EXHIBIT 10.7
LATIN AMERICA UNANIMOUS SHAREHOLDERS' AGREEMENT DATED DECEMBER 17, 1996, BETWEEN
INGENICO, S.A., INTERNATIONAL VERIFACT INC. AND IVI INGENICO INC.
INGENICO
-AND -
INTERNATIONAL VERIFACT INC.
-AND -
IVI INGENICO INC.
LATIN AMERICA UNANIMOUS SHAREHOLDERS' AGREEMENT
DECEMBER 17, 1996
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
LATIN AMERICA UNANIMOUS SHAREHOLDERS' AGREEMENT
THIS AGREEMENT made as of the 17th day of December, 1996 AMONG:
INGENICO, incorporated under the laws of France and having its head
office in the City of Puteaux Cedex, France
(hereinafter called "Ingenico")
OF THE FIRST PART
- and -
INTERNATIONAL VERIFACT INC., a corporation continued under the laws
of Canada and having its head office in the City of ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇
(hereinafter called "IVI")
OF THE SECOND PART
- and -
IVI INGENICO INC., a body corporate incorporated under the laws of
the State of Delaware and having its head office in the City of Coral
Gables, Florida
(hereinafter called "Latin Newco")
OF THE THIRD PART
WITNESSES THAT:
WHEREAS Ingenico and IVI have entered into a Master Alliance Agreement dated
December 5, 1996, to which this Latin America Unanimous Shareholders' Agreement
constitutes Schedule "U" (the "Master Agreement");
AND WHEREAS Ingenico carries on the business of development, distribution,
marketing and manufacturing of terminals with application to payment systems,
loyalty, electronic benefit transfer systems, and terminal systems for smart
card technology, principally in Europe, the Middle East, Africa, Australia,
Asia, Pacific and the Americas;
AND WHEREAS IVI carries on the business of development, distribution,
marketing and manufacturing of transaction terminals with application to payment
systems, loyalty, electronic benefit transfer systems and terminal systems in
the Americas, Europe, Asia Pacific and Australia;
AND WHEREAS Ingenico and IVI have incorporated Latin Newco as their mutual
vehicle for carrying on the IVI Business and the Ingenico Business and other
related business of Ingenico and IVI in all countries of Latin America;
AND WHEREAS the authorized share capital of the corporation is 1,000,000
common shares, such that the issued and outstanding shares of Latin Newco are
owned as follows:
NUMBER OF COMMON SHARES PERCENTAGE
------------------------------- ---------------
IVI.................................................... 51 51%
Ingenico............................................... 49 49%
AND WHEREAS the parties desire to enter into this Latin America Unanimous
Shareholders' Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties covenant and agree with one another as follows:
2
ARTICLE 1.00--INTERPRETATION
1.1 DEFINITIONS
In this agreement, unless the context shall otherwise require, the following
definitions shall apply:
(a) "Act" means the General Corporation Law of the State of Delaware;
(b) "Annual Business Plan" has the meaning ascribed to it in Section 2.4
(b);
(c) "Business" has the meaning ascribed to it in section 2.04 (a);
(d) "Control" means the power to direct or cause the direction of the
management and policies of a corporation through legal and beneficial
ownership of a majority of shares in the corporation entitled to vote;
(e) "Fiscal Year" means the fiscal year of Latin Newco ending December
31, or as otherwise determined by the Shareholders;
(f) "Master Agreement" means the Master Alliance Agreement between
Ingenico and IVI dated December 5, 1996;
(g) "Net Profits" means the profits of Latin Newco as determined by
generally accepted accounting principles on a consolidated basis as the same
may be established from time to time, applied on a consistent basis, after
deducting all costs and expenses incurred by Latin Newco for the period in
question;
(h) "Parties" means all the parties to this agreement including any
person subsequently agreeing to be bound by this agreement;
(i) "Permitted Transferee" has the meaning ascribed to it in Section
4.1;
(j) "Schedules" means the schedules annexed hereto which are
incorporated herein by reference, being:
Schedule "A"--Certificate of Incorporation and By-Laws of Latin Newco
(k) "Shareholder" or "Shareholders" means Ingenico, IVI and their
permitted successors and assigns;
(l) "Shares" means any and all shares of Latin Newco; and
(m) "30 Day Libor Rate" means, on any day, the annual rate of interest
expressed on the basis of a 360 day year (round upwards, if necessary, to
the nearest whole multiple of 1/16th of 1%) established by Latin Newco to be
the simple average of the rates, expressed as a rate of interest per annum
on the basis of a 360 day year, at which deposits in U.S. dollars are
offered by leading banks in the London Interbank Eurocurrency Market, for
delivery on the first day of any 30 day period, as determined at or about
10:00 a.m. (New York time) two business days before the first day of such
month in an amount substantially equal to the principal amount.
All other capitalized terms used in this Agreement and not defined herein
have the meanings ascribed thereto in the Master Agreement.
1.2 CURRENCY
All dollar amounts referred to herein shall, unless otherwise expressly
stated, mean United States of America dollars.
