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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment No. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-14224
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Paymentech, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 75-2634185
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1601 Elm Street, 9th Floor, Dallas, Texas 75201
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(address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code 214-849-2149
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N/A
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Former Name, Former Address and former Fiscal Year, If Changed Since Last Report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1999
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Common Stock, $.01 par value 36,380,874 shares
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EXPLANATORY NOTE
Paymentech, Inc. (the "Company") has requested confidential treatment with
respect to portions of Exhibit 2.1 to the Form 10-Q. This amendment is being
filed to reflect changes to Exhibit 2.1 as per the Securities and Exchange
Commission's staff's comments to the Company's request for confidential
treatment. Certain previously redacted information has been added back into
Exhibit 2.1 of this amended filing. No other changes are made to the Form 10-Q
as originally filed.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Reports on Form 8-K filed during the second quarter of fiscal 1999:
Report on Form 8-K filed October 29, 1998
Item 5. Other Events
Exhibit 99. Press Release
Report on Form 8-K filed December 28, 1998
Item 5. Other Events
Exhibit 99. Press Release
b. Reports on Form 8-K filed subsequent to the second quarter of fiscal 1999:
Report on Form 8-K filed February 17, 1999
Item 5. Other Events
Item 7. Financial Statements and Exhibits
Report on Form 8-K filed March 23, 1999
Item 5. Other Events
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits
c. Exhibits
The following exhibits are incorporated by reference or filed herewith:
Exhibit Number Description of Exhibit
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2.1* Merchant Asset Purchase Agreement, dated as of October 28, 1998
by and between Mellon Bank, N.A., as Seller, and Paymentech
Management Resources, Inc., as Purchaser. (Confidential
treatment has been requested for portions of this exhibit and,
accordingly, such portions have been omitted from the exhibit.
The entire document, including the portions omitted from the
exhibit, have been provided separately to the Commission).
27** Financial Data Schedule.
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* Filed herewith.
** Exhibit originally filed with the Registrant's Form 10-Q on February 16, 1999
and is not affected by this Form 10-Q/A.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 8, 1999
Paymentech, Inc.
By: /s/ Pamela H. Patsley
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Pamela H. Patsley
President and Chief Executive Officer
By: /s/ Kathryn J. Kessler
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Kathryn J. Kessler
Chief Financial Officer
3
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INDEX OF EXHIBITS
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Sequentially
Exhibit Number Description of Exhibit Numbered Page
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2.1* Merchant Asset Purchase Agreement, dated as of October 28,
1998 by and between Mellon Bank, N.A., as Seller, and
Paymentech Management Resources, Inc., as Purchaser.
(Confidential treatment has been requested for portions of
this exhibit and, accordingly, such portions have been
omitted from the exhibit. The entire document, including the
portions omitted from the exhibit, have been provided
separately to the Commission).
27** Financial Data Schedule.
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* Filed herewith.
** Exhibit originally filed with the Registrant's Form 10-Q on February 16, 1999
and is not affected by this Form 10-Q/A.
4
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Exhibit 2.1
[Confidential treatment has been requested for portions of this exhibit and,
accordingly, such portions have been omitted from the exhibit. The entire
document, including the portions omitted from the exhibit, has been provided
separately to the Commission.]
MERCHANT ASSET PURCHASE AGREEMENT
This MERCHANT ASSET PURCHASE AGREEMENT (this "Agreement") is dated as of
the 28th day of October, 1998 and is entered into by and between Mellon Bank,
N.A., a national banking association ("Seller"), and Paymentech Management
Resources, Inc., a Delaware corporation ("Purchaser").
RECITALS
A. Seller is a party to certain agreements with various Merchants, Agent
Banks, Independent Sales Organizations and other Persons according to which
Seller has agreed to provide certain services in connection with Seller's
Merchant Acquiring Business.
B. Seller wishes to sell and transfer to Purchaser all of its rights under
such agreements, and certain other assets used in connection with its Merchant
Acquiring Business, and Purchaser wishes to purchase such rights and assets used
in connection with the Merchant Acquiring Business.
C. The capitalized terms used herein shall have the meaning ascribed to
such terms in Section 13.1 hereof unless otherwise defined herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which hereby are acknowledged, and intending to be legally bound, Seller and
Purchaser hereby agree, on the terms and conditions herein set forth, as
follows:
ARTICLE I
TRANSFERRED ASSETS; ASSUMPTION OF LIABILITIES
1.1. Sale and Purchase. (a) On the terms and subject to the
conditions set forth in this Agreement, and effective as of the Closing Date,
Seller hereby sells, transfers and assigns to Purchaser and Purchaser hereby
purchases and accepts from Seller, all right, title and interest of Seller in
and to the Transferred Assets in existence on the date hereof and/or acquired by
Seller during the Conversion Period.
(b) The "Transferred Assets" consist of the following assets:
(i) all rights and interests of Seller in the Merchant Agreements,
Agent Bank Agreements, ISO Agreements and Related Agreements, including all
revenues relating to any of them resulting from original sales transactions
occurring on or after the Closing Date and all pertinent books, records and
documents relating to any of them (as further specified in Section 1.5
hereof);
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(ii) the Equipment used in the Merchant Acquiring Business in
connection with the Transferred Assets (including all cash advance
authorization terminals) and related revenues accruing on or after the
Closing Date;
(iii) the Inventory used in the Merchant Acquiring Business in
connection with the Transferred Assets;
(iv) the rights in any Reserve Accounts (including any right of
Seller to receive interest on such Reserve Accounts) established and
maintained with Seller by Merchants, Agent Banks or Independent Sales
Organizations in connection with the Transferred Assets used in the
Merchant Acquiring Business;
(v) any guaranties executed in connection with the Merchant
Agreements, the Agent Bank Agreements, the ISO Agreements or the Related
Agreements included in the Transferred Assets;
(vi) the goodwill, intangible assets and value of the Transferred
Assets and the Merchant Acquiring Business as a going concern, to the
extent any such value exists ("Goodwill"); and
(vii) any "subsidies" granted to or received by Merchants, as set
forth on Schedule 1.1(b)(vii) (the "Subsidies"), and the continuing right
to receive such subsidies.
(c) The Transferred Assets shall not include the following assets
(collectively, the "Excluded Assets"):
(i) the Merchant Agreements, and Agent Bank Agreements and ISO
Agreements and Related Agreements, identified on Schedule 1.1(c)(i)
attached hereto all revenues relating to any of them resulting from
original sales transactions occurring before, on or after the Closing Date,
and all pertinent books, records and documents relating to any of them;
(ii) the Equipment of Seller used in the Merchant Acquiring Business
and identified on Schedule 1.1(c)(ii) and related revenues accruing before,
on or after the Closing Date, and all Equipment of Seller used in any
business of Seller other than the Merchant Acquiring Business and related
revenues accruing before, on or after the Closing Date;
(iii) all computer programs, software, trademarks, service marks,
patents, trade secrets, copyrights and other intellectual property of
Seller, and any accompanying license agreements;
(iv) the Inventory of Seller used in the Merchant Acquiring Business
identified on Schedule 1.1(c)(iv) attached hereto, and all Inventory of
Seller used in any business of Seller other than the Merchant Acquiring
Business and related revenues accruing before, on or after the Closing
Date;
(v) all reserve accounts established and maintained with Seller by
Merchants, Agent Banks, Independent Sales Organizations or other Persons in
connection with the Excluded Assets;
(vi) any guaranties executed in connection with the Merchant
Agreements, the Agent Bank Agreements, the ISO Agreements or the Related
Agreements identified on Schedule 1.1(c)(i) attached hereto or any other
Excluded Asset;
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(vii) all "subsidies" granted to or received by Merchants, and the
continuing right to receive such subsidies (excluding the Subsidies
identified on Schedule 1.1(b)(vii));
(viii) all income Tax refunds or claims therefor which are allocable
to the period prior to and including the Closing Date and which Seller may
be entitled to receive from any federal, state or local authorities;
(ix) any assets of Seller not used primarily in its Merchant
Acquiring Business;
(x) any insurance covering Excluded Liabilities (it being
understood that there will be no continuing insurance coverage for Assumed
Liabilities);
(xi) any rights of Seller under the Merchant Agreements, Agent Bank
Agreements, ISO Agreements or Related Agreements included in the
Transferred Assets or any of the other Transferred Assets, to fees,
reimbursements and any other claims or rights of Seller under such
agreements relating to the conduct of the Merchant Acquiring Business prior
to the Closing Date, and any rights of Seller under any Excluded Assets to
fees, reimbursements and any other claims or rights of Seller before, on or
after the Closing Date;
(xii) any rights to any security deposits or other amounts deposited
with any state or other jurisdiction or regulatory authority in connection
with the qualification, certification, licensing or permitting of Seller in
connection with the conduct of Seller's business, including the Merchant
Acquiring Business; and
(xiii) each of the Agreements Requiring Consent until such time as
Full Transfer is obtained, whereupon each such agreement shall
automatically and without further action become a Transferred Asset.
1.2. Transfer and Assumption of Transferred Assets and Assumed
Liabilities.
(a) On the terms and subject to the conditions set forth in this
Agreement, and effective as of the Closing Date, Seller hereby transfers and
assigns to Purchaser and Purchaser hereby assumes and accepts from Seller, all
right, title and interest in the Assumed Liabilities. The sale, conveyance,
transfer, assignment and delivery of the Transferred Assets by Seller to
Purchaser and the assumption of the Assumed Liabilities by Purchaser from Seller
shall be effected by an Assignment and Assumption Agreement, substantially in
the form of Exhibit A hereto ("Assignment and Assumption Agreement"), and a Bill
of Sale, substantially in the form of Exhibit B hereto ("Bill of Sale"), and
such other deeds, bills of sale, assignment and assumption agreements,
endorsements, assignments, transfers and other instruments of transfer and
conveyance in such form, including, without limitation, warranties of title
(collectively with the Assignment and Assumption Agreement and Bill of Sale,
"Transfer Documents"), as Purchaser or Seller may reasonably request, including,
without limitation, such Transfer Documents as Purchaser or Seller may
reasonably request at and after the Conversion Date.
(b) "Assumed Liabilities" consist of the following liabilities or
obligations:
(i) the obligations of Seller arising on or after the Closing Date
to perform under the Merchant Agreements, Agent Bank Agreements, ISO
Agreements and Related Agreements included within the Transferred Assets
assigned to Purchaser pursuant to this Agreement;
(ii) the obligations of Seller to pay assessments, interchange fees,
transaction fees, fines, penalties or other fees or charges to the Credit
Card Associations, EFT
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Networks or EBT Networks, provided such obligations relate to transactions
which occur both (A) under the Merchant Agreements, Agent Bank Agreements,
ISO Agreements or Related Agreements included within the Transferred Assets
assigned to Purchaser pursuant to this Agreement; and (B) on or after the
Closing Date;
(iii) charge-backs in respect of any Credit Card or Debit Card
transaction processed by Purchaser pursuant to a Merchant Agreement, Agent
Bank Agreement, ISO Agreement or Related Agreements included within the
Transferred Assets assigned to Purchaser pursuant to this Agreement if such
Credit Card or Debit Card transaction is received by electronic
transmission or otherwise under and in compliance with the rules and
regulations of Credit Card Associations, EFT Networks or EBT Networks (as
applicable) on and after the Closing Date, and other Credit Losses on and
after the Closing Date, but only to the extent that such charge-back or
other Credit Loss relates to or arises out of an original sales transaction
occurring on or after the Closing Date;
(iv) all other liabilities and obligations of Purchaser arising on
or after the Closing Date as successor to Seller under each of the
Transferred Assets; and
(v) any other claims, liabilities or litigation (including, without
limitation, liabilities for Taxes) in respect of the Merchant Agreements,
Agent Bank Agreements, ISO Agreements and Related Agreements included
within the Transferred Assets assigned to Purchaser pursuant to this
Agreement or any other Transferred Asset or the Merchant Acquiring Business
conducted in connection with the foregoing, provided that any such claims,
liabilities or litigation relates to or arises out of events, transactions
or actions or omissions of Purchaser on or after the Closing Date.
(c) The Assumed Liabilities assumed by Purchaser hereunder shall be
limited to the liabilities and obligations specified in Section 1.2(b)(i)
through (v) above and, without limitation of the foregoing, shall not in any
event include any other liabilities or obligations of Seller, which excluded
liabilities and obligations shall include the following liabilities or
obligations (the "Excluded Liabilities"):
(i) penalties or fees that may be incurred by Seller in connection
with the termination of Seller's agreement(s) with any third party service
providers, or losses as the result of a charge-back or Credit Loss in
respect of any Merchant Agreement that result from transactions, or events,
or acts or omissions of Seller, or a Merchant, Agent Bank or Independent
Sales Organization which occurred prior to the Closing Date (except for the
fees to be paid by Paymentech as set forth in Section 3.6 which shall not
be Excluded Liabilities);
(ii) all liabilities of Seller relating to or incurred in connection
with the Excluded Assets;
(iii) all liabilities of Seller for Taxes;
(iv) except as set forth in Section 3.4(c) all liabilities of Seller
relating to any employee benefit plan or deferred compensation arrangement
maintained by Seller, in each case including, without limitation, any
retention bonus payments, or any liability or indebtedness with respect to
any wages, back pay, incentive bonuses, commissions, stock-based
compensation, other payroll-related items or taxes or liabilities in
connection with employee benefits, workers compensation or other medical
claims, and all pension, welfare or employee benefit plans, programs or
arrangements presently in effect with respect to Employees;
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(v) except as set forth in Section 3.4(c), all liabilities of
Seller with respect to any retained Employees;
(vi) all liabilities of Seller or affiliates of Seller relating to
any Agreement Requiring Consent until such time as the necessary
affirmative consents are obtained, whereupon said liabilities shall
automatically and without further action become Assumed Liabilities;
(vii) all liabilities of Seller arising in connection with its
operations unrelated to the Merchant Acquiring Business;
(viii) any other assessments, fees, penalties, charge-backs, claims,
liabilities or litigation in respect of any Excluded Assets; and
(ix) all assessments, association fees, interchange fees and similar
fees, penalties and liabilities that relate to the operation of the
Transferred Assets and the Merchant Acquiring Business prior to the Closing
Date (including without limitation any claims, liabilities or litigation
that relate to the operation of the Transferred Assets and the Merchant
Acquiring Business and that accrue from any transaction, event, action or
omission of Seller prior to the Closing Date).
(d) It is understood and agreed that Purchaser shall not assume or
become liable for the payment of any debts, liabilities, losses, Credit Losses,
charge-backs, accounts payable, bank indebtedness, mortgages, or other
obligations of Seller, any Merchant, any Agent Bank, any Independent Sales
Organizations or Related Party, whether the same are known or unknown, now
existing or hereafter arising, of whatever nature or character, whether absolute
or contingent, liquidated or disputed, except for Assumed Liabilities.
1.3. Transition Cooperation.
(a) From and after the date hereof and until the Conversion Date,
Seller and Purchaser shall use all commercially reasonable efforts in assisting
the other party with the "conversion" of the Merchant Acquiring Business herein
contemplated and the transition of the Merchant Acquiring Business from Seller
to Purchaser. Regarding any Merchant Agreements included in the Transferred
Assets, Seller also shall use all commercially reasonable efforts to encourage
the Merchants that are parties thereto to continue doing business with Purchaser
under any such Merchant Agreements.
(b) Without limiting the generality of the foregoing, promptly
following the execution of this Agreement, Seller shall cause to be delivered to
each such Merchant a notice, in form and substance mutually acceptable to Seller
and Purchaser, of the assignment by Seller to Purchaser, effective as of the
Closing Date, of all rights in and to such Merchant Agreements. If Seller and
Purchaser so agree, such notice may inform each such Merchant of Purchaser's
intention to convert that Merchant from the Mellon Payment Processing System to
Purchaser's network, as well as to a clearing bank and merchant accounting
system designated by Purchaser.
(c) From and after the date hereof and until the Conversion Date,
Seller and Purchaser shall each from time to time upon the reasonable request of
the other party cooperate with the other party to provide each other and the
Merchants, Agent Banks, Independent Sales Organizations and Related Parties that
are parties to the Merchant Agreements, Agent Bank Agreements, ISO Agreements
and Related Agreements included within the Transferred Assets with information
regarding the Year 2000 compliance status of Seller and Purchaser. The
information that may be requested may consist of brief summaries of the testing
and analysis which Seller or Purchaser has performed, any exceptions to Year
2000 compliance (including a brief summary of plans for dealing with the
exceptions), and any other information required to be
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provided to such Merchants, Agent Banks, Independent Sales Organizations or
Related Parties by applicable law. Both Seller and Purchaser understand and
agree that nothing in this Section 1.3(c) is intended, or shall be construed, as
a representation or warranty regarding the Year 2000 compliance status of
Seller, Purchaser or any other Person, and that neither Seller nor Purchaser
shall make any representation or warranty, or provide any information, regarding
the other party's Year 2000 compliance status without the express prior written
consent of the other party.
1.4. Procedures for Transferred Assets not Transferable.
(a) Seller shall use all commercially reasonable efforts to obtain
Full Transfer of the Merchant Agreements, Agent Bank Agreements, ISO Agreements
and Related Agreements after the execution of this Agreement until February 15,
1999 and Purchaser shall use all commercially reasonable efforts to assist
Seller in that endeavor.
(b) Anything in this Agreement to the contrary notwithstanding,
this Agreement shall not constitute an agreement to assign or delegate any
Merchant Agreement, Agent Bank Agreement, ISO Agreement or Related Agreements
included within the Transferred Assets, or any claim, right, benefit, duty,
obligation or liability arising thereunder or resulting therefrom, if an
attempted assignment or delegation thereof, without the affirmative consent of a
third party, would be ineffective or would constitute a breach or other
contravention of such Merchant Agreement, Agent Bank Agreement, ISO Agreement or
Related Agreement or give rise to any right of termination thereof.
