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HomeMy WebLinkAboutR-1996-172 Bankcard services agreement / Bank of America NWM N.A. / D/B/A/ Seafirst Bank / Finance for credit cardsRESOLUTION NO. R-96- 172 A RESOLUTION authorizing and directing the City Manager and the City Clerk of the City of Yakima to execute a bankcard services agreement with Bank of America NW, N.A., d/b/a Seafirst Bank, and the City of Yakima. WHEREAS, the effective and efficient management of the City's cash resources requires expeditious revenue collection and aggregation; and WHEREAS, the use of credit cards has become a customary and economical business practice to improve cash management that the City should consider and use when appropriate; and WHEREAS, the State of Washington, at RCW 3.02.045(2) has specifically authorized the use of credit cards for the payment of specific fines; and WHEREAS, the policies, procedures, and practices of cash management should be reviewed and revised as required to ensure that the City achieves the most effective cash management possible and such review by the Finance Department has resulted in a recommendation that the City accept credit card payments in some circumstances; and WHEREAS, the City recognizes the necessity to best accommodate its citizens by facilitating their payment of various fees, including but not limited to judicially - imposed fines and fees; and WHEREAS, the City currently utilizes Seafirst Bank for various banking services; and WHEREAS, Seafirst Bank has the experience and expertise necessary to provide such bankcard services and is willing to do so in accordance with the terms and conditions of the attached bankcard services agreement; and WHEREAS, the City Council deems it to be in the best interest of the City of Yakima to enter into the attached bankcard services agreement with Seafirst Bank; now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: The City Manager and the City Clerk of the City of Yakima are hereby authorized and directed to execute the attached and incorporated bankcard services agreement with Bank of America NW, N.A., d/b/a Seafirst Bank. ADOPTED BY THE CITY COUNCIL this 17thday of December , 1996. ATTEST: Lyn : uchanan, Mayor City Clerk I,.1 i../t.nkc.rd.,a CITY'S AMENDMENTS TO BANK CARD SERVICES MERCHANT AGREEMENT Section 2.03 (new language in bold) (-B)--Unless-Bank-has given -notice -of -termination of -this -Agreement; Merchant shall notify-Bank--in—writing-at-least 30 -calendar -days -prier -to -replacing Bank--with-any-other provider--ef-Merchant Ser-viees;and shall -provide- Bank -with -a right of -first refusal-befere-entcring-inte-any-cent-raetual-relatienship-nidi any --ether provider-ef-Merchant-Services: Amended as follows: (B) The term of this Agreement shall commence upon execution hereof and shall terminate at 12:00 p.m., December 31, 1998; provided, however, that either the Bank or the Merchant may terminate this Agreement earlier, with or without, by providing the other party at least 30 calendar days prior written notice of termination. Section 3.02: Preservation and Security of Information and Records: (A) Merchant shall treat this Agreement and all Visa System, MasterCard System, Network and Bank documents and materials relating to this Agreement, including but not limited to all pricing information, reference materials, technical specifications and operating and procedure manuals, as confidential and proprietary information and protect them with not less than the degree of care a prudent business entity would use to protect its own confidential and proprietary information. Such documents and materials shall be disclosed only to employees of Merchant with a specific need to know. Amended as follows: (new language in bold) (A) Merchant shall treat this Agreement and all Visa System, MasterCard System, Network and Bank documents and materials relating to this Agreement, including but not limited to all pricing information, reference materials, technical specifications and operating and procedure manuals, as confidential and proprietary information and protect them with not less than the degree of care a prudent business entity would use to protect its own confidential and proprietary TD -17 T1-12/10/96 Page 1 information. Such documents and --materials shall -be -disclosed -only -to employees -e€ Merchant -with a specific—need to knew, Bank understands that merchant is bound by Washington State Public Disclosure laws, as amended from time to time, and niay be required under certain circumstances to disclose otherwise proprietary information to the public, if requested. Section 3.06: Operating Procedures The Operating Procedures and any additions or modifications to the Operating Procedures that Bank may from time to time provide Merchant, are the sole property of Bank or Bank's designated independent contractor. Merchant shall take any action reasonably practicable and necessary under the circumstances to protect Bank's ownership interest against any and all claims by other parties. Merchant shall not make or permit to be made copies of any portion of the Operating Procedures without Bank's express written authorization. Merchant understands and agrees that the Operating Procedures may be changed by Bank at any time in its sole discretion in accordance with Section 14 of this Agreement, and any such change shall become part of this Section as of its effective date. Amended as follows: (new language in bold) The Operating Procedures and any additions or modifications to the Operating Procedures that Bank may from time to time provide Merchant, are the sole property of Bank or Bank's designated independent contractor. Merchant shall take any action reasonably practicable and necessary under the circumstances to protect Bank's ownership interest against any and all claims by other parties. Merchant shall not make or permit to be made copies of any portion of the Operating Procedures without Bank's express written authorization, unless denial of request violates Washington State Public Disclosure laws. Merchant understands and agrees that the Operating Procedures may be changed by Bank at any time in its sole discretion in accordance with Section 14 of this Agreement, and any such change shall become part of this Section as of its effective date. Section 12. Indemnification Merchant shall indemnify Bank against any and all claims, levies, fines, assessments, demands, losses, damages, liability, actions, costs, judgments, arbitral awards and expenses (including independent attorneys' fees, allocated costs for in- house legal services, and attorneys' fees in bankruptcy proceedings) arising in whole or in part from any Bank Card Transaction involving merchant, any act or omission of Merchant in connection with any such Transaction, any breach of this Agreement, or Merchant's violation of applicable Laws or Operating Procedures. TD -17 T1--12/10/96 Page 2 Amended as follows: Delete section. Section 15. Arbitration Merchant and Bank shall settle any controversy or claim arising from this Agreement or from any agreements or instruments relating to this Agreement, including, without limitation, a claim arising from a tort, by arbitration, under the auspices and rules of the American Arbitration Association, and subject to the provisions of RCW 7.04 or comparable provision of the Revised Code of Washington. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. Without waiving this provision, either party shall be entitled to obtain provisional or ancillary remedies from a court of competent jurisdiction before or during the pendency of any arbitration. Amended as follows: Delete section. John R. Hanson Director of Finance and Budget City of Yakima Dick Zais,cty Manager City of Yakima Attest: Contract No. 46- ia.a Resolution No. AQ -q% TD -17 TJ --12/10/96 Page 3 Signing for Seafirst Bank (Name) Title Date BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. cP,-' For Meeting Of 12/17/96 ITEM TITLE: Resolution authorizing execution of a Bankcard services agreement with Bank of America NW, DBA Seafirst Bank. SUBMITTED BY: Department of Finance & B CONTACT PERSON/TELEPHONE: Johntom�, Director of Finance & Budget 575-6070 Tim Je' - ' Accoun . nt 576-6639 SUMMARY EXPLANATION: In response to requests from citizens to accept credit cards for Parks and Senior Center programs, the Finance and Legal Departments researched the possibility. RCW's allow for credit card payments for fees and fines. With the onset of Municipal Court, it would be beneficial to have this method of payment available when the Court begins operations. The attached Resolution would approve the attached Bankcard agreement and amendments for a 2- year demonstration term. Bank discount fees will be incorporated into an existing agreement for claims warrant clearing services with Seafirst because they will allow the City to offset fees with compensating balance credits carried over from 1995. After the demonstration term, the City will evaluate this program and opt to continue with Seafirst or another bank. Resolution _X_Ordinance _ _Contract Other (Specify) Agreement & amendments Funding Source N/A APPROVED FOR SUBMITTAL: City Manager STAFF RECOMMENDATION: Adopt Resolution BOARD/COMMISSION RECOMMENDATION: COUNCIL ACTION: Resolution adopted. Resolution No. R-96-172 4 53-5604 REV 02/96 Printed 011 recycled paper. Merchant Agreement • a BANKCARD SERVICES i2»)7) /4/'i Basic Bank Card Acceptance Procedures To ensure' compliance with Bank, Visa®, and MasterCard® regulations, the following minimum precautions should become a part of your daily business operating procedures. These activities will also reduce the risk, and increase the profitability associated with accepting Bank Cards. 1. Examine the Card. Determine the validity of the card using the following checklist: • Verify that the effective ("valid from") and expiration dates make the card eligible for use. • Check to see that the card is signed. • If applicable, determine that the user of the card resembles the person depicted in any photograph intended for identification on the card. • Look for the distinguishing features indicating the association to Visa or MasterCard. There should be either a Visa or MasterCard logo and an appropriate hologram on the card. Other plastic cards may look like a Bank Card, but if accepted for payment of goods or services, will result in a financial loss to your business. • Look for the true 3-D holograms that appear to move when the card is turned. The proper hologram for Visa is a dove in flight, and for MasterCard, interlocking globes behind a world map The final four digits of the embossed account number should extend into the hologram. • Visa card account numbers begin with the number four (4) and has either 13 or 16 digits. A MasterCard account number will begin with a five (5) and have 16 digits. • Visa cards Bank Identification Numbers appear in small print above the embossing and the first four embossed account numbers should match. 2. Watch for Fraud. The following list of security features should assist you spotting counterfeit cards and/or fraudulent use of Bank Cards: • Card printing should appear crisp and clear. Letters should not be fuzzy or crooked. • Embossed characters should be straight, correctly spaced, uniform in size, height, style and alignment. • Examine the card for any signs of tampering or alterations made to the signature panel, the security hologram, any of the embossed numbers, or the magnetic stripe. • Check for signature panels that appear discolored, glued, taped or painted. Any attempts of erasure should expose the word VOID • Visa cards have "Visa" microprinted around the Visa logo • Some MasterCard cards will display the optional embossed security character "MC" next to the expiration date. Those same cards will have the account number and a three -digit verification code indent -printed in reverse italics on the signature panel. • If using an electronic Point -of -Sale terminal that reads and displays, or, reads and prints the magnetic stripe information on the Bank Card, compare and ensure that the embossed account number is the same as the number displayed and/or printed by the terminal. Be sensitive to suspicious behavior that may be telling you of fraudulent use of the card: • Does the customer appear nervous? Are they making indiscriminate purchases? • Is the customer purchasing an unusual amount of expensive items? • Is the customer taking a card from a pocket instead of a wallet? • A card thief will often make several small, separate purchases to stay under your floor limit, or to test your authorization practices, then possibly return later to make additional purchases. Your floor limit with Seafirst is zero; all bankcard transactions should receive authorization. • Since there is usually little time to perfect a forged signature, a card thief may be slow and calculating in an effort to sign the sales draft. • Is a purchase being made in haste just before store closing? 