3
1.3 GOVERNING LAW AND ATTORNMENT
This agreement shall be governed by and construed in accordance with the
laws of the State of New York and the parties hereto hereby attorn to such
jurisdiction.
ARTICLE 2.00--BUSINESS AND OPERATION OF LATIN NEWCO
2.1 GENERAL
Each of the Shareholders of Latin Newco covenants and agrees to vote its
Shares at all times and to cause its nominee or nominees to the board of
directors of Latin Newco to act at all times in order that the provisions of
this Agreement shall govern the Business and affairs of Latin Newco to the
maximum extent permitted by law, notwithstanding any conflicting provision in
the certificate of incorporation or by-laws of Latin Newco and, in the case of
conflict between the provisions of this Agreement and the provisions of the said
certificate of incorporation and/or by-laws, the provisions hereinafter set
forth shall, to the maximum extent permitted by law, at all times prevail.
2.2 TERM
Subject to express provisions herein to the contrary, the provisions of this
Agreement shall remain in effect unless and until terminated by mutual agreement
of the Shareholders or until such time as all of the Shares are held by one
Shareholder.
2.3 CERTIFICATE OF INCORPORATION
The Certificate of Incorporation and by-laws of Latin Newco are and shall
remain in the form annexed as Schedule "A" to this Agreement unless and until
amended by unanimous written approval of the Shareholders.
2.4 BUSINESS OF LATIN NEWCO
(A) The business of Latin Newco shall be the marketing, distribution and
manufacturing, if necessary, of the IVI Products, Ingenico Products, IVI
Future Products, Ingenico Future Products, Ingenico Technology, IVI
Technology and Unicapt Technology in Latin America and the carrying out of
the related business of Ingenico and IVI. It is acknowledged by the parties
hereto that the business of Latin Newco may be carried out in one or more of
the countries comprising Latin America either by it directly, through
subsidiaries (which may or may not include the participation of other
parties) or through distribution agreements entered into with distributors
in Latin America.
(B) In conducting the Business, Latin Newco and the Shareholders shall
adhere to and implement a business plan approved annually by the Board of
Directors of Latin Newco (the "Annual Business Plan"). Each of the officers
of Latin Newco and the Board if Directors shall act at all times in order
that the Annual Business Plan shall regulate the business and affairs of
Latin Newco.
2.5 DIRECTORS
(A) The Shareholders shall vote their Shares at all times and act in all
other respects in connection with the corporate proceedings of Latin Newco
so as to ensure the election and maintenance in office as directors of Latin
Newco one nominee designated by IVI and one nominee designated by Ingenico
and to ensure that the maximum number of directors of Latin Newco shall be
two persons. In the event of the death, incapacity, resignation or
disqualification of a nominee of or director nominated by any Shareholder,
the Shareholder that designated such nominee shall have the right to
designate another person (hereinafter called the "replacement nominee") as
its nominee for
4
the position of director of Latin Newco to replace the nominee or director
who ceased to act as a director of Latin Newco and the Shareholders of Latin
Newco agree to vote their Shares of Latin Newco at all times so as to ensure
the prompt election of the replacement nominee as director of Latin Newco.
Any Shareholder may at any time replace a nominee designated by the
Shareholder wishing to replace such nominee and such Shareholder may
designate another person as its nominee for the position of director of
Latin Newco and the Shareholders agree to vote their Shares of Latin Newco
at all times so as to ensure the removal of any such director and the
election and maintenance in office as director of Latin Newco of such
nominee. The initial directors of Latin Newco shall be ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and L.
▇▇▇▇▇ ▇▇▇▇▇▇▇.
(B) The quorum for meetings of the directors shall be both directors
then in office. No meeting of the directors shall continue with the
transaction of business in the absence of a quorum.
(C) All questions before the directors shall be decided by unanimous
approval of the directors, whether at a meeting or by written resolution
signed by all directors. The chairman of the meeting of the directors shall
not have a second or casting vote.
(D) Directors shall be reimbursed all reasonable costs of transportation
and lodging in connection with attendance at Board meetings and fulfillment
of their duties as directors.
(E) The directors of Latin Newco shall meet not less frequently than
quarterly, with conference telephone participation permitted. Board meetings
may be called by any director on not less than 21 days prior written notice
to the other directors.
2.6 DAILY MANAGEMENT
Other than as prescribed in this Agreement, all daily management and
operations of Latin Newco shall be directed by IVI.
2.7 POWERS OF DIRECTORS AND OFFICERS
During the term hereof, all of the officers of Latin Newco shall be
appointed by the Board of Directors, provided that Ingenico agrees to cause its
nominee on the Board of Directors to approve the appointment of the individual
nominated by IVI for the office of President and Chief Executive Officer and IVI
agrees to cause its nominees on the Board of Directors to approve the
appointment of the individual nominated by Ingenico for the office of Chairman
of the Board of Directors. The Board of Directors will be consulted on the
hiring of any senior management. Each of the officers shall have all the powers,
rights, duties and obligations of such office as set out in the By-Laws of Latin
Newco, or as otherwise established by the Board of Directors from time to time.
