Agreement and Plan of Merger - iPayment Inc. and Cardsync Processing Inc.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of September
5, 2002, is by and among IPAYMENT, INC., a Delaware corporation ("iPayment"),
CARDSYNC ACQUISITON SUB, INC., a California corporation ("iPayment Merger Sub"),
and CARDSYNC PROCESSING, INC., a California corporation ("CardSync").
RECITALS:
WHEREAS, iPayment Merger Sub is a wholly-owned subsidiary of iPayment;
WHEREAS, the respective boards of directors of iPayment, iPayment
Merger Sub and CardSync have determined that it is in the best interests of
their respective companies and stockholders to consummate the business
combination transactions provided for herein, in which iPayment Merger Sub will
merge with and into CardSync (the "Merger") and CardSync shall thereby become a
wholly-owned subsidiary of iPayment, subject to the terms and conditions set
forth herein;
WHEREAS, iPayment, as the sole stockholder of iPayment Merger Sub, has
approved this Agreement and the Merger with respect to iPayment Merger Sub;
WHEREAS, it is intended that the Merger shall be pursuant to the
applicable laws of the State of California and shall qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"); and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
AGREEMENT:
ARTICLE I. DEFINED TERMS AND INTERPRETATION
1.1. Defined Terms. Certain terms used in this Agreement have the meanings
ascribed thereto in Article X hereof. Accounting terms used in this Agreement
which are not otherwise defined herein shall have the meaning assigned such
terms under GAAP.
1.2. Interpretation.
(a) When used in this Agreement, the word "including" and words of
similar import shall mean "including, without limitation," and any list of items
that may follow such word shall not be deemed to represent a complete list of,
or be limited to, the contents of the referent of the subject.
<PAGE>
(b) Unless the context otherwise requires, when used in this Agreement,
the singular shall include the plural, the plural shall include the singular,
and all nouns, pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine or neuter, as the identity of the Person or Persons may
require.
(c) The headings contained in this Agreement are for reference purposes
only and do not affect in any way the meaning or interpretation of this
Agreement.
(d) In this Agreement, unless a contrary intention appears, (i) the
words "herein," "hereof" and "hereunder" and other words of similar import refer
to this Agreement as a whole and not to any particular Article, Section or other
subdivision, and (ii) references to any Article or Section are to an article or
a section of this Agreement, as applicable, and references to any schedule or
exhibit are to a schedule or exhibit to this Agreement, as applicable.
(e) The parties hereto have each negotiated the terms hereof, reviewed
this Agreement carefully, and discussed it with their respective legal counsel.
It is the intent of the parties that each word, phrase and sentence and other
part hereof shall be given its plain meaning. No provision of this Agreement
shall be interpreted or construed against any party hereto solely because such
party or its legal representative drafted such provision.
(f) References to any document (including this Agreement) are
references to that document as amended, consolidated, supplemented, novated or
replaced by the parties from time to time. References to any party to this
Agreement shall include references to its respective successors and permitted
assigns. References to law are references to that law as amended, consolidated,
supplemented or replaced from time to time prior to the date hereof, and shall
include references to any constitutional provision, treaty, decree, convention,
statute, act, regulation, rule, ordinance, subordinate legislation, rule of
common law and of equity and judgment and shall include the requirements of any
applicable stock exchange. References to a judgment shall include references to
any order, injunction, decree, determination or award of any court or tribunal.
(g) All references to "$" or "dollars" shall be to United States
dollars and all references to "days" shall be to calendar days unless otherwise
specified.
ARTICLE II. THE MERGER
2.1. The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the California Corporations Code (the "California Code"), at the
Effective Time, iPayment Merger Sub shall merge with and into CardSync. CardSync
shall be the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") in the Merger, and shall continue its corporate existence under
the laws of the State of California. The name of the Surviving Corporation shall
be "CardSync Processing, Inc." Upon consummation of the Merger, the separate
corporate existence of iPayment Merger Sub shall terminate.
2.2. Effective Time. The Merger shall become effective (the "Effective
Time") upon filing of a certificate of merger (the "Certificate of Merger") with
respect to the Merger with the Secretary of State of the State of California
(the "California Secretary") in accordance with the California Code, or at such
later time as mutually agreed among the parties hereto and set forth in the
Certificate of Merger. The parties hereto shall cause the Certificate of Merger
to be filed with
<PAGE>
the California Secretary in accordance with the California Code simultaneously
with or as soon as practicable after the Closing. iPayment and CardSync agree,
however, that effective control of CardSync was transferred to iPayment without
restrictions on September 1, 2002.
2.3. Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in the California Code.
2.4. Conversion of CardSync Common Stock; Merger Consideration. At the
Effective Time each share of common stock, par value $.01 per share, of CardSync
(the "CardSync Common Stock"), issued and outstanding immediately prior to the
Effective Time (other than CardSync Dissenting Shares and other than shares of
CardSync Common Stock held directly or indirectly by iPayment or CardSync or any
of their respective Subsidiaries), shall, by virtue of this Agreement and
without any action on the part of the holder thereof, be converted into One
Million Four Hundred and Fifty Thousand (1,450,000) shares of the common stock,
par value $.01 per share, of iPayment ("iPayment Common Stock") to be allocated
among the CardSync Shareholders as set forth in Section 2.4 of the CardSync
Disclosure Schedule. The CardSync Shareholders shall receive cash in the
aggregate amount of One Million One Hundred and Fifteen Thousand Dollars
($1,115,000) to be allocated as set forth in Section 2.4 of the CardSync
Disclosure Schedule.. Section 2.4 of the Disclosure Schedule shall specify the
stockholders of CardSync, the number of issued and outstanding shares owned and
by each stockholder of CardSync immediately prior to the Merger, the number of
shares of iPayment Common Stock to be received upon Closing (as hereinafter
defined), and the amount of cash each stockholder shall receive upon Closing (as
hereinafter defined). The 1,450,000 shares of iPayment Common Stock and the One
Million One Hundred and Fifteen Thousand Dollars in cash may hereinafter be
referred to in the aggregate as the "Merger Consideration."
2.5. No Fractional Shares. Notwithstanding anything to the contrary
contained herein, no fractional shares of iPayment Common Stock shall be issued
in the Merger. Instead, all fractional shares of iPayment Common Stock that a
holder of CardSync Common Stock would otherwise be entitled to receive as a
result of the Merger shall be aggregated and if a fractional share results from
such aggregation, such fractional share shall be rounded up to the nearest whole
number of shares if such fractional share is .5 or greater of a share, and shall
be rounded down to the nearest whole number of shares if such fractional share
is less than .5 of a shares.
2.6. Cancellation of Treasury Stock. At the Effective Time, all shares of
CardSync Common Stock that are owned directly or indirectly by iPayment or
CardSync or any of their respective Subsidiaries, shall be canceled and shall
cease to exist.
2.7. Stock Options. At the Effective Time, each unexpired option or warrant,
if any, granted by CardSync to purchase shares of CardSync Common Stock (each an
"CardSync Option") which is outstanding and unexercised immediately prior to the
Effective Time shall cease to represent a right to acquire shares of CardSync
Common Stock and shall be terminated.
2.8. Effect on iPayment Common Stock. Except for any shares of iPayment
Common Stock owned by CardSync or any of its subsidiaries, which shall be
converted into treasury stock, the shares of iPayment Common Stock issued and
outstanding immediately prior to the Effective Time shall be unaffected by the
Merger and such shares shall remain issued and outstanding.
<PAGE>
2.9 Conversion of Merger Sub Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of iPayment as the sole
stockholder of iPayment Merger Sub, each issued and outstanding share of common
stock, par value $.01 per share, of iPayment Merger Sub ("iPayment Merger Sub
Common Stock") will convert into one share of common stock, par value $.01 per
share, of the Surviving Corporation.
2.10. Certificate of Incorporation of the Surviving Corporation. At the
Effective Time, the certificate of incorporation of the Surviving Corporation
shall be amended and restated in its entirety such that it shall be identical in
all respects to the certificate of incorporation of iPayment Merger Sub, as in
effect at the Effective Time, except that the name of the Surviving Corporation
shall be as set forth in Section 2.1.
2.11. Bylaws of the Surviving Corporation. At the Effective Time, the bylaws
of the Surviving Corporation shall be amended and restated in their entirety
such that they shall be identical in all respects to the bylaws of iPayment
Merger Sub, as in effect at the Effective Time, except that the name of the
Surviving Corporation shall be as set forth in Section 2.1.
2.12. Directors and Officers of the Surviving Corporation. At the Effective
Time, the directors of iPayment Merger Sub immediately prior to the Effective
Time shall be the directors of the Surviving Corporation, each to hold office in
accordance with the certificate of incorporation and bylaws of the Surviving
Corporation until their respective successors are duly elected or appointed and
qualified. At the Effective Time, the officers of the Surviving Corporation
shall be the individuals designated therefor by the board of directors of the
Surviving Corporation in accordance with the bylaws of the Surviving
Corporation. At or prior to the Closing, CardSync shall deliver to iPayment
written resignations of each of the directors of CardSync, in form and substance
satisfactory to iPayment, with such resignations to be effective as of the
Effective Time.
2.13. Tax Consequences. It is intended that the Merger shall qualify as a
reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a plan of reorganization within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations.
iPayment does not make any representation or warranty with respect to the Merger
qualifying as a reorganization within the meaning of Section 368(a) of the Code,
nor with respect to the tax consequences of the Merger to CardSync or the
CardSync Shareholders.
2.14. Closing. The closing of the transactions contemplated herein (the
"Closing") shall take place at the offices of Waller Lansden Dortch & Davis, A
Professional Limited Liability Company, Nashville, Tennessee at 10:00 a.m.
Nashville time on or before September 5, 2002, or at such other location, and on
such other date and/or time, as the parties hereto may mutually agree (the
"Closing Date"). At the Closing, subject to the satisfaction of the terms and
conditions set forth herein, each of CardSync, iPayment and iPayment Merger Sub
will execute and deliver the instruments, certificates and other documents to be
executed and delivered hereunder or as may be reasonably requested by any party
to consummate the transactions contemplated hereby, all in form and substance
reasonably satisfactory to the parties hereto and their respective counsel.
<PAGE>
2.15 Options. Immediately after Closing, Robert Onesian shall be entitled to
receive an option to purchase Seventy-Five Thousand (75,000) shares of iPayment
Common Stock at an exercise price of approximately $3.85 a share, upon such
terms and conditions as set forth in the iPayment Holdings, Inc. Stock Incentive
Plan. Further, immediately after Closing, Michael Cain or his designees shall be
entitled to receive options to purchase One Hundred and Fifty Thousand (150,000)
shares of iPayment Common Stock at an exercise price of approximately $3.85 a
share, upon such terms and conditions as set forth in the iPayment Holdings,
Inc. Stock Incentive Plan.
ARTICLE III. EXCHANGE OF SHARES
3.1. Exchange of Certificates. At the Closing, certificates which represent
shares of stock converted from CardSync Common Stock to iPayment Common Stock,
or affidavits of loss or destruction in lieu thereof, may be exchanged for new
certificates reflecting the conversion.
3.2. No Dividends Paid to Holders of Unsurrendered Certificates. No
dividends or other distributions declared after the Effective Time with respect
to iPayment Common Stock and payable to the holders of record thereof shall be
paid to the holder of any unsurrendered certificate until the holder thereof
shall surrender such certificate in accordance with this Article III or provides
an affidavit of loss or destruction in lieu thereof. After the surrender of a
certificate in accordance with this Article III, the record holder thereof shall
be entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
iPayment Common Stock represented by such certificate.
3.3. Issuance of Certificate in Name Differing From Surrendered Certificate.
If any certificate representing shares of iPayment Common Stock is to be issued
in a name other than that in which the certificate surrendered in exchange
therefor is registered, it shall be a condition of the issuance thereof that the
certificate so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer) and otherwise in proper form for transfer,
and that the person requesting such exchange shall pay to iPayment in advance
any transfer or other taxes required by reason of the issuance of a certificate
representing shares of iPayment Common Stock in any name other than that of the
registered holder of the certificate surrendered, or required for any other
reason, or shall establish to the satisfaction of the iPayment that such tax has
been paid or is not payable.
3.4. Closing of Stock Transfer Books. Upon and after the Effective Time,
there shall be no transfers on the stock transfer books of CardSync of the
shares of CardSync Common Stock which were issued and outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates
representing such shares are presented for transfer to iPayment, they shall be
canceled and exchanged for certificates representing shares of iPayment Common
Stock as provided in this Article III.
3.5. Lost, Stolen or Destroyed Certificates. In the event any certificate
shall have 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, iPayment will issue in exchange for such lost, stolen or
<PAGE>
destroyed certificate the shares of iPayment Common Stock deliverable in respect
thereof pursuant to this Agreement.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF
CARDSYNC
CardSync hereby represents and warrants to iPayment and iPayment Merger
Sub that, except as set forth in the disclosure schedule dated as of the date
hereof and signed on behalf of CardSync by an authorized officer of CardSync,
with each such exception included therein specifically identifying the relevant
Section hereto to which it specifically relates (the "CardSync Disclosure
Schedule"):
4.1. Corporate Organization. CardSync is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
and has the corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as it is currently being conducted.
