Document:

exv10w8

Exhibit 10.8

FOURTH AMENDMENT TO SERVICE AGREEMENT

          This Fourth Amendment to Service Agreement (this “Amendment”) is made and entered into as of
this 25th day of May, 2004 between First Data Merchant Services Corporation
(“FDMS”) and iPayment, Inc., formerly known as iPayment Holdings, Inc. (“Customer”).

RECITALS

          A. Customer and FDMS have previously entered into a Service Agreement dated as of July 1,
2002, as previously amended by amendments dated October 25, 2002, November 27, 2002 and January 8,
2004 (the “Service Agreement”).

          B. Customer and FDMS now desire to amend the Service Agreement as set forth herein.

AGREEMENT

          In consideration of the foregoing, Customer and FDMS hereby agree as follows:

          1. The terms of this Amendment will be effective as of May 25, 2004.

          2. Section III of Exhibit “A” to the Service Agreement is hereby amended by the
addition of the following:

	“J. 	 	 Electronic Benefit Transfer Services. FDMS will make available and perform electronic
benefit transfer services (“EBT Services”) on the terms set forth in this Section.

	 	(1)	 	Customer acknowledges that FDMS and/or its Affiliates and Fiserv DC., Inc.,
d/b/a Consumer Network Services (“Fiserv”) as assignee of Electronic Data Systems
Corporation, have entered into that certain Electronic Benefit Transfer Services
agreement (the “EDS Agreement”), a copy of which is attached hereto as Exhibit A, under
which Merchants may receive certain services for the processing of electronic food
stamp, cash and other benefits. Customer agrees to be bound by the terms and conditions
of the EDS Agreement, including all laws, rules, regulations and procedures referenced
therein, as such terms may apply directly to Customer or may apply to FDMS and/or its
Affiliates and flow through to Customer, including Sections 2(a) – (f), 7, 9 and 11.
	 
	 	(2)	 	Fees for the EBT Services shall be the same as those charged to Customer for
Acquiring Debit Services, including all pass-through switch, network and other fees.
	 
	 	(3)	 	Customer will cause each Merchant receiving EBT Services to enter into a
written agreement with Customer in substantially the same form as that set forth in

Page 1

 

	 	 	 	Attachment A to the EDS Agreement. Customer may charge a Merchant receiving EBT
Services any fee(s) that Customer deems reasonable.
	 
	 	(4)	 	Customer shall be subject to the liability provisions set forth in the EBT
Contractor Operating Rules, as amended from time to time, as referenced in the EDS
Agreement and as provided to the Customer by FDMS from time to time.
	 
	 	(5)	 	Notwithstanding anything herein or in the Service Agreement to the contrary,
FDMS’s obligation to provide EBT Services shall terminate automatically without penalty
or obligation of any type to FDMS upon the termination of the EDS Agreement for any
reason.

          3. Capitalized terms used but not otherwise defined in this Amendment will have the meanings
set forth in the Service Agreement.

          4. As hereby amended and supplemented, the Service Agreement will remain in full force and
effect.

          IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above
written.

	 	 	 	 
	 	 	 	 
	FIRST DATA MERCHANT SERVICES CORPORATION	 
	 
	 	 	 
	By:

	 	/s/ Rick Learch	 
	Name:
	 	Rick Learch 	 
	Title:
	 	VP 	 
	 
	 	 	 
	iPAYMENT, INC.	 
	 
	 	 	 
	By:

	 	/s/ Joseph Jorling	 
	Name:
	 	Joseph Jorling	 
	Title:
	 	C.O.O.	 

Page 2

 

EXHIBIT A

ELECTRONIC BENEFIT TRANSFER SERVICES SECOND ADDENDUM AND

SUPPLEMENT (the “Addendum”)

to the

GATEWAY SERVICES AGREEMENT (the “Agreement”)

between

ELECTRONIC BUSINESS DIVISION

of

ELECTRONIC DATA SYSTEMS CORPORATION (“EDS”)

and

FIRST DATA MERCHANT SERVICES CORPORATION (“FDMSC”)

WHEREAS, EDS has entered into agreements (the “Processor Agreements”) with various states’
Electronic Benefit Transfer Contractors (“EBT Contractors”) in connection with those states’
Electronic Benefit Transfer (“EBT”) Programs (collectively, the “Programs”) to provide certain
services in connection with the State’s delivery of various State benefits (“EBT Services”), which
benefits include the issuance of United States Department of Agriculture, Food and Nutrition
Services (“FNS”) food stamp benefits (“FS Benefits”), and/or government delivered cash assistance
benefits (“Cash Benefits”, with FS Benefits, “Benefits”) through an Electronic Benefits Transfer
system (the “EBT System”) to benefit recipients in each Program Area and benefit recipients of
other states not within a Program Area (“Recipients”); and

