ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "agreement") is made and entered into
as of the 18th day of May 2004 (the "Effective Date"), by and between MILLENNIUM
MERCHANT SERVICES, INC. and ▇▇▇▇ ▇▇▇▇▇▇▇, (the "Sellers") and PIPELINE DATA INC.
("PPDA" the Sellers and PPDA sometimes may be referred to as the "Parties"). For
purposes of this Agreement, the capitalized terms used herein shall have the
meaning ascribed to such terms in Section 9.1 hereof unless otherwise defined
herein.
BACKGROUND AND PURPOSE:
A. Sellers are independent agents in the business of soliciting merchants and
other customers on behalf of third-party providers of card-based
transaction processing services for the purpose of encouraging such
merchants and other customers to conclude merchant agreements with such
providers (Sellers' business is referred to herein as the "Merchant
Solicitation Business").
B. Seller is a party to the following agreements:
i. an Agreement with IPayment, INC. , (attached hereto as Exhibit 1.1 and
defined herein the "IPayment Existing Agreement"),
ii. an Agreement with Cornerstone (attached hereto as Exhibit 1.2 and
defined herein and defined herein as the "Cornerstone Existing
Agreement") ,
iii.an Agreement with Concord EFS (attached hereto as Exhibit 1.3 and
defined herein and defined herein as the "Concord Existing
Agreement"), and
iv. an Agreement with Authorizenet, (attached hereto as Exhibit 1.4 and
defined herein and defined herein as the "Authorizenet Existing
Agreement") (Together the IPayment Existing Agreement, the Cornerstone
Existing Agreement, the Concord Existing Agreement and the
Authorizenet Existing Agreement may be hereinafter referred to as the
"Existing Agreements".)
C. This Agreement shall provide the terms governing the transfer of residual
rights from Existing Agreements as well as other similar
yet-to-be-identified Merchant Solicitation Business agreements (the "Future
Agreements")( when referred to together, the Existing Agreements and the
Future Agreements may be referred to as the "Merchant Agreements").
D. Pursuant to the Merchant Agreements, Sellers refer certain merchants, as
the case may be, to each of IPayment, Cornerstone, Concord and Authorizenet
as well as other similar business institutions ("the Processors"), such
merchants consist principally of retail and other providers of goods and
services, who, as a result of such referrals, may enter into Merchant
Agreements to receive broad payment services, including but not limited to,
certain credit card and debit card transaction processing services from the
Processors in connection with the Merchant Solicitation Business. Pursuant
to the Merchant Agreements, Sellers are entitled to receive residual
payments from Processors as governed by the specific Merchant Agreement
(the "Residuals") (rights to the Residuals under the Merchant Agreements
may be referred to as the "Residual Rights").
E. Seller wishes to sell and transfer to PPDA all of its rights which relate
to the Residual Rights, and PPDA is willing to purchase and accept such
Residual Rights. Seller and PPDA 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 mutual agreements contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which hereby are acknowledged, Sellers and PPDA hereby agree, on the terms
and conditions herein set forth, as follows:
ARTICLE I
ASSETS SOLD
1.1 Sale and Purchase.
1.1.1On the terms and subject to the conditions set forth in this
Agreement, and effective as of the Effective Date, Sellers hereby
sell, transfer and assign to PPDA, and PPDA hereby purchases and
accepts from Seller, all Residual Rights of Sellers which relate to
the merchants (the "Merchants," each of which is specifically
identified on Schedule 1.1), under the Existing Agreements arising on
or after the Effective Date (collectively, the "Asset Sold"). Sellers
acknowledges and agrees that, immediately after the Closing, (i) they
will have no right, title and interest in and to the Residual Rights,
and (ii) no agent of the Sellers or other party has any right or claim
to any portion of the Residuals Rights and (iii) neither PPDA nor any
of its affiliates shall be responsible to pay any portion of the
Residual Rights transferred under this Agreement to any such agent or
third party. If the Shares are subdivided or combined into a greater
or smaller number of Shares, the formula in Section 2 below shall be
proportionately reduced in case of subdivision of Shares or stock
dividend or proportionately increased in the case of combination of
Shares, in each such case by the ratio which the total number of
Shares outstanding immediately after such event bears to the total
number of Shares outstanding immediately prior to such event.
1.1.2In addition to the other terms and conditions contained herein, the
Parties acknowledge and agree that the Residual Rights under the
Merchant Agreements, including the Existing Agreements, shall be
assigned and consideration therefor shall be paid only after PPDA
receives consents to such assignments from the relevant processors.
