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Merchant Asset Purchase Agreement

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Sectors: Banking
Governing Law: Florida, View Florida State Laws
Effective Date: December 29, 2005
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EXHIBIT 10.15





EXECUTION COPY



MERCHANT ASSET PURCHASE AGREEMENT



THIS MERCHANT ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as of this 29 th day of December, 2005 by and between TIB BANK , a bank chartered under the laws of the State of Florida (the "Bank"), and NOVA INFORMATION SYSTEMS, INC. , a Georgia corporation ("NOVA").



BACKGROUND AND PURPOSE:



A. The Bank is a party to certain Merchant Agreements with various Merchants, who consist principally of merchants and other providers of goods and services, according to which agreements the Bank has agreed to provide certain services in connection with the Bank's Merchant Bankcard Business.



B. The Bank wishes to sell and transfer to NOVA all of its rights under the Merchant Agreements, and the Bank wishes to sell and transfer to NOVA certain other assets utilized in connection with the Merchant Bankcard Business, and NOVA is willing to accept such rights and assets and to assume certain obligations in connection with the Merchant Bankcard Business. The parties hereto are willing and able, additionally, to undertake and perform certain other obligations pursuant to and in connection with this Agreement, subject to the terms and conditions hereof.



THE AGREEMENT



NOW, THEREFORE , in consideration of the premises, the mutual agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Bank and NOVA hereby agree, on the terms and conditions herein set forth, as follows:



The capitalized terms used herein shall have the meaning ascribed to such terms in Section 12.1 hereof unless otherwise defined herein.



ARTICLE I



ASSETS SOLD; ASSUMPTION OF LIABILITIES



1.1 Sale and Purchase. On the terms and subject to the conditions set forth in this Agreement, and effective as of 11:59 p.m. on December 31, 2005 (the "Effective Date"), the Bank hereby sells, transfers and assigns to NOVA and NOVA hereby purchases and accepts from the Bank, all right, title and interest of the Bank in all of the Bank's assets and interests, both tangible and intangible, accrued or contingent, used, useful, or arising in the conduct of in the Merchant Bankcard Business, directly or indirectly, in existence on the date hereof and on and after the Effective Date (other than the Excluded Assets), including the following properties and assets (collectively, the "Assets Sold"):



(a) all rights and interests of the Bank in and to the Merchants (under the Merchant Agreements and otherwise) arising on or after the Effective Date, and all pertinent books, records and documents relating to such Merchant Agreements (as further specified in Section 1.5 hereof);



(b) the Equipment (and any rentals and leases related thereto) and related revenues accruing on and after the Effective Date;



(c) the Inventory;



(d) all rights and interests of the Bank with respect to any reserve accounts established and maintained with the Bank by Merchants in connection with the Merchant Bankcard Business;



(e) all rights and interests under any guarantees executed in connection with the Merchant Agreements;



(f) all rights and interests of the Bank with respect to any other third party contract related to the Bank's Merchant Bankcard Business and listed on Schedule 1.1 (b) (the "Other Assumed Contracts");



(g) all claims and causes of action of the Bank, whether known or unknown, relating to the Merchant Bankcard Business; and



(h) the goodwill, intangible assets and value of the Merchant Bankcard Business as a going concern, to the extent any such value exists.



1.2 Transfer and Assumption of Assets Sold and Assumed Liabilities. Effective upon the Effective Date, NOVA shall, by the execution and delivery of the Bill of Sale and Assignment and Assumption Agreement, acquire title to the Assets Sold and assume and agree to pay and discharge when due the Assumed Liabilities. In addition to the Bill of Sale and Assignment and Assumption Agreement, the sale, conveyance, transfer, assignment and delivery of the Assets Sold by the Bank to NOVA shall be effected by such deeds, bills of sale, endorsements, assignments, transfers and other instruments of transfer and conveyance in such form, including warranties of title (collectively, "Transfer Documents"), as NOVA may reasonably request, including such Transfer Documents as NOVA may reasonably request at and after the Transition Date.



