Asset Sale and Purchase Agreement - iPayment Technologies Inc. and Electronic Check Processing Inc.
ASSET SALE AND PURCHASE AGREEMENT
BETWEEN
iPAYMENT TECHNOLOGIES, INC.
A CALIFORNIA CORPORATION ("COMPANY")
AND
ELECTRONIC CHECK PROCESSING, INC.
A CALIFORNIA CORPORATION ("ECP")
AND
MICHAEL N. MCCORMICK,
AN INDIVIDUAL AND A SHAREHOLDER OF ECP ("MCCORMICK")
DATED: JANUARY 12, 2001
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ASSET SALE AND PURCHASE AGREEMENT
THIS ASSET SALE AND PURCHASE AGREEMENT (this "Asset Purchase Agreement") is
made and entered into effective as of this 12 the day of January, 2001 by and
among iPayment Technologies, Inc. (f/k/a/"creditcards.com"), a California
corporation (the "Company"), ELECTRONIC CHECK PROCESSING, INC. a California
corporation ("ECP"), and Michael N. McCormick, an individual and a shareholder
of ECP ("McCormick"), with reference to the following facts:
A. Company and McCormick are parties to a certain Loan Agreement (the
"Loan Agreement") dated as of February 25, 2000, and the other Loan Documents,
as defined in the Loan Agreement (the "McCormick Loan Documents"). The Loan is
evidenced by a Promissory Note (the "Note") in the amount of $750,000 executed
by Company as the "Borrower" and dated February 25, 2000. Certain terms of the
Loan Agreement and the Note have been modified in part by the terms of a certain
Novation And Agreement To Release Collateral dated July 20, 2000 (the "Novation
Agreement") to which Company and McCormick are parties thereto.
B. In order to induce McCormick to make the Loan under the McCormick Loan
Documents, the Company, pursuant to and subject to the terms and conditions of
Section 7 of the Loan Agreement, granted McCormick, certain Option Rights (as
that term is defined in Section 7.1 of the Loan Agreement), which grant
McCormick, the option and right to purchase 307,692 shares of the authorized but
unissued common stock of Company (the "Shares") for a purchase price of $6.50
per share (the "Per Share Purchase Price"), for a total aggregate purchase price
of $2,000,000.00 (the number of Shares and the Per Share Purchase Price are
subject to adjustment as provided under Section 7.3 of the Loan Agreement),
provided that, concurrent with such Share purchase by McCormick, and pursuant to
the terms and conditions of a proposed form of Agreement attached as Exhibit "E"
to the Loan Agreement and made a part thereof, (the "Purchase Agreement"), ECP
sells and Company purchases all of ECP's right, title and interest in certain
"Acquired Assets", including certain "Merchant Accounts" as those terms are
defined in SECTION 1.1, below), and payments and credits arising therefrom.
C. Concurrent with the full execution and delivery of this Asset Purchase
Agreement the parties hereto have each executed and delivered to the other
parties hereto, a letter agreement dated January 12, 2001 (the "Letter
Agreement") a copy of which is attached hereto as EXHIBIT A and made apart
hereof, whereby the parties have modified and amended certain terms of the Note,
and the Loan Agreement, including, without limitation thereto, for the
modification or termination of the Option Rights and revisions to the terms for
the purchase and sale of the Acquired Assets pursuant to the terms and
conditions of this Asset Purchase Agreement, in lieu of and in substitution of
the Purchase Agreement attached as Exhibit E to the Loan Agreement.
D. The parties hereto desire to consummate the transactions set forth in
the Letter Agreement, including without limitation thereto the desire of ECP to
sell and assign,
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to Company, and Company's desire to purchase, all of ECP's right, title and
interest in the Acquired Assets (as defined below), and payments and credits
arising therefrom, as described on SCHEDULE 1.1 hereto on the terms set forth
in this Asset Purchase Agreement in lieu of and in substitution of the terms
proposed in the Purchase Agreement attached as Exhibit E to the Loan Agreement,
and to further provide for certain rights in the event that the parties fail to
consummate the purchase and sale of the Acquired Assets under this Asset
Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Purchase and Sale of Interest in Merchant Accounts.
1.1 Merchant Account Assets to be Conveyed. Subject to the terms and
conditions hereinafter stated, ECP hereby agrees to convey, transfer, assign,
sell and deliver to Company, and Company hereby agrees to acquire, accept and
purchase, all of the following assets, properties and rights of ECP
(collectively the "Acquired Assets"):
(a) ECP's right, title and interest in and to the Merchant Accounts
and Portfolio acquired pursuant to that certain Asset Purchase Agreement made
and entered into as of May 28, 1998, by and between Company, Richard J. Gordon
and ECP (the "May 1998 Asset Agreement") pursuant to which ECP acquired certain
rights to Merchant Accounts from Company pursuant to that certain Merchant
Program Management Agreement, effective as of March 1, 1997, with Humboldt Bank,
a California corporation ("Humboldt") (the "Humboldt Agreement") and thereafter
subject to that certain Merchant Program Management Agreement dated effective
May 28, 1998, by and between Humboldt and ECP (the "ECP Humboldt Agreement")
relating to: (i) Fee Payments, (as defined therein), arising from the accounts
(the "Merchant Accounts") of the merchants (the "Merchants") listed on Schedule
1.1 thereto and as amended or supplemented to date as reflected on SCHEDULE 1.1
hereto, (the "Portfolio") and accruing after the Closing Date; and (ii) ECP's
security interest in all Merchant Reserve Accounts (as such term is used in the
Humboldt Agreement) and other similar reserve funds;
(b) All of ECP's right, title and interest in all books, records and
accounts, correspondence, sales records, and any other documentation pertaining
exclusively to the Portfolio;
(c) The exclusive right to use all know-how, and each sales, business
and marketing plan, process, invention, technique, schematic, customer prospect
and marketing list and trade secret owned by ECP or which ECP has the right to
use and assign to Company and all other confidential information pertaining
exclusively to the Portfolio (the assets to be conveyed to Company pursuant to
this clause (c) are hereinafter referred to collectively as the "Proprietary
Rights"); and
ECP and Company hereby agree and acknowledge that the Acquired Assets do
not include any Guaranteed Reserve Account or similar fund that ECP may maintain
with Humboldt pursuant to the ECP Humboldt Agreement.
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1.2 Executory Obligations Assumed by Company. At the Closing (as
hereinafter defined) Company shall assume and agree thereafter to pay when due
and discharge in the ordinary course only those obligations of ECP listed on
SCHEDULE 1.2 hereto (the "Assumed Liabilities"). Other than as set forth in
SCHEDULE 1.2, Company will not assume or be liable for, and ECP hereby agrees
to indemnify, defend and hold harmless Company from and against any claims in
respect of any debts, obligations or liabilities of ECP of any nature
whatsoever, whether direct or indirect, known or unknown, absolute or
contingent, relating to obligations of ECP under the ECP Humboldt Agreement,
and liability for any chargebacks or chargeback handling fees, or others costs
and expenses of any nature which occur on or after the Closing Date but which
relate to transactions settled prior to the Closing Date. Nothing herein
contained releases ECP from any preexisting obligation except as specifically
set forth in this Asset Purchase Agreement.
