EXHIBIT 10.11
NETWORK 1 FINANCIAL CORPORATION
AFFILIATE OFFICE AGREEMENT
THIS AGREEMENT is entered into by and between NETWORK 1 FINANCIAL, INC.
("NETWORK 1"), a Virginia Corporation with its principal place of business at
0000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000, XxXxxx, Xxxxxxxx 00000-0000, and Payment
Data Systems, Inc., the Affiliate Office ("AFFILIATE"), a Nevada Corporation
with its principal place of business at 00000 Xxx Xxxxx Xxxxx 000 Xxx Xxxxxxx,
XX 00000. NETWORK 1 and Affiliate hereby agree as follows:
RECITALS
WHEREAS, Network 1 Financial, Inc. ("Network 1") provides through various Member
Bank(s) ("Member"), VISA and MasterCard processing and related payment
processing services ("Services") to merchant(s) ("Merchant(s)") in accordance
with the terms of certain Agreement (s) between Network 1, Member and other
settlement/transaction processing providers; and
WHEREAS, the Network 1 desires to locate individuals to market Services as
Contractor(s) (the "Contractors") of Network 1;
WHEREAS, Affiliate desires to establish an "Affiliate Office" on behalf of
Network 1 and Affiliate to market the Services of Network 1 and its subsidiaries
and to locate Contractors on behalf of Network 1, Member, and Affiliate and to
provide a "Local Office" for such Contractors on the terms and for the
consideration set forth herein; And
WHEREAS, Affiliate requires a referral arrangement while Affiliate is
negotiating an ISO sponsorship agreement with Network 1 and Xxxxxx Bank and this
Agreement shall govern the agreement between the parties until such time that
the ISO sponsorship agreement has been approval and executed in which case the
Processing Agreement, ISO sponsorship Agreement, and Three Party Agreement will
govern the relationship and this Agreement shall be terminated without penalty
or prejudice;
NOW, THEREFORE, in consideration of the foregoing and for the mutual promises
set forth herein, the parties hereby agree as follows:
ARTICLE I
OBLIGATIONS OF AFFILIATES
1.01 CONTRACTORS. Affiliate shall use its best efforts to market and sell
to commercial businesses the Services of Network 1 and Network 1's subsidiaries
and to locate individuals who are willing and capable of acting as Contractors
of Network 1 and Affiliate subject to the approval of all such individuals by
Network 1 as set out in Section 2.01. All such Contractors must process
Merchant applications and transactions exclusively through Network 1. Network 1
consents to waive said exclusivity requirement with respect to specific
Merchants in the event Network 1 (i) is unable to process for such specific
Merchant, and (ii) the declined Merchant is not accepted for processing by a
provider that Network 1 designates for specific Merchant's that are declined by
Network 1 ("B Bank Source"). Affiliate shall disclose to Network 1 all
information known to Affiliate with respect to the background, character,
employment history, business experience and other information regarding each
prospective Contractor relevant to Network 1's determination whether to accept
or not accept each prospective Contractor.
1.02 LOCAL OFFICE (AFFILIATE OFFICE). Affiliate shall locate, establish and
maintain such offices (the "Local Office"), as it deems necessary for use by all
Contractors identified by Affiliate and accepted by Network 1. Network 1
expressly agrees that Affiliate shall not be geographically restricted in its
establishment of such offices. Local Office has met the satisfaction of Network
1 in terms of space, quality, appearance, equipment, supplies, office hours,
support staff, working conditions, and other factors materially affecting the
working conditions of its Contractors. All Local Offices shall bear signs,
emblems and other insignia, including a telephone number, indicating that the
office is in fact an office of Network 1 subject to the conditions of 4.02.
However, all leases, utility listing, telecommunication, furniture and equipment
expense, employment contracts for support personnel and other contracts relating
to the operation of the Local Office shall be in the name of the Affiliate and
shall be the sole responsibility of the Affiliate.
1.03 REQUIRED REGISTRATION. All of the Contractors located by Affiliate
must also be registered representative through Network 1 pursuant to the
registration documents noted on Exhibit D.
