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Delaware | 7389 | 62-1847043 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Delaware | 7389 | 06-1702178 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
California | 7389 | 95-4764063 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Delaware | 7389 | 33-0875528 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Nevada | 7389 | 62-1848662 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Delaware | 7389 | 00-0000000 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Delaware | 7389 | 20-4183702 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
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Tennessee | 7389 | 20-0259183 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Delaware | 7389 | 47-0883973 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Delaware | 7389 | 36-3267982 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Delaware | 7389 | 20-2107430 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Delaware | 7389 | 83-0342988 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Delaware | 7389 | 41-2150922 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Delaware | 7389 | 20-3582543 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Delaware | 7389 | 20-2898997 | ||
(State or other jurisdiction of incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
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CardPayment Solutions, LLC CardSync Processing, Inc. E-Commerce Exchange, Inc. 1st National Processing, Inc. iPayment Acquisition Sub, LLC iPayment Central Holdings, Inc. iPayment of California, LLC | iPayment of Maine, Inc. Online Data Corp. PCS Acquisition Sub, LLC Quad City Acquisition Sub, Inc. TS Acquisition Sub, LLC NPMG Acquisition Sub, LLC iPayment ICE Holdings, Inc. |
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EX-5.2: OPINION OF JONES VARGAS | ||||||||
EX-23.1: CONSENT OF ERNST & YOUNG LLP | ||||||||
EX-99.1: LETTER OF TRANSMITTAL |
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• | our ability to be profitable; | |
• | our sales and operating results; | |
• | anticipated cash flow; | |
• | capital expenditures; |
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• | estimates of aggregate future earnout payments; | |
• | gross margins; | |
• | adequacy of resources to fund operations and capital investments; | |
• | marketing, general and administrative expenditures; | |
• | acquisitions; and | |
• | litigation that has been, or could be, commenced against us. |
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Purchase amount | $ | 100.00 | ||
Less cash to merchant | (97.50 | ) | ||
iPayment gross revenue (discount fee) | 2.50 | |||
Interchange fee paid to card-issuing bank | (1.60 | ) | ||
Assessment fee paid to credit card association | (0.10 | ) | ||
Processing vendor fee | (0.12 | ) | ||
Sponsoring bank fee | (0.02 | ) | ||
Other transaction costs | (0.26 | ) | ||
iPayment processing margin | $ | 0.40 | ||
• | Processing Vendors — Our senior management team has a close and longstanding relationship with First Data Merchant Services Corporation (“FDMS”), our primary processing vendor. We believe we are one of the largest merchant services customers of FDMS, and, as such, we believe we are a primary channel for FDMS to provide payment processing services to small merchants. In addition to |
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FDMS, we have strong relationships with other processing vendors, such as Vital Processing Services, LLC and Global Payments Direct, Inc. | ||
• | Independent Sales Groups — We have been very successful in maintaining ISGs in our network and increasing the number of merchant applications that they submit to us. | |
• | Sponsoring Banks — We have a strong relationship with JPMorgan Chase Bank, N.A. our primary sponsoring bank. In turn, we believe we represent JPMorgan’s largest sponsorship relationship. We also have strong relationships with other sponsoring banks, including HSBC Bank USA and Bank of America. |
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• | we have substantial indebtedness, which may adversely affect our financial condition and could prevent us from fulfilling our obligations under the exchange notes; | |
• | we have faced, and may in the future face, possible “chargeback” liability (if our merchants refuse or cannot reimburse disputed charges resolved in favor of customers) as well as potential liability for merchant or customer fraud; and | |
• | we rely on third parties, including bank sponsors to sponsor our membership of Visa and MasterCard, card payment processors to perform key transaction processing functions and independent sales groups to market our services, and a failure to maintain our relationships any of these third parties could result in serious harm to our business. |
• | equity financing in an aggregate amount of $170.0 million provided through (1) the delivery of an aggregate of $166.6 million of iPayment common stock by Mr. Daily, on his own behalf and on |
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behalf of certain related parties, and by Mr. Grimstad, on his own behalf and on behalf of certain related parties, and (2) approximately $3.4 million of cash provided by Mr. Daily; | ||
• | a term loan of $515.0 million pursuant to a credit facility entered into between iPayment and a syndicate of lenders, which we refer to in this prospectus as the Senior Secured Credit Facility and which also included a $60.0 million revolving credit facility; | |
• | approximately $202.2 million raised through the issuance by iPayment of the private notes; and | |
• | approximately $8.2 million funded by cash on hand and borrowings under the revolving credit facility described above. |
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The Exchange Offer | We are offering to exchange up to $205.0 million aggregate principal amount of our 93/4% senior subordinated notes due 2014, or the exchange notes, for up to $205.0 million aggregate principal amount of our 93/4% senior subordinated notes due 2014 that are currently outstanding, or the private notes. Private notes may only be exchanged in $1,000 principal increments. In order to be exchanged, a private note must be properly tendered and accepted. All private notes that are validly tendered and not validly withdrawn prior to the expiration of the exchange offer will be exchanged. | |
Resales Without Further Registration | Based on an interpretation by the staff of the SEC set forth in no-action letters issued to third parties, we believe that the exchange notes issued pursuant to the exchange offer may be offered for resale, resold or otherwise transferred by you without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that: | |
• you are acquiring the exchange notes issued in the exchange offer in the ordinary course of your business; | ||
• you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, the distribution of the exchange notes issued to you in the exchange offer in violation of the provisions of the Securities Act; and | ||
• you are not our “affiliate,” as defined under Rule 405 of the Securities Act. | ||
In addition, each broker-dealer that receives exchange notes for its own account in exchange for private notes, where such private notes were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes.Broker-dealers who purchased outstanding private notes directly from us for resale pursuant to Rule 144A or any other available exemption under the Securities Act may not participate in the exchange offer because they will be deemed to be making a distribution of exchange notes. Consequently, such broker-dealers cannot rely on the position of the staff of the SEC set forth in no-action letters, cannot use this prospectus for the exchange offer in connection with a resale of the exchange notes and, absent an exemption, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale of the exchange notes. See “Plan of Distribution.” | ||
The letter of transmittal states that, by so acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes |
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received in exchange for private notes where such private notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed to use our reasonable best efforts to make this prospectus, as amended or supplemented, available to any broker-dealer for a period of 90 days after the consummation of the exchange offer, for use in connection with any such resale. See “Plan of Distribution.” | ||
Expiration Date | 5:00 p.m., New York City time, on , 2006 unless we extend the exchange offer. | |
Conditions to Exchange Offer | The exchange offer is subject to customary conditions which include, among other things, any applicable law or any applicable interpretation of the staff of the SEC which, in our reasonable judgment, would materially impair our ability to proceed with the exchange offer. The exchange offer is not conditioned upon any minimum principal amount of private notes being submitted for exchange. See “The Exchange Offer — Conditions.” | |
Procedures for Participating in Exchange Offer | If you wish to participate in the exchange offer, you must complete, sign and date an original or faxed letter of transmittal in accordance with the instructions contained in the letter of transmittal accompanying this prospectus. Then you must mail, fax or deliver the completed letter of transmittal, together with the notes you wish to exchange and any other required documentation to Wells Fargo Bank, N.A., which is acting as exchange agent, on or before the expiration date. By signing the letter of transmittal, you will represent to and that: | |
• you are not engaged in, do not intend to engage in or have any arrangement or understanding with any person to participate in, the distribution of the private notes or exchange notes; | ||
• you are not an “affiliate” (as defined in Rule 405 under the Securities Act) of ours or, if you are such an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable; | ||
• if you are a broker-dealer, you have not entered into any arrangement or understanding with us or any “affiliate” of ours (within the meaning of Rule 405 under the Securities Act) to distribute the exchange notes; and | ||
• if you are a broker-dealer and receive exchange notes for your own account in exchange for unregistered private notes that were acquired as a result of market-making activities or other trading activities, that you will deliver a prospectus in connection with any resale of such exchange notes. | ||
Special Procedures for Beneficial Owners | If your private notes are held through a broker, dealer, commercial bank, trust company or other nominee and you wish to surrender such private notes, you should contact your intermediary promptly and instruct it to surrender your private notes on your behalf. |
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If you wish to tender on your own behalf, you must, before completing and executing the letter of transmittal for the exchange offer and delivering your private notes, either arrange to have your private notes registered in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take a long time. | ||
Guaranteed Delivery Procedures | If you wish to tender your private notes and you cannot meet the expiration date deadline, or you cannot deliver your private notes, the letter of transmittal or any other documentation on time, then you must surrender your private notes according to the guaranteed delivery procedures appearing below under “The Exchange Offer — Guaranteed Delivery Procedures.” | |
Acceptance of Private Notes and Delivery of Exchange Notes | We will accept for exchange any and all private notes that are properly surrendered in the exchange offer and not withdrawn prior to the expiration date, if you comply with the procedures of the exchange offer. The exchange notes will be delivered promptly after the expiration date. | |
Withdrawal Rights | You may withdraw the surrender of your private notes at any time prior to the expiration date, by complying with the procedures for withdrawal described in “The Exchange Offer — Withdrawal of Tenders.” | |
Accounting Treatment | We will not recognize a gain or loss for accounting purposes as a result of the exchange. | |
Material Federal Income Tax Considerations | The exchange of private notes for exchange notes should not be a taxable transaction for United States Federal income tax purposes. You should not have to pay federal income tax as a result of your participation in the exchange offer. See “United States Taxation.” | |
Exchange Agent | Wells Fargo Bank, N.A. is serving as the exchange agent in connection with the exchange offer. Wells Fargo Bank, N.A. also serves as trustee under the indenture governing the notes. The exchange agent can be reached at Wells Fargo Bank, N.A., Corporate Trust Operations, MACN9303-121, P.O. Box 1517, Minneapolis, MN 55480, Attn: Reorg., its facsimile number is 612-667-4927 and its telephone number is 612-667- 9764. | |
Failure to Exchange Private Notes Will Adversely Affect You | If you are eligible to participate in this exchange offer and you do not surrender your private notes as described in this prospectus, you will not have any further registration or exchange rights. In that event, your private notes will continue to accrue interest until maturity in accordance with the terms of the private notes but will continue to be subject to restrictions on transfer. As a result of such restrictions and the availability of registered exchange notes, your private notes are likely to be a much less liquid security. |
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Issuer | iPayment, Inc. | |
Securities | $205 million aggregate principal amount of 93/4% senior subordinated notes due 2014. | |
Maturity | The exchange notes will mature, and the principal amount of the exchange notes will be paid, on May 15, 2014. | |
Interest | • Annual rate: 93/4%. | |
• Payment frequency: semiannually on May 15 and November 15. | ||
• First payment: November 15, 2006. | ||
Ranking | The exchange notes will be our unsecured senior subordinated obligations. Accordingly, they will rank: | |
• junior in right of payment to all of our existing and future senior debt, including all borrowings under our new senior secured credit facility; | ||
• equal in right of payment with all of our future senior subordinated debt; | ||
• senior in right of payment to any of our future debt that expressly provides that it is subordinated in right of payment to the notes; and | ||
• effectively junior to (1) all of our existing and future secured debt to the extent of the value of the assets securing such debt, and (2) to the liabilities of our subsidiaries that are not guarantors. | ||
As of June 30, 2006, the private notes were subordinated to $521.5 million of senior secured debt, we had borrowing availability of $52.5 million under our senior secured credit facility and our subsidiaries that are not guarantors had $3.0 million of total balance sheet liabilities. | ||
Guarantees | The exchange notes will be fully and unconditionally guaranteed, jointly and severally, by each of our existing and future subsidiaries that guarantees our other debt or debt of the guarantors, including debt under our new senior secured credit facility, as described in the “Description of Notes” section of this prospectus. We refer to these subsidiaries as the guarantors. These guarantees will be subject to termination under specified circumstances, as set forth in the “Description of Exchange Notes — Certain Covenants — Guarantees” section of this prospectus. |
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The guarantees of the exchange notes will be unsecured senior subordinated obligations of the guarantors. Accordingly, they will rank: | ||
• junior in right of payment to all existing and future senior debt of the guarantors, including the guarantors’ guarantees of borrowings under our new senior secured credit facility; | ||
• equal in right of payment with any future senior subordinated debt of the guarantors; and | ||
• senior in right of payment to all future debt of the guarantors that expressly provides that it is subordinated in right of payment to the guarantees of the exchange notes. | ||
As of June 30, 2006, the guarantees of the private notes were subordinated to approximately $521.5 million of senior secured debt of the guarantors, $521.2 million of which consisted of guarantees of our borrowings under our new senior secured credit facility. | ||
Optional Redemption | We may redeem the exchange notes, in whole or in part, at any time on or after May 15, 2010, at the redemption prices set forth under the heading “Description of Exchange Notes — Optional Redemption,” plus accrued and unpaid interest, if any, to the date of redemption. | |
Prior to May 15, 2010, we may redeem the exchange notes, in whole or in part, at a price equal to 100% of the principal amount plus a “make whole” premium and accrued and unpaid interest, described under the “Description of Exchange Notes — Optional Redemption” section of this prospectus. | ||
In addition, prior to May 15, 2009, we may redeem up to 35% of the exchange notes with the net cash proceeds of certain sales of our equity securities at 109.750% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption. See “Description of Exchange Notes — Optional Redemption.” However, we may only make such redemptions if at least 65% of the aggregate principal amount of the exchange notes issued under the indenture remains outstanding immediately after the occurrence of such redemption. | ||
Change of Control | Upon the occurrence of a change of control, you will have the right, as a holder of the exchange notes, to require us to repurchase all of your exchange notes at a repurchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of repurchase. We may not have enough funds or the terms of our other debt may prevent us from purchasing the exchange notes. See “Description of Exchange Notes — Repurchase at the Option of Holders — Change of Control.” | |
Certain Covenants | The indenture governing the exchange notes contains certain covenants that limit, among other things, our ability and the ability of our restricted subsidiaries to: | |
• incur additional debt; | ||
• pay dividends on, redeem or repurchase capital stock; |
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• issue capital stock of restricted subsidiaries; | ||
• make certain investments; | ||
• sell assets; | ||
• enter into certain types of transactions with affiliates; | ||
• engage in material unrelated businesses; | ||
• incur certain liens; and | ||
• consolidate, merge or sell all or substantially all of our assets. | ||
These covenants are subject to a number of important exceptions and limitations, which are described under the heading “Description of Exchange Notes — Certain Covenants.” | ||
Absence of an Established Market for the Notes | The notes are a new issue of securities and currently there is no market for them. We do not intend to apply to have the exchange notes listed on any securities exchange or to arrange for any quotation system to quote them. | |
Use of Proceeds | We will not receive any proceeds from the issuance of the exchange notes. |
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Year Ended December 31, | Period from | Pro Forma | ||||||||||||||||||||||||||||||||||||||||||||
Pro Forma | Six Months | |||||||||||||||||||||||||||||||||||||||||||||
Six Months | January 1, 2006 | May 11, 2006 | Six Months | Year Ended | Ended | |||||||||||||||||||||||||||||||||||||||||
Ended | through | through | Ended | December 31, | June 30, | |||||||||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | June 30, 2005 | May 10, 2006 | June 30, 2006 | June 30, 2006 | 2005(2) | 2006(2) | ||||||||||||||||||||||||||||||||||||
Sucessor | Combned(1) | |||||||||||||||||||||||||||||||||||||||||||||
Predecessor | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||||||||||||||||
Revenues | $ | 38,889 | $ | 115,813 | $ | 226,052 | $ | 364,182 | $ | 702,712 | $ | 344,501 | $ | 252,514 | $ | 107,549 | $ | 360,063 | $ | 702,712 | $ | 360,063 | ||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||||||||||||
Interchange | 15,805 | 51,844 | 114,255 | 176,562 | 407,736 | 203,452 | 145,459 | 62,389 | 207,848 | 407,736 | 207,848 | |||||||||||||||||||||||||||||||||||
Other cost of services | 21,996 | 47,796 | 76,571 | 135,316 | 213,138 | 103,866 | 78,006 | 32,424 | 110,430 | 214,338 | 110,897 | |||||||||||||||||||||||||||||||||||
Selling, general and administrative | 3,782 | 6,541 | 8,012 | 12,437 | 18,062 | 8,200 | 13,420 | 2,322 | 15,742 | 16,416 | 7,821 | |||||||||||||||||||||||||||||||||||
Total operating expenses | 41,583 | 106,181 | 198,838 | 324,315 | 638,936 | 315,518 | 236,885 | 97,135 | 334,020 | 638,490 | 326,566 | |||||||||||||||||||||||||||||||||||
Income (loss) from operations | (2,694 | ) | 9,632 | 27,214 | 39,867 | 63,776 | 28,983 | 15,629 | 10,414 | 26,043 | 64,222 | 33,497 | ||||||||||||||||||||||||||||||||||
Other income (expenses): | ||||||||||||||||||||||||||||||||||||||||||||||
Interest expense | (2,928 | ) | (6,894 | ) | (9,928 | ) | (2,707 | ) | (8,657 | ) | 4,578 | 5,229 | 8,602 | 13,831 | (62,191 | ) | (31,370 | ) | ||||||||||||||||||||||||||||
Other | 625 | (3,221 | ) | (265 | ) | 279 | (1,423 | ) | 577 | 6,729 | 1,956 | 8,685 | — | (58 | ) | |||||||||||||||||||||||||||||||
Total other expense | (2,303 | ) | (10,115 | ) | (10,193 | ) | (2,428 | ) | (10,080 | ) | 5,155 | 11,958 | 10,558 | 22,516 | (62,191 | ) | (31,428 | ) | ||||||||||||||||||||||||||||
Income (loss) before income taxes | (4,997 | ) | (483 | ) | 17,021 | 37,439 | 53,696 | 23,828 | 3,671 | (144 | ) | 3,527 | 2,031 | 2,069 | ||||||||||||||||||||||||||||||||
Income tax provision (benefit) | (107 | ) | 10 | 1,403 | 12,704 | 20,915 | 9,293 | 3,343 | (77 | ) | 3,266 | 792 | 807 | |||||||||||||||||||||||||||||||||
Minority interest income | — | — | — | — | 606 | 66 | 522 | 193 | 715 | 606 | 715 | |||||||||||||||||||||||||||||||||||
Net income (loss) | $ | (4,890 | ) | $ | (493 | ) | $ | 15,618 | $ | 24,735 | $ | 33,387 | $ | 14,601 | $ | 850 | $ | 126 | $ | 976 | $ | 1,845 | $ | 1,977 | ||||||||||||||||||||||
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Period from | ||||||||||||||||||||||||||||||||||||
Year Ended December 31, | Six Months | January 1 | May 11 | Six Months | ||||||||||||||||||||||||||||||||
Ended | through | through | Ended | |||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | June 30, 2005 | May 10, 2006 | June 30, 2006 | June 30, 2006 | ||||||||||||||||||||||||||||
Successor | Combined(1) | |||||||||||||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||||||||||||||||||
($ in thousands, except charge volume) | ||||||||||||||||||||||||||||||||||||
Financial and Other Data: | ||||||||||||||||||||||||||||||||||||
Charge volume (in millions)(unaudited)(3) | $ | 802 | $ | 2,868 | $ | 6,478 | $ | 12,850 | $ | 25,725 | $ | 12,850 | $ | 9,072 | $ | 3,887 | $ | 12,959 | ||||||||||||||||||
Capital expenditures | 386 | 401 | 631 | 897 | 1,133 | 810 | 587 | 490 | 1,077 | |||||||||||||||||||||||||||
EBITDA(4) | 2,230 | 11,730 | 34,990 | (5) | 60,289 | 103,616 | 48,744 | 26,701 | 11,029 | 37,730 | ||||||||||||||||||||||||||
Ratio of earnings to fixed charges(6) | (0.71 | ) | 0.93 | 2.71 | 14.83 | 7.32 | 6.23 | 1.87 | 1.02 | 1.34 | ||||||||||||||||||||||||||
Net cash (used in) provided by operating activities | (2,167 | ) | (8,976 | ) | 20,063 | 38,451 | 76,228 | 34,283 | 48,441 | (12,155 | ) | 36,286 | ||||||||||||||||||||||||
Net cash used in investing activities | (21,133 | ) | (10,007 | ) | (86,242 | ) | (143,576 | ) | (26,062 | ) | (18,752 | ) | (11,561 | ) | (2,831 | ) | (14,392 | ) | ||||||||||||||||||
Net cash (used in) provided by financing activities | 23,022 | 20,524 | 65,081 | 105,280 | (50,031 | ) | (14,070 | ) | 601,519 | (624,247 | ) | (22,728 | ) |
As of December 31, | As of | |||||||||||||||||||||||
June 30, | ||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |||||||||||||||||||
Successor | ||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 290 | $ | 1,831 | $ | 733 | $ | 888 | $ | 1,023 | $ | 189 | ||||||||||||
Working capital (deficit) | (8,817 | ) | (14,181 | ) | (1,045 | ) | 10,889 | (4,679 | ) | (3,469 | ) | |||||||||||||
Total assets | 36,081 | 116,981 | 201,943 | 336,248 | 340,981 | 783,022 | ||||||||||||||||||
Total long-term debt, including current portion | 32,800 | 78,070 | 65,136 | 168,440 | 100,329 | 723,749 | ||||||||||||||||||
Stockholders equity (deficit) | (10,991 | ) | 13,519 | 123,834 | 154,016 | 209,353 | 21,131 |
(1) | In accordance with GAAP, our predecessor results have not been aggregated with our successor results and, accordingly, our interim unaudited financial statements do not show results of operations or cash flows for the six months ended June 30, 2006. However, in order to facilitate an understanding of our results of operations for the six months ended June 30, 2006 in comparison with the comparable period in 2005, we present and discuss our predecessor results and our successor results on a combined basis. The combined results of operations are non-GAAP financial measures and should not be used in isolation or substitution of the predecessor and successor results. |
(2) | The unaudited pro forma statements of operations data for the year ended December 31, 2005 and for the six months ended June 30, 2006 give effect to the Transactions as if they had occurred on January 1, 2005. The merger was accounted for as a purchase in conformity with Statement of Financial Accounting Standards, or SFAS, No. 141, “Business Combinations” and Emerging Issues Task Force, or EITF, Issue No. 88-16, “Basis in Leveraged Buyout Transactions.” The total cost of the purchase was allocated as a partial change in basis to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values as of the date of the merger based upon an independent valuation. The excess of the purchase price over the historical basis of the net assets acquired has been allocated to goodwill. See “Unaudited Pro Forma Condensed Consolidated Financial Statements.” |
