EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by
and
among
INTERCEPT, INC.
(a Georgia corporation)
INTERCEPT MERGER SUB, INC.
(a Delaware corporation and wholly-owned
subsidiary of InterCept, Inc.)
ELECTRONIC PAYMENT EXCHANGE, INC.
(a Delaware corporation)
and
CERTAIN
STOCKHOLDERS OF ELECTRONIC PAYMENT
EXCHANGE, INC.
May 21, 2002
TABLE OF CONTENTS
Page
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ARTICLE 0 - DEFINITIONS ....................................................................... 2
ARTICLE 1 - THE MERGER ........................................................................ 5
1.1 The Merger ................................................................. 5
1.2 Closing .................................................................... 6
1.3 Effective Time of the Merger ............................................... 6
1.4 Effect of the Merger ....................................................... 6
1.5 Certificate of Incorporation; Bylaws ....................................... 6
1.6 Directors and Officers of the Surviving Corporation ........................ 6
1.7 Satisfaction of Certain Liabilities ........................................ 6
ARTICLE 2 - CONSIDERATION AND CONVERSION AND EXCHANGE OF SHARES ............................... 7
2.1 Merger Price ............................................................... 7
2.2 Surrender and Exchange of Certificates Representing Seller Stock ........... 8
2.3 Appraisal Rights ........................................................... 8
2.4 Tax Accounting Consequences ................................................ 8
2.5 Fractional Shares .......................................................... 9
ARTICLE 3 - RULES OF CONSTRUCTION ............................................................. 9
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE STOCKHOLDERS ................. 10
4.1 Entity Organization; Capitalization ........................................ 10
4.2 Entity Power; Authorization; Enforceable Obligations ....................... 11
4.3 No Conflict ................................................................ 11
4.4 Government Consents ........................................................ 11
4.5 Required Contract Consents ................................................. 11
4.6 Financial Matters .......................................................... 12
4.7 Absence of Changes ......................................................... 12
4.8 No Undisclosed Liabilities ................................................. 14
4.9 Title to Tangible Property ................................................. 14
4.10 Condition of Property ...................................................... 14
4.11 Inventory .................................................................. 14
4.12 Contracts .................................................................. 14
4.13 Intellectual Property ...................................................... 15
4.14 Leases ..................................................................... 16
4.15 Restrictions on Business Activities ........................................ 16
4.16 Litigation ................................................................. 16
4.17 Court Orders, Decrees, and Laws ............................................ 16
4.18 Personnel and Compensation ................................................. 17
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4.19 Employee Benefit Plans and Arrangements ................................ 17
4.20 Insurance Matters ...................................................... 18
4.21 Broker's or Finder's Fees .............................................. 19
4.22 Accounts Receivable .................................................... 19
4.23 Vehicles ............................................................... 19
4.24 No Guarantees .......................................................... 19
4.25 Tax Matters ............................................................ 19
4.26 Customers and Suppliers ................................................ 20
4.27 No Commitments Regarding Future Products ............................... 21
4.28 Disclosure ............................................................. 21
4.29 Transactions with Related Parties ...................................... 21
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS ............................. 22
5.1 Ownership of Shares .................................................... 22
5.2 Authorization .......................................................... 22
5.3 Absence of Violations or Conflicts ..................................... 22
5.4 No Consents Required ................................................... 23
5.5 No Claims Against Seller ............................................... 23
5.6 Litigation Related to this Agreement ................................... 23
5.7 Investment Intent ...................................................... 23
5.8 Access to Information; Accredited Investor Status ...................... 24
5.9 Economic Risk .......................................................... 24
5.10 Tax Advice ............................................................. 25
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF THE PARENT ................................... 25
6.1 Corporate Organization ................................................. 25
6.2 Corporate Power and Authorization; Validity of Contemplated
Transactions ........................................................... 25
6.3 Current Public Information; Financial Statements ....................... 26
6.4 Broker's and Other Fees ................................................ 26
6.5 Parent Common Stock .................................................... 27
6.6 Taxes .................................................................. 27
6.7 Required Consents ...................................................... 27
6.8 Outstanding Stock ...................................................... 28
6.9 No Undisclosed Liabilities ............................................. 28
6.10 Litigation ............................................................. 28
6.11 Compliance with Laws ................................................... 28
6.12 Liabilities of Merger Sub .............................................. 28
ARTICLE 7 - CONDUCT OF BUSINESS PENDING CONSUMMATION ....................................... 28
7.1 Affirmative Covenants of Seller ........................................ 28
7.2 Negative Covenants of Seller ........................................... 29
7.3 Adverse Changes in Condition ........................................... 30
ARTICLE 8 - COVENANTS AND CERTAIN ACTIONS OF THE PARTIES ................................... 30
8.1 Efforts; Further Assurances; Cooperation ............................... 30
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8.2 Public Announcements ..................................................... 31
8.3 Personal Guaranties ...................................................... 31
8.4 Stockholders' Approval ................................................... 31
8.5 Release by the Stockholders .............................................. 31
8.6 Employee Matters ......................................................... 31
8.7 Tax Matters .............................................................. 32
8.8 Registration Rights of Parent Common Stock ............................... 33
8.9 Applications; Antitrust Notification ..................................... 33
8.10 Filings with State Offices ............................................... 33
8.11 Investigation and Confidentiality ........................................ 33
8.12 Tax Treatment ............................................................ 34
8.13 Exclusive Dealing ........................................................ 34
8.14 Seller Indebtedness ...................................................... 34
8.15 Joinder Agreement ........................................................ 37
8.16 Joint Disclosure Memorandum .............................................. 37
ARTICLE 9 - CLOSING CONDITIONS ............................................................... 37
9.1 Conditions of Each Party's Obligations Under this Agreement .............. 37
9.2 Conditions to the Obligations of the InterCept Parties Under this
Agreement ................................................................ 38
9.3 Conditions to the Obligations of the Seller and the Stockholders
Under this Agreement ..................................................... 39
ARTICLE 10 - INDEMNIFICATION ................................................................. 40
10.1 Indemnification by the Seller and the Stockholders ....................... 40
10.2 Indemnification by the Parent ............................................ 41
10.3 Claims for Indemnification ............................................... 42
10.4 Defense of Claim by Third Parties ........................................ 42
10.5 Third Party Claim Assistance ............................................. 42
10.6 Settlement of Indemnification Claims ..................................... 43
10.7 Manner of Indemnification ................................................ 43
10.8 Restriction on Claim Amounts ............................................. 43
10.9 Limitations .............................................................. 44
10.10 Indemnification Exclusive Remedy ......................................... 44
10.11 Other Indemnification .................................................... 44
10.12 Survival of Representations and Warranties ............................... 44
ARTICLE 11 - TERMINATION ..................................................................... 45
11.1 Termination .............................................................. 45
11.2 Effect of Termination .................................................... 45
ARTICLE 12 - MISCELLANEOUS ................................................................... 45
12.1 Extension; Waiver ........................................................ 45
12.2 Expenses ................................................................. 46
12.3 Notices .................................................................. 46
12.4 Parties in Interest ...................................................... 47
12.5 Specific Performance ..................................................... 48
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12.6 Amendment ............................................................. 48
12.7 Entire Agreement ...................................................... 48
12.8 Counterparts .......................................................... 48
12.9 Assistance of Counsel ................................................. 48
12.10 Governing Law ......................................................... 48
12.11 Arbitration ........................................................... 49
12.12 Invalidity of any Part ................................................ 49
12.13 Time of the Essence; Computation of Time .............................. 49
12.14 Appointment of Stockholder Designated Official by Stockholders ........ 49
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EXHIBITS AND SCHEDULES
Exhibit No. Description
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Exhibit 1.5 Amended Certificate of Incorporation and Bylaws
Exhibit 2.1 Form of Escrow Agreement
Exhibit 8.8 Form of Registration Rights Agreement
Exhibit 8.15 Form of Joinder and Consent Agreement
Exhibit 9.2(b) Form of Opinion of Counsel to Seller
Exhibit 9.2(d) Form of Stockholder Employment Agreement
Exhibit 9.3(b) Form of Opinion of Counsel to the Parent
Disclosure
Schedule No. Description
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Schedule A Stockholders of Seller
Schedule B Liens
Schedule 1.7 Satisfaction of Certain Liabilities
Schedule 4.1(b) Contracts to Issue Additional Shares
Schedule 4.1(e) Corporate Qualification
Schedule 4.1(g) Corporate Documents
Schedule 4.1(h) Ownership or Control in Other Entities
Schedule 4.3 Conflicts
Schedule 4.4 Required Government Consents
Schedule 4.5 Required Contract Consents
Schedule 4.7 Absence of Changes
Schedule 4.8 Liabilities
Schedule 4.12(a) Seller Contracts
Schedule 4.12(b) Defaults
Schedule 4.13 Exceptions From Ownership of Intellectual Property,
and List of Intellectual Property
Schedule 4.13(d) Intellectual Property Claims
Schedule 4.14 Leases
Schedule 4.15 Restrictions on Business Activities
Schedule 4.16 Litigation
Schedule 4.17(a) Compliance with Laws
Schedule 4.17(b) Authorizations for Ownership and Conduct of Business
Schedule 4.18(a) List of Personnel
Schedule 4.18(b) Employee Relations
Schedule 4.19 Employee Benefit Plans and Arrangements
Schedule 4.19(d) Compensation Resulting from Merger
Schedule 4.20 Insurance Policies
Schedule 4.20(b) Insurance Claims
Schedule 4.22(a) Accounts Receivable Exceptions
Schedule 4.22(b) Accounts Receivable
Schedule 4.23 Vehicles
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Schedule 4.24 Guaranties or Contingent Obligations
Schedule 4.25(a) Tax and Social Returns of Seller
Schedule 4.25(b) Other Tax Matters
Schedule 4.25(c) Tax and Social Audits
Schedule 4.25(e) Tax Basis and Tax Attributes
Schedule 4.25(f) Withholding Taxes
Schedule 4.26 Customers and Suppliers
Schedule 4.27 Products and Services in Development
Schedule 4.29 Transactions with Related Parties
Schedule 5.1 Ownership of Shares - Restrictions on Transfers
Schedule 6.6(b) Tax Matters of InterCept Parties
Schedule 6.7 Required Consents of InterCept
Schedule 7.2 Negative Covenants
Schedule 7.2(g) Severance or Termination Pay
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of the
21st day of May, 2002 (the "Execution Date"), is by and among InterCept, Inc., a
Georgia corporation (the "Parent"), InterCept Merger Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Parent ("Merger Sub," the
Parent and the Merger Sub shall be collectively referred to as the "InterCept
Parties"), Electronic Payment Exchange, Inc., a Delaware corporation (the
"Seller"), and certain of the stockholders of the Seller joining in the
execution of this Agreement by virtue of the execution of joinder and consent
agreements. The foregoing named parties to this Agreement are sometimes referred
to herein collectively as the "Parties" and individually as a "Party."
Background:
(1) This Agreement provides for the strategic combination of the Parent
and the Seller in furtherance of the Parties' long-term strategic plans.
(2) As of the Execution Date, the stockholders of the Seller listed on
Schedule A (each, a "Stockholder," collectively, the "Stockholders") own all of
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the Seller Stock (as defined below), in the individual amounts listed on
Schedule A next to such Stockholder's name.
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(3) The combination will be accomplished by a merger of Merger Sub with
and into the Seller with the Seller surviving and the Stockholders receiving the
consideration hereinafter set forth proportionate with such Stockholder's equity
interest as set forth on Schedule A.
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(4) The Boards of Directors of the Seller, the Parent and Merger Sub
have duly adopted and approved this Agreement and the other Merger Documents (as
defined below); Merger Sub's sole stockholder will, immediately after the
execution and delivery of this Agreement duly adopt and approve this Agreement
and the other Merger Documents; and the Board of Directors of Seller has
recommended this Agreement and the other Merger Documents to the Stockholders,
who will, immediately after the execution and delivery of this Agreement duly
adopt and approve this Agreement and the other Merger Documents by adoption and
approval by those Stockholders holding a majority of the issued and outstanding
common stock of the Seller.
(5) The Parties intend, by executing this Agreement (directly or by
joinder), to adopt a plan of reorganization within the meaning of Section 368 of
the Code (as defined below), and to cause the Merger (as defined below) to
qualify as a reorganization under the provisions of Section 368(a)(1)(A) and
Section 368(a)(2)(E) of the Code.
Intending to be legally bound, the Parties hereto agree as follows:
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
"Authorizations" means any governmental approvals, authorizations,
certifications, consents, variances, permissions, licenses, and permits to or
from, or filings, notices, or recordings to or with, federal, state, and/or
local governmental authorities as well as states and jurisdictions outside of
the U.S.
"Beneficiaries" is defined in Section 4.19(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Closing" is defined in Section 1.2.
"Closing Date" is defined in Section 1.2.
"Contemplated Transactions" means such transactions as are required to
be consummated by the Parties pursuant to this Agreement and the other Merger
Documents (as defined below).
"Delaware Law" means the General Corporation Law of the State of
Delaware.
"Disclosure Schedules" shall mean the disclosure schedules, dated as of
the Execution Date, which have been delivered on the Execution Date by the
Seller to the Parent, and references to a numbered Schedule shall mean that
portion of the Disclosure Schedules that refers to the specific section or
subsection of this Agreement.
"Equity Rights" means subscriptions, options, warrants, calls,
commitments, or agreements of any character calling for the transfer, purchase,
subscription, or issuance of any Shares (as defined below) of a Seller Entity
(as defined below).
"Escrow Agent" means Wachovia Bank, National Association.
"GAAP" means United States generally accepted accounting principles
consistently applied and maintained.
"Governmental Authority" means any United States federal, state or
local, or foreign, governmental, regulatory or administrative authority, agency,
department, board, investigative body or commission or any court, tribunal, or
judicial or arbitral body.
"Including" (whether capitalized or not) means "including, without
limitation."
"Intellectual Property" means, as used by the Seller in connection with
the conduct of the Seller's Business (i) all United States, international and
foreign patents and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and
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continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all domain names, uniform resource locators and other names and
locators associated with the Internet; (v) all industrial designs and any
registrations and applications therefor; (vi) all trade names, logos, common law
trademarks and service marks, trademark and service xxxx registrations and
applications therefor; (vii) all databases and data collections and all rights
therein; (viii) all moral and economic rights of authors and inventors, however
denominated; (ix) any computer software and databases, whether owned or
licensed; and (x) any similar or equivalent rights to any of the foregoing (as
applicable) used directly or indirectly or relating to the Seller's Business.
"Inventory" means all unused or reusable materials, work in process,
damaged or unfinished goods and supplies, in each case to the extent owned by
the Seller and used directly or indirectly in or otherwise relating primarily to
the Seller's Business.
"Joint Memorandum" means the joint memorandum, including the annexes
thereto, complying with Regulation D under the 1933 Act to be delivered to the
Stockholders in connection with the Merger.
"Laws" means all (i) statutes, ordinances or other published
legislative enactments of the United States of America or other country or
foreign government, or of any state or political subdivision or agency thereof
(including any county, municipal or other local subdivisions), (ii) rules,
regulations, orders, permits, directives or other actions or approvals of any
Governmental Authority, and (iii) judgments, awards, orders, decrees, writs and
injunctions of any court, Governmental Authority or arbitrator.
"Letter Agreement" means that certain letter agreement dated March 19,
2002 between the Parent and the Seller.
"Litigation" means any claim, action, suit, proceeding, inquiry,
hearing, arbitration, administrative proceeding, or investigation.
"Lien" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale contract, title retention contract or other contract to
give any of the foregoing.
"Material Adverse Effect" with respect to a Person (as defined below)
means any circumstance, change in, or effect on the business and affairs of such
Person or any Subsidiary (as defined below) thereof that, individually or in the
aggregate with any other circumstances, changes in, or effects on, the business
and affairs of such Person and its Subsidiaries: (i) is, or would reasonably be
expected to be, materially adverse to the business, operations, assets or
liabilities, results of operations or financial condition of such Person and its
Subsidiaries, taken as a whole, or (ii) would reasonably be expected to
materially adversely affect the ability of such
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Person and its Subsidiaries to operate or conduct its or their respective
businesses and affairs in the manner in which it is currently operated or
conducted.
"Material Seller Contracts" means: (i) as of the date of this
Agreement, all of the Seller Contracts (as defined below) under which either the
Seller or any Seller Subsidiary (as defined below) paid $50,000 or more during
the 12 month period ending February 28, 2002, or the Seller or any Seller
Subsidiary received $50,000 or more during the 12 month period ending February
28, 2002; and (ii) as of the Closing Date, the Seller Contracts referred to in
subsection (i) above and the Seller Contracts that the Seller reasonably
determines shall result in the payment or receipt of more than $50,000 for the
12 month period following the Closing Date.
"Merger" means the merger of the Merger Sub with and into the Seller.
"Merger Documents" means this Agreement, together with all the
agreements, certificates, opinions, and other instruments and documents required
to be executed pursuant to this Agreement (excluding the Joint Memorandum).
"Parent Common Stock" is defined in Section 2.1(a).
"Parent Subsidiary" means any Subsidiary of the Parent.
"Party" has the meaning set forth in the preamble hereto.