WHEREAS, certain retail merchants (“Merchants”), which will be identified in writing from time to
time by FDMSC to EDS, have entered into agreements (the “Merchant Agreements”) with FDMSC, or with
certain of its alliance partners and or Clients (in whose agreements FDMSC will pass through all
relevant, material terms and conditions contained herein, and collectively referred to as
“Alliances”), for switching and settlement services for various Point-of-Sale Transactions, which
will include those initiated in connection with the EBT System; and

WHEREAS, EDS, in order to facilitate the issuance of Benefits, desires FDMSC to solicit
participation of such Merchants, directly or indirectly through Alliances, to permit the issuance
of Benefits in the form of a purchase of food and other items by Recipients at such Merchant in
payment for which EDS will authorize a debit to the Recipient’s Benefits allotment and a
corresponding credit via the Automated Clearing House (“ACH”) to FDMSC’s Settlement Bank for credit
to such Merchant’s account; and

WHEREAS, FDMSC desires to switch, and accept settlement for Transactions initiated in connection
with the EBT System for such Merchants, and EDS is willing to accept Transactions from, and process
settlement to FDMSC on behalf of such Merchants for Transactions initiated by such Merchants in
connection with the EBT System, subject to

Exhibit A, Page 1

 

the terms and conditions hereof, each party acknowledging and agreeing, however, that this Addendum
is entered into on a non-exclusive basis and that FDMSC may, in its sole discretion, enter into
agreements with third parties for similar services, or develop similar services itself;

NOW, THEREFORE, in consideration of the foregoing and of the mutual consideration set forth herein,
the parties hereto agree to supplement the Agreement as follows:

1. Scope of this Addendum. The terms and conditions of this Addendum are applicable solely to the
EBT Services and are not intended to modify or alter either EDS’ or FDMSC’s obligations relating to
other Services being provided under the Agreement. The Agreement and any exhibits and amendments
thereto will also apply to the extent appropriate, to the provision of EBT Services by EDS,
provided that with regard to EBT Services, in the event of any conflict between the Agreement and
this Addendum, the terms and conditions of this Addendum will control. In the event of any conflict
between this Addendum and the Rules (as defined in Section 2.c.), the terms and conditions of the
Rules will control.

2. Engagement of FDMSC

     a. FDMSC represents and warrants that:

     (i) FDMSC has been engaged by those Merchants identified from time to time in
writing to EDS, to provide access to the EBT System for the Programs and that such
engagement is in full force and effect, enforceable in accordance with its terms, and FDMSC
will advise EDS as soon as practicable of any Merchants who wish to add or terminate access
to the EBT System,

     (ii) pursuant to the terms of such engagement, each Merchant has agreed to support
issuance of Benefits in accordance with the terms and conditions for the issuance of
Benefits in substantially the same form as set forth in Attachment A, the terms of which
will be agreed upon by the parties and attached hereto within 30 days of the execution of
this Addendum, and

     (iii) FDMSC has been authorized by such Merchants to initiate Transactions on
their behalf and to receive settlement for such Transactions to FDMSC’s Settlement Bank as
identified below and FDMSC acknowledges that FDMSC shall be responsible, to the extent
provided herein, for Transactions initiated on behalf of a Merchant following termination by
FDMSC of such authorization.

     b. FDMSC agrees to give Merchant and EDS prompt notice of any planned cessation of services or
inability to comply with the terms of this Addendum.

Exhibit A, Page 2

 

     c. FDMSC agrees to comply with the EBT Contractor Operating Rules (the “Rules”), as amended
from time to time, promulgated by the National Automated Clearing House Association, or such other
rules governing the issuance of Benefits pursuant hereto as may be agreed between FDMSC and EDS,
such Rules and any updates to be provided to FDMSC by EDS as soon as commercially practicable
following their receipt by EDS, and with all applicable Federal and State laws, rules and
regulations as may be applicable to the issuance of Benefits in connection herewith, including
without limitation, laws pertaining to delivery of services to Recipients and Recipient
confidentiality, and the federal Civil Rights Act of 1964, Rehabilitation Act of 1973, Americans
with Disabilities Act of 1990, Clean Air Act, Clean Water Act, Energy Policy and Conservation Act,
Immigration Reform and Control Act of 1986, and regulations issued by the Department of Agriculture
pertaining to the Food Stamp Program. Unless otherwise defined herein, all capitalized terms shall
have the meanings ascribed them in the Rules. FDMSC shall, and shall cause the Merchants to comply
with the procedures specified to FDMSC by EDS and the procedures set forth in EDS’ EBT Product
Manual (the “Manual”), provided to FDMSC by EDS, as amended from time to time.

     d. Upon notification from its Merchants, FDMSC shall promptly advise EDS of changes in the
types of Benefits issued by such Merchants.

     e. FDMSC will promote the use of the EBT Contractor marks among Merchants.

     f. FDMSC shall comply with the terms of this Addendum and require that any third party
processors contracted by FDMSC also meet with the terms of this Addendum.