3. Obtain and Imprint of the Card. Bank Card imprints are taken to show the presence of a card for a particular transaction and can be made manually with an imprinter, or electronically by a magnetic stripe reading Point -of -Sale device. Any transaction where the authorization was obtained by calling the voice authorization operator, or the account number is manually keyed into an electronic terminal, requires a manual imprint of the Bank Card on a completed Sales Draft, signed by an authorized Cardholder. Merchants who are authorized to accept mail and phone order transactions are not required to obtain card imprints. 4. Obtain an Authorization. All Bank Card transactions require authorization for the full amount of sale. Authorization requests may only be made in conjunction with bona fide Bank Card transactions, and once declined, must not be honored, or resubmitted by either the same, or any alternative method. Authorization requests to determine or test cardholder credit limits are prohibited. 5. Obtain and Compare Signatures. This step is one of the most important, and in most transactions, the step most often skipped. While you are not expected to be a handwriting expert, a reasonable check must be made to determine that the signature on the Sales Draft matches the signature on the back of the card, as judged by spelling and handwriting. The signature on the back of the card may be different from the name embossed or printed on the face of the card. An example of acceptable and unacceptable signatures for one particular situation is as follows: Card is embossed with: "Patrick D Jones" Back of card is signed. "Pat Jones" Acceptable signatures. "Patrick D Jones", "Patrick Jones", "Pat D Jones", "P D Jones", "P. Jones" Unacceptable signatures: "B. Jones", "Pat Jons", "Robert Jones" Bank Cards should be returned to the Cardholder only after a Sales Draft has been signed and a comparison of signatures has been made. If a card is presented to you unsigned, we strongly recommend that you make every effort to get the cardholder to sign the card before proceeding with the transaction. If the cardholder declines, you have the right to request another form of payment. If you complete the transaction with an unsigned card, you may be liable for a chargeback, even if you request, and are presented with a driver's license or other identification. 6. Settle Your Transactions Promptly. This is the step that means the most to you, as a merchant. Depositing or settling your transactions is the process that provides you with payment for Bank Card transactions that you accept. If you are paper processing your Bank Card transactions, your Sales Drafts are to be delivered to a bank branch, or a designated processing site within 5 calendar days after the transaction date. If you are a merchant using an electronic draft capture terminal, transactions should be balanced and transmitted to the designated processor on at least a daily basis. Being alert has its rewards. In addition to avoiding transaction that may cause your business a financial loss, being alert to potentially counterfeit or fraudulent credit card activity may provide you with financial rewards. If you are advised in response to an authorization request to confiscate a card, you may be eligible for a reward of not less than $50 00 If anything about the card, or the card user is suspicious, call the voice authorization operator with a "Code 10" authorization request. They will ask you a series of questions designed to determine if the card or card user is fraudulent. These questions are asked in such a way as to not alarm or alert your customer. If you are advised to confiscate a card as a result of a "Code 10" call, you may be eligible for a reward of not less than $50 00, and potentially as high as $250 00 in a "Code 10" situation, be sure to follow the operator's instructions precisely, but don't place yourself or any other staff in physical danger in confronting a customer If a cardholder refuses to allow you to retain the card, do not engage in any type of physical confrontation. Seafirst Bank disclaims any liability to merchants and their employees resulting from a physical challenge or confrontation. promotional material. and any other items provided by Bank. shall cease. Termination of this Agreement shall not affect the obligations of Merchant with respect to any Discount or other fee owing at termination, to any Paper accepted by Bank (whether before or after such termination) including, without limitation, Merchant's chargeback and indemnity obligations, and the security interest granted to Bank under Paragraphs 8 02(A) and 8 02(B) 13.01 Reserve Accounts At Bank's option, the Bank may, at any time, require Merchant to establish and maintain a Reserve Account with a principal amount at least equal to the total gross dollar amount of Sales Drafts charged back to Merchant during the consecutive 6 -month period imme- diately preceding the date when such a Reserve Account is re- quired, or such other amounts as Bank may reasonably demand, or negotiate with Merchant, and all Paper delivered to Bank in violation of Sections 6 07, 6 08, 6 09, and 6 10 of this Agreement. The requirement to establish such a Reserve Account may also be made upon notice of termination of this Agreement for a one-year period after termination as described in Section 8 02. Bank also may withhold any funds in any accounts Merchant maintains at Bank, or withhold settlement of Transactions for the purpose of establishing the Reserve Account. Without limiting the terms of this Section, Section 6.15, Section 11, Section 12, and Section 15, Bank may recover the amount of any Sales Draft charged back to Merchant during the consecutive 12 months following termina- tion by debiting the amount of the Sales Draft to the Reserve Ac- count. If the funds in the Reserve Account are inadequate to cover chargebacks at any time during the one-year period, Merchant, within 5 calendar days following Bank's notice, shall deposit addi- tional funds to the Reserve Account to cover actual and antici- pated chargebacks for the remainder of the period. At the end of the one-year period, Bank shall return the funds remaining in the Reserve Account to Merchant, excluding funds held in reserve clue to Merchant's violation of Sections 6 07, 6 08, 6 09, and 6 10 of this Agreement which funds may remain on reserve for a longer time reasonably necessary to cover risk of chargeback. Section 14. Amendments to Agreement (A)Bank may amend this Agreement at any time by providing written notice to Merchant at least 10 calendar days before the effective date of the amendment in accordance with Paragraph 16 03 The amend- ment shall become effective unless Bank receives Merchant's notice of termination of this Agreement before the effective date of the amendment. This Agreement is subject to amendment by Bank upon less than 10 days prior notice to Merchant if immediate modifica- tion is reasonably determined by Bank to be required by any Laws or Operating Procedures or any adverse change in Merchant's financial condition. (B) Addenda may tie added to this Agreement regarding tape transmis- sion, guaranteed reservation and related services, or other special- ized Bank Card services. Section 15. Arbitration Merchant and Bank shall settle any controversy or claim arising from this Agreement or from any agreements or instruments relating to this Agreement, including, without limitation, a claim arising from a tort, by arbitration, under the auspices and rules of the American Arbitration Association, and subject to the provisions of RCW 7 04 or comparable provision of the Revised Code of Washington. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. Without waiving this provision, either party shall be entitled to obtain provisional or ancillary remedies from a court of competent jurisdiction before or during the pendency of any arbitration. Section 16. General Provisions 16.01 Applicable Law This Agreement shall be governed by and construed under the Laws of the State of Washington. This Agreement, and the duties regarding this Agreement shall be governed by and interpreted in accordance with federal law and the laws of the State of Washing- ton, regardless of where Merchant may conduct business, or how the Merchant Services account is used, at any time. The choice of Washington law is made because of the strong relationship of the Agreement and the Merchant Services account to the State of Wash- ington and to ensure uniform procedures and interpretations for all of the Bank's customers, no matter where they may conduct business. The Bank is a national banking association with its head- quarters in Washington. All credit extended under this Agreement will be extended from Washington. Your repayment must be made in Washington. This Agreement is made in Washington. Merchant agrees to submit to the personal jurisdiction of any state or federal court located in King County, Washington and at the option of Bank venue in any action concerning this Agreement may be placed in any state or federal court in King County, Washington. 16.02 Notices All notices required by this Agreement shall be in writing and shall be effective when delivered to Bank at Bank's address shown below and to Merchant at Merchant's address to which Merchant's Merchant Statement is mailed, if Merchant has made arrangements with Bank to mail such Statements, or at such other address as one party may provide by notice to the other party Any address Merchant designates shall also be the address to which Merchant's Merchant Statements are mailed. Bank's address for all notices required by this Agreement is: Seafirst Bankcard Services ATTN Merchant Services Manager P 0 Box 2462 Spokane, Washington 99210-9955 16.03 Waiver Any failure of Bank to enforce any of the terms, conditions or covenants of this Agreement shall not constitute a waiver of any of Bank's rights under this Agreement, and all waivers or amend- ments shall be in writing. 16.04 Phone Call Monitoring Merchant authorizes Bank Supervisory Personnel, at Bank's dis- cretion, to listen to or record all telephone calls between the Bank and Merchant, or any person or company authorized by Merchant to act on Merchant's behalf. Merchant assumes the duty of obtain- ing the required consent from those acting on Merchant's behalf for this monitoring Section 17. American Express, Discover, Diners Club and Carte Blanche Cards if a Merchant has been approved by Bank to submit American Express, Discover, Diners Club or Carte Blanche card transactions, the following provisions are a part of this Agreement. 17.01 Transaction Settlement Bank agrees to process transactions for Merchant that are com- pleted by Cardholders using American Express, Discover, Diners Club or Carte Blanche cards. Bank shall capture American Ex- press transactions and send them to American Express, Discover transactions and send thein to the Dean Witter Financial Network; and Diners Club or Carte Blanche transactions and send them to Citicorp Diners Club, Inc. Merchant agrees that American Express, the Dean Witter Financial Network, or Citicorp Diners Club, Inc., as the case may be, and not Bank shall be responsible for settle- ment (payment) of American Express, Discover, Diners Club and Carte Blanche transactions. Merchant agrees to pay fees to Bank as specified in Merchant's Merchant Bankcard Application. 17.02 Separate Agreement Requirements Merchant understands that acceptance of American Express, Dis- cover, Diners Club or Carte Blanche cards requires execution of a merchant card acceptance agreement with American Express, the Dean Witter Financial Network, or Citicorp Diners Club, Inc., as the case may be, which agreement shall govern sales draft storage and retrieval and other terms of the relationship between the par- ties. If Merchant experiences problems with transmission or de- livery of American Express, Discover, Diners Club or Carte Blanche transactions, Merchant must contact the appropriate terminal ser- vice provider PAGE 11 Section 8. Merchant Deposit Account(s) Unless otherwise expressly agreed in writing, any Deposit Account Merchant maintains with Bank for the transfer of payments between the parties shall be subject to the standard terms and conditions applicable to Bank's deposit accounts (including, without limitation service charges and fees, immediate payment of overdraft amounts on demand, and Bank's charges for overdrafts) As amounts become payable to Bank or to Merchant under the terms of this Agreement Bank may, unless otherwise agreed, make payments to or receive payments from Merchant by crediting or debiting Merchant's account without prior notice. If Merchant does not maintain a deposit account with Bank, payments between the parties shall be made in a manner satisfactory to Bank. If Merchant does not maintain sufficient balances in its deposit accounts with Bank to cover fees owing under the Agreement, Merchant shall immediately pay all such fees directly to Bank. If Merchant fails to pay any sum required by this Agreement when due, that amount shall bear interest at the rate of 18% per year, until paid. 8.01 Financial Accommodation It is agreed and understood by both parties to this Agreement that Bank's agreement to settle Merchant's Bank Card Transactions and/ or Debit Card Transactions is a contract to extend financial ac- commodations to or for the benefit of Merchant. 