1.04 PURCHASE AND LEASE OF EQUIPMENT. All equipment and software sold,
leased or otherwise provided by Affiliate to Merchants and Commercial Businesses
(whether sold directly, through Contractors, or leasing companies) relating to
any services provided by Network 1 may be purchased from Network 1. Network 1
agrees to sell such Equipment and Software to Affiliate at prices pursuant to a
price list established by Network 1 and provided to the Affiliate. The
Affiliate shall be responsible for and hereby guarantees the payments of all
amounts owed to Network 1 with respects to the purchase of Equipment and
Software from Network 1 by merchant or commercial business.
1.05 NETWORK 1 TO APPROVE ALL MERCHANTS AGREEMENTS. Affiliate agrees to
submit all Merchant Agreements procured by Affiliate in accordance with this
Agreement to Network 1. Network 1 agrees to review and approve or decline all
Merchant Agreements submitted by Affiliate to Network 1 in accordance with
Network 1's approval policy. Affiliate acknowledges that approval of a Merchant
creates a customer relationship between Bank and the Merchant, which involves,
among other things, the collection and disbursement of funds to process and
settle Merchant Transactions. Bank and Network 1 shall, in its sole discretion,
make the final decision as to whether or not approve or decline any Merchant
Agreement submitted to Bank in accordance with this Agreement. Network 1 agrees
to make reasonable efforts to review and approve or decline all Merchant
Agreements submitted to Network 1.
1.06 RESTRICTED MERCHANTS AND MERCHANT ACTIVITIES. Affiliate shall market
only to bona fide and lawful retail, MO/TO, and Internet businesses, all in
accordance with Merchant Program Standards established by Network 1. Affiliate
shall not engage in factoring or laundering or promote the same. Factoring or
laundering, for purpose of this Agreement, means the processing or attempted
processing of Merchant Transactions through a Merchant Account other than that
which is the Merchant Account of the Merchant processing or attempting to
process the Merchant Transaction. At the Affiliate request, a boarded Merchant
may be terminated from services so long as good reason exists.
ARTICLE II
RIGHTS OF NETWORK 1
2.01 CONTRACTORS. Network 1 shall have the right, at its discretion, to
accept, not accept, terminate or otherwise deal with any individuals located by
Affiliate pursuant to Section 1.01. All individuals identified by Affiliate
shall be subject to the rules imposed by Network 1, VISA, MasterCard, NACHA, and
the Member bank ("Member") utilized by Network 1, including rules pertaining to
qualification disqualification, conduct and otherwise, and shall agree to enter
into, and shall in fact enter into, a three party Contractor Agreement in the
form attached hereto as Exhibit 1 as amended from time to time.
2.02 LOCAL OFFICE. Network 1 shall have the right to inspect the Local
Offices during normal business hours to insure compliance by Affiliate with is
obligations pursuant to Section 1.02.
2.03 RETENTION OF CONTRACTORS. In the event that this contract between
Network 1 and Affiliate is terminated for any reason, the Contractors located by
Affiliate shall remain Contractors of Network 1.
(A) RIGHT OF FIRST REFUSAL. If during the term of this Agreement for any
renewal of this Agreement (the "Right of First Refusal Period"), Affiliate shall
receive (i) any Bona Fide Offer to purchase the revenue due Affiliate under this
Agreement or Affiliate's company through an asset purchase or merger (in which
case Network 1 shall be subordinate to the Checkfree first refusal right), or
(ii) a Bona Fide Offer to acquire or merge with or into Affiliate (in which case
Network 1 shall be subordinate to the Checkfree first refusal right), Affiliate
shall immediately give written notice (the "Offer Notice") to Network 1 of the
terms and conditions of the Bona Fide Offer, including without limitation the
price. Network 1 shall have the exclusive right of first refusal to purchase
all or any part of the revenue due Affiliate or acquire Affiliate (as the case
may be) on the same terms and conditions as the Bona Fide Offer. If Network 1
desires to exercise its rights under this Section it will give written notice to
Affiliate within 15 business days of receipt of the Offer. The failure by
Network 1 to exercise its rights within the 15-day period shall be deemed a
waiver of such right. Any changes in the terms of the Bona Fide Offer as well
as any subsequent Bona Fide Offer received by Affiliate shall require full
compliance by Affiliate with the procedures in this Section.
