EXHIBIT 10.37
Certain confidential portions of this Exhibit were omitted by means of asterisks
in lieu of the text (the "▇▇▇▇"). This Exhibit has been filed separately with
the Secretary of the Securities and Exchange Commission without the ▇▇▇▇
pursuant to the Company's request for confidential treatment pursuant to the
Company's request for confidential treatment pursuant to Rule 406 under the
Securities Act of 1933, as amended.
IPAYMENT, INC.
CHASE MERCHANT SERVICES, L.L.C., AND
JPMORGAN CHASE BANK
MERCHANT PROGRAM
PROCESSING AGREEMENT
MERCHANT PROGRAM PROCESSING AGREEMENT
THIS MERCHANT PROGRAM PROCESSING AGREEMENT ("Agreement") is entered
into this 31st day of January 2003, among IPAYMENT, INC., a Delaware
corporation, having its principal place of business at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("IPAYMENT"), CHASE MERCHANT SERVICES, L.L.C. ("CMS"),
with an office at ▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, and
JPMORGAN CHASE BANK ("CHASE"), with an office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇. Under this Agreement, CMS and CHASE will collectively be
referred to as "SERVICERS".
RECITALS
WHEREAS, CHASE, as a principal Member of VISA, U.S.A. Incorporated
("VISA") and MasterCard International, Inc. ("MasterCard"), and a member of
certain Networks, together with CMS, provides Merchants the ability to establish
a merchant account through which CHASE and CMS provide electronic Card
processing services, including authorization, data capture, processing,
settlement and reconciliation of United States Dollar denominated credit and
debit card transactions (the "Payment Processing Services").
WHEREAS, IPAYMENT and its wholly-owned subsidiaries listed on EXHIBIT B
to this Agreement ("Subsidiaries") are in the business of developing and
marketing Merchant credit and debit card programs, originating Merchant
relationships, and providing (either directly or through a third party provider)
Merchant bankcard processing services.
WHEREAS, IPAYMENT and its Subsidiaries, pursuant to existing marketing
and service agreements with other Member banks, are sponsored and registered as
an Independent Sales Organizations ("ISO") and Member Service Providers ("MSP")
for Visa and MasterCard, respectively, and have acquired and/or established a
credit card merchant portfolio (through other Member banks), for which IPAYMENT
and its Subsidiaries, as of the effective date of this Agreement, either
directly or through a third party provider, provide processing services for the
merchants identified on EXHIBIT C hereto and made a part hereof (the "Existing
Portfolio").
WHEREAS, IPAYMENT and SERVICERS desire to establish a Merchant Program
whereby CHASE will sponsor as ISOs and MSPs for Visa and MasterCard,
respectively, IPAYMENT and Subsidiaries, as well as Subsidiaries' respective
Sub-Independent Sales Organizations (as such term is defined in Section 2.7 of
this Agreement) as are approved by SERVICERS in SERVICERS' sole discretion, in
accordance with this Agreement, and whereby SERVICERS will settle Card
transactions and perform certain other functions in connection therewith
pursuant to and as outlined in the terms of this Agreement, with respect to (i)
the Existing Portfolio; (ii) Approved Merchants; and (iii) any Subsequently
Acquired Portfolio approved by SERVICES under this Agreement.
WHEREAS, SERVICERS and IPAYMENT have arrived at mutually acceptable
parameters for the Program and desire to enter into this Agreement reflecting
such parameters and establishing the business and legal terms relating to the
establishment of the Program.
Page 1 of 46
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1
DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
meanings set forth below:
"ACH" shall mean the electronic transfer of funds through the Automated
Clearing House System.
"ACTIVE ACCOUNT" shall mean an Approved Merchant that is subject to
assessment for the monthly minimum fee for processing.
"AFFILIATE" shall mean any entity that directly or indirectly controls,
is controlled by or is under common control with any party to this Agreement.
Chase Merchant Ventures, Inc., First Data Merchant Services Corporation and each
of their Affiliates shall also be considered Affiliates of CMS for purposes of
this Agreement, regardless of whether they satisfy the requirements of the
preceding sentence.
"APPLICANT" shall mean a Merchant who submits a Merchant Application.
"APPLICATION" shall mean the Merchant application (approved by
SERVICERS and IPAYMENT) and disseminated by IPAYMENT. The Application may be
modified by mutual written agreement of SERVICERS and IPAYMENT. IPAYMENT shall
cease its use of any Application which may become unacceptable to SERVICERS, in
SERVICERS' sole, reasonable judgment, upon thirty (30) days' notice (unless,
however, a shorter timeframe is required by an Association, the Rules or
applicable law, rules or regulations, in which case, such shorter timeframe will
apply).
"APPLICATION MATERIALS" shall mean the Application and all other
materials developed to facilitate the execution of Merchant Processing
Agreements, as approved by SERVICERS and IPAYMENT. IPAYMENT shall cease its use
of any Application Materials which may become unacceptable to SERVICERS, in
SERVICERS' sole, reasonable judgment, upon thirty (30) days' notice (unless,
however, a shorter timeframe is required by an Association, the Rules or
applicable law, rules or regulations, in which case, such shorter timeframe will
apply).
"APPROVED MERCHANT" means each: (i) Merchant approved by SERVICERS for
participation in the Program that enters into a Merchant Processing Agreement
with SERVICERS; (ii) each Existing Merchant in the Existing Portfolio which is
approved to participate in the Program by SERVICERS pursuant to the terms of
this Agreement and whose contract for Transaction processing and settlement
services with another Member (and/or IPAYMENT or one of its Subsidiaries or a
predecessor in interest to IPAYMENT), has been assigned to SERVICERS; and (iii)
each Merchant in a Subsequently Acquired Portfolio which is approved to
participate in the Program by SERVICERS pursuant to the terms of this Agreement
and whose contract for Transaction processing and settlement services with
another Member (and/or IPAYMENT, or a predecessor in interest to IPAYMENT), has
been assigned to SERVICERS.
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"ASSOCIATION" means any entity formed to administer and promote credit
cards, including VISA and MasterCard.
"BASE AMOUNT" shall be mean $50,000 or a greater amount determined by
SERVICERS in their sole, reasonable discretion.
"BIN" means a unique Bank Identification Number assigned by Visa to
identify a Member or Processor for authorization, clearing or settlement
processing. "ICA" is the corresponding number assigned by MasterCard for the
same purpose.
"BUSINESS DAY" shall mean any day on which CHASE is open for business,
other than Saturdays, Sundays, or State or Federal holidays.
"CARD" means a credit card or debit card issued by a member of either
MasterCard or VISA and bearing its respective trade names, trademarks, and/or
trade symbols, as well as on-line debit cards issued by a participating debit
network.
"CARDHOLDER" means the individual whose name is embossed on the Card
and any authorized user of such Card.
"CONFIDENTIAL INFORMATION" shall mean non-public information about, and
proprietary materials of, either party as defined and more fully described in
SECTION 9.1 of this Agreement.
"CONVERSION" OR "CONVERTED" shall mean the conversion of Existing
Merchants in the Existing Portfolio to SERVICERS' system for settlement services
in accordance with the terms of this Agreement in conjunction with the transfer
of the BINs and ICAs to SERVICERS for such Existing Portfolio.
"CREDIT TRANSACTION" means the evidence of a refund or price adjustment
by a Merchant to a Cardholder's account in connection with a prior purchase by
such Cardholder using a Card, regardless of whether the form of such evidence is
in paper, electronic or otherwise, all of which must conform to the Rules.
"DAY" means a calendar day unless otherwise specified.
"DDA" means a direct deposit account.
"ELIGIBLE MERCHANT" shall mean a Merchant that meets the Program
approval standards, is not presently a party to a payment processing agreement
with SERVICERS, is not presently receiving Payment Processing Services from
SERVICERS, and is solicited by IPAYMENT, Subsidiaries, or IPAYMENT's
Sub-Independent Service Organizations that are approved for the Program.
Merchants whose business involves future delivery risk and whose projected Card
sales exceed $20 million per year shall not be targeted under this Program.
"EVENT OF DEFAULT" shall mean any event specified in Section 11.4.
"EXISTING MERCHANTS" shall mean those Merchants in the Existing
Portfolio which are approved to participate in the Program by SERVICERS pursuant
to the terms of this Agreement and whose contract
Page 3 of 46
for Transaction processing and settlement services with another Member, merchant
account and merchant reserves have been assigned to SERVICERS.
"EXISTING PORTFOLIO" means that collective of Merchants approved to
participate in the Program by SERVICERS that were: (i) prior to Conversion,
receiving Transaction processing and settlement services from another Member,
and (ii) whose contract has been assigned to SERVICERS pursuant to the terms of
this Agreement.
"FDMS" shall refer to First Data Merchant Services Corporation, which
will be the exclusive processing entity for the Merchant Portfolio, unless
SERVICERS approve otherwise in their sole discretion.
"INACTIVE ACCOUNT" shall mean an Approved Merchant that is not an
Active Account.
"INTELLECTUAL PROPERTY" shall mean copyrights, Marks (as defined
below), trade secrets, patents or other intellectual property of either party.
"INTEREST PAYMENT" shall have the meaning ascribed to it in Section 6.4
herein.
"LOSS OR LOSSES" shall mean any loss, liability, claim, suit, demand,
damages, judgments, expenses (including, without limitation, reasonable
attorneys' fees and collection costs), orders of restitution, and penalties
(including, without limitation, civil monetary penalties and VISA and MasterCard
fines and penalties).
"MARKS" shall mean the trademarks or service marks of either party.
"MATERIAL" when used with reference to information, a fact or
circumstance, a course of action, a decision-making process or other matter,
shall be limited to information, facts and circumstances, courses of action,
decision-making processes or other matters as to which there is a substantial
likelihood that a reasonable person would attach importance.
"MEMBER" means a licensee or member of an Association which is
authorized by the Association Ito enter or receive Transactions into (or from)
the Association's authorization and settlement systems, and to participate in
the Association's Card program.
"MERCHANT" shall mean an individual or entity that engages in, or
desires to engage in credit, debit or charge card transactions with its
customers.
"MERCHANT ACCOUNT" shall mean the account relationship established
between SERVICERS and an Approved Merchant pursuant to a Merchant Processing
Agreement.
"MERCHANT DISCOUNT AMOUNT" shall mean the portion of the face amount of
credit card drafts or transactions submitted by Approved Merchants and processed
through the Program that is paid to SERVICERS. Further, this portion shall be
determined by application of the Merchant Discount Rate that is reflected in
each Merchant Processing Agreement.
"MERCHANT DISCOUNT RATE" shall mean a percentage rate to be applied to
determine the portion of the face amount of a credit card draft or transaction
that will not be paid or credited to the originating Merchant, which rate shall
be reflected in each Merchant Processing Agreement and subject to change from
time to time pursuant to the terms of the Merchant Processing Agreement.
Page 4 of 46
"MERCHANT PORTFOLIO" shall mean the aggregate of Approved Merchants
participating in the Program pursuant to this Agreement and all additional
Merchants in a Subsequently Acquired Portfolio which are approved by SERVICERS
to participate in the Program pursuant to this Agreement and whose contract for
Transaction processing and settlement services with another Member has been
assigned to SERVICERS.