"Permitted Lien" means (i) any Lien for taxes not yet due or delinquent
or being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP, (ii) any statutory Lien
arising in the ordinary course of business by operation of Law with respect to a
liability that is not yet due or delinquent and (iii) any minor imperfection of
title or similar Lien which individually or in the aggregate with other such
Liens does not materially impair the value of the property subject to such Lien
or the use of such property in the conduct of the Seller's Business and (iv) any
Liens set forth on Schedule B.
"Person" means an individual, a trust, an estate, a partnership, an
association, a company, a limited liability company, a corporation, a sole
proprietorship, a professional corporation, a professional association or any
other entity.
"Plans" is defined in Section 4.19(a).
"Seller's Business" means the business in which the Seller, alone or
with any Seller Subsidiary, provides various Internet-based electronic
processing services that enable, among other things, businesses to accept credit
card, debit card and electronic check payments and provides straight-through
processing that eliminates a business's need to use a gateway or invest in
front-end technology to process, whether their transactions take place online,
over the telephone or at the point of sale.
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"Seller Contract" means all oral or written contracts, leases,
agreements, indentures, licenses, mortgages, insurance policies, commitments or
binding arrangements or relationships (including any amendments thereto)
pursuant to which the Seller or any Seller Subsidiary is a party.
"Seller Entity" means the Seller and each Seller Subsidiary.
"Seller Stock" means all of the issued and outstanding shares of
capital stock of the Seller as of the Closing Date.
"Seller Subsidiary" means any Subsidiary of the Seller.
"Shares" shall mean any common or preferred stock, membership
interests, limited partnership interests, equity, or other similar interest of
each Seller Entity, or any security convertible into or otherwise exercisable
for Shares.
"Social" refers to employment-related obligations of any Seller Entity,
including all actual or contingent liabilities relating to unemployment, health,
injury, death and retirement as well as any and all items of a similar nature.
"Stockholder Designated Official" shall mean Xx. Xxxxxxx Xxxxx, as
appointed pursuant to Section 12.14.
"Subsidiary" means any corporation, limited liability company,
partnership, joint venture or other legal entity in which a specified Person,
directly or indirectly, owns or controls the voting of at least a 50% share or
other equity interest or for which such Person, directly or indirectly, acts as
a general partner.
"Surviving Corporation" means the Seller upon the merger of Merger Sub
with and into the Seller.
"Tax" means all forms of levies, taxes, customs and other duties
normally deemed to be of a fiscal or customs nature, including (i) all taxes
levied, imposed or assessed under the Code, or any other statute, rule,
ordinance or Law, in the United States or elsewhere; (ii) taxes in the nature of
sales tax, franchise tax, consumption tax, value added tax, payroll tax, group
tax, undistributed profits tax, fringe benefits tax, recoupment tax, withholding
tax, land tax, water rates, municipal rates, stamp duties, gift duties or other
state, territorial, provincial or municipal charges or impositions levied,
imposed or collected by any governmental body; and (iii) any additional tax,
interest, penalty, charge, fee or other amount of any kind assessed, charged or
imposed in relation to the non-payment, late, short or incorrect payment of the
same or the failure to file any return.
ARTICLE 1 -
THE MERGER
1.1 The Merger. At the Effective Time (as defined below), Merger Sub
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shall be merged with and into the Seller in accordance with the provisions of
this Agreement and
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Delaware Law, and the separate existence of Merger Sub shall thereupon cease,
and the Seller, as the Surviving Corporation in the Merger, shall continue its
corporate existence under Delaware Law as a wholly-owned subsidiary of the
Parent.
1.2 Closing. The consummation of the Contemplated Transactions (the
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"Closing") shall take place at the offices of Cozen X'Xxxxxx, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, as soon as practicable, and in no
event later than five business days after the satisfaction or waiver of each of
the conditions set forth in Article 9 below, or on such other date as the
Parties agree (the "Closing Date"). At the Closing, the Parties shall execute
and deliver the certificates, opinions and other instruments and documents
referred to in Article 9.
1.3 Effective Time of the Merger. Contemporaneous with or immediately
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following the Closing, the Parties shall cause a certificate of merger (the
"Certificate of Merger") to be executed, delivered and filed with the Secretary
of State of Delaware in accordance with the provisions of Delaware Law. The
Merger shall become effective at the time of such filing unless a later
effective time is specified in the Certificate of Merger pursuant to Delaware
Law (the "Effective Time").
1.4 Effect of the Merger. At the Effective Time, the effect of the
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Merger shall be as provided in this Agreement, the Certificate of Merger, and
the applicable provisions of Delaware Law, including, but not limited to,
Section 251 of Delaware Law. At the Effective Time, all the property, rights,
privileges, powers and franchises of the Seller and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Seller and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.5 Certificate of Incorporation; Bylaws. The certificate of
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incorporation and bylaws of the Seller shall be amended in the Merger to read in
their entirety as set forth on Exhibit 1.5 hereto and as so amended, shall
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become the certificate of incorporation and bylaws of the Surviving Corporation,
until duly amended in accordance with applicable Law.
1.6 Directors and Officers of the Surviving Corporation. At the
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Effective Time, the Persons who are directors and officers of Merger Sub at the
Effective Time will become the directors and officers of the Surviving
Corporation until such time as they may be replaced in accordance with the
bylaws of the Surviving Corporation.
1.7 Satisfaction of Certain Liabilities. The Parent agrees that after
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the Closing, the Parent shall pay, or shall cause the Surviving Corporation to
pay or otherwise satisfy, the liabilities and obligations set forth on Schedule
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1.7 in accordance with the payment schedule set forth on Schedule 1.7.
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ARTICLE 2
CONSIDERATION AND CONVERSION AND EXCHANGE OF SHARES
2.1 Merger Price. At the Effective Time, in consideration for the
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Seller's entry into this Agreement and fulfillment of the obligations,
covenants, terms and conditions set forth in this Agreement, including the
approval of the requisite Stockholders, by virtue of the Merger:
(a) Subject to Section 2.5 regarding fractional shares and subject
to adjustment as provided in Section 8.14, the aggregate merger price
consideration (the "Merger Consideration") for the Seller Stock shall be one
million three hundred forty-nine thousand eight hundred ninety-four (1,349,894)
shares of common stock, no par value of the Parent (the "Parent Common Stock").
The number of shares of Parent Common Stock to be issued and delivered at the
Closing was determined by using the Parent Common Stock valued at $38.48 (the
average of the closing prices of the Parent Common Stock on the Nasdaq National
Market for the three trading days immediately preceding the signing of the
Letter Agreement) (the "Parent Share Price"). On the Closing Date, the Parent
shall deliver the Merger Consideration as follows:
(i) subject to the following clause (ii), 1,349,894 shares of
the Parent Common Stock (valued at the Parent Share Price) to the Stockholders,
with each Stockholder to receive such number of InterCept shares as listed in
the "InterCept Shares" column on Schedule A opposite such Stockholder's name;
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and
(ii) provided, however, that the Parent shall deliver, out of
the 1,349,894 shares specified in clause (i), 269,979 shares of the Parent
Common Stock to the Escrow Agent, which shall hold such shares (the "Escrow
Shares") in escrow (the "Escrow") pursuant to the terms of an escrow agreement
in the form of Exhibit 2.1(a) attached hereto (the "Escrow Agreement"). The
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269,979 shares of the Parent Common Stock delivered to the Escrow Agent shall be
withheld from and allocated among the Stockholders as listed in the "Escrow
Shares" column on Schedule A opposite such Stockholder's name, with such
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allocation taking into account (x) that some Stockholders are not becoming
parties to this Agreement and consequently those Stockholders' shares are not
being placed in Escrow, and (y) that the 269,979 shares placed in Escrow must be
withheld only from those Stockholders who become parties to this Agreement.
(b) Seller Stock. In exchange for payment of the Merger
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Consideration as described in Section 2.1(a), all of the Seller Stock, excluding
any such shares held in the treasury of the Seller, shall automatically be
converted into only the right to receive the Merger Consideration, and such
shares of Seller Stock shall automatically be cancelled and extinguished.
(c) Treasury Shares. Each share of Seller Stock held in the
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treasury of the Seller shall be automatically canceled and extinguished, and no
payment shall be made in respect of such shares.
(d) Merger Sub Common Stock. Each issued and outstanding share of
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Merger Sub common stock, par value $0.001 per share, at the Effective Time shall
be converted into and thereafter represent one validly issued, fully paid and
nonassessable share of common stock,
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$0.0001 per share, of the Surviving Corporation, which shall then constitute all
of the issued and outstanding shares of the Surviving Corporation.
2.2 Surrender and Exchange of Certificates Representing Seller Stock.
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At the Closing, each Stockholder shall surrender to the Parent an outstanding
certificate or certificates that immediately prior to the Effective Time
represented such holder's Seller Stock (the "Certificates"). In exchange, and
subject to the terms of the Escrow, such Stockholder shall be entitled to
receive at the Closing one or more certificates as requested by the holder
(properly issued, executed and countersigned, as appropriate) representing the
number of shares of Parent Common Stock to which such holder of Seller Stock
shall have become entitled pursuant to the provisions of Section 2.1, and the
Certificates so surrendered shall forthwith be canceled. From the Effective Time
until surrender in accordance with the provisions of this Section, each
Certificate (other than Certificates representing treasury shares) shall
represent for all purposes only the right to receive the Merger Consideration,
without interest. All payments in respect of Seller Stock that are made in
accordance with the terms of this Agreement shall be deemed to have been made in
full satisfaction of all rights pertaining to such securities.
2.3 Appraisal Rights. The Seller has endeavored, and will continue to
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endeavor, to obtain the waiver by each Stockholder of such Stockholder's
appraisal rights available under Delaware Law. In the event that the Seller is
not able to obtain waivers from all of the Stockholders prior to the Closing,
the Parent hereby agrees to cause the Surviving Corporation to provide, within
10 days after the Closing Date, written notice of appraisal rights to all
Stockholders who have not waived their appraisal rights in accordance with
Delaware Law (the "Dissenting Stockholders"). Notwithstanding anything in this
Agreement to the contrary, any Shares of Seller Stock held by Dissenting
Stockholders shall not be converted into Parent Common Stock but shall instead
be converted into the right to receive such consideration as may be determined
to be due with respect to such Dissenting Stockholders pursuant to Delaware Law.
The Seller agrees that, except with the prior written consent of the Parent, or
as required under Delaware Law, it will not voluntarily make any payment with
respect to, or settle or offer to settle, any such purchase demand. Each
Dissenting Stockholder who, pursuant to the provisions of Delaware Law, becomes
entitled to payment of the fair value for shares of Seller Stock shall receive
payment therefor (but only after such value shall have been agreed upon or
finally determined pursuant to such provisions). If, after the Effective Time,
any Dissenting Stockholders shall lose their status as Dissenting Stockholders,
the Parent shall issue and deliver, upon surrender by such holder of
certificate(s) formerly representing shares of Seller Stock, the number of
shares of Parent Common Stock (and any cash in lieu of fractional shares of
Parent Common Stock) to which such Dissenting Stockholder would otherwise be
entitled under Sections 2.1 and 2.5 hereof, without interest, pursuant to and in
accordance with the terms of this Agreement.
2.4 Tax and Accounting Consequences. The Parties intend that the Merger
-------------------------------
shall constitute a reorganization within the meaning of Section 368 of the Code,
and each of the Parties will use its commercially reasonably efforts to cause
the Merger to be treated as such a reorganization. The Parties adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations.
8
2.5 Fractional Shares. Notwithstanding anything herein to the contrary,
-----------------
no fraction of a share of Parent Common Stock will be issued, but in lieu
thereof each holder of shares of Seller Stock who would otherwise be entitled to
a fraction of a share of Parent Common Stock (after aggregating all fractional
shares of Parent Common Stock to be received by such holder) shall receive from
the Parent an amount of cash (rounded to the nearest whole cent) equal to (a)
such fraction, multiplied by (b) the Parent Share Price.
----------
ARTICLE 3
RULES OF CONSTRUCTION
In the interpretation of this Agreement, unless otherwise provided or
the context otherwise requires:
(a) the singular includes the plural and vice versa and, in
particular (but without limiting the generality of the foregoing), any word or
expression defined in the singular has the corresponding meaning used in the
plural and vice versa;
(b) any reference to any gender includes the other genders;
(c) any reference to an Article, Section, Exhibit, clause,
subclause, paragraph, subparagraph, Schedule or recital is a reference to an
Article, Section, Exhibit, clause, subclause, paragraph, subparagraph, Schedule
or recital of this Agreement;
(d) any reference to any agreement, contract, instrument or other
document (i) shall include all appendices, exhibits and schedules thereto and
all agreements, documents or other writings incorporated by reference therein,
and (ii) shall be a reference to such agreement, instrument or other document as
amended, supplemented, modified, suspended, restated or novated from time to
time;
(e) any reference to any statute shall be construed as including
all statutory provisions consolidating, amending or replacing such statute and
all governmental regulations and rules promulgated thereunder;
(f) any reference to "writing" includes printing, typing,
lithography and other means of reproducing words in a visible form;
(g) any reference to a time or date or to a local time or date is a
reference to the time and date in Atlanta, Georgia; and
(h) the headings and article, section and paragraph numbering
contained in this Agreement are used solely for convenience and do not
constitute a part of this Agreement, nor shall such headings and numbering be
used in any manner to aid in the construction of this Agreement.
9
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND THE STOCKHOLDERS
The Seller and the Stockholders hereby represent and warrant, jointly
and severally, to the InterCept Parties, except as set forth on the Disclosure
Schedules attached hereto, each of which exception shall specifically identify
the relevant subsection hereof to which it relates, as follows:
4.1 Entity Organization; Capitalization.
-----------------------------------
(a) The Seller is a corporation duly incorporated, validly
existing and in good standing under the Delaware Law. Each Seller Subsidiary is
a corporation duly organized, validly existing and in good standing under the
laws of its state of organization.
(b) The authorized Shares of the Seller consists of 3,000,000
shares of the Seller's common stock, $0.0001 par value per share, of which
1,083,951.91 shares are issued and outstanding as of the Execution Date. As of
the Execution Date, there were no shares of the Seller's common stock, or any
other class of capital stock, reserved for issuance upon the exercise of
outstanding Equity Rights. There are no contracts by which the Seller is bound
to issue additional Shares or any Equity Rights, and there are no contracts by
which the Seller is or may be bound to transfer any of its Shares. All issued
and outstanding shares of the Seller's common stock have been duly authorized
and validly issued and are fully paid and nonassessable.
(c) Credit Card Services, Inc., a Delaware corporation, ("CCS")
is the only Subsidiary of the Seller. The authorized Shares of CCS consists of
2,500 shares of CCS's common stock, no par value per share, of which 770 shares
are issued and outstanding as of the Execution Date. All issued and outstanding
shares of CCS's common stock have been duly authorized and validly issued, are
fully paid and nonassessable and are owned by the Seller.
(d) Each Seller Entity has all corporate power and authority to
operate and conduct the Seller's Business and to own and lease all of their
properties and assets related to the Seller's Business.
(e) Except as disclosed on Schedule 4.1(e), each Seller Entity is
---------------
duly qualified or licensed to do or transact business and is in good standing
under the laws of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary, which
jurisdictions are listed by the respective Seller Entity, as applicable, on
Schedule 4.1(e), other than in such jurisdictions where the failure to be so
---------------
qualified to do or transact business or in good standing (individually or in the
aggregate) would not have a Material Adverse Effect on the Seller or the
Surviving Corporation.
(f) As of the Execution Date, the Stockholders are the sole
record and beneficial owners of the Seller Stock. The Seller owns all of the
issued and outstanding Shares of each Seller Subsidiary. No Share of any Seller
Subsidiary is or may become required to be
10
issued by reason of any Equity Rights. There are no contracts by which any
Seller Subsidiary is bound to issue additional Shares or Equity Rights. There
are no contracts by which any Seller Subsidiary is or may be bound to transfer
any of the Shares of such Seller Subsidiary. There are no contracts relating to
the rights of any Seller Entity to vote or to dispose of any Shares of any such
Seller Subsidiary. All of the Shares of each Seller Subsidiary held by the
Seller are fully paid and nonassessable under the applicable corporate law of
the jurisdiction in which such Seller Subsidiary is organized and are owned by
the Seller free and clear of any Lien.
(g) Schedule 4.1(g) sets forth copies of the certificate of
---------------
incorporation, bylaws and other organizational or operating agreements, if any,
of each Seller Entity.
(h) Except as set forth in Schedule 4.1(h), no Seller Entity
---------------
owns or controls, directly or indirectly, any equity interest in any
corporation, company, association, partnership, joint venture, or other entity.
4.2 Entity Power; Authorization; Enforceable Obligations. The Seller
----------------------------------------------------
has the full corporate power and authority to execute and deliver the Merger
Documents and to consummate the Contemplated Transactions. The Seller has taken
all necessary corporate action, including all action required by its board of
directors, to authorize the execution and delivery of the Merger Documents and
the consummation of the Contemplated Transactions. The Merger Documents
constitute the legal, valid, and binding obligations of the Seller, enforceable
against the Seller in accordance with their terms and conditions, except as such
enforcement may be subject to or limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting creditors' rights generally, and by general principles of equity.
