.
---------------------
10.3.1 If the parties to this Agreement terminate this Agreement
pursuant to Section 10.1, then this Agreement (other than Section 8.10, the
obligation of the InterCept Parties to pay the Break-up Fee as provided in
clause (a) of Section 10.1.5, and this Section 10.3, each of which shall survive
termination) shall forthwith become void and have no effect, without any
liability on the part of any party to this Agreement or any Person of any party
to this Agreement. Payment of the Break-up Fee as set forth in this Article 10
shall be Sellers' sole and exclusive remedy against the InterCept Parties under
this Agreement arising out of or related to the InterCept Parties' failure to
close the Contemplated Transactions.
10.3.2 From the date hereof through the earlier of (i) the two-year
period following the date of this Agreement, if any of the Parties terminate
this Agreement pursuant to Section 10.1, or (ii) the Closing, the InterCept
Parties agree that they will not, directly or indirectly, hire or otherwise
engage any employee, officer or director of the Sellers, or otherwise induce any
such person to terminate or limit his or her relationship with Sellers.
Article 11
MISCELLANEOUS
11.1 Contents of Agreement; Parties in Interest; etc. This Agreement,
-----------------------------------------------
which
48
includes the schedules, exhibits and the other documents, agreements,
certificates and instruments executed and delivered pursuant to or in connection
with this Agreement (collectively, the "Purchase Documents") sets forth the
entire understanding and agreement of the parties hereto with respect to the
transactions contemplated hereby. It shall not be assigned, amended, or modified
except by written instrument duly executed by each of the parties hereto. Any
and all prior or contemporaneous negotiations, agreements, representations,
warranties, and understandings between or among the parties regarding the
subject matter hereof, whether written or oral, are superseded in their entirety
by this Agreement and the other Purchase Documents and shall not create any
liability on the part of any party hereto in favor of any other party (or
parties), except as otherwise expressly set forth in this Agreement and in the
other Purchase Documents.
11.2 Waiver. Any term or provision of this Agreement may be waived at any
------
time by the Party entitled to the benefit thereof by a written instrument duly
executed by such Party.
11.3 Notices. Any notice, request, demand, waiver, consent, approval or
-------
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telecopier,
air courier, telegram or by registered or certified mail, postage prepaid, as
follows:
if to the Purchaser:
InterCept, Inc.
0000 Xxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
Fax: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
First Union Plaza, Suite 1400
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
(000) 000-0000
(000) 000-0000 (facsimile)
If to any Seller, to:
Xxxxxx X. Xxxxx
0000 XX 000 Xxxxxxx
00
Xxxxx Xxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
Xxxx Xxxxxx
ICN, Ltd.
0000 X. Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Levenfeld Xxxxxxxxxx
00 Xxxx Xxxxxx Xxxxxx
00/xx/ Xxxxx
Xxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Fax: (000) 000-0000
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided in this Agreement. Such notice, request, demand,
waiver, consent, approval or other communication will be deemed to have been
given as of the date so delivered, transmitted by facsimile, telegraphed, or
mailed, as the case may be.
11.4 Georgia Law to Govern. THIS AGREEMENT SHALL BE GOVERNED BY AND
---------------------
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA,
WITHOUT REGARD TO ITS CONFLICT OF LAW PRINCIPLES.
11.5 No Benefit to Others. The representations, warranties, covenants, and
--------------------
agreements contained in this Agreement are for the sole benefit of the parties
hereto and their respective heirs, executors, administrators, legal
representatives, successors, and assigns, and nothing contained in this
Agreement or the other Purchase Documents shall be construed as conferring any
rights on any other persons.
11.6 Headings, Gender. All section headings contained in this Agreement
----------------
are for convenience of reference only, do not form a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
Words used in this Agreement, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires. The "knowledge" of a person shall include the current actual awareness
of such Person, such Person's officers charged with the responsibility for the
matters qualified by the use of the term "knowledge," and such matters as would
be revealed by a review of such Person's records.
50
11.7 Schedules and Exhibits. All exhibits and schedules referred to in
----------------------
this Agreement are incorporated in this Agreement by reference and are intended
to be and hereby are specifically made a part of this Agreement.
11.8 Severability. The invalidity or unenforceability of any provision of
------------
this Agreement in any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.
11.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed to be an
original and all of which counterparts taken together shall constitute but one
and the same instrument.
11.10 Assistance of Counsel. The InterCept Parties on the one hand, and the
---------------------
Sellers on the other hand, acknowledge that they have had the assistance of
counsel in negotiating and preparing the terms of this Agreement; therefore,
this Agreement shall be construed without regard to any presumption or other
rule requiring construction against the party causing the Agreement to be
drafted.