(c) Purchaser acknowledges and agrees that the failure of Seller to
obtain or consummate Full Transfer with respect to any Merchant Agreement,
Agent Bank Agreement, ISO Agreement or Related Agreement included within the
Transferred Assets shall not be deemed a breach by Seller of any provision of
this Agreement and, except as specifically provided in Section 1.4(d) below,
shall not give Purchaser any right to terminate, rescind, modify or seek
indemnification, adjustment of the Purchase Price or any other monetary
consideration, with respect to this Agreement and the transactions contemplated
hereby, and Purchaser and Seller acknowledge and agree that Purchaser's remedy
with respect to Seller's failure to obtain or consummate Full Transfer with
respect to such Merchant Agreement, Agent Bank Agreement, ISO Agreement or
Related Agreement is set forth in Section 1.4(d) below. Purchaser and Seller
agree to use commercially reasonable efforts, and to cooperate with each other,
in obtaining or executing and delivering promptly such other affirmative
consents and Transfer Documents, and in taking such other actions, as are
necessary or desirable in order to obtain or consummate Full Transfer with
respect to any Merchant Agreement, Agent Bank Agreement, ISO Agreement or
Related Agreements included within the Transferred Assets; provided, however,
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that no such actions shall require Purchaser or Seller to pay money (other than
routine filing fees) to third parties in order to induce such parties to furnish
any consent or approval needed to obtain or consummate Full Transfer unless the
paying party consents in writing to such payment. If Full Transfer has not
occurred with respect to any Merchant Agreement, Agent Bank Agreement, ISO
Agreement or Related Agreement as of the Closing Date, Seller shall perform all
obligations and duties under such Merchant Agreement, Agent Bank Agreement, ISO
Agreement or Related Agreement for the benefit of the Purchaser pursuant to the
Interim Transaction Processing Agreement until the Conversion Date. Upon
obtaining Full Transfer of any such Merchant Agreement, Agent Bank Agreement,
ISO Agreement or Related Agreement prior to the Conversion Date, such Merchant
Agreement, Agent Bank Agreement, ISO Agreement or Related Agreement shall be
deemed assigned and transferred to Purchaser hereunder as of the Closing Date,
Purchaser shall be entitled to retain all net revenue resulting from original
sales transactions occurring on or after the Closing Date and Seller shall be
entitled to make a claim against the Holdback Amount in an amount as set forth
on Schedule 1.4(d) with respect to such Merchant Agreement, Agent Bank
Agreement, ISO Agreement or Related Agreement, plus interest at the rate of five
percent (5%) per annum on such amount from the Closing Date to the date prior to
the day such funds are paid by Purchaser to Seller.
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(d) To the extent that Seller has not obtained Full Transfer of any
Merchant Agreement, Agent Bank Agreement, ISO Agreement or Related Agreement
included in the Transferred Assets and identified on Schedule 1.4(d) on or
before February 15, 1999, Purchaser shall elect on or before February 26, 1999
whether to:
(i) accept the assignment absent a Full Transfer, in which case,
notwithstanding the failure to obtain Full Transfer, Purchaser shall to the
extent practicable assume the obligations, duties and liabilities, and Purchaser
shall be entitled to the practical benefit, under any such Merchant Agreement,
Agent Bank Agreement, ISO Agreement or Related Agreement, which shall be deemed
assigned and transferred to Purchaser as of the Closing Date, Purchaser shall be
entitled to all net revenue resulting from original sales transactions occurring
on or after the Closing Date and Purchaser shall pay to Seller that portion of
the Holdback Amount identified with respect to such Merchant Agreement, Agent
Bank Agreement, ISO Agreement or Related Agreement in an amount as set forth on
Schedule 1.4(d), plus interest at the rate of five percent (5%) per annum on
such amount from the Closing Date to the date immediately prior to the date such
funds are paid by Purchaser to Seller and Seller shall have no liability to
Purchaser solely resulting from the failure to obtain Full Transfer of such
Merchant Agreement, Agent Bank Agreement, ISO Agreement or Related Agreement; or
(ii) reject the assignment, in which case, notwithstanding any other
provisions of this Agreement, (A) Seller shall be deemed to have retained all
claims, rights, benefits (including the revenues net of interchange fees, dues
and assessments, Subsidies and third-party processing fees attributable to such
Merchant Agreement, Agent Bank Agreement, ISO Agreement or Related Agreement, if
any), obligations, duties and liabilities under such Merchant Agreement, Agent
Bank Agreement, ISO Agreement or Related Agreement as of the Closing Date, (B)
Purchaser shall be entitled to (I) retain that portion of the Holdback Amount
identified with respect to such Merchant Agreement, Agent Bank Agreement, ISO
Agreement or Related Agreement in an amount as set forth on Schedule 1.4(d)
with respect to each rejected Merchant Agreement, Agent Bank Agreement, ISO
Agreement or Related Agreement and (II) reimbursement of all Transaction Fees
(as defined in the Interim Transaction Processing Agreement) incurred by
Purchaser from the Closing Date to the Conversion Date, for each such Merchant
Agreement, Agent Bank Agreement, ISO Agreement or Related Agreement rejected by
Purchaser under this Section 1.4(d)(ii), (C) neither this Agreement nor the
Transfer Documents shall constitute a sale, assignment, assumption, transfer,
conveyance or delivery or an attempted sale, assignment, assumption, transfer,
conveyance or delivery of any such Merchant Agreement, Agent Bank Agreement, ISO
Agreement or Related Agreement, and (D) Purchaser shall remit the revenues net
of interchange fees, dues and assessments, Subsidies and third-party processing
fees attributable to such Merchant Agreement, Agent Bank Agreement, ISO
Agreement or Related Agreement, as applicable, in immediately available funds
within thirty (30) days of the rejection of assignment.
If Purchaser does not expressly accept or reject the assignment pursuant to this
Section 1.4(d), Purchaser shall be deemed to have rejected the assignment.
1.5. Books and Records. (a) As soon after the Closing Date as is
practicable, and in no event later than ten (10) days following the Conversion
Date, Seller shall cause to be delivered to Purchaser the originals or, in the
event Seller is entitled to keep the originals pursuant to this Section 1.5 or
if Seller does not have in its possession such originals, copies, of all books,
records and documents, or portions thereof, of Seller relating to the
Transferred Assets; provided, however, that in no event shall such books,
records and documents include corporate books or records involving operations
other than the Merchant Acquiring Business, and further provided that Seller may
retain the originals or copies of such documents other than the Merchant
Agreements, Agent Bank Agreements, ISO Agreements and Related Agreements
included within the Transferred Assets as may be reasonably necessary for
Seller's business. In each case, however, the books and records relating to the
Transferred Assets for the period prior
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to the Closing Date, wherever located, that are held by a party hereto or under
the control of a party hereto (the "Inspected Party") shall be open for
inspection by the other party, and such other party's authorized agents and
representatives and regulators may, at such other party's own expense, make such
copies of any excerpts from such books, records and documents as it shall
reasonably deem necessary; provided, however, that any such inspection: (i)
shall be conducted during normal business hours from time to time reasonably
established by the Inspected Party; (ii) shall, if the Inspected Party so
requests, be conducted in the presence of an officer or designated
representative of the Inspected Party; and (iii) shall be conducted in
accordance with reasonable security programs and procedures from time to time
established by the Inspected Party, including but not limited to such
confidentiality agreements as the Inspected Party may reasonably request.
(b) All books and records relating to the Transferred Assets shall
be maintained by Purchaser or Seller, as the case may be, for a period of seven
(7) years after the Closing Date, unless the parties shall, applicable law
permitting, agree upon a shorter period; provided, however, that in the event
that, as of the end of such period, any taxable year of Purchaser or Seller is
still under examination or open for examination by any taxing authority and that
party has given notice of that fact to the other party, such books and records
shall be maintained (or, alternatively, delivered by the Inspected Party to the
other party) until the date, determined reasonably and in good faith, specified
for maintenance of such records in such notice. Prior to the destruction of any
books and records relating to the Transferred Assets, the party in possession of
such books and records shall offer them to the other party hereto.
(c) Seller covenants and agrees that it shall cause to be delivered
to Purchaser, as soon as reasonably practicable after the Closing Date, but in
no event later than ten (10) days following the Conversion Date, fully executed
originals (or, to the extent originals are not available, copies of the fully
executed originals) of (i) each Merchant Agreement included within the
Transferred Assets to which a Top 50 Merchant is a party that Seller has in its
possession (as identified in Section 6.5(b)), (ii) each Agent Bank Agreement,
ISO Agreement and Related Agreement included with the Transferred Assets
assigned to Purchaser pursuant to this Agreement that Seller has in its
possession (as identified in Section 6.5(c)), and (iii) all other Merchant
Agreements included within the Transferred Assets that Seller has in its
possession.
ARTICLE II
CONSIDERATION FOR TRANSFERRED ASSETS; CLOSING
2.1. Purchase Price. As consideration for the Transferred Assets
and Assumed Liabilities, at the Closing, Purchaser shall pay to Seller an amount
equal to $41,985,531 ("Up-Front Purchase Price"), and Purchaser shall retain an
amount equal to $9,238,469 ("Holdback Amount"), in each case such amount to be
paid in lawful currency of the United States by wire transfer (with written wire
transfer instructions to be provided at least 1 day in advance) in immediately
available funds (the sum of the Up-Front Purchase Price plus the Holdback
Amount, plus the value of the Assumed Liabilities, the "Purchase Price").
2.2. Allocation of Purchase Price.
(a) The Purchase Price shall be allocated among the Transferred
Assets and Assumed Liabilities, such allocation to be made as provided in
Section 1060 of the Code. Purchaser and Seller shall negotiate in good faith in
an attempt to agree on the allocation of the Purchase Price until the earlier of
(i) the date which is ninety (90) days after the Closing Date or (ii) the date
on which Purchaser and Seller execute and deliver an allocation agreement
reflecting the agreement between Purchaser and Seller on the allocation of the
Purchase Price ("Allocation Agreement").
<PAGE>
(b) If, after the date of the Allocation Agreement, there is any
decrease in the Purchase Price due to Purchaser making a claim against the
Holdback Amount pursuant to Section 1.4(d) hereof, Purchaser and Seller shall
negotiate in good faith one (1) or more amendments to the Allocation Agreement
covering the allocation of any such decrease in the Purchase Price until the
earlier of (i) the date which is forty-five (45) days after the date on which
such adjustment to the Purchase Price was made, or (ii) the date on which
Purchaser and Seller execute and deliver an amendment to the Allocation
Agreement covering the allocation of any such adjustment to the Purchase Price.
(c) If Purchaser and Seller agree on the allocation of the Purchase
Price and execute and deliver the Allocation Agreement and any amendments
thereto within the time limits set forth in Sections 2.2(a) and (b) above, (i)
Purchaser and Seller shall each file on a timely basis Form 8594 (Asset
Acquisition Statement Under Section 1060), including any supplements or
amendments thereto, so as to report the allocation of the Purchase Price
consistent with the Allocation Agreement and any amendments thereto, and (ii)
Purchaser and Seller shall not take any position on their respective income tax
returns that is inconsistent with the allocation of the Purchase Price as agreed
to in the Allocation Agreement and any amendments thereto.
(d) If Purchaser and Seller are unable to agree on the allocation of
the Purchase Price and execute and deliver the Allocation Agreement or any
amendments thereto within the time limits set forth in Sections 2.2(a) and (b)
above, any disputed items shall be referred to KPMG Peat Marwick, or another
independent certified public accounting firm agreed to by Purchaser and Seller,
for resolution. The decision of such accounting firm as to allocation of the
Purchase Price for the Transferred Assets and the Assumed Liabilities with
respect to any disputed item will be final and binding upon both parties.
(e) Neither Purchaser nor Seller shall file any tax returns or, in a
judicial or administrative proceeding, assert or maintain any tax reporting
position that is inconsistent with this Agreement or the allocation agreed to in
accordance with this Agreement, unless required to do so by applicable law.
2.3. Closing. The consummation of the purchase and sale of the
Transferred Assets and assumption of the Assumed Liabilities (the "Closing")
shall take place on December 1, 1998 (the "Closing Date"), or such other date as
the parties may mutually agree upon, to be effective as of the Closing Date, and
shall take place either at the offices of Reed Smith Shaw & McClay LLP, 435
Sixth Avenue, Pittsburgh, Pennsylvania 15219 or through the exchange, via
facsimile to be followed by hard copies via national overnight courier (e.g.,
Federal Express), of executed originals of this Agreement, the Operative
Documents and all other agreements, documents and instruments to be executed in
connection herewith or therewith, or at such other place or by such other method
as may be mutually agreed upon by the parties.
ARTICLE III
CONVERSION PERIOD; EMPLOYEE OBLIGATIONS; GOVERNMENT CONTRACTS CERTIFICATION
3.1. Orderly Transition. Seller and Purchaser each covenants and
agrees to use all commercially reasonable efforts to cooperate with each other
to effect an orderly transition of the Merchant Acquiring Business until the
Conversion Date with respect to the Transferred Assets and the Assumed
Liabilities, including but not limited to fulfilling its obligations under
Section 1.3 hereof. In order to further such purpose, Seller and Purchaser each
agree that until the Conversion Date it shall execute such documents as are
reasonably deemed necessary or convenient by each other to evidence the
agreements referred to in, and transactions contemplated by, this Agreement,
consistent with the rules and regulations of the Credit Card
<PAGE>
Associations, EFT Networks and EBT Networks (as applicable) and an orderly
transition of the Transferred Assets used in the Merchant Acquiring Business.
3.2. Services During the Conversion Period. During the Conversion
Period, Seller shall perform on behalf of and for the account of the Purchaser,
the services ("Transitional Services") set forth in an Interim Transaction
Processing Agreement, substantially in the form of Exhibit C hereto (the
"Interim Transaction Processing Agreement"). The Transitional Services shall be
performed by Seller in accordance with the terms and conditions of, and at such
time or times provided in, the Interim Transaction Processing Agreement.
3.3. Fees, Revenue and Expenses During the Conversion Period.
During the Conversion Period, Purchaser and Seller shall pay such fees and
expenses, in connection with the performance of the Transitional Services by
Seller as provided in the Interim Transaction Processing Agreement.
3.4. Employees.
(a) Seller shall use all commercially reasonable efforts to ensure
that the Employees employed by Seller in the Merchant Acquiring Business during
the period prior to Closing ("Merchant Acquiring Business Employees") will
continue in the employ of Seller or its subsidiaries or affiliates, performing
the duties relating to the Transferred Assets used in the Merchant Acquiring
Business therefore performed by them. Further, Seller shall provide adequate
and appropriate skilled staffing in connection with the operation of the
Transferred Assets and Merchant Acquiring Business during the period prior to
Closing.
(b) Prior to the Closing, Seller shall not, unless otherwise
expressly contemplated by this Agreement or any other Operative Document or
consented to in writing by Purchaser:
(i) increase the compensation payable to or to become payable to any
Merchant Acquiring Business Employee listed on Schedule 3.4(c)(ii), unless
such increase results from the operation of compensation arrangements in
effect prior to the date of this Agreement (including without limitation
regularly scheduled merit-based salary increases and bonuses) all of which
are set forth on Schedule 3.4(c)(ii); and
(ii) grant any severance or termination pay (other than pursuant to
the severance policy of Seller or pursuant to an agreement to which Seller
is a party and which provides for severance or termination pay as in effect
on the date of this Agreement) to, or enter into an or amend any employment
or severance agreement with any Merchant Acquiring Business Employee listed
on Schedule 3.4(c)(ii).
(c) Purchaser's obligations regarding Seller's Employees shall be as
follows:
(i) Schedule 3.4(c)(i) sets forth the following information for each
Merchant Acquiring Business Employee as of the date hereof: name, position
held, current salary grade, official title, 1997 bonus amount, current
salary, compensation history since January 1, 1998, annual vacation
entitlement, Fair Labor Standards Act status, date of hire, schedule of
work, shift differential, if any, work location, and accrued and unused
1998 vacation. Such list will indicate which Merchant Acquiring Business
Employees are Inactive Employees and, to the extent known, the date on
which each Inactive Employee is expected to return to active employment.
(ii) Purchaser shall interview, and, if the interviews are acceptable
to Purchaser, make written offers of employment on "comparable" (as defined
herein) terms effective as of the Closing Date to those Merchant Acquiring
Business Employees listed on
<PAGE>
Schedule 3.4(c)(ii) upon the earlier of (A) thirty (30) days after the date
of this Agreement or (B) three (3) days prior to the Closing Date ("Signing
Period"). Seller agrees not to make any effort to retain any Merchant
Acquiring Business Employee set forth on Schedule 3.4(c)(ii) (including
making a competing offer) unless and until such Merchant Acquiring Business
Employee rejects Purchaser's offer of employment; provided that Seller may
respond to inquiries regarding the consequences of rejecting an offer of
employment with Purchaser. To the extent any such offer of employment is
made to any Inactive Employee, such offer of employment shall be effective
as of the date which is the later of the Closing Date or the date on which
each such Inactive Employee is able and willing to commence the performance
of services on a full-time basis; provided, however, that such date occurs
within six months after the Closing Date. For purposes of this subsection
3.4(c)(ii), an offer of "comparable" employment shall mean a position with
Purchaser that: (A) pays a base salary no less than the base salary in
effect on the day before the Closing Date; (B) provides for eligibility for
Purchaser's bonus and/or long-term incentive program; and (C) is at a level
of responsibility and authority determined in good faith by Purchaser not
to be substantially below that required of the Merchant Acquiring Business
Employee as of the day before the Closing Date and is consistent with the
Merchant Acquiring Business Employee's skills, training and work
experience. All Merchant Acquiring Business Employees who accept employment
with Purchaser as of the Closing shall be referred to as "Transferred
Employees". Purchaser may also, from time to time, make offers of
employment to other Merchant Acquiring Business Employees on such terms as
Purchaser may elect, and any such Merchant Acquiring Business Employee that
accepts such offer of employment shall be deemed a Transferred Employee as
of the effective date of his or her employment by Purchaser.
(iii) Transferred Employees shall be eligible to participate as of
the later of the Closing Date or the effective date of their employment by
Purchaser in the employee benefit plans and other fringe benefits of
Purchaser on the same basis as such plans and benefits are offered to
similarly situated employees of Purchaser.
(iv) After the later of the Closing Date or the effective date of
hire by Purchaser, Purchaser shall pay, discharge and be responsible for
all obligations relating to each Transferred Employee relating to such
Transferred Employee's employment by Purchaser, including (x) all salary,
wages and claims (including, but not limited to, workers compensation
claims or benefits) and (y) any benefits or contributions under any of
Purchaser's employee benefit plans and other fringe benefits offered by
Purchaser arising out of or relating to the employment of the Transferred
Employees by Purchaser on or after the later of the Closing Date or the
effective date of hire by Purchaser, including without limitation, any
continuation coverage required pursuant to Code Section 4980B as a result
of any "qualifying event" (within the meaning of Code Section 4980B(f)(3))
occurring with respect to any Transferred Employee (or any spouse or
dependent of a Transferred Employee) after the Closing Date (or hire date,
as applicable), other than continuation coverage elected by any such
Transferred Employee, spouse or dependent under Seller's group health plan
pursuant to Code Section 4980B.
