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11.09.15 Work Session Packet
City of Farmington Mission Statement 430 Third Street Through teamwork and Farmington,MN 55024 cooperation,the City of Farmington provides quality services that preserve our proud past and foster a promising future. AGENDA CITY COUNCIL WORKSHOP November 9, 2015 6:30 PM Farmington City Hall 1. CALL TO ORDER 2. APPROVE AGENDA 3. DISCUSSION ITEMS (a) Final Recommended 2016 Operating Budgets and Tax Levy (b) Discussion-Resolution Authorizing 195th Street Reconstruction Project Internal Loan from the Storm Water Trunk Fund to the General Fund (c) Early Redemption of the Remaining Series 2005C Bonds (d) Utility Billing -Electronic Bill Presentment, Electronic Payments,Third Party Check Consolidation, Recurring ACH/Credit Card Payment Processing and Due Dates (e) Fund Balances-Committed (f) City Logo Discussion 4. CITY ADMINISTRATOR UPDATE 5. ADJOURN 41M1i. City of Farmington 0 430 Third Street Farmington,Minnesota 651.280.6800 -Fax 651.280.6899 r.4 moS www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Robin Hanson,Finance Director SUBJECT: Final Recommended 2016 Operating Budgets and Tax Levy DATE: November 9, 2015 INTRODUCTION The city council approved a preliminary 2016 property tax levy on September 8, 2015 in the amount of $9,613,254. This represents a$449,046 or 4.90% increase over the 2015 property tax levy. Since then, several line item reallocations have been made. This has not changed the total amount;the proposed levy remains the same. DISCUSSION Process The city of Farmington follows the typical budget timeline of other cities and counties in Minnesota. During summer and fall workshops council reviewed draft 2016 budgets. A"summary approach"was used when reviewing fund and department budgets, leaving the detailed work to the city administrator and staff. A preliminary tax levy was certified to the county auditor in September. A budget adoption date was also sent to the county auditor for inclusion in the Truth in Taxation notices which will be sent to all property owners later this month. Finally, after considering any comments received from property owners during the public hearing to be held on Monday,December 7, 2015,the city council will be asked to approve the final budget and tax levy which is due to the county by December 28, 2015. Changes from Preliminary Levy to Recommended Final Levy While the total levy remains the same, staff has made the changes detailed below to the proposed 2016 General Fund budget. Farmington Preliminary Net Tax Levy(9/8/2015) $9,613,254 Decrease in human resources budget per council direction ($22,000) Increase in elections budget-equipment $22,000 Increase in police budget—radio fees/warranty $5,000 Increase in fire budget-human resource costs -training $15,000 Decrease in permit revenues $14,702 Decrease in administrative reserve ($34,702) Increase in community development(2015 project carryover) $10,000 Increase in misc. revenue(comm. dev. carryover, fund balance) ($10.000) Proposed Farmington Final Net Tax Levy(11/9/2015) $9,613,254 • Per your direction at the September 8, 2015 council meeting,the 2016 human resources budget has been reduced. For now,the placeholder for the to-be-determined position is reflected as a reduction in the administration budget. • In 2016 the city must purchase new equipment for elections. Staff recently received updated costs which are$22,000 higher than originally budgeted. Staff reallocated the human resource costs savings above to the elections budget to cover the purchase price of the new equipment. • While reviewing the 2015 actual expenditures and 2016 budget staff determined the 2016 budget for police radio subscriber fees and the related warranty for the police department was low. The $5,000 increase brings the budget to the amount needed to fully cover these items. • Permit revenue was further reduced for 2016. For 2015 building permit revenues were budgeted a $380,000;the 2016 amounts have been reduced a total of$114,702 to $265,298. • The administrative reserve was reduced to $30,000. Offset was increased police budget(radios)and decreased permit revenue. • The Community Development budget was increased $10,000. These funds were committed to the Downtown Redevelopment study in 2015,but this project will not be completed until 2016. In 2015, before spending the city's General Fund monies, any progress billings will be first paid for from tax increment administrative funds and grant dollars. • To balance the budget, similar to the current year's budget,the carryover of funds which will be included in the year-end fund balance is reflected as miscellaneous revenues in the following year's budget to recognize the planned utilization of those dollars in the following year. Final Recommended General Fund-Budget and Tax Levy The final recommended General Fund budget and tax levy are as follows: 2015 2016 Change Budgeted General Fund Expenditures 11,482,624 $11,801,725 2.78% Farmington Net Tax Levy $9,164,208 $9,613,254 4.90% The recommended 2016 General Fund budget is a solid, comprehensive budget. Along with the debt levy, which provides debt service funding for the City's debt obligations, it provides for the following: • Funds human resource costs based on union contracts,benefits arrangements and the wage study implementation plan previously approved by council,retirement contributions as established by the legislature, and estimated worker's compensation premiums. • Provides funding for scheduled debt principal and interest repayment obligations, and continued efforts towards strengthening the city's debt cash flows to achieve full compliance with the 105% funding requirement. • Invests in deferred equipment needs for the fire department SCBA,turnout gear and computers. • Spends Local Government Aid(LGA)to bridge deferred vehicle needs as set forth in the Fire Capital Improvement Plan(CIP)and in the General Equipment Fund until the city's Equipment CIP comes into effect in 2021. • Continues long-term funding for the Streets CIP, Farmington Fire Relief Association, seal coating,trail maintenance and building maintenance. Change in 2016 Net Tax Levy from 2015 Net Tax Levy The changes in the net tax levy can be summarized as follows: 2016 Levy 2016 Levy $Impact %Change Decrease in fiscal disparities revenue $133,173 1.46% Decrease in permit revenue $114,702 1.26% Increase in transfers out,primarily Fire CIP $110,600 1.21% Increase in fire—SCBA, turnout gear, Toughbook computers $96,545 1.05% Increase in technology costs, excluding fire $46,278 .50% Increase in police budget-radio subscriber fees &warranty $15,039 .16% Increase in human resource costs—fire training $15,000 .16% Decrease in the debt levy(MSA$'s) ($88,880) (.97%) All other remaining line items combined $6.589 .07% $449,046 4.90% Expenditures by Department The proposed 2016 department budgets for the general fund are as follows: 2015 2016 %Change Administration $829,877 $803,482 (3.18)% Human Resource 263,344 279,035 5.96% Finance and Risk Management 614,019 681,973 11.07% Police 4,114,992 4,187,762 1.77% Fire 1,042,717 1,140,007 9.33% Community Development 526,475 604,498 14.82% Engineering 698,835 656,688 (6.03%) Municipal Services 1,289,684 1,245,499 (3.43%) Parks and Recreation 1,276,674 1,290,795 1.11% Permanent Levy Adjustment 30,000 5,379 (82.07)% Transfers Out 796,007 906 607 13.89% Total Expenditures $11,482,624 $11,801.725 Items of note include: • The finance and risk management budget reflects increases in human resource costs of.5 FTE(utility billing)in 2015,technology costs,property casualty premiums,and insurance deductibles being paid. • The increase in the fire budget begins to provide for systematic replacement of SCBA equipment,turnout gear and computer technology. • The increase in the community development budget reflects the transfer of human resource costs from the engineering department to more accurately reflect reporting lines and the carryover of funds for the downtown redevelopment study. • The decrease in engineering reflects the transfer of human resource costs to community development to more accurately reflect reporting lines. • The increase in the transfers out budget is primarily due to transfers to the Fire Capital Projects fund