“Event of Default” means any of the events specified in Section 7.01.

 

“GAAP” means generally accepted accounting principles in the United States and the Public Company Accounting Oversight Board (United States).

 

“Guaranty” shall have the meaning set forth in Section 4.01.

 

“Intent to Exercise Notice” shall have the meaning set forth in Section 3.02.

 

“Kiosks” shall have the meaning set forth in Section 2.06.

 

“Initial Interest Payment Date” shall have the meaning set forth in Section 2.03.

 

“Initial Note” shall have the meaning set forth in Section 2.04.

 

“Installment” shall have the meaning set forth in Section 2.01.

 

“Interest Deferral Termination Date” shall have the meaning set forth in Section 2.03.

 

“Letters of Understanding” shall have the meaning set forth in Section 4.01.

 

“Lien” means any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority, or other security agreement, or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction to evidence any of the foregoing).

 

“Loan” shall have the meaning set forth in Section 2.01.

 

“Loan Documents” means this Agreement, the Notes, the Security Agreement, the Voting Agreements, the Pledge Agreement, the Guaranty, the Letters of Understanding, the Subordination Agreement and the Agreement and Plan of Merger.

 

“Merger” shall have the meaning set forth in Section 3.01.

 

“Merger Effective Date” shall have the meaning set forth in Section 2.03.

 

“Merger Option” shall have the meaning set forth in Section 3.01.

 

“Merger Option Expiration Date” shall have the meaning set forth in Section 3.02.

 

“Note” and “Notes” shall have the meaning set forth in Section 2.04.

 

2

 

“Paycenters” shall have the meaning set forth in the preamble to this Agreement.

 

“Person” means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, or other entity of whatever nature.

 

“Pledge Agreement” shall have the meaning set forth in Section 4.01.

 

“Replacement Note” shall have the meaning set forth in Section 2.03.

 

“SEC Documents” shall have the meaning set forth in Section 3.07.

 

“Security Agreement” shall have the meaning set forth in Section 4.01.

 

“Shareholder Information” shall have the meaning set forth in Section 3.07.

 

“SSI” shall have the meaning set forth in the recitals to this Agreement.

 

“STEN” shall have the meaning set forth in the recitals to this Agreement.

 

“Subordination Agreement” shall have the meaning set forth in Section 4.01.

 

“Subsidiaries”  shall have the meaning set forth in the recitals to this Agreement.

 

“Surviving Entity” shall have the meaning set forth in Section 3.01.

 

“Tower” shall have the meaning set forth in the recitals to this Agreement.

 

“Voting Agreement” shall have the meaning set forth in Section 4.01.

 

SECTION 1.02.  Accounting Terms .  All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistent with that applied in the preparation of the financial statements referred to in Section 5.04, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles and, except as otherwise set forth herein, audited by an independent registered public accounting firm.

 

ARTICLE II

AMOUNT AND TERMS OF THE LOAN

 

SECTION 2.01.  Loan .  The Lender agrees, on the terms and conditions hereinafter set forth, to make a loan (the “Loan”) to the Borrower having a total aggregate principal amount of Two Million Dollars ($ 2,000,000.00).  The Loan shall be disbursed to Borrower in the following three separate installments (each, an “Installment”):

 

3

 

(1)                                   $ 800,000.00 of the Loan shall be disbursed by Lender to Borrower following execution of this Agreement in accordance with Section 2.05 of this Agreement;

 

(2)                                   $ 600,000.00 of the Loan shall be disbursed by Lender to Borrower on or following January 16, 2006 in accordance with Section 2.05 of this Agreement; and

 

(3)                                   $ 600,000.00 of the Loan shall be disbursed by Lender to Borrower on or following March 16, 2006 in accordance with Section 2.05 of this Agreement.

 

SECTION 2.02.  Interest .  Interest shall accrue on the outstanding and unpaid principal amount of the Loan under this Agreement at a rate equal to eight percent (8.0%) per annum.  Interest shall be calculated on the basis of a year of 360 days for the actual number of days elapsed.

 

SECTION 2.03.  Payment .  The principal and interest under the Loan shall be paid as follows:

 

(1)                                   Except as otherwise set forth in Section 2.03(2),  Section 2.03(3) and Section 2.03(4), the Borrower shall pay interest only beginning on December 15, 2006 (the “Initial Interest Payment Date”) and continuing on June 15 and December 15 of each year thereafter until December 15, 2010, at which time the outstanding principal and accrued and unpaid interest under the Loan shall become due and payable.

