1
Exhibit 2.1
AGREEMENT OF PURCHASE AND SALE OF ASSETS
BY AND AMONG
HYPERCOM CORPORATION,
HYPERCOM FINANCIAL, INC.,
GOLDEN EAGLE LLC,
GOLDEN CORPORATION,
XXXXXXXX X. XXXXXX, XX.,
AND
XXXXXXX X. XXXXXXXXXXX
DATED AS OF DECEMBER 14, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE 1 OVERVIEW..................................................... 1
ARTICLE 2 PURCHASE AND SALE OF ASSETS.................................. 1
2.1 Purchase and Sale of Assets...................................... 2
2.2 Schedules........................................................ 3
2.3 Free and Clear of Liens.......................................... 3
2.4 Excluded Assets.................................................. 3
2.5 Assumed Liabilities.............................................. 4
2.6 Liabilities Not Being Assumed.................................... 4
2.7 Closing Payment.................................................. 5
2.8 Incentive Payment................................................ 6
2.9 Characterization of Transaction; Allocation..................... 11
2.10 Prorations...................................................... 11
2.11 Closing Costs; Transfer Taxes and Fees.......................... 11
ARTICLE 3 THE CLOSING................................................. 11
3.1 Closing......................................................... 11
3.2 Deliveries by Seller and the Members at Closing................. 12
3.3 Deliveries by Buyer and Hypercom at Closing..................... 14
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER AND THE MEMBERS.... 14
4.1 Organization and Qualification.................................. 14
4.2 Authorization................................................... 15
4.3 No Violation; Consents.......................................... 15
4.4 Capitalization.................................................. 15
4.5 Subsidiaries.................................................... 15
4.6 Financial Statements............................................ 16
4.7 Absence of Undisclosed Liabilities.............................. 16
4.8 Absence of Certain Developments................................. 17
4.9 Title to and Condition of Acquired Assets....................... 18
4.10 Leases and Receivables.......................................... 18
4.11 Litigation...................................................... 19
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4.12 Tax Matters..................................................... 19
4.13 Contracts and Commitments....................................... 21
4.14 Patents, Trademarks, Etc........................................ 23
4.15 Licenses of Software and Other Intangible Personal Property..... 23
4.16 Environmental Matters........................................... 23
4.17 Broker's Fees................................................... 24
4.18 Employees, Labor Matters, etc................................... 24
4.19 Employee Benefits............................................... 24
4.20 Insurance....................................................... 25
4.21 Transactions with Affiliated Parties............................ 26
4.22 Compliance with Laws; Permits; Certain Operations............... 26
4.23 Adequacy of Information Systems................................. 26
4.24 Investment Representations...................................... 26
4.25 Solvency; Bulk Sales............................................ 28
4.26 Restrictions on Business Activities............................. 28
4.27 Disclosure...................................................... 28
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF HYPERCOM AND BUYER........ 28
5.1 Organization and Standing....................................... 28
5.2 Authorization................................................... 29
5.3 Authorized Capital Stock........................................ 29
5.4 Restrictions.................................................... 29
5.5 Brokers and Finders............................................. 30
5.6 Litigation...................................................... 30
5.7 SEC Documents................................................... 30
ARTICLE 6 CONDUCT PENDING THE CLOSING; COVENANTS...................... 30
6.1 General......................................................... 30
6.2 Operation of the Seller......................................... 30
6.3 Business Relationships.......................................... 31
6.4 No Negotiations................................................. 31
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6.5 Public Announcements............................................ 32
6.6 Notification of Certain Matters................................. 32
6.7 Access to Information........................................... 32
6.8 Confidentiality................................................. 33
6.9 Tax Exemption; Concession....................................... 33
6.10 Consents to Assignment.......................................... 34
6.11 Employment of Seller's Employees................................ 34
6.12 HSR Act......................................................... 34
6.13 Guarantees...................................................... 34
6.14 Repurchase Obligation........................................... 34
ARTICLE 7 CONDITIONS PRECEDENT TO PERFORMANCE BY HYPERCOM............. 35
7.1 Accuracy of Representations and Warranties...................... 35
7.2 Performance of the Seller and the Members....................... 35
7.3 No Material Adverse Changes..................................... 35
7.4 Absence of Litigation........................................... 35
7.5 Deliveries under Article 3...................................... 35
7.6 Prior Approvals................................................. 35
7.7 HSR Act Notification............................................ 35
7.8 Consent of Seller's Accountants................................. 35
ARTICLE 8 CONDITIONS PRECEDENT TO PERFORMANCE BY SELLER AND
MEMBERS...................................................... 36
8.1 Accuracy of Representations and Warranties...................... 36
8.2 Performance of Hypercom......................................... 36
8.3 Absence of Litigation........................................... 36
8.4 HSR Act Notification............................................ 36
8.5 Deliveries under Article 3...................................... 36
8.6 No Material Adverse Changes..................................... 36
ARTICLE 9 REGISTRATION RIGHTS......................................... 36
9.1 "PiggyBack" Registration Rights................................. 36
9.2 Demand Right.................................................... 37
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9.3 Registration Expenses and Indemnity............................. 39
ARTICLE 10 NON-COMPETITION............................................. 40
10.1 Agreement Not to Compete........................................ 40
10.2 Acknowledgment; Relief for Violation............................ 41
10.3 Severability.................................................... 41
10.4 Extension During Breach......................................... 41
ARTICLE 11 INDEMNIFICATION AND SURVIVAL................................ 41
11.1 Survival of Representations and Warranties...................... 42
11.2 Indemnification................................................. 42
ARTICLE 12 DISPUTE RESOLUTION.......................................... 44
12.1 Mediation....................................................... 44
12.2 Arbitration..................................................... 45
ARTICLE 13 TERMINATION................................................. 45
13.1 Termination..................................................... 45
13.2 Effect of Termination........................................... 46
ARTICLE 14 MISCELLANEOUS............................................... 46
14.1 Entire Agreement................................................ 46
14.2 Special Provision Regarding Receivables......................... 46
14.3 Severability.................................................... 46
14.4 Notices and Other Communications................................ 47
14.5 Counterparts.................................................... 47
14.6 Closing Date Balance Sheet...................................... 47
14.7 Governing Law................................................... 48
14.8 Assignment...................................................... 48
14.9 Schedules and Exhibits.......................................... 48
14.10 Waiver of Provisions............................................ 48
14.11 Specific Performance............................................ 48
14.12 Costs........................................................... 48
14.13 Section and Paragraph Headings.................................. 48
14.14 Amendment....................................................... 49
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14.15 Expenses........................................................ 49
14.16 Extent of Obligation............................................ 49
14.17 Tax Matters..................................................... 49
14.18 Bulk Sales Waiver............................................... 49
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INDEX OF EXHIBITS
Exhibit A Definitions
Exhibit B Escrow Agreement
Exhibit C Xxxx of Sale and Assumption Agreement
Exhibit D Assignment of Contracts
Exhibit E Assignment of Intellectual Property Rights
Exhibit F Assignment of Lessor's Interest in Leases
Exhibit G Legal Opinion of Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
Exhibit H Employment Agreement with Xxxxxxxx X. Xxxxxx
Exhibit I Employment Agreement with Xxx Xxxxxxxxxxx
Exhibit J Employment Agreement with Xxxx Xxxxxxx
Exhibit K Employment Agreement with Xxxx Xxxxxxx
Exhibit L Employment Agreement with Xxxx Xxxxxxx
Exhibit M Employment Agreement with Xxxxxx Xxxxx
Exhibit N Letter Agreement by and among Golden Eagle LLC, Golden Eagle
Credit Corporation, the Members, Xxxx Xxxxxxx and Xxxxxx
Xxxxxxxxxx
Exhibit O Opinion of Xxxxx & Xxxxxx L.L.P.
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AGREEMENT OF SALE AND PURCHASE OF ASSETS
This Agreement of Sale and Purchase of Assets (the "Agreement") is made as
of December 14, 1999, by and among the following parties:
- HYPERCOM CORPORATION, a Delaware corporation ("Hypercom"), and its
wholly-owned subsidiary, HYPERCOM FINANCIAL, INC., an Arizona corporation
("Buyer");
- GOLDEN EAGLE, LLC, a Connecticut limited liability company ("GE" or
"Seller"); and
- GE's three members (collectively, the "Members"):
- GOLDEN CORPORATION, a Connecticut corporation ("GC");
- XXXXXXXX X. XXXXXX, XX. ("Xxxxxx");
- XXXXXXX X. XXXXXXXXXXX ("Xxxxxxxxxxx").
ARTICLE 1
OVERVIEW
1.1 GE is engaged in the business of leasing diversified types of office,
medical, telecommunications and credit card authorization equipment, and
structuring and operating vendor leasing programs (the "Business").
1.2 By this Agreement, Buyer desires to purchase from GE, and GE desires
to sell to Buyer, substantially all of the assets of GE, and to assume certain
liabilities on the terms and subject to the conditions of this Agreement.
1.3 For purposes of this Agreement, certain capitalized terms have the
meanings subscribed to them in Exhibit A. Other terms are defined in the body of
this Agreement.
NOW, THEREFORE, in consideration of the covenants and mutual agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in reliance upon the
representations and warranties contained herein, the parties do hereby agree as
follows:
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets. Upon the terms and subject to the
conditions set forth herein, and in reliance on the respective representations
and warranties of the parties, Seller agrees to sell, transfer, assign, and
deliver to Buyer, and Buyer agrees to purchase from Seller, all of Seller's
right, title, and interest in and to those assets, rights, and properties of
Seller of every kind, character, and description, whether tangible, intangible,
real, personal, or mixed and
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wherever located, relating to or used directly or indirectly in the operation of
the Business, as specified below (the "Acquired Assets"):
(a) Balance Sheet Assets. All of the assets reflected on the
Interim Balance Sheet of Seller and all assets subsequently acquired, except for
the excluded assets set forth in Section 2.4 below and those assets disposed of
or converted into cash in the ordinary course of business consistent with past
practices and this Agreement. Schedule 2.1(a) sets forth the Interim Balance
Sheet (as defined in Section 4.6 below).
(b) Furniture, Fixture and Equipment. All furniture, fixtures,
equipment, improvements, computers, supplies, tools and other personal property,
peripherals, communication products and accessories, and all supplies and
materials;
(c) Inventories. All inventory sold and financed as part of the
Business, including repair parts;
(d) Receivables under Accounts, Notes, Leases and Conditional Sales
Agreements. All accounts, notes, leases, conditional sales agreements and other
similar contracts and all rights to receivables thereunder (collectively, the
"Receivables");
(e) Real Estate and Equipment Leases. Seller's interests, claims,
and rights, including all deposits, under real estate and equipment leases, a
current list of which is set forth in Schedule 2.1(e) hereto;
(f) Contracts. All of the (i) rights of Seller under all Listed
Contracts (as defined in Section 4.13(a)) and other arrangements, to the extent
expressly assumed by Buyer ("Assumed Contracts"), a current list of which is set
forth in Schedule 2.1(f) hereto, (ii) rights of Seller to receive payment,
goods, services or other benefits pursuant to such Assumed Contracts and to
assert claims and take other rightful actions in respect of breaches, defaults,
and other violations of such Assumed Contracts, and (iii) assignable claims,
credits, rights, and benefits (including rights of recovery) of Seller under or
with respect to such Assumed Contracts;
(g) Records and Files. All Seller's books of account, records,
files, invoices, studies, reports, plans and information used in connection with
the Acquired Assets or the Business, including customer, supplier and property
lists, employee files, operating manuals, catalogs, technical information
sheets, pricing sheets, advertising, marketing and display materials, brochures
and other materials and data, and any documents and other items contained in any
files related to the Receivables (including, but not limited to, the legal files
and the contract files);
(h) Permits. To the extent transferable, all title, claims, and
rights under any Permits or authorizations issued to Seller relating to the
Business, a current list of which is set forth in Schedule 2.1(h) hereto;
(i) Intellectual Property Rights. All of the Seller's federal,
state and foreign and common law copyrights, service marks, trademarks, trade
names (which shall include the names "Golden," "Golden Eagle," "Golden Credit,"
"Golden Eagle Leasing," "Golden Leasing" and "Quest Collection Agency"), and
patents, and all registrations thereof; all technology, know-
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how, maskworks, net lists, schematics, processes, designs, inventions, trade
secrets, and similar or related rights (whether or not patentable); all computer
software programs and applications created by or on behalf of or used by the
Seller; all agreements, licenses, permits and applications related to the
foregoing to the extent transferable; all rights held by Seller to enforce
Seller's trade secret, confidentiality, non-competition and related rights,
whether arising under law or by contract, against any third party, including any
current or former employee or consultant of Seller; any and all claims, by
Seller related thereto, including claims of infringement brought against third
parties; a current list of which is set forth in Schedule 2.1(i) (collectively,
the "Intellectual Property Rights");
(j) Cash and Equivalents. All cash, cash equivalents, deposits in
transit, prepaid items, including insurance and any cash surrender value
thereof, prepaid expenses and prepaid rent, deferred charges, advance payments,
and security deposits, but excluding prepaid taxes;
(k) Subsidiaries. All equity interests in Golden Eagle SPC, LLC and
Golden Eagle SPC II, LLC, bankruptcy remote special purpose subsidiaries (the
"Subsidiaries");
(l) Other Assets. Any additional items of tangible or intangible
property used or owned by Seller and used in connection with the Business which
are not included above; and
(m) Goodwill. All goodwill associated with the Business, whether or
not carried on the Seller's balance sheet.
2.2 Schedules. (a) Within three business days of the date hereof, Seller
shall provide complete Schedules to Buyer, together with all copies of all
documents referenced herein not previously provided to Buyer. Seller shall have
ten business days from the date of delivery to review the Schedules and
underlying documents and to determine which obligations or contracts not
previously provided or disclosed Buyer will assume. If the Schedules reveal
information concerning the Business or Acquired Assets that constitutes a
Material Adverse Change, Buyer may terminate this Agreement as provided in
Section 13.1.
(b) Seller shall update all Schedules as of the Closing Date showing any
differences from the Schedules attached hereto. If the Schedules reveal (or
Hypercom or Buyer otherwise discovers or Seller provides Hypercom or Buyer with)
information concerning the Business or the Acquired Assets that constitutes a
Material Adverse Change, Buyer may terminate this Agreement as provided in
Section 13.1.
2.3 Free and Clear of Liens. The sale of the Acquired Assets shall be made
free and clear of all liabilities, obligations, and Encumbrances, except for
Permitted Liens (as defined in Section 4.9) and for those liabilities,
obligations, and Encumbrances specifically assumed by Buyer under Section 2.5
hereof.
2.4 Excluded Assets. There shall be excluded from the Acquired Assets the
following (collectively, the "Excluded Assets"):
(a) Seller's interest or investment in GECC (but not GECC's assets related
to or used in connection with the Business which shall be transferred to GE
prior to Closing);
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(b) claims or rights against third parties relating to liabilities
or obligations that are not assumed by Buyer hereunder;
(c) all contracts of insurance (whether or not relating to the
Acquired Assets or the Business) of any kind;
(d) all corporate minute books and stock transfer books and the
corporate seal of Seller;
(e) any asset related to any Employee Benefit Plan; and
(f) tax refunds to the extent they exceed any tax deficiencies.
2.5 Assumed Liabilities. Except as hereinafter provided in this Section
2.5, from and after the Closing Date (as defined herein), Buyer shall assume
only those liabilities or obligations (the "Assumed Liabilities") of Seller (i)
reflected on the Interim Balance Sheet and all liabilities or obligations of the
same nature and character as those set forth on the Interim Balance Sheet
incurred subsequent thereto in the ordinary course of business and consistent
with past practices (excluding specifically liabilities arising out of a breach
of contract, breach of warranty, tort, infringement, claim or lawsuit, unless
specifically reserved for on the Interim Balance Sheet ), or (ii) arising on or
after the Closing Date under the terms of any Assumed Contract. It is expressly
understood and agreed that Buyer shall not be liable for any of the obligations
or liabilities of Seller of any kind or nature other than those specifically
assumed by Buyer under this Section.
2.6 Liabilities Not Being Assumed. Anything contained in this Agreement to
the contrary notwithstanding, the Seller and the Members shall remain
responsible for and Buyer shall not assume any of the following liabilities or
obligations, whether fixed or contingent, known or unknown, matured or
unmatured, executory or non-executory, of Seller, which liabilities and
obligations shall at and after the Closing Date remain the exclusive
responsibility of the Seller or the Members (the "Excluded Liabilities"):
(a) All liabilities and obligations of Seller and the Members under
this Agreement or obligations of Seller and the Members with respect to or
arising out of the consummation of the transactions contemplated by this
Agreement, including any fees and expenses incurred by Seller;
(b) All liabilities and obligations of Seller and the Members for
Taxes due or becoming due by reason of (i) the conduct of the Business on or
before the Closing Date or (ii) the ownership, possession, use, operation,
purchase, acquisition, sale or disposition of the Acquired Assets on or before
the Closing Date, including, without limitation, all Taxes imposed on or
accruing as a result of the purchase and sale of the Acquired Assets hereunder,
including Taxes attributable to or resulting from recapture of depreciation or
other Tax benefit items resulting from the transactions contemplated by this
Agreement and Taxes attributable to receipt by Seller of the Purchase Price
(including the Incentive Payment) and the assumption by Buyer of the Assumed
Liabilities;
(c) To the extent not specifically reserved for on the Interim
Balance Sheet, any liabilities or obligations or expenses of the Seller related
to any claims or litigation of Seller
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or otherwise related to the Business or Acquired Assets relating to events or
occurrences arising on or prior to the Closing Date, whether or not disclosed in
Schedule 4.11;
(d) Any Encumbrance affecting the title to the Acquired Assets,
except Permitted Liens;
(e) Any liabilities, obligations or expenses relating to any
environmental matter or condition, whether or not disclosed in Schedule 4.16;
(f) As more fully set forth below, any liabilities, obligations or
expenses relating to any Employee Benefit Plan as defined in Section 4.19 or any
employment agreement or arrangement;
(g) Amounts payable by Seller to the Members exceeding $500,000;
(h) The liabilities or obligations listed on Schedule 2.4 hereto;
(i) All liabilities or obligations of or relating to Seller or the
Business that are not Assumed Liabilities; and
(j) Any and all liabilities or obligations for the past service, or
prior employment by Seller, or any person, including, without limitation, any
liability for past due compensation, severance pay, compensation, accrued
bonuses or profit sharing under any bonus or profit-sharing program of Seller,
and any liability arising out of or relating to any Employee Benefit Plan,
except for vacation pay to the extent accrued for on the Interim Balance Sheet.