8.02 Security Interests (A) To secure obligations of Merchant to Bank, Merchant hereby grants Bank security interests (which is warranted to be of first priority) in all deposit accounts of Merchant with Bank. The security inter- ests granted under this Agreement shall continue even if this Agree- ment terminates and Bank shall remain authorized to collect any amounts Merchant owes Bank by debiting all of Merchant's de- posit accounts with Bank. (B) Bank may also require any other security or pledge Bank deems necessary to prevent loss to Bank. Merchant shall execute all such documents as may be required by Bank for it to obtain and perfect any security interest granted pursuant to this Agreement. Section 9. Fees (A) Merchant shall pay Bank in arrears on a monthly, weekly, or, daily basis, at Bank's option, a Discount Fee equal to a percentage (estab- lished by Bank) of the dollar amount of all Sales Drafts received by Bank from Merchant during the preceding calendar month, week, or, day, and such other fees as set forth in the Merchant's Merchant Bankcard Application, which Bank may amend from time to time in accordance with Paragraph 14(A) Bank may charge its Discount Fee based on a portion of the Merchant's total Sales Drafts, mutually agreed upon by Bank and Merchant. Any change in the Discount Fee shall be effective for Paper that Bank transmits to Visa or MC on or after the effective date of any amendment to or revision of the Merchant's Merchant Bankcard Application. (B) Merchant shall pay Bank all fees and charges for authorization and data capture services as specified in Merchant's Merchant Bankcard Application. Merchant understands and agrees that the fees and charges may be changed by Bank, subject to limitations on changes in fees, if any, contained in Merchant's Merchant Bankcard Applica- tion, upon 10 calendar days' prior written notice to Merchant, and that any such change will become part of this Agreement as of its effective date. The fees and charges shall be charged directly to Merchant's Account. If the balance in Merchant's Account is insuffi- cient to pay the fees and charges, and Merchant then fails to pay any amount that is due upon demand, Bank may, at its option, and with- out further notice or demand, debit the amount to Merchant's Ac- count at any time the balance in Merchant's Account is sufficient to do so (C)Merchant shall pay to Bank immediately, upon Bank's demand, the amount of any penalty, assessment, fee, fine or damages suffered by Bank as a result of any Transaction that was in violation of this Agree- ment, the Operating Procedures, or applicable Law. Section 10. Disclaimer of Warranties Bank makes no representations or warranties of any kind, express or implied, with respect to the services, the Equipment or their use by PAGE 10 Merchant, except as contained in this Section. These representations and warranties, if any, are in lieu of all other warranties, including but not limited to warranties of merchantability and fitness for a particular purpose. Bank shall have no liability to Merchant for any special, indirect, or consequential damages, including but not limited to lost profits, arising out of or incurred by Merchant in connection with the services, the Equipment or their use by Merchant. The fact that an Authorization is obtained by Merchant shall not affect Bank's right thereafter to revoke Authorization of a Bank Card Transaction or to charge back the Transaction to Merchant. In no event will the fact that an Authorization is obtained by Merchant be deemed to be Bank's representation or warranty, express or implied, that the particular Bank Card Transaction is in fact a valid, authorized or undisputed transaction entered into by the Cardholder. Section 11. Limitation of Liability (A)Bank's liability to Merchant with respect to any Bank Card Transac- tion shall not exceed the amount of the Sales Draft in connection with that Transaction, and Bank shall in no event be liable for any incidental or consequential damages. (B) Without limiting Section 10 above, with respect to Authorization and/or Electronic Draft capture services, for non -Bank Card transac- tions, Bank accepts no responsibility, obligation or liability other than providing such Authorization and/or Electronic Draft capture ser- vices. With respect to electronic check guarantee or verification by third -party provider, Bank accepts no responsibility, obligation or liability other than programming the Equipment to connect Mer- chant to the third -party provider Section 12. Indemnification Merchant shall indemnify Bank against any and all claims, levies, fines, assessments, demands, losses, damages, liability, actions, costs, judgments, arbitral awards and expenses (including independent attorneys' fees, allocated costs for in-house legal services, and attorneys' fees in bankruptcy proceedings) arising in whole or in part from any Bank Card Transaction involving Merchant, any act or omission of Merchant in connection with any such Transaction, any breach of this Agreement, or Merchant's violation of applicable Laws or Operating Procedures. Section 13. Termination of Agreement Either party may terminate this Agreement on 30 days written notice. If Merchant terminates Agreement, Bank may charge Merchant for reasonable Merchant setup expenses, if appropriate. If not terminated, this Agreement will continue without need for renewal. Bank may terminate this Agreement immediately, followed by written notice to Merchant in the event Bank reasonably determines that: (A) there is a materially adverse change in Merchant's financial condi- tion, (B) a petition in bankruptcy has been filed by or against Merchant or Merchant is generally unable to pay its debts as they become due, (C) any information provided by Merchant to Bank in establishing this Agreement was false or misleading when received, (D) Merchant has violated any term, condition, covenant or warranty of this Agreement, (E) Merchant has had for 2 consecutive months, or for any 3 months in a 6 month period, a monthly ratio of chargeback volume to sales volume in excess of 1%, (F) there is an overdraft for 5 calendar days or more in any deposit account Merchant maintains at Bank as described in Section 8, (G) there has been any material change in Merchant's operation or own- ership, (H) Merchant has been involved in originating Paper arising from fraudu- lent or otherwise unauthorized Bank Card Transactions, or (I) Merchant is unable or unwilling to perform fully its obligations un- der this Agreement or any applicable Laws or Operating Procedures. Upon the effective date of termination, Merchant's rights to enter into Bank Card Transactions, to deposit Paper with Bank, and to use forms, Table of Contents Section. 1. Definitions 101 Adjustment 102 Authorization 1 03 Authorization Provider 1 04 Bank Card 1 05 Bank Card Imprint 1 06 Bank Card Transaction 1 07 Banking Day 108 Cardholder 1 09 Cashback Transaction 110 Chargeback 1 11 Credit Voucher 1 12 Debit Card 1 13 Debit Card Transaction 1 14 (Merchant's) Deposit Account(s) 1 15 Discount Fee 1 16 EDC Program 117 Equipment 1 18 Floor Limit 1 19 Laws 1.20 Magnetic Stripe Reader 1 21 Network System 1.22 Networks 1.23 Operating Procedures 1.24 Order Form 1.25 Paper 1.26 PIN 1.27 PIN Pad 1.28 Printer 1.29 Recurring Transaction 1.30 Reduced Interchange Transaction 1.31 Reserve Account 1.32 Sales Draft 1.33 Systems 1.34 Terminal 1.35 Transaction Section 2. Merchant Acceptance 2.01 Compliance of Merchant 2.02 Merchant Obligations 2.03 Changes in Merchant Operations 2.04 Changes in Operation Procedures 2.05 Merchant Credit Information and Inquiries Section 3. Merchant's General Duties 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 3 01 Acceptance of Cards 2 3 02 Preservation and Security of Information and Records 3 3 03 Use of Service Marks and Advertising 3 3 04 Cardholder Disputes and Error Resolution 3 3 05 Merchant Disputes and Error Resolution 3 3 06 Operating Procedures 3 3 07 Forms 3 Section 4. Merchant's Responsibility for Others 3 Section 5. Electronic Equipment 5 01 Delivery and Installation of Bank -Provided Equipment 5 02 Maintenance and Inspection of Bank -Provided Equipment 5 03 Ownership of Bank -Provided Equipment 5 04 Risk of Loss for Bank -Provided Equipment 5 05 Removal or Modification of Bank -Provided Equipment 5 06 Merchant -Provided Equipment 5 07 Use of Equipment and Services 5 08 Access to Equipment 3 4 4 4 4 4 4 4 4 5 09 Telephone Hook -Ups for Equipment 4 5 10 Training 4 5 11 Back -Up Procedures 4 Section 6. Merchant Procedures for Bank Card Transactions 4 6 01 Bank Card Examination 4 6 02 Floor Limit 4 6 03 Authorization 4 6 04 Bank Card Transaction Imprinters 5 6 05 Cardholder Verification 5 6 06 Transaction Documentation 5 6 07 Delivery of Paper 5 6 08 Preauthorized Health Care Transactions 6 6 09 Recurring Transactions 6 6 10 Telephone Orders, Mail Orders, Preauthorized Orders, and Recurring Transactions; No Imprint Transactions 7 6 11 Multiple Drafts 7 6 12 Exchange and Return Policy 7 6 13 Prohibited Practices 8 6 14 Retrieval Requests 8 615 Chargebacks 8 Section 7. Merchant Procedures for Debit Card Transactions 9 7 01 Authorization and Capture 7 02 Authorization for Debit Card Transactions 7 03 Equipment Requirements for Debit Card Transactions 7 04 Cardholder Receipts 7 05 Cashback Transactions 7 06 Reversed and Void Transactions 7 07 Balance Inquires 7 08 Store and Forward Transactions 7 09 Merchant Warranties and Representations 7 10 Publication of Merchant Locations 7 11 Prohibited Practice Section 8. Merchant Deposit Account(s) 8 01 Financial Accommodation 8 02 Security Interests 9 9 9 9 9 9 9 9 9 9 9 10 10 10 Section 9. Fees 10 Section 10. Disclaimer of Warranties Section 11. Limitation of Liability Section 12. Indemnification Section 13. Termination of Agreement 13 01 Reserve Accounts 10 10 10 10 11 Section 14. Amendments to Agreement 11 Section 15. Arbitration 11 Section 16. General Provisions 16 01 Applicable Law 16 02 Notices 16 03 Waiver 16 04 Phone Call Monitoring Section 17. American Express, Discover, Diners Club and Carte Blanche Cards 17 01 Transaction Settlement 17 02 Separate Agreement Requirements 11 11 11 11 11 (D) Bank may debit the dollar amount of any Sales Drafts charged back to Merchant against Merchant's Deposit Account or any other deposit account of Merchant if the foregoing deposit account lacks sufficient funds, as the chargebacks occur on an individual and daily basis. Bank shall send chargeback advice to Merchant as debits occur. (E) To the extent that Operating Regulations permit a Merchant to dispute a chargeback, Merchant shall submit any such dispute to Bank within 10 calendar days following receipt of a chargeback from Bank. Merchant's failure to dispute a chargeback within the above specified period shall constitute a waiver of all rights of Merchant to dispute the chargeback. (F) If Merchant has multiple locations, Merchant shall, upon execu- tion of this Agreement, designate one of its locations as the cen- tral location for handling chargebacks and chargeback disputes and notify Bank of the designated location. (G) Bank shall, at its option and discretion, accept or handle any col- lection request from Merchant relating to a Sales Draft. Section 7. Merchant Procedures for Debit Card Transactions 7.01 Authorization and Capture Bank agrees to provide Merchant with electronic Authorizations for, and capture of Debit Card Transactions through Merchant's use of the Electronic Equipment. 7.02 Authorization for Debit Card Transactions Merchant must initially submit all Debit Card Transactions for electronic Authorization and shall not complete any Debit Card Transactions that has not been authorized or has been declined. No Merchant shall fail to request on-line Authorization of a Debit Card Transaction on the grounds that the Card used to initiate the Transaction is past its expiration date. 7.03 Equipment Requirements for Debit Card Transactions Merchant shall have at or in proximity to the point-of-sale an op- erating Terminal, PIN Pad, Magnetic Stripe Reader and Printer Merchant shall use a Magnetic Stripe Reader for purposes of initi- ating all Debit Card Transactions, and shall require the Cardholder to enter his or her PIN through the PIN Pad. Merchant may not require or request Cardholder's signature or any other means of verifying the Cardholder's identity. 