PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (this "Agreement"), dated October __,
2002, is entered into between QUAD CITY BANCARD, INC., a Delaware corporation
("Bancard"), ALLIED MERCHANT SERVICES, INC., an Illinois corporation ("AMS")
(Bancard and AMS sometimes collectively referred to herein as the "Seller"),
iPAYMENT, INC., a Delaware corporation ("iPayment"), and QUAD CITY ACQUISITION
CORP., a Delaware corporation, a wholly owned subsidiary of iPayment
("Purchaser").
W I T N E S S E T H:
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WHEREAS, Bancard has entered into certain merchant services agreements
with the Merchants (as further defined herein), in the forms which are attached
hereto as Exhibit A, (the "Merchant Agreements") regarding credit card
processing services;
WHEREAS, Bancard has entered into certain Merchant Agreements with
merchants that were solicited by AMS (as listed on Exhibit B hereto) (the "AMS
Merchants");
WHEREAS, Bancard has entered into certain merchant solicitation
agreements with the independent sales organizations and agents (as listed on
Exhibit C attached hereto) (the "ISO Groups") and has certain rights to merchant
agreements with merchants solicited by the ISO Groups (as listed on Exhibit D
hereto) (the "ISO Merchants");
WHEREAS, Bancard has entered into agreements with Online Data
Corporation ("ODC") and with Cardsync, Inc. ("Cardsync") to provide certain
merchant processing services to each of them for certain merchants (as listed on
Exhibit E) (the "ODC/CardSync Merchants") whereby Bank has certain rights to
such ODC/CardSync Merchants. ODC and Cardsync are both wholly owned subsidiaries
of iPayment. For purposes of this Agreement, the "AMS Merchants, the ISO
Merchants and the ODC/CardSync Merchants are hereinafter collectively referred
to as the "Merchants";
WHEREAS, Bancard (and AMS, via Bancard) has entered into certain
agreements with third party vendors, (as listed on Exhibit F attached hereto),
(all of which are collectively referred to as the "Vendor Agreements") pursuant
to which such entities agreed to provide certain services, including processing
services to the Merchants. For purposes of this Agreement, the rights of AMS and
Bancard to the Merchants, the rights of AMS and Bancard to the Merchant
Agreements, the rights of AMS and Bancard to the Vendor Agreements and all
related and ancillary documents are hereinafter collectively referred to herein
as the "Seller Portfolio";
WHEREAS, Seller desires to sell to Purchaser and Purchaser desires to
purchase from Seller the Seller Portfolio and all rights associated therewith,
whether owned by the Bancard or AMS, together with certain other assets
described in Schedule 1.01 hereto;
NOW, THEREFORE, IN CONSIDERATION of the promises and of the mutual
representations, warranties and covenants which are made and to be performed by
the respective parties, it is agreed as follows:
ARTICLE I
PURCHASE AND SALE OF SELLER PORTFOLIO
1.01. Purchase and Sale of Seller Portfolio. Subject to the terms and conditions
of this Agreement, and subject to Seller's receipt of the purchase price
set forth in Section 1.05(a), on the "Closing Date" (as defined in Section
1.08 hereof), Seller shall sell, assign and deliver good and marketable
title ("Transfer") to Purchaser, and Purchaser shall purchase, acquire,
accept and assume from Seller, all of Seller's rights and interest in and
to the Seller Portfolio, including all contracts, contract rights,
customer lists, merchant accounts, agent agreements, independent sales
organization agreements, computer printouts, papers and other documents in
the possession of Seller relating to the Seller Portfolio, and also
certain AMS office furnishings and equipment, as are further set forth in
Schedule 1.01 attached hereto. The Seller Portfolio together with the
other assets referenced in Schedule 1.01 are collectively referred to as
the "Assets." Seller Transfers such Assets to Purchaser free and clear of
all liens, liabilities and encumbrances except for any liabilities
specifically assumed by the Purchaser herein. Furthermore, Seller
transfers its right, title and interest in and to the Merchant Reserves
(as defined herein).
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Anything herein to the contrary notwithstanding, Seller and AMS reserve to
themselves, and do not sell or assign to Purchaser as part of the Seller
Portfolio or the Assets, the following:
(1) all rights (and any associated liabilities) of AMS to lease residuals
on point of sale, equipment leases made before the Effective Date
between Lease Finance Group (a division of Newcourt Financial USA,
Inc.), as Lessor, and Merchants which are a part of the AMS portion
of the Seller Portfolio, as Lessees; and
(2) Eighty percent (80%) of the annual fees for 2002 which, in accordance
with the past annual fee billing practices of AMS and Seller, the
parties hereto agree shall be assessed as a charge processed under
the Interim Processing Agreement (attached as Exhibit 5.03) in
December, 2002 to the Merchants which are a part of the AMS portion
of the Seller Portfolio. Seller and AMS will retain such 80% of those
fees as they are collected, any other terms or provisions of the
Interim Processing Agreement notwithstanding.
1.02. Assumption of Liabilities. Except for the liabilities specifically assumed
hereby and further described below, Purchaser will not assume any debts,
liabilities, obligations, expenses, taxes, contracts or commitments of
Seller or AMS of any kind, character or description, whether accrued,
absolute, contingent or otherwise. Purchaser and iPayment hereby assume
the following described liabilities and agree to indemnify Seller and AMS
and their successors, assigns, parent companies (including Quad City Bank
& Trust Company ("Bank") and QCR Holdings, Inc.), affiliates, officers,
directors, agents, attorneys and insurers against and hold them harmless
from any and all damages, claims, causes of action, Liabilities, losses,
obligations or expenses relating to the following described matters:
(a) With regard to the AMS Merchants, Purchaser will assume all
Liabilities associated therewith that relate to transactions which
occurred on or after January 1, 2002;
(b) With regard to the ISO Merchants and the ODC/CardSync Merchants,
Purchaser will assume all Liabilities whatsoever associated
therewith, whether occurring on, before or after the Effective Date;
(c) For purposes of this Section 1.02(a) and 1.02(b), "Liabilities" shall
mean Unfulfilled Chargebacks (as hereinafter defined), credit
vouchers and penalties, assessments, MasterCard/Visa fines and other
adjustments relating to Merchants and all other expenses and losses
resulting therefrom;
(d) Subject to the Interim Processing Agreement, all contractual
obligations accruing after the Effective Date of Bancard, Bank or AMS
owing to the AMS Merchants, the ISO Merchants and the ODC/CardSync
Merchants pursuant to the Merchant Agreements;
(e) All contractual obligations relating to the period after the
Effective Date of Bancard, Bank or AMS owing to the AMS sales offices
and agents, owing to the ISO Groups or owing to ODC or CardSync;
provided, however, Purchaser and iPayment shall be obligated to
perform all residual purchase obligations owing to the AMS sales
offices, regardless of when accrued, to the extent those rights are
triggered by this transaction or are exercised after the Effective
Date; and
(f) Those additional liabilities of Bancard, Bank or AMS listed on
Schedule 1.02 attached hereto and herein incorporated by this
reference.
