EXHIBIT 10.1
EXECUTION COPY
JOINT VENTURE FORMATION AGREEMENT
BY AND AMONG
NATIONSBANK N.A. (CAROLINAS),
NATIONSBANK OF FLORIDA, N.A., AND
NATIONAL BANCARD CORPORATION,
AND JOINED IN BY NATIONSBANK CORPORATION
AND FIRST FINANCIAL MANAGEMENT CORPORATION
April 2, 1995
TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS................................................... 2
1.1 Definitions.................................................... 2
ARTICLE 2: PURCHASE OF BUSINESS AND ASSETS............................... 10
2.1 Purchase of Business from Selling Banks........................ 10
2.2 Purchase of Terminal Rental Agreements......................... 11
2.3 Purchase of TMS and Certain Fixed Assets....................... 12
2.4 Price.......................................................... 12
ARTICLE 3: FORMATION OF THE PARTNERSHIP.................................. 13
3.1 Purpose of the Joint Venture................................... 13
3.2 Formation of the Partnership................................... 13
3.3 Business of the Partnership.................................... 13
3.4 Capital Contributions.......................................... 13
3.5 Contract Ownership............................................. 16
3.6 Indemnified Contracts.......................................... 17
3.7 Assumption of Certain Liabilities.............................. 19
3.8 Management of the Partnership.................................. 20
(a) Powers.................................................. 20
(b) Composition............................................. 20
(c) Resignations............................................ 20
(d) Vacancies............................................... 20
(e) Meetings................................................ 20
(f) Procedure............................................... 21
(g) Voting, Quorum and Action; Major Decisions............. 21
(h) Matters Reserved for the NB Sub......................... 21
(i) Veto Rights............................................. 22
(j) Special NB Sub Veto Rights.............................. 22
3.9 President and Controller....................................... 23
3.10 Name and Trademark............................................. 23
ARTICLE 4: INFORMATION AND SERVICES...................................... 23
4.1 Processing Information......................................... 24
4.2 Banking Services............................................... 24
4.3 NaBANCO Services............................................... 24
4.4 Pricing of Services............................................ 24
4.5 Card Activity.................................................. 26
4.6 Business Plan.................................................. 27
ARTICLE 5: EXCLUSIVITY AND TERRITORIES................................... 27
5.1 Exclusivity - Partnership Territory............................ 27
5.2 Exceptions from Exclusivity.................................... 28
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5.3 NaBANCO Sales.................................................. 28
5.4 National Merchants............................................. 29
5.5 Exclusivity-Expansion Territory................................ 30
5.6 Acquired Business.............................................. 33
ARTICLE 6: TERMINATION................................................... 34
6.1 Termination Events............................................. 34
6.2 Termination Notice............................................. 35
6.3 Additional Rights of Termination............................... 35
6.4 Effect on Capital Contribution Obligations..................... 37
ARTICLE 7: LIQUIDATION................................................... 37
7.1 Rights on Termination.......................................... 37
7.2 Partnership Liquidation........................................ 38
7.3 Non-Compete Covenant........................................... 40
7.4 On-Going Services.............................................. 40
7.5 Early Liquidation.............................................. 41
7.6 Termination Fee................................................ 41
ARTICLE 8: CASH ADVANCES................................................. 41
8.1 Purchase of Cash Advance Fees.................................. 41
8.2 Cash Advance Services.......................................... 42
8.3 Purchase Price Refund.......................................... 43
8.4 Purchase of Cash Advance Revenues by a NaBANCO Group Member.... 43
ARTICLE 9: NORFOLK; EMPLOYEES; BINs AND ICAs; OTHER MATTERS.............. 44
9.1 NB Group Merchant Operation and Conversion Expenses............ 44
9.2 Employees...................................................... 45
(a) Identification............................................ 45
(b) Severance Pay............................................. 45
(c) Benefits.................................................. 46
9.3 Transition Arrangements........................................ 47
9.4 NationsBank's BINs and ICAs.................................... 47
9.5 Payment System Indemnity....................................... 48
9.6 Special Fee.................................................... 48
ARTICLE 10: CLOSING....................................................... 48
10.1 Closing........................................................ 48
ARTICLE 11: REPRESENTATIONS AND WARRANTIES............................... 49
11.1 Representations and Warranties of NaBANCO...................... 49
(a) Corporate Organization.................................... 49
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(b) Capacity; Authorization................................... 49
(c) No Brokers................................................ 49
(d) No Violation.............................................. 49
(e) Regulatory Applications................................... 50
(f) Financial Information..................................... 50
11.2 Representations and Warranties of the Banks.................... 50
(a) Corporate Organization.................................... 50
(b) Capacity; Authorization................................... 50
(c) No Brokers................................................ 51
(d) No Violation.............................................. 51
(e) Regulatory Applications................................... 51
(f) Financial Information..................................... 51
ARTICLE 12: ADDITIONAL COVENANTS.......................................... 52
12.1 Regulatory and Other Approvals................................. 52
(a) Pursuit of Required Approvals............................. 52
(b) Cooperation............................................... 53
(c) Regulatory Applications................................... 53
12.2 Publicity...................................................... 53
12.3 Confidentiality................................................ 53
(a) Disclosure Limitation..................................... 53
(b) Confidentiality After Termination......................... 54
(c) Partnership Affected...................................... 54
(d) Survival.................................................. 54
12.4 Gain Recognition Election...................................... 54
ARTICLE 13: CONDITIONS PRECEDENT TO CLOSING............................... 54
13.1 Mutual Conditions to Obligation to
Close.......................................................... 54
(a) No Violations of Law, Litigation, Etc..................... 55
(b) Approvals................................................. 55
13.2 Additional Conditions to
Obligations of the NaBANCO Parties............................. 55
(a) Representations and Warranties, Etc....................... 55
(b) Authorization, Execution and
Delivery of Documents.......................................... 56
13.3 Additional Conditions to Obligations of the NB Parties......... 56
(a) Representations and Warranties, Etc....................... 56
(b) Authorization, Execution, and Delivery of Documents....... 56
ARTICLE 14: MISCELLANEOUS PROVISIONS..................................... 57
14.1 Notices........................................................ 57
14.2 No Agency...................................................... 58
14.3 Severability................................................... 59
14.4 Entire Agreement............................................... 59
14.5 Drafting Responsibility........................................ 59
14.6 Assignment and Succession; Assignments in Violation Void....... 59
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14.7 Expenses of Transaction........................................ 60
14.8 Waivers; Consents.............................................. 60
14.9 Further Assurances............................................. 60
14.10 Absence of Third-Party Beneficiaries........................... 60
14.11 Governing Law.................................................. 61
14.12 Alternative Dispute Resolution................................. 61
14.13 Counterparts................................................... 63
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LIST OF SCHEDULES
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Schedule 3.4A Summary of Capitalization Plan
Schedule 3.4B Pro Forma
Schedule 4.4 Included Services
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JOINT VENTURE FORMATION AGREEMENT
THIS JOINT VENTURE FORMATION AGREEMENT is entered into this 2nd day of
April 1995, effective as of March 31, 1995, by and among NationsBank N.A.
(Carolinas), NationsBank of Florida, N.A., both national banking associations
(jointly and severally, the "Banks"), and National Bancard Corporation, a
Florida corporation ("NaBANCO"). In addition, NationsBank Corporation, a North
Carolina corporation ("NationsBank") that indirectly owns the Banks and directly
or indirectly owns all of the Banks' Affiliates, and First Financial Management
Corporation, a Georgia corporation ("FFMC") that owns NaBANCO and directly or
indirectly owns all of NaBANCO's Affiliates, join in this Agreement for the
purposes provided herein.
R E C I T A L S
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A. The "NB Group" and the "NaBANCO Group" (as defined below) wish to
create a joint venture arrangement (the "Joint Venture") which will establish
the partnership described below (the "Partnership") and will engage in other
cooperative efforts.
B. The Partnership will be formed as a general partnership under
Georgia law. The sole general partners of the Partnership will be NationsBank
Merchant Services, a wholly-owned indirect subsidiary of the Banks which is a
North Carolina partnership (the "NB Sub"), and NaBANCO Georgia, Inc., a wholly-
owned subsidiary of NaBANCO which is a Georgia corporation (the "NaBANCO Sub")
(the NB Sub and the NaBANCO Sub being collectively referred to as the
"Partners"). The Partnership will conduct the business of the Joint Venture
utilizing the personnel, customer contracts and other assets and services to be
contributed by the Partners and provided by their Affiliates pursuant to this JV
Agreement, the Partnership Agreement and certain other agreements described more
fully herein.
C. FFMC and NationsBank are joining in this JV Agreement for
purposes of agreeing that the NaBANCO Group and the NB Group, respectively, will
comply with all of the provisions of this JV Agreement, will enter into the
"Related Agreements" (as defined below) as applicable and will comply with all
of the applicable provisions of the Related Agreements.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the Banks, NaBANCO, NationsBank and FFMC agree as follows:
A G R E E M E N T
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ARTICLE 1: DEFINITIONS
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1.1 Definitions.
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For the purpose of this JV Agreement, the following definitions, whether in
the singular or in the plural, shall apply:
"Acquired Business" shall mean any Merchant Processing Business acquired by
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a Group member subsequent to the formation of the Partnership, if, but only
to the extent that, Merchant Processing Services are thereby provided to
Regional Merchants (other than Excepted Merchants in the case of a NaBANCO
Group Acquired Business) located within the Partnership Territory.
"Acquired Portfolio Purchase Price" shall mean, unless otherwise agreed to
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by the parties, a price equal to: 1.75 times the Annual Gross Profit if
the portfolio is purchased from a NB Group member; or the higher of (i)
1.75 times the Annual Gross Profit or (ii) the price (based on a multiple
of Annual Gross Profit) paid by the NaBANCO Group member for any such
portfolio if the portfolio is purchased from a NaBANCO Group member within
twelve months after it was purchased by the NaBANCO Group member; plus, in
each case one times terminal net rental income and net book value of
terminals and similar fixed assets, in each case based on the Regional
Merchants (other than Excepted Merchants in the case of a NaBANCO Group
Acquired Business) included in the portfolio purchased and located within
the Partnership Territory. The Annual Gross Profit and terminal net rental
income shall be computed using the same methodology set forth in Section
3.4(e), an agreed upon twelve-month period and the applicable merchant's
available operating history with the seller from which the acquiring Group
Member acquired the Acquired Business. For purposes of calculating the
Acquired Portfolio Purchase Price, Annual Gross Profit shall include
authorization fees received from merchants, net of related authorization
costs paid to third parties.
"Affected NB Employees" shall have the meaning set forth in Section 9.2(c).
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"Affiliate" of a Person shall mean another Person that directly, or
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indirectly through one or more intermediaries, Controls, or is Controlled
by, or is under common Control with, such Person.
"Agreed Value" shall have the meaning set forth in Section 3.4(d).
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"Agreement" shall mean with respect to any Person any contract, agreement,
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arrangement, commitment, lease, license, note, bond, indenture, mortgage,
deed of trust, lien, instrument or other understanding, whether written or
oral, to which such
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Person is a party or by which its properties or assets may be subject or
affected or under which it or its business, properties or assets receive
benefits.
"Annual Gross Profit" shall mean the gross revenue from the provision of
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Merchant Processing Services minus assessments, interchange fees, equipment
sales and rental revenue, and authorization fees associated with the
applicable Merchant Processing Business for a twelve-month period to be
determined by the parties, which period shall not end earlier than three
months preceding the date of the transfer; provided, however, that for
purposes of Section 7.2 only, such term shall include, rather than exclude,
the net equipment rental revenue from each applicable merchant. For
purposes of Sections 7.1 and 7.2 only, Annual Gross Profit shall include
authorization fees received from merchants, net of related authorization
costs paid to third parties. Annual Gross Profit shall not include manual
cash disbursement reimbursement fees (cash advances).
"Applicable Law" shall mean with respect to any party any federal, state,
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local or foreign statute, law, ordinance, rule, regulation, order,
administrative interpretation, writ, injunction, directive, judgment,
decree or other requirement of any Governmental Authority applicable to
such party or to its business, properties or assets.
"Approvals" shall mean all approvals, consents, authorizations and similar
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actions that are necessary or required by any Governmental Authority, any
Card Association, or any other Person, in order to consummate the
transactions contemplated hereunder or under any of the Related Agreements.
"Asset Purchase Agreement" shall mean that certain Asset Purchase Agreement
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to be entered into by and among certain members of the NaBANCO Group and
certain members of the NB Group as provided in Article 2 of this Agreement,
which, in addition to providing for the purchase of certain assets by
members of the NaBANCO Group from the NB Group, shall also contain mutual
representations, warranties and indemnities (subject to mutually agreed
upon differences) from the NaBANCO Group and the NB Group with respect to
the assets each will contribute to the Partnership (excluding the assets
purchased by the NaBANCO Group from the NB Group in the case of the
representations, warranties and indemnities from the NaBANCO Group, and
including such assets in those given by the NB Group).
"Bankcard Merchant Processing Services" shall have the meaning set forth
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under the definition of "Merchant Processing Business."
"Capitalization Plan" shall have the meaning set forth in Section 3.4(a).
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"Card Associations" shall mean Visa U.S.A., Visa International, MasterCard
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International, Interlink, Maestro and any other association or card issuer
having
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proprietary rights to and clearing and oversight responsibilities with
respect to any credit or debit card used to effect transactions processed
hereunder and shall also include any debit card network utilized to
authorize or settle any debit card used to effect transactions processed
hereunder and pursuant to the Sponsorship and Services Agreement.
"Card Association Rules" shall mean the by-laws, rules, regulations, orders
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and interpretations issued by the respective Card Associations applicable
to the performance of Merchant Processing Services and related matters, as
amended from time to time by the respective Card Associations.
"Cash Advance Fees" shall have the meaning set forth in Section 8.1.
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"Cash Advances" shall have the meaning set forth in Section 8.1.
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"Closing" shall have the meaning set forth in Section 10.1.
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"Closing Date" shall have the meaning set forth in Section 10.1.
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"Control" or "Controlled" shall mean the ability of any Person, directly or
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indirectly, to direct or cause the direction of the management or policies
of a Person, whether through ownership of voting securities, by contract or
otherwise.
"Dispute" shall mean any dispute arising out of or relating to this JV
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Agreement, a breach hereof, or the transactions contemplated hereby,
including any claim based on or arising from an alleged tort.
"Effective Date" shall have the meaning set forth in Section 10.1.
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"Excepted Merchant" shall mean:
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(a) In the Initial Territory, existing NaBANCO merchants not contributed
to the Partnership at formation and, in any Expansion Territory, then
existing NaBANCO Merchants not purchased or contributed to the
Partnership in accordance with the provisions of Sections 5.5 and 5.6
hereof.
(b) MOTO Merchants except Permitted MOTO Merchants, provided, however,
that for purposes of exclusive rights of the Partnership to provide
services hereunder, business to business Permitted MOTO Merchants
shall not be restricted.
(c) NaBANCO merchants referred to NaBANCO by the Discover Card sales
force.
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(d) Any TeleCheck customer for which NaBANCO is providing the Merchant
Processing Business in the Initial Territory as of the Closing Date or
in any Expansion Territory at the time such territory becomes a
Partnership Territory.
(e) Any Regional Merchant to which NaBANCO (or any subsidiary of NaBANCO
which may be used to conduct any portion of NaBANCO's Merchant
Processing Business) provides Merchant Processing Services in
conjunction with services provided by any NaBANCO Affiliate so long
as: (i) such Merchant Processing Business is ancillary to such
Affiliate's primary business; (ii) the NaBANCO Sub has notified the NB
Sub of such services in the Initial and Expansion Territory, and (iii)
either (x) the total annualized bankcard volume sold in a calendar
year by all such Affiliates in the aggregate within the Partnership
Territory to merchants who are not otherwise Excluded Merchants does
not exceed nine percent (9%) of the bankcard volume processed by the
Partnership in the Partnership Territory in the preceding calendar
year or (y) NaBANCO takes appropriate steps to produce the same
economic results to the NB Sub as if any portion of such annualized
bankcard volume in excess of such nine percent (9%) limit had been
generated directly by the Partnership.
(f) Merchants that would ordinarily be Partnership merchants but that are
independent "sub-merchants" of an entity, the primary business of
which is not the Bankcard Merchant Processing Business, acquired by
any NaBANCO Group member. For example, Western Union Financial
Services, Inc. ("FSI") would be a National Merchant if NaBANCO were
providing the Merchant Processing Business to FSI. Now that NaBANCO
owns FSI, the individual Western Union agents are, or may be seen as
being "merchants." Notwithstanding the fact that such "merchants"
may well have annual sales volumes of under $100 million, they will
not be Partnership merchants.
"Excluded Merchants" shall mean in the Target Market, the Initial Territory
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and any Expansion Territory:
(a) National Merchants; and
(b) The United States Postal Service.