4.3 No Conflict. Except as set forth on Schedule 4.3, neither the
----------- ------------
execution and delivery of the Merger Documents, nor the consummation of the
Contemplated Transactions, will (i) violate any Law applicable to any Seller
Entity or the Seller's Business, (ii) violate or conflict with any provision of
the charter or bylaws of any Seller Entity, or (iii) conflict with, result in
the breach of, or constitute a default under any Material Seller Contract,
except with respect to (i) above where such violation, conflict, breach or
default would not have a Material Adverse Effect on the Seller or the Surviving
Corporation.
4.4 Government Consents. Except as listed in Schedule 4.4 (such
------------------- ------------
scheduled items being referred to in this Agreement as the "Required Government
Consents"), no Authorization is necessary for the execution and delivery of the
Merger Documents by the Seller or the consummation by the Seller of the
Contemplated Transactions, or the conduct of the Seller's Business.
4.5 Required Contract Consents. Except as disclosed in Schedule 4.5
-------------------------- ------------
(such scheduled items being referred to in this Agreement as the "Required
Contract Consents"), no approval, authorization, consent, permission, or waiver
to or from, or notice, filing, or recording to or with, any Person is necessary
(i) for the execution and delivery of the Merger Documents by any Seller Entity
or the consummation by any Seller Entity of the Contemplated Transactions; or
(ii) with respect to any Material Seller Contracts.
11
4.6 Financial Matters. The audited consolidated balance sheets of the
-----------------
Seller Entities as of December 31, 1999, 2000 and 2001, the related audited
consolidated statements of operations and cash flow for the periods ending
December 31, 1999, 2000 and 2001, and the unaudited consolidated balance sheet
of the Seller as of March 31, 2002 (the "03-31-02 Balance Sheet") are
collectively referred to in this Agreement as the "Financial Statements." The
Financial Statements, including the notes thereto, were prepared in accordance
with GAAP and fairly present the financial position, results of operations and
cash flows of the Seller Entities as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to (i) normal and recurring year-end adjustments, which are not
expected, individually or in the aggregate, to be material in amount, and (ii)
the absence of footnotes.)
4.7 Absence of Changes. Except as set forth in Schedule 4.7 and
------------------ ------------
except for the execution and delivery of this Agreement and the Contemplated
Transactions to take place pursuant hereto on or prior to the Closing Date,
since the date of the 03-31-02 Balance Sheet there has not been any event or
development that, individually or together with other such events, could
reasonably be expected to result in a Material Adverse Effect on the Seller or
the Surviving Corporation. Without limiting the foregoing, except as disclosed
in Schedule 4.7, there has not occurred, between the date of the 03-31-02
------------
Balance Sheet and the date hereof, any of the following:
(a) (i) any increase in the salary, wages or other
compensation of any employee of any Seller Entity whose annual salary is, or
after giving effect to such change would be, $50,000 or more;
(ii) any establishment or modification of (A) targets,
goals, pools or similar provisions in respect of any fiscal year under any Plan
or any employment-related contract or other compensation arrangement with or for
such employees or (B) salary ranges, increase guidelines or similar provisions
in respect of any Plan or any employment-related contract or other compensation
arrangement with or for such employees; or
(iii) any adoption, entering into or becoming bound by any
Plan, employment-related contract or collective bargaining agreement by any
Seller Entity, or amendment, modification or termination (partial or complete)
of any Plan, employment-related contract or collective bargaining agreement by
any Seller Entity, except to the extent required by applicable Law;
(b) (i) any incurrences by the Seller of indebtedness with
respect to the conduct of the Seller's Business in an aggregate principal amount
exceeding $50,000 (net of any amounts discharged during such period);
(ii) any voluntary purchase, cancellation, prepayment or
complete or partial discharge in advance of a scheduled payment date with
respect to, or waiver of any material right of the Seller under, any
indebtedness of or owing to the Seller with respect to the conduct of the
Seller's Business; or
12
(iii) any entering into or becoming bound by any operating
lease agreement by the Seller with respect to the conduct of the Seller's
Business with aggregate scheduled payments exceeding $50,000;
(c) any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the plant, real or
personal property or equipment used or held for use in the conduct of the
Seller's Business in an aggregate amount exceeding $100,000;
(d) any material change in (i) any pricing, investment,
accounting, financial reporting, inventory, credit, allowance or tax practice or
policy of the Seller's Business or (ii) any method of calculating any bad debt,
contingency or other reserve of the Seller's Business for accounting, financial
reporting or tax purposes;
(e) (i) any acquisition or disposition of any assets and
properties used or held for use in the conduct of the Seller's Business, other
than Inventory in the ordinary course of business consistent with past practice
and other acquisitions or dispositions not exceeding in either case $50,000 in
the aggregate; or
(ii) any creation or incurrence of a Lien (other than
Permitted Liens) on any assets and properties used or held in the conduct of the
Seller's Business;
(f) any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any consent with
respect to any Material Seller Contract;
(g) any capital expenditures or commitments for additions to
property, plant or equipment used or held for use in the conduct of the Seller's
Business constituting capital assets in an aggregate amount exceeding $50,000;
(h) any transaction with any officer or director (or any
associate of any such officer or director) of any Seller Entity that is either
(i) outside the ordinary course of business consistent with past practice or
(ii) other than on an arm's-length basis;
(i) any labor trouble or written notice of a claim of wrongful
discharge or other unlawful labor practice or action;
(j) the receipt of written notice of any Litigation against or,
to the Seller's knowledge, the investigation or threat of commencement of any
Litigation against, any Seller Entity or the Seller's Business;
(k) any amendments or changes to the charter or bylaws of any
Seller Entity;
(l) any declaration, setting aside, or payment of a dividend or
other distribution in respect to the equity of any Seller Entity, or any direct
or indirect redemption, purchase or other acquisition by any Seller Entity of
any of its capital stock or other equity;
13
(m) any issuance or sale by any Seller Entity of any Shares or
Equity Rights;
(n) any change in pricing, fees or royalties set or charged by
any Seller Entity to its customers or licensees or in pricing, fees, or
royalties set or charged by Persons who have licensed Intellectual Property to
any Seller Entity;
(o) any other transaction involving or development affecting the
Seller's Business outside the ordinary course of business consistent with past
practice; or
(p) any entering into of a contract or any other commitment or
resolution to do or engage in any of the foregoing.
4.8 No Undisclosed Liabilities. The Seller has no material
--------------------------
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (a) those set forth or adequately provided for in the
Financial Statements or in the notes thereto or as disclosed on Schedule 4.8,
------------
(b) those incurred in the ordinary course of business and not required to be set
forth in the Financial Statements under GAAP, (c) those incurred in the ordinary
course of business since the date of the 03-31-02 Balance Sheet or as disclosed
in Schedule 4.8 and consistent with past practice, and (d) those incurred in
------------
connection with the execution of this Agreement.
4.9 Title to Tangible Property. The Surviving Corporation at Closing
--------------------------
shall have good and marketable title to all of the tangible personal and real
property of the Seller as of 03-31-02 and acquired since that date (except as
sold in the ordinary course of business) (the "Owned Assets"), free and clear of
all material Liens whatsoever, except for the leases disclosed in Schedule 4.14,
-------------
and Permitted Liens.
4.10 Condition of Property. All of the tangible real and personal
---------------------
property used in the Seller's Business are in good operating order, condition,
and repair, ordinary wear and tear excepted, and are suitable for use in the
Seller's Business in the ordinary course, as presently operated.
4.11 Inventory. All Inventory is of usable quality and includes no
---------
material amount of obsolete or discontinued items or items that cannot be used
by the Surviving Corporation in the Seller's Business in the ordinary course,
consistent with past practices and uses, other than reserves for obsolescence as
disclosed on the 03-31-02 Balance Sheet.
4.12 Contracts. The Seller Contracts described in Schedule 4.12(a)
--------- ----------------
constitute all Material Seller Contracts of each Seller Entity in effect as of
the date of this Agreement. All such Material Seller Contracts are valid,
binding, and enforceable in accordance with their terms and are in full force
and effect. Except as set forth on Schedule 4.12(b), there are no existing
----------------
defaults by any Seller Entity under any such Material Seller Contracts and no
act, event, or omission has occurred that, whether with or without notice, lapse
of time, or both, would constitute a default thereunder by the applicable Seller
Entity.
14
4.13 Intellectual Property.
---------------------
(a) Except as described in Schedule 4.13, each Seller Entity
-------------
owns all of the Intellectual Property.
(b) Schedule 4.13 lists (i) all patents and patent applications
------------
and all registered and unregistered trademarks, trade names and service marks,
registered and unregistered copyrights, and maskworks, included in the
Intellectual Property, including the jurisdictions in which each such
Intellectual Property right owned by Seller has been issued or registered or in
which any application for such issuance and registration has been filed, (ii)
all licenses, sublicenses and other agreements as to which any Seller Entity is
a party and pursuant to which any Person is authorized to use any Intellectual
Property, and (iii) all licenses, sublicenses and other agreements as to which
any Seller Entity is a party and pursuant to which any Seller Entity is
authorized to use any third party patents, trademarks or copyrights, including
software which are incorporated in, are, or form a part of any product or
service offering of any Seller Entity.
(c) To the Seller's knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation by any third party of any
Intellectual Property rights of any Seller Entity, including any trade secret
used in or held for use in the Seller's Business. No Seller Entity has entered
into any agreement to indemnify any other Person against any charge of
infringement of any Intellectual Property, other than indemnification provisions
contained in purchase orders arising in the ordinary course of business.
(d) Except as described in Schedule 4.13(d), all patents,
----------------
registered trademarks, service marks and copyrights held by each Seller Entity
are valid and existing, and there is no assertion or claim (or basis therefor)
challenging the validity of any Intellectual Property owned by of any Seller
Entity. Except as described in Schedule 4.13(d), no Seller Entity has been sued
----------------
in any Litigation which involves a claim of infringement of any patents,
trademarks, service marks, copyrights or violation of any trade secret or other
proprietary right of any third party. To the Seller's knowledge, the conduct of
the Seller's Business as currently conducted, including the use in any way of
the Intellectual Property with respect to Seller's Business, does not infringe
or conflict with, in any way, any license, trademark, trademark right, trade
name, trade name right, patent, patent right, industrial model, invention,
service xxxx or copyright of any third party. No third party is challenging the
ownership by any Seller Entity, or the validity or effectiveness of, any of the
Intellectual Property. Except as described in Schedule 4.13(d), no Seller Entity
----------------
has brought any Litigation for infringement of Intellectual Property or breach
of any license or agreement involving Intellectual Property against any third
party. There are no pending or, to the Seller's knowledge, threatened
interference, re-examinations, oppositions or nullities involving any patents,
patent rights or applications therefor of any Seller Entity, except such as may
have been commenced by a Seller Entity.
(e) Each Seller Entity has secured valid written assignments
from all employees and, to the Seller's knowledge, consultants and independent
contractors who contributed to the creation or development of Intellectual
Property of the rights to such contributions that such Seller Entity does not
already own by operation of law.
15
(f) Each Seller Entity has taken all commercially reasonable
steps to protect and preserve the confidentiality of all confidential
information of each Seller Entity and third parties. Each Seller Entity has a
policy requiring each employee, consultant, and independent contractor to
execute proprietary information and confidentiality agreements substantially in
such Seller Entity's standard forms, and all current and former employees,
consultant and independent contractors of each Seller Entity has executed such
an agreement. To the Seller's knowledge, there has been no misuse or
misappropriation of confidential information owned by each Seller Entity. To the
Seller's knowledge, there has been no misuse or misappropriation by any Seller
Entity of confidential information not owned by a Seller Entity.
4.14 Leases. The leases disclosed in Schedule 4.14 constitute all of
------ -------------
the Seller's leasing or rental contracts, agreements, and other commitments and
arrangements in effect as of the date of this Agreement (the "Leases"). All of
the Leases are valid, binding, and enforceable in accordance with their
respective terms and are in full force and effect. Except as described in
Schedule 4.14, there are no existing defaults by any Seller Entity under any
-------------
Lease and no act, event, or omission has occurred that, whether with or without
notice, lapse of time, or both, would constitute a default thereunder by the
applicable Seller Entity.
4.15 Restrictions on Business Activities. Except as set forth on
-----------------------------------
Schedule 4.15, there is no agreement, judgment, injunction, order or decree
-------------
binding upon any Seller Entity that has or could reasonably be expected to have
the effect of prohibiting or impairing any current or future business practice
of the Seller or the Surviving Corporation. No Seller Entity has entered into an
agreement under which such Seller Entity is restricted from selling, licensing
or otherwise distributing any of its products to any class of customers, in any
geographic area, during any period of time or in any segment of the market.
4.16 Litigation. Except as disclosed in Schedule 4.16, no Litigation
---------- -------------
is pending, or, to the Seller's knowledge, threatened against any Seller Entity
(including any present directors, officers, or employees of any Seller Entity)
affecting, involving, or relating to the Seller's Business, or that could
prevent, enjoin, or materially alter or delay any of the Contemplated
Transactions, or that could reasonably be expected to have a Material Adverse
Effect on the Seller or the Surviving Corporation.
4.17 Court Orders, Decrees, and Laws.
-------------------------------
(a) Compliance With Laws. Except as set forth on Schedule
-------------------- --------
4.17(a), there is no outstanding or, to the Seller's knowledge, threatened
-------
order, writ, injunction, or decree of any court, governmental agency, or
arbitration tribunal against any Seller Entity affecting, involving, or relating
in an adverse manner to the Seller's Business. Each Seller Entity has complied
with, and is not in violation of, any Laws affecting, involving, or relating to
the Seller's Business, except for such violations or failures to comply as could
not reasonably be expected to have a Material Adverse Effect on the Seller or
the Surviving Corporation, and no Seller Entity has received any written notice
of such alleged violation.
(b) Adequacy of Authorizations. The Authorizations listed on
--------------------------
Schedule 4.17(b) constitute all approvals, authorizations, certifications,
----------------
consents, variances, permissions, licenses, or
16
permits to or from, or filings, notices, or recordings to or with, U.S. or
non-U.S., federal, state, or local governmental authorities that are required
for the ownership and the conduct of the Seller's Business under all applicable
Laws, and the Seller has such Authorizations, except where the failure to obtain
such Authorization could not have a Material Adverse Effect. Each Seller Entity
is in compliance, in all material respects, with all terms and conditions of
such required Authorizations. All of the Authorizations are in full force and
effect, and, to the Seller's knowledge, no suspension or cancellation of any of
them is being threatened. No Authorization will be affected by the consummation
of the Contemplated Transactions.
(c) Environmental Matters. The operations of each Seller Entity
---------------------
forming a part of the Seller's Business (including real property, leaseholds, or
other interests currently or formerly owned or operated by such Seller Entity)
comply, and have complied, in all material respects with all applicable Laws
relating to pollution, waste discharge limits, hazardous or toxic substances,
biological or biomedical wastes, resource extraction, construction, or
protection of the environment ("Environmental Laws"). No Seller Entity has
violated, and no Seller Entity has received any written notice of any pending or
threatened investigation, proceeding or claim with respect to the Seller's
Business to the effect that any Seller Entity or the Surviving Corporation is or
may be liable to any Person, or responsible or potentially responsible for the
costs of any remedial or removal action or other cleanup costs, as a result of
noncompliance with any Environmental Laws. There is no past or present action,
activity, condition or circumstance that could be expected to give rise to any
such liability on the part of any Seller Entity or the Surviving Corporation to
any Person or for any such cleanup costs.
4.18 Personnel and Compensation.
--------------------------
(a) List of Personnel. Schedule 4.18(a) is a true and complete
----------------- ----------------
list of the names and current compensation levels of (i) all salaried or annual
employees and (ii) all independent contractors and/or consultants (excluding
vendors and suppliers) involved in the Seller's Business.
(b) Employee Relations. There is no labor strike, dispute,
------------------
slowdown, stoppage, or similar activity pending or, to the Seller's knowledge,
threatened against any Seller Entity pertaining to the Seller's Business or the
employees involved in the Seller's Business. Except as described in Schedule
--------
4.18(b), there are no charges, investigations, administrative proceedings, or
-------
formal complaints of discrimination (including discrimination based upon sex,
age, marital status, race, national origin, sexual preference, handicap or
veteran status) pending or, to the Seller's knowledge, threatened before the
Equal Employment Opportunity Commission or any federal, state, or local agency
or court against any Seller Entity pertaining to the Seller's Business or the
employees of the Seller's Business, and, to the Seller's knowledge, no basis for
any such charge, investigation, administrative proceeding, or complaint exists.
4.19 Employee Benefit Plans and Arrangements.
---------------------------------------
(a) List of Plans and Obligations. The employee benefit plans
-----------------------------
and arrangements set forth in Schedule 4.19 is a complete and accurate list and
-------------
description of all plans, arrangements, agreements, commitments and other
binding obligations of each Seller Entity, including but not limited to pension,
retirement, profit-sharing, deferred compensation,
17
stock option, employee stock ownership, severance pay, vacation, sick leave
without compensation, bonus and other incentive plans, every medical, vision,
dental and other health plan, every life insurance plan and every other written
or unwritten employee program, arrangement, agreement or understanding,
commitment or method of contribution or compensation, whether formal or
informal, whether funded or unfunded, and other obligations under which each
Seller Entity has been, is or will be obligated to provide benefits to any
current or former employee, retiree, director, independent contractor,
stockholder, officer, consultant or other beneficiary, or dependent, spouse or
other family member or beneficiary of such employee, retiree, director,
independent contractor, stockholder, officer, consultant, or other beneficiary
of any Seller Entity, whether during their employment with such Seller Entity or
after the termination of such employment (the "Plans" and the "Beneficiaries,"
respectively).
