(EXHIBIT 10.5(A))
CARDSERVICE INTERNATIONAL INC
MERCHANT SERVICES AGREEMENT
This Agreement (the "Agreement") by and between CARDSERVICE INTERNATIONAL,
INC., a California Corporation (herein "CARDSERVICE"), with its principal
business at 00000 Xxxxxx Xxxxx Xxxx, Xxxxxx Xxxxx, XX 00000 and TEHAMA COUNTY
BANK, a California, (hereinafter "BANK") with its principal business address at
000 Xxxxx Xxxx Xxxxxx, Xxx Xxxxx, XX 00000, is intended by the Parties to amend
and supersede that agreement between them effective April 17, 1991, as amended
on November 19, 1992, and October 12, 1993, and shall be effective as of July 1,
1994. All provisions of the aforesaid prior agreement between the Parties are
intended to continue to be effective as to any matter occurring before July I,
1994.
RECITALS
WHEREAS, CARDSERVICE is in the business of providing consulting and
business development services to financial institutions which may be delivered
through its own facilities or subcontracted with external vendors.
WHEREAS, CARDSERVICE will function as marketing, business development, and
merchant servicing service for credit card services point of sale equipment, and
other related merchant transactions (those merchants for which CARDSERVICE
provides services, from time to time, under this Agreement shall be referred to
herein as "COVERED MERCHANTS");
WHEREAS, BANK will serve as an acquirer by maintaining and/or obtaining
necessary membership and licensing in VISA U.S.A. INCORPORATED ("VISA") and
MASTERCARD INTERNATIONAL ("MCI") for merchant bankcard clearing; and
WHEREAS, CARDSERVICE will provide BANK with certain services to facilitate
credit card and financial transactions.
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained, the parties agree as follows:
1.0 DEPOSIT ACCOUNTS AND PAYROLL EXPENSE.
CARDSERVICE has established and funded a reserve account (the "Reserve
Account"), in an interest bearing money market deposit account held by BANK.
CARDSERVICE shall have no control over, or access to funds deposited in, said
the Reserve Account.
1.1 CARDSERVICE shall maintain the Reserve Account at 75 basis points of
the net monthly processing volume for COVERED MERCHANTS; provided that in no
event shall the Reserve Account balance be less than 75 basis points of the
average net monthly processing volume for COVERED MERCHANTS for previous
six-month period. BANK shall release to CARDSERVICE reserve amounts in excess
of the required amount.
1.2 CARDSERVICE agrees to maintain the reserve account, at the balance
level set forth above, throughout the term of this Agreement (including any
renewal term(s)) and for a period of six months following termination of this
agreement, at the end of which six month period BANK shall return to
CARDSERVICE all funds remaining in the Reserve Account, including any accrued
interest.
1.3 BANK has established, from CARDSERVICE'S operating proceeds, a
non-interest bearing demand deposit account (the "Operating Account") in an
initial amount of $10,000. CARDSERVICE shall have no control over, or access to
funds deposited in, the Operating Account.
1.4 BANK shall from time to time reasonably determine the minimum
operating balance required in the Operating Account for the term of this
Agreement (including any renewal terms).
1.5 CARDSERVICE hereby grants BANK a security interest in the Reserve
Account, in all funds in the Reserve Account, all writings evidencing the
account, and all the proceeds of the Reserve Account, to secure CARDSERVICE'S
existing and future obligations to BANK under this agreement CARDSERVICE agrees
to take such actions as may be required, from time to time, to establish and
maintain such security interest as a first lien security interest. For the
purpose of this provision, any failure by CARDSERVICE to indemnify BANK promptly
for losses incurred in connection with credit card transactions generated by
COVERED MERCHANTS or to reimburse BANK for other amounts owed by CARDSERVICE
under this Agreement shall constitute a default by CARDSERVICE. Upon any such
default BANK, shall have all rights and remedies provided by law, including the
right to enforce its security interest by applying all funds in the Reserve
Account to any and all of CARDSERVICE'S indebtedness to BANK.
2.0 SERVICES AND INCOME.
BANK's relationship with CARDSERVICE, through the executed duties and
responsibilities listed herein will provide BANK with:
(a) An expanded geographic marketing area;
(b) Reduced risk in VISA/MasterCard processing; and
(c) Generation of fee income.