"MERCHANT PROCESSING AGREEMENT" shall mean a written agreement among
SERVICERS and an Approved Merchant that governs the Approved Merchant's
participation in the Program. The initial Merchant Processing Agreement agreed
to by the parties is attached hereto as EXHIBIT F. The Merchant Processing
Agreement may be modified by mutual written agreement of SERVICERS and IPAYMENT.
IPAYMENT shall cease its use of any Merchant Processing Agreement which may
become unacceptable to SERVICERS, in SERVICERS' sole, reasonable judgment, upon
thirty (30) days' notice (unless, however, a shorter timeframe is required by an
Association, the Rules or applicable law, rules or regulations, in which case,
such shorter timeframe will apply).
"MERCHANT PROCESSING POLICY" shall mean the merchant policy, guidelines
and standards established by SERVICERS under which SERVICERS will enter into a
Merchant Processing Agreement with a Merchant as in effect from time to time
during the term of this Agreement, a copy of which is attached hereto as EXHIBIT
D, which may be modified from time to time by SERVICERS upon 30 days prior
written notice to IPAYMENT.
"MERCHANT RESERVE ACCOUNT" shall mean one or more accounts maintained
and controlled by SERVICERS for the deposit of funds received from Merchants
pursuant to their respective Merchant Processing Agreements as security and
collateral against Merchant Loss that might be incurred by IPAYMENT or
SERVICERS.
"MINIMUM BALANCE" shall have the meaning provided in SECTION 6.1 (A).
"NET PROGRAM PARTICIPATION FEES" shall mean, at any point in time, all
Program Participation Fees minus the sum of:
(a) All compensation and other amounts (including unreimbursed
chargebacks and payments to the Reserve Account) due SERVICERS
plus
(b) All fees and other amounts due third party processors
under or in connection with this Agreement or any Merchant
Processing Agreements.
"NET SALES" shall mean the dollar amount of MasterCard and VISA sales
draft and Transactions processed under the Program for an Approved Merchant,
which drafts and Transactions are generated through the use of VISA and
MasterCard cards at an Approved Merchant during a particular period, minus the
dollar amount of all chargebacks, refunds, purchase returns and credits made
regarding the Approved Merchant during the period in connection with
Transactions that originated at the Approved Merchant.
"NET VOLUME" shall mean the gross Card volume processed monthly by the
Merchant less any credits, chargebacks and adjustments settled.
Page 5 of 46
"NETWORK" means those certain debit networks, formed to allow debit
cards from banks subscribing to the network to be used at other subscribing
banks and at subscribing retailers, that SERVICERS participate in, as such
participation may change from time to time in SERVICERS' sole discretion.
"PAYMENT DATE" shall mean the tenth (10th) Day of each calendar month
during the term of this Agreement.
"PAYMENT PROCESSING SERVICES" shall have the meaning provided in the
first recital of this Agreement.
"PRICING SCHEDULE" shall mean the pricing attached to this Agreement as
EXHIBIT A.
"PROGRAM" shall mean IPAYMENT's and Subsidiaries' sales and marketing
activities on behalf of itself and SERVICERS for the purpose of SERVICERS
providing clearing and settlement services for United States Dollar denominated
VISA and MasterCard credit card transactions and off-line debit card
transactions for Merchants located in the United States.
"PROGRAM PARTICIPATION FEES" shall mean all fees owed by Merchants
under the applicable Merchant Processing Agreements, including, but not limited
to, the Merchant Discount Amounts or Transaction fees, which amounts may be
recommended by IPAYMENT and finally determined by SERVICERS.
"PROGRAM RECEIPTS" shall mean all amounts collected by SERVICERS for a
Merchant under a Merchant Processing Agreement.
"PROGRAM TRANSFER" shall mean SERVICERS' transfer and assignment of
their rights and obligations under the Merchant Processing Agreements and
Merchant Accounts for the Merchant Portfolio, in conjunction with a transfer of
the BINs and ICAs for the Merchant Portfolio to a VISA and MasterCard Member
designated by IPAYMENT in accordance with SECTION 10.1.
"PROMOTIONAL MATERIALS" shall mean all oral and written solicitations
and advertisements and other communications (including telemarketing scripts)
used to market, promote, and solicit the establishment of Merchant Processing
Agreements with Merchants.
"PROSPECTIVE MERCHANT" is a Merchant solicited by IPAYMENT or
Subsidiaries (or IPAYMENT's Sub-Independent Service Organizations) for
participation in the Program defined in SECTION 2.4 of this Agreement.
"RESERVE ACCOUNT" shall mean the account at SERVICERS that is to be
established by IPAYMENT and fully controlled by SERVICERS as described in
SECTION 8.1 to insure payment of chargebacks, fees and other amounts due to
SERVICERS.
"RULES" shall mean the rules, bylaws, regulations and/or requirements,
releases, interpretations and other requirements that are promulgated, imposed
or adopted by VISA and/or MasterCard, as they may from time to time be amended.
Page 6 of 46
"SUBSEQUENTLY ACQUIRED PORTFOLIO" shall mean any portfolio of merchant
agreements that is acquired by IPAYMENT after the date of this Agreement.
"SUBSIDIARIES" shall mean the wholly-owned subsidiaries of IPAYMENT
which are identified on EXHIBIT B to this Agreement.
"TERMINATION RESERVE ACCOUNT" shall mean a Reserve Account to be
established upon notice of termination of this Agreement to insure the payment
of chargebacks, fees and other amounts which may become due to SERVICERS
following termination of the Agreement.
"TRANSACTION" means the consummation of a sale of goods and/or services
by a Merchant through the use of a Card or the initiation of a credit to a
Cardholder by a Merchant with respect to a Card.
"TRANSFER ACCOUNT" shall mean one or more accounts at CHASE that are
established and maintained by (and in the name of) IPAYMENT to allow SERVICERS
to credit and debit funds as provided in SECTION 6.
SECTION 2
PROGRAM SERVICES
2.1 SERVICERS' SERVICES.
(a) SERVICERS shall provide the services specified in this Agreement
and shall be compensated therefor as set forth in the Pricing Schedule
attached as EXHIBIT A. During the Initial Term of this Agreement,
SERVICERS shall not change the pricing set forth on EXHIBIT A, except
that such pricing may be adjusted by SERVICERS to (i) reflect actual
increases by an Association in interchange, assessments or other
Association fees, or (ii) pass through actual increases charged by
third party processors or third parties for on-line communication costs
and similar items for which SERVICERS are responsible for payment.
SERVICERS may adjust the pricing set forth in Exhibit A for any renewal
term by providing IPAYMENT with notice of such adjusted pricing at
least one-hundred and twenty (120) days' prior to the expiration of the
Initial Term or any renewal term.
(b) SERVICERS shall, after the full execution of this Agreement by the
parties, take such actions, with assistance from IPAYMENT and
Subsidiaries, to initially sponsor IPAYMENT and Subsidiaries, at
IPAYMENT's expense, as ISOs for Visa and as MSPs for MasterCard.
SERVICERS agree to maintain such sponsorships during the term of this
Agreement at IPAYMENT's expense and subject to IPAYMENT providing any
and all information, documents or materials as may be necessary for
such sponsorship maintenance.
Page 7 of 46
(c) SERVICERS agree, on a non-exclusive basis, to settle Transactions
for Approved Merchants in accordance with the settlement procedures and
terms and conditions set forth in SECTION 6 below of this Agreement.
(d) SERVICERS agrees that pursuant to and in accordance with the terms
and provisions set forth in Section 4, below, it will timely review and
process the Application of each Prospective Merchant submitted by
IPAYMENT or one of Subsidiaries.
(e) SERVICERS will obtain copies for IPAYMENT of the Rules or any
Association or Network manuals and publications that are available to
Members. IPAYMENT will reimburse SERVICERS for all costs incurred in
connection with this subsection 2.1(e).
(f) From time to time, and within a reasonable time following
SERVICERS' receipt of notice of Material changes in the Rules
applicable to the Program, SERVICERS will advise IPAYMENT, who shall,
in turn, notify each Merchant in the Merchant Portfolio with an Active
Account, of such changes imposed by the Rules.
(g) SERVICERS will materially comply with applicable Association Rules
and applicable law concerning Cardholder information and Transaction
data.
(h) SERVICERS will approve or disapprove, in their sole discretion, all
Application Materials and Promotional Materials proposed to be used by
IPAYMENT in marketing the Program as soon as practicable following the
submission by IPAYMENT for SERVICERS' review thereof pursuant to
Section 3.
(i) From time to time in their sole discretion and at their sole cost
and expense, SERVICERS may also perform certain risk management
services, such as periodic credit reviews, fraud reviews and monitoring
and collections, with respect to Program Merchants. SERVICERS'
participation in any such activity shall not in any way relieve
IPAYMENT from its responsibility for credit and fraud losses which may
result from or be related to Program Merchants' transactions.
2.2 IPAYMENT'S OBLIGATIONS. IPAYMENT shall perform all sales and marketing
activities in furtherance of the Program, subject to the terms of this
Agreement. It is understood that (at all times) SERVICERS have the
ultimate approval right for IPAYMENT's solicitation procedures,
Application Materials, application processing procedures, Merchant
qualification criteria, transaction processing procedures, customer
service levels, Program terms, Program fees, and other Program
policies, all of which must be approved in advance by SERVICERS in
writing. IPAYMENT shall also perform all initial Merchant credit review
and underwriting on Prospective Merchants in a manner consistent with
Section 4 of this Agreement. IPAYMENT shall submit a minimum of
[****] of Visa and MasterCard transactions processed
by FDMS
[****] Represents material which has been redacted and filed separately with the
Commission pursuant to a request for confidential treatment pursuant to Rule 406
under the Securities Act of 1933, as amended.
Page 8 of 46
to SERVICERS for clearing and settlement services; provided, however,
that Merchants that do not meet the Merchant Processing Policy, or are
otherwise declined by SERVCERS, shall not be included in calculating
this [****] performance minimum.
2.3 EXISTING MERCHANTS.
(a) IPAYMENT represents and warrants: (i) that a true and correct list
of Merchants in the Existing Portfolio as of January 16, 2003 is
attached hereto and made a part hereof as EXHIBIT C; (ii) that none of
the Merchants in the Existing Portfolio operate in the unacceptable
industries outlined in the Merchant Processing Policy (attached as
EXHIBIT D); and (iii) that it has the authority and right to assign and
transfer the Card processing agreements, merchant accounts and merchant
reserves for the Existing Merchants in the Existing Portfolio to
SERVICERS. IPAYMENT shall obtain a signed Merchant Processing Agreement
from each of its Existing Merchants and shall provide a signed copy
thereof to SERVICERS; provided, however, that IPAYMENT is not required
to obtain a substitute agreement from any Existing Merchant that
currently has in effect a valid and binding Card processing agreement
in a form acceptable to SERVICERS in their sole discretion. SERVICERS
acknowledge that they have received forms of Card processing agreements
from IPAYMENT for the Existing Portfolio as outlined on EXHIBIT E
(attached hereto), which are acceptable provided they comply with the
Rules and applicable law, rules and regulations.