1.03 Merchant Chargeback.
(a) Subsequent to the Closing, all merchant chargebacks and penalties
pertaining to Merchants' transactions will be processed in the
ordinary course of business, and debited from the operating accounts
of the affected Merchants, consistent with the applicable Merchant
Agreements, regardless of the location of the operating accounts. To
the extent that the funds within such operating accounts are
insufficient to pay any chargebacks and/or penalties and assessments
imposed by Visa USA, Inc. or Mastercard International, Inc.,
(collectively, "Unfulfilled Chargebacks"), such Unfulfilled
Chargebacks will be processed utilizing funds set aside in the
reserve accounts set forth in Section 1.03(b), subject to the
provisions thereof, and then shall be allocated pursuant to Section
1.02 above.
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(b) Seller has in its possession certain Merchants' reserves set aside
for Unfulfilled Chargebacks. The merchant reserve accounts, as of the
Closing, are as set forth in Schedule 1.03 attached hereto ("Merchant
Reserves"). The accounts in which the Merchant Reserves are deposited
will be maintained at Seller until the termination of the Interim
Processing Agreement executed concurrently herewith and until the
existing BINs and ICAs have been transferred to a new Visa/MasterCard
Member Bank in order that Seller and Bank will not have continuing
liability for Unfulfilled Chargebacks related to or arising from the
Seller Portfolio or Bancard's and Bank's continued services under the
Interim Processing Agreement (other than Unfulfilled Chargebacks
arising from AMS's pre-January 1, 2002 transactions), at which time
any remaining Merchant Reserves will be transferred to another
financial institution, which is a member in good standing of the
national credit card associations, at the Purchaser's direction
("Purchaser's Bank").
(c) Purchaser and iPayment hereby agree to accept the assignment from
Seller and AMS of the Merchant Reserves, to become the holder of the
Merchant Reserves and to assume and perform all obligations of Seller
or AMS arising from, related to, or regarding the Merchant Reserves
including, but not limited to, all obligations owing to the merchants
who have deposited such reserves and all obligations arising under
law, including, but not limited to, escheat obligations. Purchaser
and iPayment, hereby agree to indemnify, defend, and hold Seller and
AMS, and their officers, directors, parent companies and affiliates
(collectively the "Indemnified Parties") harmless from any and all
losses, liabilities, claims, causes of action, and damages now
existing or hereafter arising to which the Indemnified Parties may
become subject or which Indemnified Parties may suffer or incur
arising from, related to, or regarding the Merchant Reserve
including, but not limited to, any claims of merchants, and any
claims arising under law, including, but not limited to, escheat
obligations.
(d) As to Unfulfilled Chargebacks which are allocated to Purchaser and
iPayment pursuant to Section 1.02 above and cannot be satisfied from
the applicable Merchant Reserves, then Bancard, while it is
processing pursuant to the Interim Processing Agreement, may collect
such Unfulfilled Chargebacks in the following order of right:
(i) setting off against the next month settlement of residuals to
Purchaser or iPayment;
(ii) repayment immediately on Purchaser's demand from Purchaser or
iPayment;
(iii)repayment immediately on Purchaser's demand from Greg Daily, as
guarantor (provided that demand shall not be made on Greg Daily
sooner than five (5) days after demand is made on Purchaser and
iPayment under Section 1.03(d)(ii); and
(iv) Bancard may proceed with all applicable remedies pursuant to the
Uniform Commercial Code against its security interest in the
Seller Portfolio.
(e) Purchaser and iPayment hereby grant to Bancard and Bank a security
interest in the Seller Portfolio, which lien shall be a first and
prior lien and security interest in such Seller Portfolio, to secure
and to assure payment to Bancard and Bank of all obligations owing to
Bancard or Bank pursuant to the terms of this Purchase and Sale
Agreement. Purchaser and iPayment shall deliver to Bancard and Bank
all UCC financing statements or other documents reasonably requested
by Bancard and Bank to evidence and perfect the security interest
granted hereunder. At such time as the Interim Processing Agreement
is terminated, including transfer of the applicable BIN to a new
sponsor bank other than Bank /Bancard, and all sums owing to Bancard
and Bank hereunder have been paid in full, this security interest in
favor of Bancard and Bank in the Seller Portfolio shall terminate and
be of no further force or effect. Bancard/Bank shall undertake good
faith efforts to terminate all UCC filings upon termination of the
security interest.
1.04 Prorations. After the Closing Date, Purchaser and Seller shall prorate as
of the Closing Date any amounts which become due and payable after the
Closing Date with respect to the Assets.
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1.05 Purchase Price. The purchase price for the Seller Portfolio shall be a
total of Three Million, Five Hundred Thousand Dollars ($3,500,000.00), in
cash, due and payable at Closing. An additional sum of Seven Thousand
Eight Hundred Dollars & 00/100 ($7,800.00) shall be paid to AMS from
Purchaser in cash at closing for the AMS furnishings and equipment
described in Schedule 1.01.The foregoing purchase price for the Seller
Portfolio is allocated by the Parties entirely to the purchase of the
contracts, contract rights, customer lists, merchant accounts, agent
agreements, independent sales organization agreements, computer printouts,
papers and other documents relating to the Seller Portfolio, and as
consideration for the non-solicitation provision as follows:
(a) One Million Dollars shall be allocated towards the AMS Merchants and
the assets associated therewith.
(b) Two Million Five Hundred Thousand Dollars shall be allocated towards
the ISO Merchants and the ODC/CardSync Merchants and the assets
associated therewith.
1.06. Instruments of Conveyance and Transfer, Etc. Seller is delivering to
Purchaser herewith such assignments and other good and sufficient
instruments of conveyance and transfer, in form and substance reasonably
satisfactory to Purchaser, as is necessary to complete the Transfer and be
effective to vest in Purchaser all of Seller's rights and interest in the
Assets free of all liens or encumbrances or other claims of third parties
other than those disclosed in Schedule 1.06, and simultaneously with such
delivery, is taking such steps as may be necessary to put Purchaser in
operating control of the Seller Portfolio. Purchaser is delivering to
Seller such acknowledgments or assumption agreements herewith as may be
required to assume the obligation to perform service under the Bank
Agreements and Merchant Agreements subsequent to the Effective Date. The
consummation of the Closing shall be deemed to constitute Seller's
acknowledgment of satisfaction as to such acknowledgments and assumptions.
The documents delivered pursuant to this section shall be dated as of the
Closing Date.
1.07. Further Assurances. From time to time after the Closing, without further
consideration, either party hereto will execute and deliver such other
reasonable instruments of conveyance, assignment, transfer and delivery
and take such other action as the other party reasonably may request in
order more effectively to transfer, convey, assign and deliver to
Purchaser, and to place Purchaser in control of, the Assets, or to more
effectively cause Purchaser or iPayment to assume and perform the
obligations assumed by Purchaser and iPayment pursuant to Section 1.02
hereof.