3. Transaction Processing

     a. FDMSC agrees to process all Transactions initiated by Merchants and to accept settlement
for such Transactions in accordance with the terms and conditions set forth in Attachment A and the
respective Merchant Agreements and to comply with the processing requirements set forth in the
Manual. If FDMSC accepts manual Transactions, FDMSC shall cause all manual Transactions to be
converted to electronic format for transmission to EDS in accordance with the Manual.

     b. EDS agrees to promptly route all Transactions communicated to it to the EBT Contractor for
authorization in accordance with the terms and conditions of the Processor Agreements. EDS will
comply with all procedures set forth in the Manual for processing EBT Transactions and will comply
with all applicable laws, regulations, and rules, including without limitation, the Rules,
governing its activity as a processor for the issuance of Benefits.

Exhibit A, Page 3

 

4. FDMSC Network

     a. FDMSC and EDS shall cooperate in maintaining operating standards which meet minimum
guidelines (7 C.F.R. 274.12) of the FNS for system performance as amended from time to time. These
guidelines state as of the date hereof that:

     (i) Ninety-eight percent (98%) of all EBT Transactions have a processing response
time of ten (10) seconds or less and all EBT Transactions be processed within fifteen (15)
seconds for leased line systems and ninety-five (95%) of all EBT Transactions have a
processing response time of fifteen (15) seconds or less and all EBT Transactions processed
within twenty (20) seconds or less for dial-up systems;

     (ii) Availability of the entire system must be operational a minimum of
ninety-eight percent (98%) of the time.

     b. FDMSC shall maintain and make available to EDS, upon request and without charge reports
indicating processing time and system availability to assist in establishing compliance with FNS
Guidelines for system performance. EDS may request additional reports of FDMSC for such fees as are
agreed between the parties.

5. Settlement. EDS will perform financial settlement with FDMSC by initiating applicable credits
via ACH to FDMSC’s Settlement Bank each business day through EDS’ Single Point Settlement system.
Detail Transaction reconciliation for each day’s settlement will be performed each calendar day
with the transmission of a detail Transaction file between the EDS and FDMSC.

6. Non-Performance/Termination

     a. EDS shall notify FDMSC in writing as soon as reasonably practicable and in sufficient
detail for system nonperformance that is clearly the fault of FDMSC. If there is uncertainty as to
the source of any problem, FDMSC shall cooperate with EDS for testing to remedy such defect.

     b. In the event that FDMSC fails to meet system performance standards, FDMSC shall have thirty
(30) days in which to cure the problem following notice in writing by EDS to FDMSC. EDS shall be
permitted to notify the State of any such problem to ensure continued provision of EBT services to
FNS-authorized Merchants. In the event that the cure cannot reasonably be completed within thirty
(30) days, FDMSC shall promptly commence to effect such cure in good faith and with due diligence.
Should FDMSC fail to correct the problem in such period or fail to proceed in good faith and with
due diligence, EDS may immediately terminate this Addendum upon notice to FDMSC, however, the
Agreement shall continue in full force and effect.

Exhibit A, Page 4

 

7. Confidentiality of EBT System Information. In addition to the confidentiality obligations set
forth in the Agreement, FDMSC, its directors, officers, employees and agents shall treat all
information, with particular emphasis on information relating to Recipients, which is obtained by
it through its performance under this Addendum, as confidential information to the extent required
by the laws of the State in which FDMSC processes Transactions pursuant hereto and the United
States and any regulations promulgated thereunder.

     a. Individually identifiable information relating to any Recipient for Benefits shall be held
confidential and shall not be disclosed by FDMSC, its directors, officers, employees or agents.

     b. The use of information obtained by FDMSC in the performance of its duties under this
Addendum shall be limited to purposes directly connected with such duties.

     c. FDMSC shall be responsible for assuring that any agreement between FDMSC and any of its
directors, officers, employees or agents contains a provision which appropriately addresses the
confidentiality of the class of information covered by this Section 7.