1.3 Termination of Existing Transition Services Agreement. Concurrent
with the Closing, ECP and Company agree that the existing Transition Services
Agreement dated effective as of May 28, 1998, (as amended or supplemented to
date) (the "Transition Services Agreement"), shall be terminated (subject to
the termination survival provisions at Section 10.11 thereof), and all Fees
paid under the Transition Services Agreement, including any prepaid amounts,
shall be deemed earned, and ECP shall have no further obligation to pay any
additional Fees thereunder and Company shall have no obligation to refund any
prepaid Fees thereunder.
1.4 Termination of Obligations Under Prior Asset Purchase Agreement.
Subject to and concurrent with the Closing, ECP and Company acknowledge and
agree that except as specifically set forth herein, all covenants and
obligations of all of the parties pursuant to the May 1998 Asset Agreement, and
under any and all amendments thereto, shall be deemed satisfied, complied with
or waived.
1.5 McCormick Note Payment, Option Rights Termination and Asset Purchase
Agreement. Pursuant to the terms and conditions of the Letter Agreement, and
the transactions contemplated thereunder and hereunder, McCormick, ECP and the
Company have agreed (and hereby acknowledge and reconfirm that they agree),
subject to and concurrent with the Closing of this Asset Purchase Agreement,
that the Loan Agreement (and related McCormick Loan Documents) and McCormick's
Option Rights (and the related rights and obligations of the parties under
Sections 7.1 through 7.4 of the Loan Agreement relating to the contemplated
purchase and sale of the Merchant Accounts triggered by the Option Rights
exercise pursuant to the Purchase Agreement, shall automatically terminate and
thereafter be of no further legal force or effect, except for those provisions
which expressly survive termination in accordance with the respective McCormick
Loan Documents and which survival provisions are not inconsistent with the
provisions of the Letter Agreement or this Asset Purchase Agreement.
2. Note Payment and Acquired Assets Purchase Consideration to be Paid at
Closing.
2.1 Note to be Paid at Closing. At the Closing, the Company shall make
a
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combined payment, in the sum of not less than One Million Six Hundred Dollars
($1,600,000)(the "Initial Total Payment Amount"), provided, however, that the
Initial Total Payment Amount shall be increased by the sum of $100,000 under
SECTION 2.2 below, if Company elects to extend the Initial Closing Date in
accordance with SECTION 2.2 below, such that the Total Payment Amount to be paid
at the Closing may be increased to $1,700,000. The Initial Total Payment Amount,
as may be increased, if any, shall hereinafter be referred to the "Total Payment
Amount". At the Closing and the consummation of the transactions contemplated
hereunder, the Total Payment Amount will be applied first to the full payment of
the any and all amounts outstanding, as of and at the Closing (including accrued
interest) under the Note. The remaining balance of the Total Payment Amount
(after payment of the Note) will be deemed to be, and will be applied, as the
total purchase price (the "Purchase Price") payable (and paid) by the Company to
ECP for the Acquired Assets.
2.2 Closing of All Transactions. Subject to the satisfaction or waiver, as
appropriate, of the conditions set forth in SECTION 7, the consummation of all
of the transactions herein contemplated (the Note repayment in full, and the
concurrent purchase and sale of the Acquired Assets)(the "Closing") shall,
except as may be extended by Company in accordance with the terms and conditions
hereinbelow provided, or unless another date, time or place is agreed to in
writing by the parties hereto, take place at the offices of Stradling, Yucca,
Carlson & Rauth, 660 Newport Center Drive, Suite 1600, Newport, CA. 92660, at
11:00 A.M. on February 20, 2001, (the "Initial Closing Date"); provided,
however, that subject to the satisfaction or waiver, as appropriate, of the
conditions set forth in SECTION 7, the Company may, elect to extend the Initial
Closing Date to a later date which shall be no later than 11:00 A.M. on March
30, 2001, by giving written notice to McCormick and ECP, on or before 5:00 P.M.,
on February 16, 2001, of its election to extend the Initial Closing Date, and
designating in such written notice (the "Closing Date Extension Notice") the
designated date for the Closing, which shall be no later than 11:00 A.M. on
March 30, 2001. The date designated in the Closing Date Extension Notice is
hereafter referred to as the "Extended Closing Date". The Initial Closing Date,
as may be extended in accordance with the terms set forth herein, is hereinafter
referred to as the "Scheduled Closing Date". The actual date on which the
closing shall occur is referred to herein as the "Closing Date". If the Company
elects to extend the Initial Closing Date, the Total Payment Amount shall be
increased by $100,000, such that the Total Payment Amount will be $1,700,000
(and the corresponding amount allocated to the Purchase Price payable under the
Asset Purchase Agreement shall increase by the sum of $100,000. At the Closing,
the Total Payment Amount (as determined) will be allocated and applied as set
forth in SECTIONS 2.3 AND 2.4, below.
2.3 McCormick Note Payment. As provided in SECTION 2.2 above, at and
subject to the Closing the Company shall make the Total Payment Amount (as
determined). From the Total Payment Amount funds, McCormick shall receive, and
said funds shall be allocated first to the amount required to pay McCormick in
full, at and as of the Closing Date, the principal amount outstanding, plus all
accrued and unpaid interest due and payable under the Note (the "Note Payoff
Amount"). The Note Payoff Amount shall be delivered to McCormick at the Closing,
at the option of McCormick, by bank check or wire transfer of immediately
available funds to an account designated in writing by McCormick to Company not
less than three Business Days prior to the Closing.
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2.4 Purchase Price for Acquired Assets. As provided in Sections 2.2 and
2.3 above, at and subject to the Closing the Company shall make the Total
Payment Amount (as determined). After payment of the Note Payoff Amount under
Section 2.3 above, the remaining amount of the Total Payment Amount shall be
paid to ECP as the total purchase price (the "Purchase Price") payable (and
paid) by the Company to ECP for the Acquired Assets. The Purchase Price shall be
delivered to ECP at the Closing, at the option of ECP, by bank check or wire
transfer of immediately available funds to an account designated in writing by
ECP to Company not less than three Business Days prior to the Closing.
3. Representations and Warranties of ECP. Each representation and warranty
contained in this SECTION 3 is qualified by the disclosures made in the
disclosure schedule attached hereto as SCHEDULE 3 (the "ECP SCHEDULE OF
EXCEPTIONS"). This SECTION 3 and the ECP Schedule of Exceptions shall be read
together as an integrated provision, ECP represents and warrants to Company
that:
3.1 Organization and Good Standing. ECP is duly organized, validly
existing and in good standing under the laws of the State of California.
