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Merchant Services Bankcard Agreement

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Sectors: Specialty Retail
Governing Law: New York, View New York State Laws
Effective Date: January 15, 2002
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Exhibit 10.16


Buycomp, L.L.C. Buycomp.com Customer' s Legal Name Doing Business As 140 Technology, Suite 700 Irvine California 92718 Street Address City State Zip Code Corporation 33-0760152 Specify Whether Customer is (circle one) a Corporation,
Partnership, Sole Proprietorship, Non-Profit or Other
Type of Entity Taxpayer Identification Number Mr. Murray Williams (714) 788-3906 Recipient For Notices Under Paragraph 26.5 Facsimile Number

This Merchant Services Bankcard Agreement (" Agreement" ) is among the CUSTOMER identified above, FIRST FINANCIAL BANK, a New York state chartered bank (" BANK" ) and CHASE MERCHANT SERVICES L.L.C., (" CMS" ) (BANK and CMS are collectively referred to as " SERVICERS" ).

BANK, as a member of Visa U.S.A., Inc. (" VISA" ) and MasterCard International Incorporated (" MasterCard" ), is responsible for its VISA and MasterCard bankcard programs and has authorized CMS or its members pursuant to a separate agreement (the " Agency Agreement" ) to act as an agent of and in conjunction with BANK in performing authorization, processing and settlement services for merchants participating in BANK' S Mastercard and VISA bankcard programs, in performing the additional services with respect to other cards as specified on the schedules to this Agreement and in taking related actions. CMS is acting in such capacity by executing and performing this Agreement. As between themselves, the respective rights and obligations of CMS and BANK shall be governed by the Agency Agreement and Association Rules.

In consideration of the mutual covenants and agreements set forth herein and other good and valid consideration, the receipt and sufficiency of which are hereby acknowledged, SERVICERS and CUSTOMER agree as follows:

1. Definitions . As used in this Agreement, capitalized terms will have the meaning set forth in Annex 1. 2. Services .

2.1 During the term of the Agreement, CUSTOMER shall use SERVICERS as its exclusive provider of all Services for CUSTOMER. 2.2 Subject to Association Rules, Services may be performed by CMS or BANK as they may determine. In addition to SERVICERS, one or more affiliates of SERVICERS may assist in providing terminals or other equipment and local support functions in connection with this Agreement.

3. Acceptance of Cards .


CUSTOMER will accept any Card properly tendered, without imposing any special conditions not required or allowed by Association Rules. CUSTOMER will assess no special charge or extract any special agreement, condition (including any minimum or maximum transaction amounts) or security from a Cardholder in connection with any Card transaction. CUSTOMER shall not post signs indicating that CUSTOM will refuse to honor Card transactions below or above a specified amount. CUSTOMER may offer a discount for using cash if clearly disclosed as a discount from the price available for all other means of payment. CUSTOMER shall not engage in acceptance practices or procedures that discriminate against, discourage or favor the offered use of any

particular Card accepted by CUSTOMER. CUSTOMER will not require Cardholders to provide personal information such as a home or business telephone number, a home or business address, or any form of identification (such as a driver' s license) as a condition for honoring and accepting a Card, unless specifically required by this Agreement or the applicable Association. CUSTOMER shall not accept Cards at terminals that dispense scrip in violation of the Association Rules.

3.2 CUSTOMER will check each Card used during a transaction for validity in accordance with the terms of this Agreement, the Operating Guide and the applicable Association Rules. CUSTOMER will not honor a Card that appears to be invalid or expired.

3.3 All Sales Drafts and Credit Vouchers must include (i) either a manual imprint or an electronic printing of the Card obtained by passing the magnetic stripe on the Card through a point-of sale terminal, of Cardholder information contained on the Card or magnetic stripe; (ii) the signature of the authorized user as it appears on the Card; (iii) the date of the transaction; (iv) a description of the merchandise sold or rented or the services rendered; and (v) the total cash price of the Card transaction (including taxes).

