10 Dirty Little Secrets In Your Agent Agreement Presented By: Adam Atlas – Attorney at Law June 24 th, 2010

Introduction and Disclaimer About Adam Atlas: –Licensed in New York. Based in Montreal, Canada. Also licensed in Quebec. –7 years of work exclusively in payments; –Acts for hundreds of ISOs throughout the US; –Legal columnist in –Pleased to participate in ISO education; and –Provides free advice to ISO widows and widowers. Clauses discussed in this presentation are not necessarily the norm, but appear often enough to merit discussion In this presentation, “Processor” will refer to the party paying residuals and “Processor” will refer to the party soliciting merchants and receiving residuals. NOTHING IN THIS PRESENTATION SHALL BE INTERPRETED AS LEGAL ADVICE. ADAM ATLAS IS LICENSED IN THE STATE OF NEW YORK. ANY LANGUAGE PROPOSED IN THIS PRESENTATION IS FOR GENERAL DISCUSSION PURPOSES ONLY AND WILL NOT NECESSARILY FIT WITH YOUR AGREEMENT OR ACHIEVE THE GOAL YOU WISH TO ACHIEVE WITH IT. SEEK LEGAL ADVICE WHEN REVIEWING CONTRACTS.

Confidentiality Clause Example: Here is a typical example of a confidentiality clause that could be interpreted as a non-solicitation clause: Take Away: When getting a sense of your non-solicitation obligations, look beyond the non-solicitation clause “ISO agrees that it will not, except as expressly required in the conduct of its obligations hereunder or as authorized in writing by Processor, publish or disclose, during ISO's provision of services to Processor or subsequent thereto, any trade secret or Confidential Information relating to Services that ISO may in any way acquire by reason of his or her association with Processor.” “ISO agrees that it will not, except as expressly required in the conduct of its obligations hereunder or as authorized in writing by Processor, publish or disclose, during ISO's provision of services to Processor or subsequent thereto, any trade secret or Confidential Information relating to Services that ISO may in any way acquire by reason of his or her association with Processor.”

Processor Re-Solicitation Example: ISO agreement is silent on the ability of the Processor to re-solicit the merchants ISO has brought to Processor to ‘cut’ the ISO out of the merchant relationship. Take Away: Try to add something like this to your ISO agreement: –“Processor may not re-solicit merchants referred by ISO in order to deprive the ISO of residual income in respect thereof.”

Merchants Leaving a Processor Example: Many ISO agreements prevent the ISO from assisting a merchant to find a new processor even if the merchant has indicated its intent to leave the Processor. Take Away: Try to add something like this to your agreement: –“Processor shall also not re-solicit merchants to offer them a direct relationship with Processor without benefitting the ISO under the terms of this Agreement.”

Residual Survival Reality Check Processor can certainly stop paying when: –ISO commits fraud; –ISO commits a material breach of the Rules; or –ISO takes merchants in contravention of ISO Agreement. Processor might have the right to terminate when: –ISO commits a violation of any Rule; –ISO breaches any obligation under the ISO Agreement; or –ISO does not cure breach within a specified delay. Processor should not terminate residuals for: –any reason whatsoever; –absolutely any breach of ISO Agreement; –unintentional violation of a non-compete clause; or –automatically on termination of the ISO Agreement.

Unilateral Processor Price Changes Example: Processor maintains the right to change Schedule “A” at any time and for any reason or no reason without notice or consent of ISO. Take Away: Try to have you agreement accommodate the need for Processors to pass through pricing increases, without giving the Processor to tack on pure profit increases over and above interchange and other cost increases.

Processor pays Split on Only Part of Revenue Example: A Processor agrees to pay ISO 80% of revenue it brings in on (i) interchange; (ii) chargebacks; and (iii) terminal leases. Take Away: Try to make your agreement clear that ISO is paid a split on all revenue that Processor earns in respect of your Merchants including, for example only, early termination fees, minimum monthly fees, statement fees etc…

Fraud and Chagebacks Example: The wording of the ISO Agreement states that the ISO is liable for any losses under a Merchant Agreement to the extent that such losses arise directly or indirectly on account of any breach of the ISO Agreement by ISO. Take Away: Try to narrow the definition of when ISO becomes liable for Merchant fraud and other losses to instances where ISO had a direct hand in creating or enabling the fraud.

Hidden Personal Guarantee Example: “If any provision hereof is for any reason determined to be invalid, such provision shall be deemed modified so as to be enforceable to the maximum extent permitted by law consistent with the intent of the parties as herein expressed, and such invalidity shall not affect the remaining provisions of this Agreement, which shall continue in full force and effect. The undersigned also personally guarantees performance of the ISO under this Agreement.” Take away: Read your agreement carefully.

Not a Word on Processor Obligations Example: An ISO Agreement spread out over ten pages does not have a single word on what the Processor has to do. Take Away: Think of the various things you expect from a Processor (e.g. processing, settlement, reporting, residuals, books and records, rule compliance, security etc…) and include a clause that makes the Processor liable for them.

Processor Sells Portfolio Example: ISO has referred 500 merchants to a Processor. The Processor sells those merchants to another processor and the new processor does not honor the ISO Agreement and refuses to pay residuals. Take Away: Try to add wording to the ISO Agreement that makes it an obligation of the Processor to have a successor in interest in the portfolio continue to pay residuals and accept new merchants from the ISO.

Thank you to attendees for taking the time to listen and discuss; and thank you to Merchant Warehouse for investing in the education of the ISO community.

Merchant Warehouse ISO/Agent Program The security of a financially sound ISO Generous bonuses and benefits Uniquely fair agent contract Innovative technology In-house/dedicated customer and technical support Guaranteed lifetime residuals Marketing support In-depth sales training

Questions? Questions regarding the presentation, please Adam or call If you are interested in becoming an independent sales agent for Merchant Warehouse, please contact Doug Small at ext 2535 Merchant Warehouse will be hosting an Agent & ISO Conference* September , which will include on-site training! for more *you must be a registered agent with Merchant Warehouse who has submitted at least 3 deals this year