11.11 Time of the Essence. Time is of the essence of this Agreement.
-------------------
11.12 Actions and Proceedings. The InterCept Parties and the Sellers
-----------------------
consent to the exclusive jurisdiction and venue of state or Federal courts
having a situs in Xxxxxx County, Georgia in any action or judicial proceeding
brought by the Sellers to enforce, construe or interpret this Agreement or the
other Purchase Documents. The Sellers and the InterCept Parties consent to the
exclusive jurisdiction and venue of state or Federal courts having a situs in
Miami-Dade or Broward Counties, Florida, in any action or judicial proceeding
brought by the InterCept Parties to enforce, construe or interpret this
Agreement or the other Purchase Documents. The Parties agree that any forum
other than as provided above is an inconvenient forum and that a suit (or
non-compulsory counterclaim) brought by a party against another in a
jurisdiction other than as set forth herein should be forthwith dismissed or
transferred to a court located in the jurisdiction prescribed herein. The
reasonable attorney's fees of the parties prevailing in any action or judicial
proceeding brought by the a party to enforce, construe or interpret this
Agreement or the other Purchase Documents shall be paid by the non-prevailing
party in such dispute.
11.13 Execution by Facsimile. Any party may deliver an executed copy of
----------------------
this Agreement and any documents contemplated hereby by facsimile transmission
to another party, and such delivery shall have the same force and effect as any
other delivery of a manually signed copy of this Agreement or of such other
documents.
11.14 Survival of Representations, Warranties, Covenants and Agreements.
-----------------------------------------------------------------
Notwithstanding any right of the InterCept Parties (whether or not exercised) to
investigate the Acquired Business or any right of any party (whether or not
exercised) to investigate the accuracy of the representations and warranties of
the other party contained in this Agreement,
51
the Sellers and the InterCept Parties have the right to rely fully upon the
representations, warranties, covenants and agreements of the other contained in
this Agreement. The representations, warranties, covenants, and agreements of
the Sellers and the InterCept Parties contained in this Agreement will survive
the Closing.
11.15 Appointment of Designated Officials. The Parties agree and consent to
-----------------------------------
the appointment of their respective Designated Officials as set forth in the
definitions section of this Agreement for the purposes described in this
Agreement and the Escrow Agreement. Notwithstanding the above, each Party, in
its sole discretion, may designate a replacement Designated Official provided
such Party provides written notice to the other Party and the Escrow Agent.
[Signatures begin on next page]
52
IN WITNESS WHEREOF, the parties hereto have duly executed this
Asset Purchase Agreement on the date first written above:
"INTERCEPT PARTIES"
"Parent"
InterCept, Inc.
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxxxx
--------------------------------
Title: Chief Financial Officer, Senior
-------------------------------
Vice President, and Secretary
--------------------------------
"Purchaser"
InterCept Billing Company, LLC
By: InterCept, Inc., its sole member and
manager
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxxxx
--------------------------------
Title: Chief Financial Officer, Senior
-------------------------------
Vice President, and Secretary
--------------------------------
"SELLERS"
"iBill"
Internet Billing Company, Ltd., by Internet
Billing Corp., its sole general partner
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxx
--------------------------------
Title: President
--------------------------------
"iBill CA"
iBill California, LLC
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxx
--------------------------------
Title: Chairman
--------------------------------
53
"Liberty"
Liberty Merchant Services, LLC
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxx X. Xxxxx
----------------------------
Title: Chairman
---------------------------
"iBill Technologies"
iBill Technologies LLC
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxx X. Xxxxx
----------------------------
Title: Chairman
---------------------------
"iBill Corp."
Internet Billing Corp.
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxx X. Xxxxx
----------------------------
Title: President
---------------------------
"iBill Corp. (Delaware)"
iBill Corp.
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxx X. Xxxxx
----------------------------
Title: Chairman
---------------------------
"iBill GAP"
iBill GAP, LLC
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxx X. Xxxxx
----------------------------
Title: Chairman
---------------------------
54
"CSR"
CSR Xxxxxxx.xxx, LLC
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxx X. Xxxxx
----------------------------
Title: Chairman
---------------------------
55
Exhibit 3.2(B)
Escrow Agreement
(see attached)
56
Exhibit 3.2(C)
Break-up Fee Escrow Agreement
57
Exhibit 3.3
Earnout Payments
(see attached)
58
Exhibit 3.3
A. Earnout Payment Formula and Payment Terms.
-----------------------------------------
1. For each Earnout Quarter, there shall be calculated an "Earnout
Payment" equal to 7.5 times the Excess Dollars at the end of that Earnout
Quarter.
