Exhibit 10.17

 

CONFIDENTIAL TREATMENT HAS BEENREQUESTED FOR CERTAIN REDACTED PROVISIONS OF THIS AGREEMENT. THE REDACTEDPROVISIONS ARE INDICATED BY THREE ASTERISKS ENCLOSED BY BRACKETS AND UNDERLINED.THE CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES ANDEXCHANGE COMMISSION.

 

 

 

Merchant ProcessingAgreement

Between

NOVA InformationSystems, Inc.,

U.S. Bank, N.A.

And

NBO Systems, Inc.

 

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MERCHANT PROCESSINGAGREEMENT

 

This MerchantProcessing Agreement ("Agreement") is entered into as of the date set forthbelow, by and among NBO Systems, Inc. ("Merchant" or "you"), NOVA InformationSystems, Inc., a Georgia corporation ("NOVA") and U.S. Bank, N.A., Minneapolis,MN, a national banking association ("Member").

 

Recitals

 

A. Merchant desires to accept creditcards validly issued by Visa U.S.A., Inc. ("Visa") and MasterCard InternationalIncorporated ("MasterCard") ("Cards").

B. NOVA and Member desire to providecredit card processing services to Merchant.

C. Therefore, Merchant, NOVA andMember agree as follows:

 

Terms and Conditions

 

1. Honoring Cards.

 

A. WithoutDiscrimination. You will honor, without discrimination, any Card properlytendered by a Cardholder. "Cardholder" means a person possessing a Card andpurporting to be the person in whose name the Card is issued.

 

B. Cardholder Identification.You will identify the Cardholder and check the expiration date and signature oneach Card. You will not honor any Card if:

 

       i. the Card has expired,

       ii. the signature on the sales draft does not correspond with the signature onthe Card, or

       iii. the account number embossed on the Card does not match the account numberon the Card's magnetic stripe (as printed in electronic form) or the accountnumber is listed on a current Electronic Warning Bulletin file.

 

Unless permittedunder the Laws and Rules (defined below), you will not require a Cardholder toprovide personal information, such as a home or business telephone number, ahome or business address, or a driver's license number, as a condition forhonoring a Card.

 

C. Card Recovery. You will useyour reasonable, best efforts to recover any Card:

 

       i. on Visa Cards, if the printed four digits above the embossed account numberdo not match the first four digits of the embossed account number, 

       ii. if you are advised by Member (or its designee), the issuer of the Card orthe designated voice authorization center to retain it,

 

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       iii. if you have reasonable grounds to believe the Card is counterfeit,fraudulent or stolen, or not authorized by the Cardholder, or

       iv. or MasterCard Cards, the embossed account number, indent printed accountnumber and/or encoded account number do not agree, or the Card does not have aMasterCard hologram on the lower right comer of the Card face.

 

D. Surcharges.You will not add any amount to the posted price of goods or services you offeras a condition of paying with a Card, consistent with the Laws and the Rules.This paragraph does not prohibit you from offering a discount to induce a personto pay by cash, check or similar means rather than by using a Card.

 

E. Return Policy.You will properly disclose to the Cardholder, at the time of the Cardtransaction and in accordance with the Rules, any limitation you have onaccepting returned merchandise.

 

F. No ClaimAgainst Cardholder. You will not have any claim against, or right to receivepayment from, a Cardholder or any other customer in any Card transaction unlessMember or NOVA refuses to accept the Sales Draft (as defined in Section 3) orrevokes its prior acceptance of the Sales Draft (after receipt of a chargebackor otherwise). You will not accept any payments from a Cardholder with respectto previous charges for merchandise or services included in a Sales Draft, andin the event of receipt of any such payments, you promptly will remit suchamounts to Member.

 

G. Disputes WithCardholders. All disputes between you and any Cardholder relating to anyCard transaction will be settled between you and the cardholder. Neither NOVAnor Member bears any responsibility for such transactions.

 

2. Authorization.

 

A. Required on allTransactions. You will obtain a prior authorization via electronic terminalor similar device before completing any transaction. You will follow anyinstructions received during such authorization process. Upon receipt ofauthorization, you may consummate only the transaction authorized and must noteon the Sales Draft the authorization number. Where authorization is obtained,you will be deemed to warrant the true identity of the customer as theCardholder. Transactions will be deemed invalid on Cards that are expired,whether or not an authorization has been obtained. For electronic commercetransactions, you must attempt to obtain the Card expiration date and forward itas part of the authorization request.

 

B. Effect.Authorizations are not a guarantee of acceptance or payment of the Cardtransaction and will not waive any provision of this Agreement or otherwisevalidate a fraudulent transaction or a transaction involving the use of anexpired Card. You are fully liable for all chargebacks.

 

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C. UnreadableMagnetic Stripes. If you authorize and present Card transactionselectronically and your terminal is unable to read the magnetic stripe on theCard, you will obtain an imprint of the Card and the Cardholder's signature onthe imprinted draft before presenting the transaction to Member and NOVA forprocessing.

 

3. Presentment of Sales Drafts.

 

A. Forms. Youwill use a sales draft or other form approved by Member and NOVA ("Sales Draft")to document each Card transaction. Each Sales Draft will be legibly imprintedwith:

 

       i Merchant's name and account number,

       ii. the information embossed on the Card presented by the Cardholder (eitherelectronically or manually),

       iii. the date of the transaction,

       iv. a brief description of the goods or services involved,

       v. the transaction authorization number,

       vi. the total amount of the sale (including any applicable taxes) or credittransaction, and

       vii. adjacent to the signature line, a notation that all sales are final, ifapplicable.

