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EXHIBIT 10.5
MERCHANT ASSET PURCHASE AGREEMENT
THIS MERCHANT
ASSET PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of this 21st day of
December, 2004 by and among UMPQUA BANK, an
Oregon state-chartered bank (the "Bank"),
UMPQUA HOLDINGS CORPORATION, an Oregon
corporation and the sole shareholder of the
Bank ("Parent"), 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 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 Business, and NOVA is
willing to accept such rights and assets
and to assume certain obligations in
connection with the Merchant 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, Parent 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 the
Closing Date (the "Effective Date"),
the Bank hereby sells, transfers and
assigns to NOVA and NOVA hereby purchases
and accepts from the Bank, all right and
title to, 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 the Merchant 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"):
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(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 or after the Effective Date;
(c) the Inventory;
(d) all rights and interests under any guarantees executed in
connection with
the Merchant Agreements;
(e) all claims and causes of action of the Bank or Parent,
whether
known or
unknown, relating to the Merchant Business; and
(f) the goodwill, intangible assets and value of the Merchant
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 Bill of Sale and Assignment
and Assumption Agreement in the form
attached hereto as Exhibit 1.2 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 or
any Agent Bank, whether the same are
known or unknown, now existing or hereafter
arising, of whatever nature or
character, whether absolute or contingent,
liquidated or disputed.
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.
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(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
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 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
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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. As consideration for the Assets Sold, NOVA shall pay an
aggregate purchase price of Five Million
Eight Hundred Seventy-Five Thousand and
No/100 Dollars ($5,875,000.00), payable at
the Closing by wire transfer of
immediately available funds to an account
that is designated in writing by the
Bank no later than three (3) days prior to
the Closing Date.
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 21, 2004 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, the other
Operative Documents 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, 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 commercially
reasonable efforts, as reasonably
instructed by NOVA, to effect an orderly
transition of the Merchant 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 owned by the Bank in connection
with the Merchant 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. In
connection with the activities contemplated
by this Article III, NOVA shall replace
Equipment held by Merchants that is not
compatible with the NOVA networks, as
necessary, at its expense.
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3.2 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 Business all of the services performed by the Bank in
connection with
the Merchant 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
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. During
the Transition
Period, NOVA and the Bank agree to cooperate, in good faith,
in effecting the
BIN reconciliation provisions and procedures set forth on
Schedule 3.2(a)
attached hereto.
(b) Without limiting the generality of the foregoing, during
the
Transition
Period, the Bank shall continue to provide credit to Merchants
under the same
terms and conditions and in the same time frame as presently
provided. In
addition, the Bank shall, from time to time at NOVA's request,
use its
commercially reasonable efforts to assist NOVA in procuring
executed
Merchant Agreements from those Merchants set forth on Schedule
6.7(b).
(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
Business which
would constitute a violation of such rules and regulations.
(d) NOVA shall reimburse the Bank for direct, out-of-pocket,
expenses
incurred by the
Bank during the Transition Period that are related to the
conversion and
transitional activities described in this Article III and
the continued
conduct of the Merchant Business during the Transition Period
(collectively,
"Transition Expenses") according to and in the amounts set
forth on
Schedule 3.2(d). All reimbursements hereunder shall be made
within
fourteen (14)
days following NOVA's receipt from the Bank of written
evidence,
reasonably satisfactory to NOVA, detailing the amount of the
reimbursement
due pursuant to this Section 3.2(d).
3.3 REVENUE
DURING THE TRANSITION PERIOD. In performing services during the
Transition Period on behalf of and for the
account of NOVA, 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 Business (collectively,
"Revenue"). The Bank acknowledges and agrees
that it will not deduct any Transition
Expenses from the Revenue; rather, such
Transition Expenses shall separately be
reimbursed by NOVA pursuant to and in
accordance with Section 3.2(d) hereof. In
connection with the Transition Period,
the Bank shall pay to NOVA monthly (by the
10th day of each month) 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. At
the time of each such payment, the Bank
shall also furnish to NOVA a certificate
of an
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authorized financial officer certifying the
amount due to NOVA and showing
the calculation thereof in such reasonable
detail as NOVA may request.
3.4 EMPLOYEES.
During the Transition Period, the Bank shall use all
reasonable efforts to ensure that the
employees utilized in the Merchant
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 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
Business during the Transition Period.
3.5 CLEARING
BANK ARRANGEMENT.
(a) In order to permit an orderly transition of the processing
of
Credit Card and
Debit Card transactions, during the Transition Period, 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, for a period of time ending
not
later than the
Transition Date.
(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.
3.6 EXTENSION OF
TRANSITION PERIOD. The Transition Period may be extended
upon the mutual agreement of the parties,
and in such event, the parties shall
continue to comply with their obligations
under this Article III for such
extended period.
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 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
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
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in any manner that might reasonably be
anticipated to adversely affect the
Merchant Business or NOVA's relations with
Merchants or other persons or
entities. The covenants contained in this
Section 4.2 shall survive for a period
of five (5) years after the date
hereof.
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 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. Without
limiting the foregoing, the Bank
agrees, if requested by NOVA, to continue
processing such chargebacks through
the Bank's BIN and ICA for up to 180 days
after the Transition Date.
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 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 or
entity. Notwithstanding the foregoing, the
Bank and Parent acknowledge and agree 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 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,
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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. The covenants contained in this
Section 5.1 shall survive for a period of
five (5) years after the date hereof.
