Exhibit 2.3
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of March 19,
2002, is by and among iPAYMENT HOLDINGS, INC., a Tennessee corporation
("iPayment"), iPAYMENT ACQUISITION SUB, INC., a Delaware corporation ("iPayment
Merger Sub"), and E-COMMERCE EXCHANGE, INC., a Delaware corporation ("ECX").
RECITALS:
WHEREAS, iPayment Merger Sub is a wholly-owned subsidiary of iPayment;
WHEREAS, the respective boards of directors of iPayment, iPayment
Merger Sub and ECX have determined that it is in the best interests of their
respective companies and stockholders to consummate the business combination
transactions provided for herein, in which iPayment Merger Sub will merge with
and into ECX (the "Merger") and ECX shall thereby become a wholly-owned
subsidiary of iPayment, subject to the terms and conditions set forth herein;
WHEREAS, iPayment, as the sole stockholder of iPayment Merger Sub, has
approved this Agreement and the Merger with respect to iPayment Merger Sub;
WHEREAS, the parties intend that the Merger be treated as a taxable
transaction under the provisions of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (the "Code") and,
at iPayment's option, iPayment may make a Section 338 election under the Code
for ECX following Closing; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
AGREEMENT:
ARTICLE I. DEFINED TERMS AND INTERPRETATION
1.1. Defined Terms. Certain terms used in this Agreement have the meanings
ascribed thereto in Article X hereof. Accounting terms used in this
Agreement which are not otherwise defined herein shall have the meaning
assigned such terms under GAAP.
1.2. Interpretation.
(a) When used in this Agreement, the word "including" and words of
similar import shall mean "including, without limitation," and any list of items
that may follow such word shall not be deemed to represent a complete list of,
or be limited to, the contents of the referent of the subject.
(b) Unless the context otherwise requires, when used in this Agreement,
the singular shall include the plural, the plural shall include the singular,
and all nouns, pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine or neuter, as the identity of the Person or Persons may
require.
(c) The headings contained in this Agreement are for reference purposes
only and do not affect in any way the meaning or interpretation of this
Agreement.
(d) In this Agreement, unless a contrary intention appears, (i) the
words "herein", "hereof" and "hereunder" and other words of similar import refer
to this Agreement as a whole and not to any particular Article, Section or other
subdivision, and (ii) references to any Article or Section are to an article or
a section of this Agreement, as applicable, and references to any schedule or
exhibit are to a schedule or exhibit to this Agreement, as applicable.
(e) The parties hereto have each negotiated the terms hereof, reviewed
this Agreement carefully, and discussed it with their respective legal counsel.
It is the intent of the parties that each word, phrase and sentence and other
part hereof shall be given its plain meaning. No provision of this Agreement
shall be interpreted or construed against any party hereto solely because such
party or its legal representative drafted such provision.
(f) References to any document (including this Agreement) are
references to that document as amended, consolidated, supplemented, novated or
replaced by the parties from time to time. References to any party to this
Agreement shall include references to its respective successors and permitted
assigns. References to law are references to that law as amended, consolidated,
supplemented or replaced from time to time prior to the date hereof, and shall
include references to any constitutional provision, treaty, decree, convention,
statute, act, regulation, rule, ordinance, subordinate legislation, rule of
common law and of equity and judgment and shall include the requirements of any
applicable stock exchange. References to a judgment shall include references to
any order, injunction, decree, determination or award of any court or tribunal.
(g) All references to "$" or "dollars" shall be to United States
dollars and all references to "days" shall be to calendar days unless otherwise
specified.
ARTICLE II. THE MERGER
2.1. The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the General Corporation Laws of the State of Delaware (the
"DGCL"), at the Effective Time, iPayment Merger Sub shall merge with and into
ECX. ECX shall be the surviving corporation (hereinafter sometimes called the
"Surviving Corporation") in the Merger, and shall continue its corporate
existence under the laws of the State of Delaware. The name of the Surviving
Corporation shall be "E-Commerce Exchange, Inc." Upon consummation of the
Merger, the separate corporate existence of iPayment Merger Sub shall terminate.
2.2. Effective Time. The Merger shall become effective (the "Effective Time")
upon filing of a certificate of merger (the "Certificate of Merger") with
respect to the Merger with the Secretary of State of the State of Delaware (the
"Delaware Secretary") in accordance with the DGCL, or at such later time as
mutually agreed among the parties hereto and set forth in the Certificate of
Merger. The parties hereto shall cause the Certificate of Merger to be filed
with the Delaware
Secretary in accordance with the DGCL simultaneously with or as soon as
practicable after the Closing.
2.3. Effects of the Merger. At and after the Effective Time, the Merger shall
have the effects set forth in Section 259 of the DGCL.
2.4. Merger Consideration. At the Effective Time, each share of common stock,
par value $.01 per share, of ECX (the "ECX Common Stock"), issued and
outstanding immediately prior to the Effective Time, by virtue of this Agreement
and without any action on the part of the holder thereof, shall be converted
into the right to receive $0.00001 and each share of Class A Convertible
Participating Preferred Stock, par value $.01 per share, of ECX (the "ECX Class
A Preferred"), issued and outstanding immediately prior to the Effective Time,
by virtue of this Agreement and without any action on the part of the holder
thereof, shall be converted into the right to receive a pro rata portion (based
on the number of shares of ECX Class A Preferred so issued and outstanding) of
subordinated convertible notes (the "Notes") of iPayment, substantially in the
form as set forth in Exhibit A hereto, in the initial aggregate principal amount
of $15,000,000.
2.5. Cancellation of Treasury Stock. At the Effective Time, all shares of ECX
Common Stock that are owned directly or indirectly by iPayment or ECX or any of
their respective Subsidiaries, shall be canceled and shall cease to exist.
2.6. Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of ECX Common Stock which are outstanding immediately prior to
the Effective Time and with respect to which appraisal rights shall have been
properly demanded in accordance with Section 262 of the DGCL ("ECX Dissenting
Shares") shall not be converted into the right to receive, or be exchangeable
for, any merger consideration set forth in Section 2.4 above but, instead, the
holders thereof shall be entitled to payment of the appraised value of such ECX
Dissenting Shares in accordance with the provisions of Section 262 of the DGCL;
provided, however, that (i) if any holder of ECX Dissenting Shares shall
subsequently deliver a written withdrawal of his demand for appraisal of such
shares, or (ii) if any holder fails to establish his entitlement to appraisal
rights as provided in Section 262 of the DGCL, such holder or holders (as the
case may be) shall forfeit the right to appraisal of such shares of ECX Common
Stock and each of such shares shall thereupon be deemed to have been converted
into a right to receive the applicable merger consideration set forth in Section
2.4 above as of the Effective Time. ECX shall give iPayment prompt notice of any
demands for appraisal received by ECX, withdrawals of such demands and any other
instruments served pursuant to the DGCL and received by ECX, and the opportunity
to direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL. ECX shall not, except with the prior written consent of
iPayment, make any payment with respect to any demands for appraisal or offer to
settle or settle any such demands.
2.7. Stock Options. At the Effective Time, each unexpired option or warrant
granted by ECX to purchase shares of ECX Common Stock (each an "ECX Option")
which is outstanding and unexercised immediately prior to the Effective Time
shall cease to represent a right to acquire shares of ECX Common Stock and shall
be terminated.
2.8. Conversion of Merger Sub Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of iPayment as the sole stockholder of
iPayment Merger Sub, each issued and outstanding share of common stock, par
value $.01 per share, of iPayment Merger Sub ("iPayment Merger Sub Common
Stock") will convert into one share of common stock, par value $.01 per share,
of the Surviving Corporation.
2.9. Certificate of Incorporation of the Surviving Corporation. At the Effective
Time, the certificate of incorporation of iPayment Merger Sub, as in effect at
the Effective Time, shall be the certificate of incorporation of the Surviving
Corporation.
2.10. Bylaws of the Surviving Corporation. At the Effective Time, the bylaws of
iPayment Merger Sub, as in effect immediately prior to the Effective Time, shall
be the bylaws of the Surviving Corporation until thereafter amended in
accordance with applicable law and the certificate of incorporation of the
Surviving Corporation.
2.11. Directors and Officers of the Surviving Corporation. At the Effective
Time, the directors of iPayment Merger Sub immediately prior to the Effective
Time shall be the directors of the Surviving Corporation, each to hold office in
accordance with the certificate of incorporation and bylaws of the Surviving
Corporation until their respective successors are duly elected or appointed and
qualified. At the Effective Time, the officers of the Surviving Corporation
shall be the individuals designated therefor by the board of directors of the
Surviving Corporation in accordance with the bylaws of the Surviving
Corporation. At or prior to the Closing, ECX shall deliver to iPayment written
resignations of each of the directors of ECX, in form and substance satisfactory
to iPayment, with such resignations to be effective as of the Effective Time.
2.12. Closing. The closing of the transactions contemplated herein (the
"Closing") shall take place at the offices of Xxxxxx Xxxxxxx Xxxxxx & Xxxxx, A
Professional Limited Liability Company, Nashville, Tennessee at 10:00 a.m.
Nashville time on the earlier of March ___, 2002, and the date that is five
Business Days following the satisfaction, or waiver by the applicable party, of
all of the conditions set forth in Sections 7.1, 7.2 and 7.3 hereof, or at such
other location, and on such other date and/or time, as the parties hereto may
mutually agree (the "Closing Date"). At the Closing, subject to the satisfaction
of the terms and conditions set forth herein, each of ECX, iPayment and iPayment
Merger Sub will execute and deliver the instruments, certificates and other
documents to be executed and delivered hereunder or as may be reasonably
requested by any party to consummate the transactions contemplated hereby, all
in form and substance reasonably satisfactory to the parties hereto and their
respective counsel.
ARTICLE III. EXCHANGE OF CERTIFICATES FOR THE NOTES AND CASH
3.1. Exchange of Certificates for the Notes and Cash. At Closing, iPayment shall
issue the Notes pursuant to Article II in exchange for the certificates
representing all outstanding shares of ECX Class A Preferred and the cash
pursuant to Article II in exchange for the certificates representing all
outstanding shares of ECX Common Stock.
3.2. Closing of Stock Transfer Books. Upon and after the Effective Time, there
shall be no transfers on the stock transfer books of ECX of the shares of ECX
Common Stock and ECX Class A Preferred which were issued and outstanding
immediately prior to the Effective Time. If,
after the Effective Time, certificates representing such shares are presented
for transfer, they shall be deemed to represent only the right to receive upon
such surrender the merger consideration pursuant to Section 2.4 into which such
certificates have been converted pursuant to this Agreement.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF
E-COMMERCE EXCHANGE
ECX hereby represents and warrants to iPayment and iPayment Merger Sub
that, except as set forth in the disclosure schedule dated as of the date hereof
and signed on behalf of ECX by an authorized officer of ECX, with each such
exception included therein specifically identifying the relevant Section hereto
to which it specifically relates (the "ECX Disclosure Schedule"):
4.1. Corporate Organization. ECX is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
the corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is currently being conducted. ECX
is duly qualified and in good standing to transact business as a foreign
corporation in each jurisdiction in which the ownership or use of its assets and
properties and the conduct of its business requires such qualification, except
such jurisdictions, individually or in the aggregate, in which the failure to be
so qualified does not have, and would not be reasonably expected to have, an ECX
Material Adverse Effect. True, accurate and complete copies of ECX's certificate
of incorporation (including any certificates of designation), bylaws, corporate
minute book, board committee documents or similar governing documents, and all
amendments thereto, in each case as in effect on the date hereof, have
heretofore been delivered or made available to iPayment.
4.2. Authorization; Binding Agreement. ECX has the corporate power and authority
to enter into this Agreement and the other documents and instruments to be
executed and delivered by ECX pursuant hereto (collectively, the "ECX
Documents"), and, subject to receipt of approval of this Agreement by the
stockholders of ECX, to consummate the Merger and the other transactions
contemplated hereby. The execution and delivery of this Agreement and the ECX
Documents, and the consummation of the transactions contemplated hereby, have
been duly authorized and approved by the Board of Directors of ECX at a meeting
duly called and held and at which a quorum was present and acting throughout, by
the requisite affirmative vote of the directors of ECX, and the Board of
Directors of ECX has determined that the Merger is in the best interests of ECX
and its stockholders, approved this Agreement and the Merger, recommended to the
stockholders of ECX that they approve and adopt this Agreement and directed that
this Agreement and the transactions contemplated hereby be submitted to the
stockholders of ECX for approval by such stockholders by taking action by
written consent in lieu of a meeting of such stockholders. No other corporate
proceedings on the part of ECX are necessary to authorize the execution and
delivery of this Agreement or, except for the adoption of this Agreement by the
requisite vote of ECX's stockholders in accordance with the DGCL and the
certificate of incorporation and bylaws of ECX, the consummation by ECX of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by ECX, and, assuming due execution and delivery by
iPayment and iPayment Merger Sub, this Agreement constitutes the valid and
binding agreement and obligation of ECX, enforceable against ECX in accordance
with its terms (except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws now or hereafter in effect affecting creditors'
rights generally and general equitable principles, regardless of whether
enforceability is considered in a proceeding in law or in equity).
4.3. Consents and Approvals. Except for (a) the approval of this Agreement by
the requisite vote of the stockholders of ECX, (b) the filing of the Certificate
of Merger with the Delaware Secretary, (c) any filings required under state
securities or "Blue Sky" laws, (d) any filings and consents as may be required
under any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval necessitated by the transactions
contemplated in this Agreement, and (e) such other authorizations, consents,
approvals or filings, the failure of which to obtain or make, individually or in
the aggregate, would not be expected to prevent or delay the consummation by ECX
of the transactions contemplated hereby, no authorization, consents or approvals
of or filings or registrations with any federal, state, local or foreign
government, court, administrative, regulatory or other governmental agency or
commission or other governmental authority or instrumentality (each a
"Governmental Authority") or with any third party are necessary in connection
with (i) the execution and delivery by ECX of this Agreement and the ECX
Documents and (ii) the consummation by ECX of the Merger.