(3) | Represents the total dollar volume of all Visa and MasterCard transactions processed by our merchants, which is provided to us by our third party processing vendors. |
(4) | EBITDA is defined as net income (loss) before (i) depreciation and amortization, (ii) interest expense, and (iii) provision for income taxes (benefit). During the second quarter of 2005, we acquired a 51% interest in iPayment ICE of Utah, LLC, a provider of credit card transaction processing services (the “ICE Joint Venture”). For the purposes of calculating EBITDA, we have included the minority partner’s 49% share of operating losses, excluding depreciation and amortization, interest expense and provision for income taxes. The reconciliation of net income (loss) under GAAP to EBITDA is as follows: |
Period from | ||||||||||||||||||||||||||||||||||||
Six Months | January 1 | May 11 | Six Months | |||||||||||||||||||||||||||||||||
Year Ended December 31, | Ended | through | through | Ended | ||||||||||||||||||||||||||||||||
June 30, | May 10, | June 30, | June 30, | |||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2006 | 2006 | 2006 | ||||||||||||||||||||||||||||
Predecessor | Successor | Combined | ||||||||||||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||||||
Net income (loss) | $ | (4,890 | ) | $ | (493 | ) | $ | 15,618 | $ | 24,735 | $ | 33,387 | $ | 14,601 | $ | 850 | $ | 126 | $ | 976 | ||||||||||||||||
Depreciation and amortization | 4,299 | 5,319 | 8,041 | 20,143 | 40,657 | 20,272 | 17,279 | 2,378 | 19,657 | |||||||||||||||||||||||||||
Interest expense | 2,928 | 6,894 | 9,928 | 2,707 | 8,657 | 4,578 | 5,229 | 8,602 | 13,831 | |||||||||||||||||||||||||||
Income tax provision (benefit) | (107 | ) | 10 | 1,403 | 12,704 | 20,915 | 9,293 | 3,343 | (77 | ) | 3,266 | |||||||||||||||||||||||||
EBITDA | $ | 2,230 | $ | 11,730 | $ | 34,990 | $ | 60,289 | $ | 103,616 | $ | 48,744 | $ | 26,701 | $ | 11,029 | $ | 37,730 |
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(5) | Includes $1.3 million representing a one-time benefit from the reversal of a reserve for loss from a single merchant expensed in a previous year. |
(6) | Computed in accordance with Item 503(d) of Regulation S-K. For purposes of computing the ratio of earnings to fixed charges, fixed charges consist of interest expense on long-term debt and capital leases, amortization of deferred financing costs and that portion of rental expense deemed to be representative of interest. Earnings consist of income (loss) before income taxes and minority interest, plus fixed charges and minority interest inpre-tax losses of subsidiaries that have not incurred fixed charges. For the fiscal year ended December 31, 2001, earnings were insufficient to cover fixed charges by $859,000. The ratio of earnings to fixed charges differs from the fixed charge coverage ratio computed for the purposes of the indenture governing the exchange notes and from the consolidated interest coverage ratio computed for the purpose of the credit agreement governing the senior secured credit facility. |
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• | increase our vulnerability to adverse general economic and industry conditions; | |
• | require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, investments, capital expenditures and other general corporate purposes; | |
• | limit our ability to make required payments under our existing contractual commitments (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources”); | |
• | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; | |
• | place us at a competitive disadvantage compared to our competitors that have less debt; | |
• | create a perception that we may not continue to support and develop certain services; | |
• | increase our exposure to rising interest rates because a portion of our borrowings is at variable interest rates; and | |
• | limit our ability to borrow additional funds on terms that are satisfactory to us or at all. |
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• | incur additional debt; | |
• | pay dividends on, redeem or repurchase capital stock; | |
• | issue capital stock of restricted subsidiaries; | |
• | make certain investments; | |
• | sell assets; | |
• | enter into certain types of transactions with affiliates; | |
• | engage in material unrelated businesses; | |
• | incur certain liens; and | |
• | consolidate, merge or sell all or substantially all of our assets. |
• | The scope of permitted liens under the credit agreement is narrower than under the indenture. For example, the indenture permits us to incur liens to secure up to $5.0 million of additional permitted indebtedness, while the credit agreement permits the same only up to $1.0 million of additional permitted indebtedness. | |
• | The credit agreement contains a general prohibition on restricted payments subject to certain exceptions, while the indenture permits us to make restricted payments up to an amount that is based, in part, on our cumulative consolidated net income since the date of the indenture. | |
• | The credit agreement generally prohibits the incurrence of additional indebtedness subject to certain exceptions, while the indenture permits us to incur additional indebtedness provided we maintain a fix charge coverage ratio of 2:1. | |
• | The credit agreement requires us to maintain an agreed consolidated interest coverage ratio and consolidated leverage ratio at the end of each fiscal quarter. There is no comparable requirement in the indenture. | |
• | The credit agreement prohibits us from making dispositions of our property other than for cash and not in excess of $2.0 million in any fiscal year. The indenture does not prohibit such dispositions, but requires us to apply the net proceeds therefrom to repay senior debt, make certain investments or expenditures, and otherwise repay the exchange notes. | |
• | The credit agreement prohibits us from prepaying our other debt, including the exchange notes, while borrowings under our senior secured credit facility are outstanding. | |
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• | the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all of its assets; or | |
• | if the present fair saleable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or | |
• | it could not pay its debts as they become due. |
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• | the prevailing interest rates being paid by companies similar to us; | |
• | our ratings with major credit rating agencies; and | |
• | the overall condition of the financial and credit markets. |
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• | additional development costs; | |
• | diversion of technical and other resources; | |
• | loss of merchants; | |
• | loss of merchant and cardholder data; | |
• | negative publicity; | |
• | harm to our business or reputation; or | |
• | exposure to fraud losses or other liabilities. |
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• | create uncertainty in the marketplace that could reduce demand for our services; | |
• | limit our ability to collect and to use merchant and cardholder data; | |
• | increase the cost of doing business as a result of litigation costs or increased operating costs; or | |
• | in some other manner have a material adverse effect on our business, results of operations and financial condition. |
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• | “qualified institutional buyers,” or QIBs, as defined in Rule 144A under the Securities Act, in reliance on Rule 144A; and | |
• | non-U.S. persons in offshore transactions in compliance with Regulation S under the Securities Act. |
• | no later than 90 days after the issue date of the private notes, file a registration statement with the SEC with respect to a registered offer to exchange the private notes for the exchange notes having terms substantially identical in all material respects to the private notes (except that the exchange notes will not contain terms with respect to transfer restrictions, registration rights and additional notices); | |
• | cause the exchange offer registration statement to become effective under the Securities Act not later than 180 days after the issue date of the private notes; | |
• | in connection with the foregoing, (i) file all pre-effective amendments to such registration statement as may be necessary in order to cause such registration statement to become effective, (ii) file, if applicable, a post-effective amendment to such registration statement pursuant to Rule 430A under the Securities Act and (iii) cause all necessary filings in connection with the registration and qualification of the exchange securities to be made under the state securities or blue sky laws of such jurisdictions as are necessary to permit consummation of the exchange offer; and | |
• | cause the exchange offer to be consummated not later than 210 days after the issue date of the private notes. |
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(1) the Company is not required to file an exchange offer registration statement or to consummate the exchange offer because the exchange offer is not permitted by applicable law or the SEC’s policy; | |
(2) the exchange offer is not consummated within 210 days after the issuance of the private notes; or | |
(3) with respect to any holder of securities, such holder: |
(A) is prohibited by applicable law or Commission policy from participating in the exchange offer; or | |
(B) may not resell the exchange securities acquired by it in the exchange offer to the public without delivering a prospectus and that the prospectus contained in the exchange offer registration statement is not appropriate or available for such resales by such holder; or | |
(C) is a broker-dealer and holds initial securities acquired directly from the Company or one of its affiliates, then, in the case of clause (3) such holder so notifies the Company, then the Company and the Guarantors shall use commercially reasonably efforts to: |
(i) cause to be filed a shelf registration statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the exchange offer registration statement on or prior to 90 days after such filing obligation arises, which self registration statement shall provide for resales of all securities; and | |
(ii) cause such self registration statement to be declared effective by the Commission on or before the 180th day after the obligation to file such shelf registration statement arises, |
• | as promptly as reasonably practicable, file a shelf registration statement covering resales of the private notes or the exchange notes, as the case may be; |
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• | use our commercially reasonable efforts to keep the shelf registration statement continuously effective under the Securities Act; and | |
• | use our reasonable best efforts to ensure that the self registration statement conforms in all material respects with the requirements of the registration rights agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years following the issue date of the private notes. |
(1) any of the registration statements required by the registration rights agreement is not filed with the Commission within the agreed period; | |
(2) any of such registration statements has not been declared effective by the Commission within 180 days after the issue date of the private notes; | |
(3) the exchange offer has not been consummated within 210 after the issue date of the private notes; or | |
(4) any registration statement required by the registration rights agreement is filed and declared effective but thereafter ceases to be effective or fail to be usable for its intended purpose and such registration statement is not succeeded within 10 days by a post-effective amendment to such registration statement that cures such ineffectiveness or failure and that is itself within 10 days of filing declared effective; provided that with respect to a shelf registration statement that we and the Guarantors are required to keep effective, we and the Guarantors may suspend such shelf registration statement in excess of the periods set forth in clause (4) above so long as such suspensions do not exceed 30 days in the aggregate in any twelve month period (each such event referred to in clauses (1) through (4) is a “registration default”) |
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• | the exchange notes will have a different CUSIP number from the private notes; | |
• | the exchange notes will be registered for the exchange offer under the Securities Act and, therefore, the exchange notes will not bear legends restricting the transfer of the exchange notes; and | |
• | holders of the exchange notes generally will not be entitled to any of the registration rights of holders of private notes under the registration rights agreement. |
• | notify the exchange agent of any extension by oral or written notice; and | |
• | issue a press release or other public announcement which will include disclosure of the approximate number of private notes deposited; such press release or announcement would be issued prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. |
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• | to delay accepting any private notes; | |
• | to extend the exchange offer; | |
• | to terminate the exchange offer; or | |
• | amend the terms of the exchange offer in any manner, |
• | you are acquiring the exchange notes in the ordinary course of business; | |
• | you are not engaged in, do not intend to engage in or have any arrangement or understanding with any person to participate in, the distribution of the private notes or exchange notes; | |
• | you are not an “affiliate” (as defined in Rule 405 under the Securities Act) of ours or, if you are such an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable; | |
• | if you are a broker-dealer, you have not entered into any arrangement or understanding with us or any “affiliate” of ours (within the meaning of Rule 405 under the Securities Act) to distribute the exchange notes; and | |
• | if you are a broker-dealer receiving exchange notes for your own account in exchange for unregistered private notes that were acquired as a result of market-making activities or other trading activities, you will deliver a prospectus in connection with any resale of such exchange notes. |
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• | properly complete, sign and date the letter of transmittal (or a facsimile of the letter of transmittal); | |
• | have the signatures on the letter of transmittal (or facsimile) guaranteed if required by the letter of transmittal; and | |
• | mail or deliver the letter of transmittal (or facsimile) together with your private notes and any other required documents to the exchange agent at the address appearing below under “— Exchange Agent” for receipt prior to 5:00 p.m., New York City time, on the expiration date. |
• | certificates for such private notes must be received by the exchange agent along with the letter of transmittal; | |
• | a timely confirmation of a book-entry transfer of the private notes into the exchange agent’s account at DTC pursuant to the procedure for book-entry transfer described below under “— Book-Entry Transfer,” must be received by the exchange agent prior to the expiration date; or | |
• | you must comply with the procedures described below under “— Guaranteed Delivery Procedures.” |
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• | a member firm of a registered national securities exchange or of the NASD; | |
• | a commercial bank or trust Company having an office or correspondent in the United States; or | |
• | an “eligible guarantor institution” within the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of the recognized signature guarantee programs identified in the letter of transmittal. |
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• | to reject any and all private notes not properly tendered; | |
• | to reject any private notes if our acceptance of them would, in the opinion of our counsel, be unlawful; and | |
• | to waive any defects, irregularities or conditions of tender as to particular private notes. |
• | the exchange offer, or the making of any exchange by a holder, violates, in our good faith determination or on the advice of counsel, any applicable law, rule or regulation or any applicable interpretation of the staff of the SEC; | |
• | any action or proceeding is instituted or threatened in any court or by the SEC or any other governmental agency with respect to the exchange offer that, in our judgment, would impair our ability to proceed with the exchange offer; or | |
• | we have not obtained any governmental approval which we, in our sole discretion, consider necessary for the completion of the exchange offer as contemplated by this prospectus. |
• | certificates for private notes or a timely confirmation from DTC of such private notes into the exchange agent’s account at DTC; | |
• | a properly completed and duly executed letter of transmittal or, with respect to DTC and its participants, an “agent’s message” described further below in which the tendering holder acknowledges its receipt of and agreement to be bound by the letter of transmittal for such exchange offer; and | |
• | all other required documents. |
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• | you have full power and authority to tender, exchange, assign and transfer the private notes; | |
• | you are acquiring the exchange notes in the ordinary course of your business; | |
• | neither you nor any beneficial owner is an “affiliate”, as defined in Rule 405 under the Securities Act, of ours, or a broker-dealer tendering the private notes acquired directly from us for its own account; | |
• | you are not engaged in, and do not intend to engage in, an arrangement or understanding with any person to participate in a distribution of the exchange notes; | |
• | you and each beneficial owner acknowledge and agree that any person who is a broker-dealer registered under the Exchange Act or is participating in the exchange offer for the purpose of distributing the exchange notes must comply with the registration and prospectus delivery requirements of Section 10 of the Securities Act in connection with a secondary resale transaction of the exchange notes acquired by such person and cannot rely on the position of the staff of the Commission set forth in certain no-action letters; | |
• | you and each beneficial owner understand that a secondary resale transaction described above and any resales of exchange notes obtained by you in exchange for the private notes acquired by you directly from us should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the SEC; and | |
• | we will acquire good and marketable title to the private notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. |
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• | the tender is made through an eligible institution; | |
• | prior to the expiration date, the exchange agent receives from such eligible institution a properly completed and duly executed notice of guaranteed delivery substantially in the form provided by us, by facsimile transmission, mail or hand delivery, containing: | |
• | the name and address of the holder, the certificate number(s) of the private notes, if applicable, and the principal amount of private notes tendered; | |
• | a statement that the tender is being made thereby; | |
• | a guarantee that, within three business days after the expiration date, the letter of transmittal, together with the certificate(s) representing the private notes in proper form for transfer or a book-entry confirmation, and any other required documents, will be deposited by the eligible institution with the exchange agent; and | |
• | the properly executed letter of transmittal, as well as the certificate(s) representing all tendered private notes in proper form for transfer or a book-entry confirmation, and all other documents required by the letter of transmittal are received by the exchange agent within three business days after the expiration date. |
• | specify the name of the person who tendered the private notes to be withdrawn; | |
• | identify the private notes to be withdrawn (including the certificate number(s) and aggregate principal amount of such private notes); and | |
• | be signed by the holder in the same manner as the original signature on the letter of transmittal by which the private notes were tendered (including any required signature guarantees). |
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• | any law, statute, rule or regulation is proposed, adopted or enacted, or the staff of the SEC interprets any existing law, statute, rule or regulation in a manner, which, in our reasonable judgment, would materially impair our ability to proceed with the exchange offer; | |
• | any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer which, in our reasonable judgment, would materially impair our ability to proceed with the exchange offer; or | |
• | any governmental approval, which we deem necessary for the consummation of the exchange offer, has not been obtained. |
• | refuse to accept any private notes and return all tendered private notes to the tendering holders; | |
• | extend the exchange offer and retain all private notes tendered prior to the expiration of the exchange offer, subject, however, to the rights of holders who tendered the private notes to withdraw their tendered private notes; or | |
• | waive the unsatisfied conditions, if permissible, with respect to the exchange offer and accept all properly tendered private notes which have not been withdrawn. If that waiver constitutes a material change to the exchange offer, we will promptly disclose the waiver by means of a prospectus supplement that will be distributed to the registered holders, and we will extend the exchange offer as necessary to keep the offer open for at least five additional business days. |
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By Registered or Certified Mail: | By Overnight Courier or Regular Mail: | By Hand Delivery: | ||
Wells Fargo Bank, N.A. Corporate Trust Operations MAC N9303-121 P.O. Box 1517 Minneapolis, MN 55480 Attention: Reorg | Wells Fargo Bank, N.A. Corporate Trust Operations MAC N9303-121 6th & Marquette Avenue Minneapolis, MN 55479 Attention: Reorg. or Facsimile: (612) 667-6282 Telephone: (800) 344-5128 | Well Fargo Bank, N.A. Corporate Trust Services 608 2nd Avenue South Northstar East Building — 12th Floor Minneapolis, MN 55402 Attention: Reorg. |
• | to a person whom the purchaser reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A; | |
• | in an offshore transaction complying with Rule 903 or Rule 904 of Regulation S; |
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• | pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available); | |
• | in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel acceptable to us, if we so request); | |
• | to us; or | |
• | pursuant to an effective registration statement under the Securities Act, and, in each case, in accordance with all applicable U.S. state securities or “blue sky” laws. |
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Amount | |||||
($ in millions) | |||||
Source of Funds | |||||
Term loan(1) | $ | 515.0 | |||
Private notes(2) | 202.2 | ||||
Equity(3) | 170.0 | ||||
Cash on hand and revolving credit facility(1) | 8.2 | ||||
Total sources | $ | 895.4 | |||
Uses of Funds | |||||
Purchase of iPayment common stock(4) | $ | 800.0 | |||
Repayment of indebtedness(5) | 70.0 | ||||
Fees and expenses(6) | 25.4 | ||||
Total uses | $ | 895.4 |
(1) | Our senior secured credit facility with Bank of America and JPMorgan Chase provides for a $515.0 million term loan facility and a $60.0 million revolving credit facility. |
(2) | The private notes are proposed to be exchanged for the exchange notes pursuant to the registration statement of which this prospectus forms a part. |
(3) | Consisted of $166.6 million of our common stock contributed by Gregory S. Daily and Carl A. Grimstad, and certain related parties, and $3.4 million of cash contributed by Mr. Daily. |
(4) | Includes the equity contribution to Holdings described in footnote (3) above. Certain directors and officers of iPayment, including Mr. Grimstad, received payments as a result of payment of the merger consideration. See “Certain Relationships and Related Party Transactions — Effect of the Merger on Share Ownership of Executive Officers” for the amount of such payments. |
(5) | Our outstanding indebtedness prior to the Transactions consisted of our senior secured credit facility with Bank of America and JPMorgan Chase. |
(6) | Transaction fees and expenses include discounts to the initial purchasers of the private notes, commitment and financing fees payable in connection with our senior secured credit facility, and legal, accounting, advisory and other costs in connection with the Transactions. |
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As of | ||||||
June 30, | ||||||
2006 | ||||||
(unaudited) | ||||||
($ in millions) | ||||||
Long-term debt, including current portion | ||||||
Capital leases | $ | 0.3 | ||||
Senior secured credit facility: | ||||||
Term loan facility | 513.7 | |||||
Revolving credit facility(1) | 7.5 | |||||
93/4% senior subordinated notes, net of discount | 202.3 | |||||
Total long-term debt, including current portion | 723.8 | |||||
Total stockholder’s equity | 21.1 | |||||
Total capitalization | $ | 744.9 | ||||
(1) | As of June 30, 2006, the borrowing availability under our new revolving credit facility was $52.5 million. |
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Adjustment for | ||||||||||||||
Historical | the Transactions | Pro Forma | ||||||||||||
($ in thousands) | ||||||||||||||
Statement of Operations Data: | ||||||||||||||
Revenues | $ | 702,712 | $ | — | $ | 702,712 | ||||||||
Operating expenses: | ||||||||||||||
Interchange | 407,736 | — | 407,736 | |||||||||||
