EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
dated April 6, 2001
by and among
Ingenico S.A.
Idaho Acquisition Corp.
and
IVI Checkmate Corp.
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER............................................................................ 2
Section 1.1. The Merger........................................................... 2
Section 1.2. Effective Time....................................................... 2
Section 1.3. Effects of the Merger................................................ 2
Section 1.4. Certificate of Incorporation and By-Laws of the Surviving Corporation 2
Section 1.5. Directors............................................................ 3
Section 1.6. Officers............................................................. 3
Section 1.7. Conversion of Shares of Common Stock................................. 3
Section 1.8. Conversion of Merger Sub Common Stock................................ 3
Section 1.9. Options.............................................................. 4
Section 1.10. No Other Equity...................................................... 4
Section 1.11. Stockholders' Meeting................................................ 4
Section 1.12. Special Meeting of IVI Checkmate Ltd................................. 5
Section 1.13. Additional Actions................................................... 6
Section 1.14. Closing.............................................................. 6
ARTICLE II PAYMENT FOR SHARES.................................................................... 6
Section 2.1. Dissenting Shares.................................................... 6
Section 2.2. Payment for Shares of Common Stock................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................... 8
Section 3.1. Organization and Qualification; Subsidiaries......................... 8
Section 3.2. Certificate of Incorporation and By-Laws............................. 8
Section 3.3. Capitalization; Subsidiaries......................................... 9
Section 3.4. Authority Relative to this Agreement................................. 10
Section 3.5. No Conflict; Required Filings and Consents........................... 10
Section 3.6. SEC Reports and Financial Statements................................. 11
Section 3.7. IVI Checkmate Ltd.................................................... 13
Section 3.8. Employee Benefit Matters............................................. 13
Section 3.9. Litigation........................................................... 16
Section 3.10. Information.......................................................... 16
Section 3.11. Taxes................................................................ 16
Section 3.12. Intellectual Property................................................ 19
Section 3.13. Certain Approvals.................................................... 19
Section 3.14. Brokers.............................................................. 19
Section 3.15. Opinions of Financial Advisor........................................ 20
Section 3.16. Vote Required........................................................ 20
Section 3.17. Rights Agreement..................................................... 20
Section 3.18. Environmental Matters................................................ 20
Section 3.19. Compliance with Applicable Laws...................................... 21
Section 3.20. Material Contracts................................................... 21
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Section 3.21. Support Agreements................................................... 21
Section 3.22. Ingenico Agreements.................................................. 22
Section 3.23. Investments.......................................................... 22
Section 3.24. Stock Option Exchange Program........................................ 22
Section 3.25. Congress Financial Corporation (Southern)............................ 22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER............................ 22
Section 4.1. Organization and Qualification....................................... 22
Section 4.2. Authority Relative to this Agreement................................. 23
Section 4.3. No Conflict; Required Filings and Consents........................... 23
Section 4.4. Information.......................................................... 23
Section 4.5. Financing............................................................ 24
ARTICLE V COVENANTS............................................................................. 24
Section 5.1. Conduct of Business of the Company................................... 24
Section 5.2. Access to Information................................................ 26
Section 5.3. Reasonable Best Efforts.............................................. 26
Section 5.4. Public Announcements................................................. 27
Section 5.5. Indemnification...................................................... 27
Section 5.6. Notification of Certain Matters...................................... 28
Section 5.7. Takeover Laws........................................................ 28
Section 5.8. Rights Agreement..................................................... 28
Section 5.9. No Solicitation...................................................... 28
Section 5.10 Equity Investment.................................................... 30
Section 5.11. Additional Director; Board Committees................................ 30
Section 5.12. Registration Rights Agreement........................................ 30
Section 5.13. Stock Option Exchange Program........................................ 30
Section 5.14. Restructuring........................................................ 30
Section 5.15. Paid-Up Capital...................................................... 30
Section 5.16. Series B Preferred Stock............................................. 30
Section 5.17. Parent Vote.......................................................... 30
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER.............................................. 31
Section 6.1. Conditions........................................................... 31
Section 6.2. Parent and Merger Sub Conditions..................................... 31
ARTICLE VII TERMINATION; AMENDMENTS; WAIVER....................................................... 33
Section 7.1. Termination.......................................................... 33
Section 7.2. Effect of Termination................................................ 35
Section 7.3. Amendment............................................................ 35
Section 7.4. Extension; Waiver.................................................... 35
ARTICLE VIII MISCELLANEOUS......................................................................... 36
Section 8.1. Non-Survival......................................................... 36
Section 8.2. Entire Agreement; Assignment......................................... 36
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Section 8.3. Validity............................................................. 36
Section 8.4. Notices.............................................................. 36
Section 8.5. Governing Law........................................................ 37
Section 8.6. Descriptive Headings................................................. 37
Section 8.7. Counterparts......................................................... 38
Section 8.8. Parties in Interest.................................................. 38
Section 8.9. Fees and Expenses.................................................... 38
Section 8.10. By-Laws.............................................................. 39
Section 8.11. Certain Definitions.................................................. 39
Section 8.12. Specific Performance................................................. 39
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April 6,
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2001, by and among Ingenico S.A., a societe anonyme organized and existing under
the laws of the Republic of France ("Parent"), Idaho Acquisition Corp., a
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Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and
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IVI Checkmate Corp., a Delaware corporation (the "Company").
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WHEREAS, Parent beneficially owns 1,544,416 shares (the "Parent
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Shares") of the common stock, par value $0.01 par share, of the Company (the
"Common Stock");
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WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have approved the acquisition of the Company by Parent on the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have approved the merger of Merger Sub with and into the Company
(the "Merger"), whereby each issued share of Common Stock not owned directly by
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Parent or the Company shall be converted into the right to receive $3.30 in cash
without interest thereon (the "Merger Consideration"), upon the terms and
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subject to the conditions set forth in this Agreement;
WHEREAS, a special committee (the "Special Committee") comprised of
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three independent directors of the Board of Directors of the Company (the
"Board") who are not affiliated with Parent or any member of the Company's
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management has received the written opinion of Wachovia Securities, Inc. (the
"Financial Advisor") that, based on, and subject to, the various assumptions and
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qualifications set forth in such opinion, as of the date of such opinion, the
consideration to be received by the holders of Common Stock (other than Parent
and Merger Sub) pursuant to the Merger is fair to such holders from a financial
point of view;
WHEREAS, IVI Checkmate Ltd., a subsidiary of the Company, has
outstanding a class of shares (the "Exchangeable Shares") that, pursuant to
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their terms and the terms of a related support agreement and voting and exchange
trust agreement (collectively, the "Exchangeable Share Provisions") are intended
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to afford the holder substantially the same economic and voting rights as are
available to the holders of the Common Stock;
WHEREAS, the Board of Directors of IVI Checkmate Ltd. has received the
written opinion of the Financial Advisor that, based on, and subject to, the
various assumptions and qualifications set forth in such opinion, as of the date
of such opinion, the implementation of the Merger is fair to the holders of the
Exchangeable Shares; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Parent,
Merger Sub and the Company agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the
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satisfaction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the General Corporation Law of the
State of Delaware (the "DGCL"), at the Effective Time (as defined below) Merger
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Sub shall be merged with and into the Company. Following the Merger, the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation and a wholly owned subsidiary of Parent
(the "Surviving Corporation"). At the option of Parent, and provided that such
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amendment does not materially delay the Effective Time, the Merger may be
structured so that, and this Agreement shall thereupon be amended to provide
that, the Company shall be merged with and into Merger Sub or with another
direct or indirect wholly owned subsidiary of Parent, with the Company, Merger
Sub or such other subsidiary of Parent continuing as the Surviving Corporation
(as determined by Parent); provided, however, that the Company shall be deemed
not to have breached any of its representations and warranties herein if and to
the extent such breach would have been attributable to such election. In such
event, the parties agree to execute an appropriate amendment to this Agreement
in order to reflect the foregoing and, where appropriate, to provide that Merger
Sub (or another Parent subsidiary designated by Parent) shall be the Surviving
Corporation.
Section 1.2. Effective Time. As soon as practicable after the
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satisfaction or waiver of the conditions set forth in Sections 6.1 and 6.2 of
this Agreement, the Company shall execute, in the manner required by the DGCL
and deliver to the Secretary of State of the State of Delaware a duly executed
certificate of merger, and the parties shall take such other and further actions
as may be required by law to make the Merger effective. The Merger shall be
effective upon the filing of the certificate of merger or such later time as
specified in the certificate of merger. The time the Merger becomes effective
in accordance with applicable law is referred to as the "Effective Time."
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Section 1.3. Effects of the Merger. From and after the Effective
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Time, the Merger shall have the effects set forth in Section 259 of the DGCL.
Section 1.4. Certificate of Incorporation and By-Laws of the
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Surviving Corporation.
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(a) The Certificate of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with its provisions and applicable law, except for Article I thereof,
which shall read as follows: "The name of the corporation is IVI Checkmate
Corp. (hereinafter the "Corporation")."
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(b) The By-Laws of Merger Sub in effect at the Effective Time shall be
the By-Laws of the Surviving Corporation until thereafter amended in accordance
with its provisions and applicable law.
Section 1.5. Directors. Subject to applicable law, the directors of
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Merger Sub immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
Section 1.6. Officers. The officers of the Company immediately prior
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to the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
Section 1.7. Conversion of Shares of Company Stock.
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(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than any shares of
Common Stock held by Parent, Merger Sub, any wholly owned subsidiary of Parent
or Merger Sub, in the treasury of the Company or by any wholly owned subsidiary
of the Company, which shares of Common Stock, by virtue of the Merger and
without any action on the part of the holder thereof, shall be cancelled and
retired and shall cease to exist with no payment being made with respect thereto
and other than Dissenting Shares (as defined below)), shall be converted into
the right to receive in cash an amount equal to the Merger Consideration,
payable to the holder thereof, without interest thereon, upon surrender of the
certificate formerly representing such share of Common Stock.
(b) If, at the Effective Time there are outstanding any Exchangeable
Shares which are not owned by the Company, any of its Subsidiaries or any person
directly or indirectly controlled by or under common control of the Company, or
there are shares of stock, debt, options or other agreements of the Company or
any of its Subsidiaries which could give rise to the issuance of any
Exchangeable Shares to any person (other than the Company, any of its
Subsidiaries or any person directly or indirectly controlled by or under common
control of the Company), then each share of Series B Preferred Stock (as defined
below) outstanding at the Effective Time shall remain outstanding in accordance
with its terms.
(c) Each share of Series D Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Series D
Preferred Stock held by Parent, Merger Sub, any wholly owned subsidiary of
Parent or Merger Sub, in the treasury of the Company or by any wholly owned
subsidiary of the Company, which shares of Series D Preferred Stock, by virtue
of the Merger and without any action on the part of the holder thereof, shall be
cancelled and retired and shall cease to exist with no payment being made with
respect thereto) shall remain outstanding in accordance with its terms.
Section 1.8. Conversion of Merger Sub Common Stock. At the Effective
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Time, by virtue of the Merger and without any action on the part of the holder
thereof, each share of
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common stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully paid
and non-assessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
Section 1.9. Options. The Board (or, if appropriate, any Committee
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thereof) has adopted appropriate resolutions and taken all other actions
necessary to provide for the cancellation, effective at the Effective Time, of
all the outstanding stock options (the "Options") heretofore granted under any
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stock option or similar plan of the Company or its Subsidiaries (the "Stock
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Plans"). Immediately prior to the Effective Time, (i) each Option, whether or
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not then vested or exercisable, shall no longer be exercisable but shall entitle
each holder thereof at the Effective Time, in cancellation and settlement
therefor, to payments in cash, reduced by any applicable withholding taxes (the
"Cash Payment"), at the Effective Time, equal to the product of (x) the total
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number of shares of Common Stock subject or related to such Option, whether or
not then vested or exercisable and (y) the excess (if any) of the Merger Price
over the exercise price per share subject or related to such Option, each such
Cash Payment to be paid to each holder of an outstanding Option as soon as
practicable following the Effective Time. The Stock Plans and any other plan,
program or arrangement providing for the issuance or grant of any other interest
in respect of the capital stock of the Company or any subsidiary shall terminate
as of the Effective Time. The Company will obtain all consents, if any, that
are necessary to ensure that after the Effective Time, the only rights of the
holders of Options will be to receive the Cash Payment in cancellation and
settlement of the Option.