 

B. Signatures.Sales Drafts must be signed by the Cardholder. The requirement for theCardholder's signature on the Sales Draft will only be waived if the Cardtransaction is a valid mail/telephone order or electronic commerce Cardtransaction which fully complies with the requirements set forth in thisAgreement.

 

C. Reproduction ofInformation. If the following information embossed on the Card and theMerchant's name is not legibly imprinted on the Sales Draft, you will legiblyreproduce:

 

       i. the Cardholder's name,

       ii. account number,

       iii. expiration date, and

       iv. the Merchant's name and place of business.

 

Additionally, for MasterCardtransactions, you will legibly reproduce the name of the bank as it appears onthe face of the Card.

 

D. Delivery andRetention of Sales Drafts. You will deliver a true and complete copy of theSales Draft or credit voucher to the Cardholder at the time of the transactionYou will retain the "merchant copy" of the Sales Draft or credit memorandum forat least 3 

 

 

 

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years following the date ofcompletion of the Card transaction (or such longer period as the Rules mayrequire).

 

E. ElectronicTransmission. If you utilize electronic authorization and/or data captureservices, you will enter the data related to a sales or credit transaction intoa computer terminal or magnetic stripe reading terminal no later than the closeof business on the date the transaction is completed. If you provide your ownelectronic terminal or similar device, such terminals must meet NOVA'srequirements for processing transactions. Information regarding a sales orcredit transaction transmitted with a computer or magnetic stripe readingterminal will be transmitted by you to NOVA or its agent in the form NOVA fromtime to time specifies, or as required under the Laws or Rules. If Member orNOVA requests a copy of a Sales Draft, credit voucher or other transactionevidence, you will provide it within 10 calendar days following the request.

 

4. Deposit of Sales Drafts.

 

A. Funds.

 

       i. Deposits. You agree that this Agreement is a contract of financialaccommodation within the meaning of the Bankruptcy Code, 11 U.S.C. § 365, asamended from time to time. Subject to this Section, Member will deposit to theMerchant Account (defined in Section 6 below) all funds evidenced by SalesDrafts (whether evidenced in writing or by electronic means) complying with theterms of this Agreement and the Rules and will provide you provisional creditfor such Sales Drafts (less recoupment of any credit(s), adjustments, fines,chargebacks or fees). You acknowledge that your obligation to NOVA and Memberfor all amounts owed under this Agreement arise out of the same transaction asMember's obligation to deposit funds to the Merchant Account.

       ii. Provisional Credit. Notwithstanding the previous Section, under nocircumstance will Member or NOVA be responsible for processing credits oradjustments related to original sales transactions not processed by Member andNOVA. All Sales Drafts and deposits are subject to audit and final checking byMember and NOVA, and may be adjusted for inaccuracies. You acknowledge that allcredits provided to you are provisional and subject to chargebacks andadjustments in accordance with the Rules, whether or not a transaction ischarged back by the Card Issuer. Member may elect to grant conditional creditfor individual or groups of any Sales Drafts. Final credit for those conditionalSales Drafts will be granted within Member's sole discretion.

 

B. Chargebacks.You are fully liable to NOVA and Member for all transactions returned to NOVA orMember for whatever reason, otherwise known as "chargebacks." You will pay NOVAand Member on demand the value of all chargebacks. You agree to accept forchargeback and will be liable to Member and NOVA in the amount of any sale

 

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for which thecardholder disputes the validity of the sale. You authorize Member and NOVA tooffset from incoming transactions and to debit the Merchant Account, the ReserveAccount, or any other account held at Member or at another financial institutionthe amount of all chargebacks. You will fully cooperate with NOVA and Member incomplying with the Rules regarding chargebacks.

 

C. ExcessiveActivity. Your presentation to NOVA of Excessive Activity will be a breachof this Agreement and cause for immediate termination of this Agreement."Excessive Activity" means, during any monthly period, and for any one ofMerchant's terminal identification numbers or merchant identification numbers,chargebacks and/or retrieval requests in excess of one percent (1%) of theaverage monthly dollar amount of your Card transactions. You authorize, upon theoccurrence of Excessive Activity, Member and NOVA to take additional actions aseither of them may deem necessary, including, but not limited to, suspension ofprocessing privileges or creation or maintenance of a reserve account inaccordance with this Agreement on any one or more of Merchant's terminalidentification numbers or merchant identification numbers, as may be applicable.

 

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D. Credits.

 

       i. Credit Memoranda. You will issue a credit memorandum, instead ofmaking a cash advance, a disbursement or a refund on any Card transaction.Member will debit the Merchant Account for the total face amount of each creditmemorandum submitted to NOVA. You will not submit a credit relating to any SalesDraft not originally submitted to NOVA, nor will you submit a credit thatexceeds the amount of the original Sales Draft. You will, within the time periodspecified by applicable law, provide NOVA with a credit memorandum or creditstatement for every return of goods or forgiveness of debt for services whichwere the subject of a Card transaction.

       ii. Revocation of Credit. Member or NOVA may refuse to accept any SalesDraft or revoke its prior acceptance of a Sales Draft in the followingcircumstances: (a) the transaction giving rise to the Sales Draft was not madein compliance with all terms and conditions of this Agreement, the Laws and theRules; (b) the Cardholder disputes his liability to Member for any reason,including but not limited to those chargeback rights enumerated in the Rules; or(c) the transaction giving rise to the Sales Draft was not directly between youand the Cardholder. You will pay Member or NOVA, as appropriate, any amountpreviously credited to you for a Sales Draft not accepted by Member or NOVA or,where accepted, is subsequently revoked.