in accordance with the Fire CIP. Tax Levy Impact-Residential In 2016 the estimated market value(EMV)for the average residential home in Farmington is $212,787, a 6.66%increase from 2015. The impact of the proposed 2015 tax levy for the city portion of the average residential homes property taxes is projected to be an annual increase of$45.81 or$3.82/month. This is a decrease of$2.37 from the most recent estimate of$48.18/year provided to council in September. The county's updated tax capacity figures for properties located in the city of Farmington shows an overall $3.6 million decrease in estimated taxable market value. The estimated market value for residential properties declined; commercial, industrial, apartments and rural vacant remained the same;and utility,railroads and personal property increased. The mix changed and resulted in a net increase in the city's tax capacity of $4,507. Debt Service Funds, Special Revenue Funds, Capital Projects Fund, Enterprise Funds In addition to the General Fund,the city council also reviewed Debt Service Funds, Special Revenue Funds, Capital Projects Funds and Enterprise Funds operating budgets during the summer and fall. Only the Fire Capital Projects Fund budget has changed since you last reviewed them during your August 10, 2015 workshop. It has been updated to reflect the updated Fire CIP and recent sale of Rescue 1. Copies of the summary budgets are attached for you. Finally,updated fund balance projections have also be included for your review. BUDGET IMPACT The attached would establish the budgets for 2016. ACTION REQUESTED The purpose of this item is to provide council with one final opportunity to review the proposed budgets before you are asked to approve the final levy on Monday, December 7, 2015. If you need additional information before the meeting please let me know so I can have the information ready. ATTACHMENTS: Type Description © Backup Material General and Debt Service Fund Budge D Backup Material Special Revenue, Capital Projects and Enterprise Fund Budgets i Backup Material Fund Balance-Actual and Projected City of Farmington Budget and Tax Levy 2015 Budget,2016 Proposed and 2017 Proposed 2015 2018 Budget% 2017 Budget Change Company Budget Proposed Change Proposed • Non-Property Tax Revenues I • Licenses and Permits 483,220 371,203 (23.18)% 371,490' 0.08% IntergovernmentalRevenue 780,867; 803,134 5.58% 778,857. (3.02)% Charge for Service 558,950 591,700 5.86% 575,200: (270)% Fines and Forfeitures 72,000, 65,000_ (9.72)%— 85,000; 0.00% Investment Interest 20,000; 18,462 (7.69)% 18,482; 0.00% 1• Miscellaneous 121,000 56,685 (53.15)% 48,1851 (15.00)% Transfers In 1,124,180; 1,148,371 2.15% 1.182,840; 3.00% Total Revenues 3,140,207] 3,054,555 (2.73)% 3.040,034' (0.48)% Expenditures i Administration 829,877; 803,482 (3.18)% 934,125; 16.28% ' Human Resource 263,344; 279,035 6.96% 290,102. 3.97% Finance and Risk Mgmt 614,019' 681,973 11.07% 715,940' 4.98% Police 4,114,992 4,187,782 1.77% 4,331,181. 3.42% Fire .. ....... 1,042,717 1,140,007 9.33% 1,388,877; 21.88% Community Development 526,475, 804,498 .14.82%_____ 892,830• 14.61% Engineering ---- 898,835; 656,688 (6.03)% 690,684_. 5.18% Municipal Services 1,289,684 1,245,499 (3.43)% 1,394,511 11.96% Parks end Recreation 1,276,874 1,290,795 1.11% 1,318,993 2.18% Penn LevyAdJ 05,'16,'17) 30,000. 5,379 8207)% 30,000 457.72% Transfers Out .____ Total Expenditures -- , 11,482,824' 11,801,7251 2.78% 12,898,830, 7.58% Revenues Over(Under)Expenditures (8,342,417); (8,747,170) 4.85% (9,868,798): 10.40% Fiscal Disparities 2,237,937; 2,104,764 (5.95)% 2,077,080; (1.32)% General Fund Levy 6,104,480; 6,842,4061 8.81% 7,579,718' 14.11% Debt Levy Debt Levy-Bonds 2939,728; 2,850,848 (3.02)% 3,184,903; 11.72% Debt Levy-Fire Truck _ — — 120,000: 120,000 0.00% 117,5621 (2.03)% Total Debt Levy 3,059,728; 2,970,848 (2.90)%1 3,302,4651 11.16% Ag Credit 0, I : Farmington Net Tax Levy 9,184,208, 9,613,2541 4.90%1 10,882,1811 1320% Location:Documents\FARMINGTON1 Budget 2016-2017\1 General Fund Budget Summary Page 2015 Base 11/3/2015 4:22:16 PM General Fund Detailed Non-Property Tax Revenue Summary 2013 Budget,2014 Budget, 2015 Proposed and 2016 Proposed Object 2013 2014 2015 2016 Account Budget Budget Proposed Proposed LIQUOR LICENSES 26,000 26,000 29,6001 31,0001 BEER&WINE LICENSES 3,000. 2,800 2,200 2,200' CLUB LICENSES 300 300 500 3001 ARCADE LICENSE 600 655 520 655 MASSAGE LICENSE 750: 850 100 1001 GAMBLING LICENSE/PERMIT 300 300 150 200, OTHER LICENSE&PERMIT 3,000. 2,500 1,400 1,9001 ANIMAL LICENSES 1,400' 8,600 1200 5,0001 _ Licenses 34,350, 42,005[ 35,6701 41,3551 BUILDING PERMITS 293,000 315,000 380,000 265,2981 REINSPECTION FEES 300 400 8001 6001 PLUMBING&HEATING PERMITS 31,000 32,5681 35,0001 32,0001 SEWER PERMITS 5,000 5,0001 5,000 5,000 ELECTRIC PERMITS 7,100 i 12,0001 12,000 ISTS PERMITS 500 5001 3501 3501 COUNTY SEPTIC FEE UTILITY PERMITS 5,500. 5,5001 5,500, 5,5001 STREETBREAKING PERMITS 200 0 SIGN PERMITS 500 500 5001 5001 BURNING PERMITS 4,200 4,300 4,3001 4,500! OTHER PERMITS 7,000 5,000 4,1001 4,100 Permits 347,200 375,8681 447,550 329,848 licenses and Permits 381550 417873 `r `483,220 371 203 FPULRAL GRANT 0 0 LOCAL GOVERNMENT AID 245,329 276,6071 284,884; MSA MAINTENANCE 163,150. 163,150 190,000. POLICE AID 155,000. 160,362 170,000; 180,0001 POST TRAINING 10,000 14,000 25,0001 31,0001 FIRE AID 73,000' 92,000 92,0001 110,000 STATE GRANT 1 2,000 2,000 i MARKET VALUE CREDIT 3,000: 3,000 COUNTY MISCELLANEOUS 5,250 5,2501 5,250 5,250! OTHER MISCELLANEOUS 1,200 800, 1 Intergovernmental 410,600 683,801 76dB57 4{k803134 CUSTOMER SERVICES NONTAXABLE 600 600' 600 ZONING&SUBDIVISION FEES 3,500 3,000 1,600 0' ADMINISTRATION FEES-PROJECTS 1,000 5001 250 01 FIRE CHARGES 130,000 164,000 175,0001 215,0001 POLICE SERVICE CHARGES 75,000: 112,500 75,0001 75,0001 EROSION&SEDIMENT CONTROL 10,500 10,500 10,5001 12,000 G.I.S.FEES 200 0 PUBLIC WORKS MISC CHARGES 3,000 --- 200 3001 RECREATION FEES-GENERAL 100,000 100,000 97,000 96,000, POOL SWIM CESSION PEES 17,000 38,000 40,000 37,000; - - - -- 8 - 17,000 14,00011 13,000, CONCESSIONS 9,500 10,000 13,000' 11,000; RECREATION FEES-SENIOR CTR 13,850 11,000 16,0001 18,000 MEMBERSHIP FEES-SENIOR CTR 10,500 14,000 13,0001 12,000 Location:Documents\FARMINGTONIBudget 2015-201611,1 Gen'i Fund Revenue Summary Base 2014 Page 1 of 2 General Fund Detailed Non-Property Tax Revenue Summary 2013 Budget,2014 Budget, 2015 Proposed and 2016 Proposed Object 2013 2014 2015 2016 Account Budget Budget Proposed Proposed MOBILE MEALS-SENIOR CTR 1 I ADVERTISING Oi—__ 5001 1 ADVERTISING 1,800, 1,8001 2,2001 2,200' SALES OF ASSETS 33,200 2,000, 0! FRANCHISE FEE 75,000 100,000; 100,0001 100,000 I Char es For Services 521,650 585100 558 950 591,700 ; COURT FINES 62,000 70,000; 72,000i 05,000 CODE VIOLATIONS&ADMIN FINES 800 800' I Fines&Forfeitures 62,800 .70800 721000 65,000 .,._.-.,.. INTEREST ON INVESTMENTS 60,000 55,000 20,000 18,462. ' GAIN/LOSS INVEST MKT VALUE ;•Investment Inco e 1 7 = 60,000 '!55;000 20,000 `:18,4621 MISCELLANEOUS REVENUE 7,000 5,500; 86,000 15,000; CASH OVER&SHORT I RENTAL INCOME-RRC 8,500 13 000; 18,000! 20,000; RENTAL INCOME-POOL 3,500 3,0001 3,0001 2,0001 RENTAL INCOME 7,000. 14,0001 14,000; 19,6851 DONATIONS 6,500 01 Mlsd Revenue 32,500 35 500 121,000 56,665; OPERATING 1 RANSFERS 1,064,498 1,066,612 1,124,180 1,148,3711 Transfers In 1,064,498 1,086,612 1,124,180 1,148,37t Total Revenues $2,533,598 $2,934,776 ,$3,140,207 $3,054,555-; Location:Documents\FARMINGTONIBudget 2015-201611.1 Gen'l Fund Revenue Summary Base 2014 Page 2 of 2 General Fund Expenditure Detail Summary . 2013 Budget,2014 Budget, 2015 Proposed and 2016 Proposed Company 2013 2014 2015 2016 Budget Budget Proposed Proposed • Expenditures Administration Legislative(1005) 78,279; 73,574 109,514 86,906; Historical Preservation(1006) 7,5001 7,500 7,500 3,855' Administration(1010) 514,815; 457,204 419,713 357,747: . Elections(1013) • 22,050: 32,837 21,839 57,548. Communications(1014) 84,5221 85,923: 100,641 102,105 City Hall(1015) 204,1361 201,534 170,670 195,321 Community Development(1035) 10,476; 0 u rAdminfstratlon 621,778 8ti58,572 ° 829,877 ,a803,482 Human Resources 188,1661 251,726 263,3441 279,035 Human Resource(1011) 188,1661 251,726 263,344, 279,035. iluman Resources 188 166 251,726 263,344 279,035' Finance and Risk Management 1 Finance(1021) 375,597 406,654. 