Section 1.10. No Other Equity. Except as provided in Section 5.16
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with respect to the Series B Preferred Stock and except for the Series D
Preferred Stock, the Company will take all appropriate steps acceptable to
Parent to ensure that after the Effective Time none of the Parent, the Company
or any of their respective subsidiaries is or will be bound by any Options, or
any other options, warrants, rights or agreements which would entitle any
Person, other than Parent or its affiliates, to own any capital stock of the
Surviving Corporation or any of its subsidiaries or to receive any payment in
respect thereof or have any right under the Stock Plans or otherwise to acquire
any capital stock of the Company, Parent, the Surviving Corporation or any of
their respective subsidiaries.
Section 1.11. Stockholders' Meeting.
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(a) The Company, acting through the Board, shall, as soon as
practicable following the execution of this Agreement and in accordance with
applicable law and the Company's Certificate of Incorporation and By-Laws:
(i) duly call, give notice of, convene and hold a special meeting
of the Company's stockholders (the "Stockholders") (such meeting, the
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"Special Meeting") for the purpose of presenting this Agreement to the
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Stockholders for their consideration and approval;
(ii) prepare and file with the United States Securities and
Exchange Commission (the "SEC") and with the securities regulatory
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authority of each of the Canadian provinces of British Columbia, Alberta,
Saskatchewan, Manitoba and Ontario
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(the "Canadian Jurisdictions"), a preliminary proxy statement relating to
this Agreement, and use its reasonable best efforts (x) to obtain and
furnish the information required to be included by the SEC in the Proxy
Statement (as defined below) and, after consultation with Parent, to
respond promptly to any comments made by the SEC or its staff with respect
to the preliminary proxy statement and cause a definitive proxy statement
(the "Proxy Statement") to be mailed to its Stockholders and (y) subject to
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the fiduciary duties of the Board under applicable law, to obtain the
necessary approvals of the Merger and this Agreement by its Stockholders;
and
(iii) subject to the fiduciary obligations of the Board and the
Special Committee under applicable law, include in the Proxy Statement the
recommendation of the Board and the Special Committee that Stockholders
vote in favor of the approval and adoption of this Agreement.
(b) Parent agrees that it will vote, or cause to be voted, all of the
shares of Common Stock then owned by it, Merger Sub or any of its other
subsidiaries in favor of the approval of this Agreement at the Special Meeting.
Section 1.12. Special Meeting of IVI Checkmate Ltd.
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(a) The Company, acting through the Board, shall, as soon as
practicable following the execution of this Agreement and in accordance with
applicable law and the Articles of Incorporation and By-laws of IVI Checkmate
Ltd., cause IVI Checkmate Ltd. to:
(i) duly hold a special meeting (the "Canadian Special Meeting")
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of holders (the "Holders") of the Exchangeable Shares not less than 20
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business days prior to the Special Meeting to consider a special
resolution, in form and substance acceptable to Parent, acting reasonably
(the "Resolution"), of the Holders approving an amendment (the "Exchange
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Amendment") to the Exchangeable Share Provisions to permit the redemption
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of the Exchangeable Shares, or their purchase by the Surviving Corporation,
Parent or one of their affiliates, immediately following the Effective Time
on a basis which results in Holders receiving, on an economically
equivalent basis, the same consideration for each Exchangeable Share as is
received by the Stockholders for each share of Common Stock. Parent shall
provide, on terms to be agreed, funding to the Surviving Corporation
sufficient to fully fund the Surviving Corporation's redemption or
repurchase, if any, of the Exchangeable Shares; and
(ii) in connection with the Canadian Special Meeting, ensure that
an information circular (the "Circular") containing all information
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necessary to permit the Holders to make an informed decision and the
recommendation of the Board of Directors of IVI Checkmate Ltd. that the
Holders approve the Resolution and as otherwise may be required by
applicable law is circulated to all of the Holders.
(b) After having called the Canadian Special Meeting, other than as
expressly contemplated in this Agreement or as required by applicable law, the
Company shall ensure that IVI Checkmate Ltd. shall not, without the prior
written consent of Parent, adjourn, postpone or
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cancel, or except as required for quorum purposes pursuant to Article 8 of
the provisions attaching to the Exchangeable Shares or as required by Holders
pursuant to a valid point of order raised at the Canadian Special Meeting,
adjourn or postpone the Canadian Special Meeting.
(c) The Company shall cause IVI Checkmate Ltd., in consultation with,
and with the cooperation of Parent, to prepare, file and distribute the Circular
and such other documents as may be necessary or desirable to permit the Holders
to vote on the Resolution and to otherwise implement the Resolution and shall
cause the Board of Directors of IVI Checkmate Ltd. to recommend to the Holders
in the Circular that the Holders approve the Resolution.
(d) The Company will vote, or cause to be voted, all of the common
shares of IVI Checkmate Ltd. in favor of the approval of the Resolution.
Section 1.13. Additional Actions. If, at any time after the
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Effective Time, the Surviving Corporation shall consider or be advised that any
further deeds, assignments or assurances in law or any other acts are necessary
or desirable to (a) vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of the Company, or (b) otherwise carry out the
provisions of this Agreement, the Company and its officers and directors shall
be deemed to have granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such deeds, assignments or assurances in law
and to take all acts necessary, proper or desirable to vest, perfect or confirm
title to and possession of such rights, properties or assets in the Surviving
Corporation and otherwise to carry out the provisions of this Agreement, and the
officers and directors of the Surviving Corporation are authorized in the name
of the Company or otherwise to take any and all such action.
Section 1.14. Closing. The closing of the Merger (the "Closing")
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shall take place at the offices of Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. on the second business day
following the satisfaction (or, to the extent permitted by law, waiver by the
applicable party) of the conditions set forth in Article VI (other than those
that by their terms cannot be satisfied until the time of the Closing, but
subject to their satisfaction at such time), or at such other place, time and
date as shall be agreed in writing between Parent and the Company. The date on
which the Closing occurs is referred to in this Agreement as the "Closing Date."
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ARTICLE II
PAYMENT FOR SHARES
Section 2.1. Dissenting Shares. Notwithstanding anything in this
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Agreement to the contrary, shares of Common Stock outstanding immediately prior
to the Effective Time and held by a holder who has not voted in favor of the
Merger or consented thereto in writing and who has demanded appraisal for such
shares in accordance with the requirement of Section 262 of the DGCL
("Dissenting Shares"), shall not be converted into the right to receive the
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Merger Consideration as provided in Section 1.7, unless and until such holder
fails to perfect or withdraws or otherwise loses his or her right to appraisal
and payment under the DGCL. If, after
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the Effective Time, any such holder fails to perfect or withdraws or loses his
or her right to appraisal, such Dissenting Shares shall thereupon be treated as
if they had been converted as of the Effective Time into, and had become
exchangeable solely for the right to receive, the Merger Consideration to which
such holder is entitled, without interest or dividends thereon. The Company
shall give Parent prompt notice of any demands received by the Company for
appraisal of shares of Common Stock and, prior to the Effective Time, Parent
shall have the right to participate in all negotiations and proceedings with
respect to such demands. Prior to the Effective Time, the Company shall not,
except with the prior written consent of Parent, make any payment with respect
to, or settle or offer to settle, any such demands, or agree to do any of the
foregoing.
Section 2.2. Payment for Shares of Common Stock.
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(a) From and after the Effective Time, a bank or trust company
selected by Parent and reasonably acceptable to the Company, shall act as paying
agent (the "Paying Agent") in effecting the payment of the Merger Price in
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respect of certificates (the "Certificates") that, prior to the Effective Time,
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represented shares of Common Stock entitled to payment of the Merger Price
pursuant to Section 1.7. Promptly following the Effective Time, Parent or the
Purchaser shall deposit, or cause to be deposited, with the Paying Agent the
aggregate Merger Price to which holders of shares of Common Stock shall be
entitled at the Effective Time pursuant to Section 1.7.
(b) Promptly after the Effective Time, the Paying Agent shall mail to
each record holder of Certificates that immediately prior to the Effective Time
represented shares of Common Stock (other than Certificates representing shares
of Common Stock held by Parent or the Purchaser, any wholly owned subsidiary of
Parent or the Purchaser, in the treasury of the Company or by any wholly owned
subsidiary of the Company and other than Certificates representing Dissenting
Shares) a form of letter of transmittal which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Paying Agent and instructions
for use in surrendering such Certificates and receiving the Merger Consideration
in respect thereof. Upon the surrender of each such Certificate, the Paying
Agent shall pay the holder of such Certificate the Merger Consideration
multiplied by the number of shares of Common Stock formerly represented by such
Certificate, in consideration therefor, and such Certificate shall be cancelled.
Until so surrendered, each such Certificate (other than Certificates
representing shares of Common Stock held by Parent or the Purchaser, any wholly
owned subsidiary of Parent or the Purchaser, in the treasury of the Company or
by any wholly owned subsidiary of the Company and other than Certificates
representing Dissenting Shares) shall represent solely the right to receive the
aggregate Merger Consideration relating thereto. No interest or dividends shall
be paid or accrued on, or with respect to, the Merger Consideration. If the
Merger Consideration (or any portion thereof) is to be delivered to any person
other than the person in whose name the Certificate formerly representing shares
of Common Stock surrendered therefor is registered, it shall be a condition to
such right to receive such Merger Consideration that the Certificate so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person surrendering such shares of Common Stock shall pay
to the Paying Agent any transfer or other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
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of the Certificate surrendered, or shall establish to the satisfaction of the
Paying Agent that such tax has been paid or is not applicable.
(c) Promptly following the date which is 90 days after the Effective
Time (or such later date as the Surviving Corporation shall request), the Paying
Agent shall deliver to the Surviving Corporation all cash, Certificates and
other documents in its possession relating to the Transactions, and the Paying
Agent's duties shall terminate. Thereafter, each holder of a Certificate
formerly representing a share of Common Stock may surrender such Certificate to
the Surviving Corporation and (subject to applicable abandoned property, escheat
and similar laws) receive in consideration therefor the aggregate Merger
Consideration relating thereto, without any interest or dividends thereon.
(d) From and after the Effective Time, there shall be no transfers on
the stock transfer books of the Surviving Corporation of any shares of Common
Stock which were outstanding immediately prior to the Effective Time. If, on or
after the Effective Time, Certificates formerly representing shares of Common
Stock are presented to the Surviving Corporation or the Paying Agent, they shall
be surrendered and cancelled in return for the payment of the aggregate Merger
Consideration relating thereto, as provided in this Article II, subject to
applicable law in the case of Dissenting Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that:
Section 3.1. Organization and Qualification; Subsidiaries. The
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Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of the Company's subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. The Company and each of its
subsidiaries has the requisite corporate power and authority to own, operate or
lease its properties and to carry on its business as it is now being conducted,
and is duly qualified or licensed to do business, and is in good standing, in
each jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary, except where the failure to have such power or authority, or the
failure to be so qualified, licensed or in good standing, could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company. The term "Material Adverse Effect on the
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Company," as used in this Agreement, means any change in or effect on the
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business, assets, liabilities, financial condition, results of operations,
profitability or prospects of the Company or any of its subsidiaries that is
materially adverse to the Company and its subsidiaries taken as a whole.
Section 3.2. Certificate of Incorporation and By-Laws. The Company
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has heretofore made available to Parent and Merger Sub a complete and correct
copy of the certificate of incorporation and the by-laws or comparable
organizational documents, each as amended to, and as in effect on, the date
hereof, of the Company and each of its subsidiaries.
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Section 3.3. Capitalization; Subsidiaries.
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(a) The authorized capital stock of the Company consists of 99,000,000
shares of Common Stock and 1,000,000 shares of Preferred Stock, par value $.01
per share (the "Preferred Stock"), one share of which Preferred Stock is
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designated "Series A Preferred Stock" (the "Series A Preferred Stock"), one
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share of which is designated "Series B Special Voting Preferred Stock" (the
"Series B Preferred Stock), 100,000 shares of which are designated "Series C
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Junior Participating Preferred Stock" (the "Series C Preferred Stock") and
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authorized in connection with the Rights Agreement, and 894,663 shares of which
are designated "Series D Convertible Preferred Stock" (the "Series D Preferred
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Stock"). As of April 5, 2001, 12,927,017 shares of Common Stock were issued and
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outstanding, one share of Series B Preferred Stock was issued and outstanding,
803,353 shares of Series D Preferred Stock were issued and outstanding and no
shares of Series A Preferred Stock or Series C Preferred Stock were outstanding.
As of April 5, 2001, no shares of Common Stock were held in treasury.