 

E. Reprocessing.Notwithstanding any authorization or request from the Cardholder or customer,you will not reenter or reprocess any Card transaction that has been chargedback

 

F. Factoring.You will not present for processing or credit, directly or indirectly, anytransaction not originated as a result of a Card transaction directly betweenyou and the Cardholder.

 

5. Other Types of Transactions.

 

A. Mail Order.You may solicit or accept mail orders or telephone orders or any transaction inwhich the Cardholder and Card are not present ("mail/telephone orders") withoutNOVA's or Member's prior authorization as presently disclosed on Exhibit "A"attached hereto and incorporated herein and as disclosed subsequently on theAdditional Location form for any new location that is approved by NOVA.Mail/telephone orders completed without prior consent of NOVA or Member will bea breach of this Agreement and cause for immediate termination in addition toany other remedies available under the Laws and the Rules. You may be requiredto use an address verification service ("AVS")

 

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on mail/telephonetransactions. AVS is not a guarantee of payment and the use of AVS will notwaive any provision of this Agreement or validate a fraudulent transaction. Youwill obtain the expiration date of the Card for a mail/telephone order andsubmit the expiration date when obtaining authorization of the Card transaction.For mail/telephone order transactions, you will type or print legibly on thesignature line of the Sales Draft the following applicable words or letters:telephone order or "TO"; or mail order or "MO".

 

B. RecurringTransactions. For recurring transactions, you must obtain a written requestfrom the Cardholder for such goods and services to be charged to theCardholder's account, the frequency of the recurring charge and the duration oftime during which such charges may be made. You will not complete any recurringtransaction after receiving: (i) a cancellation notice from the Cardholder, (ii)notice from NOVA or Member, or (iii) a response that the Card is not to behonored. You must print legibly on the Sales Draft the words "RecurringTransaction".

 

C. Multiple SalesDrafts. You will include a description and total amount of goods andservices purchased in a single sales transaction on a single Sales Draft ortransaction record, unless: (i) partial payment is entered on the Sales Draft ortransaction record and the balance of the transaction amount is paid in cash orby check at the time of transaction, or (ii) a Sales Draft represents an advancedeposit in a Card transaction completed in accordance with this Agreement andthe Rules.

 

D. Deposits.

 

       i. Prior Consent. You will not accept for payment by Card any amountrepresenting a deposit or partial payment for goods or services to be deliveredin the future without the prior consent of NOVA or Member. The acceptance of aCard for payment or partial payment of goods or services to be delivered in thefuture without prior consent will be deemed to be a breach of this Agreement andcause for immediate termination, in addition to any other remedies availableunder the Laws or Rules.

       ii. Acceptance. If you have obtained prior consent, then you willcomplete such Card transactions in accordance with the terms set forth in thisAgreement, the Rules, and the Laws. Cardholders must execute one Sales Draftupon making a deposit with a Card and a second Sales Draft upon paying thebalance. You will note upon the Sales Draft the words "deposit" or "balance" asappropriate. You will not deposit the Sales Draft labeled "balance" until thegoods have been delivered to Cardholder or you have fully performed theservices.

 

E. Future Delivery.You will not present any Sales Draft or other memorandum to Member or NOVA forprocessing (whether by electronic means or otherwise) which relates to the saleof goods or services for future delivery without Member or NOVA's

 

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prior authorization.If Member has previously given such consent, you represent and warrant to Memberand NOVA that you will not rely on any proceeds or credit resulting from suchtransactions to purchase or furnish goods or services. You will maintainsufficient working capital to provide for the delivery of goods or services atthe agreed upon future date, independent of any credit or proceeds resultingfrom Sales Drafts or other memoranda taken in connection with future deliverytransactions.

 

F. Electronic CommerceTransactions.

 

       i. Authorization. You have NOVA's prior consent to process electroniccommerce ("EC") transactions as presently disclosed on Exhibit "A" attachedhereto and incorporated herein and as disclosed subsequently on the AdditionalLocation form for any new location that is approved by NOVA, and you may processsuch transactions only if the transactions have been encrypted by a third partyvendor acceptable to NOVA and Member. If you submit EC transactions withoutNOVA's consent, NOVA may immediately terminate this Agreement. You understandthat transactions processed via EC are high risk and subject to a higherincidence of chargebacks. You are liable for all chargebacks and losses relatedto EC transactions, whether or not: i) EC transactions have been encrypted; orii) you have obtained NOVA's consent to engage in such transactions. Encryptionis not a guarantee of payment and will not waive any provision of this Agreementor otherwise validate a fraudulent transaction. All communication costs relatedto EC transactions will be your responsibility. You understand that NOVA willnot manage EC telecommunications link and that it is your responsibility tomanage that link. All EC transactions will be settled by Member into adepository institution of the United States in U.S. currency. 

       ii. Requirements. For goods to be shipped on EC transactions, you mayobtain authorization up to 7 calendar days prior to the shipment date. Theauthorization is valid if the Sales Draft amount is within 15% of the authorizedamount, provided that the additional amount represents shipping costs. Further,your web site must contain all of the following information: (a) completedescription of the goods or services offered, (b) returned merchandise andrefund policy, (c) customer service contact, including electronic mail addressand/or telephone number, (d) transaction currency (such as U.S. or Canadiandollars), (e) export or legal restrictions, if known, and (f) delivery policy.If you store cardholder account numbers, expiration dates, and other personalcardholder data in a database, you must folldw MasterCard's guidelines onsecuring such data.