3.4 Except for transactions completed by using magnetic stripe reading point-of-sale terminals that print Card transaction records or originated at limited amount terminals that are capable of reading magnetic stripes and limit each Card transaction to $25, CUSTOMER is deemed to warrant the true identity of any Cardholder unless CUSTOMER imprints the Card on the Sales Draft, as described in subsection 3.3, above.

3.5 Unless, a Card transaction is governed by Section 6 or otherwise specifically authorized by SERVICERS in writing, CUSTOMER may only complete a Card transaction when (i) the Card is present and (X) the data stored on the magnetic stripe is electronically read and printed by a magnetic stripe reader or (Y) the Card is manually imprinted, (ii) the Card is signed and the signature on the Sales Draft appears to be the same as the signature on the Card, (iii) the Cardholder resembles the person pictured (if any) on the Card, and (iv) all, or the appropriate portion, of the embossed account number on the Card matches with the corresponding digits printed on the Card and with the account number displayed and/or printed by a point-of-sale device reading the magnetic strip on the Card. (If a previously unsigned Card is signed at the time of a Card transaction, CUSTOMER will review (and identify on the Sales Draft) a current, official government identification document (such as a driver' s license or passport) bearing the Cardholder' s signature.) CUSTOMER will deliver at least one copy of the Sales Draft or agreement or Credit Voucher to the Cardholder.

4. Operating Guide, Association Rules .

CUSTOMER acknowledges that it has received, (or will receive promptly upon execution of this Agreement) the Operating Guide, the terms of which are incorporated into this Agreement. CUSTOMER agrees to follow the procedures in the Operating Guide in connection with each Card transaction and to comply with all applicable Association Rules. From time to time, SERVICERS may change the Operating Guide, in whole or in part, and other operating procedures, by providing CUSTOMER with at least 30 days' prior written notice of the change. However, in the event of changes in the Association Rules or due to security reasons, certain changes in Card procedures may become effective on shorter notice. If there is any conflict between the terms of this Agreement and the Operating Guide, the terms of this Agreement will govern, unless the conflict is directly related to a change in the Operating Guide which specifically addresses a procedure or requirement detailed in this Agreement. If CUSTOMER loses or otherwise misplaces the Operating Guide or notices of changes thereto, CUSTOMER shall be responsible for contacting SERVICERS to obtain replacement copies.

5. Authorization .


CUSTOMER shall be responsible for obtaining Authorization in advance for each Card transaction. The Authorization number provided by SERVICERS shall be noted by CUSTOMER


in the appropriate place on the Sales Draft. If Authorization is declined, CUSTOMER shall not complete the Card transaction. 5.2 CUSTOMER shall comply with any special authorization procedures contained in any other sections of this Agreement, the Operating Guide the Schedules and the Association Rules.

5.3 CUSTOMER acknowledges that Authorization, (i) indicates only the availability of credit at the time of Authorization; (ii) does not warrant that the person presenting the Card is the rightful Cardholder; and (iii) is not an unconditional promise or guarantee by SERVICERS that any Card transactions will not be subject to Chargeback.

6. Telephone and Mail Orders .

6.1 If CUSTOMER is authorized to accept telephone or mail orders, Authorization for each such Card transaction, regardless of the face amount, must be obtained and CUSTOMER must write " TO" (indicating telephone order), or " MO" (indicating mail order) as applicable, on the Sales Draft in lieu of the Cardholder' s signature. CUSTOMER assumes all responsibility for identification of the Cardholder and the validity of the Card information for telephone and mail orders. For telephone and mail order Card transactions where merchandise is to be shipped or delivered to or for the Cardholder, the shipping date shall not be more than five calendar days after the Authorization is obtained, and any shipping costs not included in the Authorization amount must not exceed 15% of the amount authorized.

6.2 An installment payment option may be offered for telephone or mail order merchandise if all terms are clearly disclosed, each installment is authorized, the first installment is not submitted for settlement until the merchandise is shipped, and subsequent installments are submitted no more frequently than monthly.

6.3 Under no circumstances may CUSTOMER require that a Cardholder complete a postcard or other document which displays the Cardholder' s account data in plain view when mailed.

