AGREEMENT
This Agreement is entered into effective December 12, 1997, by and
between SUMMIT NATIONAL BANK ("BANK"), 0000 Xxxxxx Xxxxxx, Xxxx Xxxxx, Xxxxx
00000, and WEBSITE MANAGEMENT CO., INC., doing business as FlashNet
Communications ("FLASHNET"), 0000 X. Xxxxxx Xxxx Xxxx., Xxxx Xxxxx, Xxxxx
00000. This Agreement amends and restates and replaces in its entirety a
prior agreement between Bank and FlashNet concerning credit card processing.
The Security Agreement among the parties executed simultaneously with such
prior agreement, and the liens and security interests therein granted, are
also hereby terminated and shall no longer be of any further force or effect.
Bank agrees to prepare and submit to FlashNet or FlashNet's designee
termination statements with respect to such liens and security interests on
or before December 17, 1997.
RECITALS
A. FlashNet is an Internet provider. Many of FlashNet's customers
charge the fees payable to FlashNet on credit cards. Bank processes credit
card invoices for FlashNet through First USA. Bank charges FlashNet a fee for
the processing services performed by it (the "FEE").
B. FlashNet's customers may cancel their contract for services within
30 days after initially contracting for such services with FlashNet.
Generally, such cancellations are handled by FlashNet as credit sales. If
FlashNet's customers are not satisfied with the credit process or if a
dispute exists, FlashNet's customers may contest charges made by FlashNet.
Whenever a customer who has made a charge on a credit card processed through
First USA contests the charge, First USA credits the cardholder's account and
charges the amount back to FlashNet by debiting Bank's clearing account at
Bank One, Texas, N.A., Fort Worth, Texas ("BANK ONE"), or by debiting
FlashNet's account at Bank. Those debits are called a "CHARGEBACK" or
collectively the "CHARGEBACKS."
C. Bank and FlashNet desire to enter into this Agreement with respect
to Bank's processing of credit card charges through First USA and to provide
for security to Bank with respect to contingent liabilities that it has
incurred or may incur for Chargebacks.
AGREEMENT
Now therefore, in consideration of the mutual covenants and agreements
of the parties herein contained, and for valuable consideration, the receipt
and sufficiency of which are acknowledged, Bank and FlashNet agree as follows:
1. Whenever Bank's clearing account for credit card processing at Bank
One or FlashNet's account at the Bank is debited by First USA, the amount of
the Chargeback shall immediately be due and payable by FlashNet to Bank to
the extent that available, collected funds are not directly debited from
FlashNet's operating account to cover the Chargeback. All amounts owing under
this paragraph that are not paid when due shall bear interest from the date
that First USA debits the account (or such other date as Bank may pay or
become indebted for a Chargeback) at the rate of 18% per annum until paid.
2. FlashNet agrees to indemnify and hold harmless Bank from all
liability, loss, damage and expense incurred by Bank with respect to
Chargebacks.
3. The failure of FlashNet to pay Bank the amount of any Chargeback
within five (5) days after notice thereof shall constitute a default
hereunder. Without limitation upon its other remedies, Bank, at its election,
may recoup the amount of any Chargeback from FlashNet's operating checking
account, from any other account of FlashNet with Bank, or from the Reserve
Account provided for below.
4. FlashNet agrees to establish and maintain a reserve account
("RESERVE ACCOUNT") with Bank throughout the period provided herein. The
Reserve Account shall bear interest accruing at a fluctuating rate equal to
Bank's money market rate for similar accounts. The amount of the Reserve
Account shall be determined by Bank monthly on or before the 20th day of each
month. The amount of the Reserve Account shall be equal to:
(a) the product of three (3) times the total of Chargebacks during the
three (3) most-recent calendar months (excluding the month in which the
determination is made); plus
(b) fifteen thousand dollars ($15,000) per month beginning December 31,
1997 and continuing until one (1) year after Bank ceases processing credit
card charges for FlashNet.
The initial Reserve Account is $98,040.21 as of December 1, 1997.
Whenever the Reserve Account is deficient for any reason, FlashNet shall
within five (5) days after notice thereof deposit sums necessary to restore
the Reserve Account to the required level. The failure of FlashNet to do so
shall constitute a default hereunder. Notwithstanding any subsequent decline
in the amount of Chargebacks, FlashNet will not be entitled to withdraw any
sums from the Reserve Account until permitted under Section 8 of this
Agreement. FlashNet further agrees to maintain its primary operating
depository accounts at Bank until Bank releases the Reserve Account pursuant
to Section 8 below.
5. All sums payable by FlashNet to Bank or to the Reserve Account
shall be payable at Bank's office in Fort Worth, Tarrant County, Texas.
6. The Fee will be changed by Bank from time to time, upon written
notice to FlashNet by Bank, without further consent by FlashNet.