4.4. No Conflicts. Neither the execution or delivery by ECX of this Agreement
and the other ECX Documents, nor the consummation by ECX of the transactions
contemplated hereby or thereby, nor the compliance by ECX with the provisions
hereof, will: (a) violate or conflict with or result in any breach of any
provision of the certificate of incorporation (including any certificates of
designation), bylaws, corporate minute book, board committee documents or
similar governing documents of ECX or its Subsidiaries; (b) materially violate
or conflict with any order, injunction, decree, law, statute, rule, ordinance or
regulation applicable to ECX or its Subsidiaries or by which any of their
respective properties or assets may be bound; or (c) result in a violation or
breach of, constitute a default or give rise to any right of termination,
cancellation or acceleration under, any material loan or credit agreement, note,
mortgage, bond, indenture, lease, benefit plan or other agreement, obligation or
instrument applicable to ECX or its Subsidiaries, or result in the creation of
an Encumbrance upon any property or asset of ECX or its Subsidiaries or by which
any such properties or assets may be bound, or trigger any right of first
refusal or other purchase right applicable to ECX or its Subsidiaries.
4.5. Capitalization.
(a) The authorized capital stock of ECX consists of 27,000,000 shares
of ECX Common Stock, 300,000 shares of ECX Class A Preferred, 300,000 shares of
Class B Redeemable Preferred Stock, par value $.01 per share (the "ECX Class B
Preferred"), and 300,000 shares of Class C Convertible Preferred Stock, par
value $.01 per share (the "ECX Class C Preferred"). As of the date hereof, (i)
11,325,000 shares of ECX Common Stock are issued and outstanding, all of which
were validly issued and are fully paid, nonassessable and free of preemptive
rights, (ii) 300,000 shares of ECX Class A Preferred, which are held by the
Persons set forth in Section 4.5 of the ECX Disclosure Schedule, are issued and
outstanding, all of which were validly issued and are fully paid, nonassessable
and free of preemptive rights, (iii) no shares of ECX Class B Preferred are
issued and outstanding, (iv) no shares of ECX Class C Preferred are issued and
outstanding, and (v) no shares of ECX Common Stock, ECX Class A
Preferred, ECX Class B Preferred and ECX Class C Preferred are held in the
treasury of ECX or any of its Subsidiaries.
(b) There are no shares of ECX Common Stock reserved for issuance
pursuant to the exercise of outstanding options and warrants other than (i)
5,898,641 shares of ECX Common Stock reserved for issuance pursuant to ECX's
1999 Stock Incentive Plan (the "ECX 1999 Stock Plan"), and (ii) 590,000 shares
of ECX Common Stock reserved for issuance pursuant to the exercise of certain
warrants to purchase shares of ECX Common Stock (the "ECX Warrants).
(c) Except for (i) options outstanding to purchase a total of 5,898,641
shares of ECX Common Stock under the ECX 1999 Stock Plan, (the options
outstanding under the ECX 1999 Stock Plan are collectively referred to as the
"ECX Plan Options"), (ii) the ECX Warrants outstanding to purchase a total of
590,000 shares of ECX Common Stock, and (iii) 300,000 shares of ECX Class A
Preferred issued and outstanding as of the date hereof, ECX does not have and is
not bound by any outstanding subscriptions, options, warrants, convertible
securities, conversion rights, preemptive or other rights, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of ECX Common Stock, ECX Class A Preferred, ECX Class B Preferred or ECX Class C
Preferred or any other equity security or capital stock of ECX or any securities
representing the right to purchase or otherwise receive any shares of ECX Common
Stock or any other equity security or capital stock of ECX. ECX has no
outstanding stock appreciation rights, phantom stock rights or similar rights.
ECX has no outstanding obligations, contingent or otherwise, to reacquire any
shares of ECX Common Stock. Set forth in Section 4.5 of the ECX Disclosure
Schedule is a complete and correct list, for each of the outstanding ECX Plan
Options and the ECX Warrants, of the names of the optionees or holders thereof,
the date of grant or issuance, the ECX Option Plan to which any such ECX Plan
Option relates, the number of shares of ECX Common Stock subject to each such
ECX Plan Option and ECX Warrant, and the price at which each such ECX Plan
Option and ECX Warrant may be exercised.
(d) All ECX Plan Options shall terminate upon Closing. ECX mailed a
notice to each holder of ECX Plan Options on February 20, 2001 informing the
holders that all ECX Plan Options shall terminate upon Closing. Other than the
holders of the ECX Class A Preferred and the holders of ECX Common Stock, no
person has any right to the merger consideration set forth in Section 2.4 or any
other consideration issuable in respect of their ECX Common Stock or ECX Class A
Preferred in the Merger pursuant to the DGCL or the ECX Charter.
(e) All ECX Warrants shall terminate upon Closing.
(f) Pursuant to the Restated Certificate of Incorporation, including
the amendments thereto (the "ECX Charter") of ECX, the holders of the ECX Class
A Preferred set forth in Section 4.5 of the ECX Disclosure Schedule are entitled
to the Class A Preferred Liquidation Preference (as defined in the ECX Charter).
The ECX Charter provides that, through the Class A Preferred Liquidation
Preference, the holders of the ECX Class A Preferred shall receive upon the
Closing of the Merger an aggregate amount equal to $29,000,100. The Notes, as of
the date hereof, are in the aggregate principal amount of $15,000,000. Because
the consideration issued in the Merger is less than the aggregate amount of the
Class A Preferred Liquidation Preference owed to the holders of the ECX Class A
Preferred, the holders of the ECX Class A Preferred are
entitled to the Notes in accordance with the ECX Charter and they hereby waive
their right to all other merger consideration set forth in Section 2.4.
(g) The holders of bonds, debentures, notes or other indebtedness of
ECX do not have the right, as such, to vote on this Agreement and the
transactions contemplated herein or other matters with respect to which
stockholders of ECX may vote. There are no voting trusts, proxies or other
agreements or understandings (collectively, "Voting Arrangements") to which ECX
or any of its Subsidiaries, directors or executive officers is a party or is
bound with respect to the voting of any shares of capital stock of ECX.
4.6. Financial Statements.
The audited financial statements for the years ended December 31, 2000
and 1999, the unaudited financial statements for the year ended December 31,
2001 and unaudited interim financial statements of ECX attached as Section 4.6
of the ECX Disclosure Schedule (collectively, the "ECX Financial Statements")
were prepared in accordance with GAAP consistently applied throughout the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly present in all material respects the consolidated financial position
of ECX and its Subsidiaries as of the dates thereof and the results of their
operations and their cash flows for the periods then ended, subject, in the case
of the unaudited interim financial statements, to normal year-end and audit
adjustments (which are not material) and to the absence of footnote disclosures
normally contained in audited consolidated financial statements.
4.7. Subsidiaries.
(a) Set forth in Section 4.7 of the ECX Disclosure Schedule is the name
and state of incorporation of each of ECX's Subsidiaries and, except as so
disclosed, ECX does not control, directly or indirectly, and does not have any
direct or indirect equity participation in any other Person. Each Subsidiary of
ECX is duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation and has the requisite power and authority to
own, lease and operate its assets and properties and to carry on its business as
it is now being conducted. Each Subsidiary of ECX is qualified to do business
and is in good standing in each jurisdiction in which the properties it owns,
leases or operates or the nature of the business it conducts makes such
qualification necessary, except such jurisdictions, individually or in the
aggregate, in which the failure to be so qualified does not have, and would not
be reasonably expected to have, an ECX Material Adverse Effect. True, accurate
and complete copies of the respective certificates or articles of incorporation,
bylaws or other similar governing documents, and all amendments thereto, in each
case as in effect on the date hereof, of ECX's Subsidiaries have heretofore been
delivered or made available to iPayment.
(b) ECX owns, directly or indirectly, all of the issued and outstanding
shares of the capital stock and equity securities of each of its Subsidiaries,
free and clear of all liens, charges, encumbrances and security interests
whatsoever, and all of such shares are duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. ECX's Subsidiaries do not conduct
any business and ECX has filed all necessary documents to initiate dissolution
of each of its Subsidiaries and has requested all Tax Clearance Certificates,
Articles of Dissolution or other such equivalent
documents. ECX's Subsidiaries shall be dissolved upon the receipt of a Tax
Clearance Certificate and Articles of Dissolution or other such equivalent
documents as filed with the state of its incorporation and certified by either
the Franchise Tax Board or Secretary of State, as appropriate, of the state of
its incorporation. ECX and its Subsidiaries have paid all Taxes owed in order to
receive the applicable Tax Clearance Certificate and no further action is
required by ECX to dissolve its Subsidiaries. ECX's Subsidiaries are not bound
by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock or any other equity security of any of ECX's Subsidiaries or
any securities representing the right to purchase or otherwise receive any
shares of capital stock or any other equity security of any of ECX's
Subsidiaries. There are no outstanding subscriptions, options, warrants, calls,
commitments, agreements or Voting Arrangements of any character by which ECX or
any of its Subsidiaries will be bound calling for the voting, purchase or
issuance of any shares of the capital stock or equity securities of any of ECX's
Subsidiaries.
(c) Except for its Subsidiaries or as provided in Section 4.7 of the
ECX Disclosure Schedule, ECX does not own directly or indirectly any interest or
investment in any corporation, partnership, joint venture, business, trust or
other entity.
4.8. Absence of Undisclosed Liabilities. None of ECX or its Subsidiaries has
incurred any material liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except (i) liabilities, obligations or
contingencies that are accrued or reserved against in the ECX Financial
Statements or reflected in the notes thereto, (ii) liabilities, obligations or
contingencies under contacts or agreements described in Section 4.15 of the ECX
Disclosure Schedule or under contracts and agreements which are not required to
be disclosed thereon (but not liabilities, obligations or contingencies for
breaches thereof), (iii) liabilities, obligations or contingencies which have
arisen after December 31, 2001 in the ordinary course of business consistent
with past practice or otherwise in accordance with the terms and conditions of
this Agreement, and (iv) liabilities, obligations or contingencies disclosed in
Section 4.8 of the ECX Disclosure Schedule.
4.9. Investigations; Litigation.
(a) To the knowledge of ECX, there is no investigation or review being
undertaken or that is pending by any Governmental Authority with respect to ECX
or any of its Subsidiaries, nor has any Governmental Authority notified ECX or
any of its Subsidiaries of an intention to conduct any such investigation or
review.
(b) Except as disclosed in Section 4.9 of the ECX Disclosure Schedule,
there are no claims, suits, actions, arbitration actions or other proceedings
pending or, to the knowledge of ECX, threatened against, relating to or
affecting any of ECX or its Subsidiaries, or their respective directors and
officers, in their capacities as such, or their respective assets, businesses or
properties, which are, or would reasonably be expected to be material, either
alone or in the aggregate with all such claims, actions or other proceedings.
There are no decrees, injunctions, writs or orders of any court or governmental
department or agency applicable to any of ECX or its Subsidiaries, or their
assets or businesses, or which prohibits or restricts the consummation of the
transactions contemplated herein.
4.10. Compliance with Law. ECX and each of its Subsidiaries is in compliance, in
all material respects, with all applicable statutes, regulations, judgments,
injunctions, decrees, orders, ordinances and other laws (collectively, "Laws")
of the United States of America and any applicable foreign jurisdictions, all
state and local governments and other Governmental Authorities, and agencies and
courts of any of the foregoing, to which any of ECX or its Subsidiaries is
subject, and none of ECX or its Subsidiaries has received any notice to the
effect that, or otherwise been advised by counsel that, any of ECX or its
Subsidiaries has materially violated or is not in compliance in all material
respects with any of such Laws, and, to the knowledge of ECX, there are no
investigations with respect thereto, nor past or current business conduct or
practices of ECX similar to the conduct or practices of other businesses that to
the knowledge of ECX have been the subject of investigations, proceedings,
claims, actions, suits, demands or notices with respect thereto or have resulted
in any liability arising out of or related to such conduct or practices.
4.11. Absence of Certain Changes or Events. Except as set forth in Section 4.11
of the ECX Disclosure Schedule, since December 31, 2001, none of ECX or its
Subsidiaries has (other than actions taken in connection with the transactions
contemplated by this Agreement or at the request of iPayment or its
Subsidiaries): (a) operated other than in the ordinary course of business
consistent in all material respects with past practice; (b) incurred,
experienced or suffered any ECX Material Adverse Effect; (c) acquired or agreed
to acquire any material assets, or entered into any ECX Merchant Related
Agreements, other than Merchant Agreements, or acquisition agreements (or
similar agreements), either directly or indirectly, by purchase, merger, stock
purchase or otherwise; (d) transferred, leased, licensed, sold, mortgaged,
pledged, disposed of or encumbered any material assets; (e) adopted any new, or
amended or otherwise increased, or accelerated the payment or vesting of the
amounts payable or to become payable under any existing, bonus, incentive
compensation, deferred compensation, severance, profit sharing, stock option,
stock purchase, insurance, pension, retirement or other employee benefit plan
agreement or arrangement, entered into any employment, consulting, change in
control, severance or similar agreement with or, except in accordance with the
existing written agreements, granted any severance, change in control or
termination pay to any officer, director, key employee, consultant, agent or
group of employees, or increased the compensation or benefits of any officer,
director, key employee, consultant, agent or group of employees (other than
periodic increases in compensation to employees in the ordinary course of
business and consistent with past practice); (f) modified, amended, canceled or
terminated, or suffered or received notice of the termination or cancellation
of, any ECX Merchant Related Agreements or Merchant Agreements, or any material
leases, contracts or receivables, or waived, released or assigned any material
rights or claims with respect thereto, except in the ordinary course of business
and consistent with past practice; (g) incurred or modified any material
indebtedness or other material liability, except in the ordinary course of
business and consistent with past practice; (h) assumed, guaranteed, endorsed or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for material obligations of any other person, except in the ordinary
course of business and consistent with past practice; (i) made any material
loans, advances or capital contributions to, or investments in, any other person
(other than to its wholly-owned Subsidiaries or in the ordinary course of
business consistent with past practice); (j) instituted, settled or agreed to
settle, any material litigation, action or proceeding before any court,
arbitrator or governmental body; (k) made any tax election or settled or
compromised any tax liability, or made any change in any method of accounting
for taxes or accounting policy with
respect to taxes; (l) changed in any material respect any of the accounting
methods or policies used by it; (m) paid, discharged or satisfied any material
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), or material claims, liabilities or obligations
reflected or reserved against in, or contemplated by, the ECX Financial
Statements; (n) entered into any material transaction, contract, agreement or
commitment, other than this Agreement, or other than in the ordinary course of
business and consistent with past practice; (o) delayed or postponed the payment
of accounts payable and other liabilities outside the ordinary course of
business; or (p) agreed, whether in writing or otherwise, to take any action
described in this Section 4.11.