7. Multiple Sales Drafts and Partial Consideration .

7.1 Except as shall be specifically set forth in the Operating Guide or the Association Rules, CUSTOMER shall list all items of goods and services purchased during each Card transaction and the total amount thereof on a single Sales Draft.

7.2 CUSTOMER shall comply with all special procedures and conditions applicable under the Operating Guide and the Association Rules with respect to any partial payment, installment payment, delayed delivery or advance deposit situation and any delayed or amended charges for a travel and entertainment transaction. CUSTOMER shall not use more than one Sales Draft to represent a single Card transaction to avoid the need for Authorization.

8. Preauthorized Orders and Recurring Sales .

8.1 A Preauthorized Order or Recurring Sale may include the payment of recurring charges such as insurance premiums, subscriptions, membership fees, tuition or utility charges and may also include preauthorized health care payments (subject to a Schedule).

8.2 If CUSTOMER is authorized to accept Preauthorized Orders or Recurring Sales, Authorization for each such Card transaction, regardless of the amount, must be obtained and CUSTOMER must write " Recurring Transaction" (for Visa and other non-MasterCard Card transactions) or " PO" (for MasterCard Card transactions) as applicable, on the sales Draft in lieu of the Cardholder' s signature.

3 8.3 Except for preauthorized health care payments for the incremental costs not covered by insurance, advance deposits and installment payments, all made in compliance with this Agreement and the Operating Guide and Association Rules, a Preauthorized Order or Recurring Sale may not include partial payments made to CUSTOMER for goods services purchased in a single transaction. In no event may any finance charges be imposed on any periodic payments in connection with a Preauthorized Order or Recurring Sale.

8.4 CUSTOMER may not accept a Preauthorized Order or Recurring Sale from a Cardholder for the purchase of goods or services which are delivered or performed periodically unless the Cardholder completes and delivers to CUSTOMER a written request (and, when applicable, a written renewal request) identifying (i) the goods or services to be charged to the Cardholder' s account, (ii) the amount of the preautharized or recurring charges (unless such charges are for variable amounts), (iii) the frequency of the preauthorized or recurring charges and (iv) the duration of time for which the Cardholder' s permission is granted. If CUSTOMER accepts any Preauthorized Orders or Recurring Sales for variable amounts, CUSTOMER must comply with the supplemental provisions set forth in the applicable Schedules.

8.5 The Cardholder' s written request (including any written renewal request) must be (i) retained for the duration of the preauthorized or recurring charges; (ii) provided in response to a Card issuing bank' s request for original documentation; and (iii) used no longer after receiving notice of cancellation.

9. Cardholder Refunds and Credits .

9.1 If a Cardholder returns goods or cancels services purchased from CUSTOMER with a Card, or CUSTOMER allows any other price adjustment after a sale has been completed and a refund or adjustment is due to the Cardholder (other than any involuntary refund required by applicable airline or other tariff or by law), CUSTOMER will not return cash to the Cardholder but will instead prepare a Credit Voucher and process each such refund or adjustment, as specified in the Operating Guide and Association Rules. CUSTOMER will give the Cardholder a copy of the completed Credit Voucher.

9.2 If CUSTOMER establishes a policy limiting refunds or acceptance of returned merchandise ( e.g. , no refund, exchange only, in-store credit only, or special conditions), CUSTOMER must follow the procedures regarding refunds and returned merchandise as set forth in the Association Rules including, without limitation, the proper disclosure of such policy on all copies of each Sales Draft in letters at least 1/4" high in close proximity to the space provided for the Cardholder' s signature.

9.3 CUSTOMER will not accept money from a Cardholder for the purpose of preparing and depositing a Credit Voucher that will effect a deposit to the Cardholder' s account. CUSTOMER must not process a Credit Voucher without having completed a previous Card transaction with the same Cardholder (or with a Cardholder who purchased a gift returned by the recipient). Under no circumstances may CUSTOMER require a Cardholder to waive the Cardholder' s right to dispute a Card transaction with the Card issuing bank.