7.04 Cardholder Receipts At the time of any Debit Card Transaction, Merchant shall make available to each Cardholder a written receipt that complies fully with the Operating Procedures and applicable Laws, and includes, but is not limited to, the following information. (A) the amount of the transaction (including any gratuity and appli- cable taxes), (B) the transaction date, (C) the type of transaction (e.g., payment from an account) and, if more than one type of account may be accessed at the Terminal by the Cardholder, the type of account (e.g., checking or savings) and, if more than one account of the same type may be accessed at the Terminal by the Cardholder, a unique identification of the spe- cific account accessed (if the Network is able to provide this infor- mation to Merchant), a number or code that uniquely identifies the Cardholder initiat- ing the Transaction, or the Cardholder's account, or the Debit Card used to initiate the Transaction, the location of the Terminal at which the Transaction was initi- ated, the name of the Merchant providing the goods, services or money to the Cardholder, and the trace number. Cashback Transactions The amount of cash a Cardholder may receive in a Cashback Trans- action may be limited by the Networks or Debit Card issuers. If Merchant allows Cardholders to initiate Cashback Transactions, (D) (E) (F) (G) 7.05 (A) Merchant shall transmit to the Network, for each Cashback Trans- action initiated at Merchant's location, the amount of the cash given to the Cardholder pursuant to the Transaction. (B) Merchant may receive, in response to a request for Authorization for a Cashback Transaction that involves the purchase of goods or services, a denial code that indicates that a Cashback Transaction has been denied solely because the cash portion of the Transac- tion would cause the Cardholder to exceed a limit on cash with- drawals imposed on the Cardholder by the financial institution that issued the Card. In such event, Merchant shall inform the Cardholder that the Transaction was denied because it would cause the Cardholder to exceed such limit on cash withdrawals, but that a new Transaction in the amount of the purchase alone may be approved. (C) Merchant is excused from the foregoing transmission requirements if Merchant's Electronic Equipment does not have the capacity to differentiate the cashback portion of a Debit Card Transaction from the goods and services portion. 7.06 Reversed and Void Transactions A Debit Card Transaction may be reversed or voided electroni- cally only if there has been no intervening Debit Card Transaction on the Terminal or if the Cardholder reenters his or her PIN and the Debit Card is swiped through the Magnetic Stripe Reader. If there has been an intervening Debit Card Transaction, Merchant may treat the Transaction as a return Transaction, provided, how- ever, that Merchant understands that some Networks may not permit return Transactions. 7.07 Balance Inquires Balance inquiries may be performed only at Cardholder -operated Terminals and shall at all times require entry of the Cardholder's PIN and use of the Magnetic Stripe Reader Balance information may not be displayed to Merchant or recorded. 7.08 Store and Forward Transactions If Bank approves, and Merchant's Terminal is capable of storing transaction information and if Authorization Provider is capable of processing such stored Transactions, Merchant may store Debit Card Transaction information at Merchant's own risk, when a Net- work becomes inoperative. Merchant shall forward to Bank the stored Debit Card Transaction information as soon as the Net- work becomes operative, but in no event may Merchant forward the transaction information later than five (5) Banking Days from the date of the original Transaction. Merchant shall be liable for any stored Transaction that is subsequently rejected upon elec- tronic submission. 7.09 Merchant Warranties and Representations By forwarding a Debit Card Transaction to the Authorization Pro- vider, Merchant warrants and represents to Bank that: (A) all cash has been disbursed, all goods have been delivered or all services have been performed as described in the Debit Card Trans- action, (B) the Transaction was accepted and approved by Merchant, (C) Merchant completed and processed the Transaction in accordance with this Agreement, the Operating Procedures and applicable Laws, and (D) Merchant has no knowledge or notice of facts that might impair the validity, enforceability or collectibility of the Transaction. 7.10 Publication of Merchant Locations Bank and the Networks shall have the right to publish and distrib- ute the business names and locations of Merchants that accept Debit Cards. 7.11 Prohibited Practice Merchants who mark or post a single regular price for merchan- dise or services shall not charge a customer who uses a Debit Card any more than that regular price, and shall not increase or add to the regular price any additional fee or surcharge. PAGE 9 6.13 (A) (B) (C) (D) (E) (F) (G) (H) The policy must appear in letters approximately 1/4 -inch high and in close proximity to the space provided for the Cardholder's signature, and the Sales Draft must be signed by the Cardholder Bank Card Transactions completed as Telephone Order Transac- tions cannot be covered by any restrictive return policy because with such Transactions verification of proper disclosure cannot be made. if Merchant accepts any goods for return, if any services are termi- nated or canceled, or if Merchant allows any price adjustment (other than involuntary refunds required by Law), in connection with a Bank Card Transaction, then Merchant shall not make any cash refund, but shall complete and deliver promptly to Bank a Credit Voucher showing the refund or adjustment, and deliver to the Cardholder a complete copy of the Credit Voucher at the time the refund or adjustment is made. Merchant shall include on the Credit Voucher a brief description of the goods returned, services terminated or canceled, or refund or adjustment made, together with the date and amount of the credit in enough detail to identify the Transaction. Merchant shall imprint or legibly reproduce on each Credit Voucher the embossed information from the Bank Card on which the original purchase was charged and from Merchant's imprinter plate. The amount of the Credit Voucher cannot exceed the amount of the original Transaction as shown on the Sales Draft. Merchant shall not deliver a Credit Voucher to Bank for any credit or price adjustment in connection with a non -Bank Card transac- tion. Prohibited Practices Unless expressly authorized in writing by Bank, Merchant shall not. execute a Bank Card Transaction in any currency other than U S Dollars, conduct a Bank Card Transaction to advance any cash to a Card- holder, either directly or by deposit to the Cardholder's account, receive monies from a Cardholder and subsequently prepare and deliver to Bank a Credit Voucher for the purpose of making a de- posit to the Cardholder's account, require, directly or indirectly, through an increase in price or oth- erwise, any Cardholder to pay either any surcharge at the time of sale (cash discounts are permissible, however) or any part of any charge imposed by Bank on Merchant, establish or post any signs indicating that Merchant requires a minimum or maximum amount for any Bank Card Transaction, submit any Transaction that has been previously declined, submit any Transaction for Authorization for the purpose of de- termining or testing Cardholder credit limits, sell, purchase, provide or exchange Cardholder name or account number information obtained through a Bank Card Transaction to any third party not covered in Section 3 02, except Merchant's agents for the purpose of assisting Merchant in its business, Bank, MC or Visa, or appropriate authorities in response to legal pro- cess, or (I) engage in acceptance practices or procedures that discriminate against, or discourage the use of, MasterCard Cards in favor of any other competing card brand that is also accepted. 6.14 Retrieval Requests For Merchants participating in the EDC Program, Merchant shall, at Bank's request, provide Paper supporting electronically processed Transactions to Bank or to Bank's designated processing agent as follows: Merchant shall accept retrieval requests from Bank by a delivery method of the Bank's choice. Retrieval requests shall in- clude Merchant's number, the dollar amount according to Bank's records, the Cardholder's Bank Card account number and the date of the Transaction. Unless otherwise requested, Merchant shall deliver copies of the original Paper to Bank or Bank's designated processing agent within 48 hours of receipt of Bank's retrieval re- quests, excluding weekends and holidays observed by Merchant. Merchant shall provide Bank with either the original or copy of the Paper at Bank's retrieval requests for at least 3 years after the Transaction date. Merchant is liable for Bank Card Transactions for which Merchant is unable to respond to a retrieval, request, within the time period allowed, with a copy of the Transaction, and proof of delivery of such copy. If Merchant has more than ons location, Merchant shall, upon execution of this Agreement, no- tify Bank of the location designated by Merchant as the central location where Bank will send Bank's retrieval requests. Merchant shall give Bank 30 days prior notice of a change of Merchant's central location. 6.15 Chargebacks All Bank Card Transaction debits and credits shall be subject to final audit and verification by Bank. (A) Bank may without notice charge back to Merchant the amount of any Sales Draft which Bank has accepted from Merchant if Bank reasonably determines that: (1) the Sales Draft or any material information it contains (such as the account number, effective date of the Bank Card, Merchant description, transaction amount, transaction date, or authorization date) is illegible, inaccurate or incomplete, or not signed by the Cardholder, or is not delivered to Bank within the required time limits, (2) the Sales Draft contains the imprint of a counterfeit or altered card or a card that had expired or was invalid on the transaction date, (3) the Transaction was one for which the Authorization or verification was not obtained, or a valid authorization code is not correctly and legibly printed on the Sales Draft, (4) the Sales Draft is a duplicate of an item previously paid or is one of two or more Sales Drafts arising from a single Transaction in violation of this Agreement, (5) the Cardholder disputes the execution of the Sales Draft, the sale delivery, quality or performance of the merchandise or services purchased, or alleges that a credit adjustment was requested and refused or that a credit adjustment was issued by Merchant but not posted to the Cardholder's account, (6) the price of the merchandise or services shown on the Sales Draft differs from the amount shown on the copy of the Paper delivered to the customer at the time of the Transaction, (7) the Merchant has violated any term, condition, covenant, warranty or other provision of this Agreement or any applicable Laws or Operating Procedures in connection with the Paper or the Transaction to which it relates, (8) the Paper is fraudulent or the related transaction is not a bona fide transaction in Merchant's ordinary course of business, or is subject to any claim of illegality, cancellation, avoidance, or offset for any reason, including, without limitation, negligence, fraud, or dishonesty on the part of Merchant or Merchant's agents or employees, (9) the Paper has been charged back to Bank for any reason by or through Visa or MC, or (10) Bank has requested copies of Sales Drafts or other records referred to in Paragraphs 3 02(B) and 6 12(A), and Merchant has failed to provide the copies in the time period allowed, with proof of delivery of such copies. (B) Bank may charge back to Merchant's Account any Bank Card Trans- action if Merchant is unable or fails to provide the original or copy of Paper supporting the Transaction as described in Paragraph 6.07(A)(4) (C) The fact that Authorization is obtained does not affect Bank's rights to revoke payment or otherwise require repayment of the Bank Card Transaction under this Agreement. In no event shall the fact that Authorization was obtained by Merchant be deemed to be Bank's representation that the particular Bank Card Transaction is in fact a valid, authorized or undisputed Bank Card Transaction entered into by the Cardholder or an authorized user of the Bank Card. Recitals This Agreement ("Agreement") between Bank of America NW, N.A., doing Business as Seafirst Bank ("Bank") and the merchant named in the Merchant Bankcard Application ("Merchant") is effective the date Bank approves Merchant's Merchant Bankcard Application for Merchant's acceptance of Bank Cards or Debit Cards, or both. If Merchant engages in Bank Card Transactions, Merchant shall be bound by the provisions of this Agreement applicable to Bank Card Transactions. If Merchant engages in Debit Card Transactions, Merchant shall be bound by the provisions of this Agreement applicable to Debit Card Transactions If Merchant engages in both Bank Card Transactions and Debit Card Transactions, the whole of this Agreement shall bind Merchant. A. Bank is a member of Visa U.S.A Incorporated ("Visa") and MasterCard International, Inc. ("MC"), and provides services to businesses accepting credit cards issued under the Visa or MC sys- tem and/or debit cards issued under the Visa, MC, and/or other Net- work system(s) ("Merchant Services") B Merchant is engaged in the business of selling merchandise, services, or both and desires that Bank provide Merchant Services to Mer- chant on the terms and conditions set forth herein. NOW, THEREFORE, for valuable consideration, the parties hereto agree as follows: Agreement Section 1. Definitions In this Agreement, the following definitions shall apply - 1.01 Adjustment shall mean a debit or a credit to Merchant's Deposit Account to correct an out -of -balance situation. 