2. The Earnout Payment shall be paid to the Sellers in cash within 45
days of the close of each Earnout Quarter.
B. Definitions.
-----------
1. "EBITDA" means the consolidated net income of the Purchaser and its
subsidiaries before interest, federal, state, local, and foreign income taxes,
depreciation and amortization, determined in accordance with GAAP.
To the extent included in the consolidated net income of the Purchaser
and its subsidiaries, EBITDA shall exclude the effects of the following items:
(a) Any extraordinary or non-recurring items under GAAP, provided
that fines and penalties imposed by VISA or MasterCard shall not be deemed to be
extraordinary or non-recurring. Notwithstanding the foregoing, any fines and
penalties imposed by VISA or MasterCard that relate to pre-Closing events and
for which the Sellers indemnify the InterCept Parties shall not reduce EBITDA
for purposes of this Exhibit 3.3 to the extent of such indemnification. The
-----------
recovery of so-called "Double Chargebacks" shall not be an extraordinary or
non-recurring income item.
(b) Any liability or obligation of the Sellers arising or incurred
in connection with the negotiation, preparation and execution of this Agreement
and the transactions contemplated hereby and fees and expenses of counsel,
accountants, brokers and other experts employed by the Sellers.
(c) Any expenses directly or indirectly incurred in connection with
the financing of the acquisition of the Acquired Business or any refinancing of
such indebtedness or any other financing not reflected in the Financial
Statements of the Acquired Business for the year ending December 31, 2001.
(d) Any gain, loss, income or expense (including, without
limitation, any costs or expenses associated with any deferred compensation,
stock option, stock bonus or similar plan or programs) resulting from a change
in the Purchaser's accounting methods, principles or practices or a change in
GAAP or any GAAP election or treatment not made or utilized by iBill in the
Financial Statements of the Acquired Business for the year ending December 31,
2001.
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(e) Intercompany charges (including any general and administrative
overhead allocation charges) between Purchaser (or any Purchaser subsidiary) and
the Parent (or any other affiliate of the Parent) that have not been approved by
Xxxxxxx X. Xxxxxx (or his successor if he is no longer the chief executive
officer of the Purchaser as a result of his employment being terminated by the
Purchaser or Parent for Cause or he has left the employment of the Purchaser
without Adequate Justification (as those terms are defined in Xx. Xxxxxx'x
employment agreement with the Parent)), which approval shall not be unreasonably
withheld. Notwithstanding the foregoing, any intercompany charges that are
reasonably likely not to result in net savings over the period in which the
Earnout Payments are to be calculated shall not be included in the calculation
of EBITDA unless they are approved not only by Xx. Xxxxxx or his successor but
also by the Seller Designated Official before the same are accrued, which
approval shall not be unreasonably withheld.
(f) Interest earned on undistributed earnings shall be excluded from
EBITDA. For the avoidance of doubt, interest earned by the Purchaser on client
deposits, holdbacks and reserves, as well as interest earned on the so-called
"customer float," shall be included in EBITDA.
(g) If the discount rates that iBill currently pays for its credit
card payment processing are reduced, then (x) if the reduction occurs pursuant
to an agreement entered into or term sheet procured from a reputable provider of
credit card transaction processing services before the Closing Date, the Sellers
shall be entitled to the entire benefit from such expense reduction in the
calculation of EBITDA, and (y) if the reduction occurs after the Closing Date
(other than pursuant to an agreement or term sheet entered into or procured as
provided in the preceding clause), the Sellers shall be entitled to only 50% of
the benefit from such expense reduction in the calculation of EBITDA.
Notwithstanding the foregoing, if the reduction occurs after the Closing Date,
but the Sellers presented to the Purchaser on or prior to the Closing Date an
agreement or term sheet from a reputable provider of credit card transaction
processing services reflecting a lower discount rate (the "Offer Rate") than the
discount rate (the "Prior Rate") in place prior to the Closing Date, and the
Purchaser opts not to proceed with the provider offering the Offer Rate and
instead secures a discount rate (the "Purchaser Alternate Rate") from another
provider, then (x) the Sellers shall be entitled to the benefit from the expense
reduction from the Prior Rate to the Offer Rate in the calculation of EBITDA,
and (y) the Sellers shall be entitled to 50% of the benefit from the expense
reduction, if any, from the Offer Rate to the Purchaser Alternate Rate in the
calculation of EBITDA. In comparing discount rates for purposes of the preceding
sentence, the parties shall in good faith take into account not only the stated
discount rate but also any other charges by the applicable provider (such as
fees per transaction) so that the rates being compared are fairly compared on an
"all in" basis.
