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Exhibit 10.9
CARDSERVICE INTERNATIONAL INC.
MERCHANT SERVICES AGREEMENT
This Agreement (the "Agreement") is effective as of April 1, 1993 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 REDDING BANK OF COMMERCE, a California Corporation
(hereinafter "BANK") with its principal business address at 0000 Xxxxxx Xxxxxx -
P. O. Xxx 0000, Xxxxxxx, XX 00000.
R E C I T A L S
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.
Within 30 days after the effective date of this agreement
CARDSERVICE shall establish a reserve account (the "Reserve
Account"), which shall be in an interest bearing "money market
deposit account held by BANK in an initial amount equal to the
greater of $10,000 or 50 basis points of the net processing
volume for COVERED MERCHANTS for the first full month of this
Agreement. CARDSERVICE shall have no control over, or access to
funds deposited in, the Reserve Account.
1.1 CARDSERVICE shall increase the amount deposited in the Reserve
Account at the rate of 5 basis points of the net monthly
processing volume for COVERED MERCHANTS per month, until the
Reserve Account balance is equal to 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 $10,000.
CARDSERVICE shall deposit additional funds in the Reserve
Account, in an amount sufficient to maintain the above balance
level, at any time the balance falls below the required level.
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
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shall return to CARDSERVICE all funds remaining in the Reserve
Account, including any accrued interest.
1.3 Within 30 days after the effective date of this Agreement,
CARDSERVICE shall establish a noninterest bearing demand deposit
account (the "General Account") with BANK in an amount of
$10,000. CARDSERVICE shall have no control over, or access to
funds deposited in, the General Account.
1.4 CARDSERVICE shall maintain minimum operating balance of $10,000
in the General Account for the term of this Agreement, (including
any renewal terms).
1.5 CARDSERVICE hereby grants BANK a security interest in the Reserve
Account and the General Account (the "Accounts"), in all funds in
the Accounts, all writings evidencing the accounts, and all the
proceeds of the Accounts, 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 identify 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 Accounts to any
and all of CARDSERVICE's indebtedness to BANK.
1.6 CARDSERVICE agrees to reimburse BANK on a monthly basis for
payroll expense in an amount set by BANK, but not to exceed
$2,000.
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:
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 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 13.5 basis points of the net sales by COVERED
MERCHANTS.
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2.2 BANK shall deposit the remainder of the Merchant Fees into the
General Account. Upon request, the remaining funds will be wired
to an account designated by CARDSERVICE.
2.3 BANK shall charge the general account from time to time, amounts
necessary to cover any/all of the following:
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.; FDR,
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 $2,000 per month;
f) All initial and annual third party service provider
registration fees charged 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) Travel expenses and related out-of-pocket expenses
incurred by BANK in connection with periodic visits by
BANK to CARDSERVICE.
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
or 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 General 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 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
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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
General 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.
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 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 this 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.
5.0 DAILY RECORD KEEPING 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 all;
a) All VISA interchange charges.
b) All MCI interchange charges.
c) All Chargebacks.
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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 6.4.
6.1 CARDSERVICE acknowledges that MCI is the owner of the MasterCard
trademarks and service marks, that CARDSERVICE will not contest
the ownership of such marks, and that MCI has the right to
immediately and without advance notice prohibit CARDSERVICE from
performing any further service or activity relating to any MCI
program if MCI deems CARDSERVICE to have violated any applicable
MCI rule or regulation.
6.2 CARDSERVICE shall not use any of the VISA or MCI trademarks or
service marks on any material 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.
6.3 CARDSERVICE shall not use the VISA or MCI trademarks or service
marks on any marketing material, including, but not limited to,
business cards stationery, nor shall CARDSERVICE permit any of
its agents to use any of the VISA or MCI trademarks or service
marks.
6.4 BANK must review and approve in advance all marketing and
solicitation material prepared by CARDSERVICE for use in
connection with its performance of the services contemplated by
this Agreement. All marketing or solicitation material used by
CARDSERVICE shall clearly disclose that any merchant agreement
entered into will be between the merchant and BANK.