"Expansion Territory" shall mean any of the lower 48 states of the United
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States of America which is not already a Partnership Territory at the
applicable time.
"Expansion Territory Portfolio Purchase Price" shall mean, unless otherwise
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agreed to by the parties, 1.75 times the Annual Gross Profit of the
portfolios to be purchased from an NB Group member; or the higher of (i)
1.75 times the Annual Gross Profit
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or (ii) the price (based on a multiple of Annual Gross Profit) paid by a
NaBANCO Group member for any such portfolio if the portfolio is purchased
from a NaBANCO Group member within twelve months after it was purchased by
the NaBANCO Group member; plus, in each case one times terminal net rental
income and net book value of terminals and similar fixed assets, in each
case based on the Regional Merchants (other than Excepted Merchants in the
case of a portfolio acquired from a NaBANCO Group member) in the applicable
portfolio and located within the Expansion Territory. The Annual Gross
Profit and terminal net rental income shall be computed using the same
methodology set forth in Section 3.4(e) and an agreed upon twelve-month
period. For purposes of calculating the Expansion Territory Portfolio
Purchase Price, Annual Gross Profit shall include authorization fees
received from merchants, net of related authorization costs paid to third
parties.
"FFB" shall mean First Financial Bank.
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"FFMC" shall mean First Financial Management Corporation.
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"Flagrant Breach" shall have the meaning set forth in Section 6.3(d).
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"Governmental Authority" shall mean any federal, state, local or foreign
----------------------
governmental authority, quasi-governmental authority, court, government or
self-regulatory organization, commission, tribunal, organization or any
regulatory, administrative or other agency, or any political or other
subdivision, department or branch of any of the foregoing, but shall not
include a Card Association.
"Group" shall mean either the NaBANCO Group or the NB Group, as the context
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shall require.
"Initial Territory" shall mean the District of Columbia, the States of
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Alabama, Florida, Georgia, Louisiana, Maryland, Mississippi, North
Carolina, South Carolina, Tennessee and Texas, and the Commonwealth of
Virginia.
"Joint Venture" shall mean the arrangements agreed to in this JV Agreement.
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"Joint Venture Term" shall mean the period commencing as of the date of
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execution of this JV Agreement and continuing until this JV Agreement is
terminated in accordance with the provisions of Article 6.
"JV Agreement" shall mean this Joint Venture Formation Agreement.
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"Merchant Processing Business" for all purposes shall mean the business of
----------------------------
providing to merchants (directly or through others) authorization, data
capture, processing, settlement and chargeback services with respect to
transactions (other than those involving Cash Advances) involving credit
and debit cards issued by members of, and
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bearing the brands of, Visa U.S.A., Inc., Visa International (collectively
"Visa"), MasterCard International Incorporated ("MasterCard"), Maestro and
Interlink. Such services are referred to as "Bankcard Merchant Processing
Services." For purposes of defining the services that may be provided to
merchants that receive Bankcard Merchant Processing Services (but not for
purposes of any provision herein dealing with any exclusive rights of the
Partnership to provide services or acquire any business from or restrict
any business activities of the Banks, NaBANCO, the Partners or any of their
respective Affiliates), Merchant Processing Business shall also mean the
business of providing certain authorization, data capture and processing
services with respect to transactions involving credit cards issued by
Diners Club/Carte Blanche, American Express, Discover Card, Japanese Credit
Bureau and such other cards as the parties may mutually agree and certain
related services and products.
"Merchant Processing Services" shall mean all bankcard and other services
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and related products described above as being provided to merchants as part
of the Merchant Processing Business. The term Merchant Processing Services
as used herein shall not include any card issuing activities or services
therefor.
"Merchant Service Contracts" shall have the meaning set forth in Section
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3.4(b)(i).
"MOTO Merchant" shall mean any merchant classified by Visa, U.S.A. as a
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Direct Marketing merchant (or an equivalent classification comparable to
the current definition) and assigned a Direct Marketing MCC code (or an
equivalent code). The MCC codes currently included in this classification
are: 5960 - Direct Marketing Insurance Services; 5962 - Direct Marketing
Travel Related Arrangement Services; 5964 - Catalog Merchant; 5965 -
Combination Catalog and Retail Merchant; 5966 -Outbound Telemarketing
Merchant; 5967 - Inbound Teleservices Merchant; 5968 -
Continuity/Subscription Merchant; 5969 - Other Direct Marketers (not
elsewhere classified).
"NaBANCO Group" shall mean NaBANCO, the NaBANCO Sub, FFMC and all
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Affiliates of FFMC.
"NaBANCO Non-Sales Employees" shall mean employees of the NaBANCO Group in
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its Merchant Processing Business who are not sales personnel.
"NaBANCO Parties" shall mean NaBANCO, the NaBANCO Sub and any Affiliate of
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NaBANCO which is a party to this JV Agreement or a Related Agreement.
"NaBANCO Sales Employees" shall mean employees of NaBANCO and its
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subsidiaries who are employed within the Initial Territory as sales
personnel for the Merchant Processing Business of NaBANCO and its
subsidiaries prior to the formation of the Partnership.
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"National Merchant" shall mean a merchant with total annual gross sales
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greater than $100 million (adjusted to increase by the Consumer Price Index
each year, but in no event greater than $10 million per year); however, the
Partners, by mutual consent, may adjust the definition.
"NB Banks" shall mean the Selling Banks and NationsBank N.A. (Carolinas).
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"NB Group" shall mean the Banks, the NB Sub, NationsBank Corporation and
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all Affiliates of NationsBank Corporation.
"NB Non-Sales Employees" shall mean employees of the NB Group in its
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Merchant Processing Business who are not sales personnel.
"NB Parties" shall mean the Banks, the NB Sub or any Affiliate of the Banks
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which is a party to this JV Agreement or a Related Agreement.
"NB Sales Employees" shall mean employees of the NB Group in its Merchant
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Processing Business who are employed as sales personnel for the NB Group
prior to the formation of the Partnership.
"Partner(s)" shall mean the NB Sub and the NaBANCO Sub in their capacities
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as general partners of the Partnership and any successors to either of
them, all as the context requires.
"Partnership" shall mean that general partnership to be formed by the
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NaBANCO Sub and the NB Sub.
"Partnership Agreement" shall mean that certain general partnership
---------------------
agreement, as agreed to before Closing and as it may be amended from time
to time, pursuant to which the NaBANCO Sub and the NB Sub shall form and
operate the Partnership.
"Partnership Interest" shall mean a Partner's right, title and interest in
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and to any assets, Distributions, Losses, Profits and shares of the
Partnership, whether cash or otherwise, and any other interest or economic
incidents of ownership whatsoever of such Partner in the Partnership.
Capitalized terms in this definition are to be used as defined in the
Partnership Agreement.
"Partnership Territory" shall mean the Initial Territory, and if and when
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the Partnership expands into an Expansion Territory, that Expansion
Territory expanded into.
"Permitted MOTO Merchant" shall mean any MOTO Merchant which is contributed
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to the Partnership by NationsBank at Partnership formation, is referred to
the Partnership through an NB Group Member, is a business to business
(purchasing
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card) merchant or is a merchant referred to the Partnership by another
Partnership merchant, so long as such referrals are incidental to other
business relations between the NB Group and the merchant, and any MOTO
Merchant in an Acquired Business or in an Expansion Territory which is
purchased by or contributed to the Partnership by any member of the NB
Group.
"Person" shall include any individual, partnership, joint venture,
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corporation, trust or unincorporated organization and any other business
entity, in each case whether acting in an individual, fiduciary or other
capacity.
"Proprietary Information" of any Person shall mean any trade secrets, know-
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how, data, formulae, processes, customer lists, marketing information,
intellectual property or other information, tangible or intangible, owned
by, relating to or used in the business of such Person.
"Purchased Contracts" shall have the meaning as defined in Section
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3.4(b)(i).
"Regional Merchant" shall mean (i) a merchant, except for an Excluded
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Merchant, with annual gross sales of up to and including $100 million
(adjusted to increase by the Consumer Price Index each year, but in no
event greater than $10 million per year), (ii) state and local government
business in the Partnership Territory (regardless of size), and (iii) all
United States Government business other than the United States Postal
Service; however, the Partners, by mutual consent, may adjust the
definition. A Regional Merchant will not include any merchant defined as
an Excluded Merchant. A Regional Merchant that is a Partnership merchant
shall not cease to be a Partnership merchant if its sales subsequently
exceed the then existing volume used for determining a National Merchant.
However, a Regional Merchant that is acquired by another merchant in a
merger or acquisition transaction shall no longer be a Regional Merchant if
the combined sales of the resulting merchant that is the party to the
merchant contract exceeds the then existing volume used for determining a
National Merchant.
"Regional Merchant Processing Business" shall mean the Merchant Processing
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Business offered to a Regional Merchant.
"Related Agreements" shall mean the Partnership Agreement, the Asset
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Purchase Agreement, the Services Agreements and all other written
agreements entered into in connection with the transactions contemplated by
this JV Agreement, as the same may be amended from time to time.
"Selling Banks" shall mean NationsBank of Florida, N.A., NationsBank of
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Georgia, N.A.; NationsBank of Tennessee, N.A.; NationsBank of Texas, N.A.,
NationsBank N.A. and NationsBank of Kentucky, N.A.
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"Services Agreements" shall mean the agreements pursuant to which specified
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NaBANCO Parties and NB Parties, respectively, will furnish services to the
Partnership and shall include the Sponsorship and Services Agreement.
"Sharing Percentage" shall have the meaning as defined in Section 3.3 of
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the Partnership Agreement and shall be 80% for the NaBANCO Sub and 20% for
the NB Sub initially and at all times unless the Partners mutually agree to
change such percentages and by amendment make all conforming changes
necessary to this JV Agreement and the Related Agreements.
"Significant Financial Institution" shall mean any of the top 50 United
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States bank holding companies and/or Affiliates in asset holdings.
"Sponsorship and Services Agreement" shall mean the agreement to be entered
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into at the Closing contemplated by this JV Agreement pursuant to which
specified NaBANCO Parties and specified NB Parties will authorize one
another to act on their behalf in performing certain aspects of the
Merchant Processing Business on behalf of the Partnership and specified
NaBANCO Parties and specified NB Parties will furnish services to the
Partnership or to the NB Banks in the case of Cash Advances.
"Target Market" shall mean Regional Merchants which may have need of the
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Merchant Processing Business offered by the Partnership in the Partnership
Territory.
"Transaction" shall mean a sale or credit transaction processed through
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NaBANCO on behalf of the Partnership. The definition specifically excludes
any other type of transactions, such as Cash Advances.
ARTICLE 2: PURCHASE OF BUSINESS AND ASSETS.
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2.1 Purchase of Business from Selling Banks.
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On the Closing Date, NaBANCO and FFB jointly shall purchase or shall
cause a NaBANCO Party to purchase from the Selling Banks, and the
Banks shall cause the Selling Banks to sell to a NaBANCO Party, those
Merchant Service Contracts (including economic interests) determined
as follows: (A) all such contracts owned by NationsBank, N.A.,
NationsBank of Georgia, N.A., NationsBank of Kentucky, N.A.,
NationsBank of Tennessee, N.A. and NationsBank of Texas, N.A.; and (B)
a portion of such contracts owned by NationsBank of Florida, N.A.
("NationsBank Florida"), determined as provided below. Those
contracts of NationsBank Florida that will be sold to a NaBANCO Party,
rather than being contributed by NationsBank Florida through the NB
Sub to the Partnership, shall be determined as follows:
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(a) An estimated value of all of the Merchant Service Contracts owned
by the NB Banks shall be calculated by multiplying two times the
Annual Gross Profit attributable to such contracts, based on
actual results of the NB Banks for the twelve-month period ending
February 28, 1995.
(b) It shall be assumed for purposes of estimating the price that the
economic rights and obligations to Merchant Service Contracts
currently owned by NaBANCO and FFB that will be contributed to
the Partnership will have Annual Gross Profit (based on actual
results for the twelve-month period ending February 28, 1995), of
$14,878,000 and thus will have an estimated value of two times
such amount, or $29,756,000.
(c) An estimated value for the terminal rental agreements with all
Regional Merchants of the NB Banks and with all current NaBANCO
and FFB Regional Merchants that are parties to those Merchant
Service Contracts, the economic rights and obligations of which
will be contributed to the Partnership, will be determined by
multiplying one times the actual terminal net rental income
received during the twelve-month period ending February 28, 1995
equal to $2,795,000 for terminal rental agreement with Regional
Merchants of the NB Banks and $1,644,000 for terminal rental
agreements of NaBANCO/FFB Regional Merchants to be contributed to
the Partnership, for a total of $4,439,000.
(d) The estimated values determined pursuant to subparagraphs (a)
through (c) will be added together and then multiplied by 20%.
NationsBank Florida will retain (and then contribute to the
Partnership through the NB Sub) a sufficient number of its
Merchant Service Contracts which, when added to the Merchant
Service Contracts owned by NationsBank, N.A. (Carolinas) will
have an estimated value equal to 20% of the sum of the estimated
values determined pursuant to subparagraphs (a) through (c).
NationsBank Florida will sell the balance of its Merchant Service
Contracts to FFB and NaBANCO.
2.2 Purchase of Terminal Rental Agreements.
--------------------------------------
On the Closing Date, a NaBANCO Group member will purchase from the NB
Group member(s) the terminal rental agreements associated with the NB
Group Merchant Processing Business and assume all liabilities related
to such terminal rental agreements and for equipment which is
subleased to merchants, to the extent those liabilities relate to or
arise from actions, omissions, or events that take place after
Closing.
11
2.3 Purchase of TMS and Certain Fixed Assets.
----------------------------------------
On the Closing Date, the proper NB Group member(s) and NaBANCO Group
member(s) shall sell, and the Partnership shall buy:
(a) all of the stock of Terminal Management Systems, Inc. (after
giving effect to the transfers of assets contemplated by Section
3.4(b)(v)(A)) and
(b) certain fixed assets used by the NaBANCO Group in providing
Merchant Processing Services to the merchants whose terminal
rental agreements will be contributed to the Partnership.
All assets remaining in TMS (primarily terminals) and all fixed assets
to be sold by the NaBANCO Group shall be specified by type and
specific location on a schedule to the Asset Purchase Agreement. The
purchase price of the stock of TMS and the purchase price of the fixed
assets to be sold by the NaBANCO Sub shall be based on net book value
(after depreciation) of the fixed assets shown on such schedule.
The NB Group shall indemnify and hold harmless the Partnership and the
NaBANCO Group for all liabilities, losses and expenses incurred as a
result of the purchase of the stock of TMS by the Partnership and any
assumption by the Partnership of such subsidiary's liabilities that
would not have been incurred by the Partnership or the NaBANCO Group
if the Partnership had merely purchased the TMS fixed assets scheduled
in the Asset Purchase Agreement rather than the stock of TMS.
The NB Group will prepare and file all tax returns with respect to TMS
for periods ending on or prior to the Closing Date. The NaBANCO Group
hereby agrees that it will use reasonable efforts to consult with the
NB Group relating to any tax or audit issue impacting TMS with respect
to a period after the Closing Date and will, to the extent consistent
with positions taken by the NaBANCO Group, not make any election or
take any position with respect to a tax or audit issue relating to a
period after the Closing Date that would materially and negatively
impact the NB Group based on a position or election taken by the NB
Group with respect to TMS for any tax period ending on or prior to the
Closing Date.
2.4 Price.
-----
For purposes only of the sale to the Partnership pursuant to this
Article 2 (and all applicable reporting with respect to such sale),
the initial price for the purchase and assumption of assets and
liabilities set forth in Sections 2.1 and
12
2.2, shall be equal to the estimated value of such assets determined
pursuant to Sections 2.1 and 2.2 plus $3.2 million, but the Asset
Purchase Agreement shall provide for a post-Closing purchase price
adjustment within 60 days based on the sum of: (a) the Agreed Value
of such assets computed in accordance with Section 3.4 and (b) $3.2
million.
ARTICLE 3: FORMATION OF THE PARTNERSHIP
- ----------------------------------------
3.1 Purpose of the Joint Venture.
----------------------------
The Banks and NaBANCO agree to form the Joint Venture relationship, on
the terms and conditions set forth herein. The Banks and NaBANCO
shall effect the Joint Venture through the Partnership, which will be
operated in accordance with the terms of this JV Agreement, the
Partnership Agreement, and the other Related Agreements.
3.2 Formation of the Partnership.
----------------------------
On the Closing Date, the Banks and NaBANCO will cause the NB Sub and
the NaBANCO Sub, respectively, to execute and deliver the Partnership
Agreement and thereby form the Partnership in accordance with the
terms thereof.
3.3 Business of the Partnership.
---------------------------
The Partnership shall conduct Merchant Processing Business for those
merchants who are contributed by the Partners as initial capital
contributions and any merchants subsequently contributed to or
purchased by the Partnership, and shall solicit and serve new
customers in the Target Market.