(h) Any expense or reserve for an expense or liability that relates to
pre-Closing events and for which the Sellers indemnify the InterCept Parties.
(i) The gain or loss from the exchange of securities, or any increase
or reduction in the carrying value of such securities.
A-2
(j) Any reserves or adjustments to reserves that are not consistent
with past practices of the Acquired Business.
(k) The financial results of Interactive and Certidigm to the extent
attributable to the Purchaser's interest therein.
(l) Any costs or expenses under GAAP that result from the issuance of
stock options with exercise prices below the fair market value of the Parent's
common stock at the relevant time, or that result from any stock bonus, deferred
compensation award or similar plan or program.
(m) Any expense that iBill would have booked as a pre-Closing expense
if it had prepared financial statements for the period under GAAP. (For example,
if iBill would have accrued an expense on its books for a $5,000 utility xxxx
that it received pre-Closing, the Purchaser shall not treat the payment of that
expense as an expense that reduces EBITDA in an Earnout Quarter.)
For purposes of this Exhibit 3.3, the Purchaser shall aggregate, on a
quarterly basis, the amounts by which the cash compensation of Xxxxxxx Xxxxxx
and the other members of iBill's key management team is reduced, in exchange for
nondeductible compensation such as stock options, in connection with the
negotiation of their employment by the InterCept Parties. That aggregate amount
shall be added to the other expenses of the Purchaser in the quarterly
calculations of EBITDA hereunder.
2. "Earnout Quarter" means each of the six calendar quarters beginning with
the calendar quarter commencing on July 1, 2002.
3. "Accumulated EBITDA Goal" means for the close of an Earnout Quarter
identified in the left hand column, the amount set forth in the right hand
column:
A-3
--------------------------------------------------------------------------------
Earnout Quarter Starting and Ending Accumulated EBITDA Goal
----------------------------------- -----------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
July 1, 2002 - September 30, 2002 $ 4,000,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
October 1, 2002 - December 31, 2002 $ 8,000,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
January 1, 2003 - March 30, 2003 $ 4,000,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
April 1, 2003 - June 30, 2003 $ 8,000,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
July 1, 2003 - September 30, 2003 $12,000,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
October 1, 2003 - December 31, 2003 $16,000,000
--------------------------------------------------------------------------------
4. "Excess Dollars" means:
(a) For Earnout Quarters one and two (Q3 and Q4 2002): the total
accumulated EBITDA for each of the Earnout Quarters through the close of the
Earnout Quarter in respect of which the Earnout Payment is calculated, less the
----
Accumulated EBITDA Goal for that Earnout Quarter, less the Excess Dollars for
----
any previous 2002 Earnout Quarter in respect of which an Earnout Payment was
paid.
(b) For the remaining Earnout Quarters (three through six, or Q1 through
Q4 in 2003): the total accumulated EBITDA for each of the Earnout Quarters
(beginning with Earnout Quarter three) through the close of the Earnout Quarter
in respect of which the Earnout Payment is calculated, less the Accumulated
----
EBITDA Goal for that Earnout Quarter, less the Excess Dollars for any previous
----
2003 Earnout Quarter (three through five) in respect of which an Earnout Payment
was paid.
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(c) The failure of the Purchaser to perform in a manner that results
in an Earnout Payment for one or more quarters shall not result in iBill having
to refund any portion of an Earnout Payment previously paid with respect to any
prior quarter.
5. "Change in Control" shall be deemed to occur if with respect to either
InterCept Party (the "Company"):
(a) The members of the Board of Directors of the Company ("Board") at
the beginning of any consecutive 12 calendar month period ("Incumbent
Directors") cease for any reason other than due to death to constitute at least
a majority of the members of the Board; provided, however, that any director
whose election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the members of the Board then still
in office who were members of the Board at the beginning of such 12 calendar
month period, shall be deemed an Incumbent Director.
(b) Any "person", including a "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Act"), but excluding the Company, any of its affiliates, or any employee
benefit plan of the Company or any of its affiliates) is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) under the Act), directly or
indirectly, of securities of the Company representing the greater of 50% or more
of the combined voting power of then outstanding securities.
(c) The shareholders of the Company approve a definitive agreement
for the merger or other business combination of the Company with or into another
corporation if (A) a majority of the directors of the surviving corporation were
not directors of the Company immediately prior to the effective date of such
merger or (B) the shareholders of the Company immediately prior to the effective
date of such merger own less than a majority of the combined voting power in the
then outstanding securities in such surviving corporation.