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 and
Parent hereby jointly and severally make 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 Oregon and
is authorized to conduct its business
as presently conducted (including the
Merchant Business) under those laws and
all other applicable laws. Parent is a
corporation organized under the laws of
the State of Oregon and is authorized to
conduct its business as presently
conducted under those laws and other
applicable laws. Parent owns one hundred
percent (100%) of the issued and
outstanding shares of capital stock of the
Bank, and the Bank is the only Affiliate of
Parent that conducts banking
business.
6.2 AUTHORITY.
The Bank and Parent have the right, power, capacity and
authority to enter into and deliver the
Operative Documents to which each is a
party, to perform their respective
obligations under the Operative Documents to
which each is a party, and to effect the
transactions contemplated by the
Operative Documents to which each is a
party, and no person or entity other than
the Bank has any interest in the Merchant
Business or the Merchant Agreements.
The execution, delivery and performance of
the Operative Documents to which each
of the Bank and Parent is a party have been
approved by all requisite action on
the part of the Bank and Parent, and when
executed and delivered pursuant
hereto, the Operative Documents to which
each of the Bank and Parent is a party
will constitute valid and binding
obligations of the Bank and Parent enforceable
in accordance with their terms.
6.3 GOVERNMENT
NOTICES. The Bank has not received notice from any federal,
state or other governmental agency or
regulatory body indicating that such
agency or regulatory body would oppose or
not grant or issue its consent or
approval, if required, with respect to the
transactions contemplated by the
Operative Documents.
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6.4 NO
VIOLATIONS.
(a) The execution and delivery by the Bank of the Operative
Documents,
and its
performance thereunder, will not (i) violate, conflict with,
result
in a breach of
or constitute (with or without notice or lapse of time or
both) a default
under any material agreement, indenture, mortgage or lease
to which the
Bank is a party or by which the Bank or its properties, or the
Merchant
Business, are bound; (ii) constitute a material violation by
the
Bank of any law
or government regulation applicable to the Bank or the
Merchant
Business; (iii) violate any provision of the Charter or Bylaws
(or
similar
governing documents) of the Bank; or (iv) violate in any
material
respect any
order, judgment, injunction or decree of any court, arbitrator
or governmental
body against or binding upon the Bank or the Merchant
Business.
(b) With respect to the Merchant Business, the Bank is not, has
not
been and will
not be (by virtue of any past or present action, omission to
act, contract to
which the Bank is a party or any occurrence or state of
facts
whatsoever) in violation of any applicable local, state or
federal
law, ordinance,
regulation, order, injunction or decree, or any other
requirement of
any governmental body, agency or authority or court binding
on it, or
relating to its properties or businesses (including any
antitrust
laws and
regulations).
(c) The Bank has properly compared the Merchants against the
required
government lists
(including, but not limited to, the Office of Foreign
Assets Control
SDN List and USA Patriot Act Section 314(a)) and has taken
appropriate
actions with regard to all Merchants that appear on any of the
government
lists. The latest comparison of the Merchants against the
Office
of Foreign
Assets Control SDN List occurred not more than fourteen (14)
days prior to
the date of this Agreement.
6.5 ASSETS SOLD.
The Bank is the sole owner of all rights, title and
interest in and to the Assets Sold, free
and clear of all title defects or
objections, assignments, liens,
encumbrances of any nature whatsoever,
restrictions, security interests, rights of
third parties, or other liabilities,
and has good and valid title to the Assets
Sold. To the Knowledge of the Bank,
the Equipment being sold hereunder is in
good operating condition, ordinary wear
and tear excepted, and has been reasonably
maintained and repaired. The
Equipment is of the quantity and type
represented on Schedule 6.5(a), which
schedule is true, accurate, correct and
complete in all material respects and
which Schedule indicates any Equipment that
is leased to third parties (and the
identity of said parties). To the Knowledge
of the Bank, the Inventory consists
of items of a quality and quantity usable
and saleable in the ordinary course of
the Merchant Business. The Inventory is set
forth on Schedule 6.5(b), which is
true, accurate, correct and complete in all
material respects. Since November
30, 2004, no items of Equipment or
Inventory have been sold or disposed of
except through sales or transactions in the
ordinary course of business,
consistent with past practices. The Assets
Sold include all rights, properties
and other assets necessary to permit NOVA
to conduct the Merchant Business in
substantially the same manner as the Bank's
Merchant Business has heretofore
been conducted, without any need for
replacement, refurbishment or extraordinary
repair.
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6.6 FINANCIAL
INFORMATION CONCERNING THE MERCHANT BUSINESS.
(a) The financial and other information concerning the Merchant
Business
attached hereto as Schedule 6.6(a) (collectively, the
"Financial
Information") is
true, accurate, complete and correct in all material
respects and
fairly presents the financial condition of the Merchant
Business in
respect of the Assets Sold as of and for the periods indicated
on such
information. Further, the Financial Information does not
contain
any untrue
statement of material fact, nor omit any material fact
necessary
in order to make
the statements made and information presented in the
Financial
Information, not misleading. This representation and warranty
may
not be limited
or satisfied by inconsistent information provided after the
date hereof.
Since December 31, 2003, there has been no material adverse
change in the
Merchant Business.
(b) The information relative to Merchants' annualized (i) Credit
Card
sales volume and
(ii) Debit Card sales volume set forth on Schedule 6.6(b)
is true,
accurate, correct and complete in all material respects as of
the
date hereof and
for the periods indicated, and such information does not
contain any
untrue statement of material fact nor omit any material fact
necessary in
order to make the statements made and information presented
therein, not
misleading. This representation and warranty may not be
limited or
satisfied by inconsistent information provided after the date
hereof.