1.3 Liabilities. It is understood and agreed that, except to the extent that any of the following constitute Assumed Liabilities, NOVA shall not assume or become liable for the payment of any debts, liabilities, losses, Credit Losses, chargebacks, accounts payable, bank indebtedness, mortgages, or other obligations of the Bank or any Merchant, whether the same are known or unknown, now existing or hereafter arising, of whatever nature or character, whether absolute or contingent, liquidated or disputed. Specifically, the Assumed Liabilities shall not in any event include any penalties or fees that may be incurred by the Bank in connection with the termination of the Bank's agreement(s) with any third party service providers, including without limitation (i) that certain Operating Agreement between the Bank and Card Management Corporation dated July 1, 1992, as amended, (ii) that certain Processing Services Agreement between the Bank and Vital Processing Services, L.L.C., dated December 1, 1999, as amended (iii) that certain Payment Gateway Reseller Agreement between the Bank and Authorize.net Corp, dated May 31, 2002 and (iv) that certain Referral Agreement between the Bank and Global Payments Direct, Inc., dated August 12, 2005 (collectively, the "Third Party Processing Agreements").



1.4 Consent and Assignment.



(a) The Bank, in cooperation with NOVA, from and after the date hereof and during the Transition Period, shall use its best efforts to obtain, in such manner and to such extent as NOVA may reasonably specify, (i) the agreement of the Merchants to the continuation of business with NOVA under the Merchant Agreements, all as contemplated by this Agreement, (ii) the consent of the Merchants to NOVA's conversion of such Merchants to such clearing bank and merchant accounting system as NOVA may specify, and (iii) the consent of the Merchants to NOVA's conversion of such Merchants to NOVA's network, all on such terms as are satisfactory to NOVA.



(b) Without limiting the generality of the foregoing, promptly following the Closing, the Bank shall cause to be delivered to each of the Merchants a notice, in a form specified by NOVA, of the assignment by the Bank, effective as of the Effective Date, of all rights in and to said Merchant Agreements to NOVA. In NOVA's discretion, such notice may inform each Merchant of NOVA's intention to convert the Merchant to NOVA's network, as well as to a clearing bank and merchant accounting system designated by NOVA.



1.5 Books and Records.



(a) As soon after the Closing Date as is practicable, and in no event later than the conclusion of the Transition Period, the Bank shall cause to be delivered to NOVA the originals or, in the event the Bank is entitled to keep the originals pursuant to this Section 1.5, copies of all books, records and documents of the Bank relating to the Assets Sold; provided, however, that in no event shall such books, records and documents include corporate books or records involving operations other than the Merchant Bankcard Business, and further provided that the Bank may retain the originals or copies of such documents other than the Merchant Agreements as may be reasonably necessary to the Bank's business. In addition, the Bank shall, at its expense, provide or cause to be provided to NOVA all information related to the Merchant Bankcard Business that is in intangible (i.e., computer-readable) form, including information necessary or desirable for the transfer of clearing bank responsibilities contemplated by Section 3.5(b) (for example, a Merchant Master File Dump in ASCII format). In each case, however, the books and records relating to the Assets Sold for the period prior to the Closing Date, wherever located, that are held by a party hereto or under the control of a party hereto (the "Inspected Party") shall be open for inspection by the other party, and such other party's authorized agents and representatives and regulators may, at such other party's own expense, make such copies of any excerpts from such books, records and documents as it shall reasonably deem necessary; provided, however, that any such inspection: (i) shall be conducted during normal business hours from time to time reasonably established by the Inspected Party; (ii) shall, if the Inspected Party so requests, be conducted in the presence of an officer or designated representative of the Inspected Party; and (iii) shall be conducted in accordance with reasonable security programs and procedures from time to time established by the Inspected Party, including such confidentiality agreements as the Inspected Party may reasonably request.