434,019: 491,973 Risk Management(1022) 134,000 155,500 180,000; 190,000: ;Finance and,Risk Mn emenl ��t`5 . �.,' ,r 509 597 562,154 " '41,099 `,g{,ri681,973 Police Police Administration(1050) 790,695 779,548 818,227; 840,955 1 Patrol Services(1051) • 2,508,709 2,520,076 2,516,154; 2,679,435' Investigations(1052) 707,613 766,865 774,4611 662,472 Emergency Management(1054) 5,400 6,150 6,1501 4,900 • i olice +- v{c fi 4;011417 4,07 ,639 44'114992 -::'4,187,7621 Fire Fire(1060) 756,3031 1,066,542 984,652 1,140,007 Rescue(1061) 49,2011 54,724 58,065 0. Fire Truck(1062) 01 0 QiiIFire '4 t+� y`�".i ' !x 2r , r , ;,805 504 1 121{266 '(,042,717 ';1 140,007: Engineering Ehgineering(1070) 542,1851 539,884 581,252 531,112 Planning(1030) 259,2171 252,209 268,756 347,774 Building Inspection(1031) 246,963; 258,320 259,719 256,724 Natural Resources(1076) 107,4671 105,360. 117,583 125,576 i1.6,E(tgineering 1,155832 ;':11558773 '1225;310 1f261186 1 Municipal Services Streets(1072) 1,071,4891 1,042,795. 199,690 1,018,604 Snow Removal(1073) 191,3621 192,112. 23,6871 226,895 v� 1,„.: .... i � i�ilp31 �c:7::. : rvices';r • 262;851 1,234,907 223 377 1,2.46499 Parks and Recreation Park Maintenance(1090) 611,650 559,036 595 7421 608,700 Rambling River Center(1093) 146,602 153,287 169,7511 171,298 Park&Rec Admin(1094) 1 261,637 257,873 248,062 i _ 262,158 Recreation Programs(1095) 118,110 112,851 113,259; 113,407 ! Swimming Pool(1097) 141,509 139,168 149,8601 135,232 r1G$ arks arld RecreationKl i4[;-P a 111.,` ' '7 " 1,2`!6608 - 1,222 215 1;276,674 1�290�795 1 Perm Levy Adj(2015&2016)and 113 Delq Exp(2016) ` I 30,0001 5,379 Transfers Out 435,000.00 490,579,00 796,007,00; 906,607.00 Transfers Out 435,000,00 -490,579.00 7 96;00700 906,607.00' Tofal Expenditures 10,568,653 -11909,831 80,41:6 317 11,601,725 11/3/2015 4:23:03 PM Page 1 of 1 Debt Service Funds Summary *Includes Fund 3005(formerly 86A)as placeholder for Fire Truck loan, Fund 3093 as Placeholder for 2015A 195th St Bond Issue, 2013 Actual,2014 Budget, 2015 Proposed and 2016 Proposed • Company 2013 2014 2015 2016 Actual Budget Proposed Proposed Revenues Property Taxes(i.e.Debt Levy) • 2,600,801 2,943,000' 3,059,728 2,970,848 Special Assessments 543,122 239,041 489,607 466,817 Deferred Assessments(VRC) 23,539 331,5981 Interest on Investments 0 01 8,440 24,745 Total Revenues 3,167,463 3,513,639E 3,557,775 3,462,410 Expenditures —— Principal Repayment 7,444,424 2,473,156 3,082,819 4,527,474 Interest on Debt 1,218,973 1,078,2121 973,822 972,115 Debt-Fiscal Charges 153,888 60,6081 118,162 29,089 Total Expenditures 8,817,265 3,611,9761 4,174,803 5,528,678 Other Financing Sources Bond Proceeds 6,860,000 14,2501 4,290,000 Transfers In : 4,242,466 639,860 826,140 1,878,552 Transfers Out (1,618,800) (202,000) (4,437,000) (117,000) • Total Transfers 9,483,8661 452,1101 679,1401 1,761,552 • Change in Fund Balance 3,833,863• 353,7731 62,1121 (304,716) 11/3/2015 4:23:20 PM Page 1 of 1 Special Revenue Funds Budget Summary 2013 Actual,2014 Budget, 2015 Proposed and 2016 Proposed Company 2013 2014 2015 2016 Actual Budget Proposed Proposed Revenues EDA(2000) 132,258_ 2,050 750 _ 1,572 TIF-City Center(2050) 129,725 1.35,000 137,120 1.11,978 TIF-Eagles(2051) 0 14,000 190 Police Donations-8;Forfeitures(2100) 13,415 5,000 5,060 5,084 Park Improvement Fund(2300) 86,621. 52,860 21,193 9,008 Ice Arena(2500) __ 279,692 285,1001 306,860 321,750 Total Revenues 641,710 494,010; 471,173 449,392 Expenditures EDA(2000) 68,255 42,013, 40,750 42,430 TIF-City Center(2050) 11,595 9,304 9,304 8,704• 1 TIF-Eagles(2051) 1,657 14,000 0 Police Donations&Forfeitures(2100) 20,449 6,500 6,500 6,500, Park improvement Fund(2300) 128,879 80,000 70,000 60,000 Ice Arena(2500) 271,302 298,450 316,204 317,418 Total Expenditures 502,137 450,267 442,758 435,052• Transfers Transfers in 61,380 60,000 130,000 80,000 Transfers Out (155,672) (74,720) (50,000) Total Transfers - (94,292) (14,720)1 80,0001 80,000 Change In Fund Balance 45,281 29,0231 108,4151 94,340 • 11/3/2015 4:23:34 PM Page 1 of 1 Capital Projects Funds Summary 2014 Actual,2015 Budget, 2016 Proposed and 2017 Proposed Company 2014 2015 2016 2017 Actual Budget Proposed Proposed Revenues 1 Sanitary Sewer Trunk(3900) 64,824 34,7901 32,437 2,437 Cable Communications Fund(4000) 169,208 173,210 174,177 174,177 Road and Bridge/Street Reconstruction Fund(4100) 135,634 53,135 35,978 23,716 Fire Capital Projects Fund(4300) 49,150 15,090 15,6581 658 Storm Water Trunk(4400) 108,588 36,270 30,2381 30,238 RRC&Youth Hockey Cap-Proj Donations(Rec Cap Proj Fund-4500) _ 18,901 5,140 5,210 210 Private Capital Projects(4600) 26,050 21,990 ___22,354 2,354 Permanent Imp Revolving Fund(4900) 23,892 17,038__ 18,400 780 Gen'l Cap Equip Fund(5600) - 6,260 1 13 13 Maintenance Fund(5700) 0 4,1801 11,631 11,631 Total Revenues 600,506 360,8431 344,096 246,214 Expenditures Sanitary Sewer Trunk 7,588 0 _ -_ Cable Communications Fund 230,785 71,000 81,000 81,000 Road and Bridge/Street Reconstruction Fund(4100) 3,313 01 -_- Fire Capital Projects Fund(4300) 120,9601 62,5001 222,500 Storm Water Trunk Fund 447 350,000 RRC&Youth Hockey Cap Proj Donations(Rec Cap Proj Fund-4500) 15,817 7,500• _ 7,500 Private Capital Projects 1,6811 20,0001 20,000 Permanent Imp Revolving Fund 388 0; 4741 Gen9 Cap Equip Fund(5600) 165,707' 141,607 Maintenance Fund 1,338,7541 5,020,0001 821,500• 594,250 Total Expenditures 1,719,712 5,696,707 1,094,581 675,250 ------- .. .. ..._ Transfers Transfers In --- 820,579 5.072,7071 983,607 1,042,607 Transfers Out - (257,633) (518,833)1 (1,754,000) (219,000) • Total Transfers 562,946 4,554,074 (770,393)1 823,607 IChange In Fund Balance (556,260) (781,780) (1,520,878) 394,571 11/3/2016 4:58:11 PM Page 1 of 1 Enterprise Funds Budget Summary 2013 Actual,2014 Budget, 2015 Proposed and 2016 Proposed 2013 2014 2015 2016 Company Actual Budget Proposed Proposed Revenues Liquor Stores,Net of Cost of Goods Sold(6100:6115) 1,143,196 1,077,575 1,158,372 1,157,128 Sewer Operations(6200:6205) 1,897,807 1,795,750 1,803,280 2,046,425; Solid Waste(8300:6302) 2,026,028 1,867,700 1,928,430 1,027,295 Storm Water(6400:6405) 550,904 553,500 558,350 641,396, Water(65004.608) 1,520,581 1,699,750 1,732,312 1,677,698. Streetlights(6660:6602) 216,719 215,000 216,070 219,380: Total Revenues 7,355,215 7,209,275 7,392,814 7,669,321: Expenditures Liquor Stores 827,800 912,468 872,022 934,208 •Sewer Operations 1,621,061 1,824,550 2,703,969 2,077,805 Solid Waste 1,658,549 1,707,870 1,711,408 2,072,302 . . _ . Storm Water 501,458 666,338 701,759 637,676 Water 1,406,125 1,794,091 1,538,396 1,523,282 Streetlights 184,834 188,150 216,900 222,100 Total Expenditures 6,199,8261 7,093,467 7,744,454 7,467,3731 Transfers Transfers In 130,427 0 Transfers Out . (1,495,114) (1,414,119) (1,466,687) (1,312,923) Total Transfers (1,364,687)1 (1,414,119) (1,468,687) (1,312,923) Change In Fund Balance (269,298)1 (1,298,311)1 (1,818,327) (1,110,975), • 11/3/2015 4:24:17 PM Page 1 of 1 < m N in 00 N d' N CO N e-i N N CO LD Ln m N V N in N LD co "0 l0 Ql Cr O Ln M c0 LO N N N cn N CO 7r N N co M N CO N 4 CO CU ati N CO LA CO d; d' N N N. 