CardSync is duly qualified and in good standing to transact business as a
foreign corporation in each jurisdiction in which the ownership or use of its
assets and properties and the conduct of its business requires such
qualification, except such jurisdictions, individually or in the aggregate, in
which the failure to be so qualified does not have, and would not be reasonably
expected to have, an CardSync Material Adverse Effect. True, accurate and
complete copies of CardSync's certificate of incorporation (including any
certificates of designation), bylaws, corporate minute book, board committee
documents or similar governing documents, and all amendments thereto, in each
case as in effect on the date hereof, have heretofore been delivered or made
available to iPayment.
4.2. Authorization; Binding Agreement. CardSync has the corporate power and
authority to enter into this Agreement and the other documents and instruments
to be executed and delivered by CardSync pursuant hereto (collectively, the
"CardSync Documents"), and, subject to receipt of approval of this Agreement by
the stockholders of CardSync, to consummate the Merger and the other
transactions contemplated hereby. The execution and delivery of this Agreement
and the CardSync Documents, and the consummation of the transactions
contemplated hereby, have been duly authorized and approved by the Board of
Directors of CardSync at a meeting duly called and held and at which a quorum
was present and acting throughout, by the requisite affirmative vote of the
directors of CardSync, and the Board of Directors of CardSync has determined
that the Merger is in the best interests of CardSync and its stockholders,
approved this Agreement and the Merger, recommended to the stockholders of
CardSync that they approve and adopt this Agreement and directed that this
Agreement and the transactions contemplated hereby be submitted to the
stockholders of CardSync for approval by such stockholders by taking action by
written consent in lieu of a meeting of such stockholders. No other corporate
proceedings on the part of CardSync are necessary to authorize the execution and
delivery of this Agreement or, except for the adoption of this Agreement by the
requisite vote of CardSync's stockholders in accordance with the California Code
and the certificate of incorporation and bylaws of CardSync, the consummation by
CardSync of the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by CardSync, and, assuming due execution and
delivery by iPayment and iPayment Merger Sub, this Agreement constitutes the
valid and binding agreement and obligation of CardSync, enforceable against
CardSync in accordance with its terms (except as such enforceability may be
limited by bankruptcy,
<PAGE>
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
now or hereafter in effect affecting creditors' rights generally and general
equitable principles, regardless of whether enforceability is considered in a
proceeding in law or in equity).
4.3. Consents and Approvals. Except for (a) the approval of this Agreement
by the requisite vote of the stockholders of CardSync, (b) the filing of the
Certificate of Merger with the California Secretary, (c) any filings required
under state securities or "Blue Sky" laws, (d) any filings and consents as may
be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval necessitated by
the transactions contemplated in this Agreement, and (e) such other
authorizations, consents, approvals or filings, the failure of which to obtain
or make, individually or in the aggregate, would not be expected to prevent or
delay the consummation by CardSync of the transactions contemplated hereby, no
authorization, consents or approvals of or filings or registrations with any
federal, state, local or foreign government, court, administrative, regulatory
or other governmental agency or commission or other governmental authority or
instrumentality (each a "Governmental Authority") or with any third party are
necessary in connection with (i) the execution and delivery by CardSync of this
Agreement and the CardSync Documents and (ii) the consummation by CardSync of
the Merger.
4.4. No Conflicts. Neither the execution or delivery by CardSync of this
Agreement and the other CardSync Documents, nor the consummation by CardSync of
the transactions contemplated hereby or thereby, nor the compliance by CardSync
with the provisions hereof, will: (a) violate or conflict with or result in any
breach of any provision of the certificate of incorporation (including any
certificates of designation), bylaws, corporate minute book, board committee
documents or similar governing documents of CardSync or its Subsidiaries; (b)
materially violate or conflict with any order, injunction, decree, law, statute,
rule, ordinance or regulation applicable to CardSync or its Subsidiaries or by
which any of their respective properties or assets may be bound; (c) result in a
violation or breach of, constitute a default or give rise to any right of
termination, cancellation or acceleration under, any material loan or credit
agreement, note, mortgage, bond, indenture, lease, benefit plan or other
agreement, obligation or instrument applicable to CardSync, or result in the
creation of an Encumbrance upon any property or asset of CardSync or by which
any such properties or assets may be bound, or trigger any right of first
refusal or other purchase right applicable to CardSync or its Subsidiaries; or
(d) result in a sale of CardSync under section 5(d) of CardSync's Sales
Representation Agreements with its individuals sales representatives.
4.5. Capitalization.
(a) The authorized capital stock of CardSync consists of 10,000 shares
of CardSync Common Stock. As of the date hereof, 100 shares of CardSync Common
Stock are issued and outstanding, all of which were validly issued and are fully
paid, nonassessable and free of preemptive rights.
(b) CardSync does not have and is not bound by any outstanding
subscriptions, options, warrants, convertible securities, conversion rights,
preemptive or other rights, calls, commitments or agreements of any character
calling for the purchase or issuance of any shares of CardSync Common Stock, or
any other equity security or capital stock of CardSync or any
<PAGE>
securities representing the right to purchase or otherwise receive any shares of
CardSync Common Stock or any other equity security or capital stock of CardSync.
CardSync has no outstanding stock appreciation rights, phantom stock rights or
similar rights. CardSync has no outstanding obligations, contingent or
otherwise, to reacquire any shares of CardSync Common Stock.
(c) Other than the holders of the CardSync Common Stock, no person has
any right to the Merger Consideration set forth in Section 2.4 or any other
consideration issuable in respect of their CardSync Common Stock in the Merger
pursuant to the California Code or the CardSync Charter.
(d) The holders of bonds, debentures, notes or other indebtedness of
CardSync do not have the right, as such, to vote on this Agreement and the
transactions contemplated herein or other matters with respect to which
stockholders of CardSync may vote. There are no voting trusts, proxies or other
agreements or understandings (collectively, "Voting Arrangements") to which
CardSync or any of its Subsidiaries, directors or executive officers is a party
or is bound with respect to the voting of any shares of capital stock of
CardSync.
4.6. Financial Statements.
The unaudited financial statements for the years ended December 31,
2001, 2000 and 1999 and unaudited interim financial statements of CardSync
attached as Section 4.6 of the CardSync Disclosure Schedule (collectively, the
"CardSync Financial Statements") were prepared in accordance with GAAP
consistently applied throughout the periods involved (except as may be indicated
therein or in the notes thereto) and fairly present in all material respects the
consolidated financial position of CardSync as of the dates thereof and the
results of their operations and their cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
year-end and audit adjustments (which are not material) and to the absence of
footnote disclosures normally contained in audited consolidated financial
statements.
4.7. Subsidiaries. CardSync has no Subsidiaries and does not control,
directly or indirectly, and does not have any direct or indirect equity
participation in any other Person. Further, CardSync does not own directly or
indirectly any interest or investment in any corporation, partnership, joint
venture, business, trust or other entity.
4.8. Absence of Undisclosed Liabilities. CardSync has not incurred any
material liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature, except (i) liabilities, obligations or contingencies
that are accrued or reserved against in the CardSync Financial Statements or
reflected in the notes thereto, (ii) liabilities, obligations or contingencies
under contracts or agreements described in Section 4.15 of the CardSync
Disclosure Schedule or under contracts and agreements which are not required to
be disclosed thereon (but not liabilities, obligations or contingencies for
breaches thereof), (iii) liabilities, obligations or contingencies which have
arisen after December 31, 2001 in the ordinary course of business consistent
with past practice or otherwise in accordance with the terms and conditions of
this Agreement, and (iv) liabilities, obligations or contingencies disclosed in
Section 4.8 of the CardSync Disclosure Schedule.
<PAGE>
4.9. Investigations; Litigation.
(a) To the knowledge of CardSync, there is no investigation or review
being undertaken or that is pending by any Governmental Authority with respect
to CardSync, nor has any Governmental Authority notified CardSync of an
intention to conduct any such investigation or review.
(b) Except as disclosed in Section 4.9 of the CardSync Disclosure
Schedule, there are no claims, suits, actions, arbitration actions or other
proceedings pending or, to the knowledge of CardSync, threatened against,
relating to or affecting CardSync or its respective directors and officers, in
their capacities as such, or their respective assets, businesses or properties,
which are, or would reasonably be expected to be material, either alone or in
the aggregate with all such claims, actions or other proceedings. There are no
decrees, injunctions, writs or orders of any court or governmental department or
agency applicable to CardSync or its assets or businesses, or which prohibits or
restricts the consummation of the transactions contemplated herein. None of the
claims or litigation disclosed in Section 4.9 of the CardSync Disclosure
Schedule shall result in liability to CardSync in excess of $30,000.
4.10. Compliance with Law. CardSync is in compliance, in all material
respects, with all applicable statutes, regulations, judgments, injunctions,
decrees, orders, ordinances and other laws (collectively, "Laws") of the United
States of America and any applicable foreign jurisdictions, all state and local
governments and other Governmental Authorities, and agencies and courts of any
of the foregoing, to which CardSync is subject, and CardSync has not received
any notice to the effect that, or otherwise been advised by counsel that,
CardSync has materially violated or is not in compliance in all material
respects with any of such Laws, and, to the knowledge of CardSync, there are no
investigations with respect thereto, nor past or current business conduct or
practices of CardSync similar to the conduct or practices of other businesses
that to the knowledge of CardSync have been the subject of investigations,
proceedings, claims, actions, suits, demands or notices with respect thereto or
have resulted in any liability arising out of or related to such conduct or
practices.
4.11. Absence of Certain Changes or Events. Except as set forth in
Section 4.11 of the CardSync Disclosure Schedule, since December 31, 2001,
CardSync has not (other than actions taken in connection with the transactions
contemplated by this Agreement or at the request of iPayment or its
Subsidiaries): (a) operated other than in the ordinary course of business
consistent in all material respects with past practice; (b) incurred,
experienced or suffered any CardSync Material Adverse Effect; (c) acquired or
agreed to acquire any material assets, or entered into any CardSync Merchant
Related Agreements, other than Merchant Agreements, or acquisition agreements
(or similar agreements), either directly or indirectly, by purchase, merger,
stock purchase or otherwise; (d) transferred, leased, licensed, sold, mortgaged,
pledged, disposed of or encumbered any material assets; (e) adopted any new, or
amended or otherwise increased, or accelerated the payment or vesting of the
amounts payable or to become payable under any existing, bonus, incentive
compensation, deferred compensation, severance, profit sharing, stock option,
stock purchase, insurance, pension, retirement or other employee benefit plan
agreement or arrangement, entered into any employment, consulting, change in
control, severance or similar agreement with or, except in accordance with the
existing written agreements, granted any severance, change in control or
termination pay to any officer, director, key employee,
<PAGE>
consultant, agent or group of employees, or increased the compensation or
benefits of any officer, director, key employee, consultant, agent or group of
employees (other than periodic increases in compensation to employees in the
ordinary course of business and consistent with past practice); (f) modified,
amended, canceled or terminated, or suffered or received notice of the
termination or cancellation of, any CardSync Merchant Related Agreements or
Merchant Agreements, or any material leases, contracts or receivables, or
waived, released or assigned any material rights or claims with respect thereto,
except in the ordinary course of business and consistent with past practice; (g)
incurred or modified any material indebtedness or other material liability,
except in the ordinary course of business and consistent with past practice; (h)
assumed, guaranteed, endorsed or otherwise become liable or responsible (whether
directly, contingently or otherwise) for material obligations of any other
person, except in the ordinary course of business and consistent with past
practice; (i) made any material loans, advances or capital contributions to, or
investments in, any other person (other than to its wholly-owned Subsidiaries or
in the ordinary course of business consistent with past practice); (j)
instituted, settled or agreed to settle, any material litigation, action or
proceeding before any court, arbitrator or governmental body; (k) made any tax
election or settled or compromised any tax liability, or made any change in any
method of accounting for taxes or accounting policy with respect to taxes; (l)
changed in any material respect any of the accounting methods or policies used
by it; (m) paid, discharged or satisfied any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or material claims, liabilities or obligations reflected or reserved
against in, or contemplated by, the CardSync Financial Statements; (n) entered
into any material transaction, contract, agreement or commitment, other than
this Agreement, or other than in the ordinary course of business and consistent
with past practice; (o) delayed or postponed the payment of accounts payable and
other liabilities outside the ordinary course of business; or (p) agreed,
whether in writing or otherwise, to take any action described in this Section
4.11.
4.12. Title to Assets. CardSync has good and marketable title to all of its
respective assets, free and clear of all Encumbrances, other than Permitted
Liens, and no financing statement covering all or any portion of CardSync's
assets and naming CardSync thereof as debtor has been filed in any public
office, and CardSync has not signed any financing statement or security
agreement as debtor or borrower which financing statement or security agreement
covers all or any portion of the assets of CardSync.