(b) SERVICERS agree that each Merchant in the Existing Portfolio is
approved by SERVICERS to participate in the Program pursuant to the
terms of this Agreement, subject to SERVICERS' continued credit review.
Should SERVICERS' determine that an Existing Merchant within the
Existing Portfolio does not meet the Merchant Processing Policy,
following the Conversion, SERVICERS may decline such Merchant and cease
providing settlement services under this Agreement, in SERVICERS' sole
discretion.
(c) IPAYMENT represents and warrants that its merchant processing
business has in all material respects been operated in compliance with
all applicable laws, rules, orders, regulations, policies and
guidelines of all governmental and regulatory entities and all
Associations, including all underwriting and monitoring procedures.
(d) Following the effective date of this Agreement, IPAYMENT shall
assist SERVICERS in performing SERVICERS' continued credit review on
each Existing Merchant and agrees to provide SERVICERS at a minimum
with the following documentation:
(i) An electronic report of the annual Card sales volume for
each Existing Merchant account, including account numbers,
d.b.a. names, legal names, addresses, start dates, MCC codes,
annual sales and transactions, annual returns and annual
Chargebacks.
(ii) Upon request by SERVICERS, a copy of the Existing
Merchant's application, data sheets, DDA account balances, and
any other information SERVICERS deem necessary to perform a
credit review.
[****] Represents material which has been redacted and filed separately with the
Commission pursuant to a request for confidential treatment pursuant to Rule 406
under the Securities Act of 1933, as amended.
Page 9 of 46
(iii) A list of all Existing Merchants on Association
compliance programs, internal watch list or
classified accounts or any collateralized accounts.
(iv) Upon request by SERVICERS, a financial statement
(including a balance sheet and an income statement)
on all Existing Merchants with $1,000,000 or more in
high risk annual Bank Card sales volume, or those
Existing Merchants where SERVICERS find such
financial statements necessary. In addition to the
foregoing, IPAYMENT shall promptly provide any
additional documentation requested by SERVICERS.
(e) If under Section 2.3(d) SERVICERS determine, in their sole
discretion, that IPAYMENT has insufficient data upon which
SERVICERS can perform an adequate and proper credit review on
an Existing Merchant, IPAYMENT will obtain a fully completed
Merchant Application from each such Existing Merchant. If
IPAYMENT is unable to obtain a fully completed Merchant
Application from an Existing Merchant, SERVICERS may decline
such Merchant and cease providing settlement services under
this Agreement
(f) The parties acknowledge that certain of the Existing Merchants
are Inactive Accounts. The reserve accounts, along with the
merchant accounts, for such Existing Merchants shall be
transferred to SERVICERS upon Conversion.
2.4 PROSPECTIVE MERCHANTS. IPAYMENT will actively promote and recommend
SERVICERS' Payment Processing Services to Prospective Merchants.
2.5 PRICING. All Program Participation Fees shall be recommended by
IPAYMENT and finally determined by SERVICERS and reflected in
applicable Merchant Processing Agreements.
2.6 BINS AND ICAS TRANSFER AND ASSIGNMENT.
(a) For purposes of Prospective Merchants that are approved by
SERVICERS for participation in the Program, SERVICERS will make
available the use of BINs and ICAs to facilitate the Program and to
segregate Program Merchants into BINs and ICAs separate from Merchants
not covered by the Program.
(b) Immediately following execution of this Agreement, for
purposes of facilitating the assignment of the Existing Portfolio to
SERVICERS, IPAYMENT shall initiate and be responsible for the transfer
of the BINs and ICAs from other Member Banks to SERVICERS with respect
to the Existing Portfolio. To that end, IPAYMENT shall be responsible
for providing any and all information, documents or materials as may be
necessary to transfer the BINs and ICAs for the Merchant Portfolio and
for addressing any information requests from VISA or MasterCard. Upon
completion of such transfer to SERVICERS, including without limitation,
approval by VISA and MasterCard, SERVICES shall use such BINs and ICAs
solely for the Program.
(c) IPAYMENT shall be solely responsible for, and reimburse
SERVICERS for, any and all costs arising out of or related to making
available, converting or transferring the BINs and ICAs pursuant to
Sections 2.6(a) and (b).
Page 10 of 46
2.7 USE OF SUB-INDEPENDENT SALES ORGANIZATIONS. If IPAYMENT desires to use
the services of any other independent sales organization (a
"Sub-Independent Sales Organization"):
(a) IPAYMENT shall provide adequate notice to SERVICERS of
IPAYMENT's intention to use the services of any
Sub-Independent Sales Organization;
(b) SERVICERS shall be provided an adequate opportunity to review
the business practices of such Sub-Independent Sales
Organization;
(c) SERVICERS may request any additional information regarding a
proposed Sub-Independent Sales Organization which they deem
appropriate prior to SERVICERS approving or disapproving of
IPAYMENT's use of such Sub-Independent Sales Organization;
(d) If SERVICERS object to IPAYMENT's use of a Sub-Independent
Sales Organization IPAYMENT shall not obtain any services
(including sales and marketing services) from such entity for
the Program;
(e) A Sub-Independent Sales Organization may not use SERVICERS'
names or Marks without written approval from the applicable
SERVICER(s); and
(f) IPAYMENT shall enter into a written agreement with each
Sub-Independent Sales Organization that (i) requires the
Sub-Independent Sales Organization to comply with all
applicable terms of this Agreement and all rules and
regulations of VISA and MasterCard, (ii) prohibits the use of
any of SERVICERS' names or Marks without prior approval, (iii)
prohibits the making of any representation or creating any
liability on behalf of SERVICERS, (iv) provides for
indemnification of SERVICERS by the Sub-Independent Sales
Organization to the same extent IPAYMENT indemnifies SERVICERS
pursuant to this Agreement, and (v) makes SERVICERS third
party beneficiaries thereunder. Notwithstanding, IPAYMENT's
compliance with this Section 2.7, IPAYMENT shall not be
relieved of any responsibilities or obligations it is
otherwise assuming with regard to Merchants Accounts obtained
as a result of the activities of any Sub-Independent Sales
Organization or the activities of a Sub-Independent Sales
Organization. SERVICERS shall also have the right to require
IPAYMENT to terminate its use for the Program of any
Sub-Independent Sales Organization at any time upon written
notice to IPAYMENT.
2.8 IPAYMENT shall not enter any CHASE bank branches located in New York,
New Jersey, Connecticut or Texas for purposes of soliciting Prospective
Merchants. IPAYMENT further agrees not to enter into marketing
arrangements with any CHASE bank division or branch or other third
party for purposes of soliciting existing CMS or CHASE customers or
existing CMS or CHASE Merchants for the Program. In the event of a
material breach of the obligations set forth in this Section 2.8 by
IPAYMENT that is not cured within a thirty (30) day notification and
cure period, SERVICERS may discontinue accepting Applications and
Application Materials from IPAYMENT for Merchants in New York, New
Jersey, Connecticut and Texas, and/or may terminate this Agreement upon
thirty (30) days' notice, in their sole discretion, in addition to any
Page 11 of 46
other rights or remedies that SERVICERS may have under this Agreement
or applicable law. Should SERVICERS discontinue accepting Applications
and Application Materials in New York, New Jersey, Connecticut and
Texas, pursuant to the preceding sentence, IPAYMENT shall not be
restricted from soliciting Merchants, located within New York, New
Jersey, Connecticut and Texas, on behalf of a processing services
provider other than Service Providers (a "Third Party Provider"). The
parties agree that in the event of a material breach of the obligations
set forth in this Section 2.8 by IPAYMENT, or one of IPAYMENT's
employees or independent representatives, IPAYMENT may attempt to cure
by terminating or canceling any marketing arrangements or by taking
internal disciplinary action up to and including termination of the
employee or independent representative, as applicable; provided,
however, that SERVICERS, in their sole discretion, believe that such
actions taken by IPAYMENT will remedy the breach.
2.9 ADDITIONAL OBLIGATIONS OF IPAYMENT.
(a) IPAYMENT and its Subsidiaries may sell or make arrangements
for the lease or rental by Approved Merchants of terminals and
equipment or software applications necessary for Approved Merchant to
participate in the Merchant Program. IPAYMENT and Subsidiaries will
install (and, pursuant to a separate agreement, if any, with the
Approved Merchant, maintain and/or upgrade) such terminals, equipment
and applications at no expense to SERVICERS. IPAYMENT and its
Subsidiaries may, at its option, provide the services set forth in this
subsection 2.9(a) itself or through one or more subcontractors. Neither
CMS nor CHASE are to be parties to any such agreements for terminals,
software or equipment. IPAYMENT represents and warrants that it shall
be solely and exclusively responsible for providing any terminals,
software or equipment, as well as any and all costs related thereto,
and shall indemnify, defend and hold harmless SERVICERS from and
against any and all claims or liabilities arising out of such
provision, in accordance with Section 12.1 of this Agreement.
(b) IPAYMENT will be responsible for Merchant Account
implementation and will be responsible for all Losses relating to
inaccuracies or omissions in account data entry.
(c) IPAYMENT will timely respond to all inquiries from Approved
Merchants concerning the Program using above industry standards.
(d) IPAYMENT will perform daily risk management monitoring and
review of all Active Accounts, in accordance with the Rules and the
terms of this Agreement, to attempt to minimize Merchant Losses and
shall, upon written request thereof from SERVICERS, provide SERVICERS
with summary reports thereof.
(e) IPAYMENT will be responsible for processing chargebacks in
accordance with the Rules.
Page 12 of 46
SECTION 3
MARKETING AND COMPLIANCE
3.1 APPLICATION MATERIALS. The initial approved Application and Application
Materials are attached hereto as EXHIBIT F. Any changes to the form and
content of the approved Application and/or Application Materials,
attached hereto, must be presented to SERVICERS for prior approval in
writing by SERVICERS. IPAYMENT shall use reasonable efforts to ensure
that each Application completed by an Applicant is current and contains
accurate and complete information.
3.2 COMPLIANCE RESPONSIBILITY. IPAYMENT understands and agrees that the
Merchant Processing Agreement, Application and Application Materials
shall comply with all applicable laws, rules, regulations and the
Rules. IPAYMENT shall have the sole responsibility for ensuring that
the Merchant Processing Agreement, Application, Application Materials,
marketing plans, Promotional Materials and all services performed
hereunder comply, and remain in compliance, with all applicable laws,
rules, regulations and the Rules. IPAYMENT agrees to provide all
documents to SERVICERS for approval prior to IPAYMENT's use.
3.3 MARKETING PLAN. IPAYMENT will develop an annual marketing plan, subject
to approval by SERVICERS, in their reasonable discretion, which the
parties acknowledge is part of IPAYMENT's annual report. SERVICERS may
at any time and from time to time request additional information
regarding IPAYMENT's marketing plan or procedures (in addition to the
information provided in the annual report), which IPAYMENT agrees to
promptly provide to SERVICERS. IPAYMENT shall comply with the marketing
plan and all activities conducted thereunder shall comply with all
applicable laws, rules, regulations and the Rules.