1.02 Authorization shall mean process provided by Bank and Operat- ing Procedures whereby a Bank Card Transaction or Debit Card Transaction for a specified dollar amount is approved by the card - issuing banks or their approved agents. 1.03 Authorization Provider shall mean Bank or the third -party pro- cessing agent(s) designated or approved by Bank, from whom Merchant requests authorization for Bank Card Transactions in accordance with Section 6.03 1.04 Bank Card shall mean. (A) an unexpired Bank Card with service marks and holograms owned and licensed by MC, which marks include the word "MasterCard," a distinctive design consisting of a red circle overlapping an ochre circle, and other marks and holograms that may be adopted by MC from time to time for use in connection with its Bank Card program, or (B) an unexpired Bank Card with service marks and holograms owned and licensed by Visa or Visa International Inc., which marks in- clude the word "Visa," the distinctive blue, white and gold bands, and other marks and holograms that may be adopted by Visa or Visa International Inc. from time to time for use in connection with its Bank Card program. 1.05 Bank Card Imprint shall mean a record of Bank Card informa- tion made using either. (A) a manual imprinter to impress a copy of embossed material on a Bank Card onto a paper Sales Draft or Credit Voucher, or (B) a Magnetic Stripe Reader to produce an electronic image of infor- mation stored on the magnetic stripe of a Bank Card. 1.06 Bank Card Transaction shall mean a transaction between Mer- chant and a Cardholder for sale, rental or service, or any credit related thereto, that is evidenced by a Sales Draft, a Credit Voucher or electronic transmission and is presented to Bank by Merchant for processing through the VISA System or MasterCard System. 1.07 Banking Day shall mean a calendar day other than a Saturday, a Sunday or any other legal public holiday on which Bank is closed for business. 1.08 Cardholder shall mean the person whose name is embossed on a Bank Card or a Debit Card, or whose name appears on a Bank Card or a Debit Card as an authorized user. 1.09 Cashback Transaction shall mean a Debit Transaction wherein Merchant delivers currency to a Cardholder in addition to goods or services. 1.10 Chargeback shall mean a Bank Card Transaction adjusted or deb- ited to Merchant's Deposit Account without notice to or consent of Merchant upon certain occurrences specified in Section 6 15 of this Agreement. 1.11 Credit Voucher shall mean a written or electronically produced voucher showing a refund or price adjustment by Merchant for a Bank Card transaction to be credited to a Cardholder's Bank Card account. 1.12 Debit Card shall mean a valid proprietary card that is used to access consumer checking accounts to pay for goods and/or ser- vices 1.13 Debit Card Transaction shall mean a transaction between Mer- chant and a Cardholder initiated with a Debit Card and presented by electronic transmission to Bank by Merchant for Authorization and processing through a Network System. 1.14 (Merchant's) Deposit Account(s) shall mean a demand deposit account designated by Merchant through which all Transactions, Chargebacks, fees, charges and Adjustments shall be processed by Bank. 1.15 Discount Fee shall mean the fee payable by Merchant to Bank under Paragraph 9(A) below for services Bank provides to Mer- chant under this Agreement. 1.16 EDC Program shall mean the Bank's Electronic Data Capture pro- gram whereby a participating Merchant can translate paper Sales Drafts and Credit Vouchers into computer readable form and elec- tronically transmit Bank Card Transaction data to Bank using prop- erly installed and programmed Terminals. 1.17 Equipment shall mean separately or collectively, Terminals, PIN Pads, Magnetic Stripe Readers, and Printers, as well as any other equipment that may be used to effect Transactions. 1.18 Floor Limit shall mean the dollar amount for a single Bank Card Transaction over which Authorization must be obtained by Mer- chant. 1.19 Laws shall mean the Federal Consumer Credit Protection Act, and all related regulations, and any other Laws, rules, regulations or judicial decisions of the United States or any state or local gov- ernment or agency, or of any foreign country if that law is deemed to apply. 1.20 Magnetic Stripe Reader shall mean a device at a point-of-sale Terminal that is capable of reading the magnetic stripe on a Bank Card or Debit Card. 1.21 Network System shall mean the telecommunications and pro- cessing system of each Network that is utilized by Network mem- ber banks to allow their Cardholders to purchase goods and ser- vices using the member bank's proprietary Debit Card with a PIN at a point-of-sale. 1.22 Networks shall mean the shared electronic funds transfer net- works, of which Bank is a member 1.23 Operating Procedures shall mean. (A) collectively, manuals, instructional materials and specifications provided to Merchant by Bank, by Visa and MasterCard Associa- tions, or by Bank designated vendors, that describe the policies, procedures and transaction requirements to be followed by Mer- chant with respect to Bank Card Transactions or Debit Card Trans- actions, as they are amended from time to time, (B) the Visa Operating Regulations and any other operating rules or procedures published by Visa, as they are amended from time to time, (C) the MC Rules, the MC Operations Manual, and any other operat- ing rules or procedures published by MC, as they are amended from time to time, and (D) any official bulletins issued by Visa or MC relating to its Bank Card program. PAGE 8 PAGE 1 1.24 Order Form shall mean either a mail order form, a Recurring Trans- action form, or a Preauthorized Order Transaction form, which bears the Cardholder's signature authorizing goods or services to be charged to the Cardholder's account. 1.25 Paper shall mean manually prepared or electronically generated documentation of business transactions showing either a sale of goods or services or an amount to be credited to a Cardholder's Bank Card account. 1.26 PIN shall mean a Personal Identification Number comprised of an alphanumeric or numeric code that is used as verification of Cardholder identity when a PIN is an acceptable substitute for signature, to initiate a Debit Card Transaction. 1.27 PIN Pad shall mean an electronic device with an alphanumeric keyboard through which a Cardholder may enter a PIN 1.28 Printer shall mean a device at the point-of-sale that is capable of printing a cardholder receipt that complies with this Agreement. 1.29 Recurring Transaction shall mean a mail order transaction for which permission has been granted by a Cardholder to a Mer- chant to periodically charge the Cardholder's account for recur- ring goods or services. 1.30 Reduced Interchange Transaction shah mean a transaction for which a Sales Draft is submitted in accordance with all applicable specifications contained in the Merchant's Merchant Bankcard Application. 1.31 Reserve Account shall mean Merchant's deposit account estab- lished and maintained at Bank as described in Section 13 01 1.32 Sales Draft shall mean Paper showing a purchase of goods or services by a Cardholder from Merchant through the use of a Bank Card or a Debit Card. 1.33 Systems shall mean collectively, all Networks, the VISA System and the MasterCard System. 1.34 Terminal shall mean an electronic point-of-sale device and re- lated equipment (including software and hardware) used to elec- tronically obtain Authorization or capture a Transaction. 1.35 Transaction shall mean collectively, Bank Card Transactions and Debit Card Transactions. Section 2. Merchant Acceptance 2.01 Compliance of Merchant (A) This Agreement is binding upon the parties and their successors and assigns. Merchant shall not assign this Agreement to any per- son without Bank's prior written consent, and any purported as- signment made without Bank's consent shall be void. (B) This Agreement, along with the related Merchant Bankcard Ap- plication, exhibits, and additional addenda, if any, is the entire agreement between the parties on the subject matter contained within. Paragraphs related to Chargebacks, Fees, Merchant De- posit Account, Indemnification, Limitation of Liability, Arbitra- tion, Electronic Equipment, Merchant Credit Information and Inquiries, Preservation and Security of Records, and, General Pro- visions shall survive termination of this Agreement. 2.02 Merchant Obligations (A) Merchant shall provide adequate services in connection with each Bank Card Transaction in accordance with standard trade prac- tices and customs and manufacturer's warranties, and shall pro- vide repairs, service, and replacements and take other corrective action as may be required by Laws. (B) Merchant shall comply with all Laws in completing Bank Card Transactions, originating and submitting Paper to Bank, perform- ing its obligations under this Agreement, and otherwise conduct- ing its business. 2.03 Changes in Merchant Operations (A) Merchant shah notify Bank in writing at least 30 calendar days prior to any change in Merchant's name or location, any material change in ownership of Merchant's business, or any change in any information concerning Merchant required by this Agreement to be provided on Paper PAGE 2 (B) Unless Bank has given notice of termination of this, Agreement, Merchant shall notify Bank in writing at least 30 calendar days prior to replacing Bank with any other provider of Merchant Ser vices, and shall provide Bank with a right of first refusal before entering into any contractual relationship with any other provider of Merchant Services. Merchant has the right to select a processor, as its agent for the direct delivery of Paper to Bank. If Merchant elects to contract with such a processor, Merchant agrees to the following condi- tions: (1) Merchant must provide satisfactory notice to Bank that it chooses to exercise the option specified in this provision. (2) Merchant understands and agrees that the obligation of Bank to Merchant to reimburse it for Bank Card transactions is limited to the amount (less the appropriate fees) delivered by that agent. (3) Merchant is responsible for any failure by its agent to comply with Operating Regulations including but not limited to any violation which results in a Chargeback, or adjustment. 