4.13. Assets. CardSync's equipment, furniture, computers and other tangible
personal property are in good operating condition in all material respects
(ordinary wear and tear excepted), free of any material defects and suitable in
all material respects for the operations of CardSync's business, as currently
conducted, are not in need of maintenance or repairs except for ordinary,
routine maintenance and repairs that are not material in nature or cost. Set
forth in Section 4.13 of the CardSync Disclosure Schedule is a complete and
accurate description of the accounts receivable, notes receivable, evidences of
indebtedness and other rights to receive payment and other amounts payable to
CardSync ("Receivables") as of December 31, 2001. Such Receivables are valid and
enforceable claims and obligations, have arisen only from bona fide transactions
in the ordinary course of business, and CardSync has, to its knowledge, the full
legal right to collect such Receivables in the aggregate amount thereof, less
any applicable reserves recorded on CardSync's balance sheet as of December 31,
2001, a copy of which has heretofore been provided to CardSync, which reserves
are adequate and calculated consistent with past practice.
<PAGE>
Except as set forth in Section 4.13 of the CardSync Disclosure Schedule, to the
knowledge of CardSync, there are no asserted contests, refusals to pay or rights
of set-off with respect to any of such Receivables.
4.14. Intellectual Property Rights. Schedule 4.14(a) contains a complete and
accurate list and description of all registered or material unregistered
copyrights, patents, registered or material unregistered trademarks and service
marks, and pending applications for any of the foregoing, other than
"shrink-wrap" or "off-the-shelf" licenses and other similar licenses associated
with software that is commercially available on the mass market (collectively,
the "Intellectual Property"), owned by or licensed to CardSync. Except as set
forth in Schedule 4.14(b), CardSync has all right, title and interest in, or a
valid and binding license to use, all such Intellectual Property. CardSync is
not in default (or with the giving of notice or lapse of time, or both, would be
in default) under any license to use such Intellectual Property. No opposition,
extension of time to oppose, interference, rejection, or refusal to register has
been received in connection with any pending Intellectual Property application.
There are no outstanding and no threatened disputes or disagreements with
respect to any of the Intellectual Property. No order, holding, decision or
judgment has been rendered by any governmental authority, and no agreement,
consent or stipulation exists, which would limit the right of CardSync to use
any of the Intellectual Property. None of the Intellectual Property is being
infringed by any third party; and CardSync is not infringing any intellectual
property of any third party.
4.15. Contracts.
(a) Set forth in Section 4.15(a) of the CardSync Disclosure Schedule is
a list, including parties and dates, of each of the CardSync Merchant Related
Agreements. CardSync has heretofore delivered to iPayment or its counsel true,
correct and complete copies of all of the CardSync Merchant Related Agreements,
and all amendments and supplements related thereto. Each of the CardSync
Merchant Related Agreements is a valid and binding obligation of CardSync, are
unmodified, to the knowledge of CardSync are in full force and effect, and to
the knowledge of CardSync are enforceable against each of the parties thereto in
accordance with their respective terms (except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws now or hereafter in effect affecting creditors'
rights generally and general equitable principles, regardless of whether
enforceability is considered in a proceeding in law or in equity). To the
knowledge of CardSync, except as disclosed in Section 4.15(a) of the CardSync
Disclosure Schedule, (i) no event has occurred which, after notice or the
passage of time or both, would constitute a default or breach by any party to
any of the CardSync Merchant Related Agreements, (ii) no party to any of the
CardSync Merchant Related Agreements has or, to the knowledge of CardSync,
intends, to terminate or adversely modify its agreement(s) or obligations with
respect thereto, or cease performing thereunder, and (iii) there are no
outstanding material disputes under any of the CardSync Merchant Related
Agreements, and there is no pending or, to the knowledge of CardSync,
threatened, litigation or other legal proceeding with respect to any of the
CardSync Merchant Related Agreements. To the knowledge of CardSync, the CardSync
Merchant Related Agreements constitute all of the contracts, agreements and
understandings applicable to the provision of credit card services or equipment
leasing and sales by CardSync.
<PAGE>
(b) Set forth in Section 4.15(b) of the CardSync Disclosure Schedule is
a list, including parties and dates, of any contract or agreement (whether
written or oral), other than the CardSync Merchant Related Agreements, to which
CardSync is a party to or bound by (i) with respect to the employment of any
employees, independent contractors, officers, directors or consultants, (ii)
which, upon the consummation of the transactions contemplated by this Agreement,
will (either alone or upon the occurrence of any additional acts or events)
result in any payment or benefits (whether of severance pay or otherwise)
becoming due, or the acceleration or vesting of any rights to any payment or
benefits, from iPayment, CardSync, the Surviving Corporation or any of their
respective Subsidiaries to any employee, independent contractor, officer,
director or consultant thereof, (iii) which is a material contract to be
performed after the date of this Agreement ("CardSync Material Contracts"), (iv)
which is not terminable on 90 days or less notice involving the payment of more
than $10,000 per annum, or (v) which restricts in any material respect the
conduct of any line of business by CardSync. Each contract, arrangement,
commitment or understanding of the type described in this Section 4.15(b) is
referred to herein as a "CardSync Contract." CardSync has heretofore provided to
iPayment or its counsel true, correct and complete copies of each CardSync
Contract. Each CardSync Material Contract is valid and binding and in full force
and effect with respect to the obligations of CardSync and, to the knowledge of
CardSync, is valid and binding, enforceable and in full force and effect with
respect to the obligations of the counterparties thereto (except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws now or hereafter in effect
affecting creditors' rights generally and general equitable principles,
regardless of whether enforceability is considered in a proceeding in law or in
equity), and CardSync has performed in all material respects all obligations
required to be performed by it to date under each such CardSync Material
Contract, and no event or condition exists which constitutes or, after notice or
lapse of time or both, would constitute, a material default on the part of
CardSync under any CardSync Material Contract, or to the knowledge of CardSync,
any other party thereto.
4.16. Leases. Set forth in Section 4.16 of the CardSync Disclosure Schedule
is a list, including parties and dates, of any Leases. CardSync has heretofore
delivered to iPayment true, correct and complete copies of each of the lease
agreements, and all amendments and supplements related thereto, under which
CardSync leases real or personal property (collectively, the "Leases"). To the
knowledge of CardSync, each Lease is legal, valid, binding, enforceable and in
full force and effect and will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby (except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws now or hereafter in effect affecting creditors'
rights generally and general equitable principles, regardless of whether
enforceability is considered in a proceeding in law or in equity). CardSync is
not in breach or default under any Lease and no event has occurred which, with
notice or lapse of time, would constitute a breach or default of such Lease by
CardSync or permit termination, modification or acceleration thereof by the
respective lessor, and no party to any such Lease has repudiated any provision
thereof. There are no disputes, oral agreements or forbearance programs in
effect as to any Lease. All facilities leased under the Leases are supplied with
utilities and other services necessary for the operation of said facilities.
4.17. Tax Matters.
<PAGE>
(a) Except as set forth on Section 4.17 of the CardSync Disclosure
Schedule, all Tax Returns for all periods ending on or before the Closing Date
that are or were required to be filed by or with respect to CardSync, or any
predecessor, either separately or as a member of an affiliated group of
corporations, have been filed on a timely basis and in accordance with
applicable laws, regulations and administrative requirements. All such Tax
Returns that have been filed on or before the Closing Date were, when filed, and
continue to be, true, correct and complete in all material respects.
(b) CardSync has provided or made available to iPayment all reports of
and communications for all open years from IRS agents and the corresponding
agents of other state, local and foreign Governmental Authorities who have
examined the respective books and records applicable to CardSync. Section
4.17(b) of the CardSync Disclosure Schedule describes all adjustments in respect
of CardSync to Tax Returns filed by, or on behalf of, CardSync, or any
affiliated group of corporations of which CardSync is or was a member, for all
open taxable years, that have been proposed by any representative of any
Governmental Authority, and Section 4.17(b) of the CardSync Disclosure Schedule
describes the resulting Taxes, if any, proposed to be assessed. All deficiencies
proposed (plus interest, penalties and additions to tax that were or are
proposed to be assessed thereon, if any) as a result of such examinations have
been paid, reserved against or settled or, as described in Section 4.17(b) of
the CardSync Disclosure Schedule, are being contested in good faith by
appropriate proceedings. CardSync has not given or been requested to give
waivers or extensions (or is or would be subject to a waiver or extension given
by any other entity) of any statute of limitations relating to the payment of
Taxes for which CardSync may be liable.
(c) Except as are set forth in Section 4.17(c) of the CardSync
Disclosure Schedule, CardSync has paid, or made provision for the payment of,
all Taxes that have or, to the knowledge of CardSync, may become due for all
periods ending on or before the Closing Date, including, without limitation, all
Taxes reflected on the Tax Returns referred to in this Section 4.17, or in any
assessment, proposed assessment or notice, received by CardSync. The charges,
accruals and reserves with respect to Taxes reflected in the CardSync Financial
Statements were determined in accordance with GAAP consistently applied. In all
material respects, all Taxes that CardSync is or was required by law to withhold
or collect have been duly withheld or collected and, to the extent required,
have been paid to the appropriate Governmental Authority. There are no liens
with respect to Taxes upon any of the properties or assets, real or personal,
tangible or intangible, of CardSync (except for Taxes not yet due).
(d) There are no closing agreements, requests for rulings or requests
for technical advice, in respect of any Taxes, pending between CardSync and any
Governmental Authority.
(e) No consent to the application of Section 341(f)(2) of the Code has
ever been filed with respect to any property or assets held or acquired or to be
acquired by CardSync.
(f) There is no existing tax allocation or sharing agreement that may
or will require that any payment be made by or to CardSync on or after the
Closing Date.
(g) No property or asset owned by CardSync is property that iPayment is
or will be required to treat as being owned by another person pursuant to the
provisions of
<PAGE>
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately before the enactment of the Tax Reform Act of 1986, or is
"tax-exempt use property" within the meaning of Section 168(h)(1) of the Code.
(h) CardSync has not agreed to, or is required to make, any adjustment
pursuant to Section 481(a) of the Code, nor has the IRS proposed any such
adjustment or change in accounting method with respect to CardSync. CardSync
does not have any application pending with any Governmental Authority requesting
permission for any change in accounting method.
(i) Except as disclosed in Section 4.17(i) of the CardSync Disclosure
Schedule, there is no contract, agreement, plan or arrangement covering any
person that, individually or collectively, as a consequence of this transaction
could give rise to the payment of any amount that would not be deductible by
iPayment, the Surviving Corporation, or CardSync by reason of Section 280G of
the Code.
(j) CardSync does not own an interest in any (i) domestic international
sales corporation, (ii) foreign sales corporation, (iii) controlled foreign
corporation, or (iv) passive foreign investment company.
(k) CardSync is not a party to any deferred intercompany transaction
that will be restored (pursuant to the Treasury Regulations under Section 1502
of the Code) and will result in income or loss to CardSync due to this Agreement
and the transactions contemplated hereby.
(l) CardSync is not, nor has ever been, a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(m) None of the assets of CardSync directly or indirectly secures any
debt the interest on which is tax-exempt under Section 103(a) of the Code.
(n) CardSync is not, and has not been, an S corporation within the
meaning of Section 1361(a) of the Code.
4.18. Employee Benefit Matters.
(a) Set forth in Section 4.18 of the CardSync Disclosure Schedule is a
complete and accurate list of each employee benefit plan including, but not
limited to, pension, profit sharing, 401(k), severance, welfare, disability and
deferred compensation, and all other material employee benefit plans,
agreements, programs, policies or arrangements including, but not limited to,
stock purchase, stock option, employment, change-in-control, fringe benefit,
bonus and incentive, whether or not subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether formal or informal, oral or
written, legally binding or not, under which any employee, former employee,
director, consultant or independent contractor of CardSync or any ERISA
Affiliate thereof has any present or future right to benefits or under which
CardSync or any ERISA Affiliate thereof has any present or future liability. All
such plans, agreements, programs, policies and arrangements shall be
collectively referred to as the "CardSync Benefit Plans" but shall be separately
identified in such Section 4.18 of the CardSync Disclosure Schedule.
<PAGE>
(b) With respect to each CardSync Benefit Plan, CardSync has delivered
or made available to iPayment (i) current, accurate and complete copies of each
such CardSync Benefit Plan, including all trust agreements, each summary plan
description or other description, insurance or annuity contracts, agreements,
participant records and any other material documents or instruments relating
thereto; (ii) copies of each Form 5500 Annual Report and accompanying schedules;
(iii) each actuarial report (to the extent applicable) and; (iv) with respect to
each such CardSync Benefit Plan which is an employee pension benefit plan (as
such term is defined in section 3(2) of ERISA), intended to qualify under
section 401(a) of the Code, copies of the most recent IRS determination letter
or opinion letter (including copies of any outstanding request for determination
letters).