3.2 Authorization of Asset Purchase Agreement. ECP has all requisite
corporate power and authority to enter into this Asset Purchase Agreement and to
consummate the transactions contemplated on the part of ECP hereby. This Asset
Purchase Agreement and all other agreements and instruments to be executed by
ECP in connection herewith, together with all other documents to be executed in
connection herewith or therewith (the "Transaction Documents") have been (or
upon execution will have been) duly executed and delivered by ECP, have been
effectively authorized by all necessary action, corporate or otherwise, and
constitute (or upon full execution will constitute) legal valid and binding
obligations of ECP, except as such enforceability may be limited by general
principles of equity and bankruptcy, insolvency, reorganization and moratorium
and other similar laws relating to creditors' rights (the "Bankruptcy
Exception"). The signatories executing this Asset Purchase Agreement and the
Transaction Documents on behalf of ECP have all requisite power and authority to
execute and deliver such documents.
3.3 Ownership of the Acquired Assets. ECP is the lawful owner of or has
the right to use and, provided the Humboldt Assignment and Consent Agreement (as
defined and provided for in SECTION 7.1(f) below) is obtained to transfer to
Company each of the Acquired Assets. Provided that the Humboldt Assignment and
Consent (as defined and contemplated in SECTION 7.1(f) below) is obtained at or
prior to the Closing, on the Closing Date, the Acquired Assets will be free and
clear of all liens, mortgages, pledges, security interests, restrictions, prior
assignments, encumbrances and claims of any kind. The delivery to Company of a
bill of sale, substantially in the form set forth in EXHIBIT B (the "Bill of
Sale") will vest good and marketable title to the Acquired Assets in Company,
free and clear of all liens, mortgages, pledges, Security Interests,
restrictions, prior assignments, encumbrances and claims of any kind, except
those of Humboldt related to the senior security interest of Humboldt in the
Merchant Reserve Accounts.
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3.4 No Conflict or Violation. Except as set forth on Schedule 3.4 hereto,
the execution, delivery and performance by ECP and the consummation of the
transactions contemplated hereby do not and will not: (i) violate or conflict
with any provision of the charter documents of ECP, (ii) require the approval or
consent of any third party, other than Humboldt Bank; (iii) violate any
provision or requirement of any domestic or foreign, national state or local
law, statute, judgment order, writ, injunction, decree, award, rule, or
regulation of any arbitrator or court, state, local or foreign government
agency, regulatory body, other governmental authority or any department board,
commission, bureau or instrumentation of any of the foregoing (each of the
foregoing hereafter referred to as a "Governmental Entity") applicable to ECP or
its business; (iv) violate, result in a breach or constitute (with due notice or
lapse of time or both) a default or cause any obligation, penalty, premium or
right of termination to arise or accrue under any agreement, contract, lease,
license, instrument or other arrangement to which ECP is a party or by which it
is bound or to which any of its assets is subject, provided that the Humboldt
Assignment and Consent is obtained and the release of any Security Interest that
Humboldt may have in the Acquired Assets (each a "Contract" and collectively the
"Contracts"); (v) result in the creation or imposition of any lien, charge or
encumbrance of any kind whatsoever upon any of the properties or assets of ECP;
or (vi) result in the cancellation, modification, revocation or suspension of
any license, permit, certificate, franchise, authorization, consent or approval
issued or granted to ECP by any Governmental Entity (each a "License" and
collectively the "Licenses").
3.5 Litigation. There are no material claims, disputes, actions,
proceedings or investigations of any nature pending or, to the knowledge of ECP,
threatened against or involving ECP, its business or any of the officers,
directors, agents or employees of ECP which relate to the Merchant Accounts.
Neither ECP nor or any of its assets or properties is subject to any order,
judgment, award, injunction or decree of any Governmental Entity or arbitrator,
that could result in a Material Adverse Change to the financial condition or
results of operations of ECP or that would interfere with the transactions
contemplated by this Asset Purchase Agreement.
3.6 Visa and MasterCard Compliance. To the extent applicable, ECP is in
material compliance with all of the rules and regulations of Visa USA, Inc.
("Visa") and MasterCard International, Inc. ("MasterCard").
3.7 Related Party Transactions. No officer, director or shareholder of
ECP, or any affiliate of any such person now has, or within the last three (3)
years had, either directly or indirectly a business relationship with any
Merchant except pursuant to the ECP Humboldt Agreement or the Humboldt
Agreement. For purposes of this Asset Purchase Agreement, "Affiliate" shall have
the meaning ascribed to such term in Rule 405 under the Securities Act of 1933,
as amended (the "Securities Act").
4. Representations and Warranties of Company. Except as disclosed by Company
in Schedule 4 hereto (the "Company Schedule of Exceptions") and subject to such
disclosures, Company, hereby represents and warrants to each of ECP and
McCormick that the statements contained in this Section 4 are true, complete and
correct. Each representation
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and warranty contained in this SECTION 4 is qualified by the disclosures made
in the correspondingly numbered section of the Company Schedule of Exceptions,
which shall be read together with this SECTION 4 as an integrated provision.
Subject to the forgoing, Company, hereby represents and warrants to each of ECP
and McCormick as follows:
4.1 Organization and Standing. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has full corporate power and authority to conduct its business as presently
conducted and to enter into and perform this Asset Purchase Agreement and all
other agreements required to be executed by Company at or prior to the Closing.
4.2 Authority for Asset Purchase Agreement; No Conflict. The execution,
delivery and performance by Company of this Asset Purchase Agreement, and the
consummation by Company of the transactions contemplated hereby and thereby,
have been duly authorized by all necessary corporate action. This Asset
Purchase Agreement has been duly executed and when delivered by Company will
constitute valid and binding obligations of Company enforceable in accordance
with its term's subject as to enforcement of remedies to the Bankruptcy
Exception. The execution of and performance of the transactions contemplated by
this Asset Purchase Agreement and compliance with its respective provisions by
Company do not: (a) conflict with or violate any provision of the Articles of
Incorporation or By-laws of Company, in each case as amended; (b) require on
the part of Company any filing with, or any permit, authorization, consent or
approval of, any Governmental Entity; (c) except as set forth in SCHEDULE 4.2
hereto, conflict with, result in a breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel,
or require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness or other arrangement to which
Company is a party or by which Company is bound; or (d) violate any order,
writ, injunction or decree applicable to Company. For purposes of this Asset
Purchase Agreement, "Security Interest" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien (whether arising by contract or by
operation of law).
4.3 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with,
any Governmental Entity is required on the part of Company in connection with
the execution and delivery of this Asset Purchase Agreement or the other
transactions to be consummated by Company at the Closing, as contemplated by
this Asset Purchase Agreement.
4.4 Litigation. To the best of the Company's knowledge (after due inquiry
of it's executive officers) there is no action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to the best of Company's
knowledge, any threat thereof, against Company, which questions the validity of
this Asset Purchase Agreement or the right of Company to enter into it, or
which is reasonably likely to interfere with the Closing of the transactions
contemplated by this Asset Purchase Agreement.