(b) All books and records relating to the Assets Sold shall be maintained by NOVA, or the Bank, as the case may be, for a period of three (3) years after the Closing Date, unless the parties shall, applicable law permitting, agree upon a shorter period; provided , however , that in the event that, as of the end of such period, any taxable year of NOVA or the Bank is still under examination or open for examination by any taxing authority and that party has given notice of that fact to the other party, such books and records shall be maintained (or, alternatively, delivered by the Inspected Party to the other party) until the date, determined reasonably and in good faith, specified for maintenance of such records in such notice. Prior to the destruction of any books and records relating to the Assets Sold, the party in possession of such books and records shall offer them to the other party hereto. Pursuant to the above, the Bank specifically agrees to make available to NOVA, and promptly deliver to NOVA at NOVA's request, any historical records of Merchant sales and monthly statements.



ARTICLE II



CONSIDERATION FOR ASSETS SOLD; CLOSING



2.1 Purchase Price.



(a) As consideration for the Assets Sold, NOVA shall pay an aggregate purchase price of Seven Million and No/l00 Dollars ($7,000,000.00) (the "Purchase Price"), payable at the Closing by wire transfer of immediately available funds to an account designated in writing by the Bank or by cashier's check payable to the order of the Bank.



(b) In addition to the Purchase Price, if, and only if, the Closing occurs on or prior to December 31, 2005, NOVA shall pay to the Bank a one-time additional bonus payment of Two Hundred Fifty Thousand and No/l00 Dollars ($250,000.00) (the "Signing Bonus"), which shall be paid to the Bank in the same manner as the Purchase Price; provided, however, that in the event that (a) the Bank has complied with all of its obligations under this Agreement and the Operative Documents, as applicable and (b) the Closing is unable to occur on or prior to December 31, 2005 due to an act or omission of NOVA, the Bank shall be entitled to receive the Signing Bonus at the Closing.



2.2 Closing . Subject to the satisfaction or waiver of the conditions set forth herein, the consummation of the purchase and sale of the Assets Sold and the assumption of the Assumed Liabilities (the "Closing") shall take place on December 30, 2005 at 10:00 a.m. (Atlanta, Georgia time) or on such other date at such other time as the parties shall agree in writing (the "Closing Date"), to be effective as of the Effective Date, and shall take place through the execution and exchange, via facsimile transmission, of this Agreement and the other documents and agreements herein contemplated. The parties acknowledge and agree that upon mutual exchange and receipt of signature pages via facsimile, and upon receipt by the Bank of the purchase price herein contemplated, this Agreement and the other documents and instruments delivered in connection herewith shall be deemed effective as of the Effective Date, and the transactions hereby contemplated shall be deemed consummated, notwithstanding any party's failure or refusal to deliver original (i.e. non-facsimile) signature pages.



ARTICLE III



TRANSITION PERIOD



3.1 Orderly Transition . The Bank covenants and agrees to use all reasonable efforts, as reasonably instructed by NOVA, to effect an orderly transition of the Merchant Bankcard Business during the Transition Period in respect of the Assets Sold and the Assumed Liabilities, including fulfilling its obligations under Section 1.4 hereof. In order to further such purpose, the Bank agrees that during the Transition Period it shall execute such documents as are reasonably deemed necessary or convenient by NOVA, including documents as may be appropriate to cause the BIN and ICA numbers used by the Bank in connection with the Merchant Bankcard Business to be transferred to such "Principal Member" of the Credit Card Associations as may be designated by NOVA, to evidence the agreements referred to in, and transactions contemplated by, this Agreement, consistent with the rules and regulations of the Credit Card Associations and NOVA's practices and procedures.



3.2 Card Management Corporation Rebate . The Bank and NOVA hereby acknowledge that pursuant to the terms of that certain Operating Agreement between the Bank and Card Management Corporation dated July 1, 1992, as amended, the Bank is entitled to receive a cash rebate from First Data Resources calculated based on transaction processing volume of the Bank for the period from February 1, 2005 to January 31, 2006 (the "CMC Credit"), which is payable to the Bank on or before April 30, 2006. Within 5 business days of receipt of the CMC Credit, the Bank shall pay to NOVA an amount equal to one-twelfth (1/12) of the total CMC Credit and provide written evidence to NOVA of the total amount of the CMC Credit.