1.08. Closing Date. The purchase and sale of the Seller Portfolio pursuant to
this Agreement (the "Closing") shall take place on October __, 2002, at
the office of Seller. The date of Closing is referred to in this Agreement
as the "Closing Date." Irrespective of the actual time of Closing, for all
economic purposes, including without limitation the allocation of
chargebacks liability, and revenue relating to the Assets, the Closing
will be deemed to have taken place and shall be effective as of October 1,
2002 ("Effective Date"); provided, however, that all representations,
warranties and covenants (to the extent any covenants are to be performed
after Closing) shall be measured and determined as of the Closing Date.
1.09 Retained Liabilities. Purchaser is not assuming and will not perform any
liabilities or obligations of Seller or AMS not specifically described in
Section 1.02 herein, whether fixed or contingent, known or unknown,
disclosed or undisclosed, recorded or unrecorded and whether relating to
the Assets or other facts or circumstances.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND AMS
Seller, as to the Seller Portfolio and AMS as to those portion of the Seller
Portfolio pertaining to AMS, hereby represents and warrants to Purchaser as
follows:
2.01. Corporate Organization; Etc. Seller is a Delaware corporation and AMS is
an Illinois corporation, both duly organized, validly existing and in good
standing and having full corporate power and authority to carry on the
business as it is now being conducted and to own the properties and assets
it now owns, including the Seller Portfolio.
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2.02. Authorization. Seller and AMS have full corporate power and authority to
enter into this Agreement and carry out the transactions contemplated
hereby. The Boards of Directors of Seller and AMS have duly authorized the
execution and delivery by Seller and AMS of this Agreement, the
performance by Seller and AMS of their obligations hereunder and the
consummation of the transactions contemplated hereby.
2.03. No Violation. Except as disclosed on Schedule 2.03, neither the execution
and delivery of this Agreement, nor the performance by Seller or AMS of
its obligations hereunder nor the consummation of the transactions
contemplated hereby will (a) violate any provision of the Articles of
Incorporation or Bylaws of Seller or AMS; (b) would require the consent of
any other party which has not been obtained prior to Closing, constitute a
breach of, or result in the creation or imposition of any lien upon the
Seller Portfolio under, any agreement or commitment to which Seller or AMS
is a party or by which Seller or AMS is bound; (c) violate any statute or
law or any judgment, decree, order, regulation or rule of any court or
governmental authority to which Seller or AMS is subject or (d) whether
with or without notice, the lapse of time or both, will not conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which Seller or AMS is
a party or by which it is bound or create any lien, security interest,
charge, encumbrance or restriction on any of the Assets. No other
corporate proceedings on the part of Seller or AMS are necessary to
authorize the execution and delivery of this Agreement or the completion
by Seller or AMS of the transactions contemplated hereby.
2.04. Consents and Approvals of Governmental Authorities. No consent, approval
or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority is required to be made or obtained by
Seller or AMS in connection with the execution, delivery and performance
of this Agreement by Seller or AMS.
2.05. No Undisclosed Liabilities. Neither Bancard nor AMS have knowledge of
material liabilities or obligations that adversely impact the portion of
the Seller Portfolio relating to the AMS merchants, except as disclosed to
Purchaser and iPayment in Schedule 2.05. Bancard does not have knowledge
of material liabilities or obligations that adversely impact the portion
of the Seller Portfolio relating to the ISO merchants, except as disclosed
to Purchaser and iPayment in Schedule 2.05.
2.06. Litigation. Other than the litigation disclosed in Schedule 2.06, there is
no known action, proceeding or investigation pending or threatened against
Seller, or any properties or rights of Seller or AMS, before any court,
arbitrator or administrative or governmental body that would involve the
Seller Portfolio in any manner.
2.07. Seller Portfolio. The list of the accounts contained in the Seller
Portfolio is attached hereto as Exhibits B, D and E, which sets forth (a)
the name of the individual Merchant, (b) the September, 2002 sales, and
(c) the current year-to-date sales discount rate is accurate and complete
in all material respects to the best knowledge of Seller. The Seller's
most recent Nobel/ISO settlement reports (August, 2002) regarding the
Seller Portfolio are attached hereto as Schedule 2.07, and are accurate
and complete in all material respects to the best knowledge of Seller
Seller has no reason to believe any of the Bank Agreements are
unenforceable. Finally, to the best knowledge of Seller, Seller is not
subject to any material agreements involving Merchants or the Seller
Portfolio which are not being assigned to Purchaser pursuant to this
Agreement. The knowledge of Seller in this Agreement refers to the
knowledge of John W. Schricker, President of Seller and William J.
Brockway, Vice President of Seller. The knowledge of AMS in this Agreement
refers to the knowledge of Gerald Grecco, President of AMS, and William J.
Brockway. With respect to the information referenced in items (c), (d) and
(e) above, the information is not presently included in Schedule 2.07, but
will be provided by Seller as soon as commercially practicable after the
Closing Date.
2.08. Licenses, Permits and Authorizations. To the knowledge of Seller and AMS,
they have all approvals, authorizations, consents, licenses, franchises,
orders and other permits of all governmental or regulatory agencies,
whether federal, state, local or foreign, the absence of which would
impair the Seller Portfolio.
2.09. Intentionally Deleted
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2.10 Compliance with Law. To the knowledge of Seller and AMS, they are in
compliance, in all respects, with all applicable statutes, regulations,
judgments, injunctions, decrees, orders, ordinances and other laws
(collectively, "Laws") of the United States of America, all state and
local governments and other governmental authorities, and agencies and
courts of any of the foregoing, to which Seller is subject, and they have
not received any notice to the effect that, or otherwise been advised by
counsel that, they have materially violated or are not in compliance in
all material respects with any of such Laws, and, to the knowledge of
Seller and AMS, there are no investigations with respect thereto, nor past
or current business conduct or practices of Seller or AMS similar to the
conduct or practices of other businesses that to the knowledge of Seller
or AMS have been the subject of investigations, proceedings, claims,
actions, suits, demands or notices with respect thereto or have resulted
in any liability arising out of or related to such conduct or practices.