3.4 Capital Contributions.
---------------------
(a) The Partnership will be initially capitalized pursuant to a plan
of capitalization under which the NaBANCO Sub will contribute
capital having an Agreed Value equal to 80% of the total value of
all Partnership capital and the NB Sub will contribute capital
having an Agreed Value equal to 20% of the total value of all
Partnership capital (the "Capitalization Plan"). Such
Capitalization Plan, as more fully described below, shall include
(i) the contribution by the NaBANCO Sub of certain assets
purchased from the Banks, certain NaBANCO assets, and agreed-upon
amounts of cash, and (ii) the contribution by the NB Sub of its
assets remaining after the closing of the sale of assets by the
Banks to NaBANCO/FFB and certain amounts of agreed upon
13
cash. A summary of the Capitalization Plan is attached hereto as
Schedule 3.4.
(b) In order to implement the Capitalization Plan (but subject to the
provisions of Section 7.5 in the event of a termination and
liquidation of the Partnership within 60 days from the date of
its formation),
(i) NaBANCO and FFB will close the purchase and sale of certain
assets from the Banks and their Affiliate, Terminal
Management Systems, Inc. ("TMS"), including a portfolio of
certain Merchant Processing Business contracts (all such
contracts except for terminal rental agreements being
referred to as "Merchant Service Contracts") and related
market based intangibles and certain terminal rental
agreements, all as more particularly described in Article 2
and the Asset Purchase Agreement (the "Purchased
Contracts").
(ii) NaBANCO will contribute the purchased terminal rental
agreements and the economic rights and obligations under
the Merchant Service Contracts (including related market
based intangibles) (the "NaBANCO Portion of the Purchased
Contracts") to the NaBANCO Sub, which will contribute the
NaBANCO Portion of the Purchased Contracts to the capital
of the Partnership.
(iii) The Banks will contribute all the economic rights and
obligations under the Merchant Service Contracts (including
related market based intangibles) held by any NB Bank after
the closing of the purchase by NaBANCO and FFB of the
Purchased Contracts, except for contracts with American
Airlines and the United States Postal Service.
(iv) The NaBANCO Sub will contribute the economic rights and
obligations under additional Merchant Service Contracts
(including related market based intangibles) with Regional
Merchants having less than $10 million in annual bankcard
volume and related terminal rental agreements to the extent
necessary to cause the Agreed Value of the economic rights
and obligations under all of the Merchant Service Contracts
and related terminal rental agreements contributed to the
Partnership by the NaBANCO Sub to have an Agreed Value
equal to four times the Agreed Value of the Merchant
Service Contracts contributed to the Partnership by the NB
Sub.
14
(v) Each Partner shall contribute an amount of cash equal to
its respective Sharing Percentage times the total amount of
cash needed by the Partnership to fund:
(A) the purchase of all of the stock of TMS (after giving
effect to the sale by TMS of all terminal rental
agreements as part of the Purchased Contracts and the
transfer to another member of the NB Group of any
other assets that are not to be transferred to the
Partnership); and
(B) such additional amounts that the Partners mutually
agree are needed for adequate working capital.
(c) Each Partner shall have a Partnership capital account to which
shall be credited the Agreed Value of such Partner's capital
contributions, but in no event shall the total Agreed Value of
all capital contributed by the NB Sub ever be valued at an amount
in excess of or less than 20% of the value of all capital
contributed to the Partnership. Not later than 60 days after the
formation of the Partnership, the parties shall prepare and
deliver mutually acceptable schedules listing all the Merchant
Service Contracts contributed by each of them, and the terminal
rental agreements contributed by the NaBANCO Sub, to the capital
of the Partnership and the value of each of their contributions.
The amount specified in such schedules shall be deemed to be the
Agreed Value of the Merchant Service Contracts and related
terminal rental agreements for all purposes under this Agreement
and shall be the amount actually credited to the Partner's
capital account.
(d) "Agreed Value" shall mean (i) two times the Annual Gross Profit
(computed as set forth below) attributable to all Merchant
Service Contracts, (ii) one times the terminal net rental income
attributable to all terminal rental agreements (determined as
provided below), and (iii) the amount of cash mutually agreed
upon by the Partners.
(e) For purposes of the Agreed Value, the Annual Gross Profit and
terminal net rental income shall be computed as follows:
(1) Such computation shall be based on amounts received (subject
to the adjustments below) during the twelve-month period
ending March 31, 1995 for all active merchants that were
customers of the NB Group or the NaBANCO Group as of March
31, 1995 and were parties to contracts the economic
---
15
rights and obligations of which were contributed to the
Partnership at its formation.
(2) For any active merchant customer as of March 31, 1995 that
has received Bankcard Merchant Processing Services from an
NB Group Member or a NaBANCO Group Member during part but
not all of the twelve-month period ending March 31, 1995,
the Annual Gross Profit and terminal net rental income
attributed to that merchant will be calculated by
annualizing the Annual Gross Profit and terminal net rental
income from such merchant, using the available operating
history and a mutually agreed upon method for annualizing,
based on that merchant's characteristics.
(3) The calculation of Annual Gross Profit and terminal net
rental income shall exclude all revenues and expenses
derived from the provision of Merchant Processing Services
to "Inactive Merchants" (defined as those that began
submitting transactions for processing and then had no
Bankcard Merchant Processing Services activity posted during
March 1995, except for any such merchant that is a seasonal
merchant).
(f) NaBANCO represents and warrants that the Service Contracts, the
economic rights and obligations of which are to be contributed to
the Partnership by the NaBANCO Sub as set forth in subparagraph
(b)(iv) above (the "NaBANCO Merchant Service Contracts"), shall
be selected from NaBANCO's Merchant Processing Business portfolio
on a fair and equitable basis and shall be generally
representative of NaBANCO's portfolio of Regional Merchants with
under $10 million in annual bankcard volume. The NB Banks shall
be given an opportunity to review the NaBANCO Merchant Service
Contracts prior to their contribution to the Partnership to
ensure compliance with the terms of this subsection (f) and shall
be given an opportunity to negotiate with NaBANCO to resolve any
differences between the parties with respect to specific NaBANCO
Merchant Service Contracts to be contributed.
3.5 Contract Ownership.
------------------
After formation of the Partnership, the title to the merchant
contracts pursuant to which the Partnership provides Bankcard Merchant
Processing Services shall be owned as follows:
(a) FFB shall own all such bankcard merchant contracts that are:
16
(i) contributed to the Partnership by the NaBANCO Sub (including
those purchased from the NB Banks); or
(ii) developed thereafter by the Partnership; and
(b) An NB Group member shall own all such bankcard merchant contracts
that are contributed to the Partnership by the NB Sub.
(c) The economic rights and obligations (including all revenue and
market-based intangibles) in all such merchant contracts,
however, will belong to the Partnership, as more fully set forth
in the Sponsorship and Services Agreement, except as provided
below for certain losses arising under "Indemnified Contracts"
and as may otherwise be provided in the Sponsorship and Services
Agreement.
3.6 Indemnified Contracts.
---------------------
By the Closing Date, from the total merchant contracts that the NB
Group will contribute to the Partnership or sell to the NaBANCO Group,
the NaBANCO Group shall be entitled to designate as "Indemnified
Contracts" merchant contracts covering the processing of annual
bankcard sales not exceeding $250 million. Also by the Closing Date,
from the merchant contracts that the NaBANCO Group will contribute to
the Partnership (excluding those purchased from the NB Group), the NB
Group shall be entitled to designate as Indemnified Contracts merchant
contracts covering the processing of annual bankcard sales not
exceeding 5% of the total annual bankcard sales processed under all
merchant contracts contributed by the NaBANCO Group (excluding those
purchased from the NB Group). After the Closing Date, with respect to
merchant contracts acquired through any acquisition by the Partnership
of an Acquired Business, the NaBANCO Group in the case of an Acquired
Business that the Partnership acquires from the NB Group, and the NB
Group in the case of an Acquired Business that the Partnership
acquires from the NaBANCO Group, shall be entitled to designate as
Indemnified Contracts an amount of such acquired merchant contracts
representing not more than 5% of the total annual bankcard sales
processed by the Acquired Business. (Consistent with the definition
of Acquired Business, this 5% will be based on annual bankcard sales
so processed for Regional Merchants in the Partnership Territory.) In
the case of Indemnified Contracts so designated by the NaBANCO Group,
the NB Group shall indemnify and hold harmless the Partnership and the
NaBANCO Group for all credit, fraud, chargeback and similar losses
arising in connection with the Indemnified Contracts, and in the case
of Indemnified Contracts so designated by the NB Group, the NaBANCO
Group shall indemnify and hold harmless the Partnership and the NB
Group for all credit, fraud, chargeback
17
and similar losses arising in connection with the Indemnified
Contracts, in both cases subject to the time limitations set forth
below; provided in each case that any such loss arises with respect to
a transaction or event that occurs while such contract is an
Indemnified Contract (whether the claim for indemnification is made
during or after such period).
(a) Except as provided in Subsection (b) below, a contract designated
an Indemnified Contract on or before the Closing Date shall
remain an Indemnified Contract for six months following the
Closing Date (plus the additional time set forth below for
indemnification to be terminated), and a contract so designated
in connection with the Partnership's purchase of an Acquired
Business shall remain an Indemnified Contract for a period of six
months following the date such contract is acquired by the
Partnership (plus the additional time set forth in Subsection (b)
below for indemnification to be terminated).
(b) No later than 15 days prior to the end of the applicable six-
month period with respect to each Indemnified Contract, the
Partnership will notify the indemnifying Group of those
Indemnified Contracts that the Partnership is not willing to keep
in effect without such indemnifying Group's continued
indemnification. Within 10 days after any such notice, the
indemnifying Group will notify the Partnership (i) whether the
indemnifying Group wants to terminate such indemnification as
soon as permitted, in which case such indemnification shall
terminate 45 days after the Partnership's receipt of the
indemnifying Group's responsive notice (or for any longer period
required under such contract for a notice of termination to
become effective) or (ii) whether the indemnifying Group will
extend such indemnification until further notice, in which case
such indemnification shall continue in effect until 60 days after
any subsequent notice from the indemnifying Group to the
Partnership that it will no longer provide such indemnification
(or, if shorter, for five business days more than the minimum
period required under such contract for a notice of termination
to become effective). If the indemnifying Group does not
continue such indemnification with respect to some or all of the
Indemnified Contracts for which the Partnership has notified the
indemnifying Group that is it unwilling to keep such contract in
effect without continued indemnification, the Partnership may
terminate or sell such Indemnified Contract (and FFB or any
NationsBank Bank owning any such merchant contract shall
cooperate in implementing the Partnership's decision).
18
(c) Except as set forth above and in Section 7.2(d), Indemnified
Contracts shall be treated and performed in the same way as other
merchant contracts.
3.7 Assumption of Certain Liabilities.
---------------------------------
The Partnership shall assume and agree to discharge all liabilities
and obligations of the Partners attributable to those merchant
contracts the economic rights and obligations of which are contributed
to the Partnership pursuant to Section 3.4, but only to the extent
such liabilities and obligations relate to or arise from actions,
omissions, or events that take place after Closing, as more fully
explained below, and subject to the indemnity from the NB Parties or
the NaBANCO Parties with respect to any Indemnified Contracts, as
provided in Section 3.6. The Partnership shall be responsible solely
for the transactions processed following the Closing as part of the
Merchant Processing Services provided pursuant to those merchant
contracts the economic rights and obligations of which are contributed
to the Partnership; provided, however, that the applicable NB Parties
and the applicable NaBANCO Parties shall perform the services which
they are required to perform under the Sponsorship and Services
Agreement with respect to such transactions and shall be responsible
for and shall indemnify the Partnership with respect to any losses,
costs or expenses incurred with respect to such transactions as a
result of any negligence or intentional misconduct by such NB Parties
or NaBANCO Parties, respectively, or arising from a failure by any
such party to comply with the terms of the Sponsorship and Services
Agreement in performing such services and in such other circumstances
as provided in the Sponsorship and Services Agreement. In addition,
chargebacks or other write-offs that occur with respect to
transactions authorized but not processed prior to the Closing and
that are attributable to any failure or error by any NB Party or any
NaBANCO Party (or any third party performing services on behalf of any
NB Party or NaBANCO Party) in connection with the authorization
process shall be the sole responsibility of such NB Party or NaBANCO
Party, as the case may be. Settlement transactions processed by any
NB Party or any NaBANCO Party prior to Closing, and any liability for
subsequent adjustments and chargebacks on such transactions, shall be
the sole responsibility of the party that processed such transactions.
Any subsequent recoveries with respect to any chargebacks or other
write-offs for which an NB Party or a NaBANCO Party, rather than the
Partnership, is responsible shall belong to the NB Party or the
NaBANCO Party that was responsible for the prior chargeback or other
write-off. For purposes of this JV Agreement, a "chargeback" means a
chargeback arising in accordance with the chargeback rules of Visa,
MasterCard or any other Card Association to the extent any processor
may have any related responsibility.
19
3.8 Management of the Partnership.
-----------------------------
(a) Powers. The management and direction of the business and affairs
------
of the Partnership is delegated by the Partners to the management
board of the Partnership. The management board may delegate such
powers and authority to the officers of the Partnership as are
appropriate to facilitate the operations and related business
activities of the Partnership, consistent with the terms of the
Partnership Agreement.
(b) Composition. The management board shall consist of five
-----------
members. The NaBANCO Sub shall have the right to appoint three
members and the NB Sub shall have the right to appoint two
members by written notice to the other Partner. Each such member
of the management board shall serve at the pleasure of, and may
be removed with or without cause by, the Partner by which he or
she was appointed. Board members shall serve until resignation,
removal or death.
(c) Resignations. Any member of the management board may resign his
------------
or her position at any time by giving written notice thereof to
the Partners.
(d) Vacancies. A vacancy on the board shall be deemed to exist in
---------
the case of the resignation, removal or death of any management
board member. In the event of a vacancy, regardless of how
caused, the Partner that appointed the member whose position is
to be filled shall have the same right of appointment, which
shall be exercised as soon as practicable.
(e) Meetings. Regular meetings of the management board shall be held
--------
at least quarterly, unless otherwise agreed by the members
thereof, and special meetings shall be held whenever requested by
any member of the board. Notice of regular and special meetings
shall be given to each member, specifying the time and place of
the meeting and the agenda therefor, and must be given in writing
(which includes facsimile transmission) to all members at least
ten days in advance of each regular meeting and at least two days
in advance of each special meeting. Any member served with
notice of a special meeting less than ten days in advance thereof
and who notifies the other members that the proposed meeting date
is inconvenient for such member may contact the other members
within 36 hours after receipt of the notice of the special
meeting, and the member may reschedule the meeting to a date (and
at a mutually agreed upon time) not more than three business days
later than the date specified in the original notice of the
20
special meeting. Notice need not be given to any member who
signs a waiver of notice (whether before or after the meeting) or
who attends the meeting without protesting the lack of notice
prior to its commencement. The expenses of attendance at meetings
shall be Partnership expenses and shall be reimbursed to the
Partner incurring such expense. Meetings may be held through a
telephone conference, and participation by such means shall
constitute presence in person at such meeting.
(f) Procedure. The management board may establish rules of procedure
---------
in accordance with this JV Agreement pursuant to which it shall
conduct its proceedings. A member of the board or the President
shall serve as Secretary ex officio of the board and shall be
----------
responsible for keeping the minutes of the proceedings and
decision of the management board, distributing minutes of all
meetings to the board members within 30 days after the meeting
and for giving notice of meetings of the board meetings.
(g) Voting, Quorum and Action; Major Decisions. Each member of the
-------------------------------------------
management board shall be entitled to one vote. Three members
(regardless of which Partner appointed them) shall constitute a
quorum for the transaction of business at any meeting. Decisions
(other than as to matters specified in this Agreement or in the
Partnership Agreement as requiring the unanimous consent of the
Partners, including capital contributions other than for required
portfolio purchases) shall be taken at any meeting for which
notice is properly given by majority vote of the total number of
Partners. In lieu of a regular or special meeting, any action
required or permitted to be taken by the management board may be
taken in the form of a written consent signed by all the members
of the management board in absence of a meeting.
(h) Matters Reserved for the NB Sub. In the event that the Partners
-------------------------------
(directly or through their respective management board
representatives) are unable to agree, and notwithstanding the
provisions of Section 3.8(g), but subject to the transitional
provisions relating to use of the NationsBank name and BINs and
ICAs set forth in Section 3.10 and Section 9.4, respectively, the
NB Sub management board members, voting together at the direction
of the NB Sub, shall make the final decisions concerning the
following issues, and such decisions shall be final:
(1) The use of the NationsBank Name in all respects, including
the withdrawal from use by the Partnership.