The Members and Seller shall discharge or make an adequate provision for
all Excluded Liabilities and, without limitation of the foregoing, if Seller
shall liquidate, dissolve, or wind-up after the Closing Date, Seller shall pay,
post security for, or otherwise make provision for all Excluded Liabilities
prior thereto as provided under law and the Members and their spouses expressly
agree to guarantee the payment of all Excluded Liabilities.
2.7 Closing Payment.
(a) At the Closing, Hypercom shall deliver to Seller an amount
equal to the sum of Eighteen Million Five Hundred Thousand Dollars ($18,500,000)
in cash or other immediately available funds, plus Four Million Dollars
($4,000,000) in the form of Hypercom Common Stock (the "Closing Payment"). The
number of shares to be issued at closing will be determined by dividing Four
Million Dollars ($4,000,000) by the Conversion Price. The Conversion Price means
the average closing sales prices of a share of Hypercom Common Stock as reported
by The New York Stock Exchange for the twenty-day trading period ending on the
fifth trading day immediately preceding the Closing Date, subject to appropriate
adjustment for any stock split (including in the form of a stock dividend),
reverse stock split or reclassification or spin-off excluding the formation of
Cirilium Corporation.
(b) At the Closing Date, Seller will deliver to a mutually
acceptable escrow agent (the "Escrow Agent") an amount equal to the Sales and
Use Tax Calculation (as defined in Section 3.2(s)), to be held by the Escrow
Agent pursuant to an escrow agreement substantially in
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the form of Exhibit B hereto (hereinafter, the "Escrow Agreement"), to secure
the amounts that may be paid in connection with the Sales and Use Tax
Calculation and for undisclosed liabilities and breaches of representations,
warranties and covenants as more fully provided for in the Escrow Agreement.
2.8 Incentive Payment.
(a) General. As additional consideration for the Acquired Assets
and based upon the performance standards set forth below in Section 2.8(c),
Hypercom shall pay to the Seller over a three (3) year period (the "Incentive
Term") an amount up to an aggregate of Thirty-Two Million Five Hundred Thousand
Dollars ($32,500,000) ("Incentive Payment"). The Incentive Payments shall be
made within fifteen (15) days after the earlier of March 31, 2001, 2002, or
2003, as applicable, or the release of Hypercom's audited financial results for
the previous fiscal year end (each considered an "Incentive Payment Date"). The
Incentive Payments will be payable in the form of Hypercom Common Stock;
provided, however, that in the event that any Incentive Payment Date precedes
the effective date of (i) any consolidation or merger in which Hypercom is not
the continuing corporation and in which the Hypercom Common Stock outstanding
immediately prior to the merger or consolidation is exchanged for cash,
securities or other property of Hypercom or another entity, (ii) any sale,
transfer, lease or conveyance to another Person of the property of Hypercom as
an entirety or substantially as an entirety, or (iii) any statutory exchange of
securities of Hypercom with another Person (other than in connection with a
merger or acquisition), any corresponding Incentive Payment shall be payable in
cash or other immediately available funds unless the successor entity at the
time of the transaction, at its option, determines to pay the Incentive Payment
in its equivalent securities or cash; and provided, further, that in lieu of any
fractional shares issuable in respect of any Incentive Payment, the Seller shall
be entitled to receive cash for such portion of such Incentive Payment. The
number of shares to be issued will be determined by dividing each Incentive
Payment by the Conversion Price.
(b) HSR Filing. As more fully provided for in Section 6.12, Seller
and the Members on the one hand and Buyer on the other hand shall, prior to the
payment in Hypercom Common Stock of any Incentive Payment hereunder, shall each
file with the FTC and DOJ any notifications required to be filed by their
respective "ultimate parent entities" under the HSR Act, with respect to the
transactions contemplated herein.
(c) Targeted Amounts. Each Incentive Payment shall be based upon
the percentage of the target EBT (the "Target EBT") achieved by the Business for
each of (A) the twelve month period ending on December 31, 2000, (B) the twelve
month period ending on December 31, 2001, and (C) the twelve month period ending
on December 31, 2002 (each, subject to adjustment as set forth in Sections
2.8(e)(iv), (vi), and (vii) and 2.8(f)) all as set forth in the chart below. For
purposes hereof, "EBT" shall mean the Seller's income before benefit for income
taxes as computed in accordance with GAAP on an accrual basis of accounting.
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TARGET EBT
YEAR ENDING DECEMBER 31:
2000 2001 2002
---- ---- ----
December 31, 2000 $ 4,956,243 $ 4,956,243 $ 4,956,243
December 31, 2001 13,593,497 13,593,497
December 31, 2002 23,192,592
----------- ----------- -----------
CUMULATIVE EBT TARGET $ 4,956,243 $18,549,740 $41,742,332
PERCENTAGE ACHIEVED: INCENTIVE PAYMENT
2000 2001 2002
---- ---- ----
<60% 0 0 0
>60 - < 70% 1,805,555 1,805,555 1,805,555
>70 - < 80% 3,611,110 3,611,110 3,611,110
>80 - < 90% 5,416,665 5,416,665 5,416,665
>90 - < 100% 7,222,220 7,222,220 7,222,220
>100 - < 110% 9,027,775 9,027,775 9,027,775
110% 10,833,333 10,833,333 10,833,333
EXPLANATORY NOTE: Incentive Payments are measured cumulatively and accordingly
may be made up. Actual cumulative percentage is determined by dividing
cumulative target EBT by actual cumulative results (EBT). Then, add the
cumulative Incentive Payments for the years considered and deduct any Incentive
Payments previously earned. Amounts in between each "percentage achieved" shall
be pro rated.
The following sets forth a hypothetical situation as an example:
2000 2001 2002
---- ---- ----
December 31, 2000 $3,130,000 $3,130,000 $3,130,000
December 31, 2001 12,163,902 12,163,902
December 31, 2002 32,550,941
------------ ------------ ------------
Cumulative results (EBT) $3,130,000 $15,293,902 $47,844,843
Cumulative percentage achieved 63% 82.4% 110%
Cumulative incentive payout 2,347,220 9,479,167 32,500,000
Less previous payments (2,347,220) (9,479,167)
------------ ------------ ------------
Incentive Payment due $2,347,220 $7,131,947 $23,020,833
(d) Accounting Matters.
(i) In order to facilitate the calculation of the Incentive Payments
hereunder, the Business shall be accounted for as a separate division. All costs
and revenues
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which are reasonably related to the Business shall be included for purpose of
calculating the EBT of the Business.
(ii) The Business will be accounted for in accordance with
accounting principles consistently applied by the Business prior to the
acquisition hereunder, to the extent pursuant to GAAP. The Board of Directors of
Buyer has the authority to make any changes in the Business' accounting
practices only to conform such practices to GAAP.
(iii) EBT of the Business will be computed as if the acquisition of
the Business had, for accounting purposes, been accounted for as a pooling of
interests and no charge for the amortization of goodwill shall be made against
pre-tax income.
(iv) On each Incentive Payment Date, the Buyer shall deliver to the
Seller a statement (each an "EBT Calculation Statement") setting forth in
reasonable detail its calculation of (i) EBT for the Business for the preceding
fiscal year and (ii) Target EBT for such fiscal year, as adjusted, if necessary,
pursuant to Sections 2.8(e)(iv), (vi), and (vii) or 2.8(f) (as so adjusted,
"Adjusted Target EBT").
(e) Operation of Business.
(i) It is the intent of the parties that the Business shall operate
in a commercially reasonable manner with a view to maximizing its short-term and
long-term profitability. Buyer and Seller both acknowledge that the
profitability of the Business is determined by a multitude of factors, many of
which are beyond the control of Buyer or Seller, and there is no assurance to
either Buyer or Seller that any certain profit levels or appreciation in value
of the Business will be achieved. Further, recognizing that there may be issues
as to which short-term objectives and long-term objectives of the Business are
inconsistent, Buyer and Seller have agreed upon the provisions of this Section
2.8 as Seller's exclusive remedy in the event of a difference in opinion between
Buyer and Seller regarding the management of the Business.
(ii) The Board shall have ultimate authority on all matters
relating to the Business. In the absence of an action by the Board, the
authority of the Board may be exercised by the written direction of a senior
executive of Buyer designated in writing for such purpose ("Designated
Officer").
(iii) There will be no general allocation of overhead of Buyer or
its Affiliates with respect to the Business; however, the Business must pay for
services or benefits provided by Buyer or its Affiliates. Services rendered by
the Business to Buyer or its Affiliates and services or benefits rendered by
Buyer or its Affiliates to the Business will be charged at the rates allocated
or charged to other divisions or subsidiaries of Hypercom or its Affiliates and,
if there are no such allocations or charges, on an arm's-length basis.
(iv) Prior to the end of each fiscal year during the Incentive
Term, Buyer and Seller shall mutually agree on a budget for the Business, which
shall include an estimate of need for capital resources or financing over the
next fiscal year. Buyer will use its reasonable commercial efforts to provide
capital resources or financing to the Business (the "Available Capital") not
materially less, for any fiscal year during the Incentive Term, than the amount
contemplated for such fiscal year in the mutually agreed benchmark projections
(the
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"Agreed Capital"). If the Available Capital for any fiscal year during the
Incentive Term is materially less than the Agreed Capital for such fiscal year,
then the Target EBT for such fiscal year shall be reduced downward by an amount
that appropriately reflects any corresponding reduced earnings capacity for the
Business. Funds provided to the Business for operations, including for capital
expenditures, will be loaned to the Business at the average weighted cost of
borrowings by Hypercom.
(v) The Board or Designated Officer may authorize the combination
or integration of other businesses into the Business, the entry into a new
business (by acquisition or otherwise) by the Business, or the acquisition of
additional lease portfolios (hereinafter referred to as a "Buyer Integration");
provided however, (i) that the Buyer provide to Seller within 10 days after a
decision to proceed with such Buyer Integration has been made by the Buyer
(either through Board Approval or through the Designated Officer) written notice
of such Buyer Integration (the "Buyer Integration Notice"), such notice to
include pertinent information pertaining to the Buyer Integration, and (ii) in
the event Seller opposes any such Buyer Integration and advises the Board or
Designated Officer in writing within fifteen (15) days after the receipt of such
Buyer Integration Notice that it elects to have the activities of such Buyer
Integration excluded from the determination of Incentive Payments, then the
Buyer shall maintain separate financial records for such Buyer Integration so
that the revenues, expenses, capital expenditure requirements and other
financial attributes with respect to such Buyer Integration shall not be
included in the calculation of EBT for the Business and the corresponding
Incentive Payment.
(vi) The Board or the Designated Officer may authorize the sale or
termination of any product line or service offered by the Business. If such
product line or service represents, individually or in the aggregate with other
discontinued product lines or services, more than five percent (5%) of the net
sales of the Business in any given year or 10% in the aggregate during the
Incentive Term, Seller shall have the right to an equitable adjustment to the
Target EBT to compensate Seller for any demonstrable adverse effect on its
ability to achieve the Incentive Payment payable hereunder. If such product line
or service represents five percent (5%) or less of the net sales in any given
year or 10% in the aggregate during the Incentive Term, such sale or termination
shall not afford Seller the right to an equitable adjustment.
(vii) The Board or Designated Officer may authorize the cessation
of business or sell or otherwise dispose of all or substantially all of the
assets of the Business or Buyer may sell or otherwise dispose of all or
substantially all of the stock in the Business. In the event Buyer elects to
discontinue the Business or sell all or substantially all of its stock in the
Business or all or substantially all of the assets of the Business to a party
other than an Affiliate of Buyer or a company which has substantially the same
shareholders as Buyer, Seller shall have the right to an equitable adjustment to
the Target EBT to compensate Seller for any demonstrable adverse effect on its
ability to achieve the Incentive Payment payable hereunder; provided, however,
Seller will not have the right to an equitable adjustment if such other party
assumes Buyer's obligation to make the Incentive Payment and agrees to comply
with the relevant terms of this Agreement pertaining thereto.
(viii) Seller and the Members acknowledge that Buyer intends to
discontinue off-balance sheet securitization transactions or sales of
portfolios.
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(f) Termination Without Cause or for Good Reason. In the event that
during the Incentive Term the Buyer terminates the employment of either
Friedlander, Lawler, or Xxxx Xxxxxxx without "Cause" or such person resigns for
"Good Reason" as defined in their Employment Agreements, Seller shall have a
right to an equitable adjustment to the Target EBT to compensate Seller for any
demonstrable adverse effect on its potential ability to achieve the Incentive
Payment payable hereunder.
(g) Disputes. If Seller disputes the amount of any Incentive
Payment provided for herein, Seller shall notify Hypercom within thirty (30)
days after the delivery of such payment and EBT Calculation Statement. The basis
of such dispute must be the failure to calculate such Incentive Payment or its
corresponding Adjusted Target EBT, if any, in accordance with this Agreement. If
Seller gives notice of a dispute within such thirty (30) day period, promptly
thereafter Hypercom and its accountants shall meet and consult with Seller
and/or its accountants to discuss matters relating to the calculation. Seller
shall have the right to conduct an audit of the financial statements of the
Business. Seller shall pay for the expense of any such audit performed by it
unless, if the issue is arbitrated as set forth below, the Accounting Arbitrator
(as defined below) determines that the Incentive Payment in dispute is less by
more than ten percent (10%) from the actual Incentive Payment amount, in which
case Hypercom shall pay the full cost of Seller's review of the financial
statements of the Business in dispute. For purposes of conducting its audit of
such financial statements, Hypercom and its accountants shall provide Seller
with all supporting work papers and other materials as Seller's representative
shall reasonably request.
If Hypercom and Seller are unable to resolve any dispute regarding the
calculation of an Incentive Payment due Seller with respect thereto within
thirty (30) calendar days after receipt of notice of dispute by Buyer, then an
accounting firm of national repute (other than the firm currently serving as
auditors for Seller or the Members) as may be mutually agreed upon by Hypercom
and Seller (the "Accounting Arbitrator") shall be employed as arbitrator
hereunder to settle such dispute as soon as practicable. The parties shall give
the Accounting Arbitrator access to all documents, facilities and personnel
within their respective control reasonably necessary to perform its function as
arbitrator. The parties agree that the Accounting Arbitrator shall decide only
matters involving differences as to accounting practices and principles and
other matters relating to the calculation of the Incentive Payment due Seller
pursuant to this Agreement (including the allocation of any costs and revenues
to the Business rather than to an opposed Buyer Integration pursuant to Section
2.8(e)(v), or vice versa), and not to any non-accounting matters involving the
construction or interpretation of this Agreement. Any arbitration pursuant to
this Section 2.8(g) shall be conducted in Chicago, Illinois, in accordance with
the then existing Commercial Arbitration Rules of the American Arbitration
Association. The Accounting Arbitrator determination with respect to any dispute
by the Members hereunder shall be final and binding on all parties, and judgment
on the arbitration award may be enforced in any court having jurisdiction over
the subject matter of the controversy. Each party shall share the fees and
expenses of the Accounting Arbitrator for such services.
(h) Offsets. Any Incentive Payment due to Seller shall be subject to Hypercom's
or Buyer's right of offset under Section 11.2(f).
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(i) Survivability. The provisions of this Section 2.8 shall apply
only to the conduct of the Business until December 31, 2002.
(j) Imputation of Interest. To the extent that any portion of the
Incentive Payment is treated as imputed interest for income tax purposes, the
amount of such imputed interest shall be determined based upon the short term
applicable federal rate, using annual compounding, for the month in which the
Closing Date occurs.
2.9 Characterization of Transaction; Allocation. Buyer, Seller, and
Members acknowledge and agree that the purchase and sale contemplated by this
Agreement constitutes an "applicable asset acquisition" within the meaning of
Section 1060 of the Code (and the corresponding provisions of state and local
law). Buyer, Seller, and Members further acknowledge and agree that the Purchase
Price payable by Buyer (and Buyer's assumption of the Assumed Liabilities and
all other capitalizable costs) shall be allocated among the Acquired Assets in
accordance with the allocation set forth in Schedule 2.9 and Buyer and Seller
shall report the purchase and sale of the Acquired Assets in accordance with
such allocation for all Tax purposes, including the filing of Internal Revenue
Service Form 8594 as required by law. The Buyer and Seller further agree to file
such amended Internal Revenue Service Forms 8594 as may be necessary as a result
of any Incentive Payments which may be made or other adjustments to the Purchase
Price which may occur after the Closing Date.