2.11 Ownership and Portability of Merchant Accounts. With respect to all of the
Merchant Accounts (except for (i) iPayment's, ODC's and CardSync's
pre-existing rights and obligations regarding the ODC/CardSync Merchants,
(ii) those rights disclosed in Schedule 2.11 which are retained by the ISO
Groups as to the ISO Merchants, and (iii) the residuals retained by, and
the related payout rights of, the AMS Sales Centers and Agents as
described in Schedule 2.11), (a) Bancard or AMS owns such Merchant
Accounts free and clear of all liens, claims, charges, encumbrances,
mortgages, pledges, security interests and other interests, (b) such
Merchant Accounts, to the knowledge of Bancard and AMS, are processed
under unique BINs and ICAs, and (c) Purchaser will have the right at any
time and from time to time after the Closing Date, to direct Seller and
third-party processors to, and such third-party processors are
obligatedto, (i) assign the Merchant Agreements relating to the Merchants
so identified, including all Merchant files and records (paper and fiche),
related merchant reserve and hold accounts, BINs, ICAs and databases
relating thereto, to one or more other Member Banks and/or third-party
processors designated by Seller and (ii) effect the deconversion of such
Merchant Accounts. Subject to the rights of the ISO Groups, ODC and
CardSync, such third-party processors are obligated to transfer the
merchant files, merchant agreements, related documents and other items
described herein after receipt of Seller's request for such assignment and
deconversion and such assignment and deconversion of the Merchant Accounts
shall be at no cost or expense to Purchaser or iPayment other than the
reasonable cost of copying, shipping, supplies, programming and the like
and any related reasonable transfer, association or registration fees.
Bancard agrees to use reasonable efforts following Closing to obtain the
consents of the ISO Groups to this transaction and to iPayment's
assumption of the Bank's obligations under the merchant solicitation
agreements with the respective ISO Groups; provided, however, if Bancard
is unable to obtain such consents, there shall be no penalty or other
adverse consequences to Bancard from Purchaser or iPayment. "BINs" shall
mean a unique Bank Identification Number assigned by VISA and licensed to
a Member Bank for its use in entering or receiving transactions into (or
from) VISA's settlement authorization systems and participating in the
VISA card program. An "ICA" is the corresponding number assigned by
MasterCard for the same purpose. "Member Bank" means a member of VISA
and/or MasterCard which is authorized by such association(s) to enter or
receive transactions into (or from) such association(s) settlement and
authorization systems, and to participate in such association(s) charge
card program.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER: AND PAYMENT
Purchaser and iPayment hereby represent and warrant to Seller as follows:
3.01. Corporate Organization; Etc. Purchaser and iPayment are at the date
hereof, and will be on the Closing Date, corporations duly organized,
validly existing and in good standing under the laws of the State of
Delaware, are solvent, and have corporate power and authority to carry on
their business as now being conducted.
3.02. Authorization, Etc. Purchaser and iPayment have full corporate power and
authority to enter into this Agreement and carry out the transactions
contemplated hereby.
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3.03. No Violation. Neither the execution and delivery of this Agreement, nor
the performance by Purchaser or iPayment of their obligations hereunder
nor the consummation of the transactions contemplated hereby will (a)
violate any provision of the Charters or Bylaws of Purchaser or iPayment;
(b) would require the consent of any other party which has not been
obtained prior to Closing; or (c) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or governmental
authority to which Purchaser or iPayment is subject.
3.04. Litigation. There is no known action, proceeding or investigation pending
or, to the best knowledge and belief of Purchaser or iPayment, threatened
against Purchaser or iPayment, or any properties or rights of Purchaser or
iPayment, before any court, arbitrator or administrative or governmental
body, which questions or challenges the validity of this Agreement or any
action taken or to be taken by Purchaser or iPayment pursuant to this
Agreement or in connection with the transactions contemplated by this
Agreement.
ARTICLE IV
CERTAIN COVENANTS AND AGREEMENTS
4.01. Seller's and AMS's Non-Solicitation Covenant. During the period of three
(3) years following the Closing Date, Seller and its successors in
interest, assigns and affiliates, shall not (i) other than mass market
campaigns not specifically directed toward any Merchant, directly solicit
any Merchant for purposes of providing credit card authorization and
related services to any of the Merchants, wherever located, or (ii)
intentionally or knowingly interfere with, disrupt or attempt to disrupt
any past, present or prospective business relationship, contractual,
between Purchaser and any Merchant, client, supplier, consultant, agent or
employee of Purchaser; provided, however, nothing herein shall prevent
Seller or its successors, assigns and affiliates from contracting with any
such Merchant, client, supplier, consultant, agent or employee in a manner
that does not interfere with, disrupt or attempt to disrupt any
contractual relationship between such person and Purchaser or from
accepting any unsolicited business relationships of any kind with any such
person. Notwithstanding the foregoing neither Seller nor its successors,
assigns or affiliates shall be prohibited from: (a) contracting with any
Merchant that terminated service with Purchaser at least six months prior
to entering into a contract with Seller, so long as Seller was not in
breach of this covenant with respect to such Merchant prior to entering
into such contract; (b) mass marketing campaigns not specifically directed
toward any Merchant and done without violation of Section 4.02 by any of
Seller or any successor, assign or affiliate of Seller shall not be deemed
a violation of this Section 4.01; (c) agent banks now or hereafter
affiliated with Quad City Bank & Trust Company in the ordinary course of
business signing up and processing through Seller any Merchant in those
agent banks' respective bank trade areas; and (d) Seller in the ordinary
course of its business signing up and processing any Merchant in the bank
trade areas of Quad City Bank & Trust Company and Cedar Rapids Bank &
Trust Company.
4.02. Confidentiality. Unless otherwise required by law, Seller agrees that
during the period of five (5) years following the Closing Date, it will
not voluntarily at any time, directly or indirectly, communicate, furnish,
divulge or disclose to any individual, firm, association, partnership or
corporation except to its accountants, attorneys, regulators, or to
persons or entities who are conducting due diligence for purposes of
selling the Seller Portfolio to Purchaser or its parent/holding company,
subject, however, to a confidentiality agreement, , any knowledge or
information with respect to any matters concerning or relating to the
Merchants or the Seller Portfolio, including but not limited to, copies or
originals of any information supplied to Purchaser.
4.03. Right to Injunctive Relief. Seller agrees and acknowledges that the
violation of the foregoing covenants set forth in Sections 4.01 and 4.02
would cause irreparable injury to Purchaser and that the remedy at law for
any violation or threatened violation would be inadequate and that
Purchaser, provided that Purchaser shall be in compliance with this
Agreement, shall be entitled to temporary and permanent injunctive relief
or other equitable relief without the necessity of proving actual damages.
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4.04. Notice of Merchant Conversion. If Seller discovers that it has accepted
the application for credit card authorization services from a Merchant,
except as permitted in Section 4.01 above, for a three year period from
the date hereof, it shall promptly notify Purchaser. Purchaser agrees that
in the event that Seller takes processing applications from any of the
Merchants, except as permitted in Section 4.01 above, Purchaser shall,
prior to taking the actions permitted in Section 4.03 above, give written
notice to the Seller and Seller shall then have 30 days in which to assign
such processing application to Purchaser or to cancel the processing
agreement between Seller and such Merchant. If the Seller fails to take
such action within the 30 day period, Purchaser shall then be entitled to
pursue any remedies against Seller, including without limitation, the
remedies provided in Section 4.03.