3.5. Clearing Bank Arrangement.
(a) In order to permit an orderly transition of the processing of
Credit Card and Debit Card transactions, during the Conversion Period, Seller
shall continue to be a party (fulfilling Member responsibilities) to the
Merchant Agreements, Agent Bank Agreements, ISO Agreements and Related
Agreements included in the Transferred Assets and Seller shall act as a clearing
bank for Purchaser with respect to Credit Card and Debit Card transactions
processed under the Merchant Agreements, Agent Bank Agreements, ISO Agreements
and Related Agreements included in the Transferred Assets all in accordance with
the provisions of the
<PAGE>
Transitional Services Agreement and the rules and regulations of the Credit Card
Associations, EFT Networks and EBT Networks, for a period of time ending not
later than the Conversion Date.
(b) At the request of Purchaser, Seller shall execute appropriate
documents to evidence the transfer of the clearing bank responsibilities under
the Merchant Agreements, the Agent Bank Agreements, ISO Agreements and/or
Related Agreements included in the Transferred Assets to a Person agreed upon by
Seller and Purchaser. In addition, Seller shall render such other necessary
assistance as Purchaser may reasonably request. Seller shall provide to
Purchaser all information necessary for such transfer.
3.6. Third Party Service Provider Contracts.
(a) Purchaser acknowledges that Seller has in effect the agreements
identified on Schedule 3.6(a) with third party service providers, and that
Seller shall maintain such agreements at least until the Conversion Date, unless
such agreements can be earlier terminated upon mutual agreement of the parties
hereto. During the Conversion Period, Seller agrees to continue its operational
responsibilities under all of the agreements listed in Schedule 3.6(a) relating
to the Transferred Assets and the Merchant Acquiring Business as Transitional
Services in accordance with the terms and conditions of the Interim Transaction
Processing Agreement. During the Conversion Period, Purchaser shall pay to
Seller such fees as set forth in the Interim Transaction Processing Agreement
and Seller shall maintain and implement such agreements with third party service
providers, including those identified on Schedule 3.6(a), as necessary to
provide the Transitional Services under the Interim Transaction Processing
Agreement. In the event Purchaser requires the services of the third party
service providers listed on Schedule 3.6(a) beyond the Conversion Date,
Purchaser agrees to either, at Seller's sole discretion, assume the agreements
from Seller as of the Conversion Date or enter into new agreements with such
third party service providers.
(b) With respect to the Buypass Agreement, Purchaser and Seller
agree as follows:
(i) between the Closing Date and the Cut-Off Date (as that term is
defined in the Interim Transaction Processing Agreement), (A) Seller may
pass on to Purchaser the actual charges for point of sale authorization,
settlement and other services incurred thereunder ("Usage Fees") in
accordance with the terms of the Interim Transaction Processing Agreement
and (B) Purchaser and Seller shall share equally any amounts required to be
paid in excess of the Usage Fees in connection with any minimum payment
requirements ("Minimum Fees"); and
(ii) after the Cut-Off Date, Seller and Purchaser share equally any
Minimum Fees or fees paid to terminate or assign the Buypass Agreement.
3.7. Conversion. Purchaser shall use all commercially reasonable
efforts to complete the conversion of the point-of-sale terminals utilized by
Merchants from the Mellon Payment Processing System to Purchaser's network no
later than the Conversion Date, and Seller shall use all commercially reasonable
efforts, until the Conversion Date, to assist Purchaser in such conversion.
Purchaser acknowledges that it is responsible for the direct costs of such
conversion.
3.8. Conversion Date. In no event shall the Conversion Date be
extended beyond September 30, 1999; provided, however, that if reasons,
circumstances or other factors beyond the reasonable control of Purchaser or
Seller shall not allow Purchaser and Seller to cause all processing services
heretofore provided by Seller at Seller's premises (except for clearing,
settlement, or other "Member" services in connection with Section 3.5 and the
maintenance of
<PAGE>
certain agreements pursuant to Section 3.6) to be transitioned from Seller's
premises to Purchaser's premises on or prior to the Conversion Date, upon the
agreement of Purchaser and Seller, the Conversion Date may be extended upon such
terms and conditions as each of Purchaser and Seller may agree.
3.9. Operation of Business; Other Restrictions. (a) Prior to the
Closing, Seller shall, unless otherwise expressly contemplated by this Agreement
or any other Operative Document or consented to in writing by Purchaser:
(i) operate the Merchant Acquiring Business in the usual and
ordinary course of business consistent with past practices;
(ii) use all commercially reasonable efforts to preserve
substantially intact the business organization of the Merchant Acquiring
Business, maintain its material rights and franchises, retain the services
of its respective officers and employees and maintain its relationships
with its customers and suppliers;
(iii) continue to actively solicit and sign-up new Merchants, Agent
Banks and Independent Sales Organizations in accordance with past
practices;
(iv) use commercially reasonable efforts to maintain and keep the
Merchant Acquiring Business properties and assets in as good repair and
condition as at present, ordinary wear and tear excepted, and maintain
supplies and inventories consistent with past practices;
(v) use commercially reasonable efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage to
that maintained by Seller as of the date of this Agreement; and
(vi) promptly notify Purchaser of the occurrence of any event which
reasonably could be expected to cause a Material Adverse Effect.
(b) Prior to the Closing, Seller shall not, unless otherwise
expressly contemplated by this Agreement or any other Operative Document or
consented to in writing by Purchaser:
(i) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, any of the Transferred Assets or any interest
therein, except for dispositions of inventories and of assets in the
ordinary course of business and consistent with past practices; or
(ii) amend, modify or change any Merchant Agreement, Agent Bank
Agreement, ISO Agreement or Related Agreement included within the
Transferred Assets.
(c) Nothing in this Section 3.9 shall impose any restrictions on,
or otherwise restrict in any way, Seller's ability to operate, perform under,
service, support or dispose of any Excluded Asset or Excluded Liability.
3.10. Government Contracts Certification. Purchaser and Seller shall
work and cooperate with each other and use all commercially reasonable efforts
to (a) obtain the consent of the Financial Management Service to Purchaser
acting as subcontractor to Seller under the Government Contracts, and (b) obtain
the required federal government security certification (collectively, "Required
Government Certifications"). If the Required Government Certifications have not
been obtained on or before April 1, 1999, then Purchaser may elect, at its
option, by delivery of written notice to Seller, to extend the period to obtain
the Required Government Certifications until May 1, 1999 (the "First Extension
Period"). If the
<PAGE>
Required Government Certifications have not been obtained prior to the
expiration of the First Extension Period, Purchaser may elect, at its option, by
delivery of written notice to Seller, to extend the period to obtain the
Required Government Certifications until June 1, 1999 (the "Second Extension
Period").
[Confidential treatment has been requested for portions of this exhibit
below, and, accordingly, such portions have been omitted from the exhibit.
The entire document, including the portions omitted from the exhibit, has
been provided separately to the Commission.]
Purchaser shall pay to Seller ____ for each month (or portion thereof)
after ________, but not in excess of two (2) months thereafter, in which Seller
must continue to maintain the operation of its Mellon Payment Processing System
to process the Government Contracts due to either the extension of time from the
First Extension Period or the Second Extension Period; provided, that Seller
must use all commercially reasonable efforts to consummate the conversion of the
Government Contracts on or before ________, and provided further that Purchaser
shall in no event pay to Seller more than ____.
If the Required Government Certifications have not been obtained by
the end of the Second Extension Period, Seller shall use all commercially
reasonable efforts to sell, transfer and convey the right to provide Merchant
Acquiring Business services as a subcontractor under the Government Contracts to
a Person reasonably acceptable to Seller, and Purchaser shall be entitled to
receive all proceeds therefrom less any reasonable, direct, out-of-pocket, third
party transaction costs incurred by Seller. Seller agrees to act in a
commercially reasonable fashion with respect to the sale of the right to provide
Merchant Acquiring Business services as a subcontractor under the Government
Contracts taking into account price, the ability of the proposed purchaser to
provide the services required, the certainty of closing, and other similar
factors typically evaluated in connection with similar transactions and consult
with Purchaser regarding the process.
3.11. Seller's Employees Related to Government Contracts. The three
(3) key employees of Seller whose principal function relates to the merchant
processing services under the Government Contracts are set forth on Schedule
3.11 (the "Key Government Employees"). The Key Government Employees shall
remain in the employ, and under the control, of Seller. Such Key Government
Employees shall perform their services principally for the benefit of Purchaser
and shall dedicate their full-time attention and efforts to the merchant
processing services provided under the Government Contracts. The Key Government
Employees shall fully cooperate with Purchaser's management and employees in the
development, implementation, support and marketing of the merchant processing
services provided under the Government Contracts. Purchaser shall have the
right to raise objections to Seller with respect to the services rendered by any
Key Government Employee if such services are not to the reasonable satisfaction
of Purchaser, and Seller shall promptly and reasonably respond to such
objections. Seller shall bear all costs and expenses with respect to the Key
Government Employees for the first twelve (12) month period after the Closing
Date. During the second twelve (12) month period after the Closing Date, (a)
Seller shall be responsible for (i) the compensation of such Key Government
Employees, (ii) applicable withholding Taxes from each Key Government Employee's
salary, and (iii) paying over or depositing such Taxes with the appropriate
governmental agencies and (b) Purchaser shall reimburse Seller for (i) all
compensation (including Seller's portion of any Taxes that are not withheld from
the Key Government Employees' salaries) and benefits incurred by Seller for such
Key Government Employees and (ii) any direct, out-of-pocket, travel expenses for
the Key Government Employees incurred by Seller that are related to the merchant
processing services function under the Government Contracts. Notwithstanding
the foregoing, Purchaser's aggregate liability for such expenses shall in no
event exceed $224,000 during the second twelve (12) month period after the
Closing Date and Purchaser's obligations under this Section 3.11 shall expire
upon the earlier of (a) the second anniversary of the Closing Date or (b) the
purchase by Seller of the Purchaser's rights as subprocessor under the
Subprocessed Contracts (as defined in the Marketing Agreement) under the
Marketing Agreement or by another Person as contemplated by Section 3.10.
Purchaser and Seller agree that, if a Key Government Employee's employment with
Mellon is terminated prior to the second anniversary of the Closing Date,
Purchaser and Seller will discuss replacement of such Key Government Employee
and associated expense issues and whether such replacement should be hired by
Seller or Purchaser. After the second anniversary of the Closing Date,
Purchaser and Seller will negotiate in good faith to determine whether the
functions performed
<PAGE>
by the Key Government Employees should be performed by employees of Seller or
employees of Purchaser and associated expense issues.
ARTICLE IV
CERTAIN COVENANTS AND AGREEMENTS OF SELLER
4.1. Confidentiality of Information. On and after the date hereof,
Seller and its officers, employees, agents and representatives shall treat all
information, books and records, originals or copies of books or records which
are retained or obtained by it pursuant to Section 1.5, all information learned
or obtained about Purchaser's business or relating to the Transferred Assets
used in the Merchant Acquiring Business, and the terms and conditions of this
Agreement, as confidential and will not disclose such information to third
parties except as required by law, stock exchange rules, as needed in connection
with a lawsuit, claim, litigation or other proceeding or in connection with Tax
or regulatory matters and except to the extent that such information is already
in the public domain, or subsequently enters the public domain, other than as a
result of the breach of Seller's obligations under this Section 4.1. Seller and
its officers, employees, agents and representatives shall not use the
information described in this Section 4.1 in any manner that might reasonably be
anticipated to have a Material Adverse Effect or have a material adverse effect
on Purchaser's relations with Merchants, Agent Banks, Independent Sales
Organizations or with other Persons.
4.2. Notice of Breach or Potential Breach. Seller shall promptly
notify Purchaser of any change, circumstance or event that may prevent Seller
from complying with any of its obligations hereunder.
4.3. Further Assurances. On and after the Closing Date, Seller
shall (i) give such further assurances to Purchaser and execute, acknowledge and
deliver all such acknowledgments and other instruments and take such further
action as Purchaser may reasonably request to effectuate the transactions
contemplated by this Agreement, including the transfer of the Transferred Assets
and assumption of the Assumed Liabilities, and (ii) use all commercially
reasonable efforts to assist Purchaser in the orderly transition referred to in
Article III.
4.4. Schedule Updates. Seller agrees to update the Schedules
identified on Schedule 4.4 attached hereto at the times, and within the time
periods, identified on Schedule 4.4. Notwithstanding such update, the
representations and warranties made by Seller shall be true, correct and
complete, in all material respects as though made at the Closing Date without
such updated Schedules.
4.5. Collections. Seller shall use all commercially reasonable
efforts from and after the Closing Date to assist Purchaser, at Purchaser's
request, in processing amounts in respect of any charge-back or other Credit
Loss received or identified in connection with the Transferred Assets used in
the Merchant Acquiring Business and relating to or arising out of any original
sales transaction occurring on or after the Closing Date. Purchaser shall be
responsible for all costs and expenses relating to such collection efforts,
including costs and expenses of employee salaries, benefits, other overhead,
collection letters, litigation, arbitration proceedings, and similar actions.
4.6. HSR and Other Government Approval Fees. Seller shall pay
one-half of the filing fees paid by both Seller and Purchaser in connection with
the filing of the notification required by HSR, if any, and one-half of any
filing fees required in connection with the Required Government Certifications.
Seller shall be solely responsible for all other fees and expenses paid or
incurred by Seller in connection with the preparation and filing of the
notification required by
<PAGE>
the HSR and any other notification or filing required to be made by Seller with
any other governmental or regulatory body.
4.7. Subsidies. Seller covenants and agrees that it shall
continue to pay or otherwise pass on to Purchaser, for the benefit of Purchaser,
each of the Subsidies included within the Transferred Assets.
4.8. Access to Information. (a) Subject to Section 4.8(b) below,
prior to the Closing Date, Seller shall (i) afford to Purchaser and its
officers, directors, accountants, consultants, legal counsel, agents and other
representatives (collectively, "Purchaser's Representatives") access, upon
reasonable prior notice and during normal business hours, to the officers,
employees, agents, properties, offices, other facilities and books and records
of Seller relating to the Transferred Assets and Merchant Acquiring Business as
Purchaser may from time to time reasonably request, and (ii) furnish promptly to
Purchaser and Purchaser's Representatives such other information concerning the
business, properties, contracts, records and personnel of Seller relating to the
Transferred Assets and the Merchant Acquiring Business (including, without
limitation, financial, operations and other data and information) as Purchaser
may from time to time reasonably request.
(b) After the Closing Date, Seller shall (i) afford to Purchaser
and Purchaser's Representatives access, upon reasonable prior notice and during
normal business hours, to the officers, employees, agents, properties, offices,
other facilities and books and records of Seller relating to Transferred Assets,
the Merchant Acquiring Business or Transitional Services and (ii) furnish
promptly to Purchaser and Purchaser's Representatives such other information
concerning the business, properties, contracts, records and personnel of Seller
relating to the Transferred Assets, the Merchant Acquiring Business and the
Transitional Services (including, without limitation, financial, operations and
other data and information) as Purchaser may from time to time request.
(c) Notwithstanding Section 4.8(a) above, Seller shall not be
required to grant access or furnish information to Purchaser or Purchaser's
Representatives to the extent that such access or the furnishing of such
information is prohibited by law or Seller is bound by a confidentiality or
other obligation that prevents Seller from disclosing such information; provided
that, in the event Seller is prohibited from providing access to or furnishing
any such information by law, confidentiality or other obligation, Seller shall
notify Purchaser (either orally or in writing) that it is prohibited from
disclosing such information to Purchaser.
ARTICLE V
CERTAIN COVENANTS AND AGREEMENTS OF PURCHASER
5.1. Confidentiality of Information. On and after the date
hereof, Purchaser and its officers, employees, agents and representatives shall
treat the terms and conditions of this Agreement, and all information learned,
or obtained about Seller's businesses (including without limitation the Excluded
Assets and Excluded Liabilities), other than the Transferred Assets used in the
Merchant Acquiring Business, as confidential and will not disclose such
information to any Person , except as required by law, stock exchange rules, as
needed in connection with a lawsuit, claim, litigation or other proceeding or in
connection with Tax or regulatory matters and except to the extent that such
information is already in the public domain, or subsequently enters the public
domain, other than as a result of the breach of Purchaser's obligations under
this Section 5.1. Purchaser and its officers, employees, agents, and
representatives shall not use the information described in this Section 5.1 in
any manner that might reasonably be anticipated to have a Material Adverse
Effect or otherwise have an adverse material affect on Seller's financial
condition, business, prospects or agreements or arrangements (including without
limitation any Excluded Assets or Excluded Liabilities) with any other Person.
Notwithstanding the previous
<PAGE>
provisions of this Section 5.1, Seller and Purchaser understand and agree that
Purchaser may not provide or otherwise disclose or use the list of Merchants,
Agent Banks, Independent Sales Organizations and Related Parties that are
counterparties to the Merchant Agreements, Agent Bank Agreements, ISO Agreements
and Related Agreements included within the Transferred Assets to or on behalf of
Bank One Corporation or any Affiliate of Bank One Corporation (including any
successor in interest to Bank One Corporation or any Affiliate of Bank One
Corporation); provided that Purchaser may provide such list to its industrial
loan company subsidiary, First USA Financial Services, Inc., after the end of
the eighteenth month after the Closing Date if the subsidiary agrees in writing
to keep such list confidential (subject to the same exceptions set forth in this
Section 5.1). Purchaser and Seller understand and agree that nothing in the
preceding sentence is intended to prevent Purchaser from providing such list to
Purchaser's employees or agents, subject to the provisions of this Section 5.1,
for the purpose of, and in connection with, the provision of Merchant Acquiring
Business services.
5.2. Notice of Breach or Potential Breach. Purchaser shall
promptly notify Seller of any change, circumstance or event that may prevent
Purchaser from complying with any of its obligations hereunder.
5.3. Further Assurances. On and after the Closing Date, Purchaser
shall (i) give such further assurances to Seller and execute, acknowledge and
deliver all such acknowledgments and other instruments and take such further
action as Seller may reasonably request to effectuate the transactions
contemplated by this Agreement, including the transfer of the Transferred Assets
and assumption of the Assumed Liabilities and (ii) use all commercially
reasonable efforts to assist Seller in the orderly transition referred to in
Article III.