CARDSERVICE shall provide the following services for the BANK:
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(a) Solicitation of new merchants.
(b) Complete documentation, processing, evaluation and
recommendation of new merchants.
(c) All input necessary to set-up new merchants and then maintain
them on the processing vendors computer system.
(d) Daily loss prevention monitoring of the serviced accounts.
(e) Maintenance of a well trained, readily available, Merchant
Service Department to provide processing, equipment and fraud prevention
assistance to the COVERED MERCHANTS.
The fees collected by Bank from COVERED MERCHANTS pursuant to BANK's
agreement with such Merchants ("Merchant Fees") shall be allocated, used, and
distributed as follows:
2.1 BANK shall retain for itself that portion of the Merchant Fees which
equals 15.0 basis point (.15%) of the net bankcard sales and five cents
($0.05) per Debit transaction for COVERED MERCHANTS. Except for those amounts
identified in sections 1.3, 1.4 and 2.3 of the Agreement. CARDSERVICE shall be
entitled to all remaining funds.
Note: For merchants who have a monthly volume (totaling multiple locations)
in excess of $50,000 and fall below CARDSERVICE's Average Profitability for
BANK; BANK shall refund to CARDSERVICE 5.0 basis points (.05%) of the net
bankcard sales of those merchants after receipt and verification of a written
request submitted by CARDSERVICE.
2.2 Upon request, the funds not needed to maintain the OPERATING ACCOUNT
at the required level will be wired to an account designated by CARDSERVICE.
2.3 BANK shall charge the Operating Account from time to time, amounts
necessary to cover any/all of the following charges attributable to COVERED
MERCHANTS:
(a) All VISA interchange charges, transaction charges, frequency
charges, application fees, dues;
(b) All MCI interchange charges, transaction charges, frequency
charges, application fees, dues;
(c) All third party vendor processing charges, i.e.: FOR, Envoy,
MDI, etc.
(d) Automated Clearing House ("ACH") fees incurred in connection
with the transmittal by BANK of funds to COVERED MERCHANTS;
(e) BANK's payroll expenses of up to $4,000 per month;
(f) All initial and annual third party service provider
registration fees charged
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to BANK by VISA and MCI;
(g) All fines paid by BANK to VISA or MCI resulting from
CARDSERVICE's violation of the bylaws, rules, regulations, and other directives
of VISA or MCI (the "Card Association Rules"): and
(h) Any other "out of pocket" expense directly attributable to the
administration of the BANK's Merchant Servicing Program for COVERED MERCHANTS.
2.4 CARDSERVICE shall hold BANK harmless from and indemnify BANK against
all claims, losses, damages, and liabilities, including attorneys' fees and
other costs of defense, that relate to or result from either the processing of
credit card transactions for COVERED MERCHANTS or any alleged violations by
CARDSERVICE of the Card Association Rules. BANK may reimburse itself for any
such claims, losses, damages, or liabilities by immediately charging the Reserve
Account and/or the Operating Account in the amount of the loss incurred.
3.0 BANK'S OBLIGATIONS.
BANK agrees to the following considerations:
3.1 BANK agrees to perform all requirements as acquirer for COVERED
MERCHANTS.
3.2 BANK agrees that for the term of this agreement, or any extension
thereof, CARDSERVICE shall be the BANK's exclusive outside provider of merchant
credit card marketing and business development services for retail face to face
merchants, and that if at the conclusion of this agreement, it is not renewed
BANK shall allow CARDSERVICE to transfer the COVERED MERCHANTS, to another
institution without any additional consideration, subject to applicable Card
Association Rules; provided, however, that nothing herein shall prohibit BANK
from contracting directly with merchants other than the COVERED MERCHANTS
without the assistance of any third party service provider.
3.3 BANK agrees to maintain and/or obtain appropriate membership in
VISA, MCI and in all other entities required to allow BANK to serve as an
acquirer and to provide CARDSERVICE the authority to participate as a third
party merchant service provider. CARDSERVICE shall reimburse BANK for all costs
incurred by BANK in obtaining and maintaining the necessary memberships in VISA,
MCI, and any similar entity; provided, however, that all such costs, if any,
that are attributable directly and solely to BANK's role as an issuer shall be
borne by BANK. BANK may collect any amounts for which CARDSERVICE is
responsible under this paragraph by charging the Operating Account in the amount
owed by CARDSERVICE.