2.10 Prorations. On the Closing Date, or as promptly as practicable
following the Closing Date, but in no event later than sixty (60) calendar days
thereafter, the personal property Taxes, real property Taxes, water, gas,
electricity and other utilities, local business or other license fees or Taxes,
merchants' association dues and other similar periodic charges payable with
respect to the Acquired Assets or the Business shall be prorated between Buyer
and Seller effective as of the Closing Date.
2.11 Closing Costs; Transfer Taxes and Fees. Seller shall be responsible
for paying (i) any and all Taxes associated with the transfer of the Acquired
Assets to Buyer, including, without limitation, any and all documentary,
transfer, sales, use or other Taxes imposed by reason of the transfers of
Acquired Assets contemplated by this Agreement, (ii) all costs and fees
associated with the transfer of any motor vehicles listed on Schedules 2.1,
including, without limitation, all sales and transfer Taxes, (iii) all costs of
obtaining the transfer of existing Permits which may be lawfully transferred,
(iv) all fees and costs of recording or filing all applicable conveyancing
instruments described in Section 3.2, and (v) all fees and costs of recording or
filing all UCC termination statements and other releases of Encumbrances or of
filing new UCC or other security statements in connection with the transfer of
security interests on the Acquired Assets in favor of Buyer.
ARTICLE 3
THE CLOSING
3.1 Closing. The Closing of the transactions contemplated herein (the
"Closing") shall be held on January 7, 2000, at the offices of Xxxxx & Xxxxxx,
L.L.P., Phoenix, Arizona, or at such other time and place as the parties shall
mutually agree (the "Closing Date").
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3.2 Deliveries by Seller and the Members at Closing. In addition to any
other documents required to be delivered at Closing, Seller and the Members
shall deliver or cause to be delivered each of the following, in form and
substance satisfactory to Buyer:
(a) An executed Xxxx of Sale and Assumption Agreement in the form
attached hereto as Exhibit C and other instruments of transfer, with full
warranties of title, dated as of the Closing Date, conveying to Buyer all of
Seller's right, title, and interest in and to the Acquired Assets, all in form
and substance satisfactory to Buyer;
(b) An executed Assignment of Contracts (with consents if required)
in the form attached hereto as Exhibit D, with respect to the Assumed Contracts
set forth in Schedule 2.1;
(c) Executed assignments of all assignable Permits issued to Seller
by any governmental entity or vendor;
(d) All books, records and other data relating to the Business
(other than those reflected in Section 2.1(g);
(e) Properly executed and acknowledged titles and other instruments
of transfer to all motor vehicles owned by Seller and used in connection with
the Business;
(f) Assignments of Intellectual Property Rights, each in the form
attached hereto as Exhibit E, in recordable form to the extent necessary to
assign such rights;
(g) Instruments of assignment and transfer of all other property of
Seller used in connection with the Business of every kind and description and
wherever situated;
(h) All documents necessary to release the Acquired Assets from all
Encumbrances, except for Permitted Liens;
(i) Such certificates of Seller's officers and others to evidence
compliance with the conditions set forth in this Agreement as may be reasonably
requested by Buyer;
(j) Certified resolutions adopted by Seller's governing board and
the Members approving this Agreement and the transactions contemplated hereby;
(k) All agreements or consents of any parties, including to the
assumption of debt on Seller's balance sheet by its lenders, necessary to the
consummation of the transactions contemplated by this Agreement;
(l) The legal opinion of Reboul, MacMurray, Xxxxxx, Xxxxxxx &
Kristol, counsel to the Seller and the Members, in the form attached hereto as
Exhibit G;
(m) The executed Employment Agreements with Friedlander, Lawler,
Xxxx Xxxxxxx ("Xxxxxxx"), Xxxx Xxxxxxx, Xxxx Xxxxxxx and Xxxxxx Xxxxx in the
forms attached hereto as Exhibits H, I, J, K, L, and M (the "Employment
Agreements");
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(n) A UCC-1 Financing Statement (see explanation in Section 14.2);
(o) Audited financial statements for the nine months ended
September 30, 1999 and 1998, prepared in accordance with GAAP and in a manner
consistent with the accounting principles adopted in the preparation of the
Financial Statements;
(p) Evidence of the prior assignment to Seller of all assets,
properties, licenses, permits or other authorizations relating to the Business
from GC, GECC, GLS and Xxxxxxx, as applicable;
(q) Certificates or assignments of GC, GECC, GLS and Xxxxxxx to (i)
evidence that each do not directly or indirectly own any assets, properties,
licenses, permits or other authorizations relating to or used in connection with
the Business and (ii) as to Xxxxxxx, that he assigns all direct and indirect
interest in the names "Golden Leasing" and "Golden Eagle Leasing" that he may
have;
(r) Evidence that the names of GE, GC, GECC, and GLS have been
changed;
(s) PricewaterhouseCooper's final calculation of the amount of
potential Taxes that may be due, but have not been paid or accrued, in
applicable state, local and other jurisdictions arising out of the lease of
property in those jurisdictions (the "Sales and Use Tax Calculation");
(t) Letter agreement by and among Golden Eagle LLC, Golden Eagle
Credit Corporation, the Members, Xxxxxxx and Xxxxxx Xxxxxxxxxx in substantially
the form attached hereto as Exhibit N;
(u) Lease assignments with respect to each parcel of real estate or
any item of personal property which is leased by Seller and which is to be
assumed by Buyer hereunder, properly executed and acknowledged by Seller, and
accompanied by all consents of lessors required by this Agreement and the leases
being assigned;
(v) Executed agreements of the spouses of Xxxxxxxxxxx and Xxxxxx,
whereby such spouses agree with and consent to be bound by the terms of this
Agreement and guarantee the payment of all Excluded Liabilities per Section 2.6
above; and
(w) Such other instruments as shall be requested by Buyer to vest
in Buyer title in and to the Acquired Assets in accordance with the provisions
hereof, all of which instruments including those specifically listed above shall
be in form acceptable to Buyer and its counsel.
The Members and Seller, at any time before or after the Closing, will
execute, acknowledge, and deliver any further deeds, assignments, conveyances,
and other assurances, documents, and instruments of transfer, reasonably
requested by Buyer, and will take any other action consistent with the terms of
this Agreement that may reasonably be requested by Buyer, for the purpose of
assigning, transferring, granting, conveying, and confirming to Buyer, or
reducing to possession, the Business, and all the Acquired Assets. If requested
by Buyer, Seller further agrees to prosecute or otherwise enforce in its own
name for the benefit of Buyer, any
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claims, rights, or benefits that are transferred to Buyer by this Agreement and
that require prosecution or enforcement in Seller's name. Any prosecution or
enforcement of claims, rights, or benefits under this Section shall be at
Buyer's expense, unless the prosecution or enforcement is made necessary by a
breach of this Agreement by Seller.
3.3 Deliveries by Buyer and Hypercom at Closing. At the Closing, Buyer or
Hypercom shall deliver or cause to be delivered each of the following, in form
and substance satisfactory to the Seller:
(a) Delivery of the Closing Payment to the Seller;
(b) Certified resolutions of the Board of Directors of Hypercom and
Buyer, authorizing the execution and delivery of this Agreement and the
transactions contemplated hereby;
(c) An executed Xxxx of Sale and Assumption Agreement in the form
attached hereto as Exhibit B;
(d) The executed Employment Agreements;
(e) The legal opinion of Xxxxx & Xxxxxx L.L.P., counsel to Buyer,
in substantially the form attached hereto as Exhibit O hereto; and
(f) Written consents and permits of any and all persons, including
without limitation government agencies, authorities and other third parties,
required to be obtained by Buyer prior to the consummation of the transactions
contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE MEMBERS
As of the date hereof and as of the Closing Date, the Seller and each
Member jointly and severally represent and warrant to Buyer and Hypercom each of
the following:
4.1 Organization and Qualification. The Seller is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Connecticut with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all of its
obligations. Copies of the Articles of Organization and the Operating Agreement
of the Seller, and all amendments thereto, heretofore delivered to Hypercom are
accurate and complete as of the date hereof and are currently in effect without
further amendment thereto, except as set forth therein. The Seller is duly
qualified or licensed to do business as a foreign limited liability company and
is in good standing in the states or other jurisdictions listed in Schedule 4.1,
which constitutes states or jurisdictions in which ownership of property, the
employment of personnel or the conduct of its business requires such
qualification, except where failure to be so licensed or qualified will not have
a Material Adverse Effect.
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4.2 Authorization. Each of Seller and the Members has full power and
authority (corporate, fiduciary or other) to enter into this Agreement and to
carry out the transactions contemplated hereby, and the board of directors,
management committee, trustees, or any governing body or person of the Seller
and the Members has taken all action required by law, its charter or other
governing documents, as the case may be, or otherwise, to be taken by it to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement is the
legal, valid and binding obligation of each Seller and the Members, enforceable
against each of them in accordance with its respective terms, except as may be
limited by or subject to any bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and subject to general principles of equity. A copy
of the resolutions of Seller's governing board and the Members authorizing this
Agreement and the related transactions is attached as Schedule 4.2.
4.3 No Violation; Consents. Except as set forth on Schedule 4.3, neither
the execution, delivery and performance of this Agreement nor the consummation
of the transactions contemplated hereby will (i) violate any provision of the
Articles of Organization or the Operating Agreement of the Seller, the Articles
of Incorporation or Bylaws of GC or governing documents of any Member, (ii)
violate, result in a breach of, conflict with, or constitute a default under (or
an event which, with the giving of notice or lapse of time or both, would
constitute a default under) or require any consent under, or give to others any
right of termination, amendment, acceleration, suspension, revocation or
cancellation with respect to, any Contract to which the Seller and the Members
are a party or by which any of the Acquired Assets are bound, (iii) result in
the creation or imposition of any Encumbrance upon any of the Acquired Assets
under any agreement, commitment or other Contract to which the Seller and the
Members are a party or by which the Seller or the Members are bound, or to which
the property of the Seller or any Member is subject, or (iv) violate, conflict
with or result in the breach of any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental authority to which the
Seller or the Members, or any of the Acquired Assets are subject, in each case,
which violation, conflict, breach, default or Encumbrance would have a Material
Adverse Effect. Except as set forth in Schedule 4.3 and provided for in Section
6.12, no action, consent, approval or authorization by or filing with any person
or entity, including, without limitation, any governmental authority, is
required in connection with the execution, delivery and performance by the
Seller and the Members of this Agreement, or the consummation by the Seller and
the Members of the transactions contemplated by each of them herein.
4.4 Capitalization. All of the outstanding limited liability company
interests of Seller are owned free and clear by the Members and there are no
other interests in Seller outstanding. There are no outstanding subscriptions,
options, rights, or other agreements or commitments obligating Seller or the
Members to issue or transfer any limited liability company interests in Seller.
4.5 Subsidiaries.
4.5.1 List of Subsidiaries. Schedule 4.5 sets forth a complete and
accurate list of all Subsidiaries. Except as set forth on Schedule 4.5, all of
the Subsidiaries are, directly or indirectly, wholly-owned by GE, free and clear
of all Encumbrances. Schedule 4.5 also sets
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forth the jurisdiction of incorporation of each of the Subsidiaries, each
jurisdiction in which each such Subsidiary is qualified or licensed to do
business, the number of shares of capital stock of such Subsidiary outstanding,
and the ownership thereof.
4.5.2 Capital Stock. Except as set forth on Schedule 4.5, there are
no outstanding (i) securities convertible into or exchangeable or exercisable
for any Subsidiary's capital stock; (ii) options, warrants, calls or other
rights with respect to the issued capital stock of any Subsidiary; (iii)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance, sale, transfer, or assignment of any capital stock,
convertible or exchangeable securities or options, warrants or rights of any
Subsidiary; or (iv) voting trust agreements or other contracts, agreements,
arrangements, commitments, plans, proxies or understanding restricting or
otherwise relating to conveyance, voting or dividend rights with respect to such
capital stock.
4.5.3 Duly Organized. Each Subsidiary has been duly organized as a
limited liability company and is validly existing and in good standing under the
laws of the state Connecticut and is duly licensed or qualified to do business
and in good standing in each state in which, the ownership of property, the
employment of personnel or the character of its business requires it to do so,
except where the failure to be so qualified or licensed would not have a
Material Adverse Effect on GE.
4.6 Financial Statements. Attached as Schedule 4.6 hereto are (i) the
audited financial statements of the Seller as at and for each of the twelve
month periods ended December 31, 1998, 1997, and 1996, together with, in each
case, a report thereon by Seller's independent certified public accountants, and
(ii) the unaudited balance sheet of Seller as of September 30, 1999 (the
"Interim Balance Sheet"), including in each case a balance sheet, a statement of
income and retained earnings, and a statement of cash flows (the statements
referenced in (i) and (ii) above are collectively referred to as the "Financial
Statements"). The Financial Statements are complete and correct in all material
respects, are in accordance with the books and records of Seller (which are also
complete and correct in all material respects), fairly present the assets,
liabilities, and results of operations and financial condition of the Seller,
and have been prepared in accordance with GAAP. The Financial Statements have
also been prepared in accordance with applicable regulations of the SEC,
including those set forth in Regulation S-X and the interpretations of the SEC
thereunder.
4.7 Absence of Undisclosed Liabilities. The Seller has no obligations or
liabilities (whether accrued, absolute, contingent, liquidated, unliquidated or
otherwise, whether due or to become due and regardless of when asserted), except
(a) obligations under contracts or commitments described in Schedule 4.13, or
under contracts and commitments that are not required to be disclosed thereunder
(but excluding any liabilities for breaches thereof which shall be set forth in
Schedule 4.7); (b) liabilities reflected on the Interim Balance Sheet; and (c)
liabilities that have arisen in the ordinary course of business after the date
of the Interim Balance Sheet (none of which is an uninsured liability for breach
of contract, breach of warranty, tort, infringement, claim or lawsuit).
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4.8 Absence of Certain Developments. Since the date of the Interim Balance
Sheet, except (i) as otherwise set forth in Schedule 4.8 hereto or (ii) as
otherwise expressly contemplated by this Agreement, the Seller has not with
respect to the Business:
(a) except to comport to GAAP (as requested by Buyer) changed its
accounting methods or practices (including any change in depreciation or
amortization policies or rates) or revalued any of its assets;
(b) borrowed any amount under existing lines of credit or otherwise
or incurred or become subject to any indebtedness, except as reasonably
necessary for the ordinary operation of the Business and in a manner and in
amounts that are in keeping with the historical practice of the Seller;
(c) sold, assigned, transferred, mortgaged, pledged or subjected to
any Encumbrance, any material tangible assets, properties, or rights of the
Seller, except as incurred in the ordinary course of business consistent with
the past practices of the Seller;
(d) sold, assigned or transferred (including without limitation
transfers to any employees, Members or Affiliates of the Seller) any material
patents, trademarks, trade names, copyrights, trade secrets or other material
intangible assets, or disclosed any material proprietary or confidential
information to any person other than Buyer, except in the ordinary course of
business;
(e) materially changed the pricing set or charged by the Seller to
its customers or lessees or agreed to any such material change;
(f) released any material Encumbrance related to any Receivable or
canceled, waived or compromised any material right, claim or debt;
(g) suffered any material theft, damage, destruction or loss of or
to any property or properties owned or used by it, whether or not covered by
insurance or suffered any Material Adverse Change;
(h) increased the annualized level of compensation of or granted any
bonuses, benefits or other forms of direct or indirect compensation to any
employee, officer, director or consultant, except in the ordinary course of
business, or terminated, amended or otherwise modified any plans for the benefit
of employees, except in the ordinary course of business;
(i) made any material loans or advances to, or guarantees for the
benefit of, any Persons, except in the ordinary course of business consistent
with past practice;
(j) engaged or agreed to engage in any extraordinary transactions or
distributions, made any distribution of assets to any of the Members by way of
dividend, return on capital, repurchase of stock or otherwise, or taken any
other action or entered into any other transaction other than in the ordinary
course of business and in accordance with past custom and practice;
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(k) entered into any transaction with any Affiliate, including the
Members, other than in the ordinary course of business;
(l) hired any management-level employee; or
(m) made any agreements to do any of the things described in the
preceding clauses (a) through (l).
4.9 Title to and Condition of Acquired Assets. Seller has and will
transfer to Buyer good and marketable fee simple title to the Acquired Assets
and, upon the consummation of the transactions contemplated hereby, Buyer will
acquire good and marketable title to all of the Acquired Assets, free and clear
of any Encumbrances, except for liens for taxes not yet due or being contested
in good faith, other similar statutory liens for amounts not yet due, liens
securing liabilities to be assumed by Buyer pursuant to Section 2.5 and any
Encumbrance listed on Schedule 4.9 and accepted in writing by Buyer
(collectively, the "Permitted Liens"). The tangible personal property, fixtures,
machinery and equipment comprising the Acquired Assets is in the aggregate in
all material respects adequate for the operation of the Business, in good repair
and operating condition (subject to normal wear and tear), and there are no
facts or conditions affecting the Acquired Assets which could, individually or
in the aggregate, interfere in any material respect with the use, occupancy, or
operation thereof as currently used, occupied, or operated, or their adequacy
for such use.