(b) CLIENT shall have the right to withdraw ("Transfer") Merchants from the
Merchant Program, provided (i) that CLIENT shall have given 120 days written
notice to NET1, (ii) that Affiliate is not in, and has not breached any terms of
this Agreement, (iii) NW1 has waived its rights in Section 2.03 (a) (iv) 18
months have lapsed under this Agreement and (v) Affiliate pays the applicable
Exit Fee as defined in section 7.6 (c) below. NET1 agrees that it shall use its
reasonable efforts to cause the prompt and orderly Transfer of all Merchants to
the processor or processors selected by Affiliate. Affiliate agrees that in
addition to the Exit Fee, all out of pocket and reasonable reimbursement of
staff expenses shall be paid prior to the Transfer of the Merchants from NET1 or
Xxxxxx Bank.
(c) The Exit Fee shall be paid by Affiliate immediately prior to the
assignment or Transfer of Merchants and/or its net revenue. The amount of the
Exit Fee during and following the termination of this Agreement shall be defined
as the following: (1) the aggregate sum, per transferring merchant, equal to
eighteen (18) months net recurring revenue normally paid to Affiliate under the
compensation terms of this Agreement to a maximum of $250,000.
ARTICLE III
COMPENSATION
3.01 AMOUNT. As compensation for Affiliate's services hereunder, Network 1,
or an affiliate, shall pay to Affiliate the following (the "Affiliate's Fee"):
A. The surplus funding amount after costs noted in Exhibit A based on all
Merchant applications obtained for Equipment and Products sold or leased by
Affiliate or Contractors located by Affiliate pursuant to Section 1.01.
Affiliate shall receive the buy rate with revenue share as noted in Exhibit A.
B. Affiliate acknowledges and agrees that all merchants and subscribing
businesses referred by Affiliate are a party to a contract with Network 1 and
it's Member bank and that Network 1 and the Member bank has a direct contractual
relationship with the merchants and subscribing businesses. Network 1
acknowledges and agrees that Affiliate has certain rights to residual revenue as
specifically defined in this agreement. Affiliate acknowledges and agrees that
it has no claims or rights of ownership over Merchants and subscribing
businesses, Unless ISO agreement is consummated or Network 1 does not approve
Affiliate or Network 1 cancels Affiliate and that it is a service provider to a
customer of Network 1 (namely Merchants and subscribing businesses). In such
case, Affiliate shall have the right to Transfer accounts in accordance with
Section 2.03 (b) and 2.03 (c). The Affiliate's Fees outlined in Exhibit A
attached hereto and incorporated herein shall be subject to modification by
Network 1, at its discretion, upon the giving of thirty-days (30) prior written
notification.
3.02 PAYMENT. The Affiliate's Fee payable pursuant to this agreement shall
be payable as outlined in Exhibit A. All payments to Affiliate are subject to
Network 1 receipt of all amounts payable to Network 1 by the Member Bank with
respect to the transaction giving rise to Affiliate's Fee. Network 1 shall have
no liability with respect to the payment of such Affiliate's Fee (for any
specific Merchant) under Section 3.01 unless and until Network 1 receives the
above referenced payment for Merchant. In the event Merchant rejects fees for
any reason, the fees due to Affiliate shall not be due and only payable upon
Network 1's receipt of such payment. Payments will be made on or before the 25th
of each calendar month.
3.03 LOSSES. All losses or charges arising from acts or omissions of the
Affiliate, Contractors located by the Affiliate, or arising from transactions,
chargebacks, lost revenues due to account cancellation or rejected fee
collections, acts or omissions of Merchants obtained by Contractors located by
Affiliate shall be borne as set out in Exhibit C.
ARTICLE IV
RESTRICTIONS ON AFFILIATE
4.01 RESTRICTIONS. Affiliate shall not, without the express written consent
of Network 1:
i. Contact or otherwise deal directly with, VISA, MasterCard or the
Member Bank; or
ii. Make any representations with respect to Network 1, VISA, MasterCard or
the Member Bank; or
iii. Make contact with or contract with any vendor of Network 1 or its
subsidiaries including other Affiliate's, direct sponsored ISO/MSP's of Network
1/Member Bank, or any merchants currently processing with Network 1 or Member
Bank.
iv. Network 1 expressly understands and gives permission to Affiliate to
contact any organization that Affiliate deems necessary to implement its ISO
program.
4.02 NETWORK 1 NAME USAGE. Affiliate shall use the Network 1 name in
Relationship to all Bankcard marketing activity as required by the rules of VISA
USA, International and MasterCard International. Affiliate acknowledges that
the use of the Network 1 name is on a non-exclusive basis and further agrees to
cease using Network 1 name, including but not limited to logo(s) and insignia(s)
at the written request of Network 1. In the event this contract terminates for
any reason, Affiliate shall immediately cease using the Network 1 name. The
insignia, logo's, Service Marks, trademarks and name of Network 1 are the
absolute and sole right of Network 1 Financial Corporation, a Virginia
Corporation.