Other cost of services | 213,138 | 1,200 | (1) | 214,338 | ||||||||||
Selling, general and administrative | 18,062 | (1,646 | )(2) | 16,416 | ||||||||||
Total operating expenses | 638,936 | (446 | ) | 638,490 | ||||||||||
Income from operations | 63,776 | 446 | 64,222 | |||||||||||
Other income (expenses): | ||||||||||||||
Interest expense | (8,657 | ) | (53,534 | )(3) | (62,191 | ) | ||||||||
Other | (1,423 | ) | 1,423 | (4) | — | |||||||||
Total other expense | (10,080 | ) | (52,111 | ) | (62,191 | ) | ||||||||
Income (loss) before income taxes | 53,696 | (51,665 | ) | 2,031 | ||||||||||
Income tax provision (benefit) | 20,915 | (20,123 | )(5) | 792 | ||||||||||
Minority interest income | 606 | — | 606 | |||||||||||
Net income (loss) | $ | 33,387 | $ | (31,542 | ) | $ | 1,845 | |||||||
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Adjustments for | ||||||||||||||
Historical | the Transactions | Pro Forma | ||||||||||||
Statement of Operations Data: | ||||||||||||||
Revenues | $ | 360,063 | $ | — | $ | 360,063 | ||||||||
Operating expenses: | ||||||||||||||
Interchange | 207,848 | — | 207,848 | |||||||||||
Other cost of services | 110,430 | 467 | (1) | 110,897 | ||||||||||
Selling, general and administrative | 15,742 | (7,921 | )(2) | 7,821 | ||||||||||
Total operating expenses | 334,020 | (7,454 | ) | 326,566 | ||||||||||
Income from operations | 26,043 | 7,454 | 33,497 | |||||||||||
Other income (expenses): | ||||||||||||||
Interest expense | (13,831 | ) | (17,539 | )(3) | (31,370 | ) | ||||||||
Other | (8,685 | ) | 8,627 | (4) | (58 | ) | ||||||||
Total other expense | (22,516 | ) | (8,912 | ) | (31,428 | ) | ||||||||
Income (loss) before income taxes | 3,527 | (1,458 | ) | 2,069 | ||||||||||
Income tax provision (benefit) | 3,266 | (2,459 | )(5) | 807 | ||||||||||
Minority interest income | 715 | — | 715 | |||||||||||
Net income (loss) | $ | 976 | $ | 1,001 | $ | 1,977 | ||||||||
(1) | The pro forma adjustment to other cost of services represents incremental amortization expense due to revaluation of certain intangible assets as a result of the merger. |
(2) | Consists of share-based compensation expense that would not have been incurred because all shares were redeemed at the closing of the transaction. |
(3) | The pro forma adjustment to interest expense reflects the elimination of a proportional amount of the interest expense for the year ended December 31, 2005 and the six months ended June 30, 2006, and the estimated interest expense on the 93/4% senior subordinated notes, estimated interest expense on the term loan and revolving credit facility (including the unused portion) and estimated related debt issuance costs, net of the historical interest expense incurred by iPayment under notes and debt expected to be repaid. |
Year Ended | Six Months Ended | |||||||
December 31, 2005 | June 30, 2006 | |||||||
Estimated interest expense | $ | 59,650 | (a) | $ | 30,100 | (b) | ||
Estimated amortization of debt issuance costs | 2,192 | 1,096 | ||||||
Discount | 349 | 174 | ||||||
Pro forma interest expense | 62,191 | 31,370 | ||||||
Historical interest expense | (8,657 | ) | (13,831 | ) | ||||
Pro forma adjustment for interest expense | $ | 53,534 | $ | 17,539 | ||||
(a): | Represents interest expense at a weighted average interest rate of 8.0% for the $205.0 million principal amount of the 93/4% senior subordinated notes, $515.0 million principal outstanding for the term loan and $30.0 million principal assumed to be outstanding under our revolving credit facility. |
(b): | Represents interest expense at a weighted average interest rate of 8.4% for the $205.0 million principal amount of the 93/4% senior subordinated notes and $515.0 million principal outstanding for the term loan. |
(4) | Transaction-related expenses. |
(5) | The pro forma income tax adjustments reflect the tax benefit of the pro forma interest expense using a consolidated effective tax rate of 39.0% for the year ended December 31, 2005 and the six months ended June 30, 2006. |
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Period from | |||||||||||||||||||||||||||||||||
January 1 | May 11 | ||||||||||||||||||||||||||||||||
Year Ended December 31, | through | through | |||||||||||||||||||||||||||||||
Six Months Ended | May 10, | June 30, | |||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | June 30, 2005 | 2006 | 2006 | ||||||||||||||||||||||||||
Predecessor | Successor | ||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||
($ in thousands, except charge volume) | |||||||||||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||||||||||
Revenues | $ | 38,889 | $ | 115,813 | $ | 226,052 | $ | 364,182 | $ | 702,712 | $ | 344,501 | $ | 252,514 | $ | 107,549 | |||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||
Interchange | 15,805 | 51,844 | 114,255 | 176,562 | 407,736 | 203,452 | 145,459 | 62,389 | |||||||||||||||||||||||||
Other cost of services | 21,996 | 47,796 | 76,571 | 135,316 | 213,138 | 103,866 | 78,006 | 32,424 | |||||||||||||||||||||||||
Selling, general and administrative | 3,782 | 6,541 | 8,012 | 12,437 | 18,062 | 8,200 | 13,420 | 2,322 | |||||||||||||||||||||||||
Total operating expenses | 41,583 | 106,181 | 198,838 | 324,315 | 638,936 | 315,518 | 236,885 | 97,135 | |||||||||||||||||||||||||
Income (loss) from operations | (2,694 | ) | 9,632 | 27,214 | 39,867 | 63,776 | 28,983 | 15,629 | 10,414 | ||||||||||||||||||||||||
Other income (expenses): | |||||||||||||||||||||||||||||||||
Interest expense | (2,928 | ) | (6,894 | ) | (9,928 | ) | (2,707 | ) | (8,657 | ) | 4,578 | 5,229 | 8,602 | ||||||||||||||||||||
Other | 625 | (3,221 | ) | (265 | ) | 279 | (1,423 | ) | 577 | 6,729 | 1,956 | ||||||||||||||||||||||
Total other expense | (2,303 | ) | (10,115 | ) | (10,193 | ) | (2,428 | ) | (10,080 | ) | 5,155 | 11,958 | 10,558 | ||||||||||||||||||||
Income (loss) before income taxes | (4,997 | ) | (483 | ) | 17,021 | 37,439 | 53,696 | 23,828 | 3,671 | (144 | ) | ||||||||||||||||||||||
Income tax provision (benefit) | (107 | ) | 10 | 1,403 | 12,704 | 20,915 | 9,293 | 3,343 | (77 | ) | |||||||||||||||||||||||
Minority interest income | — | — | — | — | 606 | 66 | 522 | 193 | |||||||||||||||||||||||||
Net income (loss) | $ | (4,890 | ) | $ | (493 | ) | $ | 15,618 | $ | 24,735 | $ | 33,387 | $ | 14,601 | $ | 850 | $ | 126 | |||||||||||||||
Balance Sheet Data (as of period end): | |||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 290 | $ | 1,831 | $ | 733 | $ | 888 | $ | 1,023 | N/ A | N/ A | $ | 189 | |||||||||||||||||||
Working capital (deficit) | (8,817 | ) | (14,181 | ) | (1,045 | ) | 10,889 | (4,679 | ) | N/ A | N/ A | (3,469 | ) | ||||||||||||||||||||
Total assets | 36,081 | 116,981 | 201,943 | 336,248 | 340,981 | N/ A | N/ A | 783,022 | |||||||||||||||||||||||||
Total long-term debt, including current portion | 32,800 | 78,070 | 65,136 | 168,440 | 100,329 | N/ A | N/ A | 723,749 | |||||||||||||||||||||||||
Stockholders equity (deficit) | (10,991 | ) | 13,519 | 123,834 | 154,016 | 209,353 | N/ A | N/ A | 21,131 | ||||||||||||||||||||||||
Financial and Other Data: | |||||||||||||||||||||||||||||||||
Charge volume (in millions) (unaudited)(1) | $ | 802 | $ | 2,868 | $ | 6,478 | $ | 12,850 | $ | 25,725 | $ | 12,850 | $ | 9,072 | $ | 3,887 | |||||||||||||||||
Capital expenditures | 386 | 401 | 631 | 897 | 1,133 | 810 | 587 | 490 | |||||||||||||||||||||||||
Ratio of earnings to fixed charges(2) | (0.71 | ) | 0.93 | 2.71 | 14.83 | 7.32 | 6.23 | 1.87 | 1.02 |
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(1) | Represents the total dollar volume of all Visa and MasterCard transactions processed by our merchants, which is provided to us by our third party processing vendors. |
(2) | Computed in accordance with Item 503(d) of Regulation S-K. For purposes of computing the ratio of earnings to fixed charges, fixed charges consist of interest expense on long-term debt and capital leases, amortization of deferred financing costs and that portion of rental expense deemed to be representative of interest. Earnings consist of income (loss) before income taxes and minority interest, plus fixed charges and minority interest inpre-tax losses of subsidiaries that have not incurred fixed charges. For the fiscal year ended December 31, 2001, earnings were insufficient to cover fixed charges by $859,000. The ratio of earnings to fixed charges differs from the fixed charge coverage ratio computed for the purposes of the indenture governing the exchange notes and from the consolidated interest coverage ratio computed for the purpose of the credit agreement governing the senior secured credit facility. |
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Acquired Business or Significant Portfolio of | Date of | |||
Merchant Accounts | Acquisition | |||
CardPayment Solutions | August 2003 | |||
FDMS Bank Portfolio | December 2003 | |||
Transaction Solutions | September 2004 | |||
FDMS Merchant Portfolio | December 2004 | |||
Petroleum Card Services | January 2005 | |||
iPayment ICE of Utah, LLC | June 2005 | |||
National Processing Management Group | October 2005 |
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Six months ended | |||||||||||||||||||||
Year ended December 31, | June 30, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||
Successor | |||||||||||||||||||||
Predecessor | Predecessor | Predecessor | Predecessor | (Combined) | |||||||||||||||||
Revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
Operating expenses: | |||||||||||||||||||||
Interchange | 50.5 | 48.5 | 58.0 | 59.1 | 57.7 | ||||||||||||||||
Other cost of services | 33.9 | 37.2 | 30.3 | 30.1 | 30.7 | ||||||||||||||||
Selling, general and administrative | 3.6 | 3.4 | 2.6 | 2.4 | 4.4 | ||||||||||||||||
Total operating expenses | 88.0 | 89.1 | 90.9 | 91.6 | 92.8 | ||||||||||||||||
Income from operations | 12.0 | 10.9 | 9.1 | 8.4 | 7.2 | ||||||||||||||||
Other income (expenses): | |||||||||||||||||||||
Interest expense | (4.4 | ) | (0.7 | ) | (1.2 | ) | 1.3 | 3.8 | |||||||||||||
Other | (0.1 | ) | 0.1 | (0.2 | ) | 0.2 | 2.4 | ||||||||||||||
Total other expense | (4.5 | ) | (0.6 | ) | (1.4 | ) | 1.5 | 6.2 | |||||||||||||
Income before income taxes | 7.5 | 10.3 | 7.7 | 6.9 | 1.0 | ||||||||||||||||
Income tax provision | 0.6 | 3.5 | 3.0 | 2.7 | 0.9 | ||||||||||||||||
Minority interest income | — | — | 0.1 | 0.0 | 0.2 | ||||||||||||||||
Net income (loss) | 6.9 | 6.8 | 4.8 | 4.2 | 0.3 | ||||||||||||||||
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Contractual Obligations | Total | 2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | |||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Senior Secured Credit Facility(1) | $ | 547,788 | $ | 5,150 | $ | 5,150 | $ | 5,150 | $ | 5,150 | $ | 5,150 | $ | 522,038 | ||||||||||||||
Senior Subordinated Notes(1) | 205,000 | — | — | — | — | — | �� | 205,000 | ||||||||||||||||||||
Interest(2) | 452,005 | 62,118 | 61,725 | 61,333 | 60,940 | 60,547 | 145,342 | |||||||||||||||||||||
Capital lease obligations | 329 | 102 | 102 | 87 | 23 | 15 | — | |||||||||||||||||||||
Operating lease obligations | 5,307 | 1,819 | 1,439 | 1,018 | 822 | 209 | — | |||||||||||||||||||||
Purchase obligations(3)(4)(5) | 45,682 | 16,241 | 11,230 | 8,011 | 4,027 | 2,819 | 3,354 | |||||||||||||||||||||
Total contractual obligations | $ | 1,256,111 | $ | 85,430 | $ | 79,646 | $ | 75,599 | $ | 70,962 | $ | 68,740 | $ | 875,734 |
(1) | Future interest obligations are calculated using current interest rates on debt balances as of December 31, 2005, assuming the Transaction had occurred as of that date, and assuming no principal reduction other than mandatory principal payments in accordance with the terms of the credit agreement governing the senior secured credit facility and the indenture governing the exchange notes. |
(2) | Excludes interest payable. |
(3) | Purchase obligations represent costs of contractually guaranteed minimum processing volumes with certain of our third-party transaction processors. |
(4) | We are required to pay FDMS an annual processing fee related to the FDMS Merchant Portfolio and the FDMS Bank Portfolio of at least $11.7 million in fiscal 2006, and for each subsequent year through 2011 of at least 70% of the amount of the processing fee paid during the immediately preceding year. The minimum commitment for years after 2006, included in the table above are based on the preceding year minimum amounts. The actual minimum commitments for such years may very based on actual results in preceding years. |
(5) | We have agreed to utilize FDMS to process at least 75% of our consolidated transaction sales volume in any calendar year through 2011. The minimum commitments for such years are not calculable as of June 30, 2006, and are excluded from this table. |
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Year Ended | ||||
December 31, 2005 | ||||
($ in thousands) | ||||
EBITDA | $ | 103,616 | ||
Minority interest | (606 | ) | ||
Minority partner’s share of operating losses | 919 | |||
Pre-acquisition EBITDA of NPMG | 1,914 | |||
Expenses referenced in the indenture | 3,623 | |||
Private company savings | 3,111 | |||
Other expenses | 1,423 | |||
Adjusted EBITDA | $ | 114,000 |
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Purchase amount | $ | 100.00 | ||
Less cash to merchant | (97.50 | ) | ||
iPayment gross revenue (discount fee) | 2.50 | |||
Interchange fee paid to card-issuing bank | (1.60 | ) | ||
Assessment fee paid to credit card association | (0.10 | ) | ||
Processing vendor fee | (0.12 | ) | ||
Sponsoring bank fee | (0.02 | ) | ||
Other transaction costs | (0.26 | ) | ||
iPayment processing margin | $ | 0.40 | ||
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• | Processing Vendors — Our senior management team has a close and longstanding relationship with First Data Merchant Services Corporation (“FDMS”), our primary processing vendor. We believe we are one of the largest merchant services customers of FDMS, and, as such, we believe we are a primary channel for FDMS to provide payment processing services to small merchants. As small merchants can be difficult and costly to identify and serve, we believe we are also the most efficient channel for FDMS to access the small merchant market. In 2003 and 2004, FDMS sold to us two of its portfolios of small merchants. In addition to FDMS, we have strong relationships with other processing vendors, such as Vital Processing Services, LLC and Global Payments Direct, Inc. | |
• | Independent Sales Groups — We have been very successful in maintaining ISGs in our network and increasing the number of merchant applications that they submit to us. We believe the strong relationships we typically enjoy with our ISGs are a result of: (i) the perpetual revenue stream we share with an ISG for as long as the merchant it sourced remains a customer of ours; (ii) the rapid and consistent review and acceptance of merchant applications we provide to an ISG; (iii) the reliability and stability of the support we give an ISG, and (iv) the compelling offerings we develop for an ISG to market to prospective merchants. | |
• | Sponsoring Banks — We have a strong relationship with JPMorgan Chase, our primary sponsoring bank. In turn, we believe we represent JPMorgan’s largest sponsorship relationship. We also have strong relationships with other sponsoring banks, including HSBC Bank USA and Bank of America. We provide value to sponsoring banks by paying them a sponsoring fee for each transaction we process at a minimal cost to them. |
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• | Merchants. Merchants are the businesses that accept payment cards, including Visa and MasterCard, as payment for their merchandise and services. | |
• | Sponsoring Banks. Sponsoring banks are financial institutions that are Visa and MasterCard association members and provide the funds on behalf of the card user, enabling merchants to accept payment cards. | |
• | Processing Vendors. Processing vendors, which may include banks, gather sales information from merchants, obtain authorization for merchants’ transactions from card issuers, facilitate the collection of funds from sponsoring banks for payment to merchants and provide merchant accounting and settlement services on our behalf. |
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• | Underwriting. Our sales agents send new applications to our underwriting department for their review and screening. All of our underwriters have previous industry underwriting experience and have the authority to render judgment on new applications or to take additional actions such as adjusting processing limits, average charge per transaction or reserve requirements for new and existing merchants. We obtain a personal guaranty from most of the owners of new merchants we enroll. | |
• | Proprietary Management Information Systems. Our proprietary systems automatically generate credit reports on new applicants, categorize risk based on all of the information provided and place the applications in a queue to be processed by our underwriting staff. The underwriting staff can access all of the collected information on a merchant online in order to render a decision on whether to approve or reject an application or whether to seek additional information. | |
• | Merchant Monitoring. We provide several levels of merchant account monitoring to help us identify suspicious transactions and trends. Daily merchant activity is downloaded to our Bankcard Application Manager system from our third-party processors such as FDMS and is sorted into a number of customized reports by our proprietary systems. Our risk management team also receives daily reports from Card Commerce International, a risk management services company, that highlight all exceptions to the established daily merchant parameters such as average ticket size, total processing volume or expected merchandise returns. | |
• | Risk Review Department. We have established an in-house risk review department that monitors the sales activities of all of the merchants that we service. Our risk review department focuses particular attention on fewer than 2,000 merchants in our portfolio, measured by volume, average ticket and other criteria, which accounted for approximately 2% of our total charge volume for December 31, 2005. The risk review department conducts background checks on these merchants, interviews merchants, anonymously purchases products and services, reviews sales records and follows developments in risk management procedures and technology. The risk review department reports to the risk committee, consisting of our President, Chief Executive Officer and Chief Financial Officer | |
• | Investigation and Loss Prevention. If a merchant exceeds any approved parameter as established by our underwriting and/or risk management staff or violates regulations established by the applicable card association or the terms of our agreement with the merchant, an investigator will identify the incident and take appropriate action to reduce our exposure to loss, as well as the exposure of our merchants. This action may include requesting additional transaction information, instructing the merchant acquirer/processor to retrieve, withhold or divert funds, verifying delivery of merchandise or even deactivating the merchant account. | |
• | Reserves. We require some of our merchants to post reserves (cash deposits) that we use to offset against chargebacks we incur. Our sponsoring banks hold reserves related to our merchant accounts as long as we are exposed to loss resulting from a merchant’s processing activity. In the event that a small company finds it difficult to post a cash reserve upon opening an account with us, we may build the reserve by retaining a percentage of each transaction the merchant performs. This solution permits the merchant to fund our reserve requirements gradually as its business develops. As of December 31, 2005, these reserves (which are not included in our accompanying consolidated balance sheet) totaled approximately $48.9 million. |
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• | quality of service; | |
• | reliability of service; | |
• | ability to evaluate, undertake and manage risk; | |
• | speed in approving merchant applications; and | |
• | price. |
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Name | Age | Position | ||||
Gregory S. Daily | 47 | Chairman and Chief Executive Officer and Director | ||||
Carl A. Grimstad | 38 | President and Director | ||||
Clay M. Whitson | 48 | Chief Financial Officer and Treasurer | ||||
Afshin M. Yazdian | 34 | Executive Vice President, General Counsel and Secretary | ||||
Robert S. Torino | 52 | Executive Vice President and Assistant Secretary |
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Gregory Daily |
Carl Grimstad |
Clay Whitson |
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Annual Compensation | Long-Term Compensation | ||||||||||||||||||||||||||||
Securities | |||||||||||||||||||||||||||||
Other Annual | Restricted Stock | Underlying | All Other | ||||||||||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus | Compensation | Awards | Options | Compensation | ||||||||||||||||||||||
Gregory S. Daily | 2005 | $ | 300,000 | $ | 100,000 | $ | — | $ | — | — | $ | 6,000 | (1) | ||||||||||||||||
Chairman of the Board and | 2004 | 300,000 | — | — | — | — | 6,000 | (1) | |||||||||||||||||||||
Chief Executive Officer | 2003 | 12,000 | — | — | — | — | 200 | (1) | |||||||||||||||||||||
Carl A. Grimstad | 2005 | $ | 300,000 | $ | 100,000 | $ | — | — | — | ||||||||||||||||||||
President | 2004 | 225,000 | 300,000 | — | $ | — | — | — | |||||||||||||||||||||
2003 | 200,000 | — | — | — | 50,000 | — | |||||||||||||||||||||||
Clay M. Whitson | 2005 | $ | 296,000 | $ | 100,000 | $ | — | $ | 3,625,000 | (2) | — | $ | 10,850 | (1) | |||||||||||||||
Chief Financial Officer | 2004 | 296,000 | 300,000 | — | 705,000 | (4) | — | 48,880 | (3) | ||||||||||||||||||||
2003 | 276,000 | — | — | — | 100,000 | 7,935 | (1) | ||||||||||||||||||||||
Afshin M. Yazdian | 2005 | $ | 160,000 | $ | 100,000 | $ | — | $ | — | 30,000 | $ | 9,300 | (1) | ||||||||||||||||
Executive Vice President, | 2004 | 135,000 | 175,000 | — | 352,500 | (4) | — | 4,800 | (1) | ||||||||||||||||||||
General Counsel and Secretary | 2003 | 105,000 | — | — | — | 7,500 | 4,650 | (1) | |||||||||||||||||||||
Robert S. Torino | 2005 | $ | 230,000 | $ | 100,000 | $ | — | $ | — | — | — | ||||||||||||||||||
Executive Vice President | 2004 | 205,000 | 250,000 | — | 352,500 | (4) | — | — | |||||||||||||||||||||
and Assistant Secretary | 2003 | 180,000 | — | — | — | 20,000 | — |
(1) | Represents our matching of 401(k) plan contributions made by executive officers. |
(2) | On May 3, 2005, Mr. Whitson received 100,000 shares of restricted stock. These shares vest evenly on each anniversary date of the award through 2015 or immediately upon a change of control. As of December 31, 2005, the fair value of these restricted shares held by Mr. Whitson was $4,152,000. |
(3) | Represents moving expenses of $40,000 reimbursed to Mr. Whitson in 2004 and our matching of Mr. Whitson’s 401(k) plan contributions of $8,880. |
(4) | On January 14, 2004, Mr. Whitson received 20,000 shares of restricted stock and Mr. Yazdian and Mr. Torino each received 10,000 shares of restricted stock. As of December 31, 2005, the fair value of restricted shares held by Mr. Whitson, Mr. Yazdian and Mr. Torino was $830,400, $415,200 and $415,200, respectively. These shares became fully vested on January 14, 2006. |
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Number of Securities | Value of Unexercised | ||||||||||||||||||||||||
Underlying Unexercised | In-the Money Options at | ||||||||||||||||||||||||
Shares | Options at Fiscal Year-End | Fiscal Year-End(1) | |||||||||||||||||||||||
Acquired on | Value | ||||||||||||||||||||||||
Exercise | Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||||
Name and Principal Position | (#) | ($) | (#) | (#) | ($) | ($) | |||||||||||||||||||
Gregory S. Daily | — | $ | — | — | — | $ | — | $ | — | ||||||||||||||||
Chairman of the Board | |||||||||||||||||||||||||
and Chief Executive Officer | |||||||||||||||||||||||||
Carl A. Grimstad | — | $ | — | 25,000 | 25,000 | $ | 638,000 | $ | 638,000 | ||||||||||||||||
President | |||||||||||||||||||||||||
Clay M. Whitson | — | $ | — | 188,810 | 50,000 | $ | 6,289,391 | $ | 1,276,000 | ||||||||||||||||
Chief Financial Officer | |||||||||||||||||||||||||
Afshin M. Yazdian | 2,500 | $ | 114,514 | 94,417 | 33,750 | $ | 3,669,813 | $ | 253,800 | ||||||||||||||||
Executive Vice | |||||||||||||||||||||||||
President, General | |||||||||||||||||||||||||
Counsel and Secretary | |||||||||||||||||||||||||
Robert S. Torino | — | $ | — | 10,000 | 10,000 | $ | 255,200 | $ | 255,200 | ||||||||||||||||
Executive Vice President | |||||||||||||||||||||||||
and Assistant Secretary |
(1) | Calculated based on the closing price of our common stock as traded on The Nasdaq National Market as of December 31, 2005, which was $41.52, less the per share exercise price, multiplied by the number of shares underlying the options. The weighted average exercise price of the exercisable options held by Mr. Grimstad was $16.00, by Mr. Whitson was $8.21, by Mr. Yazdian was $2.65, by Mr. Torino was $16.00 and by all the named executive officers as a group was $7.42. The weighted average exercise price of the unexercisable options held by Mr. Grimstad was $16.00, by Mr. Whitson was $16.00, by Mr. Yazdian was $34.00, by Mr. Torino was $16.00 and by all the named executive officers as a group was $21.12. |
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Number of iPayment | Number of iPayment | Aggregate | ||||||||||
Name | Shares | Options | Cash Payment | |||||||||
Gregory S. Daily(1) | — | — | $ | — | ||||||||
Carl A. Grimstad(2) | 352,982 | 50,000 | 16,729,717 | |||||||||
Clay M. Whitson | 214,889 | 238,810 | 17,385,907 | |||||||||
Robert S. Torino | 286,324 | 20,000 | 13,005,094 | |||||||||
Afshin M. Yazdian | 16,500 | 128,167 | 4,895,134 |
(1) | Mr. Daily and entities related to him contributed to Holdings an aggregate of 2,493,842 shares in connection with the merger. Mr. Daily also contributed $3.4 million in cash in connection with the merger. |