 

G. AmericanExpress, Discover, and Diner's Transactions. Upon your request, NOVA willprovide authorization or authorization and data capture services for Discover,Diner's and American Express transactions. You must enter into a separatemerchant agreement with NOVUS Services, Inc., Citicorp Diners Club,

 

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or American Expressif you choose to take such transactions. Neither NOVA nor Member is responsiblefor finding such transactions.

 

6. Merchant Account.

 

A. Establishmentand Authority. You will establish and maintain with Member (or with an ACHreceiving institution acceptable to Member), one or more commercial checkingaccount(s) to facilitate payment for Card transactions (collectively, the"Merchant Account"). You will maintain sufficient funds in the Merchant Accountto accommodate all transactions including, but not limited to, fees, fines, andchargebacks contemplated by this Agreement. You irrevocably authorize NOVA andMember to debit the Merchant Account for chargebacks in accordance with theRules, fees and any other penalties or payments under this Agreement. You alsoauthorize NOVA's or Member's vendors or agents to debit the Merchant Account forany fees due such vendor or agent. You must obtain prior written consent fromMember and NOVA to change the Merchant Account. If you don't get that consent,NOVA or Member may immediately terminate the Agreement and may take otheractions necessary to protect them within their discretion.

 

B. Member MerchantAccount. If the Merchant Account is maintained with Member, Member willdeposit all funds evidenced by Sales Drafts to it subject to Section 4 of thisAgreement. You authorize Member or NOVA to initiate reversal or adjustmententries and initiate or suspend such entries as may be necessary to grant youconditional credit for any entry.

 

C. Other MerchantAccount. If the Merchant Account is maintained at a depository institutionapproved by Member, Member will make deposits to the Merchant Account pursuantto this Agreement. You authorize and appoint Member to act as your agent tocollect Card transaction amounts from the Card issuing bank. As the collectingagent, Member, in its sole discretion, may grant you provisional credit fortransaction amounts in the process of collection, subject to receipt of finalpayment by Member and NOVA and subject to all chargebacks, returns, fees andfines.

 

D. Asserted Errors.You must promptly examine all statements relating to the Merchant Account, andimmediately notify NOVA in writing of any errors. Your written notice mustinclude: (i) Merchant name and account number, (ii) the dollar amount of theasserted error, (iii) a description of the asserted error, and (iv) anexplanation of why you believe an error exists and the cause of it, if known.That written notice must be received by NOVA within 60 days after you receivedthe periodic statement containing the asserted error. You may not make any claimagainst Member or NOVA for any loss or expense relating to any asserted errorfor 60 days immediately following NOVA's receipt of your written notice. Duringthat 60 day period, NOVA will be entitled to investigate the asserted error, andyou will not incur any cost or expense in connection with the asserted errorwithout notifying NOVA.

 

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E. Indemnity.You will indemnify and hold NOVA and Member harmless for any action they takeagainst the Merchant Account pursuant to this Section. You will also indemnifyand hold harmless the institution at which you maintain your Merchant Accountfor acting in accordance with any instruction from us regarding the MerchantAccount. This section will survive termination of this Agreement.

 

F. ACHAuthorization. You authorize Member, NOVA, and their vendors or agents toinitiate debit/credit entries to the Merchant Account, the Reserve Account, orany other account maintained by you at any institution that is a receivingmember of ACH, all in accordance with this Agreement. In the event you changethe Merchant Account, you will notify NOVA, and this authorization will apply tothe new account.

 

7. Security Interests, ReserveAccount, Recoupment and Set-Off.

 

A. SecurityInterests. This Agreement will constitute a security agreement under theUniform Commercial Code. You grant to Member and NOVA a security interest in andlien upon: (i) all funds at any time in the Merchant Account, (ii) all funds atany time in the Reserve Account (as defined below), regardless of the source ofsuch funds, (iii) present and future Sales Drafts, and (iv) all your rightsrelating to this Agreement including, without limitation, all rights to receiveany payments or credits under this Agreement (collectively, the "SecuredAssets"). Upon request of Member or NOVA, you will execute one or more financingstatements or other documents to evidence this security interest. You representand warrant that no other party has a security interest in the Secured Assets.These security interests and liens will secure all of your obligations underthis Agreement and any other agreements now existing or later entered intobetween Merchant, NOVA and/or Member including, but not limited to, yourobligation to pay any amounts due and owing to Member or NOVA. With respect tosuch security interests and liens, Member and NOVA will have all rights affordedunder the Uniform Commercial Code, any other applicable law and in equity. Youwill obtain from Member and NOVA written consent prior to granting a securityinterest of any kind in the Secured Assets to a third party. You agree that thisis a contract of recoupment and Member and NOVA are not required to file amotion for relief from a bankruptcy action automatic stay to realize on any ofthe Secured Assets. Nevertheless, you agree not to contest or object to anymotion for relief from the automatic stay filed by NOVA or Member.

 

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B. Reserve Account.

 

       i. Establishment. Upon the occurrence of a Reserve Event, you willestablish and maintain a deposit account ("Reserve Account") at Member in theamount of the Reserve Amount.

 

               a) Reserve Events. The following will constitute Reserve Events: (1)fraudulent activity in any monthly period that equal or exceeds 1% of Merchant'saverage monthly volume over the preceding 12 month period, (2) chargebacks inany monthly period that equal or exceed 1% of the total dollar value of incomingitems to NOVA, (3) NOVA's reasonable belief that you have accepted deposits buthave not delivered the goods or services, (4) the commencement of bankruptcy,receivership, insolvency or similar action or proceeding initiated by or againstyou, and (5) termination of this Agreement for any reason.