The remuneration of the Executive Vice-President and General Manager shall be
based upon the objectives of Latin Newco as established by the Board of
Directors from time to time, and successful attainment of those objectives. The
Board of Directors shall employ an officer for product and technical support
proposed by Ingenico. The initial officers of Latin Newco shall be as follows:
Chairman of the Board ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
President and CEO L. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Executive Vice-President ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
and
General Manager
The officers of Latin Newco shall have full power to direct and cause to be
carried out all of the operations of Latin Newco provided, however, that
notwithstanding Section 2.5, none of the following actions shall be taken
without an authorizing resolution of the Board of Directors of Latin Newco which
has been unanimously approved by the Board of Directors.
5
By the Board of Directors :
(A) the entering into of any joint venture or business combination with any
third party;
(B) other than as expressly provided herein, the entering into of any
contract with any Shareholder or any Affiliate of a Shareholder outside
of the ordinary course of business or on terms not comparable to those
available from arm's length parties;
(C) the making of any loans to a Shareholder, or any Affiliate of a
Shareholder;
(D) any borrowing by Latin Newco not within authorized lines of credit
previously established by the Board of Directors, other than as
specifically provided herein;
(E) the committing of Latin Newco to any capital disposition or capital
expenditure, or series of related capital dispositions or capital
expenditures out of the ordinary course of business or not contemplated
in the Annual Business Plan of Latin Newco;
(F) any material change in the Business not contemplated in the Annual
Business Plan;
(G) any alteration of capital of Latin Newco, whether issued or unissued,
including any allotment, issue, purchase, exchange or redemption of
shares;
(H) the entering into by Latin Newco of any guarantee, indemnity or similar
obligation or agreement to an Affiliate or a Shareholder;
(I) the committing of Latin Newco to any acquisition of a business, or
series of business acquisitions involving any expenditures;
(J) any transfer of shares except as permitted by this Agreement;
(K) any increase in the number of directors;
(L) approval of the Annual Business Plan; and
(M) the granting of approval for Ingenico and/or IVI to manufacture Ingenico
Products, IVI Products, Ingenico Future Products or IVI Future Products
in Latin America; and
(N) any appointment or designation of the authorized signing officers of
Latin Newco.
2.8 POWERS OF SHAREHOLDERS
None of the following actions concerning Latin Newco shall be taken without
a unanimous authorizing resolution of the Shareholders:
(A) any matter requiring Shareholder approval pursuant to the Act;
(B) subject to Section 3.5, the allotment or issue of additional Shares, or
the granting of rights or options to purchase or receive any Shares;
(C) the transfer by a Shareholder of Latin Newco of any Shares not made
pursuant to the provisions of this Agreement; or
(D) any amendment of Latin Newco's Certificate of Incorporation or by-laws.
6
2.9 NET PROFITS DISTRIBUTIONS
The Parties acknowledge and agree that, unless otherwise determined by the
Board of Directors, Latin Newco shall pay and remit Net Profits of Latin Newco
in a timely fashion and in the following order of priority:
(A) firstly, in payment of outstanding interest due and owing with respect
to all arm's length, third party debt financing of Latin Newco;
(B) secondly, in payment of any outstanding interest and principal with
respect to loans from Shareholders;
(C) thirdly, in payment of dividends and distributions to the Shareholders;
(D) fourthly, as a reserve (as determined by the directors) to fund future
operations of Latin Newco.
2.10 OPERATION PLANS
Management of Latin Newco shall complete and submit for approval by the
Board of Directors an Annual Business Plan including a one-year capital budget
with respect to the 1997 Fiscal Year within 60 days of the Closing Date. Such
Annual Business Plan shall be reviewed annually in November, commencing November
1997, and approved by the Board of Directors of Latin Newco by no later than the
following January 31st. Following such approval, each of the Shareholders shall
fund or make mutually agreed arrangements to fund the Annual Business Plan
promptly through shareholder loans or capital as required in accordance with the
terms of such budget, in accordance with Section 3.5.
2.11 (INTENTIONALLY DELETED)
2.12 BANKING
All cheques, withdrawals and monetary transfers by Latin Newco require two
signatures, in accordance with such procedures and limits as determined by the
Board of Directors from time to time.
2.14 Notwithstanding the foregoing, if revenues generated by Latin Newco from
sales of the Ingenico Products in Latin America are less than 20%, 50% or 60% of
the Performance Criteria for Latin Newco in the first, second or third calendar
years respectively of the term of the Marketing and Distribution Agreement, then
Ingenico shall have the right, but not the obligation, to acquire 1% of the
issued and outstanding Shares of Latin Newco held by IVI for an aggregate
purchase price of $1.00, in order that the shareholdings shall then be 50% for
each of IVI and Ingenico. If Ingenico exercises such right, the daily
management, as contemplated in Section 2.6, shall be directed by Ingenico and,
under Section 2.7, the Chairman shall be a nominee of IVI, and the President and
CEO and the Executive Vice-President and General Manager shall be a nominee of
Ingenico. In such circumstances, all other terms of this Agreement shall remain
in force, unamended.