(b) Compliance. All of the Plans have been maintained, funded
----------
and administered in compliance, in all respects, with all applicable Laws,
including but not limited to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the Code and all regulations and rulings related
thereto. There are no penalties, interest, or Taxes related to the Plans due to
any federal or state authority.
(c) No Liabilities or Obligations. Except as reflected on the
-----------------------------
Financial Statements, no Seller Entity has any liabilities or obligations to any
Beneficiaries, Governmental Authorities, or any other parties arising out of or
relating to the Plans.
(d) No Payments. Except as disclosed on Schedule 4.19(d), the
----------- ----------------
consummation of the Merger pursuant to this Agreement will not (i) entitle any
Beneficiary to any severance pay, unemployment compensation, or any other
payment contingent upon a change in control or ownership of the Seller or its
assets, or (ii) accelerate the time of payment or vesting or increase the amount
of any compensation or benefit due to any Beneficiary.
(e) No Multi-Employer or Certain Other Plans. None of the Plans
----------------------------------------
is a multi-employer plan, as defined in Section 3(37) of ERISA, or is subject to
Title IV of ERISA or Code section 412; and no Seller Entity (or any affiliate of
any Seller Entity) has or has had any liability or other obligation in
connection with any such multi-employer plan, or plan which is or was subject to
Title IV of ERISA or Code section 412.
4.20 Insurance Matters.
-----------------
(a) Insurance Policies. Schedule 4.20 lists all insurance
------------------- -------------
policies of each Seller Entity. Each Seller Entity has policies of insurance and
bonds of the type and in amounts customarily carried by Persons conducting
businesses or owning assets similar to those of such Seller Entity. All premiums
due and payable under all such policies and bonds have been paid and each Seller
Entity is otherwise in compliance with the terms of such policies and bonds. No
Seller Entity has any knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies, other than industry-wide
premium increases for reasons not specifically limited to the Seller Entities.
18
(b) Insurance Claims. Except as disclosed on Schedule 4.20(b),
---------------- ----------------
there are no pending material claims against insurance established or obtained
with respect to the Seller's Business by any Seller Entity as to which insurers
have denied liability or are defending under any reservation of rights, and
there exists no material claim under such insurance that has not been properly
filed by any Seller Entity.
4.21 Broker's or Finder's Fees. No brokerage or finder's fee (or
-------------------------
agent's commissions or investment banker's fee or any similar charges in
connection with this Agreement or any of the Contemplated Transactions) has been
incurred or will be incurred by any Seller Entity.
4.22 Accounts Receivable. Except as set forth in Schedule 4.22(a), the
------------------- ----------------
Seller's accounts receivable as set forth on Schedule 4.22(b) (a) arose from
----------------
bona fide sales or services transactions in the ordinary course of business and
---- ----
are payable on ordinary trade terms, (b) are legal, valid and binding
obligations of the respective debtors enforceable in accordance with their
terms, (c) to the Seller's knowledge, are not subject to any valid set-off or
counterclaim, (d) do not represent obligations for goods sold on consignment, on
approval or on a sale-or-return basis or subject to any other repurchase or
return arrangement, (e) are collectible in the ordinary course of business
consistent with past practice in the aggregate recorded amounts thereof, except
to the extent of any reserves for bad debts or doubtful accounts as provided for
in the 03-31-02 Balance Sheet, and (f) are not the subject of any actions or
proceedings brought by or on behalf of any Seller Entity.
4.23 Vehicles. Schedule 4.23 contains a true and complete list of all
-------- -------------
motor vehicles owned or leased by any Seller Entity and used or held for use in
the conduct of the Seller's Business (the "Vehicles"). Except as disclosed in
Schedule 4.23, each Seller Entity has good and valid title to, or has valid
-------------
leasehold interests in or valid rights under contract to use, each Vehicle, free
and clear of all Liens other than Permitted Liens.
4.24 No Guarantees. Except as disclosed on Schedule 4.24, none of the
------------- -------------
liabilities of the Seller's Business or of any Seller Entity incurred in
connection with the conduct of the Seller's Business is guaranteed by or subject
to a similar contingent obligation of any other Person, nor has any Seller
Entity guaranteed or become subject to a similar contingent obligation in
respect of the liabilities of any customer, supplier or other Person to whom any
Seller Entity sells goods or provides services in the conduct of the Seller's
Business or with whom such Seller Entity otherwise has significant business
relationships in the conduct of the Seller's Business.
4.25 Tax Matters.
-----------
(a) Tax and Social Returns. Except as set forth on Schedule
---------------------- --------
4.25(a), each Seller Entity has correctly and timely (i) filed all Tax and
-------
Social returns required to be filed in the manner required by Tax and Social
authorities, (ii) responded to information requested by said authorities and
(iii) made on or before the applicable due date all Tax and Social payments
required to be made as set forth on such returns.
(b) Other Matters. Except as set forth in Schedule 4.25(b): (i)
------------- ----------------
no Seller Entity is subject to income tax in countries other than those where
such entity is registered; (ii) if any
19
Seller Entity is established in a country where value added tax is applicable,
such Seller Entity is duly registered as an entity subject to such Tax; (iii)
expenses already incurred or which any Seller Entity is required to incur in the
ordinary course of carrying on its trade or business are deductible from its
ordinary income; (iv) no Seller Entity has entered into any transaction which
could be disregarded or recharacterized for Tax or Social purposes on the
grounds that it aimed at the evasion of Tax or Social obligations; and (v) no
Seller Entity is the subject matter of any inquiry, investigation or audit
relating to Tax or Social matters, nor has any such Seller Entity been informed
of any proposed audit.
(c) Tax and Social Audits. Schedule 4.25(c) sets forth the
--------------------- ----------------
conclusions of any Tax or Social audit or reassessment made during any period
not yet completely time barred by applicable statutes of limitation.
(d) Returns Furnished. The Seller has provided the Parent with
-----------------
true and complete copies of (a) income tax audit reports, statements of
deficiencies or audit response letters relating to Taxes, if any, and (b) all
tax returns for each Seller Entity for all periods since inception.
(e) Tax Basis and Tax Attributes. Schedule 4.25(e) contains an
---------------------------- ----------------
accurate and complete description or the tax basis of the assets of each Seller
Entity.
(f) Withholding Taxes. Except as disclosed in Schedule
----------------- --------
4.25(f), the Seller has withheld and paid all Taxes required to have been
-------
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(g) Tax Sharing or Allocation Agreements. The Seller is not a
------------------------------------
party to or bound by any Tax indemnity, Tax sharing, or Tax allocation
agreement.
(h) Prior Affiliated Groups. The Seller has never been a member
-----------------------
of an affiliated group of corporations, within the meaning of Section 1504 of
the Code (as hereinafter defined).
4.26 Customers and Suppliers. Except as disclosed in Schedule 4.26, no
----------------------- -------------
customer that individually accounted for more than 2% of the Seller's aggregate
gross revenues during the 12-month period preceding the date of this Agreement,
and no supplier of any Seller Entity to which any Seller Entity has paid more
than 2% of the Seller's aggregate gross revenues during the 12-month period
preceding the date of this Agreement, has cancelled or otherwise terminated, or
made any written or, to the Seller's knowledge, oral threat to any Seller Entity
to cancel or otherwise terminate its relationship with such Seller Entity prior
to the stated expiration date, or has at any time on or after December 31, 2000
decreased materially its services or supplies to any Seller Entity in the case
of any such supplier, or its usage of the services or products of the any Seller
Entity in the case of such customer, and, to the Seller's knowledge, no such
supplier or customer intends to cancel or otherwise terminate its relationship
with any Seller Entity or to decrease materially its services or supplies to any
Seller Entity or its usage of the services or
20
products of any Seller Entity, as the case may be. No Seller Entity has engaged
in any fraudulent conduct with respect to any customer or supplier of any Seller
Entity.
4.27 No Commitments Regarding Future Products. No Seller Entity has
----------------------------------------
made any sales to customers that are contingent upon providing future
enhancements of existing products or services, to add features not presently
available on existing products or services, or to otherwise enhance the
performance of its existing products or services (other than beta or similar
arrangements pursuant to which a Seller Entity's customers from time to time
test or evaluate products or services). The products or services any Seller
Entity has delivered to customers substantially comply with published
specifications for such products and services, and no Seller Entity has received
material complaints from customers about its products or services that remain
unresolved. Schedule 4.27 accurately sets forth a complete list of products and
-------------
services in development (exclusive of mere enhancements to and additional
features for existing products and services).
4.28 Disclosure. No representation, warranty, or statement made by the
----------
Seller or the Stockholders in the Merger Documents contains or will contain any
untrue statement or omits or will omit to state any fact necessary to make the
statements contained in this Agreement or in those Merger Documents, under the
circumstances in which they were made, not materially misleading. The "EPX
Information" (as defined in the following sentence) will, when the Joint
Memorandum is distributed to the Stockholders of the Seller, not contain any
untrue statement or omit to state any fact necessary to make the statements
contained in the EPX Information, under the circumstances in which they were
made, not materially misleading. "EPX Information" means the narrative and
financial information contained in the Joint Memorandum about the Seller,
including, without limitation, its capital structure, stockholders, officers and
directors and their interests in the transaction, financial and operating data,
capital resources, liquidity, corporate actions and procedures, risk factors,
and certificate of incorporation and bylaws.
4.29 Transactions with Related Parties. Except as set forth on Schedule
--------------------------------- --------
4.29 or in connection with customary transactions in the ordinary course of
----
business, no officer, director, or stockholder of any Seller Entity (including
any relative or affiliate of any such Person):
(a) owes money to any Seller Entity;
(b) has any claim against any Seller Entity;
(c) has any interest in any property or assets used by Seller
Entity in the Seller's Business;
(d) has any benefits which are contingent on the Contemplated
Transactions, other than as stated herein;
(e) has any agreement whereby any Seller Entity has any
outstanding financial obligations to such parties;
21
(f) has any agreement with Seller Entity that is not terminable by
such Seller Entity without penalty or notice;
(g) has any agreement providing severance benefits or other
benefits (which are conditioned upon a change of control) after the termination
of employment of such employee regardless of the reason for such termination of
employment; or
(h) has any agreement or Plan, any of the benefits of which will
be increased, vested or accelerated by the occurrence of any of the Contemplated
Transactions.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder, severally and not jointly, additionally represents
and warrants to the Parent, with respect to such Stockholder, as follows:
5.1 Ownership of Shares. Each Stockholder owns of record and
-------------------
beneficially all of the Seller Stock set forth opposite such Stockholder's name
on Schedule A. Each Stockholder owns all right, title and interest in and to
----------
such Seller Stock, free and clear of all Liens (including those for federal or
state estate or inheritance taxes), options, rights of refusal or similar rights
or other transfer restrictions of any nature whatsoever (including any arising
from any pending or, to the applicable Stockholder's knowledge, threatened
Litigation) other than restrictions on transfers arising out of applicable
federal and state securities Laws and the agreements identified on Schedule 5.1
------------
(which restrictions shall be terminated at or prior to the Closing).Except as
disclosed on Schedule 5.1, no Stockholder owns any other securities of the
------------
Seller.
5.2 Authorization. With respect to this Agreement and any other
-------------
agreements, instruments and documents required to be executed and delivered by
the Stockholders pursuant to this Agreement (this Agreement and such other
agreements, instruments and documents are collectively referred to as the
"Stockholder Delivered Agreements"): (i) each Stockholder has the right, power
and authority to enter into the Stockholder Delivered Agreements executed and
delivered by such Stockholder and to consummate the Contemplated Transactions,
and otherwise to comply with and perform such Stockholder's obligations under
them; and (ii) each of the Stockholder Delivered Agreements will, when
delivered, constitute a valid and binding obligation of the Stockholder
enforceable against the Stockholder in accordance with its terms.
5.3 Absence of Violations or Conflicts. The execution and delivery of
----------------------------------
the Stockholder Delivered Agreements and the consummation by each Stockholder of
the Contemplated Transactions, or other compliance with the performance under
the Stockholder Delivered Agreements do not and will not with the passing of
time or giving of notice or both: (i) constitute a violation of, be in conflict
with, constitute a default or require any payment under, permit a termination
of, or result in the creation or imposition of any Lien upon any assets of any
Seller Entity or any of the Seller Stock under (A) any contract, agreement,
commitment, undertaking or understanding (including rights of refusal or similar
rights or other transfer
22
restrictions) to which such Stockholder is a party or to which such Stockholder
or such Stockholder's properties or any Seller Entity or its properties are
subject or bound, (B) any judgment, decree or order of any Governmental
Authority to which such Stockholder or such Stockholder's properties are subject
or bound, or (C) any applicable Laws; or (ii) create, or cause the acceleration
of the maturity of, any debt, obligation or liability of such Stockholder that
would result in any Lien or other claim upon the assets of any Seller Entity.
5.4 No Consents Required. No Authorization or any other consent of,
--------------------
approval of or notice to any other third party on the part of any Stockholder is
required in connection with such Stockholder's execution or delivery of the
Stockholder Delivered Agreements or the consummation of the Contemplated
Transactions by, or other compliance with the performance under, such
Stockholder Delivered Agreements by such Stockholder.
5.5 No Claims Against Seller. No Stockholder has any claim against any
------------------------
Seller Entity, except for accrued compensation and benefits and expenses or
similar obligations incurred in the ordinary course of business (including
reimbursement of medical expenses pursuant to the Plans disclosed pursuant to
this Agreement), and except as otherwise specifically provided in this
Agreement.
5.6 Litigation Related to this Agreement. No Stockholder is a party to
------------------------------------
or subject to any judgment, decree or order entered in any Litigation brought by
any Governmental Authority or other third party seeking to prevent the execution
of this Agreement or the consummation of the Contemplated Transactions.
5.7 Investment Intent. Each Stockholder will acquire the Stockholder's
-----------------
portion of the Parent Common Stock pursuant to this Agreement for the
Stockholder's own account, to hold for investment and with no present intention
of dividing the Stockholder's participation with others or reselling or
otherwise participating, directly or indirectly, in a distribution thereof, and
the Stockholder will not make any sale, transfer or other disposition of the
Stockholder's portion of the Parent Common Stock in violation of the Securities
Act of 1933, as amended (the "1933 Act") or any applicable state securities Laws
(the "State Acts"). Without limiting the foregoing, each Stockholder has no plan
or intention to sell or otherwise dispose of any of such Stockholder's portion
of the Parent Common Stock issued to such Stockholder pursuant to this
Agreement. Each Stockholder agrees that there will be placed on the certificate
or other evidence of the Parent Common Stock, or any substitutions therefor, a
legend stating in substance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
BEEN ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT") AND STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED
OTHER THAN (i) PURSUANT TO AN EFFECTIVE REGISTRATION OR AN EXEMPTION
THEREFROM UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS, AND
(ii) UPON RECEIPT BY THE ISSUER OF EVIDENCE SATISFACTORY TO IT OF
23
COMPLIANCE WITH THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS. THE
ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY
TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE LAWS.
Further, each Stockholder agrees that there will be placed on the certificate or
other evidence of the Parent Common Stock, or any substitutions therefor,
evidencing the shares that are placed into the Escrow pursuant to the Escrow
Agreement, a legend stating in substance as follows:
THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN AN
ESCROW AGREEMENT (THE "ESCROW AGREEMENT") DATED AS OF MAY _, 2002 AMONG
THE ISSUER, WACHOVIA BANK, NATIONAL ASSOCIATION, THE HOLDER OF THE
SECURITIES AND OTHERS. ANY ATTEMPTED TRANSFER IN VIOLATION OF THE
ESCROW AGREEMENT SHALL BE NULL AND VOID. A COPY OF THE ESCROW AGREEMENT
OR A SUMMARY OF SUCH RESTRICTIONS IS AVAILABLE FROM THE ISSUER UPON
REQUEST.
5.8 Access to Information; Accredited Investor Status. Each
-------------------------------------------------
Stockholder has been given access to material and relevant information
concerning the Parent, including but not limited to the Joint Memorandum,
thereby enabling such Stockholder to make an informed investment decision
concerning the Stockholder's investment in the Parent Common Stock. Each
Stockholder has relied solely upon an independent investigation made by such
Stockholder and such Stockholder's representatives, if any, and has, prior to
the date of this Agreement, been given access to and the opportunity to examine
data and information relating to the Parent, including the Parent's SEC Reports
(as defined in Section 6.3 below). In making the investment decision to acquire
the Parent Common Stock pursuant to this Agreement, each Stockholder is not
relying on any oral or written representations or assurances from the Parent or
any other Person or any representative of the Parent or any other Person other
than as set forth in this Agreement and in the Joint Memorandum. Each
Stockholder has completed and submitted to the Parent an "Investor
Questionnaire" stating such Stockholder (i) is an "accredited investor" as such
term is defined in Rule 501 of Regulation D under the 1933 Act, or (ii) together
with the Stockholder's "purchaser representative" as such term is defined in
Rule 501 of Regulation D under the 1933 Act, has such knowledge and experience
in financial and business matters that such Stockholder is capable of evaluating
the merits and risks of an investment in the Parent Common Stock. Each
Stockholder acknowledges that the Investor Questionnaires and the responses
thereto are incorporated by reference into this Agreement for reliance by the
Parent and the Merger Sub, and each Stockholder hereby represents and warrants
the truthfulness and accuracy of such Stockholder's responses in such
Stockholder's Investor Questionnaire.