4.12. Title to Assets. ECX and its Subsidiaries have good and marketable title
to all of their respective assets, free and clear of all Encumbrances, other
than Permitted Liens, and no financing statement covering all or any portion of
ECX's and its Subsidiaries' assets and naming ECX or a Subsidiary thereof as
debtor has been filed in any public office, and neither ECX nor any Subsidiary
thereof has signed any financing statement or security agreement as debtor or
borrower which financing statement or security agreement covers all or any
portion of the assets of ECX or its Subsidiaries.
4.13. Assets. ECX's and its Subsidiaries' equipment, furniture, computers and
other tangible personal property are in good operating condition in all material
respects (ordinary wear and tear excepted), free of any material defects and
suitable in all material respects for the operations of ECX's and its
Subsidiaries' business, as currently conducted, are not in need of maintenance
or repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. Set forth in Section 4.13 of the ECX Disclosure
Schedule is a complete and accurate description of the accounts receivable,
notes receivable, evidences of indebtedness and other rights to receive payment
and other amounts payable to ECX and its Subsidiaries ("Receivables") as of
December 31, 2001. Such Receivables are valid and enforceable claims and
obligations, have arisen only from bona fide transactions in the ordinary course
of business, and ECX and its Subsidiaries have, to their knowledge, the full
legal right to collect such Receivables in the aggregate amount thereof, less
any applicable reserves recorded on ECX balance sheet as of December 31, 2001, a
copy of which has heretofore been provided to ECX, which reserves are adequate
and calculated consistent with past practice. Except as set forth in Section
4.13 of the ECX Disclosure Schedule, to the knowledge of ECX, there are no
asserted contests, refusals to pay or rights of set-off with respect to any of
such Receivables.
4.14. Intellectual Property Rights. Schedule 4.14(a) contains a list and
description of all registered copyrights, patents, trademarks and service marks
owned by or licensed to ECX and its Subsidiaries. Except as set forth in
Schedule 4.14(b), ECX and its Subsidiaries have all right, title and interest
in, or a valid and binding license to use, all such intellectual property.
Neither ECX nor any Subsidiary thereof is in default (or with the giving of
notice or lapse of time, or both, would be in default) under any license to use
such intellectual property. To the knowledge of ECX, such intellectual property
is not being infringed by any third party and neither ECX nor any Subsidiary
thereof is infringing any intellectual property of any third party.
4.15. Contracts.
(a) Set forth in Section 4.15(a) of the ECX Disclosure Schedule is a
list, including parties and dates, of each of the ECX Merchant Related
Agreements. ECX has heretofore delivered to iPayment or its counsel true,
correct and complete copies of all of the ECX Merchant Related Agreements, and
all amendments and supplements related thereto. Each of the ECX Merchant Related
Agreements is a valid and binding obligation of ECX, are unmodified, to the
knowledge of ECX are in full force and effect, and to the knowledge of ECX are
enforceable against each of the parties thereto in accordance with their
respective terms (except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
now or hereafter in effect affecting creditors' rights generally and general
equitable principles, regardless of whether enforceability is considered in a
proceeding in law or in equity). To the knowledge of ECX, except as disclosed in
Section 4.15(a) of the ECX Disclosure Schedule, (i) no event has occurred which,
after notice or the passage of time or both, would constitute a default or
breach by any party to any of the ECX Merchant Related Agreements, (ii) no party
to any of the ECX Merchant Related Agreements has or, to the knowledge of ECX,
intends, to terminate or adversely modify its agreement(s) or obligations with
respect thereto, or cease performing thereunder, and (iii) there are no
outstanding material disputes under any of the ECX Merchant Related Agreements,
and there is no pending or, to the knowledge of ECX, threatened, litigation or
other legal proceeding with respect to any of the ECX Merchant Related
Agreements. To the knowledge of ECX, the ECX Merchant Related Agreements
constitute all of the contracts, agreements and understandings applicable to the
provision of credit card services or equipment leasing and sales by ECX.
(b) Set forth in Section 4.15(b) of the ECX Disclosure Schedule is a
list, including parties and dates, of any contract or agreement (whether written
or oral), other than the ECX Merchant Related Agreements, to which ECX or any of
its Subsidiaries is a party to or bound by (i) with respect to the employment of
any employees, independent contractors, officers, directors or consultants, (ii)
which, upon the consummation of the transactions contemplated by this Agreement,
will (either alone or upon the occurrence of any additional acts or events)
result in any payment or benefits (whether of severance pay or otherwise)
becoming due, or the acceleration or vesting of any rights to any payment or
benefits, from iPayment, ECX, the Surviving Corporation or any of their
respective Subsidiaries to any employee, independent contractor, officer,
director or consultant thereof, (iii) which is a material contract to be
performed after the date of this Agreement ("ECX Material Contracts"), (iv)
which is not terminable on 90 days or less notice involving the payment of more
than $50,000 per annum, or (v) which restricts in any material respect the
conduct of any line of business by ECX or any of its Subsidiaries. Each
contract, arrangement, commitment or understanding of the type described in this
Section 4.15(b) is referred to herein as an "ECX Contract." ECX has heretofore
provided to iPayment or its counsel true, correct and complete copies of each
ECX Contract. Each ECX Material Contract is valid and binding and in full force
and effect with respect to the obligations of ECX or its Subsidiaries and, to
the knowledge of ECX, is valid and binding, enforceable and in full force and
effect with respect to the obligations of the counterparties thereto (except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws now or hereafter in effect
affecting creditors' rights generally and general equitable principles,
regardless of whether enforceability is considered in a proceeding in law or in
equity), and ECX and each of its Subsidiaries has performed in all
material respects all obligations required to be performed by it to date under
each such ECX Material Contract, and no event or condition exists which
constitutes or, after notice or lapse of time or both, would constitute, a
material default on the part of ECX or any of its Subsidiaries under any ECX
Material Contract, or to the knowledge of ECX, any other party thereto.
4.16. Leases. Set forth in Section 4.16 of the ECX Disclosure Schedule is a
list, including parties and dates, of any Leases. ECX has heretofore delivered
to iPayment true, correct and complete copies of each of the lease agreements,
and all amendments and supplements related thereto, under which ECX or its
Subsidiaries lease real or personal property (collectively, the "Leases"). To
the knowledge of ECX, each Lease is legal, valid, binding, enforceable and in
full force and effect and will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby (except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws now or hereafter in effect affecting creditors'
rights generally and general equitable principles, regardless of whether
enforceability is considered in a proceeding in law or in equity). Neither ECX
nor any of its Subsidiaries is in breach or default under any Lease and no event
has occurred which, with notice or lapse of time, would constitute a breach or
default of such Lease by ECX or any of its Subsidiaries or permit termination,
modification or acceleration thereof by the respective lessor, and no party to
any such Lease has repudiated any provision thereof. There are no disputes, oral
agreements or forbearance programs in effect as to any Lease. All facilities
leased under the Leases are supplied with utilities and other services necessary
for the operation of said facilities.
4.17. Tax Matters.
(a) All Tax Returns for all periods ending on or before the Closing
Date that are or were required to be filed by or with respect to ECX and any of
its Subsidiaries, or any predecessor of any of them, either separately or as a
member of an affiliated group of corporations, have been filed on a timely basis
and in accordance with applicable laws, regulations and administrative
requirements. All such Tax Returns that have been filed on or before the Closing
Date were, when filed, and continue to be, true, correct and complete in all
material respects.
(b) ECX has provided or made available to iPayment all reports of and
communications for all open years from IRS agents and the corresponding agents
of other state, local and foreign Governmental Authorities who have examined the
respective books and records applicable to ECX and any of its Subsidiaries.
Section 4.17(b) of the ECX Disclosure Schedule describes all adjustments in
respect of ECX and any of its Subsidiaries to Tax Returns filed by, or on behalf
of, ECX, its Subsidiaries or any affiliated group of corporations of which ECX
or a Subsidiary thereof is or was a member, for all open taxable years, that
have been proposed by any representative of any governmental agency, and Section
4.17(b) of the ECX Disclosure Schedule describes the resulting Taxes, if any,
proposed to be assessed. All deficiencies proposed (plus interest, penalties and
additions to tax that were or are proposed to be assessed thereon, if any) as a
result of such examinations have been paid, reserved against or settled or, as
described in Section 4.17(b) of the ECX Disclosure Schedule, are being contested
in good faith by appropriate proceedings. Neither ECX nor any of its
Subsidiaries has given or been requested to give waivers or extensions (or is or
would be subject to a waiver or extension
given by any other entity) of any statute of limitations relating to the payment
of Taxes for which ECX or any of its Subsidiaries may be liable.
(c) ECX and its Subsidiaries have paid, or made provision for the
payment of, all Taxes that have or, to the knowledge of ECX and its
Subsidiaries, may become due for all periods ending on or before the Closing
Date, including, without limitation, all Taxes reflected on the Tax Returns
referred to in this Section 4.17, or in any assessment, proposed assessment or
notice, received by ECX or any Subsidiary of ECX, except such Taxes, if any, as
are set forth in Section 4.17(c) of the ECX Disclosure Schedule that are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP consistently applied) have been provided. The charges,
accruals and reserves with respect to Taxes reflected in the ECX Financial
Statements were determined in accordance with GAAP consistently applied. In all
material respects, all Taxes that ECX and its Subsidiaries are or were required
by law to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the appropriate Governmental Authority. There
are no liens with respect to Taxes upon any of the properties or assets, real or
personal, tangible or intangible, of ECX or any of its Subsidiaries (except for
Taxes not yet due).
(d) There are no closing agreements, requests for rulings or requests
for technical advice, in respect of any Taxes, pending between ECX or any of its
Subsidiaries and any Governmental Authority.
(e) No consent to the application of Section 341(f)(2) of the Code has
ever been filed with respect to any property or assets held or acquired or to be
acquired by ECX or any of its Subsidiaries.
(f) There is no existing tax allocation or sharing agreement that may
or will require that any payment be made by or to ECX or any of its Subsidiaries
on or after the Closing Date.
(g) No property or asset owned by ECX or any of its Subsidiaries is
property that iPayment is or will be required to treat as being owned by another
person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately before the enactment of the
Tax Reform Act of 1986, or is "tax-exempt use property" within the meaning of
Section 168(h)(1) of the Code.
(h) Neither ECX nor any of its Subsidiaries has agreed to, or is
required to make, any adjustment pursuant to Section 481(a) of the Code, nor has
the IRS proposed any such adjustment or change in accounting method with respect
to ECX or any of its Subsidiaries. ECX and its Subsidiaries do not have any
application pending with any Governmental Authority requesting permission for
any change in accounting method.
(i) Except as disclosed in Section 4.17(i) of the ECX Disclosure
Schedule, there is no contract, agreement, plan or arrangement covering any
person that, individually or collectively, as a consequence of this transaction
could give rise to the payment of any amount that would not be deductible by
iPayment, the Surviving Corporation, or ECX or any of its Subsidiaries by reason
of Section 280G of the Code.
(j) Neither ECX nor any of its Subsidiaries owns an interest in any (i)
domestic international sales corporation, (ii) foreign sales corporation, (iii)
controlled foreign corporation, or (iv) passive foreign investment company.
(k) Neither ECX nor any of its Subsidiaries is a party to any deferred
intercompany transaction that will be restored (pursuant to the Treasury
Regulations under Section 1502 of the Code) and will result in income or loss to
ECX or any of its Subsidiaries due to this Agreement and the transactions
contemplated hereby.
(l) Neither ECX nor any of its Subsidiaries is, nor has ever 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.
(m) None of the assets of ECX or any of its Subsidiaries directly or
indirectly secure any debt the interest on which is tax-exempt under Section
103(a) of the Code.
4.18. Employee Benefit Matters.
(a) Set forth in Section 4.18 of the ECX Disclosure Schedule is a
complete and accurate list of each employee benefit plan including, but not
limited to, pension, profit sharing, 401(k), severance, welfare, disability and
deferred compensation, and all other material employee benefit plans,
agreements, programs, policies or arrangements including, but not limited to,
stock purchase, stock option, employment, change-in-control, fringe benefit,
bonus and incentive, whether or not subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether formal or informal, oral or
written, legally binding or not, under which any employee, former employee,
director, consultant or independent contractor of ECX or any ERISA Affiliate
thereof has any present or future right to benefits or under which ECX or any
ERISA Affiliate thereof has any present or future liability. All such plans,
agreements, programs, policies and arrangements shall be collectively referred
to as the "ECX Benefit Plans" but shall be separately identified in such Section
4.18 of the ECX Disclosure Schedule.
(b) With respect to each ECX Benefit Plan, ECX has delivered or made
available to iPayment (i) current, accurate and complete copies of each such ECX
Benefit Plan, including all trust agreements, each summary plan description or
other description, insurance or annuity contracts, agreements, participant
records and any other material documents or instruments relating thereto; (ii)
copies of each Form 5500 Annual Report and accompanying schedules; (iii) each
actuarial report (to the extent applicable) and; (iv) with respect to each such
ECX Benefit Plan which is an employee pension benefit plan (as such term is
defined in section 3(2) of ERISA), intended to qualify under section 401(a) of
the Code, copies of the most recent IRS determination letter or opinion letter
(including copies of any outstanding request for determination letters).
(c) Each ECX Benefit Plan has been established and administered in
accordance with its terms, and each such ECX Benefit Plan and ECX and its
Subsidiaries are in material compliance with the applicable provisions of ERISA,
the Code and other federal and state applicable laws, rules and regulations with
respect thereto.
(d) Each ECX Benefit Plan that is an "employee pension benefit plan"
(within the meaning of section 3(2) of ERISA) is qualified under section 401(a)
of the Code and its related trust is exempt from federal income tax under
section 501(a) of the Code. To ECX's knowledge, no event has occurred or
circumstance exists that will or could give rise to disqualification or loss of
tax-exempt status of any such ECX Benefit Plan or trust.
(e) No event has occurred and no condition exists that likely could
subject ECX or any ERISA Affiliate thereof to any tax, fine, lien, penalty or
other liability imposed by ERISA (including any breach of fiduciary
responsibility by any director, officer or employee), the Code or other
applicable laws, rules and regulations.
