EXHIBIT 10.5
AGREEMENT
This agreement made and entered this 26th of February, 1998 by and between
CRITTSON FINANCIAL LLC, an Indiana corporation maintaining its principal offices
in Elkhart, Indiana, hereinafter known as `CF' and First Security Bank of
Lexington, a Kentucky corporation, maintaining its principal offices in
Lexington, Kentucky, hereinafter referred to as `Customer.'
WHEREAS, CF is in the business of providing services necessary to the
administration of Visa and MasterCard credit card programs; and, Customer
desires such services, and;
WHEREAS, in the event that Customer is approved and accepted by MasterCard
International, Inc. and/or Visa U.S.A. Inc. as members thereof, CF is desirous
of providing to Customer those services set forth and described in that document
attached hereto and made a part hereof as Schedule `A,' in exchange for
compensation in amounts equal to those set forth in that document attached
hereto and made a part hereof as Schedule `B.'
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. In the event that Customer is not approved and accepted by MasterCard
International, Inc. and/or Visa U.S.A. Inc. as members thereof, this
Agreement shall be null and void and of no further force or effect.
2. CF will perform for Customer those services set forth and described in
Schedule `A' hereof and shall be compensated therefor by Customer, based
upon services actually performed for Customer, in appropriate multiples of
those amounts set forth and described in Schedule `B' hereof.
3. Customer shall comply with all MasterCard International, Inc. nd/or Visa
U.S.A. Inc. regulations and with all applicable Federal and State laws,
and shall indemnify and save CF and its agents and hold it harmless with
respect to any claim, cause of action, complaint, suit or loss, including,
but not limited to, costs and attorney fees, which may be occasioned by
Customer's failure to do so. In addition thereto, Customer will supply CF
and, when known, CF will supply to Customer, any and all data and other
information necessary for each to comply with such regulations and laws.
4. CF and Customer acknowledge that the performance of services by CF
hereunder are subject, without notice, to regulation and examination of
various governmental agencies, including, but not limited to, Comptroller
of the Currency, to the same extent as if such services were performed by
Customer for itself on its own premises. Customer shall provide to CF, in
a timely fashion, all information and data necessary to comply with the
regulations and rules of such governmental agencies and shall bear the
costs of any examinations or inspections of records, performed by such
agencies during the term of this Agreement.
5. CF will exercise due care in performing its obligations hereunder
and will bear the cost to Customer of any losses attributable solely to
the errors or omissions of its agents or employees. The cost of errors or
omissions on the part of employees or agents of Customer shall be borne
exclusively by Customer and Customer shall indemnify CF, its agents and
employees, for any losses, including, but not limited to, costs and
attorney fees, occasioned by the errors or omissions of Customer's agents
or employees.
6. Customer shall employ CF and its agents exclusively, for the performance
of all services herein set forth and described, utilized by Customer in
connection with Customer's credit card program.
7. Customer shall pay all interchange fees on sales transactions deposited by
Customer's merchants for account holders of MasterCard International, Inc.
and/or Visa U.S.A. members. Customer will receive all interchange fees on
sales transactions of account holders of Customer which are deposited by
MasterCard International Inc. and/or Visa U.S.A.Inc. members. Customer
will pay all interchange fees on cash advance transactions negotiated by
its account holders, which are deposited by MasterCard International Inc.
and/or Visa U.S.A. Inc. Customer will receive all interchange fees on
cash advance transactions negotiated by cardholders of other members of
MasterCard International Inc. and/or Visa U.S.A. Inc. and deposited by
Customer.
8. Customer will pay all MasterCard International Inc. and/or Visa U.S.A.
Inc. fees, royalties, dues and assessments, including, but not limited to,
INAS, INET, BASE I and BASE II, as the same are fixed by applicable
MasterCard International Inc. and/or Visa U.S.A. Inc. rules and
regulations.
9. Customer will maintain a checking account with an approved financial
institution for the purpose of monetary settlement for Customer's card
program, CF or its agents will charge or credit, as appropriate, this
account for or with the daily settlement transactions resulting from the
operation of Customer's credit card program. Customer will transfer funds
to this account, as needed to cover daily settlement transactions, as
directed by CF or its agents.
10. Customer will be responsible for the establishment and maintenance of
account holder and authorization limits.
11. Customer shall provide CF all data reasonably necessary for the
administration of Customer's credit card program. Such data will be
supplied to CF in a timely fashion. Documents sent by Customer to CF shall
be balanced, proven as to amount, legibility and completeness. Any data
submitted by Customer to CF for processing which is incorrect, illegible,
or otherwise not in proper form, shall be returned to Customer for
correction before processing.