(c) Each CardSync Benefit Plan has been established and administered in
accordance with its terms, and each such CardSync Benefit Plan and CardSync is
in material compliance with the applicable provisions of ERISA, the Code and
other federal and state applicable laws, rules and regulations with respect
thereto.
(d) Each CardSync Benefit Plan that is an "employee pension benefit
plan" (within the meaning of section 3(2) of ERISA) is qualified under section
401(a) of the Code and its related trust is exempt from federal income tax under
section 501(a) of the Code. To CardSync's knowledge, no event has occurred or
circumstance exists that will or could give rise to disqualification or loss of
tax-exempt status of any such CardSync Benefit Plan or trust.
(e) No event has occurred and no condition exists that likely could
subject CardSync or any ERISA Affiliate thereof to any tax, fine, lien, penalty
or other liability imposed by ERISA (including any breach of fiduciary
responsibility by any director, officer or employee), the Code or other
applicable laws, rules and regulations.
(f) CardSync does not sponsor or maintain, has not ever sponsored or
maintained, or has no actual or contingent liability under or relating to, any
plan that is or was a defined benefit plan, as defined in section 3(35) of
ERISA, or that is a Multiemployer Plan within the meaning of section 4001(a)(3)
of ERISA, or that is otherwise subject to title IV of ERISA.
(g) No CardSync Benefit Plan is a "multiple employer welfare
arrangement" within the meaning of section 3(40) of ERISA, except for CardSync
Benefit Plans that are fully insured and with respect to which each Form M-1 has
been timely filed.
(h) All material reports, returns, notices and similar documents
pertaining to each CardSync Benefit Plan that are required to be filed with any
Governmental Authority or distributed to any CardSync Benefit Plan participant
have been duly and timely filed or distributed.
(i) To CardSync's knowledge, for each CardSync Benefit Plan with
respect to which a Form 5500 has been filed, no material change has occurred
with respect to the matters covered by the most recent Form 5500 since the date
thereof.
(j) No "prohibited transaction" (as such term is defined in section 406
of ERISA and section 4975 of the Code) or "accumulated funding deficiency" (as
such term is defined in
<PAGE>
section 302 of ERISA and section 412 of the Code (whether or not waived)) has
occurred with respect to any CardSync Benefit Plan.
(k) No CardSync Benefit Plan or any related trust or fiduciary thereof
is the direct or indirect subject of a material audit, investigation or
examination by any Governmental Authority or quasi-governmental authority.
(l) The execution of this Agreement and the performance of the
transactions contemplated hereby will not constitute an event under any CardSync
Benefit Plan that may reasonably be expected to result in any payment (whether
of severance pay or otherwise), acceleration, vesting or increase in benefits
with respect to any employee, former employee or director of CardSync.
(m) All contributions and payments made or accrued with respect to all
CardSync Benefit Plans and other benefit obligations are deductible under
section 162 of the Code or section 404 of the Code. No amount or any asset of
any CardSync Benefit Plan is subject to tax as unrelated business taxable
income.
(n) To the knowledge of CardSync, no event has occurred or circumstance
exists that could result in an increase in premium costs of CardSync Benefit
Plans and other benefit obligations that are insured or a material increase in
benefit costs of such plans and obligations that are self-insured.
(o) Except to the extent required under section 601 et seq. of ERISA
and section 4980B of the Code, CardSync and its ERISA Affiliates do not provide
health or welfare benefits for any retired or former employee and is not
obligated to provide health or welfare benefits to any active employee following
such employee's retirement or other termination of service.
(p) CardSync and its ERISA Affiliates have the right to modify and
terminate each CardSync Benefit Plan with respect to both retired and active
employees.
(q) CardSync and its ERISA Affiliates have complied in all material
respects with the provisions of section 601 et seq. of ERISA and section 4980B
of the Code.
(r) With respect to any CardSync Benefit Plan, (i) no actions, suits or
claims (other than claims for benefits made in the ordinary course of the
CardSync Benefit Plan's operation) are pending or, to the knowledge of CardSync,
threatened; and (ii) no facts or circumstances exist that reasonably could give
rise to any such actions, suits or claims.
(s) Full payment has been made of all amounts which are due to any of
the CardSync Benefit Plans. Furthermore, CardSync has made adequate provision
for reserves in accordance with generally accepted accounting principles to meet
contributions that have not been made because they are not yet due under the
terms of each of the CardSync Benefit Plans.
4.19. Environmental Matters.
(a) Except for noncompliance which, individually or in the aggregate,
does not, and would not reasonably be expected to have an CardSync Material
Adverse Effect, CardSync is in
<PAGE>
compliance with all applicable international, federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) (collectively, "Environmental Laws"),
which compliance includes, but is not limited to, the possession by CardSync of
all permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof.
(b) CardSync has not received written notice of, or, to the knowledge
of CardSync, is not the subject of, any actions, causes of action, claims,
investigations, demands or notices by any person asserting an obligation to
conduct investigations or cleanup activities under Environmental Law or alleging
liability under or noncompliance with any Environmental Law (collectively,
"Environmental Claims").
(c) To the knowledge of CardSync, there are no past or present events,
conditions, circumstances, activities, practices, incidents, actions or plans
which may interfere with or prevent continued compliance, or which may give rise
to any material common law or statutory liability or otherwise form the basis of
any material claim, action, suit, proceeding, hearing or investigation, based on
or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge, release
or threatened release into the environment, or any pollutant, contaminant, or
hazardous or toxic material or waste (including biohazardous and medical waste)
with respect to or affecting CardSync.
4.20. Labor Controversies. There are no disputes pending or, to the knowledge
of CardSync, threatened between CardSync and any representatives of any of their
employees and, to the knowledge of CardSync, there are no organizational efforts
being made involving any unorganized employees of CardSync.
4.21. Insurance. CardSync maintains insurance coverage reasonably adequate
for their assets and the operation of its business. CardSync is not in default
with respect to any policies or binders of indemnity, liability, directors' and
officers', worker's compensation, health and other forms of insurance policies
or binders in force as of the date hereof and insuring against risks of
CardSync. No notice of cancellation or non-renewal with respect to, or
disallowance of any claim under, any such policy has been received by CardSync.
4.22. Required Stockholder Vote. The affirmative vote of a majority of the
outstanding shares of CardSync Common Stock is the only vote of the holders of
any shares of capital stock of CardSync necessary under CardSync's certificate
of incorporation, bylaws and other governing documents and applicable law to
approve and adopt this Agreement and the transactions contemplated hereby.
4.23. Brokers and Finders. CardSync has not entered into any contract,
arrangement or understanding with any Person or firm which may result in the
obligation of CardSync to pay any finder's fees, brokerage fees, agent
commissions or similar fees, commissions or payments in connection with the
transactions contemplated hereby, and there is no claim for payment of any such
fees, commissions or payments in connection with the negotiations leading to
this Agreement or the consummation of the transactions contemplated hereby.
<PAGE>
4.24. Equipment Leases and Inventory. All equipment acquired by CardSync for
purposes of leasing was, when acquired, to CardSync's knowledge merchantable and
fit for the purpose for which it was procured, and to CardSync's knowledge the
obligations of each lessee to make payments required under the related lease
throughout the term thereof is unconditional, without any right of set-off by
such lessee and without regard to any event affecting the equipment or
obsolescence thereof. Since December 31, 2001, there has not been a material
change in the revenue derived from CardSync's leasing operations, and there is
no reasonable basis to believe that residual liability arising out of or related
to its leasing operations will exceed historical levels.
4.25. Cash Flow of Merchant Accounts and Compliance with VISA/MasterCard
Rules. Attached hereto as Section 4.25 of the CardSync Disclosure Schedule is
CardSync's settlement reports for each of the six (6) full months preceding
Closing setting forth each Merchant's name and address and its current
year-to-date sales (the "Settlement Reports"). These Settlement Reports
represent months during which CardSync conducted its respective business in the
ordinary course and consistent with past practices, and are true, accurate and
complete as of the Closing Date. Since the date of the Settlement Report, there
has not been a material change in the aggregate cash flow generated by the
Merchant Accounts. CardSync has operated and conducted its business, in all
material respects, in accordance with any and all applicable VISA/MasterCard
rules and regulations. The Settlement Reports attached hereto as Section 4.25 of
the CardSync Disclosure Schedule lists, as of the date of the Settlement
Reports, the Merchant reserve accounts maintained by each Merchant at the
applicable Member Bank and, to CardSync's knowledge, such amounts are in
compliance with the requirements of such Member Banks. Section 4.25 of the
CardSync Disclosure Schedule reflects all fines that have been assessed and/or
paid, directly or indirectly through the assessment and/or payment of such fine
through a Member Bank or other party, within the last 12 months. Except as set
forth in Section 4.25 of the CardSync Disclosure Schedule, CardSync has no
reasonable basis to believe that the operation or conduct of its business will
result in such fines after the Closing.
4.26. Franchise Issues. CardSync is in material compliance with all federal
and state statutes, rules, regulations and guidelines, if applicable, regarding
the offer of franchises or business opportunities.
4.27. Ownership and Portability of Merchant Accounts. Except as disclosed on
Section 4.27 hereto, with respect to all of the Merchant Accounts, (a) CardSync
owns such Merchant Accounts free and clear of all Encumbrances, other than
Permitted Liens, (b) to CardSync's knowledge, such Merchant Accounts are
processed under unique BINs and ICAs, and (c) CardSync has the right at any time
and from time to time to direct the applicable Member Bank and third-party
processors to, and such banks and third-party processors are obligated to, (i)
assign the Merchant Agreements relating to the Merchants so identified,
including all Merchant files and records (paper and fiche), related merchant
reserve and hold accounts, BINs, ICAs and databases relating thereto, to one or
more other Member Banks and/or third-party processors designated by CardSync and
(ii) effect the deconversion of such Merchant Accounts. The Member Banks and
third-party processors are obligated to transfer the merchant files, merchant
agreements, related documents and other items described herein after receipt of
CardSync's request for such assignment and deconversion and such assignment and
deconversion of the Merchant Accounts shall be at no cost or expense to CardSync
other than the reasonable cost of
<PAGE>
copying, shipping, supplies and any related association fees; provided, however,
that all such costs, expenses or fees shall not exceed $25,000.
4.28. Conduct of Business. In operating its business, CardSync has not (i)
withheld an increased discount rate for electronic transactions without prior
notification, (ii) charged an increased rate for manual or voice authorizations
without prior notification, (iii) applied new charges to bill statements without
prior notification, (iv) charged rates for services in excess of rates stated in
the Merchant Agreement without prior notification, (v) unilaterally modified
Merchant Agreements, (vi) debited Merchant Accounts without authorization, (vii)
failed to disclose the origin and existence of certain fees, or (vii) made
misrepresentations to Merchants about services offered by CardSync.
4.29. Prior Sales of Securities. All offers and sales of CardSync Common
Stock by CardSync prior to the date hereof were exempt from the registration
requirements of the Securities Act of 1933, as amended, and were duly registered
or the subject of an available exemption from the registration requirements of
the applicable state securities or Blue Sky laws, or the relevant statues of
limitations have expired, or civil liability thereafter has been eliminated by
an offer to rescind.
4.30. Employees and Independent Contractors.
(a) Set forth on Section 4.29 of the CardSync Disclosure Schedule is a
true, complete and correct list setting forth as of the date hereof (i) the
names, location of services and current compensation of all individuals
currently employed directly or indirectly by CardSync on a salaried or hourly
basis, and (ii) the names and total annual compensation for all independent
contractors (other than vendors and similar professionals) who render services
on a regular basis to CardSync for whom CardSync prepared an IRS Form 1099 for
fiscal year 2001 and whose total annual compensation is in excess of $10,000.
CardSync has not entered into any employment agreements with any of its
employees.
(b) To CardSync's knowledge, all non-employee/independent Persons that
solicit Merchants for or on behalf of CardSync have, at all times during their
relationship with CardSync, been properly classified as independent contractors
and not employees of CardSync for purposes of all applicable law, including,
without limitation, for federal, state and local employment tax purposes.
(c) Set forth in Section 4.29 of the CardSync Disclosure Schedule is a
true, complete and correct list setting forth as of the date hereof the names of
all employees, agents and independent contractors of CardSync and the amount of
all retention payments, severance payments, change in control payments or other
similar compensation or benefits which are or may become payable in connection
with the consummation of the transactions contemplated by this Agreement. To the
knowledge of CardSync, CardSync has not incurred liability relating to, or
promised or agreed (whether orally or in writing) to pay retention payments,
severance payments, change in control payments or other similar compensation or
benefits which are or may become payable in connection with the consummation of
the transactions contemplated by this Agreement. CardSync has taken no action
prior to the Closing related to the foregoing that
<PAGE>
will subject it or iPayment or any of its Subsidiaries to liability after the
Closing other than payment of the foregoing by CardSync.
4.31. Dissenters' Rights. CardSync has received no notice from a stockholder
that such stockholder will seek to exercise his or her statutory dissenters'
rights under the California Code. No shareholder of CardSync has a legal right
to exercise his or her dissenters' rights after the Closing Date.