 

               b) Reserve Amount. "Reserve Amount" means an amount equal to theaggregate dollar value of [(Average % credits to processing volume during thesame period + Average % chargebacks to processing volume during the same period)multiplied by three] multiplied by [Average Monthly Processing Volume] plus [onemonth's average fees] plus [# days delayed delivery multiplied by the averageday's processing volume]. For purposes of this calculation, the number of daysdelayed delivery means the number of days between the date on which thecardholder's card is charged and the date the cardholder receives and issatisfied with the product. Further, for purposes of this calculation, NOVA willdetermine, in its sole discretion, the applicable period considering factorssuch as Merchant's sale's growth and seasonality.

 

               c) Funding. Member and NOVA have the right to debit the Merchant Accountto establish or maintain funds in the Reserve Account. Member or NOVA maydeposit into the Reserve Account funds they would otherwise be obligated to payyou, for the purpose of establishing or maintaining the Reserve Account inaccordance with this Section, if they determine such action is reasonablynecessary to protect their interests. Further, Merchant may at any time replacefunds held in the Reserve Account with a letter of credit issued by aninstitution and in a form acceptable to NOVA.

 

       ii. Authorizations. Member or NOVA may, without notice to you, applydeposits in the Reserve Account against any outstanding amounts you owe underthis Agreement or any other agreement between you and Member or NOVA. Also, NOVAor Member may exercise their rights under this

 

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Agreement to collectany amounts due to Member or NOVA including, without limitation, rights ofset-off and recoupment.

 

       iii. Funds. Funds in the Reserve Account will remain in the ReserveAccount until 90 days following termination of Reserve Events (1) through (4),above. With regard to Reserve Event number (5), (termination), in no event willyou be entitled to a return of Reserve Account funds before 270 days followingthe effective date of termination of this Agreement, provided, however, that youwill remain liable to NOVA and Member for all liabilities occurring beyond such270 day period. Member and NOVA will have sole control of the Reserve Account.NOVA will, however, review the Merchant account activity and the Reserve Accountevery 45 days to determine what, if any, funds may be returned to the Merchantbefore 270 days following the effective date of termination of this Agreement.

 

C. Recoupment andSet Off. Member and NOVA have the right of recoupment and set-off. Thismeans that they may offset any outstanding/uncollected amounts owed to themfrom: (i) any amounts they would otherwise be obligated to deposit into theMerchant Account, and (ii) any other amounts NOVA or Member may owe you underthis Agreement or any other agreement. You acknowledge that in the event of abankruptcy proceeding, in order for you to provide adequate protection underBankruptcy Code § 362 to NOVA, you must create or maintain the Reserve Account asrequired by NOVA, and NOVA will have the right to offset against the ReserveAccount for any and all obligations which you may owe to NOVA and Member,without regard to whether the obligations relate to Sales Drafts initiated orcreated before or after the filing of the bankruptcy petition.

 

D. RemediesCumulative. The rights conferred upon Member and NOVA in this Section arenot intended to be exclusive of each other or of any other rights and remediesof Member and NOVA under this Agreement, at law or in equity. Rather, each andevery right of Member and NOVA at law or in equity will be cumulative andconcurrent and in addition to every other right.

 

8. Fees.

 

A. Fees. Youare obligated to pay Member and NOVA, or Member's or NOVA's designated agent,fees for services, forms or equipment in accordance with the Schedule of Feeswhich is incorporated into this Agreement by reference. Such fees will becalculated and debited from the Merchant Account once each month for theprevious month's activity.

 

B. Fee Amendments. The feesset forth on the Schedule of Fees will not be amended by NOVA for the InitialTerm of the Agreement except to pass through to you increases in

 

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interchange,assessments, or fees imposed by a third party. Notwithstanding the previoussentence, the NOVA Processing Fee may be adjusted in NOVA's or Member'sdiscretion for the remaining term of the Agreement if: i) your annualizedVisa/MasterCard average ticket or volume falls below projections by more than20%, or ii) your Visa/MasterCard average ticket or volume for any month fallsbelow 50% of such Visa/MasterCard average ticket or volume during the same monththe previous calendar year.

 

C. Taxes. Youare also obligated to pay all taxes and other charges imposed by anygovernmental authority on the services provided under this Agreement.

 

9. Application, Indemnification,Limitation of Liability.

 

A. Application.You represent and warrant to Member and NOVA that all information in theApplication is correct and complete. You must notify NOVA in writing of anychanges to the information in the Application, including but not limited to: anyadditional location or new business, the identity of principals and/or owners,the form of business organization (i.e., sole proprietorship, partnership,etc.), type of goods and services provided, and how sales are completed (i.e.,by telephone, mail, or in person at your place of business). The notice must bereceived by NOVA within 10 business days of the change. You will provide updatedinformation to NOVA within a reasonable time upon request. You are liable toMember and NOVA for all losses and expenses incurred by Member or NOVA arisingout of your failure to report changes to us.

 

B. Indemnification.You will be liable for, hold harmless, and will indemnify NOVA, Member and theiremployees, officers, directors, and agents for all attorneys' fees and othercosts and expenses paid or incurred by Member and NOVA in the enforcement of theAgreement, and in collecting any amounts due to Member or NOVA, arising, from: (i)a dispute between you and a Cardholder, (ii) the transmission of information byyou, or (iii) resulting from any breach by you of this Agreement.