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5. Representations and Warranties of McCormick. McCormick hereby represents
and warrants to Company as follows:
5.1 Authorization. This Asset Purchase Agreement together with all other
documents to be executed in connection herewith or therewith (the "Transaction
Documents") have been (or upon execution will have been) duly executed and
delivered by McCormick, and as to those provisions applicable to McCormick
constitute (or upon full execution will constitute) legal valid and binding
obligations of McCormick, except as such enforceability may be limited by
general principles of equity and bankruptcy, insolvency, reorganization and
moratorium and other similar laws relating to creditors' rights (the "Bankruptcy
Exception").
6. Certain Understandings and Agreements of the Parties.
6.1 Access. Between the date hereof and the Closing Date or the earlier
termination of this Asset Purchase Agreement, (i) authorized representations of
Company shall have reasonable access during normal business hours to all
properties, books, records, and documents of ECP to the extent any of the
foregoing relate to the Acquired Assets, (ii) ECP will furnish to Company all
information with respect to its affairs and the Acquired Assets that Company may
reasonably request; and (iii) Company shall have the right to discuss the
Acquired Assets with the employees of ECP.
6.2 Non-Interference. ECP shall not interfere with, disrupt, or attempt to
interfere with or disrupt, any past, present or prospective business
relationship, contractual or otherwise, related to or arising from the
Portfolio, the Merchant Accounts or the Merchants, including, without limitation
Company's ability to receive the Fee Payments as contemplated herein. This
covenant shall survive the Closing for a period of two (2) years after the
Closing.
6.3 Taxes. ECP shall pay all federal, state, and local sales, documentary,
and other transfer taxes, if any, due as a result of the purchase, sale, or
transfer of the Acquired Assets in accordance herewith on either party as well
as all income taxes in respect of Fees received by ECP on Merchant's Accounts
and relating to transactions settled prior to Closing, and ECP shall indemnify,
reimburse, and hold harmless Company in respect of the liability of or the
failure to pay any such taxes or the filing of or failure to file any reports
required in connection therewith. Company shall indemnify ECP in respect of
taxes owing for Fees received by Company after the Closing.
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6.4 Access to Records and Files. ECP shall have the right for a period of
three (3) years following the Closing Date to have reasonable access to such
books, records and accounts, correspondent, and other similar information as are
transferred to Company pursuant to the terms of this Asset Purchase Agreement
for the limited purposes of concluding its involvement in the Acquired Assets.
Company shall have the right for a period of three (3) years following the
Closing Date to have reasonable access to those books, records and accounts,
correspondence, and other records which are retained by ECP pursuant to the
terms of this Asset Purchase Agreement to the extent that any of the foregoing
relate exclusively to the Acquired Assets.
6.5 Exclusivity. Prior to Closing, ECP will not (i) solicit, initiate or
encourage the submission of any proposal or offer from any person or entity
relating to the acquisition of any of the Acquired Assets, or (ii) participate
in any discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner any
effort or attempt by any person or entity to do or seek any of the foregoing, or
enter into any agreement with respect to the foregoing.
6.6 Merchant Reserves. After the Closing, ECP shall not draw or make any
claim against, or agree to release, any Merchant Reserve Account (as defined in
the Humboldt Agreement and the ECP Humboldt Agreement) or any security deposit
held by Humboldt on behalf of any Merchant, except for any losses incurred by
ECP or Humboldt relating to transactions by the Merchants prior to the Closing
that are otherwise not recovered by or reimbursed to ECP.
6.7 Notices of Changes. The parties hereto will promptly notify the other
parties in writing of any event occurring after the date of this Asset Purchase
Agreement which would render any of its representations or warranties contained
herein, if made on or as of the date of such event or as of the Closing Date,
except for representations and warranties applicable solely to specified
date(s), untrue or inaccurate.
6.8 Notices of Material Adverse Changes. The parties hereto will promptly
notify the other parties in writing of any Material Adverse Change occurring
after the date of this Asset Purchase Agreement. For purposes of this Asset
Purchase Agreement, a "Material Adverse Change" shall mean any event,
circumstance, condition, development, or occurrence causing, resulting, in
having, or that could reasonably be expected to have, a material adverse effect
on the Merchant Accounts, the Portfolio, or the Acquired Assets.
6.9 Best Efforts. Upon the terms and subject to the conditions of this
Asset Purchase Agreement, each of the parties hereto shall use its best efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable consistent with applicable law to cause
the fulfillment of the conditions to Closing set forth herein to consummate and
make effective the transactions contemplated herein.
6.10 Survival Indemnification.
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(a) Survival Periods. The representations and warranties made in
this Asset Purchase Agreement, the Transaction Documents or in any exhibit,
schedule, document, certificate, or other instrument delivered by or on behalf
of the parties pursuant to this Asset Purchase Agreement or the Transaction
Documents shall survive any investigation made by any party hereto and the
Closing of the transactions contemplated hereby until the second anniversary of
the Closing Date, except those representations and warranties contained in
SECTION 3.3 (Ownership of Acquired Assets) and SECTION 3.4 (No Conflict or
Violation) which will survive indefinitely. As to any matter which is based
upon willful fraud by the indemnifying party, the representations and
warranties set forth in this Asset Purchase Agreement shall expire only upon
expiration of the applicable statute of limitations. No party will be liable to
another under any warranty or representation, after the applicable expiration
of such warranty or representation; provided however, if a claim or notice is
given under this SECTION 6 with respect to any representation or warranty prior
to the applicable expiration date, such claim may be pursued to resolution
notwithstanding expiration of the representation or warranty under which the
claim was brought. Completion of the transactions contemplated hereby shall not
be deemed or construed to be a waiver of any right or remedy of any of the
parties notwithstanding the existence of any facts that any of the parties knew
or should have known at the time hereof, except as specifically provided for in
SECTION 8 hereto.
(b) Indemnification by ECP. Subject to the limits set forth in this
SECTION 6, ECP shall indemnify, defend and hold harmless Company in respect of
any and all claims, losses, damages, liabilities and expenses (including,
without limitation settlement costs and any legal, accounting and other
expenses for investigating or defending any actions or threatened actions)
("Losses") incurred by Company, in connection with any of the following:
(i) the ownership and operation by ECP of the Acquired
Assets prior to the Closing that relate to, or arise out of transactions prior
to the Closing Date;
(ii) the operations of ECP relating to the Acquired Assets
at any time before or after the Closing Date;
(iii) any untruth or inaccuracy of any representation or
warranty made by ECP in this Asset Purchase Agreement or any Transaction
Document;
(iv) the breach of any covenant, agreement or obligation of
ECP contained in this Asset Purchase Agreement or any Transaction Document,
except Losses based upon or arising from the termination of this Asset Purchase
Agreement by Company pursuant to SECTION 8.2(b) below; and
(v) any claims against, or liabilities or obligations of,
ECP not specifically assumed by Company pursuant to this Asset Purchase
Agreement.