6.7 AGREEMENTS
RELATING TO THE MERCHANT BUSINESS.
(a) Schedule 6.7(a)(i) sets forth a complete list of all
Merchants.
The Bank has no
Agent Banks or Agent Bank Agreements. The Bank is not in
default (and
would not be in default upon notice, lapse of time or both)
under any
provision of the Merchant Agreements. The Bank does not have
any
reason to
suspect, and has not received any notice of, fraud by, or
bankruptcy or
contemplated bankruptcy of, any Merchant or any other party
or guarantor to
any of the Merchant Agreements, and has not received any
notice of
default or adverse comment from any regulatory authority in
respect of any
Merchant. Except as set forth on Schedule 6.7(a)(ii), the
Bank has neither
given nor received notice of election to terminate any
Merchant
Agreement. Except as set forth on Schedule 6.7(a)(ii), all
Merchants
currently process Credit Card transactions. Except as set forth
on Schedule
6.7(a)(iii), each Merchant is a party to a Merchant Agreement
with the Bank.
No Merchant (x) is a high-risk inbound teleservices
merchant, (y) is
involved in adult-oriented business, or (z) otherwise
engages in a
business activity that would result in additional fees or
charges being
imposed by any Credit Card Association, including but not
limited to fees
relating to Internet payment service providers.
(b) Except as set forth on Schedule 6.7(b), the Bank is a party to
a
Merchant
Agreement with each Merchant, and has in its possession, and
shall
deliver to NOVA
in accordance with Section 1.5 hereof, an original executed
copy of each
Merchant Agreement. All agreements between the Bank and the
Merchants are in
the form of one of the Standard Merchant Agreements
attached hereto
as Exhibit 6.7(b)(i), and are freely assignable by the Bank
without the
consent of the applicable Merchant or any other party.
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(c) Except as set forth on Schedule 6.7(c), the Bank has
obtained
guarantees from
principals or third parties of each Merchant. The Bank has
in its
possession, and shall deliver to NOVA in accordance with Section
1.5
hereof, an
original executed copy of all such guarantees. All such
guarantees are
in the form of the Guarantee attached hereto as Exhibit
6.7(c) (the
"Standard Guarantee"), and are freely assignable by the Bank
without the
consent of the applicable Merchant or any other party.
(d) The Bank has no ISOs or ISO Agreements. Except with respect to
any
agreements
listed on Schedule 6.7(d), the Bank has no agreements, written
or oral, with
any agent bank, other association, institution, independent
sales
organization, or any other third party which provides for any one
or
more of the
following: (i) the deposit of Credit Card or Debit Card
transaction
records; (ii) the settlement of Credit Card or Debit Card
transactions;
(iii) the processing of Credit Card or Debit Card
transactions; or
(iv) the referral of merchants to the Bank (collectively,
"Other
Agreements"). The Bank has provided NOVA with true, correct and
complete copies
of each Other Agreement and each Other Agreement is freely
assignable by
the Bank without the prior consent of any other party.
(e) Except for disputes that have arisen in the ordinary course
of
business and
that (i) are not material or otherwise significant in nature
or amount, and
(ii) have not been referred to legal counsel, whether
internal or
external, the Bank is not engaged in any dispute with any
Merchant or
otherwise relating to the Merchant Business. The Bank does not
have any reason
to believe, and has not received any notice, written or
oral, that the
consummation of the transactions contemplated hereunder will
have any adverse
effect on the business relationship of the Bank with any
Merchant.
(f) The Bank is a member in good standing of the Credit Card
Associations.
The Bank and the Merchant Business are in compliance in all
material
respects with all applicable rules and regulations and
certification
requirements of the Credit Card Associations. The Bank has
provided NOVA
true and correct copies of all contracts and agreements
between the Bank
and any of the foregoing entities.
(g) The Bank does not maintain any Reserve Accounts in connection
with
the Merchant
Agreements or the Merchant Business.
(h) Schedule 6.7(h) sets forth the credit and charge cards, other
than
the Credit Card
Associations, for which the Bank has contracted to provide
authorization
and data capture services.
6.8 MERCHANTS'
CREDIT. Schedule 6.8 lists the fifty (50) Merchants with the
highest dollar value of Credit Card
transactions processed during the twelve
(12) month period ending October 31, 2004
(collectively, the "Top 50
Merchants"). The Bank does not have
Knowledge of (a) any Top 50 Merchant that
has a credit facility with the Bank whose
credit facility will not or cannot be
continued, renewed or extended, or (b) any
Top 50 Merchant who plans to apply
for new or additional credit with the Bank,
and whose application will be denied
or rejected, in whole or in part. Each Top
50 Merchant is a party to a Merchant
Agreement with the Bank, copies of which
have been delivered to NOVA.
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6.9 EFT
NETWORKS. The Bank is a member in good standing of the
electronic
funds transfer networks identified on
Schedule 6.9 attached hereto (the "EFT
Networks"). The Bank and the Merchant
Business are in full compliance in all
respects with all applicable rules and
regulations of the EFT Networks.
6.10 CONSENTS
AND APPROVALS.
(a) No action of, or filing with, any governmental or public body
is
required by the
Bank to authorize, or is otherwise required in connection
with, the
execution and delivery by the Bank of this Agreement or the
other
Operative
Documents or, if required, the requisite filing has been
accomplished and
all necessary approvals obtained.