 

(2)                                   In the event that Lender delivers to Borrower an Intent to Exercise Notice (defined in Section 3.02), Borrower will not be required to make any payment of interest (although such interest will continue to accrue) to Lender under Section 2.03(1) between the date Lender delivers the Intent to Exercise Notice and the earliest to occur of the following dates (the “Interest Deferral Termination Date”): (a) the date the Merger (defined in Section 3.01) becomes effective (the “Merger Effective Date”), (b) the date that the Lender notifies Borrower in writing that it will not deliver a Confirmation Notice (defined in Section 3.02), (c) the date that Lender rescinds its Confirmation Notice in accordance with Section 3.05, or (d) the Merger Option Expiration Date (defined in Section 3.02).  On and after the Interest Default Termination Date, payments of interest and principal under the Loan shall be made as provided in Sections 2.03(3) and Sections 2.03(4), as applicable.

 

(3)                                   In the event that the Merger becomes effective, the Notes (as defined in Section 2.04) shall be cancelled and all outstanding principal and interest owed under the Loan and the Notes shall be deemed to have been paid in full as of the Merger Effective Date.

 

(4)                                   In the event that Lender has delivered to Borrower an Intent to Exercise Notice and an Interest Deferral Termination Date occurs (other than the Merger Effective Date): the Borrower shall, within five (5) Business Days after the Interest Deferral Termination Date execute and deliver to Lender a promissory note (the “Replacement Note”) in the form of Exhibit A-2, dated as of the Interest Deferral Termination Date and having a principal amount equal to

 

4

 

the amount of principal and accrued and unpaid interest under the Loan as of the Interest Deferral Termination Date.  Upon acceptance by Lender of an executed Replacement Note, in form and substance acceptable to Lender, Lender shall return to Borrower the original Initial Note.

 

(5)                                   All payments shall be made in lawful money of the United States of America and by wire transfer to an account designated by Lender to Borrower in writing.  In the event a payment date is not a Business Day, such payment shall be made on the next succeeding Business Day, and the extension of time shall in such case be included in the computation of the payment of interest.

 

SECTION 2.04.  Note .  The Loan made by the Lender under this Agreement shall, until a Replacement Note is accepted by Lender, be evidenced by, and repaid with interest in accordance with, a single promissory note of Borrower, substantially in the form of Exhibit A-1 , duly completed and dated as of the same date of this Agreement (the “Initial Note”).  After acceptance by Lender of the Replacement Note, the Loan made by Lender under this Agreement shall be evidenced by, and repaid with interest in accordance with, the Replacement Note.  The Initial Note and the Replacement Note are each referred to herein as the “Note” and collectively as the “Notes”. The Lender is hereby authorized by the Borrower to endorse on the schedule attached to the Note the date of each Installment disbursed by Lender to Borrower, which endorsement shall, in the absence of manifest error, be conclusive as to the outstanding balance of the Loan made by the Lender; provided, however, that the failure to make such notation with respect to any Installment shall not limit or otherwise affect the obligations of the Borrower under this Agreement or the Notes.

 

SECTION 2.05.  Disbursement of Loan Proceeds.  Lender shall disburse to Borrower the Loan proceeds under each Installment within ten (10) Business Days after satisfaction, or waiver by Lender, of the conditions precedent for such Installment as set forth in Article IV of this Agreement, or at such other time and place as the Lender and Borrower may agree.

 

SECTION 2.06.  Use of Proceeds .  The proceeds of the Loan shall be used by the Borrower to (i) fully satisfy all tax liens of the Borrower and all Subsidiaries, written evidence of such satisfaction must be provided to Lender within five (5) days after disbursement by Lender of the first Installment, and (ii) all remaining proceeds of the Loan shall be used in accordance with the attached Schedule 2.06 , unless otherwise agreed to by Lender in writing.

 

SECTION 2.07 . Consent Prior to Placement. The Borrower agrees that during the term of this Agreement, Borrower shall not execute any contract for the placement of its kiosk product (used to facilitate bill payment and other financial transactions in retail locations), without receiving prior written consent of the Lender.