(b) As of the date hereof, 3,376,746 shares of Common Stock were
reserved for issuance upon exercise of options outstanding under the Company's
Stock Plans. As of the date hereof, the Company has options to purchase shares
of Common Stock outstanding and issued as listed by individuals holding such
options (including exercise price and vesting schedule) in Section 3.3(b) of the
disclosure schedule delivered to Parent by the Company on the date hereof (the
"Company Disclosure Schedule"). As of April 5, 2001, 5,306,317 Exchangeable
----------------------------
Shares were outstanding which are exchangeable by the holders of such shares at
any time for shares of Common Stock on a one-for-one basis. All the outstanding
shares of Common Stock and the Exchangeable Shares are, and all shares of Common
Stock which may be issued pursuant to the exercise of outstanding Options or the
retraction or redemption of the Exchangeable Shares will be, when issued in
accordance with the respective terms thereof, duly authorized, validly issued,
fully paid and nonassessable and are not subject to, nor were they issued in
violation of, any pre-emptive rights. There are no bonds, debentures, notes or
other indebtedness having general voting rights (or convertible into securities
having such rights) ("Voting Debt") of the Company or any of its subsidiaries
-----------
issued and outstanding.
(c) Except (i) as set forth in Section 3.3(b), (ii) for the Rights,
(iii) for the 200,000 warrants issued in April 1999 to DataCard Corporation (the
"DataCard Warrants") each of which has an exercise price of $6.00 per share and
-----------------
(iv) for the transactions contemplated by this Agreement (the "Transactions"),
------------
there are no existing options, warrants, calls, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the issued
or unissued capital stock of the Company or any of its subsidiaries, obligating
the Company or any of its subsidiaries to issue, transfer or sell or cause to be
issued, transferred or sold any shares of capital stock or Voting Debt of, or
other equity interest in, the Company or any of its subsidiaries or securities
convertible into or exchangeable for such shares or equity interests and neither
the Company nor any of its subsidiaries is obligated to grant, extend or enter
into any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment. Except as contemplated by this Agreement and except
for the Company's obligations in respect of the Options under the Stock Plans,
the Exchangeable Shares and the DataCard Warrants, there are no outstanding
contractual obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any shares of Common Stock or the capital stock or
-9-
other equity interests of the Company or any of its subsidiaries. Each of the
outstanding shares of capital stock or other equity interests of each of the
Company's subsidiaries is duly authorized, validly issued, fully paid, and to
the extent applicable, nonassessable, and, except as set forth in Section 3.3(c)
of the Company Disclosure Schedule, such shares or other equity interests of the
Company's subsidiaries as are owned by the Company or by a subsidiary of the
Company are owned in each case free and clear of any lien, claim, option,
charge, security interest, limitation, encumbrance and restriction of any kind
(any of the foregoing being a "Lien"). Except as set forth in Section 3.3(c) of
----
the Company Disclosure Schedule, the Company has not agreed to register any
securities under the United States Securities Act of 1933, as amended, and the
rules and regulations thereunder (the "Securities Act"), or under any state
--------------
securities law or granted registration rights to any person or entity; copies of
any registration rights agreements set forth in Section 3.3(c) of the Company
Disclosure Schedule have previously been provided to Parent. Set forth in
Section 3.3(c) of the Company Disclosure Schedule is a complete and correct list
of each subsidiary (direct or indirect) of the Company and any joint ventures,
partnerships or similar arrangements in which the Company has an interest (and
the amount and percentage of any such interest). No entity in which the Company
owns, directly or indirectly, less than a 50% equity interest is, individually
or when taken together with all such other entities, material to the business of
the Company and its subsidiaries taken as a whole.
Section 3.4. Authority Relative to this Agreement. The Company has
------------------------------------
all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the Transactions (except that the Merger requires
Stockholder Approval (as defined below)). The execution and delivery of this
Agreement by the Company and the consummation by the Company of the Transactions
have been duly and validly authorized and approved by the Board and the Special
Committee and no other corporate proceedings on the part of the Company are
necessary to authorize or approve this Agreement or to consummate the
Transactions (other than the approval of this Agreement by the affirmative vote
of the holders of a majority of the then outstanding shares of Common Stock and
Exchangeables Shares, in each case, entitled to vote thereon, voting together as
a single class, to the extent required by applicable law ("Stockholder
-----------
Approval")). No corporate proceedings on the part of IVI Checkmate Ltd. are
--------
necessary in connection with this Agreement or the consummation of the
Transactions (other than the approval of the Resolution by the affirmative vote
of two-thirds of the votes cast in respect thereof). This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due and
valid authorization, execution and delivery of this Agreement by Parent and
Merger Sub, constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
Section 3.5. No Conflict; Required Filings and Consents.
------------------------------------------
(a) Assuming (i) the filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), foreign or
-------
supranational antitrust, competition, trade regulatory or similar laws, rules or
regulations ("Antitrust Laws"), and the Investment Canada Act (Canada) are made
--------------
and the waiting periods thereunder have been terminated or have expired, (ii)
the requirements of the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "Exchange Act"), and any
------------
applicable state securities, "blue sky" or takeover laws, statutes and any
applicable provincial
-10-
securities laws, rules or instruments are met, (iii) the filing of the
certificate of merger and other appropriate merger documents, if any, as
required by the DGCL, is made, (iv) Stockholder Approval is received and (v) the
Resolution is passed, none of the execution and delivery of this Agreement by
the Company, the consummation by the Company of the Transactions or compliance
by the Company with any of the provisions hereof will (a) conflict with or
violate the Certificate of Incorporation or By-Laws of the Company or the
comparable organizational documents of any of its subsidiaries, (b) conflict
with or violate any statute, ordinance, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries, or by which any of
them or any of their respective properties or assets may be bound or affected,
or (c) result in a violation or breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in any loss of any material benefit, or the creation
of any Lien on any of the property or assets of the Company or any of its
subsidiaries (any of the foregoing referred to in clause (b) or this clause (c)
being a "Violation") pursuant to, any note, bond, mortgage, indenture, contract,
---------
agreement, arrangement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective
properties may be bound or affected, except in the case of the foregoing clauses
(b) or (c) for any such Violations which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company, or could not, individually or in the aggregate, reasonably be expected
to prevent or materially delay consummation of the Transactions. Section 3.5(a)
of the Company Disclosure Schedule sets forth any such Violation of clause (c)
of the immediately preceding sentence.
(b) None of the execution and delivery of this Agreement by the
Company, the consummation by the Company of the Transactions or compliance by
the Company with any of the provisions hereof will require any consent, waiver,
approval, authorization or permit of, or registration or filing with or
notification to (any of the foregoing being a "Consent"), any federal, state,
-------
provincial, local, foreign or supranational administrative, governmental or
regulatory authority, agency, commission, tribunal or body (a "Governmental
------------
Entity"), except for (i) compliance with any applicable requirements of the
------
Exchange Act, (ii) the filing of the certificate of merger pursuant to the DGCL,
(iii) compliance with the HSR Act and any requirements of any Antitrust Laws and
the Investment Canada Act (Canada), (iv) Consents, which are listed on Section
3.5(b) of the Company Disclosure Schedule, the failure of which to obtain or
make could not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on the Company or reasonably be expected to prevent or
materially delay consummation of the Transactions, (v) compliance with the
requirements of applicable Canadian corporate and securities legislation in
respect of the Canadian Special Meeting and (vi) the filing of any articles
required to implement the Resolution.
Section 3.6. SEC Reports and Financial Statements.
------------------------------------
(a) The Company has filed with the SEC all forms, reports, schedules,
registration statements and definitive proxy statements required to be filed by
the Company with the SEC since January 1, 1998 (as they have been amended since
the time of their filing, collectively, the "SEC Reports"). As of their
-----------
respective dates, the SEC Reports (including but
-11-
not limited to any financial statements or schedules included or incorporated by
reference therein) complied in all material respects with the requirements of
the Exchange Act and the Securities Act, and the rules and regulations of the
SEC promulgated thereunder applicable, as the case may be, to such SEC Reports,
and, as of their respective dates, none of the SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(b) The Company has heretofore furnished to Parent the latest
available drafts of filings to be made with the SEC pursuant to the Exchange Act
which have not been filed with the SEC, including without limitation drafts of
the Company's Annual Report to Stockholders (collectively, the "Draft Filings").
-------------
Each of the Draft Filings will comply when filed as to form in all material
respects with the provisions of the Exchange Act, and will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated or incorporated by reference therein, or necessary to make the
statement made therein, in light of the circumstances under which they were
made, not misleading.
(c) The financial statements of the Company included in the SEC
Reports at the time filed (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing,
respectively, and, in the case of any SEC Report amended or superseded by a
filing prior to the date of this Agreement, then on the date of such amending or
superseding filing) complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
----
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC), and fairly
present (subject, in the case of unaudited statements, to normal, recurring
audit adjustments) the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended. No subsidiary of
the Company is subject to the periodic reporting requirements of the Exchange
Act or required to file any form, report or other document with the SEC, the
Nasdaq Stock Market, any stock exchange or any other comparable Governmental
Authority except for IVI Checkmate Ltd. which is subject to the continuous
disclosure requirements of the securities legislation of the Canadian
Jurisdictions. IVI Checkmate Ltd. has received an exemption order dated June 2,
1998 (the "Exemption Order") from the securities regulatory authorities of the
---------------
Canadian Jurisdictions which exempts it from the continuous disclosure
requirements of these jurisdictions.
(d) Except as reflected, reserved against or otherwise disclosed in
the financial statements of the Company included in the SEC Reports or as
otherwise disclosed in the SEC Reports, in each case, filed prior to the date of
this Agreement or as set forth in Section 3.6(d) of the Company Disclosure
Schedule, as of the date hereof, neither the Company nor any of its subsidiaries
has any liabilities or obligations (absolute, accrued, fixed, contingent or
otherwise) which would be required to be reflected on a balance sheet or the
notes thereto prepared in accordance with GAAP, other than liabilities incurred
in the ordinary course of business
-12-
consistent with past practice since December 31, 2000 which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
(e) Since December 31, 2000, (i) no development or event has occurred
that has, or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company or on the ability of the
Company, Parent or Merger Sub to consummate the Transactions, (ii) the Company
and each of its subsidiaries has conducted its respective operations in the
ordinary and usual course of business consistent with past practice and (iii)
neither the Company nor any of its subsidiaries has taken any action or omitted
to take any action, which act or omission, if after the date of this Agreement,
would result in a breach or violation of Section 5.1.
(f) The Company has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications which have not yet been filed
with the SEC to agreements, documents or other instruments which previously had
been filed by the Company with the SEC pursuant to the Securities Act or the
Exchange Act.
Section 3.7. IVI Checkmate Ltd. IVI Checkmate Ltd. is a reporting
------------------
issuer in each of the Canadian Jurisdictions and is not in default of, and has
filed all forms, reports and documents required to be filed under, any of the
requirements of the securities legislation of the Canadian Jurisdictions for
which it has not received relief from pursuant to the Exemption Order. No
securities commission, stock exchange or similar regulatory authority has issued
or threatened to issue any order preventing or suspending trading in any
securities of IVI Checkmate Ltd. nor has the Company or IVI Checkmate Ltd.
received notice that any such order is pending. IVI Checkmate Ltd. has complied
with, and is currently in compliance with, the terms and conditions of the
Exemption Order and the Exemption Order continues to have effect, unamended, as
of the date of this Agreement.
Section 3.8. Employee Benefit Matters.
------------------------
(a) Section 3.8(a) of the Company Disclosure Schedule lists any
employee benefit plan, program, policy, practice, or other arrangement,
agreement or understanding providing benefits to any current or former employee,
officer or director of the Company or any of its subsidiaries or any beneficiary
or dependent thereof that is sponsored or maintained by the Company or any of
its subsidiaries or to which the Company or any of its subsidiaries contributes
or is obligated to contribute, whether or not written, including without
limitation any employee welfare benefit plan within the meaning of Section 3(1)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
-----
any employee pension benefit plan within the meaning of Section 3(2) of ERISA
(whether or not such plan is subject to ERISA), any bonus, incentive, deferred
compensation, vacation, stock purchase, stock option, severance, employment,
change of control or fringe benefit plan, program or policy, and any contract,
offer letter or agreement of the Company or any of its subsidiaries with or
addressed to any individual who is rendering or has rendered services thereto as
an employee or consultant pursuant to which the Company or any of its
subsidiaries has any actual or contingent liability or obligation to provide
compensation and/or benefits in consideration for past, present or future
services (the "Employee Benefit Plans").