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(c) Indemnification by McCormick. Subject to the limits set forth in this
SECTION 6, McCormick shall indemnify, defend and hold harmless Company in
respect of any and all Losses incurred by Company, in connection with any of
the following:
(i) any untruth or inaccuracy of any representation or warranty made
by McCormick in this Asset Purchase Agreement or any Transaction Document;
(ii) the breach of any covenant, agreement or obligation of McCormick
contained in this Asset Purchase Agreement or any Transaction Document, except
Losses based upon or arising from the termination of this Asset Purchase
Agreement by Company pursuant to SECTION 8.2(b) below.
(d) Indemnification by Company. Subject to the limits set forth in this
SECTION 6, Company shall, defend and hold harmless ECP and McCormick in respect
of any and all Losses incurred by such parties, in connection with any of the
following:
(i) the ownership and operation of the Acquired Assets after the
Closing Date that relate to, or arise out of transactions after the Closing
Date;
(ii) the operation of Company at any time before the Closing Date;
(iii) any untruth or inaccuracy of any representation or warranty made
by it in this Asset Purchase Agreement or any Transaction Document;
(iv) the breach of any covenant, agreement or obligation of it
contained in this Asset Purchase Agreement or any Transaction Document, except
Losses based upon or arising from the termination of this Asset Purchase
Agreement by ECP and/or McCormick pursuant to SECTION 8.2 (c) below; and
(v) any claims against, or liabilities or obligations of, ECP
specifically assumed by Company pursuant of this Asset Purchase Agreement.
(e) Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"INDEMNIFIED PARTY") shall promptly provide written notice (the "NOTICE") to the
other party(ies) (the "INDEMNIFYING PARTY") of the claim, provided that the
failure to so promptly notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent it is
materially prejudiced thereby.
(f) Defense by Indemnifying Party. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Asset Purchase Agreement (a
"THIRD PARTY CLAIM") the Notice shall provide, when known, the facts
constituting the basis for such claim. The Indemnifying Party at its sole cost
and expense may, upon written notice to the Indemnified Party, assume the
defense of any such claim or legal proceeding. After notice from the
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Indemnifying Party to the Indemnified Party of its election so to assume the
defense, conduct or settlement thereto the Indemnifying Party will not be liable
to the Indemnified Party for any legal or other expenses subsequently incurred
by the Indemnified Party in connection with the defense, conduct or settlement
thereof unless the Indemnified Party has defenses that may conflict with, or
that may not be available to, the Indemnifying Party. The Indemnified Party will
reasonably cooperate with the Indemnifying Party in connection with any such
claim assumed by the Indemnifying Party, make available to the Indemnifying
Party all pertinent information under the Indemnified Party's control and will
not consent to the entry of a judgment or enter into any settlement with respect
to the matter without the written consent of the Indemnifying Party (which shall
not be unreasonably withheld or delayed). The Indemnifying Party will not
consent to the entry of a judgment with respect to the matter or enter into any
settlement which does not include a provision whereby the plaintiff or claimant
in the matter releases the Indemnified Party from all liability with respect
thereto, without the written consent of the Indemnified Party (which shall not
be unreasonably withheld or delayed). The Indemnified Party shall be entitled to
participate in (but not control) the defense of any such action, with its
counsel and at its own expense. If the Indemnifying Party does not assume the
defense of any such claim or litigation resulting therefrom, (i) the 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,
provided, however, the Indemnifying Party has given its written consent to such
settlement (which shall not be unreasonably withheld or delayed), and (ii) the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense.
(g) Non-Third Party Claims. If any Indemnified Party should have a claim
against any Indemnifying Party hereunder which does not involve a Third Party
Claim, the Notice transmitted to the Indemnifying Party shall describe in
reasonable detail the nature of the claim, an estimate of the amount of the
Losses attributable to such claim and the basis of the Indemnified Party's
request for indemnification under this Asset Purchase Agreement.
(h) Payments. Payments of all amounts owing by an Indemnifying Party
pursuant to this SECTION 6 relating to a Third Party Claim shall be made in cash
within thirty (30) days after the latest of (a) the settlement of such Third
Party Claim, (b) the expiration of the period for appeal of a final adjudication
of such Third Party Claim or (c) the expiration of the period for appeal of a
final adjudication of the Indemnifying Party's liability to the Indemnified
Party under this Asset Purchase Agreement. Payments of all amounts owing by an
Indemnifying Party pursuant to this SECTION 6 shall be made in cash within
thirty (30) days after the later of (i) the expiration of the 30-day Notice
period or (ii) the expiration of the period for appeal of a final adjudication
of the Indemnifying Party's liability to the Indemnified Party under this Asset
Purchase Agreement.
(i) Limits on Indemnification. Notwithstanding any provision of this Asset
Purchase Agreement to the contrary, no Indemnifying Party shall have any
obligation to indemnify any person entitled to indemnity under this SECTION 6
in respect of Losses attributable to Third Party Claims unless the persons so
entitled to indemnity thereunder have suffered Losses attributable to such
Third Party Claims in an aggregate amount in excess of
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Fifty Thousand Dollars ($50,000) (the "INDEMNIFICATION THRESHOLD"). Once the
aggregate amount exceeds the Indemnification Threshold, the Indemnified Party
shall be entitled to recover the full amount of all Losses, including any
amounts which constituted the Indemnification Threshold, up to an aggregate
maximum of the Purchase Price amount (as determined under SECTION 2.4 above).
7. Conditions to Closing.
7.1 Conditions to Obligations of Company. The obligations of Company to
consummate the transactions contemplated hereby shall be, at the option the
Company, subject to the fulfillment, at or prior to the Closing Date, of the
following additional conditions, but compliance with any such conditions may be
waived by the Company in writing; provided however, that except for clause (f)
below, such waiver will not waive or diminish any right to indemnification
pursuant to SECTION 6 unless so stated, and any waiver of the condition of
clause (f) below shall expressly waive any right of the Company to
indemnification as provided in clause (f) below:
(a) Representations and Warranties True. The representations and
warranties of ECP and McCormick shall be true and correct in all material
respects on the Closing Date, and at the Closing, ECP shall have delivered to
Company a certificate to such effect signed by an officer of ECP as to ECP and
as to McCormick by him individually.
(b) Performance of Other Parties. ECP and McCormick shall have
performed in all material respects all obligations required under the Asset
Purchase Agreement to be performed by each of them on or before the Closing
Date, and at the Closing, ECP shall have delivered to Company a certificate
dated the Closing Date to such effect signed by an officer of ECP as to ECP and
as to McCormick by him individually.
(c) Authority. All actions required to be taken by, or on the part
of, ECP to authorize the execution, delivery and performance of this Asset
Purchase Agreement, the Transaction Documents, and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by the
Board of Directors of ECP.
(d) Liens. Any liens on the Acquired Assets shall have been
released, and such release shall have been documented and filed, to the
Company's satisfaction.
(e) No Action or Proceeding. No Claim action, suit, investigation,
or other proceeding shall be pending or threatened against ECP or McCormick
before any arbitrator or Governmental entity which presents a substantial risk
of the restraint or prohibition of the transactions contemplated by this Asset
Purchase Agreement or obtaining of material damages or other relief in
connection therewith.