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Ln U 01 LL Ln D_ d CO Z G a-' J LA Ln V) > Ln a C < E a a) a m c z .c C W 0 N U w * -a f6 * v10, of 1R#i City of Farmington 430 Third Street Farmington,Minnesota 651.280.6800 -Fax 651.280.6899 "4.4 plioofr° www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator • FROM: Robin Hanson,Finance Director SUBJECT: Discussion-Resolution Authorizing 195th Street Reconstruction Project Internal Loan from the Storm Water Trunk Fund to the General Fund DATE: November 9,2015 INTRODUCTION The 195th street reconstruction project is nearing completion. The city expects to receive its initial invoice from the county soon. The remaining invoice(s)will be received later,when all of the work has been completed and final costs tallied. As we have discussed several times,the city is paying for its share of the project from three different sources: 1)a construction draw from the city's MSA construction account which was received in late September, 2)net bond proceeds from the 2015A bond sale which were received on October 15, 2015,and 3)an internally funded loan. DISCUSSION The loan amount,exact timing of the internally funded loan disbursements, and loan repayments are not known at this time. The city will pay the county first from net bond proceeds ($3,128,294.07)and secondly the MSA construction draw($1,000,000);the loan proceeds will be spent last. To only use funds when needed, staff is proposing council adopt the attached resolution with a loan amount not to exceed$1,641,250 and to provide for draws to pay the remainder of the amounts owed to the county for the 195th street reconstruction project, as invoiced. The exact timing or amounts of the repayments of the MSA construction reimbursement funds are not known. Staff is proposing the loan be structured with the option to prepay the loan,in part or in full, at any time,without penalty. To ensure the loan is ultimately repaid, the loan will be structured to provide minimum annual payments sufficient to repay the loan in full on or before February 1, 2030(the final scheduled payment date for the 2015A bonds). The resolution further requires,that in the event the loan is not expected to be repaid in full by April 30,2029, council levy sufficient funds to repay the loan in full, including interest, as part of the 2029 debt levy so the loan is repaid in full on or before February 1,2030. Finally,two reasons why staff is recommending the city utilize an internal loan for a portion of the 195th street financing. First,the city will not`borrow' the funds until they are needed,thereby minimizing the interest cost for this project. Second,tax-exempt, general obligation bond-financings generally mandate bonds cannot be prepaid,in part or in whole, for the first 10 years. This can be very costly. For example, if the city received a$500,000 prepayment in year 5 and the city was not able to repay the corresponding bonds until year 10,the city would most likely invest those funds at a lower rate than is being paid on the bonds. Assuming you could invest the prepayment at 1.75%and the cost of the outstanding debt is 2.50%, it would cost the city$18,750 in negative interest income to wait until the optional redemption date to repay the bonds. Given the uncertainty surrounding the timing and amounts to be received from the State for the city's MSA construction reimbursement amounts,by providing for prepayments, in part or in whole at any time, an internal loan provides the city the option to minimize the length of time the debt is outstanding, in turn minimizing the amount of interest paid by providing for prepayments in part or in whole at any time. The attached amortization schedule provides a sample amortization schedule. If the loan was to be fully disbursed on November 30,2015 and annual repayments began on April 30,2016,the city would incur $242,586.32 of interest. With the opportunity to prepay at any time in whole or in part, any accelerated payments will directly reduce the amount of interest paid,ultimately saving the city money. ACTION REQUESTED This item is for discussion. Staff wanted to provide council an opportunity to ask questions before being asked to approve the item on the November 16, 2015 council agenda. ATTACHMENTS: Type Description © Resolution Resolution Authorizing Interfund Loan from Storm Water Trunk Fund to the General Fund D Backup Material Sample Loan Amortization Schedule- 195th Steet Internal Loan RESOLUTION NO.Rxx-xx AUTHORIZING AN INTERFUND LOAN FROM THE STORM WATER TRUNK FUND TO THE GENERAL FUND Pursuant to due call and notice thereof a regular meeting of the City Council of the City of Farmington,Minnesota was held in the Council Chambers of said City on the 16th day of November 2015 at 7:00 p.m. Members present: Members absent: Member introduced and Member seconded the following resolution: WHEREAS,the City of Farmington has participated with Dakota County in the street reconstruction of 195th street from Flagstaff to Diamond Path; and WHEREAS,the Council has determined it is in the best interest of the City to fmance a portion of these improvements with an internally funded loan; and WHEREAS,the Storm Water Trunk Fund has sufficient funds within its fund balance to be loaned for a period of time without detriment of any function or project for which the fund was established; and WHEREAS,the City has the taxing authority to repay the loan,but intends to utilize future Minnesota State Aid(MSA)construction reimbursement funds to repay the loan; and WHEREAS,the City of Farmington desires, by this resolution,to document the loan from the Storm Water Trunk Fund to the General fund, and to express the terms and conditions of said loan. NOW,THEREFORE,BE IT RESOLVED by the City Council of the City of Farmington, that: 1.. An interfund loan from the Storm Water Trunk Fund to the General Fund in an amount not to exceed$1,641,250 be approved; such loan to be repaid over fourteen(14)years with an annual interest rate of 2.09%(rounded True Interest Cost of the 2015A bonds); this represents the net amount projected to be owed to the county,net of the$1,000,000 2015 MSA construction draw and$3,128,294.07 of net 2015A bond proceeds previously received. 2. The loan may be drawn down as needed to pay the County. Cumulative draws may not exceed the maximum loan amount. 3. Annual repayment installments will be made on the loan from the city's Municipal State Aid construction reimbursements. 4. This loan may be repaid, in part or in whole, at any time without penalty. Interest will be calculated on an actual/365 day basis. 5. Should the MSA funds be insufficient to repay the internal loan, including accumulated interest,before December 31, 2028, council shall levy against all taxable properties within the city of Farmington,the remaining amount due and owing, including interest, on the interfund loan as part of the 2029 levy to repay the loan in full on or before February 1, 2030. This resolution is adopted by recorded vote of the City of Farmington City Council in open session on the 16th day of November, 2015. Mayor Todd Larson Attested to the day of November, 2015 David McKnight, City Administrator SEAL 2015A Sample Loan Amortization Schedule Amortization Table 1/4/2013 A simple amortization table covering 24 payment periods of a loan. 1)To use the table,simply change any of the values in the"initial data"area of the worksheet. 2)To print the table,just choose"Print"from the"File"menu.The print area is already defined. Initial Data LOAN DATA TABLE DATA Loan amount: $1,641,250.00 Table starts at date:) Annual interest rate: 2.09% or at payment number. 1 Term in years: 14 Payments per year. 1 11/30/2015 First payment due: 4/30/2016 4/30/2016 152 PERIODIC PAYMENT Entered payment: $136,430.68 The table uses the calculated periodic payment amount Calculated payment: $136,430.68 unless you enter a value for"Entered payment". CALCULATIONS Use payment of: $136,430.68 Beginning balance at payment 1: 1,641,250.00 1st payment in table: 1 Cumulative interest prior to payment 1: 11,668.00 Table Payment Beginning Ending Cumulative No. Date Balance Interest Principal Balance Interest 1 4/30/2016 1,641,250.00 14,284.72 122,145.96 1,519,104.04 14,284.72 2 4/30/2017 1,519,104.04 31,749.27 104,681.41 1,414,422.63 46,033.99 3 4/30/2018 1,414,422.63 29,561.43 106 869.25 1,307,553.39 75,595.43 4 4/30/2019 1,307,553.39 27,327.87 109,102.81 1,198,450.57 102,923.29 5 4/30/2020 1,198,450.57 25,047.62 111,383.06 1,087,067.51 127,970.91 6 4/30/2021 1,087,067.51 22,719.71 113,710.97 973,356.54 150,690.62 7 4/30/2022 973,356.54 20,343.15 116,087.53 857,269.01 171,033.77 8 4/30/2023 857,269.01 17,916.92 118,513.76 738,755.26 188,950.70 9 4/30/2024 738,755.26 15,439.98 120,990.70 617,764.56 204,390.68 10 4/30/2025 617,764.56 12,911.28 123,519.40 494,245.16 217,301.96 11 4/30/2026 494,245.16 10,329.72 126,100.96 368,144.20 227,631.68 12 4/30/2027 368,144.20 7,694.21 128,736.47 239,407.74 235,325.90 13 4/30/2028 239,407.74 5,003.62 131,427.06 107,980.68 240,329.52 14 4/30/2029 107,980.68 2,256.80 107,980.68 0.00 242,586.32 242,586.32 1,641,250.00 Page 1 yot tar City of Fa mington Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 1j`*••rao� www.ci.farmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Robin Hanson,Finance Director SUBJECT: Early Redemption of the Remaining Series 2005C Bonds DATE: November 9,2015 INTRODUCTION After