12. Customer shall insure regally and timely delivery to CF of sales drafts,
cash advance forms, credit vouchers, and other data, reasonably necessary
to the efficient performance of CF's obligations hereunder. Such delivery
may be accomplished by daily courier service, semi-weekly courier service,
or first class mail. All costs of delivery will be the responsibility of
Customer. Customer shall bear any loss occasioned by delay in the delivery
of such data and shall indemnify CF for any costs incurred by CF,
including, but not limited to, attorney fees, occasioned thereby.
13. CF will act with due diligence and good faith in the collection of
Customer's accounts, exercising such efforts as are reasonable and lawful.
In the event, however, CF is unable to collect an account after exercising
reasonable diligence and good faith, then Customer shall bear all losses
from uncollected accounts and all expenses incurred as a result of unpaid
accounts or the collection thereof, other than the cost of those services
set forth and described in Schedule `A' hereof. Customer will, at its
expense, arrange for any action which may be appropriate or necessary
because of the misuse or abuse of any account opened or maintained by its
account holders.
14. The data and information gathered and maintained with respect to
Customer's account holders and Customer's merchants, are and will remain
the property of Customer. Upon termination of this Agreement at the end of
its term, CF will, at the request of Customer and at Customer's expense,
deliver to Customer as much of such data and information as is requested
by Customer and as is available to CF through the exercise of reasonable
diligence.
15. CF will safeguard and hold confidential, to unauthorized persons, all data
relating to Customer's business submitted by or on behalf of Customer to
CF pursuant to the terms of this Agreement. CF shall be under no
obligation to hold confidential data that is otherwise available to the
public. Nothing contained herein shall preclude CF from making such data
available, as reasonably necessary, to entities performing services
necessary for the fulfillment of CF's obligations hereunder, or the
participation by CF in card recovery bulletin and/or restricted card list
procedures or in processing authorization inquiries from merchants or
financial institutions in connection with sales transactions or cash
advances. Nothing herein shall preclude CF from releasing such data or
information as part of the resolution of a dispute with Customer.
Customer will safeguard and hold confidential to unauthorized personas all
information relating to the services of CF and its agents, unless such
information is otherwise available to the public. Nothing herein shall
preclude Customer from releasing such data or information as part of the
resolution of a dispute with CF.
16. CF shall permit Customer, at any reasonable time and at Customer's
expense, to conduct an inspection or audit of CF's records relative to
Customer's affairs.
17. In the event that the relationship created by the terms of this Agreement
between CF and Customer, or any services rendered hereunder, gives rise
to any tax liability, exclusive of income or similar taxes, payable to
any government entity, such liability, even if not assessed against
Customer, will be the responsibility of Customer. In the event that CF is
required to pay or satisfy such tax liability, Customer will reimburse CF
therefor upon demand.
18. CF will suffer no liability by reason of its failure to provide any
service set forth or described herein if such failure is due to any cause
or condition beyond the reasonable control of CF or its agents.
19. The term of this Agreement will commence on the 1st day of June, 1998 and
will continue in full force and effect to and including the 31st day of
May, 2002 a period of four (4) years. This Agreement will be
automatically renewed for subsequent periods of four (4) years each
unless, at least one hundred twenty (120)days prior to any renewal date,
either party hereto gives written notice to the other that it does not
wish to renew this Agreement.
In lieu of notice of non-renewal, CF may, at least one hundred fifty
(150)days prior to any such renewal date, submit to Customer this
Agreement in modified form. In the event that CF elects to submit this
Agreement in modified form to Customer prior to any such renewal date,
Customer shall notify CF, at least one hundred twenty (120) days prior to
such renewal date, whether or not the modified form of this Agreement is
acceptable to Customer. Failure of Customer to notify as stipulated will
constitute acceptance of the modified contract as submitted.
If, for any reason, Customer exercises its option not to renew this
Agreement, CF agrees to cooperate in the required deconversion of the
Customer's cardholder and/or merchant records in their possession.
Customer agrees to compensate CF in the sum of twenty five hundred
dollars ($2,500), payable with the notice of non-renewal, for the
necessary activities connected with such deconversion.
20. Notwithstanding the foregoing, in the event of breach of any term of this
Agreement by any party hereto, the non-breaching party may terminate this
Agreement upon the giving to the breaching party of one hundred twenty
(120) days prior written notice of its intention to terminate and its
reason therefor.
However, the party committing the alleged breach shall have ninety (90)
days from the receipt of such notice to remedy said breach, and in the
event that it is properly remedied within such period, this Agreement
shall continue as though no such notice had been sent. In the event that
this Agreement is terminated due to the un-remedied breach of its
provisions by Customer, Customer shall pay to CF, in addition to any
other damages to which CF may be entitled, the following:
(a) Additional costs incurred by CF or its agents in connection with
processing or related services which result from such un-remedied
breach;
(b) Deconversion costs, including, but not limited to, proportionate
losses sustained as a result of the abandonment of any equipment
acquired or utilized in order to fulfill the obligations of CF
hereunder;
(c) Processing fees and other expenss incurred by CF on behalf of
Customer; and
(d) Fees to which CF would have been entitled, but for termination;
or if greater in value than (d),
(e) An amount equal to all payments made by Customer to CF during the
calendar year immediately preceding termination, or an amount equal
to all payments made to CF by Customer during that calendar month
immediately preceding termination, multiplied by twelve, whichever
is greater.