(f) Neither ECX nor any Subsidiary thereof sponsors or maintains, or
has ever sponsored or maintained, or has any actual or contingent liability
under or relating to, any plan that is or was a defined benefit plan, as defined
in section 3(35) of ERISA, or that is a Multiemployer Plan within the meaning of
section 4001(a)(3) of ERISA, or that is otherwise subject to title IV of ERISA.
(g) No ECX Benefit Plan is a "multiple employer welfare arrangement"
within the meaning of section 3(40) of ERISA, except for ECX Benefit Plans that
are fully insured and with respect to which each Form M-1 has been timely filed.
(h) All material reports, returns, notices and similar documents
pertaining to each ECX Benefit Plan that are required to be filed with any
Governmental Authority or distributed to any ECX Benefit Plan participant have
been duly and timely filed or distributed.
(i) To ECX's knowledge, for each ECX Benefit Plan with respect to which
a Form 5500 has been filed, no material change has occurred with respect to the
matters covered by the most recent Form 5500 since the date thereof.
(j) No "prohibited transaction" (as such term is defined in section 406
of ERISA and section 4975 of the Code) or "accumulated funding deficiency" (as
such term is defined in section 302 of ERISA and section 412 of the Code
(whether or not waived)) has occurred with respect to any ECX Benefit Plan.
(k) No ECX Benefit Plan or any related trust or fiduciary thereof is
the direct or indirect subject of a material audit, investigation or examination
by any Governmental Authority or quasi-governmental authority.
(l) The execution of this Agreement and the performance of the
transactions contemplated hereby will not constitute an event under any ECX
Benefit Plan that may reasonably be expected to result in any payment (whether
of severance pay or otherwise), acceleration, vesting or increase in benefits
with respect to any employee, former employee or director of ECX or any
Subsidiary thereof.
(m) All contributions and payments made or accrued with respect to all
ECX Benefit Plans and other benefit obligations are deductible under section 162
of the Code or section 404 of the Code. No amount or any asset of any ECX
Benefit Plan is subject to tax as unrelated business taxable income.
(n) To the knowledge of ECX, no event has occurred or circumstance
exists that could result in an increase in premium costs of ECX Benefit Plans
and other benefit obligations that are insured or a material increase in benefit
costs of such plans and obligations that are self-insured.
(o) Except to the extent required under section 601 et seq. of ERISA
and section 4980B of the Code, ECX and its ERISA Affiliates do not provide
health or welfare benefits for any retired or former employee and is not
obligated to provide health or welfare benefits to any active employee following
such employee's retirement or other termination of service.
(p) ECX and its ERISA Affiliates have the right to modify and terminate
each ECX Benefit Plan with respect to both retired and active employees.
(q) ECX and its ERISA Affiliates have complied in all material respects
with the provisions of section 601 et seq. of ERISA and section 4980B of the
Code.
(r) With respect to any ECX Benefit Plan, (i) no actions, suits or
claims (other than claims for benefits made in the ordinary course of the ECX
Benefit Plan's operation) are pending or, to the knowledge of ECX, threatened;
and (ii) no facts or circumstances exist that reasonably could give rise to any
such actions, suits or claims.
(s) Full payment has been made of all amounts which are due to any of
the ECX Benefit Plans. Furthermore, ECX and its Subsidiaries have made adequate
provision for reserves in accordance with generally accepted accounting
principles to meet contributions that have not been made because they are not
yet due under the terms of each of the ECX Benefit Plans.
4.19. Environmental Matters.
(a) Except for noncompliance which, individually or in the aggregate,
does not, and would not reasonably be expected to have an ECX Material Adverse
Effect, ECX and each of its Subsidiaries are in compliance with all applicable
international, federal, state, local and foreign laws and regulations relating
to pollution or protection of human health or the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) (collectively, "Environmental Laws"), which compliance
includes, but is not limited to, the possession by ECX and its Subsidiaries of
all permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof.
(b) Neither ECX nor any of its Subsidiaries has received written notice
of, or, to the knowledge of ECX, is the subject of, any actions, causes of
action, claims, investigations, demands or notices by any person asserting an
obligation to conduct investigations or cleanup activities under Environmental
Law or alleging liability under or noncompliance with any Environmental Law
(collectively, "Environmental Claims").
(c) To the knowledge of ECX, there are no past or present events,
conditions, circumstances, activities, practices, incidents, actions or plans
which may interfere with or prevent continued compliance, or which may give rise
to any material common law or statutory liability or otherwise form the basis of
any material claim, action, suit, proceeding, hearing or
investigation, based on or related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, or any pollutant,
contaminant, or hazardous or toxic material or waste (including biohazardous and
medical waste) with respect to or affecting ECX or any of its Subsidiaries.
4.20. Labor Controversies. There are no disputes pending or, to the knowledge of
ECX, threatened between any of ECX or its Subsidiaries and any representatives
of any of their employees and, to the knowledge of ECX, there are no
organizational efforts being made involving any unorganized employees of any of
ECX or its Subsidiaries.
4.21. Insurance. ECX and its Subsidiaries maintain insurance coverage reasonably
adequate for their assets and the operation of their businesses. None of ECX or
its Subsidiaries is in default with respect to any policies or binders of
indemnity, liability, directors' and officers', worker's compensation, health
and other forms of insurance policies or binders in force as of the date hereof
and insuring against risks of any of ECX and its Subsidiaries. No notice of
cancellation or non-renewal with respect to, or disallowance of any claim under,
any such policy has been received by ECX or any of its Subsidiaries.
4.22. Required Stockholder Vote. The affirmative vote of a majority of the
outstanding shares of ECX Common Stock and ECX Class A Preferred (voting as if
converted to ECX Common Stock), voting together as a single class, and the
affirmative vote of a majority of the outstanding shares of ECX Class A
Preferred, voting as a separate class, are the only votes of the holders of any
shares of capital stock of ECX necessary under ECX's certificate of
incorporation, bylaws and other governing documents and applicable law to
approve and adopt this Agreement and the transactions contemplated hereby.
4.23. Brokers and Finders. ECX and its Subsidiaries have not entered into any
contract, arrangement or understanding with any Person or firm which may result
in the obligation of ECX or any of its Subsidiaries to pay any finder's fees,
brokerage fees, agent commissions or similar fees, commissions or payments in
connection with the transactions contemplated hereby, and there is no claim for
payment of any such fees, commissions or payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.
4.24. Equipment Leases and Inventory. All equipment acquired by ECX for purposes
of leasing was, when acquired, to ECX's knowledge merchantable and fit for the
purpose for which it was procured, and to ECX's knowledge the obligations of
each lessee to make payments required under the related lease throughout the
term thereof is unconditional, without any right of set-off by such lessee and
without regard to any event affecting the equipment or obsolescence thereof.
Since December 31, 2001, there has not been a material change in the revenue
derived from ECX's leasing operations, and there is no reasonable basis to
believe that residual liability arising out of or related to its leasing
operations will exceed historical levels.
4.25. Cash Flow of Merchant Accounts and Compliance with VISA/MasterCard Rules.
Attached hereto as Section 4.25 of the ECX Disclosure Schedule is ECX's and its
Subsidiaries most recent settlement reports setting forth each Merchant's name
and address and its current
year-to-date sales (the "Settlement Reports"). Since the date of the Settlement
Report, there has not been a material change in the aggregate cash flow
generated by the Merchant Accounts. ECX and its Subsidiaries have operated and
conducted their business, in all material respects, in accordance with any and
all applicable VISA/MasterCard rules and regulations. The Settlement Reports
attached hereto as Section 4.25 of the ECX Disclosure Schedule lists, as of the
date of the Settlement Reports, the Merchant reserve accounts maintained by each
Merchant at the applicable Member Bank and, to ECX's knowledge, such amounts are
in compliance with the requirements of such Member Banks. Section 4.25 of the
ECX Disclosure Schedule reflects all fines that have been assessed and/or paid,
directly or indirectly through the assessment and/or payment of such fine
through a Member Bank or other party, within the last 12 months. Except as set
forth in Section 4.25 of the ECX Disclosure Schedule, ECX has no reasonable
basis to believe that the operation or conduct of its business will result in
such fines after the Closing.
4.26. Franchise Issues. To ECX's knowledge, ECX and its Subsidiaries are in
material compliance with all federal and state statutes, rules, regulations and
guidelines, if applicable, regarding the offer of franchises or business
opportunities.
4.27. Ownership and Portability of Merchant Accounts. Except as disclosed on
Section 4.27 hereto, with respect to all of the Merchant Accounts, including
without limitation the Merchant Accounts of those Merchants participating in the
Minotola Bank Merchant Program, (a) ECX owns such Merchant Accounts free and
clear of all Encumbrances, other than Permitted Liens, (b) to ECX's knowledge,
such Merchant Accounts are processed under unique BINs and ICAs, and (c) ECX has
the right at any time and from time to time to direct the applicable Member Bank
and third-party processors to, and such banks and third-party processors are
obligated to, (i) assign the Merchant Agreements relating to the Merchants so
identified, including all Merchant files and records (paper and fiche), related
merchant reserve and hold accounts, BINS, ICAs and databases relating thereto,
to one or more other Member Banks and/or third-party processors designated by
ECX and (ii) effect the deconversion of such Merchant Accounts. The Member Banks
and third-party processors are obligated to transfer the merchant files,
merchant agreements, related documents and other items described herein after
receipt of ECX's request for such assignment and deconversion and such
assignment and deconversion of the Merchant Accounts shall be at no cost or
expense to ECX other than the reasonable cost of copying, shipping, supplies and
any related association fees; provided, however, that all such costs, expenses
or fees shall not exceed $25,000.
4.28. Prior Sales of Securities. All offers and sales of ECX Common Stock, ECX
Class A Preferred and of any shares of capital stock of any the Subsidiaries of
ECX by ECX or such Subsidiary prior to the date hereof were exempt from the
registration requirements of the Securities Act of 1933, as amended, and were
duly registered or the subject of an available exemption from the registration
requirements of the applicable state securities or Blue Sky laws, or the
relevant statues of limitations have expired, or civil liability thereafter has
been eliminated by an offer to rescind.
4.29. Employees and Independent Contractors.
(a) Set forth on Section 4.29 of the ECX Disclosure Schedule is a true,
complete and correct list setting forth as of the date hereof (a) the names,
location of services and current
compensation of all individuals currently employed directly or indirectly by ECX
and its Subsidiaries on a salaried or hourly basis, and (b) the names and total
annual compensation for all independent contractors (other than vendors and
similar professionals) who render services on a regular basis to ECX and its
Subsidiaries for whom ECX or a Subsidiary prepared an IRS Form 1099 for fiscal
year 2001 and whose total annual compensation is in excess of $10,000. ECX has
sent WARN Act notices to all of the employees listed on Section 4.29 of the ECX
Disclosure Schedule.
(b) To ECX's knowledge, all non-employee/independent Persons that
solicit Merchants for or on behalf of ECX or its Subsidiaries have, at all times
during their relationship with ECX and its Subsidiaries, been properly
classified as independent contractors and not employees of ECX or its
Subsidiaries for purposes of all applicable law, including, without limitation,
for federal, state and local employment tax purposes.
(c) Set forth in Section 4.29 of the ECX Disclosure Schedule is a true,
complete and correct list setting forth as of the date hereof the names of all
employees, agents and independent contractors of ECX and its Subsidiaries and
the amount of all retention payments, severance payments, change in control
payments or other similar compensation or benefits which are or may become
payable in connection with the consummation of the transactions contemplated by
this Agreement. To the knowledge of ECX, ECX and its Subsidiaries have not
incurred liability relating to, or promised or agreed (whether orally or in
writing) to pay retention payments, severance payments, change in control
payments or other similar compensation or benefits which are or may become
payable in connection with the consummation of the transactions contemplated by
this Agreement in an aggregate amount in excess of $636,549.54. ECX and its
Subsidiaries have taken no actions prior to the Closing related to the foregoing
that will subject it or iPayment or any of its Subsidiaries to liability after
the Closing other than payment of the foregoing by ECX and its Subsidiaries.
4.30. Net Worth. ECX and its Subsidiaries have a consolidated net worth of at
least $5,000,000.
4.31. Holders of ECX Class A Preferred.
(a) The holders of ECX Class A Preferred are corporations or other
legal entities duly organized, validly existing and in good standing under the
laws of the states where incorporated or otherwise organized, and have the
corporate power and authority to own, lease and operate their respective assets
and properties and to carry on their respective businesses as they are currently
being conducted. The holders of ECX Class A Preferred are duly qualified and in
good standing to transact business as foreign corporations in each jurisdiction
in which the ownership or use of their respective assets and properties and the
conduct of their respective businesses require such qualification, except such
jurisdictions, individually or in the aggregate, in which the failure to be so
qualified does not have, and would not reasonably be expected to have, a
material adverse effect on such holders.
(b) The holders of ECX Class A Preferred have the power and authority
to enter into the documents and instruments to be executed and delivered by the
holders of ECX Class A Preferred pursuant to this Agreement (collectively, the
"ECX Class A Preferred Documents").
The execution and delivery of the ECX Class A Preferred Documents, and the
consummation of the transactions contemplated hereby, have been duly authorized
and approved by all necessary actions of the holders of ECX Class A Preferred.
No other proceedings on the part of the holders of ECX Class A Preferred are
necessary to authorize the execution and delivery of the ECX Class A Preferred
Documents or the consummation of the transactions contemplated hereby. The ECX
Class A Preferred Documents have been duly and validly executed and delivered by
the holders of the ECX Class A Preferred, and, assuming due execution and
delivery by iPayment and the other Persons party to such agreements, the ECX
Class A Preferred Documents constitute the valid and binding agreement and
obligation of the holders of the ECX Class A Preferred, enforceable against the
holders of the ECX Class A Preferred in accordance with their respective terms
(except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws now or
hereafter in effect affecting creditors' rights generally and general equitable
principles, regardless of whether enforceability is considered in a proceeding
in law or in equity).
(c) Each of the holders of the ECX Class A Preferred is an "accredited
investor" as defined in Rule 501 under the Securities Act of 1933, as amended.