10. Presentment of Card Transactions .


CUSTOMER shall electronically or physically deliver to SERVICERS Sales Drafts for all Card transactions to be processed and settled hereunder. The deadlines for submitting Sales Drafts are: (i) for VISA and MasterCard Card transactions, the special time frames specified in the Schedules for CUSTOMER' s Card transactions to qualify for the special pricing provided under applicable VISA and MasterCard incentive programs; (ii) for Card transactions involving Cards other than VISA or MasterCard, the time frames established by CUSTOMER' s agreement with the applicable Association or by the applicable Association Rules; (iii) the applicable time of day specified in the Schedules hereto and (iv) in no event later than the fifth calendar day or third banking day (whichever is earlier) after completing Card transactions (unless CUSTOMER is


entitled to any special extension of these deadlines). CUSTOMER acknowledges that the times specified in clause (iv) of the previous sentence are outside deadlines and that faster time frames are required to qualify for incentive programs .

10.2 CUSTOMER will not submit any Sales Draft that was not created in conjunction with a Card transaction between CUSTOMER and the applicable Cardholder. Under no circumstances will CUSTOMER submit any Sales Draft that has been previously charged back by the Cardholder and subsequently returned to CUSTOMER.

11. Settlement of Card Transactions .

11.1 SERVICERS will only be required to settle CUSTOMER' s Card transactions for Cards, as specified in the Schedules. Promptly after presentment of Sales Drafts pursuant to Section 10, above, as applicable, SERVICERS will initiate a transfer of the applicable settlement funds to CUSTOMER in one of the following ways:

(i) Direct Settlement Account . If CUSTOMER maintains a Settlement Account at a financial institution with which SERVICERS have arrangements permitting direct payment of settlement funds, SERVICERS will initiate a transfer of such applicable settlement funds through a credit to the Settlement Account. Such settlement will occur by the second banking day after SERVICERS process the applicable Card transactions unless a different time is specified.

(ii) Wire Transfer . If CUSTOMER receives payment of settlement funds by wire transfer, SERVICERS will initiate a wire transfer of such applicable settlement funds to the Settlement Account. Settlement by wire generally occurs by 3:00 p.m. Eastern time on the following banking day after SERVICERS process the applicable Card transactions. (iii) Automated Clearing House Credit . If CUSTOMER receives payment of settlement funds through automated clearing house credit, SERVICERS will initiate a transfer of such applicable settlement funds through ACH to CUSTOMER' s Settlement Account. Settlement by automated clearing house credit will take place the second banking day after SERVICERS process the applicable card transactions.

11.2 All settlements to CUSTOMER for VISA and MasterCard Card transactions will be based upon gross sales, less credits/refunds, adjustments, applicable discount fees when due, Chargebacks, and any other amounts then due from CUSTOMER to SERVICERS.

11.3 All credits to CUSTOMER' s Settlement Account or other payments to CUSTOMER are provisional and are subject to, among other things, SERVICERS' final audit, Chargebacks (including SERVICERS' related losses), fees and fines imposed by the Associations. CUSTOMER agrees that SERVICERS may debit or credit CUSTOMER' s Settlement Account for any deficiencies, overages, fees and pending Chargebacks, or may deduct such amounts from settlement funds due to CUSTOMER. Alternatively, SERVICERS may elect to invoice CUSTOMER for any such amounts, net due 30 days after the invoice date or on such earlier date as may be specified. 11.4

SERVICERS will not be liable for any delays in receipt of funds or errors in debit and credit entries caused by third parties including but not limited to any Association or CUSTOMER' s financial institution. In addition to any other remedies available to SERVICERS under this Agreement, CUSTOMER agrees that should any of the events set forth in Paragraph 21.3 occur, SERVICERS may, upon at least 24 hours' advance written notice, change processing or payment terms to suspend credits or other payments of any and all funds, money and amounts now due or hereafter to become due to CUSTOMER from SERVICERS pursuant to the terms of this Agreement, until SERVICERS have had reasonable opportunity to investigate and discuss such


event with CUSTOMER. In cases of fraud or similar cause, no prior notice shall be required, but SERVICERS shall notify CUSTOMER in writing within three business days after effectuating a suspension of credits or other payments, which notice shall state SERVICERS' reason for the belief that such fraud or similar cause exists. 12. Financial Accommodation .