7.0 SUPPLIES AND EQUIPMENT.
CARDSERVICE agrees to provide COVERED MERCHANTS with all
supplies/equipment necessary to enable such Merchants to accept
credit cards in payment for goods and services.
8.0 LAW AND REGULATIONS.
BANK agrees to comply with all applicable laws and regulations
regulating banks as acquirers of credit card transactions.
9.0 ELECTRONIC TICKET CAPTURE AND MERCHANT ACCOUNT APPROVAL.
Through the use of a point of sale terminal, merchant VISA/MCI
sales will be processed by electronic ticket capture.
9.1 BANK shall facilitate Merchant deposits by opening the necessary
merchant accounts, or by providing deposit service to the
merchant through use of the Automatic Clearing House (ACH).
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9.2 BANK shall have the final right to refuse any merchant
recommended by CARDSERVICE.
9.3 All COVERED MERCHANTS will complete, to the satisfaction of
BANK, all necessary forms and agreements required by BANK, VISA,
and MCI on forms approved by BANK and distributed to COVERED
MERCHANTS by CARDSERVICE.
9.4 BANK agrees to release CARDSERVICE, its respective officers,
directors and representatives from all claims, demands,
liabilities and damages resulting from BANK'S relationships with
COVERED MERCHANTS for normal banking services such as
maintaining checking accounts.
10.0 TERM.
This agreement shall be effective as of the first date written
above and shall continue in full force for a period of four
years. This Agreement will automatically renew for additional
four year periods 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 expiration of that period.
10.1 Notwithstanding the provisions of Section 10.0 above, BANK may
terminate this Agreement immediately, 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 or MCI prohibits
CARDSERVICE from continuing to provide services with respect to
the products of that card association; or (b) either VISA or MCI
terminates BANK'S membership in or licensing by that card
association.
11.0 NON PERFORMANCE CLAUSE.
CARDSERVICE agrees to perform to the best of its ability all of
its responsibilities listed herein. BANK may invoke revocation
of 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
merchant. 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.
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14.0 REGULATION.
It is understood and agreed to by the parties hereto that the
performance of the services contemplated hereunder is or may be
subject to regulation or examination by 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. CARDSERVICE
shall notify BANK promptly upon receipt of any request for such
information.
15.0 NOTICES.
Any written notice required or permitted to be given by BANK to
CARDSERVICE hereunder shall be addressed to:
CARDSERVICE INTERNATIONAL, INC.
00000 XXXXXX XXXXX XX.
XXXXXX XXXXX, XX 00000
ATTENTION: XXXXX XXXXXXXXX
and any written notice required or permitted to be given by
CARDSERVICE to BANK under this Agreement shall be addressed to:
REDDING BANK OF COMMERCE
0000 XXXXXX XXXXXX X.X. XXX 0000
XXXXXXX, XX 00000
ATTENTION: XXXXXXX X. XXXXXX
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 [sic] 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, becomes insolvent,
makes a general assignment for the benefit of creditors, suffers
or permits 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 sale
relating to insolvency or the protection of the rights of
creditors, then (at the option
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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. 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 in any of the terms, provisions or covenants
of this Agreement shall not be construed to be a waiver by that
party or any subsequent breach of default of the same or other
terms, provisions of 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, arbitration, or other proceedings shall be
awarded attorney's fees and other collection fees and legal
costs incurred by that party in connection with those
proceedings.
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 judgement 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
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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.
REDDING BANK OF COMMERCE
NAME: /s/ Xxxxxxx X. Xxxxxx
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TITLE: Executive Vice President
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DATE: April 16, 1993
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CARDSERVICE INTERNATIONAL, INC.