----------------------
-13-
(b) With respect to each Employee Benefit Plan, the Company has
delivered to Parent a true, correct and complete copy of: (i) each writing
constituting a part of such Plan, including without limitation all plan
documents, trust agreements, and insurance contracts and other funding vehicles;
(ii) the most recent Annual Report (Form 5500 Series) and accompanying schedule,
if any; (iii) the current summary plan description and any material
modifications thereto, if any; (iv) the most recent annual financial report, if
any; (v) the most recent actuarial report, if any; and (vi) the most recent
determination letter from the Internal Revenue Service, if any. Except as
specifically provided in the foregoing documents delivered to Parent, there are
no amendments to any Plan that has been adopted or approved.
(c) Except as discussed in Section 3.8(c) of the Company Disclosure
Schedule, (i) all Employee Benefit Plans are in compliance with and have been
administered in compliance with all applicable requirements of law, including,
but not limited to, the Code and ERISA (except with respect to the Employee
Benefit Plans offered exclusively in Canada), if applicable, and have been
operated in accordance with their terms, and all contributions required to be
made to each such plan under the terms of such plan, ERISA or the Code, as
applicable, for any period through the date hereof have been timely paid or made
in full and through the Effective Time will be timely paid or made in full; (ii)
no nonexempt "prohibited transaction" (as defined in Section 4975 of the Code or
Section 406 of ERISA) has occurred with respect to any Employee Benefit Plan
which would reasonably be expected to subject any Employee Benefit Plan (or its
related trust), the Company or any subsidiary or any person the Company or its
subsidiaries has an obligation to indemnify, to a tax or penalty imposed under
Section 4975 of the Code or Section 502 or ERISA; (iii) none of the Company, its
subsidiaries or any entity, trade or business that is considered one employer
with the Company or any of its subsidiaries under Section 4001(a)(14) of ERISA
or Section 414(b) or (c) of the Code (an "ERISA Affiliate") is required to
---------------
contribute to, or during the five-year period ending on the Effective Time will
have been required to contribute to, or could have any liability under, any
"multiemployer plan" (as defined in Section 3(37) of ERISA); (iv) each Employee
Benefit Plan which is not maintained in the United States is funded and/or book
reserved for in accordance with applicable laws and reasonable accounting
assumptions; and (v) there is no pending or, to the Company's knowledge,
threatened legal action, suit or claim relating to any current or former
employee of the Company or its subsidiaries or any Employee Benefit Plan other
than routine claims for benefits that could not reasonably be expected to result
in any material liability to the Company or its subsidiaries or any person the
Company or its subsidiaries has an obligation to indemnify.
(d) Section 3.8(d) of the Company Disclosure Schedule identifies each
Employee Benefit Plan that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code ("Qualified Plans"). The Internal Revenue
---------------
Service has issued a favorable determination letter with respect to each
Qualified Plan and the related trust that has not been revoked, and, to the
Company's knowledge, there are no existing circumstances and no events have
occurred that could adversely affect the qualified status of any Qualified Plan
or the related trust.
(e) No Employee Benefit Plan is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code.
-14-
(f) The Company and its subsidiaries have no liability for life,
health, medical or other welfare benefits to former employees or beneficiaries
or dependents thereof, except for health continuation coverage as required by
Section 4980B of the Code or Part 6 of Title I of ERISA or other applicable
laws. The Company and each of its subsidiaries has reserved the right to amend,
terminate or modify at any time all plans or arrangements providing for retiree
health or life insurance coverage.
(g) No labor organization or group of employees of the Company or any
of its subsidiaries has made a pending demand for recognition or certification,
and there are no representation or certification proceedings or petitions
seeking a representation proceeding presently pending or, to the Company's
knowledge, threatened to be brought or filed, with the National Labor Relations
Board or any other labor relations tribunal or authority. There are no
organizing activities, strikes, work stoppages, slowdowns, lockouts, material
arbitrations or material grievances, or other material labor disputes pending
or, to the Company's knowledge, threatened against or involving the Company or
any of its subsidiaries. Each of the Company and its subsidiaries is in
compliance with all applicable laws and collective bargaining agreements
respecting employment and employment practices, terms and conditions of
employment, wages and hours and occupational safety and health.
(h) Each individual who renders services to the Company or any of its
subsidiaries who is classified by the Company or such subsidiary, as applicable,
as having the status of an independent contractor or other non-employee status
for any purpose (including for purposes of taxation and tax reporting and under
Employee Benefit Plans) is properly so characterized, except as would not be
reasonably expected to have a Material Adverse Effect on the Company.
(i) Other than as contemplated in Section 1.9 hereof and Section
3.8(i) of the Company Disclosure Schedule, the Transactions will not, separately
or in the aggregate, constitute a "change of control" under, require the consent
from or the giving of notice to a third party pursuant to, or accelerate
vesting, funding or repurchase rights under the terms, conditions or provisions
of any Employee Benefit Plan. Except as set forth in Section 3.8(i) of the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries is
a party to any agreement, contract or arrangement that could result, on account
of the Transactions, separately or in the aggregate (including upon any
subsequent termination of employment), in the payment of any excess parachute
payments within the meaning of Section 280G of the Code or any payment that
would be nondeductible under Section 162(m) of the Code. No such agreement,
contract or arrangement provides for the reimbursement of excise taxes under
Section 4999 of the Code or any income taxes under the Code. The total amounts
payable to the employees and consultants of the Company, as set forth in Section
3.8(i) of the Company Disclosure Schedule, as a result of the Transactions
contemplated by this Agreement and/or any subsequent employment termination
(excluding any cash-out or acceleration of options and restricted stock but
including any "gross-up" payments with respect thereto), based on compensation
data applicable as of the date hereof, calculated assuming effective Federal tax
rates of 39.6%, will not exceed the amount set forth on such Schedule.
-15-
Section 3.9. Litigation. Except as specifically disclosed in the
----------
SEC Reports filed prior to the date of this Agreement, there is no suit, claim,
action, proceeding or investigation pending or threatened in writing against the
Company or any of its subsidiaries before any Governmental Entity which could,
individually or in the aggregate, if adversely determined, reasonably be
expected to have a Material Adverse Effect on the Company or prevent or
materially delay the consummation of the Transactions. Except as specifically
disclosed in the SEC Reports filed prior to the date of this Agreement, neither
the Company nor any of its subsidiaries is subject to any outstanding order,
writ, injunction or decree which could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company or
prevent or materially delay the consummation of the Transactions.
Section 3.10. Information. None of the information supplied by the
-----------
Company in writing specifically for inclusion or incorporation by reference in
(i) the Proxy Statement or (ii) any other document to be filed with the SEC or
any other Governmental Entity prior to the Effective Time (the "Other Filings")
-------------
will, at the respective times filed with the SEC or other Governmental Entity
and, in addition, in the case of the Proxy Statement, at the date it or any
amendment or supplement is mailed to the Stockholders, at the time of the
Special Meeting and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act, except that no representation is made by the Company with respect
to statements made therein based on information supplied by Parent or Merger Sub
in writing specifically for inclusion in the Proxy Statement.
Section 3.11. Taxes.
-----
(a) Except as set forth in 3.11(a) of the Company Disclosure Schedule
and except as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company: (i) all Tax Returns
required to be filed (taking into account extensions) on or before the Effective
Time for taxable periods ending on or before the Effective Time by, or with
respect to any activities of, or property owned by, the Company, its
subsidiaries, or each affiliated, consolidated, combined or unitary group that
included or includes the Company or any of its subsidiaries (a "Tax Group"),
---------
have been or will be filed in accordance with all applicable laws and are true,
correct and complete in all respects as filed and have not been amended, all
Taxes shown as due on such Tax Returns have been or will be timely paid, and
reserves reflected on the most recent balance sheet of the Company are in
accordance with GAAP and are sufficient to cover all Taxes (whether or not shown
as due on any Tax Return) accrued as of such date and, adjusted for the passage
of time, will be sufficient to cover all Taxes as of the Effective Time; (ii)
all Taxes required to be withheld by the Company or its subsidiaries have been
withheld, and such withheld Taxes have either been duly and timely paid to the
proper Governmental Entities or set aside in accounts for such purpose if not
yet due; (iii) no Tax Return filed by the Company or any of its subsidiaries is
currently under audit by any Taxing Authority or is the subject of any judicial
or administrative proceeding, and to the Company's knowledge no Taxing Authority
is threatening to commence any such audit; (iv) no Taxing Authority is now
asserting against the Company or any of its subsidiaries any deficiency or claim
-16-
for Taxes or any adjustment of Taxes; (v) other than any Tax sharing or
indemnification agreement to which the parties are exclusively the Company
and/or some or all of its subsidiaries, neither the Company nor any of its
subsidiaries is subject to or bound by any Tax sharing agreement (or other
arrangement or practice for the sharing of Taxes); (vi) neither the Company nor
any of its subsidiaries has ever been a member of a Tax Group, other than one
for which the Company or one of its subsidiaries was the common parent; (vii)
there are no liens for Taxes (other than Taxes not yet due) upon any of the
assets of the Company or any of its subsidiaries; and (viii) neither the Company
nor any of its Subsidiaries has any liability for the Taxes of any person other
than the Company and its subsidiaries.
(b) Neither the Company nor any of its subsidiaries is or has been a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(c) Neither the Company nor any of its subsidiaries has constituted a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (i) in the
past 24-month period or (ii) in a distribution which could otherwise constitute
part of a "plan" or "series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.
(d) Prior to the date hereof, the Company has provided Parent with
written schedules of (i) the taxable years of the Company for which the statute
of limitations with respect to federal, state and local income Taxes has not yet
expired, and (ii) with respect to federal, state and local income Taxes, those
years for which examinations by a Taxing Authority have been completed, those
years for which examinations by a Taxing Authority have commenced but not yet
been completed, and those years for which examinations by a Taxing Authority
have not yet commenced.
(e) IVI Checkmate Ltd. has withheld from each payment made to any non-
resident of Canada the amount of all Taxes and other deductions required to be
withheld or remitted in respect thereof and has remitted any such withheld
amounts to the proper Taxing Authority within the time required by law.
(f) Section 3.11(f) of the Company Disclosure Schedule sets out, to
the best knowledge of the Company, acting in good faith, a preliminary estimate
of the paid-up capital of all issued and outstanding shares of IVI Checkmate
Ltd. for the purposes of the Income Tax Act (Canada) (the "ITA") and any
---
relevant principal taxing statute.
(g) No amount in respect of any outlay or expense that is deductible
for the purposes of computing the income of IVI Checkmate Ltd. for the purposes
of the ITA has been owing by IVI Checkmate Ltd. for longer than two years to a
person not dealing at arm's length (for the purposes of the ITA) with IVI
Checkmate Ltd. at the time the outlay or expense was incurred.
-17-
(h) Except as set forth in Section 3.11(h) of the Company Disclosure
Schedule, there are no circumstances which exist and would result in, or which
have existed and resulted in, Sections 79 or 80 of the ITA applying to IVI
Checkmate Ltd.
(i) IVI Checkmate Ltd. has neither directly nor indirectly transferred
property to or supplied services to or acquired property or services from a
person, corporation, partnership, trust or other taxpayer with whom it was not
dealing at arm's length (for the purposes of the ITA) for consideration other
than consideration equal to the fair market value of the property or services at
the time of the transfer, supply or acquisition of the property or services.
(j) IVI Checkmate Ltd. has not entered into any advance pricing
agreement with any Taxing Authority.
(k) Neither IVI Checkmate Ltd. nor any corporation to which IVI
Checkmate Ltd. is related (for the purposes of the ITA) is a corporation whose
principal business is (A) the lending of money to persons with whom such
corporation is dealing at arm's length (for the purposes of the ITA); (B) the
purchasing of debt obligations issued to such persons; or (C) a combination
thereof.
(l) IVI Checkmate Ltd. has not been party to any elections filed under
sections 83 or 85 of the ITA.
(m) All applicable retail sales tax was paid by IVI Checkmate Ltd. on
the initial acquisition of its tangible personal property and none of the assets
of IVI Checkmate Ltd. have been transferred at any time on a tax exempt basis
under section 13 of regulation 1013 of the Retail Sales Tax Act (Ontario).
(n) IVI Checkmate Ltd. has not made any elections under the Excise Tax
Act (Canada).
(o) None of the Company's wholly-owned Subsidiaries owns shares of
Common Stock, and neither the Company nor any of its Subsidiaries owns any
shares of the Company's Preferred Stock.