2.04 Changes in Operating Procedures Merchant shall be responsible for complying with the Operating Procedures as they may be changed by the Visa and/or MasterCard Associations from time to time. 2.05 Merchant Credit Information and Inquiries (A) Bank may, from time to time: (1) obtain credit and other information on Merchant from others (such as stores, lenders, and credit reporting agencies), and (2) furnish information on Merchant's relationship with Bank and on Bank's experience with Merchant to others, as deemed by Bank as needing to know, seeking such information. LVleILilarlt shall, from tiiiic to time Upon request 11o111 Bank, pro- vide Bank with updated business and financial information con- cerning Merchant. All such information shall be used only by Bank, Visa, MC or other appropriate persons, and only as Bank deems appropriate in performing Merchant Services or related services. Bank, MC and Visa shall have the right to audit Merchant's files and records at any reasonable time. Section 3. Merchant's General Duties 3.01 Acceptance of Cards (A) Merchant shall honor without discrimination any valid Bank Card or Debit Card when presented as payment by a Cardholder in con- nection with a bona fide, legitimate business transaction. How- ever, if Merchant does not deal with the public at large (for ex- ample, a private club), Merchant shall be required to honor a valid Bank Card only if presented by a Cardholder who has purchasing privileges or a membership with Merchant. (B) Merchant shall not require Cardholders to provide any personal information such as home or business telephone number, home or business address or driver's license number as a condition for honoring Bank Cards unless the information is required under specific circumstances in the Operating Regulations. (C) Merchant shall use best efforts by reasonable and peaceful means to retain or recover a Bank Card. (1) if Merchant is advised to retain it in response to an authorization request, or (2) if Merchant has reasonable grounds to believe that the Bank Card is counterfeit, fraudulent, or stolen. However, Merchant should take no action to retain or recover a Bank Card that could result in a breach of peace or any injury to person or property. (D) For each Bank Card Transaction, if Merchant receives a positive Account Number Verification Response, or an Authorization, the positive Account Number Verification Response, or the authori- zation code must be recorded on the Sales Draft. If a Bank Card Transaction is declined, or if it receives a negative Account Num- ber Verification Response, Merchant must not complete the trans- action, and if instructed, attempt to recover the card by reason - (1) the Merchant's material must clearly disclose the installment terms including but not limited to (a) the availability of the plan for selected items or the total amount of the order, and (b) the handling of the shipping and handling charges and any applicable tax. (2) no finance charges may be added by the Merchant. The sum of the installment Transactions may not exceed the total sale price of the merchandise on a single Transaction basis. (3) Authorization is required for each installment Transaction, the Merchant's Floor Limit is zero (4) the Merchant may not deposit the first installment Transaction with Bank until the merchandise is shipped. Subsequent installment Transactions must be deposited at intervals of: (a) 30 days or more, or (b) the anniversary date (for example, the same date each month) (5) in addition to the Merchant name, an appropriate installment Transaction descriptor (for example, "1 of 5", "2 of 5") must be included in the Merchant name field of the clearing record. 6.10 Telephone Orders, Mail Orders, Preauthorized Orders, and Re- curring Transactions; No Imprint Transactions (A) Merchant may complete a Bank Card Transaction without a Bank Card imprint or the Cardholder's signature in the case of a Mail Order ("MO"), Telephone Order ("TO"), Preauthorized Order ("PO") Transaction, or Recurring Transaction only if Merchant has completed the appropriate areas on Merchant's Merchant Bankcard Application, or has been otherwise expressly authorized in writing by Bank to accept such Transactions. In such Transac- tions, Merchant shall prepare Paper, invoice, contract, or like docu- ment for delivery to Cardholder, and enter legibly on the Paper- ( 1) aper-(1) the card trade issuer's name or style as it appears on the face of the Bank Card, (2) the Cardholder's name and any company name appearing on the Bank Card, (3) the address that merchandise is to be delivered and/or where services are to be performed, (4) address verification information, if applicable, (5) the account number on the Bank Card, (6) the expiration date and any effective date on the Bank Card, (7) for MC Transactions, the card issuer's interbank number and any bank initials, (8) the date of the transaction, (9) the Authorization code for the Transaction, (10) a description of the merchandise and/or services sold in enough detail to identify the Transaction, (11) the amount of the transaction (including any applicable taxes), (12) the information identifying Merchant that would appear on an imprint transaction, and (13) on the signature line, the letters "TO", "MO" or "PO", or the applicable phrases, "Telephone Order", "Mail Order", "Preauthorized Order", or "Recurring Transaction", as appropriate. (B) Merchant shall not solicit a TO through use of inbound or out- bound telemarketing without first registering as a telemarketing company with Bank and obtaining written consent from Bank to act as a telemarketing merchant. (C) In the case of a PO or a Recurring Transaction, Merchant shall require the Cardholder to execute and deliver to Merchant a writ- ten preauthorization, and in the case of a PO, MO, or Recurring Transaction, Merchant shall retain and make available the written orders to Bank upon request. (D) When requesting Authorization, Merchant must inform the Au- thorization Provider that the Bank Card Transaction is a Mail Or - der, Telephone Order, Preauthorized Order, or a Recurring Trans- action. If participating in the EDC Program for Bank Cards, Mer- chant shall use the appropriate Terminal procedures that identify the Transaction as a Mail Order, Telephone Order, Preauthorized Order, or a Recurring Transaction. Authorizations obtained with- out this notification shall be considered invalid. Merchant warrants to Bank the customer initiating the Transac- tion is an authorized user of the Bank Card. Merchant shall not deliver merchandise or perform services un- der a TO, MO, PO, or Recurring Transaction subsequent to notifi- cation that the order has been canceled or that the Bank Card should not be honored. Merchant shall deliver to the Cardholder a copy of any Sales Draft prior to or at the time of delivery of merchandise or rendering of services. Merchant understands that any Bank Card Transaction completed without the benefit of a Bank Card Imprint and signature com- parison (including not only Mail and Telephone Orders, but also those Bank Card Transactions where the Cardholder was present but no Bank Card Imprint or signature was obtained) contains an elevated level of risk and can be subject to Chargeback. Merchant understands than an Authorization obtained in accordance with the terms of this Agreement does not reduce this element of risk when the Cardholder alleges that he or she did not enter into or authorize the Bank Card Transaction. Multiple Drafts Merchant shall include on a single Sales Draft the entire amount due for each Transaction (including applicable taxes), unless: the customers pays the balance of the amount due at the time of the transaction in cash or by check, or all or a portion of the goods or services are to be delivered or performed at a later date, and the customer signs two separate Sales Drafts, one of which represents a deposit and the second of which represents payment of the balance, and the "balance" Sales Draft is completed only upon delivery of the goods or performance of the services. In the case of delayed payment of the balance due on a Transaction, Merchant shall. (1) note on the Sales Drafts the word "deposit" or "balance," as appropriate, (2) obtain prior Authorization and note the authorization code(s) on the Sales Drafts, and (3) not present the "balance" Sales Draft until all the goods are delivered or all the services are performed. 6.12 Exchange and Return Policy (A) If Merchant maintains a policy of permitting refunds, exchanges, returns, or adjustments for cash customers, Merchant shall main- tain the same policy for persons making purchases through use of a Bank Card. If Merchant sets any limits on refunds or returned merchandise, such restrictions must be clearly disclosed to the Cardholder at the time of the sale. (B) Merchant may limit its acceptance of returned merchandise and canceled services or establish a policy of making price adjustments for any transaction, provided that proper disclosure is made and purchased goods or services are delivered to the Cardholder at the time of the Bank Card Transaction Proper disclosure by Merchant shall be deemed to have been made at the time of the Bank Card Transaction if the following words or similar words are legibly printed on all copies of the Sales Draft being presented to the Cardholder for signature: "No Refund"—for a merchant that will not accept merchandise in return or exchange and will not issue a refund to a Cardholder "Exchange Only"—for a merchant that will only accept merchan- dise in immediate exchange for similar merchandise of a price equal to the amount of the original Bank Card Transaction "In -Store Credit Only"—for a merchant that will accept merchan- dise in return and deliver to the Cardholder an in-store credit for the value of the merchandise returned which may be used only in the Merchant's place(s) of business PAGE 7 (3) any Paper that results from a Transaction outside of Merchant's normal course of business, (4) any Paper that results from a Transaction not involving Merchant or not originated as the result of an act between Merchant and a Cardholder, or (5) any Paper containing the account number of a Bank Card issued to Merchant, or any account numbers issued to the Merchant business owner(s) and/or principal(s), for Transactions that do not represent a purchase of goods or services. (D) By delivering any Paper to Bank, Merchant warrants to Bank that: (1) the Paper is free of any alteration not authorized by the Cardholder, (2) the customer signing a Sales Draft was authorized to use and was using a valid Bank Card, and (3) Merchant has, with respect to the Paper, complied with the terms and conditions of this Agreement and all applicable Laws and Operating Procedures. (E) Subject to any of Merchant's warranties in this Agreement and Bank's chargeback rights described in Section 6 15, Bank shall ac- cept Paper presented by Merchant during the term of this Agree- ment in accordance with the terms of this Agreement. Merchant shall be deemed to have endorsed in Bank's favor any Paper Mer- chant delivers to Bank, and Merchant hereby authorizes Bank to endorse Paper on Merchant's behalf. (F) Upon Bank's receipt, validation, and settlement of Paper that Mer- chant delivers to Bank, Bank shall pay Merchant the total face amount of all Sales Drafts delivered by Merchant to Bank in accor- dance with the provisions of this Agreement net of the total face amount of all Credit Vouchers presented by Merchant to Bank and the amount the Bank charges back to Merchant under Section 6 15 Any payment made by Bank to Merchant shall be subject to adjustment upon further review and verification by Bank. (G) For Merchants who participate in the EDC Program, Bank Card Transaction data transmitted through the Equipment shall be cap- tured electronically at the time of Authorization. For any given day (the "Transaction Date"), all authorized Transactions occur- ring before the cut-off time designated by Bank, will be tabulated and the net dollar amount of the Transactions shall be credited or debited by Bank to Merchant's Account, subject to the Merchant's adherence to the Operating Procedures provided by Bank for each Merchant location. Multiple deposits transmitted over the period of a single, or a series of consecutive non -Banking Days, will ac- cumulate and be delivered as a single deposit entry to Merchant's Deposit Account, available for posting on the first Banking Day following said period. (H) After settlement, Bank shall have the sole right to receive pay- ments on any accepted Sales Draft as long as Bank has not charged back the Paper to Merchant. Unless specifically authorized in writ- ing by Bank, Merchant shall not make or attempt to make any collections on any accepted Sales Draft, shall hold in trust for Bank any payment it receives of all or part of the amount of any Sales Draft accepted by Bank, and shall deliver promptly to Bank any such collections as soon as received, together with the Cardholder's name and account number and any correspondence accompany- ing the payment. 