4.32 Disclosure. No representations or warranties by CardSync in this
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary to make the statements
herein not misleading. CardSync knows of no fact or development which materially
adversely affects, or which would be reasonably likely to result in a CardSync
Materially Adverse Effect or an iPayment Material Adverse Effect, which has not
been set forth in this Agreement, the Exhibits or the Schedules attached hereto.
4.33 Accredited Investors. Robert Onesian and the J&T Cain Family Limited
Partnership are "accredited investors" as defined in Rule 501 under the
Securities Act of 1933, as amended.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF IPAYMENT AND IPAYMENT MERGER SUB
iPayment and iPayment Merger Sub hereby represent and warrant to
CardSync that, except as set forth in the disclosure schedule dated as of the
date hereof and signed on behalf of iPayment by an authorized officer of
iPayment, with each such exception included therein specifically identifying the
relevant Section hereto to which it specifically relates (the "iPayment
Disclosure Schedule"):
5.1. Corporate Organization.
(a) iPayment is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has the corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is currently being conducted. iPayment is duly
qualified and in good standing to transact business as a foreign corporation in
each jurisdiction in which the ownership or use of its assets and properties and
the conduct of its business requires such qualification, except such
jurisdictions, individually or in the aggregate, in which the failure to be so
qualified does not have, and would not be reasonably expected to have, an
iPayment Material Adverse Effect. True, accurate and complete copies of
iPayment's charter, bylaws or other governing documents, and all amendments
thereto, in each case as in effect on the date hereof, have heretofore been
delivered or made available to CardSync.
(b) iPayment Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, and has
the corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is currently being conducted.
iPayment Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated in this Agreement and has not engaged in any
activities other
<PAGE>
than in connection with those transactions. iPayment Merger Sub has not incurred
any material obligations or liabilities or entered into any material agreements
or arrangements with any Person except for this Agreement and as contemplated
hereby. True, accurate and complete copies of iPayment Merger Sub's certificate
of incorporation, bylaws or other governing documents, and all amendments
thereto, in each case as in effect on the date hereof, have heretofore been
delivered or made available to CardSync.
5.2. Authorization; Binding Agreement. Each of iPayment and iPayment Merger Sub
has the corporate power and authority to enter into this Agreement and the other
documents and instruments to be executed and delivered by iPayment and iPayment
Merger Sub pursuant hereto (collectively, the "iPayment Documents"), and to
consummate the Merger and the other transactions contemplated hereby. The
execution and delivery of this Agreement and the iPayment Documents, and the
consummation of the transactions contemplated hereby, have been duly authorized
and approved by the Board of Directors of iPayment at a meeting duly called and
held and at which a quorum was present and acting throughout, by the requisite
affirmative vote of the directors of iPayment, and the Board of Directors of
iPayment has determined that the Merger is in the best interests of iPayment and
its stockholders and approved this Agreement and the Merger. The execution and
delivery of this Agreement and the iPayment Documents, and the consummation of
the transactions contemplated hereby, have been duly authorized and approved by
the Board of Directors of iPayment Merger Sub, and by iPayment as the sole
stockholder of iPayment Merger Sub, and the Board of Directors of iPayment
Merger Sub has determined that the Merger is in the best interests of iPayment
Merger Sub and its stockholders and approved this Agreement and the Merger. No
other corporate proceedings on the part of iPayment or iPayment Merger Sub are
necessary to authorize the execution and delivery of this Agreement or the
consummation by iPayment and iPayment Merger Sub of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by iPayment and iPayment Merger Sub, and, assuming due execution and
delivery by CardSync, this Agreement constitutes the valid and binding agreement
and obligation of iPayment and iPayment Merger Sub, enforceable against iPayment
and iPayment Merger Sub in accordance with its terms (except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws now or hereafter in effect
affecting creditors' rights generally and general equitable principles,
regardless of whether enforceability is considered in a proceeding in law or in
equity).
5.3. Consents and Approvals. Except for (a) the filing of the Certificate of
Merger with the California Secretary, (b) any filings required under state
securities or "Blue Sky" laws, (c) any filings and consents as may be required
under any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval necessitated by the transactions
contemplated in this Agreement, (d) those consents set forth in Section 5.3 of
the iPayment Disclosure Schedule which are required to consummate the Merger,
and (e) such other authorizations, consents, approvals or filings, the failure
of which to obtain or make, individually or in the aggregate, does not have, and
would not reasonably be expected to have, an iPayment Material Adverse Effect or
materially impair or delay the consummation by iPayment or iPayment Merger Sub
of the transactions contemplated hereby, no consents or approvals of or filings
or registrations with any Governmental Authority or with any third party are
necessary in connection with (i) the execution and delivery by iPayment and
iPayment Merger Sub of this
<PAGE>
Agreement and the iPayment Documents and (ii) the consummation by iPayment and
iPayment Merger Sub of the Merger.
5.4. No Conflicts. Except as set forth in Section 5.4 of the iPayment Disclosure
Schedule, neither the execution or delivery by iPayment and iPayment Merger Sub
of this Agreement and the other iPayment Documents, nor the consummation by
iPayment and iPayment Merger Sub of the transactions contemplated hereby or
thereby, nor the compliance by iPayment and iPayment Merger Sub with the
provisions hereof, will: (a) violate or conflict with or result in any breach of
any provision of the certificate of incorporation, bylaws or other governing
documents of iPayment and iPayment Merger Sub; (b) violate or conflict with any
order, injunction, decree, law, statute, rule, ordinance or regulation
applicable to iPayment, iPayment Merger Sub or their Subsidiaries or by which
any of their respective properties or assets may be bound; (c) result in a
violation or breach of, constitute a default or give rise to any right of
termination, cancellation or acceleration under, any loan or credit agreement,
note, mortgage, bond, indenture, lease, benefit plan or other agreement,
obligation or instrument applicable to iPayment, iPayment Merger Sub or their
Subsidiaries, or result in the creation of an Encumbrance upon any property or
asset of iPayment, iPayment Merger Sub or their Subsidiaries or by which any
such properties or assets may be bound, or trigger any right of first refusal or
other purchase right applicable to iPayment, iPayment Merger Sub or any
Subsidiary thereof; or (d) result in the loss of any license, franchise or
permit applicable to iPayment, iPayment Merger Sub or any Subsidiary thereof;
except in each case, where such violation, conflict, breach, default, loss or
other event, individually or in the aggregate, does not have, and would not
reasonably be expected to have, an iPayment Material Adverse Effect.
5.5. Capitalization.
(a) The authorized capital stock of iPayment consists of 130,000,000
shares of iPayment Common Stock, and 20,000,000 shares of preferred stock, no
par value per share ("iPayment Preferred Stock"). As of the date hereof, (i)
[13,108,190] shares of iPayment Common Stock were issued and outstanding, all of
which were validly issued and are fully paid, nonassessable and free of
preemptive rights, (ii) 2,577,200 shares of iPayment Preferred Stock were issued
and outstanding, all of which were validly issued and are fully paid,
nonassessable and free of preemptive rights, and (iii) no shares of iPayment
Common Stock and no shares of iPayment Preferred Stock were held in the treasury
of iPayment or any of its Subsidiaries.
(b) Except for options, commitments and agreements under iPayment's
stock option programs and warrants to purchase a total of [4,897,472] shares of
iPayment Common Stock, iPayment does not have and is not bound by any
outstanding subscriptions, options, warrants, convertible securities, conversion
rights, preemptive or other rights, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of iPayment Common
Stock or iPayment Preferred Stock or any other equity security or capital stock
of iPayment or any securities representing the right to purchase or otherwise
receive any shares of iPayment Common Stock or any other equity security or
capital stock of iPayment. iPayment has no outstanding stock appreciation
rights, phantom stock rights or similar rights. iPayment has no outstanding
obligations, contingent or otherwise, to reacquire any shares of iPayment Common
Stock.
<PAGE>
(c) The authorized capital stock of iPayment Merger Sub consists of
1,000 shares of iPayment Merger Sub Common Stock. iPayment owns beneficially and
of record all the issued and outstanding shares of iPayment Merger Sub Common
Stock.
(d) Section 5.5 of the iPayment Disclosure Schedule sets forth all
indebtedness of iPayment and its Subsidiaries.
5.6. Financial Statements.
The audited consolidated financial statements for the years ended
December 31, 2001, 2000 and 1999 and unaudited interim consolidated financial
statements of iPayment attached as Section 5.6 of the iPayment Disclosure
Schedule (collectively, the "iPayment Financial Statements") were prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as may be indicated therein or in the notes thereto) and fairly present
in all material respects the consolidated financial position of iPayment and its
Subsidiaries as of the dates thereof and the results of their operations and
their cash flows for the periods then ended, subject to normal year-end and
audit adjustments (which are not material), any non-cash adjustments regarding
amortization of goodwill related to acquisitions and, in the case of the
unaudited interim consolidated financial statements, to the absence of footnote
disclosures normally contained in the audited consolidation financial
statements.
5.7. Valid Issuance of Stock. The iPayment Common Stock issuable upon the
exchange for shares of CardSync Common Stock as provided in Article II have been
duly and validly reserved for issuance upon conversion thereof and, when issued
upon such conversion, shall be duly authorized and validly issued, fully paid
and nonassessable.
5.8. Brokers and Finders. iPayment and its Subsidiaries have not entered into
any contract, arrangement or understanding with any Person or firm which may
result in the obligation of CardSync to pay any finder's fees, brokerage fees,
agent commissions or similar fees, commissions or payments in connection with
the transactions contemplated hereby, and there is no claim for payment of any
such fees, commissions or payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
5.9. Absence of Undisclosed Liabilities. Except as disclosed in Section 5.9 of
the iPayment Disclosure Schedule, none of iPayment or its Subsidiaries has
incurred any material liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except (i) liabilities, obligations or
contingencies that are accrued or reserved against in the iPayment Financial
Statements or reflected in the notes thereto, (ii) liabilities, obligations or
contingencies under contracts or agreements entered into in the ordinary course
of business (but not liabilities, obligations or contingencies for breaches
thereof), and (iii) liabilities, obligations or contingencies which have arisen
after June 30, 2002 in the ordinary course of business consistent with past
practice or otherwise in accordance with the terms and conditions of this
Agreement.
5.10 Investigations; Litigation.
(a) To the knowledge of iPayment, there is no investigation or review
being undertaken or that is pending by any Governmental Authority with respect
to iPayment or any of
<PAGE>
its Subsidiaries, nor has any Governmental Authority notified iPayment or any of
its Subsidiaries of an intention to conduct any such investigation or review.
(b) Except as disclosed in Section 5.10 of the iPayment Disclosure
Schedule, there are no claims, suits, actions, arbitration actions or other
proceedings pending or, to the knowledge of iPayment, threatened against,
relating to or affecting any of iPayment or its Subsidiaries, or their
respective directors and officers, in their capacities as such, or their
respective assets, businesses or properties, which are, or would reasonably be
expected to be material, either alone or in the aggregate with all such claims,
actions or other proceedings. There are no decrees, injunctions, writs or orders
of any court or governmental department or agency applicable to any of iPayment
or its Subsidiaries, or their assets or businesses, or which prohibits or
restricts the consummation of the transactions contemplated herein.
5.11. Tax Matters.
(a) All Tax Returns for all periods ending on or before the Closing
Date that are or were required to be filed by or with respect to iPayment,
either separately or as a member of an affiliated group of corporations, have
been filed on a timely basis and in accordance with applicable laws, regulations
and administrative requirements. All such Tax Returns that have been filed on or
before the Closing Date were, when filed, and continue to be, true, correct and
complete in all material respects.
(b) iPayment has paid, or made provision for the payment of, all Taxes
that have or, to the Knowledge of iPayment, may become due for all periods
ending on or before the Closing Date, including, without limitation, all Taxes
reflected on the Tax Returns referred to in this Section 5.11, or in any
assessment, proposed assessment or notice, received by iPayment, except such
Taxes, if any, as are set forth in Section 5.11(b) of the iPayment Disclosure
Schedule that are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP consistently applied) have been
provided. The charges, accruals and reserves with respect to Taxes reflected in
the iPayment Financial Statements were determined in accordance with GAAP
consistently applied. In all material respects and to the Knowledge of iPayment,
all Taxes that iPayment are or were required by law to withhold or collect have
been duly withheld or collected and, to the extent required, have been paid to
the appropriate Governmental Authority. There are no liens with respect to Taxes
upon any of the properties or assets, real or personal, tangible or intangible,
of iPayment (except for Taxes not yet due).
5.12. Required Stockholder Vote. The affirmative vote of the sole shareholder of
iPayment Merger Sub is the only vote of the holders of any shares of capital
stock of iPayment Merger Sub necessary under its certificate of incorporation,
bylaws and other governing documents and applicable law to approve and adopt
this Agreement and the transactions contemplated hereby.