the next scheduled payment on February 1, 2016,the 2005C bonds will have$1,385,000 in outstanding principal remaining. Beginning February 1, 2016, the bonds are optionally redeemable, in whole or in part, at par, plus accrued interest. The remaining interest rates range from 3.875% -4.40%. The bonds were issued to finance Fire Station#2 and are being repaid with property taxes. DISCUSSION Staff recommends calling for the early redemption of the remaining Series 2005C Bonds as soon as due notice can be properly given to the trustee,US Bank. Retiring these bonds early will lower the city's financing costs, saving the city approximately$189,000 in interest. Rather than paying issuance costs and underwriter's discounts (combined$35,000)to issue refunding bonds and incurring annual arbitrage and trustee fees at an estimated total cost of$14,750, staff recommends the city borrow$1,385,000 from the Storm Water Trunk Fund to redeem the bonds. Similar to the existing bonds,the loan would be repaid from the annual tax levy in semi-annual installments at the interest rate in effect at the time of redemption for a 10 year Agency bullet. A sample loan amortization schedule is attached. The proposed interfund loan resolution is attached. BUDGET IMPACT The benefit to the City is estimated to be$189,000 in net interest savings. A schedule detailing the remaining interest payments for the 2005C bonds, after the February 1,2016 debt service payment is included in your packet. The scheduled interest for the remaining bonds totals $346,843, less the projected interest on the interfund loan of$157,446, results in estimated net interest savings of approximately$189,000. ACTION REQUESTED This item is for discussion. Staff wanted to provide council an opportunity to ask questions before being asked to approve the item on the November 19,2015 council agenda. ATTACHMENTS: Type Description © Backup Material Sample Interfund Loan Amortization Schedule- 2005C D Resolution Resolution Authorizing Interfund Loan from Storm Water Trunk Fund to 2005C Bond Fund Backup Material 2005C Post 2-1-2016 Debt Service Remaining Debt Payments Loan Amortization Schedule Amortization Table A simple amortization table covering 24 payment periods of a loan. 1)To use the table,simply change any of the values in the"initial data"area of the worksheet. 2)To print the table,just choose"Print"from the"File"menu.The print area is already defined. Initial Data • LOAN DATA TABLE DATA Loan amount: $1,385,000.00 Table starts at date:) Annual interest rate: 2.29% or at payment number. 1 Term in years: 10 Payments per year 2 2/1/2016 First payment due: 6/30/2016 6/30/2016 150 PERIODIC PAYMENT Entered payment: $83,000.00 The table uses the calculated periodic payment amount Calculated payment $77,875.48 unless you enter a value for"Entered payment". CALCULATIONS Use payment ot. $83,000.00 Beginning balance at payment 1: 1,385,000.00 1st payment in table: 1 Cumulative interest prior to payment 1: 0.00 Table Payment Beginning Ending Cumulative No. Date Balance Interest Principal Balance Interest 1 6/30/2016 1,385,000.00 13,034.18 69,965.82 1,315,034.18 13,034.18 2 12/30/2016 1,315,034.18 15,057.14 67,942.86 1,247,091.32 28,091.32 3 6/30/2017 1,247,091.32 14,279.20 68,720.80 1,178,370.52 42,370.52 4 12/30/2017 1,178,370.52 13,492.34 69,507.66 1,108,862.86 55,862.86 5 6/30/2018 1,108,862.86 12,696.48 70,303.52 1,038,559.34 68,559.34 6 12/30/2018 1,038,559.34 11,891.50 71,108.50 967,450.84 80,450.84 7 6/30/2019 967,450.84 11,077.31 71,922.69 895,528.15 91,528.15 8 12/30/2019 895,528.15 10,253.80 72,746.20 822,781.95 101,781.95 9 6/30/2020 822,781.95 9,420.85 73,579.15 749,202.80 111,202.80 10 12/30/2020 749,202.80 8,578.37 74,421.63 674,781.18 119,781.18 11 6/30/2021 674,781.18 7,726.24 75,273.76 599,507.42 127,507.42 12 12/30/2021 599,507.42 6,864.36 76,135.64 523,371.78 134,371.78 13 6/30/2022 523,371.78 5,992.61 77,007.39 446,364.39 140,364.39 14 12/30/2022 446,364.39 5,110.87 77,889.13 368,475.26 145,475.26 15 6/30/2023 368,475.26 4,219.04 78,780.96 289,694.30 149,694.30 16 12/30/2023 289,694.30 3,317.00 79,683.00 210,011.30 153,011.30 17 6/30/2024 210,011.30 2,404.63 80,595.37 129,415.93 155,415.93 18 12/30/2024 129,415.93 1,481.81 81,518.19 47,897.74 156,897.74 19 6/30/2025 47,897.74 548.43 47,897.74 0.00 157,446.17 20 12/30/2025 0.00 0.00 0.00 0.00 157,446.17 Total interest for 2005C interfund loan. Page 1 RESOLUTION NO.Rxx-xx AUTHORIZING AN INTERFUND LOAN FROM THE STORM WATER TRUNK FUND TO THE 2005C BOND FUND Pursuant to due call and notice thereof a regular meeting of the City Council of the City of Farmington, Minnesota was held in the Council Chambers of said City on the 16th day of November 2015 at 7:00 p.m. Members present: Members absent: Member introduced and Member seconded the following resolution: WHEREAS,the City of Farmington issued the 2005C bonds to finance fire station#2; and WHEREAS,the Council has determined it is in the best financial interest of the City to redeem the 2005C bonds on their optional redemption date; and WHEREAS,the Storm Water Trunk Fund has sufficient funds within its fund balance to be loaned for a period of time without detriment of any function or project for which the fund was established;and WHEREAS,the City has the taxing authority to repay the loan, WHEREAS,the loan will be repaid from an annual tax levy over ten years(2016—2025)in semi-annual installments;and WHEREAS,the City of Farmington desires,by this resolution,to document the loan from the Storm Water Trunk Fund to the 2005C G.O. Capital Improvement Bond Fund,and to express the terms and conditions of said loan. NOW,THEREFORE,BE IT RESOLVED by the City Council of the City of Farmington, that: 1. An interfund loan from the Storm Water Trunk Fund to the 2005C G.O. Capital Improvement Bond Fund in an amount not to exceed$1,385,000 be approved; such loan to be repaid over ten years in semi-annual installments with an annual interest rate of _%(10 year Agency bullet). 2. Semi-annual repayment installments will be made on the loan from the city's annual tax levy. These payments will originate as part of the City's tax levy against all taxable properties within the City of Farmington, and will be adopted as part of the City's budget and tax levy from 2016-2025. 3. This loan may be repaid, in part or in whole, at any time without penalty. Interest will be calculated on an actuaU365 day basis. This resolution is adopted by recorded vote of the City of Farmington City Council in open session on the 16th day of November,2015. Mayor Todd Larson Attested to the day of November,2015 David McKnight,City Administrator SEAL City of Farmington, MN 2005C Post 2/1/16 Optional Redemption Date Debt Schedule Original Issue Date:July 1,2005 Final Maturity Date: February 1,2026 Interest Payment Dates:2/1 and 8/1 Optional Redemption Date:2/1/16 Pmt Year Principal Rate Interest 2016 28,876.25 2017 110,000 3.875% 55,621.25 2018 115,000 4.000% 51,190.00 2019 120,000 4.000% 46,490.00 2020 130,000 4.050% 41,457.50 2021 135,000 4.100% 36,057.50 2022 140,000 4.150% 30,385.00 2023 150,000 4.250% 24,292.50 2024 155,000 4.300% 17,772.50 2025 160,000 4.300% 10,960.00 2026 170,000 4.400% 3,740.00 1,385,000 346,843 Less Projected Interfund Loan Interest: 157,446 Projected Interest Savings i 189,396 41i• City of Farmington kritik.ok 430 Third Street Farmington,Minnesota ,, o 651.280.6800 -Fax 651.280.6899 POO www.ci.farmington.mn.us TO: Mayor, Councihnembers and City Administrator FROM: Robin Hanson,Finance Director SUBJECT: Utility Billing-Electronic Bill Presentment,Electronic Payments,Third Party Check Consolidation,Recurring ACH/Credit Card Payment Processing and Due Dates DATE: November 9, 2015 INTRODUCTION The city presently uses eUtility Billing software to provide an electronic interface for its utility billing customers. This software allows customers to view their utility account balance online,register for a-bills, and if they have previously registered for a-bills,view their invoice online. Electronic payment options,either online through eUtility Billing or over the phone(IVR)via a dedicated 1-800 number, are provided to customers through separate Paymentus payment processing software. The eUtility Billing software provides limited features. Online bills are only available