 

5

 

ARTICLE III

MERGER OPTION

 

SECTION 3.01.  Grant of Merger Option.  Subject to the terms and conditions of this Agreement, the Borrower and the Subsidiaries each hereby grant to the Lender, the right, privilege and option (the “Merger Option”), exercisable in the sole discretion of Lender, to cause the Borrower and the Subsidiaries to merge with and into Lender (the “Merger”) so that upon such Merger the separate corporate existence of Borrower will cease and the Lender will continue after the Merger as the surviving entity (the “Surviving Entity”) and Subsidiaries will exist, immediately after the Merger, as  wholly owned subsidiaries of Lender.  The Lender shall be under no obligation whatsoever to exercise the Merger Option at any time prior to delivery of the Confirmation Notice (defined below).

 

SECTION 3.02  Exercise of Merger Option .  The Lender may exercise the Merger Option at any time on or after the date hereof, but no later than 270 calendar days following disbursement of proceeds under the final Installment of the Loan (the “Merger Option Expiration Date”), by (1) delivering to the Borrower written notice of its intent to exercise the Merger Option (the “Intent to Exercise Notice”) and then subsequently (2) delivering a written confirmation notice of such intent to exercise (the “Confirmation Notice”) to the Borrower.  For purposes of clarity, so long as Lender delivers the Intent to Exercise Notice on or prior to the Merger Option Expiration Date, neither the delivery of the Confirmation Notice nor the Merger Effective Date need occur prior to the Merger Option Expiration Date.  The Lender, the Borrower and Paycenters each agree to take, and to cause the other Subsidiaries to take, commercially reasonable steps to cause the Merger Effective Date to occur no later than 120 calendar days after the Confirmation Notice.

 

SECTION 3.03.  Deliverables upon Initial Exercise.   Within sixty (60) calendar days after receipt of the Intent to Exercise Notice, the Borrower shall deliver to the Lender an executed agreement and plan of merger, in form and content reasonably acceptable to Lender containing the agreed terms set forth on Exhibit B , together with other customary terms and conditions reasonably acceptable to the Lender (the “Agreement and Plan of Merger”). 

 

SECTION 3.04.  Due Diligence.   From and after the date that the Intent to Exercise Notice is delivered to the Borrower until the earliest of (1) the Merger Effective Date, or (2) the date, if any, that the Lender rescinds the Confirmation Notice pursuant to Section 3.05, the Lender and its advisors shall be afforded by the Borrower continual, free and full access to the facilities, properties, books, records and all other information of the Borrower during normal business hours.

 

SECTION 3.05.  Confirmation of Exercise.   If, after completing its due diligence review, the Lender desires to proceed with the Merger, which decision to proceed or not to proceed with the Merger is determined in the sole discretion of the Lender and need not be based on any cause, the Lender shall deliver to the Borrower a Confirmation Notice or notice that it shall not deliver a Confirmation Notice.  Notwithstanding any other provision in this Agreement to the contrary, if after any delivery by the Lender of a Confirmation Notice, the Lender is notified, or reasonably believes, that one or more of the conditions precedent to closing set forth in the Agreement and Plan of Merger will not be satisfied by Borrower prior to the

 

6

 

closing of the Merger, then the Lender may, in addition to all other rights available to the Lender under this Agreement, at law and/or in equity, rescind its Confirmation Notice, in which case (1) this Agreement and the Notes shall remain in full force and effect; (2) the Borrower will reimburse all of the reasonable costs and expenses incurred by the Lender from and after the Confirmation Notice Date in preparing for the Merger, including without limitation reasonable attorneys’ fees, and (3) none of the parties hereto shall be obligated to proceed with the Merger until such time, if ever, that the Merger Option is re-exercised in accordance with the provisions of this Agreement.

 

SECTION 3.06.  Effect of Failure to Exercise Merger Option.  If the Lender elects, in its sole discretion not to deliver to Borrower: (1) the Intent to Exercise Notice prior to the Merger Option Expiration Date, or (2) the Confirmation Notice, no party shall be obligated to proceed with the Merger and the Merger will not be consummated.

 

SECTION 3.07.  Preparation of Shareholder Information; SEC Documents; Shareholders’ Meeting.

 

(1)                                   As promptly as practicable following the receipt of the Intent to Exercise, Borrower shall prepare and cause a notice of shareholder meeting to be mailed to its shareholders, including with such notice any document as may be required by law or reasonably requested by Lender (the “Shareholder Information”).  Borrower shall, within 60 days following the delivery of the Intent to Exercise Notice, establish a record date for, duly call, give notice of, convene and hold a meeting of its shareholders solely for the purpose of obtaining the approval of its shareholders for the Merger, the Agreement and Plan of Merger and such other proposals as may be required for the consummation of the Merger in accordance with this Agreement.  Borrower shall, through its Board of Directors, recommend to its shareholders approval of the Agreement and Plan of Merger and to the Merger and shall include such recommendation in the Shareholder Information.