3.3 Services During the Transition Period.



(a) During the Transition Period, the Bank shall perform on behalf of and for the account of NOVA at the same location(s) presently used to conduct the Merchant Bankcard Business all of the services performed by the Bank in connection with the Merchant Bankcard Business prior to the Closing Date. The Bank shall perform such services substantially in the same manner and with no less than the same degree of care as performed in connection with the Merchant Bankcard Business prior to the Closing Date, and shall otherwise perform such services in accordance with such performance standards, including underwriting guidelines, as are specified by NOVA. In performing such services, the Bank shall follow the reasonable instructions of NOVA. Further, NOVA shall reimburse the Bank for the reasonable out-of-pocket expenses set forth on Schedule 3.3(a) hereto that are actually incurred by the Bank in providing services in connection with Merchant Bankcard Business during the Transition Period (the "Transition Expenses"). For purposes of clarity, Schedule 3.3(a) sets forth the type and estimated amount of each anticipated Transition Expense, and NOVA shall not be liable for (i) any expense not enumerated in Schedule 3.3(a) or (ii) any increase in Transition Expense arising out of or relating to this Agreement, the Operative Documents or the transactions contemplated hereby or thereby.



(b) Without limiting the generality of the foregoing, during the Transition Period, the Bank shall continue to provide credit to Merchants on the same business day deposits are made by Merchants for Draft deposits (provided such deposits are made prior to 2:00 p.m. closing; Draft deposits made after 2:00 p.m. closing shall be considered to be made on the following business day) and on the day of receipt of ACH notice for Credit Card and Debit Card transactions processed electronically. The Bank shall not be entitled to reimbursement for cost of funds for providing such credit.



(c) During the Transition Period, and in performing services hereunder, the Bank shall comply in all respects with the rules and regulations of the Credit Card Associations and the EFT Networks, and shall not take, or fail to take, any actions with respect to the Merchant Bankcard Business which would constitute a violation of such rules and regulations.



(d) During the Transition Period, NOVA shall designate a service coordinator (the "Service Coordinator") as the person at NOVA primarily responsible for ensuring an orderly transition of the Merchant Bankcard Business. The name and contact information of the initial Service Coordinator is set forth on Schedule 3.3(d) . NOVA shall have the right, in its sole discretion to remove and promptly replace the Service Coordinator at any time during the Transition Period and shall provide the Bank with written notice of such change.



3.4 Revenue During the Transition Period. In performing services during the Transition Period on behalf of and for the account of NOVA:



(a) the Bank shall, beginning on the Effective Date and continuing throughout the Transition Period, on behalf of and for the account of NOVA, collect revenue generated by the Merchant Bankcard Business, less interchange fees (collectively, "Revenue") and which shall include Revenue for (i) all original sales transactions generated pursuant to the Assets Sold and occurring on or after the Effective Date, and (ii) all the other revenue generated by the Assets Sold and occurring on or after the Effective Date. In connection with the Transition Period, the Bank and NOVA shall cooperate to coordinate the accounting and reconciliation of the Bank's monthly revenue accruals with the corresponding adjustments to occur in the month immediately following the month in which such Revenue accrues (the "Accrual Adjustment"). Within 10 business days of the Accrual Adjustment, the Bank shall pay to NOVA the Revenue finally determined by such Accrual Adjustment (the "Revenue Payment"). At the time of each Revenue Payment, the Bank shall also furnish to NOVA a certificate of an authorized financial officer certifying the amount due to NOVA and showing the calculation thereof in such reasonable detail as NOVA may request; and



(b) within forty-five (45) days of completion of the Transition Period, the Bank shall pay to NOVA any remaining unpaid Revenue that was accrued during the Transition Period.