5.13. Compliance with Law. To the knowledge of iPayment, iPayment and each of
its Subsidiaries is in compliance, in all Laws of the United States of America
and any applicable foreign jurisdictions, all state and local governments and
other Governmental Authorities, and agencies and courts of any of the foregoing,
to which any of iPayment or its Subsidiaries is subject, and if it is decided
that iPayment or its Subsidiaries is not in compliance in a non-material respect
with such Laws, such non-compliance will not have a iPayment Material
<PAGE>
Adverse Effect, and to the knowledge of iPayment, none of iPayment or its
Subsidiaries has received any notice to the effect that, or otherwise been
advised by counsel that, any of iPayment or its Subsidiaries has materially
violated or is not in compliance in all material respects with any of such Laws,
and, to the knowledge of iPayment, there are no investigations with respect
thereto, nor past or current business conduct or practices of iPayment or its
Subsidiaries similar to the conduct or practices of other businesses that to the
knowledge of iPayment have been the subject of investigations, proceedings,
claims, actions, suits, demands or notices with respect thereto or have resulted
in any liability arising out of or related to such conduct or practices.
ARTICLE VI. CERTAIN COVENANTS AND AGREEMENTS
6.1. Access to Information.
(a) Upon reasonable notice and subject to applicable Laws relating to
the exchange of information, each of iPayment and CardSync shall, and shall
cause each of its respective Subsidiaries to, afford to the officers, employees,
accountants, attorneys, financial advisors and other representatives (each, a
"Representative") of the other party, access during normal business hours during
the period prior to the Effective Time to all its properties, books, contracts,
commitments, records, officers, employees, accountants, counsel and other
representatives and, during such period, it shall, and shall cause its
Subsidiaries to, make available to the other party all information concerning
its business, properties and personnel as the other party may reasonably request
in connection herewith. The rights of iPayment and CardSync hereunder shall not
be exercised in such a manner as to interfere unreasonably with the conduct of
the business of the other party and its Subsidiaries.
(b) All information furnished pursuant to Section 6.1(a) shall be
subject to, and the parties shall hold all such information in confidence in
accordance with, the provisions of the Nondisclosure and Confidentiality
Agreement, dated as of June 2, 2002 (the "Confidentiality Agreement"), between
iPayment and CardSync.
(c) Notwithstanding anything in the Confidentiality Agreement or any
other agreement to the contrary, no provision of the Confidentiality Agreement
or investigation by either of the parties or their respective Representatives
shall affect the representations, warranties, covenants or agreements of the
other set forth herein and the parties shall remain responsible to the extent
provided herein.
6.2. No Solicitation.
(a) CardSync agrees that it and its officers, directors, employees,
representatives, consultants, investment bankers, attorneys, accountants and
agents shall not, directly or indirectly, (i) encourage, solicit, initiate,
facilitate, entertain or accept any Acquisition Proposal, (ii) enter into any
agreement with respect to any Acquisition Proposal or enter into any
arrangement, understanding or agreement requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions contemplated by this
Agreement, (iii) propose or make any Acquisition Proposal to any Person other
than iPayment and iPayment Merger Sub, (iv) participate in any way in
discussions or negotiations with, or furnish or disclose any information to, any
Person (other than iPayment and iPayment Merger Sub) in connection with
<PAGE>
or with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal, or (v) authorize or permit its Subsidiaries,
officers, directors, employees, representatives, consultants, investment
bankers, attorneys, accountants and agents to do any of the foregoing. CardSync
and its officers, directors, employees, representatives, consultants, investment
bankers, attorneys, accountants and agents shall immediately cease any
discussions, activities or negotiations with Persons other than iPayment and
iPayment Merger Sub that may be ongoing or previously or currently conducted
with respect to any Acquisition Proposal.
(b) In addition, the Board of Directors of CardSync, and each committee
thereof, shall not (A) withdraw or modify, or propose to withdraw or modify, in
a manner adverse to iPayment or iPayment Merger Sub, the approval and
recommendation of this Agreement or the Merger, or (B) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal other than the Merger.
(c) Within 24 hours of receipt thereof, CardSync shall promptly notify
iPayment of any request for information or of any Acquisition Proposal, or any
inquiry, proposal, discussions or negotiations with respect to any Acquisition
Proposal, and CardSync shall promptly provide iPayment with the terms and
conditions of such request, Acquisition Proposal, inquiry, proposal, discussion
or negotiation, copies of any written materials received by CardSync in
connection with any of the foregoing and the identity of the Person making any
such Acquisition Proposal or such request, inquiry or proposal or with whom any
discussions or negotiations are taking place. CardSync shall keep iPayment fully
informed of the status and details (including amendments or proposed amendments)
of any such request or Acquisition Proposal.
(d) Nothing contained in this Section 6.2 shall prohibit CardSync from
taking or disclosing to its stockholders a position contemplated by Rule
14d-9(f) or Rule 14e-2(a) promulgated under the Securities Exchange Act of 1934,
as amended, or from making any disclosure to CardSync's stockholders if the
Board of Directors of CardSync determines in good faith that the failure to do
so would violate the fiduciary obligations of such Board of Directors under
applicable law; provided, however, that neither CardSync nor its Board of
Directors nor any committee thereof shall withdraw or modify, or propose to
withdraw or modify, its position with respect to this Agreement or the Merger or
approve or recommend, or propose to approve or recommend, an Acquisition
Proposal.
6.3. Stockholders' Approval. CardSync shall take all steps in accordance with
applicable law necessary to obtain the approval and adoption of this Agreement
by its stockholders. CardSync will, through its Board of Directors, recommend to
its stockholders approval and adoption of this Agreement and the Merger and
other transactions contemplated hereby.
6.4. Press Releases. iPayment and CardSync shall consult with each other and
will mutually agree on any press releases pertaining to this Agreement or the
transactions contemplated hereby and will not issue any such press releases
prior to such consultation and agreement, except as may be required by
applicable securities or other laws, in which case the party proposing to issue
such press release will use its best efforts to consult in good faith with the
other party before issuing any such press releases. Notwithstanding anything
herein to the contrary, the parties hereto acknowledge and agree that iPayment
may upon the advice of counsel and provisions of
<PAGE>
notice to the other parties, file a copy of this Agreement or disclose terms of
this Agreement in filings with applicable Governmental Authorities if this
Agreement is deemed material to iPayment.
6.5. Expenses and Fees. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, including legal, accounting
and financial advisory fees and expenses, will be paid by the party incurring
such costs and expenses. No costs and expenses incurred by CardSync in
connection with this Agreement and the transactions contemplated thereby shall
be assumed by iPayment. Such costs and expenses shall be paid by the CardSync
Shareholders out of the Merger Consideration. The foregoing shall not affect the
legal right, if any, that any party hereto may have to recover expenses from any
other party that breaches its obligations hereunder.
6.6. Notification. Each of CardSync and iPayment agree to (a) give prompt notice
to the other party, and to use their respective reasonable best efforts to
prevent or promptly remedy, (i) upon such party obtaining knowledge thereof, the
occurrence or failure to occur, or the impending or threatened occurrence or
failure to occur, of any event whose occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time, and (ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder and (b) give prompt notice to the other party of any fact which, if
known by it on the date hereof, would have been required to be set forth or
disclosed by it pursuant to this Agreement.
6.7. Additional Agreements. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective Subsidiaries shall take all such necessary action
as may be reasonably requested by iPayment.
6.8. Reasonable Best Efforts, Cooperation. Subject to the terms and conditions
of this Agreement, each of iPayment and CardSync agrees to use its respective
reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Merger as promptly as practicable and otherwise to enable consummation of
the transactions contemplated hereby and shall cooperate fully with the other
party hereto to that end.
6.9 Preparation of Audit Report. Subsequent to Closing at a time CardSync and
iPayment agree, CardSync shall cooperate with the preparation by iPayment and
its independent auditors of an audit report (the "CardSync Audit") on CardSync's
financial statements and records and will provide access to such information as
is reasonably necessary in connection therewith, including but not limited to,
CardSync consenting to and requesting that its independent auditors provide
iPayment's independent auditors with access to CardSync's work papers, if any.
The independent auditors preparing the CardSync Audit shall be of iPayment's
choosing, and at its sole expense.
<PAGE>
6.10 Taxes. The following provisions shall govern the allocation of
responsibility for certain Tax matters following the Closing Date:
(a) The CardSync Shareholders shall prepare or cause to be prepared and
timely file or cause to be timely filed all Tax Returns for CardSync (i) that
are required to be filed on or before the Closing Date and (ii) for all Tax
periods ending on or prior to the Closing Date which are filed after the Closing
Date. The CardSync Shareholders shall permit iPayment to review and comment on
each such Tax Return described in the preceding sentence prior to filing and
shall make such revisions, if any, to such Tax Returns as are requested by
iPayment. iPayment shall prepare or cause to be prepared and shall file or cause
to be filed all other Tax Returns required of CardSync.
(b) The CardSync Shareholders shall pay or cause to be paid all Taxes
owed by CardSync (i) for all Tax periods ending on or before the Closing Date
and (ii) for that portion of any Straddle Period that ends on the Closing Date.
For purposes of this Agreement, a "Straddle Period" is defined as any Tax period
that includes (but does not end on) the Closing Date.
(c) In the case of any Straddle Period, (i) the periodic Taxes of
CardSync that are not based on income or receipts for the portion of any
Straddle Period ending on the Closing Date (the "Pre-Closing Tax Period") shall
be computed based upon the ratio of the number of days in the Pre-Closing Tax
Period and the number of days in the entire Tax period; and (ii) Taxes of
CardSync for the Pre-Closing Tax Period (other than Taxes described in Section
6.10(c)(i) above) shall be computed as if such Tax period ended as of the close
of business on the Closing Date.
(d) The CardSync Shareholders shall cooperate fully, as and to the
extent reasonably requested by iPayment, in connection with the filing of Tax
Returns pursuant to this Section 6.10 and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon iPayment's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding. CardSync
and the CardSync Shareholders agree (i) to retain all books and records with
respect to Tax matters pertinent to CardSync relating to any Tax period
beginning before the Closing Date and (ii) to give iPayment reasonable written
notice prior to transferring, destroying or discarding any such books and
records. CardSync and the CardSync Shareholders further agree, upon request, to
use their best efforts to obtain any certificate or other document from any
Governmental Authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
ARTICLE VII. CONDITIONS TO CLOSING
7.1. Conditions to Each Party's Obligation To Effect the Merger. The respective
obligation of each of the parties hereto to effect the Merger shall be subject
to the satisfaction, or the waiver by such party, at or prior to the Effective
Time, of the following conditions:
(a) Stockholder Approval. This Agreement shall have been duly approved
and adopted by the requisite vote of the stockholders of CardSync under
applicable law.
<PAGE>
(b) Approvals. All consents, approvals, orders or authorizations of or
registrations, declarations or filings with any Governmental Authority, which
the failure to obtain, make or occur has or would reasonably be expected to have
the effect of making the Merger or any of the transactions contemplated hereby
illegal or to have an iPayment Material Adverse Effect, as the case may be,
shall have been obtained, shall have been made or shall have occurred, and shall
be in full force and effect.
(c) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect. No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated or enforced by any Governmental Authority
which prohibits, restricts or makes illegal consummation of the Merger.
7.2. Conditions to Obligations of iPayment. The obligation of iPayment to effect
the Merger is also subject to the satisfaction, or waiver by iPayment, at or
prior to the Effective Time, of the following conditions:
(a) Representations and Warranties of CardSync. Each of the
representations and warranties of CardSync contained in this Agreement (i) that
are qualified by materiality, including the terms "material," "in any material
respects" and "in all material respects" and "CardSync Material Adverse Effect"
or words of similar effect, shall be true and correct in all respects when made
and as of the Closing, with the same effect as though such representations and
warranties had been made on and as of the Closing, and (ii) that are not so
qualified by materiality, shall be true and correct in all material respects
when made and as of the Closing, with the same effect as though such
representations and warranties had been made on and as of the Closing. iPayment
shall have received a certificate signed on behalf of CardSync by its Chief
Executive Officer to the foregoing effect.
(b) Performance of Obligations of CardSync. CardSync shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and iPayment shall have
received a certificate signed on behalf of CardSync by its Chief Executive
Officer to such effect.
(c) Consents. Prior to Closing, CardSync shall have (i) provided all
requisite notices to and (ii) obtained all requisite consents, waivers and
approvals from any third party in order for CardSync to consummate the Merger.
(d) Resignations. At Closing, iPayment shall have received written
resignations from each of the directors and officers of CardSync.
(e) Delivery of Certificates. The holders of the CardSync Common Stock
shall deliver all certificates representing outstanding shares of CardSync
Common Stock other than certificates representing shares of CardSync Common
Stock for which their holders have exercised their dissenters' rights under the
California Code.
(f) Confidentiality/Non-Solicitation Agreements. CardSync shall deliver
confidentiality and non-solicitation agreements in the form attached hereto as
Exhibit A with iPayment executed by Michael Cain, Robert Onesian Jerry Cain and
Tayrn Cain.