4.10 Leases and Receivables.
(a) Lease Receivables. In all material respects, the Receivables
that are reflected on the Interim Balance Sheet are and all the Receivables
created prior to Closing will be (i) valid obligations arising from sales or
leases actually made or services actually performed in the ordinary course of
business; (ii) unless paid prior to the Closing Date, collected in the ordinary
course of business net of the reserves shown on the Interim Balance Sheet or, as
to Receivables created after the Interim Balance Sheet, as set forth in the
Seller's books and records consistent with past practices (which reserves are
adequate and recorded consistent with past practice); (iii) to the Knowledge of
Seller or the Members, not subject to any claims, offsets, defenses, disputes or
claims of rescission or cancellation of any type; (iv) originated and maintained
and serviced by Seller in compliance with state and federal laws, including
without limitation, the Truth-In-Lending Act, the Equal Credit Opportunity Act,
the Fair Debt Collection Practices Act and the Fair Credit Reporting Act, to the
extent such laws are applicable; (v) as to Receivables that represent
financings, secured by a valid and enforceable first priority security interest
in favor of Seller in the financed property, which security interest will be
validly assigned and transferred to Buyer on the Closing Date; and (vi) except
as set forth in Schedule 4.10(a), guaranteed personally by the owner/merchant
originating the Receivable. Receivables with balances of $20,000 or more at
issuance are secured by a first priority perfected security interest in favor of
Seller. Seller has in all material respects and in good faith performed and
discharged all of its obligations to the customer arising under each Receivable
or relating to the Receivable. Other than leases that have been sold or
securitized, the Seller is in possession of all original or duplicate originals
of all the leases and the contract files provided to Buyer relating to the
Receivables are complete and correct and there are no oral commitments of Seller
relating to the Receivables. There are no legends preprinted, typed or written
on any original or duplicate
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original of any lease stating that there is a security interest or other
interest in favor of any third party.
(b) Sale of Receivables. In connection with the sale or
securitization of Receivables, the representations and warranties made by Seller
or the Subsidiaries in the sale or securitization documents were true and
correct in all material respects, and Seller and each of the Subsidiaries has
complied in all material respects with all covenants and agreements related
thereto. Except as set forth in Schedule 4.10(b), Seller and each of the
Subsidiaries has no ongoing liability or obligation in respect of these
transactions, including without limitation, no obligation to repurchase any
Receivables upon non-payment or otherwise, all such sales or securitizations
were made in accordance with Applicable Law and were accounted for in accordance
with GAAP, and Seller maintains all necessary Permits or authorizations to
effect such sales.
4.11 Litigation. Except as set forth in Schedule 4.11, there is no action,
order, writ, injunction, judgment, or decree outstanding or any claim, suit,
litigation, proceeding, labor dispute, arbitral action, governmental audit or
investigation with respect to the Business (collectively, "Actions") pending or,
to the Knowledge of the Seller or the Members, threatened (a) against, related
to or affecting Seller, the Business, or the Acquired Assets or (b) seeking to
delay, limit or enjoin the transactions contemplated by this Agreement, at law
or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and there is no basis known to the Seller or the Members
for any of the foregoing. Except as set forth in Schedule 4.11, the Seller or
the Members have not received any opinion or legal advice to the effect that the
Seller, the Business or the Acquired Assets are exposed from a legal standpoint
to any material liability. To the Knowledge of Seller or the Members, no
governmental entity has at any time challenged or questioned the legal right of
the Seller to manufacture, offer or sell any of its products in the present
manner or style thereof.
4.12 Tax Matters.
(a) Except as otherwise set forth in Schedule 4.12(a), the Members
have furnished Buyer with copies of all Tax Returns filed by or with respect to
Seller relating to the period encompassing the three taxable years of Seller
preceding the date hereof.
(b) Except as set forth in Schedule 4.12(b), Seller has filed all
Tax Returns that Seller was required to file prior to the date hereof. All such
Tax Returns were correct and complete and were prepared and filed in accordance
with Applicable Law. Except as set forth in Schedule 4.12(b), all Taxes owed by
or with respect to Seller (whether or not shown on any Tax Return) with respect
to taxable periods ending prior to the date hereof have been paid. Except as set
forth in Schedule 4.12(b), all other Taxes due and payable by or with respect to
Seller with respect to periods ending on or as of the Closing Date or in respect
of transactions entered into or any state of facts existing as of the date of
the Closing (whether or not a Tax Return is due on such date) have been or will
be paid on or before the Closing Date or will be accrued and a corresponding
amount of cash segregated in the accounts of Seller on or before the Closing
Date. For purposes of the preceding sentence, in determining the amount of Taxes
due and payable by or with respect to Seller with respect to periods ending on
or as of the date of the Closing or in
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respect of transactions entered into or any state of facts existing as of the
date of the Closing, the Closing Date shall be deemed to be the last day of any
applicable tax period. Except as set forth in Schedule 4.12(b), all Tax Returns
of or with respect to Seller the due date of which (determined without
extensions) shall be on or after the date hereof but on or before the Closing
Date will be correct and complete and filed in accordance with Applicable Law.
(c) Except as set forth in Schedule 4.12(c), with respect to each
taxable period of Seller ending on or prior to the date hereof or as of the
Closing Date (or as of such other date as set forth below), (i) either such
taxable period has been audited by the relevant taxing authority or the time for
assessing or collecting Taxes with respect to each such taxable period has
closed and each taxable period is not subject to review by a relevant taxing
authority; (ii) no deficiency or proposed adjustment that has not been settled
or otherwise resolved for any amount of Taxes has been asserted or assessed by
any taxing authority against Seller; (iii) Seller has not consented to extend
the time in which any Taxes may be assessed or collected by any taxing
authority; (iv) Seller has not requested or been granted an extension of the
time for filing any Tax Return; (v) there is no action, suit, taxing authority
proceeding, or audit or claim for refund now in progress, pending, or threatened
against or with respect to Seller regarding Taxes; (vi) there are no liens,
pledges, charges, claims, security interests, or other encumbrances on the
assets of Seller relating or attributable to Taxes (other than liens for sales
and payroll Taxes not yet due and payable) and Seller and the Members have no
Knowledge of any reasonable basis for the assertion of any claim relating or
attributable to Taxes which, if adversely determined, would result in any lien,
pledge, charge, claim, security interest, or other encumbrance on the assets of
Seller; (vii) Seller will not be required (A) as a result of a change in method
of accounting for a taxable period ending on or prior to the Closing Date, to
include any adjustment under Section 481 of the Code (or any corresponding
provision of state, local, or foreign law) in taxable income for any taxable
period (or portion thereof) beginning after the Closing Date or (B) as a result
of any "closing agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local, or foreign law) to include any item of
income or exclude any item of deduction from any taxable period (or portion
thereof) beginning after the Closing Date; (viii) Seller has not been a member
of an affiliated group (as defined in Section 1504 of the Code) or filed or been
included in a combined, consolidated, or unitary income Tax Return; (ix) Seller
is not a party to or bound by any tax allocation or tax sharing agreement and
has no current or potential contractual or other obligation to indemnify any
other Person with respect to any Tax or pay the Taxes of any other Person under
Treasury Regulations Section 1.1502-6 (or any similar provisions of state,
local, or foreign law) as a transferee or successor, by contract or otherwise;
(x) no claim has ever been made by a taxing authority in a jurisdiction where
Seller does not file Tax Returns that Seller is or may be subject to Taxes
assessed by such jurisdiction; (xi) Seller does not have a permanent
establishment in any foreign country, as defined in the relevant tax treaty
between the United States of America and such foreign country; (xii) Seller has
not been a "U.S. real property holding corporation" (within the meaning of Code
Section 897(c)(2)) during the applicable period specified in Code Section
897(c)(1)(A)(ii); (xiii) Buyer will not be required to deduct and withhold any
amount with respect to Taxes upon consummation of the transactions contemplated
by this Agreement; (xiv) Seller has made no payments, is not obligated to make
any payments, and is not a party to any agreement that under any circumstances
could obligate it to make any payments, that will not be deductible under Code
Sections 280G or 162; (xv) Seller has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to an
employee, independent contractor, member, or other third party;
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(xvi) Seller has disclosed on each Tax Return filed by Seller all positions
taken thereon that could give rise to a substantial understatement of penalty of
federal income Taxes within the meaning of Code Section 6662; (xvii) Seller owns
no interest in any "controlled foreign corporation" (within the meaning of Code
Section 957), "passive foreign investment company" (within the meaning of Code
Section 1296) or other entity the income of which is required to be included in
the income of Seller whether or not distributed; (xviii) none of Seller's assets
is property required to be treated as being owned by any other Person under the
"safe harbor lease" provisions of former Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended, or (B) has been financed with or directly or
indirectly secures any bond or debt the interest of which is tax-exempt under
Section 103(a) of the Code; (xix) Seller has always been classified as a
partnership for Federal, state and local income tax purposes. For purposes of
clause (xiv), the term "payments" refers to payments in the nature of
compensation.
(d) Schedule 4.12(d) lists (i) all countries, states, cities, or
other jurisdictions in which Seller is currently subject to an obligation to
file Tax Returns or to collect sales or use Taxes and (ii) with respect to each
of the Acquired Assets, (x) the countries, states, cities, or other
jurisdictions in which Seller is a beneficiary of any real or personal property
Tax exemptions or concessions, reduced rates, or Tax credits, (y) the annual
benefit of each such item, and (z) the terms governing expiration or phase-out
of each such item.
(e) Any reference to the term "Seller" in this Section 4.12 and
elsewhere in this Agreement in the context of obligations relating to Taxes
shall refer to Seller, any predecessor entity, any subsidiary of Seller and any
entity owned by the Seller (or any of the foregoing) intended to be disregarded
for federal and state income tax purposes. Further, any reference to any action
of "Seller" in this Section 4.12 shall encompass any action or actions taken by
or at the direction of Seller whether or not such actions taken by or at the
direction of Seller were properly authorized.
(f) Neither Seller nor any of the Members is other than a "United
States person" within the meaning of Section 7701 of the Code and Seller and
Members agree to furnish a statement to such effect meeting the requirements
under Code Sections 1445 and 897(c) if requested by Buyer.
4.13 Contracts and Commitments.
(a) Schedule 4.13 sets forth a complete and accurate list of all
Contracts of the following categories (the "Listed Contracts"):
(i) collective bargaining agreement or contract with any labor
union;
(ii) bonus, pension, profit sharing, retirement, or other form
of deferred compensation plan;
(iii) medical insurance or similar plan or practice, whether
formal or informal;
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(iv) contract for the employment of any officer, employee, or
other person on a full-time or consulting basis or relative to severance pay or
change-in-control benefits for any such person;
(v) agreement or indenture relating to the borrowing of money
in excess of $100,000 or to mortgaging, pledging or otherwise placing a lien on
any assets of the Seller which has a fair market value in excess of $100,000 in
the aggregate;
(vi) guaranty of any obligation in excess of $100,000 for
borrowed money or otherwise, other than endorsements made for collection;
(vii) lease or agreement under which it is lessor of, or
permits any third party to hold or operate, any property, real or personal;
(viii) contract or group of related contracts with the same
party for the purchase of products or services, under which the undelivered
balance of such products and services has a purchase price in excess of
$100,000;
(ix) contract or group of related contracts with the same
party for the sale of products or services under which the undelivered balance
of such products or services has a sales price in excess of $100,000;
(x) other contract or group of related contracts with the same
party continuing over a period of more than twelve (12) months from the date or
dates thereof or involving more than $100,000 per annum in amount;
(xi) material contract or franchise agreement relating to the
distribution of the Seller's products; or
(xii) other agreement material to the Business or not entered
into in the ordinary course of business.
(b) The Seller has delivered to Buyer true, correct and complete
copies of all of the Listed Contracts, including all amendments and supplements
thereto.
(c) To the Knowledge of Seller and the Members, all of the Listed
Contracts are valid and in full force and effect. The Seller has duly performed
all of its obligations under the Listed Contracts to the extent those
obligations to perform have accrued, and no violation of, or default or breach
under any Listed Contract by the Seller or any other party has occurred, which
individually or in the aggregate would have a Material Adverse Effect, and
neither the Seller nor any other party has repudiated any provisions thereof.
Except as set forth on Schedule 4.13(c), all of the Assumed Contracts may be
assigned to and will be enforceable by the Buyer after the Closing Date to the
same extent as if the transactions contemplated by this Agreement had not been
consummated.
4.14 Patents, Trademarks, Etc. Except as set forth on Schedule 4.14
hereto, no person has made or, to the Knowledge of Seller or the Members,
threatened to make, any claims that the operations of the Business are in
violation of or infringe upon any Intellectual Property Rights of
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any third party. Except as set forth on Schedule 4.14, all Intellectual Property
Rights and Intangible Personal Property (as defined below) used in the Business
may be transferred to Buyer without consent of any Person and Buyer shall not be
obligated to make any royalty or other payment to use such rights or property in
connection with the Business.
4.15 Licenses of Software and Other Intangible Personal Property. Schedule
4.15 lists all material licenses or similar agreements or arrangements relating
to computer software (other than standard commercially available third-party
"shrink wrap" software) or other intangible personal property (collectively,
"Intangible Personal Property") used in the Business, to which Seller is a party
either as licensee or licensor. Except as set forth on Schedule 4.15:
(i) no proceedings have been instituted or are pending or, to
the Knowledge of Seller or the Members, threatened that challenge the rights of
Seller in any material respect in and to any of such Intangible Personal
Property or any license thereof; and
(ii) there are no pending or, to the Knowledge of Seller or
the Members, threatened claims, demands or proceedings, restricting the right of
Seller to use or charging Seller with infringement of, any of such Intangible
Personal Property or any license thereof which, if adversely determined, would
have a Material Adverse Effect on the business, assets or financial condition of
the Business.
4.16 Environmental Matters.
(a) Except as set forth in Schedule 4.16 hereto, Seller has
conducted the business and operations of the Business in material compliance
with all Environmental Laws governing its Business, operations, properties, and
assets, including, without limitation: (i) all requirements relating to the
discharge and handling of hazardous substances or other wastes; (ii) all
requirements relating to notice, record keeping, and reporting; (iii) all
requirements relating to obtaining and maintaining Permits for the ownership of
its properties and assets and the operation of the Business, including Permits
relating to the handling and discharge of hazardous substances and other wastes;
or (iv) all applicable writs, orders, judgements, injunctions, governmental
communications, decrees, informational requests, or demands issued pursuant to,
or arising under, any Environmental Laws.
(b) Neither the Members or Seller have received any notice of any
violation or alleged violation of, or any liability under, any Environmental Law
in connection with the Business or the Acquired Assets during the past three
years;
(c) There are no writs, injunctions, decrees, orders or judgments
outstanding, or any actions, suits, proceedings or investigations pending or, to
the Knowledge of Seller or the Members, threatened, relating to compliance with
or liability under any Environmental Law affecting the Business or the Acquired
Assets;
(d) Seller currently maintains all governmental authorizations and
Permits required by all Environmental Laws necessary for the conduct of the
Business as currently conducted, except where failure to maintain such
authorization or Permit would not have a Material Adverse Effect;
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(e) Seller has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Seller pertaining to hazardous materials or hazardous activities
in, on, or under the real property leased by Seller.
4.17 Broker's Fees. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the participation
of any Person acting on behalf of the Seller or the Members in such manner as to
give rise to any valid claim against Hypercom, Buyer or any of their Affiliates
for any brokerage or finder's commission, fee, or similar compensation upon
consummation of the transactions contemplated hereby or otherwise.
4.18 Employees, Labor Matters, etc. Schedule 4.18 (i) contains a list of
all employees of Seller, and their wage rates or salaries, as of the date of
this Agreement, (ii) sets forth the dates of employment for such employees, and
(iii) accurately characterizes them as exempt or non-exempt. Except as set forth
in Schedule 4.13, the Seller is not a party to or bound by any collective
bargaining agreement, and to the Knowledge of Seller or the Members, there are
no labor unions or other organizations representing, purporting to represent or
attempting to represent any employees employed by the Seller. Except as set
forth on Schedule 4.18, there has not occurred or been threatened any strike,
slowdown, picketing, work stoppage, concerted refusal to work overtime, or other
similar labor activity with respect to any employees employed by the Seller.
There are no labor disputes currently subject to any grievance procedure,
arbitration, or litigation, and there is no representation petition pending or
threatened with respect to any employee employed by the Seller. Except as set
forth on Schedule 4.18, the Seller conducts the business and operations of the
Business in material compliance with all provisions of Applicable Law pertaining
to the employment of employees including without limitation all such Applicable
Law relating to labor relations, equal employment, fair employment practices,
entitlement, prohibited discrimination, or other similar employment practices or
acts. Except as set forth in Schedule 4.18, the employment of all persons
presently employed or retained by the Seller is terminable at will by the
Seller.
4.19 Employee Benefits. Schedule 4.19 lists each Employee Benefit Plan of
the Seller or any Commonly Controlled Entity. With respect to each Employee
Benefit Plan, except as otherwise specifically disclosed on Schedule 4.19:
(a) Neither the Seller nor any Commonly Controlled Entity
contributes to, ever has contributed to, or ever has been required to contribute
to any multiemployer plan within the meaning of Section 4001(a)(3) of ERISA or
has any liability (including withdrawal liability) under any multiemployer plan.