Should the consents not be received by PPDA within 90 days after the
Effective Date, PPDA shall have the right in is sole discretion to
cancel its agreement to purchase the residual rights under the
particular Existing Agreement for which the consent was not received.
In this event, Sellers may substitute the relevant Existing Agreement
for another Merchant Agreement, subject to governing provisions
including the requirement to obtain a consent to such assignment
within 90 days after transfer. The Parties shall follow the procedures
set forth in 2.1.1.5 hereof.
1.2 No Assumption of Liabilities. Sellers acknowledge and agree that PPDA shall
not assume or become liable for the payment of any debts, liabilities,
losses, accounts payable, mortgages, or other obligations of Sellers or any
Merchant, whether the same are known or unknown, now-existing or hereafter
arising, of whatever nature or character, whether absolute or contingent,
liquidation or disputed.
1.3 ▇▇▇▇ of Sale. The sale, conveyance, transfer, assignment and delivery of
the Assets Sold by Sellers to PPDA shall be evidenced and effected by the
execution of a ▇▇▇▇ of Sale in the form of Exhibit 1.3 attached hereto (the
"▇▇▇▇ of Sale").
ARTICLE II
CONSIDERATION FOR ASSETS SOLD; PROVISION OF LOANS; CLOSING
2.1 Purchase Price. The Residual Rights shall be purchased in a series of
transactions. The consideration for the Residual Rights shall be shares of
PPDA's common stock (the "Shares"). There shall be a total of 4.2 million
Shares set aside for the Residual Rights sales (the "Transactions")
(subject to adjustments in the event of a reverse stock split)..
2.1.1PPDA shall purchase the Residual Rights in consideration for its
Shares valued at $1.00 per share in accordance with the following
formula:
2.1.1.1 The formula by which the purchase price of the Residual Rights
shall be determined shall be based upon the average monthly gross
revenue actually derived from the Residual Rights and
subsequently deposited into an escrow account for the three month
period between April and June 2004 (except that the three month
period for Authorizenet shall be from May to July 2004), subject
to review for exceptional items and to possible extension for
delays in portfolio payments (the "Average Monthly Gross Revenue
Figure" Revenue Figure). The average monthly revenue shall be
distributed to PPDA and shall be calculated in order to determine
the Average Gross Monthly Revenue Figure. The parties agree and
acknowledge that all information reasonably related to the
calculation of the Average Gross Monthly Revenue Figure will be
made available to both parties.
2.1.1.2 The Average Monthly Gross Revenue Figure shall be multiplied
by 30 and then divided by $1.00 to derive the total number of the
PPDA's Shares required to purchase the Residual Rights.
2.1.1.3 For example if the net revenue for each of the three target
months were $80,000, $85,000 and $90,000, respectively, the
Average Monthly Gross Revenue Figure would be $85,000. When this
figure is multiplied by 30, the product would equal a total cash
purchase price of $2,550,000 and then when divided by $1.00, the
purchase price would be payable with 2,550,000 Shares of the
PPDA's common stock.
2.1.1.4 On the date monies are first deposited into escrow, 2.4
million Shares to be issued as -- consideration for the Residual
Rights underlying the Existing Agreements shall be issued and
held in trust by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq. pending final calculation
of the Average Monthly Gross Revenue Figure pursuant to Section
2.1 hereof. Revenue statements or other information reasonably
requested to verify Revenue Residuals shall be supplied by the
Sellers to PPDA. Upon the determination of the Average Monthly
Gross Revenue Figure, the number of Shares shall be adjusted to
reflect the actual number of shares required to be issued after
deriving the Average Monthly Gross Revenue Figure and shall be
promptly delivered to the Sellers. Should the number of Shares
required to be issued be less than the 2.4 million Shares held in
escrow, the Parties agree that the excess Shares shall be
cancelled, pending reissuance upon transfer of Residual Rights
under Future Agreements. This procedure shall be followed in the
case of the transfer of Residual Rights under Future Agreements.
2.1.1.5 As stated herein, the Parties have agreed that the Residual
Rights under Existing Agreements shall be assigned and
consideration therefor shall be paid only after PPDA receives
consents to such assignments from the relevant processors. Thus,
in regards to the Existing Agreements, the Sellers shall pay over
to PPDA the Residuals derived therefrom and PPDA shall issue
Shares, as set forth in Section 2.1.1.4 hereof, in anticipation
of its receipt of all relevant consents. Should the consents not
be received by PPDA within 90 days after the Effective Date, PPDA
shall have the right in is sole discretion to cancel its
agreement to purchase the Residual Rights under the particular
Existing Agreement for which the consent was not received or
extend the deadline for receiving such consent. In this event
PPDA cancels the assignment, Sellers may substitute the relevant
Existing Agreement for another Merchant Agreement. Three month
Residuals from the substituted Merchant Agreement shall be used
to determine Average Monthly Gross Revenue Figure in accordance
with Section 2.1.1 hereof. Residuals previously paid over to PPDA
derived from the cancelled assignment shall be offset against
Residuals from the substituted Merchant Agreement to be paid over
the three months following assignment. Upon determination of the
Average Monthly Gross Revenue Figure, the resultant number of
Shares shall be delivered to the Sellers.