8. Confidentiality of FDMSC Information. In addition to the confidentiality obligations set
forth in the Agreement, EDS, its directors, officers, employees and agents shall treat all
information, with particular emphasis on information relating to FDMSC’s non-EBT business,
Recipients and applicants, which is obtained by it through its performance under this Addendum, as
confidential information to the extent required by the laws off the State of New York and of the
United States and any regulations promulgated thereunder.

     a. The use of information obtained by EDS in the performance of its duties under this Addendum
shall be limited to purposes directly connected with such duties.

     b. EDS shall be responsible for assuring that any agreement between EDS and any of its
directors, officers, employees or agents contains a provision which appropriately addresses the
confidentiality of the class of information covered by this Section 8.

9. Issuance of Records, Investigation and Audit

     a. Upon receipt of instructions from the EBT Contractor, EDS agrees to furnish
instructions to FDMSC concerning EBT Transaction-related records to be maintained, as may be
reasonably requested by EDS or otherwise required by the State and FDMSC agrees to separately
maintain such records in accordance with EDS’ instructions and to promptly make such records
available for audit upon request to

Exhibit A, Page 5

 

representatives of the EBT Contractor, the State, or other authorized State or Federal government
agency during normal business hours.

     b. In the event that the EBT Contractor, NACHA, or Federal or State Agencies having authority
therefor has reasonable cause to question the accuracy, timeliness, completeness or reliability of
any activities undertaken by or on behalf of FDMSC under the Rules, or the compliance of FDMSC with
the Rules, FDMSC agrees to provide such parties full and free access to all records and systems of
FDMSC and Merchants, for the purpose of examination or auditing such performance and compliance. At
such party’s discretion, such examination or audit may be conducted, at FDMSC’s expense, by (i) an
outside auditor of FDMSC’s choosing, (ii) any of such parties or (iii) a third party retained by
any of such parties at the FDMSC’s expense. If such examination or audit reveals any exception to
FDMSC’s compliance with these Rules, FDMSC shall promptly remedy such exception. To the extent
feasible, such parties shall coordinate any such examination or audit with and rely upon any
comparable examination or audit performed by any similar oversight authority.

     c. FDMSC agrees to maintain and preserve all financial records or documentation arising
hereunder during the course of this Addendum and for a period of three (3) years following Benefit
issuance, or for such additional period as applicable regulations may require. Records involving
matters in litigation will be kept for a period of not less than three (3) years following the
termination of the litigation. Copies of any documents in media other than paper (e.g., microfilm,
etc.) related to this Addendum may be substituted for the originals to the extent permitted under
applicable law and provided that legible paper copies can be reproduced within a reasonable time
following written notice to FDMSC.

10. Standard of Care; Liability; Indemnity.

     In addition to the obligations of each party to indemnify the other under the Agreement, the
standard of care, liability and indemnity provisions set forth in the Rules, as they are amended
from time to time, shall apply to this Addendum. For purposes of clarification in the Rules and in
this Addendum, except for the requirement that it be a Depository Institution, FDMSC shall be
subject to the same obligations as if it were considered an “Acquirer” under the Rules and EDS
shall be considered a “Processor” as that term is defined in the Rules. Liability for circumstances
not addressed in the Rules shall be governed by the Agreement and in no event shall either party be
responsible for special, indirect, incidental or consequential damages which may be incurred by the
other party or experienced on account of entering into or relying on this Addendum, even if that
other party has been advised of the possibility of such damages.

Exhibit A, Page 6

 

11. Advertising; Trademarks.

     a. Each party shall submit to the other party, and obtain its approval on any joint
advertising or promotional literature which in any way identifies the other party, prior to the use
of such material. Each party agrees to review such material provided by the other and notify the
other party of any comments with respect thereto as promptly as possible after receipt of such
material.

     b. Neither party shall use the trademark or service mark of the other without the written
approval of the other nor shall FDMSC use that of the EBT Contractor or any of its affiliates
without written approval from the EBT Contractor.

     c. FDMSC shall promote the use of the EBT Contractor marks, and any other Government Entity
service marks of, and other materials supplied by the State or EDS to Merchants in accordance with
the Rules or other standards set by the State. Merchants may only use the marks to indicate that
Benefits are issued at Merchant’s location(s) and will not indicate that the State, EDS or NACHA
endorse Merchant’s goods or services. FDMSC’s and Merchants’ right to use such marks pursuant to
this Addendum will continue only so long as this Addendum remains in effect or until FDMSC or
Merchant is notified by the State, EDS or NACHA to cease their use or display.

