ANNEX A
COMBINATION AGREEMENT
EXECUTION COPY
COMBINATION AGREEMENT
BY AND AMONG:
IVI CHECKMATE CORP.,
INTERNATIONAL VERIFACT INC.,
CHECKMATE ELECTRONICS, INC.
AND
FUTURE MERGER CORPORATION
DATED AS OF JANUARY 16, 1998
TABLE OF CONTENTS
ARTICLE 1.00--PRELIMINARY STEP.................................................................... 2
1.1 INCORPORATION AND ORGANIZATION OF NEWCO..................................... 2
1.2 INCORPORATION OF MERGER SUB................................................. 3
ARTICLE 2.00--THE ARRANGEMENT..................................................................... 3
2.1 THE ARRANGEMENT............................................................. 3
2.2 THE VOTING AND EXCHANGE TRUST AGREEMENT..................................... 4
2.3 SUPPORT AGREEMENT........................................................... 4
2.4 DISSENTING SHARES........................................................... 4
ARTICLE 3.00--THE MERGER.......................................................................... 4
3.1 MERGER OF MERGER SUB WITH AND INTO CHECKMATE................................ 4
3.2 EFFECT OF THE MERGER........................................................ 5
3.3 SURVIVING CORPORATION ARTICLES OF INCORPORATION AND BY-LAWS; DIRECTORS...... 5
3.4 CONVERSION OF CHECKMATE COMMON SHARES....................................... 5
3.5 CLOSING OF CHECKMATE TRANSFER BOOKS......................................... 6
3.6 EXCHANGE AGENT.............................................................. 6
3.7 NO FRACTIONAL SHARES........................................................ 6
3.8 DISSENTING SHARES........................................................... 6
3.9 LOST CERTIFICATES........................................................... 7
ARTICLE 4.00--POST-CLOSING CORPORATE STRUCTURE.................................................... 7
4.1 POST-CLOSING CORPORATE STRUCTURE............................................ 7
ARTICLE 5.00--ADDITIONAL AGREEMENTS............................................................... 7
5.1 CLOSING..................................................................... 7
5.2 CONTEMPORANEOUS TRANSACTIONS................................................ 8
5.3 ACCOUNTING CONSEQUENCES..................................................... 8
5.4 MATERIAL ADVERSE EFFECT..................................................... 8
5.5 ADJUSTMENTS TO EXCHANGE RATIOS.............................................. 8
5.6 DISSENTERS' RIGHTS.......................................................... 8
5.7 SHAREHOLDER MEETINGS; PROXY MATERIALS; FORM S-4............................. 9
5.8 ACCESS TO INFORMATION; CONFIDENTIALITY...................................... 10
5.9 CONSENTS; APPROVALS......................................................... 11
5.10 STOCK OPTIONS............................................................... 11
5.11 AGREEMENTS OF AFFILIATES.................................................... 12
5.12 INDEMNIFICATION AND INSURANCE............................................... 12
5.13 NOTIFICATION OF CERTAIN MATTERS............................................. 13
5.14 FURTHER ACTION.............................................................. 13
5.15 PUBLIC ANNOUNCEMENTS........................................................ 14
5.16 LISTING OF NEWCO COMMON STOCK AND EXCHANGEABLE SHARES....................... 14
5.17 CONVEYANCE TAXES............................................................ 14
5.19 DIRECTORS AND OFFICERS...................................................... 14
5.20 STRATEGIC ALLIANCE WITH INGENICO............................................ 15
5.21 FAIR PRICE AND BUSINESS COMBINATIONS REQUIREMENTS........................... 15
5.22 SHAREHOLDER PROTECTION RIGHTS REDEMPTION.................................... 15
5.23 EMPLOYMENT AGREEMENTS....................................................... 16
5.24 REORGANIZATION TREATMENT.................................................... 16
5.25 COMBINED FINANCIAL RESULTS.................................................. 16
ARTICLE 6.00--REPRESENTATIONS AND WARRANTIES OF IVI............................................... 16
6.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES................................ 16
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6.2 ARTICLES OF CONTINUATION AND BY-LAWS; MINUTES............................... 17
6.3 CAPITALIZATION.............................................................. 17
6.4 AUTHORITY RELATIVE TO THIS AGREEMENT........................................ 18
6.5 MATERIAL CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.............. 18
6.6 COMPLIANCE; PERMITS......................................................... 19
6.7 SECURITIES REGULATORY AUTHORITY REPORTS AND FINANCIAL STATEMENTS............ 20
6.8 ABSENCE OF CERTAIN CHANGES OR EVENTS........................................ 20
6.9 NO UNDISCLOSED LIABILITIES.................................................. 21
6.10 ABSENCE OF LITIGATION....................................................... 21
6.11 EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS............................... 21
6.12 LABOUR MATTERS.............................................................. 23
6.13 REGISTRATION STATEMENT; PROXY STATEMENT..................................... 23
6.14 RESTRICTIONS ON BUSINESS ACTIVITIES......................................... 24
6.15 TITLE TO PROPERTY........................................................... 24
6.16 TAXES....................................................................... 25
6.17 ENVIRONMENTAL MATTERS....................................................... 27
6.18 BROKERS..................................................................... 28
6.19 FULL DISCLOSURE............................................................. 28
6.20 INTELLECTUAL PROPERTY....................................................... 28
6.21 INTERESTED PARTY TRANSACTIONS............................................... 30
6.22 INSURANCE................................................................... 30
6.23 OPTION PLANS................................................................ 30
6.24 POOLING MATTERS............................................................. 30
6.25 AFFILIATES.................................................................. 30
6.26 OPINION OF FINANCIAL ADVISOR................................................ 31
ARTICLE 7.00-REPRESENTATIONS AND WARRANTIES OF CHECKMATE.......................................... 31
7.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES................................ 31
7.2 ARTICLES OF INCORPORATION AND BY-LAWS; MINUTES.............................. 31
7.3 CAPITALIZATION.............................................................. 32
7.4 AUTHORITY RELATIVE TO THIS AGREEMENT........................................ 32
7.5 MATERIAL CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.............. 32
7.6 COMPLIANCE; PERMITS......................................................... 33
7.7 SECURITIES REGULATORY AUTHORITY REPORTS AND FINANCIAL STATEMENTS............ 34
7.8 ABSENCE OF CERTAIN CHANGES OR EVENTS........................................ 35
7.9 NO UNDISCLOSED LIABILITIES.................................................. 35
7.10 ABSENCE OF LITIGATION....................................................... 35
7.11 EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS............................... 35
7.12 LABOUR MATTERS.............................................................. 38
7.13 REGISTRATION STATEMENT; PROXY STATEMENT..................................... 38
7.14 RESTRICTIONS ON BUSINESS ACTIVITIES......................................... 39
7.15 TITLE TO PROPERTY........................................................... 39
7.16 TAXES....................................................................... 39
7.17 ENVIRONMENTAL MATTERS....................................................... 41
7.18 BROKERS..................................................................... 42
7.19 FULL DISCLOSURE............................................................. 42
7.20 INTELLECTUAL PROPERTY....................................................... 42
7.21 INTERESTED PARTY TRANSACTIONS............................................... 44
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7.22 INSURANCE................................................................... 44
7.23 OPTION PLANS................................................................ 44
7.24 POOLING MATTERS............................................................. 44
7.25 AFFILIATES.................................................................. 45
7.26 OPINION OF FINANCIAL ADVISOR................................................ 45
ARTICLE 8.00--REPRESENTATIONS AND WARRANTIES OF NEWCO............................................. 45
8.1 ORGANIZATION AND QUALIFICATION.............................................. 45
8.2 ARTICLES OF INCORPORATION AND BY-LAWS; MINUTES.............................. 45
8.3 CAPITALIZATION.............................................................. 45
8.4 AUTHORITY RELATIVE TO THIS AGREEMENT........................................ 45
ARTICLE 9.00--REPRESENTATIONS AND WARRANTIES OF MERGER SUB........................................ 46
9.1 ORGANIZATION AND QUALIFICATION.............................................. 46
9.2 ARTICLES OF INCORPORATION AND BY-LAWS; MINUTES.............................. 46
9.3 CAPITALIZATION.............................................................. 46
9.4 AUTHORITY RELATIVE TO THIS AGREEMENT........................................ 46
ARTICLE 10.00--CONDUCT OF BUSINESS PENDING THE ARRANGEMENT........................................ 46
10.1 CONDUCT OF BUSINESS BY IVI PENDING THE TRANSACTIONS......................... 46
10.2 NO SOLICITATION............................................................. 48
10.3 NO SOLICITATION............................................................. 50
ARTICLE 11.00--CONDITIONS TO THE TRANSACTIONS..................................................... 52
11.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE TRANSACTIONS........... 52
11.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF IVI................................. 53
OPINION OF CHECKMATE COUNSEL................................................ 54
TAX OPINION................................................................. 54
11.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF CHECKMATE........................... 54
ARTICLE 12.00--TERMINATION........................................................................ 56
12.1 TERMINATION................................................................. 56
12.2 EFFECT OF TERMINATION....................................................... 57
12.3 FEES AND EXPENSES........................................................... 57
ARTICLE 13.00--GENERAL PROVISIONS................................................................. 57
13.1 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS................. 57
13.2 NOTICES..................................................................... 57
13.3 AMENDMENT................................................................... 59
13.4 WAIVER...................................................................... 59
13.5 HEADINGS.................................................................... 59
13.6 SEVERABILITY................................................................ 59
13.7 ENTIRE AGREEMENT............................................................ 59
13.8 ASSIGNMENT.................................................................. 59
13.9 PARTIES IN INTEREST......................................................... 59
13.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE....................... 60
13.11 GOVERNING LAW............................................................... 60
13.12 COUNSEL FEE................................................................. 60
13.13 COUNTERPARTS................................................................ 60
13.14 WAIVER OF JURY TRIAL........................................................ 60
13.15 U.S. CURRENCY............................................................... 60
13.16 ARBITRATION................................................................. 60
SCHEDULE A........................................................................................ 1
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COMBINATION AGREEMENT
This COMBINATION AGREEMENT is entered into as of January 16, 1998 (this
"Agreement"),
BY AND AMONG:
IVI CHECKMATE CORP., a Delaware corporation ("Newco"),
INTERNATIONAL VERIFACT INC., a Canadian corporation ("IVI"),
CHECKMATE ELECTRONICS, INC., a Georgia corporation ("Checkmate") and
FUTURE MERGER CORPORATION, a Georgia corporation ("Merger Sub").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of IVI and Checkmate have each determined
that it is advisable and in the best interests of their respective shareholders
to carry out the transactions contemplated herein upon the terms and subject to
the conditions set forth herein;
WHEREAS, in furtherance of such transactions, the Board of Directors of IVI
has approved the execution and delivery of this Agreement in order to provide
for the reorganization of the capital of IVI whereby each of the issued and
outstanding common shares in the capital of IVI (the "IVI Common Shares") will
be exchanged, at the holder's election, for either one (the "IVI Exchange
Ratio") share of common stock, no par value of Newco (the "Newco Common Stock")
or one Exchangeable Share (as defined below) of IVI and certain ancillary
agreements will be entered into including the Voting Trust Agreement and the
Support Agreement (as defined below) (such reorganization referred to herein as
the "Arrangement");
WHEREAS, the Exchangeable Shares are exchangeable by the holders thereof for
shares of Newco Common Stock on a one-for-one basis at any time subject to the
terms of this Agreement and the exhibits hereto;
WHEREAS, the Arrangement shall be effected under Section 192 of the CBCA
pursuant to the terms hereof and a plan of arrangement (the "Plan of
Arrangement"), substantially in the form of Exhibit A hereto together with such
other terms and conditions as may be agreed to by the parties hereto acting
reasonably;
WHEREAS, the holders of IVI Common Shares that elect to receive Exchangeable
Shares from IVI (i) will grant and transfer to Newco certain rights to acquire
the Exchangeable Shares ("Call Rights") and (ii) will receive from Newco certain
voting rights in respect of Newco ("Voting Rights") and certain rights to
transfer the Exchangeable Shares directly to Newco ("Exchange Rights");
WHEREAS, the Boards of Directors of Newco, Checkmate and Merger Sub each
have approved the execution and delivery of this Agreement in order to provide
for the merger (the "Merger") of Merger Sub with and into Checkmate in
accordance with the applicable provisions of the Georgia Law, and upon the terms
and subject to the conditions set forth herein;
WHEREAS, pursuant to the Merger, each outstanding share (a "Checkmate
Share") of Checkmate's common stock, $.01 par value (the "Checkmate Common
Shares"), shall be converted into the right to receive the "Merger
Consideration" (as defined in Section 3.4(c)), upon the terms and subject to the
conditions set forth herein;
WHEREAS, Newco, Merger Sub and Checkmate intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
within the meaning of Section 368(a) of the Code, and the Treasury regulations
thereunder, and further intend that the Merger be treated as a tax-free
reorganization under Section 368(a) of the Code;
WHEREAS, the parties intend that (i) the transfer of IVI Common Shares to
Newco in exchange for Newco Common Stock by those shareholders of IVI that elect
to receive Newco Common Stock, (ii) the transfer of Call Rights to Newco in
exchange for Voting Rights and Exchange Rights by those shareholders of IVI that
elect to receive Exchangeable Shares, and (iii) the transfer of Checkmate Common
Shares to Newco by the shareholders of Checkmate pursuant to the Merger,
collectively, be treated as a single integrated tax-free transaction under
Section 351(a) of the Code;
WHEREAS, concurrently with the execution of this Agreement, and as an
inducement to IVI, Checkmate and Merger Sub to enter into this Agreement, IVI,
Merger Sub, certain principal shareholders of Checkmate and a certain principal
shareholder of IVI have entered into stockholders agreements (the "Shareholders
Agreements"), pursuant to which such persons have agreed, among other things, to
vote their Checkmate Common Shares or IVI Common Shares, as the case may be, in
favour of any shareholders' resolutions relating to the Transactions proposed by
management at a meeting of shareholders of Checkmate or IVI, as the case may be;
WHEREAS, upon completion of the Transactions the shareholders of IVI,
through their holdings of Newco Common Stock (and options therefor) and the
Exchangeable Shares and related rights, shall be effectively entitled to
approximately 57% of the equity of Newco, and the shareholders of Checkmate,
through their holdings of Newco Common Stock (and options therefor), shall be
effectively entitled to approximately 43% of the equity of Newco, based on a
fully diluted treasury stock method calculation;
WHEREAS, the parties intend as soon as practicable after the execution of
this Agreement, to file with the SEC preliminary proxy materials as a joint
proxy statement to solicit proxies of shareholders with respect to the
shareholders' meetings to be held to approve the Arrangement, in the case of
IVI, and the Merger, in the case of Checkmate, and to cause Newco thereafter to
file with the SEC a registration statement on Form S-4 for the Newco Common
Stock to be issued in connection with the Merger and the Arrangement;
WHEREAS, if required, the parties intend, as soon as practicable after the
execution of this Agreement, to cause Newco to file with the OSC and certain
other securities regulatory authorities in Canada a preliminary "non-offering"
prospectus under subsection 53(2) of the OSA and the equivalent provisions in
such other jurisdictions, or take any other steps necessary, to make Newco a
"reporting issuer" under the OSA and the securities laws of such other
jurisdictions;
WHEREAS, for accounting purposes, it is intended that the Transactions shall
be accounted for as a pooling of interests under United States generally
accepted accounting principles ("GAAP");
WHEREAS, this Agreement uses certain terms as defined terms, the definitions
for which appear in Schedule A hereto;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE 1.00--PRELIMINARY STEPS
1.1 INCORPORATION AND ORGANIZATION OF NEWCO
(a) Checkmate has caused the incorporation of Newco under the Delaware
General Corporation Law ("Delaware Law") with a Certificate of Incorporation
in the form set forth in Exhibit B hereto and which Certificate of
Incorporation does:
(i) authorize the Newco Common Stock to be issued in the Arrangement
and the Merger and a sufficient number of shares of Newco Common Stock so
that the Call Rights, Exchange Rights and retraction and redemption
rights attached to the Exchangeable Shares and the rights of holders of
options issued pursuant to IVI Option Plan and Checkmate Stock Option
Plans may be honoured; and
(ii) create Newco Preferred Stock.
(b) Newco has adopted By-laws in the form set forth in Exhibit D hereto;
(c) The initial directors of Newco are J. Xxxxxxxx Xxxxxx, Xxxxxx
Xxxxxxx, L. Xxxxx Xxxxxxx and Xxxxxxx X. Xxxxx;
(d) Prior to the Closing, Newco will file a certificate of designation
under Section 151(g) of the Delaware Law in connection with the Newco
Special Voting Stock substantially in the form of Exhibit C hereto.
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1.2 INCORPORATION OF MERGER SUB
Newco has caused Merger Sub to be incorporated under the Georgia Law as a
wholly-owned subsidiary of Newco.
ARTICLE 2.00--THE ARRANGEMENT
2.1 THE ARRANGEMENT
As promptly as practicable after the execution of this Agreement, IVI will
apply to the Ontario Court of Justice (General Division) (the "Court") pursuant
to Section 192 of the CBCA for an interim order in form and substance
satisfactory to Checkmate (such approval not to be unreasonably withheld or
delayed) (the "Interim Order") providing for, among other things, the calling
and holding of a special meeting of its shareholders for the purpose of
considering and, if deemed advisable, approving the Arrangement under Section
192 of the CBCA and pursuant to the Plan of Arrangement. Upon approval of the
Arrangement by IVI shareholders, as promptly as practicable thereafter, IVI will
take the necessary steps to submit the Arrangement to the Court and apply for a
final order of the Court approving the Arrangement in such fashion as the Court
may direct (the "Final Order"). At the time specified in the Articles of
Arrangement (the "Effective Time") on the date (the "Effective Date") shown on
the Certificate of Arrangement issued by the Director under the CBCA giving
effect to the Arrangement, the following reorganization of capital shall occur
and shall be deemed to occur in the following order without any further act or
formality:
(a) The Articles of Continuation of IVI shall be amended to authorize a
class of exchangeable shares (the "Exchangeable Shares") and one Series A
Preferred Share of IVI (the "Series A Preferred Share").
(b) IVI shall issue to Newco one Series A Preferred Share in
consideration of the issuance by Newco to IVI of one share of the preferred
stock, $.01 par value, of Newco (the "Newco Preferred Stock"). The stated
capital of the Series A Preferred Share shall be equal to the fair market
value, as determined by the board of directors of IVI, of a share of Newco
Preferred Stock. No certificate shall be issued in respect of the Series A
Preferred Share.
(c) Each of the outstanding IVI Common Shares (other than IVI Common
Shares held by holders who have exercised their rights of dissent in
accordance with the Plan of Arrangement and who are ultimately entitled to
be paid fair value for such shares) will be exchanged either (i) with IVI,
for a number of Exchangeable Shares at the IVI Exchange Ratio or (ii) with
Newco, for a number of shares of Newco Common Stock at the IVI Exchange
Ratio, at the holder's election and Newco shall issue such number of shares
of Newco Common Stock. Each holder of IVI Common Shares (other than IVI
Common Shares held by holders who have exercised their rights of dissent in
accordance with the Plan of Arrangement and who are ultimately entitled to
be paid fair value for such shares) will receive that whole number of
Exchangeable Shares or shares of Newco Common Stock, as the case may be,
resulting from the exchange of such holder's IVI Common Shares. No
fractional shares of Newco Common Stock or fractional Exchangeable Shares
will be issued and no certificate therefor will be issued. Any holder of IVI
Common Shares who would otherwise be entitled to receive a fraction of an
Exchangeable Share or share of Newco Common Stock, as the case may be,
shall, upon surrender of his certificate or certificates representing IVI
Common Shares, receive a share certificate adjusted to the next lower whole
number of Newco Common Stock or Exchangeable Shares, as the case may be.
(d) Upon the exchange referred to in paragraph (c) above, each holder of
an IVI Common Share shall cease to be such a holder, shall have his name
removed from the register of holders of IVI Common Shares and shall become a
holder of either (i) the number of fully paid Exchangeable Shares to which
he is entitled as a result of the exchange referred to in paragraph (c) or
(ii) the number of fully paid shares of Newco Common Stock to which he is
entitled as a result of the exchange referred to in paragraph (c) and such
holder's name shall be added to the register of holders of Exchangeable
Shares or shares of Newco Common Stock, as the case may be.
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(e) The stated capital of the Exchangeable Shares will be equal to the
stated capital of the IVI Common Shares actually exchanged for Exchangeable
Shares immediately prior to the Arrangement.
(f) Pursuant to the Arrangement and the Voting Trust Agreement, the
holders of IVI Common Shares that elect to receive Exchangeable Shares (i)
will grant and transfer directly to Newco the Call Rights and (ii) will
receive directly from Newco the Voting Rights and the Exchange Rights.
(g) The one outstanding Series A Preferred Share held by Newco will be
exchanged for one IVI Common Share and Newco shall cease to be a holder of
the Series A Preferred Share, shall have its name removed from the register
of holders of Series A Preferred Shares, and Newco's name shall be added to
the register of holders of IVI Common Shares accordingly, and the one Series
A Preferred Share shall be cancelled by IVI.
(h) The stated capital of the one IVI Common Share referred to in
Section 2.1(g) shall be equal to the stated capital of the one Series A
Preferred Share prior to the Arrangement.
(i) The Newco Preferred Stock shall be purchased from IVI by Newco for
the fair market value determined by the board of directors of IVI in
accordance with Section 2.1(b) and immediately thereafter shall be cancelled
by Newco.
2.2 THE VOTING AND EXCHANGE TRUST AGREEMENT
Prior to the Effective Time, Newco, IVI and a Canadian trust company
reasonably acceptable to all the parties (the "Trustee"), shall execute and
deliver a Voting and Exchange Trust Agreement in substantially the form set
forth as Exhibit E hereto, and such changes and additions thereto as may be
reasonably requested by the Trustee together with such other terms and
conditions as may be agreed to by the parties hereto acting reasonably (as so
executed the "Voting Trust Agreement"). Newco shall issue and deposit with the
Trustee, for the benefit of the holders of the Exchangeable Shares, the one
share of Newco Special Voting Stock to be held in accordance with the Voting
Trust Agreement.
2.3 SUPPORT AGREEMENT
Prior to the Effective Time, Newco and IVI shall execute and deliver the
Support Agreement (the "Support Agreement") containing the terms and conditions
set forth in Exhibit F hereto, together with such other terms and conditions as
may be agreed to by the parties hereto acting reasonably.
2.4 DISSENTING SHARES
Notwithstanding anything in this Agreement to the contrary, IVI Common
Shares that are issued and outstanding immediately prior to the Effective Time
and that are held by shareholders who have not voted such shares in favour of
the Arrangement and who have delivered a written demand for appraisal of such
shares in the manner provided in Section 190 of the CBCA ("IVI Dissenting
Shares") shall not be exchanged for Exchangeable Shares or Newco Common Stock as
described in Section 2.1 and shall from and after the Effective Time represent
only the right to receive such consideration as shall be determined to be due to
such shareholder pursuant to Section 190 of the CBCA; provided, however, that
IVI Common Shares outstanding immediately prior to the Effective Time and held
by a person who shall, with the written approval of IVI if required by Section
190 of the CBCA, withdraw his demand for the value of his shares or lose his
right to demand to receive the value of his shares, in either case pursuant to
Section 190 of the CBCA, shall be deemed to be and become and have substituted
therefor, as of the Effective Time, the appropriate number of Exchangeable
Shares of IVI as specified in Section 2.1 without interest.
ARTICLE 3.00--THE MERGER
3.1 MERGER OF MERGER SUB WITH AND INTO CHECKMATE
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, Merger Sub shall be merged with and into Checkmate and the
separate existence of Merger Sub shall cease. Checkmate shall be the
surviving corporation in the Merger (the "Surviving Corporation").
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(b) As provided in Section 5.1, Checkmate and Merger Sub will file a
certificate of merger with the Secretary of State of the State of Georgia
(the "Georgia Certificate of Merger") and make all other filings or
recordings required by the Georgia Law in connection with the Merger. The
Merger will become effective on the Effective Date at the Effective Time as
specified in the Georgia Certificate of Merger duly filed with the Secretary
of State of Georgia.
3.2 EFFECT OF THE MERGER
The Merger shall have the effects set forth in the Georgia Law. Without
limiting the generality of the foregoing, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises, of a public as well
as a private nature, and be subject to all the restrictions, disabilities and
duties, of each of Merger Sub and Checkmate (collectively, the "Constituent
Corporations"). The Surviving Corporation shall be vested with the rights,
privileges, powers and franchises, all property (real, personal, and mixed) and
all debts due on whatever account and all other things in action or belonging
to, and all and every other interest of, each of the Constituent Corporations.