3.4 PROMOTIONAL MATERIALS. IPAYMENT shall be responsible, at its sole
expense, for the development of all Promotional Materials and shall
bear the cost of the development and the printing and distribution of
the Promotional Materials. The Promotional Materials shall comply with
all applicable laws, rules, regulations and the Rules and otherwise be
approved in writing by SERVICERS prior to IPAYMENT's use. IPAYMENT will
not use SERVICERS' Marks in any advertising, promotional or display
materials without SERVICERS' prior written approval. Any use of the
CHASE name or ▇▇▇▇(s) will be subject to the prior written approval of
CHASE.
3.5 OTHER PROMOTIONS. At the sole discretion ofCHASE, CHASE may enter into
negotiations with IPAYMENT whereby IPAYMENT may refer Eligible
Merchants to CHASE for other CHASE products and services.
SECTION 4
APPLICATION AND UNDERWRITING PROCEDURES
4.1 APPLICATIONS. IPAYMENT shall solicit Applications from Eligible
Merchants at IPAYMENT's sole expense and shall provide each Applicant
with Application Materials. IPAYMENT shall collect completed and signed
Application Materials from Applicants and shall forward the
Page 13 of 46
Application Materials to SERVICERS (which may be forwarded to SERVICERS
via IPAYMENT's automated application system or to a facsimile number
designated by SERVICERS, provided such complies with the Rules and
applicable laws, rules and regulations) or to any other place(s) as
SERVICERS may designate for processing and document storage. IPAYMENT
shall retain copies of all Application Materials and documents
forwarded to SERVICERS. IPAYMENT shall provide SERVICERS with access to
IPAYMENT's automated application system and IPAYMENT's online Merchant
Account system (BAMS, or any such successor or replacement system) at
no cost to SERVICERS.
4.2 UNDERWRITING. IPAYMENT shall underwrite, perform a credit review and
conduct a site inspection for each Application as required by this
Agreement, the Merchant Processing Policy and the Rules to determine
whether each Applicant is an Eligible Merchant. IPAYMENT may conduct
such credit review without notification to and participation by
SERVICERS, except as otherwise provided below (i.e., for any
Prospective Merchant that falls within the risk and volume parameters
set forth in this Section 4.2), provided that IPAYMENT performs the
credit review in accordance with the Merchant Processing Policy
(attached as EXHIBIT D), the terms of this Agreement and the Rules. A
Sub-Independent Sales Organization, in accordance with and as permitted
by this Agreement, or third-party service provider approved by
SERVICERS may perform site inspections for IPAYMENT. IPAYMENT shall be
responsible for such Sub- Independent Sales Organization or approved
third-party service provider's compliance with this Section 4.2 in
performing such site inspection. IPAYMENT shall be responsible for all
credit and fraud Losses associated with any Program Merchants or the
Program, regardless of any services or assistance, which may be
provided by SERVICERS or any of their Affiliates. Notwithstanding
anything in this Section 4.2 to the contrary, for any high risk
Prospective Merchant who in good faith IPAYMENT anticipates will have
annual VISA and MasterCard transaction volume equal to or greater than
[****], and any low risk Prospective Merchant who in good faith
IPAYMENT anticipates will have an annual VISA and MasterCard volume
equal to or greater than [****], IPAYMENT shall advise SERVICERS in
writing and permit SERVICERS to conduct their own credit review. Upon
receipt of a complete underwriting package from IPAYMENT, SERVICERS
will respond to IPAYMENT within three (3) Business Days as to
SERVICERS' acceptance or rejection of such Merchant. SERVICERS'
participation in any such credit review will not in any way relieve
IPAYMENT from its responsibility for credit and fraud losses which may
result from a Merchant's transaction processing. SERVICERS may at any
time require that a Merchant relationship be terminated by IPAYMENT and
SERVICERS may cease the provision of Payment Processing Services to any
such Merchant. SERVICERS shall have the sole right and authority to
accept or reject any Application. IPAYMENT shall obtain Prospective
Merchants' authorization for IPAYMENT and/or SERVICERS to obtain all
reports (including personal and business credit reports) and other
information necessary in connection with their Application. Upon any
rejection of a Prospective Merchant by SERVICERS, IPAYMENT may refer
such Prospective Merchant to another Member.
[****] Represents material which has been redacted and filed separately with the
Commission pursuant to a request for confidential treatment pursuant to Rule 406
under the Securities Act of 1933, as amended.
Page 14 of 46
4.3 CREDIT DECISIONS. IPAYMENT shall employ the Merchant Processing Policy
(attached as EXHIBIT D) in making credit evaluations. SERVICERS reserve
the right, in their sole and absolute discretion to:
(i) Change the Merchant Processing Policy upon thirty
days' notice to IPAYMENT;
(ii) Reject the Application of any Applicant who SERVICERS
determine does not satisfy SERVICERS' Merchant Processing
Policy; and
(iii) Terminate the Merchant Processing Agreement with
respect to any Merchant at any time in accordance with the
terms of the Merchant Processing Agreement with such Merchant,
unless the termination is due to a policy change affecting
numerous Merchants (rather than a violation of the Rules), in
which case SERVICERS will provide at least 30 days written
notice.
4.4 MERCHANT RESERVE ACCOUNTS. IPAYMENT shall be responsible for
determining the amount of any Merchant Reserve Accounts. IPAYMENT shall
also be responsible for ensuring all Merchant Reserve Accounts are
adequately funded. All Merchant Reserve Accounts, along with any other
monies or collateral collected from Program Merchants, shall be
deposited with SERVICERS. SERVICERS may generate interest on such
deposits at a rate determined by SERVICERS in their sole discretion.
Any and all interest amounts shall be retained by SERVICERS and
IPAYMENT shall have no interest in or right to receive any portion
thereof. Once monies or other collateral are deposited in a Merchant
Reserve Account, SERVICERS shall control the disbursements of such
funds which are to be (i) paid to IPAYMENT or SERVICERS to cover
potential Losses incurred in connection with the applicable Program
Merchant, or (ii) returned to the applicable Program Merchant upon a
reduction in the potential risk to IPAYMENT and SERVICERS arising from
the provision of services to such Program Merchant. From time to time,
IPAYMENT may request SERVICERS to disburse monies held in a Merchant
Reserve Account to IPAYMENT or a Program Merchant as set forth in the
preceding sentence. SERVICERS shall consider such requests in good
faith, but shall not be under any obligation to honor any such request.
SERVICERS may draw against any Merchant Reserve Account to cover any
Losses from the applicable Program Merchant incurred by SERVICERS
without the consent of IPAYMENT or the applicable Program Merchant. A
return of monies from a Merchant Reserve Account to the applicable
Program Merchant will be initiated within two (2) Business Days after
such return is approved.
4.5 SURVIVAL. The provisions of SECTION 4.4 shall survive termination or
expiration of this Agreement.
SECTION 5
PROPRIETARY RIGHTS
Page 15 of 46
5.1 SERVICERS shall have all rights conferred on it under the Merchant
Processing Agreements until a Program Transfer pursuant to Section 10
of this Agreement. SERVICERS shall be exclusively entitled to receive
all payments, collections, and other amounts due from Merchants until a
Program Transfer is consummated, subject to SERVICERS' payment
obligations to IPAYMENT in accordance with the terms of this Agreement.
SERVICERS' rights under the Merchant Processing Agreements shall
survive the termination of this Agreement by either party and for
whatever cause.
5.2 EARLY TERMINATION FEE. In the event IPAYMENT requests to sell, transfer
or assign all or a portion of its interest in the Merchant Portfolio
pursuant to a Program Transfer during the first thirty-six months
following the Conversion, then IPAYMENT agrees to pay SERVICERS: (i)
[****] if such Program Transfer occurs during the first twelve
months following the Conversion; (ii) [****] if such Program
Transfer occurs during months thirteen through twenty-four following
the Conversion; or (iii) [****] if such Program Transfer occurs
during months twenty-five through thirty-six following the Conversion.
5.3 SURVIVAL. The provisions of SECTION 5.2 shall survive the termination
of this Agreement.
SECTION 6
SETTLEMENT AND PAYMENT
6.1 TRANSFER ACCOUNT.
(a) IPAYMENT shall establish and maintain the Transfer Account at CHASE
during the term of this Agreement to facilitate the making of all
payments due to SERVICERS from IPAYMENT and to IPAYMENT from SERVICERS.
IPAYMENT agrees that it will, at all times, maintain collected funds in
the Transfer Account in an amount at least equal to the greater of the
Base Amount or the amount then due SERVICERS hereunder (which greater
amount shall be referred to herein as the "Minimum Balance"). IPAYMENT
hereby authorizes SERVICERS to withdraw funds from the Transfer Account
without signature or notice to effect all payments, offsets,
deductions, and other transactions due SERVICERS or otherwise provided
for under this Agreement. IPAYMENT further agrees to execute any
additional documents, which may be required for SERVICERS to execute
their rights under this section. IPAYMENT shall be responsible for all
fees associated with maintaining the Transfer Account.
(b) If the collected funds on deposit in the Transfer Account at any
point in time are less than the Minimum Balance, IPAYMENT shall, by
12:00 P.M. P.T. on the third Business Day after being notified by
SERVICERS, wire transfer to SERVICERS, or otherwise deposit to the
Transfer Account, additional collected funds in an amount sufficient to
cover the deficiency.
(c) Each Banking Day, SERVICERS will transfer to the Transfer Account
any funds that are payable to IPAYMENT under this Agreement.
[****] Represents material which has been redacted and filed separately
with the Commission pursuant to a request for a confidential treatment
pursuant to Rule 406 under the Securities Act of 1933, as amended.
Page 16 of 46
(d) IPAYMENT hereby grants SERVICERS a security interest in the
Transfer Account to secure all of IPAYMENT's obligations to SERVICERS
under this Agreement. IPAYMENT further grants SERVICERS the right to
set-off against the Transfer Account or any other monies belonging or
payable to IPAYMENT which are in SERVICERS' possession, which right may
be executed to fulfill any payment obligations of IPAYMENT under this
Agreement, including IPAYMENT's obligations related to Merchant
chargebacks, regardless of whether such obligations are contingent or
matured.
6.2 SETTLEMENT PROCEDURES.
(a) SERVICERS shall settle each Merchant Account in accordance with the
terms of the applicable Merchant Processing Agreement, remitting to
each Approved Merchant, by ACH or other acceptable method, all Program
Receipts due to the Approved Merchant after first deducting from the
Program Receipts all applicable Program Participation Fees and any
other amounts due to SERVICERS.