NAME: /s/ Xxxxx Xxxxxxxxx
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TITLE: President/CEO
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DATE: April 15, 1993
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ADDENDUM
This is an addendum to the contract entered into by and between
Cardservice International Inc., hereinafter "CARDSERVICE", and Redding Bank of
Commerce, hereinafter "BANK", on April 1, 1993.
The parties mutually desire to offer electronic point of sale debit card
services, in addition to credit card services currently offered to merchants. In
order to accomplish this objective the parties are amending the aforementioned
contract in the following respects:
1. BANK agrees to become a member of the networks identified by
CARDSERVICE and agreed to by the BANK.
2. BANK agrees to provide settlement services for CARDSERVICE for
the networks BANK joins.
3. CARDSERVICE agrees to pay all fees and costs related to network
membership. These fees and costs are to include, but are not
limited to, entry fees, membership fees, sponsorship fees,
transaction fees and etc.
4. CARDSERVICE agrees to pay the BANK five cents ($0.05) per debit
transaction processed.
All other terms and conditions of the contract remain in force and where
appropriate are applicable to debit processing.
Any breach of this addendum shall constitute a breach of the April 1,
1993 agreement.
IN WITNESS WHEREOF, each of the parties has caused this Addendum to be executed
on is [sic] behalf by a duly authorized representative on the day and written
below.
REDDING BANK OF COMMERCE CARDSERVICE INTERNATIONAL, INC.
Name: /s/ Xxxxx X. Xxxxx Name: /s/ Xxxxx Xxxxxxxxx
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Title: CFO Title:
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Date: 11-9-93 Date:
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THIRD ADDENDUM
This is an addendum to the Agreement entered into by and between
Cardservice International, Inc., hereinafter "CARDSERVICE", and Redding Bank of
Commerce, hereinafter "BANK", on April 1, 1993.
The parties mutually desire [sic] amend the agreement as follows:
SECTIONS 1.1:
The Reserve Account balance referred to in line 3 is hereby
changed from 75 basis points to 25 basis points.
SECTION 2.1:
This Section shall be replaced with the following:
Each month the BANK shall retain for itself that portion of the
Merchant Fees for COVERED MERCHANTS which equals 13.5 basis
points (.135%) of the first $93,000,000 of net bankcard sales
($125,550); for net bankcard sales that exceed $93,000,000 the
BANK shall retain 2.0 basis points (.02%) of such net bankcard
sales.
All other terms and conditions of the Agreement remain in force.
Any breach of this addendum shall constitute a breach of the April 1,
1993 Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Addendum to be executed
on its behalf by a duly authorized representative on the day written below.
XXXXXXX BANK OF COMMERCE CARDSERVICE INTERNATIONAL, INC.
NAME: /s/ Xxxxxxx X. Xxxxxx NAME: /s/ Xxxxxx X. Xxxxxxxx
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XXXXXX X. XXXXXXXX
TITLE: EXECUTIVE VP/CLO TITLE: CFO
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DATE: SEPT. 19, 1996 DATE: SEPT. 23, 1996
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FOURTH ADDENDUM
This is an addendum to the Agreement entered into by and between
Cardservice International Inc., hereinafter "CARDSERVICE", and Xxxxxxx Bank of
Commerce, hereinafter "BANK", on April 1, 1993.
The parties mutually desire [sic] amend the agreement as follows:
SECTIONS 1.6:
The amount referred to in line 2 is hereby changed from $2,000 to
$4,000.
SECTION 2.3 e):
The amount referred to is hereby changed from $2,000 to $4,000.
All other terms and conditions of the Agreement remain in force.
Any breach of this addendum shall constitute a breach of the April 1,
1993 Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Addendum to be executed
on its behalf by a duly authorized representative on the day written below.
XXXXXXX BANK OF COMMERCE CARDSERVICE INTERNATIONAL, INC.
NAME: /s/ Xxxxxxx X. Xxxxxx NAME: /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
TITLE: Executive Vice President TITLE: Chief Financial Officer
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DATE: September 30, 1996 DATE: Sept. 23, 1996
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