ARTICLE V
TERM AND TERMINATION
5.01 TERM. The term ("Term") of this Agreement shall be for one hundred
eighty days (180) from the date set forth below unless Network 1 or Visa or
MasterCard or Xxxxxx Bank doesn't approve Affiliate's ISO application, in which
case, the Term will be 3 years. This Agreement will automatically renew for
successive one-year terms unless terminated by either party by providing the
other with 30 days written notice that this Agreement will not be renewed or
Affiliate enters into a Processing agreement with Network 1 and an ISO
Sponsorship agreement with Xxxxxx Bank in which case this Agreement will
automatically terminate concurrent with the execution of such agreements.
5.02 TERMINATION. Agreement may be terminated prior to the conclusion of
the Term by giving written notice of termination:
A. By either party as a result of default by the other party under this
Agreement and failure to cure said default within thirty (30) days after notice
of said default is given.
B. By either party in the event of insolvency, receivership, voluntary or
involuntary bankruptcy or an assignment for the benefit of creditors of or by
the Affiliate other than in the ordinary course of business. However, Affiliate
may pledge or otherwise collateralize assets for the purpose of securing
commercial loans or lines of credit in the ordinary course of business provided
that such pledge is subordinate to an security interest associated with the
Merchant accounts and/or losses from such accounts.
C. By Affiliate in the event of any changes in the Affiliate's Fee (other
than direct pass through increases related to Visa and MasterCard interchange,
fees, assessments and dues, processor communication costs, and other direct
increases including terminal hardware).
D. By Network 1, for cause. For purpose hereof; "cause" shall consist of (i)
fraud, intentional misrepresentation or negligence by Affiliate or any
Contractor located by Affiliate in compiling or providing any information
submitted to or relied on by Network 1 to Network 1, whether or not such fraud
or misrepresentation is based on a misstatement, omission, a substantive fact,
or data; (ii) intentional violations by the Affiliate or any Contractor(s)
located by Affiliate of any of the rules or regulations of VISA, MasterCard, the
Member Bank or Network 1; and (iii) the providing of vendor services or merchant
services by Affiliate or Contractor(s) located by Affiliate which are
competitive with Network 1 or without the prior written consent of Network 1,
contrary to Section 1.01 and IV, violation of any clause of Network 1 Affiliate
Office Agreement and failure to cure such violation within 30 days of
notification
E. By Network 1 in the event any provision of the Sales Certificate or the
Code of Ethics is in breach by the Affiliate or Contractor(s) located by
Affiliate.
F. Affiliate enters into a Processing agreement with Network 1 and an ISO
Sponsorship agreement with Xxxxxx Bank in which case this Agreement will
automatically terminate concurrent with the execution of such agreements.
If this Agreement is terminated for cause, all rights of the Affiliate to
future payments hereunder shall immediately terminate and Transferability will
remain in place in accordance with Section 2.03 (b) and 2.03 (c).
5.03 EFFECT OF TERMINATION. Upon termination of this Agreement, except in
the event of termination due to an uncured default by Affiliate pursuant to
Section 5.02A, Network 1 shall continue to pay to the Affiliate the Affiliate's
Fee described in Section 3.01B for so long as Network 1 continues to process
transactions of the Merchants in accordance with Schedule B attached hereto and
Affiliate continues to maintain the merchant accounts, provided, however, that
no such Affiliate's Fees shall be earned or paid for any calendar month in which
the Affiliate's Fee does not exceed $500. Upon termination due to an uncured
default by Affiliate, or termination for cause pursuant to Section 5.02D all
Affiliates fees shall cease to be accrued and paid immediately upon the
occurrence of said event. Additionally, upon termination of this contract for
any reason, all merchants recruited by Affiliate on behalf of Network 1 for any
product offered through Network 1, Affiliate shall not approach, rewrite,
pursue, or contract with any current client for the purpose of obtaining said
client as a new customer for Affiliate or any competing entity the Affiliate may
be in contract with. Such restriction shall also apply to Affiliate's past,
current and future officers, directors, sales representatives, and Contractors.