(2) | Mr. Grimstad contributed to Holdings an aggregate of 890,722 shares in connection with the merger. |
Number of Shares | Price per | Aggregate | ||||||||
of Restricted Stock | Share | Payment | ||||||||
Name | ||||||||||
Clay M. Whitson | 100,000 | $ | 43.50 | $4,350,000 |
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Common Stock | ||||||||||||||||
Subject to Options | Common Stock | |||||||||||||||
at an Exercise | Subject to Options | Weighted | ||||||||||||||
Price Equal to or | at an Exercise | Average | ||||||||||||||
Greater Than | Price Less Than | Exercise | Aggregate | |||||||||||||
Name | $43.50 per Share | $43.50 per Share | Price | Payment | ||||||||||||
Gregory S. Daily | — | — | $ | — | $ | — | ||||||||||
Carl A. Grimstad | — | 50,000 | 16.00 | 1,375,000 | ||||||||||||
Clay M. Whitson | — | 238,810 | 9.84 | 8,038,235 | ||||||||||||
Robert S. Torino | — | 20,000 | 16.00 | 550,000 | ||||||||||||
Afshin M. Yazdian | — | 128,167 | 10.91 | 4,177,384 | ||||||||||||
Directors and executive officers as a group | — | 436,977 | 11.14 | $ | 14,140,617 |
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• | a seven-year $515.0 million Term Facility the proceeds of which will (i) finance our previously announced merger with iPayment; (ii) repay certain of our existing debt; and (iii) pay fees and expenses incurred in connection with the Transactions; and | |
• | a six-year $60.0 million Revolving Facility, which includes a Swingline Loan facility and is available from time to time until the sixth anniversary of the Closing Date. |
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• | are general unsecured obligations of the Company; | |
• | are subordinated in right of payment to all existing and future Senior Debt of the Company, including the Indebtedness of the Company under the Credit Agreement; |
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• | arepari passuin right of payment with any future senior subordinated Indebtedness of the Company; | |
• | are senior in right of payment to any future subordinated Indebtedness of the Company; | |
• | are fully and unconditionally guaranteed, jointly and severally, by the Guarantors; and | |
• | are effectively subordinated to any future Indebtedness and other liabilities of the Company’s Subsidiaries that are not Guarantors. |
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• | is a general unsecured obligation of that Guarantor; | |
• | is subordinated in right of payment to all existing and future Senior Debt of that Guarantor, including the Guarantee by that Guarantor of Indebtedness under the Credit Agreement; | |
• | ispari passuin right of payment with any future senior subordinated Indebtedness of that Guarantor; and | |
• | is senior in right of payment to any future subordinated Indebtedness of that Guarantor. |
(1) any liquidation or dissolution of the Company; | |
(2) any bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property; | |
(3) any assignment for the benefit of creditors; or | |
(4) any marshaling of the Company’s assets and liabilities. |
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(1) a default (a “payment default”) in the payment of principal, premium or interest on Designated Senior Debt of the Company occurs and is continuing; or | |
(2) any other default (a “nonpayment default”) occurs and is continuing on any series of Designated Senior Debt of the Company that permits holders of that series of Designated Senior Debt of the Company to accelerate its maturity and the Trustee receives a notice of such default (a “Payment Blockage Notice”) from a representative of the holders of such Designated Senior Debt. |
(1) in the case of a payment default on Designated Senior Debt of the Company, upon the date on which such default is cured or waived; and | |
(2) in case of a nonpayment default on Designated Senior Debt of the Company, the earlier of (x) the date on which such default is cured or waived, (y) 179 days after the date on which the applicable Payment Blockage Notice is received and (z) the date the Trustee receives notice from the representative for such Designated Senior Debt rescinding the Payment Blockage Notice, unless, in each case, the maturity of such Designated Senior Debt of the Company has been accelerated. |
(1) 360 days have elapsed since the delivery of the immediately prior Payment Blockage Notice; and | |
(2) all scheduled payments of principal, interest and premium and Additional Interest, if any, on the Notes that have come due have been paid in full in cash or Cash Equivalents. |
(1) the payment is prohibited by these subordination provisions; and | |
(2) the Trustee or the Holder, as the case may be, has actual knowledge that the payment is prohibited (providedthat such actual knowledge of the Holder will not be required in the case of any payment default on Designated Senior Debt), |
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(1) any Indebtedness outstanding under the Credit Agreement; and | |
(2) any other Senior Debt the amount of which is $25.0 million or more and that has been designated by the Company as “Designated Senior Debt.” |
(1) Equity Interests in the Company or any business entity that succeeds to the rights and obligations of the Company as provided for by a plan of reorganization with respect to the Company; and | |
(2) debt securities of the Company or any Guarantor or any business entity that succeeds to the rights and obligations of the Company or such Guarantor as provided for by a plan of reorganization that are subordinated to all Senior Debt and any debt securities issued in exchange for Senior Debt to the same extent as, or to a greater extent than, the Notes and the Note Guarantees are subordinated to Senior Debt under the Indenture. |
(1) all Indebtedness of such Person outstanding under the Credit Agreement; | |
(2) all Obligations of such Person in respect of any Receivables Financing; | |
(3) any other Indebtedness of such Person, unless the instrument under which such Indebtedness is Incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes or any Note Guarantee; and | |
(4) all Obligations with respect to the items listed in the preceding clauses (1) and (2) (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law). |
(1) any liability for federal, state, local or other taxes owed or owing by the Company or any Guarantor; | |
(2) any Indebtedness of the Company or any Guarantor to any of their Subsidiaries; | |
(3) any trade payables; | |
(4) the portion of any Indebtedness that is Incurred in violation of the covenant described under “Certain Covenants — Incurrence of Indebtedness;”providedthat no such violation shall be deemed to exist for purposes of this clause (4) if a good faith determination shall be made by the Board of Directors of the Company evidenced by a Board Resolution or by the Chief Financial Officer of the Company evidenced by an officer’s certificate, that any Indebtedness being Incurred under any Credit Facility is (or that the Incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would be) permitted by such covenant; |
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(5) any Indebtedness of the Company or any Guarantor that, when Incurred, was without recourse to the Company or such Guarantor; or | |
(6) any repurchase, redemption or other obligation in respect of Disqualified Stock or Preferred Stock. |
(1) at least 65% of the aggregate principal amount of Notes issued under the Indenture (including any Additional Notes) remains outstanding immediately after the occurrence of such redemption; and | |
(2) the redemption must occur within 90 days of the date of the closing of such Equity Offering. |
Year | Percentage | |||
2010 | 104.875 | % | ||
2011 | 102.438 | % | ||
2012 and thereafter | 100.000 | % |
(1) if the Notes are listed on any national securities exchange, in compliance with the requirements of such principal national securities exchange; or | |
(2) if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee will deem fair and appropriate. |
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(1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;providedthat no Note will be repurchased in part if less than $1,000 in principal amount of such Note would be left outstanding; | |
(2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and | |
(3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. |
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(1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of; and | |
(2) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash, Cash Equivalents or Replacement Assets or a combination of both. For purposes of this provision, each of the following will be deemed to be cash: |
(a) any liabilities (as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet) of the Company or any Restricted Subsidiary (other than contingent liabilities, Indebtedness that is by its express terms subordinated in right of payment to the Notes or any Note Guarantee and liabilities to the extent owed to the Company or any Restricted Subsidiary of the Company) (i) that are assumed by the transferee of any such assets or Equity Interests pursuant to a written agreement that releases the Company or such Restricted Subsidiary from further liability therefor or (ii) in respect of which the Company or such Restricted Subsidiary has no obligation following such Asset Sale; | |
(b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion) within 90 days following the closing of such Asset Sale; and |
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(c) any Designated Non-cash Consideration received by the Company or any such Restricted Subsidiary in such Asset Sale having an aggregate Fair Market Value, taken together with all other Designated Non-cash Consideration received pursuant to this clause (c) that is at that time outstanding and any then outstanding Investments made pursuant to clause (14) of the definition of Permitted Investments, not to exceed the greater of (i) $25.0 million and (ii) 8% of Total Assets at the time of the receipt of such Designated Non-cash Consideration, with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value. |
(1) to repay Senior Debt and, if the Senior Debt repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; or | |
(2) to (a) make capital expenditures or (b) purchase Replacement Assets (or enter into a binding agreement to purchase any such Replacement Assets;providedthat (x) such purchase is consummated within 60 days after the date of such binding agreement and (y) if such purchase is not consummated within the period set forth in subclause (x), the Net Proceeds not so applied will be deemed to be Excess Proceeds (as defined below)). |
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(i) declare or pay (without duplication) any dividend or make any other payment or distribution on account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company’s or any of its Restricted Subsidiaries’ Equity Interests in their capacity as such (other than dividends, payments or distributions (x) payable in Equity Interests (other than Disqualified Stock) of the Company or (y) to the Company or a Restricted Subsidiary of the Company); | |
(ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) any Equity Interests of the Company held by Persons other than the Company or any of its Restricted Subsidiaries; | |
(iii) make any principal payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Company or any Guarantor that is expressly subordinated in right of payment to the Notes or any Note Guarantees and is held by Persons other than the Company or any of its Restricted Subsidiaries, except (a) a payment of principal at the Stated Maturity thereof (including any scheduled sinking fund payment, scheduled principal payment or payment at final maturity) or (b) the purchase, redemption, defeasance or other acquisition or retirement of any such Indebtedness in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such purchase, redemption, defeasance or other acquisition or retirement; or | |
(iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as “Restricted Payments”), |
(1) no Default or Event of Default will have occurred and be continuing or would occur as a consequence thereof; and | |
(2) the Company would have been permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption “— Incurrence of Indebtedness;” and |
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(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Issue Date (excluding Restricted Payments permitted by clauses (2) through (6), (8) through (10) and (11) (which shall be included therein only to the extent of one half of the amounts paid pursuant to such clause (11) and only to the extent Consolidated Net Income is not reduced by such amounts) of the next succeeding paragraph (B)), is less than the sum, without duplication, of: |
(a) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the Issue Date to the end of the Company’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit),plus | |
(b) 100% of the aggregate net cash proceeds and the Fair Market Value of assets (other than cash) received by the Company since the Issue Date as a contribution to its common equity capital or from the issue or sale of Equity Interests (other than Disqualified Stock) of the Company or from the Incurrence of Indebtedness of the Company that has been converted into or exchanged for such Equity Interests (other than Equity Interests sold to, or Indebtedness held by, a Subsidiary of the Company),plus | |
(c) with respect to Restricted Investments made by the Company and its Restricted Subsidiaries after the Issue Date, an amount equal to the net reduction in such Restricted Investments in any Person resulting (x) from repayments of loans or advances, or other transfers of assets or returns of capital, in each case to the Company or any Restricted Subsidiary or from the net cash proceeds and Fair Market Value of assets (other than cash) received from the sale or other disposition of any such Restricted Investment (except, in each case, to the extent any such payment or proceeds are (at the Company’s option) included in the calculation of Consolidated Net Income for the purposes of clause 3(a) above or applied to reduce the amount of Investments made pursuant to clause (13) of paragraph (B) below pursuant to the last paragraph of the definition of “Investments”), (y) from the release of any Guarantee (except to the extent any amounts are paid under such Guarantee) or (z) from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries, not to exceed, in each case, the amount of Restricted Investments previously made by the Company or any Restricted Subsidiary in such Person after the Issue Date. |
(1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; | |
(2) the payment of any dividend or making of any other payment or distribution by a Restricted Subsidiary of the Company to holders of any series of its Equity Interests on a pro rata basis (or, in the case of holders other than the Company and its Restricted Subsidiaries, on no more than a pro rata basis, and in the case of the Company and its Restricted Subsidiaries, on at least a pro rata basis), measured by value; | |
(3) the purchase, redemption, defeasance or other acquisition or retirement of any subordinated Indebtedness of the Company or any Guarantor or of any Equity Interests of the Company or any Restricted Subsidiary in exchange for, or out of the net cash proceeds of a contribution to the common equity of the Company or a substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests (other than Disqualified Stock) of the Company;providedthat the amount of any such net cash proceeds that are utilized for any such purchase, redemption, defeasance or other acquisition or retirement will be excluded from clause (3) (b) of the preceding paragraph (A); |
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(4) the purchase, redemption, defeasance or other acquisition or retirement of Indebtedness subordinated to the Notes or the Note Guarantees with the net cash proceeds from an Incurrence of Permitted Refinancing Indebtedness; | |
(5) Investments acquired as a capital contribution to the Company, or in exchange for, or out of the net cash proceeds of a substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock) or any Parent;providedthat the amount of any such net cash proceeds that are utilized for any such acquisition or exchange will be excluded from clause (3) (b) of the preceding paragraph (A); | |
(6) the purchase of Equity Interests deemed to occur upon the exercise of options or warrants to the extent that such Equity Interests represents all or a portion of the exercise price thereof or taxes due in connection with such exercise; | |
(7) the purchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Parent held by any current or former employee, officer or director of the Company or any of its Subsidiaries or any other Management Investor, including pursuant to the terms of any employment agreement, employee equity subscription agreement, stock option agreement or similar agreement or otherwise, and any loan, advance, dividend or distribution by the Company to any Parent to permit any Parent to make any such purchase, redemption or other acquisition or retirement for value;providedthat the aggregate price paid for all such purchased, redeemed, acquired or retired Equity Interests in any calendar year will not exceed $2.5 million in any calendar year, with unused amounts in any calendar year being carried over to succeeding calendar years (which amount shall be increased by the amount of any cash proceeds received by the Company after the Issue Date to the extent not already applied in any prior calendar year to make repurchases pursuant to this clause (7) from, or as a contribution to its capital from, (x) sales of Equity Interests (other than Disqualified Stock of the Company) to Management Investors to the extent the cash proceeds have not otherwise been applied to the payment of Restricted Payments by virtue of clause 3(b) of paragraph (A) of this covenant and (y) any “key man” life insurance policies); | |
(8) dividends on Preferred Stock of a Restricted Subsidiary of the Company or on Disqualified Stock of the Company or its Restricted Subsidiaries issued in accordance with the covenant “— Incurrence of Indebtedness” to the extent such dividends are included in the definition of Fixed Charges; | |
(9) any Restricted Payment made pursuant to the Merger Agreement; | |
(10) the payment of dividends or making of other payments or distributions by the Company to holders of its Equity Interests (x) for so long as the Company is treated as an S corporation or a qualified subchapter S subsidiary for Federal income tax purposes (a “Flow-Through Entity”), in an amount equal to the Permitted Tax Distributions and (y) for so long as the Company is not a Flow-Through Entity but is a member of a consolidated, combined or unitary income tax group of which it is not the common parent, in amounts required to pay Federal, state, local and foreign income tax obligations imposed to the extent such income taxes are attributable to the income of the Company and its Subsidiaries;provided, however, in each case the amount of such payments in respect of any Tax Period does not exceed the amount that the Company and its Subsidiaries would have been required to pay in respect of Federal, state, local and foreign income taxes in respect of such Tax Period determined using the Assumed Tax Rate as if the Company and its Subsidiaries filed separate income tax returns on a separate company basis; | |
(11) without duplication as to amounts dividended or distributed under clause (10) above, loans, advances, dividends or distributions to any Parent or other payments by the Company or any of its Restricted Subsidiaries to pay or permit any Parent to pay Parent Expenses; | |
(12) any principal payment on or with respect to any Indebtedness of the Company or any Guarantor that is expressly subordinated in right of payment to the Notes or any Note Guarantee (x) made from Net Proceeds to the extent permitted by the covenant described under “— Repurchase at |
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the Option of Holders — Asset Sales” and (y) following the occurrence of a Change of Control (or other similar event described therein as a “change of control”), but only if the Company shall have complied with the covenant described under “— Repurchase at the Option of Holders — Change of Control” and, if required, purchased all Notes tendered pursuant to the offer to repurchase all the Notes required thereby, prior to repaying any such Indebtedness; or | |
(13) other Restricted Payments in an aggregate amount (net of amounts reducing the amount of any Investment made pursuant to this clause (13) in accordance with the last paragraph of the definition of “Investments”) not to exceed $15.0 million. |
(1) Indebtedness of the Company or any of its Restricted Subsidiaries under Credit Facilities (including, without limitation, the Incurrence of Guarantees thereof) in an aggregate principal amount (or face amount in the case of letters of credit) at any one time outstanding pursuant to this clause (1) not to exceed $615.0 million,lessthe aggregate principal amount of Indebtedness Incurred and outstanding pursuant to this clause (1) that has been permanently repaid (with a corresponding commitment reduction, in the case of revolving credit Indebtedness) out of the Net Proceeds of Asset Sales by the Company or any Restricted Subsidiary thereof pursuant to the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales;” | |
(2) Existing Indebtedness; | |
(3) Indebtedness represented by the Notes (other than any Additional Notes) and the related Note Guarantees; | |
(4) Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, Incurred for the purpose of financing or refinancing all or any part of the purchase price or cost of construction or improvement of property, plant, equipment or other assets used or to be used in the business of the Company or any Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness Incurred pursuant to clause (5) of this paragraph to refund, refinance or replace any Indebtedness Incurred pursuant to this clause (4), not to exceed $15.0 million at any time outstanding; |
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(5) Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness that was permitted by the Indenture to be Incurred under the first paragraph of this covenant or clause (2), (3), (4), (5), (14) or (15) of this paragraph; | |
(6) Indebtedness of the Company or any of its Restricted Subsidiaries owing to and held by the Company or any of its Restricted Subsidiaries;provided, however, that: |
(a) if the Company or any Guarantor is the obligor on such Indebtedness (and such Indebtedness is held by a Restricted Subsidiary that is not a Guarantor), such Indebtedness must be expressly subordinated in right of payment to the prior payment in full of all Obligations with respect to the Notes, in the case of the Company, or the Note Guarantee, in the case of a Guarantor; and | |
(b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof, will be deemed, in each case, to constitute an Incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); |
(7) the Guarantee of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be Incurred by another provision of this covenant; | |
(8) Hedging Obligations that are Incurred for the purpose of fixing, hedging or swapping interest rate, commodity price or foreign currency exchange rate risk (or to reverse or amend any such agreements previously made for such purposes), and not for speculative purposes; | |
(9) Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or Guarantees or letters of credit, surety bonds or performance bonds securing any obligations of the Company or any of its Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition), so long as the amount does not exceed the gross proceeds actually received by the Company or any Restricted Subsidiary thereof in connection with such disposition; | |
(10) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business,provided, however, that such Indebtedness is extinguished within five Business Days of its Incurrence; | |
(11) Indebtedness constituting reimbursement obligations with respect to letters of credit provided or issued in the ordinary course of business;providedthat, upon the drawing of such letters of credit in an aggregate face amount equal to or exceeding $10.0 million, such obligations are reimbursed within 30 days following such drawing or Incurrence (it being understood that any failure to make such reimbursement shall not cause such Indebtedness not to be Senior Debt); | |
(12) Indebtedness (A) in respect of performance, surety, appeal or other similar bonds, bankers’ acceptances, or other similar instruments or obligations provided or issued, or relating to liabilities or obligations (other than to support an obligation for borrowed money) incurred, in the ordinary course of business or (B) in respect of the financing of insurance premiums in the ordinary course of business; | |
(13) Indebtedness to the extent that net proceeds thereof are promptly deposited to defease or to satisfy and discharge the Notes; | |
(14) Indebtedness of Persons that are acquired by the Company or any Restricted Subsidiary of the Company or consolidated or merged with or into the Company or a Restricted Subsidiary of the Company in accordance with the terms of the Indenture;providedthat such Indebtedness is not Incurred in contemplation of such acquisition, consolidation or merger; andprovided furtherthat after giving |
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effect to such acquisition, consolidation or merger (x) the Company would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of this covenant or (y) the Company’s Fixed Charge Coverage Ratio is greater than immediately prior to such acquisition, consolidation or merger; or | |
