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Merchant Processing Agreement

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Exhibit 10.7

Certain confidential portions of this Exhibit were omitted by means of asterisks in lieu of the text (the " Mark" ). This Exhibit has been filed separately with the Secretary of the Securities and Exchange Commission without the Mark pursuant to the Company' s request for confidential treatment pursuant to Rule 406 under the Securities Act of 1933, as amended.


This Merchant Processing Agreement, together with Schedules A and B attached hereto and incorporated herein (" Agreement" ) is made and entered into this 1st day of, April, 2002 by and between KeyBank National Association, a national bank with its principal office located in Cleveland, Ohio (" KeyBank" ), and Heartland Payment Systems Inc. (" HPS" ), a Delaware Corporation with its principal office located in Princeton, New Jersey.


WHEREAS, KeyBank has established a credit card merchant processing program (" Program" ) whereby KeyBank provides processing and related services for merchants which accept, as a method of payment for goods and services, Visa, MasterCard and other proprietary credit cards approved for acceptance by KeyBank; and

WHEREAS, the Program is operated in conformity with applicable by-laws and regulations of Visa U.S.A., Inc. (" Visa" ) or its successor, and MasterCard International, Inc. (" MasterCard" ) or its successor and regulations of governmental agencies; and

WHEREAS, KeyBank is a member of Visa and MasterCard; and

WHEREAS, Heartland Payment Systems, Inc. will from time to time enter into contracts with individual clients (" Clients" ) to provide merchant processing services consistent with the Program to said Clients (" Plan" ); and

WHEREAS, Heartland Payment Systems, Inc. has entered into an agreement with Vital to provide various services related to the Plan, including but not limited to risk management, front-end and back-end processing, and merchant chargebacks; and

WHEREAS, Heartland Payment Systems, Inc. desires to have KeyBank perform certain other processing and related services of the Program which are applicable to the Plan and which are set forth on the attached Schedule A (Description of Services, Fees and Charges) and on such additional schedules as the parties mutually agree upon.

NOW, THEREFORE, in consideration of the mutual promises of each, the parties agree as follows:



1.1. General

(a) KeyBank will perform such processing and related services as are applicable to HPS' s Plan as set forth in Schedule A.

(b) KeyBank will process HPS' s Plan in accordance with accepted industry standards and in a manner that is consistent with the existing care and attention used for its current portfolio.

(c) HPS acknowledges and agrees that its obligations hereunder and in connection with the Plan include compliance with:

(i) all state and federal laws and regulations which affect the Plan; and

(ii) applicable by-laws and regulations of Visa and/or MasterCard, including but not limited to, providing to KeyBank any information regarding HPS or its Clients requested by KeyBank that is required to be provided to Visa and/or MasterCard.

(d) HPS will pay KeyBank charges as set forth on attached Schedule A in the manner as set forth in Section 1.5.

(e) HPS will, at its expense, administer the Plan in accordance with established risk management practices and take or cause to be taken any such additional action as may be appropriate or necessary to protect KeyBank against any loss as a result of abuse, or fraud on the part of any Client.

(f) HPS has received, and understands and agrees to comply fully with all by-laws and regulations of Visa and MasterCard, including but not limited to, rules regarding independent sales organizations and member service providers.

(g) HPS shall be responsible for all actions or failure to act by Vital in compliance with any of the requirements set forth in this Agreement.

(h) HPS represents that it maintains a sales office at 343 West Bagley Road, Suite 400, Berea, Ohio 44017, and sales representatives throughout the United States. HPS agrees that it will provide KeyBank with written notice of any sales locations or any changes in the location of its current sales office. In addition, HPS shall disclose the following on all statements, marketing and other materials delivered to Clients the following disclosure: " Visa and MasterCard services provided through KeyBank National Association" .

(i) In the event of any inconsistency between any provision of this Agreement and the by-laws and regulations of Visa and/or MasterCard, the by-laws and regulations of Visa or MasterCard in each instance shall be afforded precedence and shall apply.


(j) HPS acknowledges and agrees that Visa and MasterCard are the owners of their trademarks and service marks, that HPS will not contest the ownership of such marks, and that Visa and MasterCard each has the right to immediately and without advance notice prohibit HPS from performing any further service or activity relating to use of their respective marks and the operation of their programs should HPS be deemed by Visa or MasterCard to have violated any Visa or MasterCard by-law or regulation relating to its performance as an independent sales organization or as a member service provider.