5.4. Collections. Purchaser shall use all commercially reasonable
efforts from and after the Closing Date to assist Seller, at Seller's request,
in processing amounts in respect of any charge-back or other Credit Loss
received or identified in connection with the Transferred Assets used in the
Merchant Acquiring Business and relating to or arising out of any original sales
transaction occurring prior to the Closing Date. Seller shall be responsible
for all costs and expenses relating to such collection efforts, including costs
and expenses of collection letters, litigation, arbitration proceedings and
similar actions. Regarding each charge-back or other Credit Loss received or
identified in connection with the Transferred Assets used in the Merchant
Acquiring Business and relating to or arising out of any original sales
transaction with a Merchant occurring prior to the Closing Date, Purchaser
agrees to grant to Seller access to, and Seller shall have the right to access,
any funds held in the Reserve Account in accordance with the terms of the
agreements governing such Reserve Account, if any, included within the
Transferred Assets for that Merchant for the purpose of debiting or crediting
any charge-backs or other Credit Losses attributable to that Merchant against
such Reserve Account; provided, however, Seller shall have no such rights with
respect to Credit Losses resulting from the gross negligence or willful
misconduct of Seller or Seller's Representatives.
5.5. Taxes. All sales or transfer taxes, including stock transfer
taxes, recording fees, property or asset transfer taxes, and excise taxes,
arising out of or in connection with the consummation of the transactions
contemplated hereby, shall be paid by Purchaser. Purchaser shall execute and
deliver to Seller a form of "Pennsylvania Exemption Certificate" for
Pennsylvania state or local sales and use tax within 60 days of the Closing
Date, and Seller shall retain such certificate in its files such that Seller can
provide the certificate to the appropriate tax authority if requested.
5.6. HSR and Government Approval Fees. Purchaser shall pay
one-half of the filing fees paid by both Seller and Purchaser in connection with
the filing of the notification required by HSR, if any, and one-half of any
filing fees required in connection with the Required Government Certifications.
Purchaser shall be solely responsible for all other fees and expenses paid or
incurred by Purchaser in connection with the preparation and filing of the
notification
<PAGE>
required by the HSR and any other notification or filing required to be made by
Purchaser with any other governmental or regulatory body.
5.7. Access to Information. (a) Subject to Section 5.8(b) below,
Purchaser shall (i) afford to Seller and its officers, directors, accountants,
consultants, legal counsel, agents and other representatives (collectively,
"Seller's Representatives") access, upon reasonable prior notice and during
normal business hours, to the officers, employees, agents, properties, offices,
other facilities and books and records of Purchaser relating to Purchaser's
business as Seller may from time to time reasonably request, and (ii) furnish
promptly to Seller and Seller's Representatives such other information
concerning the business, properties, contracts, records and personnel of
Purchaser or the Transferred Assets and the Merchant Acquiring Business
(including, without limitation, financial, operating and other data and
information) as Seller may from time to time reasonably request.
(b) Notwithstanding Section 5.7(a) above, Purchaser shall not be
required to grant access or furnish information to Seller or Seller's
Representatives to the extent that such access or the furnishing of such
information is prohibited by law or Purchaser is bound by a confidentiality or
other obligation that prevents Purchaser from disclosing such information;
provided that, in the event Purchaser is prohibited from providing access to or
furnishing any such information by law or confidentiality or other obligation,
Purchaser shall notify Seller (either orally or in writing) that it is
prohibited from disclosing such information to Purchaser.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby makes the following representations and warranties to
Purchaser as of the date hereof and as of the Closing Date:
6.1. Organization. Seller is a national banking association,
validly existing and in good standing under the laws of the United States, and
has all requisite corporate power and authority to own and operate the
Transferred Assets and the Merchant Acquiring Business as now conducted.
6.2. Authority. Seller has the right, power, capacity and
authority to enter into and deliver the Operative Documents, to perform its
obligations under the Operative Documents, and to effect the transactions
contemplated by the Operative Documents, and no other Person has any interest in
the Transferred Assets used in the Merchant Acquiring Business (other than any
respective counterparties thereto). The execution, delivery and performance of
the Operative Documents has been approved by all requisite corporate action on
the part of Seller, and when executed and delivered pursuant hereto (assuming
due execution and delivery by the other parties thereto), the Operative
Documents will constitute valid and binding obligations of Seller enforceable in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws of
general applicability affecting creditors' rights and by general equitable
principles.
6.3. No Violations.
(a) The execution and delivery by Seller of the Operative
Documents, and its performance thereunder, will not: (i) violate, conflict with,
result in a material breach of or constitute (with or without notice or lapse of
time or both) a default under any agreement, indenture, mortgage or lease to
which Seller is a party or by which Seller or its properties, or the Transferred
Assets used in the Merchant Acquiring Business, are bound; (ii) constitute a
violation by Seller of any law or government regulation applicable to Seller or
the Transferred Assets used in the Merchant Acquiring Business; (iii) violate
any provision of the charter or
<PAGE>
bylaws (or similar governing documents) of Seller; or (iv) violate any order,
judgment, injunction or decree of any court, arbitrator or governmental body
against or binding upon Seller, except in each case with respect to clauses (i)
through (iv) above for those violations, conflicts, breaches or defaults that
will not result in a Material Adverse Effect.
(b) With respect to the Transferred Assets and the Merchant
Acquiring Business, Seller is not, and has not been (by virtue of any past or
present action, omission to act, contract to which it is a party, or any
occurrence or state of facts whatsoever) in violation of any material local,
state or federal law, ordinance, regulation, order, injunction or decree, or any
other requirement of any governmental body, agency or authority or court
applicable to and binding on it, or relating to the Transferred Assets and the
Merchant Acquiring Business.
6.4. Transferred Assets. Seller is the owner of all right, title
and interest in and to the Transferred Assets, free and clear of all title
defects or objections, assignments, liens, encumbrances of any nature
whatsoever, restrictions, security interests, rights of third parties, or other
liabilities, and has good and valid title to the Transferred Assets. To the
best of Seller's knowledge, the Equipment being sold hereunder is in good
operating condition, ordinary wear and tear excepted, and has been reasonably
maintained and repaired (the parties acknowledge that certain items of the
Equipment may be in the process of being repaired as of the date hereof). The
Inventory being sold hereunder, including all Merchant supplies, consists of
items of a quality and quantity usable and saleable in the ordinary course of
the Merchant Acquiring Business. Except for the Excluded Assets and as set
forth on Schedule 6.4, the Transferred Assets constitute all of the assets of
any nature required to operate the Merchant Acquiring Business in the ordinary
course.
6.5. Agreements; Merchants, Agent Banks and Independent Sales
Organizations.
(a) Seller is not in default (and would not be in default upon
notice, lapse of time or both) under any material provision of the Merchant
Agreements, Agent Bank Agreements, ISO Agreements or Related Agreements included
within the Transferred Assets. Complete lists of the Merchants, Agent Banks,
Independent Sales Organizations and Related Parties that are counterparties to
the Merchant Agreements, Agent Bank Agreements, ISO Agreements and Related
Parties included within the Transferred Assets are set forth on Schedule
6.5(a)(i), 6.5(a)(ii), 6.5(a)(iii) and 6.5(a)(iv), respectively. Except as set
forth on Schedule 6.5(a)(v), Seller does not have any reason to suspect, and has
not received any notice of, fraud by, or bankruptcy or contemplated bankruptcy
of, any party or guarantor to any of the Merchant Agreements, Agent Bank
Agreements, ISO Agreements or Related Agreements included within the Transferred
Assets, and has not received any notice of default or adverse comment from any
regulatory authority in respect of any of the Merchant Agreements, Agent Bank
Agreements, ISO Agreements or Related Agreements included within the Transferred
Assets. Except as set forth on Schedule 6.5(a)(v), Seller has not given notice
of its election to terminate any of the Merchant Agreements, Agent Bank
Agreements, ISO Agreements or Related Agreements included in the Transferred
Assets, and Seller has not received written notice from any Merchant, Agent
Bank, Independent Sales Organization or Related Party of its election to
terminate any of the Merchant Agreements, Agent Bank Agreements, ISO Agreements
or Related Agreements included with the Transferred Assets. Except as provided
in Schedule 6.5(a)(vi), no Independent Sales Organization has the express
contractual right under any ISO Agreement included in the Transferred Assets to
contractually require Seller to assign any Merchant Agreements to any other
party upon the termination of the ISO Agreement or the consummation of the
transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 6.5(b), Seller has in its
possession a fully executed original (or, to the extent originals are not
available, copies of the fully executed originals) of (i) each Merchant
Agreement included within the Transferred Assets to which a Top
<PAGE>
50 Merchant is a party (collectively, the "Top 50 Merchant Agreements"), and
(ii) substantially all other Merchant Agreements included within the Transferred
Assets. True, correct and complete copies of the Top 50 Merchant Agreements
(except as set forth on Schedule 6.5(b)) have been made available by Seller to
Purchaser. Without regard to whether Seller has in its possession an original or
a copy of any particular Merchant Agreement, each Merchant identified on
Schedule 6.5(a)(i), other than the Merchants identified on Schedule 6.5(b), is a
party to a written Merchant Agreement with Seller that is included within the
Transferred Assets, and except as identified on Schedule 6.8(b)(i), all such
agreements are freely assignable by Seller without the affirmative consent of
the applicable Merchant or any other party.
(c) Except for the Agent Bank Agreements included within the
Transferred Assets to which Seller and each of the Agent Banks listed on
Schedule 6.5(a)(ii) are severally a party (true, correct and complete copies of
which have been made available by Seller to Purchaser, except as listed on
Schedule 6.5(c)(i)), and except for the ISO Agreements included in the
Transferred Assets to which Seller and each of the Independent Sales
Organizations listed on Schedule 6.5(a)(iii) are severally a party (true,
correct and complete copies of which have been made available by Seller to
Purchaser, except as listed on Schedule 6.5(c)(ii)), and except for the Related
Agreements included in the Transferred Assets to which Seller and each of the
Related Parties listed on Schedule 6.5(a)(iv) are severally a party (true,
correct and complete copies of which have been made available by Seller to
Purchaser, except as listed on Schedule 6.5(c)(iii)), Seller has no material
agreements, written or oral, with any agent bank, other association,
institution, independent sales organization, or any other third party which
provides for any one or more of the following: (i) the deposit of Credit Card or
Debit Card transaction records for or on behalf of any third party; (ii) the
settlement of Credit Card or Debit Card transactions for or on behalf of any
third party; (iii) the processing of Credit Card or Debit Card transactions for
or on behalf of any third party; or (iv) the referral of merchants to Seller.
Except as set forth on Schedule 6.5(c)(i) regarding Agent Bank Agreements
included in the Transferred Assets, Schedule 6.5(c)(ii) regarding ISO Agreements
included in the Transferred Assets, and Schedule 6.5(c)(iii) regarding Related
Agreements included in the Transferred Assets, Seller has in its possession, and
shall deliver to Purchaser in accordance with Section 1.5 hereof, a fully
executed original (or, to the extent originals are not available, copies of the
fully executed originals) of each Agent Bank Agreement, ISO Agreement and
Related Agreement included in the Transferred Assets, each of which, except as
identified on Schedule 6.8(b)(i), is freely assignable by Seller without the
affirmative consent of the applicable Agent Bank, Independent Sales Organization
or Related Party or any other party.
(d) Except as set forth on Schedule 6.5(d)(i), and except for
disputes that have arisen in the ordinary course of business, Seller is not
engaged in any dispute with any Merchant, Agent Bank, Independent Sales
Organization or Related Party that is a counterparty to any Merchant Agreement,
Agent Bank Agreement, ISO Agreement or Related Agreement included in the
Transferred Assets that could have a Material Adverse Effect and Seller has not
received, within the last twelve (12) months, any written notice from any
Merchant, Agent Bank, Independent Sales Organization or Related Party with
respect to the quality of services provided by Seller under any Merchant
Agreement, Agent Bank Agreement, ISO Agreement or Related Agreement. Except as
set forth on Schedule 6.5(d)(ii), Seller does not have any reason to believe,
and has not received any notice, written or oral, that the consummation of the
transactions contemplated hereunder will have a Material Adverse Effect on (i)
the business relationship of Seller with any Top 50 Merchant, Agent Bank,
Independent Sales Organization or Related Party that is a counterparty to any
Merchant Agreement, Agent Bank Agreement, ISO Agreement or Related Agreements
included in the Transferred Assets, or (ii) the Transferred Assets as a whole.
(e) Seller is a member in good standing of the Credit Card
Associations. Except as set forth on Schedule 6.5(e)(i), Seller and the
Transferred Assets used in the Merchant Acquiring Business are in compliance in
all material respects with all applicable rules and
<PAGE>
regulations and certification requirements of the Credit Card Associations.
Seller has provided to Purchaser true and correct copies of all contracts and
agreements between Seller and the Credit Card Associations relating to the
Transferred Assets. Except as set forth on Schedule 6.5(e)(ii), Seller has in
its possession a fully executed original (or, to the extent originals are not
available, copies of the fully executed originals) of each sponsorship agreement
with each Agent Bank and Independent Sales Organization that is a counterparty
to any Agent Bank Agreement or ISO Agreement included in the Transferred Assets
and is sponsored by Seller into any Credit Card Association.
(f) Schedule 6.5(f) sets forth a complete and accurate list of all
rights and interests of Seller with respect to any reserve accounts established
and maintained by Merchants, Agent Banks, Independent Sales Organizations or
Related Parties and maintained with Seller in connection with any Merchant
Agreements, Agent Bank Agreements, ISO Agreements and Related Agreements
included within the Transferred Assets and used in the Merchant Acquiring
Business (collectively, the "Reserve Accounts"), and indicates the amount
contained in each such Reserve Account as of the date thereof and further
indicates the terms and conditions relative to each of such Reserve Accounts.
Except as identified on Schedule 6.8(b)(ii), the Reserve Accounts are freely
assignable by Seller without the affirmative consent of the applicable Merchant
or any other party thereto.
(g) Schedule 6.5(g) sets forth the credit and charge cards, other
than the Credit Card Associations, for which Seller has contracted to provide
authorization and data capture services in connection with any Transferred Asset
and identifies the Related Agreement pursuant to which such services are
provided, and Schedule 6.5(g) also identifies the Merchants to whom such
non-Credit Card Association services are provided.
(h) Schedule 1.1(b)(vii) sets forth all Subsidies included within
the Transferred Assets or Assumed Liabilities.
6.6. Top 50 Merchants. The Merchants listed on Schedule 6.6 are
the fifty (50) Merchants that are counterparties to Merchant Agreements included
in the Transferred Assets with the highest dollar value of Credit Card
transactions processed during the twelve (12) month period ending December 31,
1997 (collectively, the "Top 50 Merchants").
6.7. EFT Networks; EBT Networks. Seller is a principal or
sponsored member in good standing of the electronic funds transfer networks
identified on Schedule 6.7(a) attached hereto (the "EFT Networks"). Seller is a
member in good standing of the electronic benefit transfer networks identified
on Schedule 6.7(b) attached hereto ("EBT Networks"). Except as set forth on
Schedule 6.7(c), Seller and the Transferred Asserts used in the Merchant
Acquiring Business are in compliance in all material respects with all
applicable rules and regulations of the EFT Networks and EBT Networks. Seller
has made available to Purchaser true and correct copies of all agreements
between Seller and the EFT Networks and EBT Networks relating to the Transferred
Assets.
6.8. Consents and Approvals.
(a) Except as set forth on Schedule 6.8(a), other than the Required
Government Certifications, no regulatory action of, or regulatory filing with,
any governmental or public body is required by Seller to authorize, or is
otherwise required in connection with, the execution and delivery by Seller of
this Agreement or the other Operative Documents or, if required, the requisite
regulatory filing has been accomplished and all necessary approvals obtained.
Purchaser and Seller understand and agree that the representation and warranty
set forth in this Section 6.8(a) does not include any filing, affirmative
action, affirmative consent or affirmative approval of any governmental or
public body required pursuant to the terms of or in connection
<PAGE>
with a Merchant Agreement, Agent Bank Agreement, ISO Agreement, Related
Agreement or any other agreement included within the Transferred Assets.
(b) Except with respect to those Merchant Agreements, Agent Bank
Agreements, ISO Agreements, Related Agreements and other agreements included
within the Transferred Assets set forth on Schedule 6.8(b)(i) (collectively, the
"Agreements Requiring Consent") and the other Transferred Assets set forth on
Schedule 6.8(b)(ii), no affirmative consent or affirmative approval is required
by virtue of the execution hereof or any other Operative Document by Seller or
the consummation of any of the transactions contemplated herein by Seller to
avoid the violation or breach of, or the default under, or the creation of a
lien on any of the Transferred Assets pursuant to the terms of, any law,
regulation, order, decree or award of any court or governmental agency or any
lease, agreement, contract, mortgage, note, license, or any other instrument to
which Seller is a party or to which it or any of the Transferred Assets is
subject.
6.9. Litigation and Claims. Schedule 6.9: (a) sets forth all
litigation, claims, suits, actions, investigations, indictments or informations,
proceedings or arbitrations, grievances or other procedures (including grand
jury investigations, actions or proceedings, and product liability and workers'
compensation suits, actions or proceedings, and investigations conducted by any
Credit Card Association, EFT Network or EBT Network (as applicable)) that are
pending, or to the knowledge of Seller, threatened, in or before any court,
commission, arbitration tribunal, or judicial, governmental or administrative
department, body, agency, administrator or official, grand jury, Credit Card
Association, EFT Network or EBT Network (as applicable), or any other entity or
forum for the resolution of grievances, against Seller and relating in any way
to the Transferred Assets used in the Merchant Acquiring Business, which if
decided adversely to Seller, could have a Material Adverse Effect (collectively
"Claims"), and (b) indicates which of such Claims are being defended by an
insurance carrier, and which of such Claims being so defended are being defended
under a reservation of rights. Seller has made available to Purchaser true,
correct and complete copies of all pleadings, briefs and other documents filed
in each pending litigation, claim, suit, action, investigation, indictment or
information, proceeding, arbitration, grievance or other procedure listed in
Schedule 6.9, and the judgments, orders, writs, injunctions, decrees,
indictments and information, grand jury subpoenas and civil investigative
demands, plea agreements, stipulations and awards listed in Schedule 6.9.
6.10. Required Licenses and Permits. Except for such licenses,
permits and other authorizations that result solely from Seller's status as a
national banking association, to the best of Seller's knowledge, no other
licenses, permits or other governmental authorizations are necessary for the
conduct by Seller of the Merchant Acquiring Business.
6.11. Agreements, Contracts and Commitments. Except for those
agreements, contracts and commitments set forth and identified with
particularity in Sections (or the corresponding Schedules) 6.5 and 6.12 or
otherwise disclosed to Seller:
(a) Seller does not have any agreement, contract, commitment or
relationship, whether written or oral, related to the Transferred Assets used in
the Merchant Acquiring Business, by which Purchaser could be bound;
(b) Seller is not subject to any contract or agreement related to
the Transferred Assets used in the Merchant Acquiring Business limiting Seller's
freedom to compete in the Merchant Acquiring Business;
(c) With respect to the Transferred Assets used in the Merchant
Acquiring Business, there is no contract, agreement or other arrangement
entitling any Person to any profits, revenues or cash flows of Seller or
requiring any payments or other distributions based on such profits, revenues or
cash flows.