(f) Humboldt Assignment and Consent Agreement. On or before the
Closing Date, Humboldt and Company shall have executed and delivered to each
other an agreement satisfactory to Company in its reasonable discretion,
pursuant to which Humboldt shall: (i) consent to the assignment of ECP's rights
in the Merchant Accounts, including
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ECP's Security Interest in all the Merchant Reserve Accounts related thereto to
the Company, clear and free from any liens, offset rights, or claims Humboldt
may have applicable to ECP and/or the Acquired Assets; (ii) Humboldt agrees to
look to ECP for its remedies in connection with any obligation of ECP under the
ECP Humboldt Agreement related to the Merchant Accounts arising or relating to
transactions prior to the Closing Date and to look to Company for its remedies
in connection with any obligation of Company under its current agreement with
the Company related to the Merchant Accounts arising or relating to
transactions after the Closing Date, consistent with the indemnification
provisions contained in SECTION 6 of this Asset Purchase Agreement; and (iii)
whereby Humboldt agrees to execute and deliver any such documents reasonably
requested by Company to effectuate Humboldt's release of any Security Interest
in the Acquired Assets granted by ECP to Humboldt in the Acquired Assets (the
"Humboldt Assignment and Consent Agreement"). The obligation and responsibility
to obtain the Humboldt Assignment and Consent Agreement is the Company's. The
Closing shall not occur unless this condition is satisfied or waived solely by
Company, provided that such waiver expressly waives any right of Company to
indemnification from ECP and/or McCormick related thereto pursuant to SECTION
6, and provided, further, such waiver expressly provides that ECP shall be
entitled to the indemnification rights pursuant to SECTION 6 from Company
related to the Closing, notwithstanding the failure of Company to obtain the
Humboldt Assignment and Consent Agreement.
(g) Additional Closing Documents and Deliveries of ECP and
McCormick. Company shall have received at the Closing the following, dated the
Closing Date:
(i) Copies, certified by the Secretary or an Assistant
Secretary of ECP, of resolutions of the Board of Directors of ECP authorizing
the execution, delivery and performance of this Asset Purchase Agreement and the
Transaction Documents, and the consummation of the transactions contemplated
hereby;
(ii) The Bill of Sale;
(iii) Such further instruments of sale, transfer, conveyance,
assignment or delivery covering the Acquired Assets or any part thereof as
Company may reasonably require to assure the full and effective sale, transfer,
conveyance, assignment or delivery to it of the Acquired Assets;
(iv) The original McCormick Note marked "fully paid";
7.2 Conditions to Obligations of ECP Parties. The obligation of ECP and
McCormick to consummate the transactions contemplated hereby shall be, at the
option of such parties, subject to the fulfillment, at or prior to the Closing
Date, of the following additional conditions, but compliance with any such
conditions may be waived by such parties in writing; provided however, that
such waiver will not waive or diminish such parties' right to indemnification
pursuant to SECTION 6, unless so stated:
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(a) Representations and Warranties True. The representations and
warranties of Company contained in this Asset Purchase Agreement or in any
Transaction Document shall be true and correct in all material respects on the
Closing Date with the same effect as if made on the Closing Date, and at the
Closing, Company shall have delivered to ECP a certificate to such effect,
signed by an officer of Company.
(b) Performance of Covenants. The Company has performed in all material
respects all obligations required under this Asset Purchase Agreement to be
performed on or before the Closing Date, and at the Closing, Company shall have
delivered to ECP a certificate dated the Closing Date to such effect signed by
an officer of Company.
(c) Authority. All actions required to be taken by, or on the part of,
Company to authorize the execution, delivery and performance of this Asset
Purchase Agreement and the Transaction Documents, and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by the
Board of Directors of the Company.
(d) No Action or Proceeding. No Claim action, suit, investigation, or
other proceeding shall be pending or threatened against Company before any
arbitrator or Governmental entity which presents a substantial risk of the
restraint or prohibition of the transactions contemplated by this Asset
Purchase Agreement or obtaining of material damages or other relief in
connection therewith
(e) Additional Closing Documents and Deliveries of Company to ECP. ECP
shall have received at the Closing the following documents, each dated as of
the Closing Date:
(i) Copies, certified by the Secretary or an Assistant Secretary of
Company, of resolutions of its Board of Directors authorizing the execution and
delivery of this Asset Purchase Agreement and the Transaction Documents, and
the consummation of the transactions contemplated hereby;
(ii) Payment of the Purchase Price (as determined under Section 2.4
above, wire transfer confirmation) cash consideration relating to the Acquired
Assets;
(iii) Such other closing documents as ECP's counsel may reasonably
request.
(f) Additional Closing Documents and Deliveries of Company to McCormick.
McCormick shall have received at the Closing the following documents, each
dated as of the Closing Date:
(i) Copies, certified by the Secretary or an Assistant Secretary of
Company, of resolutions of its Board of Directors authorizing the execution and
delivery of this Asset Purchase Agreement and the Transaction Documents, and
the consummation of the transactions contemplated hereby;
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(ii) The Note Payoff Amount, payable in the manner provided for
in SECTION 2.3 above (wire transfer confirmation).
8. TERMINATION.
8.1 Termination. This Asset Purchase Agreement and the transactions
contemplated hereby may be terminated, by giving written notice ("Notice of
Termination") by any party at any time prior to the Closing under clauses (a)
or (b) below, and by Company under clause (c) below:
(a) in the event that any other party fails to comply in any material
respect with any of their covenants or agreements contained herein; or
(b) any of the representations and warranties of any other party is
breached or inaccurate in any material way; or any condition to its performance
hereunder have not satisfied prior to or at the Scheduled Closing Date; or
(c) if Company fails to obtain the Humboldt Assignment and Consent
Agreement under 7.1 (f) above or fails to waive such condition in accordance
with the provisions of SECTION 7.1 (f).
Notwithstanding the foregoing, a party may not terminate this Asset
Purchase Agreement if the event giving rise to the termination right results in
whole or part from the willful failure of such party to perform or observe any
of the covenants or agreements set forth herein to be performed or observed by
such party or if such party is, at such time, in material breach of this Asset
Purchase Agreement. For purposes of this provision, McCormick and ECP shall be
collectively deemed a single party.
8.2 EFFECT OF TERMINATION.
(a) General. Termination of this Asset Purchase Agreement pursuant to
SECTION 8.1 shall terminate all obligations of the parties hereunder, except for
the obligations specified under this SECTION 8.2 which shall survive.