6.08 Preauthorized Health Care Transactions (A) If a Health Care Merchant agrees to accept a Preauthorized Health Care Transaction from a Cardholder for the purchase of services, the Cardholder shall complete and deliver to the Health Care Merchant an Order Form containing a written request for such services to be charged to the Cardholder's account. The Order Form must at least specify (1) the assignment of insurance benefits by the Cardholder to the Health Care Merchant, (2) the Cardholder's authorization for the Health Care Merchant to charge the Cardholder's account for only that portion of the bill due subsequent to receipt of any applicable insurance payment by the Health Care Merchant, and PAGE 6 (B) (C) (D) (E) 6.09 (A) (3) the duration of time for which such Cardholder's permission is granted, such period not to exceed one year. In the event that a Preauthorized Health Care Transaction is renewed,, the Cardholder shall complete and deliver to the Health Care Merchant a subsequent Order Form for continuation of such services to be charged to the Cardholder's account. A microfilm copy of the Order Form must be retained for the du- ration of the period for which it is in effect and provided in re- sponse to Bank's request for original Paper A Health Care Merchant must not complete an initial or subse- quent Preauthorized Health Care Transaction after receiving a can- cellation notice from the Cardholder, the Bank, or a response that the Card is not to be honored. The Health Care Merchant shall type or print legibly on the signa- ture line of the Sales Draft "Preauthorized Health Care." Upon receipt by the Health Care Merchant of the notice of adjudi- cation from the Cardholder's insurance company, the Health Care Merchant shall complete a Sales Draft and request Authorization for the amount of the Cardholder's portion of the bill. Recurring Transactions If a Merchant agrees to accept a Recurring Transaction from a Cardholder for the purchase of goods or services which are deliv- ered or performed periodically, the Cardholder shall complete and deliver to the Merchant an Order Form containing a written re- quest for such goods or services to be charged to the Cardholder's account. The Order Form must at least specify the following: (1) the Transaction amount(s) charged to the Cardholder's account, unless the Recurring Transactions are to be for varying amounts, (2) the frequency of the recurring charges, and (3) the duration of time for which such Cardholder's permission is granted. In the event that a Recurring Transaction is renewed, the Card- holder shall complete and deliver to the Merchant a subsequent Order Form for continuation of such goods or services to be charged to the Cardholder's account. A Recurring Transaction may include the payment of recurring charges such as insurance pre- miums, subscriptions, membership fees, tuition or utility charges. Except as allowed in Section 6 11, a Recurring Transaction may not include partial payments made to the Merchant for goods or services purchased in a single Transaction, nor may it be used for periodic payments of goods or services on which the Merchant assesses additional finance charges. (B) If the Recurring Transactions are to be for varying amounts, the following additional conditions apply (1) the Order Form must allow space for the Cardholder to specify a minimum and maximum Transaction amount to be charged periodically to their account. (2) the Merchant must inform the Cardholder that they have the right to receive, at least 10 days prior to each scheduled Transaction Date, written notification of the amount and date of the next charge. The Cardholder may elect to receive the notice. (a) for every charge, or (b) only when the transaction amount does not fall within the range of amounts specified on the Order Form, or (c) only when the transaction amount will differ from the most recent charge by more than an agreed-upon amount. (C) A microfilm copy of the Order Form must be retained for the du- ration of the recurring charges and provided in response to Bank's request for original Paper (D) A Merchant must not complete an initial or subsequent Recurring Transaction after receiving a cancellation notice from the Cardholder, the Bank, or a response that the Card is not to be honored. (E) A mail or telephone order Merchant may offer Cardholders an installment payment option for mail and telephone merchandise under the following conditions: able peaceful means that would not result in a breach of the peace or any injury to person or property. 3.02 Preservation and Security of Information and Records (A) Merchant shall treat this Agreement and all Visa System, MasterCard System, Network and Bank documents and materials relating to this Agreement, including but not limited to all pricing information, reference materials, technical specifications and op- erating and procedure manuals, as confidential and proprietary information and protect them with not less than the degree of care a prudent business entity would use to protect its own confi- dential and proprietary information. Such documents and materi- als shall be disclosed only to employees of Merchant with a spe- cific need to know (B) Merchant shall adopt procedures to store and maintain Sales Drafts, Credit Vouchers and related information (e.g. Cardholder Bank Card account numbers) in a safe, secure and confidential manner Merchant shall within 48 hours following receipt of Bank's retrieval request, excluding weekends and holidays observed by Merchant, provide copies of Paper and records pertaining to any Bank Card Transaction to Bank or Bank's designated processing agent. Mer- chant shall be liable for, and Bank will have the right to charge back to Merchant the amount of any Sales Draft that becomes a Chargeback for Non Receipt of Requested Item, as a result of a Merchant's failure to respond to Bank's retrieval request, in the required time period. Merchant must be able to provide proof of delivery of such copies to Bank. Merchant shall be liable for trans- actions which Merchant elects not to retain copies of Paper. Merchants shall retain copies of all Bank Card Transaction records for at least three (3) years from the date of the transaction, unless a longer period is required by applicable Laws or another provi- sion of this Agreement. Merchants shall retain copies of all Debit Card Transaction records for at least three (3) years from the date of the transaction, unless a longer period is required by applicable Laws or another provi- sion of this Agreement. Merchants who process mail or telephone orders, preauthorized orders, or recurring transactions may provide a substitute docu- ment, provided that said document contains all information re- quired by Sections 6 06, 6 08, 6 09, and 6 10 of this Agreement. After record retention periods have expired, Merchant shall de- stroy the records in a manner which renders the data unreadable. Merchant shall protect the confidentiality of Cardholder PINs, in compliance with all applicable Network operating procedure rules. Cardholder information may only be used or recorded for pur- poses specifically authorized in this Agreement. At no time may the Cardholder account number be utilized in any other manner, including, but not limited to the collection of other debts. The use of a Cardholder account number recorded on a personal check is expressly prohibited, and fines incurred from the Associations will be collected from Merchant by Bank in the event of a violation of this Paragraph. (I) Merchant shall not divulge or give out any Cardholder informa- tion over the phone in response to any request made for such data. Official requests for this type of information, if any, by Bank, its agents, the Authorization Provider, Visa U.S.A Incorporated, and MasterCard International Inc. are never made over the phone. (J) Solicitations to Cardholders by Merchant will provide for the re- turn of Cardholder information in a secured manner Use of post cards or other return mailers displaying account numbers in plain sight are in violation of this Agreement, and may be subject to fines from the Associations. 3.03 Use of Service Marks and Advertising Merchant shall. (A) display adequately any advertising and promotional materials pro- vided or required by Bank to inform the public that Bank Cards will be honored at Merchant's place of business (provided that such displays are not required of a private club or other Merchant that does not deal with the general public, a vehicle leasing com- pany at an airport location, a transportation company subject to federal or foreign regulation or any other Merchant expressly ex- empted under any Operating Regulations), (B) have the right to use or display the proprietary names and sym- bols associated with Bank Cards only while this Agreement is in effect, or until Merchant is notified by Bank or any appropriate Bank Card organization to cease such use, (C) comply with all applicable Operating Regulations concerning the use of service marks and copyrights owned by MC or Visa, and (D) use the proprietary names and symbols associated with Bank Cards only to indicate that Bank Cards are accepted for payment and shall not indicate, directly or indirectly, that MC, Visa, or any Bank Card organization endorses Merchant's products or services. 3.04 Cardholder Disputes and Error Resolution Merchant shall cooperate fully with Bank, the Systems, and any of their members or processors to resolve disputes and errors as- serted by Cardholders with respect to Transactions. Merchant shall provide such assistance and any required documentation within sufficient time to allow compliance with the time periods of the Systems for resolution of disputes and errors. In addition, Mer- chant shall comply with any dispute and error resolution proce- dures specified in the Procedure Manual. 3.05 Merchant Disputes and Error Resolution Merchant's right to review, question or dispute Merchant's deliv- ery of Paper to Bank or Bank's receipt of any Paper delivered by Merchant shall be limited to a period of 30 calendar days follow- ing the transaction date of the Paper 3.06 Operating Procedures The Operating Procedures and any additions or modifications to the Operating Procedures that Bank may from time to time pro- vide Merchant, are the sole property of Bank or Bank's designated independent contractor. Merchant shall take any action reason- ably practicable and necessary under the circumstances to protect Bank's ownership interest against any and all claims by other par- ties. Merchant shall not make or permit to be made copies of any portion of the Operating Procedures without Bank's express writ- ten authorization. Merchant understands and agrees that the Op- erating Procedures may be changed by Bank at any time in its sole discretion in accordance with Section 14 of this Agreement, and any such change shall become part of this Section as of its effec- tive date. 3.07 Forms Merchant shall use only the forms for Paper that are provided or approved in advance by Bank. Merchant shall not use forms for Paper provided by Bank other than in connection with Paper de- livered to Bank. Section 4. Merchant's Responsibility for Others Bank shall not be responsible for any advice from, omissions by, acts of fraud or acts of misconduct by Merchant's employees, pro- cessors, consultants, professional advisors, contractors, agents, of- ficers and/or directors. Section 5. Electronic Equipment If Merchant engages in Debit Card Transactions, Merchant must have in its possession properly installed and programmed Termi- nals, PIN Pads, Magnetic Stripe Readers and Printers, with all elec- tronic hardware and software appropriately certified. If Merchant participates in the EDC Program for Bank Card Transactions, Mer- chant must have in its possession properly installed and pro- grammed Terminals and Magnetic Stripe Readers, and other ap- propriately certified electronic hardware and software. For both such Merchants, the following provisions are applicable: (A) Merchant may elect to have Bank provide the Equipment covered by this Section ("Bank -Provided Equipment") or to provide the Equipment by separate arrangement ("Merchant -Provided Equip- ment") Unless otherwise confirmed by Merchant in writing, Bank shall provide the Equipment. (B) Upon Merchant's request, Bank shall provide terminals, or other related equipment to Merchant, which Merchant shall maintain in good working order For providing such equipment, Merchant PAGE 3 shall pay to Bank fees as described in Merchant's Merchant Bank - card Application. (C) Upon termination of this Agreement or at Bank's request, Mer- chant shall promptly return, on demand of Bank, all machinery or Bank -Provided Equipment, and all unused Paper, plates, plastics and other reusable supplies or materials provided by Bank. 5.01 Delivery and Installation of Bank -Provided Equipment If Merchant uses Bank -Provided Equipment, Bank or Bank's des- ignated independent contractor shall deliver, and if applicable in- stall, the Equipment at Merchant's premises. If Merchant installs Bank -Provided Equipment, Merchant shall be solely responsible for proper installation of the Equipment and for any damages in- curred by Bank or Bank's designated independent contractor, in- cluding, without limitation, special, indirect, or consequential damages, resulting from improper installation. 5.02 Maintenance and Inspection of Bank -Provided Equipment Bank shall be responsible for the maintenance of Bank -Provided Equipment, provided, however, that Merchant shall pay for all maintenance or repairs required as a result of Merchant's negli- gence or misuse of Bank -Provided Equipment. Merchant shall notify Bank immediately of any apparent failure or malfunction of, damage to or loss arising from the use or operation of any Bank -Provided Equipment. 5.03 Ownership of Bank -Provided Equipment Bank -Provided Equipment shall be the sole property of Bank or Bank's designated independent contractor, and Merchant has no property right or other interest of any kind in the Equipment. Merchant shall not disturb any labels or other identifying num- bers indicating the ownership of Equipment. Merchant shall take any action reasonably practicable and necessary under the circum- stances to protect the ownership interest against any and all claims by other parties. 