(b) Neither the Seller nor any Commonly Controlled Entity maintains
or has ever maintained, or contributes, ever contributed, or has ever been
required to contribute to, any "employee welfare benefit plan" (within the
meaning of Section 3(1) of ERISA) ("Welfare Plan") providing medical, health, or
life insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents (other than in
accordance with the health care continuation provisions of Part 6 of Title I of
Subtitle B of ERISA and Code Section 4980B).
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(c) Each Employee Benefit Plan that is a "group health plan", as
defined in Section 607(1) of ERISA ("Group Health Plan"), has been operated in
material compliance with the health care continuation provisions of Part 6 of
Title I of Subtitle B of ERISA and Section 4980B of the Code at all times.
(d) Seller represents that the transaction shall constitute a sale
of substantially all assets in the Seller's trade or business as defined in
Section 401(k)(10)(A)(ii) of the Code.
For purposes of this Agreement, "Employee Benefit Plan" means and includes
any pension, retirement, profit-sharing, bonus, incentive, deferred
compensation, change of control, or severance plan, or other employee benefit
program, arrangement, agreement, or understanding, or medical, vision, dental,
or other health plan or life insurance or disability plan, or any other employee
benefit plan, including, without limitation, any "employee benefit plan" as
defined in Section 3(3) of ERISA, that is sponsored or maintained by the Seller
or any Commonly Controlled Entity. An Employee Benefit Plan will be considered
to be sponsored or maintained by the Seller or a Commonly Controlled Entity
under any or all of the following circumstances: the Seller or any Commonly
Controlled Entity has formally adopted or sponsored the Employee Benefit Plan or
is designated by the terms of the Plan as a sponsor or administrator of the
Employee Benefit Plan; the Seller or any Commonly Controlled Entity contributes,
is required to contribute, ever has contributed, or has ever been required to
contribute to the Employee Benefit Plan; the Seller or any Commonly Controlled
Entity is a party or is otherwise bound by the terms of, or may have any
liability under, the Employee Benefit Plan; or the employees or former employees
(or their beneficiaries) of the Seller or any Commonly Controlled Entity are
eligible to participate or derive a benefit under the terms of the Employee
Benefit Plan, and "Commonly Controlled Entity" means and includes any member of
a controlled group of corporations (within the meaning of Section 414(b) of the
Code) that includes the Seller, any entity included with the Seller in a group
of trades or business that are under common control (within the meaning of
Section 414(c) of the Code), any member of an affiliated service group (within
the meaning of Section 414(m) of the Code) that includes the Seller, and any
entity that must be aggregated with the Seller pursuant to Section 414(o) of the
Code.
4.20 Insurance. Schedule 4.20 lists each insurance policy and fidelity
bond maintained by the Seller with respect to its properties, assets, employees
and officers and directors of the Seller. All of such insurance policies are in
full force and effect and the Seller is not in default with respect to its
obligations under any of such insurance policies. To the Knowledge of Seller or
the Members, there is no claim of the Seller pending under any of such policies
or bonds as to which coverage is being questioned, denied or disputed by the
underwriters of such policies or bonds. The Seller and the Members have no
Knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies. The insurance coverage of the Seller is
customary for corporations of similar size engaged in similar lines of
businesses.
4.21 Transactions with Affiliated Parties. Except as set forth in Schedule
4.21, no Member, employee, agent, officer, or director of the Seller or any of
their spouses or children, any trust of which any such person is the grantor,
trustee, or beneficiary, any corporation of which any such person or party is a
member, employee, officer, or director, or any partnership in which any such
person or party owns an interest (all such persons and entities being herein
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referred to collectively as "Affiliated Parties" and individually as "Affiliated
Party") has any agreement with the Seller or any interest in any property,
tangible or intangible, used in or pertaining to the Seller. To the Knowledge of
Seller or the Members, no Affiliated Party has any ownership interest, directly
or indirectly, or beneficially, in any competitor or potential competitor,
supplier, or customer of the Seller.
4.22 Compliance with Laws; Permits; Certain Operations. To the Knowledge
of Seller or the Members, except as set forth on Schedule 4.22 hereto, the
conduct of the Business by Seller does not violate any Applicable Laws and no
claims have been filed against the Seller alleging a violation of any such law
or regulation. Without limiting the generality of the foregoing, except as set
forth in Schedule 4.22, to the Knowledge of the Seller and the Members the
conduct of the Business by Seller does not violate the Occupational Safety and
Health Act of 1970, or any other state or federal acts (including rules and
regulations thereunder) regulating or otherwise affecting employee health and
safety, except for such violations as, individually or in the aggregate, would
not have a Material Adverse Effect. The Seller has not in connection with the
Business given or agreed to give any money, gift or similar benefit (other than
incidental gifts of articles of nominal value) in violation of any Applicable
Law to any actual or potential customer, supplier, governmental employee or any
other Person in a position to assist or hinder the Seller in connection with any
actual or proposed transaction. The Seller holds all Permits, licenses,
certificates and other authorizations of foreign, federal, state and local
governmental agencies required for the conduct of the Business, except where the
failure to hold such Permit, license, certificate or other authorization,
individually or in the aggregate, would not have a Material Adverse Effect.
4.23 Adequacy of Information Systems. Except as set forth in Schedule
4.23, each component of the Seller's management information and operating
systems relating to or supportive of the Seller's sales, account, inventory,
distribution and other material systems and operations, including all hardware
and software relating thereto, used in connection with the Business
(collectively "MIS Systems"), is adequate to support the Seller's present and
expected future business operations. Without limiting the generality of the
foregoing, the Seller's MIS Systems (i) include design, function and performance
capabilities such that the MIS Systems will not abnormally end or have invalid
or incorrect results from and/or performance or functional degradation because
of the then-current date; (ii) the design and function of the Seller's MIS
Systems ensure year 2000 functionality and century and multicentury formulas and
date values, and date data interface values that reflect the then current
century; and (iii) are otherwise year 2000 date compliant with present
capability to implement year 2000 century date conversion without material
additional cost or devotion of management, employees or other resources, such
that Seller will suffer no material adverse disruption resulting from such date
conversion. The Seller has made or provided no warranty or guarantee, or other
assurance, express or implied, to any other person that any products or services
sold or provided by the Seller are year 2000 date compliant in any respect or
otherwise will not or are not likely to experience year 2000 century recognition
or functionality difficulties.
4.24 Investment Representations. Each Member and Seller represents that:
(a) Seller and the Member has been advised that the Hypercom Common
Stock has not been registered under the Securities Act nor qualified under any
state securities
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laws on the grounds that no distribution or public offering of the Hypercom
Common Stock is to be effected, and that in this connection Hypercom is relying
in part on the representations of the Seller and each of the Members set forth
herein.
(b) The Hypercom Common Stock is being acquired for the Seller's and
Member's own account for the purpose of investment and not with a view to
distribution or resale thereof, and that it or he has no present intention of
selling, granting any participation in, or otherwise distributing the Hypercom
Common Stock being acquired.
(c) Seller and the Member is able to bear the economic risk of an
investment in the Hypercom Common Stock acquired by it or him pursuant to this
Agreement and without materially impairing it or his financial condition, can
hold the Hypercom Common Stock for an indefinite period of time and can afford
to suffer a complete loss on it or his investment.
(d) Seller and the Member has such knowledge and experience in
financial and business matters as to be capable of evaluating the risks and
merits of acquiring the Hypercom Common Stock. Seller and the Member has
received all the information it or he has requested from Hypercom it or he
considers necessary or appropriate for deciding whether to accept the Hypercom
Common Stock.
(e) Seller and the Member is aware that the Hypercom Common Stock
may not be resold without registration or qualification under the Securities Act
and applicable state securities laws or in certain limited circumstances and if
certain conditions are met. Seller and the Member is also aware that none of the
Hypercom Common Stock may be sold pursuant to Rule 144 adopted under the
Securities Act unless certain conditions have been met and until Seller and such
Member has held the Hypercom Common Stock for at least the holding period
required by such rule.
(f) Seller and the Member acknowledges that the certificates
representing the Hypercom Common Stock, when issued, will contain the following
legend, as well as any legends regarding applicable state securities laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD,
ASSIGNED, OFFERED, TRANSFERRED OR OTHERWISE DISTRIBUTED UNLESS THERE
IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH LAWS
COVERING SUCH SECURITIES OR HYPERCOM CORPORATION RECEIVES AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO HYPERCOM CORPORATION STATING
THAT SUCH PLEDGE, HYPOTHECATION, SALE, ASSIGNMENT, OFFER, TRANSFER
OR OTHER DISTRIBUTION IS EXEMPT FROM
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THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT
AND SUCH LAWS.
(g) Seller and the Member is an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated by the SEC.
4.25 Solvency; Bulk Sales. Seller is solvent and able to pay its
outstanding debts as they mature. Seller shall not be rendered insolvent by the
transfer of the Acquired Assets pursuant to this Agreement, and the transfer of
the Acquired Assets is not fraudulent to any creditor or equity interest holder
of Seller. There is no bulk sales or bulk transfer law applicable to the sale of
the Acquired Assets hereunder.
4.26 Restrictions on Business Activities. Except as set forth in Schedule
4.26, there is no agreement (noncompete or otherwise), commitment, judgment,
injunction, order, or decree to which the Seller is a party or otherwise binding
on the Business which has or reasonably could be expected to have the effect of
prohibiting or impairing the Business, any acquisition of property (tangible or
intangible) by Buyer in respect of the Business, or the conduct of the Business.
4.27 Disclosure. No representation or warranty by Seller or the Members
contained in this Agreement nor any certificate, agreement, Schedule or Exhibit
furnished by or on behalf of Seller or any Member to Hypercom hereunder or in
connection herewith or pursuant hereto contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading, and there is no fact
which has not been disclosed to Hypercom that materially affects adversely or
could reasonably be anticipated to materially affect adversely the assets,
financial condition or operating results, customer, employee or supplier
relations, business condition or prospects, or financing arrangements of the
Business.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF HYPERCOM AND BUYER
As of the date hereof and as of the Closing Date, Hypercom and Buyer each
severally represent and warrant to Seller each of the following:
5.1 Organization and Standing. Hypercom is a duly organized and validly
existing corporation in good standing under the laws of the State of Delaware
with full corporate power and authority to conduct its business as it is now
being conducted, to own or use the properties and assets that it purports to own
or use, and to perform all of its obligations. Buyer is a duly organized and
validly existing corporation in good standing under the laws of the State of
Arizona with full corporate power and authority to conduct its business as it is
now being conducted, to own or use the properties and assets that it purports to
own or use, and to perform all of its obligations.
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5.2 Authorization.
(a) Hypercom and Buyer each has full power and authority (corporate,
fiduciary or other) to enter into this Agreement and the Xxxx of Sale and
Assumption Agreement and to carry out the transactions contemplated hereby and
thereby, and the board of directors of Hypercom and Buyer have taken all action
required by law, their respective charters or other governing documents, to be
taken by them to authorize the execution, delivery and performance of this
Agreement and the Xxxx of Sale and Assumption Agreement and the consummation of
the transactions contemplated hereby and thereby. This Agreement and the Xxxx of
Sale and Assumption Agreement are the legal, valid and binding obligations of
Hypercom and Buyer and enforceable in accordance with their terms. A copy of the
resolutions of Hypercom's and Buyer's board of directors authorizing this
Agreement, the Xxxx of Sale and Assumption Agreement and the related
transactions is attached as Schedule 5.2.
(b) The shares of Hypercom Common Stock to be issued in accordance
with this Agreement (the "Shares") have been duly authorized by Hypercom and,
when issued in accordance with this Agreement, will be validly issued and
outstanding and fully paid.
5.3 Authorized Capital Stock.
(a) As of the date hereof, the authorized capital stock of Hypercom
consists of (i) 100,000,000 shares of Hypercom common stock, of which 33,197,517
shares are validly issued and outstanding and fully paid, (ii) 10,000,000 shares
of preferred stock, of which none are issued or outstanding, and (iii) 8,081,250
shares of common stock are reserved for issuance under outstanding option or
stock purchase plans.
(b) The Shares of Hypercom Common Stock have the rights set forth
under Hypercom's Amended and Restated Certificate of Incorporation and Delaware
General Corporation Law. Upon issuance, the Shares will be free and clear of any
Encumbrances created by Hypercom, except those disclosed herein, and their
issuance to the Seller will not violate the preemptive rights of any shareholder
of Hypercom.
5.4 Restrictions. Neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
violate any provision of the Certificate of Incorporation or Bylaws of Hypercom
or Buyer, (ii) violate, result in a breach of, conflict with, or constitute a
default (or an event which, with the giving of notice or lapse of time or both,
would constitute a default) or require any consent under, or give to others any
right of termination, amendment, acceleration, suspension, revocation or
cancellation with respect to, any Contract to which Hypercom or Buyer is a
party, or (iii) violate, conflict with or result in the breach of any statute or
law or any judgment, decree, order, regulation or rule of any court or
governmental authority to which Hypercom or Buyer is subject. Except as provided
for Section 6.12, no action, consent, approval or authorization by or filing
with any person or entity, including, without limitation, any governmental
authority, is required in connection with the execution, delivery and
performance by Hypercom or Buyer of this Agreement, or the consummation by
Hypercom or Buyer of the transactions contemplated by each of them herein.
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5.5 Brokers and Finders. All negotiations relating to this Agreement and
the transactions contemplated hereby have been carried on without the
participation of any Person acting on behalf of the Hypercom or the Buyer in
such manner as to give rise to any valid claim against Seller, the Members or
any of their Affiliates for any brokerage or finder's commission, fee, or
similar compensation upon consummation of the transactions contemplated hereby
or otherwise.
5.6 Litigation. There is no action, order, writ, injunction, judgment, or
decree outstanding or any claim, suit, litigation, proceeding, labor dispute,
arbitral action, governmental audit or investigation pending or, to the
knowledge of Hypercom or Buyer, threatened against Hypercom or Buyer seeking to
delay, limit or enjoin the transactions contemplated by this Agreement, at law
or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and there is no basis known to Hypercom or Buyer for any of
the foregoing.
5.7 SEC Documents. Hypercom has delivered to the Seller and the Members
true and correct copies of its Annual Report on Form 10-K for the fiscal year
ended June 30, 1999, and its Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, all as filed with the SEC. (All such reports are
collectively referred to hereinafter as the "Hypercom SEC Documents"; and the
financial statements, including the notes thereto, contained in the Hypercom SEC
Documents are collectively referred to hereinafter as the "Hypercom
Financials.") In the aggregate, the Hypercom SEC Documents do not contain any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary to make the statements in such reports, in light
of the circumstances under which they were made, not misleading. The Hypercom
Financials included in the Hypercom SEC Documents were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
through the periods involved and present fairly the consolidated financial
position, results of operations, and cash flows of Hypercom and its consolidated
subsidiaries as of the dates and for the periods indicated therein, subject, in
the case of unaudited interim statements, to normal year-end accounting
adjustments and the absence of complete footnote disclosure.
ARTICLE 6
CONDUCT PENDING THE CLOSING;
COVENANTS
6.1 General. The Seller, the Members, Hypercom and the Buyer shall use
their best efforts to take all actions and do all things necessary, proper, or
advisable in order to expeditiously consummate and make effective the
transactions contemplated by this Agreement.
6.2 Operation of the Seller. Except as specifically contemplated in this
Agreement, from the date of this Agreement through the Closing Date, the Seller
will be operated only in the ordinary course, and, in particular, the Seller,
without the prior written consent of Hypercom, will not:
(a) cancel or permit any material insurance to lapse or terminate,
unless renewed or replaced by like coverage;
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(b) default under any material contract, agreement, commitment, or
undertaking of any kind;
(c) knowingly violate or fail to comply with any laws applicable to
it or its properties or business;
(d) commit any act or permit the occurrence of any event or the
existence of any condition of the type described in clauses (a) through (m) of
Section 4.8;
(e) fail to maintain and repair its material assets and properties
in accordance with good standards of maintenance and as required in any material
leases or other material agreements pertaining thereto;
(f) merge, consolidate or agree to merge or consolidate with or into
any other corporation or other entity;
(g) amend its Articles of Organization or Operating Agreement;
(h) transfer any limited liability company interests, issue or
create any warrants, obligations, subscriptions, options, convertible
securities, or other commitments under which limited liability company interests
may be issued or transferred, or effect any transfer of outstanding limited
liability company interests, or otherwise permit the transfer of any outstanding
limited liability company interests or declare or distribute any distributions
whether in cash, limited liability company interests or other property;
(i) make any new material Tax elections; or
(j) agree to do any of the acts listed above.
6.3 Business Relationships. The Seller will exercise its commercially
reasonable efforts to preserve intact its business organization and goodwill,
keep available the services of its officers and employees as a group, and
maintain satisfactory relationships with suppliers, distributors, customers, and
others having business relationships with it.
6.4 No Negotiations.
(a) The Members or Seller shall not, directly or indirectly, through
any officer, director, agent, or otherwise, solicit, initiate, or encourage
submission of any proposal or offer from any person or entity (including any of
its or their officers or employees) relating to the sale or other transfer or
disposition of its capital stock or any liquidation, dissolution,
recapitalization, merger, consolidation, or acquisition or purchase of all or a
portion of the assets of, or any equity interest in, the Seller or other similar
transaction or business combination involving the Seller or participate in any
negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist, participate in,
facilitate, or encourage, any effort or attempt by any other person or entity to
do or seek any of the foregoing. The Members or Seller shall promptly notify
Hypercom if any such proposal or offer, or any inquiry from or contact with any
person with respect thereto, is made and shall
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promptly provide Hypercom with such information regarding such proposal, offer,
inquiry, or contact as Hypercom may request.