2.15 FINANCIAL STATEMENTS
Audited financial statements will be prepared and distributed to each
Shareholder within 60 days following Fiscal Year end. Unaudited monthly profit
and loss statements shall be distributed to each Shareholder within 30 days of
each month end, including a written report on business conditions and any
material variance from Latin Newco's Annual Business Plan prepared pursuant to
Section 2.10. In addition, the Parties shall provide forecasts on a quarterly
basis within thirty (30) days of the end of a fiscal quarter.
7
ARTICLE 3.00--OPERATIONS OF LATIN NEWCO
3.1 EMPLOYMENT AND CONTRACTING
Latin Newco shall hire, from time to time, such permanent employees and
retain such third party independent contractors as determined by the Board of
Directors, or the Annual Business Plan. In addition, Latin Newco may retain from
time to time, with the approval of the Board of Directors, additional employees
or third party contractors on a project basis to service and advance a
particular project of the Business. Any employees seconded, in whole or in part,
to Latin Newco by the Shareholders shall be provided at the cost of the
providing Shareholder.
3.2 MARKETING AND DISTRIBUTION AGREEMENT
On the Closing Date, Latin Newco shall enter into the Marketing and
Distribution Agreement.
3.3 TRANSFER PRICING
During the term of the Marketing and Distribution Agreement, IVI and
Ingenico shall supply the IVI Products, IVI Future Products, IVI Technology,
Ingenico Products, Ingenico Future Products, Ingenico Technology and Unicapt
Technology respectively, to Latin Newco on transfer pricing terms that are equal
to the lesser of a transfer price mutually agreed to by the Parties, and direct
manufacturing costs plus a markup of 20%. It is the Parties' interest that the
transfer price should enable Latin Newco and the products distributed by Latin
Newco to be and continue to be extremely competitive where marketed. The
Shareholders agree that the cost structure of Latin Newco shall also be and
continue to be such that it enables Latin Newco to be extremely competitive.
3.4 MANUFACTURING LICENSE IN LATIN AMERICA
Subject to Section 2.7(m), Ingenico and IVI hereby agree not to grant a
manufacturing license of Ingenico Products, IVI Products, Ingenico Future
Products or IVI Future Products in any country in Latin America without the
prior written approval of the Board of Directors of Latin Newco and in the event
a manufacturing license of Ingenico Products, IVI Products, Ingenico Future
Products or IVI Future Products takes place for any reason Ingenico or IVI, as
the case may be, shall take all steps necessary to terminate such manufacturing
license
3.5 ADDITIONAL CAPITAL
(A) If the Board of Directors determines that Latin Newco requires
additional funds, then the Board of Directors may request, by issuance of
a notice (a "Funding Notice") to the Shareholders, that the Shareholders
each contribute, within 15 days after the issuance of the Funding Notice
(the "Funding Period"), additional capital to Latin Newco PRO RATA based
upon the number of Shares held by the Shareholders, by way of
subscription for Shares or loan, as determined by the Board of Directors
and set forth in the Funding Notice.
(B) If additional capital is to be contributed, pursuant to subsection (a),
by way of subscription for Shares, the subscription price for each such
Share shall be as determined by the Board of Directors and set out in the
Funding Notice, and Latin Newco shall issue to each Shareholder making a
contribution of capital pursuant to the Funding Notice, out of its
treasury, such number of Shares as shall be equal to the number (rounded,
if necessary, to the nearest lower whole number) obtained by dividing the
amount of the contribution required to be made by such Shareholder by the
per Share subscription price, upon receipt by Latin Newco of the amount
of such contribution.
8
(C) If additional capital is to be advanced pursuant to subsection (a) by
way of loan, each such loan shall be made on such terms (including
security, rate of interest and repayment terms) as the Board of Directors
shall determine PROVIDED THAT the terms of all such loans made pursuant
to the same Funding Notice (other than the principal amounts) shall be
the same for all Shareholders.
(D) if any Shareholder (a "Defaulting Shareholder") fails to contribute its
PRO RATA portion of funding as required pursuant to a Funding Notice,
then the other Shareholder (an "Excess Subscribing Shareholder") may, but
shall not be obliged to, within 10 days after the expiry of the Funding
Period, advance to Latin Newco all or any portion of the amount which the
Defaulting Shareholder failed to advance (such additional amount advanced
by the Excess Subscribing Shareholder being referred to as the "Excess
Advance").
(E) Such Excess Advance made by such Excess Subscribing Shareholder must be
repaid by Latin Newco within 6 months from the date such Excess Advance
is made and, until repaid, the amount outstanding from time to time shall
bear interest at a rate per annum equal to 300 basis points above the 30
Day Libor Rate, compounded monthly, which shall be payable at the same
time as the repayment of principal.