 

(2)                                   Lender and Borrower shall furnish each other all information as may be reasonably requested by the other in the preparation and distribution of the Shareholder Information or any filing to be made by STEN with the Securities and Exchange Commission (the “Commission”), including any proxy statement or other report or disclosure to be filed by STEN under the Securities Exchange Act of 1934 (collectively, the “SEC Documents”).  Borrower acknowledges and agrees that the existence of and content of this Agreement and the transactions contemplated hereby are required to be disclosed by STEN in the SEC Documents.

 

(3)                                   Borrower shall not distribute the Shareholder Information and STEN shall not file or disseminate any SEC Document relating to the Merger, without providing the other party a reasonable opportunity to review and comment thereon.

 

(4)                                   If at any time prior to the Merger Effective Date, either Borrower or STEN discovers that any information relating to Borrower or STEN, or any of their respective affiliates, directors or officers, should be amended, corrected or supplemented in the Shareholder Information or any SEC Document, so that either such document would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, the party which discovers such information shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be promptly publicly

 

7

 

disclosed, disseminated to the shareholders of Borrower and/or filed with the Commission, as the case may be.

 

SECTION 3.08.  Public Announcements.   STEN and Borrower shall consult with each other before issuing, and give each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement, including the Merger, and shall not issue any such press release or make any such public statement prior to such consultation, except as such party may reasonably conclude may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system, including without limitation any SEC Document.

 

ARTICLE IV

CONDITIONS PRECEDENT

 

SECTION 4.01.  Conditions Precedent to Initial Installment.   The obligations of the Lender to disburse Loan proceeds under the initial Installment are subject to the condition precedent that the Lender shall have received on or before the day of such initial Installment each of the following, in form and substance satisfactory to the Lender and its counsel:

 

(1)                                  Note .  The Initial Note duly executed by the Borrower;

 

(2)                                  Security Agreement .  A Security Agreement, duly executed by Paycenters, substantially in the form attached hereto as Exhibit C (the Security Agreement”);

 

(3)                                  Voting Agreements.  A voting agreement in the form attached hereto as Exhibit D , executed by each of Ken Antos, Mark Hill, and Arthur Petrie (each a “Voting Agreement”);

 

(4)                                  Pledge Agreement.  A pledge agreement in the form attached hereto as Exhibit E , executed by the Borrower (the “Pledge Agreement”);

 

(5)                                  Subordination Agreement . A subordination in the form attached hereto as Exhibit F , executed by Arthur Petrie (the “Subordination Agreement”);

 

(6)                                  Guaranty.  A guaranty in the form attached hereto as Exhibit G , executed by Paycenters (the “Guaranty”);

 

(7)                                  Letters of Understanding.  Letters of Understanding in the form attached hereto as Exhibit H , executed by Ken Antos and Mark Hill, respectively;

 

(8)                                  Evidence of all corporate action .  Copies of all corporate action taken by the Borrower and Paycenters, including resolutions of its Board of Directors or Board of Governors, authorizing the execution, delivery, and performance of the Loan Documents to which it is a party and each other document to be delivered pursuant to this Agreement that are

 

8

 

certified (dated as of the date of this Agreement) by a duly authorized officer of the Borrower; and

 

(9)                                  Incumbency and signature certificate .  A certificate (dated as of the date of this Agreement) of the Secretary of the Borrower and the Secretary of Paycenters certifying the names and true signatures of the officers of the Borrower and Paycenters authorized to sign the Loan Documents to which it is a party and the other documents to be delivered by the Borrower or Paycenters under this Agreement.

 

SECTION 4.02.  Conditions Precedent to Second Installment.  The obligations of Lender to disburse funds under second Installment are subject to the condition precedent that the Lender shall have received on or before the day of such second Installment, written evidence, satisfactory to Lender and its counsel, of a full release of all tax liens of Borrowers and the Subsidiaries and satisfaction of all unpaid taxes, interest, penalties and other amounts owed with in connection with such tax liens.  Also, a statement as to the actual use of the proceeds from the first Installment in relation to matters set forth on Schedule 2.06.

 

SECTION 4.03.  Conditions Precedent to Third Installment. The obligations of Lender to disburse funds under the third Installment are subject to the condition precedent that