(d) A sale, exchange or other disposition of all or substantially all
of the assets of the Company.
C. Special Covenants and Agreements.
---------------------------------
The InterCept Parties acknowledge that but for the expectation of receiving
Earnout Payments in accordance with this Agreement, the Sellers would not have
entered into the transactions contemplated by the Agreement (although the
Sellers acknowledge that the undertakings of the InterCept Parties hereunder are
not a guaranty that all or any part of the Earnout Payments will be earned).
Accordingly, the InterCept Parties agree as follows:
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1. The Purchaser shall use commercially reasonable efforts consistent
with sound business practice to maximize the revenues, carefully manage
expenses, and maximize EBITDA of the Acquired Business throughout the Earnout
Quarters.
2. The Purchaser shall use commercially reasonable efforts to avoid any
act that might have (and actually results in) a Material Adverse Effect upon its
assets or business.
3. Subject to Section C.7 below, the Parent shall operate the Purchaser
as a separate and independent entity and business (which business shall be that
of the Acquired Business) and shall endeavor always to maintain the integrity of
the Purchaser as a business unit and legal entity distinct from the Parent and
its other affiliates. Subject to Section C.7 below, the Purchaser shall not be
combined (by acquisition, merger, consolidation, reorganization, joint venture
or other means) with any other business or business entity.
4. The Purchaser shall cause to be maintained in effect levels of
property damage, liability, business interruption, and other insurance
substantially consistent with the levels maintained by the Sellers before
Closing.
5. The Purchaser shall pay its debts and liabilities and perform its
obligations as they mature in accordance with their terms and payment schedules.
6. The Purchaser shall comply with all applicable Laws, except for such
failures to comply as could not reasonably be expected to have a Material
Adverse Effect on the Acquired Business.
7. The Parent agrees not to divert or attempt to divert customers or
revenues away from the Purchaser relating to the Acquired Business. The Sellers
acknowledge, however, that the Parent expects to continue to make acquisitions
of companies that will complement and enhance its business. If the Parent
acquires a company that engages in payment processing for traditional, "bricks
and mortar" customers, no adjustment shall be made to the calculation of EBITDA
hereunder. On the other hand:
(a) If the Parent acquires or starts a company that engages in
online payment processing of the nature performed by the Purchaser, then the
Parent may elect, or not, to combine the business of the acquired or new company
with that of the Purchaser.
(b) Whether or not the acquired or new company is combined with the
Purchaser, the EBITDA of the acquired or new company for the applicable Earnout
Quarter shall be calculated according to this Exhibit 3.3, and the "Incremental
EBITDA" of the acquired or new company (as defined in the following sentence)
for such quarter shall then be added to the EBITDA of the Purchaser for purposes
of this Exhibit 3.3. "Incremental EBITDA" of an acquired company is equal to (x)
the amount of EBITDA of the acquired company for the Earnout Quarter for which
the calculation is being made,
A-6
minus (y) the amount of EBITDA of the acquired company for the most recent full
three month period that preceded the Purchaser's acquisition of the new company;
"Incremental EBITDA" of a new company is the entire amount of EBITDA of the new
company for the Earnout Quarter for which the calculation is being made.
Notwithstanding the foregoing, if the incremental EBITDA of the acquired or new
company is less than zero, it will not be added to the EBITDA of the Purchaser
for purposes of this Exhibit 3.3.
(c) If the Parent exercises the special payment election provided in
Section F below at any time during the same quarter in which it acquires an
existing company or starts a new company, the Earnout Payment that would have
been payable in respect of that Earnout Quarter shall be calculated pursuant to
the standard formula above based on the performance of the Purchaser excluding
the incremental EBITDA of the acquired or new company. If the Parent exercises
the special payment election provided in Section F below at any time after the
quarter in which it acquires an existing company or starts a new company, the
Earnout Payment for the applicable Earnout Quarter shall be calculated pursuant
to the standard formula above based on the performance of the Purchaser
including the incremental EBITDA of the acquired or new company for such Earnout
Quarter (or for the period beginning on the date of acquisition or startup if
such period is shorter than a full quarter).
8. In the case of any Change in Control of the Parent or the Purchaser,
the acquiring, surviving, and successor entities, jointly and severally, shall
agree to remain obligated to make payment to Sellers of all of the payments
required hereunder as if no such transaction had occurred.