 

C. Limitation ofLiability. The liability, if any, of NOVA or Member under this Agreement forany claims, costs, damages, losses and expenses for which they are or may belegally liable, whether arising in negligence or other tort, contract, orotherwise, will not exceed in the aggregate the amount of fees paid by you, lessinterchange and assessments, over the previous 12 month period, calculated fromthe date the liability accrued. In no event will NOVA, Member or their agents,officers, directors or employees be liable for indirect, special, orconsequential damages.

 

D. Performance.NOVA and Member will perform all services in accordance with this Agreement.NOVA makes no other warranty, express or implied, regarding the services, andnothing contained in the Agreement will constitute such a warranty. **NOVAdisclaims all implied warranties, including those of merchantability and fitnessfor a particular purpose.** No party will be liable to the other parties forany failure or delay in

 

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its performance ofthis Agreement if such failure or delay arises out of causes beyond the controland without the fault or negligence of such party.

 

10. Representationsand Warranties. You represent and warrant to NOVA and Member the following:

 

A. Information.All information contained on the Application or any other document submitted toNOVA is true and complete and properly reflects the business, financialcondition, and principal partners, owners, or officers of Merchant. You are notengaged or affiliated with any businesses, products or methods of selling otherthan those set forth on the Application, unless you obtain the prior writtenconsent of NOVA.

 

B. Corporate Power.Merchant and the person signing this Agreement have the power to execute andperform this Agreement. Merchant represents and warrants that the personexecuting this Agreement is duly authorized to bind Merchant to all provisionsof this Agreement, and that such person is authorized to execute any documentsand to take any action on behalf of Merchant that may be required by NOVA orMember, now or in the future. This Agreement will not violate any law, orconflict with any other agreement to which you are subject.

 

C. No Litigation.There is no action, suit or proceeding pending or to your knowledge threatenedwhich if decided adversely would impair your ability to carry on your businesssubstantially as now conducted or which would adversely affect your financialcondition or operations. You have never been placed on the MasterCard MATCHsystem or the Combined Terminated Merchant File.

 

D. Transactions.All transactions are bona fide. No transaction involves the use of a Card forany purpose other than the purchase of goods or services from you and does notinvolve a Cardholder obtaining cash from you unless allowed by the Rules andagreed in writing with NOVA.

 

E. Rule Compliance. You willcomply with the Laws and Rules. 

 

11. Audit and Financial Information.

 

A. Audit. Youauthorize NOVA and Member to audit your records to confirm compliance with thisAgreement. You will submit a copy of your latest audit of your business whenrequested by NOVA or Member. Merchant acknowledges that they have a continuingobligation to provide quarterly reporting to NOVA detailing the funds on holdfor gift certificates and gift cards processed under this Agreement.Specifically, the quarterly reporting must contain information on how theMerchant reconciles the cash in the bank to what the Merchant has outstandingwith sufficient detail to identify what items the Merchant has taken to thebottom line

 

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to reconcile fromprior periods. This report is currently known as the Bank Reconciliation Report.

 

B. Financial Information.

 

       i. Authorizations. You authorize NOVA and Member to make any creditinquiries they consider necessary to review the acceptance of this Agreement.You also authorize any person or credit reporting agency to compile informationto answer those credit inquires and to furnish that information to them.

 

       ii. Documents. You will provide NOVA and Member financial statements andother financial information as requested from time to time. You will furnishwithin 120 days after the end of each fiscal year to NOVA and Member a financialstatement of profit and loss for the fiscal year and a balance sheet as of theend of the fiscal year.

 

12. Third Parties.

 

A. Services.You may be using special services or software provided by a third party toassist you in processing transactions, including authorizations and settlements,or accounting functions. You are responsible for ensuring compliance with therequirements of any third party in using their products. This includes makingsure you have and comply with any software updates. NOVA has no responsibilityfor any transaction until that point in time NOVA receives data about thetransaction.

 

B. Use ofTerminals Provided by Others. You will notify NOVA immediately if you decideto use electronic authorization or data capture terminals provided by any entityother than NOVA or its authorized designee ("third party terminals") to processtransactions. If you elect to use third party terminals, you agree (1) the thirdparty providing the terminals will be your agent in the delivery of Cardtransactions to Member via Visa Net or a similar data processing system ornetwork; and (ii) to assume full responsibility and liability for any failure ofthat third party to comply with the Rules or this Agreement. Neither Member norNOVA will be responsible for any losses or additional fees incurred by you as aresult of any error by a third party agent or a malfunction in a third partyterminal.

 

13. Term and Termination.

 

A. Term. TheAgreement will become effective on the date Member executes this Agreement("Effective Date"). The Agreement will remain in effect for a period of 1 year("Initial Term") and will renew for successive 1 year terms ("Renewal Term")unless terminated as set forth below.

 

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B. Termination.

 

       i. Without Cause. The Agreement may be terminated by any party to beeffective at the end of the Initial Term or any Renewal Term by giving writtennotice of its intent not to renew at least 90 days before the end of the currentterm.

       ii. With Cause. The appropriate party may terminate this Agreementimmediately upon the occurrence of an Event of Default, defined below. Notice oftermination may be given orally or in writing, but if given orally will beconfirmed in writing. Termination will be effective on the date specified by thenotice.

 

C. Events of Default. Thefollowing will constitute an Event of Default

 

       i. Excessive Event. The occurrence of Excessive Activity.

 

       ii. Mail or Telephone Orders. Accepting mail or telephone orders or ECtransactions without NOVA's prior consent.

 

       iii. Nonpayment. You do not pay NOVA or Member any amount you owe NOVA orMember.

 

       iv. Adverse Financial Condition. Your financial condition materiallychanges adversely.