All debts, liabilities and duties of each of the Constituent Corporations shall
attach to the Surviving Corporation and may be enforced against it to the same
extent as if such debts, liabilities and duties had been incurred or contracted
by it.
3.3 SURVIVING CORPORATION ARTICLES OF INCORPORATION AND BY-LAWS; DIRECTORS
The Articles of Incorporation of Merger Sub shall be the Articles of
Incorporation of the Surviving Corporation immediately after the Effective Time,
until amended in accordance with applicable law, except that the name of the
Surviving Corporation shall be "IVI Checkmate Inc.". The By-laws of Merger Sub
shall be the By-laws of the Surviving Corporation immediately after the
Effective Time. The directors of the Surviving Corporation immediately after the
Effective Time shall be J. Xxxxxxxx Xxxxxx, Xxxxxx Xxxxxxx, L. Xxxxx Xxxxxxx and
Xxxxxxx X. Xxxxx.
3.4 CONVERSION OF CHECKMATE COMMON SHARES
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder of any shares of Checkmate Common Shares or
Merger Sub:
(i) Each share of common stock, par value $.01 per share, of Merger
Sub outstanding immediately prior to the Effective Time shall be
converted into and become one share of common stock of the Surviving
Corporation and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation.
(ii) Each Checkmate Common Share and the associated share purchase
right of Checkmate (a "Share") outstanding immediately prior to the
Effective Time shall, except as provided in Section 3.8 with respect to
Shares as to which appraisal rights have been exercised, and subject to
Section 3.7, be converted into the right to receive 1.2775 shares of
Newco Common Stock; provided, however, that the number of shares of Newco
Common Stock so to be received is subject to adjustment as provided in
Section 5.5. The ratio of 1.2775 shares of Newco Common Stock to one
Checkmate Common Share, as such ratio may be adjusted pursuant to Section
5.5 below, is hereinafter referred to as the "Checkmate Exchange Ratio".
(b) From and after the Effective Time, all Shares converted in
accordance with Section 3.4(a)(ii) shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such Shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration and any dividends or distributions with a record date after
the Effective Time theretofore paid or payable with respect to Newco Common
Stock ("Subsequent Dividends"). From and after the Effective Time, all
certificates representing the common stock of Merger Sub shall be deemed for
all purposes to represent the number of shares of Common Stock of the
Surviving Corporation into which they were converted in accordance with
Section 3.4(a)(i).
(c) The Newco Common Stock to be received in consideration pursuant to
the Merger by each holder of Shares is referred to herein as the "Merger
Consideration".
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3.5 CLOSING OF CHECKMATE TRANSFER BOOKS
At and after the Effective Time, holders of certificates representing Shares
shall cease to have any rights as shareholders of Checkmate and the stock
transfer books of Checkmate shall be closed with respect to Checkmate Common
Shares issued and outstanding immediately prior to the Effective Time and no
further transfer of such shares shall thereafter be made on such stock transfer
books. If, after the Effective Time, valid certificates previously representing
such shares are presented to the Surviving Corporation or the Exchange Agent
(duly endorsed as the Exchange Agent may require) they shall be exchanged as
provided in Section 3.6.
3.6 EXCHANGE AGENT
(a) Prior to the Effective Time, Newco shall appoint an agent (the
"Exchange Agent") for the purpose of exchanging certificates representing
Shares for the Merger Consideration. The Exchange Agent shall be a bank or
trust company to be agreed by IVI and Checkmate prior to the Effective Time.
For purposes of determining the Merger Consideration to be made available,
Newco shall assume that no shareholder of Checkmate will perfect his right
to appraisal of his Shares. Promptly following the Effective Time, Newco
will send, or will cause the Exchange Agent to send, to each holder of
Shares at the Effective Time a letter of transmittal for use in such
exchange.
(b) Each holder of Shares that have been converted into a right to
receive the Merger Consideration and Subsequent Dividends, upon surrender to
the Exchange Agent of a certificate or certificates representing Shares,
will be entitled to receive the Merger Consideration and Subsequent
Dividends payable in respect of such Shares. Until so surrendered, each such
certificate shall, after the Effective Time, represent for all purposes only
the right to receive the Merger Consideration and the Subsequent Dividends.
(c) If any portion of the Merger Consideration in respect of any Share
is to be issued to a person other than the registered holder of the Shares
represented by the certificate or certificates surrendered, it shall be a
condition to such issuance that the certificate or certificates so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required as a result of such
payment to a person other than the registered holder of such Shares or
establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not payable.
(d) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to paragraph (a) of this Section 3.6 in respect of
Shares for which appraisal rights have been perfected shall be returned to
Newco upon demand.
3.7 NO FRACTIONAL SHARES
No fractional shares of Newco Common Stock will be issued in connection with
the Merger and no certificate therefor will be issued. Any holder of Shares who
would otherwise receive a fractional share of Newco Common Stock shall, upon
surrender of his certificate or certificates representing Shares, receive a
share certificate adjusted to the next lower whole number of shares of Newco
Common Stock.
3.8 DISSENTING SHARES
Notwithstanding anything in this Agreement to the contrary, Shares that are
issued and outstanding immediately prior to the Effective Time and held by a
holder who has delivered written notice to Checkmate before the vote has been
taken demanding payment for his Shares if the Merger is consummated and has not
voted in favour of the Merger and who has otherwise perfected his dissenters'
rights in the manner provided in the Georgia Law ("Checkmate Dissenting Shares")
shall not be canceled and converted into a right to receive the Merger
Consideration in accordance with the Checkmate Exchange
6
Ratio as described in Section 3.4 and shall from and after the Effective Time
represent only the right to receive such consideration as shall be determined to
be due to such shareholder pursuant to the Georgia Law, unless such holder fails
to perfect or withdraws or otherwise loses his right to dissent. If after the
Effective Time such holder fails to perfect or waives, rescinds, withdraws or
otherwise loses his right to dissent, such Shares shall be treated as if they
had been converted as of the Effective Time into a right to receive the Merger
Consideration payable in respect of such Shares pursuant to Section 3.4 without
interest.
3.9 LOST CERTIFICATES
If any certificate which immediately prior to the Effective Time represented
outstanding Checkmate Common Shares that were exchanged pursuant to Section 3.6
has been lost, stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such certificate to be lost, stolen or destroyed, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
certificate, certificates representing shares of Newco Common Stock (and any
dividends or distributions with respect thereto) deliverable in respect thereof
as determined in accordance with Section 3.6. When authorizing such payment in
exchange for any lost, stolen or destroyed certificate, the person to whom
certificates represented shares of Newco Common Stock are to be issued shall, as
a condition precedent to the issuance thereof, give a bond satisfactory to the
Surviving Corporation and the Exchange Agent, as the case may be, in such sum as
the Surviving Corporation may direct or otherwise indemnify the Surviving
Corporation and the Exchange Agent in a manner satisfactory to the Surviving
Corporation and the Exchange Agent against any claim that may be made against
the Surviving Corporation or the Exchange Agent with respect to the certificate
alleged to have been lost, stolen or destroyed.
ARTICLE 4.00--POST-CLOSING CORPORATE STRUCTURE
4.1 POST-CLOSING CORPORATE STRUCTURE
It is the parties' intention, on or immediately after the Effective Date, to
restructure the corporate holdings of Newco, IVI and the Surviving Corporation,
in a tax-efficient manner which does not adversely affect the pooling treatment
of the Transactions, such that
(i) the Surviving Corporation acquires (by merger or otherwise) the
assets and liabilities of, or the stock of, IVI International Inc., a
Delaware corporation and International Verifact Inc. ("U.S."), a Delaware
corporation, and
(ii) the shareholdings of IVI in NTN and IVI Ingenico Inc. are
transferred to Newco. For greater certainty, 1245344 Ontario Limited
shall remain a subsidiary of IVI.
It is also the parties' intention, on or immediately after the Effective
Date, to take the steps necessary to have the Surviving Corporation, as a
"statutory close corporation", eliminate its board of directors, in accordance
with the Georgia Law.
ARTICLE 5.00--ADDITIONAL AGREEMENTS
5.1 CLOSING
Unless this Agreement shall have been terminated pursuant to Section 12.1
hereof, and subject to the satisfaction or waiver of the conditions set forth in
Article 11 hereof, the consummation of the Transactions (the "Closing") will
take place two business days after satisfaction or waiver of the conditions set
forth in Article 11 hereof, at the offices of Xxxxxxx Xxxxxx, Xxxxxxx Xxxxx
Canada Tower, 000 Xxxx Xxxxxx Xxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx, X0X 0X0,
unless another date, time or place is agreed to in writing by the parties
hereto. At the Closing, the parties hereto shall deliver the documents
contemplated hereby
7
together with such other customary documents as may be reasonably requested by
the parties. Concurrently with the Closing, the Articles of Arrangement shall be
filed with the Director and the Georgia Certificate of Merger shall be filed
with the Secretary of State of the State of Georgia.
5.2 CONTEMPORANEOUS TRANSACTIONS
The parties hereto agree that each of the Transactions that is in fact
consummated will, to the extent permitted by applicable law, be consummated
substantially contemporaneously with any other Transaction that is in fact
consummated.
5.3 ACCOUNTING CONSEQUENCES
It is intended by the parties hereto that the Transactions shall qualify for
accounting treatment as a pooling of interests under GAAP.
5.4 MATERIAL ADVERSE EFFECT
When used in connection with IVI or any of its subsidiaries, or Checkmate or
any of its subsidiaries, as the case may be, any reference to any event, change
or effect being "material" means any material event, change or effect related to
the condition (financial or otherwise), properties, Liabilities, businesses,
operations, results of operations or prospects of such entity or group of
entities. When used in connection with IVI or any of its subsidiaries, or
Checkmate or any of its subsidiaries, as the case may be, the term "Material
Adverse Effect" means any change or effect that, individually or when taken
together with any other occurrences, events, changes or effects that have
occurred prior to the date of determination of the occurrence of the Material
Adverse Effect, is or is reasonably likely to be materially adverse to
(i) the business, properties, financial condition, results of
operations or prospects of IVI and its subsidiaries or Checkmate and its
subsidiaries, as the case may be, in each case taken as a whole or
(ii) the ability of IVI or Checkmate, as the case may be, to perform
its obligations under this Agreement or to consummate the Transactions
contemplated by this Agreement; provided that "Material Adverse Effect"
shall not be deemed to include the impact of the Transactions and
compliance with the provisions of this Agreement on the operating
performance of the parties.
5.5 ADJUSTMENTS TO EXCHANGE RATIOS
The IVI Exchange Ratio and the Checkmate Exchange Ratio shall be
proportionally adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into IVI Common Shares or Checkmate Common Shares), reorganization,
recapitalization or other like change with respect to IVI Common Shares or
Checkmate Common Shares which has a record date or (if no record date is
required or established, by operation of law or otherwise) effective date on or
after the date hereof and prior to the Effective Date.
5.6 DISSENTERS' RIGHTS
Each of IVI and Checkmate shall give the other
(i) prompt notice of any written demand of a right of dissent,
withdrawals of such demands, and any other instruments served pursuant to
the CBCA or the Georgia Law and received by IVI or Checkmate, as the case
may be, and
(ii) the opportunity to participate in all negotiations and
proceedings with respect to such demands. Neither IVI nor Checkmate
shall, except with the prior written consent of the other, make any
payment with respect to, or offer to settle or settle, any such demands.
8
5.7 SHAREHOLDER MEETINGS; PROXY MATERIALS; FORM S-4
(a) Unless the Board of Directors of Checkmate shall take any action
permitted by the third sentence of this Section 5.7(a) or the Board of
Directors of IVI shall take any action permitted by the third sentence of
Section 5.7(b), Checkmate shall cause a meeting of its shareholders (the
"Checkmate Shareholders' Meeting") to be duly called and held as soon as
reasonably practicable after the date of this Agreement for the purpose of
voting on the approval and adoption of this Agreement and the Merger (the
"Checkmate Shareholder Approval"). Except as provided in the next sentence,
the Board of Directors of Checkmate shall recommend approval and adoption of
this Agreement and the Merger by the shareholders of Checkmate. The Board of
Directors of Checkmate shall be permitted to
(i) not recommend to Checkmate's shareholders that they give the
Checkmate Shareholder Approval,
(ii) withdraw or modify in a manner adverse to IVI its recommendation
to Checkmate's shareholders that they give the Checkmate Shareholder
Approval, or
(iii) cancel the Checkmate Shareholders' Meeting, but in each of
cases (i), (ii) and (iii) only if and to the extent that Checkmate has
complied with Section 10.2(a) and a Superior Proposal with respect to
Checkmate is pending at the time Checkmate's Board of Directors
determines to take any such action or inaction. In connection with the
Checkmate Shareholders' Meeting, Checkmate
(iv) will promptly prepare and file with the SEC, will use its
reasonable best efforts to have cleared by the SEC and will thereafter
mail to its shareholders as promptly as practicable a proxy statement and
all other materials for such meeting (the "Checkmate Proxy Statement"),
(v) will use its reasonable best efforts, subject to the immediately
preceding sentence, to obtain the Checkmate Shareholder Approval, and
(vi) will otherwise comply with all legal requirements applicable to
such meeting.
(b) Unless the Board of Directors of IVI shall take any action permitted
by the third sentence of this Section 5.7(b) or the Board of Directors of
Checkmate shall have taken any action permitted by the third sentence of
Section 5.7(a), IVI shall cause a meeting of its shareholders (the "IVI
Shareholders' Meeting") to be duly called and held as soon as reasonably
practicable after the date of this Agreement for the purpose of voting on
the approval and adoption of this Agreement and the Arrangement (the "IVI
Shareholder Approval"). Except as provided in the next sentence, the Board
of Directors of IVI shall recommend approval and adoption of this Agreement
and the Arrangement by IVI's shareholders. The Board of Directors of IVI
shall be permitted to
(i) not recommend to IVI's shareholders that they give the IVI
Shareholder Approval,
(ii) withdraw or modify in a manner adverse to Checkmate its
recommendation to IVI's shareholders that they give the IVI Shareholder
Approval, or
(iii) cancel the IVI Shareholders' Meeting, but in each of cases (i),
(ii) and (iii) only if and to the extent that IVI has complied with
Section 10.2(a) and a Superior Proposal with respect to IVI is pending at
the time IVI's Board of Directors determines to take any such action or
inaction. In connection with the IVI Shareholders' Meeting, IVI
(x) will promptly prepare and file with the OSC, the TSE and the SEC,
will use its reasonable best efforts to have cleared by the OSC, the TSE
and the SEC and will thereafter mail to its shareholders as promptly as
practicable the proxy statement and management information circular and
all other materials for such meeting (the "IVI Proxy Statement", and
collectively with the Checkmate Proxy Statement, the "Proxy Statements"),
9
(y) will use its reasonable best efforts, subject to the immediately
preceding sentence, to obtain the IVI Shareholder Approval, and
(z) will otherwise comply with all legal requirements applicable to
such meeting.
(c) Newco shall, and IVI and Checkmate shall cause Newco, promptly to
prepare and file with the SEC a registration statement (the "Registration
Statement") on Form S-4 under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Newco Common Stock issuable
at the Effective Time in connection with the Arrangement and the Merger and
take any action required to be taken under applicable SEC, state and
provincial securities Laws, the regulations of the TSE and the regulations
of NASD for the Nasdaq National Market in connection with the issuance of
such Newco Common Stock. Subject to the terms and conditions of this
Agreement and unless the Board of Directors of Checkmate or IVI, as the case
may be, shall take any action permitted by the third sentence of paragraph
(a) or (b) of Section 5.7 above, as the case may be, IVI and Checkmate shall
cause Newco to use its reasonable best efforts to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after the Registration Statement is filed.
(d) Newco shall, and IVI and Checkmate shall cause Newco, to prepare and
file as soon as practicable after the Effective Date with the SEC a
registration statement on Form S-3 (the "Form S-3") under the Securities
Act, with respect to the shares of Newco Common Stock issuable in connection
with the exchange of the Exchangeable Shares and take any action required to
be taken under applicable SEC, state and provincial securities Laws, the
regulations of the TSE and the regulations of NASD for the Nasdaq National
Market in connection with the issuance of such shares of Newco Common Stock.
Subject to the terms and conditions of this Agreement and unless it is
determined by counsel to Newco that Newco is not eligible to use the Form
S-3, IVI and Checkmate shall cause Newco to use its reasonable best efforts
to have such registration statement on Form S-3 declared effective under the
Securities Act as promptly as practicable after such registration statement
is filed.
(e) Newco shall, and IVI and Checkmate shall cause Newco, if required,
promptly to prepare and file with the OSC and certain other securities
regulatory authorities in Canada a preliminary "non-offering" prospectus
(together with the (final) prospectus, the "Prospectus") under subsection
53(2) of the OSA and the equivalent provisions in the securities Laws of
such other jurisdictions, or file such other documents and take such other
steps as may be required so that Newco will become a "reporting issuer"
under the OSA and the securities Laws of such other jurisdictions, and take
any action required to be taken under applicable provincial securities Laws
and the regulations of the TSE in connection therewith. Subject to the terms
and conditions of this Agreement and unless the Board of Directors of
Checkmate or IVI, as the case may be, shall take any action permitted by the
third sentence of paragraph (a) or (b) of Section 5.7 above, as the case may
be, IVI and Checkmate shall cause Newco to use its reasonable best efforts
to obtain a receipt for the (final) "non-offering" prospectus or such other
document on or before the Effective Date.
5.8 ACCESS TO INFORMATION; CONFIDENTIALITY
Upon reasonable notice and subject to restrictions contained in
confidentiality agreements to which such party is subject, IVI and Checkmate
shall each (and shall cause each of their subsidiaries to) afford to the
officers, employees, accountants, counsel and other representatives of the
other, reasonable access during the period prior to the Effective Date, to all
its properties, books, contracts, commitments and records and, during such
period, IVI and Checkmate each shall (and shall cause each of their subsidiaries
to) furnish promptly to the other all information concerning its business,
properties and personnel as such other party may reasonably request, and each
shall make available to the other the appropriate individuals (including
attorneys, accountants and other professionals) for discussion of the other's
business, properties
10
and personnel as either party may reasonably request. Each party shall keep such
information confidential in accordance with the terms of the existing
confidentiality and standstill agreement (the "Confidentiality/ Standstill
Agreement") between IVI and Checkmate, notwithstanding the expiration thereof on
March 31, 1998.
5.9 CONSENTS; APPROVALS
IVI, Checkmate and Newco shall each use all reasonable efforts to obtain all
Approvals and IVI, Checkmate and Newco shall make all filings (including,
without limitation, all filings with United States, Canadian federal and
provincial and foreign governmental entities) required in connection with the
authorization, execution and delivery of this Agreement by IVI, Newco, Merger
Sub and Checkmate and the consummation by them of the transactions contemplated
hereby. IVI and Checkmate (with respect to themselves and their respective
subsidiaries), upon the reasonable request of any party hereto, shall furnish
all information required to be included in the Registration Statement, Proxy
Statements, Form S-3, Prospectus or for any Approval or other filing to be made
pursuant to all Laws in connection with the transactions contemplated by this
Agreement.
5.10 STOCK OPTIONS
(a) On the Effective Date, IVI's obligations with respect to each
outstanding option to purchase IVI Common Shares (each an "IVI Option")
under IVI's 1997 Stock Option Plan ("IVI Option Plan"), and Checkmate's
obligations with respect to each outstanding option to purchase Checkmate
Common Shares (each a "Checkmate Option") under Checkmate's 1988 Employee
Incentive Stock Option Plan, 1993 Stock Option Plan and 1994 Directors'
Stock Option Plan (individually, a "Checkmate Stock Option Plan," and,
collectively, the "Checkmate Stock Option Plans") (the IVI Option Plan and
the Checkmate Stock Option Plans are collectively referred to herein as the
"Stock Option Plans"), whether vested or unvested, will be assumed by Newco
and, on such assumption, the rights to acquire IVI Common Shares under the
IVI Option Plan and the rights to acquire Checkmate Common Shares under the
Checkmate Stock Option Plans shall be exchanged for rights to acquire Newco
Common Stock under such plans. Each IVI Option and Checkmate Option so
assumed by Newco under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the IVI Option Plan or the
Checkmate Stock Option Plans, as the case may be, and the agreement pursuant
to which such IVI Option or Checkmate Option, as the case may be, was issued
as in effect immediately prior to the Effective Date, except that
(i) such IVI Option or Checkmate Option, as the case may be, will be
deemed to constitute an option to purchase that number of shares of Newco
Common Stock that the holder of such option would have been entitled to
receive pursuant to the Arrangement or the Merger, as the case may be,
had such holder exercised such option immediately prior to the Effective
Date (not taking into account whether such option was in fact
exercisable), rounded down to the nearest whole number of shares of Newco
Common Stock, and
(ii) the per share exercise price for the shares of Newco Common
Stock issuable upon exercise of such assumed IVI Option or Checkmate
Option, as the case may be, will be equal to the quotient determined by
dividing the exercise price per share of IVI Common Shares or Checkmate
Common Shares at which such IVI Option or Checkmate Option, as the case
may be, was exercisable immediately prior to the Effective Date by the
IVI Exchange Ratio or the Checkmate Exchange Ratio, as the case may be,
and rounding the resulting exercise price up to the nearest whole cent.
(b) It is the intention of the parties that the IVI Options and
Checkmate Options assumed by Newco qualify following the Effective Date as
incentive stock options as defined in the Code
11
("ISOs"), to the extent the IVI Options or Checkmate Options, as the case
may be, qualified as ISOs prior to the Effective Date.
(c) IVI and Checkmate shall obtain any required consents of holders of
such options to such assumptions prior to the Effective Date.
(d) As soon as practicable after the Effective Date, Newco shall deliver
to each holder of an outstanding IVI Option or Checkmate Option, an
appropriate notice setting forth such holder's rights pursuant thereto and
such IVI Option or Checkmate Option shall continue in effect on the same
terms and conditions (including further anti-dilution provisions, and
subject to the adjustments required by this Section 5.10 after giving effect
to the Transactions). Newco shall comply with the terms of all such IVI
Options and Checkmate Options. Newco shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Newco
Common Stock for delivery pursuant to the terms set forth in this Section
5.10.
(e) Newco shall file and cause to become effective not later than the
Effective Date a registration statement on Form S-8 under the Securities Act
with respect to the issuance of shares of Newco Common Stock upon exercise
of those IVI Options and Checkmate Options referred to in this Section 5.10
and shall keep such registration statement effective throughout the term of
such options.
5.11 AGREEMENTS OF AFFILIATES
Each of IVI and Checkmate shall deliver to Newco and to the other, prior to
the date the Registration Statement becomes effective under the Securities Act,
a letter (each, an "Affiliate Letter") identifying all persons who are, or may
be deemed to be, at the Effective Time, affiliates of IVI or Checkmate, as the
case may be, for purposes of Rule 145 under the Securities Act. Each of IVI and
Checkmate shall use its reasonable best efforts to cause each person who is
identified as an "affiliate" in the Affiliate Letter to deliver to Newco and to
the other, prior to the Effective Date, a written agreement (an "Affiliate
Agreement") substantially in the form of Exhibit G-1 or G-2, respectively. Newco
shall be entitled to place restrictive legends upon certificates for shares of
Newco Common Stock issued to affiliates of Checkmate or IVI in connection with
the Transactions to enforce applicable provisions of Law.
5.12 INDEMNIFICATION AND INSURANCE
The provisions of this Section 5.12 are intended for the benefit of the
parties indemnified herein, and shall be enforceable by such parties.
(a) The By-Laws of IVI and the By-Laws of the Surviving Corporation
shall not be amended, repealed or otherwise modified, for a period of six
years from the Effective Date in any manner that would adversely affect the
rights thereunder of individuals who immediately prior to the Effective Date
were directors, officers, employees or agents of IVI or Checkmate, as the
case may be, unless such modification is required by Law.
(b) Newco shall, to the fullest extent permitted under applicable Law,
indemnify and hold harmless, each present and former director, officer,
employee, fiduciary and agent of each of IVI and Checkmate or any of their
subsidiaries (collectively, the "Indemnified Parties") against any costs or
expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, Liabilities and amounts paid in settlement in connection with any
Litigation, claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining to
any action or omission occurring at or prior to the Effective Date
(including, without limitation, the transactions contemplated by this
Agreement) for a period of six years after the Effective Date; PROVIDED,
HOWEVER, that in the event that any claim or claims for indemnification are
asserted or made within such six-year period, all rights to indemnification
in respect of any such claim or claims shall continue until the disposition
of any and all such claims. The Indemnified Parties as a group may
12
retain only one law firm to represent them with respect to any single action
unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties. Any counsel retained by the Indemnified Parties shall
be reasonably satisfactory to Newco and Newco shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld).