If terminated for cause Affiliate is responsible for any expense incurred by
Network 1 for investigating incidents, attorney fees, fines, and administration
expense.
ARTICLE VI
INDEPENDENT CONTRACTOR
6.01 NO EMPLOYER-EMPLOYEE RELATIONSHIP. Nothing in this contract or its
fulfillment is intended to create an employer-employee relationship between
Affiliate and contractors located by Affiliate and Network 1. You must not take
a position contrary to your status as an independent contractor. YOU agree to
accept the responsibilities placed on an independent contractor by federal and
state law, regulation, and rule or otherwise.
6.02 MANNER & MEANS OF WORK CONDUCT. You decide when and where, as well as
the manner and means by which you conduct your work activities. You acknowledge
that you set your business hours.
6.03 BUSINESS RESPONSIBILITY. You shall be responsible for and pay all
expenses and fees incurred by you, including but not limited to your business
overhead, transportation, state and federal income taxes, self-employment tax,
unemployment tax and workers' compensation. You are responsible for and shall
pay all taxes, duties, assessments and governmental charges, now or in the
future, related to carrying out your obligations under this contract and or
payments made to you by Network 1.
ARTICLE VII
INDEMNIFICATION
7.01 AFFILIATE. Affiliate hereby agrees to indemnify and hold harmless
Network 1, VISA, MasterCard and the Member Bank from and against any loss, cost
or damage (including reasonable legal fees and court costs) incurred by Network
1, VISA, MasterCard and the Member Bank as a result of Affiliate's failure to
comply with the terms of this Agreement, Affiliate's misrepresentation with
respect to this Agreement or Affiliate's knowing or negligent misrepresentation
with respect to Contractors.
7.02 NETWORK 1. Network 1 hereby agrees to indemnify and hold harmless
Affiliate from and against any loss, cost or damage (including reasonable legal
fees and court costs) incurred by Affiliate as a result of Network 1's failure
to comply with the terms of this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.01 NOTICES. All notices required hereunder shall be in writing and
delivered in person, by e-mail, facsimile, Federal Express, UPS, or by certified
or registered mail, return receipt requested, postage prepaid. Such notices
shall be addressed as follows:
To Network 1 To Affiliate
Network 1 Financial Payment Data Systems
1501 Farm Credit Drive 00000 Xxx Xxxxx, Xxxxx 000
Xxxxx 0000 Xxx Xxxxxxx, XX 00000
XxXxxx, Xxxxxxxx 00000-0000 FAX: 000.000.0000
All notices shall be deemed given when delivered in person or upon depositing
said notice in the United States mail with proper postage affixed thereto.
8.02 NON-EXCLUSIVITY. Affiliate's rights to locate Contractors hereunder
shall not be exclusive. It is expressly contemplated and understood that
Network 1 will utilize other persons and companies to locate Contractors.
8.03 AMENDMENT. Except as otherwise provided herein, this Agreement and the
Schedules hereto may not be amended, altered or modified except in writing
executed by all parties hereto.
8.04 BENEFITS AND ASSIGNMENTS. This agreement may be assigned or delegated,
in whole or in part, by NETWORK 1 without the prior written consent of the other
party herein. This agreement may not be assigned or delegated by Affiliate
without prior written consent from Network 1. Such consent shall not be
unreasonably withheld.
8.05 GOVERNING LAW. All disputes or claims by Payment Data Systems
hereunder shall be resolved by arbitration in McLean, Virginia, pursuant to the
rules of the American Arbitration Association. All disputes or claims by NETWORK
1 hereunder shall be resolved by arbitration in San Antonio, Texas, pursuant to
the rules of the American Arbitration Association.
8.06 ARBITRATION. All disputes or claims hereunder shall be resolved by
arbitration in McLean, Virginia, pursuant to the rules of the American
Arbitration Association.
8.07 SEVERABILITY. The illegality, invalidity or unenforceability of any
provision of this Agreement shall not affect the remainder of this Agreement.
8.08 ENTIRE AGREEMENT. This Agreement and the attached Schedules, Exhibits
and Addendums hereto contain the entire understanding of the parties hereto and
supersede all prior agreements with respect to the subject of this Agreement.
EXECUTED this ________ day of ______________________, in the year ____________.
Network 1 Affiliate
By: ______________________________________ By:
________________________________________
Authorized Representative Authorized Representative