21. All obligations of either party hereto, incurred or existing under the
terms of this Agreement as of the date of any termination hereof, will
survive such termination.
22. CF will furnish to Customer detailed monthly billings for all services
rendered to Customer and charges incurred on behalf of Customer. Customer
shall pay such invoices upon receipt thereof.
23. All specifications, computer programs and systems utilized or developed
by CF, or its agents, in order to provide the services rendered
hereunder, are and will remain the absolute property of CF or its agents.
24. Each of the parties warrants that neither its execution and delivery of
this Agreement nor its performance of the provisions hereof is, or will
constitute, a violation on its part of any contract, indenture or other
agreement or relationship to which it is a party or by which it is bound,
and hereby agrees that it will indemnify and save harmless the other
party from and against any loss, costs, liability, damages or expenses by
reason of any claim which may be asserted to the contrary by any third
party.
25. This Agreement will be governed and interpreted by and under the laws of
the State of Indiana.
26. Notice, when required hereunder, will be deemed served when sent by
certified or registered mail, postage pre-paid, to the respective parties
as set forth below:
To President: Julian Beard
First Security Bank of Lexington
To CF: Mr. Robert Gordon, President
CRITTSON FINANCIAL LLC
P.O. Box 1226
Elkhart, Indiana 46515
27. This Agreement shall be binding upon and inure to the benefit of the
assigns and successors-in-interest of the parties hereto.
28. In the event that either party hereto fails to fulfill any obligation
imposed upon that party hereunder, the non-breaching party shall be
entitled to recover of the breaching party, in addition to any other
damages to which it may be entitled, all costs and attorney fees
reasonably expended in the assertion of its rights hereunder.
29. Customer agrees to contract for the following services with Electronic
Data Systems, Inc.:
(1) Maintain computer system.
(2) Storage of raw plastics.
(3) Emboss, encode and mail plastics to new accounts.
(4) Purchase drafts through Visa and MasterCard systems and pass to
cardholder accounts.
(5) Generate and mail monthly cardholder statements.
(6) Provide authorizations for cardholders through the Visa and
MasterCard systems.
(7) Produce daily and monthly activity reports.
(8) Maintain history of cardholder records and activity.
30. CF agrees to arrange with Electronic Data Systems, Inc. for on-line
capability.
ACCEPTED
CRITTSON FINANCIAL LLC FIRST SECURITY BANK OF LEXINGTON
By: /s/ Kenneth R. Howard By: Financial Institution
/s/ Julian E. Beard
Printed: Kenneth R. Howard Printed: Julian E. Beard
Title: Vice President Title: Chairman and President
Date: 3-13-98 Date: 2-26-98
ADDENDUM
TO THE
CFC KENTUCKY CONTRACT
It is hereby mutually agreed by the two parties involved, that the following
amendments and/or clarifications are to be attached to, and hereby made a part
of, the Service Agreement between Crittson Financial Corporation and the CBK
Member Bank named below; entered into on February 26, 1998.
Page 1, item 5: "Errors and omissions" (Amendments)
This paragraph is replaced by the following:
"The cost of errors or omissions on the part of employees or agents of CFC or
Customer shall be borne exclusively by CFC or Customer, as the case may be, and
the responsible party shall indemnify the other, its agents and employees, for
any losses, including, but not limited to, costs and attorney fees occasioned
by the errors or omissions of its agents or employees."
On page 2, item 17: "Tax Liability" (Clarification)
As previously explained, since Crittson conditionally guarantees its fees for
the four (4) year term of this contract, it is necessary that this item remain
intact. However, it is intended to cover only an instance where the tax is
assessed because of this and/or similar relationships and is not intended to be
applied as a result of increases or changes in general taxation. Example of an
applicable tax: The State of Indiana places a tax on Service Agreements with
any organization based outside of Indiana.
Page 3, item 20: "Notice of termination and/or remedy"
(Amendment to First Paragraph)
The parties agree to amend the Agreement to reduce the stipulated 120 days
"prior written notice" to 60 days and to reduce the stipulated 90 days to
"remedy said breach" to 45 days "from the receipt of such notice".
(Clarification of Second Paragraph)
As discussed, (a) through (c) are remedies that flow to Crittson because we
perform the services addressed and incur, on your behalf, the potential
liability involved. Either item (d) or (e) is applied in the case of an
unremedied breach by you and is the only alternative available to CFC. Other
than the "notification and remedy" amendments cited in the paragraph above, all
other provisions of item 20 remain intact.