4.32. Dissenters' Rights. ECX has received no notice from a stockholder that
such stockholder will seek to exercise his or her statutory appraisal rights
under the DGCL. No shareholder of ECX has a legal right to exercise his or her
appraisal rights after the Closing Date.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF IPAYMENT AND IPAYMENT MERGER SUB
iPayment and iPayment Merger Sub hereby represent and warrant to ECX
that, except as set forth in the disclosure schedule dated as of the date hereof
and signed on behalf of iPayment by an authorized officer of iPayment, with each
such exception included therein specifically identifying the relevant Section
hereto to which it specifically relates (the "iPayment Disclosure Schedule"):
5.1. Corporate Organization.
(a) iPayment is a corporation duly organized, validly existing and in
good standing under the laws of the State of Tennessee, and has the corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is currently being conducted. iPayment is duly
qualified and in good standing to transact business as a foreign corporation in
each jurisdiction in which the ownership or use of its assets and properties and
the conduct of its business requires such qualification, except such
jurisdictions, individually or in the aggregate, in which the failure to be so
qualified does not have, and would not be reasonably expected to have, an
iPayment Material Adverse Effect. True, accurate and complete copies of
iPayment's charter, bylaws or other governing documents, and all amendments
thereto, in each case as in effect on the date hereof, have heretofore been
delivered or made available to ECX.
(b) iPayment Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
the corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is
currently being conducted. iPayment Merger Sub was formed solely for the purpose
of engaging in the transactions contemplated in this Agreement and has not
engaged in any activities other than in connection with those transactions.
iPayment Merger Sub has not incurred any material obligations or liabilities or
entered into any material agreements or arrangements with any Person except for
this Agreement and as contemplated hereby. True, accurate and complete copies of
iPayment Merger Sub's certificate of incorporation, bylaws or other governing
documents, and all amendments thereto, in each case as in effect on the date
hereof, have heretofore been delivered or made available to ECX.
5.2. Authorization; Binding Agreement. Each of iPayment and iPayment Merger Sub
has the corporate power and authority to enter into this Agreement and the other
documents and instruments to be executed and delivered by iPayment and iPayment
Merger Sub pursuant hereto (collectively, the "iPayment Documents"), and to
consummate the Merger and the other transactions contemplated hereby. The
execution and delivery of this Agreement and the iPayment Documents, and the
consummation of the transactions contemplated hereby, have been duly authorized
and approved by the Board of Directors of iPayment at a meeting duly called and
held and at which a quorum was present and acting throughout, by the requisite
affirmative vote of the directors of iPayment, and the Board of Directors of
iPayment has determined that the Merger is in the best interests of iPayment and
its stockholders and approved this Agreement and the Merger. The execution and
delivery of this Agreement and the iPayment Documents, and the consummation of
the transactions contemplated hereby, have been duly authorized and approved by
the Board of Directors of iPayment Merger Sub, and by iPayment as the sole
stockholder of iPayment Merger Sub, and the Board of Directors of iPayment
Merger Sub has determined that the Merger is in the best interests of iPayment
Merger Sub and its stockholders and approved this Agreement and the Merger. No
other corporate proceedings on the part of iPayment or iPayment Merger Sub are
necessary to authorize the execution and delivery of this Agreement or the
consummation by iPayment and iPayment Merger Sub of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by iPayment and iPayment Merger Sub, and, assuming due execution and
delivery by ECX, this Agreement constitutes the valid and binding agreement and
obligation of iPayment and iPayment Merger Sub, enforceable against iPayment and
iPayment Merger Sub in accordance with its terms (except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws now or hereafter in effect affecting creditors'
rights generally and general equitable principles, regardless of whether
enforceability is considered in a proceeding in law or in equity).
5.3. Consents and Approvals. Except for (a) the filing of the Certificate of
Merger with the Delaware Secretary, (b) any filings required under state
securities or "Blue Sky" laws, (c) any filings and consents as may be required
under any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval necessitated by the transactions
contemplated in this Agreement, (d) requisite consent to consummation of the
Merger by the lenders under the iPayment Credit Agreement, holders of preferred
stock, holders of the Mezzanine Debt, and (e) such other authorizations,
consents, approvals or filings, the failure of which to obtain or make,
individually or in the aggregate, does not have, and would not reasonably be
expected to have, an iPayment Material Adverse Effect or materially impair or
delay the consummation by iPayment or iPayment Merger Sub of the transactions
contemplated hereby, no consents or approvals of or filings or registrations
with any Governmental Authority
or with any third party are necessary in connection with (i) the execution and
delivery by iPayment and iPayment Merger Sub of this Agreement and the iPayment
Documents and (ii) the consummation by iPayment and iPayment Merger Sub of the
Merger.
5.4. No Conflicts. Neither the execution or delivery by iPayment and iPayment
Merger Sub of this Agreement and the other iPayment Documents, nor the
consummation by iPayment and iPayment Merger Sub of the transactions
contemplated hereby or thereby, nor the compliance by iPayment and iPayment
Merger Sub with the provisions hereof, will: (a) violate or conflict with or
result in any breach of any provision of the certificate of incorporation,
bylaws or other governing documents of iPayment and iPayment Merger Sub; (b)
violate or conflict with any order, injunction, decree, law, statute, rule,
ordinance or regulation applicable to iPayment, iPayment Merger Sub or their
Subsidiaries or by which any of their respective properties or assets may be
bound; (c) result in a violation or breach of, constitute a default or give rise
to any right of termination, cancellation or acceleration under, any loan or
credit agreement, note, mortgage, bond, indenture, lease, benefit plan or other
agreement, obligation or instrument applicable to iPayment, iPayment Merger Sub
or their Subsidiaries, or result in the creation of an Encumbrance upon any
property or asset of iPayment, iPayment Merger Sub or their Subsidiaries or by
which any such properties or assets may be bound, or trigger any right of first
refusal or other purchase right applicable to iPayment, iPayment Merger Sub or
any Subsidiary thereof; or (d) result in the loss of any license, franchise or
permit applicable to iPayment, iPayment Merger Sub or any Subsidiary thereof;
except in each case, where such violation, conflict, breach, default, loss or
other event, individually or in the aggregate, does not have, and would not
reasonably be expected to have, an iPayment Material Adverse Effect.
5.5. Capitalization.
(a) The authorized capital stock of iPayment consists of 40,000,000
shares of iPayment Common Stock, and 10,000,000 shares of preferred stock, no
par value per share ("iPayment Preferred Stock"). As of the date hereof, (i)
9,683,190 shares of iPayment Common Stock were issued and outstanding, all of
which were validly issued and are fully paid, nonassessable and free of
preemptive rights, (ii) 2,577,200 shares of iPayment Preferred Stock were issued
and outstanding, all of which were validly issued and are fully paid,
nonassessable and free of preemptive rights, and (iii) no shares of iPayment
Common Stock and no shares of iPayment Preferred Stock were held in the treasury
of iPayment or any of its Subsidiaries.
(b) Except for options, commitments and agreements under iPayment's
stock option programs and warrants to purchase a total of 3,107,845 shares of
iPayment Common Stock, iPayment does not have and is not bound by any
outstanding subscriptions, options, warrants, convertible securities, conversion
rights, preemptive or other rights, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of iPayment Common
Stock or iPayment Preferred Stock or any other equity security or capital stock
of iPayment or any securities representing the right to purchase or otherwise
receive any shares of iPayment Common Stock or any other equity security or
capital stock of iPayment. iPayment has no outstanding stock appreciation
rights, phantom stock rights or similar rights. iPayment has no outstanding
obligations, contingent or otherwise, to reacquire any shares of iPayment Common
Stock.
(c) The number of outstanding shares of iPayment Common Stock and
iPayment Preferred Stock and the number of shares of iPayment Common Stock
reserved for issuance upon the exercise of stock options and warrants in
Sections 5.5(a) and (b) above assume the completion of Minority Stock Exchange.
(d) The authorized capital stock of iPayment Merger Sub consists of
1,000 shares of iPayment Merger Sub Common Stock. iPayment owns beneficially and
of record all the issued and outstanding shares of iPayment Merger Sub Common
Stock.
(e) Section 5.5 of the iPayment Disclosure Schedule sets forth all
indebtedness of iPayment and its Subsidiaries.
5.6. Financial Statements.
The audited consolidated financial statements for the years ended
December 31, 2000 and 1999, the unaudited consolidated financial statements for
the year ended December 31, 2001 and unaudited interim consolidated financial
statements of iPayment attached as Section 5.6 of the iPayment Disclosure
Schedule (collectively, the "iPayment Financial Statements") were prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as may be indicated therein or in the notes thereto) and fairly present
in all material respects the consolidated financial position of iPayment and its
Subsidiaries as of the dates thereof and the results of their operations and
their cash flows for the periods then ended, subject to normal year-end and
audit adjustments (which are not material), any non-cash adjustments regarding
amortization of goodwill related to acquisitions and, in the case of the
unaudited interim consolidated financial statements, to the absence of footnote
disclosures normally contained in the audited consolidation financial
statements.
5.7. Absence of Undisclosed Liabilities. Neither iPayment nor its Subsidiaries
has any material liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except (i) liabilities, obligations or
contingencies that are accrued or reserved against in the iPayment Financial
Statements or reflected in the notes thereto, (ii) liabilities, obligations or
contingencies under contacts or agreements (but not liabilities, obligations or
contingencies for breaches thereof), (iii) liabilities, obligations or
contingencies which have arisen after December 31, 2001 in the ordinary course
of business consistent with past practice or otherwise in accordance with the
terms and conditions of this Agreement, and (iv) liabilities, obligations or
contingencies disclosed in Section 5.7 of the iPayment Disclosure Schedule.
5.8. Litigation; Decrees. Except as disclosed in Section 5.8 of the iPayment
Disclosure Schedule, there are no claims, suits, actions, arbitration actions,
government investigations or inquiries or other proceedings pending or, to the
knowledge of iPayment, threatened against, relating to or affecting any of
iPayment or its Subsidiaries, or their respective directors and officers in
their capacities as such, or their assets or businesses, which seeks to restrain
or enjoin the consummation of the transactions contemplated herein or which
have, or would reasonably be expected to have, either alone or in the aggregate
with all such claims, actions or other proceedings, an iPayment Material Adverse
Effect. Except as disclosed in Section 5.8 of the iPayment Disclosure Schedule,
there are no decrees, injunctions, writs or orders of any court or governmental
department or agency applicable to any of iPayment or its Subsidiaries, or their
assets or businesses, or which prohibits or restricts the consummation of the
transactions contemplated herein or which have, or would reasonably be expected
to have, an iPayment Material Adverse Effect.
5.9. Compliance with Law. iPayment and each of its Subsidiaries is in
compliance, in all material respects, with all applicable Laws of the United
States of America and any applicable foreign jurisdictions, all state and local
governments and other Governmental Authorities, and agencies and courts of any
of the foregoing, to which any of iPayment or its Subsidiaries is subject, and
none of iPayment or its Subsidiaries has received any notice to the effect that,
or otherwise been advised that, any of iPayment or its Subsidiaries has violated
or is not in compliance with any of such Laws, and, to the knowledge of
iPayment, there are no investigations with respect thereto; except in each case
with respect to non-compliance or violations that, individually or in the
aggregate, do not have, and would not reasonably be expected to have, an
iPayment Material Adverse Effect. iPayment and its Subsidiaries have all permits
necessary to conduct their businesses as currently conducted, except for
permits, the absence of which, in the aggregate, do not have, and would not
reasonably be expected to have, an iPayment Material Adverse Effect, and none of
iPayment and its Subsidiaries is in violation of the terms of any such permit,
except for delays in filing reports or violations that do not have, and would
not reasonably be expected to have, an iPayment Material Adverse Effect.
5.10. Absence of Certain Changes or Events. Except as disclosed in Section 5.10
of the iPayment Disclosure Schedule, since January 31, 2001, none of iPayment or
its Subsidiaries has (other than actions taken in connection with the
transactions contemplated by this Agreement) operated other than in the ordinary
course of business consistent in all material respects with past practice, or
incurred, experienced or suffered any iPayment Material Adverse Effect.
5.11. Title to Assets. iPayment and its Subsidiaries have good and marketable
title to all of their respective assets, free and clear of all Encumbrances,
other than Permitted Liens, and no financing statement covering all or any
portion of iPayment's or its Subsidiaries' assets and naming iPayment or a
Subsidiary thereof as debtor has been filed in any public office, and neither
iPayment nor any Subsidiary has signed any financing statement or security
agreement as debtor or borrower which financing statement or security agreement
covers all or any portion of the assets of iPayment or its Subsidiaries.
5.12. Valid Issuance of Stock. The iPayment Common Stock issuable upon
conversion of the Notes have been duly and validly reserved for issuance upon
conversion thereof and, when issued upon such conversion, shall be duly
authorized and validly issued, fully paid and nonassessable.
5.13. Brokers and Finders. iPayment and its Subsidiaries have not entered into
any contract, arrangement or understanding with any Person or firm which may
result in the obligation of ECX or any of its Subsidiaries to pay any finder's
fees, brokerage fees, agent commissions or similar fees, commissions or payments
in connection with the transactions contemplated hereby, and there is no claim
for payment of any such fees, commissions or payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.
5.14. Certain Merchant Accounts. The processing of Merchants engaged in audio
text or video text businesses constitutes a small percentage of iPayment's
business and is not a business focus of iPayment.
ARTICLE VI. CERTAIN COVENANTS AND AGREEMENTS
6.1. Access to Information.
(a) Upon reasonable notice and subject to applicable Laws relating to
the exchange of information, each of iPayment and ECX shall, and shall cause
each of its respective Subsidiaries to, afford to the officers, employees,
accountants, attorneys, financial advisors and other representatives (each, a
"Representative") of the other party, access during normal business hours during
the period prior to the Effective Time to all its properties, books, contracts,
commitments, records, officers, employees, accountants, counsel and other
representatives and, during such period, it shall, and shall cause its
Subsidiaries to, make available to the other party all information concerning
its business, properties and personnel as the other party may reasonably request
in connection herewith. The rights of iPayment and ECX hereunder shall not be
exercised in such a manner as to interfere unreasonably with the conduct of the
business of the other party and its Subsidiaries.
(b) All information furnished pursuant to Section 6.1(a) shall be
subject to, and the parties shall hold all such information in confidence in
accordance with, the provisions of the Non-Disclosure Agreement, dated as of
October 24, 2001 (the "Confidentiality Agreement"), between iPayment and ECX.
(c) Notwithstanding anything in the Confidentiality Agreement or any
other agreement to the contrary, no provision of the Confidentiality Agreement
or investigation by either of the parties or their respective Representatives
shall affect the representations, warranties, covenants or agreements of the
other set forth herein and the parties shall remain responsible to the extent
provided herein.