(F) If the Excess Advance is not repaid by Latin Newco within 6 months from
the date it is made, such Excess Advance shall be repayable on demand by
the Excess Subscribing Shareholder or the Excess Subscribing Shareholder
shall be entitled, at any time, upon notice to Latin Newco, to convert
all or part of such Excess Advance into additional common shares of Latin
Newco. If the additional capital contributed pursuant to subsection (a)
was by subscription for Shares, then the conversion price for each Share
under this subsection shall be equal to 85% of the subscription price set
out in the Funding Notice. If the additional capital advanced pursuant to
subsection (a) was by way of loan, then the conversion price for each
Share under this subsection shall be equal to 85% of the fair market
value of such Share as determined by the Board of Directors. Forthwith
upon such determination of the conversion price, Latin Newco shall issue
to such Shareholder from authorized but unissued shares, such number of
Shares as shall be equal to the number (rounded, if necessary, to the
nearest lower whole number) obtained by dividing the amount of the Excess
Advance made by such Shareholder which such Shareholder has elected to so
convert by the conversion price.
ARTICLE 4.00--SHARE TRANSFERS
4.1 RESTRICTION ON TRANSFER OR PLEDGE OF SHARES
(A) Except as provided in this Agreement, no Shares (or any part thereof) or
this Agreement or any interest herein may be sold, exchanged, transferred
(which shall be deemed to include any transfer by operation of law),
disposed of, encumbered, assigned, pledged, mortgaged, hypothecated or
given, and no agreement or commitment will be made to do any of the same
except in each case pursuant to the applicable provision of this
Agreement, and any attempt to do so shall be void.
(B) No sale, exchange, transfer, disposition, encumbrance, pledge, mortgage,
hypothecation or gift of Shares nay be made by any Shareholder, other
than to an Affiliate, without the prior written consent of the other,
which consent may be withheld in such Shareholder's sole discretion.
9
(C) Notwithstanding the foregoing, a Shareholder may on notice to the other
Shareholders transfer all or part of the Shares owned by it to a
corporation which is then controlled by such Shareholder (a "Permitted
Transferee") subject to the limitations that:
(I) the Shareholder shall at all times Control the Permitted Transferee;
and
(II) the transferring Shareholder shall:
A. be appointed by the Permitted Transferee as its proxy to attend
and vote at all meetings of the Shareholders; and
B. give notice to the other Shareholders of the shareholdings and
any proposed changes in the shareholdings of the Permitted
Transferee from time to time upon the request of any other
Shareholder.
(D) No transfer shall be effective unless and until the proposed Permitted
Transferee has executed an Adoption Agreement, as defined below.
(E) Each Shareholder transferring its Shares shall continue to be bound by
this Agreement notwithstanding any transfer of Shares to such Permitted
Transferee and shall at all times cause such Permitted Transferee of
which it owns shares to carry out the provisions of this Agreement and
any agreement entered into pursuant to this Agreement.
(F) The Shareholder and the Permitted Transferee shall represent and warrant
as at the date of the transfer and shall be deemed to represent and
warrant to the other Shareholders throughout the term of this Agreement
that the Shareholder Controls the Permitted Transferee.
(G) The Permitted Transferee shall not directly or indirectly sell, assign,
give, mortgage, charge, pledge, create a security interest in, or
otherwise encumber or dispose of any Shares owned by it, other than to
the Shareholder which controls such Permitted Transferee.
(H) No Shareholder shall give up direct or indirect Control of any Permitted
Transferee that holds any Shares. For greater certainty, a Shareholder
shall be entitled to cause the Permitted Transferee to transfer any
Shares held by such Permitted Transferee back to such Shareholder or to
another Permitted Transferee in accordance with the terms of this
Agreement.
(I) Any purported sale, assignment, gift, mortgage, charge, pledge, creation
of security interest, encumbrance or disposal of any Shares in violation
of the provisions of this Agreement shall be null,, void and of no force
or effect, and shall not be reflected in the records of Latin Newco
relating to ownership of Shares.
4.2 PLEDGE OF SHARES
Neither Shareholder, nor any of their permitted assigns or successors, shall
be entitled to pledge, charge, mortgage, hypothecate or create any lien on their
Shares at any time without the prior written consent of all other holders of
Shares, which consent may be withheld for any reason whatsoever. Notwithstanding
the foregoing, a Shareholder may pledge its Shares to a financial institution in
support of its borrowings, so long as (i) the Shareholder continues to exercise
all voting rights attaching to such Shares and (ii) any sale or realization of
such Shares by the financial institution shall be subject to the provisions of
this Agreement.