12. Miscellaneous

     a. No Third Party Beneficiaries. This Addendum does not create and shall not be
construed as creating, any rights enforceable by any person not a party to this Addendum, except
that the State and EBT Contractor shall be deemed third party beneficiaries of the representations,
warranties, covenants and agreements of FDMSC hereunder.

     b. State Action. Nothing in this Addendum shall preclude the State wherein FDMSC operates
under this Addendum from commencing appropriate administrative or legal action against FDMSC or for
making any referral for such action to any appropriate Federal State, or local agency.

     c. Reference to State. Any reference to State in this Addendum shall mean the State in which a
Merchant issues Benefits pursuant hereto. If a Merchant is issuing Benefits in more than one State
pursuant hereto, then such reference shall mean each State severally, not jointly.

     IN WITNESS WHEREOF, the parties have caused this Electronic Benefit Transfer Services Addendum
and Supplement to be executed on their behalf by their duly authorized officers.

Exhibit A, Page 7

 

	 	 	 	 	 	 	 	 	 	 	 

	ELECTRONIC BUSINESS DIVISION of

Electronic Data Systems Corporation	 	First Data Merchant Services
Corporation
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	
	 	By:	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name:

	 	Christopher K. Carter
	 	Name:	 	 	 	 	 	 
	Title:

	 	Division Vice President
	 	Title:	 	 	 	 	 	 
	Date:

	 	 	 	Date:	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 

Exhibit A, Page 8

 

ATTACHMENT A

MERCHANT ACCEPTANCE OF EBT TRANSACTIONS

TERMS AND CONDITIONS

PARTIES:

                                         (“Service Provider”)

                                         (“Merchant”)

BACKGROUND

          1. SERVICE PROVIDER offers electronic interfaces to Electronic Benefits Transfer (“EBT”)
networks for the processing of cash payments or credits to or for the benefit of benefit
recipients (“Recipients”); and

          2. MERCHANT wishes to contract for the services offered through SERVICE PROVIDER for the
purposes of offering EBT benefits to Recipients under the terms and conditions set forth below.

	1.	 	Agreement to Issue Benefits

	 	a.	 	SERVICE PROVIDER will provide settlement and switching services for
various Point-of-Sale transactions initiated through MERCHANT (the “Services”) for
the authorization of the issuance of the United States Department of Agriculture,
Food and Nutrition Services (“FNS”) food stamp benefits (“FS Benefits”) and/or
government delivered cash assistance benefits (“Cash Benefits,” with FS Benefits,
“Benefits”) to Recipients through the use of a state-issued card (“EBT Card”).
	 
	 	b.	 	Subject to the terms and conditions hereof, MERCHANT agrees to issue Benefits
during MERCHANT’s normal business hours.
	 
	 	c.	 	If MERCHANT has agreed to issue Cash Benefits and will provide cash back or
cash only transactions, MERCHANT agrees to maintain adequate cash on hand to issue
confirmed Cash Benefits and will issue Cash Benefits to Recipients in the same manner
and to the same extent cash is provided to other customers of MERCHANT. MERCHANT will
not require, and will not in its advertising suggest, that any Recipient must purchase
goods or services at MERCHANT’s facilities as a condition to

Exhibit A, Page 9

 

 

	 	 	 	receiving a Cash Only from Cash Account Transaction for such Recipient,
unless such condition applies to other customers as well. MERCHANT will not
designate special checkout lanes restricted to use by Recipients, provided that if
MERCHANT designates special checkout lanes for electronic debit or credit cards
and/or other payment methods such as checks or other than cash, Recipients may be
directed to such lanes so long as other customers are directed there as well.
	 
	 	d.	 	MERCHANT agrees to give prompt notice to SERVICE PROVIDER of any planned
cessation of services, or inability to comply with the terms of this Agreement.

	2.	 	Issuance of Benefits

	 	a.	 	MERCHANT agrees to issue Benefits to Recipients in accordance with the
procedures specified in all documentation and user guides provided to MERCHANT by
SERVICE PROVIDER, as amended from time-to-time (the “User Guides”) and pursuant to
applicable law. MERCHANT will provide each Recipient a receipt for each Benefit
issuance. MERCHANT will be solely responsible for MERCHANT’s issuance of
Benefits other than in accordance with authorizations.
	 