(c) If Newco or any successors or assigns of Newco shall consolidate
with or merge into any other person and shall not be the continuing or
surviving person of such consolation or merger or shall transfer all or
substantially all of its properties to any person, then and in each case,
proper provision shall be made, so that such successors and assigns shall
assume the obligations of Section 5.12(b).
(d) Newco shall obtain directors' and officers' insurance for the
directors and officers of Newco, Checkmate and IVI, including, without
limitation, policy limits at least as high as, and risks protected against
at least as expansive as, Checkmate's just prior to the date hereof.
5.13 NOTIFICATION OF CERTAIN MATTERS
Each party hereto shall give prompt notice to all other parties of:
(i) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be likely to cause any representation
or warranty of such party contained in this Agreement to be incomplete,
untrue or inaccurate; and
(ii) any failure of such party materially to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by
it hereunder;
PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section
5.13 shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice; and
PROVIDED, FURTHER, that failure to give such notice shall not be treated as
a breach of covenant for the purposes of Sections 11.2(b) or 11.3(b) unless the
failure to give such notice results in material prejudice to IVI or Checkmate,
as the case may be.
5.14 FURTHER ACTION
Upon the terms and subject to the conditions hereof, each of the parties
hereto shall use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, to obtain in a timely manner all
necessary waivers, consents and Approvals and to effect all necessary
registrations and filings, and to otherwise satisfy or cause to be satisfied all
conditions precedent to its obligations under this Agreement. In addition, IVI
and Checkmate shall provide each other with such cooperation and information as
either of them reasonably may request of the other in filing any Tax Return,
amended Tax Return or claim for refund, determining a Liability for Taxes or a
right to a refund of Taxes, participating in or conducting any audit or other
proceeding in respect of Taxes or making representations to or furnishing
information to parties subsequently desiring to purchase any of the Newco Common
Stock. Such cooperation and information shall include providing copies of
relevant Tax Returns or portions thereof, together with accompanying schedules,
related work papers and documents relating to rulings or other determinations by
Tax authorities.
13
5.15 PUBLIC ANNOUNCEMENTS
IVI and Checkmate shall consult with each other before issuing any press
release or otherwise making any public statements with respect to the
Transactions or this Agreement and shall not issue any such press release or
make any such public statement without the prior consent of such other party,
which shall not be unreasonably withheld; PROVIDED, HOWEVER, that IVI or
Checkmate may, without the prior consent of such other party, issue such press
release or make such public statement as may upon the advice of counsel be
required by Law, the SEC, NASD, TSE, OSC or any other governmental entity to
which such party is subject if it has used all reasonable efforts to consult
with such other party as to the timing and content of such release or statement.
5.16 LISTING OF NEWCO COMMON STOCK AND EXCHANGEABLE SHARES
Newco shall use its reasonable best efforts to cause the shares of Newco
Common Stock to be issued in the Transactions (including shares of Newco Common
Stock to be issued as a result of rights attaching to the Exchangeable Shares)
to be approved for quotation on the Nasdaq National Market and listing on the
TSE. Newco and IVI shall use their reasonable best efforts to cause the
Exchangeable Shares to be approved for listing on the TSE.
5.17 CONVEYANCE TAXES
IVI and Checkmate shall cooperate in the preparation, execution and filing
of all returns, questionnaires, applications or other documents regarding any
real property transfer or gains, sales, use, transfer, value added, stock
transfer and stamp taxes, any transfer, recording, registration and other fees,
and any similar taxes which become payable in connection with the Transactions
that are required or permitted to be filed on or before the Effective Date.
5.18 POOLING ACCOUNTING TREATMENT
Each of IVI and Checkmate agree not to knowingly take any action that would
adversely affect the ability of Newco to treat the Transactions as a pooling of
interests under GAAP.
5.19 DIRECTORS AND OFFICERS
Effective as of the Effective Time:
(a) the Newco Board of Directors shall increase the number of Directors
from four to nine and the Board of Directors shall be constituted in the
following manner:
(i) three nominees of IVI (the "IVI Directors"), including Xxxxxx
Xxxxxxx and L. Xxxxx Xxxxxxx;
(ii) three nominees of Checkmate (the "Checkmate Directors"),
including J. Xxxxxxxx Xxxxxx and Xxxxxxx X. Xxxxx; and
(iii) three Directors mutually agreed upon by IVI and Checkmate (the
"Outside Directors"), which shall include Xxxxxx Xxxxxxx and a second
nominee of Ingenico;
(b) the Board of Directors of the Surviving Corporation shall be
comprised of four members, being J. Xxxxxxxx Xxxxxx, Xxxxxx Xxxxxxx, L.
Xxxxx Xxxxxxx and Xxxxxxx X. Xxxxx;
(c) IVI shall cause all of its Directors but L. Xxxxx Xxxxxxx to resign,
the number of Directors who shall constitute the whole Board shall be
reduced to three and the Directors shall elect J. Xxxxxxxx Xxxxxx and the
senior operating officer of IVI as new Directors for the balance of the term
and until their successors shall have been elected and qualified;
14
(d) the Newco Board of Directors shall cause the officers of Newco to
include J. Xxxxxxxx Xxxxxx as Chairman, Xxxxxx Xxxxxxx as Vice-Chairman and
L. Xxxxx Xxxxxxx as President and Chief Executive Officer; provided that in
the event that the Chairman becomes inactive (as defined in his employment
agreement) for any reason, the Vice-Chairman shall assume the position of
Chairman;
(e) the Board of Directors of the Surviving Corporation shall cause the
Officers of the Surviving Corporation to include L. Xxxxx Xxxxxxx as Chief
Executive Officer, Xxxxxxx X. Xxxxx as President and Chief Operating
Officer, Xxxxxxx XxXxxxxx as Executive Vice-President, Sales and Marketing,
Xxxx X. Xxxxxxx as Executive Vice-President and Chief Financial Officer and
Xxxx Xxxxxxx as Vice-President, Development; and
(f) the Newco Board of Directors shall appoint and constitute four
Committees of the Board of Directors, being the Audit Committee, the
Nomination/Governance Committee, the Compensation Committee and the
Executive Committee. The Executive Committee shall be comprised of J.
Xxxxxxxx Xxxxxx, L. Xxxxx Xxxxxxx and Xxxxxx Xxxxxxx. The Executive
Committee's mandate will include the review of key operational and strategic
initiatives of management and will be regularly consulted by management.
Each of the other committees will be comprised of three members, being a
nominee of the IVI Directors, a nominee of the Checkmate Directors and a
nominee of the Outside Directors, except for the Nomination/Governance
Committee which shall be comprised of four members. In the case of the
Nomination/Governance Committee, it shall be comprised of J. Xxxxxxxx
Xxxxxx, Xxxxxx Xxxxxxx, Xxxxxx Xxxxxxx and one Outside Director, who is not
associated with Ingenico, who shall be chairman of such committee.
5.20 STRATEGIC ALLIANCE WITH INGENICO
IVI shall assign to Newco, in a tax-efficient manner, as of the Effective
Time, all of its right, title, interest and obligations in, to and under certain
agreements between IVI and Ingenico, being the Master Alliance Agreement dated
December 5, 1996, the Investment Agreement dated December 5, 1996, as amended,
the Marketing and Distribution Agreement dated December 17, 1996, the Joint
Development and Procurement Agreement dated December 17, 1996, the Technology
License Agreement dated December 17, 1996 and the Latin America Unanimous
Shareholders' Agreement dated December 17, 1996.
5.21 FAIR PRICE AND BUSINESS COMBINATIONS REQUIREMENTS
Checkmate shall take all steps necessary to ensure that the provisions of
Article 11, Part 2 and Part 3, Sections 14-2-1110 through 1113 and 14-2-1131
through 1133 (and any successor provisions thereto) and any other applicable
State Take-Over Laws of the Georgia Law are satisfied and do not in any way
inhibit, affect or prohibit the Transactions.
5.22 SHAREHOLDER PROTECTION RIGHTS REDEMPTION
Checkmate shall take all necessary action (including, if required, redeeming
all of the outstanding rights or amending or terminating the Shareholder
Protection Rights Agreement between Checkmate and First Union National Bank
dated October 13, 1997 (the "Shareholder Protection Rights Agreement")) so that
the entering into of this Agreement and consummation of the transactions
contemplated hereby do not and will not result in the grant of any rights to any
person under the Shareholder Protection Rights Agreement or enable or require
such rights to be exercised, distributed or triggered. Checkmate shall not,
except in accordance with the acceptance of a Superior Proposal, waive,
terminate or otherwise render the Shareholder Protection Rights Agreement
inoperative with respect to any other Acquisition Proposal.
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5.23 EMPLOYMENT AGREEMENTS
On or before the Effective Date Newco or one of its subsidiaries shall enter
into or assume responsibility for Employment Agreements with J. Xxxxxxxx Xxxxxx,
Xxxxxx Xxxxxxx, L. Xxxxx Xxxxxxx, Xxxxxxx X. Xxxxx and Xxxx X. Xxxxxxx,
substantially on the terms set forth in Exhibit H to take effect at the
Effective Time.
5.24 REORGANIZATION TREATMENT
Each of IVI and Checkmate agree not to knowingly take any action that will
adversely affect the ability of IVI, Checkmate, Newco and Merger Sub to treat
(i) the Merger as a reorganization under Sections 368 (a)(1)(A) and
368(a)(2)(E) of the Code,
(ii) the Arrangement as a reorganization of capital under Section 86
of the ITA, and
(iii) the transfers of IVI Common Shares, Call Rights and Checkmate
Common Shares to Newco as a tax-free transaction under Section 351 of the
Code.
5.25 COMBINED FINANCIAL RESULTS
Each of Surviving Corporation, IVI and Newco covenant and agree for the
benefit of the persons specified in Schedules 6.25 and 7.25 that, as promptly as
practicable following the Effective Time and in any event no later than 45 days
after the end of the calendar month in which the Effective Time occurs it will
publicly release the combined financial results of IVI and the Surviving
Corporation for the 30 or 31-day period ending on a calendar month end following
the Effective Date.
ARTICLE 6.00--REPRESENTATIONS AND WARRANTIES OF IVI
Except as set forth in the IVI Disclosure Schedule, IVI hereby represents
and warrants to Checkmate that:
6.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES
IVI and each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite corporate power and
authority and is in possession of or has duly made all federal, state,
provincial, local and foreign governmental franchises, grants, authorizations,
licences, permits, easements, consents, certificates, rights, filings,
registration declarations, approvals and orders ("Approvals") necessary to own,
lease and operate the properties it purports to own, operate or lease and to
carry on its business as it is now being conducted, except where the failure to
have such power, authority and Approvals would not have a Material Adverse
Effect. Each of IVI and each of its subsidiaries is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not have a Material Adverse Effect. A true and complete
list of all of IVI's subsidiaries, together with the jurisdiction of
incorporation or organization of each subsidiary is set forth in Section 6.1 of
the written disclosure schedule previously delivered by IVI to Checkmate (the
"IVI Disclosure Schedule"). Except as set forth in Section 6.1 of the IVI
Disclosure Schedule, IVI or one of its subsidiaries owns all of the issued and
outstanding equity or similar securities of each IVI subsidiary. No equity or
similar securities of any IVI subsidiary are or may become required to be issued
by reasons of any Rights, and there are no Contracts by which IVI or any IVI
subsidiary is bound to issue additional equity or similar securities or Rights
or by which IVI or any IVI subsidiary is or may be bound to transfer any equity
or similar securities of any IVI subsidiary. There are no Contracts relating to
the rights of IVI or any IVI subsidiary to vote or to dispose of any equity or
similar
16
securities of any IVI subsidiary. All of the equity or similar securities of
each IVI subsidiary held by IVI or another IVI subsidiary are fully paid and
nonassessable under the applicable corporation Law of the jurisdiction in which
such subsidiary is incorporated or organized and are owned by IVI or an IVI
subsidiary free and clear of any Lien. Except as set forth in Section 6.1 of the
IVI Disclosure Schedule, neither IVI nor any IVI subsidiary directly or
indirectly owns any equity or similar interest in, or any Rights in, any
corporation, partnership, joint venture or other business association or entity.
6.2 ARTICLES OF CONTINUATION AND BY-LAWS; MINUTES
IVI has heretofore furnished to Checkmate a complete and correct copy of its
Articles of Continuation and By-Laws, as amended to date, and equivalent
organizational documents of each of its subsidiaries. Such Articles of
Continuation, By-Laws and equivalent organizational documents of each of its
subsidiaries are in full force and effect. Neither IVI nor any of its
subsidiaries is in violation of any of the provisions of its Articles of
Continuation or By-Laws or equivalent organizational documents. The minute books
of IVI and its subsidiaries have been made available to Checkmate for review.
Except as disclosed in Section 6.2 of the IVI Disclosure Schedule, the minute
books of IVI and its subsidiaries provided to Checkmate pursuant to this Section
6.2 are true and complete in all material respects as of the date of this
Agreement and accurately reflect in all material respects all proceedings of the
Board of Directors and equity securities holders thereof.
6.3 CAPITALIZATION
The authorized capital stock of IVI consists of an unlimited number of IVI
Common Shares and an unlimited number of preference shares, issuable in series
(the "IVI Preference Shares"). As of January 8, 1998:
(i) 9,163,135 IVI Common Shares were issued and outstanding, all of
which are validly issued, fully paid and nonassessable under the CBCA.
None of the outstanding shares of capital stock of IVI has been issued in
violation of any preemptive rights of any current or past holder of IVI
share capital;
(ii) no IVI Common Shares were held by subsidiaries of IVI;
(iii) IVI has outstanding IVI Options to purchase 477,100 IVI Common
Shares pursuant to the IVI Option Plan. Section 6.3 of the IVI Disclosure
Schedule accurately sets forth the name of each optionee, the number of
IVI Common Shares subject to each such IVI Option, the date of grant,
exercise price and termination date of each such IVI Option, and a
vesting schedule for each such IVI Option. Section 6.3 of the IVI
Disclosure Schedule sets forth a true and correct copy of the IVI Option
Plan;
(iv) except as is provided by the Investment Agreement between IVI
and Ingenico dated December 5, 1996, as amended (the "Participation
Right") or as set forth in this Section 6.3 or in Section 6.3 or Section
6.11 of the IVI Disclosure Schedule, there are not any shares of capital
stock or other ownership interests of IVI authorized, reserved for
issuance, issued or outstanding or any outstanding Rights relating to the
share capital or other ownership interests of IVI;
(v) no IVI Preference Shares were issued or outstanding.
No change in such capitalization has occurred between January 8, 1997 and
the date hereof, except for the issuance of IVI Common Shares under the exercise
of options or other Rights outstanding prior to January 8, 1998.
17
6.4 AUTHORITY RELATIVE TO THIS AGREEMENT
IVI has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by IVI and the consummation by IVI of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of IVI are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than the
approval and adoption of the Arrangement by the holders of at least two-thirds
of the outstanding shares of IVI Common Shares who are permitted to, and who,
vote in accordance with and subject to the CBCA, the OSA, IVI's Articles of
Continuation and By-Laws and the approval of the Court in accordance with the
CBCA). The Board of Directors of IVI has determined that it is advisable and in
the best interest of IVI's shareholders for IVI to enter into a business
combination with Checkmate, Newco and Merger Sub upon the terms and subject to
the conditions of this Agreement. This Agreement has been duly and validly
executed and delivered by IVI and, assuming the due authorization, execution and
delivery by Checkmate, Newco and Merger Sub, as applicable, and subject to
approval by the holders of IVI Common Shares and approval of the Court,
constitutes a legal, valid and binding obligation of IVI.
6.5 MATERIAL CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND CONSENTS
(a) Section 6.5(a) of the IVI Disclosure Schedule includes a list of:
(i) all material Contracts of IVI and its subsidiaries including,
without limitation,
A. any Contract which restricts or prohibits IVI or any
subsidiary of IVI from engaging in any business activity in any
geographic area, line of business or otherwise in competition with
any person, and
B. any Contracts with Ingenico; and
(ii) all agreements which, as of the date hereof, would be required
to be filed as an exhibit to Form 10-K filed by IVI pursuant to the
requirements of the Exchange Act and the SEC's rules thereunder ((i) and
(ii) being, collectively, the "IVI Material Contracts").
(b) The execution and delivery of this Agreement by IVI does not, and
the performance of this Agreement by IVI will not,
(i) conflict with or result in a default or violation of the Articles
of Continuation or By-Laws or equivalent organizational documents of IVI
or any of its subsidiaries,
(ii) conflict with or violate any Law or Order applicable to IVI or
any of its subsidiaries or by which its or any of their respective
businesses or properties is bound or affected, or
(iii) result in any default or violation, or impair IVI's or any of
its subsidiaries' rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any IVI Material Contract, or result in
the creation of a Lien on any of the properties of IVI or any of its
subsidiaries pursuant to any Contract or Approval to which IVI or any of
its subsidiaries is a party or by which IVI or any of its subsidiaries or
its or any of their respective properties is bound or affected.
(c) No Approval of or with any court, administrative agency or
commission or other governmental authority or instrumentality, federal,
state, provincial, local, or foreign (each a "governmental entity"), is
required to be obtained by IVI or any of its subsidiaries in connection with
the execution and delivery of this Agreement or the Plan of Arrangement or
the consummation of the Transactions, except for:
18
(i) the filing with the OSC, the SEC, the Director and the Court and
the mailing to shareholders of IVI of the IVI Proxy Statement;
(ii) the furnishing to the SEC of such reports and information under
the Exchange Act and the rules and regulations promulgated by the SEC
thereunder, as may be required in connection with this Agreement and the
Transactions (the "IVI SEC Filings");
(iii) approval by the Court of the Arrangement and the filings of the
Articles of Arrangement and any other required amalgamation, arrangement,
notice or other documents as required by the CBCA;
(iv) such Approvals as may be required under state "control share
acquisition," "anti-takeover", "fair price", "business combinations" or
other similar statutes and regulations (collectively, "State Takeover
Laws");
(v) such Approvals as may be required under the OSA and other
relevant Canadian securities Laws, any other applicable federal,
provincial or state securities Laws and the rules of the NASD or the TSE;
(vi) such filings and notifications as may be necessary under the HSR
Act;
(vii) required notices and filings under the INVESTMENT CANADA ACT
and under the COMPETITION ACT (Canada); and
(vii) where the failure to obtain such Approval, would not prevent or
delay the consummation of the Arrangement or otherwise would not have a
Material Adverse Effect on IVI.
6.6 COMPLIANCE; PERMITS
(a) Neither IVI nor any of its subsidiaries is in conflict with, or in
default or violation of,
(i) any Law or Order applicable to IVI or any of its subsidiaries or
by which its or any of their respective properties or businesses is bound
or affected, or
(ii) any Contract to which IVI or any of its subsidiaries is a party
or by which IVI or any of its subsidiaries or its or any of their
respective properties is bound or affected, except for any such
conflicts, defaults or violations which would not have a Material Adverse
Effect. All of the indebtedness of IVI or any subsidiary of IVI (and all
indebtedness guaranteed by any such person) for money borrowed is
prepayable at any time by such person without penalty or premium.
(b) IVI and its subsidiaries hold all Approvals from governmental
entities that are material to the operation of the business of IVI and its
subsidiaries (collectively, the "IVI Permits"). IVI and its subsidiaries are
in compliance with, and not in default or violation of, the terms of IVI
Permits, except where the failure to so comply, or such default or
violation, would not have a Material Adverse Effect.
(i) Except as disclosed in Section 6.6 of the IVI Disclosure
Schedule, neither IVI nor any IVI subsidiary has, since January 1, 1995,
received any notification or communication from any governmental entity
(a) asserting that IVI or any IVI subsidiary is not in compliance in any
material respect with any Law or Order, (b) threatening to revoke any IVI
Permits, or (c) requiring IVI or any IVI subsidiary to (1) enter into or
consent to the issuance of a cease and desist order (or other similar
Order) or a formal agreement, directive, commitment or memorandum of
understanding (or other similar Contract), or (2) to adopt any board or
shareholder resolution or similar undertaking.
19
6.7 SECURITIES REGULATORY AUTHORITY REPORTS AND FINANCIAL STATEMENTS
(a) CANADIAN COMPLIANCE
Since January 1, 1995, IVI has filed all forms, reports and documents
with the OSC required to be filed by it pursuant to the OSA and the
regulations promulgated thereunder and the applicable policies and rules of
the OSC (collectively, the "IVI OSC Reports"), all of which have complied in
all material respects with all applicable requirements of such statute,
regulations, policies and rules. None of the IVI OSC Reports, at the time
filed or as subsequently amended, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. IVI has
delivered to Checkmate's counsel correct and complete copies of each IVI OSC
Report.
(b) SEC REPORTS
IVI has delivered to Checkmate's counsel correct and complete copies of
each report, schedule, registration statement and definitive proxy or
information statement (if any) filed by IVI with the SEC on or after January
1, 1995 (the "IVI SEC Documents"), which are all the documents that IVI was
required to file with the SEC on or after such date and all of which were
timely filed in accordance with the rules and regulations of the SEC. As of
their respective dates or, in the case of registration statements, their
effective dates (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing), none of the IVI SEC
Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and the IVI
SEC Documents complied when filed in all material respects with the then
applicable requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations promulgated by the SEC
thereunder. IVI has filed all material documents and agreements which were
required to be filed as exhibits to the IVI SEC Documents.
(c) FINANCIAL STATEMENTS
The consolidated balance sheets and the consolidated statements of
operations, retained earnings and cash flows (including the related notes
thereto) of IVI contained in the IVI OSC Reports are in accordance with the
books and records of IVI and its subsidiaries, and present fairly the
consolidated financial position and the consolidated results of operations
and cash flows of IVI and its consolidated subsidiaries as of the dates or
for the periods presented therein in conformity with Canadian generally
accepted accounting principles and have been reconciled to GAAP as set out
in the notes to such financial statements, applied on a consistent basis
during the periods involved, except as otherwise noted therein and subject
in the case of quarterly financial statements to normal and recurring year-
end audit adjustments, none of which were or are reasonably expected to be
material as to kind or amount, individually or in the aggregate.
6.8 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except as set forth in Section 6.8 of the IVI Disclosure Schedule and the
IVI OSC Reports and IVI SEC Reports, since September 30, 1997, IVI and its
subsidiaries have conducted their business in the ordinary course and there has
not occurred:
(i) any Material Adverse Effect;
(ii) any amendments or changes in the Articles of Continuation or
By-laws of IVI or organizational documents of IVI's subsidiaries;
20
(iii) any damage to, destruction or loss of any properties of IVI and
its subsidiaries (whether or not covered by insurance) that have a
Material Adverse Effect;
(iv) any revaluation by IVI of any of its and its subsidiaries'
properties, including, without limitation, writing down the value of
capitalized software or inventory or writing off notes or accounts
receivable other than in the ordinary course of business;
(v) any other action or event that would have required the consent of
Checkmate pursuant to Section 10.1 hereof had such action or event
occurred after the date of this Agreement; or
(vi) any sale of a material amount of the properties of IVI and its
subsidiaries, except for the sale of inventory in the ordinary course of
business.
6.9 NO UNDISCLOSED LIABILITIES
Except as is disclosed in Section 6.9 of the IVI Disclosure Schedule,
neither IVI nor any of its subsidiaries has any Liabilities which are,
individually or in the aggregate, material to the business, operations or
financial condition of IVI and its subsidiaries on a consolidated basis, except
Liabilities
(a) accrued or reserved against in IVI's balance sheet (including any
related notes thereto) for the period ended September 30, 1997 included in
the IVI OSC Reports (the "IVI Balance Sheet"),
(b) incurred since September 30, 1997 in the ordinary course of business
consistent with past practices
(c) disclosed in the IVI OSC Reports, or
(d) incurred in connection with this Agreement.
6.10 ABSENCE OF LITIGATION
Except as set forth in Section 6.10 of the IVI Disclosure Schedule, there
are no claims, actions, suits, proceedings (arbitration, litigation or
otherwise) or investigations (collectively, "Litigation") pending or, to the
knowledge of IVI, threatened (or unasserted but considered by IVI probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against IVI or any of its subsidiaries, or any
properties or rights of IVI or any of its subsidiaries, before any governmental
entity that have a Material Adverse Effect, nor are there any Orders outstanding
against IVI or any IVI subsidiary that have a Material Adverse Effect. Section
6.10 of the IVI Disclosure Schedule contains a summary of all Litigation as of
the date of this Agreement to which IVI or an IVI subsidiary is a party, or for
which IVI or a subsidiary of IVI has any potential Liability.