5.04 Risk of Loss for Bank -Provided Equipment Merchant shall assume all risk of loss, damage or destruction of Bank -Provided Equipment. Merchant shall notify Bank immedi- ately of any loss, damage or destruction of Equipment. If Bank - Provided Equipment is lost, damaged or destroyed by fire, theft or any other cause, Merchant shall pay Bank within 30 calendar days after such event the actual cost of Bank or Bank's designated inde- pendent contractor for each unit of Bank -Provided Equipment affected. 5.05 Removal or Modification of Bank -Provided Equipment Merchant shall not remove Bank -Provided Equipment from its original installation site without Bank's prior consent. Merchant shall not make or permit any alterations, attachments, additions or modifications to Bank -Provided Equipment. 5.06 Merchant -Provided Equipment If Merchant uses Merchant -Provided Equipment, Merchant shall obtain, install, inspect and maintain the Equipment at Merchant's sole expense and responsibility Merchant shall be solely respon- sible for any loss, damage or destruction of Merchant -Provided Equipment, and for any damages or losses incurred by Bank, in- cluding, without limitation, special, indirect, or consequential damages, resulting from the incompatibility or improper installa- tion of Merchant -Provided Equipment, or software. Merchant un- derstands and agrees that the use of Merchant -Provided Equip- ment, and software is subject to Bank's approval as to compatibil- ity for use in connection with the services covered by the Section. If Bank at any time reasonably disapproves of the use of any Mer- chant -Provided Equipment and/or software, Merchant shall not use the Equipment and/or software and shall promptly obtain and use other Equipment and/or software acceptable to Bank. 5.07 Use of Equipment and Services Merchant shall process all Bank Card Transactions through the Equipment in accordance with this Section, the Operating Proce- dures and any other instructions supplied by Bank from time to time using ordinary care and in compliance with all applicable rules and regulations of Bank, MC and Visa as well as all appli- cable Laws and regulations. PAGE `t 5.08 Access to Equipment Merchant shall permit Bank or Bank's designated independent con- tractor to enter Merchant's premises during regular business hours,. or at other times with Merchant's prior approval, to deliver, in- stall, inspect, repair, maintain, reprogram or update systems/soft- ware, or relocate the Equipment, as appropriate. Merchant shall allow the same access to disconnect and/or remove Bank -Provided Equipment. 5.09 Telephone Hook -Ups for Equipment Merchant shall, at its sole expense and risk, provide or install suit- able communication dial-up telephone line connections and elec- tric power sources, and shall make all alterations to Merchant's premises required to install the Equipment. 5.10 Training Bank shall provide training or training materials, at Bank's option, to Merchant's designated employees who either will operate the Equipment or will train other employees to operate the Equip- ment. Merchant shall not permit any employee who has not re- ceived the training to operate the Equipment. 5.11 Back -Up Procedures Bank shall have no obligation to provide authorization or data capture services where Bank is prevented from doing so due to malfunction of the Equipment, computer communication break- down or interruption, or any other circumstances beyond the con- trol of Bank, provided, however, that subject to the limitations specified in this Section, Bank shall take any action reasonably practicable and necessary under the circumstances to effect prompt commencement or resumption of services, in whole or in part. If malfunction of the Equipment or any communication interrup- tion prevents use of the Equipment, Merchant shall handle Bank Card transaction authorization and processing in accordance with backup procedures specified in the Operating Procedures,and shall handle non -Bank Card transaction authorization and processing in accordance with the requirements of the issuer(s) of those cards. Section 6. Merchant Procedures for Bank Card Transactions The following provisions shall apply both to Merchants who use Paper Sales Drafts for Bank Card Transaction and Merchants participating in the EDC Program. Processing requirements for Merchants participating in the EDC Program that are either different or required in addition to those processing requirements of Merchants who use Paper Sales Drafts and Paper Credit Vouchers are listed in the appropriate paragraphs of this Section. Merchant shall not utilize electronic authorization or draft capture services unless Merchant has checked the appropriate box on Merchants Merchant Bankcard Application, or has otherwise received written authorization from Bank. 6.01 Bank Card Examination (A) Before honoring any Bank Card, Merchant is, at a minimum, re- quired to (1) check the effective date (if any) and the expiration date on the Bank Card, and (2) examine any Bank Card security features included in, but not limited to those listed in the Basic Bank Card Acceptance Procedures, such as the Bank Card hologram, notwithstanding Mail Order or Telephone Order, Preauthorized Order, and Recurring Transaction sales provisions of this Agreement. (B) Merchant shall not honor any Bank Card that is not yet effective, that has expired, or that lacks the hologram. 6.02 Floor Limit The Floor Limit for Bank Card Transactions is zero Merchant shall secure Authorization for every Bank Card Transaction. 6.03 Authorization (A) On the date of the transaction and before honoring any Bank Card, Merchant shall request Authorization for the total amount of the Transaction from the Authorization Provider If Merchant at any (B) (C) time completes a Bank Card Transaction without Authorization, Merchant shall be liable to Bank under Paragraph 6 15(A)(3) Obtaining Authorization will not guarantee payment to Merchant for goods or services rendered as a part of a Bank Card Transac- tion. Obtaining Authorization will not necessarily prevent a Chargeback to Merchant. Merchant shall not divide a single Transaction between two or more Sales Drafts, whether to avoid an Authorization request or for any other reason, except as stated under Paragraph 6 11 Merchant may contact the Authorization Provider by telephone, magnetic stripe reading terminal, or other means acceptable to Bank. Merchant shall follow all Operating Procedures with respect to obtaining Authorization. If Authorization is denied, Merchant shall not complete the Transaction and shall follow any instruc- tions from the Authorization Provider (D) For Merchants who manually prepare Paper Sales Drafts, if Au- thorization is granted Merchant shall print each authorization code and authorization date, if different from the transaction date, leg- ibly on the Sales Draft. Merchants who participate in the EDC Program and utilize equipment that document authorization in- formation are not required to record this information. (E) For Merchants who participate in the EDC Program, Merchant shall electronically obtain Authorization for and process Bank Card Transactions using the Equipment by passing the Bank Card through the Magnetic Stripe Reader and shall not as a general prac- tice key -enter Card data without notification to, and approval by Bank. (F) For Merchants who participate in the EDC Program, Merchant shall in all cases when the magnetic stripe on the Bank Card is read, compare and ascertain that the embossed account number is the same as the number displayed and/or printed from the au- thenticating Terminal. Merchant shall not complete Transaction if the displayed and/or printed account numbers do not match. (G) If, in the course of any EDC Program Bank Card Transaction pro- cessing, any terminal does not appear to function, Merchant shall obtain Authorization by telephone call to Authorization Provider 6.04 Bank Card Transaction Imprinters (A) If Merchant is using Paper Sales Drafts and Credit Vouchers, Bank shall provide Merchant with an appropriate number of Sales Draft imprinters if Merchant so requests. Merchant shall pay Bank the fees specified on the Merchant Bankcard Application for such im- printers. (B) For Merchants participating in the EDC Program, if the magnetic stripe on a Bank Card is unreadable through the point-of-sale de- vice and Merchant elects to key enter the account number for Authorization and settlement, Merchant must obtain a manual Bank Card imprint, complete the Sales Draft, and obtain the Bank Card user's signature. Failing to obtain a manual Bank Card im- print in these situations may result in a Chargeback to the Mer- chant. 6.05 Cardholder Verification (A) Merchant shall determine that the Bank Card user's signature on each Sales Draft is the sante as the signature on the signature panel on the back of the Bank Card, as judged by spelling and handwrit- ing. The signature may be different from the name embossed or printed on the Card. Example: Card is embossed with "Patrick D Jones" Back of Card is signed "Pat D Jones" Acceptable Signatures: "Pat D Jones", "Pat Jones", "P D Jones", "P Jones" Unacceptable Signatures: "B Jones", "Pat Jons", "Robert Jones" (B) Merchant shall determine, if applicable, that the Bank Card user resembles the person depicted in any photograph intended for identification on the Card. (C) If Merchant is presented with a Bank Card that has not been signed, Merchant shall request additional identification (but not record the information) for verification, and request the Cardholder to sign the Card. If the Cardholder refuses to sign the back of the Card, Merchant may, at their discretion complete the Transaction. discontinue the Transaction, or, request another form of payment Merchant shall be liable for Transactions that are completed with unsigned Cards and result in a Chargeback for that reason (D) Merchant warrants to Banlc that the Cardholder is an authorized user of the Bank Card 6.06 Transaction Documentation (A) Without exception, the authorization code(s) must be legibly docu- mented on the Sales Draft (B) Except as stated below, Merchants who transact and deposit Paper Sales Drafts and Credit Vouchers shall do all of the following when honoring a Bank Card. (1) enter on the Sales Draft the transaction date, a description of the merchandise and/or services sold in enough detail to identify the Transaction and its amount (including any applicable taxes), (2) with the exception of Mail Order, Telephone Order, Preauthorized Order, and Recurring Transactions, obtain the signature of the Cardholder on the Sales Draft, (3) with the exception of Mail Order, Telephone Order Preauthorized Order, and Recurring Transactions, imprint legibly on the Sales Draft the embossed information from the Bank Card and from the Merchant's imprinter plate, and (4) deliver a complete copy of the Sales Draft to the Cardholder at the time of the delivery of the goods or services. 6.07 Delivery of Paper (A) Merchant shall deliver for settlement all Paper to Bank within 5 calendar days after the date of the Transaction, except that. (1) Merchant shall deliver no Sales Draft untilthegoods Merchant '� have been shipped or the services have been performed and Merchant has otherwise performed all of its principal obligations to the customer in connection with the Transaction, (2) if Merchant requests and receives written Authorization for delayed delivery and legibly prints on the Sales Drafts the authorization number and the words "Delayed Delivery" and writes both the authorization date and the Bank Card transaction date on the Sales Draft, Merchant may deliver the Sales Draft within the period permitted for delayed delivery (not to exceed 15 calendar days), (3) if Merchant delivers Paper to Bank as a Reduced Interchange Transaction, Merchant shall deliver the Paper to Bank within the number of Banking Days specified in Merchant's Merchant Bankcard Application after the date of the Transaction. If such Paper does not comply with Reduced Interchange Transaction requirements, as applicable, Merchant shall be obligated to pay Bank a higher Discount Fee as either specified in Merchant's Merchant Bankcard Application or amended in writing by Bank to Merchant, and (4) if Merchant participates in the EDC Program, excluding the receipt copy delivered to the Cardholder, and except in response to legal process, Merchant shall not tender or deliver the original or copy of Paper supporting an electronically processed Transaction to a party other than Bank for any reason With respect to such Paper, Merchant or Bank's designated processing agent, shall retain all Paper supporting electronically processed Transactions, subject to Bank's retrieval requests. (B) If Merchant has multiple locations or offices, in the same city, or in different cities, Merchant must deliver Paper in such a manner that allows Bank to identify the Transactions originating at each respecii'e location. (C) Merchant shall not deliver to Bank, directly or indirectly (1) any Paper previously submitted to Bank, (2) any Paper that Merchant knows or should have known to be fraudulent or not authorized by the Cardholder, PAGE 5