	 	b.	 	MERCHANT will issue FS and/or Cash Benefits to Recipients, in accordance with
the procedures set forth in the User Guides, in the amount authorized through its
point-of-sale (“POS”) terminal, with personal identification number (“PIN”) pad and
printer (“Equipment”), upon presentation by Recipient of an EBT Card and Recipient
entry of a valid PIN. MERCHANT agrees that in the event of the failure of the
Equipment to print Benefit issuance information as approved and validated as a
legitimate transaction, MERCHANT will comply with the procedures set forth in the User
Guides for authorization of Benefits in such instance.
	 
	 	c.	 	MERCHANT agrees to comply with all applicable laws, rules and regulations in
the performance of its obligations under this Agreement, including without limitation,
laws pertaining to delivery of services to benefit recipients and benefit recipient
confidentiality, and the federal Civil Rights Act of 1964, Rehabilitation Act of 1973,
Americans with Disabilities Act of 1990, Clean Air Act, Clean Water Act, Energy Policy
and Conservation Act, Immigration Reform and Control Act of 1986, and regulations
issued by the Department of Agriculture pertaining to Food Stamp Program.
	 
	 	d.	 	MERCHANT agrees to comply with the procedures set forth in the User Guides as
well as the Quest Operating Rules (the “Rules”), as amended from

Exhibit A, Page 10

 

 

	 	 	 	time-to-time, issued by the National Automated Clearing House Association as
approved by the Financial Management Service of the U.S. Treasury Department, as
necessary, and other such rules and regulations as may be applicable to the
issuance of Benefits by MERCHANT hereunder. Unless otherwise defined herein, all
capitalized terms shall have the meanings ascribed them in the Rules. MERCHANT
agrees to comply with all additional procedures specified by the State, regarding
lost EBT Cards, forgotten PINs, discrepancies in benefits authorized and similar
matters by providing Recipients with information such as telephone numbers and
addresses of the State or other appropriate agencies.
	 
	 	e.	 	MERCHANT will not accept any EBT Card for any purpose other than the
issuance of Benefits, including without limitation acceptance of any EBT Card as
security for repayment of any Recipient obligation to MERCHANT. In the event of any
violation of this provision, MERCHANT will be obligated to reimburse the State for
any Benefits unlawfully received by either Recipient or MERCHANT to the extent
permitted by law.

	3.	 	Issuance Records

	 	a.	 	MERCHANT will retain all EBT-related records (including but not limited to
manual sales drafts) for three (3) years following Benefit issuance, or for such
additional period as may be required by law.
	 
	 	b.	 	MERCHANT agrees to make all EBT-related records available for audit upon
request to representatives of the State or its EBT Service Provider, or other
authorized State or Federal government agency during normal business hours.
	 
	 	c.	 	To assure compliance with this Agreement, the State, its EBT Service
Provider, or other authorized State or Federal government agency, will at all times,
upon advance notice except in the case of suspected fraud or other similar activity,
have the right to enter, during normal business hours, MERCHANT’s premises to
inspect or evaluate any work performed under this Agreement, or to obtain any other
information required to be provided by MERCHANT or otherwise related to this
Agreement.

	4.	 	Required Licenses. If MERCHANT issues FS Benefits under this Agreement, MERCHANT
represents and warrants to SERVICE PROVIDER that MERCHANT is a FNS authorized Merchant and
is not currently disqualified or withdrawn from redeeming food stamp coupons or otherwise
disqualified or withdrawn by FNS. MERCHANT agrees to secure and maintain at its own
expense all necessary licenses, permits, franchises, or other authorities required to
lawfully effect the issuance and distribution of Benefits under this Agreement, including
without

Exhibit A, Page 11

 

 

	 	 	limitation, any applicable franchise tax certificate and non-governmental contractor’s
certificate, and covenants that MERCHANT will not issue Benefits at any time during which
MERCHANT is not in compliance with the requirements of any applicable law.
	 
	5.	 	Term and Termination

	 	a.	 	If MERCHANT is disqualified or withdrawn from the FS Program, MERCHANT’s
authority to issue FS Benefits will be terminated contemporaneously therewith.
Such disqualification or withdrawal will be deemed a breach of this Agreement with
respect to MERCHANT’s authority to issue Cash Benefits and, in the event of
such disqualification, SERVICE PROVIDER shall have the right to immediately terminate
this Agreement.
	 