6.11 EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS
(a) Section 6.11(a) of the IVI Disclosure Schedule lists all employee
benefit plans (as defined in Section 3(3) of ERISA), regardless of whether
ERISA is applicable thereto, all other bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance or
termination pay, or medical, life or other insurance, supplemental
unemployment benefits, profit-sharing, pension or retirement plans,
agreements or arrangements and other similar fringe or employee benefit
plans, programs or arrangements (including those sponsored by the federal or
any provincial government of Canada, collectively "Government Sponsored or
Mandated Plans") and any current or former (solely to the extent obligations
thereunder are still enforceable) employment or executive compensation or
severance Contracts, for the benefit of, or relating to, any employee of
IVI, any trade or business (whether or not incorporated) which is a member
of a controlled group including IVI or which is under common control with
IVI (an "IVI ERISA Affiliate") within the meaning of Section 414 of the
Code, or any subsidiary of IVI, as well as each plan with respect to
21
which IVI or an IVI ERISA Affiliate could incur Liability if such plan has
been or were terminated (together, along with all amendments thereto, the
"IVI Employee Plans"), and a complete and correct copy of each such written
IVI Employee Plan has been made available to Checkmate.
(b) Except as set forth in Section 6.11(b) of the IVI Disclosure
Schedule,
(i) none of the IVI Employee Plans promises or provides retiree
medical, post termination medical or other retiree or post termination
welfare benefits to any person and none of the IVI Employee Plans is a
"multiemployer plan" as such term is defined in Section 3(37) of ERISA;
(ii) there has been no transaction or failure to act with respect to
any IVI Employee Plan by any person, which could result in any material
Liability of IVI or any of its subsidiaries;
(iii) all IVI Employee Plans are in compliance in all material
respects with the requirements prescribed by any and all Laws and Orders
currently in effect with respect thereto, and IVI and each of its
subsidiaries have performed all material obligations required to be
performed by them under, are not in any material respect in default or
violation of, and have no knowledge of any default or violation by any
other party to, any of the IVI Employee Plans;
(iv) each IVI Employee Plan intended to qualify under Section 401(a)
of the Code and each trust intended to qualify under Section 501(a) of
the Code is the subject of a favorable determination letter from the IRS,
and to the knowledge of IVI nothing has occurred which may reasonably be
expected to impair such determination;
(v) all contributions required to be made to any IVI Employee Plan,
under the terms of the IVI Employee Plan or any collective bargaining
agreement, have been made on or before their due dates and a reasonable
amount has been accrued for contributions to each IVI Employee Plan for
the current plan years;
(vi) with respect to each IVI Employee Plan subject to Title IV of
ERISA, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice
requirement has been waived under the regulations to Section 4043 of
ERISA) nor any event described in Section 4062, 4063 or 4041 of ERISA has
occurred;
(vii) neither IVI nor any IVI ERISA Affiliate has incurred, nor
reasonably expects to incur, any Liability under Title IV of ERISA (other
than liability for premium payments to the Pension Benefit Guaranty
Corporation arising in the ordinary course);
(viii) no material oral or written representation or communication
with respect to any aspect of the IVI Employee Plans has been made to
employees of IVI or any IVI subsidiary prior to the date hereof that is
not in accordance with the written or otherwise preexisting terms and
provisions of such plans; and
(ix) no IVI Employee Plan is an employee pension benefit plan as
defined in ERISA Section 3(2).
(c) Each IVI Employee Plan that is required or intended to be qualified
under applicable Law or registered or approved by a governmental entity has
been so qualified, registered or approved by the appropriate governmental
entity, and nothing has occurred since the date of the last qualification,
registration or approval to adversely affect, or cause, the appropriate
governmental entity to revoke such qualification, registration or approval.
(d) All contributions (including premiums) required by any Law or
Contract to have been made or approved by IVI and its subsidiaries under or
with respect to the IVI Employee Plans have been paid or accrued by IVI.
Without limiting the foregoing, there are no material unfunded Liabilities
under any IVI Employee Plan.
22
(e) There is no pending or to the knowledge of IVI, threatened
Litigation against IVI or any of its subsidiaries with respect to any of the
IVI Employee Plans.
(f) There is no pending or, to the knowledge of IVI, threatened
Litigation by former or present employees of IVI and its subsidiaries (or
their beneficiaries) with respect to the IVI Employee Plans or the assets or
fiduciaries thereof (other than routine claims for benefits).
(g) Neither IVI nor any of its subsidiaries maintains any 401(k) or
other type of pension plan subject to Section 401(a) of the Code in the
United States.
(h) No condition or event has occurred with respect to the IVI Employee
Plans which has a Material Adverse Effect.
(i) IVI has made available to Checkmate:
(ii) copies of all employment Contracts with officers of IVI or a
subsidiary of IVI;
(iii) copies of all Contracts with consultants or employees who are
individuals obligating IVI and its subsidiaries (collectively) to make
annual cash payments in an amount exceeding $100,000;
(iv) a schedule listing all officers of IVI and its subsidiaries who
have executed a non-competition agreement with IVI or a subsidiary of
IVI;
(i) copies of all severance Contracts, programs and policies of IVI
and its subsidiaries with or relating to their employees;
(i) copies of all plans, programs, Contracts and other arrangements
of IVI and its subsidiaries with or relating to their employees which
contain change in control provisions.
6.12 LABOUR MATTERS
(i) There is no Litigation pending or, to the knowledge of IVI,
threatened, between IVI or any of its subsidiaries and any of their
respective current or former employees, which have or may have a Material
Adverse Effect, or asserting that IVI or any subsidiary has committed an
unfair labor practice (within the meaning of the National Labor Relations
Act of the United States or any other comparable Law), or seeking to
compel IVI or one of its subsidiaries to bargain with any labor union or
other collective bargaining unit.
(ii) Neither IVI nor any of its subsidiaries is a party to any
collective bargaining agreement or other labour union contract applicable
to persons employed by IVI or any of its subsidiaries nor does IVI know
of any activities or proceedings of any labour union or other collective
bargaining unit to organize any such employees.
(iii) There are no strikes, slowdowns, work stops, lockouts, or other
labor disputes pending, or, to the knowledge of IVI, threatened, by or
with respect to any employees of IVI or any of its subsidiaries.
6.13 REGISTRATION STATEMENT; PROXY STATEMENT
None of the information supplied or to be supplied by IVI in writing for
inclusion or incorporation by reference in
(i) the Registration Statement,
(ii) the Proxy Statements and the prospectus contained in the
Registration Statement (the "Proxy Statement/Prospectus"),
23
(iii) the Prospectus, and
(iv) any other document to be filed with the SEC, OSC or any
regulatory agency by Newco, Merger Sub or IVI in connection with the
transactions contemplated by this Agreement (the "IVI Other Filings")
will, at the respective times filed with the SEC, OSC or other regulatory
agency and, in addition,
A. in the case of the Proxy Statement/Prospectus, at the date it
or any amendments or supplements thereto are mailed to shareholders,
B. in the case of the Registration Statement, when it becomes
effective under the Securities Act, and
C. in the case of the Prospectus, at the date of the receipt from
the OSC for the Prospectus,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they
are made, not misleading. The IVI Proxy Statement will comply as to form
in all material respects with the applicable provisions of the OSC and
the Exchange Act and the rules and regulations thereunder. If at any time
prior to the Effective Date any event relating to IVI or any of its
respective affiliates, officers or directors should be discovered by IVI
which should be set forth in an amendment to the Registration Statement
or Prospectus, or a supplement to the IVI Proxy Statement, IVI shall
promptly inform Newco and Checkmate.
Notwithstanding the foregoing, IVI makes no representation or warranty with
respect to any information supplied by Checkmate or Newco which is contained in
any of the foregoing documents.
6.14 RESTRICTIONS ON BUSINESS ACTIVITIES
Except for this Agreement and as set forth in Section 6.14 of the IVI
Disclosure Schedule, there is no material Contract or Order binding upon IVI or
any of its subsidiaries which has or could reasonably be expected to have the
effect of prohibiting or impairing any material business practice of IVI or any
of its subsidiaries, the acquisition of property by IVI or any of its
subsidiaries or the conduct of business by IVI or any of its subsidiaries as
currently conducted or as proposed to be conducted by IVI.
6.15 TITLE TO PROPERTY
IVI owns no real property. Section 6.15 of the IVI Disclosure Schedule sets
forth a true and complete list of all real property leased by IVI or any of its
subsidiaries requiring annual lease payments of more than $50,000, and the
aggregate monthly rental or other fee payable under such lease. IVI and each of
its subsidiaries have good and marketable title to all of their properties, free
and clear of all Liens, except for any Lien:
(i) identified in Section 6.15 of the IVI Disclosure Schedule or
disclosed or reserved against in the IVI Balance Sheet;
(ii) created, arising or existing under or in connection with any
agreement or other matter referred to in the IVI Disclosure Schedule,
provided that such Lien (and a description of its material terms) is
identified with such Agreement or matter in the IVI Disclosure Schedule;
(iii) relating to any Tax or other governmental charge or levy that
is not yet due and payable;
(iv) relating to, or created arising or existing in connection with,
any Litigation that is being contested in good faith, provided that any
such Lien (and a description of its material terms) is identified with
such Litigation in the IVI Disclosure Schedule; or
24
(v) which, individually or in the aggregate, would not result in a
Material Adverse Effect to IVI;
and all leases pursuant to which IVI or any of its subsidiaries lease from
others material items or amounts of real or personal property, are in good
standing, valid, effective and enforceable in accordance with their respective
terms, and there is not, under any of such leases, any existing material default
or violation except where the lack of such good standing, validity,
effectiveness or enforceability or the existence of such default or violation
would not have a Material Adverse Effect. All the facilities of IVI and its
subsidiaries, except such as may be under construction, are in good operating
condition and repair, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with past practice except where the
failure of such plants, structures and equipment to be in such good operating
condition and repair or so usable would not have a Material Adverse Effect. The
properties of IVI and its subsidiaries include, in the aggregate, all of the
properties required to operate the business of IVI and its subsidiaries as
presently conducted. All items of inventory of IVI and its subsidiaries
reflected in the IVI Balance Sheet consisted of items of a quality and quantity
usable and saleable in the ordinary course of business and conform to generally
accepted standards in the industry in which IVI and its subsidiaries are a part.
6.16 TAXES
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean all
taxes, fees, levies, duties, tariffs, imposts, premiums and governmental
impositions or charges of any kind, payable to any federal, state,
provincial, local or foreign taxing authority, including (without
limitation):
(i) income, capital, business, franchise, profits, corporate,
alternative minimum, gross receipts, ad valorem, goods and services,
customs, net worth, value added, sales, use, service, real or personal
property, special assessments, capital stock, licence, payroll,
withholding, employment, social security, workers' compensation,
employment insurance or compensation, utility, severance, production,
excise, stamp, occupation, premiums, windfall profits, transfer and gains
taxes, surtaxes, fees, levies, duties, tariffs, imposts, premiums and
governmental impositions, whether disputed or not; and
(ii) interest, penalties, additional taxes and additions to tax
imposed with respect thereto;
and "Tax Returns" shall mean returns, reports and information statements of
any kind with respect to Taxes required to be filed with Revenue Canada, the
IRS or any other taxing authority, domestic or foreign, including, without
limitation, consolidated, combined and unitary tax returns.
(b) IVI and its subsidiaries have filed all Canadian and United States
federal income Tax Returns and all other Tax Returns required to be filed by
them on or prior to the date hereof, or requests for extensions have been
timely filed, granted and have not expired; all Tax Returns filed by IVI and
its subsidiaries are complete and accurate; and IVI and its subsidiaries
have paid and discharged all Taxes when due, whether or not shown on any Tax
Return, except such as are being contested in good faith by appropriate
proceedings (in each case, as disclosed in Section 6.16(b) of the IVI
Disclosure Schedule) and with respect to which IVI is maintaining reserves
to the extent currently required for their payment; except to the extent
that the failure so to file, to be complete and correct, to reserve or so to
pay, individually or in the aggregate with all other such failures, would
not have a Material Adverse Effect. Neither Revenue Canada, the IRS nor any
other taxing authority is now asserting or, to the knowledge of IVI,
threatening to assert against IVI or any of its subsidiaries any deficiency
or claim for additional Taxes other than additional Taxes (except, in each
case, as disclosed in Section 6.16(b) of the IVI Disclosure Schedule) with
respect to which IVI is maintaining reserves in all material respects
adequate for their payment. Except as disclosed in Section 6.16(b) of the
IVI Disclosure Schedule, neither IVI nor any of its subsidiaries is
currently being audited by any taxing authority nor has notice been given by
any taxing authority that it will commence such an audit or
25
examination. There are no Tax Liens on any properties of IVI or any
subsidiary thereof and neither IVI nor any of its subsidiaries has granted
any waiver of any statute of limitations with respect to, or any extension
of a period for the assessment of, any Tax. Neither IVI nor any of its
subsidiaries has received any notice of seizure from any taxation authority.
The accruals and reserves for Taxes reflected in the IVI Balance Sheet are
in all material respects sufficient to cover all Taxes accruable through the
date thereof (including Taxes being contested and any deferred Taxes) in
accordance with Canadian generally accepted accounting principles and, as of
the Effective Date, such accruals and reserves, as adjusted for the passage
of time through the Effective Date, will be sufficient for the then unpaid
Taxes of IVI and its subsidiaries. Except as disclosed in Section 6.16(b) of
IVI Disclosure Schedule, neither IVI nor any of its subsidiaries (whether as
a result of the Transactions or otherwise) is required to include in income:
(i) items in respect of any change in accounting principles or
deferred intercompany transactions; or
(ii) any installment sale gain,
in each case where the inclusion in income would result in a tax
Liability materially in excess of the reserves therefor.
(c) IVI, on behalf of itself and all its subsidiaries, hereby represents
that, other than as disclosed on Section 6.16(c) of the IVI Disclosure
Schedule, and other than with respect to items the inaccuracy of which would
not have a Material Adverse Effect:
(i) neither IVI nor any of its subsidiaries has made any payment or
is a party to any agreement, contract or arrangement that may result,
separately or in the aggregate, in the payment of any "excess parachute
payment" within the meaning of Section 280G of the Code, determined
without regard to Section 280G(b)(4) of the Code;
(ii) neither IVI nor any of its subsidiaries has been subject to any
accumulated earnings tax or personal holding company tax;
(iii) neither IVI nor any of its subsidiaries owns stock in a passive
foreign investment company within the meaning of Section 1296 of the
Code;
(iv) neither IVI nor any of its subsidiaries is obligated under any
agreement with respect to industrial development bonds or other
obligations the tax exempt character of which for United States federal
or state income tax purposes could be affected by the transactions
contemplated hereunder; and
(v) neither IVI nor any of its subsidiaries has, prior to the date
hereof, acquired or had the use of any material property from a person
with whom it was not dealing at arm's length, or disposed of any material
property to a person with whom it was not dealing at arm's length for
proceeds less than the fair market value thereof.
(d) No power of attorney has been granted by IVI or any of its
subsidiaries with respect to any matter relating to Taxes which is currently
in force.
(e) Neither IVI nor any of its subsidiaries
(i) is a party to any agreement or arrangement (written or oral)
providing for the allocation or sharing of Taxes, or
(ii) has any Liability for Taxes of any person (other than IVI and
its subsidiaries) under Treasury Regulation Section 1.1502-6 (or similar
provision of Law) as a transferee or successor or by Contract or
otherwise.
26
(f) IVI and each of its subsidiaries has withheld all material amounts
from each payment made to any of its respective past or present employees,
officers or directors, suppliers, customers or other third parties the
amount of all Taxes and other material deductions required to be withheld
therefrom and have paid the same to the proper taxation authority or other
receiving officers within the time required under applicable Law.
(g) IVI has remitted to the appropriate tax authority when required by
law to do so all amounts collected by it on account of all GST, retail sales
and similar Taxes.
(h) IVI has withheld from each payment made to any non-resident of
Canada the amount of all material Taxes and other deductions required to be
withheld therefrom and has paid the same to the proper taxation authority or
other receiving officers within the time required under applicable Law.
(i) IVI has not deducted any material amounts in computing its income in
a taxation year which will be included in a subsequent taxation year under
section 78 of the ITA.
(j) IVI and all of the subsidiaries of IVI have taxation years ending on
December 31 of each year.
(k) Neither IVI nor any of its subsidiaries has (except as disclosed in
section 6.16(k) of the IVI Disclosure Schedule), prior to the date hereof,
(i) made or filed any election under Section 85 of the ITA with
respect to the acquisition or disposition of any property; or
(ii) made or filed any election under Section 83 of the ITA with
respect to the payment out of the capital dividend account of IVI or any
of its subsidiaries.
6.17 ENVIRONMENTAL MATTERS
(a) Except in all cases as do not have a Material Adverse Effect, IVI
and each of its subsidiaries;
(i) have obtained all applicable Approvals which are required under
foreign, federal, state, provincial or local laws relating to pollution
or protection of human health or the environment, including Laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous substances or wastes into ambient air, surface
water, ground water or land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or hazardous substances or wastes
("Environmental Laws"); and
(ii) are in compliance with all terms and conditions of such
Approvals and also are in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in Environmental Laws or
contained in any Law or Order issued, entered, promulgated or approved
thereunder.
(b) There is no Litigation pending or, to the knowledge of IVI,
threatened before any governmental entity in which IVI or any IVI subsidiary
or any of the properties owned, leased, managed or operated by IVI or one of
its subsidiaries has been or, with respect to threatened Litigation, may be
named as a defendant for alleged noncompliance (including by any
predecessor) with any Environmental Law, whether or not occurring at, on,
under, or involving a property owned, leased, managed, or operated (in whole
or in part) by IVI or any subsidiary of IVI or any of their properties. To
the knowledge of IVI, there is no reasonable basis for any Litigation of a
type described in the immediately foregoing sentence.
(c) During the period of IVI's or any of its subsidiaries'
(i) ownership or operation of any of their respective current
properties,
27
(ii) participation in the management of any properties of any other
person, or
(iii) holding of a security interest in any properties of any other
person, there have been no releases of "hazardous substances" in, on,
under, or affecting such properties. Prior to the period of IVI's or any
of its subsidiaries'
A. ownership or operation of any of their respective current
properties,
B. IVI's or any of its subsidiaries' participation in the
management of any properties of any other person, or
C. holding of a security interest in any properties of any other
person, there were no releases of "hazardous substances" in, on,
under, or affecting any such properties.
(d) For purposes of this Section 6.17 and Section 7.17, "hazardous
substances" shall mean
(i) any hazardous substance, hazardous material, hazardous waste,
regulated substance or toxic substance (as those terms are defined by any
applicable Environmental Laws) and
(ii) any chemicals, pollutants, contaminants, petroleum, petroleum
products, or oil (and specifically shall include asbestos requiring
abatement, removal or encapsulation pursuant to the requirements of
governmental authorities and any polychlorinated biphenyls).
6.18 BROKERS
No broker, finder or investment banker (other than BancAmerica Xxxxxxxxx
Xxxxxxxx) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of IVI. A complete and correct copy of all
agreements between IVI and BancAmerica Xxxxxxxxx Xxxxxxxx pursuant to which such
firm would be entitled to any payment relating to the transactions contemplated
hereunder are set forth in Section 6.18 of the IVI Disclosure Schedule.
6.19 FULL DISCLOSURE
No statement contained in this Agreement or any certificate or schedule
furnished or to be furnished by IVI or any of its subsidiaries to Checkmate in,
or pursuant to the provisions of, this Agreement contains or shall contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary, in the light of the circumstances under which it was made, in
order to make the statements herein or therein not misleading.
6.20 INTELLECTUAL PROPERTY
(a) Except in such instances that do not have a Material Adverse Effect,
IVI or an IVI Subsidiary owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights and any applications therefor, technology, know-how,
computer software programs or applications (in both source code and object
code form), tangible or intangible proprietary information or material and
other intellectual property rights that are used or proposed to be used in
the business of IVI and its subsidiaries as currently conducted. Section
6.20 (a) of the IVI Disclosure Schedule lists all current and past (lapsed,
expired, abandoned or canceled) patents, registered and material
unregistered trademarks and service marks, registered and material
unregistered copyrights, trade name, other intellectual property and any
applications therefor owned by IVI and its subsidiaries (the "IVI
Intellectual Property Rights"), and specifies the jurisdictions in which
each such IVI Intellectual Property Right has been issued or registered (if
any) or in which an application for such issuance and registration has been
filed (if any), including the respective registration or application numbers
and the names of all registered owners, together with a list of all
28
of IVI's and its subsidiaries' currently marketed software products and an
indication as to which, if any, of such software products have been
registered for copyright protection with the United States or Canadian
Copyright Office and any other foreign offices and by whom such items have
been registered. Section 6.20 (a) of the IVI Disclosure Schedule includes
and specifically identifies all third-party patents, trademarks or
copyrights (including software), and other intellectual property (the "IVI
Third Party Intellectual Property Rights") to the knowledge of IVI which are
incorporated in, are, or form a part of, any product of IVI or are otherwise
used in (or proposed to be used in) or necessary for the conduct of IVI's
business as currently conducted. Section 6.20 (a) of the IVI Disclosure
Schedule lists:
(i) any requests IVI has received to make any such registration,
including the identity of the requestor and the item requested to be so
registered, and the jurisdiction for which such request has been made;
(ii) except for object code licence agreements for IVI's and its
subsidiaries' products executed in the ordinary course of business and in
accordance with IVI's and its subsidiaries' past practices, all material
licences, sublicences and other Contracts as to which IVI or any
subsidiary of IVI is a party and pursuant to which any person is
authorized to use any IVI Intellectual Property Right, including any
trade secret material to IVI or any subsidiary of IVI; and
(iii) all material licences, sublicences and other Contracts as to
which IVI is a party and pursuant to which IVI is authorized to use any
IVI Third Party Intellectual Property Rights, including any trade secret
of a third party, and includes the identity of all parties thereto, a
description of the nature and subject matter thereof, the applicable
royalty and the term thereof.
(b) IVI and its subsidiaries are not, nor will they be as a result of
the execution and delivery of this Agreement by IVI or the performance of
its obligations hereunder, in violation in any material respect of any
licence, sublicence or Contract described in Section 6.20(a) of the IVI
Disclosure Schedule. No Litigation with respect to the IVI Intellectual
Property Rights, including any trade secret material to IVI, or IVI Third
Party Intellectual Property Rights is currently pending or, to the knowledge
of IVI, is threatened by any person, nor does IVI know of any valid grounds
for any bona fide Litigation:
(i) to the effect that the manufacture, sale, licensing or use of any
product as now used, sold or licensed or proposed for use, sale or
license by IVI or any of its subsidiaries infringes on any copyright,
patent, trademark, service xxxx or trade secret;
(ii) against the use by IVI or any of its subsidiaries of any
trademarks, trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in IVI's or
any of its subsidiaries, business as currently conducted or as proposed
to be conducted by IVI or any of its subsidiaries;
(iii) challenging the ownership, validity or effectiveness of any of
the IVI Intellectual Property Rights, including trade secrets, material
to IVI or any of its subsidiaries; or
(iv) challenging IVI's or any of its subsidiaries' license or legally
enforceable right to use of the IVI Third Party Intellectual Property
Rights. To IVI's knowledge, all patents, registered trademarks, maskworks
and copyrights held by IVI or any of its subsidiaries are valid and
subsisting. Except as set forth in Section 6.20 (b) of the IVI Disclosure
Schedule, to IVI's knowledge, there is no material unauthorized use,
infringement or misappropriation of any of the IVI Intellectual Property
by any third party, including any employee or former employee of IVI or
any of its subsidiaries.
Except as set forth in Section 6.20 (b) of the IVI Disclosure Schedule,
neither IVI nor any of its subsidiaries
29
(i) has been sued or charged in writing as a defendant in any
Litigation, claim, suit, action or proceeding which involves a claim or
infringement of trade secrets, any patents, trademarks, service marks,
maskworks or copyrights and which has not been finally terminated prior
to the date hereof, or been informed or notified by any third party that
IVI or any of its subsidiaries may be engaged in such infringement, or
(ii) has knowledge of any infringement Liability with respect to, or
infringement by, IVI or any of its subsidiaries of any trade secret,
patent, trademark, service xxxx, maskwork, copyright or other
intellectual property of another.
(c) Except as noted in Section 6.20 (c) of the IVI Disclosure Schedule,
all software that is IVI Intellectual Property Rights and IVI's and its
subsidiaries' business systems (including hardware and software) and
products, are Year 2000 Compliant.
6.21 INTERESTED PARTY TRANSACTIONS
Except as set forth in Section 6.21 of the IVI Disclosure Schedule, since
December 31, 1996, no event has occurred that would be required to be reported
as a Certain Relationship or Related Transaction, pursuant to Item 404 of
Regulation S-K promulgated by the SEC or that is a related party transaction for
the purposes of OSC Policy 9.1.