for those who have previously elected a-bills (4%of the city's utility billing customers)and only on a prospective basis. For customers who have elected to receive e-bills, the e-mail alert letting them know their bills is ready does not include the balance due or the payment due date. Customers cannot set-up recurring payment options through the website. The eUtility Billing software is also expensive to support. LOGIS would need to add an additional staff person to continue to support the eUtility Billing software which in turn would be billed to the member cities. Since the eUtility Billing software has limited functionality and is expensive to support,LOGIS researched alternatives. This past spring LOGIS arranged for five vendors to provide demonstrations of their products to its members. City staff participated in the demonstrations. Members were then asked to provide detailed feedback and additional questions to be further researched. Additional discussion occurred and ultimately two vendors were selected: InvoiceCloud and Paymentus. Now each city is responsible for further refining their research and analysis and ultimately selecting the vendor that best meets their community's needs. DISCUSSION Either software product will provide an improved customer experience. With either product,InvoiceCloud or Paymentus,customers will have the option to register for recurring payments,via eCheck or debit/credit card,themselves and different payment configurations will be available (ex. amount when due, amount when invoiced,or `x' amount once/month). Presently, customers only have the option to set-up recurring payment options by completing and submitting a paper form to city staff which must be manually entered into the system. Anytime a customer's account information is changed(e.g. bank account closed, credit card canceled for fraud, etc.)a new paper form must be completed, submitted and then manually updated by city staff. This process is cumbersome,time-consuming, and creates a situation where city staff has access to customer's financial account information which they have to securely maintain. In addition,the present system only provides one payment option,payment in full on the due date. Another example of an enhanced feature would be e-mail alerts. Alerts are used to notify customers their e- bill is ready and will now include the amount due, due date and a link to the payment portal. Subsequent reminders are available a few days before the bill is due and if the bill is delinquent. The current system only notifies a customer their bill is ready. They do not know the amount due or the due date,unless they sign-in to the eUtility Billing software. So,the question is...which vendor will provide the better customer experience and be more efficient for city staff(ie. front desk,utility billing and finance)? Staff recommends the city utilize InvoiceCloud. The city's experience with Paymentus has been positive,but staff feels there are several InvoiceCloud features, summarized below,which will provide a better customer experience and will be more efficient for staff. Courtesy e-mail address -This allows customers to establish a courtesy e-mail address where a second copy of the e-bill may be sent. Landlords complain the present system requires them to remember to forward the bill to their tenants. Tenants complain landlords do not provide them a copy of the bill. By having a courtesy e-mail address, the landlord can easily and consistently(ie. automatically)provide their tenant with a copy of the e-bill, if they so choose. This provides better customer service for both the landlord and the tenant,will eliminate many,many phone calls to city staff and has the potential to reduce delinquent balances. User ID is customer's email address—InvoiceCloud utilizes the customer's email address as their user id. This makes it much easier for customers to remember their user id and reduces the amount of staff time needed to work with customers to determine their user id and/or reset it, if necessary. Registration Not Required—Customers do not have to register to access up to 24 months (prospectively)of billing history. In addition, if a customer utilizes the one-time payment feature and has not already elected to receive an e-bill,they will automatically receive an e-bill, along with their next paper bill. The goal is to have customers become more and more comfortable with the electronic process, increasing the likelihood they will eventually elect to receive only electronic bills in the future. No mobile app is needed. The InvoiceCloud software utilizes responsive web design,which means the software recognizes the type of device the customer is using(e.g. computer,tablet, or smart phone)and automatically adjusts the software for viewing and response on the appropriate device. Bounced e-bills—If an electronic bill is sent and the email address is rejected, customers are automatically re-enrolled in paper billing. This is possible with Paymentus,but requires manual intervention by staff to review exceptions and update customer records. Customer service screen—If a customer is having trouble online and calls the utility billing staff,the InvoiceCloud software takes staff to the same screen the customer is seeing. Staff will have more knowledge about the customer's specific situation and will be able to better assist them,providing a much better customer experience and reducing the amount of staff time involved. With the Paymentus system, staff must separately log in to a customer service screen and then determine where in the process the customer is before being able to assist them. Third party check consolidation—Third party check consolidations are visually presented on a check template(rather than a single line text file)making it much easier to review and process exceptions. And the process seemed easier for coding non-utility bill payments, for example insurance payments. Pricing for Debit/Credit Cards and eChecks The InvoiceCloud product is more expensive than the proposed Paymentus pricing,but staff believes it provides the better value for our city. InvoiceCloud would charge the same for debit/credit card and e-check processing that Paymentus currently charges. However,this is more than Paymentus is proposing to charge if the city selects Paymentus to replace the eUtility Billing software. The proposed pricing for existing services is summarized below: eUtility/Paymentus InvoiceCloud Paymentus (Present Cost) (Proposed) (Proposed) Debit/Credit Cards $2.50/trans/$600 $2.50/trans/$600 $1.90/trans/$600 increment increment increment eChecks $1.50/trans/$600 $1.50/trans/$600 $.95/trans/$600 increment increment increment Move existing recurring ACH transactions to InvoiceCloud. Approximately 15%of the city's customers currently pay via recurring ACH(ie. automatic debit to their savings/checking account). Presently, staff must run a manual routine each month-end to process these payments. Staff must manually follow-up on exceptions (ie. closed accounts, insufficient funds). Staff is recommending this payment option be moved to InvoiceCloud. This provides several advantages: 1)Customers will be able to see online which bank account(s)they have set-up for recurring automatic payment. If they need to change accounts,they will be able to easily update their bank account information online. 2)Customers will be able to take advantage of different payment options (e.g. the day the bill is due, `x' day of the month). 