<PAGE>
(g) No Dissenting Stockholders. No holders of CardSync Common Stock
shall have perfected their rights to dissent to the Merger.
(h) Releases. Each of Michael Cain, Robert Onesian, Jerry Cain and
Tayrn Cain shall execute and deliver a release, the form of which is set forth
as Exhibit B to this Agreement.
7.3. Conditions to Obligations of CardSync . The obligation of CardSync to
effect the Merger is also subject to the satisfaction, or waiver by CardSync, at
or prior to the Effective Time, of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of iPayment and iPayment Merger Sub contained in this Agreement (i)
that are qualified by materiality, including the terms "material," "in any
material respects," "in all material respects" and "iPayment Material Adverse
Effect" or words of similar effect, shall be true and correct in all respects
when made and as of the Closing, with the same effect as though such
representations and warranties had been made on and as of the Closing, and (ii)
that are not so qualified by materiality, shall be true and correct in all
material respects when made and as of the Closing, with the same effect as
though such representations and warranties had been made on and as of the
Closing. CardSync shall have received a certificate signed on behalf of iPayment
by its Chief Executive Officer to the foregoing effect.
(b) Performance of Obligations of iPayment and iPayment Merger Sub.
iPayment and iPayment Merger Sub shall have performed in all material respects
all obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and CardSync shall have received a certificate signed on
behalf of iPayment by its Chief Executive Officer to such effect.
(c) Consents. Prior to Closing, iPayment shall have (i) provided all
requisite notices to and (ii) obtained all requisite consents, waivers and
approvals from any third party in order for iPayment to consummate the Merger,
including, but not limited to, those consents from the parties set forth in
Section 5.3 of the iPayment Disclosure Schedule, such consents having been
provided to CardSync prior to Closing.
ARTICLE VIII. INDEMNIFICATION
8.1 Indemnification by CardSync Shareholders.
(a) The CardSync Shareholders shall indemnify, save and hold iPayment
(including iPayment and its Subsidiaries following the Merger) and its
affiliates, successors and permitted assigns, and each officer, director,
employee or agent thereof, their respective controlling persons, and their
respective estates, successors and assigns (collectively, the "iPayment
Indemnitees" and each an "iPayment Indemnitee"), harmless against and from any
liability, demands, claims, actions or causes of action, assessments, losses,
fines, penalties, costs, damages and expenses, including reasonable attorneys'
fees, disbursements and expenses (collectively, "Damages"), sustained or
incurred by any of the iPayment Indemnitees after the Closing Date as a result
of, arising out of or by virtue of any misrepresentation, breach of any warranty
or representation, or non-fulfillment of any agreement or covenant that was to
be fulfilled prior to the Closing Date, in each case on the part of CardSync,
whether contained in this Agreement or any Exhibit or Schedule hereto or thereto
or
<PAGE>
any written statement or certificate furnished or to be furnished to iPayment
pursuant hereto or in any closing document delivered by CardSync to iPayment in
connection herewith.
(b) The CardSync Shareholders shall indemnify, save and hold the
iPayment Indemnitees harmless against and from any Damages, sustained or
incurred by any of the iPayment Indemnitees after the Closing Date as a result
of, arising out of or by virtue of any liability for (i) any Taxes of CardSync
for any Tax period that ends on or before the Closing Date and the portion of
any Straddle Period ending on the Closing Date, (ii) any breach of the
representations and warranties contained in Section 4.17 and (iii) any
non-fulfillment of any agreement or covenant contained in Section 6.10 of this
Agreement.
(c) The CardSync Shareholders shall indemnify, save and hold the
iPayment Indemnitees harmless against and from any Damages, sustained or
incurred by any of the iPayment Indemnitees after the Closing Date as a result
of, arising out of or by virtue of (i) CardSync's contractual right to collect
termination fees from its merchants under its merchant agreements, (ii)
CardSync's efforts to collect such termination fees prior to the Closing Date,
or (iii) CardSync's collection of such termination fees prior to the Closing
Date.
8.2. Conditions of Indemnification.
(a) Promptly following the receipt by any iPayment Indemnitee who may
be entitled to indemnification hereunder (each, an "Indemnified Party") of
written notice of a demand, claim, action, assessment or proceeding made or
brought by a third party, including a governmental agency (a "Third Party
Claim") for which such Person seeks indemnification, the Indemnified Party
receiving such notice of the Third Party Claim shall promptly notify CardSync
Shareholders (the "Indemnifying Party") of its existence, setting forth the
facts and circumstances of which such Indemnified Party has received notice, but
the failure to notify the Indemnifying Party will not relieve the Indemnifying
Party of any liability that it may have to the Indemnified Party except to the
extent that the Indemnifying Party demonstrates that the defense if such action
is prejudiced by the Indemnified Party's failure to provide such notice.
(b) The Indemnified Party shall tender the defense of a Third Party
Claim to the Indemnifying Party. If the Indemnifying Party accepts
responsibility for the defense of a Third Party Claim, then the Indemnifying
Party shall have the exclusive right to contest, defend and litigate the Third
Party Claim and shall have the exclusive right, in its discretion exercised in
good faith and upon the advice of counsel, to settle any such matter, either
before or after the initiation of litigation, at such time and upon such terms
as it deems fair and reasonable, provided that at least ten days prior to any
such settlement, it shall give written notice of its intention to settle to the
Indemnified Party. The Indemnified Party shall have the right to be represented
by counsel at its own expense in any defense conducted by the Indemnifying Party
(but the Indemnifying Party will control the defense of the Third Party Claim
(if it has elected to do so)).
(c) If, in accordance with the foregoing provisions of this Section
8.2, an Indemnified Party shall be entitled to indemnification against a Third
Party Claim, and if the Indemnifying Party shall fail to accept the defense of a
Third Party Claim that has been tendered in accordance with this Section 8.2,
the Indemnified Party shall have the right, without prejudice to its right of
indemnification hereunder, in its discretion exercised in good faith and upon
the advice of
<PAGE>
counsel, to contest, defend and litigate such Third Party Claim, and may settle
such Third Party Claim, either before or after the initiation of litigation, at
such time and upon such terms as the Indemnified Party deems fair and
reasonable, provided at least ten days prior to any such settlement, written
notice of its intention to settle is given to the Indemnifying Party. If,
pursuant to this Section 8.2 the Indemnified Party so defends or settles a Third
Party Claim for which it is entitled to indemnification hereunder, as
hereinabove provided, the Indemnified Party shall be reimbursed or otherwise
indemnified by the Indemnifying Party hereunder in accordance with Section 8.3
(if applicable) for the reasonable attorneys' fees and other expenses of
defending the Third Party Claim that are incurred from time to time. No failure
by the Indemnifying Party to acknowledge in writing its indemnification
obligations under this Article VIII shall relieve it of such obligations to the
extent they exist.
(d) Notwithstanding the foregoing, in connection with any settlement
negotiated by the Indemnifying Party, no Indemnified Party shall be required to
(i) enter into any settlement (A) that does not include the delivery by the
claimant or plaintiff to the Indemnified Party of a release from all liability
in respect of such claim or litigation, or (B) if the Indemnified Party shall,
in writing to the Indemnifying Party within the ten day period prior to such
proposed settlement, disapprove of such settlement proposal (which settlement
proposal will not be unreasonably disapproved) and desire to have the
Indemnifying Party tender the defense of such matter back to the Indemnified
Party, or (ii) consent to the entry of any judgment that does not include a full
dismissal of the litigation or proceeding against the Indemnified Party with
prejudice; provided, however, that should the Indemnified Party disapprove of a
settlement proposal pursuant to clause (B) above, the Indemnified Party shall
thereafter have all of the responsibility for defending, contesting and settling
such Third Party Claim but shall not be entitled to indemnification by the
Indemnifying Party to the extent that, upon final resolution of such Third Party
Claim, the Indemnifying Party's liability to the Indemnified Party but for this
proviso exceeds what the Indemnifying Party's liability to the Indemnified Party
would have been if the Indemnifying Party were permitted to settle such Third
Party Claim in the absence of the Indemnified Party exercising its right under
clause (B) above.
(e) Notwithstanding the foregoing, if an Indemnified Party determines
in good faith that there is a reasonable probability that a Third Party Claim
may adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the Indemnified Party may, by notice to the Indemnifying Party, assume the
exclusive right to defend, compromise or settle the Third Party Claim without
the Indemnifying Party's consent (which may not be unreasonably withheld). If
the Indemnifying Party does not assume the defense of any claim or litigation,
any Indemnified Party may defend against such claim or litigation in such manner
as it may deem appropriate, including, but not limited to, settling such claim
or litigation, after giving notice of the same to the Indemnifying Party, on
such terms as the Indemnified Party may deem appropriate. The Indemnifying Party
will promptly reimburse the Indemnified Party in accordance with the provisions
hereof.
8.3. Survival. All of the terms and conditions of this Agreement, together with
the representations, warranties and covenants of CardSync and the CardSync
Shareholders contained herein or in any instrument or document delivered or to
be delivered pursuant to this Agreement, shall survive Closing (even if the
Indemnified Party knew or had reason to know of any misrepresentation or breach
of warranty at the time of Closing) and continue in full force in
<PAGE>
effect indefinitely thereafter (subject to any applicable statutes of
limitations). No party shall be entitled to recover for any Damages pursuant to
Section 8.1 unless written notice of a claim thereof is delivered to the other
party prior to the 18th month anniversary of the date hereof, notwithstanding
any investigation heretofore or hereafter made by or on behalf of any party
hereto.
8.4 Payment. All indemnification hereunder shall be effected by payment of cash
or delivery of a certified or official bank check in the amount of the
indemnification liability. All indemnification payments under this Article VIII
shall be deemed adjustments to the Purchase Price.
ARTICLE IX. GENERAL
9.1. Amendment. This Agreement may be amended at any time only by a written
instrument signed on behalf of each of CardSync and iPayment.
9.2. Notices. All notices, claims, demands and other communications hereunder
shall be in writing and shall be deemed given upon (i) confirmation of receipt
of a facsimile transmission, (ii) confirmed delivery by a standard overnight
carrier or when delivered by hand, or (iii) the expiration of three Business
Days after the day when mailed by registered or certified mail (postage prepaid,
return receipt requested), in each case addressed to the respective parties at
the following addresses (or such other address for a party as shall be specified
by like notice):
(a) If to iPayment or iPayment Holdings, Inc.
iPayment Merger Sub, to: 30 Burton Hills, Suite 520
Nashville, Tennessee 37215
Telecopy No.: (615) 665-8434
Attention: Afshin Yazdian
With a copy (which Waller Lansden Dortch & Davis, PLLC
shall not constitute 511 Union Street, Suite 2100
notice) to: Nashville, Tennessee 37219
Telecopy No.: (615) 244-6804
Attention: Benjamin C. Huddleston, Esq.
<PAGE>
(b) If to CardSync, to: CardSync Processing, Inc.
25322 Rye Canyon Road
Santa Clarita, California 91355
Telecopy No.: (661) 702-0474
Attention: Robert Onesian
With a copy (which David J. Bartone, Esq.
shall not constitute 1875 Eye Street, N.W.
notice) to: Twelfth Floor
Washington, D.C. 20006
Telecopy No.: (202) 223-6220
9.3. Entire Agreement. This Agreement (including the schedules and exhibits
thereto, and the other documents and instruments referred to herein, including
the Confidentiality Agreement) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties or any of them, with respect to the subject matter hereof, including any
transaction between or among the parties hereto. No representation, promise,
inducement or statement of intention has been made by CardSync, iPayment or
iPayment Merger Sub that is not embodied in this Agreement or the other
agreements referred to herein and entered into in connection herewith, the
schedules or exhibits hereto, or the written statements, certificates or other
documents delivered pursuant hereto.
9.4. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws thereof or of any other jurisdiction. If legal
action is commenced to enforce this Agreement, the prevailing party in such
action shall be entitled to recover its costs and reasonable attorneys' fees in
addition to any other relief granted.
9.5. Counterparts; Effectiveness. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement. This Agreement shall become
effective when each party hereto shall have received counterparts thereof signed
by all the other parties hereto.
9.6. Assignment; Successors and Assigns; Parties In Interest. No party hereto
shall assign this Agreement, or its right or duties hereunder, by operation of
law or otherwise, without first obtaining the written consent of the other
parties hereto, except that iPayment Merger Sub may assign this Agreement and
its rights and obligations hereunder to another wholly-owned Subsidiary of
iPayment. Subject to the foregoing provisions, all of the rights, benefits,
duties, liabilities and obligations of the parties hereto shall inure to the
benefit of and be binding upon the parties and their respective successors and
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any other person any rights or remedies hereunder.
9.7. Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
<PAGE>
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
9.8. Enforcement of Agreement. The parties hereto agree that irreparable damage
would occur in the event that the provisions contained in this Agreement were
not performed in accordance with its specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to seek an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state having jurisdiction, without having to post bond therefor or prove
actual damages, this being in addition to any other remedy to which they are
entitled at law or in equity.