6.22 INSURANCE
Section 6.22 of the IVI Disclosure Schedule lists all material insurance
policies and fidelity bonds covering the business, properties, operations,
employees, officers and directors of IVI and its subsidiaries. Except as is set
forth in Section 6.22 of the IVI Disclosure Schedule, there is no claim by IVI
or any of its subsidiaries pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums payable under all such policies and bonds
have been paid and IVI and its subsidiaries are otherwise in compliance in all
material respects with the terms of such policies and bonds (or other policies
and bonds providing substantially similar insurance coverage). Such policies of
insurance and bonds are of the type and in amounts customarily carried by
persons conducting businesses similar to those of IVI and its subsidiaries. IVI
and its subsidiaries have not received notice of and do not know of any
threatened termination of, or material premium increase with respect to, any of
such policies.
6.23 OPTION PLANS
Except as set forth in Section 6.23 of the IVI Disclosure Schedule, the
Board of Directors of IVI has taken all necessary action (or refrained from
taking action, where appropriate) under the IVI Option Plan so that none of the
IVI Stock Options (or any portion thereof) will be entitled to receive cash or
other property as a result of the consummation of the transactions contemplated
hereby, but instead shall be assumed as provided in Section 5.10 hereof.
6.24 POOLING MATTERS
Neither IVI nor to IVI's knowledge any of its affiliates has taken or agreed
to take any action that (without giving effect to any action taken or agreed to
be taken by Checkmate or any of its affiliates or Newco) would affect the
ability of Newco to account for the business combination to be effected by the
Transactions as a pooling of interests.
6.25 AFFILIATES
Section 6.25 of the IVI Disclosure Schedule sets forth each person who, as
of the date hereof, is an affiliate of IVI.
30
6.26 OPINION OF FINANCIAL ADVISOR
IVI has been advised by its financial advisor, BancAmerica Xxxxxxxxx
Xxxxxxxx, that, in its opinion, as of the date hereof, the terms of the
Arrangement are fair to IVI from a financial point of view, and has delivered a
written copy of such opinion to IVI.
ARTICLE 7.00--REPRESENTATIONS AND WARRANTIES OF CHECKMATE
Except as set forth in the Checkmate Disclosure Schedule, Checkmate hereby
represents and warrants to IVI that:
7.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES
Checkmate and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite corporate power and
authority and is in possession of or has duly made all Approvals necessary to
own, lease and operate the properties it purports to own, operate or lease and
to carry on its business as it is now being conducted, except where the failure
to have such power, authority and Approvals would not have a Material Adverse
Effect. Each of Checkmate and each of its subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not have a Material Adverse Effect. A
true and complete list of all of Checkmate's subsidiaries, together with the
jurisdiction of incorporation or organization of each subsidiary is set forth in
Section 7.1 of the written disclosure schedule previously delivered by Checkmate
to IVI (the "Checkmate Disclosure Schedule"). Except as set forth in Section 7.1
of the Checkmate Disclosure Schedule, Checkmate or one of its subsidiaries owns
all of the issued and outstanding equity or similar securities of each Checkmate
subsidiary. No equity or similar securities of any Checkmate subsidiary are or
may become required to be issued by reason of any Rights, and there are no
Contracts by which Checkmate or any Checkmate subsidiary is bound to issue
additional equity or similar securities or Rights or by which Checkmate or any
Checkmate subsidiary is or may be bound to transfer any equity or similar
securities of any Checkmate subsidiary. There are no Contracts relating to the
rights of Checkmate or any Checkmate subsidiary to vote or to dispose of any
equity or similar securities of any Checkmate subsidiary. All of the equity or
similar securities of each Checkmate subsidiary held by Checkmate or another
Checkmate subsidiary are fully paid and nonassessable under the applicable
corporation Law of the jurisdiction in which such subsidiary is incorporated or
organized and are owned by Checkmate or a Checkmate subsidiary free and clear of
any Lien. Except as set forth in Section 7.1 of the Checkmate Disclosure
Schedule, neither Checkmate nor any Checkmate subsidiary directly or indirectly
owns any equity or similar interest in, or any Rights in, any corporation,
partnership, joint venture or other business association or entity.
7.2 ARTICLES OF INCORPORATION AND BY-LAWS; MINUTES
Checkmate has heretofore furnished to IVI a complete and correct copy of its
Articles of Incorporation and By-Laws, as amended to date, and equivalent
organizational documents of each of its subsidiaries. Such Articles of
Incorporation, By-Laws and equivalent organizational documents of each of its
subsidiaries are in full force and effect. Neither Checkmate nor any of its
subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation or By-Laws or equivalent organizational documents. The minute
books of Checkmate and its subsidiaries have been made available to IVI for
review. Except as disclosed in Section 7.2 of the Checkmate Disclosure Schedule,
the minute books of Checkmate and its subsidiaries provided to IVI pursuant to
this Section 7.2 are true and complete in all material respects as of the date
of this Agreement and accurately reflect in all material respects all
proceedings of the Board of Directors and equity securities holders thereof.
31
7.3 CAPITALIZATION
The authorized capital stock of Checkmate consists of 40,000,000 shares of
Checkmate Common Stock. As of January 12, 1998:
(i) 5,420,188 Checkmate Common Shares were issued and outstanding,
all of which are validly issued, fully paid and nonassessable under the
Georgia Law. None of the outstanding shares of capital stock of Checkmate
has been issued in violation of any preemptive rights of any current or
past holder of Checkmate capital stock;
(ii) no Checkmate Common Shares were held by subsidiaries of
Checkmate;
(iii) Checkmate has outstanding Checkmate Options to purchase
1,337,175 Checkmate Common Shares pursuant to Checkmate Stock Option
Plans. Section 7.3 of the Checkmate Disclosure Schedule accurately sets
forth the name of each optionee, the number of Checkmate Common Shares
subject to each such Checkmate Option, the date of grant, exercise price
and termination date of each such Checkmate Option, and a vesting
schedule for each such Checkmate Option. Section 7.3 of the Checkmate
Disclosure Schedule sets forth a true and correct copy of the Checkmate
Stock Option Plans;
(iv) except in connection with the Shareholder Protection Rights
Agreement, as set forth in this Section 7.3, or as disclosed in Section
7.3 or Section 7.11 of the Checkmate Disclosure Schedule, there are not
any shares of capital stock or other ownership interests of Checkmate
authorized, reserved for issuance, issued or outstanding or any
outstanding Rights relating to the capital stock or other ownership
interests of Checkmate.
No change in such capitalization has occurred between January 12, 1998 and
the date hereof, except for the issuance of shares under the exercise of options
or other Rights outstanding prior to January 12, 1998.
7.4 AUTHORITY RELATIVE TO THIS AGREEMENT
Checkmate has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Checkmate and the consummation by Checkmate of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Checkmate are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than the approval and adoption of the Merger
by the holders of at least a majority of the outstanding Checkmate Common Shares
who are permitted to vote in accordance with the Georgia Law and Checkmate's
Articles of Incorporation). The Board of Directors of Checkmate has determined
that it is advisable and in the best interest of Checkmate's shareholders for
Checkmate to enter into a business combination with IVI, Newco and Merger Sub
upon the terms and subject to the conditions of this Agreement. This Agreement
has been duly and validly executed and delivered by Checkmate and, assuming the
due authorization, execution and delivery by IVI, Newco and Merger Sub, as
applicable, and subject to approval by the holders of Checkmate Common Shares,
constitutes a legal, valid and binding obligation of Checkmate.
7.5 MATERIAL CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND CONSENTS
(a) Section 7.5(a) of the Checkmate Disclosure Schedule includes a list
of:
(i) all material Contracts of Checkmate and its subsidiaries
including, without limitation, any Contract which restricts or prohibits
Checkmate or any subsidiary of Checkmate from engaging in any business
activity in any geographic area, line of business or otherwise in
competition with any person; and
32
(ii) all Contracts which, as of the date hereof, would be required to
be filed as an exhibit to a Form 10-K filed by Checkmate pursuant to the
requirements of the Exchange Act, and the SEC's rules thereunder ((i) and
(ii) being, collectively, the "Checkmate Material Contracts").
(b) The execution and delivery of this Agreement by Checkmate does not,
and the performance of this Agreement by Checkmate will not,
(i) conflict with or result in a default or violation of the Articles
of Incorporation or By-Laws or equivalent organizational documents of
Checkmate or any of its subsidiaries,
(ii) conflict with or violate any Law or Order applicable to
Checkmate or any of its subsidiaries or by which its or any of their
respective businesses or properties is bound or affected, or
(iii) result in any default or violation or impair Checkmate's or any
of its subsidiaries' rights or alter the rights or obligations of any
third party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any Checkmate Material
Contract, or result in the creation of a Lien on any of the properties of
Checkmate or any of its subsidiaries pursuant to any Contract or Approval
to which Checkmate or any of its subsidiaries is a party or by which
Checkmate or any of its subsidiaries or its or any of their respective
properties is bound or affected.
(c) No Approval of or with any governmental entity is required to be
obtained by Checkmate or any of its subsidiaries in connection with the
execution and delivery of this Agreement or the Merger or the consummation
of the Transactions, except for:
(i) the filing with SEC and the mailing to shareholders of Checkmate
of the Checkmate Proxy Statement;
(ii) the filing of the Registration Statement or the furnishing to
the SEC of such reports and information under the Exchange Act and the
rules and regulations promulgated by the SEC thereunder, as may be
required in connection with this Agreement and the Transactions (the
"Checkmate SEC Filings");
(iii) Approvals as may be required under State Takeover Laws;
(iv) such Approvals as may be required under applicable federal,
provincial or state securities Laws and the rules of NASD;
(v) such Approvals as may be necessary under the HSR Act; and
(vi) where the failure to obtain such Approval would not prevent or
delay the consummation of the Transactions or otherwise would not have a
Material Adverse Effect on Checkmate.
7.6 COMPLIANCE; PERMITS
(a) Neither Checkmate nor any of its subsidiaries is in conflict with,
or in default or violation of,
(i) any Law or Order applicable to Checkmate or any of its
subsidiaries or by which its or any of their respective properties or
businesses is bound or affected, or
(ii) any Contract to which Checkmate or any of its subsidiaries is a
party or by which Checkmate or any of its subsidiaries or its or any of
their respective properties is bound or affected, except for any such
conflicts, defaults or violations which would not have a Material Adverse
Effect. All of the indebtedness of Checkmate or any subsidiary of
Checkmate (and all indebtedness guaranteed by any such person) for money
borrowed is prepayable at any time by such person without penalty or
premium.
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(b) Checkmate and its subsidiaries hold all Approvals from governmental
entities that are material to the operation of the business of Checkmate and
its subsidiaries (collectively, the "Checkmate Permits"). Checkmate and its
subsidiaries are in compliance with, and not in default or violation of the
terms of Checkmate Permits, except where the failure to so comply, or such
default or violation would not have a Material Adverse Effect.
(i) Except as disclosed in Section 7.6 of the Checkmate Disclosure
Schedule, neither Checkmate nor any Checkmate subsidiary has, since
January 1, 1995, received any notification or communication from any
governmental entity
A. asserting that Checkmate or any Checkmate subsidiary is not in
compliance in any material respect with any Law or Order,
B. threatening to revoke any Checkmate Permits, or
C. requiring Checkmate or any Checkmate subsidiary to
(1) enter into or consent to the issuance of a cease and
desist order (or other similar Order) or a formal agreement,
directive, commitment or memorandum of understanding (or other
similar Contract), or
(2) to adopt any board or shareholder resolution or similar
undertaking.
7.7 SECURITIES REGULATORY AUTHORITY REPORTS AND FINANCIAL STATEMENTS
(a) SEC REPORTS
Checkmate has delivered to IVI's counsel correct and complete copies of
each report, schedule, registration statement and definitive proxy statement
(other than preliminary material) filed by Checkmate with the SEC on or
after January 1, 1995 (the "Checkmate SEC Documents"), which are all the
documents that Checkmate was required to file with the SEC on or after such
date and all of which were timely filed in accordance with the rules and
regulations of the SEC. As of their respective dates or, in the case of
registration statements, their effective dates (or if amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
filing), none of the Checkmate SEC Documents (including all exhibits and
schedules thereto and documents incorporated by reference therein) contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and the Checkmate SEC Documents complied when filed in all
material respects with the then applicable requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations
promulgated by the SEC thereunder. Checkmate has filed all material
documents and agreements which were required to be filed as exhibits to the
Checkmate SEC Documents.
(b) FINANCIAL STATEMENTS
The consolidated balance sheets and the consolidated statements of
income, stockholders' equity and cash flows (including the related notes
thereto) of Checkmate contained in the Checkmate SEC Reports are in
accordance with the books and records of Checkmate and its subsidiaries, and
present fairly the consolidated financial position and the consolidated
results of operations and cash flows of Checkmate and its consolidated
subsidiaries as of the dates or for the periods presented therein in
conformity with GAAP applied on a consistent basis during the periods
involved, except as otherwise noted therein and, in the case of unaudited
quarterly financial statements, as permitted by Form 10-Q and Rule 10-01 of
Regulation S-X as promulgated by the SEC, and subject in the case of
quarterly financial statements to normal and recurring year-end audit
adjustments, none of which were or are reasonably expected to be material as
to kind or amount, individually or in the aggregate.
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7.8 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except as set forth in Section 7.8 of the Checkmate Disclosure Schedule and
Checkmate SEC Reports, since September 30, 1997, Checkmate and its subsidiaries
have conducted their business in the ordinary course and there has not occurred:
(i) any Material Adverse Effect;
(ii) any amendments or changes in the Articles of Incorporation or
By-laws of Checkmate;
(iii) any damage to, destruction or loss of any properties of
Checkmate and its subsidiaries (whether or not covered by insurance) that
could have a Material Adverse Effect;
(iv) any revaluation by Checkmate of any of its and its subsidiaries'
properties, including, without limitation, writing down the value of
capitalized software or inventory or writing off notes or accounts
receivable other than in the ordinary course of business;
(v) any other action or event that would have required the consent of
Checkmate pursuant to Section 10.3 hereof had such action or event
occurred after the date of this Agreement; or
(vi) any sale of a material amount of the properties of Checkmate and
its subsidiaries, except for the sale of inventory in the ordinary course
of business.
7.9 NO UNDISCLOSED LIABILITIES
Except as is disclosed in Section 7.9 of Checkmate Disclosure Schedule,
neither Checkmate nor any of its subsidiaries has any Liabilities which are,
individually or in the aggregate, material to the business, operations or
financial condition of Checkmate and its subsidiaries on a consolidated basis,
except Liabilities
(a) accrued or reserved against in Checkmate's balance sheet (including
any related notes thereto) for the period ended September 30, 1997 included
in Checkmate SEC Reports (the "Checkmate Balance Sheet"),
(b) incurred since September 30, 1997 in the ordinary course of business
consistent with past practices,
(c) disclosed in the Checkmate SEC Reports,
(d) incurred in connection with this Agreement.
7.10 ABSENCE OF LITIGATION
Except as set forth in Section 7.10 of the Checkmate Disclosure Schedule,
there is no Litigation pending or, to the knowledge of Checkmate, threatened (or
unasserted but considered by Checkmate probable of assertion and which if
asserted would have at least a reasonable probability of an unfavourable
outcome) against Checkmate or any of its subsidiaries, or any properties or
rights of Checkmate or any of its subsidiaries, before any governmental entity
that have a Material Adverse Effect, nor are there any Orders outstanding
against Checkmate or any Checkmate subsidiary that have a Material Adverse
Effect. Section 7.10 of the Checkmate Disclosure Schedule contains a summary of
all Litigation as of the date of this Agreement to which Checkmate or a
Checkmate subsidiary is a party, or for which Checkmate or a subsidiary of
Checkmate has any potential Liability.
7.11 EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS
(a) Section 7.11(a) of the Checkmate Disclosure Schedule lists all
employee benefit plans (as defined in Section 3(3) of ERISA), regardless of
whether ERISA is applicable thereto, all other
35
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance or termination pay, or medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension
or retirement plans, agreements or arrangements and other similar fringe or
employee benefit plans, programs or arrangements and any current or former
(solely to the extent obligations thereunder are still enforceable)
employment or executive compensation or severance Contracts for the benefit
of, or relating to, any employee of Checkmate, any trade or business
(whether or not incorporated) which is a member of a controlled group
including Checkmate or which is under common control with Checkmate (a
"Checkmate ERISA Affiliate") within the meaning of Section 414 of the Code,
or any subsidiary of Checkmate, as well as each plan with respect to which
Checkmate or a Checkmate ERISA Affiliate could incur Liability if such plan
has been or were terminated (together, along with all amendments thereto,
the "Checkmate Employee Plans"), and a complete and correct copy of each
such written Checkmate Employee Plan has been made available to IVI.
(b) Except as set forth in Section 7.11(b) of the Checkmate Disclosure
Schedule,
(i) none of the Checkmate Employee Plans promises or provides retiree
medical, post termination medical or other retiree or post termination
welfare benefits to any person and none of the Checkmate Employee Plans
is a "multiemployer plan" as such term is defined in Section 3(37) of
ERISA;
(ii) there has been no transaction or failure to act with respect to
any Checkmate Employee Plan by any person, which could result in any
material Liability of Checkmate or any of its subsidiaries;
(iii) all Checkmate Employee Plans are in compliance in all material
respects with the requirements prescribed by any and all Laws and Orders
currently in effect with respect thereto, and Checkmate and each of its
subsidiaries have performed all material obligations required to be
performed by them under, are not in any material respect in default or
violation of, and have no knowledge of any default or violation by any
other party to, any of the Checkmate Employee Plans;
(iv) each Checkmate Employee Plan intended to qualify under Section
401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code is the subject of a favorable determination letter
from the IRS, and to the knowledge of Checkmate nothing has occurred
which may reasonably be expected to impair such determination;
(v) all contributions required to be made to any Checkmate Employee
Plan, under the terms of the Checkmate Employee Plan or any collective
bargaining agreement, have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each Checkmate
Employee Plan for the current plan years;
(vi) with respect to each Checkmate Employee Plan subject to Title IV
of ERISA, no "reportable event" within the meaning of Section 4043 of
ERISA (excluding any such event for which the thirty (30) day notice
requirement has been waived under the regulations to Section 4043 of
ERISA) nor any event described in Section 4062, 4063 or 4041 of ERISA has
occurred;
(vii) neither Checkmate nor any Checkmate ERISA Affiliate has
incurred, nor reasonably expects to incur, any Liability under Title IV
of ERISA (other than liability for premium payments to the Pension
Benefit Guaranty Corporation arising in the ordinary course);
(viii) no material oral or written representation or communication
with respect to any aspect of the Checkmate Employee Plans has been made
to employees of Checkmate or any Checkmate subsidiary prior to the date
hereof that is not in accordance with the written or otherwise
preexisting terms and provisions of such plans;
36
(ix) no Checkmate Employee Plan is an employee pension benefit plan
as defined in ERISA Section 3(2).
(c) Each Checkmate Employee Plan that is required or intended to be
qualified under applicable Law or registered or approved by a governmental
entity has been so qualified, registered or approved by the appropriate
governmental entity, and nothing has occurred since the date of the last
qualification, registration or approval to adversely affect, or cause, the
appropriate governmental entity to revoke such qualification, registration
or approval.
(d) All contributions (including premiums) required by any Law or
Contract to have been made or approved by Checkmate and its subsidiaries
under or with respect to the Checkmate Employee Plans have been paid or
accrued by Checkmate. Without limiting the foregoing, there are no material
unfunded liabilities under any Checkmate Employee Plan.
(e) There is no pending, or to the knowledge of Checkmate, threatened
Litigation against Checkmate or any of its subsidiaries with respect to any
of the Checkmate Employee Plans to the knowledge of Checkmate.
(f) There is no pending or, to the knowledge of Checkmate, threatened
Litigation by former or present employees of Checkmate and its subsidiaries
(or their beneficiaries) with respect to the Checkmate Employee Plans or the
assets or fiduciaries thereof (other than routine claims for benefits).
(g) Except as set forth in Section 7.11 of the Checkmate Disclosure
Schedule neither Checkmate nor any of its subsidiaries maintains any 401(k)
or other type of pension plan subject to Section 401(a) of the Code in the
United States.
(h) No condition or event has occurred with respect to the Checkmate
Employee Plans which has a Material Adverse Effect.
(i) Checkmate has made available to IVI:
(i) copies of all employment Contracts with officers of Checkmate or
a subsidiary of Checkmate;
(ii) copies of all Contracts with consultants or employees who are
individuals obligating Checkmate and its subsidiaries (collectively) to
make annual cash payments in an amount exceeding $100,000;
(iii) a schedule listing all officers of Checkmate and its
subsidiaries who have executed a non-competition agreement with Checkmate
or a subsidiary of Checkmate;
(iv) copies of all severance Contracts, programs and policies of
Checkmate and its subsidiaries with or relating to their employees; and
(v) copies of all plans, programs, Contracts and other arrangements
of Checkmate and its subsidiaries with or relating to their employees
which contain change in control provisions.
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7.12 LABOUR MATTERS
(i) There is no Litigation pending or, to the knowledge of Checkmate,
threatened, between Checkmate or any of its subsidiaries and any of their
respective current or former employees, which have or may have a Material
Adverse Effect, or asserting that Checkmate or any subsidiary has committed
an unfair labor practice (within the meaning of the National Labor Relations
Act of the United States or any other comparable Law), or seeking to compel
Checkmate or one of its subsidiaries to bargain with any labor union or
other collective bargaining unit.
(ii) Neither Checkmate nor any of its subsidiaries is a party to any
collective bargaining agreement or other labour union contract applicable to
persons employed by Checkmate or any of its subsidiaries nor does Checkmate
know of any activities or proceedings of any labour union or other
collective bargaining unit to organize any such employees.
(iii) There are no strikes, slowdowns, work stops, lockouts, or other
labour disputes pending or, to the knowledge of Checkmate, threatened by or
with respect to any employees of Checkmate or any of its subsidiaries.
7.13 REGISTRATION STATEMENT; PROXY STATEMENT
None of the information supplied or to be supplied by Checkmate in writing
for inclusion or incorporation by reference in
(i) the Registration Statement,
(ii) the Proxy Statement/Prospectus,
(iii) the Prospectus, and
(iv) any other document to be filed with the SEC or any regulatory
agency by Newco, Merger Sub or Checkmate in connection with the transactions
contemplated by this Agreement (the "Other Checkmate Filings")
will, at the respective times filed with the SEC or other regulatory
agency and, in addition,
A. in the case of the Proxy Statement/Prospectus, at the date it or
any amendments or supplements thereto are mailed to shareholders,
B. in the case of the Registration Statement, when it becomes
effective under the Securities Act, and
C. in the case of the Prospectus, at the date of the receipt from the
OSC for the Prospectus
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. The Checkmate Proxy Statement will comply as to form
in all material respects with the applicable provisions of the Exchange Act
and the rules and regulations thereunder. If at any time prior to the
Effective Date any event relating to Checkmate or any of its respective
affiliates, officers or directors should be discovered by Checkmate which
should be set forth in an amendment to the Registration Statement or
Prospectus or a supplement to the Checkmate Proxy Statement, Checkmate shall
promptly inform Newco and IVI.
Notwithstanding the foregoing, Checkmate makes no representation or warranty
with respect to any information supplied by IVI or Newco which is contained in
any of the foregoing documents.
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7.14 RESTRICTIONS ON BUSINESS ACTIVITIES
Except for this Agreement and as set forth in Section 7.14 of the Checkmate
Disclosure Schedule, there is no material Contract or Order binding upon
Checkmate or any of its subsidiaries which has or could reasonably be expected
to have the effect of prohibiting or impairing any material business practice of
Checkmate or any of its subsidiaries, the acquisition of property by Checkmate
or any of its subsidiaries or the conduct of business by Checkmate or any of its
subsidiaries as currently conducted or as proposed to be conducted by Checkmate.