CUSTOMER acknowledges and agrees that the Services constitute the extension of financial accommodations to or for the benefit of CUSTOMER within the meaning of Section 365(c) of the Bankruptcy Code and entail the assumption by SERVICERS of significant credit risks. By reason of the assumption of such credit risks, CUSTOMER has granted to and conferred upon SERVICERS certain security, authorization to take reserves and other assurances of payment, all of which are material to SERVICERS' willingness to continue to provide services under this Agreement. The parties acknowledge that this Agreement creates a contract for the extension of financial accommodations to CUSTOMER within the meaning of Section 365(c) of the Bankruptcy Code.

13. Fees; Adjustments; Collection of Amounts Due .

13.1 SERVICERS shall charge CUSTOMER a fee for the Services, which shall be calculated and payable pursuant to the Schedules and any additional pricing supplements. The discount fees shown on such Schedules shall be calculated based on the gross amount of only VISA and MasterCard transactions submitted to SERVICERS. The fees with respect to other Card transactions shall be a percentage of the gross amount of, or a per transaction fee for, all such Card transactions. CUSTOMER acknowledges that the fees stated herein are based upon the qualification of CUSTOMER' s transactions for certain reduced interchange fees as set by the applicable Association. If CUSTOMER' s Card transactions fail to qualify for the reduced interchange fees, SERVICERS shall process such Card transactions at the applicable interchange fees as set by the applicable Association. 13.2 The fees for Services set forth in the Schedules and any additional pricing supplement, are based upon assumptions associated with the anticipated annual volume, average transaction size and CUSTOMER' s method of doing business. If the actual volume or average transaction size are not as expected or if CUSTOMER significantly alters its method of doing business, SERVICERS may adjust CUSTOMER' s discount fee or transaction fees without prior notice.

13.3 The fees for Services so forth in the Schedules may be adjusted to reflect increases or decreases by Associations in interchange, assessment or other Association fees or to pass through increases charged by third parties for on-line communications and similar items. All such adjustments shall be CUSTOMER' s responsibility to pay and shall become effective upon the date any such change is implemented by the applicable Association or other third party.

13.4 If CUSTOMER receives settlement funds by wire transfer, SERVICERS may charge wire transfer fees of $10 per wire, notwithstanding any lesser amount shown on the Schedules, during any month in which the average daily settlement funds wire transferred to CUSTOMER is less than $10,000.

13.5 In addition to the regular Chargeback fees, as set forth on the Schedules, CUSTOMER agrees to pay SERVICERS any fines imposed on SERVICERS by any Association, resulting from Chargebacks and any other fees or fines imposed by an Association with respect to acts or omissions of CUSTOMER.


If CUSTOMER' s Chargeback Percentage for any line of business exceeds the estimated industry chargeback percentage, CUSTOMER shall, in addition to the regular Chargeback fees due to SERVICERS and any applicable Chargeback handling fees or fines imposed by the applicable Association, pay SERVICERS the excessive Chargeback fee shown on the Schedules for all Chargebacks occurring in such month in such line(s) of business. Each estimated industry


chargeback percentage is subject to change from time to time by SERVICERS in order to reflect changes in the industry chargeback percentage reported by VISA or MasterCard. Each then-current industry chargeback percentage for CUSTOMER' s applicable line(s) of business will be reflected in the monthly loss prevention report furnished to CUSTOMER. 13.7 If CUSTOMER believes any adjustments should be made with respect to CUSTOMER' s Settlement Account for any amounts due to or due from SERVICERS, CUSTOMER shall notify SERVICERS in writing within 45 days after any debit or credit is or should have been effected. If CUSTOMER notifies SERVICERS after such time period, SERVICERS may, in their discretion, assist CUSTOMER, at CUSTOMER' s expense, in investigating whether any adjustments are appropriate and whether any amounts are due to or from other parties, but SERVICERS shall not have any obligation to investigate or effect any such adjustments. Any voluntary efforts by SERVICERS to assist CUSTOMER in investigating such matters shall not create any obligation to continue such investigation or assist with any investigation in response to any future notices of possible adjustments that are not timely submitted. 14. Chargebacks .