(15) Indebtedness (x) issued by the Company or any of its Restricted Subsidiaries to a seller or any Affiliate thereof as part of the consideration for an acquisition of assets, Merchant Portfolios, a business or a Subsidiary by the Company or any Restricted Subsidiary or (y) consisting of or arising from agreements providing for earnouts or similar obligations Incurred in connection with the acquisition of any business, assets, Merchant Portfolio or Person, in an aggregate principal amount, including all Permitted Refinancing Indebtedness Incurred pursuant to clause (5) of this paragraph to refund, refinance or replace Indebtedness Incurred pursuant to this clause (15), not to exceed $10.0 million at any time outstanding; | |
(16) Indebtedness (A) of a Receivables Subsidiary secured by a Lien on all or part of the assets disposed of in, or otherwise Incurred in connection with, a Financing Disposition or (B) otherwise Incurred in connection with a Receivables Financing; and | |
(17) Indebtedness in an aggregate principal amount at any time outstanding not to exceed $50.0 million. |
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(1) pay dividends or make any other distributions on its Capital Stock (or with respect to any other interest or participation in, or measured by, its profits) to the Company or any of its Restricted Subsidiaries or pay any liabilities owed to the Company or any of its Restricted Subsidiaries; | |
(2) make loans or advances to the Company or any of its Restricted Subsidiaries; or | |
(3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries; |
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(1) existing under, by reason of or with respect to the Credit Agreement, Existing Indebtedness or any other agreements in effect on the Issue Date and any amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings thereof,providedthat the encumbrances and restrictions in any such amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings are (in the good faith determination of the Board of Directors or senior management of the Company) not materially more restrictive, taken as a whole, than those contained in the Credit Agreement, Existing Indebtedness or such other agreements, as the case may be, as in effect on the Issue Date; | |
(2) set forth in the Indenture, the Notes and the Note Guarantees; | |
(3) existing under, by reason of or with respect to applicable law, rule, regulation or order, or required by any regulatory authority having jurisdiction over the Company or any Restricted Subsidiary or any of their businesses; | |
(4) with respect to any Person or the property or assets of a Person acquired by the Company or any of its Restricted Subsidiaries existing at the time of such acquisition and not incurred in connection with or in contemplation of such acquisition, which encumbrance or restriction is not applicable to any Person or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired and any amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings thereof,providedthat the encumbrances and restrictions in any such amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings are (in the good faith determination of the Board of Directors or senior management of the Company) not materially more restrictive, taken as a whole, than those in effect on the date of the acquisition;providedthat for purposes of this clause (4), if a Person other than the Company is the Successor in a transaction pursuant to the covenant described under “— Merger, Consolidation or Sale of Assets,” any Subsidiary of such Person or property or assets of any such Subsidiary shall be deemed acquired by the Company or a Restricted Subsidiary, as the case may be, when such Person becomes such Successor; | |
(5) (A) that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is or is subject to a lease, license, conveyance or contract or similar property or asset, | |
(B) existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on or easement relating to, any property or assets of the Company or any Restricted Subsidiary thereof not otherwise prohibited by the Indenture, or | |
(C) arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary thereof in any manner material to the Company or any Restricted Subsidiary thereof; | |
(6) existing under, by reason of or with respect to any agreement for the sale or other disposition of all or substantially all of the Capital Stock of, or property and assets of, a Restricted Subsidiary that restrict distributions by that Restricted Subsidiary pending such sale or other disposition; | |
(7) with respect to cash or other deposits or net worth imposed or required by customers, suppliers, sponsoring banks, processors or vendors or by insurance, surety or bonding companies, in each case, under agreements entered into in the ordinary course of business; | |
(8) pursuant to (x) purchase money obligations not otherwise prohibited by the Indenture that impose encumbrances or restrictions on the property or assets so acquired, or (y) Hedging Obligations; | |
(9) existing under, by reason of or with respect to any Indebtedness Incurred subsequent to the Issue Date if (in the good faith determination of the Board of Directors or senior management of the Company) such encumbrances and restrictions taken as a whole (i) are not materially less favorable to |
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the Holders of the Notes than the encumbrances and restrictions in effect on the Issue Date, or (ii) are not materially more disadvantageous to the Holders of the Notes than is customary in comparable financings and (in the case of this clause (ii)) the relevant encumbrance or restriction will not materially affect the Company’s ability to make principal or interest payments on the Notes; | |
(10) existing under, by reason of or with respect to customary provisions contained in agreements or other documents governing a joint venture, partnership or similar arrangements entered into in the ordinary course of business; or | |
(11) pursuant to an agreement or instrument relating to Indebtedness of or a Financing Disposition to or by any Receivables Entity. |
(1) either: (a) the Company is the surviving corporation, limited liability company or limited partnership; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made (such Person, as the case may be, the “Successor”) (i) is a corporation, limited liability company or limited partnership organized or existing under the laws of the United States, any state thereof or the District of Columbia and (ii) assumes all the obligations of the Company under the Notes, the Indenture and the Registration Rights Agreement pursuant to one or more agreements in form reasonably satisfactory to the Trustee (providedthat if the Company or Successor is not a corporation there must be a co-obligor of the Notes that is a Wholly Owned Restricted Subsidiary and that is a corporation organized and existing under the laws of the United States, any state thereof or the District of Columbia); | |
(2) immediately after giving effect to such transaction, no Default or Event of Default exists; | |
(3) immediately after giving effect to such transaction on a pro forma basis, (i) the Company or the Successor will be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “— Incurrence of Indebtedness;” or (ii) the Fixed Charge Coverage Ratio of the Company or the Successor would be greater than such ratio of the Company immediately prior to such transaction; | |
(4) each Guarantor, unless such Guarantor is (x) a Guarantor that will be released from its obligations under its Note Guarantee in connection with such transaction or (y) the Person with which the Company has entered into a transaction under this covenant, will have confirmed in writing that its Note Guarantee will apply to the obligations of the Company or the surviving Person in accordance with the Notes and the Indenture; and | |
(5) the Company delivers to the Trustee an Officers’ Certificate and Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to such consolidation, transfer or disposition have been complied with. |
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(1) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable arm’s-length transaction by the Company or such Restricted Subsidiary with a Person that is not an Affiliate of the Company or any of its Restricted Subsidiaries; and | |
(2) the Company delivers to the Trustee: |
(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $3.0 million, a Board Resolution set forth in an Officers’ Certificate certifying that such Affiliate Transaction or series of related Affiliate Transactions complies with this covenant and that such Affiliate Transaction or series of related Affiliate Transactions has been approved by a majority of the Disinterested Directors of the Board of Directors of the Company;providedthat at any time during which no Disinterested Director is serving on such Board of Directors, no such Board Resolution or approval shall be required if the Company delivers to the Trustee a fairness opinion meeting the requirements of clause (b) below with respect to such Affiliate Transaction; and | |
(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to the Company or such Restricted Subsidiary of such Affiliate Transaction or series of related Affiliate Transactions from a financial point of view issued by an independent accounting, appraisal or investment banking firm of national standing. |
(1) transactions between or among the Company and/or its Restricted Subsidiaries and/or any Receivables Entity; | |
(2) payment of reasonable and customary fees to, and reasonable and customary indemnification and similar payments on behalf of, directors of the Company (as determined in good faith by the Company’s Board of Directors); |
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(3) Restricted Payments that are permitted by the provisions of the Indenture described above under the caption “— Restricted Payments,” Permitted Payments and transactions excluded from the definition of Restricted Payments; | |
(4) any offering, issuance, sale or transfer of Equity Interests (other than Disqualified Stock) of the Company or capital contribution to the Company; | |
(5) transactions pursuant to agreements or arrangements in effect on the Issue Date or any amendment, modification, or supplement thereto or replacement thereof, as long as such agreement or arrangement, as so amended, modified, supplemented or replaced, taken as a whole, is not more disadvantageous to the Company and its Restricted Subsidiaries than the original agreement or arrangement in existence on the Issue Date; | |
(6) any employment, consulting, service or termination agreement, or reasonable and customary indemnification arrangements, entered into by the Company or any of its Restricted Subsidiaries with officers and employees of the Company or any of its Restricted Subsidiaries, and transactions pursuant thereto; and the payment of compensation to officers and employees of the Company or any of its Restricted Subsidiaries (including amounts paid pursuant to employee benefit plans, employee stock option or similar plans), so long as such agreement or payment is in the ordinary course of business or has been approved by the Board of Directors of the Company; | |
(7) the granting or performance of registration rights under a written registration rights agreement approved by the Board of Directors of the Company and containing customary terms, taken as a whole; | |
(8) transactions with Persons solely in their capacity as holders of Indebtedness or Capital Stock of the Company or any of its Restricted Subsidiaries, where such Persons are treated no more favorably than holders of Indebtedness or Capital Stock of the Company or such Restricted Subsidiary generally; | |
(9) any transaction in the ordinary course of business with customers, suppliers, joint ventures, joint venture partners, sales agents, sales representatives, independent sales groups or sellers of goods and services on terms not less favorable to the Company or the relevant Restricted Subsidiary than those that could be obtained at the time in a transaction with a Person who is not an Affiliate of the Company; | |
(10) execution, delivery and performance of a tax sharing agreement with respect to any of the Permitted Payments described in clause (B)(10) of the covenant described under “— Restricted Payments,” or any Related Taxes; | |
(11) the transactions contemplated by the Merger Agreement, all transactions in connection therewith (including, but not limited to, the financing thereof), and all fees and expenses paid or payable in connection with such transactions; | |
(12) any transaction in the ordinary course of business or approved by a majority of the Board of Directors of the Company between the Company or any Restricted Subsidiary and any Affiliate of the Company that is a joint venture or similar entity controlled by the Company (and of which no other Affiliate of the Company (other than any Subsidiary thereof) directly or indirectly holds any Capital Stock); and | |
(13) any agreement to do any of the foregoing. |
(1) any Guarantee by the Company or any Restricted Subsidiary thereof of any Indebtedness of the Subsidiary being so designated will be deemed to be an Incurrence of Indebtedness by the Company or such Restricted Subsidiary (or both, if applicable) at the time of such designation, and such Incurrence |
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of Indebtedness would be permitted under the covenant described above under the caption “— Incurrence of Indebtedness;” | |
(2) (A) the Subsidiary to be so designated has total consolidated assets of $1,000 or less or (B) if the Subsidiary being so designated has consolidated assets greater than $1,000, then the aggregate Fair Market Value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary being so designated (including any Guarantee by the Company or any Restricted Subsidiary thereof of any Indebtedness of such Subsidiary) will be deemed to be a Restricted Investment made as of the time of such designation and that such Investment would be permitted under the covenant described above under the caption “— Restricted Payments;” | |
(3) such Subsidiary does not hold any Liens on any property of the Company or any Restricted Subsidiary thereof at the time of such designation; | |
(4) at the time of such designation the Subsidiary being so designated: |
(a) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; | |
(b) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect legal obligation (i) to subscribe for additional Equity Interests or (ii) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results; and | |
(c) has not Guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries,except to the extent such Guarantee or credit support would be released upon such designation; and |
(5) no Default or Event of Default would be in existence upon giving effect to such designation. |
(1) such designation will be deemed to be an Incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if such Indebtedness is permitted under the covenant described under the caption “— Incurrence of Indebtedness;” | |
(2) all outstanding Investments owned by such Unrestricted Subsidiary will be deemed to be made as of the time of such designation and such designation will only be permitted if such Investments would be permitted under the covenant described above under the caption “— Restricted Payments;” | |
(3) all Liens upon property or assets of such Unrestricted Subsidiary existing at the time of such designation would be permitted under the caption “— Liens;” and | |
(4) no Default or Event of Default would be in existence upon giving effect to such designation. |
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(1) immediately after giving effect to that transaction, no Default or Event of Default exists; and | |
(2) either: |
(a) the Person formed by or surviving any such consolidation or merger (if other than the Guarantor) is organized or existing under the laws of the United States, any state thereof or the District of Columbia and assumes all the obligations of that Guarantor under the Indenture, its Note Guarantee and the Registration Rights Agreement pursuant to one or more agreements in form reasonably satisfactory to the Trustee; or | |
(b) such consolidation or merger complies with the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales,” to the extent applicable. |
(1) upon any direct or indirect sale or other disposition (by consolidation, merger or otherwise) of any Capital Stock of or any interest in a Guarantor in compliance with the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales,” following which such Guarantor is no longer a Restricted Subsidiary of the Company; | |
(2) if the Company properly designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary under the Indenture; | |
(3) upon the release, discharge or termination of the Guarantee which resulted in the creation of such Note Guarantee pursuant to the first paragraph under “— Certain Covenants — Guarantees” (including the Guarantee of the Credit Agreement in the case of any Initial Guarantor), except a discharge, release or termination by or as a result of payment under such Guarantee; or | |
(4) upon legal defeasance of the Notes or satisfaction and discharge of the Indenture as provided below under the captions “Legal Defeasance and Covenant Defeasance” and “Satisfaction and Discharge.” |
Payments for Consent |
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Reports |
(1) default for 30 days in the payment when due of interest on, or Additional Interest with respect to, the Notes whether or not prohibited by the subordination provisions of the Indenture; | |
(2) default in payment when due (whether at maturity, upon acceleration, redemption or otherwise) of the principal of, or premium, if any, on the Notes, whether or not prohibited by the subordination provisions of the Indenture; | |
(3) failure by the Company or any of its Restricted Subsidiaries to comply with the provisions described under the captions “— Repurchase at the Option of Holders — Change of Control” or “— Certain Covenants — Merger, Consolidation or Sale of Assets;” | |
(4) failure by the Company or any of its Restricted Subsidiaries for 30 days after written notice by the Trustee or Holders representing 25% or more of the aggregate principal amount of Notes outstanding to comply with any of the other agreements in the Indenture; | |
(5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness by the Company or any of its Restricted Subsidiaries whether such Indebtedness now exists, or is created after the Issue Date, if that default: |
(a) is caused by a failure to make any payment when due at the final maturity of such Indebtedness (a “Payment Default”); or | |
(b) results in the acceleration of such Indebtedness prior to its express maturity, |
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and, in each case, the amount of any such Indebtedness, together with the amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more; |
(6) failure by the Company or any of its Significant Subsidiaries (or any Restricted Subsidiaries that together would constitute a Significant Subsidiary) to pay final judgments (to the extent such judgments are not paid or covered by insurance provided by a reputable carrier that has the ability to perform) aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; | |
(7) except as permitted by the Indenture, any Note Guarantee held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect or any Guarantor denies or disaffirms in writing its obligations under its Note Guarantee; and | |
(8) certain events of bankruptcy or insolvency with respect to the Company or any Significant Subsidiary of the Company (or any Restricted Subsidiaries that together would constitute a Significant Subsidiary). |
(1) the Holder gives the Trustee written notice of a continuing Event of Default; | |
(2) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy; | |
(3) such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; | |
(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and |
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(5) during such60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request. |
(1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Additional Interest, if any, on, such Notes when such payments are due from the trust referred to below; | |
(2) the Company’s obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust; | |
(3) the rights, powers, trusts, duties and immunities of the Trustee, and the Company’s and the Guarantors’ obligations in connection therewith; and | |
(4) the Legal Defeasance provisions of the Indenture. |
(1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, or interest and premium and Additional Interest, if any, on, the outstanding Notes on the applicable Stated Maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; |
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(2) in the case of Legal Defeasance, the Company will have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the Issue Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel will confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; | |
(3) in the case of Covenant Defeasance, the Company will have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; | |
(4) no Default or Event of Default will have occurred and be continuing on the date of such deposit; | |
(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; | |
(6) the Company must have delivered to the Trustee an Opinion of Counsel to the effect that, assuming no intervening bankruptcy of the Company or any Guarantor between the date of deposit and the 91st day following the deposit and assuming that no Holder is an “insider” of the Company under applicable bankruptcy law, after the 91st day following the deposit, the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code; | |
(7) the Company must deliver to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over the other existing creditors of the Company or with the actual intent of hindering, delaying or defrauding creditors of the Company; | |
(8) if the Notes are to be redeemed prior to their Stated Maturity, the Company must deliver to the Trustee irrevocable instructions to redeem all of the Notes on the specified redemption date; and | |
(9) the Company must deliver to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. |
(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; | |
(2) reduce the principal of or change the fixed maturity of any Note or alter the provisions, or waive any payment, with respect to the redemption of the Notes; |
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(3) reduce the rate of or change the time for payment of interest on any Note; | |
(4) waive a Default or Event of Default in the payment of principal of, or interest, or premium or Additional Interest, if any, on, the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); | |
(5) make any Note payable in money other than U.S. dollars; | |
(6) make any change in the provisions of the Indenture relating to waivers of past Defaults or that impairs the rights of Holders of Notes to receive payments of principal of, or interest or premium or Additional Interest, if any, on, the Notes on or after the due dates therefor; | |
(7) release any Guarantor that is a Significant Subsidiary from any of its obligations under its Note Guarantee or the Indenture, except in accordance with the terms of the Indenture; | |
(8) impair the right to institute suit for the enforcement of any payment of principal of, or interest or Additional Interest, if any, on, the Notes on or after the due dates therefor; | |
(9) amend, change or modify the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control in accordance with the covenant described under the caption “Repurchase at the Option of Holders — Change of Control” after such Change of Control has occurred, including amending, changing or modifying any definition to the extent relating thereto; | |
(10) amend or modify any of the provisions of the Indenture providing for, or the related definitions to the extent affecting, the subordination of the Notes or any Note Guarantee in any manner adverse to the Holders; or | |
(11) make any change in the preceding amendment and waiver provisions. |
(1) to cure any ambiguity, defect or inconsistency; | |
(2) to provide for uncertificated Notes in addition to or in place of certificated Notes; | |
(3) to provide for the assumption of the Company’s or any Guarantor’s obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Company’s or such Guarantor’s assets; | |
(4) to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not materially adversely affect the legal rights under the Indenture of any such Holder; | |
(5) to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act; | |
(6) to comply with the provisions described under “— Certain Covenants — Guarantees” or otherwise to add Guarantees with respect to the Notes, or to secure the Notes, or to confirm and evidence the release, termination or discharge of any Guarantee or Lien with respect to or securing the Notes when such release, termination or discharge is provided for under the Indenture; | |
(7) to evidence and provide for the acceptance of appointment by a successor Trustee; | |
(8) to conform the text of the Indenture, the Notes or any Note Guarantee to any provision of this “Description of Notes;” | |
(9) to provide that any Indebtedness that becomes an obligation of a Successor or a Guarantor pursuant to any merger or consolidation (and that is not expressly subordinated in right of payment to |
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the Notes or the Note Guarantees) ispari passuin right of payment with the Notes or the applicable Note Guarantee; or | |
(10) to provide for the issuance of Additional Notes in accordance with the Indenture. |
(1) either: |
(a) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or | |