4.05 Merchant Reserves. At the time that Seller ceases to process the Seller
Portfolio for Purchaser pursuant to the Interim Processing Agreement, and
subject to the existing BIN's and ICA's being transferred to a new
Visa/MasterCard Member Bank in order that Seller and Bank will not have
continuing liability for Unfulfilled Chargebacks related to or arising
from the Seller Portfolio or Bancard's and Bank's continued services under
the Interim Processing Agreement (other than Unfulfilled Chargebacks
arising from AMS's pre-January 1, 2002 transactions), then Seller shall
transfer the Merchant Reserves to a financial institution of Purchaser's
choosing at closing as set forth in Section 1.03 hereof.
4.06 Litigation Support. In the event and for so long as Purchaser actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i)
any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving Seller, Seller will cooperate with
Purchaser and hisPurchaser's counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending
party.
4.07 Public Statements. Purchaser and Seller shall consult with each other and
will mutually agree on any press releases or public announcements
pertaining to this Agreement or the transactions contemplated hereby and
will not issue any such press releases or make any such public
announcements prior to such consultation and agreement, except as may be
required by applicable securities or other laws, in which case the party
proposing to issue such press release or make such public announcement
will use its best efforts to consult in good faith with the other party
before issuing any such press releases or making any such public
announcements.
4.08 Reasonable Best Efforts, Cooperation. Subject to the terms and conditions
of this Agreement, each of Seller and Purchaser agrees to use its
respective reasonable best efforts in good faith to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper or desirable, or advisable under applicable laws, so as to permit
consummation of the transactions contemplated by this Agreement as
promptly as practicable and otherwise to enable consummation of the
transactions contemplated hereby and shall cooperate fully with the other
party hereto to that end.
ARTICLE V
DELIVERY OF DOCUMENTS AT OR PRIOR TO CLOSING
5.01. Delivery of Documents by Seller and AMS. At or prior to the Closing,
Seller and AMS shall deliver to Purchaser, unless waived by Purchaser, the
following documents and instruments:
(a) all consents from government agencies and third parties necessary to
complete the Transfer and otherwise to consummate the transactions
contemplated hereby;
(b) such bills of sale, endorsements, assignments, and other good and
sufficient instruments of conveyance and assignment, reasonably
satisfactory in form and substance to Purchaser and its counsel, as
shall be necessary to vest all of Seller's and AMS's rights and
interest in, and title to, the Seller Portfolio in Purchaser and
otherwise to consummate the transactions contemplated hereby;
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(c) the most recent VISA/MASTERCARD Settlement Report and copies of such
other documents and computer printouts requested by Purchaser related
to the Seller Portfolio. Seller may delete all information not
related to the Seller Portfolio. At the time that Seller ceases to
process the Seller Portfolio for Purchaser pursuant to the Interim
Processing Agreement, and subject to the existing BIN's and ICA's
being transferred to a new Visa/MasterCard Member Bank in order that
Seller and Bank will not have continuing liability for Unfulfilled
Chargebacks related to or arising from the Seller Portfolio or
Bancard's and Bank's continued services under the Interim Processing
Agreement (other than Unfulfilled Chargebacks arising from AMS's
pre-January 1, 2002 transctions), then Seller shall deliver to
Purchaser originals of all documents that relate to the Seller
Portfolio;
(d) written instruments whereby the creditors, if any listed on Schedule
5.01(d) hereto, if any, have effectively released and discharged the
security interests referred to in said schedule;
(e) Bancard agrees to use reasonable efforts following Closing to obtain
the consents of the ISO Groups to this transaction and to iPayment's
assumption of the Bank's obligations under the merchant solicitation
agreements with the respective ISO Groups; provided, however, if
Bancard is unable to obtain such consents, there shall be no penalty
or other adverse consequences to Bancard from iPayment or Purchaser;
and
(f) such other documents or instruments as Purchaser may reasonably
request.
5.02. Delivery of Documents by Purchaser. At or prior to the Closing, Purchaser
shall deliver to Seller and AMS, the following documents and instruments:
(a) the purchase price set forth in Section 1.05 hereof payable as
allocated in said Section 1.05; and
(b) the Purchaser's Receipt.
5.03 Concurrent Agreement. At or prior to the Closing, Purchaser and Seller
shall enter into an Interim Processing Agreement in the form attached
hereto as Exhibit 5.03.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.01. No Brokerage. Each party hereto represents and warrants to the other party
hereto that it has not incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
like payment in connection with this Agreement or the transactions
contemplated hereby, and each party agrees to indemnify and hold the other
party harmless against and in respect of any such obligation or liability
based in any way on agreements, arrangements or understandings claimed to
have been made by such party with any third party.
6.02. Survival. Unless otherwise noted herein, each party hereto covenants and
agrees that its representations, warranties, covenants and agreements
contained in this Agreement and in any instrument of sale, assignment,
conveyance and transfer executed and delivered pursuant to this Agreement,
shall survive the Closing Date.
6.03. Amendments. Purchaser and Seller may amend, modify or supplement this
Agreement only by an instrument in writing signed on behalf of Purchaser
and Seller.
6.04. Waivers. Either party to this Agreement may, by written notice to the
other, (a) extend the time for the performance of any of the obligations
or other actions of the other party; (b) waive any inaccuracies in the
representations or warranties of the other party contained in this
Agreement or in any document delivered pursuant to this Agreement; (c)
waive compliance with any of the covenants of the other party contained in
this Agreement; and (d) waive or modify performance of any of the
obligations of the other partyThe waiver by either party hereto of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
6.05. Expenses. Whether or not the transactions contemplated by this Agreement
are consummated, each of the parties hereto shall pay its own fees and
expenses incident to the negotiation, preparation, execution and
performance of this Agreement including counsel and accountant's fees.
9
6.06. Notices. All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and shall be deemed to have
been given if mailed, certified mail, return receipt requested, with
postage prepaid:
(a) If to Bancard or to AMS, to:
Quad City Bancard, Inc.
Attn: John W. Shricher
3551 - 7 Street
Moline, IL 61265
With copy to:
QCR Holdings, Inc.
Attn: Douglas Hultquist
3551 - 7th Street
Moline, IL 61265
With copy to:
Terry M. Giebelstein
LANE & WATERMAN
220 N Main Street, Suite 600
Davenport, IA 52801
(b) If to Purchaser, to:
QuadCity Acquisition Corp.
c/o iPayment, Inc.
Attn: Afshin Yazdian, General Counsel
30 Burton Hills, Suite 520
Nashville, Tennessee 37215
With a copy to:
Howard Herndon, Esq.
Waller Lansden Dortch & Davis,
A Professional Limited Liability Company
511 Union Street, Suite 2100
Nashville, Tennessee 37219-1760
or to such other person or address as either party shall furnish the other
party in writing.
6.07. Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned
without the prior written consent of the other party.