	 	b.	 	With respect to the issuance of Cash Benefits only, MERCHANT’s
authority to issue Cash Benefits may be suspended or terminated immediately by
SERVICE PROVIDER, the State or its EBT Service Provider, in its sole discretion,
effective upon delivery of a notice of suspension or termination specifying the
reasons for such suspension or termination if there shall be (i) any suspension,
injunction, cessation, or termination of the EBT Service Provider’s authority to
provide EBT services to the State; (ii) failure by MERCHANT, upon not less than thirty
(30) days prior written notice, to cure any breach by MERCHANT of the provisions of
these terms and conditions, including without limitation, MERCHANT’s failure
to support the issuance of Benefits during MERCHANT’s normal business hours
consistent with MERCHANT’s normal business practices, MERCHANT’s
failure to comply with issuance procedures, MERCHANT’s impermissible
acceptance of an EBT Card, or MERCHANT’s disqualification or withdrawal from
the FS Program: or (iii), based on the State’s or its EBT Service Provider’s
investigation of the relevant facts, evidence that MERCHANT or any of its agents or
employees is committing, participating in, or has knowledge of fraud or theft in
connection with the dispensing of Benefits. In the event that MERCHANT fails to cure
any breach as set forth above, MERCHANT may appeal such suspension of termination to
the State for determination in its sole discretion.
	 
	 	c.	 	In the event that MERCHANT’s authority to issue Benefits is
suspended or terminated by the State or its EBT Service Provider, and MERCHANT
successfully appeals such suspension or termination to the State or its EBT Service
Provider, SERVICE PROVIDER shall be under no obligation to MERCHANT to reinstate this
Agreement.

Exhibit A, Page 12

 

 

	 	d.	 	This Agreement will terminate immediately in the event MERCHANT’s
Processing Service Agreement with SERVICE PROVIDER terminates.
	 
	 	e.	 	This Agreement shall terminate automatically in the event that SERVICE
PROVIDER’s or its service provider’s Agreement with the EBT Service Provider
terminates for any reason.

	6.	 	Confidentiality of EBT System Information

	 	a.	 	All information related to the issuance of Benefits and the Recipients shall
be considered confidential information.
	 
	 	b.	 	Individually identifiable information relating to any Recipient or applicant
for Benefits will be held confidential and will not be disclosed by MERCHANT, its
directors, officers, employees or agents, without prior written approval of the State.
	 
	 	c.	 	The use of information obtained by MERCHANT in the performance of its duties
under this Agreement will be limited to purposes directly connected with such duties.

	7.	 	EBT Service Marks. MERCHANT will adequately display the State’s service marks or other
licensed marks, including the Quest mark, and other materials supplied by SERVICE PROVIDER,
collectively the “Protected Marks,” in accordance with the standards set by the State.
MERCHANT will use the service marks only to indicate that Benefits are issued at
MERCHANT’s location(s) and will not indicate that SERVICE PROVIDER, the State or its
EBT Service Provider endorse MERCHANT’s goods or services. MERCHANT’s right
to use such service marks pursuant to this Agreement will continue only so long as this
Agreement remains in effect or until MERCHANT is notified by SERVICE PROVIDER, the State or
its EBT Service Provider to cease their use or display.
	 
	8.	 	Miscellaneous

	 	a.	 	Amendments. If any of these terms and conditions are found to conflict with
Federal or state law, regulation or policy of the Rules, these terms and conditions
are subject to reasonable amendment by SERVICE PROVIDER, the State or its EBT Service
Provider to address such conflict upon sixty (60) days written notice to MERCHANT,
provided that MERCHANT may, upon written notice, terminate this Agreement upon receipt
of notice of such amendment.
	 
	 	b.	 	State Action. Nothing contained herein shall preclude the State from
commencing appropriate administrative or legal action against

Exhibit A, Page 13

 

 

	 	 	 	MERCHANT or for making any referral for such action to any appropriate Federal,
State, or local agency.
	 
	 	c.	 	Reference to State. Any references to State herein shall mean the State
in which MERCHANT issues Benefits pursuant hereto. If MERCHANT issues Benefits in more
than one State pursuant hereto, then the reference shall mean each such State
severally, not jointly.

This Agreement shall become effective on the date last written below.

	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	<<SERVICE PROVIDER>>	 	 
	 	 	 	 	 
	 	 
	(MERCHANT)	 	 	 	(SERVICE PROVIDER)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	Name:

	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	Date:

	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 

Exhibit A, Page 14exv10w11

Exhibit 10.11

May 1, 2005

First Data Merchant Services Corporation

1307 Walt Whitman Road,
Melville, New York 11747

Attn: Anthony Lucatuorto

			
	      Re:	 	Letter Agreement regarding Asset Purchase Agreement and
Service Agreement.