<PAGE>
6.12. Vendors and Suppliers. Schedule 6.12 sets forth a complete
and accurate list of each supplier to Seller of goods and services directly
related to the Transferred Assets used in the Merchant Acquiring Business which
are material to the Transferred Assets and the conduct of the Merchant Acquiring
Business as conducted by Seller. Seller has made available to Purchaser true
and correct copies of all material agreements and contracts between Seller and
those Persons identified on Schedule 6.12 as being parties to written
agreements.
6.13. Agreements in Full Force and Effect. Except as expressly
set forth in Schedule 6.13, all contracts and agreements included in the
Transferred Assets referred to, or required to be referred to, herein or in any
Schedule delivered hereunder, other than the Merchant Agreements, Agent Bank
Agreements, ISO Agreements and Related Agreements included in the Transferred
Assets (which are represented in Section 6.5), are valid and binding, and are in
full force and effect and are enforceable in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws of general applicability affecting
creditors' rights and by general equitable principles. Seller has not received
notice of any pending or threatened bankruptcy, insolvency or similar proceeding
with respect to any party to such agreements, and no event has occurred which
(whether with or without notice, lapse of time or the happening or occurrence of
any other event) would constitute a default thereunder by Seller, or to the
knowledge of Seller, any other party thereto.
6.14. Absence of Certain Changes and Events. Except as set forth
in Schedule 6.14, since December 31, 1997 Seller has conducted the Merchant
Acquiring Business only in the ordinary course, and has not:
(a) incurred, assumed or guaranteed any liability or obligation
(absolute, accrued, contingent or otherwise) with respect to the Transferred
Assets used in the Merchant Acquiring Business, other than in the ordinary
course of business consistent with past practice;
(b) paid, discharged, satisfied or renewed any claim, liability or
obligation with respect to the Transferred Assets used in the Merchant Acquiring
Business, other than payment in the ordinary course of business and consistent
with past practice;
(c) permitted any of the Transferred Assets to be subjected to any
mortgage, lien, security interest, restriction, charge or other encumbrance of
any kind;
(d) waived any material claims or rights with respect to the
Transferred Assets used in the Merchant Acquiring Business;
(e) sold, transferred or otherwise disposed of any of the
Transferred Assets used in the Merchant Acquiring Business, except in the
ordinary course of business consistent with past practice;
(f) made any change in any method, practice or principle of
financial or Tax accounting or otherwise made any changes in the manner in which
Seller operates the Merchant Acquiring Business that could have a Material
Adverse Effect or have an adverse material affect on any financial information
relating to or derived from the Transferred Assets used in the Merchant
Acquiring Business;
(g) managed working capital components relating to the Transferred
Assets used in the Merchant Acquiring Business, including cash, receivables,
other current assets, trade payables and other current liabilities in a fashion
inconsistent with past practice, including failing to sell inventory and other
property in an orderly and prudent manner or failing to make all budgeted and
other normal capital expenditures, repairs, improvements and dispositions;
<PAGE>
(h) paid, loaned, advanced, sold, transferred or leased any
Transferred Asset used in the Merchant Acquiring Business to any employee,
except for normal compensation involving salary and benefits;
(i) entered into any material commitment or transaction, other than
in the ordinary course of business consistent with past practice, affecting the
Transferred Assets used in the Merchant Acquiring Business; or
(j) agreed in writing, or otherwise, to take any action described
in this Section.
6.15. Employees. None of the Merchant Acquiring Business Employees
is covered by any union, collective bargaining or similar agreement. Except for
failures to comply and liabilities which will not result in a Material Adverse
Effect, Seller has, with respect to the Transferred Assets and Merchant
Acquiring Business, complied with all, and is not liable for the payment of
Taxes, fines or penalties with respect to, any federal, state and local laws,
ordinances and regulations that (i) relate to employment practices, terms and
conditions of employment, equal employment opportunity, non-discrimination,
immigration, wages, benefits, payment of Taxes and occupational health and
safety, and (ii) apply to any of the Merchant Acquiring Business Employees
listed on Schedule 3.4(c)(ii).
6.16. Financial Information. Schedule 6.16 sets forth certain
financial information regarding the Seller, the Transferred Assets and the
Merchant Acquiring Business ("Financial Information"). Such Financial
Information accurately presents the transaction processing volume, revenue, net
revenue and merchants for the periods indicated.
6.17. Credit Policies. All Merchants with whom Seller has entered
into a Merchant Agreement or otherwise began providing merchant acquiring
services after December 31, 1997 were enrolled substantially in compliance with
Seller's then existing credit and underwriting policies for new Merchants.
6.18. Agreements with Affiliates. Except as set forth in Schedule
6.18, there exist no agreements, contracts, obligations, promises, or
undertakings (whether written or oral and whether express or implied) by and
among Seller and any of its other divisions or Affiliates relating to the
transaction processing volume, revenue, net revenue or number of merchants
contained in the Financial Information.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser makes the following representations and warranties to Seller
as of the date hereof and as of the Closing Date:
7.1. Organization. Purchaser is a corporation duly organized and
validly existing under the laws of Delaware and is authorized to conduct its
business.
7.2. Authority. Purchaser has the right, power, capacity and
authority to enter into and deliver the Operative Documents, to perform its
obligations under the Operative Documents, and to effect the transactions
contemplated by the Operative Documents. The execution, delivery and
performance of the Operative Documents has been approved by all requisite
corporate action on the part of Purchaser, and when executed and delivered
pursuant hereto, the Operative Documents will constitute valid and binding
obligations of Purchaser enforceable in accordance with their terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws of general applicability affecting
creditors' rights and by general equitable principles.
<PAGE>
7.3. Governmental Notices. Purchaser has not received notice from
any federal, state or other governmental agency or regulatory body indicating
that such agency or regulatory body would oppose or not grant or issue its
consent or approval, if required, with respect to the transactions contemplated
by the Operative Documents.
7.4. No Violations. The execution and delivery by Purchaser of
the Operative Documents, and its performance thereunder, will not: (i) violate,
conflict with, result in a breach of or constitute (with or without notice or
lapse of time or both) a default under, any material agreement, indenture,
mortgage or lease to which Purchaser is a party or by which it or its properties
are bound; (ii) constitute a material violation by Purchaser of any material law
or governmental regulation applicable to Purchaser; (iii) violate any provision
of the articles of incorporation or bylaws (or similar governing documents) of
Purchaser; or (iv) violate any order, judgment, injunction or decree of any
court, arbitrator or governmental body against or binding upon Purchaser.
7.5. Consents and Approvals.
(a) Except as set forth on Schedule 7.5(a), other than the Required
Government Certifications, no regulatory action of, or regulatory filing with,
any governmental or public body is required by Purchaser to authorize, or is
otherwise required in connection with, the execution and delivery by Purchaser
of this Agreement or the other Operative Documents or, if required, the
requisite regulatory filing has been accomplished and all necessary approvals
obtained. Purchaser and Seller understand and agree that the representation and
warranty set forth in this Section 7.5(a) does not include any filing, consent,
action or approval of any governmental or public body required pursuant to the
terms of or in connection with a Merchant Agreement, Agent Bank Agreement, ISO
Agreement, Related Agreement or any other agreement included within the
Transferred Assets.
(b) Except as set forth on Schedule 7.5(b), no filing, consent or
approval is required by virtue of the execution hereof or any other Operative
Document by Purchaser or the consummation of any of the transactions
contemplated herein by Purchaser to avoid the violation or breach of, or the
default under, any law, regulation, order, decree or award of any court or
governmental agency or any lease, agreement, contract, mortgage, note, license,
or any other instrument to which Purchaser is a party or is subject.
7.6. Compliance with Laws. Purchaser is in compliance with all
material rules and regulations applicable to its businesses, under applicable
federal and state law.
7.7. Litigation; Claims. As of the date hereof, there is no
action, proceeding or investigation pending or, to Purchaser's knowledge,
threatened before any court, governmental or regulatory body, agency,
commission, official or arbitrator which (a) questions or calls into question
the validity of this Agreement, any other Operative Document or any action taken
or to be taken pursuant hereto, (b) if decided adversely to Purchaser, could
materially impair the ability of Purchaser to conduct the Merchant Acquiring
Business and assume its rights and perform its obligations under this Agreement
and the other Operative Documents and the Transferred Assets as contemplated
hereby, or (c) calls into question Purchaser's state or federal regulatory
authority to consummate the transactions contemplated hereby.
7.8. Brokers. Purchaser has dealt with no broker, finder,
commission agent or other similar Person in connection with the transactions
contemplated by this Agreement other than Seller's agent, Salomon Smith Barney,
and Purchaser is under no obligation to pay any broker's fee, finder's fee or
commission in connection with such transactions.
7.9. Purchase Price. As of the Closing, Purchaser will have all
funds necessary to pay on the Closing Date the Purchase Price and all fees and
expenses related hereto, and will
<PAGE>
have the financial capacity directly or indirectly to perform all of its other
obligations under this Agreement and the other Operative Documents.
ARTICLE VIII
COVENANTS OF THE PARTIES
Seller and Purchaser hereby covenant and agree as follows:
8.1. Credit Card Association Filings. Seller and Purchaser shall
file with the Credit Card Associations, the EFT Networks and the EBT Networks
any document or information that, and enter into any agreement that, each such
Credit Card Association, EFT Network or EBT Network deems to be required or
desirable to be filed in order for the transactions contemplated by this
Agreement to be completed.
8.2. HSR Notification. Each of Seller and Purchaser shall
keep and protect as confidential all information about the others obtained in
connection with the preparation of the notification required by the
Hart-Scott-Rodino Anti-Trust Improvement Act of 1976, as amended ("HSR"), if
any, as well as any Required Government Certifications. In the event Seller and
Purchaser shall receive a request for additional information or documentary
material from the Justice Department or the FTC (a) Seller and Purchaser shall
be responsible for responding to any such request received by them, and (b)
neither Purchaser nor Seller shall respond to such request or furnish any
additional information or documentary material without first notifying the other
party in writing.
8.3. Other Necessary Consents. (a) Seller shall use all
commercially reasonable efforts to obtain all material affirmative consents and
material affirmative approvals identified in Section 6.8. With respect to each
such material affirmative consent or material affirmative approval, Seller shall
provide to Purchaser written evidence, reasonably satisfactory to Purchaser,
that such material affirmative consent or material affirmative approval has been
duly and lawfully filed, given, obtained or taken and is effective, valid and
subsisting. For purposes of this Section 8.3, a "material affirmative consent"
and "material affirmative approval" shall mean any affirmative consent or
affirmative approval identified in Section 6.8 (other than an affirmative
consent or affirmative approval required in connection with an ISO Agreement
included in the Transferred Assets) which would, if not obtained, have a
Material Adverse Effect when taken as a whole. Purchaser and Seller understand
and agree that an affirmative consent or affirmative approval required in
connection with an ISO Agreement included in the Transferred Assets shall not in
any case be deemed a "material affirmative consent" or "material affirmative
approval" for purposes of this Section 8.3.
(b) Purchaser shall use all commercially reasonable efforts to
obtain all consents and approvals identified in Section 7.5. With respect to
each such consent or approval, Purchaser shall provide to Seller written
evidence, reasonably satisfactory to Seller, that such consent or approval has
been duly and lawfully filed, given, obtained or taken and is effective, valid
and subsisting.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLER
Each of the obligations of Seller to be performed hereunder shall be
subject to the satisfaction (or waiver by Seller) at or before the Closing of
each of the following conditions:
9.1. Required Governmental Approvals. All regulatory
authorizations, regulatory consents and regulatory approvals from governmental
or public bodies necessary for
<PAGE>
the valid consummation of the transactions contemplated hereby shall have been
obtained and shall be in full force and effect, including, without limitation,
preliminary approval by the federal government of Purchaser as a subcontractor
to Seller with respect to the Government Contracts. All applicable governmental
pre-acquisition filing, information furnishing and waiting period requirements
(including any such requirements under the HSR) shall have been met or such
compliance shall have been waived by the governmental authority having authority
to grant such waivers. Purchaser and Seller understand and agree that the
closing condition set forth in this Section 9.1 does not include any filing,
consent, action or approval of any governmental or public body required pursuant
to the terms of or in connection with a Merchant Agreement, Agent Bank
Agreement, ISO Agreement, Related Agreement or any other agreement included
within the Transferred Assets.
9.2. Interim Transaction Processing Agreement. Purchaser shall
have executed and delivered to Seller the Interim Transaction Processing
Agreement.
9.3. Marketing and Sales Alliance Agreement. Purchaser shall have
executed and delivered to Seller a Marketing Sales and Alliance Agreement,
substantially in the form of Exhibit D attached hereto (the "Marketing
Agreement").
9.4. Transfer Documents. Purchaser shall have executed and
delivered such Transfer Documents, including without limitation the Bill of Sale
and Assignment and Assumption agreement, as Seller shall reasonably request to
evidence the transfer to Purchaser of the Transferred Assets and the Assumed
Liabilities.
9.5. Documents Satisfactory in Form and Substance. All
agreements, certificates, opinions and other documents delivered by Purchaser to
Seller hereunder shall be in form and substance satisfactory to counsel of
Seller, in the exercise of such counsel's reasonable judgment.
9.6. Credit Card Associations. All material filings required or
desirable pursuant to Section 8.1 shall have been made, and all material
required or desirable approvals shall have been received, and neither Seller nor
Purchaser shall have received any material objection from a Credit Card
Association, EFT Network or EBT Network (as applicable) either in response to
the filings required under Section 8.1 or otherwise.
9.7. Compliance with Laws. Purchaser shall be in compliance with
all material rules and regulations applicable to its businesses, under
applicable federal and state law.
9.8. Litigation; Claims. No action, proceeding or investigation
shall be pending before any court, governmental or regulatory body, agency,
commission, official or arbitrator which (a) questions or calls into question
the validity of this Agreement, any other Operative Document or any action taken
or to be taken pursuant hereto, (b) if decided adversely to Purchaser, would
materially impair the ability of Purchaser to conduct the Merchant Acquiring
Business and assume its rights and perform its obligations under this Agreement
and the other Operative Documents and the Transferred Assets as contemplated
hereby, or (c) calls into question Purchaser's state or federal regulatory
authority to consummate the transactions contemplated hereby.
9.9. Receipt of Purchase Price. Seller shall have received the
Up-Front Purchase Price, and all fees and expenses related thereto and payable
as of the Closing Date, in each case in lawful currency of the United States and
immediately available funds.
9.10. Opinion of Purchaser's Counsel. Seller shall have received
an opinion from Purchaser's general counsel, Philip E. Taken, Esq., in form and
substance satisfactory to Seller, covering the matters in Sections 7.1 and 7.2
of this Agreement.
<PAGE>
9.11. Additional Conditions to Obligations of Seller. The
obligations of the Seller to be performed hereunder are also subject to the
satisfaction at or prior to the Closing Date of the following conditions, any or
all of which may be waived in writing in the sole discretion of the Seller:
(a) Representations and Warranties. Each of the representations
and warranties of Purchaser contained in this Agreement shall be true and
correct in all material respects as of the Closing Date (except for those
representations and warranties already qualified by materiality, which
representations and warranties shall be true and correct in all respects as of
the Closing Date). The Seller shall have received a certificate of an officer of
the Purchaser, dated the Closing Date, to such effect.
(b) Agreements and Covenants. The Purchaser shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date. The Seller shall have received a certificate of an officer of Purchaser,
dated the Closing Date, to such effect.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to be performed hereunder shall be
subject to the satisfaction (or waiver by Purchaser) at or before the Closing of
each of the following conditions:
10.1. Required Governmental Approvals. All governmental
regulatory authorizations, regulatory consents and regulatory approvals
necessary for the valid consummation of the transactions contemplated hereby
shall have been obtained and shall be in full force and effect, including,
without limitation, preliminary approval by the federal government of Purchaser
as a subcontractor to Seller with respect to the Government Contracts. All
applicable governmental pre-acquisition filing, information furnishing and
waiting period requirements (including any such requirements under the HSR)
shall have been met or such compliance shall have been waived by the
governmental authority having authority to grant such waivers. Purchaser and
Seller understand and agree that the closing condition set forth in this Section
10.1 does not include any filing, affirmative action or affirmative approval of
any governmental or public body required pursuant to the terms of or in
connection with a Merchant Agreement, Agent Bank Agreement, ISO Agreement,
Related Agreement or any other agreement included within the Transferred Assets.
10.2. Interim Transaction Processing Agreement. Seller shall have
executed and delivered to Purchaser the Interim Transaction Processing
Agreement.
10.3. Marketing and Sales Alliance Agreement. Seller shall have
executed the Marketing Agreement.
10.4. Transfer Documents. Seller shall have executed and
delivered such Transfer Documents, including without limitation the Bill of Sale
and Assignment and Assumption Agreement, as Purchaser shall reasonably request
to evidence the transfer to Purchaser of the Transferred Assets and the Assumed
Liabilities.
10.5. Documents Satisfactory in Form and Substance. All
agreements, certificates, opinions and other documents delivered by Seller to
Purchaser hereunder shall be in form and substance satisfactory to counsel of
Purchaser, in the exercise of such counsel's reasonable judgment.
<PAGE>
10.6. Credit Card Associations. All filings required or desirable
pursuant to Section 8.1 shall have been made, and all required or desirable
approvals shall have been received, and neither Seller nor Purchaser shall have
received any material objection from a Credit Card Association, EFT Network or
EBT Network (as applicable) either in response to the filings required under
Section 8.1 or otherwise.
10.7. Opinion of Seller's Counsel. Purchaser shall have received
an opinion from Seller's counsel, Reed Smith Shaw & McClay, LLP, in form and
substance satisfactory to Purchaser, covering the matters in Sections 6.1 and
6.2 of this Agreement.
10.8. Additional Conditions to Obligations of Purchaser. The
obligations of the Purchaser to be performed hereunder are also subject to the
satisfaction at or prior to the Closing Date of the following conditions, any or
all of which may be waived in writing in the sole discretion of the Purchaser:
(a) Representations and Warranties. Each of the representations
and warranties of Seller contained in this Agreement shall be true and correct
in all material respects as of the Closing Date (except for those
representations and warranties already qualified by materiality, which
representations and warranties shall be true and correct in all respects as of
the Closing Date). The Purchaser shall have received a certificate of an officer
of the Seller, dated the Closing Date, to such effect.
