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Operations Agreement

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Sectors: Banking
Governing Law: New York, View New York State Laws
Effective Date: January 01, 1996
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DRAFT: NOVEMBER 25, 1996


OPERATIONS AGREEMENT


DATED AS OF ________, 1996


AMONG


MONEYGRAM PAYMENT SYSTEMS, INC.,


FIRST DATA TECHNOLOGIES, INC.


AND


INTEGRATED PAYMENT SYSTEMS INC.


TABLE OF CONTENTS
-----------------


Section Page - ------- ---- ARTICLE 1


DEFINITIONS ............................................................. 1


ARTICLE 2


SERVICES ................................................................ 9
Section 2.1. Support Services ................................... 9
Section 2.2. Additional Services ................................ 9


ARTICLE 3


TRANSACTION SETTLEMENT; PORTFOLIO AND REGULATORY COMPLIANCE ............. 9
Section 3.1. Transaction Settlement ............................. 9
Section 3.2. Portfolio .......................................... 10
Section 3.3. MoneyGram Agents ................................... 11
Section 3.4. Compliance with Laws ............................... 13
Section 3.5. Transition of Business ............................. 14


ARTICLE 4


SECURITY ................................................................ 15


ARTICLE 5


GENERAL AGREEMENTS OF THE PARTIES ....................................... 15
Section 5.1. Company Obligations ................................ 15
Section 5.2. First Data Obligations ............................. 16
Section 5.3. Extension of Term; Money Order Processing .......... 16
Section 5.4. License to Certain Software ........................ 17


ARTICLE 6


PAYMENTS TO FIRST DATA .................................................. 18
Section 6.1. Fees and Charges ................................... 18
Section 6.2. IPS Reports and Payments ........................... 18
Section 6.3. Taxes .............................................. 19
Section 6.4. Certification of Charges ........................... 19


ARTICLE 7


CONFIDENTIALITY ......................................................... 19
Section 7.1. General ............................................ 19


i


Section Page - ------- ----
Section 7.2. Confidential Information Defined ................... 20
Section 7.3. Permitted Disclosure; Public and Generic
Information; Legally Required Disclosure ........... 21
Section 7.4. Notices ............................................ 22
Section 7.5. Company Disclosure of Confidential Information
to First Data ...................................... 22
Section 7.6. Remedy ............................................. 23


ARTICLE 8


DISCLAIMER OF REPRESENTATIONS AND WARRANTIES ............................ 23


ARTICLE 9


TERM AND TERMINATION .................................................... 23
Section 9.1. Term ............................................... 23
Section 9.2. Termination by Company ............................. 24
Section 9.3. Termination by First Data .......................... 26
Section 9.4. Orderly Transition ................................. 27
Section 9.5. Effect of Termination .............................. 27


ARTICLE 10


INDEMNITIES, LIABILITY AND LIMITS OF LIABILITY .......................... 28
Section 10.1. First Data's Indemnification ....................... 28
Section 10.2. Company's Indemnification .......................... 29
Section 10.3. Notification ....................................... 31
Section 10.4. Claims Period ...................................... 32
Section 10.5. Subrogation ........................................ 33
Section 10.6. Exclusive Remedy ................................... 33
Section 10.7. No Special Damages ................................. 33


ARTICLE 11


DISPUTE RESOLUTION ...................................................... 34
Section 11.1. Dispute Resolution ................................. 34
Section 11.2. Recourse to Courts and Other Remedies .............. 37
Section 11.3. Affiliates ......................................... 37
Section 11.4. Exception to Article 11 ............................ 37


ARTICLE 12


MISCELLANEOUS ........................................................... 37
Section 12.1. Expenses ........................................... 37
Section 12.2. Relationship of Parties ............................ 38


ii


Section Page - ------- ----
Section 12.3. Force Majeure ...................................... 38
Section 12.4. Entire Agreement ................................... 39
Section 12.5. Assignment ......................................... 39
Section 12.6. Notices ............................................ 39
Section 12.7. Counterparts ....................................... 40
Section 12.8. Governing Law ...................................... 41
Section 12.9. Media Releases ..................................... 41
Section 12.10. Waiver ............................................. 41
Section 12.11. Severability ....................................... 41
Section 12.12. Construction Rules ................................. 42


iii


EXHIBITS


A. Support Services


A-1. Agent Services
A-2. Corporate Support Services
A-3. Data Center Services
A-4. Voice Center Disaster Recovery Services
A-5. Regulatory Compliance Services


B. Inspection, Review and Timing


C. Software


C-1. IPS Application Software
C-2. MoneyGram Application Software
C-3. PC MoneyGram Application Software


D. Pricing and Reimbursable Expenses


E. Terminable Groups of Data Center Services


F. Form of Agent Contract


iv


OPERATIONS AGREEMENT


THIS OPERATIONS AGREEMENT (this "Agreement") dated as of __________, 1996 is among MoneyGram Payment Systems, Inc., a Delaware corporation ("Company"), First Data Technologies, Inc., a Delaware corporation ("FDT"), and Integrated Payment Systems Inc., a Delaware corporation ("IPS" and, together with FDT, "First Data").