(b) Except for the Waiver and except as set forth on Schedule 6.10,
no
filing, consent
or approval is required by virtue of the execution hereof
or any other
Operative Document by the Bank or the consummation of any of
the transactions
contemplated herein by the Bank to avoid the violation or
breach of, or
the default under, or the creation of a lien on any of the
Assets Sold
pursuant to the terms of, any law, regulation, order, decree or
award of any
court or governmental agency or any lease, agreement,
contract,
mortgage, note, license, or any other instrument to which the
Bank is a party
or to which the Bank or any of the Assets Sold is subject.
6.11 LEASES.
Schedule 6.11 contains a complete and accurate list of all (i)
leases (including any capital leases) and
lease-purchase arrangements pursuant
to which the Bank leases real or personal
property related to the Merchant
Business from others, and (ii) lease,
rental and lease-purchase arrangements
pursuant to which the Bank leases property
to any Merchant or other party in
connection with the Merchant Business.
Schedule 6.11 specifies which of such
leases, if any, are capital leases. The
Bank has made available to NOVA a true,
correct and complete copy of each of the
items listed on Schedule 6.11.
6.12
INTELLECTUAL PROPERTY.
(a) With respect to the Merchant Business, the Bank has made
available
to NOVA true,
correct and complete copies of each trademark and service
mark
registration or application therefor.
(b) The Bank has not heretofore infringed upon, and is not now
infringing upon,
and the continuation of the Merchant Business as presently
conducted will
not infringe upon, any patent, service mark, trade name,
trademark,
copyright, trade secret, or other intellectual property,
confidential
information or proprietary information belonging to any other
person and the
Bank has not agreed to indemnify any person for or against
any
infringement.
(c) To the Knowledge of the Bank, no person is infringing upon any
of
the Bank's
patents, service marks, trademarks, copyrights, trade secrets,
or other
intellectual property that is or are related to the Merchant
Business.
6.13 LITIGATION
AND CLAIMS. There is no litigation, claims, suits, actions,
investigations, indictments or
informations, proceedings or arbitrations,
grievances or other
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procedures (including grand jury
investigations, actions or proceedings, and
product liability and workers' compensation
suits, actions or proceedings, and
investigations conducted by any Credit Card
Association) that are pending, or to
the Knowledge of the Bank or Parent,
threatened, in or before any court,
commission, arbitration tribunal, or
judicial, governmental or administrative
department, body, agency, administrator or
official, grand jury, Credit Card
Association, or any other entity or forum
for the resolution of grievances,
against the Bank and relating in any way to
the Merchant Business.
6.14 MERCHANT
BUSINESS EMPLOYEES. The Bank has no Merchant Business
Employees.
6.15 LABOR;
COLLECTIVE BARGAINING. There are no labor contracts, collective
bargaining agreements, letters of
understanding or other arrangements, formal or
informal, with any union or labor
organization covering any of the Merchant
Business Employees and none of said
employees are represented by any union or
labor organization.
6.16 REQUIRED
LICENSES AND PERMITS. No licenses, permits or other
authorizations of governmental authorities
are necessary for the conduct of the
Merchant Business by the Bank.
6.17 AGREEMENTS,
CONTRACTS AND COMMITMENTS. Except as set forth and
specifically identified in Sections (or the
corresponding Schedules) 6.7, 6.11,
6.14, 6.15 and 6.19:
(a) The Bank does not have any agreement, contract, commitment
or
relationship,
whether written or oral, related to the Merchant Business, by
which NOVA could
be bound;
(b) The Bank does not have any outstanding contract related to
the
Merchant
Business, written or oral, with any officer, employee, agent,
consultant,
advisor, salesman, manufacturer's representative, distributor,
dealer,
subcontractor, or broker that is not cancelable by the Bank, on
notice of not
longer than thirty (30) days and without liability, penalty
or premium of
any kind, except liabilities which arise as a matter of law
upon termination
of employment, or any agreement or arrangement related to
the Merchant
Business providing for the payment of any bonus or commission
based on sales
or earnings;
(c) Except as set forth on Schedule 6.17(c), the Bank is not
subject
to any contract
or agreement related to the Merchant Business containing
covenants
limiting the freedom of the Bank to compete in any line of
business in any
geographic area;
(d) With respect to the Merchant Business, there is no
contract,
agreement or
other arrangement entitling any person or other entity to any
profits,
revenues or cash flows of the Bank or requiring any payments or
other
distributions based on such profits, revenues or cash flows.
6.18 AGREEMENTS
IN FULL FORCE AND EFFECT. Except as expressly set forth on
Schedule 6.18, all contracts and agreements
referred to, or required to be
referred to, herein or in any Schedule
delivered hereunder are valid and
binding, and are in full force and effect
and are enforceable in accordance with
their terms. The Bank has not received
notice of any pending or
13
<PAGE>
threatened bankruptcy, insolvency or
similar proceeding with respect to any
party to such agreements, and no event has
occurred which (whether with or
without notice, lapse of time or the
happening or occurrence of any other event)
would constitute a default thereunder by
the Bank, or to the knowledge of the
Bank, any other party thereto.
6.19 VENDORS AND
SUPPLIERS. Schedule 6.19 sets forth a complete and
accurate list of each supplier to the Bank
of goods and services directly
related to the Merchant Business that
charged, billed or invoiced the Bank in
excess of $10,000 during the twelve (12)
month period ending November 30, 2004.
The Bank has provided to NOVA true and
correct copies of all agreements and
contracts between the Bank and any of the
persons and entities listed on
Schedule 6.19.