21
(2) The offering of special pricing and/or special customer
services for NB Group customers and the resolution of
customer service issues for matters not addressed in the
Procedures Manual (to be developed pursuant to the
Sponsorship and Services Agreement), provided that the full
differential between approved Partnership pricing and such
NB Group customer special pricing, and all additional costs
related to any such special customer services and
resolutions of customer issues, will be at the NB Group's
expense, and the Partnership and NaBANCO shall be given a
reasonable time to implement any changes necessary to
accommodate such special pricing, special customer services
or resolution of customer service issues. The Partnership
and NaBANCO shall not be required to implement any
resolution of customer service issues that is not practical
and reasonable.
(3) The resolution of all legal and regulatory issues relating
to banks and bank holding companies other than those that
only affect FFB or another member of the NaBANCO Group;
provided, however, that the NB Sub shall determine in the
exercise of its reasonable discretion whether any such issue
affects the NB Group; and provided, further that the NB Sub
shall first discuss such issues that FFB and NaBANCO have
indicated may affect the NaBANCO Sub with the NaBANCO Sub
and shall use its best efforts to resolve such issues in a
manner consistent with the interests of both Partners.
(4) The provision through the NB Group of all marketing and
referral programs which the Partnership requests any NB
Group member to provide.
(i) Veto Rights. Notwithstanding anything to the contrary in this
-----------
Partnership Agreement, each Partner shall have the right to veto
any activity by the Partnership that is impermissible under
Applicable Law for any such Partner to engage in through the
Partnership; provided, however, that each Partner, prior to
exercising any such veto right, shall consult with the other
Partner in an effort to reach a mutually satisfactory
accommodation, consistent with Applicable Law.
(j) Special NB Sub Veto Rights. Notwithstanding anything to the
--------------------------
contrary in this JV Agreement or any Related Agreement, the NB
Sub shall have the right to veto any decision of the Partnership.
Upon the exercise of a veto by the NB Sub pursuant to this
Section 3.8(j) in any circumstance when the NB Sub does not have
an express veto power
22
specifically provided by other Sections of this JV Agreement, the
NaBANCO Sub shall have the right to terminate the Partnership in
accordance with Section 6.1(h) and to purchase the NB Sub's
Partnership Interest at an amount equal to the sum of: (A) two
times the Annual Gross Profit of the NB Sub's Sharing Percentage
of the Partnership's portfolio plus (B) one times the annual
terminal net rental income attributed to the NB Sub's Sharing
Percentage of the Partnership' terminal net rental income plus
(C) any balance of the NB Sub's capital account in the
Partnership after making any adjustments as set forth in the
Partnership Agreement needed to eliminate the book value of the
assets described in clauses (A) and (B) above.
3.9 President and Controller.
------------------------
The parties agree that they will cause the Partners to name O.B. Rawls
as the initial President of the Partnership and to appoint a
Controller for the Partnership. Each Partner shall have the right to
require the removal of the President and the Controller at its
discretion without the consent of the other Partner with at least two
weeks' notice to the other Partner. Both Partners must approve any
replacements.
3.10 Name and Trademark.
------------------
NaBANCO shall apply for the exclusive rights to the name Unified
Merchant Services, a NaBANCO/NationsBank Venture, and the associated
trademark and to license such rights to the Partnership. Such license
shall contain a provision that it may be revoked at will only by
mutual consent of the Partners. The Partnership shall bear the
economic burden of such name change, unless an NB Group member has
requested that the Partnership change any reference in its name to its
association with the NB Group, in which case the NB Group shall bear
the economic burden of such name change. Such license shall terminate
on the 60th day after such time that no NB Group member has an
interest in the Partnership. In such circumstance, and in any other
circumstance requiring a name change in the Partnership, it is
recognized and agreed that the Partnership will comply in 60 days
following notice of the need to change its name in order to effect an
orderly name change, unless a different period is agreed to or
required by Applicable Law.
ARTICLE 4: INFORMATION AND SERVICES.
- ------------------------------------
The parties agree that, except as expressly permitted by this JV
Agreement or as otherwise mutually agreed to by the parties, the
following shall be operative during the Joint Venture Term.
23
4.1 Processing Information.
----------------------
Processing information relating to merchant bankcard transactions and
related services provided to merchants that are Merchant Processing
Business customers of the Partnership will be the Partnership's
property. Except as noted below, information is to be shared between
the Partners on a confidential basis. During the term of the
Partnership no customer or processing information will be sold to or
shared with third parties not either NB Group or NaBANCO Group members
without the consent of both. Customer information relating to non-NB
Group banking relationships of NaBANCO Group merchants contributed or
sold to the Partnership will not be disclosed to any member of the NB
Group.
4.2 Banking Services.
----------------
The Partnership will use its good faith efforts to encourage new
Partnership merchants signed by the Partnership after the Closing Date
to utilize members of the NB Group for DDA services. Such DDA
services will be offered to Partnership merchants on the same basis as
such services are offered to other similar NB Group customers.
4.3 NaBANCO Services.
----------------
The Partnership will have the right to offer to Regional Merchants and
Permitted MOTO Merchants, respectively, bankcard merchant products and
services offered by NaBANCO to its non-Partnership merchants in
comparable categories, except for any custom products and services not
generally offered to the majority of NaBANCO's non-Partnership
Regional Merchants (distinguishing between the U.S. Government and all
other Regional Merchants for purposes of comparability) or MOTO
Merchants, respectively.
4.4 Pricing of Services.
-------------------
(a) The primary service the NB Group members will provide will be ACH
services (unless the Partnership decides to obtain such services
from a lower cost provider) and use of its BINs and ICAs for
Partnership merchants. The NB Group member(s) providing such
services will be reimbursed by the Partnership for ACH services
provided to the Partnership at a rate mutually agreed upon in
advance (subject to change upon advance notice) and will be
reimbursed by the Partnership at cost for Card Association and
interchange fees and any other fees relating to the use of a NB
Group member's BINs and ICAs for Partnership merchants. Should
NB Group members provide other
24
Merchant Processing Business related services to the Partnership,
such services will be provided at cost. Nothing herein shall
limit the right of the Partnership to cease obtaining ACH
services from any member of the NB Group and to obtain ACH
services instead from any other financial institution (which may
include FFB) if such other financial institution provides ACH
services at a lower cost than the fees charged to the Partnership
by the applicable member of the NB Group.
(b) Except as set forth below, services provided to the Partnership
by NaBANCO are to be provided at cost. As more fully set forth
in the Sponsorship and Services Agreement, NaBANCO's price to the
Partnership for the services shown on Schedule 4.4, attached
hereto (the "Included Services"), will be the total amount shown
on Schedule 4.4 per Transaction for all Transactions processed
for the Partnership (whether on NaBANCO's system or completed
through the Norfolk Operations Center) during the period from
formation of the Partnership through December 31, 1996.
Thereafter, NaBANCO's price to the Partnership will be its cost.
(c) If, following the Closing, NaBANCO begins to process any new
types of transactions (such as purchasing card transactions) or
begins to provide any new services, in each case beyond those
processed or provided by NaBANCO as of the Closing, such
transactions and services will be priced at cost (rather than
being covered by the price applicable to Included Services
through December 31, 1996), and the prices of such new
transactions or new services will reflect any higher or lower
costs incurred in processing such transactions or providing such
services. Such price changes will have to be with prior notice
to and approved by both Partners.
(d) The per transaction cost for Included Services will not include
any sales or marketing costs, fraud and chargeback losses or
conversion costs.
(e) After January 1, 1997, the NB Group shall have the right, no more
frequently than annually, to audit NaBANCO's costs and
allocations; provided, however, that if NaBANCO implements a
change in any cost as set forth in the then current Business Plan
effective during the period covered by such Business Plan, the NB
Group will have the right to audit the factors resulting in the
change notwithstanding the limitation to an annual audit. If the
parties cannot agree on a resolution of any issues resulting from
such an audit, they will undertake the dispute resolution
procedure set forth in Section 14.12; provided that, if after
dispute resolution, NaBANCO believes in good faith that the price
to be charged to the Partnership is less (by an
25
amount that exceeds 6%) than NaBANCO's costs of providing the
Included Services (based on NaBANCO's own computations and
assumptions which need not be modified to reflect any
determinations made by the decision-maker(s) in the dispute
resolution procedure if NaBANCO believes in good faith that they
are not justified), and NaBANCO delivers to the NB Group a letter
from NaBANCO's or FFMC's independent auditors confirming that the
assumptions used by NaBANCO in deriving its determination of the
costs of providing the Included Services are not unreasonable,
NaBANCO shall have a right to cause the NaBANCO Sub to terminate
the Partnership.
(f) The NaBANCO Group shall have the right, no more frequently than
annually, to audit all costs and allocations by any member of the
NB Group with respect to any charges (except ACH charges) imposed
on the Partnership or on NaBANCO with respect to the Norfolk
Operations Center by the NB Group.
(g) In conducting any audit of any other party's costs and
allocations, the party performing such audit shall not
unreasonably interfere with normal operations of the party being
audited.
4.5 Card Activity.
-------------
(a) NaBANCO will work with the NB Group in good faith to develop
merchant/card issuing synergies. Such activities include
information (including transactional details) regarding bankcard
programs, new technology, products and specialized support
services for certain co-branding or other similar programs of the
NB Group. However, exclusivity with the NB Group will not be
practical for all products, technologies or programs; i.e.,
----
purchasing card merchant acquiring activity and programs
involving NaBANCO Group merchants outside of the Partnership. In
the event the NaBANCO Group considers entering into activities
with other U.S. bankcard issuers, the NaBANCO Group will discuss
such activities with the NB Group to ascertain if the NB Group is
interested in participating in conjunction with or in lieu of
other bankcard issuers.
(b) The NB Group will at all times be the Partnership's bank partner
of preference. In addition, any products, technologies or
programs which are developed in conjunction with the NB Group and
which are identified as being within the Partnership prior to the
commencement of development and which are proprietary in nature
or any programs which are designed exclusively for the
Partnership will not be offered
26
to any other card issuing institution without the consent of each
Partner.
4.6 Business Plan.
-------------
On an annual basis, or on such other basis as may be agreed between
the Partners, by September 1, the NaBANCO Sub shall present a proposal
to the Partnership management board and by November 30 the Partnership
management board shall review and approve a business plan for the
Partnership for the ensuing fiscal year based upon the Partnership
sales plan for such period and NaBANCO's cost plan for such period
(the "Business Plan"). In the event that NaBANCO makes a unilateral
decision to alter its costs from those set forth in the Business Plan,
and such cost modification results in a material adverse impact on
earnings as set forth in the Business Plan, then:
(a) if the NB Sub approves of the modification, the modified costs
will be passed on to the Partnership; and
(b) if the NB Sub does not approve of the modification, the costs
charged to the Partnership by NaBANCO will not be changed from
plan costs for that Business Plan fiscal year.
The initial Business Plan will be mutually agreed upon by the Partners
and delivered by Closing. In the event the Partners are unable to
agree on the terms and conditions of any Annual Business Plan, the
Partnership shall continue to operate under the last approved Business
Plan. If either party does not approve the proposed Business Plan
within a reasonable time after its proposal, the party not approving
shall provide a written explanation to the other party of its reasons
for not approving the proposed Business Plan and shall enter into good
faith discussions regarding the adjustments that would be needed in
order for such party to approve the new Business Plan.
ARTICLE 5: EXCLUSIVITY AND TERRITORIES
- ---------------------------------------
5.1 Exclusivity - Partnership Territory.
------------------------------------
Except as otherwise provided in this JV Agreement, the Partnership,
through a servicing agreement with NaBANCO, will be the exclusive
provider of Bankcard Merchant Processing Services to the Target Market
in the Partnership Territory. When the Partnership Territory is
expanded into any Expansion Territory, the Partnership will have
exclusivity with respect to the provision of Bankcard Merchant
Processing Services within the expanded Partnership Territory, except
as otherwise provided in this JV Agreement.
27
Nothing herein or in the Related Agreements shall prevent the NB Group
members from providing or selling treasury management and cash
management services including non-Bankcard Merchant Processing
Services.
5.2 Exceptions from Exclusivity.
---------------------------
(a) The Partnership will not have exclusivity with respect to the
Excepted Merchants, and NaBANCO shall not be limited in providing
Merchant Processing Services to the Excepted Merchants, except as
provided for in the "Excepted Merchant" definition.
(b) The Partnership sales force will not focus on MOTO Merchants, but
it may sell Merchant Processing Services to a Permitted MOTO
Merchant.
5.3 NaBANCO Sales.
-------------
(a) NaBANCO agrees that it will not, and will cause its Affiliates
not to, sell Merchant Processing Services to any merchant for
which the Partnership properly provides such services pursuant to
the terms of this JV Agreement, or to a merchant which is in the
Partnership Territory and is not otherwise an Excluded or
Excepted Merchant or eligible to become an Excepted Merchant, and
that NaBANCO will not, and will cause its Affiliates not to, sell
Bankcard Merchant Processing Services to any third party with
respect to its provision or referral of Bankcard Merchant
Processing Services to Regional Merchants (other than Excepted
Merchants) in the Partnership Territory. Notwithstanding the
foregoing, if a NaBANCO Group member is required, due to
contractual commitments in effect as of the date hereof with
respect to the Initial Territory or in effect as of the date of
acquisition of an Acquired Business or date on which an Expansion
Territory becomes a Partnership Territory with respect to such
Acquired Business or Expansion Territory, or due to Applicable
Law or Card Association Rules, to provide Merchant Processing
Services in circumstances that would otherwise be prohibited by
the foregoing sentence, the NaBANCO Group members shall not be
required to terminate the provision of such services until such
contract (which shall not be renewed by the NaBANCO Group)
expires or is otherwise terminated. The Parties agree that the
Partnership sales force shall not sell Merchant Processing
Business to any Excluded Merchant or to any Excepted Merchant for
which NaBANCO properly provides such Merchant Processing Business
pursuant to the terms of this JV Agreement. NaBANCO Affiliates
may sell other services to any merchant for which the Partnership
provides Merchant Processing
28
Business independently of, or wrapped around, such Merchant
Processing Business, but in each instance, the Partnership shall
continue to provide the Merchant Processing Business to such
merchant.
(b) Any merchant that stops receiving Merchant Processing Services
from the Partnership for any reason other than an act or omission
by a NaBANCO Group member in violation of this JV Agreement and
thereafter re-establishes a relationship with NaBANCO under
circumstances that would qualify such merchant as an "Excepted
Merchant," shall then be an Excepted Merchant notwithstanding its
earlier status as a Partnership merchant. NaBANCO shall be in
violation of this JV Agreement if there is a pattern of conduct
in which NaBANCO re-establishes relationships (other than through
Discover Card referrals) with merchants less than three months
after they cease receiving Merchant Processing Services from the
Partnership. Any such violation will not be deemed a "Flagrant
Breach" under Section 6.3(e) unless such pattern satisfies the
requirements of Section 6.3(e), and shall not prevent NaBANCO
from providing Merchant Processing Services to the merchants with
whom it has re-established relationships, but NaBANCO shall take
prompt action to remedy such pattern of conduct so as to avoid
future violations.
5.4 National Merchants.
------------------
(a) The Partnership will not be providing Merchant Processing
Services to National Merchants, other than those initially
contributed to the Partnership, or to those which the Partnership
elects to purchase as provided below in (b). NaBANCO National
Merchants will be serviced by NaBANCO directly.
(b) NB Group National Merchants not contributed to the Partnership at
formation or that are acquired by a NB Group member after
formation of the Partnership will be offered by such member to
the Partnership or, if the Partnership chooses not to purchase
any such merchant, merchants not purchased by the Partnership
will be offered to the NaBANCO Group and may be purchased at a
mutually agreed upon price. The NaBANCO Group shall not,
however, be entitled to purchase such National Merchant if the
NaBANCO Sub (or its Board representatives) voted against the
Partnership's purchase of such National Merchant. If the
Partnership or the NaBANCO Group does not purchase any such
National Merchant, that merchant may be processed by the NaBANCO
Group or any third-party or sold to any third party, at the NB
Sub's sole option.
29
(c) The Partnership sales force will not sell to National Merchants.
If any National Merchant is referred by an NB Group member to
NaBANCO and NaBANCO sells Merchant Processing Services to such
merchant, NaBANCO will pay such NB Group member a mutually agreed
upon fee.