7.15 TITLE TO PROPERTY
Checkmate owns no real property. Section 7.15 of the Checkmate Disclosure
Schedule sets forth a true and complete list of all real property leased by
Checkmate or any of its subsidiaries requiring annual lease payments of more
than $50,000, and the aggregate monthly rental or other fee payable under such
lease. Checkmate and each of its subsidiaries have good and marketable title to
all of their properties free and clear of all Liens except for any Lien:
(i) identified in Section 7.15 of the Checkmate Disclosure Schedule or
disclosed or reserved against the Checkmate Balance Sheet;
(ii) created, arising or existing under or in connection with any
agreement or other matter referred to in the Checkmate Disclosure Schedule,
provided that any such Lien (and a description of its material terms) is
identified with such Agreement or matter in the Checkmate Disclosure
Schedule;
(iii) relating to any Tax or other governmental charge or levy that is
not yet due and payable;
(iv) relating to, or created arising or existing in connection with, any
Litigation that is being contested in good faith, provided that any such
Lien (and a description of its material terms) is identified with such
Litigation in the Checkmate Disclosure Schedule, or
(vi) which, individually or in the aggregate, would not result in a
Material Adverse Effect to Checkmate;
and all leases pursuant to which Checkmate or any of its subsidiaries lease from
others material items or amounts of real or personal property, are in good
standing, valid, effective and enforceable in accordance with their respective
terms, and there is not, under any of such leases, any existing material default
or violation except where the lack of such good standing, validity,
effectiveness or enforceability or the existence of such default or violation
would not have a Material Adverse Effect. All the facilities of Checkmate and
its subsidiaries, except such as may be under construction, are in good
operating condition and repair, reasonable wear and tear expected, and are
usable in the ordinary course of business consistent with past practice, except
where the failure of such plants, structures and equipment to be in such good
operating condition and repair or so usable would not have a Material Adverse
Effect. The properties of Checkmate and its subsidiaries include, in the
aggregate, all of the properties required to operate the business of Checkmate
and its subsidiaries as presently conducted. All items of inventory of Checkmate
and its subsidiaries reflected in the Checkmate Balance Sheet consisted of items
of a quality and quantity usable and saleable in the ordinary course of business
and conform to generally accepted standards in the industry in which Checkmate
and its subsidiaries are a part.
7.16 TAXES
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean all taxes,
fees, levies, duties, tariffs, imposts, premiums and governmental impositions or
charges of any kind, payable to any federal, state, provincial, local or foreign
taxing authority, including (without limitation):
39
(i) income, capital, business, franchise, profits, corporate,
alternative minimum, gross receipts, ad valorem, goods and services,
customs, net worth, value added, sales, use, service, real or personal
property, special assessments, capital stock, licence, payroll, withholding,
employment, social security, workers' compensation, unemployment insurance
or compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes, surtaxes, fees,
levies, duties, tariffs, imposts, premiums and governmental impositions,
whether disputed or not; and
(ii) interest, penalties, additional taxes and additions to tax imposed
with respect thereto;
and "Tax Returns" shall mean returns, reports and information statements
of any kind with respect to Taxes required to be filed with the IRS or any
other taxing authority, domestic or foreign, including, without limitation,
consolidated, combined and unitary tax returns.
(b) Checkmate and its subsidiaries have filed all United States federal
income Tax Returns and all other Tax Returns required to be filed by them on or
prior to the date hereof, or requests for extensions have been timely filed,
granted and have not expired; all Tax Returns filed by Checkmate and its
subsidiaries are complete and accurate; and Checkmate and its subsidiaries have
paid and discharged all Taxes when due, whether or not shown on any Tax Return,
except such as are being contested in good faith by appropriate proceedings
(except in each case, as disclosed in Section 7.16(b) of the Checkmate
Disclosure Schedule) and with respect to which Checkmate is maintaining reserves
to the extent currently required for their payment; except to the extent that
the failure so to file, to be complete and correct, to reserve or so to pay,
individually or in the aggregate with all other such failures, would not have a
Material Adverse Effect. Neither the IRS nor any other taxing authority is now
asserting or, to the knowledge of Checkmate, threatening to assert against
Checkmate or any of its subsidiaries any deficiency or claim for additional
Taxes other than additional Taxes (in each case, as disclosed in Section 7.16(b)
of the Checkmate Disclosure Schedule) with respect to which Checkmate is
maintaining reserves in all material respects adequate for their payment. Except
as disclosed in Section 7.16(b) of the Checkmate Disclosure Schedule, neither
Checkmate nor any of its subsidiaries is currently being audited by any taxing
authority nor has notice been given by any taxing authority that it will
commence such an audit or examination. There are no Tax Liens on any properties
of Checkmate or any subsidiary thereof and neither Checkmate nor any of its
subsidiaries has granted any waiver of any statute of limitations with respect
to, or any extension of a period for the assessment of, any Tax. Neither
Checkmate nor any of its subsidiaries has received any notice of seizure from
any taxation authority. The accruals and reserves for Taxes reflected in the
Checkmate Balance Sheet are in all material respects sufficient to cover all
Taxes accruable through the date thereof (including Taxes being contested and
any deferred Taxes) in accordance with GAAP and, as of the Effective Date, such
accruals and reserves, as adjusted for the passage of time through the Effective
Date, will be sufficient for the then unpaid Taxes of Checkmate and its
subsidiaries. Except as disclosed in Section 7.16(b) of the Checkmate Disclosure
Schedule, neither Checkmate nor any of its subsidiaries (whether as a result of
the Transactions or otherwise) is required to include in income:
(i) items in respect of any change in accounting principles or deferred
intercompany transactions; or
(ii) any installment sale gain;
in each case where the inclusion in income would result in a tax
Liability materially in excess of the reserves therefor.
(c) Checkmate, on behalf of itself and all its subsidiaries, hereby
represents that, other than as disclosed on Section 7.16(c) of the Checkmate
Disclosure Schedule, and other than with respect to items the inaccuracy of
which would not have a Material Adverse Effect:
(i) neither Checkmate nor any of its subsidiaries has made any payment
or is a party to any agreement, contract or arrangement that may result,
separately or in the aggregate, in the payment of
40
any "excess parachute payment" within the meaning of Section 280G of the
Code, determined without regard to Section 280G(b)(4) of the Code;
(ii) neither Checkmate nor any of its subsidiaries has been subject to
any accumulated earnings tax or personal holding company tax;
(iii) neither Checkmate nor any of its subsidiaries owns stock in a
passive foreign investment company within the meaning of Section 1296 of the
Code;
(iv) neither Checkmate nor any of its subsidiaries is obligated under
any agreement with respect to industrial development bonds or other
obligations the tax exempt character of which for United States federal or
state income tax purposes could be affected by the transactions contemplated
hereunder; and
(v) neither Checkmate nor any of its subsidiaries has, prior to the date
hereof, acquired or had the use of any material property from a person with
whom it was not dealing at arm's length, or disposed of any material
property to a person with whom it was not dealing at arm's length for
proceeds less than the fair market value thereof.
(d) No power of attorney has been granted by Checkmate or any of its
subsidiaries with respect to any matter relating to Taxes which is currently in
force.
(e) Neither Checkmate nor any of its subsidiaries
(i) is a party to any agreement or arrangement (written or oral)
providing for the allocation or sharing of Taxes,
(ii) has been a member of an affiliated group filing a consolidated Tax
Return (other than a group the common parent of which is Checkmate), or
(iii) has any Liability for Taxes of any person (other than Checkmate
and its subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
similar provision of Law) as a transferee or successor, by Contract or
otherwise.
(f) Checkmate and each of its subsidiaries has withheld all material
amounts from each payment made to any of its respective past or present
employees, officers or directors, suppliers, customers or other third
parties the amount of all Taxes and other material deductions required to be
withheld therefrom and has paid the same to the proper taxation authority or
other receiving officers within the time required under any applicable Law.
(g) Checkmate has remitted to the appropriate taxation authority when
required by law to do so all amounts collected by it on account of all
retail sales and similar Taxes.
(h) Checkmate has withheld from each payment made to any non-resident of
the United States of America the amount of all material Taxes and other
deductions required to be withheld therefrom and has paid the same to the
proper taxation authority or other receiving officers within the time
required under any applicable Law.
(i) Checkmate and all of the subsidiaries of Checkmate have taxation
years ending on December 31 of each year.
7.17 ENVIRONMENTAL MATTERS
(a) Except in all cases as do not have a Material Adverse Effect, Checkmate
and each of its subsidiaries:
(i) have obtained all applicable Approvals which are required under
Environmental Laws; and
41
(ii) are in compliance with all terms and conditions of such Approvals
and also are in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules
and timetables contained in Environmental Laws or contained in any Law or
Order issued, entered, promulgated or approved thereunder.
(b) There is no Litigation pending or, to the knowledge of Checkmate,
threatened before any governmental entity in which Checkmate or any Checkmate
subsidiary or any of the properties owned, leased, managed or operated by
Checkmate or one of its subsidiaries has been or, with respect to threatened
Litigation, may be named as a defendant for alleged noncompliance (including by
any predecessor) with any Environmental Law, whether or not occurring at, on,
under, or involving a property owned, leased, managed or operated (in whole or
in part) by Checkmate or any subsidiary of Checkmate or any of their properties.
To the knowledge of Checkmate, there is no reasonable basis for any Litigation
of a type described in the immediately foregoing sentence.
(c) During the period of Checkmate's or any of its subsidiaries'
(i) ownership or operation of any of their respective current
properties,
(ii) participation in the management of any properties of any other
person, or
(iii) holding of a security interest in any properties of any other
person, there have been no releases of "hazardous substances" in, on, under,
or affecting such properties. Prior to the period of Checkmate's or any of
its subsidiaries'
A. ownership or operation of any of their respective current
properties,
B. Checkmate's or any of its subsidiaries' participation in the
management of any properties of any other person, or
C. holding of a security interest in any properties of any other
person, there were no releases of "hazardous substances" in, on, under,
or affecting any such properties.
7.18 BROKERS
Except as set forth in Section 7.18 of the Checkmate Disclosure Schedule, no
broker, finder or investment banker (other than BT Alex.Xxxxx) is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Checkmate. A complete and correct copy of all agreements between
Checkmate and BT Alex.Xxxxx pursuant to which such firm would be entitled to any
payment relating to the transactions contemplated hereunder are set forth in
Section 7.18 of the Checkmate Disclosure Schedule.
7.19 FULL DISCLOSURE
No statement contained in this Agreement or any certificate or schedule
furnished or to be furnished by Checkmate or any of its subsidiaries to IVI in,
or pursuant to the provisions of, this Agreement contains or shall contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary, in the light of the circumstances under which it was made, in
order to make the statements herein or therein not misleading.
7.20 INTELLECTUAL PROPERTY
(a) Except in such instances that do not have a Material Adverse Effect,
Checkmate or a Checkmate subsidiary owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights and any applications therefor, technology, know-how, computer
software programs or applications (in both source code and object code form)
tangible or intangible proprietary information or material and other
intellectual property rights that are used or
42
proposed to be used in the business of Checkmate and its subsidiaries as
currently conducted. Section 7.20(a) of the Checkmate Disclosure Schedule lists
all current and past (lapsed, expired, abandoned or canceled) patents,
registered and material unregistered trademarks and service marks, registered
and material unregistered copyrights, trade names, other intellectual property
and any applications therefor owned by Checkmate and its subsidiaries (the
"Checkmate Intellectual Property Rights"), and specifies the jurisdictions in
which each such Checkmate Intellectual Property Right has been issued or
registered (if any) or in which an application for such issuance and
registration has been filed (if any), including the respective registration or
application numbers and the names of all registered owners, together with a list
of all of Checkmate's and its subsidiaries' currently marketed software products
and an indication as to which, if any, of such software products have been
registered for copyright protection with the United States or Canadian Copyright
Office and any other foreign offices and by whom such items have been
registered. Section 7.20(a) of the Checkmate Disclosure Schedule includes and
specifically identifies all third-party patents, trademarks or copyrights
(including software), and other intellectual property (the "Checkmate Third
Party Intellectual Property Rights") to the knowledge of Checkmate which are
incorporated in, are, or form a part of, any product of Checkmate or are
otherwise used in (or proposed to be used in) or necessary for the conduct of
Checkmate's business as currently conducted. Section 7.20(a) of the Checkmate
Disclosure Schedule lists:
(i) any requests Checkmate has received to make any such registration,
including the identity of the requestor and the item requested to be so
registered, and the jurisdiction for which such request has been made;
(ii) except for object code licence agreements for Checkmate's and its
subsidiaries' products executed in the ordinary course of business and in
accordance with Checkmate's and its subsidiaries' past practices, all
material licences, sublicences and other Contracts as to which Checkmate or
any subsidiary of Checkmate is a party and pursuant to which any person is
authorized to use any Checkmate Intellectual Property Right, including any
trade secret material to Checkmate or any subsidiary of Checkmate; and
(iii) all material licences, sublicences and other Contracts as to which
Checkmate is a party and pursuant to which Checkmate is authorized to use
any Checkmate Third Party Intellectual Property Rights, including any trade
secret of a third party, and includes the identity of all parties thereto, a
description of the nature and subject matter thereof, the applicable royalty
and the term thereof.
(b) Checkmate and its subsidiaries are not, nor will they be as a result of
the execution and delivery of this Agreement by Checkmate or the performance of
its obligations hereunder, in violation in any material respect of any licence,
sublicence or Contract described in Section 7.20(a) of the Checkmate Disclosure
Schedule. No Litigation with respect to the Checkmate Intellectual Property
Rights, including any trade secret material to Checkmate, or Checkmate Third
Party Intellectual Property Rights is currently pending or, to the knowledge of
Checkmate, is threatened by any person, nor does Checkmate know of any valid
grounds for any bona fide Litigation:
(i) to the effect that the manufacture, sale, licensing or use of any
product as now used, sold or licensed or proposed for use, sale or license
by Checkmate or any of its subsidiaries infringes on any copyright, patent,
trademark, service xxxx or trade secret;
(ii) against the use by Checkmate or any of its subsidiaries of any
trademarks, trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in Checkmate's
or any of its subsidiaries' business as currently conducted or as proposed
to be conducted by Checkmate or any of its subsidiaries;
(iii) challenging the ownership, validity or effectiveness of any of the
Checkmate Intellectual Property Rights, including trade secrets, material to
Checkmate or any of its subsidiaries; or
43
(iv) challenging Checkmate's or any of its subsidiaries' license or
legally enforceable right to use of the Checkmate Third Party Intellectual
Property Rights. To Checkmate's knowledge, all patents, registered
trademarks, maskworks and copyrights held by Checkmate or any of its
subsidiaries are valid and subsisting. Except as set forth in Section
7.20(b) of the Checkmate Disclosure Schedule, to Checkmate's knowledge,
there is no material unauthorized use, infringement or misappropriation of
any of the Checkmate Intellectual Property by any third party, including any
employee or former employee of Checkmate or any of its subsidiaries.
Except as set forth in Section 7.20(b) of the Checkmate Disclosure Schedule,
neither Checkmate nor any of its subsidiaries
(i) has been sued or charged in writing as a defendant in any Litigation
which involves a claim or infringement of trade secrets, any patents,
trademarks, service marks, maskworks or copyrights and which has not been
finally terminated prior to the date hereof, or been informed or notified by
any third party that Checkmate or any of its subsidiaries may be engaged in
such infringement, or
(ii) has knowledge of any infringement Liability with respect to, or
infringement by, Checkmate or any of its subsidiaries of any trade secret,
patent, trademark, service xxxx, maskwork, copyright or other intellectual
property of another.
(c) Except as noted in Section 7.20(d) of the Checkmate Disclosure Schedule,
all software that is Checkmate Intellectual Property Rights and Checkmate's and
its subsidiaries' business systems (including hardware and software) and
products are Year 2000 Compliant.
7.21 INTERESTED PARTY TRANSACTIONS
Except as disclosed in Section 7.21 of the Checkmate Disclosure Schedule,
since December 31, 1996 no event has occurred that would be required to be
reported as a Certain Relationship or Related Transaction, pursuant to Item 404
of Regulation S-K promulgated by the SEC.
7.22 INSURANCE
Section 7.22 of the Checkmate Disclosure Schedule lists all material
insurance policies and fidelity bonds covering the business, properties,
operations, employees, officers and directors of Checkmate and its subsidiaries.
Except as is set forth in Section 7.22 of the Checkmate Disclosure Schedule,
there is no claim by Checkmate or any of its subsidiaries pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums payable
under all such policies and bonds have been paid and Checkmate and its
subsidiaries are otherwise in compliance in all material respects with the terms
of such policies and bonds (or other policies and bonds providing substantially
similar insurance coverage). Such policies of insurance and bonds are of the
type and in amounts customarily carried by persons conducting businesses similar
to those of Checkmate and its subsidiaries. Checkmate and its subsidiaries have
not received notice of and do not know of any threatened termination of, or
material premium increase with respect to, any of such policies.
7.23 OPTION PLANS
Except as set forth in Section 7.23 of the Checkmate Disclosure Schedule,
the Board of Directors of Checkmate has taken all necessary action (or refrained
from taking action, where appropriate) under the Checkmate Stock Option Plans so
that none of the Checkmate Stock Options (or any portion thereof) will be
entitled to receive cash or other property as a result of the consummation of
the transactions contemplated hereby, but instead shall be assumed as provided
in Section 5.10 hereof.
7.24 POOLING MATTERS
Neither Checkmate nor to Checkmate's knowledge any of its affiliates has
taken or agreed to take any action that (without giving effect to any action
taken or agreed to be taken by IVI or any of its affiliates or Newco) would
affect the ability of Newco to account for the business combination to be
effected by the Transactions as a pooling of interests.
44
7.25 AFFILIATES
Section 7.25 of the Checkmate Disclosure Schedule sets forth each person
who, as of the date hereof, is an affiliate of Checkmate.
7.26 OPINION OF FINANCIAL ADVISOR
Checkmate has been advised by its financial advisor, BT Alex.Xxxxx, that, in
its opinion, as of the date hereof, the terms of the Transactions are fair to
the stockholders of Checkmate from a financial point of view, and has delivered
a written copy of such opinion to Checkmate.
ARTICLE 8.00--REPRESENTATIONS AND WARRANTIES OF NEWCO
Newco hereby represents and warrants to IVI and Checkmate that:
8.1 ORGANIZATION AND QUALIFICATION
Newco is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware or organization and has the requisite
corporate power and authority and is in possession of all Approvals necessary to
own, lease and operate the properties it purports to own, operate or lease and
to carry on its business as it is now being conducted. Newco does not directly
or indirectly own any equity or similar interest in, or any Rights in, any
corporation, partnership, joint venture or other business association or entity,
except that it owns all of the outstanding capital stock of Merger Sub.
8.2 ARTICLES OF INCORPORATION AND BY-LAWS; MINUTES
The Certificate of Incorporation and By-Laws of Newco are in full force and
effect. Newco is not in violation of any of the provisions of its Certificate of
Incorporation or By-Laws or equivalent organizational documents.
8.3 CAPITALIZATION
The authorized capital stock of Newco consists of 99,000,000 shares of Newco
Common Stock and 1,000,000 shares of preferred stock of Newco ("Newco Preferred
Stock"). As of the date of this Agreement:
(i) 10 shares of Newco Common Stock are issued and outstanding, all
of which are validly issued, fully paid and nonassessable under the
Delaware Law. None of the outstanding shares of capital stock of Newco
has been issued in violation of any preemptive rights of any current or
past holder of Newco capital stock; and
(ii) no shares of Newco Preferred Stock are issued or outstanding.
8.4 AUTHORITY RELATIVE TO THIS AGREEMENT
Newco has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Newco and the consummation by Newco of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of Newco are necessary to authorize this
Agreement or to consummate the transactions so contemplated. The Board of
Directors of Newco has determined that it is advisable and in the best interest
of Newco's shareholders for Newco to enter into a business combination with IVI,
Checkmate and Merger Sub upon the terms and subject to the conditions of this
Agreement. This
45
Agreement has been duly and validly executed and delivered by Newco and,
assuming the due authorization, execution and delivery by IVI, Checkmate and
Merger Sub, as applicable, constitutes a legal, valid and binding obligation of
Newco.
ARTICLE 9.00--REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Merger Sub hereby represents and warrants to IVI and Checkmate that:
9.1 ORGANIZATION AND QUALIFICATION
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia or organization and has the
requisite corporate power and authority and is in possession of all Approvals
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted. Merger Sub
does not directly or indirectly own any equity or similar interest in, or any
Rights in, any corporation, partnership, joint venture or other business
association or entity.
9.2 ARTICLES OF INCORPORATION AND BY-LAWS; MINUTES
The Articles of Incorporation and By-Laws of Merger Sub are in full force
and effect. Merger Sub is not in violation of any of the provisions of its
Articles of Incorporation or By-Laws or equivalent organizational documents.
9.3 CAPITALIZATION
The authorized capital stock of Merger Sub consists of 1,000 shares of
Merger Sub Common Stock. As of the date of this Agreement 100 shares of Merger
Sub Common Stock are issued and outstanding, all of which are validly issued,
fully paid and nonassessable.
9.4 AUTHORITY RELATIVE TO THIS AGREEMENT
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Merger Sub and the consummation by Merger Sub of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Merger Sub are necessary to authorize this Agreement or to consummate the
transactions so contemplated. The Board of Directors of Merger Sub has
determined that it is advisable and in the best interest of Merger Sub's
shareholders for Merger Sub to enter into a business combination with IVI, Newco
and Checkmate upon the terms and subject to the conditions of this Agreement.
This Agreement has been duly and validly executed and delivered by Merger Sub
and, assuming the due authorization, execution and delivery by IVI, Newco and
Checkmate, as applicable, constitutes a legal, valid and binding obligation of
Merger Sub.
ARTICLE 10.00--CONDUCT OF BUSINESS PENDING THE ARRANGEMENT
10.1 CONDUCT OF BUSINESS BY IVI PENDING THE TRANSACTIONS
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Date, IVI
covenants and agrees that, unless Checkmate shall otherwise agree in writing,
IVI shall conduct its business and shall cause the businesses of its
subsidiaries to be conducted only in, and IVI and its subsidiaries shall not
take any action except in, the ordinary course of business and in a manner
consistent with past practice except as may be otherwise provided herein; and
IVI shall use reasonable commercial efforts to preserve substantially intact the
business organization of IVI and its subsidiaries, to keep available the
services of the present officers, employees and consultants of
46
IVI and its subsidiaries, to take all action reasonably necessary to prevent the
loss, cancellation, abandonment, forfeiture or expiration of any IVI
Intellectual Property and to preserve the present relationships of IVI and its
subsidiaries with customers, suppliers and other persons with which IVI or any
of its subsidiaries has significant business relations.
In addition, except as contemplated by this Agreement, IVI shall not, and
shall cause its subsidiaries not to, except to the extent necessary to implement
the Transactions and to carry out the intentions of the parties set forth in
Section 4.1, during the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the Effective Date,
directly or indirectly do, or agree, propose or Contract to do, any of the
following without the prior written consent of Checkmate:
(a) amend or otherwise change IVI's Articles of Continuation or By-Laws;
(b) issue, sell, pledge, dispose of or encumber or otherwise subject to
any Lien, or authorize the issuance or reservation for issuance, sale,
pledge, disposition or encumbrance of or otherwise subjecting to any Lien,
any shares of capital stock of any class or other ownership interests, or
any Rights of IVI, any of its subsidiaries or affiliates (except for the
issuance of IVI Common Shares issuable pursuant to employee stock options
under the IVI Option Plan or pursuant to the Participation Right, which
options or rights, as the case may be, are outstanding on the date hereof
and except for the issuance of shares of NTN common stock pursuant to
employee stock options which options are outstanding on the date hereof);
(c) sell, dispose of or subject any properties of IVI or any of its
subsidiaries to any Lien (except for
(i) sales of properties in the ordinary course of business and in a
manner consistent with past practice and
(ii) dispositions of obsolete or worthless properties);
(d) amend or change the period (or permit any acceleration, amendment or
change) of exercisability of options or restricted stock granted under the
IVI Employee Plans (including the IVI Option Plan) or authorize cash
payments in exchange for any options granted under any of such plans;
(e) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock or other ownership interest, except
that a wholly-owned subsidiary of IVI may declare and pay a dividend to its
parent,
(ii) split, combine or reclassify any of its capital stock or other
ownership interests or issue or authorize or propose the issuance of any
other securities or Rights in respect of, in lieu of or in substitution
for shares of its capital stock or other ownership interests, or
(iii) amend the terms of, repurchase, redeem or otherwise acquire, or
permit any subsidiary to repurchase, redeem or otherwise acquire, any of
its securities or any securities of its subsidiaries;
(f) sell, transfer, license, sublicense or otherwise dispose of any IVI
Intellectual Property, or amend or modify any existing Contracts with
respect to any IVI Intellectual Property or IVI Third Party Intellectual
Property Rights, other than nonexclusive object and source code licences in
the ordinary course of business consistent with past practice;
(g) acquire (by merger, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership or other business organization or
division thereof, other than the purchase of the assets of BancTec Payment
System's Open Payment Systems Group by NTN;
(i) incur or amend any indebtedness for borrowed money or issue any
debt securities or assume, guarantee (other than guarantees of currently
existing bank debt of IVI or IVI's
47
subsidiaries entered into in the ordinary course of business), endorse or
otherwise as an accommodation become responsible for, the obligations of
any person, or make any loans or advances, except in the ordinary course
of business consistent with past practice; or
(ii) authorize any capital expenditures or purchase of fixed assets
which are, in the aggregate, in excess of $1,000,000 for IVI and its
subsidiaries taken as a whole;
(h) increase the compensation payable or to become payable to its
officers or employees, except for increases in salary or wages of officers
or employees of IVI or any of its subsidiaries subject to performance and
compensation reviews, or grant any severance or termination pay to, or enter
into any employment or severance agreement with, any director, officer or
other employee of IVI or any of its subsidiaries, or (except as required by
Law) terminate, establish, adopt, enter into or amend any IVI Employee Plan;
(i) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, capitalization of software development costs, payments of
accounts payable and collection of accounts receivable) other than as may be
required by Canadian generally accepted accounting principles applied on a
basis consistent with past practice;
(j) make any material Tax election inconsistent with past practices or
settle or compromise any material federal, state, local or foreign Tax
Liability or agree to an extension of a statute of limitations except to the
extent the amount of any such settlement has been reserved for on the
consolidated balance sheet contained in IVI's most recent OSC Report;
(k) pay, discharge or satisfy any material Litigation or Liabilities,
other than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of Liabilities reflected or
reserved against on the consolidated balance sheet contained in IVI's most
recent OSC Report or incurred in the ordinary course of business and
consistent with past practice;
(l) modify, amend or terminate any Contracts, waive, release, relinquish
or assign any contract or other rights or claims or cancel or forgive any
indebtedness owed to it, other than in the ordinary course of business
consistent with past practice or with respect to Contracts which are not
material to IVI and its subsidiaries taken as a whole;
(m) take or allow to be taken or fail or omit to take any act which
would jeopardize the treatment of the Transactions as a pooling of interests
for accounting purposes under GAAP; or
(n) any action which would make any of the representations or warranties
of IVI contained in this Agreement untrue or incorrect in any material
respect or prevent IVI from performing or cause IVI not to perform its
covenants hereunder or result in any of the conditions to the Arrangement
set forth herein not being satisfied.