6.08. Governing Law. THE PROVISIONS OF THIS AGREEMENT AND THE LEGAL RELATIONS
BETWEEN THE PARTIES ARISING THEREFROM SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
6.09 Venue. Any and all disputes between the parties which may arise pursuant
to this Agreement shall be heard and determined before an appropriate
federal or state court located in the State of Illinois; notwithstanding
the foregoing, the parties agree to bring the action in Illinois federal
courts, rather than Illinois state courts, if there is jurisdiction in the
federal courts. The parties hereto acknowledge that such courts have the
jurisdiction to interpret and enforce the provisions of this Agreement,
and the parties waive any and all objections that they may have as to
jurisdiction, venue or conflict of law issues in any of the above courts.
6.10. Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Further, this
Agreement may be executed by facsimile signatures, which shall be deemed
binding on the parties with the same force and effect as original
signatures.
6.11. Schedules and Headings. Information set forth in the Schedules hereto is
deemed to have been disclosed for all purposes of this Agreement.
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6.12. Entire Agreement. This Agreement, including the Schedules, the Interim
Processing Agreement referred to in Section 5.03 and other documents
referred to herein which form a part hereof, embody the entire agreement
and understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, warranties,
covenants or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
6.13 Severability. In the event any portion of this Agreement may be determined
by any Court of competent jurisdiction to be unenforceable, the balance of
the Agreement shall be severed therefrom and shall continue in full force
and effect unless a failure of consideration would thereby result.
6.14. Attorneys Fees. Notwithstanding anything in Section 6.05, should a
dispute, including but not limited to any litigation or arbitration be
commenced (including any proceedings in a bankruptcy court) between the
parties hereto or their representatives concerning any provision of this
Agreement, or the rights and duties of any person or entity hereunder, the
party or parties prevailing shall be entitled to attorneys' fees, expenses
of counsel and court costs incurred by reason of such action.
ARTICLE VII
INDEMNIFICATION
7.01 Indemnification by Bancard and AMS. Bancard and AMS, as Indemnifying
Party, shall indemnify, save and hold harmless each of Purchaser and
iPayment and their affiliates, successors and permitted assigns, and each
officer, director, employee or agent thereof, their respective controlling
persons, and their respective estates, successors, and assigns
(collectively, the "iPayment Indemnified Parties" and each an "Indemnified
Party"), harmless against and from any liability, demands, claims, actions
or causes of action, assessments, losses, fines, penalties, costs, damages
and expenses, including reasonable attorneys' fees, disbursements and
expenses (collectively, "Damages"), sustained or incurred by any of the
iPayment Indemnified Parties after the Closing Date as a result of,
arising out of or by virtue of any misrepresentation, breach of any
warranty or representation, or non-fulfillment of any agreement or
covenant that was to be fulfilled prior to the Closing Date, in each case
on the part of Bancard or AMS, whether contained in this Agreement or any
Exhibit or Schedule hereto or thereto or any written statement or
certificate furnished or to be furnished to Purchaser or iPayment pursuant
hereto or in any closing document or ancillary document executed and
delivered in connection with, or contemplated by, this Agreement executed
and delivered by Bancard or AMS to iPayment or Purchaser in connection
herewith. Such indemnification shall include without limitation the
following:
(a) the untruth, inaccuracy or breach of any representation or warranty
made by Bancard or AMS in this Agreement or any ancillary document
executed and delivered in connection with, or contemplated by, this
Agreement;
(b) the nonfulfillment or breach of any covenant, agreement or obligation
of Bancard or AMS contained in this Agreement or any ancillary
document executed and delivered in connection with, or contemplated
by, this Agreement;
(c) any claim or demand by any person asserting any interest in the
Assets or any other claim in respect to the transactions contemplated
by this Agreement, except for: (i) iPayment's, ODC's and CardSync's
pre-existing rights and obligations regarding the ODC/Cardsync
Merchants; (ii) the rights disclosed in Schedule 2.11 which are
retained by the ISO Groups as to the ISO Merchants; and (iii) the
residuals retained by, and the related payout rights of, the AMS
Sales Centers and Agents as disclosed in Schedule 2.11;
(d) any failure of Seller to satisfy or comply with the requirements of
any applicable bulk sales or similar law;
(e) all Unfulfilled Chargebacks, liabilities and expenses relating to
transactions of the AMS Merchants occurring prior to January 1, 2002;
(f) any liability of Seller arising out of the operation of the Assets
prior to the Closing which is imposed upon Purchaser or iPayment,
except to the extent such liability is an Assumed Liability;
11
(g) any liability of the Bancard or AMS for unpaid taxes with respect to
any tax year or portion thereof ending on or before the Closing Date
(or for any tax year beginning before and ending after the Closing
Date to the extent allocable to the portion of such period beginning
before and ending on the Closing Date); and
(h) any liability arising out of Seller's inability to obtain consents
from the ISO Groups as further described in Sections 2.11 and
5.01(e), except for iPayment or Purchaser's claims related to loss of
the ISO Merchants or revenue therefrom.
7.02 Indemnification by Purchaser and iPayment. Purchaser and iPayment, as
Indemnifying Party, shall indemnify, save and hold harmless each of
Bancard, Bank and AMS and their affiliates, successors and permitted
assigns, and each officer, director, employee or agent thereof, their
respective controlling persons, and their respective estates, successors,
and assigns (collectively, the "Bancard Indemnified Parties" and each an
"Indemnified Party"), harmless against and from any liability, demands,
claims, actions or causes of action, assessments, losses, fines,
penalties, costs, damages and expenses, including reasonable attorneys'
fees, disbursements and expenses (collectively, "Damages"), sustained or
incurred by any of the Bancard Indemnified Parties after the Closing Date
as a result of, arising out of or by virtue of any misrepresentation,
breach of any warranty or representation, or non-fulfillment of any
agreement or covenant that was to be fulfilled after the Closing Date, in
each case on the part of iPayment or Purchaser, whether contained in this
Agreement or any Exhibit or Schedule hereto or thereto or any written
statement or certificate furnished or to be furnished to Bancard, Bank or
AMS pursuant hereto or in any closing document or ancillary document
executed and delivered in connection with, or contemplated by, this
Agreement executed and delivered by iPayment or Purchaser to Bancard, Bank
or AMS in connection herewith. Such indemnification shall include without
limitation the following:
(a) the untruth, inaccuracy or breach of any representation or warranty
made by iPayment or Purchaser in this Agreement or any ancillary
document executed and delivered in connection with, or contemplated
by, this Agreement;
(b) the nonfulfillment or breach of any covenant, agreement or obligation
of iPayment or Purchaser contained in this Agreement or any ancillary
document (including the Interim Processing Agreement) executed and
delivered in connection with, or contemplated by, this Agreement;
(c) all Unfulfilled Chargebacks, liabilities and expenses relating to
transactions of the AMS Merchants occurring on or after January 1,
2002;
(d) all Unfulfilled Chargebacks, liabilities and expenses relating to
transactions of the ISO Merchants and the ODC/CardSync Merchants,
whether occurring on, before or after the Effective Date;
(e) any liability which was assumed by iPayment and Purchaser pursuant to
Section 1.02 of this Agreement; and
(f) any liability of iPayment or Purchaser arising out of the operation
of the Assets after the Effective Date.