(b) Hypercom shall not, directly or indirectly, through any officer,
director, agent, or otherwise, solicit, initiate, or encourage submission of any
proposal or offer from any person or entity (including any of its or their
officers or employees) relating to the acquisition or purchase of all or a
portion of the assets of, or any equity interest in any entity that engages
exclusively or substantially in the business of micro-ticket leasing, or furnish
to any other person any information with respect to, or otherwise cooperate in
any way with, or assist, participate in, facilitate, or encourage, any effort or
attempt by any other person or entity to do or seek any of the foregoing.
Hypercom shall promptly notify the Members and Seller if any such proposal or
offer, or any inquiry from or contact with any person with respect thereto, is
made and shall promptly provide the Members and Seller with such information
regarding such proposal, offer, inquiry, or contact as the Members and Seller
may request.
(c) If either party breaches this Section 6.4 and the transactions
contemplated hereby are not consummated as a result, then such breaching party
shall pay to the other party an amount equal to $1,000,000 in cash or other
immediately available funds, which shall be deemed to include the other party's
out-of-pocket expenses incurred in connection with this Agreement and the
transactions and matters contemplated hereby (including without limitation, all
attorneys' and accountants' fees and expenses).
6.5 Public Announcements. The parties hereto shall not issue any press
release or public announcement, including announcements by any party for general
reception by or dissemination to employees, agents, or customers, with respect
to this Agreement and the other transactions contemplated by this Agreement
without the prior written consent of the other parties hereto (which consent
shall not be withheld unreasonably); provided, however, that Hypercom may make
any disclosure or announcement of information it is obligated to make pursuant
to applicable law or regulation, including any applicable law or regulation of
the SEC, The New York Stock Exchange, or any other national securities exchange
or self regulatory organization, as applicable.
6.6 Notification of Certain Matters. Each party shall give prompt notice
to the other of (i) the occurrence or failure to occur of any event, which
occurrence or failure would be likely to cause any representation or warranty on
its part contained in this Agreement to be untrue or inaccurate at, or at any
time prior to, the Closing Date, and (ii) any failure of such party, or any
officer, director, member, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder.
6.7 Access to Information.
(a) Hypercom shall have the opportunity to make a complete review of
the books, records, business and affairs of the Seller. To facilitate such
review, the Seller shall provide to Hypercom and its agents complete access to
all of its records and documents, shall provide to Hypercom with personal, bank
and professional references, and shall use reasonable efforts to make available
for consultation customers, employees, suppliers and distribution channels.
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(b) On and after the Closing Date, Buyer will permit Seller or its
representatives and agents at reasonable times during business hours to inspect
all files, books, records and accounts of the Business held by Buyer, as well as
access to, and the cooperation of, any employee of any operations of the
Business having knowledge of the information therein contained, if such
inspection, access and cooperation are reasonably necessary (i) to respond to a
governmental investigation or for the defense by Seller of any litigation
relating to the Business prior to the Closing Date or (ii) for accounting
reviews or audits of for judicial or administrative proceedings or
determinations relating to the liability of Seller for taxes or periods prior to
the Closing Date; provided, however, that nothing herein shall be deemed to
obviate the rules of discovery, attorney-client privilege, attorney work product
or other similar rules and concepts in any dispute between Seller and/or the
Members and Buyer.
(c) Buyer shall not dispose of any business records of the Business
transferred to Buyer pursuant to this Agreement until the later to occur of (i)
the expiration of the applicable tax statute of limitations, including
extensions thereof, and (ii) the fifth anniversary of the Closing Date provided
that, after such date, Buyer shall give Seller written notice of its intention
to dispose of any part thereof, specifying the items to be disposed of in
reasonable detail. Seller may, within a period of 60 days from receipt of any
such notice, notify Buyer of its desire to retain one or more of the items to be
disposed of. Buyer shall, upon receipt of such a notice from Seller, deliver to
Seller, at Seller's expense, the items specified therein.
6.8 Confidentiality. Each party hereto, and its officers, directors,
agents, and Affiliates, agree that all non-public information provided to the
other will be kept in strict confidence by such other party and will only be
used to evaluate the other party in conjunction with this Agreement and the
transactions contemplated herein. All documents or other media containing such
information will be returned to the appropriate party if this Agreement is
terminated. Further, regardless of whether this Agreement is terminated, each
party shall continue to hold all confidential information of the other in
strictest confidence in accordance with the Preliminary Purchase Proposal
acknowledged and accepted by Seller on October 12, 1999. Subject to the
limitations above, nothing herein shall preclude a party from developing or
offering products or services competitive with those of the other party.
6.9 Tax Exemption; Concession. In addition to all other covenants
contained herein, Seller covenants that it shall, on or after the Closing Date,
furnish all assistance reasonably requested by Buyer to enable Buyer to obtain
any and all Tax exemptions or concessions, reduced Tax rates, or Tax credits
with respect to which Seller was a beneficiary as of the date hereof or the
Closing Date in connection with the Acquired Assets or the Business.
6.10 Consents to Assignment. Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
Contract, lease, license, Permit, sales order, purchase order or any claim or
right or any benefit arising thereunder or resulting therefrom if an attempted
assignment thereof, without the consent of a third party thereto, would
constitute a breach thereof or in any way adversely affect the rights of Buyer
thereunder. If such consent is not obtained, or if an attempted assignment
thereof would be ineffective or would affect the rights thereunder so that Buyer
would not receive all such rights, Seller will cooperate with Buyer, in all
reasonable respects, to provide to Buyer the benefits under any such Contract,
lease, license, Permit, sales order, purchase order, claim or right
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including without limitation enforcement for the benefit of Buyer of any and all
rights of Seller against a third party thereto arising out of the breach or
cancellation by such third party or otherwise.
6.11 Employment of Seller's Employees. Seller will use all reasonable
efforts to cause the employees employed in the Business to make available their
employment services to Buyer, although neither Buyer nor any of their Affiliates
shall have any obligation to hire or otherwise retain the services of any such
employee. Contemporaneously with the Closing, Buyer shall offer employment to
those employees selected by Buyer, in its sole discretion, who are employed by
Seller in the Business. Those employees who accept such offers of employment
effective as of the Closing Date shall be referred to herein as the "Transferred
Employees". Such Transferred Employees shall be considered "new hires" and Buyer
shall not assume any liability of Seller in respect of the Transferred Employees
or any other Person (other than as reflected on the Interim Balance Sheet),
including any liability for accrued but unpaid salaries, wages, vacation or sick
pay or incentive compensation and Seller shall remain liable therefor and shall
also remain responsible for payment of any and all retention, change in control
or other similar compensation or benefits which are or may become payable in
connection with the consummation of the transactions contemplated by this
Agreement.
6.12 HSR Act. To the extent required by law, Seller and the Members on the
one hand and Buyer on the other shall each file with the United States Federal
Trade Commission ("FTC") and the United States Department of Justice ("DOJ") any
notifications required to be filed by their respective "ultimate parent
entities" under the HSR Act, with respect to the transactions contemplated
herein. Each party shall be responsible for all expenses incurred in the
preparation of their respective HSR Act filings and the filing fees to be paid
in connection with the HSR Act filings. The parties shall use their reasonable
best efforts to make such filings promptly, to respond to any requests for
additional information made by either the FTC or DOJ, and to cause the waiting
periods under the HSR Act to terminate or expire at the earliest possible date.
6.13 Guarantees. Buyer or Hypercom will use its commercially reasonable
efforts to release or remove the personal guarantees of Xxxxxxxxxxx and Xxxxxx
set forth in Schedule 6.13 and will indemnify and hold harmless Xxxxxxxxxxx and
Xxxxxx from and against any damages arising out of or resulting from such
guarantees on or after the Closing Date.
6.14 Repurchase Obligation. Seller covenants that it shall, prior to the
Closing Date, repurchase all of its rights, title, and interests in and to that
certain Master Agreement by and between Seller and Tokyo Leasing (U.S.A.) Bank
dated June 30, 1999 (the "Master Agreement"), and obtain a full release of its
obligations thereunder. Seller shall indemnify, save and hold harmless Buyer and
Hypercom from any liabilities and obligations arising out of, resulting from or
incident to the Master Agreement and Seller shall be responsible for all
expenses incurred in connection with the repurchase of its rights, title and
interests in and to the Master Agreement and the fees, if any, to be paid in
connection therewith.
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ARTICLE 7
CONDITIONS PRECEDENT TO
PERFORMANCE BY HYPERCOM
All obligations of Hypercom to proceed with the Closing and to consummate
the transactions contemplated hereby are subject to fulfillment and satisfaction
by the Seller and the Members, as the case may be, on or before the Closing Date
of each of the conditions precedent set forth in this Article 7. Hypercom may
waive any or all of these conditions in whole or in part without prior notice to
the Seller and the Members; provided, however, that no waiver of a condition
shall constitute a waiver by Hypercom of any of its other rights or remedies, at
law or in equity, if the Seller and the Members shall be in default of any of
its representations, warranties, or covenants under this Agreement.
7.1 Accuracy of Representations and Warranties. The representations and
warranties of the Seller, the Members, GECC, GLS and Xxxxxxx contained herein
and in any certificate or other writing delivered pursuant hereto or in
connection herewith shall be true and correct in all material respects on and as
of the Closing Date as though made at that time.
7.2 Performance of the Seller and the Members. The Seller and the Members
shall have duly performed or complied with all of the covenants, acts, and
obligations to be performed or complied with by the Seller and the Members
hereunder at or prior to the Closing Date.
7.3 No Material Adverse Changes. There shall not have been any Material
Adverse Change in the Business since the date of this Agreement.
7.4 Absence of Litigation. No action, suit, or proceeding before any court
or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
7.5 Deliveries under Article 3. Seller and the Members shall have
delivered to Hypercom all documents required to be delivered at Closing by
Seller and the Members under Article 3.
7.6 Prior Approvals. Seller shall have received all agreements or consents
of any parties, including to the assumption of debt on Seller's balance sheet by
its lenders, necessary to the consummation of the transactions contemplated by
this Agreement and in order to transfer to Buyer all of Seller's rights and
obligations under the Assumed Contracts (without causing a breach or default in
such Contract).
7.7 HSR Act Notification. In respect of any necessary notifications of
Buyer and Seller pursuant to the HSR Act, if applicable, the applicable waiting
period and any extensions thereof shall have expired or been terminated.
7.8 Consent of Seller's Accountants. Seller's independent certified public
accountants shall have agreed in writing to consent to inclusion of their
reports on the Financial Statements in filings made by Hypercom with the SEC.
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ARTICLE 8
CONDITIONS PRECEDENT TO PERFORMANCE
BY SELLER AND MEMBERS
All obligations of the Seller and the Members to proceed with Closing are
subject to fulfillment and the satisfaction on or before the Closing Date of
each of the conditions precedent set forth in this Article 8, unless otherwise
waived, in writing, by the Seller and the Members:
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Hypercom contained herein and in any certificate or other writing
delivered pursuant hereto or in connection herewith shall be true and correct in
all material respects on and as of the Closing Date as though made at that time.
8.2 Performance of Hypercom. Hypercom shall have duly performed or
complied with all of the covenants, acts, and obligations to be performed or
complied with by Hypercom hereunder at or prior to the Closing Date.
8.3 Absence of Litigation. No action, suit, or proceeding before any court
or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
8.4 HSR Act Notification. In respect of any necessary notifications of
Buyer and Seller pursuant to the HSR Act, if applicable, the applicable waiting
period and any extensions thereof shall have expired or been terminated.
8.5 Deliveries under Article 3. Hypercom or Buyer shall have delivered to
the Seller and the Members all documents required to be delivered at Closing by
Hypercom or Buyer under Article 3.
8.6 No Material Adverse Changes. There shall not have been any Material
Adverse Change in Hypercom's business since the date of this Agreement.
ARTICLE 9
REGISTRATION RIGHTS
9.1 "PiggyBack" Registration Rights.
(a) Notice of Registration. If at any time prior to the one-year
anniversary of the Closing Date, Hypercom shall determine to register any of its
Common Stock, either for its own account or the account of a security holder or
holders (other than a registration on Form X-0, X-0, or successor forms),
Hypercom will: (i) promptly give to Seller written notice thereof; and (ii)
include in such registration (and any related qualification under blue sky laws
or other compliance), and in any underwriting involved therein, all the
securities of Hypercom Common Stock issued as part of the Closing Payment
pursuant to Section 2.7 (the "Registrable Securities") specified in a written
request or requests, made within 20 days after receipt of such written notice
from Hypercom, by Seller or any Member, on a ratable basis with all other
security holders who have similar rights.
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(b) Underwriting. If the registration of which Hypercom gives notice
is for a registered public offering involving an underwriting, Hypercom shall so
advise the Seller and the Members as part of the written notice given pursuant
to Section 9.1(a). In such event the right of Seller or any Member to
registration pursuant to this Section 9.1 shall be conditioned upon the Seller
or such Member's participation in such underwriting. The Seller and all Members
proposing to distribute their securities through such underwriting shall
(together with Hypercom and any other shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by Hypercom.
Notwithstanding any other provision to this Section 9.1, if the managing
underwriter(s) determine(s) that marketing factors require a limitation of the
number of shares to be underwritten, the managing underwriter(s) may limit (or
eliminate) the Registrable Securities to be included in such registration; and
provided that no persons or entities other than Hypercom, the Seller, the
Members, and persons or entities holding registration rights shall be permitted
to include securities in the offering. If the number of Registrable Securities
to be included in the underwriting in accordance with the foregoing is less than
the total number of shares that the holders of Registrable Securities have
requested to be included, then the holders of Registrable Securities who have
requested to be included in the registration and other holders of shares of
Hypercom Common Stock entitled to include shares of Hypercom Common Stock in
such registration shall participate in the underwriting pro rata based upon
their total ownership of shares of Hypercom Common Stock (giving effect to the
conversion into Hypercom Common Stock of all securities convertible thereinto)
subject in all respects to sale by Hypercom of its own securities having
precedence. If any holder would thus be entitled to include more shares than
such holder requested to be registered, the excess shall be allocated among
other requesting holders pro rata based upon their total ownership of
Registrable Securities. If either Seller or the Members or other shareholder
disapproves of the terms of any such underwriting, it or he may elect to
withdraw therefrom by written notice to Hypercom and the managing
underwriter(s).
9.2 Demand Right. If at the time an Incentive Payment is made to Seller,
Seller and/or any of the Members are (i) deemed an "affiliate" as defined under
Rule 144 of the Securities Act and (ii) subject to the volume limitations set
forth in Rule 144(e) (a "Triggering Event"), Seller may require that Hypercom
prepare and file with the SEC a registration statement (the "Resale Registration
Statement") with respect to all or some of the Registrable Securities and the
shares of Hypercom Common Stock issued to Seller on an Incentive Payment Date
(collectively, the "Acquisition Shares"). Hypercom will use its best efforts to
effect the registration under the Securities Act by performing the following:
(a) Within ninety (90) days following a Triggering Event (or 180
days if Hypercom is in the process of or contemplating filing a registration
statement for a public offering and does so within 60 days of the Triggering
Event), Hypercom will diligently prepare and file with the SEC a Resale
Registration Statement and use all reasonable efforts to cause such registration
statement to become and remain effective until the earlier of (i) two years
after effectiveness of the Resale Registration Statement or (ii) until Seller
and the Members are free to resell the Acquisition Shares pursuant to Rule
144(k).
(b) Hypercom will as expeditiously as possible prepare and file with
the SEC such amendments and supplements to the Resale Registration Statement and
the prospectus used in connection therewith as may be necessary to update and
keep such registration statement
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effective and to comply with the provisions of the Securities Act with respect
to the sale of all securities covered by such registration statement.
(c) Hypercom will notify Seller upon discovery that the prospectus
included in the Resale Registration Statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
in the light of the circumstances under which they were made, and at the request
of Seller promptly (with due regard to the event giving rise to the need for an
amendment or supplement) prepare and furnish to it a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary so
that such prospectus will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under which
they were made; provided that, after such notification and until such supplement
or amendment has been so delivered, Seller will not deliver or otherwise use the
original prospectus.
(d) Hypercom will cause to be furnished to Seller a conformed copy
of the Resale Registration Statement and of each amendment and supplement
thereto (in each case including all exhibits) and such number of copies of the
preliminary and final prospectuses and any other prospectus filed under Rule 424
as Seller may reasonably request in order to facilitate the sale of the
Acquisition Shares. Seller will comply with all prospectus delivery requirements
under the Securities Act. It will be a condition to Hypercom's obligations to
effect registration of the Acquisition Shares that Seller provide Hypercom with
all material facts including, without limitation, furnishing such certificates,
questionnaires, and legal opinions as may be required by Hypercom concerning the
Acquisition Shares to be registered which are reasonably required to be stated
in the Resale Registration Statement or in the prospectus or are otherwise
required in connection with the offering.
(e) Hypercom will as expeditiously as possible use its commercially
reasonable efforts to register qualify the Registrable Securities covered by the
Resale Registration Statement under the securities or Blue Sky laws of such
state as the Seller shall reasonably request, and do any and all other acts and
things that may be necessary or desirable to enable the Seller to consummate the
public sale or other disposition in such states of the Registrable Securities
owned by the Seller; provided, however, that Hypercom shall not be required in
connection with this Section 9.2 to qualify as a foreign corporation, subject
itself to taxation, or execute a general consent to service of process in any
jurisdiction.