(p) "Tax" or "Taxes" means any and all taxes, fees, assessments,
--- -----
levies, duties, tariffs, imposts, and other charges of any kind (together with
any and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any Governmental Entity, including, without
limitation, taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property, assets, sales, use, capital
stock, payroll, employment, social security, workers' compensation, unemployment
compensation, severance, occupation, or net worth; taxes or other charges in the
nature of excise, withholding, ad valorem, stamp, transfer, estimated, value
added, or gains taxes; license, registration and documentation fees; and
customs' duties, tariffs, and similar charges. "Taxing Authority" means any
----------------
Governmental Entity having jurisdiction over the assessment, determination,
collection or other imposition of any Tax. "Tax Return" means any return,
----------
-18-
declaration, report, claim for refund, information statement, schedule or other
document (including any related or supporting information and including any Form
1099 or other document or report required to be provided by the Company or any
of its subsidiaries to third parties) relating to Taxes, including any document
required to be retained or provided to any Taxing Authority relating to the
Company or any of its subsidiaries or any consolidated group of which any such
entity was a member at the applicable time, and any amended Tax Returns.
Section 3.12. Intellectual Property. The Company owns, or
---------------------
possesses adequate rights to use, all Intellectual Property that is used in the
conduct of the business of the Company and its subsidiaries. The Company has
not received any notice of any conflict with or violation or infringement of,
any asserted rights of any other person with respect to any Intellectual
Property owned or licensed by the Company or any of its subsidiaries, which
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company. The conduct of the Company's and its
subsidiaries' respective businesses as currently conducted does not conflict
with any patents, registered trademarks, registered copyrights or, to the
Company's knowledge, any patent rights, licenses, trademark rights, trade names,
trade name rights, unregistered copyrights or any other rights of others with
respect to Intellectual Property, in any way that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company. To the Company's knowledge, there is no infringement of any
proprietary right owned by or licensed by or to the Company or any of its
subsidiaries that could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company. "Intellectual
------------
Property" means all domestic or foreign trademarks (registered and unregistered)
--------
and trademark applications and registrations, patents, patent applications,
inventions (whether or not patentable), processes, products, technologies,
discoveries, copyrightable and copyrighted works, apparatus, trade secrets,
brand names, certification marks, service marks and service ▇▇▇▇ applications
and registrations, trade names, trade dress, copyright registrations, design
rights, mask works, technical information (whether confidential or otherwise),
and all documentation thereof.
Section 3.13. Certain Approvals. The Board has taken appropriate
-----------------
action such that the provisions of Section 203 of the DGCL will not apply to the
execution of this Agreement or any of the Transactions. No other state takeover
law or other law, rule or published policy that purports to limit or restrict
business combinations or the ability to vote shares or imposes requirements for
approval by any specific group of shareholders, other than such approvals
expressly provided for in this Agreement, applies to the execution of this
Agreement or any of the Transactions contemplated hereby.
Section 3.14. Brokers. Except as set forth on Section 3.14 of the
-------
Company Disclosure Schedule and except for the engagement of the Financial
Advisor, none of the Company, any of its subsidiaries, or any of their
respective officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions, contingent payments
or finder's fees in connection with the Transactions. The Company has
previously delivered to Parent a copy of the Company's engagement letter with
the Financial Advisor.
-19-
Section 3.15. Opinions of Financial Advisor. The Special Committee
-----------------------------
has received the written opinion of the Financial Advisor, to the effect that,
as of the date of such opinion, the Merger Consideration to be received by the
Stockholders is fair to the Stockholders (other than Parent and Merger Sub) from
a financial point of view. The Board of Directors of IVI Checkmate Ltd. has
received the written opinion of the Financial Advisor, to the effect that, as of
the date of such opinion, the Merger is fair to the Holders from a financial
point of view. The Company has previously delivered to Parent a copy of such
opinion.
Section 3.16. Vote Required. The affirmative vote of the holders
-------------
of a majority of the outstanding shares of Common Stock and Exchangeable Shares
entitled to vote with respect to this Agreement, voting together as a single
class, is the only vote of the holders of any class or series of the Company's
capital stock that is or may be necessary to approve this Agreement and the
Transactions. The affirmative vote of two-thirds of the votes cast in respect
of the Resolution is the only vote of the shareholders of IVI Checkmate Ltd.
(other than the approval by the Company as the holder of the common shares of
IVI Checkmate Ltd.) that is or may be necessary to approve the Resolution.
Section 3.17. Rights Agreement. The Company has taken all action
----------------
necessary or appropriate to amend its Rights Agreement (the "Rights Agreement
----------------
Amendment") so that (a) the execution of this Agreement and the consummation of
---------
the Transactions do not and will not result in the ability of any person to
exercise any Rights or enable or require such Rights to separate from the shares
of the Company's capital stock to which they are attached or to be triggered or
become exercisable, and (b) the Company's Shareholder Rights Agreement will
expire immediately prior to the Effective Time. The Company has provided Parent
with a copy of the Rights Agreement Amendment duly executed and delivered by the
Company and the Rights Agent.
Section 3.18. Environmental Matters. Except as set forth in
---------------------
Section 3.18 of the Company Disclosure Schedule or except as disclosed in the
SEC Reports or otherwise would not have a Material Adverse Effect:
(a) the Company and its subsidiaries are and have been in compliance
in all respects with federal, state, local and foreign laws and regulations
relating to pollution, protection or preservation of human health or the
environment ("Environmental Laws") relating to the generation, storage,
------------------
containment, disposal, transport or handling of regulated levels of hazardous or
toxic materials, substances or wastes ("Hazardous Materials"), including
-------------------
compliance with any environmental permits or similar governmental authorizations
or the terms and conditions thereof;
(b) there is no pending claim, investigation, order, or judicial or
administrative proceeding against the Company or any of its subsidiaries for any
violation of Environmental Laws or for investigation, remediation or clean up of
Hazardous Materials, or payment therefor, by any third party included in any
governmental authority, pursuant to any Environmental Law at any location owned
or operated by the Company or its subsidiaries, or at any location to which the
Company or any of its subsidiaries have sent Hazardous Materials; and
-20-
(c) there currently exist no facts or circumstances that could
reasonably be expected to (i) give rise to proceedings described in subsection
(b) above and (ii) prevent the renewal or reissuance, on terms reasonably
comparable to those in existence, or any permits or authorizations required for
the Company's operations under any Environmental Law as such laws currently
exist.
Section 3.19. Compliance with Applicable Laws. The Company and
-------------------------------
its subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities (the "Company Permits") required in order
---------------
to own their assets and to conduct their respective businesses as currently
conducted, except where the failure to hold such Company Permits, would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company. The Company and its subsidiaries are in
compliance with the terms of the Company Permits except where the failure to
comply would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company. The operations of the Company
and its subsidiaries have been conducted in compliance with all applicable laws,
ordinances and regulations of any Governmental Entity, except violations which
will not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company.
Section 3.20. Material Contracts. Except as identified in the
------------------
SEC Reports, neither the Company nor any of its subsidiaries is party to, nor is
the Company or any of its subsidiaries (or their respective assets) bound by,
any contract, indenture, lease or other agreement which, individually or in the
aggregate, is material to the Company and the subsidiaries taken as a whole.
Except as identified in the SEC Reports or in Section 3.20 of the Company
Disclosure Schedule, there are no (i) contracts, indentures, leases or other
agreements between the Company or any subsidiary, on the one hand, and any
current or former director, officer, employee or 5% or greater shareholder of
the Company or any of their affiliates or family members, on the other, or (ii)
any non-competition agreement or any other agreement or obligation which
purports to limit in any respect the manner in which, or the localities in
which, the business of the Company and its subsidiaries, is or would be
conducted. All contracts, indentures, leases and agreement to which the Company
or any of the subsidiaries is a party or by which any of their respective assets
is bound are valid and binding, in full force and effect in accordance with its
terms would and enforceable against the parties thereto in accordance with their
respective terms, other than such failures to be so valid and binding, in full
force and effect or enforceable which would not, either individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect on the
Company. There is not under any such contract, indenture or agreement any
existing default, or event, which after notice or lapse of time, or both, would
constitute a default, by the Company or any of its subsidiaries, or to the
Company's knowledge, any other party, except to the extent for any such defaults
or events that would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Company.
Section 3.21. Support Agreements. The individuals specified in
------------------
Annex A, have each duly executed a support agreement (the "Support Agreement")
-----------------
substantially in the form of Exhibit 3.20 hereto, copies of each of which
Support Agreement have been delivered to Parent.
-21-
Section 3.22. Ingenico Agreements. For purposes of this Article
-------------------
III and the Company Disclosure Schedules, the Company shall be deemed to have
disclosed the agreements by and between the Company and Parent and all of the
provisions thereof.
Section 3.23. Investments. IVI Checkmate Ltd. owns no shares or
-----------
debt instruments of, or other investments in, any affiliate of the Company other
than certain preferred shares and debt instruments of IVI Checkmate, Inc. (the
"Investments"). IVI Checkmate Ltd. holds the Investments as capital property
-----------
for the purposes of the ITA and the fair market value of each of the Investments
for the purposes of the ITA does not exceed the adjusted cost base to IVI
Checkmate Ltd. of each Investment for the purposes of the ITA.
Section 3.24. Stock Option Exchange Program. Attached hereto as
-----------------------------
Exhibit 3.24 is a true, accurate and complete copy of the Company Stock Option
Exchange Program dated as of January 25, 2001 and of all documents which may
grant any rights thereunder (the Company Stock Option Exchange Program, together
with all such documents, the "SOEP"). All New Options and Top Up Options (as
----
those terms are defined in the SOEP) issuable under the SOEP will, if issued, be
issued on August 31, 2001.
Section 3.25. Congress Financial Corporation (Southern). Each of
-----------------------------------------
the Company and Congress Financial Corporation (Southern) ("Congress Financial")
------------------
has duly executed and delivered an agreement (the "Waiver and Consent"), a copy
------------------
of which Waiver and Consent is attached hereto as Exhibit 3.25 and which as of
the Effective Time will not have been amended and will remain in full force and
effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and Merger Sub represent and warrant to the Company as follows:
Section 4.1. Organization and Qualification. Parent is a societe
------------------------------
anonyme duly organized, validly existing and in good standing under the laws of
the Republic of France. The Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
Parent and Merger Sub has the requisite corporate power and authority to own,
operate or lease its properties and to carry on its business as it is now being
conducted, and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction in which the nature of its business or the
properties owned, operated or leased by it makes such qualification, licensing
or good standing necessary, except where the failure to have such power or
authority, or the failure to be so qualified, licensed or in good standing,
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent. The term "Material Adverse Effect on
--------------------------
Parent," as used in this Agreement, means any change in or effect on the
------
business, assets, liabilities, financial condition, results of operations,
profitability or prospects of Parent or any of its subsidiaries that is
materially adverse to Parent and its subsidiaries taken as a whole.
-22-
Section 4.2. Authority Relative to this Agreement. Each of Parent
------------------------------------
and Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the Transactions. The execution and
delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the Transactions have been duly and validly authorized
and approved by the Supervisory Board of Parent and the Board of Directors of
Merger Sub and by Parent as sole stockholder of Merger Sub and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize or approve this Agreement or to consummate the Transactions. This
Agreement has been duly executed and delivered by each of Parent and Merger Sub
and, assuming the due and valid authorization, execution and delivery by the
Company, constitutes a valid and binding obligation of each of Parent and Merger
Sub enforceable against each of them in accordance with its terms.
Section 4.3. No Conflict; Required Filings and Consents.
------------------------------------------
(a) Assuming (i) the filings required under the HSR Act, the Antitrust
Laws and the Investment Canada Act (Canada) are made and the waiting periods
thereunder have been terminated or have expired, (ii) the requirements of the
Exchange Act and any applicable state securities, "blue sky" or takeover law are
met and (iii) the filing of the certificate of merger and other appropriate
merger documents, if any, as required by the DGCL is made, none of the execution
and delivery of this Agreement by Parent or Merger Sub, the consummation by
Parent or Merger Sub of the Transactions or compliance by Parent or Merger Sub
with any of the provisions hereof will (i) conflict with or violate the
organizational documents of Parent or Merger Sub, (ii) conflict with or violate
any statute, ordinance, rule, regulation, order, judgment or decree applicable
to Parent or Merger Sub, or by which any of them or any of their respective
properties or assets may be bound or affected, or (iii) result in a Violation
pursuant to any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
Merger Sub is a party or by which any of their respective properties or assets
may be bound or affected, except in the case of the foregoing clauses (ii) and
(iii) for any such Violations which could not, individually or in the aggregate,
reasonably be expected to prevent consummation of the Transactions.
(b) None of the execution and delivery of this Agreement by Parent and
Merger Sub, the consummation by Parent and Merger Sub of the Transactions or
compliance by Parent and Merger Sub with any of the provisions hereof will
require any Consent of any Governmental Entity, except for (i) compliance with
any applicable requirements of the Exchange Act and any state securities "blue
sky" or takeover law, (ii) the filing of the certificate of merger pursuant to
the DGCL, (iii) compliance with the HSR Act and any requirements of any foreign
or supranational Antitrust Laws and the Investment Canada Act (Canada) and (iv)
Consents the failure of which to obtain or make could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent or materially adversely affect the ability of Parent or reasonably be
expected to prevent consummation of the Transactions.