6.2. No Solicitation.
(a) ECX agrees that it and its Subsidiaries, officers, directors,
employees, representatives, consultants, investment bankers, attorneys,
accountants and agents shall not, directly or indirectly, (i) encourage,
solicit, initiate, facilitate, entertain or accept any Acquisition Proposal,
(ii) enter into any agreement with respect to any Acquisition Proposal or enter
into any arrangement, understanding or agreement requiring it to abandon,
terminate or fail to consummate the Merger or any other transactions
contemplated by this Agreement, (iii) propose or make any Acquisition Proposal
to any Person other than iPayment and iPayment Merger Sub, (iv) participate in
any way in discussions or negotiations with, or furnish or disclose any
information to, any Person (other than iPayment and iPayment Merger Sub) in
connection with or with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal, or (v) authorize or permit its
Subsidiaries, officers, directors, employees, representatives, consultants,
investment
bankers, attorneys, accountants and agents to do any of the foregoing. ECX and
its Subsidiaries, officers, directors, employees, representatives, consultants,
investment bankers, attorneys, accountants and agents shall immediately cease
any discussions, activities or negotiations with Persons other than iPayment and
iPayment Merger Sub that may be ongoing or previously or currently conducted
with respect to any Acquisition Proposal.
(b) In addition, the Board of Directors of ECX, and each committee
thereof, shall not (A) withdraw or modify, or propose to withdraw or modify, in
a manner adverse to iPayment or iPayment Merger Sub, the approval and
recommendation of this Agreement or the Merger, or (B) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal other than the Merger.
(c) Within 24 hours of receipt thereof, ECX shall promptly notify
iPayment of any request for information or of any Acquisition Proposal, or any
inquiry, proposal, discussions or negotiations with respect to any Acquisition
Proposal, and ECX shall promptly provide iPayment with the terms and conditions
of such request, Acquisition Proposal, inquiry, proposal, discussion or
negotiation, copies of any written materials received by ECX in connection with
any of the foregoing and the identity of the Person making any such Acquisition
Proposal or such request, inquiry or proposal or with whom any discussions or
negotiations are taking place. ECX shall keep iPayment fully informed of the
status and details (including amendments or proposed amendments) of any such
request or Acquisition Proposal.
(d) Nothing contained in this Section 6.2 shall prohibit ECX from
taking or disclosing to its stockholders a position contemplated by Rule
14d-9(f) or Rule 14e-2(a) promulgated under the Securities Exchange Act of 1934,
as amended, or from making any disclosure to ECX's stockholders if the Board of
Directors of ECX determines in good faith that the failure to do so would
violate the fiduciary obligations of such Board of Directors under applicable
law; provided, however, that neither ECX nor its Board of Directors nor any
committee thereof shall withdraw or modify, or propose to withdraw or modify,
its position with respect to this Agreement or the Merger or approve or
recommend, or propose to approve or recommend, an Acquisition Proposal.
6.3. Stockholders Approval. ECX shall take all steps in accordance with
applicable law necessary to obtain the approval and adoption of this Agreement
by its stockholders. ECX will, through its Board of Directors, recommend to its
stockholders approval and adoption of this Agreement and the Merger and other
transactions contemplated hereby.
6.4. Public Statements. iPayment and ECX will consult with each other and will
mutually agree on any press releases or public announcements pertaining to this
Agreement or the transactions contemplated hereby and will not issue any such
press releases or make any such public announcements prior to such consultation
and agreement, except as may be required by applicable securities or other Laws,
in which case the party proposing to issue such press release or make such
public announcement will use its commercially reasonable best efforts to consult
in good faith with the other party before issuing any such press releases or
making any such public announcements.
6.5. Expenses and Fees. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, including legal, accounting
and financial advisory fees and expenses, will be paid by the party incurring
such costs and expenses. Notwithstanding the
foregoing, ECX shall only be liable for such legal fees and expenses up to
$100,000. Any amounts incurred above such level shall be paid by the holders of
the ECX Class A Preferred as set forth in Section 4.5 of the ECX Disclosure
Schedule. The foregoing shall not affect the legal right, if any, that any party
hereto may have to recover expenses from any other party that breaches its
obligations hereunder.
6.6. Notification. Each of ECX and iPayment agree to (a) give prompt notice to
the other party, and to use their respective reasonable best efforts to prevent
or promptly remedy, (i) upon such party obtaining knowledge thereof, the
occurrence or failure to occur, or the impending or threatened occurrence or
failure to occur, of any event whose occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time, and (ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder and (b) give prompt notice to the other party of any fact which, if
known by it on the date hereof, would have been required to be set forth or
disclosed by it pursuant to this Agreement.
6.7. Additional Agreements. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective Subsidiaries shall take all such necessary action
as may be reasonably requested by iPayment.
6.8. Reasonable Best Efforts, Cooperation. Subject to the terms and conditions
of this Agreement, each of iPayment and ECX agrees to use its respective
reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Merger as promptly as practicable and otherwise to enable consummation of
the transactions contemplated hereby and shall cooperate fully with the other
party hereto to that end.
6.9. iPayment Board of Directors. Promptly upon the Effective Time, iPayment's
Board of Directors shall increase the size of iPayment's Board of Directors to
create a vacancy on such Board, and Xxxxx Xxxxx, as the initial representative
of the holders of a majority of the outstanding principal amount of the Notes,
shall be appointed to fill such vacancy as a director of iPayment; provided that
Xxxxx Xxxxx or any other representative of the holders of the Notes or the
iPayment Common Stock issued upon exercise thereof shall no longer serve on
iPayment's Board of Directors upon the occurrence of certain events as set forth
in the Voting Agreement (with such representative being entitled to serve on the
Board of Directors at all times prior thereto).
6.10 ECX Guaranty. From and after Closing ECX, as the Surviving Corporation,
unconditionally and irrevocably guarantees the prompt payment when due, whether
by acceleration or otherwise, of the principal of, interest on, and all other
sums payable in connection with, the Notes until the earlier of the payment of
the Notes in full (if not converted
in whole or in part) or conversion of each of the Notes in their entirety for
shares of iPayment Underlying Common Stock.
6.11 Warrants. From and after Closing, the holders of ECX Class A Preferred
hereby covenant that they will use commercially reasonable efforts to locate and
obtain the termination of all ECX Warrants.
ARTICLE VII. CONDITIONS TO CLOSING
7.1. Conditions to Each Party's Obligation To Effect the Merger. The respective
obligation of each of the parties hereto to effect the Merger shall be subject
to the satisfaction, or the waiver by such party, at or prior to the Effective
Time, of the following conditions:
(a) Stockholder Approval. This Agreement shall have been duly approved
and adopted by the requisite vote of the stockholders of ECX under applicable
law.
(b) Approvals. All consents, approvals, orders or authorizations of or
registrations, declarations or filings with any Governmental Authority, which
the failure to obtain, make or occur has or would reasonably be expected to have
the effect of making the Merger or any of the transactions contemplated hereby
illegal or to have an iPayment Material Adverse Effect, as the case may be,
shall have been obtained, shall have been made or shall have occurred, and shall
be in full force and effect.
(c) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect. No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated or enforced by any Governmental Authority
which prohibits, restricts or makes illegal consummation of the Merger.
7.2. Conditions to Obligations of iPayment. The obligation of iPayment to effect
the Merger is also subject to the satisfaction, or waiver by iPayment, at or
prior to the Effective Time, of the following conditions:
(a) Representations and Warranties of ECX. Each of the representations
and warranties of ECX contained in this Agreement (i) that are qualified by
materiality, including the terms "material," "in any material respects" and "in
all material respects" and "ECX Material Adverse Effect" or words of similar
effect, shall be true and correct in all respects when made and as of the
Closing, with the same effect as though such representations and warranties had
been made on and as of the Closing, and (ii) that are not so qualified by
materiality, shall be true and correct in all material respects when made and as
of the Closing, with the same effect as though such representations and
warranties had been made on and as of the Closing. iPayment shall have received
a certificate signed on behalf of ECX by the Chief Executive Officer and the
Chief Financial Officer of ECX to the foregoing effect.
(b) Performance of Obligations of ECX. ECX shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and iPayment shall have received a
certificate signed on behalf of ECX by the Chief Executive Officer and the Chief
Financial Officer of ECX to such effect.
(c) Legal Opinion. iPayment shall have received an opinion from
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx, counsel to ECX ("ECX's Counsel"), in form and
substance reasonably satisfactory to iPayment, dated the Effective Time, as to
certain matters agreed upon by legal counsel of iPayment and ECX.
(d) No Material Adverse Change. Since the date of this Agreement, there
shall not have occurred any ECX Material Adverse Effect. iPayment shall have
received a certificate signed on behalf of ECX by the Chief Executive Officer
and the Chief Financial Officer of ECX to that effect.
(e) Consents. Prior to Closing, ECX and its Subsidiaries shall have (i)
provided all requisite notices to and (ii) obtained all requisite consents,
waivers and approvals from any third party in order for ECX to consummate the
Merger, including, but not limited to consents provided in Section 4.3 of the
ECX Disclosure Schedule.
(f) Resignations. At Closing, iPayment shall have received written
resignations from each of the directors and officers of ECX and its
Subsidiaries.
(g) Delivery of Certificates. The holders of ECX Class A Preferred and
the ECX Common Stock shall deliver all certificates representing outstanding
shares of ECX Class A Preferred and ECX Common Stock, respectively, other than
certificates representing shares of ECX Common Stock for which their holders
have exercised their appraisal rights under the DGCL.
(h) Confidentiality/Non-Solicitation Agreements. ECX shall deliver
confidentiality and non-solicitation agreements with iPayment executed by Xxxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxx Xxxx and Xxxx Xxxxxx.
(i) Dissenting Stockholders. The number of shares for which appraisal
rights have been exercised shall not exceed 113,250 shares (1% of total
outstanding shares).
(j) Release from Ginsbergs and Holders of ECX Class A Preferred. Each
of Xxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxx and the holders of the ECX Class A
Preferred shall execute and deliver a release, the form of which is set forth as
Exhibit B to this Agreement.
(k) Shareholders Agreement. At Closing, the Agreement and Waiver shall
be executed by the parties thereto and delivered to iPayment, and such agreement
shall, among other things, terminate the Shareholders' Agreement, dated as of
October 6, 1999, by and among ECX, the Investors (as defined in the
Shareholders' Agreement) listed on the signature pages thereto and the Other
Investors (as defined in the Shareholders' Agreement) listed on the signature
pages thereto.
7.3. Conditions to Obligations of ECX. The obligation of ECX to effect the
Merger is also subject to the satisfaction, or waiver by ECX, at or prior to the
Effective Time, of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of iPayment and iPayment Merger Sub contained in this Agreement (i)
that are qualified by
materiality, including the terms "material," "in any material respects," "in all
material respects" and "iPayment Material Adverse Effect" or words of similar
effect, shall be true and correct in all respects when made and as of the
Closing, with the same effect as though such representations and warranties had
been made on and as of the Closing, and (ii) that are not so qualified by
materiality, shall be true and correct in all material respects when made and as
of the Closing, with the same effect as though such representations and
warranties had been made on and as of the Closing. ECX shall have received a
certificate signed on behalf of iPayment by the Chief Executive Officer and the
Chief Financial Officer of iPayment to the foregoing effect.
(b) Performance of Obligations of iPayment and iPayment Merger Sub.
iPayment and iPayment Merger Sub shall have performed in all material respects
all obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and ECX shall have received a certificate signed on behalf
of iPayment by the Chief Executive Officer and the Chief Financial Officer of
iPayment to such effect.
(c) Legal Opinion. ECX shall have received an opinion from Xxxxxx
Xxxxxxx Xxxxxx & Xxxxx, PLLC, counsel to iPayment ("iPayment's Counsel"), in
form and substance reasonably satisfactory to ECX, dated the Effective Time, as
to certain matters agreed upon by legal counsel of iPayment and ECX.
(d) Consents. Prior to Closing, iPayment and its subsidiaries shall
have (i) provided all requisite notices to and (ii) obtained all requisite
consents, waivers and approvals from any third party in order for iPayment to
consummate the Merger, including, but not limited to, consents from the
following parties: the lenders under the iPayment Credit Agreement, holders of
preferred stock, and holders of the Mezzanine Debt.
(e) No Material Adverse Change. Since the date of this Agreement, there
shall not have occurred any iPayment Material Adverse Effect. ECX shall have
received a certificate signed on behalf of iPayment by the Chief Executive
Officer and the Chief Financial Officer of iPayment to that effect.
(f) Investor Rights Agreement. iPayment shall have entered into
Amendment No. 1 to the Investors' Rights Agreement (the "Investor Rights
Amendment"), in form and substance reasonably satisfactory to ECX, and the
Investor Rights Amendment shall be in full force and effect as of the Closing
Date.
(g) Voting Agreement. iPayment shall have entered into Amendment No. 1
to the Voting Agreement (the "Voting Amendment"), in form and substance
reasonably satisfactory to ECX, and the Voting Amendment shall be in full force
and effect as of the Closing Date.
(h) Co-Sale Agreement. iPayment shall have entered into Amendment No. 1
to the Righty of First Refusal and Co-Sale Agreement (the "Co-Sale Amendment"),
in form and substance reasonably satisfactory to ECX, and the Co-Sale Amendment
shall be in full force and effect as of the Closing Date.
ARTICLE VIII. INDEMNIFICATION
8.1 Indemnification by Holders of the Notes. The holders of the Notes shall (by
the mechanism set forth in Section 8.5) indemnify, save and hold iPayment
(including ECX and its Subsidiaries following the Merger) and its affiliates,
successors and permitted assigns (the "iPayment Indemnitees"), harmless against
and from any liability, demands, claims, actions or causes of action,
assessments, losses, fines, penalties, costs, damages and expenses, including
reasonable attorneys' fees, disbursements and expenses (collectively,
"Damages"), sustained or incurred by any of the iPayment Indemnitees after the
Closing Date as a result of, arising out of or by virtue of (a) any
misrepresentation, breach of any warranty or representation, or non-fulfillment
of any agreement or covenant that was to be fulfilled prior to the Closing Date,
in each case on the part of ECX, whether contained in this Agreement or any
Exhibit or Schedule hereto or thereto or any written statement or certificate
furnished or to be furnished to iPayment pursuant hereto or in any closing
document delivered by ECX to iPayment in connection herewith, or (b) any costs
or expenses in excess of $100,000 payable or paid on or after the Closing with
regard to the Deutsche Banc Alex. Xxxxx Engagement Letter, dated as of March 26,
2001, between ECX and Deutsche Banc Alex. Xxxxx.