(f) Hypercom will cause all such Registrable Securities to be listed
on The New York Stock Exchange or other exchange or trading system on which its
Common Stock regularly trades.
(g) In the event of an underwritten public offering, Hypercom will
enter into and perform its obligations under an underwriting agreement in
customary form with the managing underwriter of such offering.
(h) If Hypercom has delivered preliminary or final prospectuses to
the Seller and after having done so the prospectus is amended to comply with the
requirements of the
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Securities Act, Hypercom shall promptly notify the Seller and, if requested, the
Seller shall immediately cease making offers of Registrable Securities and
return all prospectuses to Hypercom. As soon as reasonably practicable, Hypercom
shall provide the Seller with revised prospectuses and, following receipt of the
revised prospectuses, the Seller shall be free to resume making offers of the
Registrable Securities.
Notwithstanding anything to the contrary herein, Hypercom shall not be required
to effect a registration under Section 9.2 or to update any registration if
Hypercom determines the filing would be materially detrimental to a transaction
or company registration in process or contemplated, provided that it may delay
such a filing for no more than 90 days.
9.3 Registration Expenses and Indemnity.
(a) Hypercom shall pay all expenses incurred by Hypercom or its
Affiliates in complying with this Section 9, including, without limitation, all
registration and filing fees, printing expenses, and fees and disbursements of
counsel for Hypercom and its Affiliates, exchange listing fees, and fees and
expenses of one (1) counsel selected by the sellers of the Acquisition Shares
(the "Selling Stockholders") to represent the Selling Stockholders, in an amount
not to exceed $20,000, and state Blue Sky fees and expenses. Seller shall pay
all selling commissions applicable to the sales of the Acquisition Shares and
all fees and disbursements of counsel for the Selling Stockholders' own counsel
(other than the counsel selected to represent all Selling Stockholders as
defined above).
(b) Hypercom agrees to indemnify and hold harmless (or if
indemnification is held by a court of competent jurisdiction to be unavailable,
to contribute to the amount paid or payable by) Seller or the Members holding
Acquisition Shares included as part of any registration statement filed pursuant
to this Section 9 against any losses, claims, damages, or liabilities (or
actions in respect thereof), to which Seller or the Members may be subject under
the Securities Act or any other statute or common law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
based upon (i) any untrue statement (or alleged untrue statement) of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, or any amendment or
supplement thereto, or any other document used to sell these securities, or (ii)
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make any statement therein, in light of the
circumstances under which it was made, not misleading, or (iii) any violation by
Hypercom of the Securities Act or any blue sky law, or any rule or regulation
promulgated under the Securities Act or any blue sky law, or any other law,
applicable to Hypercom in connection with such registration, qualification, or
compliance, and will reimburse Seller for any legal or other expenses reasonably
incurred by Seller in connection with defending such loss, claim, damage,
liability, or action; provided, however, that Hypercom will not be liable in any
case to the extent that any such claim, loss, damage or liability may have been
caused by an untrue statement or omission based upon information furnished in
writing to Hypercom by Seller or the Members expressly for use in any
registration statement. In the event of any registration of any of the
Acquisition Shares under the Securities Act pursuant to this Agreement, each
seller of Acquisition Shares, jointly and severally, will indemnify and hold
harmless Hypercom, each of its directors and officers and each underwriter (if
any) and each person, if any, who controls Hypercom or any such underwriter
within the meaning of the
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Securities Act or the Securities Exchange Act of 1934 against any claim, losses,
damages and liabilities, including legal and other expenses reasonably incurred
in investigating or defending it against the same, arising out of any untrue
statement of a material fact contained in any prospectus or other document
(including any related registration statement) or any omission to state therein
a material fact required to be stated therein or necessary to make the statement
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with information furnished in writing to Hypercom by or on
behalf of such selling holder, specifically for use in connection with the
preparation of such registration statement, prospectus, amendment of supplement.
ARTICLE 10
NON-COMPETITION
10.1 Agreement Not to Compete. In consideration of the Purchase Price set
forth herein and as an inducement to Buyer to enter into this Agreement, each of
Seller and the Members, for themselves and any of their direct or indirect
subsidiaries, parents or Affiliates, whether now in existence or hereafter
created or established, hereby covenant and agree that except as otherwise
agreed it or he will not after the Closing Date for a period of five (5) years
after the Closing (or if the Member is terminated without Cause or resigns for
Good Reason under his Employment Agreement, two (2) years after termination, if
less):
(a) Engage, directly or indirectly, either as principal, partner,
joint venturer, consultant, agent, or proprietor (other than as an owner of 1%
or less of the outstanding stock of a public corporation whose stock is traded
on a recognized public exchange but not including Hypercom) or in any other
manner participate in the ownership, management, operation, or control of any
person, firm, partnership, limited liability company, corporation, or other
entity which engages in the business of selling any products or providing any
services which are competitive with the products or services of Buyer or any of
its Affiliates, including the Business, within any jurisdiction in which
Hypercom or the Business does or proposes to do business; or
(b) Directly or indirectly solicit for employment (whether as an
employee, consultant, independent contractor, or otherwise) any person who is,
or during the preceding six (6) months was, an employee, consultant, independent
contractor, or of the like of Buyer or the Business, unless Buyer gives its
written consent to such employment or offer of employment; or
(c) Directly or indirectly solicit for employment (whether as an
employee, consultant, independent consultant, contractor, or otherwise) any
person who, as of the Closing Date, is any employee, consultant, independent
contractor or the like of Seller who thereafter becomes an employee of Buyer; or
(d) Call on directly or indirectly solicit or divert or take away
from Buyer or the Business (including, without limitation, by divulging to any
competitor or potential competitor of Buyer or the Business) any person, firm
corporation, or other entity who is, or during the preceding six (6) months was,
a customer or prospective customer of Buyer or the Business.
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10.2 Acknowledgment; Relief for Violation. Each of Seller and the Members
hereby agree that the period(s) of time provided for in this Article 10, and the
territorial restrictions and other provisions and restrictions set forth herein,
are reasonable and necessary to protect Buyer and its successors and assigns in
the use and employment of the goodwill of the Business conducted by Seller prior
to the Closing Date and sold by Seller to Buyer pursuant to this Agreement. Each
of Seller and the Members further agree that damages cannot compensate Buyer in
the event of a violation of the above agreement not to compete, and that, if
such violation should occur, injunctive relief shall be essential for the
protection of Buyer and its successors and assigns. Accordingly, each of Seller
and the Members hereby covenant and agree that, in the event any of the
provisions of agreement not to compete shall be violated or breached, Buyer
shall be entitled to obtain injunctive relief against the party or parties
violating such covenants, without bond but upon due notice, in addition to such
further or other relief as may appertain at equity or law. Obtainment of such an
injunction by Buyer shall not be considered an election of remedies or a waiver
of any right to assert any other remedies which Buyer has at law or in equity.
No waiver of any breach or violation hereof shall be implied from forbearance or
failure by Buyer to take action thereon.
10.3 Severability. Each of Seller and the Members agree that, if any
provision with respect to this Article 10 shall be adjudicated to be invalid or
unenforceable, such provision shall be deleted from this Agreement, but such
deletion is to apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication is made; provided, however,
that to the extent any provision hereof is deemed unenforceable by virtue of its
scope in terms of area or length of time, but may be made enforceable by
limitations thereon, each of Seller and the Members agree that the same shall be
enforceable to the fullest extent permissible under the laws and public policies
applied in such jurisdiction in which the enforcement is sought. Each of Seller
and the Members further agree that the amount(s) paid by Buyer under this
Agreement shall not limit, restrict, or otherwise be deemed to establish the
amount of damages suffered by Buyer by reason of any breach of this Article 10.
10.4 Extension During Breach. Seller and each Member agree that the time
period described in Section 10.1 shall be extended for a period equal to the
duration of any breach this Article 10 by Seller or such Member.
ARTICLE 11
INDEMNIFICATION AND SURVIVAL
11.1 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the Members, Seller, Hypercom, and Buyer
contained in this Agreement and the certificates delivered hereunder shall
survive the consummation of the transactions contemplated hereby and the Closing
Date for the period set forth in this Section 11.1, without regard to any
investigation made by any of the parties hereto. All representations and
warranties contained in this Agreement and all claims with respect thereto shall
terminate on March 31, 2001, except that the representations and warranties
contained in Sections 4.7, 4.9, 4.10 and 4.12 will survive indefinitely, the
representations and warranties contained in Section 4.22 will survive for a
period of three (3) years following the Closing Date, and the representations
and warranties contained in Sections 4.11, 4.18 and 4.19 will survive until the
expiration of any and all applicable statute of limitations pertaining thereto;
provided, however,
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that in the event notice of any claim for indemnification under Section 11.2(a)
or (b) hereof shall have been given (within the meaning of Section 14.4) within
the applicable survival period, the representations and warranties that are the
subject of such indemnification claim shall survive with respect to such claim
until such time as such claim is finally resolved. All covenants and agreements
herein shall survive forever, except as specifically limited by their terms.
11.2 Indemnification.
(a) By Seller and the Members.
(i) The Members and Seller shall indemnify, defend, save and
hold harmless Hypercom, the Buyer and their Affiliates, and their respective
Representatives, from and against any and all claims, damages, costs, losses
(including, without limitation, diminution in value), Taxes, liabilities,
judgments, penalties, fines, obligations, lawsuits, deficiencies, demands and
expenses (whether or not arising out of third-party claims), including, without
limitation, interest, penalties, costs of mitigation, clean-up or remedial
action, lost profits and other losses resulting from any shutdown or curtailment
of operations, damages to the environment, attorneys' fees, experts' fees and
all amounts paid in investigation, defense, audit or settlement of any of the
foregoing (herein, "Damages"), incurred in connection with, arising out of,
resulting from or incident to (A) any breach of any representation or warranty
made by Seller or any of the Members in or pursuant to this Agreement, the
Schedules, or any other certificate or document delivered by or on behalf of
Seller or the Members pursuant to this Agreement; (B) any breach by Seller or
the Members of any covenant or agreement of Seller or the Members in or pursuant
to this Agreement; (C) any Excluded Liability; and (D) the failure of Seller to
comply with any applicable fraudulent conveyance, bulk sale, or other law for
the protection of creditors in connection with the transactions contemplated by
this Agreement.
(ii) Hypercom's and Buyer's right to indemnification under
this Section 11.2(a) for any Damages incurred in connection with, arising out
of, resulting from or incident to any Excluded Liability shall survive the
consummation of the transactions contemplated hereby and the Closing Date
forever.
(iii) For purposes of indemnification pursuant to this Section
11.2(a), the accuracy of the representations and warranties contained in this
Agreement will be considered without regard to materiality or Knowledge
qualifiers.
(b) By Hypercom or Buyer. Hypercom or Buyer shall indemnify and save
and hold harmless the Members and Seller, their Affiliates and their
Representatives from and against any and all Damages incurred in connection
with, arising out of, resulting from or incident to (i) the inaccuracy of any
representation or warranty made by Hypercom or Buyer in or pursuant to this
Agreement; or (ii) any breach of any covenant or agreement made by Hypercom or
Buyer in or pursuant to this Agreement.
(c) Cooperation. In connection with third party lawsuits or actions,
the indemnified party shall cooperate in all reasonable respects with the
indemnifying party and such attorneys in the investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom; provided, however, that
the indemnified party may, at its own cost (except as
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provided in Section 11.2(e) hereof), participate in the investigation, trial and
defense of such lawsuit or action and any appeal arising therefrom.
(d) Defense of Claims. If a claim for Damages (a "Claim") is to be
made by a party entitled to indemnification hereunder against the indemnifying
party, the party claiming such indemnification shall give written notice (a
"Claim Notice") to the indemnifying party as soon as practicable after the party
entitled to indemnification becomes aware of any fact, condition or event which
may give rise to Damages for which indemnification may be sought here under. The
Claim Notice shall include the amounts the indemnified party believes in good
faith are subject to indemnification and a brief basis of the claim. The
indemnified party may revise its estimate of any claim by notice to the other
party.
(e) Third Party Claims. If any Action is filed against any party
entitled to the benefit of indemnity hereunder, written notice thereof shall be
given to the indemnifying party as promptly as practicable (and in any event
within fifteen (15) calendar days after the service of the citation or summons).
The failure of any indemnified party to give timely notice hereunder shall not
affect rights to indemnification hereunder, except to the extent that the
indemnifying party demonstrates actual damage caused by such failure. After such
notice, if the indemnifying party shall acknowledge in writing to the
indemnified party that the indemnifying party shall be obligated under the terms
of its indemnity hereunder in connection with such Action, then the indemnifying
party shall be entitled, if it so elects, (i) to take control of the defense and
investigation of such Action, (ii) to employ and engage attorneys of its own
choice (which shall be reasonably acceptable to the indemnified party) to handle
and defend the same, at the indemnifying party's cost, risk and expense unless
the named parties to such Action include both the indemnifying party and the
indemnified party and the indemnified party has been advised in writing by
counsel that there may be one or more legal defenses available to such
indemnified party that are different from or additional to those available to
the indemnifying party, in which case the indemnified party shall be able to
retain its own counsel at the reasonable expense of the indemnifying party), and
(iii) to compromise or settle such Action, which compromise or settlement shall
be made only with the written consent of the indemnified party, such consent not
to be unreasonably withheld; provided, however, if the remediation or resolution
of any such Action is reasonably expected to have a Material Adverse Effect on
the indemnified party's business operations, then, notwithstanding the
foregoing, the indemnified party shall be entitled to control such remediation
or resolution, including without limitation to take control of the defense and
investigation of such Action, to employ and engage attorneys of its own choice
to handle and defend the same, at the indemnifying party's cost, risk and
expense, and to compromise or settle such Action. If the indemnifying party
fails to assume the defense of such Action within fifteen (15) calendar days
after receipt of the Claim Notice, the indemnified party against which such
Action has been asserted will (upon delivering notice to such effect to the
indemnifying party) have the right to undertake, at the indemnifying party's
cost and expense, the defense, compromise or settlement of such Action on behalf
of and for the account and risk of the indemnifying party. In the event the
indemnified party assumes the defense of the Action, the indemnified party will
keep the indemnifying party reasonably informed of the progress of any such
defense, compromise or settlement. The indemnifying party shall be liable for
any settlement of any action effected pursuant to and in accordance with this
Section 11.2(e) and for any final judgment (subject to any right of appeal), and
the indemnifying party agrees to
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indemnify and hold harmless an indemnified party from and against any Damages by
reason of such settlement or judgment.
(f) Right of Offset. All Claims by Hypercom or Buyer for
indemnification against the Seller or the Members may be satisfied by set off
against any remaining Incentive Payment(s). Notwithstanding anything in this
Agreement to the contrary, Hypercom shall not be limited to the Incentive
Payments with respect to Claims against the Seller or the Members in the event
such Claims exceed the amount of any payments due thereafter.
(g) Certain Limitations.
(i) Cap. The Seller's and Members' indemnification liability
under Section 11.2(a) and Hypercom's and Buyer's indemnification liability under
Section 11.2(b) shall be limited to the aggregate amount of consideration paid
to the Seller, including the cash payment at Closing, the value of the common
stock issued at Closing, and the Incentive Payments (collectively, the "Cap").
(ii) Basket. In no event shall the Seller and the Members on
the one hand and Hypercom and Buyer on the other hand be required to indemnify
the other party for any Damages relating to any matter subject to
indemnification under this Article 11, unless and until such Damages exceed in
the aggregate $100,000 (the "Basket"), in which event only those Damages in
excess of the Basket shall be recoverable by the indemnified party.
(iii) Fraud. The Basket and Cap shall not apply to any Damages
based on, arising out of or related to fraud, intentional or willful
misrepresentation or omission by Seller or any Member, and an Excluded
Liability.
ARTICLE 12
DISPUTE RESOLUTION
All claims, disputes and other matters in controversy (herein called
"dispute") arising directly or indirectly out of or related to this Agreement,
or the breach thereof, whether contractual or noncontractual, and whether during
the term or after the termination of this Agreement, including disputes arising
out of any adjustment proposed by Buyer (or lack thereof) upon an event set
forth in Section 2.8.(d) (iv), (vi), (vii) and 2.8(f), shall be resolved
exclusively (except as set forth in Article 2) according to the procedures set
forth in this Article 12.
12.1 Mediation. Neither party shall commence an arbitration proceeding
pursuant to the provisions of Section 12.2 below unless such party shall first
give a written notice (a "Dispute Notice") to the other party setting forth the
nature of the dispute. The parties shall attempt in good faith to resolve the
dispute by mediation under the Commercial Mediation Rules of the American
Arbitration Association ("AAA") in effect on the date of the Dispute Notice. If
the parties cannot agree on the selection of a mediator within twenty (20) days
after delivery of the Dispute Notice, the mediator will be selected by the AAA.
If the dispute has not been resolved by mediation as provided above within sixty
(60) days after delivery of the Dispute Notice, then the dispute shall be
determined by arbitration in accordance with the provisions of Section 12.2.
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12.2 Arbitration.