4.4 LEGEND ON SHARE CERTIFICATES
All certificates for Shares shall have conspicuously marked thereon the
following legend:
"SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF AN
AGREEMENT DATED AS OF DECEMBER 17, 1996 BETWEEN THE SHAREHOLDERS OF
10
THE CORPORATION AND THE CORPORATION AND ARE NOT TRANSFERABLE EXCEPT UPON
COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE SAID AGREEMENT. SUCH
SHARES HAVE BEEN ACQUIRED IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933 (THE "ACT") AND CANNOT BE
RESOLD OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT OR
PURSUANT TO AN EXEMPTION THEREFROM"
4.5 DEFAULT
Notwithstanding anything to the contrary herein provided, should any of the
Shareholders (herein referred to as the "defaulting party") commit an Event of
Default (as defined in the Master Agreement), provided that in no circumstances
shall clause 13.01(a) of the Master Agreement nor a failure to achieve the
Performance Criteria for Latin America be considered to be an Event of Default,
the non-defaulting Shareholder shall have the option to purchase all or part of
the defaulting party's Shares (such option to be exercised by notice in writing
to the defaulting party, its successors or assigns, wherein the Shareholder(s)
exercising the same shall indicate the number of Shares which they or it desires
to take up), the whole at a price equal to the book value thereof as determined
and certified by Price Waterhouse or its successor as at the last day of the
month immediately preceding such Event of Default, but without taking goodwill
into account, if any, such price to be payable to the extent of 50% thereof, on
the date of purchase and, to the extent of the remaining 50% thereof, within 3
years from the date of purchase, payable in 3 equal annual installments, the
unpaid principal balance of which shall bear interest at a rate equal to a 30
Day Libor Rate plus 100 basis points.
ARTICLE 5.00--DEADLOCK AND SALE OF SHARES PROCEDURES
5.1 INTENT OF PARTIES
Each of the Parties affirms that it is entering into this Agreement in a
true sense of cooperation. Each Party recognizes and values the contribution of
the other to the success of the Business conducted by Latin Newco. Each of the
Parties also affirms its desire and intention that its association with the
other Parties as contemplated herein be an amicable long-term relationship with
no intended or foreseeable termination date. Each Party pledges to work in good
faith for the resolution of any disputes which may arise between the Parties.
5.2 COOLING-OFF PERIOD
In the event that a fundamental dispute between the Shareholders has not
been resolved to their mutual satisfaction as evidenced by a written
acknowledgment within 30 days after delivery by either Shareholder to the other
of written notice of dispute referencing this Section 5.2 (the "Cooling-Off
Period"), either Shareholder shall be entitled to invoke the arbitration
procedure described in Section 7.2. During the Cooling-off Period and the period
contemplated in Section 7.2(a) and during any arbitration proceeding, the
Shareholders shall cause their nominees on the Board of Directors to continue to
attend meetings of the Board of Directors and carry out their legal and
fiduciary duties in order for Latin Newco to carry out business in the normal
course.
5.3 BUY-SELL
At any time after January 1, 1999, and following expiry of a Cooling-Off
Period and a period of sixty (60) days from the delivery of a notice by one
party to the other pursuant to Section 7.2(b) during which no mutual written
agreement has been reached by the Shareholders, either Shareholder may deliver a
second written notice to the other of a fundamental deadlock or dispute and
referencing this Section 5.3, and provided that such fundamental deadlock or
dispute has not been resolved to the satisfaction of both
11
Shareholders within a further 30-day period, then any Shareholder ("A") may
thereafter by notice require the remaining Shareholder ("B") to (i) buy from A
on the terms set out in this section all (but not less than all) of A's Shares,
or (ii) sell to A all (but not less than all) of B's Shares, in each case at the
price per share ("Option Price") specified by A. The procedure is as follows:
(A) A shall offer all A's Shares in writing to B at the Option Price and on
the terms set out in this section;
(B) the offer shall state: the total number of A's Shares; that the Shares
are being irrevocably offered at the Option Price pursuant to and on and
subject to the terms set out in this section (which shall be incorporated
by reference); the deadline for acceptance (which shall be a date not
more than thirty (30) days after the date of the offer); the closing date
(which shall be a date not more than sixty (60) days after the date of
the offer); that if all A's Shares are not purchased A shall purchase all
of B's Shares at the Option Price pursuant to and on the terms set out in
this section; and that if B desires to accept the offer it shall
communicate its reply to A;
(C) if B accepts the offer A shall sell all (but not less than all) of A's
Shares and B shall buy them at the Option Price and in accordance with
Section 5.4;
(D) if under clause (c) B does not accept the offer as to all (but not less
than all) A's Shares within the time allowed, B shall sell and A shall
buy all (but not less than all) of B's Shares at the Option Price and in
accordance with Section 5.4; and
(E) notwithstanding any other provision of this Section, if any effective
offers properly made under this Section are in conflict, only the
earliest offer shall be effective.
5.4 APPLICATION TO OTHER SALES
The provisions of Sections 5.5 to 5.10 inclusive shall apply to any
transaction of purchase and sale pursuant to this Agreement, without limitation,
pursuant to Sections 2.14, 4.5 and 5.3, subject to any express provisions to the
contrary.
5.5 VENDOR FAILING TO COMPLETE TRANSACTION OF PURCHASE AND SALE
(A) If the vendor fails to complete the transaction of purchase and sale on
the Closing Date, the purchaser may, in addition to any other rights or remedies
he may have, complete the transaction of purchase and sale in accordance with
the provisions of this Section.