5.5 Exclusivity-Expansion Territory.
-------------------------------
(a) In the event that an NB Group member gains market share in a
state (limited to the lower 48 states of the United States)
outside the Initial Territory in excess of nine percent (9%) of
deposits among commercial banks as reported in then current FDIC
data, such NB Group member shall sell and the Partnership shall
purchase the Regional Merchant portfolio (excluding Excluded
Merchants) in such state to the Partnership at the Expansion
Territory Portfolio Purchase Price. NaBANCO shall sell and the
Partnership shall purchase, its Regional Merchant portfolio
(excluding Excluded Merchants and Excepted Merchants) in such
state at the Expansion Territory Portfolio Purchase Price;
provided, however, that the purchase of the portion of such
NaBANCO Regional Merchant portfolio that exceeds four (4) times
the value (based on 1.75 times the Annual Gross Profit) of the NB
Group member Regional Merchant portfolio required to be purchased
by the Partnership would be subject to the NB Sub Partnership
management board member veto. In lieu of selling all or a
portion of such portfolios to the Partnership, the NB Group
member and the NaBANCO Group member may mutually agree to
contribute all or a portion of such portfolios to the Partnership
to the extent their portfolios (or portion thereof) contributed
are proportionate to their Sharing Percentage. If the NB Group
member or the NaBANCO Group member is unable, due to existing
contractual commitments, Applicable Law or Card Association
Rules, to sell such Regional Merchant portfolio to the
Partnership, the other Group member will not be required to sell
or contribute its Regional Merchant portfolio in such state to
the Partnership. Upon termination of the contract or conditions
preventing transfer to the Partnership (which contract(s) shall
not be renewed or extended by the Group member), both Group
members shall sell, and the Partnership shall purchase, the
portfolios at the Expansion Territory Portfolio Purchase Price,
still subject to the NB Sub Partnership management board member
veto as to any portion of such NaBANCO Regional Merchant
portfolio that exceeds four (4) times the value (based on 1.75
times the Annual Gross Profit) of the NB Group member Regional
Merchant portfolio required to be purchased by the Partnership.
Until such time as the Group members are free to sell their
portfolios to the Partnership, both Group
30
members will be free to conduct merchant acquiring activities and
provide Merchant Processing Services in such state. If, as a
result of a veto by the NB Sub, the Partnership does not acquire
that portion of the NaBANCO portfolio that exceeds four (4) times
the value (based on 1.75 times the Annual Gross Profit) of the NB
Group member portfolio required to be purchased by the
Partnership, the NaBANCO Group will be free to service such
excess portion of its portfolio outside of the Partnership.
(b) In the event that a NB Group member obtains market share in a
non-Partnership Territory state (limited to the lower 48 states
of the United States) of less than nine percent (9%) of deposits
among commercial banks as reported in then current FDIC data,
such NB Group member shall offer to sell the Regional Merchant
portfolio, in such state to the Partnership, but the Partnership
is not required to purchase such portfolio without the approval
of both Partners. If the Partnership purchases such portfolio
(excluding Excluded Merchants), the NaBANCO Group member shall
sell, and the Partnership shall purchase, its Regional Merchant
portfolio (excluding Excluded and Excepted Merchants) in such
state at the Expansion Territory Portfolio Purchase Price, and
the state will thereafter be a Partnership Territory; provided,
however, that the purchase of the portion of such NaBANCO
portfolio that exceeds four (4) times the value (based on 1.75
times the Annual Gross Profit) of the NB Group member portfolio
required to be purchased by the Partnership would be subject to
the NB Sub Partnership management board member veto. In lieu of
selling such portfolios to the Partnership, the NB Group and the
NaBANCO Group may mutually agree to contribute all or a portion
of such portfolios to the Partnership to the extent their
portfolios (or portion thereof) contributed are proportionate to
their Sharing Percentages. If the NB Group member or the NaBANCO
Group member is unable, due to existing contractual commitments,
Applicable Law or Card Association Rules, to sell such Regional
Merchant portfolio to the Partnership, the other Group member
will not be required to sell or contribute its Regional Merchant
portfolio in such state to the Partnership. Upon termination of
the contract or conditions preventing transfer to the Partnership
(which contract(s) shall not be renewed or extended by the Group
member), both Group members shall sell, and the Partnership shall
purchase with the approval of such purchase by both Partners, the
portfolios at the Expansion Territory Portfolio Purchase Price,
still subject to the additional NB Sub Partnership management
board member veto as to any portion of such NaBANCO Regional
Merchant portfolio that exceeds four (4) times the value (based
on 1.75 times the Annual Gross Profit) of the NB
31
Group member Regional Merchant portfolio required to be purchased
by the Partnership. Until such time as the Group members are
free to sell their portfolios to the Partnership, both Group
members will be free to conduct merchant acquiring activities and
provide Merchant Processing Services in such state. If the
Partnership elects not to purchase or accept such NB Group
portfolio, the state will not be a Partnership Territory and the
NaBANCO Group and the NB Group each will be free to conduct
Merchant Processing Services in such state. If, as a result of a
veto by the NB Sub, the Partnership does not acquire that portion
of the NaBANCO portfolio that exceeds four (4) times the value
(based on 1.75 times the Annual Gross Profit) of the NB Group
member portfolio required to be purchased by the Partnership, the
NaBANCO Group will be free to service such excess portion of its
portfolio outside of the Partnership.
(c) In markets not in the Partnership Territory, NaBANCO agrees not
to enter into new bankcard merchant referral programs or other
joint ventures similar to the Partnership in conjunction with
another Significant Financial Institution in 1995. After
December 31, 1995, the NaBANCO Group will not enter into new
bankcard merchant referral programs or other joint ventures in
conjunction with another Significant Financial Institution
without first having notified the NB Group. If, in good faith,
the NB Group states it has definitive plans to enter such market
prior to December 31, 1995, or the expiration of a period of six
(6) months from the date of the notice, whichever occurs later,
in a manner whereby the NB Group will secure a market share of
nine percent (9%) or more of deposits among commercial banks as
reported in current FDIC data, and the NB Group objects to the
NaBANCO Group entering into such programs or activities, then the
NaBANCO Group will not proceed with its activities. However,
should the NB Group not enter the relevant market, or not file
the applications and notices required for the significant
regulatory approvals with respect to such entry within such
period which, when completed, would result in the NB Group
entering the relevant market or should the NB Group not object to
the NaBANCO Group entering the market, the NaBANCO Group shall be
free to proceed with another joint venture or bankcard merchant
referral program so long as such agreement may be terminated
after no longer than one (1) year. If the NB Group has not made
application for the significant required regulatory approvals nor
completed its entry into the relevant market within six (6)
months, and the NB Group requests that the NaBANCO Group extend
its moratorium in such area for an additional period, the NaBANCO
Group will, upon receipt of an agreed-upon forbearance fee, do
so. If the NaBANCO Group and the NB Group
32
cannot agree upon a forbearance fee, the NaBANCO Group and the NB
Group will be free to proceed with activities in such market
outside of the Partnership.
(d) The Partnership may purchase non-NB Group or non-NaBANCO Group
merchant portfolios in the Partnership Territory upon the
unanimous approval of the Partnership management board. If the
Partnership has an opportunity to purchase such a merchant
portfolio and does not do so because of a negative NB Sub's
Partnership management board vote, the NaBANCO Group will be free
to purchase and service such portfolio outside of the
Partnership. If both Partners vote to approve a purchase by the
Partnership of such a merchant portfolio, then in order to
preserve such opportunity pending any additional regulatory
approval applicable to the Partnership's purchase (but not
applicable to a direct purchase by NaBANCO and FFB), NaBANCO and
FFB, upon the further agreement of the NB sub and on terms agreed
to by both Partners, may purchase such portfolio and service such
portfolio independently of the Partnership pending such
additional regulatory approval. If and when such regulatory
approval is obtained, NaBANCO shall sell, and the Partnership
shall purchase from NaBANCO, the economic rights and obligations
of such portfolio at the same price paid by NaBANCO or, if there
has been a significant increase in the volume of such portfolio,
at a price calculated using the increased volume and the same
pricing formula used to calculate the purchase price paid by
NaBANCO.
5.6 Acquired Business.
-----------------
If any NB Group member shall gain an Acquired Business exclusively or
partially in the Partnership Territory, the NB Group member shall sell
to the Partnership, and the Partnership shall purchase, that portion
of the Acquired Business which is in the Partnership Territory at the
Acquired Portfolio Purchase Price. If any NaBANCO Group member shall
gain an Acquired Business exclusively or partially in the Partnership
Territory, the NaBANCO Group member shall offer to sell to the
Partnership and the Partnership shall purchase at the NB Sub's
election, that portion of the Acquired Business in the Partnership
Territory at the Acquired Portfolio Purchase Price. If the Group
member is unable, due to contractual commitments, Applicable Law or
any Card Association Rules, to sell or contribute such Acquired
Business or portion thereof to the Partnership, the Group member will
not be required to sell its portfolio or portion thereof in such
Partnership Territory to the Partnership. Upon termination of the
contract or conditions preventing transfer to the Partnership (which
contract shall not be renewed or extended by the Group member), that
portion of the Acquired Business in the
33
Partnership Territory with respect to which transfer had been
restricted shall be sold to and purchased by the Partnership if owned
by an NB Group member, and shall be offered to and at the NB Sub's
election shall be purchased by the Partnership if owned by a NaBANCO
Group member, at the Acquired Portfolio Purchase Price. If, as a
result of a negative vote by an NB Sub management board member, the
Partnership does not acquire such Regional Merchant portion of the
Acquired Portfolio of NaBANCO, the NaBANCO Group will be free to
service such Regional Merchant portion of the Acquired Business
independently of the Partnership.
ARTICLE 6: TERMINATION
- -----------------------
6.1 Termination Events.
------------------
This JV Agreement (except to the extent provided elsewhere) may be
terminated in any of the following ways:
(a) by either of the Banks or NaBANCO, in writing five (5) days in
advance of such termination, if the Closing has not occurred
within the time specified in Section 10.1 through no fault of the
party effecting such termination;
(b) at any time on or prior to the Closing Date by the mutual consent
in writing of the Banks and NaBANCO;
(c) on the Closing Date, by the Banks in writing if the conditions
set forth in Section 13.3 of this Agreement shall not have been
met by NaBANCO or waived in writing by the Banks;
(d) on the Closing Date, by NaBANCO in writing if the conditions set
forth in Section 13.2 of this Agreement shall not have been met
by the Banks or waived in writing by NaBANCO;
(e) by the Banks or NaBANCO in writing if the other shall have been
in breach of any representation and warranty in any material
respect (as if such representation and warranty had been made on
and as of the Closing Date and on the date of the notice of
breach referred to below), or in breach of any covenant,
undertaking or obligation contained herein, and such breach has
not been cured by the earlier of thirty (30) days after the
giving of written notice to the breaching party of such breach or
the Closing Date;
(f) by any party in writing at any time thirty (30) days after any
applicable authority has denied Approval of any application of
the transactions
34
contemplated herein provided that the party seeking to terminate
hereunder must have used reasonable efforts to obtain any
Approval applicable to such party;
(g) a dissolution of the Partnership in accordance with the terms of
the Partnership Agreement; or
(h) by the NaBANCO Sub following a veto by the NB Sub pursuant to the
NB Sub's veto rights pursuant to Section 3.8(j).
6.2 Termination Notice.
------------------
In the event of termination pursuant to Article 6 hereof, and except
as otherwise stated therein, written notice thereof shall be given to
the other party, and this Agreement shall terminate immediately upon
receipt of such notice unless an extension is consented to by the
party having the right to terminate.
6.3 Additional Rights of Termination.
--------------------------------
(a) At any time after the second anniversary of the Closing Date, the
NB Sub will have the right to terminate the Partnership.
(b) At any time, the NB Sub may terminate the Partnership if it
believes in good faith that the conduct of litigation by the
Partnership is not in the best interests of the NB Group.
(c) At any time after the second anniversary of the Closing Date, the
NaBANCO Sub may terminate the Partnership upon a good faith
determination by NaBANCO that the price NaBANCO must charge the
Partnership for the Included Services is less, by an amount that
exceeds six percent (6%), than NaBANCO's costs of providing such
services. This amount is subject to the provisions set forth in
Section 4.4(d).
(d) At any time after the fourth anniversary of the Closing Date if
FFMC shall determine, in its sole discretion,that the continuance
of the Partnership may have a significant adverse impact on FFMC,
the NaBANCO Sub may terminate the Partnership.
(e) At any time prior to the fourth anniversary of the Closing Date,
the Partnership may be terminated by either party if the other
party has committed a "Flagrant Breach" of its obligations under
this JV Agreement. For the purposes of this JV Agreement, the
term
35
"Flagrant Breach" shall mean one or more acts or omissions by a
party with respect to which an arbitrator appointed pursuant to
the provisions of Article 14 shall have made a final
determination finding that: (A) each and every one of the
conditions specified in clauses (i) through (iv) below or (B) the
conditions specified in clauses (i) and (v) below, shall exist.
(i) The act or omission is one which has in fact resulted in a
material loss of, or which if continued uninterrupted and
without cure or some alternative performance or other
protection against loss or injury could reasonably be
expected to result in a material loss or deprive
permanently the injured party of, a substantial portion of
the material benefits of this JV Agreement.
(ii) The act or omission is part of a pattern and practice of
acting in disregard of the material obligations imposed
under the JV Agreement.
(iii) The act or omission has continued uninterrupted for at
least 60 days after notice from the injured party to the
other, which notice shall have stated with particularity
the nature of the act or omission and the nature and extent
of the injury being suffered or which is anticipated to be
suffered by the party providing the notice.
(iv) The party committing the act or omission shall have failed
during such 60 day period to commence and to diligently
pursue an effort to cure the acts or omissions that are the
subject of the notice, or if such act or omission is of
such a nature that it cannot be cured or cannot be readily
cured through reasonably diligent efforts, the party
committing the act or omission shall have failed during
such 60 day period, to offer to perform some equivalent act
or otherwise to provide the party providing the notice with
adequate protection against loss, in either case which is
reasonably acceptable to the injured party, and shall have
failed diligently to pursue such efforts to effect a cure
or such equivalent performance or provision of protection
against loss.
(v) Any one or more of the following: (A) member of the party's
Group violates Section 5.5 or 5.6 hereof, (B) if the party
is a NaBANCO Group member, a NaBANCO Group member violates
Section 5.3 hereof if due to the provision of Bankcard
36
Merchant Processing Services to a third party that provides
Bankcard Merchant Processing Services in the Partnership
Territory, or (C) the Partnership is dissolved other than in
accordance with an expressly provided and properly exercised
right of termination set forth in the Partnership Agreement
or the JV Agreement (unless the Partnership is thereafter
immediately reconstituted or the Partner causing such
termination offers to immediately reconstitute the
Partnership) in a manner which provides substantially the
same rights and benefits in all material respects of the
other partner(s) in the Partnership as they were prior to
such dissolution.
6.4 Effect on Capital Contribution Obligations.
------------------------------------------
Upon any termination of the Partnership, any unperformed obligations
of any member of the NB Group or the NaBANCO Group to make any
contribution to the capital of the Partnership, whether in the form of
money or an in-kind contribution, shall be excused and no longer
required to be performed; provided, however, if any assets have been
sold to the Partnership and the transfer thereof to the Partnership
has been completed, then the NB Sub and the NaBANCO Sub shall remain
fully obligated to contribute their proportionate share of the amount
required to fund the purchase price for such assets to the same extent
as if the termination had not occurred.
ARTICLE 7: LIQUIDATION
- -----------------------
7.1 Rights on Termination.
---------------------
(a) Upon any termination, the NaBANCO Sub (or any member of the
NaBANCO Group designated by the NaBANCO Sub) will offer to
purchase the NB Sub's Partnership Interest for a minimum price
computed in accordance with the Expansion Territory Portfolio
Purchase Price formula applied to the Partnership's entire
portfolio times the NB Sub's Sharing Percentage (the "Minimum NB
Buy-out Price"). If, after a good faith effort, the parties are
unable to reach agreement on a price above the Minimum NB Buy-out
Price, the NB Sub shall either sell its Partnership Interest to
the NaBANCO Sub (or any member of the NaBANCO Group designated by
the NaBANCO Sub) for the Minimum NB Buy-out Price or dissolve the
Partnership in accordance with Section 7.2.
(b) Closing Procedures. Any purchase of a Partnership Interest shall
------------------
be consummated as soon as is reasonably practicable following the
determination of the purchase price therefor, and the parties
agree to
37
cooperate, in good faith, with respect to all actions necessary
and appropriate to such consummation, including, without
limitation, the execution of all reasonably requested
documentation and the obtaining, if any, of necessary consents
and approval of Governmental Authorities and other Persons.
7.2 Partnership Liquidation.
-----------------------
If the Partners do not reach agreement as set forth in Section 7.1(a),
then the Partnership will be liquidated as provided in this Section
7.2 unless the parties are able to agree on a mutually acceptable
alternative method of liquidating the Partnership and effecting an in-
kind liquidating distribution of assets. The Partnership's economic
interest in the Partnership portfolio will be divided between the
Partners so that each Partner receives an equitable distribution based
on its Sharing Percentage.
(a) Adequate provision will be made to satisfy all of the
Partnership's obligations, debts and liabilities (including all
amounts owed to any member of the NaBANCO Group or the NB Group).