9. The Purchaser's business affairs shall be operated under the direction
and control of Xxxxxxx X. Xxxxxx, subject to the general oversight of the
Parent's management team and Board (or under the direction and control of his
successor if he is no longer the chief executive officer of the Purchaser as a
result of his employment being terminated by the Purchaser or Parent for Cause
or he has left the employment of the Purchaser without Adequate Justification
(as those terms are defined in Xx. Xxxxxx'x employment agreement with the
Parent)). The Parent agrees to consult with the Seller Designated Official with
respect to the selection of any successor to Xx. Xxxxxx, provided that the
Seller Designated Official shall have no approval or veto rights.
10. (a) Within 45 days of the close of each Earnout Quarter, the Parent
shall send, by reputable overnight courier service, the Seller Designated
Official a reconciliation report which shall include (i) the financial
statements of the Purchaser for and as of the close of the Earnout Quarter, (ii)
a calculation of the Earnout Payment, and (iii) a narrative description of any
special adjustments or material items that affected the calculation of the
Earnout Payment. The report shall be signed on behalf of the Parent by a senior
financial officer of the Parent and shall not be subject to revision or
modification except in accordance with the procedures set forth below. If the
Seller Designated Official receives the report before the Parent publicly
releases its financial results for the quarter in question, the Seller
Designated Official shall maintain the confidentiality of
A-7
such financial results and shall not buy or sell the Parent's common stock
sooner than 48 hours after the financial results are publicly announced. If an
Earnout Payment is payable for the Earnout Quarter for which the reconciliation
relates, the Parent shall pay the Earnout Payment by wire transfer to iBill not
later than the date that iBill receives the reconciliation report.
(b) (1) The Sellers shall be entitled to engage a firm of
accountants to review Purchaser's books and records for the purpose of verifying
the proper amounts due to the Sellers hereunder. (The firm selected by the
Sellers shall be one of the "Big Five" accounting firms or Xxxxx Xxxxxxxx.) If
the accountants engaged by the Sellers determine that there has been an
underpayment of the amounts due to the Sellers hereunder, the accountants shall
deliver to the Parent a report explaining in reasonable detail the basis for the
accountants' determination. The report shall be deemed conclusive unless the
Parent delivers a written notice to the Seller Designated Official disputing the
accountants' report within 30 days of the date that the accountants' report is
presented to the Parent.
(2) If the Parent fails to deliver a timely notice of dispute in
writing by the 30th day, the Parent shall promptly pay the amount of the
underpayment to the Sellers, together with interest on the underpayment at the
prime rate of interest (as shown in The Wall Street Journal), plus 300 basis
-----------------------
points, from the date that is 45 days after the quarter end to which such
reconciliation relates to the date of payment. If the underpayment is greater
than 2% of the amount due, the Parent shall also pay for the reasonable costs of
the Sellers' review, provided that if the Parent ultimately demonstrates that
the accountants' report was substantially unfounded, the Sellers shall pay the
reasonable fees of the Parent's accountants incurred by the Parent in connection
with disputing the report.
(3) If the Parent delivers to the Seller Designated Official a
timely notice of dispute in writing by the 30th day after the Parent receives
the accountants' report, then the Sellers and the Parent shall endeavor in good
faith to resolve the dispute as soon as practicable. If the Parent and the
Sellers fail to do so by the 30th day after the delivery of the notice of
dispute by the Parent, then the disputed amount shall be submitted to and
settled by arbitration in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association. Such arbitration
shall be held in Atlanta, Georgia before a panel of three (3) arbitrators, one
selected by the InterCept Parties, one selected by the Sellers, and the third
selected by mutual agreement of the first two, and all of whom shall be
independent and impartial under the rules of the American Arbitration
Association. The decision of the arbitrators shall be final and binding as to
any matter submitted under this Agreement. Judgment upon any award rendered by
the arbitrators may be entered in any court of competent jurisdiction.
(4) The Sellers shall not be permitted to challenge a quarterly
reconciliation after March 31, 2004.
A-8
(c) The Purchaser shall retain records relevant to the determination
of each payment hereunder for a period of three years after the end of the
period to which such payment relates. The Sellers will keep confidential all
information of the Purchaser obtained during the course of any review permitted
hereunder, except (i) the Sellers may use such information in an appropriate
legal forum to obtain recovery hereunder, (ii) as required by legal process or
(iii) to the extent such information is otherwise made public.
11. The Purchaser shall not pay to the Parent, any Affiliate of the Parent
or any other Person funds due to customers; provided, however, that those funds
may be paid to any customer, consumer or other Person as part of routine
transaction processing (including in the settlement of Chargebacks). The
Purchaser shall not distribute to the Parent (or any Affiliate of the Parent)
any amounts, if and to the extent that, doing so would reduce the amount of
shareholders' equity below the amount shown on the opening balance sheet of the
Purchaser determined in accordance with GAAP.