(b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and accrued interest to the date of maturity or redemption; |
(2) no Default or Event of Default will have occurred and be continuing on the date of such deposit or will occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other material instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound; | |
(3) the Company or any Guarantor has paid or caused to be paid all sums then payable by it under the Indenture; and | |
(4) the Company has delivered irrevocable instructions to the Trustee under the Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be. |
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(1) the Company and the Guarantors are not permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy; | |
(2) for any reason, the Exchange Offer is not consummated within the required time period; or | |
(3) any Holder of Notes: |
(a) is prohibited by law or Commission policy from participating in the Exchange Offer; or | |
(b) may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales; or | |
(c) is a broker-dealer and owns Notes acquired directly from the Company or an affiliate of the Company, |
(1) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Company and the Guarantors will use their commercially reasonable efforts to file an Exchange Offer Registration Statement with the Commission on or prior to 90 days after the closing of this offering; | |
(2) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Company and the Guarantors will use their commercially reasonable efforts to have the Exchange Offer Registration Statement declared effective by the Commission on or prior to 180 days after the closing of this offering; | |
(3) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Company and the Guarantors will use their commercially reasonable efforts to |
(a) commence the Exchange Offer; and | |
(b) issue Exchange Notes in exchange for all Notes tendered prior thereto in the Exchange Offer; and |
(4) if obligated to file the Shelf Registration Statement, the Company and the Guarantors will use their commercially reasonable efforts to file the Shelf Registration Statement with the Commission on or prior to 90 days after such filing obligation arises and use their commercially reasonable efforts to cause the Shelf Registration to be declared effective by the Commission on or prior to 180 days after such obligation arises. |
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(1) the Company and the Guarantors fail to file any of the registration statements required by the Registration Rights Agreement on or before the date specified for such filing; or | |
(2) any of such registration statements is not declared effective by the Commission on or prior to the date specified for such effectiveness (the “Effectiveness Target Date”); or | |
(3) the Company and the Guarantors fail to consummate the Exchange Offer within 30 Business Days of the Effectiveness Target Date with respect to the Exchange Offer Registration Statement; or | |
(4) the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales or exchanges of Notes during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (1) through (4) above, a “Registration Default”), |
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(1) upon deposit of the Global Notes, DTC will credit the accounts of Participants designated by the Initial Purchasers with portions of the principal amount of the Global Notes; and | |
(2) ownership of these interests in the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the |
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Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interest in the Global Notes). |
(1) any aspect of DTC’s records or any Participant’s or Indirect Participant’s records relating to or payments made on account of beneficial ownership interest in the Global Notes or for maintaining, supervising or reviewing any of DTC’s records relating to the identity of the Participants to whose accounts the Global Notes are credited or any Participant’s or Indirect Participant’s records relating to the beneficial ownership interests in the Global Notes; or | |
(2) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants. |
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(1) DTC (a) notifies the Company that it is unwilling or unable to continue as depositary for the Global Notes or (b) has ceased to be a clearing agency registered under the Exchange Act, and in each case the Company fails to appoint a successor depositary; | |
(2) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Certificated Notes; or | |
(3) there will have occurred and be continuing a Default or Event of Default with respect to the Notes. |
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(1) the sale, lease, conveyance or other disposition of any assets (other than as provided in the following clause (2)); and | |
(2) the issuance of Equity Interests by any of the Company’s Restricted Subsidiaries or the sale by the Company or any Restricted Subsidiary thereof of Equity Interests in any of its Subsidiaries (other than directors’ qualifying shares and shares issued or sold to foreign nationals to the extent required by applicable law). |
(1) any single transaction or series of related transactions that involves assets or Equity Interests having a Fair Market Value of less than $1.0 million; | |
(2) a transaction governed by the provisions of the Indenture described above under the caption “— Repurchase at the Option of Holders — Change of Control” and/or the provisions described above under the caption “— Certain Covenants — Merger, Consolidation or Sale of Assets;” | |
(3) any sale, lease, conveyance, disposition or issuance to the Company or to another Restricted Subsidiary; | |
(4) the sale, lease, conveyance or other disposition of equipment, inventory, accounts receivable or other assets in the ordinary course of business; | |
(5) the sale, conveyance or other disposition of Cash Equivalents; | |
(6) any sale, conveyance or other disposition of accounts or notes receivable in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings; | |
(7) a Restricted Payment that is permitted by the covenant described above under the caption “— Certain Covenants — Restricted Payments,” any Permitted Investment and any Permitted Payment; |
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(8) any sale, conveyance or other disposition of any property, equipment or other assets that is surplus, damaged, worn out or obsolete; | |
(9) the creation of a Lien not prohibited by the Indenture; | |
(10) the sale or discount (with or without recourse, and on customary or commercially reasonable terms) of accounts receivable arising in the ordinary course of business; and | |
(11) any sale, conveyance or other disposition arising from foreclosure, condemnation or similar action with respect to any property or other assets, or the exercise of termination rights under any lease, license, concession or other agreement in the ordinary course of business. |
(1) with respect to a corporation, the board of directors of the corporation or, except in the context of the definitions of “Change of Control” and “Continuing Directors,” a duly authorized committee thereof; | |
(2) with respect to a partnership, the Board of Directors of the general partner of the partnership; and | |
(3) with respect to any other Person, the board or committee of such Person serving a similar function. |
(1) in the case of a corporation, corporate stock; | |
(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; | |
(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and | |
(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. |
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(1) cash; | |
(2) obligations issued or fully guaranteed or insured by the United States government or any agency or instrumentality thereof (providedthat the full faith and credit of the United States is pledged in support thereof), maturing, unless such securities are deposited to defease any Indebtedness, not more than five years from the date of acquisition; | |
(3) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with (a) any lender under the Credit Agreement, (b) any domestic commercial bank having capital and surplus in excess of $500.0 million or (c) any bank with a commercial paper rating at the time of acquisition thereof of P-1 or better from Moody’s Investors Service, Inc. or A-1 or better from Standard & Poor’s Rating Services; | |
(4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; | |
(5) commercial paper having a rating of P-1 or better from Moody’s Investors Service, Inc. or A-1 or better from Standard & Poor’s Rating Services and in each case maturing within nine months after the date of acquisition; | |
(6) securities issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, rated at least “A” by Moody’s Investors Service, Inc. or Standard & Poor’s Rating Services and having maturities of not more than five years from the date of acquisition; | |
(7) investments in funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (6) of this definition; | |
(8) investments in money market funds subject to the risk limiting conditions of Rule 2a-7 (or any successor rule) of the Commission under the Investment Company Act of 1940, as amended; and | |
(9) investments similar to any of the foregoing, and of comparable credit quality and tenor, denominated in foreign currencies, as reasonably required in connection with any business conducted by a Foreign Subsidiary in the jurisdiction where such foreign currency is legal tender, and approved by the Board of Directors. |
(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, to any Person (other than the Permitted Holders) and any “person” (as that term is used in Section 13(d)(3) of the Exchange Act) other than the Permitted Holders or a Parent, becomes the Beneficial Owner of (i) 35% or more of the voting power of the Voting Stock of such transferee Person and (ii) more of the voting power of the Voting Stock of such transferee Person than the voting power of the Voting Stock of such transferee Person Beneficially Owned, directly or indirectly, by the Permitted Holders;providedthat, (x) so long as such transferee Person is a Wholly Owned Subsidiary of any Parent, no such “person” (as so defined) shall be deemed to become a Beneficial Owner of 35% or more of the voting power of the Voting Stock of such transferee Person unless such “person” shall be or become a Beneficial Owner of 35% or more of the voting power of the Voting Stock of such Parent (and more of the voting power of the Voting Stock of such Parent than the voting power of such Voting Stock Beneficially Owned, directly or indirectly, by the Permitted Holders) and (y) any Voting Stock of which any Permitted Holder is the Beneficial Owner shall not be included in any Voting Stock of which such “person” (as so |
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defined) is the Beneficial Owner, unless such “person” is not an Affiliate of any Permitted Holder and has the sole voting power with respect to that Voting Stock; | |
(2) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more of the Permitted Holders or a Parent, becomes the Beneficial Owner, directly or indirectly, of (i) 35% or more of the voting power of the Voting Stock of the Company and (ii) more of the voting power of the Voting Stock of the Company than the voting power of the Voting Stock of the Company Beneficially Owned, directly or indirectly, by the Permitted Holders;providedthat, (x) so long as the Company is a Wholly Owned Subsidiary of any Parent, no such “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) shall be deemed to become a Beneficial Owner of 35% or more of the voting power of the Voting Stock of the Company unless such “person” or “group” shall be or become a Beneficial Owner of 35% or more of the voting power of the Voting Stock of such Parent (and more of the voting power of the Voting Stock of such Parent than the voting power of such Voting Stock Beneficially Owned, directly or indirectly, by the Permitted Holders) and (y) any Voting Stock of which any Permitted Holder is the Beneficial Owner shall not be included in any Voting Stock of which such “person” (as so defined) is the Beneficial Owner, unless such “person” is not an Affiliate of any Permitted Holder and has the sole voting power with respect to that Voting Stock; | |
(3) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors; or | |
(4) the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where immediately after giving effect to such transaction, no “person” or “group” (as such terms are used in Section 13(d) and 14(d) of the Exchange Act), other than the Permitted Holders or a Parent, becomes, directly or indirectly, the Beneficial Owner of (i) 35% or more of the voting power of the Voting Stock of the surviving Person and (ii) more of the voting power of the Voting Stock of such surviving Person than the voting power of the Voting Stock of such surviving Person Beneficially Owned, directly or indirectly, by the Permitted Holders;provided that, (x) so long as such surviving Person is a Wholly Owned Subsidiary of any Parent, no such “person” or “group” (as so defined) shall be deemed to become a Beneficial Owner of 35% or more of the voting power of the Voting Stock of such surviving Person unless such “person” or “group” shall be or become a Beneficial Owner of 35% or more of the voting power of the Voting Stock of such Parent (and more of the voting power of the Voting Stock of such Parent than the voting power of such Voting Stock Beneficially Owned, directly or indirectly, by the Permitted Holders) and (y) any Voting Stock of which any Permitted Holder is the Beneficial Owner shall not be included in any Voting Stock of which such “person” (as so defined) is the Beneficial Owner, unless such “person” is not an Affiliate of any Permitted Holder and has the sole voting power with respect to that Voting Stock. |
(1) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, including such taxes paid by such Person and its Restricted Subsidiaries with respect to minority interest income or expense for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income;plus |
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(2) Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that any such Fixed Charges were deducted in computing such Consolidated Net Income;plus | |
(3) depreciation, amortization (including amortization of intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income;plus | |
(4) the amount of any extraordinary, unusual or non-recurring losses, charges or expenses of such Person and its Restricted Subsidiaries to the extent that any such losses, charges or expenses were deducted in computing such Consolidated Net Income;plus | |
(5) for any quarter in the year ended December 31, 2005, all adjustments to “EBITDA” used in connection with the calculation of pro forma “Adjusted EBITDA” for the year ended December 31, 2005 (as set forth under “Management’s Discussion and Analysis of Results of Operation and Financial Condition — Non-GAAP Financial Measure.”) to the extent such adjustments were used in computing such Consolidated Net Income in such period and continue to be applicable;plus | |
(6) the minority interest expense consisting of subsidiary income attributable to minority equity interests of third parties in any non-Wholly Owned Restricted Subsidiary to the extent such expense was deducted in computing Consolidated Net Income;minus | |
(7) (A) non-cash items (other than the accrual of revenue), and extraordinary, unusual or non-recurring gains and (B) the minority interest income consisting of subsidiary losses attributable to the minority equity interests of third parties in any non-Wholly Owned Restricted Subsidiary, in each case to the extent increasing such Consolidated Net Income for such period; |
(1) the Net Income or loss of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included (i) solely for the purpose of determining the amount available for Restricted Payments under clause (A)(3) of “Certain Covenants — Restricted Payments” only to the extent of the amount of dividends or distributions paid to the specified Person or a Restricted Subsidiary thereof and (ii) solely for the purpose of determining Consolidated Cash Flow |
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only to the extent of the amount of dividends or distributions paid in cash (or converted to cash) to the specified Person or a Restricted Subsidiary thereof; | |
(2) the Net Income of any Restricted Subsidiary will be excluded to the extent that the declaration and payment of dividends and similar distributions, and the making of loans and advances, by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its equityholders; | |
(3) the Net Income of any Person acquired (in a pooling of interests or similar transactions) during the specified period for any period prior to the date of such acquisition will be excluded; | |
(4) the cumulative effect of a change in accounting principles will be excluded; | |
(5) any non-cash compensation expense recorded from grants of restricted stock, stock options or other rights to officers, directors and employees of such Person or any of its Restricted Subsidiaries will be excluded; | |
(6) any unrealized gains or losses in respect of currency Hedging Obligations will be excluded; | |
(7) any unrealized foreign currency transaction gains or losses in respect of Indebtedness of any Person denominated in a currency other than the functional currency of such Person will be excluded; | |
(8) any unrealized foreign currency translation or transaction gains or losses in respect of Indebtedness or other obligations owing between or among any of the Company and its Restricted Subsidiaries will be excluded; and | |
(9) any non-cash charge, expense or other impact attributable to application of the purchase method of accounting (including the total amount of depreciation and amortization, cost of sales or other non-cash expense resulting from thewrite-up of assets to the extent resulting from such purchase accounting adjustments) will be excluded. |
(1) was a member of such Board of Directors on the Issue Date; or | |
(2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors or one or more Permitted Holders who were members of such Board of Directors at the time of such nomination or election. |
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(1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations, and net of interest income, whether received or accrued, of such Person and its Restricted Subsidiaries for such period;plus | |
(2) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period;plus | |
(3) any interest expense on Indebtedness of another Person (other than such Person or one of its Restricted Subsidiaries) that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon;plus | |
(4) all dividends, whether paid or accrued and whether or not in cash, on any series of Disqualified Stock of such Person or Disqualified Stock or Preferred Stock of any of its Restricted Subsidiaries, other than (x) dividends on Equity Interests payable solely in Equity Interests (other than |
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Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary of the Company and (y) Permitted Tax Distributions, and unless (a) such Person is a Flow-Through Entity or (b) such dividends are paid or accrued on Preferred Stock of any Restricted Subsidiary that is a joint venture or similar entity and not a Wholly Owned Restricted Subsidiary owned by the minority investor in such Restricted Subsidiary, times a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, |
(1) acquisitions and dispositions of Merchant Portfolios, business entities or property and assets constituting a division, operating unit of a business or line of business of any Person that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date will be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period will be calculated on a pro forma basis in accordance with Regulation S-X under the Securities Act, but without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income; and | |
(2) consolidated interest expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on apro formabasis and bearing a floating interest rate will be computed as if the rate in effect on the Calculation Date (taking into account any interest rate option, swap, cap or similar agreement applicable to such Indebtedness if such agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period. |
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(1) interest rate swap agreements, interest rate cap agreements, interest rate collar agreements and other similar agreements or arrangements with respect to interest rates; | |
(2) commodity swap agreements, commodity option agreements, commodity forward contracts and other similar agreements or arrangements with respect to commodity prices; and | |
(3) foreign exchange contracts, currency swap agreements and other similar agreements or arrangements with respect to foreign currency exchange rates. |
(1) in respect of borrowed money; | |
(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); | |
(3) in respect of banker’s acceptances; | |
(4) in respect of Capital Lease Obligations; | |
(5) in respect of the balance deferred and unpaid of the purchase price of any property or services, except any such balance that constitutes an accrued expense or trade payable; | |
(6) representing Hedging Obligations; | |
(7) representing Disqualified Stock valued at its involuntary maximum fixed repurchase price excluding accrued dividends; or |
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(8) in the case of a Subsidiary of such Person, representing Preferred Stock valued at its involuntary maximum fixed repurchase price excluding accrued dividends; |
(1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; | |
(2) the principal amount (or, in the case of letters of credit, the face amount) thereof, in the case of any other Indebtedness; and | |
(3) in the case of Hedging Obligations, the termination value of the agreement or arrangement giving rise to such Hedging Obligation that would be payable at the time of determination. |
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(1) any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with: (a) any sale of assets outside the ordinary course of business of such Person; or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and | |
(2) any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss. |
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(1) any Investment in the Company or in a Restricted Subsidiary of the Company; | |
(2) any Investment in Cash Equivalents; | |
(3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment: |
(a) such Person becomes a Restricted Subsidiary of the Company; or | |
(b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company; |
(4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales” or from a sale, conveyance or other disposition of property or assets that does not constitute an Asset Sale; | |
(5) Hedging Obligations that are Incurred for the purpose of fixing, hedging or swapping interest rate, commodity price or foreign currency exchange rate risk (or to reverse or amend any such agreements previously made for such purposes), and not for speculative purposes; | |
(6) stock, obligations or securities received in settlement of debts or claims, or upon foreclosure, perfection or enforcement of any Lien, or in satisfaction of judgments or in connection with bankruptcy or insolvency of other Persons; | |
(7) loans, advances or other extensions of credit (including Guarantees) to or in respect of sales agents, sales representatives, independent sales groups, customers or suppliers, in the ordinary course of business; receivables created or acquired or pledges or deposits made in the ordinary course of business; and endorsements for collection or deposit arising in the ordinary course of business; | |
(8) commission, payroll, travel and similar advances to officers and employees of the Company or any of its Restricted Subsidiaries that are expected at the time of such advance ultimately to be recorded as an expense in conformity with GAAP; | |
(9) loans or advances to equityholders of any Person acquired by the Company or any of its Subsidiaries to fund taxes and expenses payable by such equityholders in connection with such acquisition not to exceed $5.0 million in the aggregate outstanding at any one time; | |
(10) loans or advances to officers and employees not to exceed $5.0 million in the aggregate outstanding at any one time; |
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(11) Investments existing, or made pursuant to legally binding commitments existing, on the Issue Date; | |
(12) loans or advances to any current or former employee, officer, or director of the Company or any of its Restricted Subsidiaries or any other Management Investor in connection with such Person’s purchase of Equity Interest of the Company or any Parent in an aggregate amount at any time outstanding not to exceed the amount of Permitted Payments permitted pursuant to clause (7) of paragraph (B) of the covenant described under “— Certain Covenants — Restricted Payments”; | |
(13) (1) Investments in any Receivables Subsidiary, or in connection with a Financing Disposition by or to any Receivables Entity, including Investments of funds held in accounts permitted or required by the arrangements governing such Financing Disposition or any related Indebtedness, or (2) any promissory note issued by the Company or any Parent, provided that if such Parent receives cash from the relevant Receivables Entity in exchange for such note, an equal cash amount is contributed by any Parent to the Company; | |
(14) other Investments, together with all other Investments made pursuant to this clause (14) since the Issue Date and all Designated Non-cash Consideration received pursuant to clause (2)(c) under the first paragraph under the caption “Repurchase at the Option of Holders — Asset Sales” and that is at that time outstanding, not to exceed the greater of (a) $25.0 million and (b) 8% of Total Assets. |