(k) KeyBank and HPS agree that in performing their responsibilities pursuant to this Agreement, they are in the position of independent contractor. This Agreement is not intended to create, nor does it create and shall not be construed to create, a relationship or joint venture or agency or any association for profit between KeyBank and HPS. HPS is not authorized thereunder to hold itself out as an agent of KeyBank or to inform or represent that HPS has authority to bind or obligate KeyBank or to otherwise act on behalf of KeyBank.

1.2. Client Relationship Requirements

(a) HPS must satisfy in full the requirements attached in Schedule B before any Client may become a participant in the Plan. Changes to the requirements must be documented by HPS and forwarded to KeyBank for review. No changes in the requirements set forth in Schedule B shall be effective as to KeyBank until approved by KeyBank in writing.

(b) HPS shall solicit applications from eligible merchants at HPS expense, and shall provide each applicant with application materials. HPS shall collect completed, signed application materials from applicants and shall forward such application materials to KeyBank or to such other place as KeyBank may designate.

(c) HPS shall underwrite each application to determine whether each applicant is an eligible merchant, and if in compliance with the attached underwriting requirements (attached hereto as Schedule B) may then be added as an approved merchant to the program and commence processing. HPS shall promptly terminate and remove from the program any applicant that is rejected by KeyBank. KeyBank may obtain credit reports and such other information, as it deems necessary or appropriate to review and underwrite all completed application materials in accordance with the merchant processing policy. HPS will monitor on-line, and other activity, reports on a timely and regular basis for suspicious client deposit activity.

(d) KeyBank reserves the right, in its sole and absolute discretion to (i) change the merchant processing policy, (ii) reject the application of any applicant who KeyBank determines, in the good faith exercise of its underwriting judgment, fails to satisfy KeyBank' s merchant processing policy, and (iii) terminate the merchant processing agreement with respect to any merchant when KeyBank, in good faith, determines that termination is appropriate under KeyBank' s merchant processing policy and the terms of the merchant processing agreement.


(e) Notwithstanding any agreement between HPS and Vital to the contrary, HPS shall be responsible for any loss or damage to KeyBank, its subsidiaries, affiliates, employees, officers, directors, successors or assigns may sustain as a result of any chargebacks, returns, merchant or customer fraud, or any other loss or damage with respect to HPS Plan. HPS will monitor online and other activity reports on a timely and regular basis for suspicious Client deposit activity.

1.3. Client Termination

KeyBank reserves the right to terminate any Client from the Plan upon a determination that there is reasonable cause to believe that the Client represents an unfavorable credit risk including but not limited to items in Section 1.2(b) to KeyBank or HPS. KeyBank agrees that as a condition to exercising such right, it will notify HPS of its intent to terminate such Client and provide HPS with the opportunity to consult with KeyBank regarding the intended termination. Nothing in this Section 1.3 shall, however, operate as a limitation on KeyBank discretion in terminating a Client and shall not limit KeyBank' s ability to suspend deposits to a Client' s account if such action is deemed necessary or appropriate by KeyBank.

1.4. Liability for Source Documentation

HPS shall bear any liability for source documentation or data as specified in Section 1.8. Failure to provide requested source documentation (including sales draft copies, if available) on a timely basis will result in HPS' s assumption of liability in settlement of cardholder disputes and KeyBank shall have the right to charge the full amount of the transaction in question to the Settlement Account (as defined in Section 1.5(a)). The data and information received by KeyBank pursuant to this Section is the property of KeyBank.

1.5. Accounts

(a) HPS will establish, or has established, a settlement account with KeyBank which will be named " Heartland Payment Systems Commercial Customer Trust Account," pursuant to the terms of a deposit agreement between HPS and KeyBank (the " Settlement Account" ). This account will be used for the settlement of Clients' Visa and MasterCard transactions and to settle fees, charges, interchange fees and reimbursements due to KeyBank hereunder. KeyBank will furnish monthly billings for all Plan services rendered and charges incurred by HPS hereunder. KeyBank' s fees, chargebacks, charges, reimbursements, and interchange fees will be charged to the Settlement Account once per month via a debit based on the detail provided by the account analysis five (5) business days after providing HPS with such detail. HPS agrees to have sufficient funds in the Settlement Account at all times so that any charges by KeyBank against the Settlement Account provided for in this Agreement shall not result in a negative balance. Charges from other processors, if applicable, including Vital will be debited via ACH for settlement of charges monthly
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