(b) Unless otherwise agreed, the NaBANCO Sub will choose first and
will pick merchants representing, in the aggregate, $400,000 in
Annual Gross Profit. The NB Sub will then pick merchants
representing, in the aggregate, $200,000 in Annual Gross Profit.
After the initial choices, the NaBANCO Sub will chose merchants
representing, in the aggregate, not more than $800,000 in Annual
Gross Profit and the NB Sub will chose merchants representing, in
the aggregate, $200,000 in Annual Gross Profits. The parties
will continue selecting merchants in that manner until the
portfolio is divided with the NaBANCO Sub having merchants
representing an economic interest of eighty percent (80%) of the
Annual Gross Profit of the Partnership and the NB Sub having
merchants representing an economic interest of twenty percent
(20%) of the Annual Gross Profit of the Partnership.
(c) A Partner may elect to choose merchants representing Annual Gross
Profit of less than the amount of Annual Gross Profit then
available with respect to that Partner's then current choice.
Similarly, a Partner may elect to pass its turn to choose any
merchants. In either case, the difference between the total
amount of Annual Gross Profit which could have been properly
attributable to merchants that could have been chosen by such
Partner and the amount of Annual Gross Profit actually
attributable to merchants actually chosen by such Partner, may be
applied by such Partner to increase the amount of Annual Gross
Profit attributable to merchants later chosen by such Partner.
In no
38
event, however, shall the aggregate Annual Gross Profit
attributable to all merchants chosen by either Partner ever
exceed the aggregate amount of Annual Gross Profit which would
have been attributable to merchants chosen by that Partner if the
Partners have chosen, on each occasion the Partner was entitled
to choose merchants, merchants representing exactly the maximum
amount of Annual Gross Profit then available to such Partner to
apply in making its choices.
(d) In picking merchants as described above, there may be certain
required picks by the NaBANCO Sub or the NB Sub. The NaBANCO Sub
will be required to treat as merchants picked by it any Regional
Merchants to which NaBANCO (or any subsidiary of NaBANCO)
provides Merchant Processing Services in conjunction with other
services provided by any NaBANCO Affiliate if and to the extent
the total annualized bankcard volume attributed to such merchants
exceeds the 9% limitation in paragraph (e) of the definition of
"Excepted Merchant." In addition, the NB Sub or the NaBANCO sub,
as the case may be, will be required to pick all merchants that
are parties to Indemnified Contracts as to which the NB Group or
the NaBANCO Group, respectively, bears an indemnification
obligation pursuant to Section 3.6. The NaBANCO Sub and the NB
Sub each may decide the round in which it will pick its own
required merchant picks, provided that the Annual Gross Profit
attributed to any required picks is fully applied during the
process.
(e) To determine the Annual Gross Profit for purposes of this Article
7 only, the following shall apply:
(i) If the Partnership has been operating for less than twelve
months from the Closing Date, actual operating history with
the Partnership and the NB Group or NaBANCO Group member
will be used to determine the Annual Gross Profit for each
active merchant that is a Partnership customer at the end of
the appropriate twelve-month period.
(ii) For any active merchant that has not received Bankcard
Merchant Processing Services from the Partnership, an NB
Group member and/or a NaBANCO Group member for a combined
twelve-month period, the Annual Gross Profit attributed to
that merchant will be calculated by annualizing using the
available operating history and an agreed upon reasonable
method for annualizing, based on that merchant's
characteristics.
39
(iii) In calculating Annual Gross Profit, there shall be
excluded all revenues and expenses derived from the
provision of Merchant Processing Services to Inactive
Merchants, except for any such merchant that is a seasonal
merchant.
(f) Each terminal or other item of equipment owned by the Partnership
and rented or otherwise provided to a merchant for use at the
merchant's location will be distributed in kind to the NaBANCO
Sub or the NB Sub that picked the particular merchant's contract
for the provision of Merchant Processing Services.
(g) Any other assets of the Partnership (or the proceeds of their
liquidation) shall be distributed in accordance with the Sharing
Percentages of the Partners in accordance with the Partnership
Agreement.
7.3 Non-Compete Covenant.
--------------------
For a period of two years following liquidation of the Partnership,
neither the NB Group nor the NaBANCO Group will seek to provide
Merchant Processing Services to merchants obtained by the other party
from the Partnership in liquidation. The NaBANCO Group will not alter
or attempt to alter the DDA relationship any NB Group member has with
a Partnership Merchant, so long as the NB Group continues to process a
payment tape in essentially the same manner and within the same time
frames as was previously handled. Notwithstanding the foregoing, in
the event of a termination of the Partnership due to a Flagrant
Breach, the provisions of this Section 7.3 shall be inoperative with
respect to the injured party, and the injured party shall be free to
provide the same or similar services to the merchants obtained in
liquidation by the party guilty of the Flagrant Breach without
restriction or limitation.
7.4 On-Going Services.
-----------------
Each Partner or its Affiliates will be required to provide the same
services to the other Partner and its Affiliates it was providing
prior to the termination and liquidation, at the other's option, for a
two year period (except for BIN/ICA services, which is set forth in
Section 9.4, and the debit card network sponsorship pursuant to the
Sponsorship and Services Agreement), from the date of dissolution at
the cost existing on the date of notice of dissolution plus an
additional twenty percent (20%) mark-up.
40
7.5 Early Liquidation.
-----------------
In the event the Partnership is terminated prior to the delivery of
mutually agreed upon schedules listing the Merchant Service Contracts
and terminal rental agreements contributed to the Partnership and
establishing the Agreed Values with respect thereto, and if, except
for the application of Section 3.4(c), the Agreed Value of the
Merchant Service Contracts and terminal rental agreements plus cash
contributed to the Partnership by the NB Sub would have been in excess
of 20% of the total value of all capital of the Partnership, then
immediately prior to proceeding with the liquidation of the
Partnership, the NaBANCO Sub will contribute, at the NaBANCO Sub's
option, either cash or Merchant Service Contracts and terminal rental
agreements to the Partnership which have an Agreed Value equal to four
times the amount of the additional Agreed Value which would have been
attributable to the contracts contributed by the NB Sub were it not
for the application of Section 3.4(c).
7.6 Termination Fee.
---------------
If the Partnership is terminated due to any action by any member of
the NB Group (including any exercise of the special veto right by the
NB Sub pursuant to Section 3.8(j) of this JV Agreement) within the
first five years following the Closing Date, other than as a result of
a breach by any member of the NaBANCO Group, the NB Group shall pay to
NaBANCO an early termination fee equal to $3.9 million, reduced by
$65,000 for each month elapsed from the Closing Date to the date of
such termination. Such fee is in addition to, and not in substitution
for or limitation of, any damages which any NaBANCO Group member may
have with respect to such termination. Any amounts due hereunder
shall be paid by the NB Group by wire transfer on the date the
Partnership is liquidated.
ARTICLE 8: CASH ADVANCES
- -------------------------
8.1 Purchase of Cash Advance Fees.
-----------------------------
(a) NaBANCO shall purchase, and the NB Group shall sell, 80% of the
"Cash Advance Fees" generated from banking center, non-automated
teller machine manual cash disbursements ("Cash Advances") made
by any NB Bank in the Initial Territory, all as provided in the
Asset Purchase Agreement.
(b) In the event the Partnership purchases a Regional Merchant
portfolio, or portion thereof, from an NB Group member under the
circumstances described in Section 5.5(a) or 5.5(b), NaBANCO
shall
41
purchase, and the NB Group shall sell, 50% of the Cash Advance
Fees generated from Cash Advances made by NB Banks in the
Expansion Territory.
(c) In the event the Partnership purchases a Regional Merchant
portfolio, or portion thereof, from an NB Group member under the
circumstances described in Section 5.6, NaBANCO shall purchase
50% of the Cash Advance Fees generated from Cash Advances made by
banking centers in the Partnership Territory which are acquired
by any NB Bank member in the transaction covered by Section 5.6.
(d) For purposes of any purchase by NaBANCO of Cash Advance Fees
pursuant to this Section 8.1, Cash Advance Fees shall mean Cash
Advance reimbursement fees (net of any third party processing
costs in the event of a purchase pursuant to subsection (b) or
(c), above) received by the NB Group members (directly or
indirectly) from Visa and MasterCard. The purchase price for
Cash Advance Fees shall be two times 80% or 50%, as appropriate,
of the Cash Advance Fees for a twelve-month period ending
February 28, 1995, in the case of subsection (a) above, and
ending on the last day of the most recent month for which results
are available in the case of subsections (b) and (c) above.
8.2 Cash Advance Services.
---------------------
NaBANCO and the NB Group Members shall agree on mutually satisfactory
procedures for the NB Group to collect Cash Advance slips from the
banking centers and other banking offices of the NB Group and make
them available for pick-up by NaBANCO and for the transmission to
NaBANCO of each Cash Advance that is data captured. NaBANCO shall
provide authorization services with respect to such cash advances by
members of the NB Group and shall process and submit all Cash Advances
to the Visa and MasterCard interchanges for settlement. Other than
its receipt of 80% or 50%, as appropriate, of the Cash Advance Fees
received by the NB Banks with respect to such Cash Advances, NaBANCO
shall not charge any additional fee for authorizing, processing and
submitting to interchange the Cash Advances made by the NB Group. All
terminals used by members of the NB Group to data capture Cash
Advances shall continue to belong to the applicable NB Group members,
but NaBANCO at its option, may substitute different terminals for the
NB Group members to use to data capture Cash Advances. NaBANCO shall
service all terminals used by the NB Group to data capture Cash
Advances without any additional charge to the NB Group. Such service
shall be provided through the Partnership's sales force, and NaBANCO
shall reimburse the Partnership at cost for such services. Upon
liquidation of the
42
Partnership, all Cash Advance Fees shall revert to the NB Banks or
NaBANCO as appropriate, based on which party initially sold such Cash
Advance Fees.
8.3 Purchase Price Refund.
---------------------
If the Partnership is terminated within five years following the date
on which NaBANCO purchases Cash Advance Fees pursuant to Section
8.1(b) or (c) above from an NB Bank due to any action by any member of
the NB Group (including any exercise of the special veto right by the
NB Sub pursuant to Section 3.8(j) of this JV Agreement) other than as
a result of a breach by any member of the NaBANCO Group, unless the
parties otherwise agree, NaBANCO shall be entitled to a refund of part
or all of its purchase price for 50% of the Cash Advance Fees received
by the NB Group, which refunds shall be a percentage of the total
purchase price paid by NaBANCO for such Cash Advance Fees, depending
on the number of years elapsed since the Closing Date as follows:
If the Partnership is Percentage of Purchase
terminated prior to: Price to be Refunded
------------------- --------------------
1st Anniversary 100%
2nd Anniversary 80%
3rd Anniversary 60%
4th Anniversary 40%
5th Anniversary 20%
Any amounts due hereunder shall be paid by wire transfer on the next
business day following receipt of notice of the amount due.
8.4 Purchase of Cash Advance Revenues by a NaBANCO Group Member.
-----------------------------------------------------------
If a NaBANCO Group member desires to purchase from a third party a
revenue stream consisting of "Cash Advance Fees" (as such term has
been previously defined but modified to mean such fees received by
such third party (directly or indirectly) from Visa and MasterCard),
such NaBANCO Group member shall notify the NB Group. By notice to
such NaBANCO Group member within 30 days, the NB Group shall have the
right to participate with the NaBANCO Group member in such purchase
unless such third party refuses to sell such Cash Advance Fees to the
NB Group jointly with the NaBANCO Group member. If the NB Group so
elects and the third party does not object to the NB Group
participation, then the NB Group shall pay 50% of the purchase price
for, and any such other costs related to, the purchase of such revenue
stream, shall share equally with the NaBANCO
43
Group member in the net profits from such revenue stream (after
payment to the applicable NaBANCO Group member(s) for all costs
associated with the authorization, processing and settlement of such
Cash Advances by the NaBANCO Group member(s)) and shall share equally
with the NaBANCO Group member(s) all costs, expenses and liabilities
incurred as a result of such purchase of Cash Advance Fees. This
Section 8.4 shall not apply to, and shall not in any way restrict the
NaBANCO Group members from entering into, any arrangements by a
NaBANCO Group member to authorize, process and settle Cash Advances
for service fees payable if and when such services are rendered in
contrast to a true purchase of a revenue stream consisting of Cash
Advance Fees.
ARTICLE 9: NORFOLK; EMPLOYEES; BINs AND ICAs; OTHER MATTERS
- ------------------------------------------------------------
9.1 NB Group Merchant Operation and Conversion Expenses.
---------------------------------------------------
Beginning on the Closing Date, NaBANCO will manage that portion of the
NB Group's Norfolk operations center used to provide Merchant
Processing Services for the Partnership's merchants, and the
Partnership will manage the NB Group's merchant sales force. NaBANCO
will be responsible for reimbursing the NB Group for costs under, for
administering and for instructing the NB Group when to terminate any
third party contracts in existence on the date hereof to which an NB
Group member is a party to the extent they relate to the Merchant
Processing Business, as set forth in more detail in the Sponsorship
and Services Agreement. In the event that the Partnership instructs
an NB Group member to take any action or give any notice under such a
third party contract which the NB Group member properly may take and
such NB Group member fails to take such action or give such notice in
a timely manner, any costs, loss or damages resulting from such
failure shall be borne by the NB Group. Except as indicated below,
the expenses of operating the Merchant Processing Services portion of
the Norfolk operations shall be reimbursed to the NB Group by NaBANCO
as part of its servicing responsibilities pending conversion of the
merchants and vacating of such facility by NaBANCO. The NB Group will
no longer be reimbursed for any leasehold or other expenses attributed
to NaBANCO's occupancy of any of the physical locations in the Norfolk
facility used in conducting the Merchant Processing Business when such
locations are vacated by NaBANCO following forty-five days advance
notice to the NB Group by the Partnership. Sales force related
expenses and conversion costs for closing the Norfolk facility and any
sales facilities will be borne by the Partnership. All such expenses
of conversion borne by the Partnership will end by March 31, 1996.
Any expenses of conversion incurred subsequent to the above date will
be borne by NaBANCO. The NB Group will be responsible for all
severance costs of NB Non-Sales Employees who are eligible for
severance as provided
44
in Section 9.2. The NB Group will also absorb personnel costs for NB
Non-Sales Employees no longer needed by the Partnership, provided that
the Partnership provides forty-five (45) days notice prior to the date
the employee is no longer needed. The Partnership will be responsible
for any cost related to the severance of sales personnel and for any
"stay" bonuses payable to NB Sales Employees pursuant to Section 9.2.
9.2 Employees.
---------
(a) Identification. The Partnership, the Banks and NaBANCO shall
--------------
identify and offer employment in the Partnership to selected NB
Sales Employees, selected NB-Non-Sales Employees and selected
NaBANCO employees, not later than December 31, 1995.
(b) Severance Pay. Severance costs with respect to the NB Sales
-------------
Employees, the NB Non-Sales Employees, and the NaBANCO Sales
Employees shall be paid and allocated as follows:
(i) With respect to any NB Sales Employee who does not accept
an offer of employment from the Partnership or from a NB
Group member, and was not offered "comparable employment"
by the Partnership or a NB Group member, such NB Sales
Employee shall be eligible for severance pay from the NB
Group member. Any severance costs incurred in connection
with such NB Sales Employee shall be reimbursed to the NB
Group member by the Partnership. For purposes of this
Section 9.2(b)(i), "comparable employment" shall mean a job
consistent with the employee's job skills and offering the
same total compensation potential (although the mix between
base salary and bonus may be changed) and in the same
geographic area (i.e., within a 35 mile radius of the
present job location or the employee's principal
residence).
(ii) With respect to NB Non-Sales Employees, the cost of any
severance benefits for such NB Non-Sales Employees shall be
determined by and borne by the NB Group. However, the
Partnership shall reimburse the NB Group for all "stay
bonuses" mutually agreed upon by the Partnership that are
offered to NB Non-Sales Employees in connection with the
formation of the Partnership.
(iii) With respect to any NaBANCO Sales Employee who does not
receive and accept an offer of comparable employment from
the Partnership or from a NaBANCO Group member, such
45
NaBANCO Sales Employee shall be eligible for severance pay
from the applicable NaBANCO Group Member. Any severance
costs incurred in connection with such NaBANCO sales
employee shall be reimbursed to the NaBANCO Group Member by
the Partnership.
In addition, for a period of twelve months following formation of
the Partnership, the Partnership shall not terminate without
cause any NB Sales Employee or NB Non-Sales Employee who accepts
employment with the Partnership without paying to such employee a
severance benefit equal to one week of salary for each year of
service with the NB Group.