(b) Agreements and Covenants. The Seller shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date. The Purchaser shall have received a certificate of an officer of Seller,
dated the Closing Date, to such effect.
(c) Material Adverse Change. Since the date of this Agreement,
there shall have been no change, occurrence or circumstance in the current
business, financial condition or results of operations of the Merchant Acquiring
Business having or reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect. The Purchaser shall have received a certificate of an
officer of Seller, dated the Closing Date, to such effect.
10.9. Additional Transfer Document. Seller shall have received such
bills of sales or other appropriate transfer documents from its Affiliate,
Mellon EFT Services, Inc., as are necessary or appropriate in order to enable
Seller to transfer the Transferred Assets to Purchaser pursuant to the terms of
this Agreement.
ARTICLE XI
NONCOMPETITION AND CONFIDENTIALITY
11.1. Noncompetition. (a) For a period of seven (7) years after the
Closing Date (the "Non-Compete Term"), neither Seller nor any of Seller's
Affiliates shall directly or indirectly engage or participate in, or provide
Merchant acquiring consulting services to, any business which engages in the
Merchant Acquiring Business in the Territory (as hereinafter defined). Seller
and Seller's Affiliates also shall not, during the Non-Compete Term, market or
sell any product that requires or involves an integrated merchant acquiring
Credit Card or Debit Card transaction processing function (an "Integrated
Product"), unless Seller offers to Purchaser the opportunity to perform the
merchant acquiring Credit Card or Debit Card transaction processing services by
providing a written notice to Purchaser containing a description of the
Integrated Product, after which (i) Purchaser shall have forty five (45) days,
or such shorter period (which shall not be unreasonably short) as required under
the circumstances and designated by Seller, from the receipt of notice from
Seller to accept Seller's offer to perform the merchant acquiring Credit Card or
Debit Card transaction processing services in connection with
<PAGE>
the Integrated Product and (ii) Purchaser shall provide such merchant acquiring
Credit Card or Debit Card transaction processing services at rates at least as
low as Purchaser provides such services to similar size customers requiring
similar services at similar volumes. If Purchaser fails to accept Seller's offer
within the designated time period, whether because Purchaser cannot provide
competitive pricing, any required functionality or otherwise, Seller shall be
entitled to enter into an agreement with another processor to develop, market
and sell the Integrated Product notwithstanding any provision of this Article
XI. If Purchaser accepts Seller's offer, Seller agrees to market the Integrated
Product with Purchaser performing the merchant acquiring Credit Card or Debit
Card functions; provided, however, if a potential customer for the Integrated
Product is a Person that is not a customer of Purchaser and has previously
engaged another Person to provide transaction processing, Seller may offer such
non-customer an Integrated Product with a third-party transaction processor;
provided, further, Seller shall not actively market such Integrated Product with
a third-party transaction processor to other parties besides such non-customer
in competition with Integrated Products with Purchaser performing the merchant
acquiring Credit Card or Debit Card functions. Furthermore, Seller shall be
entitled to develop, market and sell Stand-Alone Products (as defined below) to
merchant transaction processors besides Purchaser, regardless of whether such
processors integrate the Stand-Alone Products with such processor's acquiring
products and services and then market and sell such integrated products to
merchants, provided such integrated products are not marketed or sold by Seller
or under Seller's name, marks or brand name. Nothing in this Article XI is
intended, or should be construed, to prevent or restrict Seller's ability to
develop, market and sell any other product (the "Stand-Alone Products") that
does not involve or require a merchant acquiring Credit Card or Debit Card
transaction processing function. For example (and for purposes of illustration
only), Seller shall not be prevented from developing, marketing and selling the
following products: smart card issuance and processing, electronic commerce or
"E-commerce," non-credit card processing, digital certificate authorization, on-
line debit point of sale technology, pre-paid debit cards and closed-loop
payment systems.
(b) Seller and Purchaser hereby acknowledge and agree that Purchaser and
its Affiliates conduct business and have customers from across the United States
and Canada and that the Goodwill is not restricted to the specific states or
territories in which Purchaser or its Affiliates have offices. As such, Seller
and Purchaser hereby acknowledge and agree that in order to give full effect to
the purposes of this Article XI, the geographic scope of this Agreement shall
include all of the United States and Canada (the "Territory").
(c) If Seller or any Affiliate of Seller acquires control of any business
which has a Merchant Acquiring Business portfolio (the "Target Merchant
Acquiring Business Portfolio") representing $10 billion or less in MasterCard
and Visa processing volume during the twelve (12) month period prior to the date
of the acquisition (the "Acquisition Date"), Seller shall notify Purchaser of
the acquisition of the Target Merchant Acquiring Business Portfolio within
thirty (30) days after the Acquisition Date (the "Acquisition Notice").
Purchaser shall have a right of first refusal to acquire Seller's interest in
the Target Merchant Acquiring Business Portfolio from Seller ("Right of First
Refusal") at a price determined as set forth herein to the extent that Seller is
not (i) prohibited by law or (ii) prohibited by the terms of a contract in
existence prior to the acquisition of the Target Merchant Acquiring Business
Portfolio, between the owner of the Target Acquiring Business Portfolio and a
third-party not an Affiliate of Seller, in each case, from selling its interest
in the Target Merchant Acquiring Business Portfolio to Purchaser. To determine
the purchase price of the Target ("Target Purchase Price"), Seller and Purchaser
shall first attempt to negotiate the Target Purchase Price. If, after at least
two face-to-face meetings within thirty (30) days, Seller and Purchaser are
unable to agree on the Target Purchase Price, each shall choose an independent
financial firm with a nationally recognized expertise in evaluating businesses
in the transaction payment processing industry (the "Valuation Expert") within
forty-five (45) days of the receipt by Purchaser of the Acquisition Notice. Each
Valuation Expert shall enter into an agreement with either the Purchaser or the
Seller, as applicable, which shall provide, in part, that the fees and expenses
of such Valuation
<PAGE>
Expert shall be borne by the party retaining the Valuation Expert and that each
Valuation Expert shall make a determination of the valuation of the Target (the
"Valuation") no later than thirty (30) days after the date each Valuation Expert
is hired (the "Valuation Date"). If the lower Valuation is 90% or greater of the
higher Valuation, then the average of the two Valuations shall be the Target
Purchase Price. Purchaser may then exercise the Right of First Refusal by
delivery of written notice within ten (10) days of the receipt of written notice
of such determination of the Target Purchase Price. If the lower Valuation is
less than 90% of the higher Valuation, Seller and Purchaser shall jointly choose
a third Valuation Expert, within ten (10) days after the Valuation Date, who
shall make a determination as to Valuation. The third Valuation Expert shall
enter into an agreement with the Purchaser and the Seller which shall provide,
in part, that the fees and expenses of which shall be shared equally by Seller
and Purchaser and that such Valuation Expert shall determine the Valuation of
the Target no later than thirty (30) days after the date such Valuation Expert
is hired (the "Second Valuation Date"). Within five (5) days of the Second
Valuation Date, the three (3) Valuations shall be compared and the average of
the two (2) Valuations that are the closest dollar amount to each other shall be
the Target Purchase Price. Purchaser may then exercise the Right of First
Refusal at the Target Purchase Price by delivery of written notice to Seller
within ten (10) days of the receipt of written notice of the determination of
such Target Purchase Price. The acquisition of Seller's interest in the Target
Merchant Acquiring Business Portfolio by Purchaser shall be subject to customary
due diligence, shall be pursuant to definitive documentation in form and
substance reasonably satisfactory to Seller and Purchaser and shall be
consummated within 180 days of the Acquisition Date unless a later date is
agreed to by Seller and Purchaser. If Purchaser does not exercise its Right of
First Refusal within the applicable time period, Seller shall dispose of its
interest in the Target Merchant Acquiring Business Portfolio within 180 days of
the Acquisition Date (or such later date as agreed to by Seller and Purchaser).
If Seller is prohibited from selling its interest in the Target Merchant
Acquiring Business Portfolio as described above, Seller shall either (i) sell to
another Person or otherwise dispose of its interest in the Target Merchant
Acquiring Business Portfolio, or (ii) if Seller is likewise prohibited from
selling its interest to another Person or otherwise disposing of its interest,
treat the transaction as if a Change of Control has occurred and the provisions
of Section 11.1(e) shall apply.
(d) If Seller or any Affiliate of Seller acquires control of a Target
Merchant Acquiring Business Portfolio representing in excess of $10 billion in
MasterCard and Visa processing volume during the twelve (12) month period prior
to the Acquisition Date, Seller shall have the option, exercisable in its sole
discretion within thirty (30) days of the Acquisition Date, to either (i)
provide Purchaser with written notice of Seller's intent to divest itself of the
Target Merchant Acquiring Business Portfolio, in which case the provisions of
Section 11.1(c) shall apply to the disposition of the Target Merchant Acquiring
Business Portfolio, or (ii) provide Purchaser with a Termination Notice
regarding its obligations under this Article XI and the Marketing Agreement and
pay the Termination Payment set forth in Section 11.1(e).
(e) Upon the occurrence of a Change of Control (as defined herein) or the
Seller providing the Purchaser with the Termination Notice described in Section
11.1(d)(ii) above, Seller may, at its option, within thirty (30) days of the
Change of Control Date, or thirty (30) days of the Acquisition Date (as the case
may be), terminate its obligations under this Article XI and the Marketing
Agreement, by delivery to Purchaser of written notice of its intent to terminate
its obligations under this Article XI and the Marketing Agreement, subject to
the continued processing by Purchaser under the Subprocessed Contracts (the
"Termination Notice") and the termination payment set forth below (the
"Termination Payment"); provided, that Seller may, at its option, deliver to
Purchaser a Termination Notice and a Termination Payment after the sixtieth
(60th) month after the Closing Date for any reason, including but not limited
to, a Change of Control.
[Confidential treatment has been requested for portions of this exhibit
below, and, accordingly, such portions have been omitted from the exhibit.
The
<PAGE>
entire document, including the portions omitted from the exhibit, has been
provided separately to the Commission.]
If the Acquisition Date is between Termination Payment
---------------------------------- -------------------
Closing Date - month after Closing Date $
-- ----------
month after Closing Date - month after Closing Date $
- -- -- ----------
month after Closing Date - month after Closing Date $
- -- -- ----------
month after Closing Date - month after Closing Date $
- -- -- ----------
month after Closing Date - month after Closing Date $
- -- -- ----------
month after Closing Date - month after Closing Date $
- -- -- ----------
month after Closing Date - month after Closing Date $
- -- -- ----------
By way of illustration only, if the Closing Date is December 1, 1998, Seller
would have the right to buyout of its obligations under this Agreement and the
Marketing Agreement on _________ (i.e., the beginning of the _______ month after
the Closing Date) for $_____________. The Termination Payment as determined from
the foregoing table, in immediately available funds, shall accompany the
Termination Notice.
(f) For purposes of this Section 11.1, "Change of Control" shall mean a
change in control of Seller of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act, whether or not Seller is then subject to such reporting
requirement; provided that, without limitation, a Change of Control shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Seller representing in excess of 50% or more of the combined
voting power of Seller's then outstanding securities; or (ii) stockholders of
Seller approve: (A) a plan of complete liquidation of Seller; (B) an agreement
for the sale or disposition of all or substantially all of the assets of Seller;
or (C) a merger, consolidation or reorganization of Seller with or involving any
other corporation or Person, other than a merger, consolidation or
reorganization that would result in the voting securities of Seller outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 50% of the combined voting power of the voting securities of
Seller (or such surviving entity) outstanding immediately after such merger,
consolidation or reorganization.
(g) Notwithstanding the provisions of this Article XI, Seller and
Purchaser acknowledge and agree that:
(i) ownership, directly or indirectly, by Seller of an aggregate
equity interest of less than 5% and the combined ownership by Seller
and any Affiliates of Seller of an aggregate equity interest of less
than 10%, in any business engaged in direct or indirect competition
with the Merchant Acquiring Business in the Territory shall not be a
violation of this Article XI;
(ii) (A) Seller's Affiliate, Mellon United National Bank, has a
Merchant Acquiring Business portfolio of approximately 120 Merchants
which are being processed by a third-party processor, (B) Seller shall
cause Mellon United National Bank to operate and market such Merchant
Acquiring Business consistent with past practices using only Mellon
United National Bank employees, (C) Seller shall not market or solicit
merchants for Mellon United National Bank's Merchant Acquiring
Business, (D) Seller shall cause Mellon United Bank's Merchant
Acquiring Business portfolio to be converted to Purchaser by no later
than April 1, 2000 (or such later date as Seller and Purchaser may
agree to in writing), and (E) the maintenance of such Merchant
Acquiring Business portfolio by Mellon United National Bank shall not
constitute a violation of the provisions of this Article XI to the
extent such Merchants are converted by April 1, 2000 (or such later
date as Seller and Purchaser may agree to in writing);
(iii) (A) Seller's Affiliate, Mellon 1st Business Bank and its
parent, Mellon 1st Business Corporation, have a Merchant Acquiring
Business portfolio of approximately 230 Merchants which are being
processed by a third-party processor, (B) Seller shall cause Mellon
1st Business Bank and Mellon 1st Business Corporation to operate and
market such Merchant Acquiring Business consistent with past practices
using only Mellon 1st Business Bank and Mellon 1st Business
Corporation employees, (C) Seller shall not market or solicit
merchants for Mellon 1st Business Bank's and Mellon 1st Business
Corporation's Merchant Acquiring Business, (D) such Merchant Acquiring
Business shall be treated as an acquisition of a Merchant
<PAGE>
Acquiring Business Portfolio for purposes of this Agreement, (E) Seller
shall invoke the Right of First Refusal and valuation process set forth
in Section 11.1(c) such that such Merchants may be converted onto
Paymentech's processing system by no later than April 1, 2000 (or such
later date as Seller and Purchaser may agree to in writing) and (F) the
maintenance of such Merchant Acquiring Business portfolio by Mellon 1st
Business Bank and Mellon 1st Business Corporation shall not constitute a
violation of the provisions of this Article XI to the extent such
Merchants are converted by April 1, 2000 (or such later date as Seller
and Purchaser may agree to in writing);
(iv) To the extent that Purchaser does not obtain the Required
Government Certifications in accordance with Section 3.10 of this
Agreement, Seller's sale of the rights to perform Merchant Acquiring
Business services under the Government Contracts and the resulting
subprocessing arrangement between Seller and the buyer of such rights to
perform such Merchant Acquiring Business services under the Government
Contracts shall not constitute a violation of the provisions of this
Article XI.
(v) To the extent that Seller terminates the subprocessing
arrangement with Purchaser under the Marketing Agreement with respect to
a Subprocessed Contract (as that term is defined in the Marketing
Agreement) and obtains the rights to the performance of Merchant
Acquiring Business services under that Subprocessed Contract, (A) Seller
shall be permitted to either (1) perform Merchant Acquiring Business
services under that Subprocessed Contract or (2) sell the rights to
perform such Merchant Acquiring Business services under that Subprocessed
Contract to another Person or otherwise subcontract for the performance
of such Merchant Acquiring Business services with another Person, and (B)
such performance by Seller or subcontracting arrangement in connection
with that Subprocessed Contract shall not constitute a violation of the
provisions of this Article XI.
11.2 Confidentiality. Seller recognizes the proprietary interest of
Purchaser and its Affiliates in the Confidential Information relating to the
Merchant Acquiring Business and the Transferred Assets and agrees that a
material breach of this Article XI shall occur if Seller or its Affiliates,
during the Non-Compete Term, violates the provisions of this Section 11.2. All
Confidential Information relating to the Merchant Acquiring Business and the
Transferred Assets, whether developed by Seller alone or in conjunction with
others or otherwise, is the property of Purchaser; provided that Purchaser shall
comply with the provisions of Section 5.1 in dealing with such Confidential
Information. Seller hereby acknowledges and understands that its unauthorized
disclosure of Confidential Information relating to the Merchant Acquiring
Business and the Transferred Assets may result in irreparable injury and damage
to Purchaser and its Affiliates, and Seller acknowledges and agrees that
Purchaser and its Affiliates are entitled to prevent Seller from making
unauthorized disclosures of Confidential Information relating to the Merchant
Acquiring Business and the Transferred Assets. Therefore, except as may be
otherwise required by applicable law (including without limitation a request
from a regulator of Seller), Seller agrees at all times to hold in strict
confidence and not to disclose the Confidential Information relating to the
Merchant Acquiring Business and the Transferred Assets to any Person other than
to Persons engaged by Purchaser and its Affiliates, and not to use Confidential
Information relating to the Merchant Acquiring Business and the Transferred
Assets in any manner, including for its own benefit or the benefit of a third
party, without the prior written consent of Purchaser or its Affiliates. If
required by applicable law to disclose such Confidential Information relating to
the Merchant Acquiring Business and the Transferred Assets, Seller will provide
advance notice to Purchaser and use all commercially reasonable efforts to
prevent further disclosure. In the event that Seller or Seller's
Representatives are requested or required by deposition, interrogatory, request
for documents, subpoena, civil investigative demand or similar process to
disclose any of the Confidential Information, Seller shall provide Purchaser
with prompt written notice of such request or demand so that Purchaser may seek
a protective
<PAGE>
order or other appropriate remedy and/or consent in writing to such disclosure.
In the event that such protective order or other remedy is not obtained and the
Purchaser has not consented in writing to such disclosure and Seller or Seller's
Representatives are nonetheless, in the reasonable opinion of Seller's legal
counsel, compelled to disclose the Confidential Information to any tribunal or
else stand liable for contempt, Seller or Seller's Representatives may furnish
only that portion of the Confidential Information that Seller or Seller's
Representatives are legally required to provide as advised by opinion of
Seller's legal counsel; provided, that Seller or Seller's Representatives shall
exercise all commercially reasonable efforts to obtain an order or reasonable
assurance that confidential treatment shall be accorded such Confidential
Information. Seller or Seller's Representatives shall not be liable for the
disclosure to such tribunal unless such disclosure was caused or resulted from a
previous disclosure by Seller or Seller's Representatives not permitted
hereunder.
11.3 Remedies. In the event of a breach or a threatened breach of
any of the covenants contained in this Article XI, Purchaser and its Affiliates
shall, in addition to the remedies provided by law, have the right and remedy to
have such covenants specifically enforced by a court having equity jurisdiction,
it being acknowledged and agreed that any material breach of any of the
covenants will cause irreparable injury to Purchaser and its Affiliates and that
money damages will not provide an adequate remedy to Purchaser and its
Affiliates.