3)InvoiceCloud will automatically notify customers of processing exceptions (e.x. insufficient funds, account closed, etc.)and customers will have the online tools to update their account information. This will provide a better customer experience. Given the large number of accounts that are already set-up for this service when these accounts are transitioned to InvoiceCloud, the charge for these accounts would be$.25/transaction. This is less than InvoiceCloud would charge for new ACH customers;that cost would be$1.50/transaction(ie. eChecks). The advantage to the city to moving recurring transactions is staff no longer has to enter this information, staff will no longer have access to customer's bank account information,this information is no longer maintained in the city's/LOGIS software and the city no longer has to secure the paper authorization forms. This will be more efficient for staff. InvoiceCloud Paymentus Existing Recurring ACH—new $.25/check $.10/check feature Third-party Check Consolidation As staff discussed earlier this year with Council,bill pay checks, those checks initiated online by customers directly from their own bank are the most time-consuming for staff and very frustrating for customers. Customers believe the checks are sent electronically/instantaneously to the city. When in fact the banks issue manual checks to the city and they may take 10-14 business days to be received. These checks are time-consuming,because a payment stub does not accompany the check. Rather, than being able to scan the stub and have the payment automatically applied to the correct account, these accounts must be manually entered by staff. Many times the checks do not include the correct and/or complete customer and account number. Staff must first manually look up this information,before the check can then be manually entered into the utility billing software. Earlier this year staff was planning to use VANCO to electronically process these checks. Since,both InvoiceCloud and Paymentus offer this feature, staff decided to wait and explore using one of these two vendors, as it would further simplify the process to deal with a single vendor. InvoiceCloud Paymentus Third-party check consolidation—new feature $.25/check $.10/check Proceeding with third-party check consolidation will provide a much better customer experience and be significantly more efficient for staff. Contact—City Attorney The city attorney has reviewed the InvoiceCloud Biller Agreement and third-party merchant processing agreements. His only concern with the Biller Agreement was compliance with the state data practices rules, but he didn't feel that was too significant because much of the water and sewer billing information is generally public and the city does not utilize social security numbers as an identifier. Staff and the city attorney do not lke the third party merchant processing agreements. Similar to the VANCO agreements the clearinghouses do not want to take responsibility for their work,unless it is gross negligence. And they want the company(in this case the city)to indemnify and hold them harmless. While we do not like these terms, these are the industry standard and are the terms of the agreements under which the services would be provided. Draft documents are included in your packet. Contract-Timing The city's present contract with Paymentus expires June 18,2016 and requires a six month notice of intent not to renew or it automatically renews for three years. Staff recommends giving Paymentus notice as soon as possible that it does not intend to renew its contract. In addition staff would l ke to work with InvoiceCloud to begin processing third-party check consolidation and recurring ACH transactions as soon as the systems can be implemented. Software Recommendation Overall,the utility billing and finance staff feels the InvoiceCloud software provides a better,more efficient product for the city of Farmington and its customers and has a more modern look and feeL Staff recommends the city select InvoiceCloud as its electronic utility bill presentment and utility bill payment processor. Utility Invoice Delinquency Definition The city's ordinance states "All charges for water, sewer, and other utility services, shall be due as stated on the bill and considered delinquent the third business day after the due date stated on the bill". Staff recommends the definition of delinquent be changed to "...and considered delinquent if not paid by the due dated stated on the bill." The present definition of delinquency was adopted when the city did not offer as many payment options. Presently, customers may pay may their bill electronically online or by phone 24 hours a day/7 days per week,by mail,by placing their payment in a city drop box or in person at city hall. The present definition creates confusion and is no longer necessary. Staff is looking for direction from council on the change in definition. If council was interested in changing the definition, staff would need to bring the proposed change to a future council meeting and a public hearing would need to be held. BUDGET IMPACT The cost of the utility bill payment processing will be divided amongst the sewer, solid waste, storm water and water funds. The cost for eChecks and debit/credit card processing will be the same per transaction cost as the city's current contract with Paymentus. The cost for recurring ACH processing and third-party check consolidation is new and will cost$.25/check. ACTION REQUESTED 1. Authorize the Finance Director to give Paymentus notice of its intention not to renew its existing utility bill payment processing contract. 2. Authorize the Finance Director to enter into the InvoiceCloud agreements for electronic bill presentment and payment processing for its utility accounts. 3. Provide staff with direction on the proposed change in definition of delinquent for utility bills. ATTACHMENTS: Type Description Di Backup Material Invoide Cloud Sample Biller Agreement ® Backup Material InvoiceCloud Sample Biller Order Form D Backup Material Sage Sample Virtual Check Processing Application © Backup Material Sage Virtual Check Merchant Agreement Terms and Conditions D Backup Material Sage Sample Credit Card Application © Backup Material Sage Merchant Agreement Terms and Conditions -Bankcard Biller Agreement 1. License Grant & Restrictions. Subject to execution by Biller of the Invoice Cloud Biller Order Form incorporating this Agreement, Invoice Cloud hereby grants Biller a non-exclusive,non-transferable,worldwide right to use the Service described on the Biller Order Form until termination as provided herein, solely for the following purposes, and specifically to bill and receive payment from Biller's own customers,for Services that are referenced in the Biller Order Form. All rights not expressly granted to Biller are reserved by Invoice Cloud and its licensors. Biller will provide to Invoice Cloud all Biller Data generated for Biller's Customers. Unless otherwise expressly agreed to in writing by Invoice Cloud to the contrary,Invoice Cloud will process all of Biller's Customers'Payment Instrument Transactions requirements related to the Biller Data and will do so via electronic data transmission according to our formats and procedures for each electronic payment type selected in the Biller Order Form. In addition,Biller will sign all third party applications and agreements required for the Service including without limitation payment and credit card processing agreements and merchant agreements.For invoice types listed on the Order Form(e.g. real estate taxes, utility bills, birth certificates, parking tickets, event tickets, etc.), Biller will not use the credit card processing,ACH or check processing of any bank, payment processor, entity, or person, other than Invoice Cloud via electronic data transmission or the authorization or processing of Biller's Customers' Payment Instrument Transactions for each electronic payment type selected in the Biller Order Form throughout the term of this Agreement. Biller shall not:(i)license,sublicense,sell,resell,transfer,assign,distribute or otherwise commercially exploit or make available to any third party the Service in any way;(ii)modify or make derivative works based upon the Service;(iii)Recreate,"frame"or"mirror"any portion of the Service on any other server or wireless or Internet-based device; (iv)reverse engineer or access the Service; or(v)copy any features, functions or graphics of the Service. 2.Privacy&Security.Invoice Cloud's privacy and security policies may be viewed at http://www.invoicecloud/privacy.html.Invoice Cloud reserves the right to modify its privacy and security policies in its reasonable discretion from time to time which modification shall not materially adversely impact such policies. With respect to Protected Health Information(as defined in 45 C.F.R 160.103),Invoice Cloud will enter into a Business Associate Agreement pursuant to 45 CFR part 160 and 164. Invoice Cloud will maintain compliance with current required Payment Card Industry(PCI)standards and Cardholder Information Security standards. 