Section 4.4. Information. None of the information supplied or to be
-----------
supplied by Parent and Merger Sub in writing specifically for inclusion in the
Proxy Statement or the Other Filings will, at the respective times filed with
the SEC or such other Governmental Entity and, in addition, in the case of the
Proxy Statement, at the date it or any amendment or supplement is
-23-
mailed to the Stockholders, at the time of the Special Meeting and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
Section 4.5. Financing. At the Effective Time, Parent and Merger
---------
Sub will have available all of the funds necessary to consummate the
Transactions.
ARTICLE V
COVENANTS
Section 5.1. Conduct of Business of the Company. Except as
----------------------------------
permitted, required or specifically contemplated by, or otherwise described in,
this Agreement or otherwise with the prior written consent of Parent, during the
period from the date of this Agreement to the Effective Time, the Company will,
and will cause each of its subsidiaries to, conduct its operations only in the
ordinary and usual course of business consistent with past practice and will use
its reasonable best efforts, and will cause each of its subsidiaries to use its
reasonable best efforts, to preserve intact the business organization of the
Company and each of its subsidiaries, to keep available the services of its and
their present officers and key employees, and to preserve the good will of those
having business relationships with it, including, without limitation,
maintaining satisfactory relationships with licensors, suppliers, distributors,
customers and others having business relationships with the Company. Without
limiting the generality of the foregoing, and except as otherwise expressly
permitted, required or specifically contemplated by, or otherwise described in,
this Agreement, the Company will not, and will not permit any of its
subsidiaries to, prior to the Effective Time, without the prior written consent
of Parent:
(a) adopt or propose any amendment to its Certificate of Incorporation
or By-Laws or comparable organizational documents;
(b) (i) issue, reissue, pledge or sell, or authorize the issuance,
reissuance, pledge or sale of (A) additional shares of capital stock of any
class, or securities convertible into capital stock of any class, or any rights,
warrants or options to acquire any convertible securities or capital stock,
other than the issuance of shares of Common Stock, in accordance with the terms
of the instruments governing such issuance on the date hereof, pursuant to the
exercise of Options or the DataCard Warrants outstanding on the date hereof or
(B) any other securities in respect of, in lieu of, or in substitution for,
shares of its capital stock outstanding on the date hereof or (ii) make any
other changes in its capital structure;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock other than between any of the
Company and any of its wholly owned subsidiaries;
(d) split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities or create any
subsidiaries;
-24-
(e) (i) incur, assume or pre-pay any long-term debt or incur or
assume any short-term debt, except that the Company and its subsidiaries may
incur or pre-pay debt in the ordinary course of business in amounts and for
purposes consistent with past practice, including by repaying facilities with
SMTC Manufacturing Corporation of Canada, The Bank of Nova Scotia and Congress
Financial Corporation (Southern), (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except in the ordinary course of business
consistent with past practice, or (iii) make any loans, advances or capital
contributions to, or investments in, any other person except in the ordinary
course of business consistent with past practice and except for loans, advances
or capital contributions between any wholly owned subsidiary of the Company and
the Company or another wholly owned subsidiary of the Company;
(f) other than in the ordinary course of business consistent with past
practice, (i) modify, amend or terminate any material contract, (ii) except as
required by law, waive, release, relinquish, settle, compromise or assign any
material contract (or any of the Company's rights thereunder), right or claim,
or (iii) cancel or forgive any indebtedness owed to the Company or any of its
subsidiaries except in the ordinary course of business consistent with past
practice;
(g) (i) increase the compensation or severance payable or to become
payable to its directors, officers, employees or consultants (including the
grant of stock options or other equity or long-term compensation awards), except
for increases in salary or wages of employees of the Company or its subsidiaries
in accordance with past practices and except for increases set forth on Section
5.1(g)(i) of the Company Disclosure Schedule; (ii) except as set forth on
Section 5.1(g)(ii) of the Company Disclosure Schedule, grant any severance or
termination pay to, or enter into or amend any employment or severance agreement
with, any current or prospective employee of the Company or any of its
subsidiaries; or (iii) establish, adopt, enter into or amend any collective
bargaining agreement or Employee Benefit Plan, including, without limitation,
any plan that provides for the payment of bonuses or incentive compensation,
trust, fund, policy or arrangement for the benefit of any current or former
directors, officers, employees or consultants or any of their beneficiaries,
except, in each case, as may be required by law;
(h) file any Tax Return (except in the ordinary course of business),
or make or revoke any Tax election, or change any method of accounting, except
as required by law or to the extent that such action is consistent with past
practice and would not be material;
(i) other than in the ordinary course of business, enter into any
contract or agreement that would be material to the Company and its subsidiaries
taken as a whole;
(j) except as may be required as a result of a change in applicable
law or in GAAP, make any change in its methods or principles of accounting; or
(k) agree in writing or otherwise to take any of the foregoing actions
prohibited under this Section 5.1 or any action which would cause any
representation or warranty in this Agreement to be or become untrue or incorrect
in any material respect.
-25-
Section 5.2. Access to Information.
---------------------
(a) From the date of this Agreement until the Effective Time, the
Company will, and will cause its subsidiaries, and each of their respective
officers, directors, employees, counsel, advisors and representatives
(collectively, the "Company Representatives") to, give Parent and Merger Sub and
-----------------------
their respective officers, employees, counsel, advisors and representatives
(collectively, the "Parent Representatives") reasonable access, during normal
----------------------
business hours, to the offices and other facilities and to the books and records
of the Company and its subsidiaries and will cause the Company Representatives
and the Company's subsidiaries to furnish Parent, Merger Sub and the Parent
Representatives to the extent available with such financial and operating data
and such other information with respect to the business and operations of the
Company and its subsidiaries as Parent and Merger Sub may from time to time
reasonably request. The Company shall furnish to Parent and Merger Sub prior to
filing a copy of each report, schedule, registration statement and other
document to be filed by it or its subsidiaries during such period pursuant to
the requirements of federal or state securities laws.
(b) No investigation pursuant to this Section 5.2 shall affect any
representation or warranty in this Agreement of the Company or any condition to
the obligations of the parties hereto.
(c) All information furnished to Parent or Merger Sub or the Parent
Representatives shall be deemed "Evaluation Material" under the Confidentiality
Agreement between Parent and the Company dated October 30, 2000 (the
"Confidentiality Agreement") and Parent shall cause Merger Sub and the Parent
-------------------------
Representatives to honor and be bound by Parent's obligations thereunder.
(d) Each of the parties will use its reasonable best efforts to obtain
from applicable Canadian securities regulatory authorities such orders or
rulings as may be necessary so that, after the Effective Time, any requirements
of applicable Canadian securities legislation (including the rules and published
policies of the regulators) that might otherwise restrict transactions,
activities or relationships between IVI Checkmate Ltd. and Parent or any
affiliate of Parent or that might require public disclosure by or in respect of
IVI Checkmate Ltd. shall no longer be applicable.
Section 5.3. Reasonable Best Efforts.
-----------------------
(a) Subject to the terms and conditions provided herein, each of the
Company, Parent and Merger Sub shall, and the Company shall cause each of its
subsidiaries to, cooperate and use their respective reasonable best efforts to
(i) cause to be made all filings necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including but not limited to cooperation in the
preparation and filing of the Proxy Statement, the Circular with respect to the
Canadian Special Meeting, any required filings under the HSR Act, or other
foreign filings and any amendments to any thereof and (ii) respond promptly to
requests for further information by any Governmental Entity in connection with
any filings under the HSR Act or other foreign filings or amendments thereof.
-26-
(b) In addition, if at any time prior to the Effective Time any event
or circumstance relating to either the Company or Parent or Merger Sub or any of
their respective subsidiaries should be discovered by the Company, Parent or
Merger Sub, as the case may be, which should be set forth in an amendment to the
Proxy Statement, the discovering party will promptly inform the other parties of
such event or circumstance.
(c) Each of the parties will use its reasonable best efforts to obtain
as promptly as practicable all Consents of any Governmental Entity or any other
person required in connection with, and waivers of any Violations that may be
caused by, the consummation of the transactions contemplated by this Agreement.
Section 5.4. Public Announcements. The Company, on the one hand, and
--------------------
Parent and Merger Sub, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Merger and the other Transactions, agree to
provide to the other party for review a copy of any such press release or
statement, and shall not issue any such press release or make any such public
statement prior to such consultation and review, unless required by applicable
law or any listing agreement with a securities exchange.
Section 5.5. Indemnification.
---------------
(a) From and after the Effective Time, the Surviving Corporation shall
indemnify and hold harmless the officers and directors of the Company (the
"Indemnified Parties") in respect of acts or omissions occurring prior to the
-------------------
Effective Time to the extent currently provided under the Company's Certificate
of Incorporation or By-Laws.
(b) Parent agrees that the Company, and from and after the Effective
Time, the Surviving Corporation shall cause to be maintained in effect for not
less than six years (except as provided in the last sentence of this Section
5.5(b)) from the Effective Time the current policies of the directors' and
officers' liability insurance maintained by the Company; provided, that the
Surviving Corporation may substitute therefor other policies not less
advantageous to the beneficiaries of the current policies and provided that such
substitution shall not result in any gaps or lapses in coverage with respect to
matters occurring prior to the Effective Time; and provided, further, that the
Surviving Corporation shall not be required to pay aggregate premiums in excess
of $150,000 and if the Surviving Corporation is unable to obtain the insurance
required by this Section 5.5(b) it shall obtain the greatest comparable
insurance coverage as possible for an annual premium equal to such maximum
amount. Notwithstanding the foregoing, at any time on or after the third
anniversary of the Effective Time, Parent may, at its election, undertake to
provide funds to the Surviving Corporation to the extent necessary so that the
Surviving Corporation may self-insure at a level of coverage no less than that
otherwise required under this Section 5.5(b) in lieu of causing to remain in
effect any directors' and officers' liability insurance policy.
(c) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section, upon learning of any such claim, action, suit,
proceeding or
-27-
investigation, shall promptly notify Parent thereof. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) Parent or the Surviving Corporation shall have
the right, from and after the Effective Time, to assume the defense thereof and
Parent shall not be liable to such Indemnified Parties for any legal expenses of
other counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof provided that Parent assumes such
defense in a timely manner, (ii) the Indemnified Parties will cooperate in the
defense of any such matter and (iii) Parent shall not be liable for any
settlement effected without its prior written consent; and provided, further,
that Parent shall not have any obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall ultimately determine, and
such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
Section 5.6. Notification of Certain Matters. Parent and the Company
-------------------------------
shall promptly notify each other of (a) the occurrence or non-occurrence of any
fact or event which would be reasonably likely (i) to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time or (ii)
to cause any material covenant, condition or agreement under this Agreement not
to be complied with or satisfied in all material respects and (b) any failure of
the Company, Parent or Merger Sub, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder in any material respect; provided, however, that no such notification
shall affect the representations or warranties of any party or the conditions to
the obligations of any party hereunder. Each of the Company, Parent and Merger
Sub shall give prompt notice to the other parties hereof of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the Transactions.
Section 5.7. Takeover Laws. The Company shall, upon the request of
-------------
Parent or Merger Sub, take all reasonable steps to assist in any challenge by
Parent or Merger Sub to the validity or applicability to the Merger or the other
Transactions of any state takeover law or statute or any applicable provincial
securities law, rule or instrument or other similar law.
Section 5.8. Rights Agreement. The Company covenants and agrees
----------------
that it will not (i) redeem the Rights, (ii) amend the Rights Agreement or (iii)
take any action which would allow any Person (as defined in the Rights
Agreement) other than Parent or Merger Sub to acquire beneficial ownership of
15% or more of the Common Shares without causing a Stock Acquisition Date (as
defined in the Rights Agreement) or a Separation Time (as defined in the Rights
Agreement) to occur.
Section 5.9. No Solicitation.