11.4 Enforceability/Reformation. If any court of competent
jurisdiction determines that any of the covenants of Seller or Purchaser, or any
parts thereof, are invalid or unenforceable, the other covenants and the
remainder of any of the covenants so impaired shall not thereby be affected and
shall be given full effect, without regard to the invalid portions.
Notwithstanding the foregoing, it is the intent of each of the parties that the
provisions of Sections 11.1 and 11.2 of this Agreement be enforced to the
fullest extent permitted by applicable law. If any court of competent
jurisdiction determines that any of the provisions of Sections 11.1 and 11.2 of
this Agreement, or any parts thereof, are unenforceable under applicable laws or
public policies, it is the intent of the parties, and the parties hereby
request, that the court reform such covenant to such narrower geographic scope,
scope of activity or duration, or in such other manner, as such court may
determine is necessary to make such covenant enforceable.
11.5 Waiver. The failure of any party to insist, in any one or more
instances, upon performance of any of the terms or conditions of this Article XI
shall not be construed as a waiver of future performance of any such term or
condition, and the obligations of any party with respect thereto shall continue
in full force and effect.
11.6 Continuing Obligations. If Seller terminates its obligations
under this Article XI and the Marketing Agreement pursuant to Section 11.1(c) or
11.1(d) above prior to end of the eighteenth month after the Closing Date,
Seller agrees that, notwithstanding such termination, Seller shall not, and
Seller shall cause its Affiliates not to, directly or indirectly, market, sell
or provide any Merchant Acquiring Business products or services to any Merchant,
Agent Bank, Independent Sales Organization or Related Party that is a party to a
Merchant Agreement, Agent Bank Agreement, ISO Agreement or Related Agreement
included within the Transferred Assets for a period ending on the last day of
the eighteenth month after the Closing Date.
ARTICLE XII
INDEMNIFICATION
12.1. Seller's Indemnification. Seller shall indemnify, defend,
and hold harmless Purchaser, its successors or assigns, and their respective
officers, employees, consultants, agents and representatives (collectively,
"Purchaser Protected Parties") from any liability, loss, cost, claim or expense,
including reasonable attorney's and accountant's fees and
<PAGE>
expenses ("Loss") that result from or arise out of (i) the breach of any of
Seller's representations or warranties in this Agreement or in any certificate
delivered in connection herewith; (ii) the breach of any of Seller's covenants
or agreements in this Agreement or any certificate delivered in connection
herewith; (iii) any liability of Seller relating to the Transferred Assets,
other than the Assumed Liabilities; (iv) any liability of Seller with respect to
the Transferred Employees with respect to events occurring prior to the later of
the Closing Date or the effective date of hire of such Transferred Employee; (v)
all termination fees and "deconversion" fees owing by Seller, except as set
forth in Section 3.6, (vi) all liabilities of Seller for Excluded Liabilities
(including Taxes except as provided in Section 5.5), (vii) the gross negligence
or willful misconduct of Seller in undertaking its obligations under Article III
and/or Section 4.5, (viii) the failure of Seller to have executed originals (or
accurate copies thereof) of any Merchant Agreement, Agent Bank Agreements, ISO
Agreements or Related Agreements, or (ix) any liability with respect to the Key
Government Employees. In the event that indemnification is sought hereunder by
any member of Purchaser Protected Parties, Purchaser shall act on behalf thereof
and Seller shall be entitled to rely upon the acts and representations of
Purchaser as representing the acts and representations of such member.
12.2. Purchaser's Indemnification. Purchaser shall indemnify,
defend, and hold harmless Seller and its successors or assigns and their
respective officers, employees, consultants, agents and representatives
(collectively, "Seller Protected Parties") from any Loss that results from or
arises out of (i) the breach of any of Purchaser's representations or warranties
in this Agreement or any certificate delivered in connection herewith; (ii) the
breach of any of Purchaser's covenants or agreements in this Agreement or any
certificate delivered in connection herewith; (iii) the Assumed Liabilities;
(iv) the compliance by Seller with Purchaser's instructions to Seller in
connection with the provision by Seller of the services under Article III, or as
may otherwise arise in connection with Seller's performance of its obligations
under Section 3.5, except as may result from or arise out of the gross
negligence or willful misconduct of Seller; (v) the gross negligence or willful
misconduct of Purchaser in undertaking its obligations under Section 5.4; (iv)
any liability of Purchaser with respect to the Transferred Employees arising on
or after the Closing Date; (v) all liabilities of Purchaser for Taxes
attributable to the Transferred Assets or Merchant Acquiring Business and
accrued in any period after the Closing Date; (vii) all other liabilities and
obligations or Purchaser relating to the Transferred Assets and Transferred
Employees relating to events occurring after the Closing Date; (viii) the
failure of Purchaser to pay the amounts contemplated by Section 3.6; or (ix) the
gross negligence or willful misconduct of Purchaser to the extent Seller incurs
a Loss as a result from or arising out of such gross negligence or willful
misconduct by Purchaser in connection with any of Seller's agreements relating
to the Merchant Acquiring Business with the third party service providers
identified on Schedule 3.6(a). In the event that indemnification is sought
hereunder by any member of Seller Protected Party, Seller shall act on behalf of
and Purchaser shall be entitled to rely upon the acts and representations of
Seller as representing the acts and representations of such member.
12.3. Indemnification Procedures for Third Party Claims. In any
case where a Person shall seek indemnification under this Agreement (the
"Indemnified Party"), for a third party claim, suit or proceeding (a "Third
Party Claim"), the Indemnified Party shall comply with the following procedures:
(a) The Indemnified Party shall give prompt written notice
("Notice") of any Third Party Claim to the party from whom such indemnification
is sought (the "Indemnifying Party"), specifying the amount and nature of such
Third Party Claim.
(b) Provided that prompt Notice is given, unless the failure to
give such Notice does not prejudice the interests of the Indemnifying Party, the
Indemnifying Party shall promptly defend, contest, and protect the Indemnified
Party against such Third Party Claim, at its own
<PAGE>
expense and using counsel of its own choosing, which shall be reasonably
satisfactory to the Indemnified Party.
(c) The Indemnified Party may, but shall not be obligated to,
participate in the defense of such Third Party Claim at its own expense and
using counsel of its own choosing, but the Indemnifying Party shall be entitled
to control the defense thereof unless the Indemnified Party shall relieve the
Indemnifying Party from all liability for such Third Party Claim. The
Indemnified Party shall cooperate and provide such assistance as the
Indemnifying Party reasonably may request in connection with the Indemnifying
Party's defense and shall be entitled to recover from the Indemnifying Party the
reasonable costs of providing such assistance. The Indemnifying Party shall
inform the Indemnified Party on a regular basis, and at the Indemnified Party's
request, of the status of such Third Party Claim and the Indemnifying Party's
defense thereof.
(d) If the Indemnifying Party shall control the defense of a Third
Party Claim, the Indemnifying Party shall not compromise or settle such Third
Party Claim without the Indemnified Party's prior written consent, if: (i) such
compromise or settlement would impose an injunction or other equitable relief
upon the Indemnified Party; or (ii) such compromise or settlement does not
include the unconditional release of the Indemnified Party from all liability
arising from or relating to such Third Party Claim.
(e) If the Indemnifying Party fails promptly to defend, contest, or
otherwise protect against such Third Party Claim, the Indemnified Party may, but
shall not be obligated to, defend, contest, or otherwise protect itself against
the same, and make any compromise or settlement thereof in its sole discretion,
and recover from the Indemnifying Party all Losses of the Indemnified Party
arising from or relating to such compromise or settlement.
12.4. Indemnity Claims.
(a) The representations and warranties contained herein, in any
other Operative Document, or in any certificate or other document delivered
pursuant hereto or in connection herewith shall not be extinguished by the
Closing but shall survive the Closing, subject to the limitations set forth in
this Section 12.4 and Section 12.5 hereof, and the covenants and agreements of
Seller and Purchaser contained herein shall survive without limitation as to
time except as may be otherwise specified herein.
(b) All claims for indemnification hereunder (including, without
limitation, Third Party Claims) shall be asserted no later than 12 months after
the Conversion Date, except for claims relating to Taxes which may be asserted
no later than the expiration of the relevant statute of limitations period.
12.5. Indemnification Limitations.
(a) With respect to any particular Loss for which an Indemnifying
Party indemnifies an Indemnified Party hereunder, the liability of the
Indemnifying Party shall be reduced by the amount of any insurance proceeds
actually received by the Indemnified Party as a result of such Loss; provided,
however, that in no event shall this Section 12.5(a) be construed to require any
Indemnified Party to (i) seek or maintain insurance of any kind, or (ii) seek
recovery, reimbursement, or any other compensation under any insurance
arrangement with respect to any Loss.
(b) No claim shall be made by a party for indemnification hereunder
unless and until the aggregate amount of all Losses sought by such party to be
indemnified under this Agreement exceeds, in the aggregate, One Hundred Thousand
and Dollars ($100,000), and then for the entire amount of such claims in excess
of such $100,000 amount; provided, however, that
<PAGE>
in no event, except with respect to Losses that result from or arise out of
fraud, shall Seller's or Purchaser's liability for Losses payable hereunder
exceed, in the aggregate, Fifteen Million Dollars ($15,000,000); provided,
however, that nothing contained herein shall be deemed to limit in any manner
the ability of any party to obtain nonmonetary relief for any breach by another
party of its obligations hereunder.
(c) The limitations set forth in Section 12.5 shall not apply to
(i) breaches of representations and warranties contained in Section 6.4 and (ii)
claims for indemnification pursuant to Section 12.1(vi).
ARTICLE XIII
DEFINITIONS AND RULES OF INTERPRETATION
13.1. Definitions. For purposes of this Agreement, the following
capitalized terms have the following respective meanings:
"Acquisition Date" has the meaning set forth in Section 11.1(c).
"Acquisition Notice" has the meaning set forth in Section 11.1(c).
"Affiliate" means as to any Person, any other Person which, directly
or indirectly, controls, is controlled by, or is under common control with, such
Person. For purposes of this definition, "control" means the possession or the
power to direct or cause the direction of management and policies of such
Person, whether through ownership of voting securities, by contract or
otherwise.
"Agent Bank Agreement" means an agreement between Seller and an Agent
Bank pursuant to which the Agent Bank is providing services related to Credit
Card and/or Debit Card processing.
"Agent Bank" means a financial institution sponsored by Seller for
which services related to Credit Card and/or Debit Card processing are provided
by or on behalf of Seller.
"Agreement" means this Agreement, including all schedules and exhibits
hereto, and, if amended, modified or supplemented, as the same may be so
amended, modified or supplemented from time to time.
"Agreements Requiring Consent" has the meaning set forth in Section
6.8(b).
"Allocation Agreement" has the meaning set forth in Section 2.2(a).
"Assignment and Assumption Agreement" has the meaning set forth in
Section 1.2(a).
"Assumed Liabilities" has the meaning set forth in Section 1.2(b).
"Bill of Sale" has the meaning set forth in Section 1.2(a).
"Buypass Agreement" means that certain Participation Agreement dated
March 1, 1997, by and between Seller and Buypass Corporation.
"Change of Control" has the meaning set forth in Section 11.1(f).
<PAGE>
"Change of Control Date" has the meaning set forth in Section 11.1(f).
"Claims" has the meaning set forth in Section 6.9.
"Closing" has the meaning set forth in Section 2.3.
"Closing Date" has the meaning set forth in Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" shall mean all proprietary information
owned by Seller or its Affiliates, including without limitation, trade secrets,
financial data, information derived from reports, investigations, experiments,
research, work-in-progress, drawings, designs, plans, proposals, codes, computer
software and documentation, marketing and sales programs, customer lists,
mailing lists, financial projections, cost summaries, credit information,
pricing formulae, markets, marketing information, leasing information, vendor
relationships and all other concepts, ideas, materials or information prepared
or performed for or by Seller or its Affiliates, related to the Merchant
Acquiring Business and included within the Transferred Assets that is (i)
treated by Seller or its Affiliates as confidential, and (ii) that is not
otherwise known generally in the industry; provided, however, that Confidential
Information shall not include (A) general information regarding the nature of
the Merchant Acquiring Business, (B) information that is in the public domain,
or (C) information that becomes available to the public other than through an
act of Seller in violation of Article XI of this Agreement.
"Conversion Date" means September 30, 1999, or such later date as may
be requested by Purchaser and agreed to in writing by Seller.
"Conversion Period" means the period beginning as of the Closing Date
and ending on the Conversion Date, during which time Seller shall process all
transactions in connection with the Transferred Assets used in the Merchant
Acquiring Business from Seller's designated premises, and Seller shall provide
clearing services as provided in Section 3.5 and maintain the agreements
referenced in Section 3.6, and the Transferred Assets used in the Merchant
Acquiring Business shall be converted from Seller to Purchaser, including but
not limited to the conversion of Merchants to Purchaser's network and designated
clearing bank and merchant accounting systems.
"Credit Card" means (i) a Visa card or other card bearing the
symbol(s) of VISA, U.S.A., Inc. or VISA International, Inc. (including VISA Gold
cards), (ii) a MasterCard card or other card bearing the symbol(s) of MasterCard
International Incorporated (including MasterCard Gold cards), and (iii) private
label credit cards.
"Credit Card Associations" means Visa U.S.A., Inc., Visa
International, Inc., MasterCard International Incorporated and any successor
organizations or associations.
"Credit Loss" means any loss resulting from the failure by a Merchant
to pay amounts owed by it under a Merchant Agreement.
"Customers" means the customers of Seller or Seller's Affiliates which
are either (i) parties to the Merchant Agreements, ISO Agreements, Agent Bank
Agreements or Related Agreements or (ii) referred to Purchaser or Purchaser's
Affiliates pursuant to the Marketing Agreement.
"Debit Card" means a card with a magnetic stripe bearing the symbol(s)
of one or more EFT Networks which enables the holder to pay for goods or
services by authorizing an
<PAGE>
electronic debit to the cardholder's designated deposit account or a card used
in connection with electronic benefit transfer transactions.
"Dispute" has the meaning set forth in Section 14.15.
"Drafts" means documentary evidence of Credit Card sales deposited by
Merchants with Seller.
"EBT Networks" means the electronic benefit transfer networks
identified on Schedule 6.7(b) attached hereto.
"EFT Networks" means the electronic funds transfer networks identified
on Schedule 6.7(a) attached hereto.
"Employees" means the common law employees of Seller.
"Equipment" means the point-of-sale terminals, printers and other
equipment, supplies, or point-of-sale assets owned or leased by Seller and
utilized by Merchants or Seller's branches, or held for lease, sale or swap to
Merchants.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
"Excluded Assets" has the meaning set forth in Section 1.1(c).
"Excluded Liabilities" has the meaning set forth in Section 1.2(c).
"Executives" has the meaning set forth in Section 14.15(a).
"Financial Information" has the meaning set forth in Section 6.16.
"First Extension Period" has the meaning set forth in Section 3.10.
"Full Transfer" means the assignment and delegation, in accordance
with applicable contractual provisions and law, of all right, title and interest
of Seller, and all duties, obligations and liabilities of Seller under or in
connection with, any Merchant Agreement, Agent Bank Agreement, ISO Agreement or
Related Agreement included within the Transferred Assets.
"Goodwill" has the meaning set forth in Section 1.1(b)(vi).
"Government Contracts" means Authorization of Financial fiscal agents
and Terms of Performance - Plastic Card Network, dated April 8, 1998 by and
between Seller and Financial Management Service and such other government
contracts specifically identified as such on Schedule 1.1(c)(i).
"Holdback Amount" has the meaning set forth in Section 2.1.
"HSR" has the meaning set forth in Section 8.2.
"Inactive Employee" means any Merchant Acquiring Business Employee
who, as of any date of reference, is on leave of absence or short-term
disability leave or is otherwise not actively at work.
"Indemnified Party" has the meaning set forth in Section 12.3.
"Indemnifying Party" has the meaning set forth in Section 12.3(a).
<PAGE>
"Independent Sales Organizations" or "ISOs" means a third-party sales
organization for which services related to Credit Card and/or Debit Card
processing are provided by or on behalf of Seller.
"Initial Merchant" means the Merchants who are counterparties to the
Merchant Agreements included in the Transferred Assets acquired by Purchaser
under this Agreement.
"Initiating Party" has the meaning set forth in Section 14.15(a).
"Inspected Party" shall have the meaning set forth in Section 1.5(a).
"Integrated Product" has the meaning set forth in Section 11.1(a).
"Interim Transaction Processing Agreement" has the meaning set forth
in Section 3.2.
"ISO Agreements" an agreement between Seller and an Independent Sales
Organization pursuant to which the Independent Sales Organization is providing
services related to Credit Card and/or Debit Card processing.
"Inventory" means the imprinters, sales draft forms, application
forms, decals and all other merchant supplies of Seller.
"Key Government Employees" has the meaning set forth in Section 3.11.
"Loss" has the meaning set forth in Section 12.1.
"Marketing Agreement" has the meaning set forth in Section 9.3.
"Material Adverse Effect" means any change, effect, or condition
(other than the failure to obtain Full Transfer of any Merchant Agreement, Agent
Bank Agreement, ISO Agreement or Related Agreement or the failure to retain any
Merchant, Agent Bank or Independent Sales Organization, in each case, because of
the transactions contemplated by this Agreement) that, individually or when
taken together with all other such changes, effects or conditions, would be
materially adverse to the business, operations, assets, financial condition, or
results or operations of the Transferred Assets and Merchant Acquiring Business
taken as a whole.
"Mellon Payment Processing System" means the computer hardware,
software and peripherals, telephone equipment, terminals and electronics,
equipment, inventory, supplies, documentation and other resources used by Seller
in connection with providing the Processing Services and Back Office Services
(as such terms are defined in the Interim Transaction Processing Agreement) in
the Merchant Acquiring Business.
"Merchant" means any Person (other than Purchaser or Seller) who has
entered into a Merchant Agreement prior to the Closing Date. A list of all
Merchants who are counterparties to Merchant Agreements included in the
Transferred Assets is attached hereto as Schedule 6.5(a)(i).
"Merchant Agreement" means an agreement between Seller and a Merchant
pursuant to which the Merchant undertakes to honor Credit Cards and/or Debit
Cards and Seller agrees to accept Credit Card and/or Debit Card transaction
records, or to otherwise provide transaction processing services to such
Merchants.