12. On or before the 10th day of each calendar quarter, the Parent shall
deliver a notice in writing signed by a financial officer or the general counsel
of the Parent, and countersigned by an officer of the Parent's senior secured
lender, to the effect that as of the last day of the preceding quarter, the
Parent had cash on hand in an amount not less than $8,000,000.
13. The Purchaser shall not guarantee any indebtedness or other obligation
of any other Person, except that the Purchaser may guarantee the Parent's senior
credit facility.
D. Events of Default.
-----------------
Each of the following shall be an "Event of Default" with respect to the
Earnout Payments:
1. Failure to make any payment when due to the Sellers hereunder (after
notice and a 15-day opportunity to cure).
2. The termination of Xxxxxxx X. Xxxxxx as the Purchaser's Chief
Executive Officer other than (a) by the Company for Cause, or (b) by Xx.
Xxxxxx'x resignation or withdrawal from the Purchaser's employment other than
with Adequate Justification. (The terms "cause" and "Adequate Justification"
shall have the meanings provided in Xx. Xxxxxx'x employment agreement with the
Parent or Purchaser.)
3. The Intercept Parties or either of them (a) applies for, consents to
or acquiesces in the appointment of a trustee, receiver or other custodian of
all or a substantial part of its assets; or (b) makes a general assignment for
the benefit of creditors
4. A trustee, receiver, or other custodian is appointed for either of the
Intercept Parties and the same is not discharged or dismissed within 30 days.
A-9
5. Any bankruptcy, reorganization, debt arrangement, or other proceeding
under any bankruptcy or insolvency law, or any dissolution or liquidation
proceeding, is instituted against the InterCept Parties (or any significant
subsidiary of either of them) and is not dismissed within 30 days.
6. A Change in Control occurs with respect to the Parent, and the
acquiring, surviving, and successor entities, jointly and severally, fail to
agree to remain obligated to make payment to Sellers of all of the payments
required hereunder as if no such transaction had occurred.
7. A Change in Control occurs with respect to the Purchaser, other than
through a Change in Control of the Parent.
8. Default in the payment when due (subject to any applicable grace
period) of any obligation of the Parent, the Purchaser or the Purchaser's
subsidiaries for borrowed money or in respect of obligations, loans or advances,
individually or in the aggregate, in amounts in excess of $5,000,000, provided
that any payment default that the Purchaser is in good faith contesting, by
appropriate proceedings, shall not be deemed to be an Event of Default
hereunder.
9. The InterCept Parties shall be in breach (after notice and a 30-day
opportunity to cure) of any of the covenants or agreements set forth in Section
C above.
E. Consequences of an Event of Default.
------------------------------------
If one or more Events of Default occur (after expiry of any applicable grace or
cure period), then, at the election of the Sellers, there shall be immediately
due and payable by the InterCept Parties an amount equal to the sum of: (a)
$8,000,000 times the number of remaining Earnout Quarters; plus (b) in respect
----
of the Earnout Quarter most recently ended, the greater of (i) $8,000,000 or
(ii) the Earnout Payment that would have been payable in respect of such Earnout
Quarter pursuant to the standard formula above; plus (iii) any all other accrued
but unpaid Earnout Payments. No part of the lump sum payment shall be subject to
setoff for any Claim for which the Required Notice had not been sent before the
occurrence of the Event of Default. If the Sellers do not elect to exercise the
remedy provided in this section, they shall have all other available remedies at
law or in equity.
F. Special Payment Election.
------------------------
During any Earnout Quarter other than the final Earnout Quarter, the Purchaser
may by written notice to the Sellers elect to make a lump sum payment in lieu of
any further Earnout Payments under this Agreement. The lump sum payment shall be
equal to the sum of: (a) $8,000,000 times the number of remaining Earnout
Quarters; plus (b) in respect of the Earnout Quarter in which the notice is
----
given, the greater of (i) $8,000,000 or (ii) the Earnout Payment that would have
been payable in respect of such Earnout Quarter pursuant to the standard formula
above; plus (iii) any and all other accrued but
----
A-10
unpaid Earnout Payments. Payment of the lump sum amount shall be made not later
than 45 days after the end of the Earnout Quarter in which the notice is given.
No part of the lump sum payment shall be subject to setoff for any Claim for
which the Required Notice had not been sent at least 90 days before the notice
of the special payment election is delivered to the Sellers.