(1) Liens on the assets of the Company and any Restricted Subsidiary of the Company securing Senior Debt; | |
(2) Liens in favor of the Company or any Restricted Subsidiary that is a Guarantor; | |
(3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were not created in connection with, or in contemplation of, such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary (plus improvements, accessions, proceeds or dividends or distributions in respect thereof); | |
(4) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company, provided that such Liens were not created in connection with, or in contemplation of, such acquisition and do not extend to any property other than the property so acquired by the Company or the Restricted Subsidiary (plus improvements, accessions, proceeds or dividends or distributions in respect thereof); | |
(5) Liens securing the Notes and the Note Guarantees; | |
(6) Liens existing on, or provided for under written arrangements existing on, the Issue Date; | |
(7) Liens securing Permitted Refinancing Indebtedness; provided that such Liens do not extend to any property or assets other than the property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secure (or under such written arrangements with respect to the Indebtedness being refinanced could secure) the Indebtedness being refinanced; | |
(8) Liens on property or assets used to defease or to satisfy and discharge Indebtedness; provided that such defeasance or satisfaction and discharge is not prohibited by the Indenture; | |
(9) Liens securing Indebtedness or other obligations of any Receivables Entity; and | |
(10) Liens securing obligations that do not exceed $5.0 million at any one time outstanding. |
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(1) the amount of such Permitted Refinancing Indebtedness does not exceed the amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued and unpaid interest thereon and the amount of any reasonably determined premium necessary to accomplish such refinancing and such reasonable expenses incurred in connection therewith (in each case as determined by the Company in good faith)); | |
(2) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded ispari passuwith or expressly subordinated in right of payment to the Notes or the Note Guarantees, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; | |
(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is expressly subordinated in right of payment to the Notes or the Note Guarantees, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of the Notes and is subordinated in right of payment to the Notes or the Note Guarantees, as applicable, on terms at least as favorable, taken as a whole, to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; | |
(4) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded ispari passuin right of payment with the Notes or any Note Guarantees, such Permitted Refinancing Indebtedness ispari passuwith, or subordinated in right of payment to, the Notes or such Note Guarantees; and | |
(5) such Permitted Refinancing Indebtedness is Incurred by either (a) a Restricted Subsidiary that is a Guarantor, or that is an obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded, or that could have Incurred such Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded in compliance with the covenant described under the caption “— Certain Covenants — Incurrence of Indebtedness” or (b) the Company. |
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(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and | |
(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof). |
(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by | |
(2) the then outstanding principal amount of such Indebtedness. |
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• | banks, insurance companies, or other financial institutions; | |
• | real estate investment trusts or regulated investment companies; | |
• | persons subject to the alternative minimum tax; | |
• | tax-exempt organizations; | |
• | dealers in securities or currencies; | |
• | traders in securities that elect to use amark-to-market method of accounting for their securities holdings; | |
• | foreign persons or entities (except to the extent specifically set forth below); | |
• | certain former citizens or long-term residents of the United States; | |
• | U.S. holders (as defined below) whose functional currency is not the U.S. dollar; | |
• | persons who hold the notes as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction; or | |
• | persons deemed to sell the notes under the constructive sale provisions of the Code. |
• | an individual citizen or resident of the U.S.; | |
• | a corporation (or other entities taxable as corporations), created or organized under the laws of the U.S., any state thereof, or the District of Columbia; | |
• | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or | |
• | a trust that (1) is subject to (A) the primary supervision of a U.S. court and (B) the authority of one or more U.S. persons to control all of its substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person. |
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• | you do not own, actually or constructively, 10% or more of the total combined voting power of all classes of our stock entitled to vote within the meaning of the Code; | |
• | you are not a “controlled foreign corporation” with respect to which we are, directly or indirectly, a “related person” within the meaning of the Code; | |
• | you are not a bank receiving interest pursuant to a loan agreement entered into in the ordinary course of its trade or business; and | |
• | you provide your name and address, and certify, under penalties of perjury, that you are not a U.S. person (which certification may be made on an IRS Form W-8BEN (or successor form)), or if you hold your notes through certain intermediaries, you and the intermediaries satisfy the certification requirements of applicable Treasury Regulations. |
• | the gain is effectively connected with your conduct of a trade or business in the U.S. (or if a U.S. income tax treaty applies, the gain is effectively connected with your conduct of a trade or business in the U.S. and attributable to a U.S. “permanent establishment” maintained by you); or | |
• | you are an individual who is present in the U.S. for 183 days or more in the taxable year of sale, exchange or redemption, and certain conditions are met. |
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• | all quarterly and annual fiscal information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if we were required to file such forms, together with a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report thereon by our certified independent accountants; and | |
• | all current reports (excluding exhibits) that would be required to be filed with the SEC on Form 8-K if we were required to file such reports. |
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Page | |||||
Audited Financial Statements: | |||||
F-1 | |||||
F-2 | |||||
F-3 | |||||
F-4 | |||||
F-5 | |||||
F-7 | |||||
Unaudited Financial Statements: | |||||
F-31 | |||||
F-32 | |||||
F-33 | |||||
F-34 |
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/s/ ERNST & YOUNG LLP |
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December 31, | December 31, | |||||||||
2005 | 2004 | |||||||||
(in thousands, except share | ||||||||||
data and per share amounts) | ||||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 1,023 | $ | 888 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $508 and $130 at December 31, 2005 and December 31, 2004, respectively | 22,718 | 17,031 | ||||||||
Prepaid expenses and other current assets | 2,549 | 6,765 | ||||||||
Total current assets | 26,290 | 24,684 | ||||||||
Restricted cash | 3,090 | 3,248 | ||||||||
Property and equipment, net | 2,907 | 2,749 | ||||||||
Intangible assets, net of accumulated amortization of $65,199 and $28,896 at December 31, 2005 and December 31, 2004, respectively | 192,343 | 219,331 | ||||||||
Goodwill, net | 105,178 | 79,360 | ||||||||
Deferred tax asset, net | 5,757 | 701 | ||||||||
Other assets, net | 5,416 | 6,175 | ||||||||
Total assets | $ | 340,981 | $ | 336,248 | ||||||
LIABILITIES and STOCKHOLDERS’ EQUITY | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 6,394 | $ | 2,418 | ||||||
Accrued liabilities and other | 24,575 | 11,377 | ||||||||
Total current liabilities | 30,969 | 13,795 | ||||||||
Minority interest in equity of consolidated subsidiary | 431 | — | ||||||||
Related party long-term debt | — | 15,937 | ||||||||
Long-term debt | 100,228 | 152,500 | ||||||||
Total liabilities | 131,628 | 182,232 | ||||||||
Commitments and contingencies (Note 6) | ||||||||||
Stockholders’ equity | ||||||||||
Preferred stock, $0.01 par value; 17,422,800 shares authorized, no shares issued or outstanding at December 31, 2005 or December 31, 2004 | — | — | ||||||||
Common stock, $0.01 par value; 180,000,000 shares authorized, 17,725,181 shares issued and outstanding at December 31, 2005; 180,000,000 shares authorized, 16,757,891 shares issued and outstanding at December 31, 2004 | 155,870 | 132,825 | ||||||||
Deferred compensation | (3,413 | ) | (2,318 | ) | ||||||
Retained earnings | 56,896 | 23,509 | ||||||||
Total stockholders’ equity | 209,353 | 154,016 | ||||||||
Total liabilities and stockholders’ equity | $ | 340,981 | $ | 336,248 | ||||||
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Year Ended | Year Ended | Year Ended | ||||||||||||
December 31, | December 31, | December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||||
(in thousands, except per share data) | ||||||||||||||
Revenues | $ | 702,712 | $ | 364,182 | $ | 226,052 | ||||||||
Operating expenses: | ||||||||||||||
Interchange | 407,736 | 176,562 | 114,255 | |||||||||||
Other costs of services | 213,138 | 135,316 | 76,571 | |||||||||||
Selling, general and administrative | 18,062 | 12,437 | 8,012 | |||||||||||
Total operating expenses | 638,936 | 324,315 | 198,838 | |||||||||||
Income from operations | 63,776 | 39,867 | 27,214 | |||||||||||
Other expense (income): | ||||||||||||||
Interest expense | 8,657 | 2,707 | 9,928 | |||||||||||
Other expense (income) | 1,423 | (279 | ) | 265 | ||||||||||
Income before income taxes and minority interest in earnings of consolidated subsidiary | 53,696 | 37,439 | 17,021 | |||||||||||
Income tax provision | 20,915 | 12,704 | 1,403 | |||||||||||
Minority interest in loss of consolidated subsidiary | 606 | — | — | |||||||||||
Net income | 33,387 | 24,735 | 15,618 | |||||||||||
Accretion of mandatorily redeemable convertible preferred stock | — | — | (652 | ) | ||||||||||
Net income allocable to common stockholders | $ | 33,387 | $ | 24,735 | $ | 14,966 | ||||||||
Basic and diluted earnings per common share: | ||||||||||||||
Earnings per share | ||||||||||||||
Basic | $ | 1.96 | $ | 1.50 | $ | 1.14 | ||||||||
Diluted | $ | 1.84 | $ | 1.39 | $ | 1.02 | ||||||||
Weighted average shares outstanding | ||||||||||||||
Basic | 17,049 | 16,545 | 13,131 | |||||||||||
Diluted | 18,259 | 18,137 | 15,052 |
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Stockholders’ Equity | ||||||||||||||||||||
Common Stock | Retained | |||||||||||||||||||
Deferred | Earnings | |||||||||||||||||||
Shares | Amount | Compensation | (Deficit) | Total | ||||||||||||||||
(in thousands, except share data) | ||||||||||||||||||||
Balance at December 31, 2002 | 6,736,075 | $ | 29,736 | $ | (25 | ) | $ | (16,192 | ) | $ | 13,519 | |||||||||
Issuance of common stock for cash | 5,625,000 | 75,589 | — | — | 75,589 | |||||||||||||||
Issuance of common stock in acquisition | 118,409 | 3,000 | — | — | 3,000 | |||||||||||||||
Cancellation of shares in payment of note receivable | (38,057 | ) | (957 | ) | — | — | (957 | ) | ||||||||||||
Conversion of debt to common stock | 563,606 | 9,026 | — | — | 9,026 | |||||||||||||||
Issuance of common stock upon exercise of warrants | 2,012,648 | 36 | — | — | 36 | |||||||||||||||
Exercise of stock options and related tax benefits | 197,901 | 1,278 | — | — | 1,278 | |||||||||||||||
Accretion of mandatorily redeemable convertible preferred stock | — | — | — | (652 | ) | (652 | ) | |||||||||||||
Conversion of preferred stock to common stock | 1,192,470 | 7,322 | — | — | 7,322 | |||||||||||||||
Amortization of deferred compensation | — | — | 25 | — | 25 | |||||||||||||||
Issuance of stock options to nonemployees for services rendered | — | 30 | — | — | 30 | |||||||||||||||
Net income | 15,618 | 15,618 | ||||||||||||||||||
Balance at December 31, 2003 | 16,408,052 | $ | 125,060 | $ | — | $ | (1,226 | ) | $ | 123,834 | ||||||||||
Exercise of stock options and related tax benefits | 256,647 | 4,333 | — | — | 4,333 | |||||||||||||||
Issuance of restricted stock to employees | 93,192 | 3,410 | (3,410 | ) | — | — | ||||||||||||||
Amortization of restricted stock | — | — | 1,092 | — | 1,092 | |||||||||||||||
Issuance of stock options to nonemployees for services rendered | — | 22 | — | — | 22 | |||||||||||||||
Net income | 24,735 | 24,735 | ||||||||||||||||||
Balance at December 31, 2004 | 16,757,891 | $ | 132,825 | $ | (2,318 | ) | $ | 23,509 | $ | 154,016 | ||||||||||
Exercise of stock options and related tax benefits | 240,448 | 5,307 | — | — | 5,307 | |||||||||||||||
Issuance of restricted stock to employees | 100,000 | 3,625 | (3,625 | ) | — | — | ||||||||||||||
Amortization of restricted stock | — | — | 1,530 | — | 1,530 | |||||||||||||||
Restricted stock cancelled | (35,228 | ) | (1,334 | ) | 1,000 | — | (334 | ) | ||||||||||||
Conversion of debt to common stock | 662,070 | 15,331 | — | — | 15,331 | |||||||||||||||
Issuance of stock options to nonemployees for services rendered | — | 116 | — | — | 116 | |||||||||||||||
Net income | �� | 33,387 | 33,387 | |||||||||||||||||
Balance at December 31, 2005 | 17,725,181 | $ | 155,870 | $ | (3,413 | ) | $ | 56,896 | $ | 209,353 | ||||||||||
F-4
Table of Contents
Year Ended | Year Ended | Year Ended | |||||||||||||
December 31, | December 31, | December 31, | |||||||||||||
2005 | 2004 | 2003 | |||||||||||||
(in thousands) | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net income | $ | 33,387 | $ | 24,735 | $ | 15,618 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 40,657 | 20,143 | 8,041 | ||||||||||||
Noncash interest expense | 987 | 681 | 6,383 | ||||||||||||
Changes in assets and liabilities: | |||||||||||||||
Accounts receivable | (5,687 | ) | (3,923 | ) | (5,995 | ) | |||||||||
Prepaid expenses and other current assets | 4,260 | (4,137 | ) | (1,327 | ) | ||||||||||
Other assets | (5,757 | ) | (2,922 | ) | 1,375 | ||||||||||
Accounts payable | 3,961 | (625 | ) | 67 | |||||||||||
Accrued liabilities and other | 4,420 | 4,499 | (4,099 | ) | |||||||||||
Net cash provided by operating activities | 76,228 | 38,451 | 20,063 | ||||||||||||
Cash flows from investing activities: | |||||||||||||||
Changes in restricted cash | 209 | 7,893 | (7,850 | ) | |||||||||||
Expenditures for property and equipment | (1,133 | ) | (897 | ) | (631 | ) | |||||||||
Acquisitions of businesses, portfolios and other intangibles, net of cash acquired | (24,148 | ) | (148,572 | ) | (75,662 | ) | |||||||||
Payments related to businesses previously acquired | (990 | ) | (2,000 | ) | (2,099 | ) | |||||||||
Net cash used in investing activities | (26,062 | ) | (143,576 | ) | (86,242 | ) | |||||||||
Cash flows from financing activities: | |||||||||||||||
Net (repayments) borrowings on line of credit | (52,500 | ) | 107,500 | 43,950 | |||||||||||
Repayments of debt | (721 | ) | (4,526 | ) | (55,267 | ) | |||||||||
Proceeds from issuance of common stock | 3,190 | 2,306 | 76,398 | ||||||||||||
Net cash (used in) provided by financing activities | (50,031 | ) | 105,280 | 65,081 | |||||||||||
Net increase (decrease) in cash and cash equivalents | 135 | 155 | (1,098 | ) | |||||||||||
Cash and cash equivalents, beginning of period | 888 | 733 | 1,831 | ||||||||||||
Cash and cash equivalents, end of period | $ | 1,023 | $ | 888 | $ | 733 | |||||||||
F-5
Table of Contents
2005 | 2004 | 2003 | ||||||||||||
(in thousands) | ||||||||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||
Cash paid during the period for income taxes | $ | 20,179 | $ | 9,968 | $ | 872 | ||||||||
Cash paid during the period for interest | $ | 8,241 | $ | 1,753 | $ | 3,417 | ||||||||
Supplemental disclosure of noncash investing and financing activities: | ||||||||||||||
Accrual of deferred payment for purchase of business previously acquired | $ | 9,500 | $ | — | $ | — | ||||||||
Settlement of income tax withholding obligations through receipt of iPayment common stock | $ | 334 | $ | — | $ | — | ||||||||
Conversion of debt to common stock | $ | 15,331 | $ | — | $ | 9,026 | ||||||||
Mandatorily redeemable convertible preferred stock: | ||||||||||||||
Accretion | $ | — | $ | — | $ | 652 | ||||||||
Conversion to common stock | $ | — | $ | — | $ | 7,322 | ||||||||
Settlement of notes receivable through receipt of iPayment common stock | $ | — | $ | — | $ | 957 | ||||||||
Acquisitions of businesses funded with | ||||||||||||||
Common stock | $ | — | $ | — | $ | 3,000 |
F-6
Table of Contents
1. | Organization and Business and Basis of Presentation |
F-7
Table of Contents
2. | Summary of Significant Accounting Policies |
F-8
Table of Contents
2005 | 2004 | 2003 | |||||||||||||||||||||||||||||||||||
Income | Common | Per Share | Income | Common | Per Share | Income | Common | Per Share | |||||||||||||||||||||||||||||
Available | Shares | Amount | Available | Shares | Amount | Available | Shares | Amount | |||||||||||||||||||||||||||||
Basic earnings per share | $ | 33,387 | 17,049 | $ | 1.96 | $ | 24,735 | 16,545 | $ | 1.50 | $ | 14,966 | 13,131 | $ | 1.14 | ||||||||||||||||||||||
Effects of dilutive securities: | |||||||||||||||||||||||||||||||||||||
Stock options | — | 697 | (0.08 | ) | — | 870 | (0.08 | ) | — | 1,259 | (0.10 | ) | |||||||||||||||||||||||||
Convertible debt | 278 | 424 | (0.03 | ) | 404 | 662 | (0.02 | ) | 405 | 662 | (0.02 | ) | |||||||||||||||||||||||||
Restricted stock | — | 89 | (0.01 | ) | — | 60 | (0.01 | ) | — | — | — | ||||||||||||||||||||||||||
Diluted earnings per share | $ | 33,665 | 18,259 | $ | 1.84 | $ | 25,139 | 18,137 | $ | 1.39 | $ | 15,371 | 15,052 | $ | 1.02 | ||||||||||||||||||||||
F-9
Table of Contents
Weighted-average | ||||
Useful Life | ||||
Merchant processing portfolios | 4 to 7 years | |||
Other intangible assets | 3 to 5 years |
F-10
Table of Contents
Year Ended | Amount | ||||
2006 | $ | 37,102 | |||
2007 | 36,003 | ||||
2008 | 34,908 | ||||
2009 | 33,001 | ||||
2010 | 30,594 | ||||
Thereafter: | 20,735 | ||||
Total | 192,343 | ||||
F-11
Table of Contents
F-12
Table of Contents
Year Ended December 31, | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
Net income, as reported | $ | 33,387 | $ | 24,735 | $ | 14,966 | |||||||
Deduct: Total stock-based employee compensation expense determined under fair-value-based method | (2,338 | ) | (1,635 | ) | (1,034 | ) | |||||||
Pro forma net income | $ | 31,049 | $ | 23,100 | $ | 13,932 | |||||||
Earnings per share: | |||||||||||||
As reported: | |||||||||||||
Basic | $ | 1.96 | $ | 1.50 | $ | 1.14 | |||||||
Diluted | $ | 1.84 | $ | 1.39 | $ | 1.02 | |||||||
Pro Forma: | |||||||||||||
Basic | $ | 1.82 | $ | 1.40 | $ | 1.06 | |||||||
Diluted | $ | 1.72 | $ | 1.30 | $ | 0.95 |
F-13
Table of Contents
3. | Initial Public Offering |
4. | Acquisitions |
F-14
Table of Contents
F-15
Table of Contents
5. | Details of Balance Sheet Accounts |
December 31, 2005 | December 31, 2004 | |||||||
(in thousands) | ||||||||
Property and Equipment, net: | ||||||||
Machinery and equipment | $ | 1,131 | $ | 814 | ||||
Furniture and fixtures | 1,090 | 950 | ||||||
Leasehold improvements | 287 | 155 | ||||||
Computer software and equipment | 1,549 | 869 | ||||||
Terminals | 1,299 | 2,872 | ||||||
5,356 | 5,660 | |||||||
Less — accumulated depreciation and amortization | (2,449 | ) | (2,911 | ) | ||||
$ | 2,907 | $ | 2,749 | |||||
Goodwill, net: | ||||||||
Goodwill, net — beginning balance | 79,360 | 73,002 | ||||||
Goodwill acquired during the period | 25,492 | 6,271 | ||||||
Adjustments to goodwill acquired in prior period | 326 | 87 | ||||||
$ | 105,178 | $ | 79,360 | |||||
6. | Commitments and Contingencies |
Year Ending | Amount | |||
2006 | $ | 1,549 | ||
2007 | 1,343 | |||
2008 | 823 | |||
2009 | 790 | |||
2010 | 42 | |||
Thereafter | — | |||
Total | $ | 4,547 | ||
F-16
Table of Contents
Year Ending | Amount | |||
2006 | $ | 16,119 | ||
2007 | 11,230 | |||
2008 | 8,764 | |||
2009 | 4,027 | |||
2010 | 2,819 | |||
Thereafter | 3,354 | |||
Total | $ | 46,313 | ||
F-17
Table of Contents
F-18
Table of Contents
F-19
Table of Contents
F-20
Table of Contents
F-21
Table of Contents
F-22
Table of Contents
7. | Long-Term Debt |
December 31, | ||||||||
2005 | 2004 | |||||||
Revolving credit facility | $ | 100,000 | $ | 152,500 | ||||
Notes payable to ECX preferred stockholders including accrued interest | — | 15,937 | ||||||
Various equipment lease agreements | 329 | 3 | ||||||
100,329 | 168,440 | |||||||
Less: current portion of long-term debt | (101 | ) | (3 | ) | ||||
$ | 100,228 | $ | 168,437 | |||||
F-23
Table of Contents
Year Ending | Amount | |||
2006 | $ | 101 | ||
2007 | 102 | |||
2008 | 100,069 | |||
2009 | 41 | |||
2010 | 16 | |||
Thereafter | — | |||
$ | 100,329 | |||
8. | Income Taxes |
2005 | 2004 | 2003 | ||||||||||||
Current: | ||||||||||||||
Federal | $ | 19,512 | $ | 9,751 | $ | 692 | ||||||||
State | 4,080 | 2,275 | 711 | |||||||||||
Total current | 23,592 | 12,026 | 1,403 | |||||||||||
Deferred | (1,933 | ) | 4,569 | 5,389 | ||||||||||
Change in valuation allowance | (340 | ) | (3,891 | ) | (5,389 | ) | ||||||||
Minority interest | (404 | ) | — | — | ||||||||||
Total income tax provision | $ | 20,915 | $ | 12,704 | $ | 1,403 | ||||||||
2005 | 2004 | 2003 | ||||||||||
Statutory Rate | 35 | % | 35 | % | 35 | % | ||||||
Increase (decreases) in taxes resulting from the following: | ||||||||||||
State income taxes net of federal tax benefit | 5 | % | 6 | % | 6 | % | ||||||
Recognition of previously reserved deferred tax assets utilized in current year | (1 | )% | (8 | )% | (32 | )% | ||||||
Permanent differences and other | — | 1 | % | (1 | )% | |||||||
Total | 39 | % | 34 | % | 8 | % | ||||||
F-24
Table of Contents
2005 | 2004 | ||||||||
Deferred tax assets: | |||||||||
Depreciation and amortization | $ | 9,114 | $ | 2,423 | |||||
Net operating loss | 1,149 | 2,188 | |||||||
Other | 490 | 961 | |||||||
Total deferred tax assets | 10,753 | 5,572 | |||||||
Deferred tax liabilities: | |||||||||
Difference between book and tax basis for intangible assets | (4,602 | ) | (3,248 | ) | |||||
Other | (394 | ) | (617 | ) | |||||
Total Deferred tax liabilities | 4,996 | 3,865 | |||||||
Net deferred tax assets | (5,757 | ) | 1,707 | ||||||
Valuation allowance on deferred tax assets | — | (1,006 | ) | ||||||
Net deferred taxes | $ | 5,757 | $ | 701 | |||||
9. | Mandatorily Redeemable Convertible Preferred Stock |
10. | Stock Options and Warrants |
F-25
Table of Contents
Exercisable at Period End | |||||||||||||||||
Weighted | Weighted | ||||||||||||||||
Average | Average | ||||||||||||||||
Shares | Exercise Price | Shares | Exercise Price | ||||||||||||||
Outstanding, December 31, 2002 | 956,819 | $ | 6.18 | 200,097 | $ | 3.67 | |||||||||||
Granted | 891,063 | 18.82 | |||||||||||||||
Cancelled | (38,327 | ) | 25.22 | ||||||||||||||
Exercised | (197,901 | ) | 3.83 | ||||||||||||||
Outstanding, December 31, 2003 | 1,611,654 | $ | 13.07 | 418,467 | $ | 5.09 | |||||||||||
Granted | 99,000 | 38.00 | |||||||||||||||
Cancelled | (124,292 | ) | 11.81 | ||||||||||||||
Exercised | (256,647 | ) | 8.89 | ||||||||||||||
Outstanding, December 31, 2004 | 1,329,715 | $ | 15.85 | 640,731 | $ | 10.97 | |||||||||||
Granted | 300,000 | 41.36 | |||||||||||||||
Cancelled | (45,923 | ) | 24.19 | ||||||||||||||
Exercised | (240,448 | ) | 13.27 | ||||||||||||||
Outstanding, December 31, 2005 | 1,343,344 | $ | 21.72 | 720,956 | $ | 14.22 | |||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||
Weighted- | Weighted- | Weighted- | |||||||||||||||||||
Average | Average | Average | |||||||||||||||||||
Remaining | Exercise | Exercise | |||||||||||||||||||
Range of Exercise Prices | Shares | Life | Price | Shares | Price | ||||||||||||||||
$0.86 | 58,278 | 5.39 | $ | 0.86 | 58,278 | $ | 0.86 | ||||||||||||||
$4.32 - $5.40 | 185,784 | 4.56 | $ | 5.13 | 185,784 | $ | 5.13 | ||||||||||||||
$8.32 | 62,115 | 2.75 | $ | 8.32 | 44,892 | $ | 8.32 | ||||||||||||||
$16.00 - $23.85 | 666,167 | 7.54 | $ | 18.79 | 425,501 | $ | 20.23 | ||||||||||||||
$33.99 - $47.11 | 371,000 | 5.07 | $ | 40.83 | 6,501 | $ | 40.39 | ||||||||||||||
Totals | 1,343,344 | 6.13 | $ | 21.72 | 720,956 | $ | 14.22 |
F-26
Table of Contents
11. | Related Party Transactions |
12. | Significant Concentration |
13. | Segment Information and Geographical Information |
F-27
Table of Contents
14. | Employee Agreements and Employee Benefit Plans |
15 | Guarantor Financial Information |
F-28
Table of Contents
16. | Summarized Quarterly Financial Data |
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | ||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
2005 | |||||||||||||||||
Revenue | $ | 163,363 | $ | 181,138 | $ | 175,176 | $ | 183,035 | |||||||||
Interchange | 96,854 | 106,017 | 100,747 | 104,118 | |||||||||||||
Income from operations | 13,643 | 15,340 | 15,326 | 19,467 | |||||||||||||
Net income | 6,872 | 7,729 | 8,129 | 10,657 | |||||||||||||
Per share: | |||||||||||||||||
Basic | $ | 0.41 | $ | 0.46 | $ | 0.47 | $ | 0.61 | |||||||||
Diluted | $ | 0.38 | $ | 0.43 | $ | 0.45 | $ | 0.58 | |||||||||
Charge Volume (in millions) | 6,244 | 6,606 | 6,374 | 6,501 | |||||||||||||
2004 | |||||||||||||||||
Revenue | $ | 79,969 | $ | 89,384 | $ | 93,388 | $ | 101,441 | |||||||||
Interchange | 37,315 | 43,513 | 46,125 | 49,609 | |||||||||||||
Income from operations | 8,066 | 9,392 | 10,540 | 11,869 | |||||||||||||