(c) Benefits. With respect to NB Sales Employees and NB Non-Sales
--------
Employees who accept the an offer of employment from the
Partnership or a NaBANCO Group member (the "Affected NB
Employees"), the Banks shall cause The NationsBank Pension Plan
and The NationsBank Retirement Savings Plan to be amended
effective as of the date of their termination of employment with
the NB Group to fully (i.e., 100%) vest the accrued benefits
thereunder of such Affected NB Employees as of such termination
date, and to pay their accrued benefits under such Plans when and
as provided in such Plans, and for purposes of determining when
such benefits become payable, such Affected NB Employees shall be
deemed to have separated from service on such termination date.
In addition, the Partnership shall cause such Affected NB
Employees to be credited under the employee benefit plans of the
Partnership for their prior service with the NB Group to the
extent that service is relevant for purposes of eligibility,
vesting or allowances (including, without limitation, entitlement
to vacation and sick days) under any of the Partnership's
employee benefit plans. Affected NB Employees and their
dependents who are covered by the NB Group member's medical plan
as of such termination date shall be covered under the
Partnership's medical plan immediately upon employment, and shall
not be subject to any pre-existing condition limitations or
exclusions except those excluded under the terms of the NB Group
member's medical plan. Affected NB Employees shall not be
required to satisfy the deductible and employee co-payments and
out-of-pocket maximum required by the Partnership's comprehensive
medical or dental plans for calendar year 1995 to the extent of
amounts previously credited for 1995 under comparable plans
maintained by the NB Group members.
46
9.3 Transition Arrangements.
-----------------------
For the sake of administrative convenience, the Partners may determine
that it is advisable to leave employees who have accepted offers of
employment with the Partnership as of the Closing Date, on the payroll
and benefits programs of the NB Group member and the NaBANCO Group
member, respectively, until some date following the Closing Date on
which the Partnership's payroll systems and benefits programs will be
in place. If the Partners mutually agree to leave employees who would
otherwise become employees of the Partnership on the Closing Date on
their respective payrolls and benefit systems for a period after the
Closing Date, then the Partnership shall reimburse the NB Group member
and the NaBANCO Group member, respectively, for the payroll and
benefit costs incurred in connection with carrying such employees on
their respective payrolls and benefit programs for the affected
period, such reimbursement to be made pursuant to a methodology to be
mutually agreed upon by the Partnership, the NB Group member and the
NaBANCO Group member.
9.4 NationsBank's BINs and ICAs.
---------------------------
An NB Group member(s)' BINs and ICAs will be used for processing
Partnership merchant transactions, and the Partnership will reimburse
such NB Member(s) for all Card Association fees and incidental
expenses relating to the use of such BINs and ICAs, all as provided
in, and subject to the terms and conditions of the Sponsorship and
Services Agreement. The Sponsorship and Services Agreement also will
provide for the Partnership to indemnify the NB Group Member(s) for
credit, chargeback and fraud losses and other liabilities and risks
relating to the provision of Merchant Processing Services (except to
the extent any loss is caused by the failure to perform or
unreasonable delay by a NB Group Member in performing its obligations
under such agreement). FFMC and NationsBank hereby guarantee
performance of the Partnership's indemnification obligation in
proportion to the Sharing Percentages of the NaBANCO Sub and the NB
Sub, respectively, but shall not be liable to satisfy any such
indemnification obligation unless and until the Partnership fails to
satisfy its indemnification obligations after appropriate measures to
enforce such obligations. Upon dissolution of the Partnership, the NB
Group shall take all reasonable steps necessary to permit the NaBANCO
Group to continue its Merchant Processing Business on an uninterrupted
basis, including, without limitation, permitting or otherwise
accommodating and allowing the continued use of the NB Group
member(s)' BINs and ICAs for up to 60 days after the division of
contracts or the purchase of the NB Sub's Partnership interest. In
the case of any continued use by a member of the NaBANCO Group of such
BINs and ICAs of the NB Group following dissolution, the Sponsorship
and Services Agreement shall
47
provide for an appropriate continuation of such guarantees by the
NaBANCO Group.
9.5 Payment System Indemnity.
------------------------
NaBANCO and FFMC, jointly and severally, will indemnify the NB Group
against any reckless, fraudulent or careless activity by FFB or any
other payment system intermediary under Control of NaBANCO or FFMC or
any of their Affiliates for any payment system loss within the Control
of the NaBANCO Group. The Banks and NationsBank, jointly and
severally, will indemnify NaBANCO and FFB against any reckless,
fraudulent or careless activity by the Banks or any other payment
system intermediary under Control of the NB Group for any payment
system loss within the Control of the NB Group.
9.6 Special Fee.
-----------
The NB Group shall pay NaBANCO a fee of $1.6 million at Closing
pursuant to a separate arrangement for certain transitional services.
ARTICLE 10: CLOSING
- --------------------
10.1 Closing.
-------
The closing of the transactions contemplated by this JV Agreement,
evidenced by the closing of the Related Agreements, shall occur at a
closing (the "Closing") to be held at the offices of Sutherland,
Asbill & Brennan, 999 Peachtree Street, N.E., Atlanta, Georgia 30309,
at 10:00 a.m. local time on a date (the "Closing Date") which shall be
the later to occur of April 6, 1995, or two (2) business days
following the date upon which either party notifies the other that all
Approvals have been obtained and all statutory waiting periods have
expired, or at such other place, time or date on which the parties
shall mutually agree and shall be effective in terms of allocating all
economic consequences among the applicable parties as of March 31,
1995 (or if the Closing does not occur until after April 6, 1995,
shall be effective in terms of allocating all economic consequences
among the applicable parties as of the last day of the month in which
such Approvals are obtained and statutory waiting periods expire) (the
"Effective Date").
48
ARTICLE 11: REPRESENTATIONS AND WARRANTIES
- -------------------------------------------
11.1 Representations and Warranties of NaBANCO.
-----------------------------------------
NaBANCO and FFMC hereby jointly and severally represent and warrant to
the Banks as follows:
(a) Corporate Organization. FFMC, NaBANCO and the NaBANCO Sub are
----------------------
corporations duly organized and validly existing under the laws
of Georgia (in the case of FFMC and the NaBANCO Sub) and Florida
(in the case of NaBANCO).
(b) Capacity; Authorization. This JV Agreement has been (and the
-----------------------
Partnership Agreement when delivered shall be) duly authorized,
executed and delivered by NaBANCO and FFMC (or in the case of the
Partnership Agreement, by the NaBANCO Sub) and is (or in the case
of the Partnership Agreement, shall be) the legal, valid and
binding agreement of NaBANCO and FFMC (or in the case of the
Partnership Agreement of the NaBANCO Sub, shall be), enforceable
in accordance with their terms (except as such enforceability may
be limited by (i) equitable limitations on the availability of
equitable remedies or (ii) bankruptcy, insolvency, reorganization
or similar laws).
(c) No Brokers. All negotiations relative to this JV Agreement and
----------
the transactions contemplated hereby have been carried on by the
NaBANCO Group and there has been no participation or intervention
by any other person, firm or corporation employed or engaged by
or on behalf of the NaBANCO Group in such a manner as to give
rise to any valid claim against the Partnership or any NB Group
member for a brokerage commission, finder's fee or like
commission.
(d) No Violation. Neither the execution and delivery of this JV
------------
Agreement nor the consummation of the transactions contemplated
herein, will violate or conflict with (i) the Articles of
Incorporation or Bylaws of NaBANCO, FFMC or the NaBANCO Sub; (ii)
any material provision of any material agreement or any other
material restriction of any kind to which NaBANCO or FFMC is a
party or by which it is bound; (iii) any material statute, law,
decree, regulation or order of any Governmental Authority, or
(iv) any material provision which will result in a default under,
or which will cause the acceleration of the maturity of, any
material obligation or loan to which NaBANCO or FFMC is a party.
49
(e) Regulatory Applications. In any application or filing for an
-----------------------
Approval filed, amended or supplemented, by a NaBANCO Group
member, or if a NaBANCO Group member furnishes information to a
NB Group member for inclusion in any such application or filing,
the information so included in any such application or so
furnished shall comply in all material respects with all
Applicable Laws and Card Association Rules and will not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading.
(f) Financial Information. This JV Agreement and all reports,
---------------------
statements, lists, certificates and other documents delivered
(including the pro forma projections attached hereto as Schedule
3.4B), and any information theretofore or hereafter furnished, by
NaBANCO to the Banks in writing in connection with this JV
Agreement or any of the transactions contemplated hereby
(collectively, the "Materials and Information"), any with respect
to any particular matter, (i) have been and will be prepared in
accordance with the accounting practices, procedures and methods
employed by NaBANCO in connection with the Merchant Processing
Business; (ii) fairly presents the financial condition and
results of operations of the Merchant Processing Business as of
the date and for the periods indicated; and (iii) are true,
complete and accurate in all material respects as of the date
thereof and do not, as of such date, contain any untrue statement
of a material fact or omit to state a material fact necessary in
order to make the statement made, in light of the circumstances
under which they are made, not misleading.
11.2 Representations and Warranties of the Banks.
-------------------------------------------
The Banks and NationsBank hereby jointly and severally represent and
warrant to NaBANCO and FFMC as follows:
(a) Corporate Organization. The Banks are duly organized and validly
----------------------
existing national banking associations and NationsBank is a
corporation duly organized and validly existing under the laws of
the State of North Carolina. The NB Sub is (or will be as of the
Closing Date) a partnership duly organized, validly existing and
in good standing under the laws of the State of North Carolina.
(b) Capacity; Authorization. This JV Agreement has been (and the
-----------------------
Partnership Agreement when delivered shall be) duly authorized,
executed and delivered by the Banks and NationsBank (or in the
case of the Partnership Agreement, by the NB Sub) and is (or in
the case
50
of the Partnership Agreement, shall be) the legal, valid and
binding agreement of the Banks and NationsBank (or in the case of
the Partnership Agreement, of the NB Sub), enforceable in
accordance with their terms (except as such enforceability may be
limited by (i) equitable limitations on the availability of
equitable remedies or (ii) bankruptcy, insolvency, reorganization
or similar laws).
(c) No Brokers. All negotiations relative to this JV Agreement and
----------
the transactions contemplated hereby have been carried on by the
NB Group and there has been no participation or intervention by
any other person, firm or corporation employed or engaged by or
on behalf of the NB Group in such a manner as to give rise to any
valid claim against the Partnership or any NaBANCO Group member
for a brokerage commission, finder's fee or like commission.
(d) No Violation. Neither the execution and delivery of this JV
------------
Agreement nor the consummation of the transactions contemplated
herein, will violate or conflict with (i) any Bank's Articles of
Association or Bylaws; (ii) NationsBank's Articles of
Incorporation or Bylaws; (iii) any material provision of any
material agreement or any other material restriction of any kind
to which any Bank or NationsBank is a party or by which it is
bound; (iv) any material statute, law, decree, regulation or
order of any Governmental Authority; or (v) any material
provision which will result in a default under, or which cause
the acceleration of the maturity of, any material obligation or
loan to which any Bank or NationsBank is a party.
(e) Regulatory Applications. In any application or filing for an
-----------------------
Approval filed, amended or supplemented, by a NB Group member, or
if a NB Group member furnishes information to a NaBANCO Group
member for inclusion in any such application or filing, the
information so included in any such application or so furnished
shall comply in all material respects with all Applicable Laws
and Card Association Rules and will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
(f) Financial Information. This JV Agreement and all reports,
---------------------
statements, lists, certificates and other documents delivered,
and any information theretofore or hereafter furnished, by the
Banks in writing to NaBANCO in connection with this Agreement or
any of the transactions contemplated hereby (collectively, the
"Materials and Information"), any with respect to any particular
matter, (i) have been and will be prepared in accordance with the
accounting practices,
51
procedures and methods employed by the Banks in connection with
the Merchant Processing Business; (ii) fairly presents the
financial condition and results of operations of the Merchant
Processing Business as of the date and for the periods indicated;
and (iii) are true, complete and accurate in all material
respects as of the date thereof and does not, as of such date,
contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statement made, in
light of the circumstances under which they are made, not
misleading.
ARTICLE 12: ADDITIONAL COVENANTS
- ---------------------------------
12.1 Regulatory and Other Approvals.
------------------------------
(a) Pursuit of Required Approvals. Each of the parties shall use its
-----------------------------
best efforts as soon as reasonably possible to take all actions
to obtain all Approvals from and to make all filings with and
give all notices to Governmental Authorities and other Persons
including, without limitation:
(i) The Banks shall prepare and file applications required by
law with the appropriate banking regulatory authorities for
approval of the transactions contemplated. The Banks agree
to process such applications in a diligent manner and on a
priority basis and to provide NaBANCO promptly with a copy
of such applications as filed (except for any confidential
portions thereof) and all material notices, orders,
opinions, correspondence and other documents with respect
thereto, and to use its best efforts to obtain all
necessary regulatory approvals. As of the Closing Date, the
Banks know of no reason why such applications should not
receive all such approvals. The Banks shall promptly notify
NaBANCO upon receipt by the Banks of notification that any
application provided for hereunder has been denied.
(ii) The parties shall prepare and file all filings and other
actions required under applicable state laws to permit the
Partnership to engage in its business.
(iii) The parties shall prepare and file all other filings and
take all other actions required for the Partnership to
conduct its business.
52
(b) Cooperation. Each of the parties, to the extent applicable,
-----------
shall fully cooperate with the other parties in the preparation
of all applications, notices or other filings for any Approvals
and will furnish promptly upon request all documents,
information, financial statements or other materials as may be
required in order to complete such applications, notices or other
filings.
(c) Regulatory Applications. In any application or filing for an
-----------------------
Approval filed, amended or supplemented, or if a party hereto
furnishes information to any other party for inclusion in any
such application or filing, the information so included by such
party in any such application or so furnished to the other party
shall comply in all material respects with all Applicable Laws
and Card Association Rules and will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
12.2 Publicity.
---------
The parties will consult with each other with regard to the terms and
substance of any and all press releases, announcements or other public
statements with respect to the transactions contemplated hereby. The
parties further agree that neither of them will release any such press
release, announcement or other public statement without the prior
approval of the other parties, unless such release is required by
Applicable Law or Card Association Rules and the parties cannot agree
upon a mutually acceptable form of release, in which event the party
releasing information, announcement or public statement shall not be
deemed to be in breach of this JV Agreement. The parties also agree
that any such approval will not be unreasonably withheld, and they
agree to use best efforts to reach agreement expeditiously on the
terms of any such press release, announcement or other public
statement.
12.3 Confidentiality.
---------------
(a) Disclosure Limitation. Except as expressly authorized herein or
---------------------
by the parties hereto, during the term of this Joint Venture,
each of the parties agrees not to disclose, use, or permit the
disclosure or use by others, of any Proprietary Information
received from the other party or the Partnership, as the case may
be, for any other purpose other than to effectuate the intent of
this JV Agreement during the term of this JV Agreement or at any
time thereafter for any reason whatsoever, unless and to the
extent such Proprietary Information (i) is or becomes a matter of
public knowledge through no action or inaction of the party
53
receiving the Proprietary Information, (ii) was in the receiving
party's possession before receipt from the party providing such
Proprietary Information, (iii) is rightfully received by the
receiving party from a third party without any duty of
confidentiality, (iv) is disclosed to a third party by the party
providing the Proprietary Information without a duty of
confidentiality on the third party, (v) is disclosed pursuant to
a valid order of any Governmental Authority, (vi) is disclosed to
any Card Association, or (vii) is disclosed with the prior
written approval of the party providing such Proprietary
Information. The same provisions on disclosure apply to this JV
Agreement and all Related Agreements.
(b) Confidentiality After Termination. If this JV Agreement is
---------------------------------
terminated pursuant to Section 14.1(a)(d), each party will return
all documents, work papers and other materials of the other
party, including photocopies or other duplications thereof,
relating to the transactions contemplated by this JV Agreement,
whether obtained before or after the execution hereof, to the
party furnishing the same, and the duty of confidentiality as
provided herein shall survive termination of this JV Agreement.
(c) Partnership Affected. The parties also agree that the Partnership
--------------------
will be subject to the same provisions on confidentiality as set
forth in (a).
(d) Survival. All provisions of disclosure and confidentiality shall
--------
survive the termination of this Agreement.
12.4 Gain Recognition Election.
-------------------------
NB Group shall file an election under Section 197(f)(9)(B) of the
Internal Revenue Code of 1986, as amended, with respect to the
Merchant Service Contracts to be sold by the Selling Banks and such
election shall be in the form and filed at the time prescribed by the
Internal Revenue Service for such filings.
ARTICLE 13: CONDITIONS PRECEDENT TO CLOSING
- --------------------------------------------
13.1 Mutual Conditions to Obligation to Close.
----------------------------------------
The obligations of the parties to consummate the transactions
contemplated by this JV Agreement and the Related Agreements are
subject to the satisfaction or waiver on or before the Closing Date of
all of the following conditions:
54
(a) No Violations of Law, Litigation, Etc. The transactions
-------------------------------------
contemplated by this JV Agreement and the Related Agreements
shall not violate any Applicable Law or Card Association Rules.