2.1.2The balance of Shares remaining after payment of the purchase price
for the Residual Rights underlying the Existing Agreement shall equal
the highest number of Shares payable for the 2nd and all subsequent
purchases of the Residual Rights underlying the Future Agreements.
Pursuant to the example provided above, if 2.55 million Shares were
issued to purchase the Residual Rights underlying the Existing
Agreements, 1.65 million Shares would be highest number of total
amount payable for all further purchases of the Residual Rights
underlying the Future Agreements (4.2 million minus 2.55 million
equals 1.65 million).
2.1.3The 2nd and subsequent purchase allocations shall be based on the
same formula as set forth in paragraph 2.1.1hereof, except that the
Share price used in the formula shall be $1.20 per share.
Notwithstanding anything else in this Agreement, the total number of
shares payable for the Residual Rights under the Merchant Agreements
shall not exceed 4.2 million Shares.
2.1.4The Sellers shall have the right to put to PPDA the Residual Rights
underlying Future Agreements that comply with Sections 3.1 and 3.2
hereof in consideration for that portion of balance of the 4.2 million
Shares as determined by the purchase allocation formula as set forth
in Section 2.1.3 hereof. The value of the Residual Rights underlying
Existing Agreements shall be such that a minimum of one third the
total balance of Shares shall be issuable at Closing. The Sellers
shall have three opportunities to put Portfolios to PPDA in accordance
with the guidelines of this Section 2.1.4: November 7, 2005, May 7,
2006 and May 7, 2007. Notwithstanding the foregoing, the Sellers may
put Portfolios to PPDA at any time earlier than the dates specified in
this Section 2.1.4. If the minimum amount is not put to PPDA by the
dates provided herein, the Sellers shall forfeit the rights provided
by this section 2.1.4.
2.1.5It is the Parties' intention that Sellers will assign to PPDA
Residual Rights underlying Merchant Agreements with an aggregate value
as determined in accordance with the relevant valuation provisions set
forth in this section 2.1 hereof (the "Agreed Value"). In the event
that PPDA assigns Residual Rights underlying Merchant Agreements with
an aggregate value in excess of the Agreed Value, PPDA shall remove
such number of Merchants from portfolio(s) assigned so that the
aggregate value of the Residual Rights from Merchant Agreements equals
the Agreed Value. PPDA, in its sole discretion, may determine which
Merchants to remove.
2.1.6PPDA agrees and acknowledges that it will not actively take or permit
to be taken any action that could reduce the amount of revenue
transferred pursuant to the Residual Rights transferred hereunder in
anyway that may adversely affect the rights of Seller to receive
Shares or other compensation pursuant to this Agreement (this includes
allowing off-set or deductions against the Residual Rights for
accounts of PPDA with the Processors not acquired by PPDA pursuant to
the terms hereof). Reductions in revenue as a result of such things as
business cycles, downturns in Merchant business or extraordinary
events over which PPDA has no control is excluded from this provision.
2.2 Closing. Subject to the satisfaction or waiver of the conditions set forth
herein. It is anticipated that the transfer of Residual Rights under the
Existing Agreements will occur at multiple Closings upon receipt of
consents of processors, the first of which is estimated to take place on
May __,_ 2004 at 12.00 (Eastern 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 Sellers of the Purchase Price
hereby 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 and party's failure or refusal to deliver original (i.e.
non-facsimile) signature pages. However, this Agreement and the other
documents and instruments delivered in connection herewith shall not be
deemed effective until executed by both Parties and facsimile copies are
delivered to each other.
2.3 Provision of Loans.
2.3.1At closing, PPDA shall provide a loan to Sellers in the amount of
$500,000 at the simple interest rate of 6% per annum. This loan shall
mature on July 7, 2007 but may be repaid at any time without penalty
in cash or with Residual Rights from Merchant Accounts valued pursuant
to the subsequent purchase allocation formula (i.e., with a share
price of $1.20 per share as set forth in Section 2.1.3 hereof).
Residual Rights from Merchant Agreements used to repay the loan shall
be subject to the provisions of Section 3.1 and 3.2 of this Agreement.