3.4 BANK shall cooperate with CARDSERVICE to establish a computer to
computer interface through which BANK and the processing vendor, may transmit
information necessary to provide accurate merchant account setup, on-line
merchant information, and daily security reporting. Expenses associated with
setting up this data link will be the responsibility of CARDSERVICE.
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3.5 BANK agrees to provide the settlement services required for COVERED
MERCHANTS using Debit services.
4.0 VISA, MCI RULES AND REGULATIONS.
CARDSERVICE acknowledges that it has received and understands all
applicable Card Association Rules, and agrees to comply fully with such rules,
as they are amended from time to time, including but not limited to the rules
governing third party service providers and the use of card association
trademarks. In the event of any inconsistency between any provisions of the
Agreement and any of the Card Association Rules, the Card Association Rules
shall take precedence and shall apply. CARDSERVICE shall not be liable for the
failure of any merchant of BANK to comply with any Card Association Rules
applicable to that merchant.
4.1 BANK shall control approval and review of all COVERED MERCHANTS,
BANK shall control the establishment of Merchant Fees with respect to VISA and
MCI transactions.
4.2 BANK, VISA, MCI and/or their designees may conduct financial and
procedural audits and/or reviews of CARDSERVICE at any time.
4.3 CARDSERVICE shall make available, within seven business days of any
request by BANK, VISA, MCI, or any other regulatory agency, all records and
documents within CARDSERVICE's control that relate to the merchant services
CARDSERVICE provides to BANK.
4.4 CARDSERVICE has disclosed and will continue to disclose to BANK the
identity and location of all of CARDSERVICE's sales or other business locations.
BANK, VISA, and MCI each shall have the right to inspect any business location
of CARDSERVICE to ensure full compliance with provisions of Agreement and all
applicable Card Association Rules. CARDSERVICE shall reimburse BANK for amounts
BANK pays to VISA or MCI to cover the costs of any such inspection.
4.5 CARDSERVICE acknowledges and agrees that VISA and MCI each is the
owner of its respective trademarks and service marks, and that CARDSERVICE will
not contest the ownership of such marks nor do anything inconsistent with such
ownership. CARDSERVICE agrees that all use of these trademarks and/or service
marks shall conform to standards established and maintained by the Card
Association Rules, and further agrees upon request to supply VISA and/or MCI, as
the case may me, with specimens of all materials bearing these marks produced by
Cardservice pursuant to this Agreement.
4.6 CARDSERVICE understands and agrees that VISA and MCI each has the
right to immediately and without advance notice prohibit CARDSERVICE from
performing any further service or activity relating to any VISA or MCI program,
as applicable should CARDSERVICE be deemed by VISA or MCI to have violated any
of its rules or regulations.
4.7 CARDSERVICE shall not use any of the VISA or MCI trademarks or
service marks on any of the following materials:
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(a) MARKETING MATERIAL. On any marketing material relating to the
merchant program covered by this Agreement including, but not limited to,
business cards and stationery, nor shall CARDSERVICE permit any of its agents to
use any of the VISA or MCI trademarks or service marks.
(b) OTHER MATERIAL. On any other material relating to the merchant
program covered by this Agreement unless BANK is prominently identified by name
and city adjacent to those marks. Such material may not identify CARDSERVICE
unless CARDSERVICE is prominently identified as an agent or representative of
BANK.
(c) USE BY CARDSERVICE AGENTS. CARDSERVICE shall not permit any of
its agents or representatives to use any of the VISA or MCI trademarks or
service marks.
5.0 DAILY RECORDKEEPING BY BANK.
BANK agrees to provide CARDSERVICE with the following records within three
business days after such request is made by CARDSERVICE.
5.1 Gross merchant charges per day per merchant; (VISA/MCI)
5.2 Net VISA/MCI sales per day per merchant on;
(a) All VISA interchange charges.
(b) All MCI interchange charges.
(c) All Chargebacks.
(d) All rejects.
(e) All daily FDR (or other processor) charges.
5.3 Settlement statement to reconcile the funds received from vendor
processor, including computation of BANK fees, and addition to CARDSERVICE's
Reserve Account; and any other pertinent information upon request.