(b) On each Payment Date, SERVICERS shall credit the Transfer Account
in an amount equal to all Net Program Participation Fees less
interchange, assessments, and other amounts due to SERVICERS
corresponding to the Program Participation Fees that were actually
collected by SERVICERS since the immediately preceding Payment Date and
which have not otherwise been paid to IPAYMENT, subject to SERVICERS
absolute right hereunder to withhold, defer and divert the credits
during any period of time in which IPAYMENT is in default of any
Material obligation under this Agreement or if an Event of Default
shall have occurred. All compensation due SERVICERS, all chargebacks
and credits, and all third party processing fees, will, in all events,
be collected or deducted from Program Receipts or otherwise paid to
SERVICERS prior to the transfer of any funds to, or the crediting of,
the Transfer Account. In the event there are insufficient Program
Receipts to cover the foregoing fees and expenses, payments or
distributions, the amounts will be paid or deducted from Program
Receipts in any order determined by SERVICERS. The parties agree that
in the event credits or payments to the Transfer Account are withheld,
deferred or diverted pursuant to this Section 6.2(b), such period of
withholding, deferment or diversion will be limited to the greater of
three business days or for such longer period of time as is required
for SERVICERS to withhold sufficient funds to cover any matured or
unmatured obligations of IPAYMENT under the terms of this Agreement,
after which, funding will resume. SERVICERS may also divert any credits
or payments to the Transfer Account to fund a Reserve Account or
Termination Reserve Account as provided in Section 6.3.
(c) In the event that there are insufficient funds to pay SERVICERS'
compensation, payments to the Reserve Account, chargebacks or credits
for which SERVICERS have not been reimbursed or third party processing
fees, IPAYMENT shall provide sufficient additional funds to SERVICERS
in accordance with SECTION 6.1(B). IPAYMENT may withdraw funds from the
Transfer Account so long as the collected funds on deposit therein do
not fall below the Minimum Balance and IPAYMENT is not in default of
any Material obligation under this Agreement.
Page 17 of 46
6.3 PAYMENT DEFERRALS. SERVICERS shall have the absolute right to defer,
delay or divert any payment due to IPAYMENT to add additional funds to
the Reserve Account, or to otherwise offset any future chargebacks or
other amounts due to SERVICERS.
6.4 INTEREST PAYMENT. In the event that IPAYMENT fails at any time to
maintain the Minimum Balance in the Transfer Account (as required in
Section 6.1(a) above) and SERVICERS elect to use SERVICERS' funds to
cover the deficiency, then IPAYMENT shall pay SERVICERS interest on
such funds as follows. SERVICERS' funds used to cover a deficiency
shall accrue interest, which will be calculated on a monthly basis, at
the rate of: (i) 5.5%; or (ii) the Prime Rate (as published in the Wall
Street Journal or any successor publication) plus one percent (1%),
whichever is greater. In calculating the interest payment due from
IPAYMENT under this Section 6.4, SERVICERS will offset any interest
generated on Merchant Reserve Accounts (as provided in Section 4.4).
Should the interest payment calculated under this Section 6.4 exceed
the amount generated on Merchant Reserve Accounts under Section 4.4,
IPAYMENT shall pay the difference to SERVICERS.
6.5 EXPENSES. Except as otherwise provided, each party shall bear its own
administrative costs and overhead expenses arising out of its
performance of this Agreement.
6.6 LIABILITY FOR LOSSES. SERVICERS shall have recourse from IPAYMENT, and
IPAYMENT shall be liable to, and shall indemnify SERVICERS for, one
hundred percent (100%) of any Losses to SERVICERS that are caused by:
(a) Chargebacks, purchase returns, refunds, credits, adjustments, fees
or Association costs and expenses related to Approved Merchants,
Eligible Merchants, or any Merchant activity hereunder;
(b) Amounts remaining due to SERVICERS after the deduction of
SERVICERS' compensation as provided herein; and
(c) All third party processing fees and other amounts that SERVICERS
are obligated to pay third parties in connection with services relating
to this Agreement or any Merchant Processing Agreement.
6.7 SURVIVAL. The provisions of this SECTION 6 shall survive the
termination or expiration of this Agreement.
SECTION 7
REPRESENTATIONS AND WARRANTIES OF IPAYMENT
IPAYMENT represents and warrants to SERVICERS that, as of the date of this
Agreement, the following are true and correct, and will remain true and correct
at all times during the term of this Agreement:
7.1 ORGANIZATION AND GOOD STANDING. IPAYMENT is a Delaware corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to carry
on its business as it is now being conducted. IPAYMENT is and will be
qualified as a foreign corporation in good standing under the laws of
each jurisdiction in which the conduct of its business or the ownership
of its properties requires the qualification.
Page 18 of 46
IPAYMENT acknowledges, represents and warrants that it is responsible
for all obligations under this Agreement on behalf of itself and
Subsidiaries.
7.2 EXECUTION AND EFFECT OF AGREEMENT. IPAYMENT has the corporate power and
authority to enter into this Agreement and the execution and delivery
of this Agreement and the performance of IPAYMENT's obligations
hereunder have been duly authorized by all necessary corporate action.
This Agreement has been duly executed and delivered by IPAYMENT and
constitutes a legal, valid, and binding obligation of IPAYMENT,
enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws
affecting the rights of creditors generally and to the exercise of
judicial discretion in accordance with general principles of equity
(whether applied by a court of law or of equity).
7.3 RESTRICTIONS. Neither the execution nor delivery of this Agreement nor
the conduct of the Program contemplated here will:
(a) Violate any of the provisions of the Charter or Bylaws of
IPAYMENT; or
(b) Conflict with, or result in a breach of, or give rise to a
right of Termination of, or accelerate the performance required by the
terms of any Judgment, court order or consent decree, or any agreement,
including without limitation, a restrictive covenant or covenant
against competition, indenture, mortgage, or instrument to which
IPAYMENT is a party or to which its property is subject, or constitute
a default thereunder, except where the conflict, breach, right of
termination, acceleration or default would not prevent or have a
Material adverse effect on the conduct of the activities
contemplated hereby.
7.4 CONSENTS. Except for filings, consents, waivers, approvals, and
authorizations that the failure to obtain or make would not have a
Material adverse effect on IPAYMENT or the Program, no filing, consent,
waiver, approval, or authorization of any governmental authority or of
any third party other than VISA and MasterCard, or notice to, or filing
with, any governmental authority or any third party on the part of
IPAYMENT is required in connection with the execution and delivery of
this Agreement or the conduct of the activities contemplated hereby.
7.5 LITIGATION. There is no action at law or in equity, arbitration,
proceeding, or governmental investigation pending, or to the knowledge
of IPAYMENT threatened, by or before any court, any governmental or
administrative agency or commission, or arbitrator, against IPAYMENT
regarding this Agreement or any of the transactions contemplated hereby
that could reasonably be expected to prevent or have a Material adverse
effect on the conduct of the activities contemplated hereby.
7.6 REGISTRATION AS IPAYMENT. IPAYMENT (and each Subsidiary that provides
services under this Agreement) shall at all times, at its cost and
expense, maintain in effect during the term of this Agreement, a valid
and effective registration as an ISO with VISA and a MSP with
MasterCard and shall provide any information as VISA and MasterCard may
reasonably request in connection therewith or in connection with the
services of IPAYMENT (or such sponsored Subsidiary)
Page 19 of 46
hereunder, and shall provide SERVICERS the information as it may
reasonably request concerning IPAYMENT's (or such sponsored Subsidiary)
compliance with the requirements set forth herein.
7.7 ▇▇▇▇ RESTRICTION. IPAYMENT shall not make any use of SERVICERS' Marks
or any other intellectual property without SERVICERS' prior written
consent, which may be withheld or revoked by SERVICERS in their sole
discretion.
7.8 FINANCIAL STATEMENTS/AUDIT RIGHTS. IPAYMENT shall supply SERVICERS with
quarterly financial statements (which may be unaudited statements) and
with annual audited financial statements for each fiscal year, starting
with the fiscal year ending December 31, 2002, prepared in accordance
with generally accepted accounting principles by a nationally
recognized auditing firm within 120 days after the end of each fiscal
quarter (or after the end of each fiscal year) unless a shorter
timeframe is required by VISA, MasterCard or the Rules, in which case,
such shorter timeframe will apply. IPAYMENT will, at any and all
reasonable times upon seven days prior written notice, unless a shorter
timeframe is required by VISA, MasterCard or the Rules (in which case,
the shorter timeframe will apply), permit SERVICERS' employees, agents
auditors and/or regulators to inspect IPAYMENT's books and records at
SERVICERS' expense.
7.9 IPAYMENT'S ASSETS. IPAYMENT has net assets as of the effective date of
this Agreement of at least $14,000,000.00. Beginning ninety days after
the effective date of this Agreement, IPAYMENT shall at all times have
net assets of at least $14,000,000.00.
7.10 MAINTENANCE OF UNDERWRITING STAFF. IPAYMENT shall at all times maintain
an adequate and qualified staff to perform underwriting and credit
reviews of Program Merchants.
SECTION 8
ADDITIONAL COVENANTS
8.1 RESERVE ACCOUNT.
(a) IPAYMENT expressly authorizes SERVICERS to establish a Reserve
Account pursuant to the terms and conditions set forth in this Section
8.1. The initial amount of such Reserve Account shall be [****]
and may be increased by SERVICERS from time to time, in their sole
reasonable discretion, based upon any anticipated risk of Loss to
SERVICERS. Such Reserve Account shall be established and maintained at
CHASE.
(b) The Reserve Account shall be fully funded upon three (3) Business
Days notice to IPAYMENT. Such Reserve Account may be funded by all or
any combination of the following: (i) one or more debits to the
Transfer Account or any other accounts held by CHASE or any of its
Affiliates; (ii) one or more deductions or off sets to any payments
otherwise due to IPAYMENT; or (iii) IPAYMENT's delivery to SERVICERS of
a letter of credit issued by a bank acceptable to SERVICERS and in a
form acceptable to SERVICERS. Any Reserve Account will be held by
SERVICERS for the greater of twelve months after termination of this
Agreement or for such longer period of time as is consistent with
SERVICERS' liability for Card transactions in accordance with the
Rules.
[****] Represents material which has been redacted and filed separately
with the Commission pursuant to a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933, as amended.
Page 20 of 46
Twelve months after termination, SERVICERS agree that it shall reduce
the Reserve Account balance to reflect IPAYMENT's then potential
liability.
(c) If IPAYMENT's funds in the Reserve Account are not sufficient to
cover the Chargebacks, adjustments, fees and other charges due from
IPAYMENT or Merchants, or if the funds in the Reserve Account have been
released, IPAYMENT agrees to pay SERVICERS such sums within one (1)
Business Day of any such request by SERVICERS. In the event of a
failure by IPAYMENT to fund the Reserve Account, SERVICERS may fund
such Reserve Account in any of the manners set forth above in SECTION
8.1(B).