The loan shall be personally guaranteed by the Sellers and
collateralized by 1,000,000 Shares, subject to calls for additional
Shares in the event of a reduction in Share value.
2.3.2PPDA will stand ready to lend Sellers an additional $500,000 at
anytime between the one year anniversary date of the Closing and the
two year anniversary date of the Closing at the simple interest rate
of 6% per annum. This loan shall be due May 7, 2008. The loan shall be
personally guaranteed by the Sellers and collateralized by 1,000,000
Shares, subject to calls for additional Shares in the event of a
reduction in Share value. Notwithstanding the foregoing, Sellers must
be in compliance with terms of the Agreement as a condition precedent
to PPDA's obligation to provide this loan.
ARTICLE III
CERTAIN COVENANTS AND AGREEMENT OF SELLER
3.1 Quality Of Subsequent Series Of Portfolios. The merchant accounts
underlying the Future Agreements to be purchased pursuant to this Agreement
shall be of comparable quality to the merchant accounts under the Existing
Agreements.
3.2 Guaranteed Cash Stream. Sellers personally guarantee as provided in this
Section 3.2 that the cash streams generated by the Merchant Agreements
shall not decline by more than 20% of the Average Monthly Gross Revenue
Figure during the 12 months subsequent to purchase. If there is a decline
in excess of 20%, then within 90 days after notice of such decline (the
"Notice of Decline"), the Sellers shall replace the difference between the
20% and the actual rate of attrition with additional merchant accounts that
generate sufficient revenue and that comply with Section 3.2 hereof. Review
and potential replacement of accounts shall be conducted 12 months after
purchase except where attrition exceeds twenty-five (25%) percent in any
given month. The Notice of Decline shall be a detailed statement certified
by an officer of PPDA which lists monthly revenue for each Merchant for the
period in question.
3.2.1During the period that this Section 3.2 is in effect the PPDA agrees,
that without the prior written consent of the Sellers, PPDA will not
in any way change the Merchant relationship or the Merchants pricing
in such a way that it may adversely effect the Residual Rights. PPDA
reserves the right to reassign a Merchant to Sellers if it reasonably
believes there is a substantial likely hood of financial harm being
caused to PPDA by a Merchant.
3.3 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, shall be paid by Sellers.
3.4 Confidentiality of Information, Non-Interference.
3.4.1On and after the date hereof, Sellers and their agents and
representatives shall treat all information learned or obtained about
PPDA's 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, known by Sellers prior to
the date hereof or subsequently enters the public domain, other than
as a result of the breach of Seller's obligation under this Section
3.4. Sellers and their agents and representatives shall not use the
information described in this Section 3.4 in any manner that might
reasonably be anticipated to adversely affect the Merchant Business of
PPDA's relations with Merchants or with other persons or entities.
3.4.2Sellers covenant and agree that neither Sellers, nor any of Sellers'
affiliates, agents or representatives shall directly or indirectly
interfere with or in any way adversely affect the cash streams
underlying the Residual Rights from the Merchant Agreements. The
Parties agree that Sellers may communicate with the Merchants but that
they shall notify PPDA with any material adverse information that
could affect the Residual Rights of which it becomes aware. The
Parties agree that Sellers may solicit Merchants for additional "MID"
business (i.e., business resulting in a new merchant account
identification number) but may not solicit the Merchants for
additional "TID" business (i.e., business resulting in a new terminal
account identification number).
3.5 Notice of Breach or Potential Breach. Sellers shall promptly notify PPDA of
any change, circumstance or event which may prevent Sellers from complying
with any of their respective obligations hereunder.
3.6 Further Assurances. On and after the Closing Date, Sellers shall give such
further assurances to PPDA and execute, acknowledge and deliver all such
acknowledgments and other instruments and take further action as PPDA may
reasonably request to effectuate the transactions contemplated by this
Agreement, including the transfer of the Assets Sold. Sellers further
assures PPDA to (i) notify PPDA with any material adverse changes in a
merchant's financial condition or the type of business in which it engages
that becomes known to the Sellers, (ii) notify PPDA of any contact to it by
a Merchant regarding a Merchant Agreement for which Residual Rights have
been assigned to PPDA pursuant to the terms of this Agreement and during
such contact, Sellers shall act in a professional manner and refer all
further dealings regarding the Residual Rights to PPDA and (iii) at the
reasonable request of PPDA for information or assistance about a Merchant,
including but not limited to its original documentation, to respond to PPDA
with such information in a prompt manner.