6.0 ADVERTISING.
BANK agrees that CARDSERVICE may use its name in CARDSERVICE's
promotional/advertising material, but only with the advance consent of BANK as
further explained in paragraph 6.l.
6.1 BANK must review and approve in advance all marketing and
solicitation material prepared by CARDSERVICE.
7.0 SUPPLIES AND EQUIPMENT.
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CARDSERVICE agrees to provide its COVERED MERCHANTS with
supplies/equipment.
8.0 LAW AND REGULATIONS.
BANK agrees to comply with all applicable laws and regulations regulating
credit and credit cards.
9.0 ELECTRONIC TICKET CAPTURE AND MERCHANT ACCOUNT APPROVAL.
Through the use of a point of sale terminal, COVERED MERCHANT
VISA/MasterCard sales will be deposited into COVERED MERCHANT bank accounts by
the process of electronic ticket capture.
9.1 BANK agrees to facilitate this deposit by opening the necessary
COVERED MERCHANT account, or by providing deposit service to the COVERED
MERCHANT through use of the Automatic Clearing House (ACH).
9.2 BANK will have the final right to refuse any merchant recommended by
CARDSERVICE.
9.3 Any new client of BANK submitted by CARDSERVICE will complete, to
the satisfaction of BANK all necessary forms and agreements required by BANK,
VISA, and MCI on forms provided by CARDSERVICE for distribution to COVERED
MERCHANTS.
9.4 BANK agrees to release CARDSERVICE, its respective officers,
directors and representatives from all claims, demands, liabilities and damages
resulting from relationships with COVERED MERCHANTS for normal banking services
such as maintaining checking accounts.
10.0 TERM.
This agreement shall be effective as of the execution date hereof by
CARDSERVICE and shall continue in full force for a period equal to the contract
term BANK enters into either with FDR or any other agreed upon processing
vendor. This Agreement will automatically renew for additional periods that
coincide with renewals of the aforementioned processing vendor contract unless
written notice of cancellation is delivered 30 days prior to the expiration of
any renewal periods by either party, provided CARDSERVICE must notify BANK of
the date the current period ends, via certified mail, 90 days prior to the end
of that period.
10.1 Notwithstanding the provisions of Section 10.0 above, BANK may
terminate this Agreement, during the initial term or any renewal term, if
CARDSERVICE fails to comply fully with any applicable Card Association Rules.
In addition, this Agreement will terminate automatically if (a) either VISA,
MCI, or a lawfully recognized regulator prohibits CARDSERVICE from continuing to
provide services; or (b) either VISA or MCI terminates BANK's membership in or
licensing by that card association.
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11.0 NON PERFORMANCE CLAUSE.
CARDSERVICE agrees to perform all of its responsibilities listed herein.
BANK may terminate this Agreement by prevailing in a claim brought against
CARDSERVICE for NON PERFORMANCE in accordance with the ARBITRATION provision set
forth in Section 24 of this Agreement.
12.0 WARRANTY STATEMENT.
CARDSERVICE warrants that in carrying out its obligations hereunder, the
information originated and transmitted to BANK by CARDSERVICE or its
sub-contractors shall be accurate and the services shall be performed with due
care.
13.0 CONFIDENTIALITY.
It is understood that, in the performance of services under this Agreement,
CARDSERVICE may have access to private or confidential information of BANK.
CARDSERVICE shall use its best efforts to keep, and to have its employees and
agents keep, any and all such information confidential and to use such
information only for the purpose of fulfilling the service to be performed under
this Agreement or as otherwise agreed by BANK. CARDSERVICE shall not be
entitled to provide information concerning BANK accounts to third parties
pursuant to an administrative or judicial subpoena, summons, search warrant or
other governmental order, or through informal request of governmental agencies
without first notifying BANK of such order or informal request and providing
BANK adequate time to satisfy any requirements that BANK may have under
applicable laws. BANK agrees to hold confidential and to use only in
conjunction with the services provided under this Agreement, all proprietary
information CARDSERVICE furnishes to BANK which is identified as proprietary.
14.0 REGULATION.
It is understood and agreed to by the parties hereto that the performance
of the services hereunder are or may be subject to regulation of the Federal and
State regulatory agencies, and CARDSERVICE and BANK are each authorized to
submit or furnish to any such agency such reports, information, assurances or
other data as may be required by them under related and applicable laws and
regulations.