10.2 NO SOLICITATION
(a) Neither IVI nor Checkmate (each, for purposes of this Section 10.2,
a "Company"), nor any of their respective subsidiaries shall (whether
directly or indirectly through advisors, agents or other intermediaries),
nor shall such Company or any of its subsidiaries authorize or permit any of
its or their officers, directors, agents, representatives, advisors or
subsidiaries to solicit, initiate or knowingly take any action to facilitate
the submission of inquiries, proposals or offers from any Third Party
relating to (A) any acquisition or purchase of 5% or more of the assets of
such Company and its subsidiaries as stated in the consolidated balance
sheet contained in IVI's most recent OSC Report or Checkmate's most recent
Checkmate SEC Document, as the case may be, or of 5% or more of the number
of outstanding equity securities of any class of such Company or any of its
subsidiaries, (B) any tender offer (including a self tender offer) or
exchange offer, (C) any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or
48
similar transaction involving such Company or any of its subsidiaries whose
assets, individually or in the aggregate, constitute 5% or more of the
assets of such Company and its subsidiaries as stated in the consolidated
balance sheet contained in IVI's most recent OSC Report or Checkmate's most
recent Checkmate SEC Document, as the case may be, other than the
transactions contemplated by this Agreement, the Shareholders Agreements and
any transaction pursuant to the Participation Right, or (D) any other
transaction the consummation of which would, or could reasonably be expected
to materially impede, interfere with, prevent or delay any or all of the
Transactions (collectively, "Acquisition Proposals"), or (ii) agree to or
endorse an Acquisition Proposal, or (iii) enter into or participate in any
discussions or negotiations regarding any of the foregoing, or furnish to
any Third Party any information with respect to its business or properties
or any of the foregoing, or otherwise cooperate in any way with, or
knowingly assist or participate in, facilitate or encourage, any effort or
attempt by any Third Party to do or seek any of the foregoing; provided,
however, that the foregoing shall not prohibit such Company (either directly
or indirectly through advisors, agents or other intermediaries) from (i)
engaging in discussions or negotiations with such a Third Party who has made
a Superior Proposal but only to the extent that the Board of Directors of
such Company shall have concluded in good faith on the basis of written
advice from its outside counsel that such action is required to prevent the
Board of Directors of such Company from breaching its fiduciary duties to
the stockholders or shareholders of such Company under applicable law; or
(ii) furnishing information pursuant to an appropriate confidentiality
letter (which letter shall not be less favorable to such Company in any
material respect than the Confidentiality/Standstill Agreement, and a copy
of which shall be provided for informational purposes only to the other
Company) concerning such Company and its businesses or properties to a Third
Party who has made a Superior Proposal; provided, further, that if the Board
of Directors of such Company receives a Superior Proposal, to the extent it
may do so without breaching its fiduciary duties as advised in writing by
its outside counsel and as determined in good faith, and without violating
any of the conditions of such Superior Proposal, (A) the Board of Directors
of such Company shall not, and shall not authorize any officers or
representatives to, take any of the foregoing actions until reasonable
notice to the other Company of its intent to take such action shall have
been given in writing to the other Company; and (B) such Company shall
promptly inform the other Company of the terms and conditions of such
proposal and the identity of the person making it. As of the date hereof,
each Company shall immediately cease and cause each of its subsidiaries and
its and their advisors, agents and other intermediaries to cease, any and
all existing activities, discussions or negotiations with any Third Party
conducted heretofore with respect to any of the foregoing, and shall use its
reasonable best efforts to cause any such parties in possession of
confidential information about such Company that was furnished by or on
behalf of such Company to return or destroy all such information in the
possession of any such Third Party or in the possession of any agent or
advisor of any such party.
(b) If (A) a Third Party has made an Acquisition Proposal, (B) the
Agreement is terminated pursuant to Section 12.1(e), 12.1(f), 12.1(g) or
12.1(h) and (C) any Acquisition Proposal (whether or not proposed prior to
the IVI Shareholders' Meeting or the Checkmate Stockholders' Meeting, as the
case may be, and whether or not it involves the Third Party making the
Acquisition Proposal referred to in Section 10.2(b)(A) above) has been
consummated within twelve months following the termination of this
Agreement, then, the Company (i) whose Board of Directors took the action or
failed to take the action referred to in Section 12.1(e), (ii) which made
the Terminating Breach, (iii) who is the subject of the Superior Proposal
referred to in Sections 12.1(g) or 12.1(h); or (iv) which is subject to such
consummated Acquisition Proposal, shall pay to the other Company, within two
business days following such occurrence, a fee of $3,000,000, as liquidated
damages and not as a penalty, together with reimbursement of all reasonable
out-of-pocket costs, fees and expenses, including, without limitation, the
reasonable fees and disbursements of banks, investment banks, accountants
and legal counsel and the expenses of any litigation incurred in connection
with collecting the fee provided for in this subsection 10.2(b).
49
(c) For purposes of this Agreement, "Superior Proposal" means a bona
fide Acquisition Proposal that the Board of Directors of the Company subject
to such Acquisition Proposal believes, in its good faith judgment (based on
the advice of a financial advisor of nationally recognized reputation,
taking into account all the terms and conditions of the Acquisition
Proposal, including any break-up fees, expense reimbursement provisions and
conditions to consummation) is more favorable, from a financial point of
view, to the stockholders or shareholders of such Company than this
Agreement and the Transactions and that the funds or other consideration
necessary for the Acquisition Proposal are reasonably likely to be
available. For purposes of this Agreement, "Third Party" means any "group,"
as described in Rule 13d-5(b) promulgated under the Exchange Act, or person,
other than IVI, Checkmate or any of their respective affiliates as of the
date hereof.
(d) Both IVI and Checkmate shall ensure that the respective officers,
directors and employees of itself and its subsidiaries and any investment
bankers or other advisors or representatives retained by IVI or Checkmate,
as the case may be, are aware of the restrictions described in this Section
10.2, and shall be responsible for any breach of this Section 10.2 by such
officers, directors, employees, bankers, advisors or representatives.
10.3 CONDUCT OF BUSINESS BY CHECKMATE PENDING THE TRANSACTIONS
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Date, Checkmate
covenants and agrees that, unless IVI shall otherwise agree in writing,
Checkmate shall conduct its business and shall cause the businesses of its
subsidiaries to be conducted only in, and Checkmate and its subsidiaries shall
not take any action except in, the ordinary course of business and in a manner
consistent with past practice except as may be otherwise provided herein; and
Checkmate shall use reasonable commercial efforts to preserve substantially
intact the business organization of Checkmate and its subsidiaries, to keep
available the services of the present officers, employees and consultants of
Checkmate and its subsidiaries, to take all action reasonably necessary to
prevent the loss, cancellation, abandonment, forfeiture or expiration of any
Checkmate Intellectual Property and to preserve the present relationships of
Checkmate and its subsidiaries with customers, suppliers and other persons with
which Checkmate or any of its subsidiaries has significant business relations.
In addition, except as contemplated by this Agreement, Checkmate shall not,
and shall cause its subsidiaries not to, except to the extent necessary to
implement the Transactions and carry out the intentions of the parties set forth
in Section 4.1 during the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the Effective Date,
directly or indirectly do, or agree, propose or Contract to do, any of the
following without the prior written consent of IVI:
(a) amend or otherwise change Checkmate's Articles of Incorporation or
By-Laws;
(b) issue, sell, pledge, dispose of or encumber or otherwise subject to
any Lien, or authorize the issuance or reservation for issuance, sale,
pledge, disposition or encumbrance of or otherwise subjecting to any Lien,
any shares of capital stock of any class or other ownership interests, or
any Rights (except for the issuance of Checkmate Common Shares issuable
pursuant to employee stock options under the Checkmate Stock Option Plans,
which options are outstanding on the date hereof);
(c) sell, dispose of or subject any properties of Checkmate or any of
its subsidiaries to any Lien (except for
(i) sales of properties in the ordinary course of business and in a
manner consistent with past practice and
(ii) dispositions of obsolete or worthless properties);
50
(d) amend or change the period (or permit any acceleration, amendment or
change) of exercisability of options or restricted stock granted under the
Checkmate Employee Plans (including the Checkmate Stock Option Plans) or
authorize cash payments in exchange for any options granted under any of
such plans;
(e) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock or other ownership interest, except
that a wholly-owned subsidiary of Checkmate may declare and pay a dividend
to its parent,
(ii) split, combine or reclassify any of its capital stock or other
ownership interests or issue or authorize or propose the issuance of any
other securities or Rights in respect of, in lieu of or in substitution
for shares of its capital stock or other ownership interests, or
(iii) amend the terms of, repurchase, redeem or otherwise acquire, or
permit any subsidiary to repurchase, redeem or otherwise acquire, any of
its securities or any securities of its subsidiaries;
(f) sell, transfer, license, sublicense or otherwise dispose of any
Checkmate Intellectual Property, or amend or modify any existing Contracts
with respect to any Checkmate Intellectual Property or Checkmate Third Party
Intellectual Property Rights, other than nonexclusive object and source code
licences in the ordinary course of business consistent with past practice;
(g) (i) acquire (by merger, consolidation, or acquisition of stock or
assets or otherwise) any corporation, partnership or other business
organization or division thereof;
(ii) incur or amend any indebtedness for borrowed money or issue any
debt securities or assume, guarantee (other than guarantees of currently
existing bank debt of Checkmate's subsidiaries entered into in the
ordinary course of business), endorse or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans
or advances, except in the ordinary course of business consistent with
past practice; or
(iii) authorize any capital expenditures or purchase of fixed assets
which are, in the aggregate, in excess of $1,000,000 for Checkmate and
its subsidiaries taken as a whole;
(h) increase the compensation payable or to become payable to its
officers or employees, except for increases in salary or wages of officers
or employees of Checkmate or any of its subsidiaries subject to performance
and compensation reviews, or grant any severance or termination pay to, or
enter into any employment or severance agreement with, any director, officer
or other employee of Checkmate or any of its subsidiaries, or (except as
required by Law) terminate, establish, adopt, enter into or amend any
Checkmate Employee Plan;
(i) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, capitalization of software development costs, payments of
accounts payable and collection of accounts receivable) other than as may be
required by GAAP;
(j) make any material Tax election inconsistent with past practices or
settle or compromise any material federal, state, local or foreign Tax
Liability or agree to an extension of a statute of limitations except to the
extent the amount of any such settlement has been reserved for on the
consolidated balance sheet contained in the most recent Checkmate SEC
Document;
(k) pay, discharge or satisfy any material Liabilities, other than the
payment, discharge or satisfaction, in the ordinary course of business and
consistent with past practice, of Liabilities reflected or reserved against
in the consolidated balance sheet contained in Checkmate's most recent SEC
Report or incurred in the ordinary course of business and consistent with
past practice;
51
(l) modify, amend or terminate any Contracts, waive, release, relinquish
or assign any contract or other rights or claims or cancel or forgive any
indebtedness owed to it, other than in the ordinary course of business
consistent with past practice with respect to Contracts which are not
material to Checkmate and its subsidiaries taken as a whole;
(m) take or allow to be taken or fail or omit to take any act which
would jeopardize the treatment of the Transactions as a pooling of interests
for accounting purposes under GAAP; or
(n) take any action which would make any of the representations or
warranties of Checkmate contained in this Agreement untrue or incorrect in
any material respect or prevent Checkmate from performing or cause Checkmate
to perform its covenants hereunder or result in any of the conditions to the
Transactions set forth herein not being satisfied.
ARTICLE 11.00--CONDITIONS TO THE TRANSACTIONS
11.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE TRANSACTIONS
The respective obligations of each party to effect the Transactions shall be
subject to the satisfaction at or prior to the Effective Date of the following
conditions:
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT/COURT APPROVAL
The Registration Statement shall have been declared effective by the SEC
under the Securities Act and shall cover the Newco Common Stock both to be
issued at or immediately after the Effective Date. No stop order suspending
the effectiveness of the Registration Statement, if any, shall have been
issued by the SEC and no Litigation for that purpose and no similar
proceeding in respect of either Proxy Statement shall have been initiated or
threatened by the SEC or the OSC. The final receipt from the OSC and other
provincial securities regulatory authorities for the Prospectus shall have
been obtained. The Court shall have issued its final order approving the
Arrangement in form and substance satisfactory to IVI and Checkmate (such
approvals not to be unreasonably withheld or delayed);
(b) SHAREHOLDER APPROVAL
This Agreement and the applicable Transaction shall have been approved
and adopted by the affirmative requisite vote of the shareholders of each of
IVI and Checkmate;
(c) HSR ACT
The waiting period applicable to the consummation of the Transactions
under the HSR Act shall have expired or been terminated;
(d) OSC, ETC.
All necessary rulings shall have been obtained from the OSC and other
relevant Canadian, provincial and state securities regulatory authorities in
connection with the Transactions. The applicable waiting periods and any
extensions thereof under Part IX of the COMPETITION ACT (Canada) shall have
expired or the parties shall have received an Advance Ruling Certificate
("ARC") pursuant to section 102 of the COMPETITION ACT (Canada) setting out
that the Director under such Act is satisfied he would not have sufficient
grounds on which to apply for an order in respect of the Transactions;
(e) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY
No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of
the Transactions shall be in effect, nor shall any Litigation brought by any
governmental entity seeking any of the foregoing be pending; and there shall
not be any action taken, or any Law or Order applicable to the Transactions,
which makes the consummation of the Transactions illegal;
52
(f) LISTING
The Newco Common Stock issued at or immediately after the Effective Date
and any additional shares issued as a result of the exercise of rights
attaching to the Exchangeable Shares shall have been approved for
(i) listing, subject to notice of issuance, on the TSE, and
(ii) quotation, subject to notice of issuance, on the Nasdaq National
Market. The Exchangeable Shares shall have been approved for listing,
subject to notice of issuance, on the TSE; and
(g) DISSENT RIGHTS
IVI and Checkmate shall not have received, on or prior to the Effective
Time, notice from the holders of, in IVI's case, IVI Common Shares, and, in
Checkmate's case, Checkmate Common Shares of their intention to exercise
their rights of dissent under Section 190 of the CBCA and Article 13 of the
Georgia Law, respectively, that in the aggregate, after taking into account
all other facts and circumstances of the parties, would prevent the
Transactions from being treated as a pooling of interests under GAAP.
11.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF IVI
The obligations of IVI to effect the Transactions are also subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES
The representations and warranties of Checkmate contained in this
Agreement shall be true and correct in all material respects (except for
such representations and warranties which are qualified as to materiality
which shall be true and correct in all respects) on and as of the Effective
Date, except for
(i) changes contemplated by this Agreement, or
(ii) those representations and warranties which address matters only
as of a particular date (which shall remain true and correct as of such
date), or
and IVI shall have received a certificate to such effect signed on
behalf of Checkmate by the Chief Executive Officer and the Chief Financial
Officer of Checkmate;
(b) AGREEMENTS AND COVENANTS
Checkmate, Newco and Merger Sub shall have performed or complied in all
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Date, and IVI
shall have received a certificate to such effect signed on behalf of
Checkmate by the Chief Executive Officer and the Chief Financial Officer of
Checkmate and with respect to Newco and Merger Sub, by a director or officer
of such corporation;
(c) CONSENTS OBTAINED
All material Approvals required to be obtained or made by Checkmate for
the authorization, execution and delivery of this Agreement and the
consummation by it of the transactions contemplated hereby shall have been
obtained and made by Checkmate;
(d) GOVERNMENTAL ACTIONS
There shall not have been instituted, pending or threatened any action
or proceeding (or any investigation or other inquiry that might result in
such an action or proceeding) by any governmental entity before any
governmental entity, nor shall there be in effect any Order of any
governmental entity, in either case, seeking to prohibit or limit IVI from
exercising all material rights and privileges pertaining to the ownership or
operation by IVI or any of its subsidiaries of all or a material portion of
53
the business or properties of IVI or any of its subsidiaries, or seeking to
compel IVI or any of its subsidiaries to dispose of or hold separate all or
any material portion of the business or properties of IVI or any of its
subsidiaries, as a result of the Transactions;
(e) MATERIAL ADVERSE CHANGE
Since the date of this Agreement, there shall have been no change,
occurrence or circumstance in the business, results of operations or
financial condition of Checkmate or any subsidiary of Checkmate having a
Material Adverse Effect;
(f) ACCOUNTANTS' POOLING LETTERS
IVI shall have received a letter, dated as of the date hereof, in form
and substance reasonably acceptable to such party, from Coopers & Xxxxxxx to
the effect that such firm is not aware of any matters relating to IVI and
its subsidiaries which would preclude the Transactions from qualifying for
pooling-of-interests accounting treatment. IVI also shall have received a
letter, dated as of the Effective Date in form and substance reasonably
acceptable to such party, from Coopers & Xxxxxxx to the effect that the
Transactions qualify for pooling-of-interests accounting treatment;
(g) AFFILIATE AGREEMENTS
IVI shall have received from each person who is identified in the
Checkmate Affiliate Letter as an "affiliate" of Checkmate a Checkmate
Affiliate Agreement, and each such Checkmate Affiliate Agreement shall be in
full force and effect;
(h) OPINION OF CHECKMATE COUNSEL
IVI shall have received from Xxxxxx & Bird, counsel to Checkmate, an
opinion that the Merger is effective under Georgia Law, in form and
substance reasonably satisfactory to IVI and its counsel; and
(i) TAX OPINION
IVI shall have received an opinion in form and substance satisfactory to
IVI of Xxxxxxx Xxxxxx, counsel for IVI, to the effect that the Arrangement
will be generally treated for Canadian federal income tax purposes as a
reorganization of capital for those shareholders of IVI who hold their IVI
Common Shares as capital property for purposes of the ITA and an opinion in
form and substance satisfactory to IVI from Xxxxxx, Xxxxx & Bockius, counsel
for IVI, to the effect that a Shareholder of IVI who exchanges IVI Common
Shares for Newco Common Stock should not recognize gain or loss under
Section 351 of the Code.
11.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF CHECKMATE
The obligations of Checkmate to effect the Transactions is also subject to
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES
The representations and warranties of IVI contained in this Agreement
shall be true and correct in all material respects (except for such
representations and warranties which are qualified as to materiality which
shall be true and correct in all respects) on and as of the Effective Date,
except for
(i) changes contemplated by this Agreement, or
(ii) those representations and warranties which address matters only
as of a particular date (which shall remain true and correct as of such
date),
and Checkmate shall have received a certificate to such effect signed on
behalf of IVI by the Chief Executive Officer and the Chief Financial Officer
of IVI;
(b) AGREEMENTS AND COVENANTS
54
IVI, Newco and Merger Sub shall have performed or complied in all
material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the
Effective Date, and Checkmate shall have received a certificate to such
effect signed by the Chief Executive Officer and the Chief Financial Officer
of IVI and with respect to Newco and Merger Sub, by a director or officer of
such corporations;
(c) CONSENTS OBTAINED
All material Approvals required to be obtained or made by IVI for the
authorization, execution and delivery of this Agreement and the consummation
by them of the transactions contemplated hereby shall have been obtained and
made by IVI;
(d) GOVERNMENTAL ACTIONS
There shall not have been instituted, pending or threatened any action
or proceeding (or any investigation or other inquiry that might result in
such an action or proceeding) by any governmental entity before any
governmental entity, nor shall there be in effect any Order of any
governmental entity, in either case, seeking to prohibit or limit Checkmate
from exercising all material rights and privileges pertaining to the
ownership or operation by Checkmate or any of its subsidiaries of all or a
material portion of the business or properties of Checkmate or any of its
subsidiaries, or seeking to compel Checkmate or any of its subsidiaries to
dispose of or hold separate all or any material portion of the business or
properties of Checkmate or any of its subsidiaries, as a result of the
Transactions;
(e) MATERIAL ADVERSE CHANGE
Since the date of this Agreement, there shall have been no change,
occurrence or circumstance in the business, results of operations or
financial condition of IVI or any subsidiary of IVI having a Material
Adverse Effect;
(f) ACCOUNTANTS' POOLING LETTERS
Checkmate shall have received a letter, dated as of the date hereof, in
form and substance reasonably acceptable to such party, from Ernst & Young
to the effect that such firm is not aware of any matters relating to
Checkmate and its subsidiaries which would preclude the Transactions from
qualifying for pooling-of-interests accounting treatment. Checkmate also
shall have received a letter, dated as of the Effective Date, in form and
substance reasonably acceptable to such party, from Coopers & Xxxxxxx to the
effect that the Transactions qualify for pooling-of-interests accounting
treatment;
(g) AFFILIATE AGREEMENTS
Checkmate shall have received from each person who is identified in the
IVI Affiliate Letter as an "affiliate" of IVI an IVI Affiliate Agreement,
and each such IVI Affiliate Agreement shall be in full force and effect.
(h) OPINION OF IVI COUNSEL
Checkmate shall have received from Xxxxxxx Xxxxxx, counsel to IVI, an
opinion that the Arrangement is effective under Ontario Law, in form and
substance reasonably satisfactory to Checkmate and its counsel; and
(i) TAX OPINION
Checkmate shall have received an opinion in form and substance
satisfactory to Checkmate of Xxxxxx & Bird, counsel for Checkmate, to the
effect that the Merger will be generally treated for U.S. federal income tax
purposes as a tax-free reorganization under Section 368(a) of the Code.