14.1 CUSTOMER shall be responsible for all Chargeback amounts relating to Card transactions settled by SERVICERS where: (i) merchandise is returned and a proper credit for Cardholder is not received by SERVICERS for processing;

(ii) the Sales Draft is, or is alleged to have been, executed, accepted, endorsed, completed or assigned improperly without authority or not in accordance with the Authorization requirements or provisions of this Agreement;

(iii) regardless of any Authorization obtained (including without limitation, telephone and mail order transactions), CUSTOMER completed a transaction when the Cardholder did not sign the Sales Draft;

(iv) the signature on the draft was unauthorized as compared to the signature appearing on the Card, the signature panel on the Card was blank, or a limited purpose business purchasing card was accepted without appropriate authorization of the nature of the goods or services purchased (in addition to Authorization of the transaction amount);

(v) the Sales Draft is incorrectly completed, incomplete or illegible;

(vi) the Cardholder disputes the sale, quality or delivery (or availability for pre-arranged pick-up) of merchandise or the performance or quality of service covered by the Sales Draft or agreement accepted by such Cardholder;

(vii) the circumstances in which the Sales Draft was created or submitted by, or credit was received by, CUSTOMER constituted or otherwise involved a breach of any term, condition, representation, warranty or duty of CUSTOMER hereunder;

(viii) multiple Sales Drafts were executed to avoid the need to obtain authorization necessary to complete the transaction: (ix) the extension of credit for merchandise sold or rented or services performed was in violation of law or the rules or regulations of any governmental agency, whether federal, state, local or otherwise;

7 (x) a legible copy of the Sales Draft or Credit Voucher cannot be produced by CUSTOMER within ten days of SERVICERS' request (except to the extent SERVICERS are responsible pursuant to Paragraph 16.1);

(xi) the Cardholder asserts any claim or defense which the Cardholder has as a consumer of goods or services;

(xii) the Cardholder disputes the validity of a telephone or mail order Card transaction;

(xiii) the Card transaction is otherwise subject to Chargeback by the Card issuing bank or Cardholder in accordance with the Association Rules or applicable law; or

(xiv) the Card transaction is subject to Chargeback in accordance with the procedures set forth in the Operating Guide. 14.2 CUSTOMER shall reimburse SERVICERS for any Chargebacks, return items, or other losses resulting from CUSTOMER' s failure to produce a Card transaction record requested by SERVICERS within the applicable time limits.

15. Representations; Warranties; Limitations on Liability; Exclusion of Consequential Damages .

15.1 Without limiting any other warranties hereunder, CUSTOMER represents and warrants as to each Card transaction submitted by CUSTOMER under this Agreement that:

(i) the Card transaction represents a bona fide sale/rental of merchandise or services not previously submitted; (ii) the Card transaction represents an obligation of the Cardholder for the amount of the Card transaction;

(iii) the amount charged for the Card transaction is not subject to any dispute, setoff, or counterclaim;

(iv) the Card transaction amount is only for the merchandise or services (including taxes, but without any surcharge) sold or rented and, except for any delayed delivery or advance deposit Card transactions expressly authorized by this Agreement, the merchandise or service was actually delivered to or performed for the person entering into the Card transaction simultaneously upon CUSTOMER' s accepting and submitting the Card transaction for processing;

(v) the Card transaction does not represent the refinancing of an existing obligation of the Cardholder (including any obligation otherwise owed to CUSTOMER by a Cardholder or arising from the dishonor of a personal check);

(vi) CUSTOMER has no knowledge or notice of any fact, circumstances or defense which would indicate that the Card transaction was fraudulent or not authorized by the Cardholder or which would otherwise impair the validity or collectibility of the Cardholder' s obligation arising from such Card transaction or relieve the Cardholder from liability with respect thereto; (vii) the Card transaction submitted to SERVICERS was entered into by CUSTOMER and the Cardholder, and

(viii) the Card transaction was made in accordance with the terms of this Agreement, Association Rules and the Operating Guide.

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