6.20 ABSENCE OF
CERTAIN CHANGES AND EVENTS. Since December 31, 2003, the
Bank has conducted the Merchant Business
only in the ordinary course, and has
not:
(a)
suffered any damage or destruction materially adversely
affecting
the Merchant
Business;
(b) suffered any material adverse change in the working
capital,
assets,
liabilities, financial condition, or business prospects relating
to
the Merchant
Business, or relationships with any suppliers listed on
Schedule
6.19;
(c) except for customary increases based on term of service or
regular
promotion of
non-officer employees, increased (or announced any increase
in) the
compensation payable or to become payable to any Merchant
Business
Employee, or
increased (or announced any increase in) any bonus, insurance,
pension or other
employee benefit plan, payment or arrangement for Merchant
Business
Employees, or entered into or amended any employment,
consulting,
severance or
similar agreement with any Merchant Business Employee;
(d) incurred, assumed or guaranteed any liability or obligation
(absolute,
accrued, contingent or otherwise) with respect to the Merchant
Business, other
than a non-material amount in the ordinary course of
business
consistent with past practice;
(e) paid, discharged, satisfied or renewed any claim, liability
or
obligation with
respect to the Merchant Business, other than payment of a
non-material
amount in the ordinary course of business and consistent with
past
practice;
(f) permitted any of the Assets Sold to be subjected to any
mortgage,
lien, security
interest, restriction, charge or other encumbrance of any
kind;
(g) waived any material claims or rights with respect to the
Merchant
Business;
(h) sold, transferred or otherwise disposed of any of the assets
used
in the Merchant
Business, except non-material assets in the ordinary course
of business
consistent with past practice;
14
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(i) made any single capital expenditure or investment with respect
to
the Merchant
Business, in excess of $10,000;
(j) made any change in any method, practice or principle of
financial
or tax
accounting that in any manner materially affected the Merchant
Business or any
financial information relating to or derived from the
Merchant
Business;
(k) managed working capital components relating to the Merchant
Business,
including cash, receivables, other current assets, trade
payables
and other
current liabilities in a fashion inconsistent with past
practice,
including
failing to sell inventory and other property in an orderly and
prudent manner
or failing to make all budgeted and other normal capital
expenditures,
repairs, improvements and dispositions;
(l) paid, loaned, advanced, sold, transferred or leased any Asset
Sold
to any employee,
except for normal compensation involving salary and
benefits;
(m) entered into any commitment or transaction, other than a
non-material
commitment or transaction entered into in the ordinary course
of business
consistent with past practice, affecting the Merchant Business;
or
(n) agreed in writing, or otherwise, to take any action described
in
this
Section.
6.21 FINDER'S
FEES. Neither the Bank nor Parent has made any commitment or
done any act that would create any
liability to any person other than themselves
for any brokerage, finder's or similar fee
or commission in connection with this
Agreement or the transactions contemplated
hereby.
6.22 DISCLOSURE.
No representations, warranties, assurances or statements
by the Bank or Parent in this Agreement,
and no statement contained in any
document (including the Financial
Information and the Schedules), certificates
or other writings furnished by the Bank or
Parent (or caused to be furnished by
the Bank or Parent) to NOVA or any of its
representatives pursuant to the
provisions hereof, contains any untrue
statement of material fact, or omits or
will omit to state any fact necessary, in
light of the circumstances under which
such statement was made, in order to make
the statements herein or therein not
misleading.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF NOVA
NOVA makes the
following representations and warranties to the Bank and
Parent as of the date hereof and as of the
Effective Date:
7.1
ORGANIZATION. NOVA is a corporation duly organized and validly
existing
under the laws of the State of Georgia and
is authorized to conduct its business
under those laws.
7.2 AUTHORITY.
NOVA has the right, power, capacity and authority to enter
into and deliver the Operative Documents to
which it is a party, to perform its
obligations under the
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Operative Documents to which it is a party,
and to effect the transactions
contemplated by the Operative Documents to
which it is a party. The execution,
delivery and performance of the Operative
Documents to which NOVA is a party
have been approved by all requisite
corporate action on the part of NOVA, and,
when executed and delivered pursuant
hereto, the Operative Documents to which
NOVA is a party will constitute valid and
binding obligations of NOVA
enforceable in accordance with their
terms.
7.3 GOVERNMENTAL
NOTICES. NOVA has not received notice from any federal,
state or other governmental agency or
regulatory body indicating that such
agency or regulatory body would oppose or
not grant or issue its consent or
approval, if required, with respect to the
transactions contemplated by the
Operative Documents to which it is a
party.
7.4 NO
VIOLATIONS. The execution and delivery by NOVA of the Operative
Documents to which it is a party and its
performance thereunder will not: (i)
violate, conflict with, result in a breach
of or constitute (with or without
notice or lapse of time or both) a default
under, any material agreement,
indenture, mortgage or lease to which NOVA
is a party or by which it or its
properties are bound; (ii) constitute a
material violation by NOVA of any
material law or governmental regulation
applicable to NOVA; (iii) violate any
provision of the Articles of Incorporation
or Bylaws of NOVA; or (iv) violate in
any material respect any order, judgment,
injunction or decree of any court,
arbitrator or governmental body against or
binding upon NOVA.
7.5 CONSENTS AND
APPROVALS.
(a) No action of, or filing with, any governmental or public body
is
required by NOVA
to authorize, or is otherwise required in connection with,
the execution
and delivery by NOVA of this Agreement or the other Operative
Documents to
which it is a party or, if required, the requisite filing has
been
accomplished and all necessary approvals obtained.