8.2 Indemnification by iPayment. iPayment shall indemnify, save and hold the
holders of the Notes and its affiliates, successors and permitted assigns (the
"ECX Indemnitees"), harmless against and from any Damages sustained or incurred
by any of the ECX Indemnitees after the Closing Date as a result of, arising out
of or by virtue of, any misrepresentation, breach of any warranty or
representation, or non-fulfillment of any agreement or covenant that was to be
fulfilled prior to the Closing Date, in each case on the part of iPayment or
iPayment Merger Sub, whether contained in this Agreement or any Exhibit or
Schedule hereto or thereto or any written statement or certificate furnished or
to be furnished to ECX pursuant hereto or in any closing document delivered by
iPayment or iPayment Merger Sub to ECX in connection herewith.
8.3. Limitations on Indemnification. The indemnification provided for in
Sections 8.1 and 8.2 above is subject to the following limitations:
(a) No Person will be liable hereunder with respect to claims referred
to in Section 8.1 or Section 8.2 above unless the other party gives written
notice thereof (together with a reasonably detailed description of the claim and
the basis thereof) prior to the 12 month anniversary of the Closing Date.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as a party delivers written notice of a claim no later than the 12 month
anniversary of the Closing Date, the other party shall be required to indemnify
hereunder for all Damages which such parties may incur (subject to any
limitations set forth herein) in respect of the matters which are the subject of
such claim, regardless of when incurred.
(b) The holders of the Notes shall not be liable to the iPayment
Indemnitees for any Damages arising under Section 8.1 above (1) unless (A) the
aggregate amount of any Damages as a result of, in connection with, relating or
incidental to or by virtue of any particular breach or series of related
breaches exceeds $10,000 (the "ECX Threshold"), in which case all such Damages,
including the initial $10,000, shall be included in the calculation of Damages
under, and indemnifiable pursuant to, clause (B), and (B) the aggregate amount
of all such Damages exceeds (but only to the extent such Losses exceed) $100,000
in the aggregate (the "ECX
Basket"), or (2) to the extent the aggregate amount of all such Damages
indemnified by the holders of the Notes exceeds $3,000,000 (the "ECX Cap");
provided that the foregoing limitations (i.e., the ECX Threshold, the ECX Basket
and the ECX Cap) shall not apply with respect to any Damages arising from or
related to a breach of any of the representations or warranties of ECX set forth
in Section 4.5(e) or 8.1(b).
(c) iPayment shall not be liable to the ECX Indemnitees for any Damages
arising under Section 8.2 above (1) unless (A) the aggregate amount of any
Damages as a result of, in connection with, relating or incidental to or by
virtue of any particular breach or series of related breaches exceeds $10,000
(the "iPayment Threshold"), in which case all such Damages, including the
initial $10,000, shall be included in the calculation of Damages under, and
indemnifiable pursuant to, clause (B), and (B) the aggregate amount of all such
Damages exceeds (but only to the extent such Losses exceed) $100,000 in the
aggregate (the "iPayment Basket"), or (2) to the extent the aggregate amount of
all such Damages indemnified by the holders of the Notes exceeds $3,000,000 (the
"iPayment Cap").
(d) The amounts for which an indemnifying party shall be liable under
Sections 8.1 and 8.2 of this Agreement shall be net of any Tax benefits and
insurance proceeds that may be available to the indemnified party in connection
with the facts giving rise to the right of indemnification.
8.4. Conditions of Indemnification.
(a) Promptly following the receipt by any iPayment Indemnitee or ECX
Indemnitee who may be entitled to indemnification hereunder (each, an
"Indemnified Party") of written notice of a demand, claim, action, assessment or
proceeding made or brought by a third party, including a governmental agency (a
"Third Party Claim") for which such Person seeks indemnification, the
Indemnified Party receiving such notice of the Third Party Claim shall promptly
notify iPayment or Summit (as the representative of the holders of the Notes),
as the case may be (the "Indemnifying Party"), of its existence, setting forth
the facts and circumstances of which such Indemnified Party has received notice,
and shall specify in such notice the basis hereunder upon which the Indemnified
Party's claim for indemnification is asserted.
(b) The Indemnified Party shall tender the defense of a Third Party
Claim to the Indemnifying Party. If the Indemnifying Party accepts
responsibility for the defense of a Third Party Claim, then the Indemnifying
Party shall have the exclusive right to contest, defend and litigate the Third
Party Claim and shall have the exclusive right, in its discretion exercised in
good faith and upon the advice of counsel, to settle any such matter, either
before or after the initiation of litigation, at such time and upon such terms
as it deems fair and reasonable, provided that at least ten days prior to any
such settlement, it shall give written notice of its intention to settle to the
Indemnified Party. The Indemnified Party shall have the right to be represented
by counsel at its own expense in any defense conducted by the Indemnifying Party
(but the Indemnifying Party will control the defense of the Third Party Claim
(if it has elected to do so)).
(c) If, in accordance with the foregoing provisions of this Section
8.4, an Indemnified Party shall be entitled to indemnification against a Third
Party Claim, and if the Indemnifying
Party shall fail to accept the defense of a Third Party Claim that has been
tendered in accordance with this Section 8.4, the Indemnified Party shall have
the right, without prejudice to its right of indemnification hereunder, in its
discretion exercised in good faith and upon the advice of counsel, to contest,
defend and litigate such Third Party Claim, and may settle such Third Party
Claim, either before or after the initiation of litigation, at such time and
upon such terms as the Indemnified Party deems fair and reasonable, provided at
least ten days prior to any such settlement, written notice of its intention to
settle is given to the Indemnifying Party. If, pursuant to this Section 8.4 the
Indemnified Party so defends or settles a Third Party Claim for which it is
entitled to indemnification hereunder, as hereinabove provided, the Indemnified
Party shall be reimbursed or otherwise indemnified by the Indemnifying Party
hereunder in accordance with Section 8.5 (if applicable) for the reasonable
attorneys' fees and other expenses of defending the Third Party Claim that are
incurred from time to time, immediately following the earlier of (i) the
agreement of the Indemnified Party and the Indemnifying Party that the
Indemnifying Party is liable for such Damages pursuant to this Article VIII and
(ii) the entry of a final judgment of a court of competent jurisdiction
determining that any Damages exist and that the Indemnifying Party is liable for
such Damages pursuant to this Article VIII. No failure by the Indemnifying Party
to acknowledge in writing its indemnification obligations under this Article
VIII shall relieve it of such obligations to the extent they exist.
(d) Notwithstanding the foregoing, in connection with any settlement
negotiated by the Indemnifying Party, no Indemnified Party shall be required to
(i) enter into any settlement (A) that does not include the delivery by the
claimant or plaintiff to the Indemnified Party of a release from all liability
in respect of such claim or litigation, or (B) if the Indemnified Party shall,
in writing to the Indemnifying Party within the ten day period prior to such
proposed settlement, disapprove of such settlement proposal (which settlement
proposal will not be unreasonably disapproved) and desire to have the
Indemnifying Party tender the defense of such matter back to the Indemnified
Party, or (ii) consent to the entry of any judgment that does not include a full
dismissal of the litigation or proceeding against the Indemnified Party with
prejudice; provided, however, that should the Indemnified Party disapprove of a
settlement proposal pursuant to Clause (B) above, the Indemnified Party shall
thereafter have all of the responsibility for defending, contesting and settling
such Third Party Claim but shall not be entitled to indemnification by the
Indemnifying Party to the extent that, upon final resolution of such Third Party
Claim, the Indemnifying Party's liability to the Indemnified Party but for this
proviso exceeds what the Indemnifying Party's liability to the Indemnified Party
would have been if the Indemnifying Party were permitted to settle such Third
Party Claim in the absence of the Indemnified Party exercising its right under
clause (B) above.
8.5. Recoupment under Note. From and after the Closing (but subject to the
provisions of this Article VIII), any indemnification to which the iPayment
Indemnitees are entitled under this Agreement as a result of any Damages shall
be satisfied, as their sole and exclusive means of satisfying indemnification
claims for Damages hereunder, by recouping all of such Damages (subject to the
other provisions of this Article VIII) by iPayment notifying the holders of the
Notes that it is reducing the principal amount outstanding under the Notes, and
the number of shares of iPayment Underlying Common Stock for which the Notes are
convertible, pro rata among the holders thereof based on the aggregate principal
amounts held by each such holder. Any such recoupment shall affect the timing
and amounts of payments required under the Notes in the same manner as if
iPayment had made a permitted prepayment (without premium or
penalty) thereunder. The Notes shall bear a legend referencing iPayment's
ability to recoup Damages pursuant to this Agreement. The Notes shall also
include a provision that the Notes shall not be converted by the holders thereof
until the 12 month anniversary of the Closing, except as otherwise set forth in
the Notes.
8.6. Survival. All of the terms and conditions of this Agreement, together with
the representations, warranties and covenants contained herein or in any
instrument or document delivered or to be delivered pursuant to this Agreement,
shall survive the execution of this Agreement and the Closing Date until, and no
party shall be entitled to recover for any Damages pursuant to Section 8.1 or
8.2 unless written notice of a claim thereof is delivered to the other party
prior to, the 12 month anniversary of the date hereof, notwithstanding any
investigation heretofore or hereafter made by or on behalf of any party hereto.
Notwithstanding the foregoing, the terms, conditions, representations,
warranties and covenants set forth in Sections 4.5(e), 6.10 and 6.11 shall
survive Closing indefinitely.
8.7. Exclusivity. The rights of indemnity provided by this Article VIII of this
Agreement shall be the parties' sole remedies in respect of indemnification and
shall be exclusive of all other rights of indemnity, contribution or any other
suits or remedies (other than specific performance), whether created by Law or
otherwise, either before or after the Closing, relating in any way to the
subject matter of this Agreement; provided that any Indemnified Party shall have
the right and remedy to have any covenant specifically enforced by any court of
competent jurisdiction. Notwithstanding the foregoing, iPayment shall have the
additional indemnification rights that are set forth in a letter agreement,
dated as of March 19, 2002, by and among the holders of the ECX Class A
Preferred and iPayment, relating to the ECX Warrants.
ARTICLE IX. GENERAL
9.1. Amendment. This Agreement may be amended at any time only by a written
instrument signed on behalf of each of ECX, iPayment and the holders of the
Notes representing a majority of the aggregate outstanding principal amount of
the Notes.
9.2. Notices. All notices, claims, demands and other communications hereunder
shall be in writing and shall be deemed given upon (i) confirmation of receipt
of a facsimile transmission, (ii) confirmed delivery by a standard overnight
carrier or when delivered by hand, or (iii) the expiration of three Business
Days after the day when mailed by registered or certified mail (postage prepaid,
return receipt requested), in each case addressed to the respective parties at
the following addresses (or such other address for a party as shall be specified
by like notice):
(a) If to iPayment or iPayment Holdings, Inc.
iPayment Merger Sub, to: 00 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx Xxxxxxx
With a copy (which Xxxxxx Xxxxxxx Xxxxxx & Xxxxx, PLLC
shall not constitute 000 Xxxxx Xxxxxx, Xxxxx 0000
notice) to: Xxxxxxxxx, Xxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
(b) If to ECX, to: E-Commerce Exchange, Inc.
Xxx Xxxxxxx, Xxxxx X
Xxxxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx Xxxx
With a copy (which Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
shall not constitute 000 Xxxxxxx Xxxxxx Xxxxx
notice) to: Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
And with a copy (which Xxxxxxxx & Xxxxx
shall not constitute 000 Xxxx Xxxxxxxx Xxxxx
notice) to: Xxxxxxx, Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxx X. Xxxx, Esq.
If to the holders of Summit Partners
the ECX Class A 000 Xxxxxxxx Xxxxxx, Xxxxx 000
Preferred, to: Xxxx Xxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxx Xxxxx
With a copy (which Xxxxxxxx & Xxxxx
shall not constitute 000 Xxxx Xxxxxxxx Xxxxx
notice) to: Xxxxxxx, Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxx X. Xxxx, Esq.
9.3. Entire Agreement. This Agreement (including the schedules and exhibits
thereto, and the other documents and instruments referred to herein, including
the Confidentiality Agreement and the letter agreement, dated as of March 19,
2002, by and among the holders of the ECX Class A Preferred and iPayment,
relating to the ECX Warrants) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties or any of them, with respect to the subject matter hereof, including any
transaction between or among the parties hereto. No representation, promise,
inducement or statement of intention has been made by ECX, iPayment or iPayment
Merger Sub that is not embodied in this Agreement or the other agreements
referred to herein and entered into in connection herewith,
the schedules or exhibits hereto, or the written statements, certificates or
other documents delivered pursuant hereto.
9.4. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee without regard to the
principles of conflict of laws thereof or of any other jurisdiction. If legal
action is commenced to enforce this Agreement, the prevailing party in such
action shall be entitled to recover its costs and reasonable attorneys' fees in
addition to any other relief granted.
9.5. Counterparts; Effectiveness. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement. This Agreement shall become
effective when each party hereto shall have received counterparts thereof signed
by all the other parties hereto.
9.6. Assignment; Successors and Assigns; Parties In Interest. No party hereto
shall assign this Agreement, or its right or duties hereunder, by operation of
law or otherwise, without first obtaining the written consent of the other
parties hereto, except that iPayment Merger Sub may assign this Agreement and
its rights and obligations hereunder to another wholly-owned Subsidiary of
iPayment. Subject to the foregoing provisions, all of the rights, benefits,
duties, liabilities and obligations of the parties hereto shall inure to the
benefit of and be binding upon the parties and their respective successors and
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any other person any rights or remedies hereunder.
9.7. Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
9.8. Enforcement of Agreement. The parties hereto agree that irreparable damage
would occur in the event that the provisions contained in this Agreement were
not performed in accordance with its specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to seek an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state having jurisdiction, without having to post bond therefor or prove
actual damages, this being in addition to any other remedy to which they are
entitled at law or in equity.
9.9. Remedies Cumulative. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise or beginning of the exercise of
any thereof by any party shall not preclude the simultaneous or later exercise
of any other such right, power or remedy by such party.