5.9 Economic Risk. Each Stockholder represents that such Stockholder
-------------
is able to bear the economic risk of an investment in such Stockholder's portion
of the Parent Common Stock, which such Stockholder acknowledges is currently
illiquid, including a possible total loss of such Stockholder's investment. In
making this statement, each Stockholder represents and warrants to the Parent
that such Stockholder has adequate means of providing for such
24
Stockholder's current needs and contingencies; is able to afford to hold such
Stockholder's portion of the Parent Common Stock for an indefinite period; and
further represents that such Stockholder has such knowledge and experience in
financial and business matters that such Stockholder is capable of evaluating
the merits and risks of the investment in such Stockholder's portion of the
Parent Common Stock. Further, each Stockholder represents that such Stockholder
has no present need for liquidity in such Stockholder's portion of the Parent
Common Stock and is willing to accept such investment risks.
5.10 Tax Advice. Each Stockholder has reviewed with such Stockholder's
----------
tax advisor the Tax consequences of an investment in such Stockholder's portion
of the Parent Common Stock and the Contemplated Transactions. Each Stockholder
is relying solely on such advisors and not on any statements or representations
of the Parent or any of its agents, except as provided in this Agreement, and
such Stockholder understands that such Stockholder (and not the Parent) shall be
responsible for such Stockholder's own Tax liability that will arise as a result
of this investment or the Contemplated Transactions.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE PARENT
The Parent represents and warrants to the Seller and the Stockholders
as follows:
6.1 Corporate Organization. The Parent is a corporation duly
----------------------
organized, validly existing and in good standing under the Laws of the State of
Georgia. The Parent's shares of Common Stock are included for listing on the
Nasdaq Stock Market, and, to the Parent's knowledge, the Parent is not in
default with respect to any of Nasdaq's listing requirements. Merger Sub is a
corporation duly organized, validly existing and in good standing under Delaware
Law. The Parent is duly qualified or licensed to do or transact business and is
in good standing under the Laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, other than in such jurisdictions where the failure to be so qualified
to do or transact business or in good standing (individually or in the
aggregate) would not have a Material Adverse Effect on the Parent.
6.2 Corporate Power and Authorization; Validity of Contemplated
-----------------------------------------------------------
Transactions.
------------
(a) The InterCept Parties have the full corporate power and
authority to execute and deliver the Merger Documents and to consummate the
Contemplated Transactions in accordance with the terms of the Merger Documents.
The execution and delivery of the Merger Documents and the consummation of the
Contemplated Transactions have been duly authorized by all necessary corporate
action. The Merger Documents have been duly and validly executed and delivered
by the InterCept Parties and constitute the valid and binding obligation of the
InterCept Parties enforceable against them in accordance with their respective
terms.
(b) Neither the execution and delivery of the Merger Documents by
the InterCept Parties, nor the consummation by the InterCept Parties of the
Contemplated Transactions in accordance with the terms of this Agreement, or
compliance by the InterCept Parties with any of the terms or provisions of this
Agreement, will (i) violate any provision of the
25
Parent's or Merger Sub's articles of incorporation or certificate of
incorporation, respectively, or bylaws, (ii) violate any applicable Law relating
to the InterCept Parties, or any of their respective properties or assets, or
(iii) violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any Lien, other than
Permitted Liens, upon any of the respective properties or assets of the Parent
or Merger Sub under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which any of the InterCept Parties is a party, or by
which they or any of their respective properties or assets may be bound or
affected except, with respect to (ii) and (iii) above, such as individually or
in the aggregate will not have a Material Adverse Effect on the InterCept
Parties, and which will not prevent or delay the consummation of the
Contemplated Transactions.
6.3 Current Public Information; Financial Statements. The Parent
------------------------------------------------
represents and warrants to the Stockholders that it is a "reporting issuer" and
has a class of securities registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"). The Parent has made available
to the Stockholders copies of the Parent's Form 10-K Annual Report for the year
ended December 31, 2001, the Parent's definitive proxy statement for its 2002
annual meeting, and the other reports previously filed by the Parent since April
1, 2002 with the U.S. Securities and Exchange Commission (the "SEC") that are
listed in Annex C to the Joint Memorandum (collectively, the "SEC Reports"). The
Parent has complied with Regulation D of the 1933 Act in providing the requisite
information about the Parent to the Stockholders. The SEC Reports previously
filed by the Parent with the SEC, at the time filed, complied as to form in all
material respects with the requirements of the 1934 Act. The SEC Reports
previously filed by the Parent with the SEC did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Parent has filed
all documents required to be filed with the SEC on a timely basis. The financial
statements (including the notes thereto) contained in the SEC Reports were
prepared in accordance with GAAP and fairly present the financial position,
results of operations and cash flows of the Parent and its consolidated
subsidiaries as at the respective dates thereof and for the respective periods
indicated therein (subject, in the case of unaudited statements, to (i) normal
and recurring year-end adjustments, and (ii) the absence of footnotes which were
not and are not expected, individually or in the aggregate, to be material in
amount). The "ICPT Information" (as defined in the following sentence) will,
when the Joint Memorandum is distributed to the Stockholders, not contain any
untrue statement or omit to state any fact necessary to make the statements
contained in the ICPT Information, under the circumstances in which they were
made, not materially misleading. "ICPT Information" means the narrative and
financial information contained in the Joint Memorandum about the Parent,
including without limitation its capital structure, officers and directors,
financial and operating data, capital resources, liquidity, risk factors,
articles of incorporation and bylaws, and governing law.
6.4 Broker's and Other Fees. Except for the engagement of Credit Suisse
-----------------------
First Boston, neither the Parent nor the Merger Sub has authorized any Person to
act as broker, finder,
26
or in any other similar capacity in connection with any of the Contemplated
Transactions. The Parent shall be solely responsible for the fees and expenses
of Credit Suisse First Boston.
6.5 Parent Common Stock. At the Effective Time, the Parent Common Stock
-------------------
issued pursuant to the Merger will be duly and validly authorized, issued and
outstanding, fully paid and nonassessable, free of preemptive rights and free
and clear of all Liens created by or through the Parent (except as set forth in
this Agreement and the other Merger Documents). Any common stock of the Parent
issued pursuant to Section 8.14(g) to the Stockholders will be duly and validly
authorized, issued and outstanding, fully paid and non-assessable, free of
preemptive rights and free and clear of all Liens created by or through the
Parent.
6.6 Taxes.
-----
(a) Tax and Social Returns. Each of the InterCept Parties has
----------------------
correctly and timely (i) filed all Tax and Social returns required to be filed
in the manner required by Tax and Social authorities, (ii) responded to
information requested by said authorities and (iii) made all Tax and Social
payments at due dates. There are no material Liens on any of the assets of the
InterCept Parties that arose in connection with any failure (or alleged failure)
to pay any Tax.
(b) Other Matters. Except as set forth in Schedule 6.6(b): (i) no
------------- ---------------
InterCept Party is subject to income tax in countries other than those where
such entity is registered; (ii) if any InterCept Party is established in a
country where value added tax is applicable, such InterCept Party is duly
registered as an entity subject to such Tax; (iii) expenses already incurred or
which any InterCept Party is required to incur in the ordinary course of its
business are deductible from its ordinary income; (iv) no InterCept Party has
entered into any transaction which could be disregarded or recharacterized for
Tax or Social purposes on the grounds that it aimed at the avoidance of Tax or
Social obligations; and (v) no InterCept Party is the subject matter of any
audit, or to the Parent's knowledge, inquiry, proposed audit or investigation,
relating to Tax or Social matters.
(c) Withholding Taxes. The InterCept Parties have withheld and paid
-----------------
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any of their respective employees, independent contractors,
creditors, stockholders, or other third parties.
(d) Tax Sharing or Allocation Agreements. The Parent is not a party
------------------------------------
to or bound by any Tax indemnity, Tax sharing, or Tax allocation agreement.
(e) Prior Affiliated Groups. The Parent has never been a member of an
-----------------------
affiliated group of corporations, within the meaning of Section 1504 of the
Code.
6.7 Required Consents. Except as listed in Schedule 6.7 (such scheduled
----------------- ------------
items being referred to in this Agreement as the "Required Intercept Consents"),
no Authorization is necessary for the execution and delivery of the Merger
Documents by the Parent or Merger Sub or the consummation by the InterCept
Parties of the Contemplated Transactions. Except as disclosed in Schedule 6.7
------------
(such scheduled items being referred to in this Agreement as the
27
"InterCept Contract Consents"), no approval, authorization, consent, permission,
or waiver to or from, or notice, filing, or recording to or with, any Person is
necessary for the execution and delivery of the Merger Documents by any
InterCept Party or the consummation by any InterCept Party of the Contemplated
Transactions.
6.8 Outstanding Stock. As of May 9, 2002, the authorized capital the
-----------------
Parent consists of 50,000,000 shares of Common Stock, of which 18,176,409 shares
are issued and outstanding, and 1,000,000 shares of preferred stock, none of
which are issued and outstanding. The Parent has and will continue to have at
all times until the Closing Date a sufficient number of authorized but unissued
shares of common stock to be able to issue the Parent Common Stock to the
Stockholders.
6.9 No Undisclosed Liabilities. Except (i) as and to the extent reflected
--------------------------
and adequately reserved against on the financial statements included in the SEC
Reports, as of the date thereof; (ii) for those incurred in the ordinary course
of business since March 31, 2002; and (iii) for those incurred in connection
with the Parent's acquisition of the assets of Internet Billing Company
effective April 8, 2002, the Parent has no material liabilities or obligations
whatsoever, whether accrued, absolute, contingent or otherwise. Since the date
of this Agreement, the Parent has not incurred any material liability or
obligation whatsoever, except for liabilities and obligations incurred by the
Parent in the ordinary course of its business.
6.10 Litigation. Except as disclosed in the SEC Reports, there is no
----------
action, suit, investigation or proceeding pending or, to the Parent's knowledge,
threatened against or affecting the Parent or the assets of the Parent before
any court or by or before any Governmental Authority or arbitration tribunal
that could have a Material Adverse Effect on the Parent.
6.11 Compliance with Laws. The Parent has not violated any order of any
--------------------
court, Governmental Authority, or arbitration tribunal to which it is or was
subject, nor is the Parent in violation of any Laws, including any federal or
state securities Laws, the violation of which would have a Material Adverse
Effect on the Parent or the Contemplated Transactions.
6.12 Liabilities of Merger Sub. Immediately prior to the Effective Time,
-------------------------
Merger Sub will have no Liens or liabilities.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Seller. From the date of this Agreement until
-------------------------------
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written consent of the Parent shall have been obtained, and except as
otherwise expressly contemplated herein, the Seller shall and shall cause each
Seller Subsidiary to (a) operate its business only in the ordinary course, (b)
preserve intact its business organization, properties, and assets and maintain
its rights and franchises, and (c) take no action that would (i) have a Material
Adverse Effect upon the ability of any Party to obtain any Authorizations or
consents required for the Contemplated
28
Transactions, or (ii) have a Material Adverse Effect upon the ability of any
Party to perform its covenants and agreements under this Agreement or the other
Merger Documents.
7.2 Negative Covenants of Seller. From the Execution Date until the
------------------
earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of the Parent shall have been obtained, and except as set
forth in Schedule 7.2 or except as otherwise expressly contemplated herein, the
------------
Seller covenants and agrees that it will not do or agree or commit to do, or
permit any of its Subsidiaries to do or agree or commit to do, any of the
following:
(a) amend the certificate of incorporation, bylaws or other governing
instruments of any Seller Entity; or
(b) incur any obligation for borrowed money (other than indebtedness
of a Seller Entity to another Seller Entity) in excess of an aggregate of
$50,000 (for the Seller Entities on a consolidated basis), or impose, or suffer
the imposition, on any asset or property of any Seller Entity of any Lien or
permit any such Lien to exist (other than in connection with Liens in effect as
of the date hereof that are disclosed in the Disclosure Schedules); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under any Plans), directly or indirectly, any
Shares or Equity Rights, or declare or pay any dividend or make any other
distribution in respect of any Shares or Equity Rights; or
(d) issue, sell, pledge, encumber, authorize the issuance of, enter
into any contract to issue, sell, pledge, encumber, or authorize the issuance
of, or otherwise permit to become outstanding, any additional Shares or Equity
Rights; or
(e) adjust, split, combine or reclassify any capital stock of any
Seller Entity or issue or authorize the issuance of any other securities in
respect of or in substitution for Shares or Equity Rights, or sell, lease,
mortgage or otherwise dispose of or otherwise encumber (i) any Shares or Equity
Rights (unless any such shares of stock are sold or otherwise transferred to
another Seller Entity) or (ii) any assets or properties having a book value in
excess of $50,000 in the aggregate other than in the ordinary course of business
for reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of one year
or less, purchase any securities or make any material investment, either by
purchase of stock or securities, contributions to capital, asset transfers, or
purchase of any assets, in any Person other than a wholly owned Seller
Subsidiary, or otherwise acquire direct or indirect control over any Person; or
(g) grant any increase in compensation or benefits to the employees
or officers of any Seller Entity, except as required by applicable Law; pay any
severance or termination pay or any bonus other than pursuant to written
policies or written contracts in effect
29
on the date of this Agreement and disclosed in Schedule 7.2(g); enter into or
--------------
amend any severance agreements with officers of any Seller Entity; or grant any
increase in fees or other compensation or other benefits to directors of any
Seller Entity except in accordance with past practice and as specifically
disclosed in Schedule 7.2(g); or
--------------
(h) enter into or amend any employment contract between any Seller
Entity and any Person (unless such amendment is required by applicable Law) that
the Seller Entity does not have the unconditional right to terminate without
liability, at any time on or after the Effective Time; or
(i) adopt any new Plan of any Seller Entity or terminate or withdraw
from, or make any material change in or to, any existing Plans of any Seller
Entity other than any such change that is required by applicable Law or that, in
the opinion of counsel, is necessary or advisable to maintain the tax qualified
status of any such Plan, or make any distributions from such Plans, except as
required by applicable Law, the terms of such Plans or consistent with past
practice; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in the ordinary course of
business in accordance with past practice, settle any Litigation involving any
liability of any Seller Entity for material money damages or restrictions upon
the operations of any Seller Entity; or
(l) enter into, modify, amend or terminate any Material Seller
Contract or waive, release, compromise or assign any material rights or claims.
7.3 Adverse Changes in Condition. Each Party agrees to give written notice
----------------------------
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (a) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect upon such Party, or (b) would cause or
constitute a material breach of any of its representations, warranties, or
covenants contained herein, and to use its reasonable efforts to prevent or
promptly to remedy the same.
ARTICLE 8
COVENANTS AND CERTAIN ACTIONS OF THE PARTIES
8.1 Efforts; Further Assurances; Cooperation. Subject to the other
----------------------------------------
provisions in this Agreement, the Parties hereto shall in good faith perform
their respective obligations under this Agreement and the other Merger Documents
before, at and after the Effective Time, and shall each use their commercially
reasonable efforts to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws to obtain all Authorizations and satisfy all
conditions to the obligations of the Parties under this Agreement and to cause
the Contemplated Transactions to be carried out promptly in accordance with the
terms of this Agreement and the
30
other Merger Documents and shall cooperate fully with each other and their
respective officers, directors, employees, agents, counsel, accountants and
other designees in connection with any steps required to be taken as part of
their respective obligations under this Agreement and the other Merger
Documents. Upon the execution of this Agreement and thereafter, each Party shall
take such actions and execute and deliver such documents as may be reasonably
requested by the other Parties hereto in order to consummate the Contemplated
Transactions.
8.2 Public Announcements. Except as provided in Section 8.11, or as
--------------------
otherwise required by applicable Law or applicable rules of any securities
exchange, without the prior consent of the other Parties, neither the InterCept
Parties, on the one hand, nor the Seller and the Stockholders, on the other
hand, shall make any press release or other public disclosure, or make any
statement to any customer, supplier, employee or other Person with regard to the
Contemplated Transactions.
8.3 Personal Guaranties. The InterCept Parties shall cause all personal
-------------------
guaranties described on Schedule 4.24 to be terminated effective no later than
-------------
10 business days after the Closing Date.
8.4 Stockholders' Approval. Immediately after the execution and delivery
----------------------
of this Agreement, the Stockholders shall adopt this Agreement in compliance
with applicable Law by adoption and approval by those Stockholders holding a
majority of the issued and outstanding common stock of the Seller.
8.5 Release by the Stockholders. Each Stockholder releases each Seller
---------------------------
Entity from any and all claims, rights and causes of action that the Stockholder
may have or may have had against Seller arising out of any transactions between
the Stockholder and such Seller Entity prior to, or arising with respect to any
act or omissions occurring prior to the Effective Time; provided, however, that
the foregoing release does not apply to accrued compensation and benefits and
expenses or similar obligations incurred in the ordinary course of business
(including reimbursement of medical expenses pursuant to the Plans disclosed
pursuant to this Agreement) and to any and all claims, rights and causes of
action any Stockholder may have under this Agreement or the other Merger
Documents. If the Contemplated Transactions are not consummated, the release
given in this Section 8.5 by the Stockholders shall be void ab initio.