W I T N E S S E T H :
- - - - - - - - - -


WHEREAS, Company, IPS and First Data Corporation, a Delaware corporation and the parent company of FDT and IPS ("FDC"), have entered into a Contribution Agreement dated as of the date hereof (the "Contribution Agreement") pursuant to which IPS and certain of its Affiliates (as defined below) contributed to Company certain assets of the Business (as defined below); and


WHEREAS, Company and First Data desire to enter into this Agreement to establish, among other things, (i) the terms and conditions pursuant to which First Data shall perform for the benefit of Company certain services relating to the Business and (ii) the duties, rights and obligations of each of First Data and Company to the other;


NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, Company and First Data agree as follows:


ARTICLE 1


DEFINITIONS
-----------


In this Agreement, unless the context shall otherwise require, the capitalized terms used herein shall have the respective meanings specified or referred to in this Article 1. Each agreement referred to in this Agreement shall mean such agreement as amended, supplemented and modified from time to time to the extent permitted by the applicable provisions thereof and hereof. Each definition in this Agreement includes the singular and the plural, and reference to the neuter gender includes the masculine and feminine where appropriate. References to any statute or regulations means such statute or regulations as amended at the time and include any successor legislation or regulations. The headings to the Articles and Sections hereof and the table of contents herein are for convenience of reference


and shall not affect the meaning or interpretation of this Agreement. Except as otherwise stated, reference to Articles, Sections, Exhibits mean the Articles, Sections and Exhibits of this Agreement. The Exhibits are hereby incorporated by reference into and shall be deemed a part of this Agreement. Unless the context clearly indicates otherwise, the word "including" means "including but not limited to".


"AAA" means the American Arbitration Association.


"AAA Rules" means the AAA's Commercial Arbitration Rules.


"Additional Services" means services performed for Company by First Data or its Affiliates pursuant to this Agreement, other than (i) the Support Services and (ii) any service or other obligation to be performed by First Data pursuant to Article 3.


"Affiliate" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person; provided, however, that FDC and its Affiliates shall not be deemed Affiliates of Company and Company and its Affiliates shall not be deemed Affiliates of FDC and its Affiliates.


"Agent Contract" means an agreement pursuant to which a MoneyGram Agent provides Consumer Money Wire Transfer Services on behalf of the Business, together with any license agreement with such MoneyGram Agent related to the PC MoneyGram Application Software described in Exhibit C-3.


"Agent Services" means the services specified in Exhibit A-1.


"Amount Due" has the meaning specified in Section 6.2.


"Arbitrators" has the meaning specified in Section 11.1(b)(ii).


"Bankruptcy" means, with respect to any Party, the happening of any one or more of the following events: (a) a Party: (i) makes an assignment for the benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii) is adjudged a bankrupt or insolvent, or there has been entered against such Party an order for relief, in any bankruptcy or insolvency proceeding; (iv) files a petition or answer seeking in respect of such Party any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under


2


any statute, law or regulation; (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Party in any proceeding of a nature described above; (vi) seeks, consents or acquiesces in the appointment of a trustee, receiver, conservator or liquidator of such Party or of all or any substantial part of such Party's properties; or (vii) in respect of clauses (i), (ii), (iv), (v) or (vi) above, such Party takes any corporate action to authorize any action contemplated by any of such clauses; or (b) 90 days after the commencement of any proceeding against any Party seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation, if such proceeding has not been dismissed, or within 60 days after the appointment without such Party's consent or acquiescence of a trustee, receiver or liquidator of the Party or of all or any substantial part of such Party's properties, if such appointment is not vacated or stayed, or within 60 days after the expiration of any such stay, if such appointment is not vacated.


"Basic Qualifications" has the meaning specified in Section 11.1(b)(ii).


"Business" means the Consumer Money Wire Transfer Services marketed under the name "MoneyGram"(SM) and the sales and distribution of a "MoneyGram" phonecard.


"Business Day" means any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in Denver, Colorado.


"Claim Notice" has the meaning specified in Section 10.3(a).


"Company Data" means, at any time, data files, databases and related data and information (in any form or medium) relating to the Business or comprising the input or output of First Data's obligations specified in Article 3, the Support Services or any Additional Services.


"Company Indemnitee" has the meaning specified in Section 10.1(a).


"Confidential Information" has the meaning specified in Section 7.2.