ARTICLE IV
REPRESENTATIONS AND WARRENTIES OF SELLER
Sellers hereby make the following representations and warranties to PPDA as
of the date hereof and as of the Effective Date:
4.1 Organization: Ownership. Millennium Merchant Services, Inc. is a
Corporation and is authorized to conduct the business as presently
conducted (including the Merchant Solicitation Business) under the laws of
the State of Delaware and all other applicable laws.
4.2 Authority. Sellers have the right, power, capacity and authority to enter
into and deliver the Operative Documents, to perform the obligations under
the Operative Documents, and to effect the transactions contemplated by the
Operative Documents. The execution, delivery and performance of the
Operative Documents have been approved by all requisite corporate action on
the part of Seller, and when executed and delivered pursuant hereto, the
Operative Documents will constitute valid and binding obligations of
Sellers enforceable in accordance with their terms.
4.3 Government Notices. Sellers have not received notice from any federal,
state or other governmental agency or regulatory body indication that such
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.
4.4 No Violations.
4.4.1The execution and delivery by Sellers of the Operative Documents, and
his 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 Sellers are parties or by which Sellers or
its properties are bound (except for the consents of the Processors
contemplated by this Agreement); (ii) constitute a violation by
Sellers of any law or government regulation applicable to Sellers or
the Merchant Solicitation Business; or (iii) violate any order,
judgment, injunction or decree of any court, arbitrator of
governmental body against or binding upon Seller.
4.4.2With respect to Sellers' obligations under the Assets Sold, Sellers
have not been and will not be (by virtue of any past or present
action, omission to act, contract to which they are 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 requirements of any governmental
body, agency or authority or court binding on them, or relating to
their property or business (including any antitrust laws and
regulations).
4.5 Assets Sold. Sellers are the 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 have
good and valid title to the Assets Sold. Other than with respect to the
Residual Rights, Sellers have no right, title or interest in the Merchants
or the Merchant Agreements. Other then as identified on Schedule 5.5, no
person, other than the Processors, PPDA or the Merchants, owns or holds any
right, title or interest in the Residual Rights.
4.6 Consents and Approvals. No action of, or filing with, any governmental or
public body is required by Sellers to authorize, or is otherwise required
in connection with, the execution and delivery by Sellers of the Operative
Documents or, if required, the requisite filing has been accomplished and
all necessary approvals obtained.
4.6.1Except for the consents of the Processors, no filing, consent or
approval is required by virtue of the execution hereof or any other
Operative Document by Sellers or the consummation of any of the
transactions contemplated herein by Sellers to avoid the violation of
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 Sellers are parties or to which they or any of the Assets
Sold is subject.
4.6.2Millennium Merchant Services, Inc. shall furnish a good standing
certificate from the Secretary of State of its State of organization.
4.7 Litigation and Claims. Schedule 4.7: (i) sets forth all litigation, claims,
suits, actions, known investigations, indictments or proceedings or
arbitrations, grievances or other 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
Seller, threatened, in or before any court, commission, arbitration
tribunal, or judicial, governmental or administrative department, body,
agency, administrator or official, grand jury, Card Association, or any
other entity or forum for the resolution of grievances, against Sellers and
relating in any way to the Merchant Solicitation Business (collectively
"Claims"), and (ii) indicates which of such Claims are being defended by an
insurance carrier, and which of such Claims being so defended are being
defended under a reservation of rights. Sellers have made available to PPDA
true, correct and complete copies of all pleadings, brief and other
documents filed in each pending litigation, claim, suit, action, known
investigation, indictment or proceeding, arbitration, grievance or other
procedure listed in Schedule 5.7, and the judgments, orders, writs,
injunctions, decrees, indictments and {information,} grand jury subpoenas
and civil investigative demands, plea agreements, stipulations and awards
listed in Schedule 4.7.
4.8 Agreements, Contracts and Commitments.
4.8.1Except for the Merchant Agreements and the assignments of the
Processors contemplated hereby, Sellers have no agreement, contract,
commitment or relationship, whether written or oral, related to the
Merchant Solicitation Business, by which PPDA could be bound; and
4.8.2With respect to the Merchant Agreements, except for the Processors,
there is no contract, agreement or other arrangement entitling any
person or other entity to any profits, revenues or cash flows of
Sellers or requiring any payments of other distributions based on such
profits, revenues or cash flows.
4.8.3To the knowledge of Seller, other than with respect to the Residuals
Rights, which rights are being sold to PPDA pursuant to this
Agreement, neither Sellers nor any of its affiliates have any basis
for any claims arising under the Existing Agreements against PPDA or
any of PPDA's affiliates for payment, breach of contract or otherwise.