8.6 Employee Matters.
----------------
(a) Employee Benefits. The Parent shall take all action necessary or
-----------------
appropriate to permit the employees of the Seller at the Effective Time who
shall continue to be employed by the Surviving Corporation thereafter
("Continuing Employees") either (i) to participate after the Effective Time in
the Parent's employee benefit programs and to cause the Surviving Corporation to
take all actions necessary or appropriate to adopt the Parent's employee benefit
programs effective as of the Effective Time, or (ii) to participate after the
Effective Time in the employee benefit programs formerly offered by the Seller
and to cause the Surviving Corporation to take all actions necessary or
appropriate to continue the Seller's employee benefit programs effective as of
the Effective Time; provided, however, that nothing in this Agreement shall be
deemed to require the Parent to (A) cause to be continued any employee's
employment,
31
responsibilities or officer title for any definite period, or (B) to offer the
Continuing Employees any employee benefits other than those currently offered by
the Parent to its existing employees in similar positions.
(b) Termination of Employment Agreements. All employment agreements
------------------------------------
between any Seller Entity and any Stockholder (other than to the extent relating
to confidentiality, ownership of inventions and materials and similar agreements
benefiting the Seller) shall be, without further action, terminated effective on
the Closing Date without any further consideration or other amounts being due
thereunder.
(c) Termination of Seller's 401K Plan. Effective as of the day
---------------------------------
immediately preceding the Closing Date, the governing body of the applicable
Seller Entities shall by resolution which shall be adopted prior to the Closing
Date, terminate each Plan intended to meet the requirements of section 401(k) of
the Code. Notwithstanding the above, the Seller shall not be required to
terminate or liquidate that certain annuity contract issued by Lincoln Life, in
Fort Xxxxx, Indiana, and numbered GP85730 (the "Annuity Contract") constituting
an asset of any such Plan, and shall not be required to effectuate the
liquidation and winding up of any such Plan. If the Surviving Corporation elects
to terminate or liquidate the Annuity Contract, the Parent shall, or shall cause
the Surviving Corporation to, pay the "market value adjustment" under Section
5.06 of the Annuity Contract, and the "withdrawal charge" under Section 3.18 of
the Annuity Contract (all as defined in the Annuity Contract) (collectively the
"Termination Fees") that result from the termination or liquidation of the
Annuity Contract. If the Termination Fees exceed $50,000, Xxxxxxx Xxxxx shall
pay to the Parent or the Surviving Corporation, as applicable, (i) the amount of
the Termination Fees in excess of $50,000 but not greater than $100,000 (which
excess amount shall be treated as a Loss for which the Parent Indemnified
Parties shall be entitled to indemnification from Xxxxxxx Xxxxx (and not the
other Stockholders), without regard to the limitation specified in Section
10.9(a)); and (ii) one-half of the balance, if any, of Termination Fees in
excess of $100,000 (which shall also be treated as a Loss for which the Parent
Indemnified Parties shall be entitled to indemnification from Xxxxxxx Xxxxx (and
not the other Stockholders), without regard to the limitation specified in
Section 10.9(a)).
(d) Amended W-2s. The Parent shall cause the Surviving Corporation,
------------
no later than 30 days after the Closing, to issue amended W-2s and 1099s (the
"Amended W-2s") to those certain employees and consultants (current and/or
former) as set forth and as described on Schedule 4.25(f). Notwithstanding the
above, the Parent's and the Surviving Corporation's obligations under this
subsection are conditioned upon the applicable Stockholders providing, upon the
request of the Parent, reasonable assistance to the Parent, or the Parent's
certified public accountants, in the preparation of the Amended W-2s.
8.7 Tax Matters. The Stockholders, the Surviving Corporation and the
-----------
Parent agree to furnish, or to cause to be furnished in good faith to each
other, such cooperation and assistance as is reasonably necessary to file any
future returns, to respond to audits, to negotiate settlements with Governmental
Authorities and to prosecute and defend against Tax claims.
32
8.8 Registration Rights of Parent Common Stock. The Parent agrees to enter
------------------------------------------
into a "piggy-back" registration rights agreement (the "Registration Rights
Agreement") substantially in the form of Exhibit 8.8 attached hereto with those
-----------
Stockholders who become parties to the Registration Rights Agreement with
respect to the Parent Common Stock constituting part of the Merger Consideration
for such Stockholders.
8.9 Applications; Antitrust Notification. The Parent and the Seller have
------------------------------------
mutually agreed that the consummation of the Contemplated Transaction will not
necessitate a filing as required by Section 7A of the Xxxxxxx Act, as added by
Title II of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act").
If it is ultimately determined that an HSR Act filing is required in order to
obtain the requisite Authorizations necessary to consummate the Contemplated
Transactions, the failure to file under the HSR Act in connection with the
execution of this Merger Agreement would not be a breach by either Party and
that it would not be a cause to terminate the Merger Agreement. In such event,
the Parent and the Surviving Corporation will file within seven business days
after determining that a filing is necessitated under the HSR Act (with the
Parent and the Stockholders each bearing one-half of the filing expenses
associated therewith and the Stockholders' portion being treated as a "Loss" for
indemnification purposes), the notification and report form required for the
Contemplated Transactions hereby with the United States Federal Trade Commission
and the United States Department of Justice, and any supplemental or additional
information which may reasonably be requested in connection therewith pursuant
to the HSR Act and will comply in all material respects with the requirements of
the HSR Act.
8.10 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, Seller shall execute and file the Certificate of
Merger with the Secretary of State of the State of Delaware in connection with
the Closing.
8.11 Investigation and Confidentiality.
---------------------------------
(a) Prior to the Effective Time, each Party shall keep the other
Parties advised of all material developments relevant to its business and to
consummation of the Merger and the other Contemplated Transactions and shall
permit the other Parties to make or cause to be made such investigation of the
business and properties of it and its Subsidiaries and of their respective
financial and legal conditions as the other Parties reasonably request, provided
that such investigation shall be reasonably related to the Contemplated
Transactions and shall not interfere unnecessarily with normal operations.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information and trade secrets
about the other furnished to it by the other Parties concerning its and its
Subsidiaries' businesses, operations, and financial positions and each Party
shall not (i) use such information for any purpose except in furtherance of the
Contemplated Transactions, or (ii) make any copies of, distribute, or use any
such information except as necessary to prepare for the completion of the
Merger. The obligations under this section shall: (x) with regard to trade
secrets, remain in effect as long as the information constitutes a trade secret
under applicable law; and (y) with regard to the
33
confidential information, remain in effect for a period of three years.
Notwithstanding the foregoing, any Party may disclose confidential information
to the extent disclosure is mandated by the legal requirements of such Party,
the Nasdaq Stock Market, or the SEC, as well as to professional advisors,
directors and senior executives as reasonably necessary to effectuate the terms
of this Agreement and the Merger; provided that the disclosing Party promptly
provides notice to the other Party prior to making such disclosure. If either
Party is compelled to disclose any confidential information or the other Party
hereto pursuant to court or administrative order, legal process, law or
regulation, the Party compelled to disclose such information shall promptly
notify the other Party prior to such disclosure. This Agreement may also be
disclosed to third parties if reasonably necessary to secure consents or
approvals to consummate the Contemplated Transactions. If this Agreement is
terminated prior to the Effective Time, each Party shall promptly return or
certify the destruction of all documents and copies thereof, and all work papers
containing confidential information and trade secrets received from the other
Party. The Parties will cooperate to draft a press release for the announcement
of this Agreement as soon as possible after the execution of this Agreement by
all Parties.
8.12 Tax Treatment. Each of the Parties undertakes and agrees to use its
-------------
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for or as a "reorganization" within the meaning of
Section 368(a) of the Code for federal income tax purposes.
8.13 Exclusive Dealing. Until the termination of this Agreement in
-----------------
accordance with its terms, the Seller shall not enter into any agreement,
discussion, or negotiation with, or provide information to, or solicit,
encourage, entertain or consider any inquiries or proposals from, any other
corporation, firm or other Person with respect to (a) the possible disposition
of a material portion of the business of the Seller or (b) any business
combination involving the Seller, whether by way of merger, consolidation, share
exchange or other transaction.
8.14 Closing Balance Sheet.
---------------------
(a) Within 30 days after the Closing Date, the Stockholder
Designated Official, with the cooperation and assistance of the Parent and the
Surviving Corporation, shall prepare and deliver to the Parent and the Surviving
Corporation (i) a consolidated balance sheet of the Seller as of the Closing
Date (the "Closing Balance Sheet"), prepared in accordance with GAAP; and (ii) a
separate schedule showing the Adjusted Liabilities Amount (as defined in the
following sentence) and how it was calculated (the "Adjusted Liabilities
Schedule"). The "Adjusted Liabilities Amount" shall be equal to (x) the gross
amount of liabilities shown on the Closing Balance Sheet, minus (y) the sum of
-----
(1) customer holdbacks (if and only to the extent that the aggregate amount of
cash related to those customer holdbacks is included in the line item "Cash and
cash equivalents" on the Closing Balance Sheet), and (2) interchange due to
customers (if and only to the extent that the aggregate amount of accounts
receivable related to interchange due to customers is included in the line item
"Accounts receivable, net" on the Closing Balance Sheet). The amount calculated
as provided in the foregoing clause (y) is referred to as the "Deduction."
34
(b) For a period of 15 days after delivery of the Closing Balance
Sheet to the Parent and the Surviving Corporation (the "Objection Period"), the
Parent shall have the right to review, investigate, verify and, by written
notice to the Stockholder Designated Official (an "Objection Notice") given
before the expiration of the Objection Period, dispute or object to any item or
amount included in or omitted from (i) the Closing Balance Sheet as being
incorrect or otherwise not being in accordance with GAAP; and (ii) the Adjusted
Liabilities Schedule as being incorrect. An Objection Notice shall indicate in
reasonable detail the nature and extent of the disagreement. All matters
concerning the Closing Balance Sheet and the Adjusted Liabilities Schedule
prepared by the Stockholder Designated Official as to which the Parent does not
give an Objection Notice within the Objection Period shall be deemed accepted by
the Parent and shall be final, binding and conclusive on the Parties, subject to
Section 8.14(d) below.
(c) In the event the Parent shall give an Objection Notice before
the expiration of the Objection Period, the Stockholder Designated Official and
the Parent shall attempt to reconcile their differences in good faith as
promptly as reasonably practicable. If the Stockholder Designated Official and
the Parent are unable to resolve any disputed items specified in such Objection
Notice within 15 days after the end of the Objection Period, the Stockholder
Designated Official and the Parent shall submit the items remaining in dispute
for resolution to a nationally recognized accounting firm which does not have a
relationship with any of the Parties and acceptable to both the Stockholder
Designated Official and the Parent, who shall, as soon as practicable, determine
and issue a written report (the "Accountant's Report") to the Parties upon such
remaining disputed items in accordance with the provisions hereof, and such
report shall be binding and conclusive on the Parties. The fees and
disbursements of the aforesaid nationally recognized accounting firm shall be
allocated between the Stockholders, on the one hand, and the Parent, on the
other, in the same proportion that the aggregate amount of such remaining
disputed items so submitted to such accounting firm which were unsuccessfully
disputed by each (as finally determined by such accounting firm) bears to the
total amount of such disputed items so submitted.
(d) No later than 60 days prior to the Initial Release Date (as
defined in the Escrow Agreement, the Parent shall deliver to the Stockholder
Designated Official an accounting (the "Liabilities Accounting") reflecting
those liabilities shown on the Closing Balance Sheet that were paid by the
Parent or the Surviving Corporation since the Closing Date and those liabilities
as shown on the Closing Balance Sheet that remain unpaid and outstanding on such
delivery date, including the accrued amount for such liabilities as of such
date. The Liabilities Accounting shall include any change in the amount of the
Deduction, along with a description of the cause and calculation of such change.
The Liabilities Accounting shall be prepared in accordance with GAAP (other than
any change in the Deduction for which the amount, calculation and description
are not prescribed by GAAP) and be certified by the Chief Financial Officer of
the Parent. From the Closing Date until the Initial Release Date, the Parent and
the Surviving Corporation and their respective personnel shall provide the
Stockholder Designated Official with full access to the books, records, work
papers and facilities of the Seller's Business and shall cooperate fully with
the Stockholder Designated Official, in each case to the extent reasonably
required by the Stockholder Designated Official, to facilitate the preparation,
review, investigation and verification of the Liabilities Accounting, including
any change in the amount of the Deduction, if any, specified therein.
35
(e) For a period of 15 days after delivery of the Liabilities
Accounting to the Stockholder Designated Official (the "Review Period"), the
Stockholder Designated Official shall have the right to review, investigate,
verify and, by written notice to the Parent (a "Stockholder Notice") given
before the expiration of the Review Period, dispute or object to any item or
amount included in or omitted from the Liabilities Accounting, including any
change in the amount of the Deduction, if any, specified therein. All matters
concerning the Liabilities Accounting presented by the Parent as to which the
Stockholder Designated Official does not give a Stockholder Notice within the
Review Period shall be deemed accepted by the Stockholders and shall be final,
binding and conclusive on the Parties.
(f) In the event the Stockholder Designated Official shall give a
Stockholder Notice before the expiration of the Review Period, the Parent and
the Stockholder Designated Official shall attempt to reconcile their differences
in good faith as promptly as reasonably practicable. If the Parent and the
Stockholder Designated Official are unable to resolve any disputed items
specified in such Stockholder Notice within 15 days after the end of the Review
Period, then the disputed items specified in such Stockholder Notice that remain
disputed shall be submitted to and settled by arbitration in accordance with the
then prevailing commercial arbitration rules of the American Arbitration
Association. The arbitration shall be held in Atlanta, Georgia, before a panel
of three arbitrators, one selected by each of the Parent and the Stockholder
Designated Official and the third selected by mutual agreement of the Parent and
the Stockholder Designated Official, and all of whom shall be independent and
impartial under the commercial rules of the American Arbitration Association.
The decision of the arbitrators shall be final and binding as to disputed items
submitted pursuant to this Section 8.14(f). The Liabilities Accounting,
including any change in the amount of the Deduction, if any, specified therein,
as finally accepted by the Stockholder Designated Official or as adjusted by
resolution described in this Section 8.14(f) is hereinafter called the "Final
Accounting."
(g) Using the amounts reflected in the Final Accounting, the Parent
shall calculate the "Final Liabilities Amount," which shall be equal to (x) the
total of all liabilities paid and remaining unpaid as reflected on the Final
Accounting, minus (y) the Deduction (as revised in the Final Accounting, if
-----
applicable). If the Final Liabilities Amount is less than $13,056,000, then the
Parent shall authorize the issuance of a number of shares of common stock, no
par value, of the Parent (with a deemed per share value equal to the Parent
Share Price) having a value equal to the amount by which the Final Liabilities
Amount is less than $13,056,000, and such shares common stock shall be issued to
the Stockholders in accordance with such percentages as set forth on Schedule A
----------
opposite each such Stockholder's name. Conversely, if the Final Liabilities
Amount is greater than $13,056,000, then the Parent shall be entitled to receive
from the Escrow (in accordance with the terms of the Escrow Agreement) the
number of shares of Parent Common Stock (or Escrow Cash as defined in and in
accordance with the terms of the Escrow Agreement) having a value equal to (x)
the amount by which the Final Liabilities Amount is greater than $13,056,000,
divided by (y) the average of the closing prices of the Parent Common Stock on
-------
the Nasdaq National Market for the three trading days immediately preceding the
final disbursement of the Escrow.
36
8.15 Joinder Agreement. The Stockholders, except as otherwise expressly
-----------------
provided in Section 9.2(j), shall execute joinder and consent agreements with
the InterCept Parties in the form attached hereto as Exhibit 8.15 (a "Joinder
------------
Agreement") prior to the consummation of the Merger. By virtue of such
Stockholders' execution of a Joinder Agreement, such Stockholders shall, without
any further action on the part of the Parties hereto or such Stockholders,
become (i) a party to the Merger Agreement, the Escrow Agreement and the
Registration Rights Agreement, subject to and bound by all the terms and
provisions of the Merger Agreement, the Escrow Agreement and the Registration
Rights Agreement, and (ii) a "Stockholder" for purposes of the Merger Agreement,
the Escrow Agreement and the Registration Rights Agreement.
8.16 Joint Disclosure Memorandum. As promptly as practicable after the
---------------------------
execution of this Agreement, the Parent and the Seller shall prepare the Joint
Memorandum to be delivered to the Stockholders in connection with the Merger.
Each of the Parent and the Seller shall furnish all information concerning
itself as the other may reasonably request in connection with such actions and
the preparation of the Joint Memorandum. As promptly as practicable after
completion of the Joint Memorandum, the Seller, with the assistance of the
Parent, shall deliver the Joint Memorandum to the Stockholders. If at any time
prior to the Effective Time, the Parent or the Seller discovers any information
relating to either party, or any of their respective affiliates, officers or
directors, that should be set forth in an amendment or supplement to the Joint
Memorandum, so that the document will not include any misstatement of a material
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, the Party that discovers any misleading information shall promptly
notify the other Parties hereto and an appropriate amendment or supplement
describing the information shall be promptly prepared and disseminated to the
Stockholders.