Dear Anthony:

     This Letter Agreement is with respect to the Asset Purchase Agreement dated as of December
27, 2004 among iPayment, Inc. (“IPMT”), iPayment Acquisition Sub LLC (along with IPMT,
hereinafter referred to as the “Buyer”), First Data Merchant Services Corporation (“FDMS”) and
Unified Merchant Services (along with FDMS, hereinafter referred to as the “Seller”) (the “Asset
Purchase Agreement”), and the Service Agreement dated December 27, 2004 between FDMS and IPMT
(the “Service Agreement”).

Pursuant to discussions to date, with respect to the Asset Purchase Agreement and the Service
Agreement, the parties agree as follows:

	 	1.	 	The Buyer will return to the Seller those Merchants listed on Schedule A
hereto (the “Returned Merchants”) effective as of May 1, 2005 (the “Effective
Date”). As of the Effective Date, ownership of the Returned Merchants shall revert
back to the Seller and any and all rights, liabilities, or obligations transferred to
the Buyer relating to such Returned Merchants shall transfer back to the Seller.
	 
	 	2.	 	As of the Effective Date, the Seller shall not be charged any fees for
any activity whatsoever by the Returned Merchants pursuant to the Service
Agreement or any other agreement between the parties.
	 
	 	3.	 	The parties agree that Section 4.4 of the Service Agreement is hereby
replaced with the following:

	 	 	 	“In Processing Year 1, Customer shall pay FDMS for processing
services sufficient to generate aggregate Processing Fees at least

1

 

	 	 	 	equal to Nine Million dollars ($9,000,000) (the
“Year 1 Minimum Processing Fee”). In Processing
Year 2, Customer shall pay FDMS for processing services
sufficient to generate aggregate Processing Fees at
least equal to Seventy Percent (70%) of the Year 1
Minimum Processing Fee. In each Processing Year after
Processing Year 2, Customer will require and shall pay
FDMS for processing services sufficient to generate
aggregate Processing Fees at least equal to seventy
percent (70%) of the Processing Fees paid during the
immediately preceding Processing Year (the “Minimum
Processing Fees”). FDMS shall calculate the total
Processing Fees paid by Customer in respect of Services
performed during each Processing Year (the “Total
Annual Processing Fees”) within ninety (90) days
after the end of each Processing Year and will, after
ten (10) days written notice to Customer, draw upon
Customer’s account pursuant to Section 4.5 of this
Agreement for the amount, if any, by which the Year 1
Minimum Processing Fees or the Minimum Processing Fees,
as applicable, for the Processing Year exceed the Total
Annual Processing Fees for the Processing Year. For the
avoidance of doubt and based on economic assumptions
material to each party underlying this transaction,
Customer and FDMS expressly agree that Customer shall
pay FDMS Processing Fees each Processing Year in an
amount at least equal to the Year 1 Minimum Processing
Fee or the Minimum Processing Fees, as applicable, until
this Agreement is terminated by Customer solely pursuant
to the provisions of Section 9.2 of this
Agreement or until FDMS terminates this Agreement and
invokes compensatory payments pursuant to Section
9.4 of this Agreement.”

	 	4.	 	The parties agree that as of the Effective
Date, Exhibit B to the Service Agreement shall be
amended to include a new Section I.(g) to read as follows: *
	 
	 	5.	 	Except as agreed to herein, all terms of
the Asset Purchase Agreement and the Service Agreement shall
remain in full force and effect. Any capitalized terms
included in this Letter Agreement that are not defined
herein shall have the meanings ascribed to them in the Asset
Purchase Agreement or Service Agreement, as applicable.

 

			
	*	 	Omitted pursuant to a confidential treatment request. The confidential portion has been
filed separately with the SEC.

2

 

        If you are in agreement with the above, we ask that you please sign below as
indicated.

	 	 	 	 	 

	 

	 	/s/ Carl Grimstad
 

Carl Grimstad, on behalf of
	 	 
	 

	 	iPayment, Inc. and	 	 
	 

	 	iPayment Acquisition Sub LLC	 	 

	 	 	 	 	 	 	 	 	 

	Acknowledged, accepted and agreed to by:	 	 	 	 	 	 
	 
	 	 	 	 
	First Data Merchant Services Corporation	 	 	 	Unified Merchant Services
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	By:

	 	/s/ Brian Seims
	 	 	 	By:
	 	/s/ Deanna Kosse
	 

	 	 
	 	 	 	 	 	 
	Its:

	 	Brian Seims
	 	 	 	Its:
	 	Deanna Kosse
	Dated:

	 	10/26/05
	 	 	 	Dated:
	 	10/20/05

3

 

Schedule A

*

 

			
	*	 	Omitted pursuant to a confidential treatment request. The confidential portion has been filed
separately with the SEC.

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