(d) To secure IPAYMENT's obligations to SERVICERS under this Agreement,
IPAYMENT grants to SERVICERS a lien and security interest in and to any
of IPAYMENT's funds in the Reserve Account or otherwise related to this
Agreement now or hereafter in the possession of SERVICERS, whether now
or hereafter due or to become due to IPAYMENT from SERVICERS. In
addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, SERVICERS are hereby
authorized by IPAYMENT at any time and from time to time, without
notice or demand to IPAYMENT or to any other person (any such notice
and demand being hereby expressly waived), to set off, recoup and to
appropriate and to apply any and all such funds against and on account
of IPAYMENT's obligations to SERVICERS under this Agreement and any
other agreement with SERVICERS, whether such obligations are
liquidated, unliquidated, fixed, contingent, matured or unmatured.
IPAYMENT agrees to duly execute and deliver to SERVICERS such
instruments and documents as SERVICERS may reasonably request to
perfect and confirm the lien, security interest, right of set off,
recoupment and subordination set forth in this Agreement.
(e) Any funds maintained in the Reserve Account shall yield interest
equal to the federal funds rate, as stated from time to time in the
Wall Street Journal (or any successor publication), plus one percent
(1%), which will be payable monthly on each Payment Date.
8.2 INSPECTION. IPAYMENT will, at any and all reasonable times and upon
notice reasonable under the circumstances, permit SERVICERS' employees,
agents, attorneys, auditors, or regulators to inspect IPAYMENT's place
of business to audit its operations for compliance with all laws,
rules, regulations, and directives of any governmental regulatory
agency, as well as all rules, regulations and directives of MasterCard,
or VISA all at SERVICERS' expense.
8.3 COOPERATION. SERVICERS and IPAYMENT will each timely furnish to the
other any and all information and materials that the other may, from
time to time, reasonably request in connection with all matters
contemplated by this Agreement. Each party also shall take the action
as the other may, from time to time, reasonably request in order that
the purposes of this Agreement will be
Page 21 of 46
fully accomplished and that all matters contemplated hereby will comply
with all applicable statutory, regulatory or other legal requirements.
8.4 EXCLUSION OF WARRANTIES, LIMITATIONS OF LIABILITY.
(a) This Agreement is a service agreement and, except as expressly
provided in this Agreement, SERVICERS disclaim all other
representations or warranties, express or implied, made to IPAYMENT,
Merchants or any other person or entity, including without limitation,
any warranties regarding quality, suitability, merchantability, fitness
for a particular purpose or otherwise (regardless of any course of
dealing, custom or usage of trade) of any services or any goods
provided incidental to the services provided under this Agreement.
(b) Notwithstanding anything in this Agreement to the contrary, in no
event shall SERVICERS, their respective Affiliates or any of their
respective directors, officers, employees, agents or subcontractors, be
liable under any theory of tort, contract, strict liability or other
legal theory for lost profits, lost revenues, lost business
opportunities, exemplary, punitive, special, incidental, indirect or
consequential damages, each of which is hereby excluded by Agreement of
the parties, regardless of whether the damages where foreseeable or
whether any party or any entity has been advised of the possibility of
the damages. For sake of clarification, the exclusion set forth in this
Section 8.4(b) does not apply to direct damages.
(c) Except for claims related to payments due to IPAYMENT under Section
6.2(b) that have not been paid to IPAYMENT and notwithstanding anything
in this Agreement to the contrary, SERVICERS' cumulative liability for
all losses, claims, suits, controversies, breaches, or damages for any
cause whatsoever including, but not limited to, those arising out of or
related to this Agreement and regardless of the form of action or legal
theory shall not exceed [****].
8.5 COMPLIANCE WITH RULES. IPAYMENT also covenants to the following on
behalf of itself and Subsidiaries:
(a) IPAYMENT has received, understands, and agrees to comply fully with
all Rules and applicable laws, rules and regulations.
(b) On an ongoing basis, IPAYMENT will regularly provide SERVICERS with
the current addresses for all its offices.
(c) In the event of any inconsistency between any provision of this
Agreement and the Rules, the Rules in each instance shall be afforded
precedence and shall apply.
(d) This Agreement will automatically terminate if IPAYMENT
de-registers with VISA and/or MasterCard or when SERVICERS cease for
any reason to be a Member.
(e) IPAYMENT acknowledges and agrees that VISA and/or MasterCard are
the sole and exclusive owner of VISA and/or MasterCard Marks. IPAYMENT
agrees to never contest the ownership of these Marks and VISA and/or
MasterCard may at any time immediately and without advance notice
prohibit IPAYMENT from using their respective Marks.
(f) IPAYMENT acknowledges and agrees that VISA and/or MasterCard shall
have the right, either in law or in equity, to enforce any provision of
the Rules and to prohibit IPAYMENT's conduct that creates a risk of
injury to VISA and/or MasterCard or that may adversely affect the
[****] Represents material which has been redacted and filed separately
with the Commission pursuant to a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933, as amended.
Page 22 of 46
integrity of VISA's and/or MasterCard's systems, information or both.
IPAYMENT agrees to refrain from taking any action that would have the
effect of interfering with or preventing an exercise of these rights by
VISA and/or MasterCard.
(g) IPAYMENT agrees not to use any Marks of VISA and/or MasterCard on
its own behalf in the furtherance of the Program. IPAYMENT also agrees
not to suggest, imply or in any manner create an impression that it is
a Member or an authorized representative of VISA and/or MasterCard or
that it is other than an Independent Sales Organization for a Member.
Further, IPAYMENT may not create an impression that VISA and/or
MasterCard in any way endorses IPAYMENT or the Program it coordinates
through SERVICERS.
(h) IPAYMENT may use one (1) or more of VISA's or MasterCard's Marks
under the following conditions:
(A) Marks are used in accordance with the Rules; and
(B) Marks are used pursuant to the express written
permission of CHASE.
(i) IPAYMENT may not subcontract, sublicense, assign, license,
franchise or in any other manner extend or transfer to any third party
any right or obligation IPAYMENT may have in connection with the
Program. IPAYMENT agrees to provide services under the Program only
with IPAYMENT's or Subsidiaries' employees, independent representatives
or another Independent Sales Organization that is registered with VISA
and/or MasterCard to provide services for a Member, which has been
approved in advance by SERVICERS in writing. An "employee or
independent representative" of IPAYMENT or Subsidiary is defined as an
individual who, while providing services for the Program (i) represents
himself or herself as working for or on behalf of IPAYMENT or
Subsidiary while using only IPAYMENT's or Subsidiary's legal or "doing
business as" name(s) as registered with VISA and/or MasterCard; and
(ii) receives compensation for services rendered for the Program from
IPAYMENT or Subsidiary. An employee or independent representative may
not extend or transfer to any third party any right or obligation the
employee or independent representative may have regarding the Program
as an employee or independent representative of IPAYMENT or Subsidiary.
IPAYMENT further agrees to the following:
(i) IPAYMENT will not use VISA's and/or MasterCard's
equipment and software ("V/MC Systems") and VISA
and/or MasterCard information identified or
reasonably understood to be confidential or
proprietary ("V/MC Confidential Information") for
anything other than to perform its duties on behalf
of SERVICERS and definitely not for its own use or
for any other purpose;
(ii) To treat the V/MC Systems and V/MC Confidential
Information in at least as careful and confidential a
manner as IPAYMENT treats its own or the SERVICERS'
systems and confidential or proprietary information;
(iii) To acknowledge that access to the V/MC Systems and
V/MC Confidential Information does not convey to
IPAYMENT any right, title, interest or copyright
therein or any license to use, sell, exploit, copy or
develop them further;
Page 23 of 46
(iv) To limit access to the V/MC Systems and V/MC
Confidential Information to only those IPAYMENT
employees with a need to have access for the IPAYMENT
to perform services under the Program and to
implement and maintain reasonable and appropriate
safeguards to prevent unauthorized access to or use
of the V/MC Systems or V/MC Confidential Information;
(v) Upon request by SERVICERS, or, absent such requests,
upon termination of IPAYMENT's performance under the
Program, to immediately cease any and all use of V/MC
Systems and promptly thereafter deliver to SERVICERS
all V/MC Confidential Information then in the
possession or control or, upon request by VISA and/or
MasterCard, to immediately cease any and all use of
the V/MC Systems and promptly thereafter deliver all
V/MC Confidential Information then in its possession
or control to VISA and/or MasterCard; and
(vi) To immediately advise both SERVICERS and VISA and/or
MasterCard if any unauthorized person or external
entity seeks access to the V/MC Systems or V/MC
Confidential Information whether by legal proceeding
or otherwise.
(j) VISA and/or MasterCard may at any time conduct financial and
procedural audits of IPAYMENT. IPAYMENT agrees to cooperate
with and promptly supply VISA and/or MasterCard with all
information and material requested.
(k) IPAYMENT understands that all Program materials including, by
way of example and not limitation, Merchant Applications,
Merchant Processing Agreements, Merchant statements, and
Promotional Materials (i) must be approved by SERVICERS before
use and (ii) may not state or imply that IPAYMENT is
participating in or conducting any activity precluded by the
Rules.
(l) IPAYMENT recognizes that SERVICERS must approve (in advance)
any fee associated with the Program which must be clearly and
conspicuously disclosed in writing to the Merchant prior to
any payment or application.
(m) IPAYMENT acknowledges that under the Rules it will not have
access to any account for funds (i) then or subsequently due a
Merchant under the Program and/or (ii) withheld from a
Merchant for chargebacks arising out of the Program. IPAYMENT
also recognizes that SERVICERS may not assign or otherwise
transfer an obligation to pay or reimburse a Merchant to
IPAYMENT if the obligation arises from the Merchant's Program
participation.
8.6 GUARANTY. The parties acknowledge that they are entering into this
agreement with a personal guaranty which guarantees IPAYMENT's
performance of its obligations under this Agreement as partial
collateral. In the event IPAYMENT becomes a company whose shares of
common stock are traded on an organized national domestic exchange (a
"public company"), SERVICERS agree, upon receipt of a written request
from IPAYMENT, to review the personal guaranty requirement and to
consider a release of such guaranty in exchange for an increase in the
Reserve, to be determined by SERVICERS in their sole discretion.
8.7 SURVIVAL. The provisions of SECTION 8.1 and SECTION 8.4 shall survive
the termination or expiration of this Agreement.
Page 24 of 46
SECTION 9
CONFIDENTIAL INFORMATION
9.1 CONFIDENTIAL INFORMATION. Confidential Information is non-public and
proprietary information relating to the business of IPAYMENT or its
Affiliates that SERVICERS acquire during the term of this Agreement,
and information relating to the business of SERVICERS and their
Affiliates. It includes, but is not limited to, the following, whether
used in, or to be used in, the business of IPAYMENT or SERVICERS, and
whether or not reduced to practice; physical systems for the operation
of the business; all present and planned strategies, business plans,
and projections; all market and sales and marketing information; and
all financial, accounting, and credit information. Neither party will
disclose, furnish, sell or otherwise convey any of the other parties'
Confidential Information or materials without written authorization,
except that SERVICERS may disclose Confidential Information to its
members or Affiliates.