15.0 NOTICES.
Any written notice required or permitted to be given by BANK to CARDSERVICE
hereunder shall he addressed to:
CARDSERVICE INTERNATIONAL, INC.
00000 XXXXXX XXXXX XX.
XXXXXX XXXXX, XX 00000
and any written notice required or permitted to be given by CARDSERVICE to BANK
under this Agreement shall be addressed to:
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TEHAMA COUNTY BANK
000 XXXXX XXXX XXXXXX
XXX XXXXX, XX 00000
16.0 INDEPENDENT CONTRACTOR.
Nothing herein contained shall be construed as constituting a form of any
type of a partnership, joint venture or agency between the parties hereto. The
relationship is intended by the parties as one of independent contractor.
17.0 ASSIGNMENT.
This Agreement shall not be assignable in whole or in part by any of the
parties hereto without the prior written consent of the other parties hereto and
any assignment without such written consent shall be void. However, any of the
parties hereto may assign this Agreement to the successor of its business
through merger, sale of assets or other reorganization.
18.0 AUTHORITY.
Each party of this Agreement hereby represents and warrants to the others
that is has the full right, power and authority to enter into and perform this
Agreement in accordance with all of the terms, provisions, covenants and
conditions hereof, and that the execution and delivery of this Agreement has
been duly authorized by proper corporate action.
19.0 SPECIAL EVENTS.
In the event any of the parties to this Agreement shall cease conducting
business in the ordinary course, become insolvent, make a general assignment for
the benefit of creditors, suffer or permit appointment of a receiver for its
business or assets, or shall avail itself of, or become subject to, any
proceeding under the Federal Bankruptcy Laws or any statute of any state
relating to insolvency or the protection of the rights of creditors, then (at
the option of the other parties hereto), this Agreement shall terminate and be
of no further force and effect, and any property or rights of such other
parties, tangible or intangible, shall forthwith be returned to them.
20.0 FORCE MAJEURE.
Each party hereto will be excused from performance hereunder when and to
the extent that it is prevented from performance by, but not limited to, the
following: computer, utility, or communications breakdown, inability to operate
or obtain services for its equipment, fire and Act of God, or any act of a third
party beyond its control, provided that it takes all steps reasonably practical
and necessary to effect prompt resumption of its respective responsibilities set
forth hereunder in full or in part.
21.0 WAIVER.
Any delay, waiver or omission by any party to this Agreement to exercise
any right or power arising from any breach or default of any other party of any
of the terms, provisions or
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covenants of this Agreement shall not be construed to be a waiver by that party
of any subsequent breach or default of the same or other terms, provisions or
covenants on the part of any other party hereto.
22.0 BENEFIT.
This Agreement shall be binding upon all parties, their officers,
directors, representatives successors and assigns as provided herein.
23.0 ATTORNEY'S FEES.
Should either party hereto be required to seek the services of an attorney
to enforce its rights hereunder, the prevailing party in such action shall be
awarded attorney's fees and other collection fees and legal costs incurred by
that party in connection herewith.
24.0 ARBITRATION.
Any controversy or claim arising out of or relating to this or any related
agreements or default thereunder shall be settled by arbitration with the
Commercial Arbitration Rules of the American Arbitration Association and
judgment upon the award rendered by the Arbitrator(s) may be entered in any
court having jurisdiction thereof.
25.0 LAW.
This Agreement shall be governed in all respects by and construed in
accordance with the laws of the State of California.
26.0 SEVERABILITY.
Should any of the provisions of this Agreement be invalid, such invalidity
shall not affect the validity of the remaining provisions.
27.0 ENTIRE AGREEMENT.
This Agreement constitutes the only agreement between the parties hereto
relating to the subject matter hereof, and all prior negotiations, agreements,
and understandings, whether oral or written, are therefore superseded hereby.
No modification or amendment of this Agreement shall be effective unless and
until set forth in writing and signed by all parties hereto.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by a duly authorized representative on the day and
written below.
TEHAMA COUNTY BANK
NAME: /s/ X.X. Xxxxxxx
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TITLE: Vice President
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DATE. 7/20/94
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CARDSERVICE INTERNATIONAL, INC.
NAME: /s/ Xxxxx [text illegible]
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TITLE: CFO
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DATE. 7/19/94
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