"Consequential Damages" means any liability, Loss, Expense or damage, whether in an action arising out of breach of warranty, breach of contract, delay, negligence, theory of tort,


3


strict liability or other legal or equitable theory, for indirect, special, reliance, incidental, punitive or consequential damages or commercial loss, injury or damage, including loss of revenues, profits or use of capital or production.


"Consumer Money Wire Transfer Services" means the service of transferring the right to money using computer or telephone lines, or any other technology now existing or later developed, from one person to a different person through a MoneyGram Agent and the services marketed under the phrase "Express Payment" or "Cash Advance".


"Corporate Support Services" means the services specified in Exhibit A-2.


"Costs" means all direct costs, expenses and charges plus all indirect costs, expenses and charges, including reasonable allocations of overhead, incurred by a Party in performing its obligations under this Agreement.


"Data Center Services" means the services specified in Exhibit A-3.


"days" means calendar days.


"Designated Representative" means the employee of First Data designated in writing from time to time by First Data who shall be the only individual to whom Company shall provide certain specified information under this Agreement, including Confidential Information of Company. The Designated Representative on the date hereof is Michael H. Jeronimus.


"Dispute" has the meaning specified in Section 11.1(a).


"Expenses" means any and all reasonable expenses incurred in connection with investigating, defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against hereunder (including court filing fees, court costs, witness fees and reasonable fees and disbursements of legal counsel, investigators, expert witnesses, accountants and other professionals).


"Fees" means, with respect to each of the Support Services and the services provided by IPS under Article 3, the fees and charges set forth or referenced in Exhibit D and, with respect to any Additional Service, the fees and charges agreed to in writing by First Data and Company, in each case as the same may be modified from time to time during the Term.


4


"Fiduciary Funds" means, (i) in respect of any IPS Funds Transfer Service transaction that will be paid to the recipient thereof in U.S. dollars, the amount of money being transmitted to the recipient thereof and (ii) in respect of any IPS Funds Transfer Service transaction that will be paid to the recipient thereof in a currency other than U.S. dollars, the amount of U.S. dollars necessary to purchase the amount of such other currency being transmitted to the recipient thereof.


"First Data" has the meaning specified in the first paragraph of this Agreement.


"First Data Equipment" means the equipment owned by or leased to First Data or its Affiliates required to perform First Data's obligations hereunder.


"First Data Indemnitee" has the meaning specified in Section 10.2(a).


"Force Majeure Event" has the meaning specified in Section 12.3.


"Governmental Body" means any foreign, federal, state, local or other governmental authority or regulatory body.


"Indemnified Party" has the meaning specified in Section 10.3(a).


"Indemnifying Party" has the meaning specified in Section 10.3(a).


"IPS Application Software" means the application Software owned by IPS or its Affiliates that is used to provide the Data Center Services until such time as the Utility Software is available to perform such services in accordance with Exhibit A-3, together with the documentation (if any) relating thereto, as described on Exhibit C-1, and any modifications thereto.


"IPS Funds Transfer Service" means the Consumer Money Wire Transfer Services offered by and in the name of IPS or Travel Related Services.


"IPS Report" has the meaning set forth in Section 6.2.


"Losses" means any and all losses, Costs, obligations, liabilities, settlement payments, awards, judgments, fines, penalties, damages, deficiencies or other charges.


5


"modification" means any modification, enhancement, translation, conversion, compilation, upgrade or other derivative version of, or change or addition to, any item, and "modify" and "modified" shall have corollary meanings.


"MoneyGram Agent" means a Person that has contracted with Travel Related Services, IPS or the Company, as the case may be, to provide the Consumer Money Wire Transfer Services provided by the Business.


"MoneyGram Application Software" means the application Software owned by Company that is used in the Business, together with the documentation (if any) relating thereto, as described on Exhibit C-2.


"New MoneyGram Application Software" means all developments, improvements, modifications, additions, expansions, new versions, new releases, rewrites or enhancements to the MoneyGram Application Software that are developed by or on behalf of Company after the Closing Date.


"New Utility Software" means all developments, improvements, modifications, additions, expansions, new versions, new releases, rewrites or enhancements to the Utility Software that are developed by or on behalf of Company after the 45-day period provided in Exhibit A-3.


"Panel" has the meaning specified in Section 11.1(b)(ii).


"Party" means First Data or Company as the context requires.


"PC MoneyGram Application Software" means the application Software owned by Company that is used in the Business, together with the documentation (if any) relating thereto, as described on Exhibit C-3.


"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or Governmental Body.


"Portfolio" has the meaning specified in Section 3.2(a).


"Proprietary Rights" means all trade secret, copyright, patent, trademark, service mark, trade name, certification mark, trade dress or other proprietary rights in all countries related


6


to such item or any part thereof, any extensions or renewals of the foregoing, and any registrations, patents or applications with respect to the foregoing.


"Regulatory Compliance Services" means the services specified in Exhibit A-5.