(b) No filing, consent or approval is required by virtue of the
execution hereof
or any other Operative Document to which it is a party by
NOVA or the
consummation of any of the transactions contemplated herein by
NOVA to avoid
the violation or breach of any law, regulation, order, decree
or award of any
court or governmental agency, or any lease, agreement,
contract,
mortgage, note, license, or any other instrument to which NOVA
is
a party or is
subject, or, if required, the requisite filing has been
accomplished and
all necessary approvals obtained.
7.6 FINDER'S
FEES. NOVA has not made any commitment or done any act that
would create any liability to any person
other than itself for any brokerage,
finder's or similar fee or commission in
connection with this Agreement or the
transactions contemplated hereby.
16
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ARTICLE VIII
COVENANTS OF THE PARTIES
The parties
hereto hereby covenant and agree as follows:
8.1 CREDIT CARD
ASSOCIATION FILINGS. NOVA and the Bank shall cooperate with
each other to file with the Credit Card
Associations and the EFT Networks any
document or information that each such
Credit Card Association or EFT Network
deems to be required or desirable to be
filed in order for the acquisition
contemplated by this Agreement to be
completed.
8.2 EMPLOYEE
BENEFIT PLANS. NOVA shall not adopt, assume or otherwise
become responsible for, either primarily or
as a successor employer, any assets
or liabilities of any employee benefit
plans, arrangements, commitments or
policies currently provided by the Bank or
by any member of the Bank's
controlled group of corporations; and if
and to the extent that NOVA is deemed
by law or otherwise to be liable as a
successor employer for such purposes, the
Bank shall indemnify NOVA for the full and
complete costs, fees and other
liabilities which result. In particular,
NOVA shall not assume liability for any
group health continuation coverage or
coverage rights under Internal Revenue
Code Section 4980B and ERISA Section 606
which exist as of the Closing Date or
the Effective Date or which may arise as a
result of the Bank's termination of
any group health plan or plans, and if and
to the extent that NOVA is deemed by
law or otherwise to be liable as a
successor employer for such group health
continuation coverage purposes, the Bank
shall indemnify NOVA for the full and
complete costs, fees and other liabilities
which result.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF THE BANK AND PARENT
Each of the
obligations of the Bank and Parent to be performed hereunder
shall be subject to the satisfaction (or
waiver by the Bank and Parent) at or
before the Closing of each of the following
conditions:
9.1 REQUIRED
GOVERNMENTAL APPROVALS. All governmental authorizations,
consents and approvals necessary for the
valid consummation of the transactions
contemplated hereby shall have been
obtained and shall be in full force and
effect. All applicable governmental
pre-acquisition filing, information
furnishing and waiting period requirements
shall have been met or such
compliance shall have been waived by the
governmental authority having authority
to grant such waivers.
9.2 MARKETING
AGREEMENT. NOVA shall have executed and delivered to the Bank
the Marketing Agreement.
9.3 BILL OF SALE
AND ASSIGNMENT AND ASSUMPTION AGREEMENT. NOVA shall have
executed and delivered to the Bank the Bill
of Sale and Assignment and
Assumption Agreement.
9.4 CREDIT CARD
ASSOCIATIONS. All filings required pursuant to Section 8.1
shall have been made, and all approvals
required pursuant to Section 8.1 shall
have been received, and
17
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neither the Bank nor NOVA shall have
received any objection of any kind from a
Credit Card Association either in response
to the filings required under Section
8.1 or otherwise.
9.5 DOCUMENTS
SATISFACTORY IN FORM AND SUBSTANCE. All agreements,
certificates, opinions and other documents
delivered by NOVA to the Bank
hereunder shall be in form and substance
satisfactory to counsel of the Bank, in
the exercise of such counsel's reasonable
judgment.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF NOVA
The obligations
of NOVA to be performed hereunder shall be subject to the
satisfaction (or waiver by NOVA) at or
before the Closing of each of the
following conditions:
10.1 REQUIRED
GOVERNMENTAL APPROVALS. All governmental authorizations,
consents and approvals necessary for the
valid consummation of the transactions
contemplated hereby shall have been
obtained and shall be in full force and
effect. All applicable governmental
pre-acquisition filing, information
furnishing and waiting period requirements
shall have been met or such
compliance shall have been waived by the
governmental authority having authority
to grant such waivers.
10.2 OTHER
NECESSARY CONSENTS. The Bank shall have obtained all consents
and approvals (and estoppel certificates)
listed on Schedule 6.10. With respect
to each such consent or approval, NOVA
shall have received written evidence,
satisfactory to it, that such consent or
approval has been duly and lawfully
filed, given, obtained or taken and is
effective, valid and subsisting.
10.3
NON-COMPETITION AGREEMENT. The Bank and Parent shall have executed
and
delivered to NOVA the Non-Competition
Agreement.
10.4 MARKETING
AGREEMENT. The Bank and Parent shall have executed the
Marketing Agreement.
10.5 BILL OF
SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT. The Bank shall
have executed and delivered to NOVA the
Bill of Sale and Assignment and
Assumption Agreement.
10.6 CREDIT CARD
ASSOCIATIONS. All filings required pursuant to Section 8.1
shall have been made, and all approvals
required pursuant to Section 8.1 shall
have been received, and neither the Bank
nor NOVA shall have received any
objection of any kind from a Credit Card
Association either in response to the
filings required under Section 8.1 or
otherwise.