(b) Termination by Company. If this Asset Purchase Agreement is
terminated by Company by giving written Notice of Termination pursuant to
clauses (a) or (b) of SECTION 8.1 above, then in such event the Company shall,
on or before 5:00 P.M. of the third calendar day following the giving of the
Notice of Termination by Company, pay McCormick, by cashier's or certified funds
or wire transfer funds to an account designated by McCormick, the full amount
then outstanding (including accrued interest) under the Note. In the event the
Company timely pays the entire amount outstanding under the Note (principal and
interest) as provided herein, then in such event, the Loan Agreement, including
without limitation thereto, McCormick's Option Rights and the related provisions
of Article 7 of the Loan Agreement relating to the rights and obligations of the
parties in connection with the contemplated purchase and sale of the Acquired
Assets under the
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Purchase Agreement tied to the Option Rights (and related McCormick Loan
Documents), shall automatically without further action by either party,
terminate and thereafter be of no further legal force or effect, except for
those provisions which expressly survive termination in accordance with the
respective McCormick Loan Documents and which are not inconsistent with the
provisions in PARAGRAPH 5 of the Letter Agreement. McCormick shall within two
(2) business after receipt of the Company's full payment of the Note surrender
to the Company, the original Note marked "fully paid" for cancellation. The
Company, McCormick and ECP, hereby agree that the foregoing provisions of this
SECTION 8.2(b) shall survive the termination of this Asset Purchase Agreement
and control and supersede any inconsistent provisions contained in the Loan
Agreement (and related McCormick Loan Documents), including without limitation
thereto Section 6.1 and Sections 7.1 through 7.4 of the Loan Agreement. If this
Asset Purchase Agreement is terminated by Company by giving written Notice of
Termination pursuant to clause (c) of SECTION 8.1 above, then in such event,
said termination shall be subject to and otherwise governed by the provisions of
SECTION 8.2(c) below applicable to terminations by ECP and/or McCormick pursuant
to clauses (a) or (b) of SECTION 8.1 above, and ECP and McCormick shall be
entitled to the rights and remedies provided for in SECTION 8.2(c) for
terminations based on clauses (a) or (b) of SECTION 8.1.
(c) Termination by ECP and/or McCormick. If this Asset Purchase
Agreement is terminated by ECP and McCormick by giving written Notice of
Termination pursuant to clauses (a) or (b) of SECTION 8.1 above, or if
terminated by Company for a failure to satisfy or waive the condition in SECTION
7.1(f), then in such event:
(i)(A) the Note shall automatically be deemed amended, without
further action by either party, to be a "demand note", and all principal and
accrued interest shall be deemed to be due and payable on or before 5:00 P.M. of
the tenth calendar day following the giving of the Notice of Termination by ECP
and/or McCormick (the "Demand Note Payment Deadline"), Company shall pay
McCormick, by cashier's or certified funds or wire transfer funds to an account
designated by McCormick, the full amount then outstanding (including accrued
interest) under the Note in the manner and within the time set forth herein and
all references to "Conversion Date" or to installment payments or other terms
inconsistent with a "demand note" shall be deemed of no further force or effect.
McCormick shall surrender the original Note marked "fully paid" for cancellation
to the Company, within two (2) business after receipt of the Company's full
payment of the Note; and (B) on or before the expiration of the "Demand Note
Payment Deadline" in consideration of McCormick and ECP for entering into this
Asset Purchase Agreement and the Letter Agreement, and their taking the actions
hereunder and under the Letter Agreement, the Company shall, transfer and assign
to ECP, additional Merchant Accounts (to be added to the Merchant Portfolio of
ECP under the Asset Purchase Agreement dated May 28, 1998 by and between ECP,
Company (designated therein as Electronic Card Systems, Inc.) and Richard J.
Gordon (the "May 1998 Asset Agreement"), that are reasonably expected, based on
historical performance during the twelve month period commencing February 1,
2000 and ending January 31, 2001 to generate to ECP, commencing as of April 1,
2001, additional monthly Fee Revenue (as that term is defined in the May 1998
Asset Agreement) in the aggregate monthly sum of not less than $12,513.54 (based
on quarterly averages for
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the three months of October, November and December 2000 and as calculated
previously) (the "Merchant Make-Up Transfer"). Provided, however, that if ECP
and Company are unable to agree to the additional Merchant Accounts that are to
be included in the Merchant Make-Up Transfer, or in the event that Company is
not able to obtain all required third party consents and approvals required of
Company (including without limitation thereto, those of Humboldt and Charles D.
Aalfs) to assign and transfer such additional Merchant Accounts (to be added to
the Merchant Portfolio of ECP under the May 1998 Asset Agreement) free and
clear of all liens, mortgages, pledges, Security Interests, restrictions, prior
assignments, encumbrances and claims of any kind, except those of Humboldt
related to the senior security interest of Humboldt in the Merchant Reserve
Accounts relating to such additional Merchant Accounts, then in lieu of and in
substitution of the obligation of the Company to complete the Merchant Make-Up
Transfer as contemplated herein, the Company shall have the right at any time
up to and until the expiration of the Demand Note Payment Deadline, to pay ECP
the sum of Three Hundred Thousand Dollars ($300,000) (the "Merchant Make-Up
Transfer Amount") by cashier's or certified funds or wire transfer funds to an
account designated by ECP; and (C) in the event the Company timely (1) pays the
entire amount outstanding under the Note (principal and interest) and (2)
either completes the Merchant Make-Up Transfer or pays the entire Merchant
Make-Up Transfer Amount as contemplated and provided in clause (B) above of
this Section 8.2(c), then in said event, the Loan Agreement, including without
limitation thereto, McCormick's Option Rights and the related provisions of
Article 7 of the Loan Agreement relating to the rights and obligations of the
parties in connection with the contemplated purchase and sale of the Acquired
Assets under the Purchase Agreement tied to the Option Rights (and related
McCormick Loan Documents), shall automatically without further action by either
party, terminate and thereafter be of no further legal force or effect, except
for those provisions which expressly survive termination in accordance with the
respective McCormick Loan Documents and which are not inconsistent with the
provisions in Paragraph 5 of the Letter Agreement; or
(ii) if the Company fails to timely satisfy its obligations under
clause (i) above of this Section 8.2(c), then in said event; (A) the Note shall
automatically be deemed amended, without further action by either party, to be
a "demand note", and all principal and accrued interest shall be deemed to be
immediately due and payable without further notice or demand; and (B) ECP shall
be entitled to seek payment of the "Merchant Make-Up Transfer Amount"; and (C)
except as specifically set forth below in subparagraph (1) the terms and
conditions of the Loan Agreement, McCormick Loan Documents, the Note and the
Purchase Agreement (proposed form thereof without reference to the Letter
Agreement) as were in effect prior to the execution of the Letter Agreement and
this Asset Purchase Agreement shall remain effective, control and supersede any
terms contained in this Asset Purchase Agreement or the Letter Agreement to the
contrary, except that:
(1) Section 7.3 of the Loan Agreement entitled: "7.3 Trigger and Term of
Option Rights" shall be deemed deleted in its entirety and in lieu and in place
thereof a new Section 7.3 shall be deemed to be added to read as follows:
"7.3 Trigger and Term of Option Rights. Lender may exercise his Option
Rights as described in Sections 7.1 and 7.2 above in accordance with and until
the expiration of the
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later of the following: (i) at any time from and after September 3, 2000, and
before full payment by Borrower of any and all amounts due Lender under the
Note; or (ii) within the first ten (10) calendar day period following the
prepayment of all amounts due Lender under the Note, such ten (10) day period to
start on the date that the Note is fully paid and to expire at 5:00 P.M. Pacific
Standard Time on the tenth (10th) day after the Note is fully paid; or (iii) at
any time before Borrower has completed the "Merchant Make-Up Transfer" to ECP or
paid ECP the "Merchant Make-Up Transfer Amount" (as those terms are defined and
as provided for in Section 8.2 (c) of that certain written Asset Purchase dated
January 12, 2001, by and between Lender, Borrower (referred to therein as
"iPayment Technologies, Inc." or "Company" and ECP). If Lender does not timely
exercise its Option Rights by timely giving of the Option Exercise Notice (in
accordance with the foregoing terms and conditions set forth in (i) (ii) and
(iii) above), then said Option Rights shall expire and terminate after the time
period for the giving of such Option Rights Notice, and Lender shall have no
further rights in respect thereof.