4.9 Absence of Certain Changes and Events. Since negotiations between the
parties commenced, Seller has acted under the Existing Agreements only in
the ordinary course, and has not:
4.9.1suffered any damage or destruction adversely affecting the Residual
Rights;
4.9.2permitted any of the Assets Sold to be subjected to any mortgage,
lien, security interest, restriction, charge or other encumbrance of
any kind;
4.9.3waived any material claims or rights with respect to the Residual
Rights;
4.9.4paid, loaned, advanced, sold, transferred or leased any Asset Sold to
any employee, except for normal compensation involving salary and
benefits; or
4.9.5agreed in writing, or otherwise, to take any action described in this
Section.
4.10 Disclosure. No representations, warranties, assurances or statements by
Sellers in this Agreement, and no statement contained in the Schedules
furnished by Sellers (or caused to be furnished by Seller) to PPDA 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.
4.11 Misrepresentation. To the Sellers' knowledge, it has not made any
misrepresentation or omission on any application submitted on behalf of a
Merchant.
4.12 Liability Not Transferred with Purchase. Based on the terms and conditions
of the Merchant Agreement as of the date hereof or as later changed by or
on behalf of the Sellers , the Sellers agree that PPDA shall bear no
liability for chargebacks or other losses on the purchased Merchant
Agreements and under Merchant accounts underlying the Merchant Agreements.
Losses. Based on the terms and conditions of the Merchant Agreement as of
the date hereof or as later changed by or on behalf of the Sellers, losses
suffered under the Merchant Agreements and under Merchant accounts
underlying the Merchant Agreements through fraud or otherwise shall revert
to the Seller. Notwithstanding anything to the contrary in this paragraph
4.12, should PPDA amend the Merchant Agreements to increase its liability,
it shall bear this additional liability and the same shall not be borne by
the Sellers.
4.13 Letters of Assignment. The Sellers shall provide letters of assignment of
the Residual Rights. However, PPDA acknowledges and agrees that Cornerstone
shall have a right of first refusal as to the Merchant accounts underlying
its Merchant Agreement with the Seller.
4.14 Future Business. The Seller agrees to act in good faith to attempt to
select PPDA and/or its affiliates for all its services and to place all its
business on PPDA' internal programs. The Seller shall not be bound by this
provision should the Seller determine that the use of PPDA's program place
the Seller at a competitive disadvantage to other programs offered through
competitors of PPDA.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PPDA
PPDA makes the following representations and warranties to Sellers as of the
date hereof and as of the Effective Date:
5.1 Organization. PPDA is a corporation duly organized and validly existing
under the laws of the State of Delaware and is authorized to conduct its
business under those laws.
5.2 Authority. PPDA 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. The execution, delivery and performance of the
Operative Documents have been approved by all requisite corporate action on
the part of PPDA, and, when executed and delivered pursuant hereto, they
will constitute valid and binding obligations of PPDA enforceable in
accordance with their terms.
5.3 Governmental Notices. PPDA 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 of issue its consent or
approval, if required, with respect to the transactions contemplated by the
Operative Documents.
5.4 No Violations. The execution and delivery by PPDA of the Operative
Documents, and his 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 PPDA is party or by which PPDA or his properties
are bound; (ii) constitute a violation by PPDA of any law or government
regulation applicable to PPDA or the Merchant Solicitation Business; or
(iii)violate any order, judgment, injunction or decree of any court,
arbitrator of governmental body against or binding upon PPDA.
5.5 Consents and Approvals.
5.5.1No action of, or filing with, any governmental or public body is
required by PPDA to authorize, or is otherwise required in connection
with, the execution and delivery by PPDA of this Agreement or the
other Operative Documents or, if required, the requisite filing has
been accomplished and all necessary approvals obtained.
5.5.2No filing, consent or approval is required by virtue of the execution
hereof or any other Operative Document by PPDA or the consummation of
any of the transactions contemplated herein by PPDA to avoid the
violation or breach of under 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
PPDA is a party or is subject.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF SELLER
Each of the obligations of Sellers to be performed hereunder shall be
subject to the satisfaction (or waiver by Seller) at or before the Closing of
each of the following conditions:
6.1 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.
6.2 Documents Satisfactory in Form and Substance. All agreements, certificates,
and other documents delivered by PPDA to Sellers hereunder shall be in form
and substance satisfactory to counsel of Seller, in the exercise of such
counsel's reasonable judgment.
6.3 Share Issuance into Escrow. PPDA shall issue Shares into escrow in
accordance with Section 2.1.1.4 hereof.