(B) If that portion of the purchase price due on the Closing Date is
deposited into an account at a branch of Latin Newco's bankers in the name of
Latin Newco in trust for the vendor and if a promissory note in favor of the
vendor for the balance of the purchase price is lodged with the auditors of
Latin Newco, then from and after the date of such deposit and lodgment, and even
though the certificates evidencing the Shares held by the vendor have not been
delivered to the purchaser, the purchase of the Shares owned by the vendor shall
be deemed to have been fully completed and all right, title, benefit and
interest, both at law and in equity, in and to such Shares shall be conclusively
deemed to have been transferred and assigned to and become vested in the
purchaser and all right, title, benefit and interest, both at law and in equity,
of the vendor in and to the Shares shall cease; subject to the limitation that
the purchaser shall deposit to such account the balance of the purchase price
from time to time as and when due and the vendor shall be entitled to receive
the purchase price so deposited from time to time as and when due, without
interest. Any interest on the deposited funds shall accrue for the benefit of
the purchaser.
12
(C) The vendor hereby irrevocably constitutes and appoints the purchaser as
his true and lawful attorney-in-fact and agent for, in the name of and on behalf
of the vendor to execute and deliver in the name of the vendor all such
documents or instruments as may be necessary to transfer and assign the Shares,
or any part thereof, to the purchaser, or his nominee or nominees, on the books
of Latin Newco. Such appointment and power of attorney, being coupled with an
interest, shall not be revoked by the insolvency, bankruptcy, death or
incapacity of the vendor and the vendor hereby ratifies and confirms and agrees
to ratify and confirm all that the purchaser may lawfully do or cause to be done
by virtue of the provision of this Section.
(D) The vendor shall be entitled to receive that portion of the purchase
price deposited with the bankers of Latin Newco upon delivery to Latin Newco of
certificates evidencing the Shares so purchased duly endorsed in blank for
transfer.
5.6 OUTSTANDING INDEBTEDNESS
Concurrently with the completion of a transaction of purchase and sale
pursuant to this Agreement:
(A) the selling Shareholder shall repay, or cause to be repaid, to Latin
Newco any indebtedness then owing by that Shareholder (including in the case of
a Permitted Transferee any indebtedness owing by the Shareholder who owns shares
of that Permitted Transferee) whether or not the indebtedness is then due and
payable and the purchasing Shareholder may discharge such indebtedness out of
the purchase price payable to the selling Shareholder;
(B) Latin Newco shall repay to the selling Shareholder any indebtedness then
owing to the selling Shareholder, whether or not the indebtedness is then due
and payable or the purchasing Shareholder shall purchase and pay for such
indebtedness from the selling Shareholder against delivery of an assignment of
the indebtedness by the selling Shareholder; and
(C) if at the Closing Date the selling Shareholder is responsible for any
guarantee of, and/or has given any security for Latin Newco's debts or
liabilities, the purchasing Shareholder shall use its best efforts to cause the
selling Shareholder to be released from all such guarantees and security,
failing which the purchasing Shareholder shall indemnify the selling Shareholder
from all claims arising out of such guarantees and security.
5.7 TITLE TO SHARES FREE AND CLEAR
(A) The selling Shareholder shall represent and warrant to the purchasing
Shareholder that it legally and beneficially owns, and has good and marketable
title to, the Shares being sold, free and clear of all liens, pledges,
mortgages, charges, encumbrances, security interests and claims of others. This
representation and warranty shall survive the Closing Date until the later of:
(I) 24 months after the Closing Date; and
(II) payment of the purchase price in full.
(B) The obligation of a purchasing Shareholder to complete a purchase of
Shares is subject to the conditions that:
(I) the representation and warranty of the selling Shareholder under
Section 5.7(a) is true and correct as at the Closing Date; and
(II) any necessary regulatory approvals have been obtained.
These conditions are for the exclusive benefit of the purchasing Shareholder
and may be waived in whole or in part by it.
13
5.8 PAYMENT OF PURCHASE PRICE AND DELIVERY OF CERTIFICATES
Except in the circumstances contemplated Section 5.5, the purchase price or
any part thereof due on the Closing Date shall be paid by certified cheque or
bank draft against receipt by the purchaser of the share certificate or
certificates representing the Shares being purchased and sold, duly endorsed in
blank for transfer or with appropriately executed stock transfer powers,
together with signed and dated resignations by the vendor and its nominees as
directors and officers of Latin Newco.
5.9 PAYMENTS
All other payments required to be made in connection with a transaction of
purchase and sale shall be by certified cheque or bank draft.
5.10 TIME AND PLACE OF CLOSING
Unless otherwise agreed by the parties to the transaction of purchase and
sale, the closing of such transaction shall take place at the office of Latin
Newco at 11:00 a.m. local time on the Closing Date.