7. Bank's agreement to process credit card charges for FlashNet may be
terminated by Bank at any time upon a default under this Agreement or, if no
default, with thirty-days written notice, and will terminate immediately and
automatically upon any sale by FlashNet of all or any substantial portion of
its Internet provider business or assets, or upon the sale by shareholders of
FlashNet of a majority interest in the issued and outstanding voting shares
in FlashNet, or upon foreclosure or conveyance in lieu of foreclosure of a
substantial portion of FlashNet's assets. In addition, this Agreement will
automatically terminate upon a filing by FlashNet of a voluntary petition or
an involuntary petition filed against FlashNet under any applicable
liquidation, conservatorship, receivership, bankruptcy, moratorium,
rearrangement, insolvency,
AGREEMENT - Page 2
FlashNet's assets. In addition, this Agreement will automatically terminate
upon a filing by FlashNet of a voluntary petition or an involuntary petition
filed against FlashNet under any applicable liquidation, conservatorship,
receivership, bankruptcy, moratorium, rearrangement, insolvency,
reorganization, or similar laws affecting the rights or remedies of creditors
generally, as in effect from time to time. Subject to the obligations of
FlashNet regarding the Reserve Account that remain until Bank releases the
Reserve Account in accordance with Section 8 below, FlashNet may terminate
this Agreement at any time in connection with procurement of credit card
processing services from a third party by giving Bank thirty (30) days prior
written notice thereof.
8. Notwithstanding the termination of Bank's agreement to process
credit card charges for FlashNet (including specifically the termination of
this Agreement by FlashNet), the Reserve Account shall be maintained at the
required level until Bank shall have been released by First USA from any
liability for Chargebacks and any other liability relating to credit card
charges made for FlashNet services, or for a period of two (2) years after
Bank ceases processing credit card charges for FlashNet, whichever comes
first. Upon Bank's release by First USA or the two-year period set forth
above, Bank will release the Reserve Account. No termination of the Reserve
Account shall release FlashNet of its liability to Bank for Chargebacks or
other indebtedness.
9. FlashNet agrees to pay Bank upon demand, for all reasonable
attorneys fees and related expenses incurred by Bank in relation to the
processing of credit card charges for FlashNet or in relation to the
administration or enforcement of this Agreement. Without limitation, FlashNet
shall pay all costs and expenses (including, without limitation, the
reasonable attorneys fees of Bank's legal counsel) in connection with (i) the
preparation of this Agreement, and any subsequent amendments, supplements, or
modifications thereof, (ii) any action reasonably required in the course of
processing of credit card charges, (iii) resolution of any disputes with
FlashNet, First USA, Ascend Communications, Inc., or any other party, related
to this Agreement, and (iv) any action in the enforcement of the Bank's
rights under this Agreement.
10. FlashNet hereby represents to Bank as follows; (a) The execution,
delivery, and performance of this Agreement by FlashNet have been duly
authorized by the FlashNet's board of directors and constitutes a legal,
valid, and binding obligation of FlashNet, enforceable in accordance with its
terms; and (b) the execution, delivery, and performance of this Agreement and
the consummation of the transaction contemplated, do not require the consent,
approval, or authorization of any third party and do not and will not
conflict with, result in a violation of, or constitute a default under (i)
any provision of FlashNet's articles of incorporation or bylaws, or (ii) any
other agreement or instrument binding upon FlashNet, or (iii) any law,
governmental regulation, court decree, or order applicable to FlashNet.
11. FlashNet agrees that it shall (a) (i) maintain its existence in
good standing in the state of its incorporation, maintain its authority to do
business in all other states in which it is required to qualify, and maintain
full legal capacity to perform all its obligations under this
AGREEMENT - Page 3
Agreement, (ii) continue to operate its business as presently conducted,
(iii) not permit a material change in its ownership, control, or management,
(iv) not permit its dissolution, liquidation, or other termination of
existence or forfeiture of right to do business, and (v) not form any
subsidiary or permit a merger or consolidation or acquire all or
substantially all of the assets of any other entity; and (b) promptly inform
Bank of (i) any and all material adverse changes in FlashNet's financial
condition, (ii) all litigation and claims which could materially affect the
financial condition of FlashNet, (iii) all actual or contingent material
liabilities, (iv) the occurrence of any default under the loans to FlashNet
from Ascend Communications, Inc., or (v) any change in name, identity, or
structure of FlashNet.
12. To the extent that any provision of this Agreement conflicts with
the provisions of the merchant services agreement or any other agreement
between Bank and FlashNet, this Agreement will control.
THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES CONCERNING
THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SUMMIT NATIONAL BANK
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx, Senior Vice President
WEBSITE MANAGEMENT CO., INC.,
doing business as FlashNet
Communications
By: /s/ M. Xxxxx Xxxxxx
------------------------------------
President
AGREEMENT - Page 4