ARTICLE 9
CLOSING CONDITIONS
9.1 Conditions of Each Party's Obligations Under this Agreement. The
-----------------------------------------------------------
respective obligations of each Party under this Agreement to consummate the
Merger shall be subject to the satisfaction, or, where permissible under
applicable Law, waiver at or prior to the Closing Date of the following
conditions:
(a) Approvals and Regulatory Filings. All Authorizations required
--------------------------------
to consummate the Contemplated Transactions shall have been obtained without any
term or condition that would materially impair the value of any Seller Entity,
or that would materially impair the value of the Parent and the Parent
Subsidiaries, taken as a whole. All conditions required to be satisfied prior to
the Effective Time by the terms of any such Authorizations shall have been
satisfied, and all statutory waiting periods in respect thereof shall have
expired.
(b) Suits and Proceedings. The consummation of the Contemplated
---------------------
Transactions will not violate the provisions of any injunction, order, judgment,
decree or Law applicable or effective with respect to the InterCept Parties or
the Seller or their officers and
37
directors. No suit or proceeding shall have been instituted by any Person, or,
to the knowledge of the Parent or Seller, shall have been threatened by any
Governmental Authority, and not subsequently withdrawn, dismissed or otherwise
eliminated, which seeks (i) to prohibit or restrict consummation of the
Contemplated Transactions or to limit in any material respect the right of the
Parent to control any material aspect of the business of the Parent and the
Parent Subsidiaries or any Seller Entity after the Effective Time, or (ii) to
subject the InterCept Parties or the Seller or their respective directors or
officers to material liability on the ground that it or they have breached any
applicable Law or otherwise acted improperly in relation to the Contemplated
Transactions.
(c) Escrow Agreement. The Escrow Agent shall have executed and
----------------
delivered the Escrow Agreement relating to the Escrow Shares being placed in the
Escrow pursuant to the Escrow Agreement.
9.2 Conditions to the Obligations of the InterCept Parties Under this
-----------------------------------------------------------------
Agreement. The obligations of the InterCept Parties under this Agreement shall
---------
be further subject to the satisfaction or waiver, at or prior to the Closing
Date, of the following conditions (with the effectiveness of all agreements
listed below being expressly conditioned upon consummation of the Merger):
(a) Representations, Warranties, Covenants and Agreements; Consents.
---------------------------------------------------------------
Each of the representations and warranties of the Seller and Xxxxxxx Xxxxx
contained in this Agreement shall be true in all material respects as of the
time of the Closing with the same force and effect as though made at that time
(unless the representation or warranty expressly provides otherwise); the Seller
and Xxxxxxx Xxxxx shall have performed in all material respects the agreements,
covenants and obligations to be performed by it or him, as applicable, at or
before the Effective Time; and the Seller and Xxxxxxx Xxxxx shall have delivered
to the Parent certificates to all such effects. All Required Government Consents
and Required Contract Consents shall have been obtained or made.
(b) Opinion of Counsel. The Parent shall have received an opinion of
------------------
Cozen X'Xxxxxx, counsel to the Seller, dated the Closing Date, in form and
substance reasonably satisfactory to the Parent, covering the matters set forth
on Exhibit 9.2(b).
--------------
(c) Certificates. The Seller, the Stockholders and/or Xxxxxxx Xxxxx,
------------
as applicable, shall have furnished the Parent with (i) the certificates
referenced in Section 9.2(a) (if required), and (ii) a certificate of the
Secretary or an Assistant Secretary of the Seller as to (A) the incumbency and
signature of each officer of the Seller executing the Merger Documents to be
executed and delivered on behalf of the Seller in connection with the Closing,
and (B) the duly adopted resolutions of the requisite Stockholders and the
Seller's Board of Directors authorizing the execution, delivery and performance
of the Merger Documents and the consummation of the Contemplated Transactions.
(d) Employment Agreement. Xxx Xxxxx shall have executed and delivered
--------------------
an employment agreement with the Parent in the form attached hereto as Exhibit
-------
9.2(d)
------
38
containing standard provisions regarding confidentiality, noncompetition, and
non-solicitation (the "Stockholder Employment Agreement").
(e) Resignations. The Seller shall have delivered to the Parent, to the
------------
extent requested by the Parent, the written resignations of the directors and
officers of each Seller Entity effective as of the Effective Time.
(f) [Intentionally Omitted]
(g) [Intentionally Omitted]
(h) Material Adverse Change. No change constituting a Material Adverse
-----------------------
Effect shall have occurred with respect to any Seller Entity since the date of
this Agreement.
(i) Options and Warrants. All Equity Rights in the Seller and the
--------------------
Seller Subsidiaries shall have been exercised or terminated and cancelled.
(j) Joinder Agreements. Each of the Stockholders shall have executed
------------------
and delivered a Joinder Agreement, other than those Stockholders together
holding in the aggregate fewer than 25,000 shares of the Seller Stock as of the
Effective Time.
(k) Waiver of Appraisal Rights. Each of the Stockholders shall have
--------------------------
executed and delivered letters to the InterCept Parties waiving their statutory
appraisal rights arising under Delaware Law by virtue of the Merger, other than
those Stockholders together holding in the aggregate fewer than 25,000 shares of
the Seller Stock as of the Effective Time.
(l) Investor Questionnaire. Each of the Stockholders shall have
----------------------
executed and delivered an appropriate Investor Questionnaire (as defined in
Section 5.8), other than those Stockholders together holding in the aggregate
fewer than 25,000 shares of the Seller Stock as of the Effective Time.
(m) Joint Memorandum. The Joint Memorandum shall have been prepared in
----------------
accordance with Section 8.16 and delivered to the Stockholders at least three
(3) days before the Closing Date.
9.3 Conditions to the Obligations of the Seller and the Stockholders Under
----------------------------------------------------------------------
this Agreement. The obligations of the Seller and the Stockholders under this
--------------
Agreement shall be further subject to the satisfaction or waiver, at or prior to
the Closing Date of the following conditions (with the effectiveness of all
agreements listed below being expressly conditioned upon consummation of the
Merger):
(a) Representations, Warranties, Covenants and Agreements; Consents.
---------------------------------------------------------------
Each of the representations and warranties of the InterCept Parties contained in
this Agreement shall be true in all respects as of the time of the Closing with
the same force and effect as though made at that time (unless the representation
or warranty expressly provides otherwise); the InterCept Parties shall have
performed in all material respects the agreements, covenants and obligations to
39
be performed by it or them, as applicable, at or before the Effective Time; and
the Parent shall have delivered to the Stockholders a certificate signed by an
authorized signing officer on behalf of the Parent to all such effects (provided
that no certificates shall be required if the Execution Date and the Closing
Date are the same). All Required InterCept Consents and InterCept Contract
Consents shall have been obtained or made.
(b) Opinion of Counsel to the Parent. The Seller and the Stockholders
--------------------------------
shall have received an opinion of Nelson, Mullins, Xxxxx & Xxxxxxxxxxx, L.L.P.,
counsel to the Parent, dated the Closing Date, in form and substance reasonably
satisfactory to the Seller and the Stockholder Designated Official, covering the
matters set forth on Exhibit 9.3(b).
--------------
(c) Certificates. The InterCept Parties shall have furnished to the
------------
Seller and the Stockholders (i) the certificates referenced in Section 9.3(a)
(if required), and (ii) a certificate of the Secretary of the Parent and Merger
Sub as to (A) the incumbency and signature of each officer of the Parent and
Merger Sub executing the Merger Documents to be executed and delivered on behalf
of the Parent and Merger Sub in connection with the Closing, and (B) the duly
adopted resolutions of the Parent's and the Merger Sub's Board of Directors
authorizing the execution, delivery and performance of the Merger Documents and
the consummation of the Contemplated Transactions.
(d) Employment Agreement. The Parent shall have executed and delivered
--------------------
the Stockholder Employment Agreement.
(e) Escrow Agreement. The Parent shall have executed and delivered the
----------------
Escrow Agreement.
(f) Registration Rights Agreement. The Parent shall have executed and
-----------------------------
delivered the Registration Rights Agreement.
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification by the Seller and the Stockholders. Subject to the
--------------------------------------------------
terms of this Article 10 and the Escrow Agreement, the Seller and the
Stockholders (but after the consummation of the Merger, solely the Stockholders,
and not Seller) shall, jointly and severally (other than for the breach of
individual Stockholder representations and warranties as set forth in Article 5
for which liability shall be several, not joint and several), indemnify, defend,
save and hold harmless the Parent and Merger Sub (and the Seller, after the
consummation of the Merger) (collectively, the "Parent Indemnified Parties"),
from and against any demands, threats, claims, charges, actions, losses,
damages, deficiencies, liabilities, costs and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses, and
interest and penalties) (each a "Loss," and collectively, "Losses") actually
suffered by the Parent Indemnified Parties that arise out of or result from any
of the following (whether or not a third party initiates a proceeding or claim
giving rise to such Loss):
40
(a) any breach of any of the representations, warranties, covenants
or agreements made by the Seller or the Stockholders in this Agreement;
(b) any breach of any representation, warranty, covenant or agreement
in any other Merger Document delivered by the Seller Entities or the
Stockholders to the Parent Indemnified Parties;
(c) any expenses, charges, fees, or costs associated with any audit
of the Seller Entities for Taxes related to periods prior to the Closing Date,
and any Taxes imposed as a result of any such audit, even though any such audit
commences, or a Party does not become aware of any such audit until, after the
Closing Date; and/or
(d) any expenses, charges, fees, or costs associated or in connection
with the consummation of the Contemplated Transactions, due to any third party
with whom Seller or its agents have had discussions regarding any venture
capital, investment banking, or similar investment in Seller.
Notwithstanding the foregoing, Losses that arise from a breach of any
representation or warranty in Section 4.25 or that are associated with any audit
of the Seller Entities for Taxes related to periods prior to the Closing Date,
and any Taxes imposed as a result of any such audit, shall be net of the present
value of any tax benefits. The Parent shall provide in reasonable detail an
estimation of such benefit and the calculation thereof with the Notice of Claim
(as such term is defined below) for such Losses.
10.2 Indemnification by the Parent. Subject to the terms of this
-----------------------------
Article 10, the Parent shall indemnify, defend, save and hold harmless (A) the
Seller, (B) the Stockholders, (C) only with respect to Section 10.2(e) below,
all participants under the Seller's 401K Plan (the "Plan Participants"), and (D)
only with respect to Section 10.2(c) below, Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxxxxxxx,
Xxxxx Xxxxxxx and Xxxx Xxxxx, as trustees (the "EPX Plan Trustees") of the
Electronic Payment Exchange, Inc. 401K Retirement Plan (the "EPX 401K Plan"),
(collectively referred to in this Agreement as the "Seller Indemnified
Parties"), from and against any Loss actually suffered by the Seller, such
Stockholders, the Plan Participants or the EPX Plan Trustees that arise or
result under the following (whether or not a third party initiates a proceeding
or claim giving rise to such Loss):
(a) any breach of any of the representations, warranties, covenants
and agreements made by the InterCept Parties in this Agreement;
(b) any breach of any representation, warranty, covenant or
agreement in any other Merger Document delivered by the InterCept Parties to the
Seller or the Stockholders;
(c) with respect to the EPX Plan Trustees, any fiduciary liability
that arises solely as a result of the termination of the EPX 401K Plan as
required under Section 8.6(c) or the cancellation or surrender, after the
Closing Date, of the Annuity Contract, pursuant to the termination of the EPX
401K Plan;
41
(d) any liability that arises solely as a result of the
termination of the EPX 401K Plan as required under Section 8.6(c) or the
cancellation or surrender, after the Closing Date, of the Annuity Contract,
pursuant to the termination of the EPX 401K Plan; and /or
(e) with respect to the Plan Participants, any breach of the
covenants and agreements made by the InterCept Parties in Section 8.6(c).
10.3 Claims for Indemnification. The party entitled to indemnification
--------------------------
hereunder (the "Claimant") shall deliver to the Party from whom indemnification
is sought hereunder (the "Obligor") notice in writing (a "Notice of Claim")
within 60 days of Claimant's discovery of any Loss in respect of which the right
to indemnification is sought under this Agreement, specifying in reasonable
detail the nature of the Loss, and, if known, the amount, or, if not known, an
estimate of the amount, of the liability arising therefrom (a "Claim").
Notwithstanding the above, the failure to give Notice of Claim within such 60
day period shall not result in the waiver or loss of any right to bring such
Claim hereunder after such period unless, and only to the extent that, the other
Party is actually prejudiced by such failure. The Claimant shall provide to the
Obligor as promptly as practicable thereafter information and documentation
reasonably requested by the Obligor to support and verify the Claim asserted,
provided that, in so doing, it may condition any disclosure in the interest of
preserving privileges of importance in any foreseeable Litigation.
10.4 Defense of Claim by Third Parties. If the facts pertaining to the Loss
---------------------------------
arise out of the claim of any third party (other than a member of the Parent
Indemnified Parties or the Seller Indemnified Parties, whichever is entitled to
indemnification for such matter) and indemnification is available by virtue of
the circumstances of the Loss, the Obligor must assume the defense or the
prosecution thereof, including the employment of counsel or accountants, at its
cost and expense. If representation of both the Obligor and the Claimant by such
counsel would be inappropriate due to actual or potential differing interests
between the Obligor and the Claimant in such proceeding (such as the
availability of defenses to the Claimant), the Claimant (together with all other
indemnified parties which may be represented without conflict by one counsel
(together with any necessary local counsel)) shall have the right to retain one
separate counsel (together with any necessary local counsel), with the
reasonable fees and expenses to be paid by the Obligor. The Claimant shall have
the right to determine and adopt (or, in the case of a proposal by the Obligor,
to approve) a settlement of such matter in its reasonable discretion, except
that the Claimant need not consent to any settlement that (a) imposes any
non-monetary obligation on the Claimant or (b) the Obligor does not agree to pay
in full. The Obligor shall not be liable for any settlement of any such claim
effected without its prior written consent, which consent shall not be
unreasonably withheld or delayed. Whether or not the Obligor chooses to so
defend or prosecute such claim, all of the Parties hereto shall cooperate in the
defense or prosecution thereof and shall furnish such records, information, and
testimony, and attend such conferences, discovery proceedings, hearings, trials,
and appeals, as may be reasonably requested in connection therewith.
10.5 Third Party Claim Assistance. From time to time after the Closing,
----------------------------
the Parent, the Surviving Corporation, and the Stockholders shall provide or
cause their appropriate employees or representatives to provide the other Party
with information or data in connection with the handling and defense of any
third party claim or Litigation (including counterclaims filed by the Parties)
in respect to which a Party may be required to indemnify another party under
this
42
Agreement. The Party receiving such information or data shall reimburse the
other Party for all of its reasonable costs and expenses in providing these
services, including, without limitation, (a) all out of pocket, travel and
similar expenses incurred by its personnel in rendering these services; and (b)
all fees and expenses for services performed by third parties engaged by or at
the request of such other Party.
10.6 Settlement of Indemnification Claims. If an Obligor desires to
------------------------------------
dispute any Claim, it shall, within 30 days after receipt of the Notice of
Claim, give counternotice, setting forth the basis for disputing such Claim, to
the Claimant. If no such counternotice is given within such 30 day period, or if
the Obligor acknowledges liability for indemnification, then the amount claimed
shall be promptly satisfied as provided in Section 10.7. If, within 30 days
after the Claimant receives the counternotice, the Obligor and the Claimant
shall not have reached agreement as to the Claim in question, then the party
disputing the Claim shall satisfy any undisputed amount as specified in Section
10.7 and the disputed amount of the Claim shall be submitted to and settled by
arbitration in accordance with the then prevailing commercial arbitration rules
of the American Arbitration Association. If a Claim is brought by (a) any of the
Parent Indemnified Parties, then such arbitration shall be held in New Castle,
Delaware, or (b) any of the Seller Indemnified Parties, then such arbitration
shall be held in Atlanta, Georgia. The arbitration shall be held, in either
case, before a panel of three arbitrators, one selected by each of the Parent
and the Stockholder Designated Official and the third selected by mutual
agreement of the Parent and the Stockholder Designated Official, and all of whom
shall be independent and impartial under the commercial rules of the American
Arbitration Association. The decision of the arbitrators shall be final and
binding as to any matter submitted under this Agreement. To the extent the
decision of the arbitrators is that a Party shall be indemnified under this
Agreement, the amount shall be satisfied as provided in Section 10.7. Judgment
upon any award rendered by the arbitrators may be entered in any court of
competent jurisdiction. The "Determination Date" shall mean any of the following
dates, as applicable: (a) the date that the Parties enter into a written
agreement whereby the Obligor agrees to indemnify the Claimant; (b) the day
after the 30th day following delivery of the Notice of Claim (in accordance with
Section 10.3) if the Obligor has failed to provide a counternotice to the
Claimant within such 30 day period; or (c) the date of the arbitrators' written
decision.