9.2 EXCLUSIONS. Nothing in this Section 9 shall restrict either party with
respect to Confidential Information which: (i) the receiving party can
demonstrate was rightfully possessed by it before it received the
information from the disclosing party; (ii) was in the public domain
prior to the date of this Agreement or subsequently becomes publicly
available through no fault of the receiving party or any person acting
on its behalf; (iii) was previously received by the receiving party
from a third party or is subsequently furnished rightfully to the
receiving party by a third party not known to be under restrictions on
use or disclosure; (iv) is independently developed by such party; (v)
is required to be disclosed by law, regulation or court order, provided
that the disclosing party will exercise reasonable efforts to notify
the other party prior to disclosure; or (vi) is required to be
disclosed to comply with or to enforce the terms of this Agreement.
9.3 OWNERSHIP OF WORK PRODUCT. Each party shall have and retain all
ownership rights (including, without limitation, ownership of any
Marks) in the work product developed for the implementation of the
Program, including, without limitation, the marketing plans,
Promotional Materials, and account materials that it creates, prepares
or produces in connection with this Agreement, and all the work
products shall remain the exclusive property of that party. Upon
termination of the Agreement, each party shall immediately cease using
any materials using the other's Marks or Intellectual Property, and
shall immediately destroy all such materials.
9.4 SURVIVAL. The provisions of this SECTION 9 shall survive the
termination or expiration of this Agreement.
SECTION 10
PROGRAM TRANSFER
10.1 PROGRAM TRANSFER. At the request of IPAYMENT, SERVICERS will transfer
and assign all Merchant Processing Agreements and Merchant Accounts in
the Merchant Portfolio, to a VISA
Page 25 of 46
and MasterCard Member designated by IPAYMENT, provided: (a) all amounts
due (or estimated to become due) in connection with each Merchant
Processing Agreement and under this Agreement have been paid to
SERVICERS; (b) the Termination Reserve Account has been adequately
funded; (c) an Event of Default which has created a material increase
in risk of Loss to SERVICERS has not occurred and is not continuing;
(d) the transfer will be without recourse of any kind to SERVICERS; (e)
IPAYMENT provides full written indemnities to SERVICERS regarding
actual and potential losses or other obligations arising out of
operation of the Program or arising out of, or related to, this
Agreement or any Merchant Processing Agreement; and (f) the Program
Transfer complies with all Applicable laws and regulations. The
Merchant Reserve Accounts for Merchant Accounts in the Merchant
Portfolio will be transferred and assigned within 30 Days of completion
of a transfer of the BINs and ICAs for the Merchant Portfolio to
another a VISA and MasterCard Member pursuant to SECTION 10.2.
10.2 BIN AND ICA TRANSFER. IPAYMENT shall be responsible for initiating a
transfer of the BINs and ICAs for the Merchants in Merchant Portfolio
to another Member, for providing any and all information, documents or
materials as may be necessary to effectuate the transfer and addressing
any information requests from VISA or MasterCard. The BINs and ICAs
transfer shall only be complete upon approval by VISA and MasterCard.
IPAYMENT shall be solely responsible for, and reimburse SERVICERS for,
any and all costs arising out of or related to the transfer of the BINs
and ICAs and deconverting the Program Merchants.
10.3 SURVIVAL. The provisions of this Section 10 shall survive the
termination or expiration of this Agreement for a period of one-hundred
eighty (180) Days from the date of expiration or termination or until
the effective date of a Program Transfer under this Section 10,
whichever shall occur first.
SECTION 11
TERM AND TERMINATION
11.1 INITIAL TERM. The initial term of this Agreement shall commence upon
the initial Conversion of the Existing Portfolio and continue for four
(4) years ("Initial Term"), unless terminated earlier as provided in
this Agreement. Thereafter, this Agreement shall automatically renew
for successive one-year periods unless IPAYMENT or SERVICERS give
written notice of non- renewal to the other at least sixty (60) days
prior to the expiration of the Initial Term or renewal term, as
applicable.
11.2 TERMINATION FOR CAUSE. Either party may terminate this Agreement prior
to its expiration for cause with thirty (30) Days prior written notice
to the non-terminating party as follows:
(a) If SERVICERS or IPAYMENT become unable to perform its
obligations under this Agreement or, specifically and without
limiting the generality of the foregoing, SERVICERS or
IPAYMENT becomes unable to perform its
Page 26 of 46
obligations hereunder because of any applicable law or
regulation, or any judgment, order, decree, or agency
requirement;
(b) If VISA or MasterCard does not approve, or objects to, the
transactions contemplated hereby or imposes costs or requires
changes in connection with any activity or transaction
contemplated hereby that reduce or otherwise adversely affect
the financial benefits that either party is intended to derive
from this Agreement. Termination under this Subsection,
however, requires an additional thirty (30) days after notice
to cure. This additional time will permit an opportunity to
negotiate with VISA or MasterCard and for the parties to
renegotiate as to the manner in which to proceed; or
(c) This Agreement, the transactions contemplated hereby or
SERVICERS' participation therein is deemed or criticized by
the Office of the Comptroller of the Currency or other
regulatory agency to be unlawful, unsafe, and unsound or
otherwise inappropriate.
Notwithstanding the foregoing, (i) SERVICERS and IPAYMENT reserve the
right to immediately terminate this Agreement upon written notice for
any breach of confidentiality obligations or any infringement of
SERVICERS' or IPAYMENT's Intellectual Property or misuse of SERVICERS'
or IPAYMENT's Marks by the other party; and (ii) SERVICERS reserve the
right to immediately terminate this Agreement upon written notice for
any commission of any fraudulent or illegal activity of any Sub
Independent Sales Organization wherein either (A) the fraudulent or
illegal activity is material and IPAYMENT has not taken immediate
action to cease such activities upon any notification, or (B) VISA
and/or MasterCard require immediate termination.
11.3 TERMINATION UPON BREACH. This Agreement may be terminated by either
party upon sixty (60) Days prior written notice if the other party
Materially breaches any representation, warranty, covenant, condition
or term in this Agreement, or if any warranty or representation becomes
untrue or incorrect during the term hereof. The breaching party shall
have the right to cure any breach that is susceptible of cure during
the sixty (60) Day notice period and if the breach is cured to the
reasonable satisfaction of the non-breaching party, this Agreement
shall not be terminated and shall continue in full force and effect.
Notwithstanding the foregoing, the notice and cure periods provided for
herein shall be reduced from sixty (60) Days to ten (10) Business Days
in the event that either SERVICERS or IPAYMENT fails to make a monetary
payment it is required to make to the other (pursuant to this
Agreement) when the payment is due and the payment has not been
deferred by SERVICERS pursuant to SECTIONS 6.2, 6.3 or 8.1 of this
Agreement.
11.4 ADDITIONAL TERMINATION RIGHTS OF SERVICERS. SERVICERS may immediately
terminate this Agreement upon expiration of a thirty (30) Day notice
and cure period (such notice and cure period to run concurrently
commencing upon the date of notice from SERVICERS to IPAYMENT) if any
of the following "Events of Default" shall occur:
(a) a material adverse change in the business or financial
condition of IPAYMENT;
Page 27 of 46
(b) an assignment of this Agreement by IPAYMENT without SERVICERS
written consent;
(c) a sale of all or a substantial portion of IPAYMENT's assets,
which shall mean at least 50% of IPAYMENT's assets, which
shall in SERVICERS sole, reasonable discretion materially
increase SERVICERS risk of Loss, unless such sale is part of
IPAYMENT'S initial public offering;
(d) any change in 50% or more of ownership or control of IPAYMENT,
which shall in SERVICERS' sole, reasonable discretion
materially increase SERVICERS' risk of Loss, unless such sale
is part of IPAYMENT's initial public offering;
(e) any material failure on the part of IPAYMENT to comply with
the Merchant Processing Policy;
(f) IPAYMENT shall default in any Material respect in the payment
of any Material indebtedness, notwithstanding the provisions
of Section 11.3;
(g) IPAYMENT fails to fund the Reserve Account as required under
this Agreement; or
(h) IPAYMENT or any of its employees or independent
representatives engage in any fraudulent activity or is
reasonably suspected or accused of engaging in any fraudulent
activity in connection with the performance of their duties
under this Agreement.
(i) a material adverse change in the financial condition of any
individual or entity which has executed a guaranty which
guarantees IPAYMENT's performance of its obligations
hereunder;
(j) the termination or revocation of any guaranty which guarantees
IPAYMENT's performance of its obligations hereunder; or
(k) the death of any individual which has executed a guaranty
which guarantees IPAYMENT's performance of its obligations
hereunder.
In addition to SERVICERS' right to terminate this Agreement, if any Event
of Default shall occur and is not cured within the thirty Day notice and
cure period (as described above), then SERVICERS may, at their option: (A)
withhold any monies due or scheduled to become due to IPAYMENT in
satisfaction of any amounts due to SERVICERS; (B) withhold any monies due
or scheduled to become due to IPAYMENT to fund the Reserve Account or
Termination Reserve Account; and/or (C) sell the Merchant Portfolio to a
third party upon terms to be determined by SERVICERS after a period of six
(6) months from the date of SERVICERS' notice to IPAYMENT of an Event of
Default (subject to SERVICERS' rights to take any and all of the actions
described in Subsections (A) and (B) of this paragraph during such
six-month period) should IPAYMENT not cover (which includes by application
of all amounts withheld by SERVICERS under Subsections (A) and (B) of this
paragraph) all matured and unmatured amounts due to SERVICERS from
IPAYMENT or any Program Merchant under this Agreement prior to the end of
such six-month period. In the event of any such sale of the Merchant
Portfolio by SERVICERS, the sale proceeds shall be applied to cover any
amounts due to SERVICERS
Page 28 of 46
from IPAYMENT or any Program Merchants, as well as any costs incurred
by SERVICERS as a result of the Event of Default and the resulting
sale of the Merchant Portfolio. Also, in the event any sale proceeds
remain thereafter, the remaining monies shall be paid to IPAYMENT to
reimburse IPAYMENT for any losses or investment expense in the Program
which IPAYMENT may have incurred. In the event an 11.4(h) Event of
Default occurs, IPAYMENT may attempt to cure by terminating the
employee or independent agent, provided SERVICERS, in their sole
discretion, believe that such termination will stop the fraudulent or
suspected fraudulent activity. Notwithstanding anything in this
Section 11.4 to the contrary, in the event of a subsection 11.4(f)
Event of Default, SERVICERS will be able to withhold, set-off or
appropriate any credits or payments due or scheduled to become due to
IPAYMENT in accordance with and as permitted in Section 8.1 of this
Agreement.
11.5 TERMINATION UPON PROGRAM TRANSFER. This Agreement may be terminated by
IPAYMENT upon one hundred eighty (180) days prior written notice to
SERVICERS if IPAYMENT elects to complete a Program Transfer in
accordance with SECTION 10, provided that this termination right shall
be subject to IPAYMENT's compliance with each term, condition, and
provision of SECTION 10.
11.6 ADDITIONAL TERMINATION RIGHTS OF IPAYMENT. This Agreement may be
terminated by IPAYMENT and IPAYMENT may request a Program Transfer
without invoking SECTION 5.2 (Early Termination Fee) during the Initial
Term if SERVICERS make any change the Merchant Processing Policy which
is not due or related to a change in the Rules and such change
adversely affects IPAYMENT's solicitation of Eligible Merchants for the
Program. By "adversely affects", the parties mean a change to the
Merchant Processing Policy that reduces the number of Eligible
Merchants by ten percent (10%) or more.