6.4 Provision of Loan at Closing. At Closing, PPDA shall provide a $500,000
loan in accordance with Section 2.3.1.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PPDA
The obligations of PPDA to be performed hereunder shall be subject to the
satisfaction (or waiver by PPDA) at or before the Closing of each of the
following conditions:
7.1 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.
7.2 ▇▇▇▇ of Sale. Sellers shall have executed and delivered to PPDA the ▇▇▇▇ of
Sale.
7.3 Corporate Resolutions. Sellers shall have delivered to PPDA certified
resolutions of Sellers authorizing this Agreement and all other agreements
and transactions referenced herein.
7.4 Documents Satisfactory in Form and Substance. All agreements, certificates,
and other documents delivered by Sellers to PPDA hereunder shall be in form
and substance satisfactory to counsel of PPDA, in the exercise of such
counsel's reasonable judgment.
7.5 Certificate of Good Standing. Millennium Merchant Services, Inc. shall
furnish a facsimile copy of a good standing certificate from the Secretary
of State of its State of organization. Exhibit 7.5.
ARTICLE VIII
INDEMNIFICATION
LIMITATION OF ▇▇▇▇▇▇▇ LIABILITY
8.1 Indemnification. Sellers shall indemnify PPDA, its affiliates, their
respective successors and assigns, and their respective officers,
directors, employees, consultants and agents (each an "Indemnified Person")
and hold each Indemnified Person harmless from any liability, loss,
diminution in value, cost, claim, or expense, including reasonable
attorneys' and accountants' fees and expenses, incurred by such Indemnified
Person that result from or arise out of (i) any breach or inaccuracy of any
representation or warranty of Sellers set forth in the Operative Documents
or (ii) the breach by Sellers of any of the covenants or agreements
contained in the Operative Documents; (iii) any liability or obligation,
contingent or otherwise, of Seller; and (iv) violations of law or
governmental rules or regulations or wrongdoing or negligence by Sellers in
performing obligations in connections with this Agreement.
8.2 Limitation of ▇▇▇▇▇▇▇ Liability. Parties agree that the personal liability
of ▇▇▇▇ ▇▇▇▇▇▇▇ under this Agreement shall be for a period of three years
from the date of each assignment of Residual Rights, except that fraud
actions shall be governed by the relevant statute of limitations. Except in
the event of fraud and with reference to Sections 2.3 and 3.2,
notwithstanding anything to the contrary contained herein, ▇▇▇▇ ▇▇▇▇▇▇▇
shall not be subject to any personal liability for any breach of
representation or warranty contained in Article IV hereof unless and only
to the extent that ▇▇▇▇ ▇▇▇▇▇▇ would have been subject to personal
liability for such breach under the terms of the Merchant Agreements had
the transactions contemplated by this Agreement had not occurred.
ARTICLE IX
DEFINITIONS AND RULES OF INTERPRETATION
9.1 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.
"Closing Date" has the meaning set forth in Section 2.2 hereof
"Credit Card Associations" means VISA U.S.A., Inc., Visa
International, Inc. MasterCard International Incorporated,
American Express, Discover, JCB, Diners Club and any successor
organizations or associations or other credit card associations
not mentioned herein.
"Merchant Agreement" means an agreement between PPDA and a
servicing party, which may or may not be a bank, pursuant to
which the servicing party undertakes to honor financial
transaction devices.
"Merchant Solicitation Business" shall mean any services
pertaining to negotiation of payment, including but not limited
to acceptance of credit card or debit card transaction records in
documentary or electronic form from merchants in connection with
the processing and clearing of such records for settlement and
payment to such merchant as well as ACH transfers, check
guarantees, check authorizations, e-commerce payments and
services and point of sales systems on both a hardware or
software basis.
"Operative Documents" means this Agreement, the Non-Solicitation
Agreement, and all such other documents, agreements, certificates
or instruments executed and delivered in connection herewith.
9.2 Other Definitions; Rules of Interpretation.
9.2.1All terms defined herein shall have the defined meanings when used in
any Operative Document, certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. Singular
terms shall include the plural, and vice versa, unless the context
otherwise requires.
9.2.2Exhibits and Schedules referenced in this Agreement are deemed to be
incorporated herein by reference. The term "including" shall mean
"including without limitation."
ARTICLE X
MISCELLANEOUS
10.1 Expenses. Except as otherwise specifically provided in this Agreement, each
party shall pay its own costs and expenses in connection with this
Agreement and the transactions contemplated hereby, including all
attorneys' fees, accounting fees and other expenses.