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<PAGE>
10.7 SECRETARY'S
CERTIFICATES.
(a)
The Bank shall have delivered to NOVA a duly executed
certificate
of the Secretary
of the Bank (i) attaching a certified copy of the articles
of incorporation
of, and a certificate of existence for, the Bank as issued
by the Secretary
of State of the State of Oregon, (ii) attaching a
certified copy
of the bylaws of the Bank currently in effect, and (iii)
attaching and
certifying copies of duly adopted resolutions of the Bank's
board of
directors authorizing the Bank's execution, delivery and
performance of
this Agreement and the other documents, instruments and
certifications
required or contemplated hereby.
(b) Parent shall have delivered to NOVA a duly executed certificate
of
the Secretary of
Parent (i) attaching a certified copy of the articles of
incorporation
of, and a certificate of existence for, Parent as issued by
the Secretary of
State of the State of Oregon, (ii) attaching a certified
copy of the
bylaws of Parent currently in effect, and (iii) attaching and
certifying
copies of duly adopted resolutions of Parent's board of
directors
authorizing Parent's execution, delivery and performance of
this
Agreement and
the other documents, instruments and certifications required
or contemplated
hereby.
10.8 WAIVER. The
Bank shall have delivered to NOVA the Waiver, duly
executed by each of the Bank, Humboldt
Merchant Services, LP and First National
Bank of Arizona.
10.9 DOCUMENTS
SATISFACTORY IN FORM AND SUBSTANCE. All agreements,
certificates, opinions and other documents
delivered by the Bank and Parent to
NOVA hereunder shall be in form and
substance satisfactory to counsel of NOVA,
in the exercise of such counsel's
reasonable judgment.
ARTICLE XI
INDEMNIFICATION
11.1
INDEMNIFICATION BY THE BANK AND PARENT. The Bank and Parent
shall
jointly and severally indemnify and hold
harmless NOVA, its affiliates, their
respective successors and assigns, and
their respective directors, officers,
employees, consultants and agents (each a
"NOVA Protected Party") from any
liability, loss, damage, diminution in
value, cost, claim, consequential
damages, suit, action or expense, including
reasonable attorneys' and
accountants' fees and expenses
(collectively, "NOVA Loss"), incurred by a NOVA
Protected Party that results from or arises
out of (i) any breach or inaccuracy
of any representation or warranty of the
Bank or Parent set forth in the
Operative Documents, whether such breach or
inaccuracy exists or is made as of
the Closing Date or the Effective Date;
(ii) the breach by the Bank or Parent of
any of their covenants or agreements
contained in the Operative Documents; (iii)
any liability or obligation, contingent or
otherwise, of the Bank or Parent, or
otherwise arising from or relating to the
Bank's Merchant Business, exclusive of
the Assumed Liabilities; and (iv)
violations of law or governmental rules or
regulations or wrongdoing or negligence by
the Bank or Parent in performing
obligations in connection with this
Agreement.
11.2
INDEMNIFICATION BY NOVA. NOVA shall indemnify and hold harmless
the
Bank and Parent, their affiliates and their
respective directors, officers,
employees, consultants and
19
<PAGE>
agents (each a "Bank Protected Party") from
any liability, loss, damage,
diminution in value, cost, claim,
consequential damages, suit, action or
expense, including reasonable attorneys'
and accountants' fees and expenses
(collectively, "Bank Loss"), incurred by a
Bank Protected Party that results
from or arises out of (i) any breach or
inaccuracy of any representation or
warranty of NOVA set forth in the Operative
Documents, whether such breach or
inaccuracy exists or is made as of the
Closing Date or the Effective Date; (ii)
the breach by NOVA of any of its covenants
or agreements contained in the
Operative Documents; (iii) any Assumed
Liability; or (iv) violations of law or
governmental rules or regulations or
wrongdoing or negligence by NOVA in
performing obligations in connection with
this Agreement.
11.3 SPECIAL
INDEMNIFICATION. Without limiting the provisions of Section
11.1 hereof, and notwithstanding anything
in this Agreement or any other
Operative Document to the contrary, the
Bank and Parent shall jointly and
severally indemnify and hold harmless NOVA
and the NOVA Protected Parties from
any NOVA Loss incurred by a NOVA Protected
Party that results from or arises out
of the application of any provision of the
Humboldt Agreements that in any way
restricts, impedes or prevents, or is
breached or violated by, the Bank's and
Parent's execution and delivery of this
Agreement and the other Operative
Documents to which each is a party, the
performance of their obligations
hereunder and thereunder, and the
consummation of the transactions contemplated
hereby and thereby.
11.4 LOSS OR
ASSERTED LIABILITY. Promptly after (a) becoming aware of
circumstances that have resulted in a NOVA
Loss or a Bank Loss or potential NOVA
Loss or Bank Loss, whichever is applicable
("Loss" or "Losses"), for which any
party hereto (the "Indemnitee") intends to
seek indemnification under Section
11.1, 11.2 or 11.3, or (b) receipt by the
Indemnitee of written notice of any
demand, claim or circumstances which, with
or without the lapse of time, the
giving of notice or both, would give rise
to a claim or the commencement (or
threatened commencement) of any action,
proceeding or investigation (an
"Asserted Liability") that may result in a
Loss, the Indemnitee shall give
written notice thereof (the "Claims
Notice") to the other party obligated to
provide indemnification pursuant to Section
11.1, 11.2 or 11.3 (the
"Indemnifying Party"). The Claims Notice
shall describe the Loss or the Asserted
Liability in reasonable detail and shall
indicate the amount (estimated, if
necessary) of the Loss that has been or may
be suffered by the Indemnitee. The
Claims Notice may be amended on one or more
occasions with respect to the amount
of the Asserted Liability or the Loss at
any time prior to final resolution of
the obligation relating to the Asserted
Liability or the Loss. Failure of the
Indemnitee to give promptly the notice
required by this Section 11.4 shall not
relieve the Indemnifying Party of its
obligations to indemnify under this
Article XI.