11.7 DISSOLUTION OF CMS. Upon notice to IPAYMENT, this Agreement may be
terminated by CMS, one of its members, or its successor upon the
dissolution of CMS; provided, however, that following any such
termination, CHASE may continue to sponsor IPAYMENT as an ISO and MSP
for Visa and MasterCard and to make available the use of BINs and ICAs
to provide settlement and clearing services under separate, mutually
acceptable terms and conditions.
11.8 FINANCIAL CONDITION. This Agreement may be terminated upon the
insolvency or bankruptcy of either party.
11.9 LIABILITY FOLLOWING TERMINATION. Following expiration or termination of
this Agreement, IPAYMENT shall continue to hold all risks associated
with transactions processed by SERVICERS prior to the termination or
expiration of this Agreement or deconversion of the Program Merchants,
including all risk relating to Chargebacks and fraudulent transactions.
IPAYMENT shall pay SERVICERS any amounts associated with such risks
immediately upon demand. SERVICERS may also require additional monies
be deposited in the Reserve Account or Termination Reserve Account upon
any termination or expiration of this Agreement.
11.10 TERMINATION RESERVE ACCOUNT. Within seven (7) Days of the issuing of a
notice of termination by either party, IPAYMENT shall fund a
Termination Reserve Account. Except as specifically set
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forth otherwise in this Section 11.9, all provisions of Section 8.1 of
this Agreement with regard to the Reserve Account shall also apply to
the Termination Reserve Account. The amount of the Termination Reserve
Account shall equal:
(i) The most recent amount required for the Reserve Account under
Section 8.1 of this Agreement, or
(ii) The amount calculated as SERVICERS'estimated risk of Loss in
its sole discretion, whichever is greater. Upon termination,
any balance in the Reserve Account shall be transferred to,
and be applied toward, the Termination Reserve Account.
Notwithstanding anything in this Section 11.9 to the contrary,
upon completion of a transfer of the BINs and ICAs for the
Merchant Portfolio to another VISA and MasterCard Member
pursuant to Section 10 in connection with a Program Transfer,
SERVICERS shall review the amount of the Termination Reserve
Account and adjust the amount of such to reflect the risk of
Loss.
11.11 SURVIVAL. The provisions of SECTIONS 11.4, 11.9 and 11.10 shall survive
the termination or expiration of this Agreement.
SECTION 12
INDEMNIFICATION
12.1 IPAYMENT'S INDEMNIFICATION. IPAYMENT shall indemnify, defend, protect,
and hold SERVICERS, their Affiliates, CMS' members, and their
respective officers, directors, employees, attorneys, and permitted
assigns, harmless from and against any Losses arising directly from:
(i) Any failure by IPAYMENT to comply with any Material term or
condition of this Agreement applicable to IPAYMENT, or the
failure of any warranty or representations made by IPAYMENT to
SERVICERS to be true and correct;
(ii) Any claim for which IPAYMENT has otherwise agreed herein to
pay or indemnify SERVICERS;
(iii) Credit or fraud Losses, regardless of who may have performed
(or failed to perform) any related underwriting, credit
review, periodic review or fraud monitoring services;
(iv) Any negligence on the part of IPAYMENT or any of its
employees, independent representatives, or Sub-Independent
Sales Organizations; and
(v) any infringement arising out of IPAYMENT's use of SERVICERS'
Marks or Intellectual Property, without any limitation of
liability whatsoever.
12.2 SERVICERS' INDEMNIFICATION. SERVICERS shall indemnify, defend, protect,
and hold IPAYMENT, its Affiliates and their respective officers,
directors, employees, attorneys, and permitted assigns, harmless from
and against any Losses arising directly from:
Page 30 of 46
(i) Any failure by SERVICERS to comply with any Material term or
condition of this Agreement applicable to SERVICERS, or the
failure of any warranty or representations made by SERVICERS
to be true and correct;
(ii) Any claim for which SERVICERS has otherwise agreed herein to
pay or indemnify IPAYMENT; and
(iii) Any Losses caused by SERVICERS' breach of a Merchant
Processing Agreement.
12.3 SURVIVAL. The provisions of this SECTION 12 shall survive the
termination or expiration of this Agreement.
SECTION 13
MISCELLANEOUS
13.1 RELATIONSHIP OF THE PARTIES. SERVICERS and IPAYMENT agree that in
performing their responsibilities pursuant to this Agreement they are
in the position of independent contractors. This Agreement is not
intended to create, nor does it create and shall not be construed to
create, a relationship of partnership or joint venture or agency or any
association for profit between SERVICERS and IPAYMENT. IPAYMENT is not
authorized hereunder to hold itself out as an agent of SERVICERS or to
inform or represent to any person that IPAYMENT has authority to bind
or obligate SERVICERS or to otherwise act on behalf of SERVICERS.
IPAYMENT shall not make any representation or warranty, or create any
liability or potential liability on behalf of SERVICERS.
13.2 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended to
confer upon any person or entity other than the parties and their
Affiliates any rights or remedies.
13.3 ASSIGNMENT AND TRANSFER. IPAYMENT shall not assign or otherwise
transfer this Agreement or any of its rights or obligations hereunder,
or contract with any third party (other than the third parties named
herein) to perform any of its responsibilities or obligations relating
to this Agreement without the prior written consent of the other
parties. Upon thirty (30) Days' prior notice to IPAYMENT and subject to
the Rules, SERVICERS may assign or transfer this Agreement and their
rights and obligations hereunder and may delegate their duties
hereunder, in whole or in party, to any third party, without the
consent of IPAYMENT. Upon receipt of notice of any such assignment or
transfer, IPAYMENT shall have 30 Days to review the assignment or
transfer. If IPAYMENT disapproves of the assignment or transfer by
SERVICERS, IPAYMENT may terminate this Agreement upon 30 Days' prior
written notice to SERVICERS. IPAYMENT's failure to disapprove of the
assignment or transfer within 30 Days of its receipt of notice shall
constitute its approval. Alternatively, SERVICERS may request that
IPAYMENT's consent to any such assignment or transfer in advance, which
consent shall not be unreasonably withheld.
Page 31 of 46
IPAYMENT's hereby consents to any transfer or assignment of this
Agreement by SERVICERS to FDMS, CHASE or any of their Affiliates.
13.4 NOTICES. Any notice, request, consent, waiver or other communication
required or permitted to be given hereunder shall be effective only if
in writing and shall be deemed sufficiently given only if delivered in
person or sent by certified, registered, or overnight mail or overnight
courier service, postage prepaid, return receipt requested, addressed
as follows:
IF TO CMS:
CHASE MERCHANT SERVICES, L.L.C.
▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
WITH A COPY TO ATTENTION: General Counsel (same address)
IF TO CHASE:
JPMORGAN CHASE BANK
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Merchant Services
IF TO IPAYMENT:
IPAYMENT, INC.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇ Daily, CEO
WITH A COPY TO ATTENTION: General Counsel
IPAYMENT, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Or to such other person or address as either party may designate by
notice given to the other party as provided herein. The notice or
communication shall be deemed to have been given as of the date so
delivered.
13.6 PRIOR AGREEMENTS, ENTIRE AGREEMENT, AND MODIFICATIONS. This Agreement
supercedes all prior agreements, whether verbal or in writing, and
contains the entire Agreement between the parties regarding all
matters, issues and claims, and any other written documents exchanged,
verbal agreements reached and representations made by or between the
parties in the course of the
Page 32 of 46
negotiation of this Agreement. This Agreement may be changed only by a
written instrument specifically stating that it modifies this Agreement
and it must be signed by all parties.
13.7 EFFECTIVENESS, APPLICABLE LAW, AND FORUM. This Agreement shall become
effective as of the date first written above upon execution by the
parties, and shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to New York
conflict laws.
13.8 WAIVERS. No failure or delay by either party to exercise, and no course
of dealing regarding any right of the party concerning an obligation of
the other party to this Agreement, shall operate as a waiver unless
agreed to in writing by both parties. Both parties here waive their
right to a jury trial in the event of any legal proceedings between
them.
13.9 BINDING EFFECT, SPECIFIC PERFORMANCE. This Agreement and the rights and
obligations created hereunder shall be binding upon and inure solely to
the benefit of the parties and their respective successors and
permitted assigns, and no other person or legal entity shall acquire or
have any rights under or by virtue of this Agreement. The remedies, and
any other remedies provided for in this Agreement shall be cumulative
in nature, not exclusive, and shall be in addition to any other remedy
allowed in law or equity.
13.10 SEVERABILITY. If any provision of this Agreement is held illegal,
invalid, void, or unenforceable in any jurisdiction where this
Agreement or any part there of is to be performed by reason of any rule
of law, administrative or judicial proceeding or public policy, the
provision shall be deemed deleted and the remaining provisions of this
Agreement shall remain valid and binding.
13.11 HEADINGS. The Section headings of this Agreement are inserted as a
matter of convenience only and shall in no way define, limit, extend or
describe the scope of this Agreement or the intent of any provisions
herein.
13.12 COUNTERPARTS. Provided that all parties execute a copy of this
Agreement, this Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall
constitute one and the same instrument. The parties acknowledge that
delivery of executed copies of this Agreement may be effected by
facsimile or other comparable means, as well as by delivery of manually
signed copies.
13.13 CONSTRUCTION. As used in this Agreement, any reference to the
masculine, feminine or neuter gender shall include all genders, the
plural shall include the singular, and the singular shall include the
plural. With regard to each and every term and condition of this
Agreement and any and all agreements and instruments subject to the
terms hereof, the parties understand and agree that the same have or
has been mutually negotiable, prepared and drafted, and that, if at any
time the parties desire or are required to interpret or construe any
term or condition of any agreement or instrument subject hereto, no
consideration shall be given to the issue of which party actually
prepared, drafted or requested any term or condition of this Agreement
or any agreement or instrument subject hereto.
13.14 EXHIBITS. All Exhibits to this Agreement are incorporated by reference
with the same force and effect as if fully set forth herein. This
Agreement shall be given full force and effect without the
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Exhibits or as to those Exhibits that are attached, in the event less
than all of the Exhibits referenced herein are in fact attached.
13.15 SURVIVAL. The provisions of this SECTION 13 shall survive the
termination or expiration of this Agreement.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
31st day of January, 2003.
IPAYMENT, INC.
By:/s/ ▇▇▇▇ Daily
----------------------------------
Title: Chief Executive Officer
-------------------------------
Date: January 28, 2003
--------------------------------
CHASE MERCHANT SERVICES, L.L.C.
By:/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Title: Illegible
-------------------------------
Date: January 29, 2003
--------------------------------
JPMORGAN CHASE BANK
By:/s/ Illegible
----------------------------------
Title: Illegible
-------------------------------
Date: January 31, 2003
--------------------------------
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