3.5 Employees. During the Transition Period, the Bank shall use all reasonable efforts to ensure that the employees utilized in the Merchant Bankcard Business on and prior to the date hereof by the Bank will continue in the employ of the Bank, performing the duties relating to the Merchant Bankcard Business theretofore performed by it, as reasonably instructed by NOVA during the Transition Period. Further, the Bank shall use all reasonable efforts to provide adequate and appropriate skilled staffing in connection with the operation of the Merchant Bankcard Business during the Transition Period.



3.6 Clearing Bank Arrangement .



(a) During the Transition Period, and in order to permit an orderly transition of the processing of Credit Card and Debit Card transactions, the Bank shall continue to act as a clearing bank for NOVA with respect to Credit Card and Debit Card transactions processed under the Merchant Agreements, all in accordance with the rules and regulations of the Credit Card Associations and the EFT Networks.



(b) At the request of NOVA, the Bank shall execute appropriate documents to evidence the transfer of the clearing bank responsibilities under the Merchant Agreements to the Person designated by NOVA to effect such transfer. In addition, the Bank shall render such other necessary assistance as NOVA may reasonably request.



3.7 Extension of Transition Period . If requested by NOVA in writing at least thirty (30) days prior to the Transition Date, and notwithstanding any contrary provision contained herein, the Bank shall continue to provide those services described in this Article III as are requested by NOVA beyond the Transition Date on the same terms and conditions set forth herein. The Bank's obligation to provide such services shall continue until terminated by thirty (30) days prior written notice from NOVA but in no event shall the Transition Period be extended beyond the date that is six (6) months after the Closing Date unless agreed upon by all parties to this Agreement; provided , however, that in no event shall the Transition Period extend beyond June 30, 2006, unless the parties mutually agree otherwise.



ARTICLE IV



CERTAIN COVENANTS AND AGREEMENTS OF THE BANK



4.1 Transfer Taxes . All sales or transfer taxes, including stock transfer taxes, document recording fees, real property transfer taxes, and excise taxes, arising out of or in connection with the consummation of the transactions contemplated hereby, if any, shall be paid by the Bank.



4.2 Confidentiality of Information . On and after the date hereof, the Bank and its officers, employees, agents and representatives shall treat all information, books and records, originals or copies of books or records which are retained or obtained by it pursuant to Section 1.5, and all information learned or obtained about NOVA's business or relating to the Merchant Bankcard Business, written or oral, as confidential and will not disclose such information to third parties except as required by law, as needed in connection with a lawsuit, claim, litigation or other proceeding or in connection with tax or regulatory matters and except to the extent that such information is already in the public domain, or subsequently enters the public domain, other than as a result of the breach of the Bank's obligations under this Section 4.2. The Bank and its officers, employees, agents and representatives shall not use the information described in this Section 4.2 in any manner that might reasonably be anticipated to adversely affect the Merchant Bankcard Business or NOVA's relations with Merchants or with other Persons. The covenants contained in this Section 4.2 shall survive for the duration of the Marketing Agreement and for a period of three (3) years after the termination or expiration thereof.



4.3 Notice of Breach or Potential Breach . The Bank shall promptly notify NOVA of any change, circumstance or event which may prevent the Bank from complying with any of its obligations hereunder.



4.4 Further Assurances . On and after the Closing Date, the Bank shall (i) give such further assurances to NOVA and execute, acknowledge and deliver all such acknowledgments and other instruments and take such further action as NOVA may reasonably request to effectuate the transactions contemplated by this Agreement, including the transfer of the Assets Sold and assumption of the Assumed Liabilities, and (ii) use all reasonable efforts to assist NOVA in the orderly transition referred to in Article III.