10.7 Manner of Indemnification. Where the Stockholders are obligated to
-------------------------
indemnify the Parent Indemnified Parties under Section 10.1, such indemnity
obligation shall be satisfied from the Parent Common Stock or cash, if
applicable, held in the Escrow Fund in accordance with the terms of the Escrow
Agreement. Losses that are reimbursed from Parent Common Stock in Escrow shall
have a value equal to (x) the amount of the Loss, divided by (y) the average of
-------
the closing prices of the Parent Common Stock on the Nasdaq National Market for
the three trading days immediately preceding the disbursement from the Escrow.
All indemnification under this Article 10 that is due in the form of Parent
Common Stock or cash shall be released from the Escrow no later than two
business days following delivery of the appropriate certificate to the Escrow
Agent that the Determination Date has occurred, all in accordance with the
Escrow Agreement.
10.8 Restriction on Claim Amounts. The aggregate liability of each
----------------------------
Stockholder under this Agreement shall be limited to (a) the Parent Common Stock
that is placed into the Escrow
43
on behalf of such Stockholder in the manner set forth in the Escrow Agreement,
and (b) the net proceeds thereof and interest thereon (except as expressly
provided otherwise in the Escrow Agreement), if and to the extent that a portion
of the Parent Common Stock is sold as permitted under the Escrow Agreement.
10.9 Limitations. Notwithstanding anything in this Article 10 to the
-----------
contrary:
(a) Basket. No indemnification or any other claim for damages under
------
this Agreement or any other Merger Document shall be payable by the applicable
Party unless and until the aggregate total of all Losses suffered by (a) the
Parent Indemnified Parties, with respect to indemnification by the Stockholders,
or (b) the Seller Indemnified Parties with respect to indemnification by the
Parent, equal or exceed $250,000 (and in that event payable for Losses in excess
of $250,000) (the "Basket"). Claims against the Stockholders or the Parent, as
applicable, for Losses for which indemnification may be sought under Sections
8.3, 8.6(c), 8.9, 10.1(d), 10.2(a) only with respect to the Parent's and the
Surviving Corporation's payment obligations, 10.2(c), 10.2(d) or 10.2(e) shall
not be subject to the Basket.
(b) Maximum Indemnity. Except as expressly provided otherwise in the
-----------------
Escrow Agreement, in no event shall the aggregate liability of the Stockholders
under this Article 10 exceed the shares of Parent Common Stock and cash held in
Escrow (the "Maximum Indemnity").
(c) Liabilities Accounting. Notwithstanding the provisions of this
----------------------
Article 10, if the Loss for which the Stockholders have an indemnity obligation
to any of the Parent Indemnified Parties arose in connection with a liability of
the Seller that is reflected on the Closing Balance Sheet, then such Loss shall
not be paid by the Stockholders as an indemnification obligation under this
Article 10, but shall be reflected on the Liabilities Accounting and shall be
taken into account in accordance with Section 8.14(g).
10.10 Indemnification Exclusive Remedy. Except for non-monetary equitable
--------------------------------
relief, if the Closing occurs, indemnification pursuant to the provisions of
this Article 10 shall be the sole and exclusive remedy of the Parties for any
breach of any representation or warranty contained in this Agreement. Nothing in
the foregoing sentence shall preclude the InterCept Parties, on one hand, or the
Stockholders, on the other hand, from bringing an action for fraud or violation
of federal or state securities law. In that event, the limitations on liability
in Section 10.3 through Section 10.10 shall not apply to any Loss ultimately
determined to have occurred as a result of that fraud or violation of federal or
state securities law.
10.11 Other Indemnification. The Stockholders acknowledge and agree that the
---------------------
Seller shall have no obligation to indemnify the Stockholders pursuant to the
Seller's certificate of incorporation or by-laws or pursuant to any contract or
other commitment for any breaches of or other action or failure to act in
connection with this Agreement by the Seller or the Stockholders.
10.12 Survival of Representations and Warranties. The representations,
------------------------------------------
warranties and agreements of the Seller and the Stockholders set forth in this
Agreement are made as of the date of this Agreement and shall be true, correct,
complete and accurate in all material respects on and
44
as of the Closing Date and the Effective Time. The representations and
warranties of the Seller, the Stockholders and the Parent as set forth in this
Agreement shall survive the Closing Date and shall terminate 18 months after the
Closing Date and shall thereupon be of no further force and effect; provided,
however, that the representations and warranties in Section 4.25 shall survive
the Closing Date and shall terminate on April 15, 2006, and provided further
that the representations and warranties in Section 5.1 and Section 5.8 shall
survive indefinitely.
ARTICLE 11
TERMINATION
11.1 Termination. Notwithstanding any other provision of this
-----------
Agreement, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, whether before or after adoption of this Agreement
by the stockholders of Seller or Merger Sub:
(a) by mutual consent of the Parent and the Seller; or
(b) by either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other agreement
contained in this Agreement) in the event of a material breach by the other
Party of any representation, warranty, covenant or agreement contained in this
Agreement which cannot be, or has not been cured within 30 days after the giving
of written notice to the breaching Party of such breach; or
(c) by either Party in the event any Authorization required for
consummation of the Merger and the other Contemplated Transactions shall (i)
have been denied by final nonappealable action of such Governmental Authority or
if any action taken by such authority is not appealed within the time limit for
appeal, or (ii) have not been obtained by June 30, 2002.
11.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 11.1, this Agreement shall
become void and have no effect, except that (a) the provisions of this Section
11.2 and Article 12 and Section 8.11(b) shall survive any such termination and
abandonment, (b) the terms of the Promissory Note and Security Agreement between
the Parent and the Seller dated April 23, 2002, whereby the Parent loaned Five
Million Fifty Thousand Dollars ($5,050,000) to the Seller, shall survive such
termination and abandonment, and (c) a termination pursuant to Section 11.1(b)
shall not relieve the breaching Party from liability for an uncured willful
breach of a representation, warranty, covenant, or agreement giving rise to such
termination.
ARTICLE 12
MISCELLANEOUS
12.1 Extension; Waiver. The Parties may (a) extend the time for the
-----------------
performance of any of the obligations or other acts of the other Parties hereto;
(b) waive any inaccuracies in the representations and warranties contained in
this Agreement or in any document delivered pursuant thereto; or (c) subject to
the requirements of applicable law, waive compliance with any
45
of the agreements or conditions contained in this Agreement. Any agreement on
the part of any Party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed, with respect to any such extension, by
the Parent and the Stockholder Designated Official, and with respect to any such
waiver, by either the Parent or the Stockholder Designated Official, as
applicable, against whom the waiver is sought to be enforced and shall apply
only to the specific condition, representation or warranty identified by such
writing as being waived, extended or modified.
12.2 Expenses. Except as otherwise expressly stated in this Agreement,
--------
each of the InterCept Parties, on the one hand, and the Stockholders on the
other hand shall bear all costs and expenses they incur in connection with this
Agreement and the Contemplated Transactions (including legal, accounting and
investment banking fees and expenses).
12.3 Notices. All notices or other communications which are required
-------
or permitted under this Agreement shall be in writing and sufficient if
delivered personally or by reputable overnight or express courier, sent by
registered or certified mail, postage prepaid, or by facsimile (with subsequent
delivery via one of the two previous methods), as follows:
(a) If to the Parent or Merger Sub, to:
InterCept, Inc.
0000 Xxxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
Fax: (000) 000-0000
With a required copy to legal counsel:
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
First Union Plaza, Suite 1400
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
(000) 000-0000
(000) 000-0000 (facsimile)
(b) If to Seller, to:
Electronic Payment Exchange, Inc.
000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxx, Xxxxxxxx 00000
With a required copy to legal counsel:
Xxxxxx X. Xxxx, Esq.
Cozen X'Xxxxxx
46
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
(000) 000-0000
(000) 000-0000 (facsimile)
If to the Stockholder Designated Official, to:
Xx. Xxxxxxx Xxxxx
00 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
To the address shown under his signature to this Agreement.
With a required copy to legal counsel:
Xxxxxx X. Xxxx, Esq.
Cozen X'Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
(000) 000-0000
(000) 000-0000 (facsimile)
(c) If to the Stockholders, to their respective addresses as
set forth on the such Stockholder's Joinder Agreement;
or to such other addresses and facsimile numbers as shall be furnished in
writing by any party, and any such notice or communications shall be deemed to
have been given as of two business days after the date actually sent via
overnight or express courier, five days after mailed and upon facsimile
confirmation of receipt to addressee by the sender. Each of the Parent and
Stockholder Designated Official may at any time replace its or his legal counsel
for notice purposes by giving notice in accordance with this Section 12.3.
12.4 Parties in Interest. This Agreement shall be binding on and shall
-------------------
inure to the benefit of the Parties hereto and their respective heirs,
successors, representatives, and assigns. This Agreement (and the rights and
interests in this Agreement) may not be assigned by any Party without the
written consent of the other Parties, provided that the Parent may assign and
transfer to Wachovia Bank, National Association, as successor-in-interest to
First Union National Bank (the "Lender"), all of the Parent's rights with
respect to the Merger Documents, as additional security for the Parent's
obligations to the Lender. Any attempted assignment in contravention of the
foregoing shall be null and void. Nothing in this Agreement is intended to
confer, expressly or by implication, upon any other Person any rights or
remedies under or by reason of this Agreement, except that solely with respect
to the Parent's obligation pursuant to Section 8.3 to satisfy Mr. Xxxx
Xxxxxxxx'x personal guaranty on behalf of the Seller, Xx. Xxxxxxxx shall be
considered a Party to this Agreement, and solely with respect to their
47
indemnification rights under Section 10.2, the EPX Plan Trustees and the Plan
Participants shall be considered Parties to this Agreement.
12.5 Specific Performance. The Parties acknowledge that the rights of
--------------------
each Party to consummate the Contemplated Transactions are special, unique, and
of extraordinary character, and that, in the event that any Party violates or
fails or refuses to perform any covenant made by it in this Agreement, the other
Party or Parties will be without adequate remedy at Law. Each Party agrees,
therefore, that in the event that it violates, fails or refuses to perform any
covenant or agreement made by it in this Agreement, the other Party or Parties
so long as it or they are not in breach of this Agreement, may, in addition to
the remedies at Law, institute and prosecute an action in a court of competent
jurisdiction to enforce specific performance of such covenant or agreement or
seek any other equitable relief.
12.6 Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed by the Parent and the Stockholders who have become
parties to this Agreement. This Agreement may be amended by the parties hereto
at any time before or after adoption of this Agreement by the Stockholders or
Merger Sub; provided, however, that after any such approval, there shall not be
made any amendment that by law requires the further approval by such
Stockholders without the further approval of such Stockholders (or, in the case
of Seller, the Stockholder Designated Official, as the case may be, pursuant to
Section 12.14 hereof, on behalf of the Stockholders).
12.7 Entire Agreement. This Agreement, which includes the Disclosure
----------------
Schedules and the other Merger Documents, contains the entire agreement between
the Parties with respect to the Contemplated Transactions and supersedes all
prior negotiations, arrangements or understandings, written or oral, with
respect thereto.
12.8 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original, and each of which shall
constitute one and the same agreement. Any Party may deliver an executed copy of
this Agreement and of any documents contemplated by this Agreement by facsimile
transmission to another Party and such delivery shall have the same force and
effect as any other delivery of a manually signed copy of this Agreement or of
such other documents.
12.9 Assistance of Counsel. The InterCept Parties on the one hand, and
---------------------
the Seller and the Stockholders on the other hand, acknowledge that they have
had the assistance of counsel in negotiating and preparing the terms of this
Agreement; therefore, this Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing the
Agreement to be drafted.
12.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES OF AMERICA AND THE STATE OF
DELAWARE, EXCLUDING CHOICE OF LAW PRINCIPLES.
48
12.11 Arbitration. Any dispute, controversy or claim arising out of or
-----------
relating to this Agreement or any other related documents, agreements,
certificates or other writing, or the breach, termination, construction,
validity or enforceability of this Agreement or thereof, shall be settled by
binding arbitration in accordance with the commercial arbitration rules of the
American Arbitration Association in force at the time and in the manner
described in Section 10.6.
12.12 Invalidity of Any Part. If any provision or part of this
----------------------
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement and shall be construed as if such invalid,
illegal or unenforceable provision or part thereof had never been contained in
this Agreement, but only to the extent of its invalidity, illegality, or
unenforceability. Upon any such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the Parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that the Contemplated Transactions are consummated to the extent possible.
12.13 Time of the Essence; Computation of Time. Time is of the essence
----------------------------------------
of each and every provision of this Agreement. Whenever the last day for the
exercise of any right or the discharge of any duty under this Agreement shall
fall upon Saturday, Sunday or a federal, public or legal holiday, the Party
having such right or duty shall have until 5:00 p.m., local time on the next
succeeding regular business day to exercise such right or to discharge such
duty.
12.14 Appointment of Stockholder Designated Official by Stockholders.
--------------------------------------------------------------
(a) Each of the Stockholders hereby irrevocably constitutes and
appoints Xx. Xxxxxxx Xxxxx, as each such Stockholder's true and lawful
attorney-in-fact (the "Stockholder Designated Official"), to act in the name,
place and stead, in any and all capacities, of such Stockholder, with respect to
the terms and provisions of this Agreement, the Escrow Agreement, and the
Registration Rights Agreement (the "Closing Documents") as expressly provided in
the Closing Documents, and to do or refrain from doing all such further acts and
things, and to execute and deliver all such documents, as expressly provided in
the Closing Documents, as the Stockholder Designated Official shall deem
necessary or appropriate in connection with any of the actions contemplated
under the Closing Documents, and to execute and deliver on behalf of the
Stockholders, except as otherwise expressly provided in the Closing Documents,
all such documents and instruments as the Parent, Merger Sub, the Seller, or
Escrow Agent shall reasonably request to effect the purposes of the Closing
Documents.
(b) The appointment of the Stockholder Designated Official
shall be deemed coupled with an interest and shall be irrevocable. Each of the
Stockholders hereby expressly acknowledges and agrees that the Stockholder
Designated Official shall be authorized to act on behalf of such Stockholder
with respect to all matters set forth in the Closing Documents as expressly
provided therein, and that any Person, including the Escrow Agent, may
conclusively and absolutely, without inquiry of or liability to such
Stockholder, rely upon any joint action of the Stockholder Designated Official
as the act and deed of such Stockholder as expressly provided in the Closing
Documents. Each of the Stockholders hereby ratifies and confirms all
49
that said Stockholder Designated Official shall do or cause to be done by virtue
hereof. The Stockholder Designated Official shall act for the Stockholders as
expressly provided in the Closing Documents in the manner the Stockholder
Designated Official believes to be consistent with the Stockholders' obligations
and best interests hereunder and thereunder, but the Stockholder Designated
Official shall not be responsible to any Stockholder for any loss, liability,
damage or expense such Stockholder may suffer by reason of the performance by
the Stockholder Designated Official of its duties, other than loss or damage
arising from willful violation of Law or gross negligence in the performance of
the duties hereunder.
(c) Any Person, including the Escrow Agent, shall be expressly
authorized to assume the genuineness of the signature of the Stockholder
Designated Official if the signature in good faith is reasonably believed to be
genuine. Upon receipt of any writing which reasonably appears to have been
signed by the Stockholder Designated Official, any Person, including the Escrow
Agent, may act upon the same without any further duty of inquiry as to the
genuineness of the writing.
(d) In the event of the death or disability of Xx. Xxxxxxx
Xxxxx, the executor or administrator of Xx. Xxxxx'x estate shall be his
substituted and successor Attorney-in-Fact hereunder in place of Xx. Xxxxx. The
successor Attorney-in-Fact shall have all power and authority to act for the
Stockholders hereunder and under the Escrow Agreement as the original
Stockholder Designated Official he replaced had. Any successor hereunder shall
sign a written agreement to serve as the Stockholder Designated Official in
accordance with this Agreement.
(e) EACH STOCKHOLDER INTENDS FOR THE AUTHORIZATIONS AND
AGREEMENTS DESCRIBED IN THIS AGREEMENT, INCLUDING THE APPOINTMENT IN THIS
SECTION 12.14 OF THE STOCKHOLDER DESIGNATED OFFICIAL, TO REMAIN IN FULL FORCE
AND NOT BE AFFECTED IF SUCH STOCKHOLDER SUBSEQUENTLY BECOMES MENTALLY OR
PHYSICALLY DISABLED OR INCOMPETENT, IS DISSOLVED OR DECLARED BANKRUPT, AND SHALL
DIRECT THAT NO FILING OF AN INVENTORY NOR POSTING OF A SURETY BOND BY THE
STOCKHOLDER DESIGNATED OFFICIAL BE REQUIRED.
[Signatures begin on the Following Page]
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IN WITNESS WHEREOF, the Parent, the Merger Sub, the Seller and the
Stockholders have caused this Agreement to be executed by their duly authorized
officers as of the day and year first above written.
INTERCEPT, INC.
/s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
By: Xxxxx X. Xxxxxxxxx
-------------------------------
Its: SVP and CFO
-------------------------------
INTERCEPT MERGER SUB, INC.
/s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
By: Xxxxx X. Xxxxxxxxx
-------------------------------
Its: Chief Financial Officer
-------------------------------
ELECTRONIC PAYMENT
EXCHANGE, INC.
/s/ R Xxxxx
-------------------------------------
By: Xxx Xxxxx
-------------------------------
Its: CEO
-------------------------------
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