 

       v. Garnishment. Your deposit accounts with Member, the Merchant Account,or any of your property in the possession of NOVA or Member is garnished orattached.

 

       vi. Asset Assignment. You assign your assets generally for the benefit ofcreditors.

 

       vii. Bankruptcy. A proceeding is commenced by or against you under anybankruptcy, insolvency or similar law seeking an order to adjudicate youbankrupt or insolvent or other relief with respect to you or your debts, or seekappointment of a receiver or similar official for you or for any substantialpart of your assets.

 

       viii. Breach. A party fails to perform a material obligation of thisAgreement including but, not limited to, those items set forth in Sections13.C.ii. through 13.C.vi. above, and such failure continues for a period of 30days after the breaching party receives notice of the breach unless a lessertime is provided for under the Rules.

 

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       ix. False Representation. Any representation and warranty by a party isor becomes false or misleading in any material respect as of the date made, orbecomes false or misleading at any time during the term of this Agreement.

 

       x. Third Party Action. Visa or MasterCard requires Member or NOVA toterminate this Agreement or cease processing transactions.

 

D. Action upon anEvent of Default. Upon the occurrence of an Event of Default, NOVA may takethe following action:

 

       i. suspend processing privileges and terminate this Agreement,

       ii. create a Reserve Account, or

       iii. any other reasonable action deemed necessary by NOVA or Member to protecttheir interests.

 

E. Action upon Termination.

 

       i. Terminated Merchant File. You acknowledge that Member and/or NOVA isrequired to report your business name and the name of Merchant's principals toVisa and MasterCard when Merchant is terminated due to the reasons listed in theRules. You will waive and hold harmless NOVA and Member for all claims andliabilities you may raise as a result of such reporting.

 

       ii. Merchant Account. All your obligations regarding accepted SalesDrafts will survive termination. You must maintain in the Merchant Account andthe Reserve Account enough funds to cover all chargebacks, deposit charges,refunds and fees incurred by you for a reasonable time but, in any event, notless than the time specified in this Agreement. You authorize Member to debitthose accounts, or any other account maintained under this Agreement, for allsuch amounts. If the amount in the Merchant Account and Reserve Account is notadequate, you will pay Member and NOVA the amount you owe them upon demand,together with all costs and expenses incurred to collect that amount, includingreasonable attorneys' fees.

 

       iii. Equipment. Within 20 business days of the date of termination, youmust return all equipment owned by NOVA and immediately pay NOVA any amounts youowe it for equipment costs.

 

       iv. Early Termination. If you terminate this Agreement before the end ofthe Initial Term, you will immediately pay us, as liquidated damages, an earlytermination fee equal to: 10% of the Anticipated Fee if you terminate this

 

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Agreement in the first 12 monthsimmediately after the Effective Date. "Anticipated Fee" means an amount equal tothe monthly NOVA Processing Fee set forth in the Schedule of Fees, multiplied bythe number of remaining months in the Initial Term of the Agreement. You agreethat the early termination fee is not a penalty, but rather is reasonable inlight of the financial harm caused by your early termination.

 

14. **ComplianceWith Laws And Rules.** You agree to comply with all rules and operatingregulations issued from time to time by MasterCard and Visa and any policies andprocedures provided by Member or NOVA (collectively, the "Rules'). The Rules areincorporated into this Agreement by reference as if they were funny set forth inthis Agreement. You further agree to comply with all applicable state, federaland local laws, rules and regulations (collectively, the "Laws"), as amendedfrom time to time affecting acceptance of the cards, processing of cardtransactions, and the transactions contemplated by this Agreement. You willassist Member and NOVA in complying in a complete and timely manner with allLaws and Rules now or hereafter applicable to any Card transaction or thisAgreement. You will execute and deliver to Member and NOVA all such instrumentsthey may from time to time reasonably deem necessary,

 

15. Use of Trademarks andConfidentiality.

 

A. Use ofTrademarks. Your use of Visa and MasterCard marks will fully comply with theRules. Your right to use the Visa and MasterCard mark will terminate upontermination of this Agreement. Your use of Visa, MasterCard or other cards'promotional materials will not indicate, directly or indirectly, that Visa orMasterCard endorse any goods or services other than their own and you may notrefer to Visa or MasterCard in stating eligibility for your products orservices.

 

B. Confidentiality.

 

       i. Cardholder Information. You will not disclose to any third partyCardholders' account information or other personal information except to anagent of yours assisting in completing a Card transaction, or as required bylaw. You must keep all systems and media containing account, Cardholder, ortransaction information (physical or electronic including, but not limited to,account numbers, card imprints and TIDs) in a secure manner to prevent access byor disclosure to anyone other than your authorized personnel. You must destroyall material containing Cardholders' account numbers, Card imprints, SalesDrafts, credit vouchers and carbons (except for Sales Drafts maintained inaccordance with this Agreement, Laws, and the Rules). Further, you must take allsteps reasonably necessary to ensure Cardholder information is not disclosed orotherwise misused. You may not retain or store magnetic stripe of CVV2 dataafter authorization.

 

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       ii. Prohibitions. You will not use for your own purposes, will notdisclose to any third party, and will retain in strictest confidence allinformation and data belonging to or relating to the business of NOVA (includingwithout limitation the terms of this Agreement), and will safeguard suchinformation and data by using the same degree of care that you use to protectyour own confidential information.