4.5 Collections . The Bank shall use all reasonable efforts after the Transition Date to assist NOVA, at NOVA's request, in processing amounts in respect of any chargeback or other Credit Loss received or identified in connection with the Merchant Bankcard Business and relating to or arising out of any original sales transaction occurring on or after the Effective Date. NOVA shall be responsible for all costs and expenses relating to such collection efforts, including costs and expenses of collection letters, litigation, arbitration proceedings and similar actions.



4.6 Post-Transition Cash Advance Processing . The Bank, throughout the Post Transition Period, shall use NOVA and a principal member designated by NOVA as the exclusive processor of cash advance transactions made by the Bank.



ARTICLE V

CERTAIN COVENANTS AND AGREEMENTS OF NOVA



5.1 Confidentiality of Information . On and after the date hereof, NOVA and its officers, employees, agents and representatives shall treat all information learned, or obtained prior to the date of this Agreement or during the Transition Period about the Bank's businesses, other than the Merchant Bankcard Business, as confidential and will not disclose such information to third parties except as required by law, as needed in connection with a lawsuit, claim, litigation or other proceeding or in connection with tax or regulatory matters and except to the extent that such information is already in the public domain, or subsequently enters the public domain, other than as a result of the breach of NOVA's obligations under this Section 5.1. NOVA and its officers, employees, agents, and representatives shall not use the information described in this Section 5.1 in any manner that might reasonably be anticipated to materially adversely affect the Bank's financial condition, business or agreements or arrangements with any other Person. Notwithstanding the foregoing, the Bank acknowledges and agrees that the restrictions contained in this Section 5.1 shall not apply to any disclosures of such confidential information by NOVA in connection with, or as may result from (a) the provision by NOVA of Merchant Bankcard Services under this Agreement or the other Operative Documents, or otherwise in connection with NOVA's performance of its obligations hereunder or thereunder, (b) such disclosure as may be required by applicable law or regulation or Payment Network Regulations, (c) such disclosure as is contained in or required to prepare any financial statements (including the notes thereto), (d) appropriate or necessary disclosure to banking authorities or regulators, including as may result from NOVA's status as an affiliate of U.S. Bancorp or another bank, or (e) disclosure to U.S. Bancorp's Corporate and Compliance Units. Notwithstanding any provision of this Agreement, NOVA shall not divulge, directly or indirectly or through U.S. Bancorp or any of its affiliates, successors or assigns, any confidential information of the Bank, including information related to the Merchant Business, to U.S. Bank, N.A. which, in any manner, can be used for the purpose of soliciting customers of the Bank for any services other than the Merchant Bankcard Services. The covenants contained in this Section 5.1 shall survive for the duration of the Marketing Agreement and for a period of three (3) years after the termination or expiration thereof.



5.2 Notice of Breach or Potential Breach . NOVA shall promptly notify the Bank of any change, circumstance or event which may prevent NOVA from complying with any of its obligations hereunder.



5.3 Further Assurances . On and after the Closing Date, NOVA shall (i) give such further assurances to the Bank and execute, acknowledge and deliver all such acknowledgments and other instruments and take such further action as the Bank may reasonably request to effectuate the transactions contemplated by this Agreement, including the transfer of the Assets Sold and assumption of the Assumed Liabilities and (ii) use all reasonable efforts to assist the Bank in the orderly transition referred to in Article III.



ARTICLE VI



REPRESENTATIONS AND WARRANTIES OF THE BANK AND PARENT



The Bank hereby makes the following representations and warranties to NOVA as of the date hereof and as of the Effective Date:



6.1 Organization; Ownership. The Bank is a state-chartered bank organized under the laws of the State of Florida and is authorized to conduct its business as presently conducted (including the Merchant Bankcard Business) under those laws and all other applicable laws.



6.2 Authority . The Bank has the right, power, capacity and authority to enter into and deliver the Operative Documents, to perform its obligations under the Operative Documents, and to effect the transactions contemplated by the Operative Documents, and no Person other than the Bank (other than the Merchants party to Merchant Agreements) has any interest in the Merchant Bankcard Business or the Merchant Agreements. The execution,
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