7.03 Procedure for Indemnification - Non Third Party Claims. Whenever any claim
shall arise for indemnification hereunder not involving a Proceeding (as
hereinafter defined), the Indemnified Party shall notify the Indemnifying
Party promptly after such Indemnified Party has actual knowledge of the
facts constituting the basis for such claim. The notice to the
Indemnifying Party shall specify, if known, the amount or an estimate of
the amount of the liability arising therefrom.
7.04 Procedure for Indemnification - Third Party Claims.
(a) Promptly following the receipt by any Indemnified Party of written
notice of a demand, claim, action, assessment or proceeding made or
brought by a third party, including a governmental agency (a "Third
Party Claim") for which such person seeks indemnification, the
Indemnified Party receiving such notice of the Third Party Claim
shall promptly notify the Indemnifying Party, of its existence,
setting forth the facts and circumstances of which such Indemnified
Party has received notice, but the failure to notify the Indemnifying
Party will not relieve the Indemnifying Party of any liability that
it may have to the Indemnified Party, except to the extent that the
Indemnifying Party demonstrates that the defense of such action is
prejudiced by the Indemnified Party's failure to give such notice.
12
(b) The Indemnified Party shall tender the defense of a Third Party Claim
to the Indemnifying Party. If the Indemnifying Party accepts
responsibility for the defense of a Third Party Claim, then the
Indemnifying Party shall have the exclusive right to contest, defend
and litigate the Third Party Claim and shall have the exclusive
right, in its discretion exercised in good faith and upon the advice
of counsel, to settle any such matter, either before or after the
initiation of litigation, at such time and upon such terms as it
deems fair and reasonable, provided that at least ten days prior to
any such settlement, it shall give written notice of its intention to
settle to the Indemnified Party. The Indemnified Party shall have the
right to be represented by counsel at its own expense in any defense
conducted by the Indemnifying Party (but the Indemnifying Party will
control the defense of the Third Party Claim (if it has elected to do
so)).
(c) If, in accordance with the foregoing provisions of this Article, an
Indemnified Party shall be entitled to indemnification against a
Third Party Claim, and if the Indemnifying Party shall fail to accept
the defense of a Third Party Claim that has been tendered in
accordance with this Section, the Indemnified Party shall have the
right, without prejudice to its right of indemnification hereunder,
in its discretion exercised in good faith and upon the advice of
counsel, to contest, defend and litigate such Third Party Claim, and
may settle such Third Party Claim, either before or after the
initiation of litigation, at such time and upon such terms as the
Indemnified Party deems fair and reasonable, provided at least ten
days prior to any such settlement, written notice of its intention to
settle is given to the Indemnifying Party. If, pursuant to this
Section, the Indemnified Party so defends or settles a Third Party
Claim for which it is entitled to indemnification hereunder, as
hereinabove provided, the Indemnified Party shall be reimbursed or
otherwise indemnified by the Indemnifying Party for the reasonable
attorneys' fees and other expenses of defending the Third Party Claim
that are incurred from time to time, immediately following the
earlier of (i) the agreement of the Indemnified Party and the
Indemnifying Party that the Indemnifying Party is liable for such
Damages pursuant to this Article VII and (ii) the entry of a final
judgment of a court of competent jurisdiction determining that any
Damages exist and that the Indemnifying Party is liable for such
Damages pursuant to this Article VII. No failure by the Indemnifying
Party to acknowledge in writing its indemnification obligations under
this Article VII shall relieve it of such obligations to the extent
they exist.
(d) Notwithstanding the foregoing, in connection with any settlement
negotiated by the Indemnifying Party, no Indemnified Party shall be
required to (i) enter into any settlement (A) that does not include
the delivery by the claimant or plaintiff to the Indemnified Party of
a release from all liability in respect of such claim or litigation,
or (B) if the Indemnified Party shall, in writing to the Indemnifying
Party within the ten day period prior to such proposed settlement,
disapprove of such settlement proposal (which settlement proposal
will not be unreasonably disapproved) and desire to have the
Indemnifying Party tender the defense of such matter back to the
Indemnified Party, or (ii) consent to the entry of any judgment that
does not include a full dismissal of the litigation or proceeding
against the Indemnified Party with prejudice; provided, however, that
should the Indemnified Party disapprove of a settlement proposal
pursuant to clause (B) above, the Indemnified Party shall thereafter
have all of the responsibility for defending, contesting and settling
such Third Party Claim but shall not be entitled to indemnification
by the Indemnifying Party to the extent that, upon final resolution
of such Third Party Claim, the Indemnifying Party's liability to the
Indemnified Party but for this proviso exceeds what the Indemnifying
Party's liability to the Indemnified Party would have been if the
Indemnifying Party were permitted to settle such Third Party Claim in
the absence of the Indemnified Party exercising its right under
clause (B) above.
13
(e) Notwithstanding the foregoing, if an Indemnified Party determines in
good faith that there is a reasonable probability that a Third Party
Claim may adversely affect it or its affiliates other than as a
result of monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnified Party may, by
notice to the Indemnifying Party, assume the exclusive right to
defend, compromise or settle the Third Party Claim without the
Indemnifying Party's consent (which may not be unreasonably
withheld.) If the Indemnifying Party does not assume the defense of
any claim or litigation, any Indemnified Party may defend against
such claim or litigation in such manner as it may deem appropriate,
including, but not limited to, settling such claim or litigation,
after giving notice of the same to the Indemnifying Party, on such
terms as the Indemnified Party may deem appropriate. The Indemnifying
Party will promptly reimburse the Indemnified Party in accordance
with the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BANCARD
QUAD CITY BANCARD, INC.,
a Delaware corporation
By: ________________________________
Title: ________________________________
AMS
ALLIED MERCHANT SERVICES, INC.,
an Illinois corporation
By: ________________________________
Title: ________________________________
PURCHASER
QUADCITY ACQUISITION CORP.
a Delaware Corporation
By: ________________________________
Title: ________________________________
iPAYMENT
iPAYMENT, INC., a Delaware Corporation
By: ________________________________
Title ________________________________
14
PERSONAL GUARANTY
The undersigned, Greg Daily, being a principal in Purchaser
and iPayment, hereby assumes and personally guarantees, unconditionally and
without requirement of prior notice, demand, presentation or action against
Purchaser or iPayment, all agreements, obligations and undertakings of Purchaser
and/or iPayment owing under or pursuant to the foregoing Purchase and Sale
Agreement.
Dated this ____day of October, 2002.
-----------------------------------------
Greg Daily
15
EXHIBIT A
MERCHANT SOLICITATION AGREEMENTS
Various merchant application and agreement forms have been supplied to
iPayment/Purchaser, including:
(1) Trinity Payment Systems;
(2) Clarity Merchant Services, LLC;
(3) Rich Ryan;
(4) Student Advantage;
(5) Real Time Processing;
(6) Allied Merchant Services, LLC
(7) Card/Sync Processing, Inc.; and
(8) Online Data Corp.