G. Examples of Earnout Payment Calculations.
----------------------------------------
1. Assume EBITDA of Purchaser of $5,000,000 in Q3 of 2002. The Parent
pays the Sellers $7,500,000, or 7.5 X the $1,000,000 excess, calculated as
follows.
$1,000,000 (Excess Dollars for that quarter)
Minus
0 (the sum of all Excess Dollars that were multiplied by 7.5 in
calculating an Earnout Payment for previous quarters in 2002)
Equals $1,000,000
Multiplied by 7.5
Equals $7,500,000, the Earnout Payment for Q3 2002.
2. Assume EBITDA of Purchaser of $4,500,000 in Q4 of 2002. Cumulative
EBITDA of the Purchaser is $9,500,000, compared with an accumulated EBITDA goal
of $8,000,000. The excess is $1,500,000, but the Parent has already made an
Earnout Payment based on $1,000,000 Excess Dollars for Q3 2002, so the Excess
Dollars for purpose of the Earnout Payment for Q4 2002 is $500,000, which
multiplied by 7.5 is $3,750,000, calculated as follows:
$1,500,000 (Excess Dollars for Q4 2002)
Minus
$1,000,000 (the sum of all Excess Dollars that were multiplied by 7.5 in
calculating an Earnout Payment for previous quarters in 2002)
Equals $500,000
Multiplied by 7.5
Equals $3,750,000, the Earnout Payment for X0 0000.
Thereafter, in Q1 2003, the accumulated actual EBITDA of the Purchaser is
reinstated at $4,000,000 per quarter and accumulates at $4,000,000 per quarter
for the Sellers to earn an Earnout Payment.
3. Assume EBITDA of Purchaser of $3,000,000 in Q1 2003. Cumulative EBITDA
of the Purchaser is $3,000,000, compared with an accumulated EBITDA goal for Q1
2003 of $4,000,000. The Excess Dollars are $0, which multiplied by 7.5 is $0.
4. Thereafter, assume EBITDA of Purchaser of $6,000,000 in Q2 2003.
Cumulative EBITDA of the Purchaser is $9,000,000, compared with an accumulated
EBITDA goal for Q2 2003 of $8,000,000. The excess is $1,000,000, even though
Purchaser has exceeded the individual quarterly goal for Q2 2003 by $2,000,000,
so the
A-11
Excess Dollars for purpose of the Earnout Payment for Q2 2003 is $1,000,000,
which multiplied by 7.5 is $7,500,000, calculated as follows:
$1,000,000 (Excess Dollars for Q2 2003)
Minus
$0 (the sum of all Excess Dollars that were multiplied by 7.5 in
calculating an Earnout Payment for previous quarters in 2003)
Equals $1,000,000
Multiplied by 7.5
Equals $7,500,000, the Earnout Payment for Q2 2003.
5. Assume that Net Income in an Earnout Quarter is $2.7 million. The
calculation of EBITDA (following an adjustment for the discount rate reductions
and other adjustments shown herein) would be determined as follows:
Net Income $ 2,700,000
Interest Income ($ 100,000) (on undistributed earnings, not on
customer holdbacks)
Gain from
Discontinued Items ($ 0)
Extraordinary
Income ($ 0)
Adjusted Net Income $ 2,600,000
Plus
Interest Expense $ 300,000
Taxes $ 1,200,000
Depreciation $ 500,000
Amortization $ 500,000
------------
EBITDA $ 5,100,000
============
Savings Resulting
From Reduction in
Discount Rate paid to
card processor post
closing ($ 200,000)
EBITDA 50%
Adjustment ($ 100,000) (assuming qualification under Section B.1(g))
Adjusted EBITDA $ 5,000,000
============
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H. Modification with Consent of iBill.
----------------------------------
The terms of this Exhibit 3.3 can be amended with the written consent of
the InterCept Parties and iBill.
A-13
Exhibit 7.2.1
Closing Certificate of InterCept Parties
59
Exhibit 7.2.2
Xxxx of Sale
(see attached)
60
Exhibit 7.3.1
Closing Certificate of Sellers
61
Exhibit 8.21.1(C)
Opinion of Counsel to Sellers
(see attached)
62
Exhibit 8.21.1(D)
Non-Compete Agreements of
Xxxxxx X. Xxxxx and Xxxx Xxxxxx
63
Exhibit 8.21.1(E)
Employment Agreement of
Xxxxxxx Xxxxxx
64
Exhibit 8.21.2(D)
Opinion of NMRS or
Opinion of Counsel to InterCept Parties
65
Exhibit 8.21.2(D)
Xxxxxxxxxxxxx.xxx, LLC Term Sheet
66