10.2 Notices and Payments. All notices, demands and other communications
hereunder shall be in writing and shall be delivered (i) in person, (ii) by
United States mail, certified or registered, with return receipt requested,
or (ii) by national overnight courier (e.g., FedEx) as follows:
If to Sellers: Millennium Merchant Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile (781) v483-3423
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
With copy to: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
(which shall not Buchalter, Nemer, Fields & Younger PC
constitute notice) ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇]
If to PPDA: PIPELINE DATA INC,
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
With copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
(which shall not ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇) ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The persons or addresses to which mailings or deliveries shall be made may
be changed from time to time by notice given pursuant to the provisions of
this Section 10.2. Any notice, demand or other communication given pursuant
of this Section 10.2 shall be deemed to have been given on the earlier of
the date actually delivered or five (5) days following the date deposited
in the United States mail, properly addressed, postage prepaid, as the case
may be.
10.3 Third-Party Beneficiaries. No party to this agreement intends this
Agreement to benefit or create any right or cause of action in or on behalf
of any person other than Sellers and PPDA.
10.4 Independent Contractors. Nothing contained in this Agreement or any other
Operative Document shall be construed as creating or constituting a
partnership, joint venture or agency among the parties to this Agreement.
Rather, the parties shall be deemed independent contractors with respect to
each other for all purposes.
10.5 Finder's Fees.
10.5.1 Seller. Sellers represents and warrants that he has not made any
commitment or done any act that would create any liability to any
person other than himself for any brokerage, finder's or similar fee
or commission in connection with this Agreement or the transactions
contemplated hereby.
10.6 Successors and Assigns. All terms and provisions of this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement and the rights,
privileges, duties and obligations of the parties hereto may not be
assigned or delegated by any party without the prior written consent of the
other party; provided, however, that such consent shall not be required (a)
for the assignment by any party of its rights and privileges hereunder to a
person or entity controlling, controlled by or under common control with
such part (it being understood that no such assignment shall relieve the
assigning party of its duties or obligations hereunder) or (b) for the
assignment and delegation by any party of its rights, privileges, duties
and obligations hereunder to any person into it with which the assigning
party shall merge or consolidate formally agrees in writing to assume all
the rights and obligations of the assigning party created hereby.
10.7 Amendments and Waivers. This agreement, any of the instruments referred to
herein and any of the provisions hereof or thereof shall not be amended,
modified or waived in any fashion except by an instrument in writing signed
by the parties hereto. The waiver by a party of any breach of this
Agreement by another party shall not operate or be construed as the waiver
of the same or another breach on a subsequent occasion, nor shall nay delay
in exercising any right, power or privilege hereunder constitute a waiver
thereof.
10.8 Severability of Provisions. In any provision of this Agreement, or the
application of any such provision to any person or circumstance, is invalid
or unenforceable, the remainder of this Agreement, or the application of
such provision to persons or circumstances other than those as to which it
is invalid or unenforceable, shall not be affected by such invalidity or
unenforceability.
10.9 Counterparts; Delivery. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute on instrument.
The parties acknowledge that delivery of executed counterparts of this
Agreement, or the application of such provision to persons or circumstances
other than those as to which it is invalid or unenforceable, shall not be
affected by such invalidity or unenforceability.
10.10Governing Law. This Agreement is made and entered into under the laws of
the State of Delaware, and the laws of that State (without giving effects
to the principles of conflicts of laws thereof) shall govern the validity
and interpretation hereof and the performance by the parties hereto of
their respective duties and obligations hereunder.
10.11Section Headings. The headings of Sections contained in this Agreement are
for convenience of reference only and do not form a part of this Agreement.
10.12Entire Agreement. The making, execution and delivery of this Agreement by
the parties hereto have been induced by no representations, statements,
warranties or agreements other than those herein expressed. This Agreement
and the other written instruments specifically referred to herein embody
the entire understanding of the parties and supersede in their entirety all
prior communication, correspondence, and instruments among PPDA and Sellers
with respect to the subject matter hereof, and there are no further or
other agreements or understanding, written or oral, in effect between the
parties relating to the subject matter hereof.
10.13Publicity. Sellers agree that the timing and content of any and all public
statements, announcements or other publicity concerning the transactions
contemplated herein shall be in the sole discretion of PPDA.
(SIGNATURES APPEAR ON NEXT PAGE)
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Asset Purchase Agreement as of the date first written above.
"SELLER"
MILLENNIUM MERCHANT SERVICES, INC.
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
MILLENNIUM MERCHANT SERVICES, INC.
By:/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
Name:▇▇▇▇ ▇▇▇▇▇▇▇
Title:President
"PPDA"
PIPELINE DATA INC.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Name:▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