ARTICLE X. DEFINITIONS
As used herein, the following terms shall have the following meanings
ascribed thereto (with terms defined in the plural having comparable meaning
when used in the singular, and likewise with respect to terms defined in the
singular):
"Acquisition Proposal" shall mean any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving ECX or any
Subsidiary of ECX or any proposal, inquiry or offer to acquire in any manner, in
a single transaction or a series of related transactions, all or 15% or greater
equity interest in, or all or a substantial portion of the assets of, ECX or any
Subsidiary of ECX, other than the transactions contemplated or permitted by this
Agreement.
"Affiliate" means, with respect to any Person, any other Person which, directly
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, such Person.
"Agreement" means this Agreement and Plan of Merger.
"Articles of Dissolution" means any such documents issued by a Secretary of
State's office, or its equivalent, to commemorate and reflect the dissolution of
a Person.
"BINs" shall mean a unique Bank Identification Number assigned by VISA and
licensed to a Member Bank for its use in entering or receiving transactions into
(or from) VISA's settlement authorization systems and participating in the VISA
card program. An "ICA" is the corresponding number assigned by MasterCard for
the same purpose.
"Blue Sky laws" means the securities laws of a particular state.
"Business Day" means a day of the year on which banks are not authorized to be
closed in the City of Nashville, Tennessee.
"Certificate of Merger" shall have the meaning set forth in Section 2.2.
"Closing" shall have the meaning set forth in Section 2.12.
"Closing Date" shall have the meaning set forth in Section 2.12.
"Code" shall have the meaning set forth in the fourth recital to this Agreement.
"Confidentiality Agreement" shall have the meaning set forth in Section 6.1.
"control" of a Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management policies of a person, whether
through the ownership of voting securities, by contract, as trustee or executor
or otherwise.
"Co-Sale Amendment" shall have the meaning set forth in Section 7.3(h).
"Damages" shall have the meaning set forth in Section 8.1.
"Delaware Secretary" shall have the meaning set forth in Section 2.2.
"DGCL" shall have the meaning set forth in Section 2.1.
"ECX" shall have the meaning set forth in the preamble to this Agreement.
"ECX Basket" shall have the meaning set forth in Section 8.3(b).
"ECX Benefit Plans" shall have the meaning set forth in Section 4.18.
"ECX Cap" shall have the meaning set forth in Section 8.3(b).
"ECX Charter" shall have the meaning set forth in Section 4.5(f).
"ECX Class A Preferred" shall have the meaning set forth in Section 2.4.
"ECX Class A Preferred Documents" shall have the meaning set forth in Section
4.32.
"ECX Class B Preferred" shall have the meaning set forth in Section 4.5.
"ECX Class C Preferred" shall have the meaning set forth in Section 4.5.
"ECX Common Stock" shall have the meaning set forth in Section 2.4.
"ECX Contracts" shall have the meaning set forth in Section 4.15.
"ECX's Counsel" shall have the meaning set forth in Section 7.2.
"ECX Disclosure Schedule" shall have the meaning set forth in preamble of
Article IV.
"ECX Dissenting Shares" shall have the meaning set forth in Section 2.6.
"ECX Documents" shall have the meaning set forth in Section 4.2.
"ECX Financial Statements" shall have the meaning set forth in Section 4.6.
"ECX Indemnitees" shall have the meaning set forth in Section 8.2.
"ECX Material Adverse Effect" means any event, change, occurrence, effect, fact
or circumstance having, or would reasonably be expected to have, individually or
in the aggregate with other events, changes, occurrences, effects, facts or
circumstances, a material adverse effect on (i) the ability of ECX to perform
its obligations under this Agreement or to consummate the transactions
contemplated hereby, or (ii) the business, properties, assets, liabilities,
prospects, results of operations or condition (financial or otherwise) of ECX
and its Subsidiaries (taken as a whole), other than events, changes,
occurrences, effects, facts or circumstances affecting the industry or the
economy in general, and not specifically relating to ECX or its Subsidiaries,
and other than events, changes, occurrences, effects, facts or circumstances
resulting from this Agreement, the transactions contemplated hereby or the
announcement thereof.
"ECX Material Contracts" shall have the meaning set forth in Section 4.15.
"ECX Merchant Related Agreements" means all material contracts and other
agreements to which ECX or any of its Subsidiaries is a party relating to the
provision of credit card services or equipment leasing and sales, including, but
not limited to the following agreements:
(a) any Independent Service Organization ("ISO") Agreements and
Independent Training Organization ("ITO") Agreements or any other
agreements with non-employee/independent Persons that solicit Merchants
for or on behalf of ECX (collectively referred to as "ISO/ITO
Agreements");
(b) any agreements with authorization network vendors and backend
processors ("Vender Agreements");
(c) all agreements with Member Banks;
(d) any agreements that limit the right of ECX or its Subsidiaries
prior to the Closing Date, or iPayment or its Subsidiaries after the
Closing Date, to engage in or to compete with any Person in any
business, including the method by which any business may be conducted
by ECX or its Subsidiaries prior to the Closing Date, or by iPayment or
its Subsidiaries after the Closing Date;
(e) all equipment leasing related agreements, including factoring
arrangements;
(f) any marketing agreement not listed above; or
(g) all Merchant Agreements.
"ECX Option" shall have the meaning set forth in Section 2.7.
"ECX Plan Options" shall have the meaning set forth in Section 4.5.
"ECX Threshold" shall have the meaning set forth in Section 8.3(b).
"ECX Warrants" shall have the meaning set forth in Section 4.5.
"ECX 1999 Stock Plan" shall have the meaning set forth in Section 4.5.
"Effective Time" shall have the meaning set forth in Section 2.2.
"Encumbrance" shall mean any liens, claims, charges, encumbrances, mortgages,
pledges, security interests and other interests.
"Environmental Claims" shall have the meaning set forth in Section 4.19.
"Environmental Laws" shall have the meaning set forth in Section 4.19.
"ERISA" has the meaning set forth in Section 4.18.
"ERISA Affiliate" means (i) any related company or trade or business that is
required to be aggregated with ECX under Code Sections 414(b), (c), (m) or (o);
(ii) any other company, entity or trade or business that has adopted or has ever
participated in any ECX Benefit Plan; and (iii) any predecessor or successor
company or trade or business of ECX or its Subsidiaries. Notwithstanding the
foregoing, "ERISA Affiliate" shall not include the holders of the ECX Class A
Preferred.
"GAAP" means generally accepted accounting principles in effect in the United
States consistently applied.
"Governmental Authority" shall have the meaning set forth in Section 4.3.
"Indemnified Party" shall have the meaning set forth in Section 8.4(a).
"Indemnifying Party" shall have the meaning set forth in Section 8.4(a).
"Investor Rights Amendment" shall have the meaning set forth in Section 7.3(f).
"iPayment" shall have the meaning set forth in the preamble to this Agreement.
"iPayment Basket" shall have the meaning set forth in Section 8.3(c).
"iPayment Cap" shall have the meaning set forth in Section 8.3(c).
"iPayment Common Stock" shall have the meaning set forth in Section 5.5.
"iPayment's Counsel" shall have the meaning set forth in Section 7.3.
"iPayment Credit Agreement" shall mean the Loan Agreement between Bank of
America and iPayment.
"iPayment Disclosure Schedule" shall have the meaning set forth in preamble of
Article V.
"iPayment Documents" shall have the meaning set forth in Section 5.2.
"iPayment Financial Statements" shall have the meaning set forth in Section 5.6.
"iPayment Indemnitees" shall have the meaning set forth in Section 8.1.
"iPayment Material Adverse Effect" means any event, change, occurrence, effect,
fact or circumstance having, or would reasonably be expected to have,
individually or in the aggregate with other events, changes, occurrences,
effects, facts or circumstances, a material adverse effect on (i) the ability of
iPayment or iPayment Merger Sub to perform its obligations under this Agreement
or to consummate the transactions contemplated hereby, or (ii) the business,
properties, assets, liabilities, prospects, results of operations or condition
(financial or otherwise) of iPayment and its Subsidiaries (taken as a whole),
other than events, changes, occurrences, effects, facts or circumstances
affecting the industry or the economy in general, and not specifically relating
to iPayment or its Subsidiaries, and other than events, changes, occurrences,
effects, facts or circumstances resulting from this Agreement, the transactions
contemplated hereby or the announcement thereof.
"iPayment Merger Sub" shall have the meaning set forth in the preamble to this
Agreement.
"iPayment Merger Sub Common Stock" shall have the meaning set forth in Section
2.8.
"iPayment Preferred Stock" shall have the meaning set forth in Section 5.5.
"iPayment Threshold" shall have the meaning set forth in Section 8.3(c).
"iPayment Underlying Common Stock" means the iPayment Common Stock issued or
issuable upon conversion of the Notes and any iPayment Common Stock issued or
issuable with respect to such securities by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
"IRS" means the United States Internal Revenue Service.
"knowledge" means, with respect to an individual, such individual is actually
aware of the particular fact, matter, circumstance or other item, or a prudent
individual could be expected to discover or otherwise become aware of such fact,
matter, circumstance or other item in the course of conducting a reasonable
investigation concerning the existence of such fact or other matter; and, with
respect to any other Person (other than an individual), any individual who is
serving as a director, officer, partner, executor or trustee of such Person (or
in any similar capacity) has knowledge (as defined above) of such fact, matter,
circumstance or other item.
"Laws" shall have the meaning set forth in Section 4.10.
"Leases" shall have the meaning set forth in Section 4.16.
"MasterCard" means MasterCard International, Inc.
"Member Bank" means a member of VISA and/or MasterCard which is authorized by
such association(s) to enter or receive transactions into (or from) such
association(s) settlement and authorization systems, and to participate in such
association(s) charge card program.
"Merchant" means any customer who enters into a Merchant Agreement for the
purpose of participating in the Merchant Program.
"Merchant Accounts" means the written contractual relationship between a
Merchant, on the one hand, and/or a Member Bank and ECX or its Subsidiaries on
the other for the acquisition and processing of transactions.
"Merchant Agreements" means the written contractual agreement between a Member
Bank, a Merchant and/or ECX or its Subsidiaries, pursuant to which ECX or its
Subsidiaries provides processing services and allows the Merchant to participate
in the Merchant Program.
"Merchant Program" means the package of services offered by ECX or its
Subsidiaries and a Member Bank to a customer which enables a Merchant to make
sales to a credit card holder and which permits the Merchant to present sales
records to a processor for payment and processing.
"Merger" shall have the meaning set forth in the second recital to this
Agreement.
"Mezzanine Debt" shall mean the Subordinated Secured Promissory Note issued by
iPayment, iPayment Technologies, Inc. and First Acquisition Company to Harbinger
Mezzanine Partners, L.P. on April 12, 2001.
"Minority Stock Exchange" shall mean iPayment's planned minority stock exchange
with the shareholders of iPayment Technologies, Inc. so that after such exchange
iPayment Technologies, Inc. will be a wholly-owned subsidiary of iPayment.
"Notes" shall have the meaning set forth in Section 2.4.
"ordinary course of business" means, with respect to any particular Person: (a)
an action is consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such Person; (b) such
action is not required to be authorized by the board of directors of such Person
(or by any Person or group of Persons exercising similar authority) and is not
required to be specifically authorized by the parent company (if any) of such
Person; and (c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"Permitted Liens" means (i) Encumbrances identified in Section 10 of the ECX
Disclosure Schedule or Section 10 of the iPayment Disclosure Schedule, as
applicable; (ii) mechanics', carriers', workers', repairers', materialmen's,
warehousemen's and other similar Encumbrances arising out of operation of law
with respect to a liability incurred in the ordinary course of business and
consistent with past practice that is not delinquent or in default; (iii)
Encumbrances arising under conditional sales contracts and equipment leases with
third parties under which ECX or iPayment is not delinquent or in default; and
(iv) Encumbrances for Taxes not yet due and payable.
"Person(s)" means any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental or regulatory body or other entity.
"Receivables" shall have the meaning set forth in Section 4.13.
"Representative" shall have the meaning set forth in Section 6.3.
"Settlement Report" shall have the meaning set forth in Section 4.25.
"Subsidiary" of any Person means any other Person of which such Person (either
alone or through or together with any other Subsidiary): (i) owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders of
which are generally entitled to vote for the
election of the board of directors or other governing body of such other Person,
(ii) is a general partner, trustee or other entity performing similar functions
or (iii) has control.
"Summit" means Summit Partners V, L.P., a Delaware limited partnership.
"Surviving Corporation" shall have the meaning set forth in Section 2.1.
"Taxes" means all taxes, assessments, charges, duties, fees, levies or other
governmental charges including, without limitation, all Federal, state, local,
foreign and other income, franchise, profits, capital gains, capital stock,
transfer, sales, use, occupation, property, excise, severance, windfall profits,
stamp, license, payroll, withholding and other taxes, assessments, charges,
duties, fees, levies or other governmental charges of any kind whatsoever
(whether payable directly or by withholding and whether or not requiring the
filing of a Return), all estimated taxes, deficiency assessments, additions to
tax, penalties and interest and shall include any liability for such amounts as
a result either of being a member of a combined, consolidated, unitary or
affiliated group or of a contractual obligation to indemnify any person or other
entity.
"Tax Clearance Board" means the Franchise Tax Board, or its equivalent, of
California.
"Tax Clearance Certificate" means any such document issued by the Tax Clearance
Board to commemorate and reflect the payment of all taxes.
"Tax Returns" means any return, report, rendition or other document or
information required to be supplied to a taxing authority in connection with the
Taxes.
"Third Party Claim" shall have the meaning set forth in Section 8.3(a).
"VISA" means Visa USA, Inc.
"Voting Amendment" shall have the meaning set forth in Section 7.3(g).
"Voting Arrangements" shall have the meaning set forth in Section 4.5(g).
"WARN Act" means the Workers Adjustment Retraining and Notification Act, as
amended.
[SIGNATURE PAGE IS THE NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement the day and year first above written.
IPAYMENT HOLDINGS, INC.
By: /s/ Xxxxxxx X. Daily
-------------------------------------
Xxxxxxx X. Daily
Chairman, Chief Executive Officer and
Secretary
IPAYMENT ACQUISITION SUB, INC.
By: /s/ Xxxx Xxxxxxxx
------------------------------------
Xxxx Xxxxxxxx
President
E-COMMERCE EXCHANGE, INC.
By: /s/ Xxxx Xxxx
------------------------------------
Xxxx Xxxx
President