9.9. Remedies Cumulative. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise or beginning of the exercise of
any thereof by any party shall not preclude the simultaneous or later exercise
of any other such right, power or remedy by such party.
ARTICLE X. DEFINITIONS
As used herein, the following terms shall have the following meanings
ascribed thereto (with terms defined in the plural having comparable meaning
when used in the singular, and likewise with respect to terms defined in the
singular):
"Acquisition Proposal" shall mean any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving CardSync or any
Subsidiary of CardSync or any proposal, inquiry or offer to acquire in any
manner, in a single transaction or a series of related transactions, all or 15%
or greater equity interest in, or all or a substantial portion of the assets of,
CardSync or any Subsidiary of CardSync, other than the transactions contemplated
or permitted by this Agreement.
"Affiliate" means, with respect to any Person, any other Person which, directly
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, such Person.
"Agreement" means this Agreement and Plan of Merger.
"Articles of Dissolution" means any such documents issued by a Secretary of
State's office, or its equivalent, to commemorate and reflect the dissolution of
a Person.
"BINs" shall mean a unique Bank Identification Number assigned by VISA and
licensed to a Member Bank for its use in entering or receiving transactions into
(or from) VISA's settlement authorization systems and participating in the VISA
card program. An "ICA" is the corresponding number assigned by MasterCard for
the same purpose.
"Blue Sky laws" means the securities laws of a particular state.
"Business Day" means a day of the year on which banks are not authorized to be
closed in the City of Nashville, Tennessee.
<PAGE>
"California Code" shall have the meaning set forth in Section 2.1.
"Certificate of Merger" shall have the meaning set forth in Section 2.2.
"Closing" shall have the meaning set forth in Section 2.14.
"Closing Date" shall have the meaning set forth in Section 2.14.
"Code" shall have the meaning set forth in the fourth recital to this Agreement.
"Confidentiality Agreement" shall have the meaning set forth in Section 6.1.
"Control" of a Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management policies of a person, whether
through the ownership of voting securities, by contract, as trustee or executor
or otherwise.
"Damages" shall have the meaning set forth in Section 8.1.
"California Secretary" shall have the meaning set forth in Section 2.2.
"CardSync " shall have the meaning set forth in the preamble to this Agreement.
"CardSync Benefit Plans" shall have the meaning set forth in Section 4.18.
"CardSync Charter" shall have the meaning set forth in Section 4.5(f).
"CardSync Common Stock" shall have the meaning set forth in Section 2.4.
"CardSync Contracts" shall have the meaning set forth in Section 4.15.
"CardSync's Counsel" shall have the meaning set forth in Section 7.2.
"CardSync Disclosure Schedule" shall have the meaning set forth in preamble of
Article IV.
"CardSync Dissenting Shares" shall have the meaning set forth in Section 2.6.
"CardSync Documents" shall have the meaning set forth in Section 4.2.
"CardSync Financial Statements" shall have the meaning set forth in Section 4.6.
"CardSync Indemnitees" shall have the meaning set forth in Section 8.2.
"CardSync Material Adverse Effect" means any event, change, occurrence, effect,
fact or circumstance having, or would reasonably be expected to have,
individually or in the aggregate with other events, changes, occurrences,
effects, facts or circumstances, a material adverse effect on (i) the ability of
CardSync to perform its obligations under this Agreement or to consummate the
transactions contemplated hereby, or (ii) the business, properties, assets,
liabilities, prospects, results of operations or condition (financial or
otherwise) of CardSync (taken as a whole), other than events, changes,
occurrences, effects, facts or circumstances affecting the industry or the
<PAGE>
economy in general, and not specifically relating to CardSync or its
Subsidiaries, and other than events, changes, occurrences, effects, facts or
circumstances resulting from this Agreement, the transactions contemplated
hereby or the announcement thereof.
"CardSync Material Contracts" shall have the meaning set forth in Section 4.15.
"CardSync Merchant Related Agreements" means all material contracts and other
agreements to which CardSync or any of its Subsidiaries is a party relating to
the provision of credit card services or equipment leasing and sales, including,
but not limited to the following agreements:
(a) any Independent Service Organization ("ISO") Agreements and
Independent Training Organization ("ITO") Agreements or any other agreements
with non-employee/independent Persons that solicit Merchants for or on behalf of
CardSync (collectively referred to as "ISO/ITO Agreements");
(b) any agreements with authorization network vendors and backend
processors ("Vender Agreements");
(c) all agreements with Member Banks;
(d) any agreements that limit the right of CardSync or its Subsidiaries
prior to the Closing Date, or iPayment or its Subsidiaries after the Closing
Date, to engage in or to compete with any Person in any business, including the
method by which any business may be conducted by CardSync or its Subsidiaries
prior to the Closing Date, or by iPayment or its Subsidiaries after the Closing
Date;
(e) all equipment leasing related agreements, including factoring
arrangements;
(f) any marketing agreement not listed above; or
(g) all Merchant Agreements.
"CardSync Option" shall have the meaning set forth in Section 2.7.
"CardSync Shareholders" shall mean Michael Cain and Robert Onesian.
"Effective Time" shall have the meaning set forth in Section 2.2.
"Encumbrance" shall mean any liens, claims, charges, encumbrances, mortgages,
pledges, security interests and other interests.
"Environmental Claims" shall have the meaning set forth in Section 4.19.
"Environmental Laws" shall have the meaning set forth in Section 4.19.
"ERISA" has the meaning set forth in Section 4.18.
"ERISA Affiliate" means (i) any related company or trade or business that is
required to be aggregated with CardSync under Code Sections 414(b), (c), (m) or
(o); (ii) any other company,
<PAGE>
entity or trade or business that has adopted or has ever participated in any
CardSync Benefit Plan; and (iii) any predecessor or successor company or trade
or business of CardSync or its Subsidiaries.
"GAAP" means generally accepted accounting principles in effect in the United
States consistently applied.
"Governmental Authority" shall have the meaning set forth in Section 4.3.
"Indemnified Party" shall have the meaning set forth in Section 8.4(a).
"Indemnifying Party" shall have the meaning set forth in Section 8.4(a).
"iPayment" shall have the meaning set forth in the preamble to this Agreement.
"iPayment Common Stock" shall have the meaning set forth in Section 5.5.
"iPayment's Counsel" shall have the meaning set forth in Section 7.3.
"iPayment Disclosure Schedule" shall have the meaning set forth in preamble of
Article V.
"iPayment Documents" shall have the meaning set forth in Section 5.2.
"iPayment Financial Statements" shall have the meaning set forth in Section 5.6.
"iPayment Holdings, Inc. Stock Incentive Plan" shall have the meaning set forth
in Section 2.4.
"iPayment Indemnitees" shall have the meaning set forth in Section 8.1.
"iPayment Material Adverse Effect" means any event, change, occurrence, effect,
fact or circumstance having, or would reasonably be expected to have,
individually or in the aggregate with other events, changes, occurrences,
effects, facts or circumstances, a material adverse effect on (i) the ability of
iPayment or iPayment Merger Sub to perform its obligations under this Agreement
or to consummate the transactions contemplated hereby, or (ii) the business,
properties, assets, liabilities, prospects, results of operations or condition
(financial or otherwise) of iPayment and its Subsidiaries (taken as a whole),
other than events, changes, occurrences, effects, facts or circumstances
affecting the industry or the economy in general, and not specifically relating
to iPayment or its Subsidiaries, and other than events, changes, occurrences,
effects, facts or circumstances resulting from this Agreement, the transactions
contemplated hereby or the announcement thereof.
"iPayment Merger Sub" shall have the meaning set forth in the preamble to this
Agreement.
"iPayment Merger Sub Common Stock" shall have the meaning set forth in Section
2.8.
"iPayment Preferred Stock" shall have the meaning set forth in Section 5.5.
"iPayment Underlying Common Stock" means the iPayment Common Stock issued and
any iPayment Common Stock issued or issuable with respect to such securities by
way of stock
<PAGE>
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"IRS" means the United States Internal Revenue Service.
"Knowledge" means, with respect to an individual, such individual is actually
aware of the particular fact, matter, circumstance or other item, or a prudent
individual could be expected to discover or otherwise become aware of such fact,
matter, circumstance or other item in the course of conducting a reasonable
investigation concerning the existence of such fact or other matter; and, with
respect to any other Person (other than an individual), any individual who is
serving as a director, officer, partner, executor or trustee of such Person (or
in any similar capacity) has knowledge (as defined above) of such fact, matter,
circumstance or other item.
"Laws" shall have the meaning set forth in Section 4.10.
"Leases" shall have the meaning set forth in Section 4.16.
"MasterCard" means MasterCard International, Inc.
"Member Bank" means a member of VISA and/or MasterCard which is authorized by
such association(s) to enter or receive transactions into (or from) such
association(s) settlement and authorization systems, and to participate in such
association(s) charge card program.
"Merchant" means any customer who enters into a Merchant Agreement for the
purpose of participating in the Merchant Program.
"Merchant Accounts" means the written contractual relationship between a
Merchant, on the one hand, and/or a Member Bank and CardSync or its Subsidiaries
on the other for the acquisition and processing of transactions.
"Merchant Agreements" means the written contractual agreement between a Member
Bank, a Merchant and/or CardSync or its Subsidiaries, pursuant to which CardSync
or its Subsidiaries provides processing services and allows the Merchant to
participate in the Merchant Program.
"Merchant Program" means the package of services offered by CardSync or its
Subsidiaries and a Member Bank to a customer which enables a Merchant to make
sales to a credit card holder and which permits the Merchant to present sales
records to a processor for payment and processing.
"Merger" shall have the meaning set forth in the second recital to this
Agreement.
"Ordinary course of business" means, with respect to any particular Person: (a)
an action is consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such Person; (b) such
action is not required to be authorized by the board of directors of such Person
(or by any Person or group of Persons
<PAGE>
exercising similar authority) and is not required to be specifically authorized
by the parent company (if any) of such Person; and (c) such action is similar in
nature and magnitude to actions customarily taken, without any authorization by
the board of directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"Permitted Liens" means (i) Encumbrances identified in Section 10 of the
CardSync Disclosure Schedule or Section 10 of the iPayment Disclosure Schedule,
as applicable; (ii) mechanics', carriers', workers', repairers', materialmen's,
warehousemen's and other similar Encumbrances arising out of operation of law
with respect to a liability incurred in the ordinary course of business and
consistent with past practice that is not delinquent or in default; (iii)
Encumbrances arising under conditional sales contracts and equipment leases with
third parties under which CardSync or iPayment is not delinquent or in default;
and (iv) Encumbrances for Taxes not yet due and payable.
"Person(s)" means any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental or regulatory body or other entity.
"Receivables" shall have the meaning set forth in Section 4.13.
"Representative" shall have the meaning set forth in Section 6.3.
"Settlement Report" shall have the meaning set forth in Section 4.25.
"Subsidiary" of any Person means any other Person of which such Person (either
alone or through or together with any other Subsidiary): (i) owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such other Person, (ii) is a general partner, trustee
or other entity performing similar functions or (iii) has control.
"Surviving Corporation" shall have the meaning set forth in Section 2.1.
"Taxes" means all taxes, assessments, charges, duties, fees, levies or other
governmental charges including, without limitation, all Federal, state, local,
foreign and other income, franchise, profits, capital gains, capital stock,
transfer, sales, use, occupation, property, excise, severance, windfall profits,
stamp, license, payroll, employment, social security (or similar), unemployment,
withholding and other taxes, assessments, charges, duties, fees, levies or other
governmental charges of any kind whatsoever (whether payable directly or by
withholding and whether or not requiring the filing of a Tax Return), all
estimated taxes, deficiency assessments, additions to tax, penalties and
interest and shall include any liability for such amounts as a result either of
being a member of a combined, consolidated, unitary or affiliated group or of a
contractual obligation to indemnify any person or other entity.
"Tax Returns" means any return, report, declaration, claim for refund or other
document or information required to be supplied to a taxing authority in
connection with the Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
"Third Party Claim" shall have the meaning set forth in Section 8.3(a).
"VISA" means Visa USA, Inc.
<PAGE>
"Voting Arrangements" shall have the meaning set forth in Section 4.5(g).
"WARN Act" means the Workers Adjustment Retraining and Notification Act, as
amended.
[SIGNATURE PAGE IS THE NEXT PAGE]
<PAGE>
.11
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement the day and year first above written.
IPAYMENT, INC.
By: /s/ Gregory S. Daily
------------------------------------------------
Gregory S. Daily
Chairman and Chief Executive Officer
CARDSYNC ACQUISITION SUB, INC.
By: /s/ Gregory S. Daily
------------------------------------------------
Gregory S. Daily
President
CARDSYNC PROCESSING, INC.
By: /s/ Robert Onesian
------------------------------------------------
Robert Onesian
President
Robert Onesian for purposes of Articles VI and VIII
/s/ Robert Onesian
------------------------------------------------
Michael Cain for purposes of Articles VI and VIII
/s/ Michael Cain
------------------------------------------------