---------------
(a) The Company, its affiliates and their respective officers,
directors, employees, representatives and agents shall immediately cease any
existing discussions or negotiations, if any, with any parties conducted
heretofore with respect to any acquisition or exchange of all or any material
portion of the assets of, or any equity interest in, the Company or any of its
subsidiaries or any business combination with the Company or any of its
subsidiaries. Notwithstanding the immediately preceding sentence, the Company
shall be permitted to engage
-28-
in discussions regarding the DataCard Warrants and Options issued under the
Stock Plans with the individual holders of such DataCard Warrants or Options,
which discussions shall be solely (i) in response to any exercise thereof in
accordance with the terms of the DataCard Warrants or Options, as the case may
be, and (ii) for the limited purpose of effecting the exercise thereof in
accordance with the terms of the DataCard Warrants or Options, as the case may
be. The Company agrees that, prior to the Effective Time, it shall not, and
shall not authorize or permit any of its subsidiaries or any of its or its
subsidiaries' directors, officers, employees, agents or representatives,
directly or indirectly, to solicit, initiate, encourage or facilitate, or
furnish or disclose non-public information in furtherance of, any inquiries or
the making of any proposal with respect to any merger, liquidation,
recapitalization, consolidation or other business combination involving the
Company or any of its subsidiaries or acquisition of any capital stock or any
material portion of the assets of the Company or its subsidiaries, or any
combination of the foregoing (an "Acquisition Transaction"), or negotiate,
-----------------------
explore or otherwise engage in discussions with any person (other than Merger
Sub, Parent or their respective directors, officers, employees, agents and
representatives) with respect to any Acquisition Transaction or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other Transactions contemplated by this
Agreement; provided that prior to the receipt of the Stockholder Approval, the
Company may furnish information, pursuant to a customary confidentiality
agreement, to, and negotiate or otherwise engage in discussions with, any party
who delivers a bona fide written proposal for an Acquisition Transaction for
which all necessary financing is then in the judgment of the Board readily
obtainable, if the Board determines in good faith by a vote of a majority of the
members of the full Board that failing to take such action would constitute a
breach of the fiduciary duties of the Board (after consultation and receipt of
advice from its outside legal counsel to such effect) and such a proposal is, in
the written opinion of the Financial Advisor, more favorable to the Company's
Stockholders from a financial point of view than the Transactions contemplated
by this Agreement as the same has been proposed to be amended by Parent pursuant
to Section 5.9(b) (such bona fide written proposal, a "Superior Proposal").
-----------------
Nothing herein shall prevent or prohibit, or be construed to prevent or
prohibit, the Company from complying with Rule 14e-2 of the Exchange Act.
(b) From and after the execution of this Agreement, the Company shall
promptly advise Merger Sub in writing of the receipt, directly or indirectly, of
any inquiries, discussions, negotiations or proposals relating to an Acquisition
Transaction, identify the offeror and furnish to Merger Sub a copy of any such
proposal or inquiry, if it is in writing, relating to an Acquisition
Transaction. The Company shall promptly advise Parent of any material
development relating to such proposal, including the results of any discussions
or negotiations with respect thereto. Notwithstanding anything in this
Agreement to the contrary, prior to the approval or recommendation of a Superior
Proposal by the Board, the Company shall give Parent sufficient notice of the
material terms and conditions of any such Acquisition Transaction, and negotiate
in good faith with Parent for a period of not less than three business days (the
"Negotiation Period") after it determines and notifies Parent that such proposal
------------------
or inquiry constitutes a Superior Proposal to make such adjustments in the terms
and conditions of this Agreement as would enable the Company to proceed with the
transactions contemplated herein.
-29-
Section 5.10. Equity Investment. Simultaneously with the execution
-----------------
of this Agreement, Parent or Merger Sub shall purchase two million and six-
hundred twenty thousand four hundred fifty three (2,620,453) validly issued,
fully paid and non-assessable shares of Common Stock from the Company at a price
equal to $2.00 per share of Common Stock.
Section 5.11. Additional Director; Board Committees.
-------------------------------------
Simultaneously with the execution of this Agreement, (a) the size of the Board
shall be automatically increased by one director, (b) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be
appointed to fill the vacancy created by such increase and (c) each Committee of
the Board shall be automatically increased by one director, and one of the
directors of the Company designated by Parent shall be appointed to each such
Committee.
Section 5.12. Registration Rights Agreement. Simultaneously with
-----------------------------
the execution of this Agreement, the Company and Parent shall enter into, duly
execute and deliver to each other a registration rights agreement (the
"Registration Rights Agreement") in the form attached hereto as Exhibit 5.12.
-----------------------------
Section 5.13. Stock Option Exchange Program. The Company will seek
-----------------------------
and use its reasonable best efforts to obtain releases, relinquishments and
waivers from all participants in the SOEP in a form satisfactory to Parent.
Section 5.14. Restructuring. Prior to the Effective Time, the
-------------
Company and its Subsidiaries shall exert their reasonable best efforts to effect
and complete such corporate reorganizations and restructurings as Parent may
reasonably request in writing prior to the Effective Date in order to complete
the Merger and re-order the affairs of the Company and its Subsidiaries in the
most advantageous manner possible from a tax, legal and business perspective,
provided that such reorganization is not materially prejudicial to the Company,
any of its Subsidiaries, or the public shareholders of the Company or IVI
Checkmate Ltd.
Section 5.15. Paid-Up Capital. Each of the parties will, following
---------------
the execution of this Agreement and before the Effective Time, act together in
good faith to determine the paid-up capital of all issued and outstanding shares
of IVI Checkmate Ltd.
Section 5.16. Series B Preferred Stock. At such time (prior to, at
------------------------
or after the Effective Time) as there shall be no outstanding Exchangeable
Shares which are not owned by the Company, any of its Subsidiaries or any person
directly or indirectly controlled by or under common control of the Company, and
there are no shares of stock, debt, options or other agreements of the Company
or any of its Subsidiaries which could give rise to the issuance of any
Exchangeable Shares to any person (other than the Company, any of its
Subsidiaries or any person directly or indirectly controlled by or under common
control of the Company), then at Parent's direction, the Company shall redeem
each share of Series B Preferred Stock outstanding, without any action on the
part of the holder thereof, in accordance with Section 6(c) of the Certificate
of the Powers, Designations, Preferences and Rights of the Series B Preferred
Stock of IVI Checkmate Corp., dated as of June 23, 1998.
Section 5.17. Parent Vote. Parent shall vote its shares of Common
-----------
Stock, and shall cause each of its affiliates that holds shares of Common Stock,
together with all subsequent
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transferees of the Common Stock held by Parent and each of its affiliates, to
vote their shares of Common Stock in favor of the Transactions.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1. Conditions. The respective obligations of Parent,
----------
Merger Sub and the Company to consummate the Merger are subject to the
satisfaction or waiver, at or before the Effective Time, of each of the
following conditions:
(a) Stockholder Approval. The Stockholder Approval shall have been
--------------------
obtained.
(b) Injunctions; Illegality. The consummation of the Merger shall not
-----------------------
be restrained, enjoined or prohibited by any order, judgment, decree, injunction
or ruling of a court of competent jurisdiction or any Governmental Entity and
there shall not have been any statute, rule or regulation enacted, promulgated
or deemed applicable to the Merger by any Governmental Entity which prevents the
consummation of the Merger or the other transactions contemplated hereby or has
the effect of making the purchase of shares of Common Stock illegal.
(c) Litigation. There shall not be pending any claim, action, suit,
----------
hearing, or proceeding ("Action") challenging or seeking to restrain or prohibit
------
the consummation of the Transactions, or any other Action filed against the
Company or any of its subsidiaries after the date of this Agreement that could
reasonably be expected to be determined adversely to the Company and, if
adversely determined, could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company or on the consummation
of the Transactions.
(d) HSR Act. Any waiting period (and any extension thereof) under the
-------
HSR Act applicable to the Merger shall have expired or terminated and any other
approvals or requirements under any other Antitrust Laws and the Investment
Canada Act (Canada) shall have been obtained or complied with.
(e) Termination. No party hereto shall have terminated this Agreement
-----------
as permitted herein.
Section 6.2. Parent and Merger Sub Conditions. In addition to the
--------------------------------
satisfaction, at or before the Effective Time, of the conditions set forth in
Section 6.1, the obligations of Parent and Merger Sub to consummate the Merger
are subject to the satisfaction, at or before the Effective Time, of each of the
following conditions:
(a) no action shall have been taken, nor shall any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction have been
enacted, enforced, promulgated, amended, issued or deemed applicable to the
Merger, by any legislative body, court, government or governmental,
administrative or regulatory authority or agency, other than the routine
application of the waiting period provisions of the HSR Act to the Merger, that
would
-31-
reasonably be expected to: (i) make illegal or otherwise prohibit or materially
delay consummation of the Merger or seek to obtain material damages or make the
Merger materially more costly, (ii) prohibit or materially limit the ownership
or operation by Parent or the Surviving Corporation of all or any material
portion of the business or assets of the Company or any of its subsidiaries
taken as a whole or compel Parent to dispose of or hold separately all or any
material portion of the business or assets of Parent or the Surviving
Corporation or any of its subsidiaries taken as a whole, or seek to impose any
material limitation on the ability of Parent or the Surviving Corporation to
conduct its business or own such assets, (iii) impose material limitations on
the ability of Parent effectively to acquire, hold or exercise full rights of
ownership of the shares of common stock of the Surviving Corporation, including,
without limitation, the right to vote any shares of common stock of the
Surviving Corporation acquired or owned by the Purchaser on all matters properly
presented to the Surviving Corporation's stockholders, or (iv) require
divestiture by Parent of any shares of common stock of the Surviving
Corporation;
(b) there shall not have occurred any development, event or condition
that has, or could reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the business, assets, liabilities,
financial condition, results of operations, profitability or prospects of the
Company and its subsidiaries taken as a whole;
(c) (i) each of the representations and warranties of the Company (A)
that are qualified as to materiality or (B) set forth in Section 3.3, shall be
true and correct, and (ii) each of such representations and warranties that are
not so qualified (other than the representations and warranties set forth in
Section 3.3) shall be true and correct in every respect except where the failure
of such representations and warranties to be true and correct could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company, in each case as if such representations and
warranties were made at and as of the date hereof and at and as of the Closing
Date (except as to any such representation or warranty which speaks as of a
specific date, which must be true and correct in the foregoing respects as of
such specific date); provided, however, that for purposes of this Section
6.2(c), the representations and warranties in Section 3.12 qualified "to the
Company's knowledge" shall be deemed not so qualified and shall be deemed made
without regard to the Company's knowledge (or lack of knowledge) with respect to
the statements made in Section 3.12;
(d) the Company shall have complied in all material respects with each
of its obligations, covenants and agreements contained herein;
(e) (i) the Special Committee and the Board shall not have withdrawn
or modified in a manner adverse to Parent or Merger Sub the adoption or
recommendation of the Merger or the Merger Agreement, and (ii) neither the
Special Committee nor the Board shall have resolved to do any of the foregoing;
(f) the Company shall have provided Parent and Merger Sub with a
certificate of the Chief Executive Officer of the Company, dated as of the
Closing Date, as to the satisfaction of the conditions set forth in Sections
6.1(a), 6.2(b), 6.2(c) and 6.2(d);
-32-
(g) the Holders shall have approved and adopted the Resolution by the
requisite vote, and the Exchange Amendment and any amendments to any other
documents necessary to implement the Resolution shall have become effective;
(h) the orders and rulings contemplated by Section 5.2(d) shall have
been obtained on terms acceptable to Parent acting reasonably, and shall be in
full force and effect; and
(i) all participants in the SOEP shall have duly executed and
delivered to the Company and Parent a release, relinquishment and waiver as
contemplated in Section 5.13; provided, however, that this condition shall lapse
on the business day next following the date on which all of the New Options and
Top Up Options (as those terms are defined in the SOEP) issuable under the SOEP
which have not otherwise been released, relinquished and waived in accordance
with Section 5.13 are granted.