ARTICLE 6.00--DISSOLUTION
6.1 DISSOLUTION
In the event that the Shareholders determine, on unanimous written approval,
to dissolve Latin Newco, the Parties shall proceed to liquidate all of the
assets and liabilities of Latin Newco, and on the effective date of such
dissolution, Latin Newco shall distribute to the Shareholders the net assets of
Latin Newco (after payment of all liabilities) proportionate to the respective
shareholdings of the Shareholders in Latin Newco. Any and all property,
information, technology and products belonging to either Shareholder shall be
returned to the owner thereof, and from and after the effective date of such
dissolution.
ARTICLE 7.00--MISCELLANEOUS
7.1 NOTICE
Any notice required or permitted to be given hereunder or any tender or
delivery of documents my be sufficiently given by personal delivery, or by
sending the same by prepaid registered mail, return receipt requested, or by
telefax, to the parties at the following addresses or telex numbers (as the case
may be):
(A) if to Ingenico at the following address:
Ingenico
▇, ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇
Telecopy: ▇▇(▇) ▇▇ ▇▇ ▇▇ ▇▇
Attention: ▇▇▇▇-▇▇▇▇▇▇▇ Poutrel, President du Conseil
with a copy to:
R.G.S. Hull
▇▇▇▇▇ ▇▇▇▇▇
Suite 5800, Scotia Plaza
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
14
(B) if to IVI, to it at:
International Verifact Inc.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: L. ▇▇▇▇▇ ▇▇▇▇▇▇▇
President and CEO
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Barristers and Solicitors
▇▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Tower
▇▇▇▇-▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(C) if to Latin Newco, to each of Ingenico and IVI as described above,
or at such other address or telefax number of any party as such party may advise
the other by notice in writing. Any notice or other document, if personally
delivered at such address during normal business hours, shall be deemed to have
been given on the date of delivery, and if mailed, as aforesaid, shall be deemed
to have been given on the date of delivery by postal authorities, or if sent by
telefax, delivery shall be deemed to have occurred on the date following receipt
of the telefax, provided that an acknowledgment of transmission is received by
the sender.
7.2 ARBITRATION
(A) Best Endeavours to Settle Disputes: In the event of any dispute, claim,
question or difference arising between the parties hereto in respect of the
provisions, the subject matter, the interpretation, or the effect of this
Agreement (other than Article Seven) or any breach hereof, the parties shall use
their best endeavours to settle such dispute, claim, question or difference. To
this effect, they shall consult and negotiate with each other, in good faith and
understanding of their mutual interests, to reach a just and equitable solution
satisfactory to all Parties.
(B) Arbitration: Except as is expressly provided in this Agreement, if the
parties do not reach a solution pursuant to Section 7.2(a) within a period of 30
days, then, subject to Section 5.3, upon written notice by either Party to the
other, the dispute, claim, question or difference shall be finally settled by
arbitration in accordance with the American Arbitration Association Rules for
the conduct of arbitrations in effect at the date of commencement of such
arbitration, based upon the following:
(i) the arbitration tribunal shall consist of one arbitrator appointed
by each of the Parties who is qualified by education and training to pass
upon the particular matter to be decided, together with a third arbitrator
appointed by the first two-selected arbitrators;
(ii) the arbitrators shall be instructed that time is of the essence in
proceeding with their determination of any dispute, claim, question or
difference and, in any event, the arbitration award must be rendered within
30 days of the submission of such dispute to arbitration;
(iii) the arbitration shall take place in New York, New York;
15
(iv) the arbitration award shall be given in writing and shall be final
and binding on the Parties, not subject to any appeal, and shall deal with
the question of costs of arbitration and all matters related thereto; and
(v) judgment upon the award rendered may be entered in any court having
jurisdiction, or, application may be made to such court for a judicial
recognition of the award or an order of enforcement thereof, as the case may
be.
7.3 SUCCESSORS AND ASSIGNS
This agreement shall enure to the benefit of and be binding upon the parties
hereto, their respective successors and permitted assigns, as owners of the
Shares.
7.4 RELATIONSHIP OF PARTIES
This Agreement does not constitute a partnership and nothing herein
contained is intended to constitute, nor shall it be construed to constitute,
the parties as partners of each other or of Latin Newco. Nothing contained
herein shall constitute either Shareholder or Latin Newco as agent of either
Shareholder or Latin Newco.
7.5 SEVERABILITY
The inability or unenforceability of any provision of this Agreement or any
covenant herein contained on the part of any party shall not affect the validity
or enforceability of any other provision or covenant hereof or herein contained.
7.6 ASSIGNMENT
This Agreement is not assignable by any party hereto without the prior
written consent of the others.
16
IN WITNESS WHEREOF the parties have executed these presents.
INGENICO
Per: /s/___________________________c/s
Per: /s/______________________________
INTERNATIONAL VERIFACT INC.
Per: /s/___________________________c/s
Per: /s/______________________________
IVI INGENICO INC.
Per: /s/ L. ▇▇▇▇▇ ▇▇▇▇▇▇▇ c/s
L. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Per: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
17