"Reimbursable Expenses" means, in respect of the Support Services and the services provided by IPS under Article 3, the items of expense so designated or described in Exhibit D and, with respect to any Additional Service, the items of expense so designated or described by written agreement of the Parties, in each case subject to such additions and deletions as may be made by written agreement of the Parties from time to time during the Term.


"Requirements of Law" means any foreign, federal, state and local laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Body.


"Service Mark Letter Agreement" means the Service Mark Letter Agreement dated as of the date hereof among Company, FDC and Western Union Financial Services, Inc. ("Western Union"), which includes as an exhibit thereto the Service Mark License Agreement among IPS, Western Union and Company.


"Software" means computer software programs and software systems, including, without limitation, all databases, compilations, tool sets, compilers, higher level "proprietary" languages, related documentation and materials, whether in source code, object code or human readable form; provided, however, that Software shall not include computer software that is available in consumer retail stores and subject to "shrink-wrap" license agreements.


"Software License Agreement" means the Software License Agreement dated as of the date hereof between IPS and Company.


"Solvent", when used with respect to any Person, means that at the time of determination: (i) the fair market value of its assets is in excess of the total amount of its liabilities (including contingent liabilities determined in accordance with generally accepted accounting principles); (ii) the present fair saleable value of its assets is greater than its probable liability on its existing debts (including contingent liabilities) as such debts become absolute and matured; (iii) it is then able, and is reasonably expected to be able, to pay its debts (including contingent debts and other commitments) as they


7


mature; and (iv) it has capital sufficient to carry on its business as conducted and as proposed to be conducted.


"State Licenses" means the licenses or permits issued by Governmental Bodies in respect of State Licensing Requirements.


"State Licensing Requirements" means Requirements of Law related to the licensing of a Person offering money transfer services.


"Support Services" means the services as described in Exhibits A-1 through A-5.


"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means any federal, state, local or foreign income, gross receipts, windfall profits, severance, property, production, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, imposed by any Governmental Body.


"Term" means, subject to the provisions of Section 5.3, the period commencing on the date hereof and ending on the earlier of: (i) the second anniversary of the date hereof and (ii) the end of any transition period in accordance with Section 9.4, except that the obligations of the Parties under Article 3 (including the Regulatory Compliance Services) shall terminate in accordance with the provisions of Section 9.1(b).


"Third Party Software" means any Software that is proprietary to a Person other than any Party or its Affiliates and that is to be obtained and used by First Data or its Affiliates to perform their obligations hereunder, and any modifications thereto.


"Third Party Vendor" means, with respect to any item of First Data Equipment or Third Party Software, the owner, licensor, manufacturer, distributor or other supplier of such item.


"Travel Related Services" means American Express Travel Related Services Company, Inc., a New York corporation.


"Utility Software" means the application Software owned by IPS or its Affiliates that will be licensed to Company under the Software License Agreement, delivered pursuant to Exhibit A-3


8


and used by First Data to provide the Data Center Services, together with the documentation (if any) relating thereto.


"Voice Center Disaster Recovery Services" means the services specified in Exhibit A-4.


"Voice Center Services" means the services specified in Exhibit A-2.


ARTICLE 2


SERVICES
--------


SECTION 2.1. SUPPORT SERVICES. During the Term, First Data shall perform for Company, either directly, through its Affiliates or through agreements with Third Party Vendors, each of the Support Services described in Exhibit A.


SECTION 2.2. ADDITIONAL SERVICES. During the Term, First Data shall perform for Company, either directly, through its Affiliates or through agreements with Third Party Vendors, such Additional Services agreed to by the Parties. Such Additional Services and the Fees, Reimbursable Expenses and other terms with respect thereto shall be set forth in an additional Exhibit to this Agreement or otherwise evidenced by a written amendment hereto.


ARTICLE 3


TRANSACTION SETTLEMENT; PORTFOLIO AND REGULATORY COMPLIANCE
-----------------------------------------------------------


SECTION 3.1. TRANSACTION SETTLEMENT. (a) During the period commencing on the date hereof and until the earlier of (i) the termination of the obligations of IPS and Company in respect of any IPS Funds Transfer Service transaction as specified in Section 9.1(b) and (ii) the date 30 days after the date Company has obtained all State Licenses necessary to offer the Consumer Money Wire Transfer Services and conduct the Business in its own name, IPS shall, subject to Section 3.1(g), be responsible for the administrative function of collecting all sums due from MoneyGram Agents under Agent Contracts and the payment of all Fiduciary Funds in respect of completed IPS Funds Transfer Service transactions in accordance with the terms of the Agent Contracts.


9


(b) Each Business Day, IPS shall notify Company of the following items related to IPS Funds Transfer Service transactions effected during the immediately preceding Business Day (and, if applicable, any intervening non- Business Day or Days): (i) the aggregate amount received by MoneyGram Agents from cu
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