 

C. Return to NOVA.All promotional materials, advertising displays, emblems, Sales Drafts, creditmemoranda and other forms supplied to you and not purchased by you or consumedin use will remain the property of NOVA and will be immediately returned to NOVAupon termination of this Agreement. You will be fully liable for any and allloss, cost, and expense suffered or incurred by NOVA, arising out of orresulting from any failure to return or destroy such materials followingtermination.

 

16. General Provisions.

 

A. EntireAgreement. This Agreement, including the Schedule of Fees, the completedApplication, the Rules, and any amendment or supplement to this Agreement madein accordance with the procedures set forth in Section 16.K. below constitutesthe entire agreement between the parties, and all prior or other agreements orrepresentations, written or oral, are merged in and superseded by thisAgreement.

 

B. Governing Law.This Agreement will be governed by the laws of the State of Georgia, except thatSection 16.F shall be governed by the Federal Arbitration Act. The parties agreethat all performances and transactions under this Agreement will be deemed tohave occurred in Georgia and that Merchant's entry into and performance of thisAgreement will be deemed to be the transaction of business within the State ofGeorgia.

 

C. Exclusivity.During the initial and any renewal term of this Agreement, you may enter into anagreement with any other entity that provides credit card or debit cardprocessing services similar to those provided by NOVA and Member as contemplatedby this Agreement without NOVA's prior written consent, provided, however thatyou give written notice to NOVA within 7 business days of entering into such anagreement.

 

D. Construction.The headings used in this Agreement are inserted for convenience only and willnot affect the interpretation of any provision. The language used will be deemedto be the language chosen by the parties to express their mutual intent, and norule of strict construction will be applied against any party.

 

E. Assignability.This Agreement may be assigned by Member or NOVA, but may not be assigned byMerchant directly or by operation of law, without the prior written consent ofMember and NOVA.

 

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F. Arbitration.All claims or controversies, or other matters in question, between the partiesarising out of or related to this Agreement or the relationship between theparties that are not otherwise settled by agreement of parties will be submittedto and decided by arbitration held in Atlanta, Georgia in accordance with therules of the American Arbitration Association. The arbitrator will have theauthority to award any remedy or relief that a court in Georgia could order orgrant, including, without limitation, specific performance, issuance of aninjunction, or imposition of sanctions for abuse or frustration of thearbitration process. The parties agree that the underlying Agreement between theparties involves interstate commerce and that, notwithstanding the choice of lawprovision in Section 16.B, any arbitration shall be governed by the FederalArbitration Act.

 

G. Notices.Any written notice under this Agreement will be deemed given upon the earlier of(i) actual receipt or (ii) five days after being deposited in the United Statesmail, and addressed to the last address shown on the records of the sender.

 

H. Bankruptcy.You will immediately notify Member and NOVA of any bankruptcy, receivership,insolvency or similar action or proceeding initiated by or against Merchant orany of its principals. You will include Member and NOVA on the list and matrixof creditors as filed with the Bankruptcy Court, whether or not a claim mayexist at the time of filing, and failure to do so will be cause for immediatetermination or any other action available to NOVA under applicable Rules or Law.You acknowledge that this Agreement constitutes an executory contract to make aloan, or extend other debt financing or financial accommodations to or for thebenefit of you, and, as such, cannot be assumed or assigned in the event of yourbankruptcy.

 

I. Attorney's Fees.Merchant will be liable for and will indemnify and reimburse Member and NOVA forall attorneys' fees and other costs and expenses paid or incurred by Member andNOVA in the enforcement of this Agreement, or in collecting any amounts due fromMerchant to Member or NOVA or resulting from any breach by Merchant of thisAgreement.

 

J. CustomerContact. You authorize Member and NOVA to contact your customers if theydetermine that such contact is necessary solely to find out information aboutany Card transaction between you and the customer.

 

K. Amendments.Member and NOVA may propose amendments or additions to this Agreement includingbut, not limited to, changes in interchange, fees, assessments, and the Rules.Member or NOVA will inform you of a proposed change in a periodic statement orother written notice. You will be deemed to have agreed to the change if youcontinue to present transactions to Member and NOVA after 30 days following themailing of the notice. Notwithstanding the previous sentence, changes to feesauthorized by this Agreement will be effective upon notice to you, unless alater effective date is provided.

 

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L. Severabilityand Waiver. If any provision of this Agreement is illegal, the invalidity ofthat provision will not affect any of the remaining provisions and thisAgreement will be construed as if the illegal provision is not contained in theAgreement. Neither the failure nor delay by Member or NOVA to exercise, orpartially exercise, any right under this Agreement will operate as a waiver orestoppel of such right, nor shall it amend this Agreement. All waivers must besigned by NOVA.

 

M. IndependentContractors. NOVA, Member and Merchant will be deemed independentcontractors and none will be considered agent, joint venturer or partner of theother.

 

N. EmployeeActions. NOVA and the Merchant are responsible for their respectiveemployees' actions while in their respective employ.

 

O. Survival.All provisions that by their context are intended to survive termination of thisAgreement will so survive.

 

NBO Systems, Inc.

 

By: /s/ C. Foley                                 
Name: Christopher Foley                  
Title: CFO                                        
Date: 10/4/04                                   ** 

NOVA Information Systems, Inc.**
 

By: /s/ Timothy Miller                        
Name: Timothy Miller                        
Title: SVP                                         
Date: 10/18/04                                  ** 

U.S. Bank, N.A.**
 

By: /s/ Timothy Miller                        
Name: Timothy Miller                        
 

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Title:: SVP                                          
Date: 10/14/04 ("Effective Date")         

 

 

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**NBO Systems, Inc.

Schedule of Fees**
Merchant shall pay the following feesand expenses:

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