9. General Provisions.
9.1 Notices. All notices, requests, demands and other communications
hereunder, to the parties, their successors in interest or their assignees shall
be in writing and shall be delivered as follows, with notice deemed given as
indicated: (a) by personal delivery, when delivered personally; (b) by overnight
courier, upon written verification of receipt; (c) by telecopy or facsimile
transmission, upon acknowledgment of receipt of electronic transmission; or (d)
by certified or registered mail, return receipt requested, upon verification of
receipt. Notice shall be sent to the addresses set forth below or to or at such
other addresses as the parties may designate by written notice in accordance
with this Section 9:
If to ECP: Electronic Check Processing, Inc.
#2 Ada
Irvine, California 92168
Attention: Michael N. McCormick
Facsimile: (949) 789.7168
If to McCormick: Electronic Check Processing, Inc.
#2 Ada
Irvine, California 92168
Attention: Michael N. McCormick
Facsimile: (949) 789.7168
With a copy to: Stradling, Yucca, Carlson & Rauth,
660 Newport Center Dr., Suite 1600
Newport, California 92660
Attention: Craig Carlson, Esq.
Facsimile: (949) 724-41__
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If to Company: iPayment Technologies, Inc.
9200 Sunset Boulevard, Sixth Floor
Los Angeles, California
Attn: Legal Department
Telephone: (310) 724-6728
Facsimile: (310) 786-2714
9.2 Assignability and Parties in Interest. This Asset Purchase Agreement
and any of the rights, interests or obligations hereunder may not be assigned by
any of the parties hereto, except that Company may assign its rights and
obligations under this Asset Purchase Agreement to any Affiliate of Company or
any successor to all or substantially all of the business or assets of Company.
This Asset Purchase Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns. Nothing in
this Asset Purchase Agreement will confer upon any person or entity not a party
to this Asset Purchase Agreement, or the legal representatives of such person or
entity, any rights or remedies of any nature or kind whatsoever under or by
reason of this Asset Purchase Agreement.
9.3 Governing Law. This Asset Purchase Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of
California, without regard to its choice-of-law principles.
9.4 Counterparts. This Asset Purchase Agreement may be executed in one or
more counterparts, including via fax, each of which shall be deemed an original,
but all of which shall constitute but one and the same instrument.
9.5 Indemnification for Brokers. Each party represents and warrants to
others that no broker or finder has acted on its behalf in connection with this
Asset Purchase Agreement or the transactions contemplated hereby.
9.6 Complete Asset Purchase Agreement. This Asset Purchase Agreement, the
exhibits and schedules hereto, and the Transaction Documents contain or will
contain the entire agreement between the parties hereto with respect to the
transactions contemplated herein and shall supersede all previous oral and
written and all contemporaneous oral negotiations, commitments, and
understandings.
9.7 Modifications, Amendments and Waivers. At any time prior to the
Closing Date or termination of this Asset Purchase Agreement any party may: (i)
waive any inaccuracies in the representations and warranties of any other party
contained in this Asset Purchase Agreement or in any Transaction Document
delivered by any other party pursuant to this Asset Purchase Agreement; and (ii)
waive compliance by any other party with any of the covenants or agreements
contained in this Asset Purchase Agreement.
9.8 Headings; References. The headings contained in this Asset Purchase
Agreement are for reference purposes only and shall not affect in any way the
meaning or
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interpretation of this Asset Purchase Agreement. References herein to Sections,
Schedules and Exhibits refer to the referenced Section, Schedule or Exhibit
hereof unless otherwise specified.
9.9 Severability. Any provision of this Asset Purchase Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality, or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Asset
Purchase Agreement invalid, illegal, or unenforceable in any other jurisdiction.
9.10 Due Diligence Investigation. All representations and warranties
contained herein which are made to the knowledge of a party shall require that
such party make reasonable investigation and inquiry with respect thereto to
ascertain the correctness and validity thereof.
9.11 Expenses of Transactions. All fees, costs and expenses incurred by
any party in connection with the transactions contemplated by this Asset
Purchase Agreement and the Transaction Documents shall be borne by the party
incurring the same.
9.12 Attorneys' Fees. If any party brings any action, suit, counterclaim,
cross-claim, appeal, arbitration, or mediation for any relief against any party
hereto, declaratory or otherwise, to enforce the terms hereof or to declare
rights hereunder (collectively, an "Action"), in addition to any damages and
costs which the prevailing party otherwise would be entitled, the
non-prevailing party shall pay to the prevailing party a reasonable sum for
attorneys' fees and costs (at the prevailing party's attorneys' then-prevailing
rates) incurred in bringing and prosecuting such Action and/or enforcing any
judgment, order, ruling, or award (collectively, a "DECISION") granted therein,
all of which shall be deemed to have accrued on the commencement of such Action
and shall be paid whether or not such action is prosecuted to a Decision. Any
Decision entered in such Action shall contain a specific provision providing
for the recovery of attorneys' fees and costs incurred in enforcing such
Decision.
For the purposes of this SECTION 9, attorneys' fees shall include, but not
be limited to, fees incurred in the following: (1) postjudgment motions and
collection actions; (2) contempt proceedings; (3) garnishment, levy and debtor
and third party examinations; (4) discovery; and (5) bankruptcy litigation.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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"PREVAILING PARTY" within the meaning of this Section 9 includes, without
limitation, a party who agrees to dismiss an action on the other party's
payment of the sum allegedly due or performance of the covenants allegedly
breached, or who obtains substantially the relief sought by it. If there are
multiple claims, the prevailing party shall be determined with respect to each
claim separately. The prevailing party shall be the party who has obtained the
greater relief in connection with any particular claim although, with respect
to any claim, it may be determined that there is no prevailing party.
IN WITNESS WHEREOF, each of the parties hereto has executed this Asset
Purchase Agreement as of the date first above written.
/s/ Michael N. McCormick
----------------------------------
Michael N. McCormick, individually
ELECTRONIC CHECK PROCESSING, INC.
By: /s/ Michael N. McCormick
-----------------------------
Name: Michael N. McCormick
Title: Chief Executive Officer
iPayment Technologies, Inc. ("Company")
By /s/ Carl Grimstad
Name: Carl Grimstad
Title: Chief Executive Officer