ARTICLE VII
TERMINATION; AMENDMENTS; WAIVER
Section 7.1. Termination. This Agreement may be terminated and the
-----------
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, whether before or after receipt of the Stockholder Approval (unless
otherwise specified) (with any termination by Parent also being an effective
termination by Merger Sub):
(a) by the mutual written consent of Parent and the Company, by action
of the Supervisory Board (with respect to Parent) and of the Board (with respect
to the Company);
(b) by Parent or the Company if (i) the Merger shall not have been
consummated by September 30, 2001 (provided that if any Governmental Entity has
made a request for additional information under the HSR Act, such date shall be
extended to a date which is 60 days after substantial compliance with such
request, but in no event later than December 31, 2001), whether such date is
before or after the date of the Stockholder Approval (the "Termination Date")
----------------
(unless the failure to consummate the Merger by such date shall be due to the
breach of any obligation under this Agreement by the party seeking to terminate
this Agreement) or (ii) any condition to such party's obligation to consummate
the Merger shall have become impossible to satisfy on or prior to the
Termination Date (unless resulting from such party's breach of any of such
party's obligations under this Agreement);
(c) by Parent or the Company if any court or other Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger and such
order, decree or ruling or other action shall have become final and
nonappealable;
(d) by the Company if, prior to the receipt of the Stockholder
Approval, the Board approves or recommends a Superior Proposal; provided that
the termination described in this Section 7.1(d) shall not be effective unless
and until the Company shall have paid to Parent
-33-
all of the fees and expenses described in Section 8.9(b) including, without
limitation, the Termination Fee (as hereinafter defined);
(e) by Parent if the Board or the Special Committee (i) shall have
withdrawn or modified in a manner adverse to Merger Sub its approval or
recommendation of this Agreement or the Merger, (ii) shall have approved or
recommended another offer or an agreement to effect a proposal made by a third
party (other than an affiliate of Parent) to effect an Acquisition Transaction
or (iii) shall have resolved to effect any of the foregoing;
(f) by Parent if the board of directors of IVI Checkmate Ltd. does not
recommend, or withdraws or modifies in a manner adverse to Parent its
recommendation, that the holders of Exchangeable Shares vote in favor of the
Resolution;
(g) by Parent if any person (other than Parent or Merger Sub or any
affiliate thereof) shall have made a proposal or public announcement or
communication to the Company with respect to an Acquisition Transaction which,
pursuant to Section 5.9, the Company notifies Parent is a Superior Proposal;
(h) by Parent if there shall have occurred, and continued to exist,
(i) any general suspension of, or limitation on prices for, trading in
securities on the New York Stock Exchange or on the Paris Bourse (excluding
suspensions or limitations resulting solely from physical damage or interference
with such exchanges not related to market conditions), (ii) any decline of at
least 20% in the Dow ▇▇▇▇▇ Average of Industrial Stocks, the Standard & Poor's
500 Index or the CAC-40 Index from the close of business on the last trading day
immediately preceding the date of the Merger Agreement, (iii) any change in
currency exchange rates measured from the close of business on the date of the
Merger Agreement, resulting in an increase of 15% or more in the Merger
Consideration as translated from U.S. Dollars into Euros, (iv) a declaration of
a banking moratorium or any suspension of payments in respect of banks in the
United States, France or the European Union, or a material limitation (whether
or not mandatory) by any Governmental Entity on the extension of credit by banks
or other lending institutions, (v) a commencement of a war, armed hostilities or
other significant national or international crisis directly or indirectly
involving the United States or France, or (vi) in the case of any of the
foregoing clauses (i) and (ii) existing as of the date hereof, a material
acceleration or worsening thereof;
(i) (x) by Parent or the Company if, upon a vote taken at a duly held
meeting to obtain the Stockholder Approval, the Stockholder Approval is not
obtained, or (y) by Parent if, upon a vote taken at the Canadian Special Meeting
to obtain approval and adoption of the Resolution, the Holders' approval and
adoption of the Resolution is not obtained; or
(j) by the Company if (i) (A) any of the representations and
warranties of Parent or Merger Sub contained in this Agreement and qualified as
to materiality were when made or have since become untrue or incorrect or (B)
any other representations or warranties of Parent or Merger Sub contained in
this Agreement were when made or have become untrue or incorrect except where
the failure of such representations and warranties to be true and correct could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse
-34-
Effect on Parent or on the ability of Parent or Merger Sub to consummate the
Merger, or (ii) Parent or Merger Sub shall have breached or failed to comply in
any material respect with any of their respective agreements or obligations
under this Agreement, which breach shall not have been cured within 10 business
days following notice of such breach; and
(k) by Parent if (i) (A) any of the representations or warranties of
the Company (1) contained in this Agreement and qualified as to materiality or
(2) contained in Section 3.3 were when made or have since become untrue or
incorrect or (B) any other representations or warranties of the Company
contained in this Agreement (other than the representations and warranties set
forth in Section 3.3) were when made or have become untrue or incorrect except
where the failure of such representations and warranties to be true and correct
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company or on the ability of the Company to
consummate the Merger; provided, however, that for purposes of this Section
7.1(k), the representations and warranties in Section 3.12 qualified "to the
Company's knowledge" shall be deemed not so qualified and shall be deemed made
without regard to the Company's knowledge (or lack of knowledge) with respect to
the statements made in Section 3.12, or (ii) the Company shall have breached or
failed to comply in any material respect with any of its agreements or
obligations under this Agreement, which breach shall not have been cured within
10 business days following notice of such breach.
Section 7.2. Effect of Termination. In the event of the
---------------------
termination of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party or its directors, officers or stockholders, other than the provisions
of this Section 7.2, Section 8.9 and Section 8.10, which shall survive any such
termination. Notwithstanding the foregoing, nothing contained in this Section
7.2 shall relieve any party from liability for any breach of this Agreement or
for fraud.
Section 7.3. Amendment. This Agreement may be amended by the
---------
Company, Parent and Merger Sub at any time before or after any approval of this
Agreement by the Stockholders but, after any such approval, no amendment shall
be made which decreases the Merger Consideration or which adversely affects the
rights of the Stockholders hereunder without the approval of such Stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of all the parties.
Section 7.4. Extension; Waiver. At any time prior to the Effective
-----------------
Time, Parent and Merger Sub, as a party on the one hand, and the Company, as a
party on the other hand, may (i) extend the time for the performance of any of
the obligations or other acts of any other party hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein by the other
party or in any document, certificate or writing delivered pursuant hereto by
the other party or (iii) waive compliance with any of the agreements of the
other party or with any conditions to its own obligations. Any agreement on the
part of either party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
-35-
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Non-Survival. The representations, warranties and
------------
covenants made in this Agreement shall not survive beyond the Effective Time.
Notwithstanding the foregoing, the agreements set forth in Section 1.3, Section
1.9, Section 1.12, Article II, Section 5.5, Section 5.6 and Section 8.9 shall
survive the Effective Time indefinitely (except to the extent a shorter period
of time is explicitly specified therein).
Section 8.2. Entire Agreement; Assignment.
----------------------------
(a) This Agreement (including the Confidentiality Agreement, Support
Agreements and Registration Rights Agreement and the documents and the
instruments referred to herein) constitute the entire agreement and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder will be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties (except that Parent may assign its rights and Merger Sub may assign its
rights, interest and obligations to any affiliate or direct or indirect
subsidiary of Parent without the consent of the Company; provided, that no such
assignment shall relieve Parent of any liability for any breach by such
assignee). Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
Section 8.3. Validity. The invalidity or unenforceability of any
--------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
Section 8.4. Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by overnight courier or facsimile to
the respective parties as follows:
If to Parent or Merger Sub:
Ingenico S.A.
▇, ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy: 01 47 72 56 95
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with a copy to:
Tour Ernst & Young
▇▇▇▇▇ ▇▇▇▇▇ ▇▇ Defense Cedex
FRANCE
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇
Telecopy: 01 58 47 66 25
and
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
IVI Checkmate Corp.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President and Chief Executive Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Hunton & ▇▇▇▇▇▇▇▇
Bank of America Plaza
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. Hobby, Esq.
W. Tinley ▇▇▇▇▇▇▇▇, III, Esq
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
Section 8.5. Governing Law. This Agreement shall be governed by
-------------
and construed in accordance with the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
Section 8.6. Descriptive Headings. The descriptive headings
--------------------
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
-37-
Section 8.7. Counterparts. This Agreement may be executed in two
------------
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
Section 8.8. Parties in Interest. This Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto, and, except with
respect to Sections 1.9 and 5.5, nothing in this Agreement, express or implied,
is intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
Section 8.9. Fees and Expenses.
-----------------
(a) Whether or not the Merger is consummated, except as otherwise
specifically provided herein, all costs and expenses incurred in connection with
this Agreement and the Transactions shall be paid by the party incurring such
expenses;
(b) In the event that this Agreement is terminated pursuant to (w) (1)
Section 7.1(b) by Parent on the basis of a breach of the covenants contained in
Section 1.11(a)(i) or (2) Section 7.1(i), in each case following any public
proposal with respect to an Acquisition Transaction, (x) Section 7.1(d), (y)
Section 7.1(e) or (z) Section 7.1(f), then the Company shall simultaneously with
such termination (or, in the case of a termination by Parent, within one
business day thereafter) reimburse Parent for the out-of-pocket fees and
expenses of Parent and Merger Sub (including printing fees, filing fees and fees
and expenses of its legal and financial advisors) related to this Agreement, the
Transactions contemplated hereby and any related financing (collectively
"Expenses"), and at the same time pay Parent a termination fee of $2.75 million
--------
(the "Termination Fee") in immediately available funds by wire transfer to an
---------------
account designated by Parent. In the event that (A) this Agreement is
terminated pursuant to Section 7.1(k) by Parent and (B) within six months of the
date of such termination, the Company shall enter into an agreement for an
Acquisition Transaction with any person other than Parent and its affiliates,
then, prior to or simultaneously with entering into such agreement, the Company
shall pay Parent the Termination Fee and reimburse Parent for its Expenses, in
each case in immediately available funds by wire transfer to an account
designated by Parent.
(c) In the event that this Agreement is terminated pursuant to Section
7.1(i)(x) and Parent is in breach of its obligations under Section 5.17 (unless
the Company shall have breached or failed to comply with any of the Company's
obligations under this Agreement), Parent shall immediately reimburse the
Company for the out-of-pocket fees and expenses of the Company (including
printing fees, filing fees and fees and expenses of its legal and financial
advisors) related to this Agreement, the Transactions contemplated hereby and
any related financing, and at the same time pay the Company a termination fee of
$2.75 million in immediately available funds by wire transfer to an account
designated by the Company.
(d) The prevailing party in any legal action undertaken to enforce
this Agreement or any provision hereof shall be entitled to recover from the
other party the costs and expenses (including attorneys' and expert witness
fees) incurred in connection with such action.
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Section 8.10. By-Laws. In the event that this Agreement is
-------
terminated for any reason, the Company's By-Laws shall simultaneously with such
termination be automatically amended and restated in their entirety in the form
attached hereto as Exhibit 8.10. Any subsequent amendment or restatement of the
Company's By-Laws during any period in which Parent beneficially owns 15% or
more of the outstanding Common Stock in a manner adverse to Parent shall be
deemed a breach of this Agreement. The parties hereto acknowledge and agree
that the Termination Fees referred to in Section 8.9(b) is not a measure of
liquidated damages for a breach of this Section 8.10 and actual damages to
Parent in the event of such a breach may be higher or lower than the amount of
the Termination Fee.
Section 8.11. Certain Definitions. As used in this Agreement:
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(a) the term "affiliate", as applied to any person, shall mean any
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other person directly or indirectly controlling, controlled by, or under common
control with, that person. For the purposes of this definition, "control"
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(including, with correlative meanings, the terms "controlling," "controlled by"
----------- -------------
and "under common control with"), as applied to any person, means the
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possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise;
(b) the term "Person" or "person" shall include individuals,
------ ------
corporations, partnerships, trusts, other entities and groups (which term shall
include a "group" as such term is defined in Section 13(d)(3) of the Exchange
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Act);
(c) the term "subsidiary" when used with respect to any party means
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any corporation or other organization, incorporated or unincorporated, (i) of
which such party or another subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any subsidiary of such party do not have 50% or more of the voting
interests in such partnership) or (ii) 50% or more of the securities or other
interests of which having by their terms ordinary voting power to elect at least
50% of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or one or more of its subsidiaries (or if
there are no such voting securities or interests, 50% or more of the equity
interests of which is directly or indirectly owned or controlled by such party
or one or more of its subsidiaries); and
(d) the term "knowledge" when used with respect to any corporation
---------
means the actual knowledge of the directors and executive officers of such
corporation and the knowledge such individuals should have after due inquiry.
Section 8.12. Specific Performance. The parties hereto agree that
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irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
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remedy to which they are entitled at law or in equity, provided, that this
Section 8.11 shall have no force and effect from and after the termination of
this Agreement in accordance with Section 7.2.
[signature page follows]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its respective officer thereunto duly authorized,
all as of the day and year first above written.
INGENICO S.A.
By: /s/ ▇▇▇▇-▇▇▇▇▇▇▇ Poutrel
Name: ▇▇▇▇-▇▇▇▇▇▇▇ Poutrel
Title: President and Chief Executive Officer
IDAHO ACQUISITION CORP.
By: /s/ ▇▇▇▇-▇▇▇▇▇▇▇ Poutrel
Name: ▇▇▇▇-▇▇▇▇▇▇▇ Poutrel
Title: Chairman
IVI CHECKMATE CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President-Finance and
Administration, Chief Financial Officer,
Treasurer and Secretary
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