11.5 OPPORTUNITY
TO CONTEST. The Indemnifying Party may elect to compromise
or contest, at its own expense and by its
own counsel, any Asserted Liability.
If the Indemnifying Party elects to
compromise or contest such Asserted
Liability, it shall within thirty (30) days
(or sooner, if the nature of the
Asserted Liability so requires) of the date
of the Indemnifying Party's receipt
of the Claims Notice notify the Indemnitee
or Indemnitees of its intent to do so
by giving written notice thereof to the
Indemnitee (the "Contest Notice"), and
the Indemnitee shall cooperate, at the
expense of the Indemnifying Party, in the
compromise or contest of such Asserted
Liability. If the Indemnifying Party
elects not to compromise or contest the
Asserted Liability, fails to notify the
Indemnitee of its election as herein
provided or contests its obligation to
indemnify under this Agreement, the
Indemnitee (upon further notice to the
Indemnifying
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Party) shall have the right to pay,
compromise or contest such Asserted
Liability on behalf of and for the account
and risk of the Indemnifying Party,
subject to the right of the Indemnifying
Party to assume the compromise or
contest of such Asserted Liability at any
time before final settlement or
determination thereof. Anything in this
Article XI to the contrary
notwithstanding, (i) the Indemnitee shall
have the right, at its own cost and
expense and for its own account, to
compromise or contest any Asserted
Liability, and (ii) the Indemnifying Party
shall not, without the Indemnitees'
written consent, settle or compromise any
Asserted Liability or consent to entry
of any judgment which does not include an
unconditional release of the
Indemnitee from all liability in respect of
such Asserted Liability. In any
event, the Indemnitee and the Indemnifying
Party may participate, at their own
expense, in the contest of such Asserted
Liability. If the Indemnifying Party
chooses to contest any Asserted Liability,
the Indemnitee shall make available
to the Indemnifying Party any books,
records or other documents within its
control that are necessary or appropriate
for, shall make its officers and
employees available, on a basis reasonably
consistent with their other duties,
in connection with, and shall otherwise
cooperate with, such defense.
11.6 INDEMNITY
CLAIMS.
(a) The representations and warranties contained herein, in any
other
Operative
Document, or in any certificate or other document delivered
pursuant hereto
or in connection herewith shall not be extinguished by the
Closing but
shall survive the Closing, subject to the limitations set forth
in Section
11.6(b) hereof with respect to the time periods within which
claims for
indemnity must be asserted, and the covenants and agreements of
the Bank and
NOVA contained herein shall survive without limitation as to
time except as
may be otherwise specified herein. No investigation or other
examination of
the Bank or the Merchant Business by NOVA, or its designees
or
representatives, shall affect the term of survival of any
representation
or warranty
contained herein, in any other Operative Document, or in any
certificate or
other document delivered pursuant hereto or in connection
herewith, or the
term of the right of the NOVA Protected Parties or the
Bank Protected
Parties to seek indemnification as set forth in Section
11.6(b).
(b) All claims for indemnification hereunder shall be asserted
no
later than three
(3) years after the Closing Date, except as follows:
(i) claims with respect to Losses arising out of or related in
any way to the matters described in Sections 11.1(ii), (iii) and
(iv),
and 11.2(ii), (iii) and (iv) may be made without limitation, except
as
limited by law;
(ii) claims with respect to Losses arising out of or related in
any way to claims made
by third parties (including federal, state or
local authorities or private parties) against any of the NOVA
Protected Parties or the Bank Protected Parties with respect to any
of
the matters described in Section 11.1 hereof may be asserted
until,
and shall be asserted no later than, thirty (30) days after the
expiration of the applicable statute of limitations with
respect
thereto; and
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(iii) claims with respect to Losses arising out of or in any
way
related to the matters described in Section 11.3 may be asserted
at
any time during which the Marketing Agreement or
Non-Competition
Agreement remains in
effect.
(c) Nothing herein shall be deemed to prevent any party hereto
from
making a claim
for a Loss hereunder for potential or contingent claims or
demands provided
the notice of Loss sets forth the specific basis for any
such potential
or contingent claim or demand to the extent then feasible
and the
Indemnitee has reasonable grounds to believe that such a claim
or
demand may
become actual.
ARTICLE XII
DEFINITIONS AND RULES OF INTERPRETATION
12.1
DEFINITIONS. For purposes of this Agreement, the capitalized
terms
have the following respective meanings:
"AGREEMENT"
means this Agreement, including all schedules and exhibits
hereto, and, if amended, modified or
supplemented, as the same may be so
amended, modified or supplemented from time
to time.
"AGENT BANK"
means a financial institution sponsored by the Bank and for
which services related to the Merchant
Business are provided to such financial
institution and/or its merchants by or on
behalf of the Bank.
"AGENT BANK
AGREEMENT" means an agreement between the Bank and an Agent
Bank pursuant to which the Agent Bank and
the Bank provide services related to
the Merchant Business.
"ASSUMED
LIABILITIES" means the following liabilities or obl