(a) Any dispute that is not settled through mediation as provided in
Section 12.1 above shall be resolved by arbitration in Chicago, Illinois,
governed by the Federal Arbitration Act, 9 U.S.C. Section 1 et seq., and
administered by the American Arbitration Association under its Commercial
Arbitration Rules in effect on the date of the Dispute Notice, as modified by
the provisions of this Section 12.2, by a single arbitrator. Persons eligible to
be selected as an arbitrator shall be limited to lawyers with excellent academic
and professional credentials who have had both training and experience as an
arbitrator. In the event the parties cannot agree on a mutually acceptable
single arbitrator, the AAA shall designate three persons who, in its opinion,
meet the criteria set forth herein. Each party shall be entitled to strike one
of such three designees on a peremptory basis, indicating its order of
preference with respect to the remaining designees, and the selection of the
arbitrator shall be made from among such designee(s) which have not been so
stricken by either party in accordance with their indicated order of mutual
preference to the extent possible. The arbitrator shall base the award on
applicable law and judicial precedent and, unless both parties agree otherwise,
shall include in such award the findings of fact and conclusions of law upon
which the award is based. Judgment on the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
(b) Upon the application by either party to a court for an order
confirming, modifying or vacating the award, the court shall have the power to
review whether, as a matter of law based on the findings of fact determined by
the arbitrator, the award should be confirmed, modified or vacated in order to
correct any errors of law made by the arbitrator. In order to effectuate such
judicial review limited to issues of law, the parties agree (and shall stipulate
to the court) that the findings of fact made by the arbitrator shall be final
and binding on the parties and shall serve as the facts to be submitted to and
relied on by the court in determining the extent to which the award should be
confirmed, modified or vacated.
(c) If either party fails to proceed with mediation or arbitration
as provided herein or unsuccessfully seeks to stay such mediation or
arbitration, or fails to comply with any arbitration award, or is unsuccessful
in vacating or modifying the award pursuant to a petition or application for
judicial review, the other party shall be entitled to be awarded costs,
including reasonable attorneys' fees, paid or incurred by such other party in
successfully compelling such arbitration or defending against the attempt to
stay, vacate or modify such arbitration award and/or successfully defending or
enforcing the award.
ARTICLE 13
TERMINATION
13.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) By mutual written consent of a duly authorized officer of
Hypercom, on the one hand, and the Members and the Seller on the other hand;
(b) Upon the occurrence of a Material Adverse Change, or pursuant to
Section 2.2;
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(c) By either Hypercom on the one hand, or the Members or the Seller
on the other hand, if the other party breaches any of its material
representations, warranties, or covenants contained herein and, if such breach
is curable, such breach is not cured within five (5) business days after notice
thereof;
(d) By either Hypercom, Seller or the Members if the transactions
contemplated herein shall not have been consummated on or before January 31,
2000 or such later date as may be mutually agreed upon by the parties; provided,
however, that no party shall have the right to terminate this Agreement
unilaterally if the event giving rise to such right is primarily attributable to
such party or to any affiliated party.
13.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 13.1, this Agreement shall become void and there shall be
no liability or further obligation hereunder on the part of Buyer, Seller, or
the Members or their respective members, officers, or directors, except as set
forth in Article 14 and Section 6.8 hereof, and except for liability arising
from breach of this Agreement.
ARTICLE 14
MISCELLANEOUS
14.1 Entire Agreement. This Agreement, together with all Exhibits and
Schedules hereto, constitutes the entire understanding and supersedes all prior
oral or written agreements among the parties hereto relating to the subject
matter contained herein, and merges all prior and contemporaneous discussions
among them. No party hereto shall be bound by any definition, condition,
representation, warranty, covenant, or provision other than as expressly stated
in this Agreement or as hereafter set forth in a written instrument executed by
such party or by a duly authorized representative of such party.
14.2 Special Provision Regarding Receivables. The parties intend that the
transfer of the Receivables pursuant to this Agreement to be a true sale of the
Receivables from Seller to Buyer and not a financing secured by the Receivables,
and the beneficial interest in and title to the Receivables will not be a part
of any Seller's estate in the event of the filing of a bankruptcy petition by or
against Seller under any bankruptcy law. However, if under any bankruptcy law,
this transaction is deemed to be a financing arrangement, or it is otherwise
determined that any conveyance hereunder is for any reason not considered a sale
and that the beneficial interest in and title to the Receivables remain part of
any Seller's estate, that parties intend that with respect to any such
Receivables this Agreement will constitute a security agreement as defined under
the UCC, and Seller hereby grants to Buyer a first priority perfected security
interest in and against all of the Seller's right, title and interest in and to
the Receivables.
14.3 Severability. The parties hereto expressly agree that it is not the
intention of any party hereto to violate any public policy, statutory, or common
law rules, regulations, treaties, or decisions of any government or agency
thereof. If any provision of this Agreement is judicially or administratively
interpreted or construed as being in violation of any such provision, then,
except as set forth in Article 10, such articles, sections, sentences, words,
clauses, or combinations thereof shall be inoperative, and the remainder of this
Agreement shall remain binding upon the parties hereto.
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14.4 Notices and Other Communications. All notices, requests, demands, and
other communications required, contemplated, or permitted by this Agreement by
any party shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy,
electronic or digital transmission method; the day after sent, if sent for next
day delivery to a domestic address by recognized overnight delivery service
(e.g. Federal Express); and upon receipt, if sent by certified or registered
mail, return receipt requested. In each such case notice shall be sent to:
(a) If to Hypercom or Buyer:
Hypercom Corporation
0000 Xxxx Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxxxxx, Chief Financial Officer
with a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
(b) If to GE or the Members:
00 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
with a copy to:
Othen Prounis, Esq.
Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
or at such other address as the intended recipient shall from time to time
designate by written notice delivered in accordance herewith.
14.5 Counterparts. This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute one and the same agreement.
14.6 Closing Date Balance Sheet. Seller and the Members agree to deliver
or cause to be delivered within forty-five (45) days of Closing, a balance sheet
dated as of the Closing and prepared in accordance with GAAP and in a manner
consistent with the accounting principles adopted in the preparation of the
Financial Statements.
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14.7 Governing Law. The validity, construction, and enforceability of this
Agreement shall be governed in all respects by the laws of the State of Arizona,
without regard to its conflict of laws rules.
14.8 Assignment. Neither this agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that Buyer may, without such consent,
assign all its rights to any lender as collateral security, and Buyer may assign
all such rights and obligations to a wholly-owned subsidiary or subsidiaries of
Buyer (or a partnership controlled by Buyer) which shall assume all obligations
and liabilities of Buyer under this Agreement, but no such assignment shall
relieve Buyer of its obligations hereunder. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, and, except in the case
of indemnification expressly extended to other persons pursuant to Article 10,
no other person shall have any right, benefit or obligation under this Agreement
as a third party beneficiary or otherwise.
14.9 Schedules and Exhibits. The Schedules and Exhibits referred to herein
and attached hereto are incorporated herein by such reference as if fully set
forth in the text hereof.
14.10 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time to require performance of any provisions hereof shall, in no manner,
affect the right at a later date to enforce the same. No waiver by any party of
any condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.
14.11 Specific Performance. Each party's obligations under this Agreement
are unique. If any party should default in its obligations under this Agreement,
the parties each acknowledge it would be extremely impracticable to measure the
resulting damages; accordingly, the nondefaulting party, in addition to any
other available rights or remedies, may xxx in equity for specific performance,
and the parties each expressly waive the defense that a remedy in damages will
be adequate.
14.12 Costs. If any legal action or any arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default, or misrepresentation in connection with any of the provisions
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys" fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it or they may be
entitled.
14.13 Section and Paragraph Headings. The Article and Section headings in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
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14.14 Amendment. This Agreement may be amended only by an instrument in
writing executed by all parties hereto.
14.15 Expenses. Except as otherwise expressly provided herein, each party
shall bear its own expenses incident to this Agreement and the transactions
contemplated hereby, including without limitation, all fees of counsel,
consultants, and accountants.
14.16 Extent of Obligation. All covenants, representations, warranties,
indemnities, and agreements made by Seller and the Members shall be deemed joint
and several as to each of them.
14.17 Tax Matters. Each party to this Agreement has independently
determined the Tax consequences to such party of the transactions contemplated
by this Agreement and no party is relying upon any other party to this Agreement
with respect to such determination.
14.18 Bulk Sales Waiver. The parties hereby waive compliance with any bulk
sales or similar law.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.
"HYPERCOM" "SELLER"
HYPERCOM CORPORATION GOLDEN EAGLE LLC,
a Delaware corporation a Connecticut limited liability
company
By:________________________________ By:_______________________________
Xxxxxx X. Xxxxx Its:______________________________
Its: Chairman of the Board
"BUYER"
HYPERCOM FINANCIAL, INC.,
an Arizona corporation
By:________________________________
Its:_______________________________
"MEMBERS"
GOLDEN CORPORATION,
a Connecticut corporation
By:________________________________
Its:_______________________________
________________________________
Xxxxxxx X. Xxxxxxxxxxx
________________________________
Xxxxxxxx X. Xxxxxx, Xx.
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EXHIBIT A
DEFINITIONS
1. Definitions. For purposes of this Agreement, the following definitions
shall apply to the following terms:
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
when used with respect to a specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise.
"Applicable Law" shall mean all applicable provisions of all (i) constitutions,
treaties, statutes, laws (including the common law), rules, regulations,
ordinances, codes or orders of any governmental authority, (ii) governmental
permits, licenses or approvals and (iii) orders, decisions, interpretations,
injunctions, judgments, awards, and decrees of or agreements with any
governmental or judicial authority.
"Board" shall mean the Board of Directors of Hypercom.
"Business" shall have the meaning assigned to it in Recital A.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Contract" shall mean any agreement, contract, note, bond, mortgage, indenture,
loan, evidence of indebtedness, lease, sublease, permit, purchase order, letter
of credit, franchise agreement, undertaking, covenant not to compete, employment
agreement, license, instrument, arrangement, obligation or commitment to which
the Seller, in connection with the Business, is a party or is bound or to which
its assets or properties are subject, whether oral or written.
"Encumbrance" shall mean any claim, lien, pledge, charge, easement, security
interest, deed of trust, mortgage, option, right of first refusal, preemptive
right, right-of-way, patent reservation, encroachment, building or use
restriction, conditional sales agreement or encumbrance, whether voluntarily
incurred or arising by operation of law, and includes, without limitation, any
agreement to give any of the foregoing in the future, and any contingent sale or
other title retention agreement or lease in the nature thereof.
"Environmental Law" shall mean any applicable Law (including but not limited to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Resource Conservation and Recovery Act of 1976 and analogous state
laws) relating to (x) the protection of human health or the environment
(including air, water, vapor, surface water, groundwater, drinking water supply,
and surface or subsurface land) or (y) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, management, release or disposal of, hazardous substances or any waste
material, on-site or at any off-site locations.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"GAAP" shall mean generally accepted accounting principles in effect in the
United States of America from time to time applied on a consistent basis as of
the date of any application thereof.
"GC" shall mean Golden Corporation.
"GECC" shall mean Golden Eagle Credit Corporation.
"GLS" shall mean Golden Leasing Systems, Co.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, or any successor law, and the rules and regulations issued pursuant
to that Act or any successor law.
"Hypercom Common Stock" shall mean the common stock of Hypercom, $.001 par value
per share.
"Knowledge" means actual knowledge after reasonable investigation.
"Material Adverse Effect" or "Material Adverse Change" shall mean any material
adverse effect or change in the condition (financial or other), business,
results of operations, prospects, assets, liabilities, operations or customer,
supplier or employee relations of the Business or the Acquired Assets or on the
ability of the Seller or the Members to consummate the transactions contemplated
hereby, or any event, condition or state of facts which could be reasonably
expected, with the passage of time, to constitute a "Material Adverse Effect" or
"Material Adverse Change."
"Permits" shall mean all licenses, permits, franchises, approvals,
notifications, authorizations, consents or orders of, or filings with, any
governmental agency or authority, whether foreign, federal, state or local, or
any other person, necessary or desirable for the past, present or presently
anticipated conduct of, or relating to the operation of, the Business.
"Person" shall mean any natural person, firm, partnership, association,
corporation, company, limited liability company, limited partnership, trust,
business trust, governmental authority, or other entity.
"Purchase Price" shall mean the amounts specified in Sections 2.7 and 2.8 as the
"Closing Payment" and "Incentive Payment."
"Representative" shall mean with respect to a particular Person, any officer,
director, principal, partner, manager, member, advisor, agent, employee or other
representative of such Person, including legal counsel, accountants and
financial advisors.
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"SEC" shall mean the Securities and Exchange Commission or any successor agency.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Seller" shall have the meaning specified in the first paragraph of this
Agreement, and shall include its subsidiaries, except where the context requires
otherwise or except where otherwise defined.
"Tax" or "Taxes" shall mean any federal, state, provincial, local, foreign, or
other income, alternative minimum, accumulated earnings, personal holding
company, franchise, capital stock, net worth, capital, profits, windfall
profits, gross receipts, value added, privilege, sales, use, goods and services,
excise, customs duties, transfer, conveyance, mortgage, registration, stamp,
documentary, recording, premium, severance, environmental (including taxes under
Section 59A of the Code), real property, personal property, escheat, ad valorem,
intangibles, rent, occupancy, license, occupational, employment, unemployment
insurance, social security, disability, workers' compensation, payroll, health
care, registration, withholding, estimated, or other tax, duty, or other
governmental charge or assessment of any kind whatsoever or deficiencies thereof
(including all interest and penalties thereon and additions thereto, whether
disputed or not).
"Tax Return" shall mean any return, report, declaration, form, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
2. Other Defined Terms. The following terms shall have the meanings ascribed to
them in the Sections set forth below:
Term Section
AAA.................................................................12.1
Accounting Arbitrator.............................................2.8(g)
Acquisition Shares...................................................9.2
Actions.............................................................4.11
Acquired Assets......................................................2.1
Adjusted Target EBT...........................................2.8(d)(iv)
Affiliated Party ...................................................4.21
Agreed Capital................................................2.8(e)(iv)
Assumed Contracts.................................................2.1(f)
Assumed Liabilities..................................................2.5
Available Capital.............................................2.8(e)(iv)
Basket.......................................................11.2(g)(ii)
Buyer Integration..............................................2.8(e)(v)
Buyer Integration Notice.......................................2.8(e)(v)
Cap...........................................................11.2(g)(i)
Claim........................................................... 11.2(d)
Claim Notice.................................................... 11.2(d)
Closing..............................................................3.1
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Closing Date.........................................................3.1
Closing Payment......................................................2.7
Commonly Controlled Entity..........................................4.19
Damages......................................................... 11.2(a)
Designated Officer............................................2.8(e)(ii)
Dispute Notice......................................................12.1
DOJ.................................................................6.12
EBT...............................................................2.8(c)
Employment Agreements.............................................3.2(m)
Employee Benefit Plan...............................................4.19
Escrow Agent......................................................2.7(b)
Escrow Agreement..................................................2.7(b)
Excluded Assets......................................................2.4
Excluded Liabilities.................................................2.6
Financial Statements.................................................4.6
FTC.................................................................6.12
Group Health Plan...................................................4.19
Hypercom Financials..................................................5.7
Hypercom SEC Documents...............................................5.7
Incentive Payment.................................................2.8(a)
Incentive Payment Date............................................2.8(a)
Incentive Term....................................................2.8(a)
Intangible Personal Property........................................4.15
Intellectual Property Rights......................................2.1(i)
Interim Balance Sheet................................................4.6
Listed Contracts.................................................4.13(a)
Master Agreement....................................................6.14
MIS Systems........................................................ 4.23
Permitted Liens......................................................4.9
Receivables.......................................................2.1(d)
Registrable Securities............................................9.1(a)
Resale Registration Statement........................................9.2
Sales and Use Tax Calculation.....................................3.2(s)
Selling Stockholders.................................................9.3
Subsidiaries......................................................2.1(k)
Target EBT........................................................2.8(c)
Transferred Employees...............................................6.11
Triggering Event.....................................................9.2
Welfare Plan........................................................4.19
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SCHEDULES
Description Schedule
----------- --------
Interim Balance Sheet.....................................................2.1(a)
Assumed Contracts ........................................................2.1(f)
Permits ..................................................................2.1(h)
Intellectual Property Rights .............................................2.1(i)
Allocation of Purchase Price .............................................2.9
Organization and Qualification ...........................................4.1
Authorization ............................................................4.2
No Violation; Consents ...................................................4.3
Subsidiaries .............................................................4.5
Capital Stock ............................................................4.5
Financial Statements .....................................................4.6
Undisclosed Liabilities ..................................................4.7
Absence of Certain Developments ..........................................4.8
Permitted Liens ..........................................................4.9
Leases and Receivables ...................................................4.10
Litigation ...............................................................4.11
Tax Matters ..............................................................4.12
Listed Contracts .........................................................4.13
Patents, Trademarks, Etc. ................................................4.14
Intangible Personal Property .............................................4.15
Environmental Matters ....................................................4.16
Employees, Labor Matters, Etc. ...........................................4.18
Employee Benefits ........................................................4.19
Insurance ................................................................4.20
Transactions with Affiliated Parties .....................................4.21
Compliance with Laws; Permits; Certain Operations ........................4.22
Adequacy of Information Systems ..........................................4.23
Restrictions on Business Activities ......................................4.26
Authorization ............................................................5.2
*The registrant hereby agrees to furnish the above Schedules to the Securities
and Exchange Commission upon request.