Page 4, item 25: Clarification
Applicable law remains the state of Indiana. This is just one contract for each
bank but CFC would need fifty (50) different contracts, potentially subject to
the varying laws of fifty (50) different states. This simply isn't practical
for CFC, or for most companies, and as a result, similar contracts from other
vendors, normally, provide for such home-based junction.
ACKNOWLEDGMENT and AGREEMENT:
By the authorized signatures affixed below, the parties mutually
acknowledge that they have examined this addendum, understand and
accede to the clarifications it contains and agree to its amended
provisions.
CRITTSON FINANCIAL CORPORATION FIRST SECURITY BANK OF LEXINGTON
(Bank Name)
By: /s/ Kenneth R. Howard By: /s/ Julian E. Beard
Julian E. Beard
Title: Vice President Title: Chairman and President
SCHEDULE A
LISTING OF SERVICES PROVIDED BY CF
1. New Account Set-Up
- assignment of account number
- video input of all new account information and verification of
input
- timely issuance of new account plastics
2. Non-Monetary File Maintenance
- name changes
- address changes
- providing additional or replacement cards
3. Payment Processing
- receiving and verifying mail payments - payment balancing - daily
posting and input of payments - follow-up of NSF checks
4. Customer Service
- provide toll-free WATS line for customer service calls from your
cardholders
- explain finance charge calculation to cardholders, answer other
miscellaneous questions
- obtain copies of sales drafts as required for cardholders - process
disputes and chargebacks according to the Federal Truth in
Lending Act and other regulation requirements - make monetary
adjustments to accounts as required for customer
service
5. Collection of Accounts
- overline review and control
- delinquency collection
- charge-off recommendation summary
- monthly reporting of sub-standard accounts on a per account basis
6. Lost/Stolen Card Follow-up and Investigation
- obtain complete report from cardholder - appropriate blocking of
account for authorization denial - listing account in necessary
bulletin regions and for number of
required publications
- initiate chargebacks where applicable
- set up replacement accounts and transfer balance
- follow up all leads on fraudulent activity
7. Accounting
- processing of adjustments due to customer service - help manage money
flow for the sale and purchase of drafts - advisement to institution of
changes to receivables, income and
expense accounts on a daily basis
8. Provide the preparation of quarterly activity reports as required by
MasterCard International Inc. and/or Visa USA.
9. Tracking of plastic inventory and placing reorders as necessary
10. Reports provided to customer
- Profitability (monthly, year-to-date)
- Delinquency
- Future planning (semi-annually)
- Program Evaluation/portfolio characteristics (frequency determined
by client)
11. New Merchant Set-Up
- assignment of merchant number
- video input of new merchant information and verification - adding
merchant to VISA/MasterCard Bulletin mailing lists - obtaining
imprinter plates and deposit plastics
12. Provide Merchant Instruction Sheets Covering:
- draft completion - transmittal completion - authorization procedures
- bulletin procedures - deposit guidelines
- explanation of merchant monthly statements and advice of charge
13. Merchant Draft Processing
- Draft Verification
- legibility
- completeness
- Monetary balancing
- Correction of errors
- Enter draft information into interchange
14. Processing Incoming Chargebacks
- verification of chargeback reason
- verification of documentation received
- verification of time limitation
15. Balance Merchant Advices and Monthly Statements
16. Ordering of Merchant Supplies On Behalf of Client
ACCEPTED
CRITTSON FINANCIAL LLC FIRST SECURITY BANK OF LEXINGTON
Institutions Corporate Name
By: /s/ Kenneth R. Howard By: /s/ Julian E. Beard
Julian E. Beard
Title: Vice President Title: Chairman and President
Date: 2-31-98 Date: 2-26-98
SCHEDULE B
CBA PROGRAM
DESCRIPTION OF SERVICES, FEES AND CHARGES
SERVICE PRICE EXPLANATION
1. CF Servicing $1.00 per month Number of cardholder accounts
A. Credit Card Accounts as shown on the Last Daily
(includes all services Statistical Reports for each
in Schedule `A') month.
B. Merchant Accounts $2.00 per month Number of merchant accounts as
shown on the Last Daily
Statistical Reports for each
month.
C. Special Projects or Per Quote Implementation of Agent Banks,
Special Requests Affinity Programs and/or other
special requests that fall
outside normal servicing as
same as described in Schedule
`A' of this Agreement.
D. NSF Fee $6.00 Per NSF check charged back to
the customer's credit card
account.
ACCEPTED
CRITTSON FINANCIAL LLC FIRST SECURITY BANK OF LEXINGTON
Financial Institution Name
By: /s/Kenneth R. Howard By: /s/ Julian E. Beard
Julian E. Beard
Date: 3-13-98 Date: 2-26-98