16
EXHIBIT B
AMS MERCHANTS
List previously provided on CD Rom to Purchaser/iPayment.
17
EXHIBIT C
ISO GROUPS
(1) Trinity Payment Systems (written Merchant Broker Agreement previously
provided to Purchaser/iPayment);
(2) Clarity Merchant Services (no written agreement) (this entity is owned by
Bancard);
(3) Rich Ryan (no written agreement);
(4) Student Advantage (written Merchant Broker Agreement previously provided to
Purchaser/iPayment); and
(5) Real Time Processing (written Merchant Broker Agreement previously provided
to Purchaser/iPayment).
18
EXHIBIT D
ISO MERCHANT LIST
List previously provided on CD Rom to Purchaser/iPayment.
19
EXHIBIT E
ODC/CARDSYNC MERCHANTS
List previously provided on CD Rom to Purchaser/iPayment.
20
EXHIBIT F
VENDOR AGREEMENTS
(1) Nobel Electronic Transfer, LLC (written agreement provided to
Purchaser/iPayment).
21
SCHEDULE 1.01
LIST OF ASSETS
See attached depreciation schedule regarding AMS furnishings and
equipment.
22
SCHEDULE 1.02
ADDITIONAL LIABILITIES BEING ASSUMED BY PURCHASER/iPAYMENT
1. AMS Lease Agreement with Hammond Development Corporation for lease of real
estate in Hammond, Indiana (copy previously provided to
Purchaser/iPayment). (Requires monthly payment of $____________ and
contract expires on ________________.)
2. AMS copy machine lease with McShane's Business Products & Solutions/US
Bancorp Office Equipment Finance Services (copy previously provided to
Purchaser/iPayment). (Requires monthly payment of $____________ and
contract expires on ________________.)
23
SCHEDULE 1.03
RESERVES
Attached hereto.
(1) Merchants with Diverted Balances (closed less than 1year as of 10/8/02)
(List previously provided to Purchaser/iPayment.) Transactions, including
releases of reserves or changes to reserves, have occurred in the ordinary
course of business since 10/8/02.
(2) Merchants with Diverted Balances (closed longer than 1 year as of 10/8/02).
(List previously provided to Purchaser/iPayment.) Transactions, including
releases of reserves or changes to reserves, have occurred in the ordinary
course of business since 10/8/02.
24
SCHEDULE 1.06
LIENS
- - No lien or encumbrances.
- - The ISO Groups have certain claims to the ISO Merchants, all as set forth
in the merchant solicitation agreements with the respective ISO Group
members, as further described in Schedule 2.11 hereto.
25
SCHEDULE 2.03
REQUIRED CONSENTS
(1) Claims of ISO Group members to the respective ISO Merchants, as further
described in Schedules 1.06 and 2.11 hereof.
(2) Hammond, Indiana lease of AMS.
(3) AMS copy machine lease.
26
SCHEDULE 2.05
NO UNDISCLOSED LIABILITIES
AMS Merchants - In the ordinary course of business, there are
chargeoffs related to the AMS portfolio. In September, 2002, chargeoffs were
approximately $20,000. Prior months chargeoffs have been reported to
Purchaser/iPayment for January through August, 2002, as part of the monthly
settlement reports provided to Purchaser/iPayment.
ISO Merchants - In the ordinary course of business, there are
chargeoffs related to the ISO Group portfolios. Prior months chargeoffs have
been reported to the Purchaser/iPayment for January through August, 2002, as
part of the monthly settlement reports provided to Purchaser/iPayment.
27
SCHEDULE 2.06
EXISTING LITIGATION
1. Ticketsupfront Litigation - Ticketsupfront, a CardSync merchant, is
generating large chargebacks and resulting losses. Litigation for
declaratory judgment has been commenced in the Marion County Superior Court
(Indiana) entitled Joel Cohen vs. Quad City Bank & Trust Company, (Cause
No. 49D040209MI001591). Bank has tendered defense and indemnification
regarding the lawsuit to CardSync.
2. The Boardroom - The Boardroom, a CardSync merchant, has been shut down an
alleged prostitution establishment. Bank/Bancard have been subpoenaed for
information and testimony and have been investigated by Florida authorities
for alleged interference with an ongoing criminal investigation arising
from Bancard's report to CardSync and CardSync's report to the merchant of
the receipt of a criminal investigatory subpoena.
3. One Cent Authorization - Several ODC Merchants, both approved and
unapproved, ran approximately one million one cent authorizations through
Vital as part of a possible credit card fraud scheme. Possible
MasterCard/Visa fines and penalties may result which will be the obligation
of ODC.
28
SCHEDULE 2.07
The Seller Portfolio information has been previously provided to
Purchaser/iPayment in CD Rom format.
The August, 2002 Nobel/ISO Settlement reports have also been previously
provided to Purchaser/iPayment, and additional copies thereof are attached
hereto.
29
SCHEDULE 2.11
DISCLOSURES REGARDING OWNERSHIP AND PORTABILITY
ISO Groups Rights to ISO Merchants
Pursuant to Section 10(B) of Merchant Broker Agreements with Student
Advantage, Inc. and Trinity Payment Services, those ISO's retain 100% ownership
in their Merchants. Also, Section 11 of such Merchant Broker Agreement restricts
assignment by either party. In this case, since Bancard is selling substantially
all of its assets, the assignment is allowed, so long as Purchaser/iPayment
assumes the obligations and the other requirements of Section 11 are met.
There is no written agreement with Rich Ryan, but Ryan and Bancard
understand and previously orally agreed, that Ryan has the same rights to
Merchants as Student Advantage, Inc. and Trinity Payment Services.
Real Time Processing, Inc.'s Merchant Broker Agreement with Bancard
expired in October, 2002 and ODC has previously purchased Real Time's portfolio.
Hence, we believe ODC controls Real Time's Merchants.
AMS Sales Centers and Agents
AMS has entered into various Sales Center Agreements and Sale
Representative Agreements, copies of which have previously been provided to
Purchaser/iPayment. A list of the outstanding Sales Center and Sales
Representative Agreements is attached hereto. The Sale Centers and
Representatives retain residuals as provided in those various agreements. Also,
the Sale Centers have the right to require AMS to purchase in a lump sum the
Sales Center's residuals in the AMS Merchants pursuant to formula set forth in
Exhibit C of the Sales Center Agreements. Purchaser/iPayment are assuming the
obligations regarding residuals and lump sum payouts to the AMS Sales Centers
and AMS Sales Representatives.
30
SCHEDULE 5.01(d)
LIST OF CREDITORS
None; there are no security interests held by creditors.
31
EXHIBIT 5.03
INTERIM PROCESSING AGREEMENT
Copy attached.
32