Net income | 5,002 | 5,677 | 6,439 | 7,617 | |||||||||||||
Per share: | |||||||||||||||||
Basic | $ | 0.30 | $ | 0.34 | $ | 0.39 | $ | 0.46 | |||||||||
Diluted | $ | 0.28 | $ | 0.32 | $ | 0.36 | $ | 0.42 | |||||||||
Charge Volume (in millions) | 2,862 | 3,181 | 3,333 | 3,474 | |||||||||||||
2003 | |||||||||||||||||
Revenue | $ | 46,675 | $ | 54,308 | $ | 59,847 | $ | 65,222 | |||||||||
Interchange | 24,010 | 28,336 | 30,302 | 31,607 | |||||||||||||
Income from operations | 4,559 | 5,534 | 6,709 | 10,413 | |||||||||||||
Net income (loss) | 888 | (582 | ) | 5,086 | 10,226 | ||||||||||||
Per share: | |||||||||||||||||
Basic | $ | 0.06 | (0.06 | ) | $ | 0.31 | $ | 0.63 | |||||||||
Diluted | $ | 0.05 | (0.06 | ) | $ | 0.29 | $ | 0.58 | |||||||||
Charge Volume (in millions) | 1,338 | 1,557 | 1,729 | 1,854 |
17. | Subsequent Events (Unaudited) |
F-29
Table of Contents
Additions | ||||||||||||||||||||||
Balance at | Charged to | Charged to | ||||||||||||||||||||
Beginning of | Costs and | Other | Balance at | |||||||||||||||||||
Period | Expenses | Accounts | Deductions | End of Period | ||||||||||||||||||
Year ended December 31, 2003 | ||||||||||||||||||||||
Deducted from asset accounts: | ||||||||||||||||||||||
Allowance for doubtful accounts | $ | 93,000 | $ | 98,000 | $ | — | $ | 40,000 | (2) | $ | 151,000 | |||||||||||
Valuation allowance on deferred tax asset | 10,285,000 | (5,389,000 | ) | — | — | 4,896,000 | ||||||||||||||||
Reserve for merchant losses | 4,411,000 | 2,391,000 | (4) | 373,000 | (5) | 5,977,000 | (6) | 1,198,000 | ||||||||||||||
Total | $ | 14,789,000 | $ | (2,900,000 | ) | $ | 373,000 | $ | 6,017,000 | $ | 6,245,000 | |||||||||||
Year ended December 31, 2004 | ||||||||||||||||||||||
Deducted from asset accounts: | ||||||||||||||||||||||
Allowance for doubtful accounts | $ | 151,000 | $ | 96,000 | $ | — | $ | 117,000 | (2) | $ | 130,000 | |||||||||||
Valuation allowance on deferred tax asset | 4,896,000 | (2,486,000 | ) | (1,404,000 | )(1 | ) — | 1,006,000 | |||||||||||||||
Reserve for merchant losses | 1,198,000 | 3,936,000 | (212,000 | )(7) | 3,801,000 | (6) | 1,121,000 | |||||||||||||||
Total | $ | 6,245,000 | $ | 1,546,000 | $ | (1,616,000 | ) | $ | 3,918,000 | $ | 2,257,000 | |||||||||||
Year ended December 31, 2005 | ||||||||||||||||||||||
Deducted from asset accounts: | ||||||||||||||||||||||
Allowance for doubtful accounts | $ | 130,000 | $ | 500,000 | $ | — | $ | 122,000 | (2) | $ | 508,000 | |||||||||||
Valuation allowance on deferred tax asset | 1,006,000 | (340,000 | ) | (666,000 | )(3) | — | — | |||||||||||||||
Reserve for merchant losses | 1,121,000 | 4,393,000 | 4,370,000 | (6) | 1,144,000 | |||||||||||||||||
Total | $ | 2,257,000 | $ | 4,553,000 | $ | (666,000 | ) | $ | 4,492,000 | $ | 1,652,000 | |||||||||||
(1) | Includes $1.0 million reversal to goodwill for NOL’s related to an acquired entity, and $0.4 million reversal to common stock. |
(2) | Write-off of previously reserved accounts receivable. |
(3) | Includes $0.7 million reversal to goodwill for NOL’s related to an acquired entity. |
(4) | Includes $1.3 million reduction of earlier estimate from a single merchant. |
(5) | Reserve for merchant losses assumed in purchase accounting. |
(6) | Payments for merchant losses. |
(7) | Reserve for merchant losses previously assumed in purchase accounting reversed to goodwill. |
F-30
Table of Contents
June 30, | December 31, | |||||||||
2006 | 2005 | |||||||||
Successor | Predecessor | |||||||||
(Unaudited) | (Note 1) | |||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 189 | $ | 1,023 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $220 and $508 at June 30, 2006 and December 31, 2005, respectively | 20,778 | 22,718 | ||||||||
Prepaid expenses and other current assets | 2,934 | 2,549 | ||||||||
Total current assets | 23,901 | 26,290 | ||||||||
Restricted cash | 1,094 | 3,090 | ||||||||
Property and equipment, net | 3,485 | 2,907 | ||||||||
Intangible assets, net of accumulated amortization of $5,490 and $65,199 at June 30, 2006 and December 31, 2005, respectively | 246,653 | 192,343 | ||||||||
Goodwill, net | 488,205 | 105,178 | ||||||||
Deferred tax asset, net | — | 5,757 | ||||||||
Other assets, net | 19,684 | 5,416 | ||||||||
Total assets | $ | 783,022 | $ | 340,981 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 4,400 | $ | 1,697 | ||||||
Income taxes payable | — | 4,697 | ||||||||
Accrued liabilities and other | 17,729 | 24,575 | ||||||||
Current portion of long-term debt | 5,241 | — | ||||||||
Total current liabilities | 27,370 | 30,969 | ||||||||
Minority interest in (deficit) equity of consolidated subsidiaries | (360 | ) | 431 | |||||||
Deferred tax liabilities | 16,373 | — | ||||||||
Long-term debt | 718,508 | 100,228 | ||||||||
Total liabilities | 761,891 | 131,628 | ||||||||
Commitments and contingencies | ||||||||||
Stockholders’ equity | ||||||||||
Preferred stock, $0.01 par value; 17,422,800 shares authorized, no shares issued or outstanding at June 30, 2006, and December 31, 2005 | — | — | ||||||||
Common stock, $0.01 par value; 1,000 shares authorized, 100 shares issued and outstanding at June 30, 2006; 180,000,000 shares authorized, 17,725,181 shares issued and outstanding at December 31, 2005 | 19,602 | 155,870 | ||||||||
Deferred compensation | — | (3,413 | ) | |||||||
Accumulated other comprehensive income | 1,403 | — | ||||||||
Retained earnings | 126 | 56,896 | ||||||||
Total stockholders’ equity | 21,131 | 209,353 | ||||||||
Total liabilities and stockholders’ equity | $ | 783,022 | $ | 340,981 | ||||||
F-31
Table of Contents
Period from | Period from | |||||||||||||||||||||||||
Three | ||||||||||||||||||||||||||
May 11 | April 1 | Months | May 11 | January 1 | Six Months | |||||||||||||||||||||
through | through | Ended | through | through | Ended | |||||||||||||||||||||
June 30, | May 10, | June 30, | June 30, | May 10, | June 30, | |||||||||||||||||||||
2006 | 2006 | 2005 | 2006 | 2006 | 2005 | |||||||||||||||||||||
Successor | Predecessor | Predecessor | Successor | Predecessor | Predecessor | |||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||
Revenues | $ | 107,549 | $ | 81,613 | $ | 181,138 | $ | 107,549 | $ | 252,514 | $ | 344,501 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
Interchange | 62,389 | 47,346 | 106,031 | 62,389 | 145,459 | 203,452 | ||||||||||||||||||||
Other costs of services | 32,424 | 24,656 | 55,091 | 32,424 | 78,006 | 103,866 | ||||||||||||||||||||
Selling, general and administrative | 2,322 | 8,800 | 4,676 | 2,322 | 13,420 | 8,200 | ||||||||||||||||||||
Total operating expenses | 97,135 | 80,802 | 165,798 | 97,135 | 236,885 | 315,518 | ||||||||||||||||||||
Income from operations | 10,414 | 811 | 15,340 | 10,414 | 15,629 | 28,983 | ||||||||||||||||||||
Other expense: | ||||||||||||||||||||||||||
Interest expense | 8,602 | 3,380 | 2,281 | 8,602 | 5,229 | 4,578 | ||||||||||||||||||||
Other expense | 1,956 | 5,850 | 496 | 1,956 | 6,729 | 577 | ||||||||||||||||||||
(Loss) Income before income taxes and minority interest in losses of consolidated subsidiary | (144 | ) | (8,419 | ) | 12,563 | (144 | ) | 3,671 | 23,828 | |||||||||||||||||
Income tax (benefit) provision | (77 | ) | (1,475 | ) | 4,900 | (77 | ) | 3,343 | 9,293 | |||||||||||||||||
Minority interest in losses of consolidated subsidiary | 193 | 173 | 66 | 193 | 522 | 66 | ||||||||||||||||||||
Net income (loss) | $ | 126 | $ | (6,771 | ) | $ | 7,729 | $ | 126 | $ | 850 | $ | 14,601 | |||||||||||||
F-32
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Period from | |||||||||||||||
May 11 | January 1 | Six Months | |||||||||||||
through | through | Ended | |||||||||||||
June 30, | May 10 | June 30, | |||||||||||||
2006 | 2006 | 2005 | |||||||||||||
Successor | Predecessor | Predecessor | |||||||||||||
(In thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Cash flows from operating activities | |||||||||||||||
Net income | $ | 126 | $ | 850 | $ | 14,601 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 2,378 | 17,279 | 20,272 | ||||||||||||
Stock-based compensation | 3,253 | 4,466 | — | ||||||||||||
Noncash interest expense | 49 | 2,958 | 495 | ||||||||||||
Changes in assets and liabilities, excluding effects of acquisitions: | |||||||||||||||
Accounts receivable | (11,548 | ) | 13,488 | (3,399 | ) | ||||||||||
Prepaid expenses and other current assets | 70 | (461 | ) | (2,668 | ) | ||||||||||
Other assets | 7,584 | (6,017 | ) | (4,368 | ) | ||||||||||
Accounts payable and income taxes payable | 2,612 | (4,444 | ) | 5,718 | |||||||||||
Accrued liabilities and other | (16,679 | ) | 20,322 | 3,632 | |||||||||||
Net cash (used in) provided by operating activities | (12,155 | ) | 48,441 | 34,283 | |||||||||||
Cash flows from investing activities | |||||||||||||||
Change in restricted cash | 946 | 1,050 | 770 | ||||||||||||
Expenditures for property and equipment | (490 | ) | (587 | ) | (810 | ) | |||||||||
Acquisitions of businesses, portfolios and other intangibles, net of cash acquired | (287 | ) | (524 | ) | (18,712 | ) | |||||||||
Payments related to businesses previously acquired | (3,000 | ) | (11,500 | ) | — | ||||||||||
Net cash used in investing activities | (2,831 | ) | (11,561 | ) | (18,752 | ) | |||||||||
Cash flows from financing activities | |||||||||||||||
Net repayments (borrowings) on line of credit | 7,500 | (100,000 | ) | (16,000 | ) | ||||||||||
Proceeds received in exchange for ownership interest in Successor company | 3,378 | — | — | ||||||||||||
Repayments of debt | (1,303 | ) | (28 | ) | — | ||||||||||
Proceeds from issuance of debt, net of finance costs | (120 | ) | 701,165 | — | |||||||||||
Repurchase of common stock | (633,702 | ) | — | — | |||||||||||
Proceeds from issuance of common stock | — | 382 | 1,930 | ||||||||||||
Net cash (used in) provided by financing activities | (624,247 | ) | 601,519 | (14,070 | ) | ||||||||||
Net (decrease) increase in cash and cash equivalents | (639,233 | ) | 638,399 | 1,461 | |||||||||||
Cash and cash equivalents, beginning of period | 639,422 | 1,023 | 888 | ||||||||||||
Cash and cash equivalents, end of period | $ | 189 | $ | 639,422 | $ | 2,349 | |||||||||
Supplemental disclosure of cash flow information: | |||||||||||||||
Cash paid during the period for income taxes | $ | 107 | $ | 4,866 | $ | 5,478 | |||||||||
Cash paid during the period for interest | $ | 5,284 | $ | 2,663 | $ | 3,512 | |||||||||
Supplemental schedule of non-cash activities: | |||||||||||||||
Accrual of deferred payments for acquisitions of businesses | $ | — | $ | — | $ | 9,500 | |||||||||
Restricted stock issued to employees | $ | — | $ | — | $ | 3,625 | |||||||||
Non-cash increases in assets from acquisitions: | |||||||||||||||
Intangible assets | $ | 72,419 | $ | — | $ | — | |||||||||
Goodwill | $ | 356,756 | $ | — | $ | — |
F-33
Table of Contents
Organization and Business |
Basis of Presentation |
F-34
Table of Contents
Use of Estimates |
Share-based Compensation |
F-35
Table of Contents
Three Months | Six Months | |||||||
Ended June 30, | Ended June 30, | |||||||
2005 | 2005 | |||||||
Net income, as reported | $ | 7,729 | $ | 14,601 | ||||
Deduct: Total stock-based employee compensation expense determined under fair-value-based method, net of tax | (590 | ) | (1,165 | ) | ||||
Pro forma net income | $ | 7,139 | $ | 13,436 | ||||
Derivative Financial Instruments |
F-36
Table of Contents
(2) | Going Private and Financing Transactions |
F-37
Table of Contents
Three Months | Six Months | |||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Gross revenues | 189,162 | 181,138 | 360,063 | 344,501 | ||||||||||||
Income from operations | 18,251 | 15,556 | 33,497 | 29,354 | ||||||||||||
Interest expense | 15,685 | 15,685 | 31,370 | 31,370 | ||||||||||||
Net income | 1,896 | (13 | ) | 1,977 | (1,213 | ) |
(3) | Acquisitions |
Other Acquisitions |
F-38
Table of Contents
(4) | Long-Term Debt |
F-39
Table of Contents
(5) | Segment Information and Geographical Information |
(6) | Income Taxes |
(7) | Commitments and Contingencies |
F-40
Table of Contents
F-41
Table of Contents
F-42
Table of Contents
F-43
Table of Contents
F-44
Table of Contents
(8) | Significant Developments and Subsequent Events |
F-45
Table of Contents
Table of Contents
Item 20. | Indemnification of Officers and Directors |
II-1
Table of Contents
Item 21. | Exhibits and Financial Statement Schedules. |
Item 22. | Undertakings. |
(1) To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: |
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; | |
(ii) Reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and | |
(iii) Include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at the time shall be deemed to be the initialbona fideoffering thereof. | |
(3) To file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. |
II-2
Table of Contents
II-3
Table of Contents
iPAYMENT, INC. |
By | /s/ Gregory S. Daily |
Gregory S. Daily | |
Chairman and | |
Chief Executive Officer |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | Chairman and Chief Executive Officer and Director (Principal Executive Officer) | October 27, 2006 | ||||
* | Chief Financial Officer and Treasurer (Principal Financial Officer) | October 27, 2006 | ||||
* | Director | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-4
Table of Contents
CardPayment Solutions, LLC |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily |
Title: | President |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | President | October 27, 2006 | ||||
* | Chief Financial Officer and Treasurer | October 27, 2006 | ||||
* | Secretary | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-5
Table of Contents
CardSync Processing, Inc. |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily |
Title: | Chief Executive Officer and President |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | Chief Executive Officer and President | October 27, 2006 | ||||
* | Chief Financial Officer and Treasurer | October 27, 2006 | ||||
* | Secretary | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-6
Table of Contents
E-Commerce Exchange, Inc. |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily |
Title: | Chief Executive Officer and Secretary |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | Chief Executive Officer and Secretary | October 27, 2006 | ||||
* | Chief Financial Officer and Treasurer | October 27, 2006 | ||||
* | President | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-7
Table of Contents
1st National Processing, Inc. |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily |
Title: | Chief Executive Officer and Secretary |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | Chief Executive Officer and Secretary | October 27, 2006 | ||||
* | Chief Financial Officer | October 27, 2006 | ||||
* | President and Treasurer | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-8
Table of Contents
iPayment Acquisition Sub, LLC |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily |
Title: | Representative |
SIGNATURE | TITLE | DATE | ||||
/s/ Gregory S. Daily | Representative | October , 2006 | ||||
* | Chief Financial Officer and Treasurer | October , 2006 | ||||
* | Sole Manager | October , 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/ Gregory S. Daily |
II-9
Table of Contents
iPayment Central Holdings, Inc. |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily |
Title: | Chief Executive Officer |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | Chief Executive Officer | October 27, 2006 | ||||
* | Secretary | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-10
Table of Contents
iPayment of California, LLC |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily |
Title: | Chief Executive Officer and President |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | Chief Executive Officer and President | October 27, 2006 | ||||
* | Chief Financial Officer and Treasurer | October 27, 2006 | ||||
* | Secretary | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-11
Table of Contents
iPayment ICE Holdings, Inc. |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily |
Title: | Chief Executive Officer |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | Chief Executive Officer | October 27, 2006 | ||||
* | Secretary | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-12
Table of Contents
iPayment of Maine, Inc. |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily |
Title: | Chief Executive Officer and President |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | Chief Executive Officer and President | October 27, 2006 | ||||
* | Chief Financial Officer and Treasurer | October 27, 2006 | ||||
* | Secretary | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-13
Table of Contents
NPMG Acquisition Sub, LLC |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily |
Title: | Chief Executive Officer |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | Chief Executive Officer | October 27, 2006 | ||||
* | Secretary | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-14
Table of Contents
Online Data Corp. |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily |
Title: | Chief Executive Officer and President |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | Chief Executive Officer and President | October 27, 2006 | ||||
* | Secretary | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-15
Table of Contents
PCS Acquisition Sub, LLC |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily |
Title: | Chief Executive Officer |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | Chief Executive Officer | October 27, 2006 | ||||
* | Secretary | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-16
Table of Contents
Quad City Acquisition Sub, Inc. |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily | |
Title: Chief Executive Officer and President |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | Chief Executive Officer and President | October 27, 2006 | ||||
* | Chief Financial Officer and Treasurer | October 27, 2006 | ||||
* | Secretary | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-17
Table of Contents
TS Acquisitions Sub, LLC |
By: | /s/ Gregory S. Daily |
Name: Gregory S. Daily | |
Title: President |
SIGNATURE | TITLE | DATE | ||||
/s/Gregory S. Daily | President | October 27, 2006 | ||||
* | Chief Financial Officer and Treasurer | October 27, 2006 | ||||
* | Secretary | October 27, 2006 | ||||
* Pursuant to a Power of Attorney contained in the signature page to the Registration Statement on Form S-4 filed July 21, 2006 | ||||||
/s/Gregory S. Daily |
II-18
Table of Contents
Exhibit | Description | |||
2 | .1 | Agreement and Plan of Merger, dated as of December 27, 2005, among iPayment Holdings, Inc., iPayment MergerCo, Inc. and iPayment, Inc., (incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K for the period December 28, 2005). | ||
2 | .2 | Guarantee, dated as of December 27, 2005, by Gregory S. Daily in favor of iPayment, Inc. (incorporated by reference to Exhibit 2.2 of the Registrant’s Form 8-K for the period December 28, 2005). | ||
2 | .3 | Guarantee, dated as of December 27, 2005, by Carl A. Grimstad in favor of iPayment, Inc. (incorporated by reference to Exhibit 2.3 of the Registrant’s Form 8-K for the period December 28, 2005). | ||
3 | .1 | Certificate of Incorporation of iPayment, Inc., attached as Exhibit A to the Certificate of Merger of iPayment Merger Co., Inc. into iPayment, Inc.* | ||
3 | .2 | Bylaws of MergerCo, as adopted by iPayment, Inc.* | ||
3 | .3 | Articles of Incorporation of Cardsync Processing Inc.* | ||
3 | .4 | Amended and Restated Certificate of Incorporation of E-Commerce Exchange, Inc.* | ||
3 | .5 | Articles of Incorporation of 1st National Processing, Inc.* | ||
3 | .6 | Certificate of Incorporation of iPayment Central Holdings, Inc.* | ||
3 | .7 | Certificate of Incorporation of iPayment of Maine, Inc.* | ||
3 | .8 | Amended and Restated Certificate of Incorporation of Online Data Corp.* | ||
3 | .9 | Certificate of Incorporation of Quad City Acquisition Sub, Inc.* | ||
3 | .10 | Certificate of Incorporation of iPayment ICE Holdings, Inc.* | ||
3 | .11 | Certificate of Formation of CardPayment Solutions, LLC* | ||
3 | .12 | Certificate of Formation of iPayment Acquisition Sub, LLC* | ||
3 | .13 | Articles of Organization of iPayment of California, LLC* | ||
3 | .14 | Certificate of Formation of PCS Acquisition Sub, LLC* | ||
3 | .15 | Certificate of Formation of TS Acquisition Sub, LLC* | ||
3 | .16 | Certificate of Formation of NPMG Acquisition Sub, LLC* | ||
3 | .17 | Amended and Restated Bylaws of Cardsync Processing Inc.* | ||
3 | .18 | Amended and Restated Bylaws of E-Commerce Exchange, Inc.* | ||
3 | .19 | Amended and Restated Bylaws of 1st National Processing, Inc.* | ||
3 | .20 | Bylaws of iPayment Central Holdings, Inc.* | ||
3 | .21 | Bylaws of iPayment of Maine, Inc.* | ||
3 | .22 | Amended and Restated Bylaws of Online Data Corp.* | ||
3 | .23 | Bylaws of Quad City Acquisition Sub, Inc.* | ||
3 | .24 | Bylaws of iPayment ICE Holdings, Inc.* | ||
3 | .25 | Limited Liability Company Agreement of CardPayment Solutions, LLC* | ||
3 | .26 | Limited Liability Company Agreement of iPayment Acquisition Sub, LLC* | ||
3 | .27 | Operating Agreement of iPayment of California, LLC* | ||
3 | .28 | Limited Liability Company Agreement of PCS Acquisition Sub, LLC* | ||
3 | .29 | Limited Liability Company Agreement of TS Acquisition Sub, LLC* | ||
3 | .30 | Limited Liability Company Agreement of NPMG Acquisition Sub, LLC* | ||
4 | .1 | Indenture, dated as of May 10, 2006, among iPayment, Inc., the Subsidiary Guarantors named therein and Wells Fargo Bank, N.A. as Trustee* | ||
4 | .2 | Purchase Agreement, dated as of May 3, 2006, among iPayment, Inc., the Subsidiary Guarantors named therein, Banc of America Securities LLC and J.P. Morgan Securities Inc.* | ||
4 | .3 | Registration Rights Agreement, dated as of May 10, 2006, among iPayment, Inc., the Subsidiary Guarantors named therein, Banc of America Securities LLC and J.P. Morgan Securities Inc.* | ||
4 | .4 | Form of Note (included as Exhibit A to Exhibit 4.1 hereto).* | ||
5 | .1 | Opinion of White & Case LLP* |
Table of Contents
Exhibit | Description | |||
5 | .2 | Opinion of Jones Vargas, filed herewith. | ||
5 | .3 | Opinion of General Counsel of iPayment, Inc.* | ||
10 | .1 | Credit Agreement, dated May 10, 2006, among iPayment, Inc., as Borrower, iPayment Holdings, Inc. the Subsidiary Guarantors named therein, Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A., as Syndication Agent and Banc of America Securities LLC, as Sole Lead Arranger.* | ||
10 | .2 | Security Agreement, dated May 10, 2006, among iPayment, Inc., iPayment Holdings, Inc., the Subsidiary Guarantors named therein and Bank of America N.A.* | ||
10 | .3 | Pledge Agreement, dated May 10, 2006, among the Pledgors named therein and Bank of America N.A.* | ||
10 | .4 | Service Agreement dated July 1, 2002 between First Data Merchant Services Corporation and iPayment Holdings, Inc. (incorporated by reference to Exhibit 10.16 of the Registration Statement on Form S-1 (File No. 333-101705) filed with the Commission on March 4, 2003). | ||
10 | .5 | First Amendment to Service Agreement dated October 25, 2002 between First Data Merchant Services Corporation and iPayment, Inc. (incorporated by reference to Exhibit 10.14 of the Registration Statement on Form S-1 (File No. 333-101705) filed with the Commission on December 6, 2002). | ||
10 | .6 | Employment Agreement effective February 26, 2001 between Gregory S. Daily and iPayment Holdings, Inc. (incorporated by reference to Exhibit 10.34 of the Registration Statement on Form S-1 (File No. 333-101705) filed with the Commission on December 6, 2002). | ||
10 | .7 | Employment Agreement effective February 26, 2001 between Carl Grimstad and iPayment Holdings, Inc. (incorporated by reference to Exhibit 10.35 of the Registration Statement on Form S-1 (File No. 333-101705) filed with the Commission on December 6, 2002). | ||
10 | .8 | Employment Agreement effective September 3, 2002 between Clay M. Whitson and iPayment Holdings, Inc. (incorporated by reference to Exhibit 10.36 of the Registration Statement on Form S-1 (File No. 333-101705) filed with the Commission on December 6, 2002). | ||
10 | .9 | Merchant Program Processing Agreement dated January 31, 2003, among iPayment, Inc., Chase Merchant Services, LLC and JPMorgan Chase Bank (incorporated by reference to Exhibit 10.37 of the Registration Statement on Form S-1 (File No. 333-101705) filed with the Commission on March 3, 2003). | ||
10 | .10 | Asset Purchase Agreement, dated December 27, 2004, between iPayment, Inc., iPayment Acquisition Sub LLC, First Data Merchant Services Corporation and Unified Merchant Services (incorporated by reference to Exhibit 10.32 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004). | ||
10 | .11 | Services Agreement, dated December 27, 2004, between iPayment, Inc. and First Data Merchant Services Corporation (incorporated by reference to Exhibit 10.33 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004). | ||
10 | .12 | Officers 2005 Compensation and Bonus Schedule (incorporated by reference to Exhibit 10.34 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005). | ||
12 | .1 | Statement of Computation of Ratios.* | ||
21 | .1 | Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005). | ||
23 | .1 | Consent of Ernst & Young LLP, filed herewith. | ||
23 | .2 | Consent of White & Case LLP (included in Exhibit 5.1).* | ||
23 | .3 | Consent of Jones Vargas (included in Exhibit 5.2) | ||
23 | .4 | Consent of General Counsel of iPayment, Inc. (included in Exhibit 5.3).* | ||
24 | .1 | Power of Attorney.* | ||
25 | .1 | Statement of Eligibility under the Trust Indenture Act of 1939 of a Corporation Designated to Act as Trustee of Wells Fargo Bank, N.A. (Form T-1).* | ||
99 | .1 | Letter of Transmittal with Respect to the Exchange Offer. | ||
99 | .2 | Notice of Guaranteed Delivery with Respect to the Exchange Offer.* | ||
99 | .3 | Letter to DTC Participants Regarding the Exchange Offer.* | ||
99 | .4 | Letter to Beneficial Holders Regarding the Exchange Offer.* | ||
99 | .5 | Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.* |
* | Previously filed. |