55
ARTICLE 12.00--TERMINATION
12.1 TERMINATION
This Agreement may be terminated at any time prior to the Effective Date,
notwithstanding approval thereof by the shareholders of IVI or Checkmate:
(a) by mutual written consent duly authorized by the Boards of Directors
of IVI and Checkmate; or
(b) by either IVI or Checkmate if the Transactions shall not have been
consummated by July 31, 1998 (PROVIDED, THAT, the right to terminate this
Agreement under this Section 12.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Transactions to occur on or
before such date); or
(c) by either IVI or Checkmate if a court of competent jurisdiction or
other governmental entity shall have issued a non-appealable final Order or
taken any other action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Arrangement or the
Merger; or
(d) by either IVI or Checkmate, if, at either of the IVI Shareholders'
Meeting (including any adjournment or postponement thereof) or the Checkmate
Shareholders' Meeting (including, any adjournment or postponement thereof),
the requisite affirmative vote of the shareholders of IVI or Checkmate, as
the case may be, shall not have been obtained; or
(e) by either Company if
(i) the Board of Directors of the other Company shall withdraw,
modify or change its recommendation of this Agreement or the Transactions
in a manner adverse to the other party or shall have resolved to do so or
shall have failed by June 15 , 1998 to call the IVI Shareholders' Meeting
or the Checkmate Shareholders' Meeting, as the case may be; or
(ii) the Board of Directors of the other Company shall have taken a
"neutral" position with respect to (or shall have failed to reject as
inadequate, or shall have failed to reaffirm its recommendation of this
Agreement and the Transactions within 10 business days after the public
announcement or commencement of) an Acquisition Proposal; or
(f) by either IVI or Checkmate, upon a breach of any representation,
warranty, covenant or agreement on the part of Checkmate or IVI,
respectively, set forth in this Agreement or if any representation or
warranty of Checkmate or IVI, respectively, shall have become untrue, in
either case, such that the conditions set forth in Section 11.2(a) or
11.2(b), or Section 11.3(a) or 11.3(b), would not be satisfied (a
"Terminating Breach"),
PROVIDED, THAT, if such Terminating Breach is curable prior to the
expiration of 30 days from its occurrence (but in no event later than July
31, 1998) by Checkmate or IVI, as the case may be, through the exercise of
its reasonable best efforts and for so long as Checkmate or IVI, as the case
may be, continues to exercise such reasonable best efforts, neither
Checkmate nor IVI, respectively, may terminate this Agreement under this
Section 12.1(f) until the earlier of July 31, 1998 or the expiration of such
30-day period without such Terminating Breach having been cured; or
(g) Either Company may terminate this Agreement by written notice to the
other Company at any time prior to the Effective Time, provided that a
person has made a Superior Proposal to such Company, provided that the other
Company does not make, within five business days of the aforesaid notice, an
offer that the Board of Directors of the Company subject to such Superior
Proposal believes, in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation, taking into account
all the terms and conditions of the Superior Proposal, including any
break-up fees, expense reimbursement provisions and conditions to
consummation) is at least as favorable, from a financial point of view, to
the shareholders of such Company as such Superior
56
Proposal and that the funds or other consideration necessary for such offer
are reasonably likely to be available; or
(h) Either Company may terminate this Agreement by written notice to the
other Company if prior to the Effective Time the Board of Directors of such
Company shall have withdrawn or modified or amended, in a manner adverse to
the other Company, its approval or recommendation of this Agreement, the
Arrangement or the Merger or its recommendation that the shareholders of
such Company adopt and approve this Agreement, the Arrangement or the Merger
in order to permit such Company to execute a definitive agreement providing
for the consummation of a Superior Proposal with respect to such Company,
provided that such Company shall be in compliance with the terms of Section
10.2.
12.2 EFFECT OF TERMINATION
In the event of the termination of this Agreement pursuant to Section 12.1,
this Agreement shall forthwith become void and there shall be no Liability on
the part of any party hereto or any of its affiliates, directors, officers or
shareholders except
(i) as set forth in Section 10.2, Section 12.3 and the second
sentence of Section 13.1 hereof, and
(ii) nothing herein shall relieve any party from Liability for any
willful breach hereof.
12.3 FEES AND EXPENSES
Except as otherwise set forth in Section 10.2, each of IVI and Checkmate
shall be responsible for the fees and expenses of its own legal counsel,
accountants, investment bankers and other professional advisors in connection
with this Agreement and the Transactions, including, without limitation, the
Registration Statement, Proxy Statement/Prospectus and the Prospectus. All fees
and expenses incurred in connection with this Agreement and the Transactions by
Newco and Merger Sub, including, without limitation, fees and expenses incurred
with respect to the incorporation and organization of each of them, registration
fees and filing fees paid with respect to the Registration Statement or the
Prospectus, and printing costs incurred with respect to the Registration
Statement, Proxy Statement/Prospectus and the Prospectus shall be shared on an
equal basis by IVI and Checkmate, whether or not the Transactions are
consummated.
ARTICLE 13.00--GENERAL PROVISIONS
13.1 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Except as otherwise provided in this Section 13.1, the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Date or upon the termination of this Agreement
pursuant to Section 12.1, as the case may be, except that the agreements set
forth in Sections 5.10, 5.12, 5.23 and 5.25 shall survive the Effective Date
indefinitely and those set forth in Sections 5.8, 10.2 and 12.3 shall survive
termination indefinitely. The Confidentiality/Standstill Agreement shall survive
termination of this Agreement as provided therein.
13.2 NOTICES
All notices and other communications given or made pursuant hereto shall be
in writing and shall be deemed to have been duly given or made as of the date
delivered, if delivered personally, three days after being sent by registered or
certified mail (postage prepaid, return receipt requested), one day after
dispatch by recognized overnight courier (provided delivery is confirmed by the
courier), and upon
57
transmission by telecopy, confirmed received, to the parties at the following
addresses (or at such other address for a party as shall be specified by such
party in a notice pursuant to this Section 13.2):
(a) If to IVI:
International Verifact Inc.
00 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Telecopier No.: (000) 000-0000
Attention: L. Xxxxx Xxxxxxx
President and CEO
With a copy to:
Xxxxxxx Xxxxxx
Xxxxxxx Xxxxx Canada Tower
000 Xxxx Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Telecopier No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxx
And to:
Xxxxxx, Xxxxx & Bockius LLP
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX
X.X.X. 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Xx.
(a) If to Checkmate:
Checkmate Electronics, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxx
X.X.X. 00000
Telecopier No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxx
With a copy to:
Xxxxxx & Bird
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X.X.X. 0000-0000
Telecopier No.: (000) 000-0000
Attention: X. Xxxx Xxxxxxxx
58
13.3 AMENDMENT
This Agreement may be amended by the parties hereto by action taken by or on
behalf of their respective Boards of Directors at any time prior to the
Effective Date;
PROVIDED, HOWEVER, that, after approval of the matters put before the
shareholders of Checkmate or the shareholders of IVI, no amendment may be made
which by any Law requires further approval by such shareholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
13.4 WAIVER
At any time prior to the Effective Date, any party hereto may with respect
to any other party hereto
(a) extend the time for the performance of any of the obligations or
other acts,
(b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and
(c) waive compliance with any of the agreements or conditions contained
herein.
Any such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
13.5 HEADINGS
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
13.6 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
13.7 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement and supersedes all prior
agreements and undertakings (other than the Confidentiality/Standstill
Agreement), both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and, except as otherwise expressly provided
herein, is not intended to confer upon any other person any rights or remedies
hereunder.
13.8 ASSIGNMENT
None of the parties hereto may assign any of its rights or obligations
hereunder without the prior written consent of the other parties hereto.
13.9 PARTIES IN INTEREST
This Agreement shall be binding upon and enure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied, is intended to
or shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, other than
59
Section 5.12 (which is intended to be for the benefit of the parties indemnified
therein and may be enforced by such parties).
13.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE
No failure or delay on the part of any party hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
13.11 GOVERNING LAW
This Agreement (for purposes of Section 13.16 or otherwise) shall be
governed by and construed in accordance with the laws of the Province of Ontario
and the federal laws of Canada applicable therein, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Subject to Section 13.16, each of the parties submits to the jurisdiction of the
courts of the Province of Ontario to hear all actions, suits and proceedings
arising in connection with this Agreement arising from the enforcement of
arbitration judgments made pursuant to Section 13.16. Checkmate hereby appoints
Xxxxxxx, Xxxxx & Xxxxxxxxx as its agent for service of process in respects of
all actions, suits and proceedings in the courts of Ontario in connection with
this Agreement.
13.12 COUNSEL FEE
In the event of any Litigation by any party against the other for specific
performance or damages for breach of this Agreement which results in a final
judgment not subject to further appeal by one of the parties, the party against
whom the judgment is entered shall pay to the party in whose favour the judgment
is entered (the "successful party") all of the successful party's counsel fees
and expenses in connection with the prosecution or defence of the action,
including in respect of investigations, depositions and discoveries in
connection therewith (and including, in connection with any litigation in a
Canadian court, costs on a solicitor and his own client basis).
13.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
13.14 WAIVER OF JURY TRIAL
Each of IVI and Checkmate hereby irrevocably waives, to the fullest extent
permitted by law, all rights to trial by jury in any action, proceeding, or
counterclaim (whether based upon contract, tort or otherwise) arising out of or
relating to this agreement or any of the transactions contemplated hereby.
13.15 U.S. CURRENCY
Except as otherwise expressly stated, all dollar amounts referred to in this
Agreement are in United States currency.
13.16 ARBITRATION
(a) In the event of any dispute, claim, question or difference arising
between IVI and Checkmate in respect of the provisions, the subject matter,
the interpretation, or the effect of this Agreement or any breach hereof,
the parties shall use their best endeavors to settle such dispute, claim,
question or
60
difference. To this effect the party which raises the concern shall give
notice in writing to the other of the concern and the reasons therefor and
its proposal for resolution. Thereafter, they shall consult and negotiate
with each other, in good faith and understanding of their mutual interests,
to reach a just and equitable solution satisfactory to both parties.
(b) Except as is expressly otherwise provided in this Agreement, if the
parties do not reach a solution pursuant to Section 13.16(a) within a period
of 30 days from the written notice contemplated in Section 13.16(a), then
upon written notice by either party to the other, the dispute, claim,
question or difference shall be finally settled by arbitration in accordance
with the American Arbitration Association Rules for the conduct of
arbitrations in effect at the date of commencement of such arbitration,
based upon the following:
(i) the arbitration tribunal shall consist of one arbitrator
appointed by each of the parties who is qualified by education and
training to pass upon the particular matter to be decided, together with
a third arbitrator appointed by the first two-selected arbitrators;
(ii) the arbitrators shall be instructed that time is of the essence
in proceeding with their determination of any dispute, claim, question or
difference and, in any event, the arbitration award must be rendered
within 30 days of the submission of such dispute to arbitration;
(iii) the arbitration shall take place in the State of Delaware;
(iv) the arbitration award shall be given in writing and shall be
final and binding on the parties, not subject to any appeal, and shall
deal with the question of costs of arbitration and all matters related
thereto; and
(v) judgment upon the award rendered may be entered in any court
having jurisdiction, or, application may be made to such court for a
judicial recognition of the award or an order of enforcement thereof, as
the case may be.
61
IN WITNESS WHEREOF, IVI, Checkmate, Newco and Merger Sub have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
INTERNATIONAL VERIFACT INC.
Per: /s/ L. XXXXX XXXXXXX
-----------------------------------------
Name: L. Xxxxx Xxxxxxx
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
CHECKMATE ELECTRONICS, INC.
Per: /s/ J. XXXXXXXX XXXXXX
-----------------------------------------
Name: J. Xxxxxxxx Xxxxxx
Title: CHAIRMAN AND CEO
IVI CHECKMATE CORP.
Per: /s/ L. XXXXX XXXXXXX
-----------------------------------------
Name: L. Xxxxx Xxxxxxx
Title: PRESIDENT AND CEO
FUTURE MERGER CORPORATION
Per: /s/ J. XXXXXXXX XXXXXX
-----------------------------------------
Name: J. Xxxxxxxx Xxxxxx
Title: CHAIRMAN
62
SCHEDULE "A"
SCHEDULE OF CERTAIN DEFINITIONS
Where used in this Agreement, unless there is something in the context or
the subject matter inconsistent therewith, the following terms shall have the
following meanings, respectively:
(a) "Acquisition Proposals" shall bear the meaning ascribed to it in Section
10.2(a);
(b) "Affiliate Agreement" shall bear the meaning ascribed to it in Section 5.11;
(c) "Affiliate Letter" shall bear the meaning ascribed to it in Section 5.11;
(d) "affiliates" means a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first-mentioned person; including, without limitation, any partnership or joint
venture in which Checkmate or IVI, as the case may be, (either along, or through
or together with any other subsidiary) has, directly or indirectly, an equity
interest of 10 percent or more;
(e) "Agreement", "hereof", "herein", "hereunder", and similar expressions refer to
this Agreement and the schedules and exhibits hereto and not to any particular
article, section, paragraph, clause or other portion hereof and include any
agreement or instrument supplementary or ancillary hereto;
(f) "Approvals" shall bear the meaning ascribed to it in Section 6.1;
(g) "Arrangement" shall bear the meaning ascribed to it in the recitals;
(h) "business day" means any day other than a Saturday, Sunday or a day when banks
are not open for business in either or both of Xxxxxxx, Xxxxxxx xxx Xxxxxxx,
Xxxxxxx;
(i) "Call Rights" shall bear the meaning ascribed to it in the recitals;
(j) "CBCA" shall mean the CANADA BUSINESS CORPORATIONS ACT, as amended;
(k) "Checkmate Balance Sheet" shall bear the meaning ascribed to it in Section 7.9;
(l) "Checkmate Common Shares" shall bear the meaning ascribed to in the recitals;
(m) "Checkmate Disclosure Schedule" shall bear the meaning ascribed to it in Section
7.1;
(n) "Checkmate Dissenting Shares" shall bear the meaning ascribed to it in Section
3.8;
(o) "Checkmate Employee Plan" shall bear the meaning ascribed to it in Section 7.11;
(p) "Checkmate Exchange Ratio" shall bear the meaning ascribed to it in Section
3.4(a)(ii);
(q) "Checkmate Intellectual Property Rights" shall bear the meaning ascribed to it
in Section 7.20;
(r) "Checkmate Option" shall bear the meaning ascribed to it in Section 5.10(a);
(s) "Checkmate Proxy Statement" shall bear the meaning ascribed to it in Section
5.7(a);
(t) "Checkmate SEC Documents" shall bear the meaning ascribed to it in Section
7.7(a);
(u) "Checkmate Share" shall bear the meaning ascribed to it in the recitals;
(v) "Checkmate Shareholder Approval" shall bear the meaning ascribed to it in
Section 5.7(a);
(w) "Checkmate Shareholders' Meeting" shall bear the meaning ascribed to it in
Section 5.7(a);
(x) "Checkmate Stock Option Plans" shall bear the meaning ascribed to it in Section
5.10(a);
(y) "Checkmate Third Party Intellectual Property Rights" shall bear the meaning
ascribed to it in Section 7.20;
(z) "Closing" shall bear the meaning ascribed to it in Section 5.1;
(aa) "Code" shall mean the United States Internal Revenue Code of 1986, as amended;
(bb) "Company" shall mean IVI or Checkmate;
(cc) "Confidentiality/Standstill Agreement" shall bear the meaning ascribed to it in
Section 5.8;
(dd) "Constituent Corporations" shall bear the meaning ascribed to it in Section 3.2;
(ee) "Contracts" means any written or oral agreement, arrangement, authorization,
commitment, contract, indenture, instrument, lease, note, bond, mortgage,
license, obligation, plan, practice, restriction, understanding or undertaking
of any kind or character, or other document to which any person is a party or
that is binding on any person or its equity securities (including capital
stock), properties or business;
(ff) "control" (including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of stock, as trustee or executor, by
Contract or credit arrangement or otherwise;
(gg) "Court" shall bear the meaning ascribed to it in Section 2.1 of this Agreement;
(hh) "default or violation" means
(i) any breach, violation or default,
(ii) any occurrence of any event that with the passage of time or the giving
of notice or both would constitute a breach, violation or default, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms, or renegotiate, or to accelerate, increase,
or impose any Liability;
(ii) "Delaware Law" means Delaware General Corporation Law, as amended;
(jj) "Director" means the director appointed under Section 260 of the CBCA;
(kk) "Effective Date" shall bear the meaning ascribed to it in Section 2.1;
(ll) "Effective Time" shall bear the meaning ascribed to it in Section 2.1;
(mm) "Environmental Laws" shall bear the meaning ascribed to it in Section 6.17;
(nn) "ERISA" shall mean the EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, as
amended;
(oo) "Exchange Act" means the SECURITIES EXCHANGE ACT OF 1934, as amended;
(pp) "Exchange Agent" shall bear the meaning ascribed it in Section 3.6;
(qq) "Exchange Rights" shall bear the meaning ascribed to it in the recitals;
(rr) "Exchangeable Shares" shall bear the meaning ascribed to it in Section 2.1(a);
(ss) "Final Order" shall bear the meaning ascribed to it in Section 2.1;
(tt) "Form S-3" shall bear the meaning ascribed to it in Section 5.7(d);
(uu) "GAAP" shall bear the meaning ascribed to it in the recitals;
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(vv) "Georgia Certificate of Merger" shall bear the meaning ascribed to it in Section
3.1(b);
(ww) "Georgia Law" means the Georgia Business Corporations Code, as amended;
(xx) "governmental entity" shall bear the meaning ascribed to it in Section 6.5(c);
(yy) "hazardous substances" shall bear the meaning ascribed to it in Section 6.17(d);
(zz) "HSR Act" means the XXXX-XXXXX-XXXXXX ANTI-TRUST IMPROVEMENTS ACT OF 1976, as
amended;
(aaa) "Indemnified Parties" shall bear the meaning ascribed to it in Section 5.12(b);
(bbb) "Ingenico" means Ingenico, S.A., a French corporation;
(ccc) "IVI Balance Sheet" shall bear the meaning ascribed to it in Section 6.9;
(ddd) "IVI Common Shares" shall bear the meaning ascribed to it in the recitals;
(eee) "IVI Disclosure Schedule" shall bear the meaning ascribed to it in Section 6.1;
(fff) "IVI Dissenting Shares" shall bear the meaning ascribed to it in Section 2.4;
(ggg) "IVI Employee Plan" shall bear the meaning ascribed to it in Section 6.11;
(hhh) "IVI Exchange Ratio" shall bear the meaning ascribed to it in the recitals;
(iii) "IVI Intellectual Property Rights" shall bear the meaning ascribed to it in
Section 6.20;
(jjj) "IVI Option" shall bear the meaning ascribed to it in Section 5.10(a);
(kkk) "IVI Option Plan" shall bear the meaning ascribed to it in Section 5.10(a);
(lll) "IVI OSC Reports" shall bear the meaning ascribed to it in Section 6.7(a);
(mmm) "IVI Proxy Statement" shall bear the meaning ascribed to it in Section 5.7(b);
(nnn) "IVI SEC Documents" shall bear the meaning ascribed to it in Section 6.7(b);
(ooo) "IVI Shareholders' Meeting" shall bear the meaning ascribed to it in Section
5.7(b);
(ppp) "IVI Third Party Intellectual Property Rights" shall bear the meaning ascribed
to it in Section 6.20;
(qqq) "Interim Order" shall bear the meaning ascribed to it in Section 2.1;
(rrr) "IRS" shall mean the United States Internal Revenue Service;
(sss) "ISOs" shall bear the meaning ascribed to it in Section 5.10(b);
(ttt) "ITA" shall mean the INCOME TAX ACT (Canada), as amended;
(uuu) "knowledge of Checkmate" or "Checkmate's knowledge" or like phrases shall mean
only the actual knowledge, information and belief of X. Xxxxxxxx Xxxxxx, Xxxxxxx
X. Xxxxx and Xxxx X. Xxxxxxx, after, in all cases, reviewing all relevant
records and making due enquiries regarding the relevant matter;
(vvv) "knowledge of IVI" or "IVI's knowledge" or like phrases shall mean only the
actual knowledge, information and belief of Xxxxxx Xxxxxxx, L. Xxxxx Xxxxxxx and
Xxxxx Xxxxx, after, in all cases, reviewing all relevant records and making due
enquiries regarding the relevant matter;
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(www) "Law" means any code, law, ordinance, regulation, reporting or licensing
requirement, rule, statute or similar requirement applicable to a person or its
properties, Liabilities or business;
(xxx) "Liabilities" means any direct or indirect, primary or secondary, liability,
indebtedness, obligation, penalty, cost or expense (including costs of
investigation, collection and defence), claim, deficiency, guaranty or
endorsement of or by any person of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise;
(yyy) "Liens" means any conditional sale agreement, default of title, easement,
encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge,
reservation, restriction, security interest, title retention or other security
arrangement, or any adverse right or interest, charge, or claim of any nature
whatsoever of, on, or with respect to any property or property interest, other
than Liens for current property Taxes not yet due and payable;
(zzz) "Litigation" shall bear the meaning ascribed to it in Section 6.10;
(aaaa) "Merger" shall bear the meaning ascribed to it in the recitals;
(bbbb) "Merger Consideration" shall bear the meaning ascribed to it in Section 3.4(c);
(cccc) "NASD" means the National Association of Securities Dealers, Inc.;
(dddd) "Newco Common Stock" shall bear the meaning ascribed to it in the recitals;
(eeee) "Newco Preferred Stock" shall bear the meaning ascribed to it in Section 2.1(b);
(ffff) "Newco Special Voting Stock" means the preferred stock contemplated by Exhibit
C;
(gggg) "NTN" means National Transaction Network, Inc., a Delaware corporation;
(hhhh) "Order" means any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling, or writ of any
governmental entity;
(iiii) "OSA" shall mean the SECURITIES ACT (Ontario);
(jjjj) "OSC" means the Ontario Securities Commission;
(kkkk) "Participation Right" shall bear the meaning ascribed to it in Section 6.3(iv);
(llll) "Person" means an individual, corporation, partnership, association, trust,
unincorporated organization, other entity or group (to the extent such group is
deemed a "person" under Section 13(d)(3) of the Exchange Act);
(mmmm) "Plan of Arrangement" shall bear the meaning ascribed to it in the recitals;
(nnnn) "properties" of Checkmate, IVI, Newco or any other person means all of the
assets, properties, businesses and rights of such person of every kind, nature,
character and description, whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized in such
person's business, directly or indirectly, in whole or in part, whether or not
carried on the books and records of such person, and whether or not owned in the
name of such person or any affiliate of such person and wherever located;
(oooo) "Prospectus" shall bear the meaning ascribed to it in Section 5.7(e);
(pppp) "Proxy Statements" shall bear the meaning ascribed to it in Section 5.7(b);
(qqqq) "Proxy Statement/Prospectus" shall bear the meaning ascribed to it in Section
6.13(ii);
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(rrrr) "Registration Statement" shall bear the meaning ascribed to it in Section
5.7(c);
(ssss) "Rights" means all arrangements, calls, commitments, Contracts, options, rights
to subscribe to, scrip, understandings, warrants, or other binding obligations
of any character whatsoever relating to, or securities or rights convertible
into or exchangeable for, shares of the capital stock or other types of equity
securities of a person (or an affiliate or successor of such person) or by which
a person is or may be bound to issue additional shares of its capital stock,
other types of equity securities or other Rights;
(tttt) "SEC" shall mean the United States Securities and Exchange Commission;
(uuuu) "Securities Act" means the SECURITIES ACT OF 1933, as amended;
(vvvv) "Series A Preferred Share" shall bear the meaning ascribed to it in Section
2.1(a);
(wwww) "Share" shall bear the meaning ascribed to it in Section 3.4(a)(ii);
(xxxx) "Shareholder Protection Rights Agreement" shall bear the meaning ascribed to it
in Section 5.22;
(yyyy) "State Takeover Laws" shall bear the meaning ascribed to it in Section 6.5(c);
(zzzz) "Stock Option Plans" shall bear the meaning ascribed to it in Section 5.10(a);
(aaaaa) "Subsequent Dividend" shall bear the meaning ascribed to it in Section 3.4(b);
(bbbbb) "subsidiary" or "subsidiaries" of Checkmate, IVI, Newco or any other person
means any corporation, partnership, joint venture or other legal entity of which
Checkmate, IVI, Newco or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
more than 50% of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation, partnership, joint venture or other legal
entity;
(ccccc) "Superior Proposal" shall bear the meaning ascribed to it in Section 10.2(c);
(ddddd) "Support Agreement" shall bear the meaning ascribed to it in Section 2.3;
(eeeee) "Surviving Corporation" shall bear the meaning ascribed to it in Section 3.1(a);
(fffff) "Tax" or "Taxes" shall bear the meaning ascribed to it in Section 6.16(a);
(eeeee) "Tax Returns" shall bear the meaning ascribed to it in Section 6.16(a);
(ggggg) "Terminating Breach" shall bear the meaning ascribed to it in Section 12.1(f);
(hhhhh) "Third Party" shall bear the meaning ascribed to it in Section 10.2(c);
(iiiii) "Transactions" shall mean the Arrangement and the Merger;
(jjjjj) "Trustee" shall bear the meaning ascribed to it in Section 2.2;
(kkkkk) "TSE" means The Toronto Stock Exchange;
(lllll) "Voting Rights" shall bear the meaning ascribed to it in the recitals;
(mmmmm) "Voting Trust Agreement" shall bear the meaning ascribed to it in Section 2.2;
(nnnnn) "Year 2000 Compliant" means that the product, software or system in question:
(i) will correctly and unambiguously process date information at all times,
including as the years 1999 and 2000 are approached and reached;
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(ii) will not suffer any abends, aborts, improper operation or other
interruptions in operation as a result of the approach or reaching of any
particular date or the improper processing of any date. "Processing" of
date information includes, but is not limited to, accepting input of
dates without ambiguity, outputting all dates in an unambiguous form,
and performing calculations, comparisons or operations or taking
actions or making decisions using dates, portions of dates, or time
periods. The concept of Year 2000 Compliance includes all issues
relating to the handling of dates or time periods, including the
processing of the leap year that will occur in the year 2000.
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