<PAGE>
"Merchant Acquiring Business" shall mean acceptance of Credit Card or
Debit Card transaction records in documentary or electronic form from Merchants
pursuant to Merchant Agreements, Agent Bank Agreements, ISO Agreements and
Related Agreements governing either Credit Card transactions only or both Credit
Card and Debit Card transactions and in connection with the processing and
clearing of such records for settlement and payment to such Merchants under any
such Merchant Agreements, Agent Bank Agreements, ISO Agreements or Related
Agreements. The term "Merchant Acquiring Business" shall not include any
business conducted by Mellon or any affiliate of Mellon pursuant or relating to
any Excluded Asset or Excluded Liability, smart card issuance and processing, E-
commerce and other non-credit card payments processing, digital certificate
authorization, on-line debit card POS technology development and prepaid debit
cards.
"Merchant Acquiring Business Employees" has the meaning set forth in
Section 3.4(a)(i).
"Minimum Fees" has the meaning set forth in Section 3.6(b)(i).
"Non-Compete Term" has the meaning set forth in Section 11.1(a).
"Notice" has the meaning set forth in Section 12.3(a)
"Operative Documents" means this Agreement, the Interim Transaction
Processing Agreement, Marketing Agreement and all agreements, instruments,
certificates and other documents executed and delivered in connection herewith
or therewith.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture or other entity, a governmental or political
subdivision or agency thereof.
"Purchase Price" has the meaning set forth in Section 2.1.
"Purchaser" has the meaning set forth in the preamble to this
Agreement.
"Purchaser Protected Parties" has the meaning set forth in Section
12.1.
"Purchaser's Representatives" has the meaning set forth in Section
4.8(a).
"Related Agreement" means the affinity agreements, or other agreements
executed and delivered by Mellon in connection with the Merchant Acquiring
Business that are identified on Schedule 6.5(a)(iv) attached hereto.
"Related Party" means any Person that has executed and delivered a
Related Agreement prior to the Closing Date. A list of all Related Parties who
are counterparties to Related Agreements included in the Transferred Assets is
attached hereto as Schedule 6.5(a)(iv).
"Required Government Certifications" has the meaning set forth in
Section 3.10.
"Reserve Account" has the meaning set forth in Section 6.5(f).
"Responding Party" has the meaning set forth in Section 14.15(a).
"Right of First Refusal" has the meaning set forth in Section 11.1(c).
"Second Extension Period" has the meaning set forth in Section 3.10.
<PAGE>
"Second Valuation Date" has the meaning set forth in Section 11.1(c).
"Seller" has the meaning set forth in the preamble to this Agreement.
"Seller Protected Parties" has the meaning set forth in Section 12.2.
"Seller's Representatives" has the meaning set forth in Section
5.7(a)(i).
"Senior Executives" has the meaning set forth in Section 14.15(a).
"Signing Period" has the meaning set forth in Section 3.4(c)(ii).
"Stand-Alone Products" has the meaning set forth in Section 11.1(a).
"Subsidies" has the meaning set forth in Section 1.1(b)(vii).
"Target Merchant Acquiring Business Portfolio" has the meaning set
forth in Section 11.1(c).
"Target Purchase Price" has the meaning set forth in Section 11.1(c).
"Tax" means any tax (including any employment tax, income tax, capital
gains tax, value-added tax, sales tax, property tax, gift tax, estate tax,
generation-skipping tax or transfer tax), levy, assessment, tariff, duty
(including any customs duty), deficiency or other fee, and any related charge or
amount (including any fine, penalty, interest or addition to tax), imposed,
assessed, or collected by or under the authority of any governmental or public
body or payable pursuant to any tax-sharing agreement or any other agreement or
other document relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
"Termination Notice" has the meaning set forth in Section 11.1(e).
"Termination Payment" has the meaning set forth in Section 11.1(e).
"Territory" has the meaning set forth in Section 11.1(b).
"Third Party Claim" has the meaning set forth in Section 12.3.
"Top 50 Merchants" has the meaning set forth in Section 6.6.
"Top 50 Merchant Agreements" has the meaning set forth in Section
6.5(b)(i).
"Transfer Documents" has the meaning set forth in Section 1.2(a).
"Transferred Assets" has the meaning set forth in Section 1.1(b).
"Transferred Employees" has the meaning set forth in Section
3.4(c)(ii).
"Transitional Services" has the meaning set forth in Section 3.2.
"Up-Front Purchase Price" has the meaning set forth in Section 2.1.
"Usage Fees" has the meaning set forth in Section 3.6(b)(i).
"Valuation" has the meaning set forth in Section 11.1(c).
<PAGE>
"Valuation Date" has the meaning set forth in Section 11.1(c).
"Valuation Expert" has the meaning set forth in Section 11.1(c).
13.2. Other Definitions; Rules of Interpretation.
(a) All terms defined herein shall have the defined meanings when
used in any Operative Document, certificate or other document made or delivered
pursuant hereto unless otherwise defined therein. Singular terms shall include
the plural, and vice versa, unless the context otherwise requires. The term
"including" shall mean "including without limitation."(b) Exhibits and
Schedules referenced in this Agreement are deemed to be incorporated herein by
reference.
ARTICLE XIV
MISCELLANEOUS
14.1. Termination. (a) This Agreement may be terminated at any
time prior to the Closing Date:
(i) by mutual written consent of Seller and Purchaser;
(ii) by Seller or Purchaser if (A) any governmental entity which
must grant a required regulatory approval has denied approval of the
transaction and such denial has become final and nonappealable or (B) any
governmental entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the consummation of
the transactions contemplated by this Agreement in the manner presented;
(iii) by Seller or Purchaser (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material
breach of any of the covenants or agreements or any of the representations
or warranties set forth in this Agreement on the part of the other party
which breach is not cured within thirty (30) days following written notice
to the party committing such breach, or which breach, by its nature, cannot
be cured prior to the Closing;
(iv) by Seller if the transaction shall not have been consummated on
or before January 31, 1999, unless the failure of the Closing to occur by
such date shall be due to the failure of Seller to perform or observe the
covenants and agreements of Seller set forth herein; and
(v) by Purchaser if the transaction shall not have been consummated
on or before January 31, 1999, unless the failure of the Closing to occur
by such date shall be due to the failure of Purchaser to perform or observe
the covenants and agreements of Purchaser set forth herein.
(b) In the event of termination of this Agreement by either Seller
or Purchaser as provided in Section 14.1(a), this Agreement shall forthwith
become void and have no effect, and neither Seller, Purchaser, nor any of their
respective subsidiaries or affiliates or any of the officers, directors or
stockholders of any of them shall have any liability of any nature whatsoever
hereunder, or in connection with the transactions contemplated hereby, except
(i) the confidentiality provisions of Sections 4.1 and 5.1 and the publicity
provisions in Section 14.13 shall survive any termination of this Agreement, and
(ii) notwithstanding anything to the
<PAGE>
contrary contained in this Agreement, neither Seller no r Purchaser shall be
relieved or released from any liabilities or damages arising out of its willful
breach of any provision of this Agreement.
14.2. Expenses. Except as otherwise specifically provided in this
Agreement, each party shall pay its own costs and expenses in connection with
this Agreement and the transactions contemplated hereby, including all
attorneys' fees, accounting fees and other expenses.
14.3. Notices and Payments. All notices, demands and other
communications hereunder shall be in writing and shall be delivered (i) in
person, or (ii) by United States mail, certified or registered, with return
receipt requested, or (iii) by national overnight courier service, as follows:
If to Seller: Mellon Bank, N.A.
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258
Attn: General Counsel
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with copy to: (which shall Reed Smith Shaw & McClay LLP
not constitute notice) 435 Sixth Avenue
Pittsburgh, Pennsylvania 15219
Attn: Frank T. Guadagnino, Esq.
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If to Purchaser: Paymentech Management Resources, Inc.
1601 Elm Street, 9th Floor
Dallas, Texas 75201
Attn: President
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with copy to: (which shall Paymentech Management Resources, Inc.
not constitute notice) 1601 Elm Street, 9th Floor
Dallas, Texas 75201
Attn: General Counsel
and
Jackson Walker L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Attn: Charles D. Maguire, Jr., Esq.
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The Persons or addresses to which mailings or deliveries shall be made may be
changed from time to time by notice given pursuant to the provisions of this
Section 14.3. Any notice, demand or other communication given pursuant to the
provisions of this Section 14.3 shall be deemed to have been given on the date
actually delivered against proof of receipt therefor.
14.4. Third Party Beneficiaries. Neither party to this Agreement
intends this Agreement, nor shall this Agreement be interpreted or construed, to
benefit or create any right or cause of action in or on behalf of any Person
other than Seller and Purchaser. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their permitted successors and assigns.
14.5. Independent Contractors. Nothing contained in this
Agreement or any other Operative Document shall be construed as creating or
constituting a partnership, joint
<PAGE>
venture or agency between the parties to this Agreement. Rather, the parties
shall be deemed independent contractors with respect to each other for all
purposes.
14.6. Finder's Fees. The parties agree that if either party
employed the services of a broker or finder in connection with the transactions
contemplated hereby, that such party shall have the sole responsibility and
liability for the payment of any fees, costs or expenses of the broker retained
by that party.
14.7. Successors and Assigns. All terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This Agreement
and the rights, privileges, duties and obligations of the parties hereto may not
be assigned, delegated or otherwise transferred (by operation of law or
otherwise) by any party without the prior written consent of the other party;
provided, however, that such consent shall not be required (a) for the
assignment by Seller of its rights and privileges hereunder to a Person
controlling, controlled by or under common control with Seller (it being
understood that no such assignment shall relieve Seller of its duties or
obligations hereunder), or (b) for the assignment, delegation or other transfer
by Seller of its rights, privileges, duties and obligations hereunder to any
Person into or with which Seller shall merge or consolidate or to which Seller
shall sell all or substantially all of its assets, provided that the assignee
formally agrees in writing to assume all the rights and obligations of the
assigning party created hereby.
14.8. Amendments and Waivers. This Agreement, any of the
instruments referred to herein and any of the provisions hereof or thereof shall
not be amended, modified or waived in any fashion except by an instrument in
writing signed by the parties hereto. No delay on the part of any party hereto
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver of any other right, power or privilege hereunder,
nor shall any single or partial exercise of any other right, power or privilege
hereunder.
14.9. Severability of Provisions. If any provision of this
Agreement, or the application of any such provision to any Person or
circumstance, is invalid or unenforceable, the remainder of this Agreement, or
the application of such provision to Persons or circumstances other than those
as to which it is invalid or unenforceable, shall not be affected by such
invalidity or unenforceability.
14.10. Counterparts; Delivery. This Agreement may be executed in
one or more counterparts, all of which taken together shall constitute one
instrument. The parties acknowledge that delivery of executed counterparts of
this Agreement may be effected by a facsimile transmission or other comparable
means, with an original document to be delivered promptly thereafter via
overnight courier.
14.11. Captions. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
14.12. Entire Agreement. The making, execution and delivery of
this Agreement by the parties hereto have been induced by no representations,
statements, warranties or agreements other than those herein expressed. This
Agreement and the other written instruments specifically referred to herein
(including the Interim Transaction Processing Agreement and the Marketing
Agreement) embody the entire understanding of the parties and supersede in their
entirety all prior communication, correspondence, and instruments, and there are
no further or other agreements or understandings, written or oral, in effect
between the parties relating to the subject matter hereof.
<PAGE>
14.13. Publicity. The timing and content of any and all public
statements, announcements or other publicity concerning the transactions
contemplated herein shall be mutually agreed upon by Seller and Purchaser.
14.14. Governing Law. This Agreement is made and entered into
under the laws of the State of New York, without regard to its choice or
conflicts of law principles, and the laws of the State of New York applicable to
agreements made and to be performed entirely therein shall govern the validity
and interpretation hereof and the performance by the parties hereto of their
respective duties and obligations hereunder.
14.15. Arbitration.
The parties each hereby waive any right to trial by jury and agree
that any claim or controversy (including without limitation any claim based on
or arising from an alleged tort, breach of contract, strict liability or other
theory of liability) other than a claim for injunctive relief ("Dispute')
arising out of this Agreement or any other Operation Document shall be resolved
in accordance with the following procedures. The parties shall endeavor in good
faith to promptly, reasonably, and equitably settle all Disputes on an informal
basis in the normal course of business. All Dispute which the parties cannot so
settle in the normal course of business shall be negotiated and arbitrated in
accordance with the following terms:
(a) Either party (the "Initiating Party") may commence a
negotiation of a Dispute by serving on the other party (the "Responding Party")
a written statement of the nature and substance of the Dispute, a brief summary
of its position with respect to the Dispute, its justifications therefor, and
its proposal for resolution of the Dispute. Within ten (10) days, the Responding
Party shall prepare and serve on the Initiating Party a written statement of its
position in response. These position papers may be served by facsimile
transmission or such other means and to such addressees as the parties may
designate from time to time ("Executives"). Within fourteen (14) days of
exchanging position papers, the parties shall conduct a face-to-face meeting of
the Executives and appropriate members of their respective management teams with
knowledge of the matters underlying the Dispute and full authority to resolve
the Dispute. The first such meeting shall be held at the office of the
Responding Party, with succeeding meetings rotated between the parties' offices,
or at such other locations as the parties may agree. The Executives shall
conduct not less than two (2) meetings over a two-week period. If the Executives
cannot agree to a resolution of the Dispute within five (5) days thereafter,
they may continue discussions or either party may refer the Dispute to the next
senior levels of management (hereinafter collectively referred to as the "Senior
Executives"). The Senior Executives, along with such of their subordinates who
have personal knowledge of the Dispute, shall meet initially within five (5)
days of the referral in an effort to resolve the Dispute. The initial meeting
may take place by conference telephone call. The Senior Executives shall have
full authority to settle the Dispute and shall not be limited to the proposed
settlements set forth in the position papers. The Senior Executives may conduct
subsequent face-to-face meetings which shall be rotated between their respective
offices, commencing at the office of the Responding Party, or at such other
locations as the parties may agree. The Senior Executives shall conduct not less
than two (2) such face-to-face meetings over the ensuing 30-day period. If the
Dispute is not resolved within ten (10) days of the second such meeting, the
parties may continue discussions or either party may invoke the arbitration
procedures set forth hereafter by giving notice to the other party.
(b) The parties agree that any Dispute between Purchaser and Seller
arising out of or relating to this Agreement or any Operative Document shall, at
the request of either party after exhaustion of the procedures set forth in
Section 14.15(a) above, be determined by arbitration. Any arbitration
proceedings shall be conducted in Denver, Colorado, unless a different location
is agreed to between the Parties. The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any
<PAGE>
choice of law provision in this Agreement, and under the Commercial Rules of the
American Arbitration Association. The arbitrator(s) shall give effect to
statutes of limitation and the provisions of this Agreement and the Operative
Documents in determining any Dispute. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrator(s). The award rendered
by the arbitrator(s) shall set forth findings of facts and conclusions of law
and shall be final, and the judgment may be entered in any court having
jurisdiction thereof. A failure by the arbitrator(s) to make findings of fact
and conclusions of law shall be grounds for overturning the award. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the Dispute or claim to
arbitration if any other party contests such action for judicial relief.
(c) In any arbitration proceeding, the arbitrator(s) is (are)
authorized to apportion costs and expenses, including investigation, legal and
other expense. Such costs and expenses are to be awarded only after the
conclusion of the arbitration and will not be advanced during the course of such
arbitration.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first written above.
"SELLER"
MELLON BANK, N.A.
By: /s/ STEVEN G. ELLIOTT
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Name: Steven G. Elliott
--------------------------------
Title: Senior Vice Chairman &
Chief Financial Officer
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"PURCHASER"
PAYMENTECH MANAGEMENT RESOURCES, INC.
By: /s/ PHILIP TAKEN
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Name: Philip Taken
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Title: Chief Administrative Officer
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<PAGE>
INDEX OF SCHEDULES AND EXHIBITS
SCHEDULE DESCRIPTION
- -------- -----------
1.1(b)(vii) Subsidies
1.1(c)(i) Excluded Merchant Agreements, Agent Bank Agreements,
ISO Agreements and Related Agreements
1.1(c)(ii) Excluded Equipment
1.1(c)(iv) Excluded Inventory
1.4(d) Material Merchant Agreements, Agent Bank Agreements,
ISO Agreements and Related Agreements and
Corresponding Holdback Amounts
3.4(c)(i) Merchant Acquiring Business Employees
3.4(c)(ii) Merchant Acquiring Business Employees to Receive Offers
of Employment from Purchaser
3.6(a) Maintained Agreements with Third Party Service Providers
3.11 Key Government Employees
4.4 Schedules to be Updated
6.4 Exceptions to Required Transferred Assets
6.5(a)(i) Merchants
6.5(a)(ii) Agent Banks
6.5(a)(iii) Independent Sales Organizations
6.5(a)(iv) Related Parties and Related Agreements
6.5(a)(v) Exceptions; Notice of Election to Terminate Merchant
Agreements, Agent Bank Agreements, ISO Agreements or
Related Agreements
6.5(a)(vi) Independent Sales Organizations with Express Contractual
Rights to Require Assignment to a Third Party
6.5(b) Exceptions to Possession of Original executed Copies of Top
50 Merchant Agreements
6.5(c)(i) Exceptions to Possession of Original Executed Copies of
Agent Bank Agreements
6.5(c)(ii) Exceptions to Possession of Original Executed Copies of
ISO Agreements
6.5(c)(iii) Exceptions to Possession of Original Executed Copy of
Related Agreements
6.5(d)(i) Disputes
6.5(d)(ii) Material Adverse Effect
6.5(e)(i) Exceptions to Credit Card Association Compliance
6.5(e)(ii) Exceptions to Original Sponsorship Agreements
6.5(f) Reserve Accounts
6.5(g) Non-Credit Card Association Processing
6.6 Top 50 Merchants with Highest Dollar Value of Credit Card
Transactions
6.7(a) EFT Networks
6.7(b) EBT Networks
6.7(c) Exceptions to EFT Network and EBT Network Compliance
6.8(a) Required Governmental Approvals (Seller)
<PAGE>
6.8(b)(i) Required Merchant Agreement, Agent Bank Agreement, ISO
Agreement and Related Agreement Affirmative Consents
(Seller)
6.8(b)(ii) Other Required Affirmative Consents (Seller)
6.9 Litigation
6.12 Vendors and Suppliers
6.13 Exceptions to Agreements in Full Force and Effect
6.14 Exceptions to Absence of Certain Changes and Events
6.16 Certain Financial Information
6.18 Agreements with Affiliates
7.5(a) Required Governmental Approvals (Purchaser)
7.5(b) Other Required Consents (Purchaser)
EXHIBITS DESCRIPTION
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Bill of Sale
Exhibit C Form of Interim Transaction Processing Agreement
Exhibit D Form of Marketing and Sales Alliance Agreement
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