There shall be no pending or threatened actions or proceedings by
any Person or Governmental Authority (or determinations by any
Governmental Authority) challenging or in any manner seeking to
restrict, prohibit or condition (except pursuant to the
Approvals) the transactions and activities contemplated hereby
(as determined in the sole judgment of the party to which such
actions or proceedings relate, which judgment shall not be
unreasonably exercised) or seeking to obtain any material damages
against any of the parties to this JV Agreement or any of the
Related Agreements as a result of the transactions and activities
contemplated hereby or thereby.
(b) Approvals. All of the Approvals for the transactions and
---------
activities contemplated by this JV Agreement and the Related
Agreements shall have been obtained and shall be satisfactory in
all material respects to the Banks and NaBANCO; such Approvals
shall be in effect and no proceedings shall have been initiated
or threatened with respect thereto; and all conditions and
requirements prescribed under Applicable Law or Card Association
Rules or by such Approvals shall have been satisfied.
13.2 Additional Conditions to Obligations of the NaBANCO Parties.
-----------------------------------------------------------
The obligations of the NaBANCO Parties to consummate the transactions
contemplated by this JV Agreement and the Related Agreements are
subject to the satisfaction or waiver by NaBANCO on or before the
Closing Date (or as otherwise provided below) of all of the following
additional conditions:
(a) Representations and Warranties, Etc.
-----------------------------------
(i) All representations and warranties of the Banks and
NationsBank contained in this JV Agreement shall be true
and correct in all material respects as of the date of this
JV Agreement (or as of the Closing Date, as applicable);
(ii) the Banks shall have performed and satisfied in all
material respects all covenants and conditions required by
this JV Agreement to be performed and satisfied by each of
them at or prior to the Closing Date; and
(iii) there shall have been delivered to NaBANCO on the Closing
Date a certificate executed as of such date by a duly
authorized
55
officer of each Bank certifying compliance with all the
provisions of this Section 13.2(a).
(b) Authorization, Execution and Delivery of Documents. This JV
--------------------------------------------------
Agreement, the Partnership Agreement and Related Agreements
containing mutually agreed upon terms shall have been duly
authorized, executed and delivered by the NB Parties that are
parties thereto, and an executed counterpart of each thereof
shall have been delivered to NaBANCO.
13.3 Additional Conditions to Obligations of the NB Parties.
------------------------------------------------------
The obligations of the NB Parties to consummate the transactions
contemplated by this JV Agreement and the Related Agreements are
subject to the satisfaction or waiver by the Banks on or before the
Closing Date (or as otherwise provided below) of all of the following
additional conditions:
(a) Representations and Warranties, Etc.
-----------------------------------
(i) All representations and warranties of NaBANCO and FFMC
contained in this JV Agreement shall be true and correct in
all material respects as of the date of this JV Agreement
(or as of the Closing Date, as applicable);
(ii) NaBANCO shall have performed and satisfied in all material
respects all covenants and conditions required by this JV
Agreement to be performed and satisfied by it at or prior
to the Closing Date; and
(iii) there shall have been delivered to the Banks on the
Closing Date a certificate executed as of such date by a
duly authorized officer of NaBANCO certifying compliance
with all the provisions of this Section 13.3(a).
(b) Authorization, Execution, and Delivery of Documents. This JV
---------------------------------------------------
Agreement, the Partnership Agreement and Related Agreements
containing mutually agreed upon terms shall have been duly
authorized, executed and delivered by the NaBANCO Parties which
are parties thereto, and an executed counterpart of each thereof
shall have been delivered to the Banks.
56
ARTICLE 14: MISCELLANEOUS PROVISIONS
- -------------------------------------
14.1 Notices.
-------
Every notice or other communication required or contemplated by this
JV Agreement shall be delivered either by (i) personal delivery, (ii)
postage prepaid, return receipt requested, registered or certified
mail (airmail if available), (iii) nationally recognized express
courier, such as Federal Express, Purolator or UPS, or (iv) facsimile
with a confirmation copy sent simultaneously in the manner
contemplated by clauses (i), (ii) or (iii) of this Section 14.1, in
each case addressed as follows:
(1) If to NaBANCO:
M. Tarlton Pittard
Vice Chairman
First Financial Management Corporation
3 Corporate Square, Suite 700
Atlanta, Georgia 30329
Fax: (404) 634-6352
and
Paul R. Garcia
President and Chief Executive Officer
1401 N.W. 136th Avenue
Sunrise, Florida 33323
Fax: (305) 846-1501
with a copies to:
Randolph L.M. Hutto
Senior Executive Vice President and
General Counsel
First Financial Management Corporation
3 Corporate Square, Suite 700
Atlanta, Georgia 30329
Fax: (404) 636-7632
F. Louise Adams
Sutherland, Asbill & Brennan
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
Fax: (404) 853-8806
57
(2) If to the Banks:
Eileen M. Friars
NationsBank Corporation
101 S. Tryon Street
NC1-002-23-70
Charlotte, NC 28255
Fax: (704) 386-9964
with copies to:
G. Patrick Phillips
President, Financial Products
NationsBank Corporation
100 N. Tryon Street
Charlotte, North Carolina 28255
Fax: (704) 386-6416
General Counsel
NationsBank Corporation
100 N. Tryon Street, NC1-007-20-01
Charlotte, North Carolina 28255
Fax: (704) 386-6453
or at such other address or to such other person as the party
receiving such notice previously shall have designated by written
notice to the other party. Notice by registered or certified mail
shall be effective on the date it is officially recorded as delivered
to the intended recipient by return receipt or equivalent. All
notices and other communications required or contemplated by this JV
Agreement delivered in person or sent by courier shall be deemed to
have been delivered to and received by the addressee and shall be
effective on the date of personal delivery; notices delivered by
facsimile with simultaneous confirmation copy by registered or
certified or equivalent mail or courier shall be deemed delivered to
and received by the addressee and effective on the date sent. Notice
not given in writing shall be effective only if acknowledged in
writing by a duly authorized representative of the party to whom it
was given.
14.2 No Agency.
---------
Except to the extent expressly provided herein, this JV Agreement
shall not constitute an appointment of either party hereto as the
legal representative or agent of the other party, nor shall either
party hereto have any right or authority to assume, create or incur in
any manner any obligation or other
58
liability of any kind, express or implied, against, or in the name or
on behalf of, the other party.
14.3 Severability.
------------
In the event any provision of this JV Agreement shall be determined to
be invalid or unenforceable under Applicable Law, all other provisions
of this JV Agreement shall continue in full force and effect unless
such invalidity or unenforceability caused substantial deviation from
the underlying intent of the parties expressed in this JV Agreement or
unless the invalid or unenforceable provisions comprise an integral
part of, or are inseparable from, the remainder of this JV Agreement.
In such event, the parties shall replace the invalid provision with a
valid provision which corresponds as far as possible to the spirit and
purpose of the invalid provision.
14.4 Entire Agreement.
----------------
This JV Agreement and the Related Agreements embody the entire
agreement and understanding of the parties with respect to the subject
matter hereof, and supersede all prior and contemporaneous agreements
and understandings, oral or written, relative to such subject matter.
Neither party has relied upon any representation or warranty of other
party except as expressly set forth herein or in the Related
Agreements.
14.5 Drafting Responsibility.
-----------------------
This JV Agreement has been negotiated at arm's length and between
Persons sophisticated and knowledgeable in the matters dealt with in
this JV Agreement. Each party has been represented by experienced and
knowledgeable legal counsel. Accordingly, any rule of law or legal
decision that would require interpretation of any ambiguities in this
JV Agreement against the party that has drafted it is not applicable
and is waived. The provisions of this JV Agreement shall be
interpreted in a reasonable manner to effect the purpose of the
parties and this JV Agreement.
14.6 Assignment and Succession; Assignments in Violation Void.
--------------------------------------------------------
Any member of the NaBANCO Group may transfer its rights and interests
in this JV Agreement to an Affiliate. The Banks may transfer their
rights and interest in this JV Agreement to an Affiliate. No
assignment shall relieve the assignor from continued liability
hereunder for its obligations hereunder without the prior written
consent of the other party or parties. Otherwise, no party may assign
or otherwise transfer any rights, interests or obligations under this
JV Agreement without the prior written consent of the other parties,
59
which consent may be withheld in the sole and absolute discretion of
such parties. Any attempted assignment in violation of this provision
shall be void and of no effect.
14.7 Expenses of Transaction.
-----------------------
Each party shall pay its own respective costs and expenses incurred in
connection with the negotiation, execution and delivery of this JV
Agreement.
14.8 Waivers; Consents.
-----------------
This JV Agreement may not be changed, amended, terminated,
supplemented, rescinded or discharged (other than by performance), in
whole or in part, unless a written agreement is executed by the
parties hereto or thereto, and no waiver of any of the provisions or
conditions of this JV Agreement or any of the rights of a party hereto
shall be effective or binding unless such waiver shall be in writing
and signed by the party claimed to have given it or consented thereto.
Except to the extent that a party hereto may have otherwise agreed in
writing, no waiver by that party of any condition of this JV Agreement
or breach by the other party of any of its obligations or
representations hereunder or thereunder shall be deemed to be a waiver
of any other condition or subsequent or prior breach of the same or
any other obligation or representation by the other party, nor shall
any forbearance by the first party to seek a remedy for any
noncompliance or breach by the other party be deemed to be a waiver by
the first party of its rights and remedies with respect to such
noncompliance or breach.
14.9 Further Assurances.
------------------
Each party shall execute and deliver such instruments and take such
other actions as the other party or parties, as the case may be, may
reasonably require in order to carry out the intent of this JV
Agreement, including, without limitation, taking all actions that may
be necessary to cause the NaBANCO Sub and the NB Sub, respectively,
and each other NB Party or NaBANCO Party, respectively, to take any
actions required to be taken in order to complete the transactions
contemplated by this JV Agreement and the Related Agreements.
14.10 Absence of Third-Party Beneficiaries.
------------------------------------
No provisions of this JV Agreement, express or implied, are intended
or shall be construed to confer upon or give to any Person other than
the parties hereto or thereto, any rights, remedies or other benefits
under or by reason of this JV Agreement unless specifically provided
otherwise herein or therein,
60
and except as so provided, all provisions hereof shall be personal
solely between the parties to this JV Agreement.
14.11 Governing Law.
-------------
The validity, construction, performance and enforceability of this JV
Agreement shall be governed in all respects by the laws of the State
of Georgia applicable to agreements negotiated, executed and performed
in Georgia by Georgia parties.
14.12 Alternative Dispute Resolution.
------------------------------
(a) In the event of a Dispute between one or more NB Parties and one
or more NaBANCO parties, such parties shall promptly consult with
one another in an effort to resolve the Dispute. Initially, the
individuals directly involved will attempt to settle the Dispute
and, if they are unable to reach a resolution, their supervisors
will attempt to settle the Dispute. Failing a resolution of the
Dispute by the individuals directly involved or their
supervisors, the individuals designated by the Parties to receive
notices under this Agreement shall negotiate in good faith for at
least 30 days in an effort to settle the disagreement. If such
effort is unsuccessful, the Dispute will be submitted for binding
arbitration in accordance with this Section 14.12 through
presentation by either party to the other party of a written
notification to that effect.
(b) Any Dispute which is not resolved pursuant to subsection (a)
above shall be solely and finally determined by binding
arbitration in accordance with the Federal Arbitration Act, the
Rules of Practice and Procedure for the Arbitration of Commercial
Disputes of Judicial Arbitration and Mediation Services, Inc.
("JAMS"), and the rules set forth in subsection (c) below. In
the event of any inconsistency, the rules set forth in subsection
(c) below shall govern. Judgment upon any arbitration award may
be entered in any court having jurisdiction. Either party may
bring an action, including a summary or expedited proceeding, to
compel arbitration of any Dispute with respect to which
arbitration is required by this Section 14.12 in any court having
jurisdiction over such action.
(c) The arbitration shall be conducted in Atlanta, Georgia, and shall
be administered by JAMS, except as provided below. Before
selecting the arbitrator(s), JAMS (or if JAMS is unable or is
legally precluded from appointing the arbitrators or
administering the arbitration, then the Center for Public
Resources) shall consult with each party to discuss the
applicable qualifications for the proposed arbitrators. JAMS
(or,
61
if applicable, the Center for Public Resources) shall appoint the
arbitrator(s), each party to discuss and the arbitrator(s) shall
specify the method of administering the arbitration. Upon
request by any of the parties involved in the Dispute, JAMS (or,
if applicable, the Center for Public Resources) shall select a
panel of three arbitrators, but if no such request is made by the
time the parties comment on the qualifications for the proposed
arbitrators, JAMS (or, if applicable, the Center for Public
Resources) may select a single arbitrator unless the JAMS (or, if
applicable, the Center for Public Resources) determines that
three arbitrators are more appropriate. All arbitration hearings
will be commenced no less than forty-five (45) days and no more
than ninety (90) days after submission of a written demand for
arbitration from a party hereto to the other party, and the Banks
and NaBANCO shall exchange final position papers and provide such
papers to the arbitrator(s) within thirty (30) days after
presentation of a notification submitting the matter to
arbitration. The arbitrator(s) shall be permitted, upon a
showing of cause, to extend the commencement of such hearing for
up to, but no longer than, an additional sixty (60) days. Each
party will have no more than six (6) hours at the hearing to
present its case, including witnesses, to the arbitrator. The
arbitrator(s) shall have the right to employ experts to assist
him or her or them in any arbitration proceeding under this
Section 14.12(c). Within thirty (30) days after the hearing, the
arbitrator(s') will render a written decision. All payments due
under the arbitrator's decision will be made within thirty (30)
days of the issuance of the decision. The arbitrator(s) may
assess the fees and expenses of the arbitrator(s) and the other
costs of arbitration against one or more parties as the
arbitrator(s) deems appropriate (excluding the fees and
disbursements of the prevailing party's counsel).
(d) Nothing contained in this Section 14.12 shall limit or impair the
right of any party to seek injunctive relief from any court of
competent jurisdiction with respect to any Dispute involving a
breach of any of the exclusivity rights or noncompetition
provisions of the JV Agreement, provided, however, the sole and
exclusive remedy in any such judicial proceeding shall be the
issuance of temporary restraining order, preliminary injunction
or other interlocutory relief in order to maintain the status quo
while the parties pursue resolution of the Dispute. As otherwise
provided in Section 14.12.
(e) In no event shall either party seek or be entitled to punitive or
exemplary damages.
62
14.13 Counterparts.
------------
This JV Agreement may be executed in multiple separate counterparts,
each of which shall be deemed an original but which when taken
together, shall constitute one and the same instrument.
63
IN WITNESS WHEREOF, the parties have executed this JV Agreement as of
the date first above written.
NATIONSBANK N.A. (CAROLINAS)
By:/s/ Frank L. Gentry
----------------------------------
Frank L. Gentry
Executive Vice President
NATIONSBANK OF FLORIDA, N.A.
By:/s/ Frank L. Gentry
----------------------------------
Frank L. Gentry
Executive Vice President
NATIONAL BANCARD CORPORATION
By:/s/ Randolph L.M. Hutto
-------------------------------
Randolph L.M. Hutto
Executive Vice President
NATIONSBANK CORPORATION
By:/s/ Frank L. Gentry
----------------------------------
Frank L. Gentry
Executive Vice President
FIRST FINANCIAL MANAGEMENT CORPORATION
By:/s/ Randolph L.M. Hutto
-------------------------------
Randolph L.M. Hutto
Senior Executive Vice President
64
[LOGO OF FFMC APPEARS HERE]
First Financial Management Corporation
3 Corporate Square, Suite 700, Atlanta, Georgia 30329
(404) 321-0120
April 2, 1995
BY FACSIMILE
Ms. Eileen M. Friars
President, NationsBank Merchant Services
101 S. Tryon Street
Charlotte, North Carolina 28255
Dear Eileen:
First Financial Management Corporation, National Bancard Corporation
(NaBANCO") and First Financial Bank ("FFB") hereby agree that the Joint Venture
Formation Agreement among NationsBank, N.A. (Carolinas), NationsBank of Florida,
N.A. and National Bancard Corporation, dated April 2, 1995 (the "JV Agreement")
will be revised to reflect our agreement that in the case of an "Expansion
Territory" purchase in accordance with the terms of Section 5.5 of the JV
Agreement, the NationsBank Sub will have an option to purchase, rather than
being required to purchase, any portfolio in an Expansion Territory that has
been purchased by NaBANCO/FFB within twelve months of the date the territory
becomes an Expansion Territory, the purchase price for which would be greater
than 1.75 times the Annual Gross Profit as defined in the JV Agreement.
Sincerely,
/s/ Randolph L. M. Hutto
------------------------
Randolph L. M. Hutto
Senior Executive Vice President &
General Counsel
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