3.Account Information and Data. Invoice Cloud does not and will not own any Customer Data, in the course of providing the Service. Biller, not Invoice Cloud, shall have sole responsibility for the accuracy, quality, integrity, legality, and reliability of, and obtaining the intellectual property rights to use and process all Customer Data. In the event this Agreement is terminated, Invoice Cloud will make available to Biller a file of the Customer Data within 30 days of termination of this Agreement(or at a later time if required by applicable law),if Biller so requests at the time of termination.Invoice Cloud reserves the right to remove and/or discard Customer Data with 30 days notice except as prohibited by applicable law or in the event of exigent circumstances which makes prior notice impracticable,and in which case,notice will be provided promptly thereafter. 4. Confidentiality/Intellectual Property Ownership. Invoice Cloud agrees that it may be furnished with or otherwise have access to Customer Data that the Biller's customers considers being confidential.Invoice Cloud agrees to secure and protect the Customer Data in a manner consistent with the maintenance of Invoice Cloud's own Confidential Information,using at least as great a degree of care as it uses to maintain the confidentiality of its own confidential information,but in no event use less than commercially reasonable measures. Invoice Cloud will not sell, transfer, publish, disclose, or otherwise make available any portion of the Customer Date to third parties, except as required to perform the Services under this Agreement or otherwise required by applicable law. Invoice Cloud(and its licensors,where applicable)owns all right,title and interest,including all related Intellectual Property Rights,in and to the Invoice Cloud Technology,the Content and the Service and any enhancement requests,feedback,integration components,suggestions, ideas, and application programming interfaces, recommendations or other information provided by Biller or any other party relating to the Service.hi the event any such intellectual property rights in the Invoice Cloud Technology,the Content or the Service do not fall within the specifically enumerated works that constitute works made for hire under applicable copyright laws or are deemed to be owned by Invoice Cloud,Biller hereby irrevocably,expressly and automatically assigns all right,title and interest worldwide in and to such intellectual property rights to Invoice Cloud.The Invoice Cloud name,the Invoice Cloud logo,and the product names associated with the Service are trademarks of Invoice Cloud or third parties,and no right or license is granted to use them. Biller agrees that during the course of using or gaining access to the Service(or components thereof)it may be furnished with or otherwise have access to information that Invoice Cloud considers to be confidential including but not limited to Invoice Cloud Technology,customer and/or prospective customer information, pricing and fmancial information of the parties which are hereby deemed to be Invoice Cloud Confidential Information, or any other information by its very nature constitutes information of a type that any reasonable business person would conclude was intended by Invoice Cloud to be treated as proprietary,confidential,or private(the"Confidential Information"). Biller agrees to secure and protect the Confidential Information in a manner consistent with the maintenance of Invoice Cloud's rights therein, using at least as great a degree of care as it uses to maintain the confidentiality of its own confidential information,but in no event use less than reasonable efforts. Biller will not sell, transfer, publish, disclose, or otherwise make available any portion of the Confidential Biller Agreement Rev 2.0 The complete Biller Agreement includes the Biller Order Form,the Online Terms and Conditions and this Agreement Page 11 Biller Agreement Information of the other party to third parties(and will ensure that its employee and agents abide by the requirements hereof), except as expressly authorized in this Agreement or otherwise required by applicable law. 5.Billing and Renewal.Invoice Cloud fees for the Service are provided on the Biller Order Form.Invoice Cloud's fees are exclusive of all taxes,levies,or duties imposed by taxing authorities,Invoice Cloud may assess and/or collect such taxes,levies,or duties against Biller and Biller shall be responsible for payment of all such taxes,levies,or duties,excluding only United States(federal or state)taxes based solely on Invoice Cloud's income.All payment obligations are non-cancellable and all amounts or fees paid are non-refundable.Unless Invoice Cloud in its discretion determines otherwise,all fees will be billed in U.S.dollars. If Biller believes Biller's bill or payment is incorrect,Biller must provide written notice to Invoice Cloud within 60 days of the earlier of the invoice date,or the date of payment,with respect to the amount in question to be eligible to receive an adjustment or credit;otherwise such bill or payment is deemed correct.Invoice Cloud reserves the right to modify any pricing with respect to fees owed by the Biller upon thirty days written notice to Biller based on increases incurred by Invoice Cloud on fees,assessments,and the like from credit card processers,bank card issuers,payment associations,ACH and check processers. 6.Term and Termination.The initial term of this Agreement shall be for a period of three(3)years("Initial Term")commencing on the Effective Date on the Biller Order Form and will renew for each of additional successive three(3) year terms ("Renewal Term")unless terminated as set forth herein.This Agreement may be terminated by either party effective at the end of the Initial or any Renewal Term by such party providing written notice to the other party of its intent not to renew no less than ninety(90)days prior to the expiration of the then- current term.Additionally,this Agreement may be terminated by either party with cause in the event of a material breach of the terms of this Agreement by the other party and the breach remains uncured for a period of 30 days following receipt of written notice by the breaching party. For example, any unauthorized use of the Invoice Cloud Technology or Service by Biller, or its authorized users will be deemed a material breach of this Agreement. Upon any early termination of this Agreement by Invoice Cloud as a result of the breach, Biller shall remain liable for all fees and charges incurred,and all periodic fees owed through the end of the calendar month following the effective date of termination. Upon any termination or expiration of this Agreement, Biller's password and access will be disabled and Biller will be obligated to pay the balance due on Biller's account computed in accordance with the Charges and Payment of Fees section above. Biller agrees that Invoice Cloud may charge such unpaid fees to Biller's Debit Account or credit card or otherwise bill Biller for such unpaid fees. 7. Invoice Cloud Responsibilities. Invoice Cloud represents and warrants that it has the legal power and authority to enter into this Agreement. Invoice Cloud warrants that the Service will materially perform the functions that the Biller has selected on the Order Form under normal use and circumstances and that. Invoice Cloud shall use commercially reasonable measures with respect to Customer Data to the extent that it retains such, in the operation of the Service;provided that the Biller shall maintain immediately accessible backups of the Customer Data. In addition, Invoice Cloud will, at its own expense, as the sole and exclusive remedy with respect to performance of the Service,correct any Transaction Data to the extent that such errors have been caused by Invoice Cloud or by malfunctions of Invoice Cloud's processing systems. 8.Limited Warranty EXCEPT AS PROVIDED IN SECTION 7,THE SERVICES AND ALL CONTENT AND TRANSACTION DATA IS PROVIDED WITHOUT ANY EXPRESS, OR IMPLIED WARRANTY, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND ALL OTHER WARRANTIES ARE HEREBY DISCLAIMED TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW BY INVOICE CLOUD AND ITS LICENSORS AND PAYMENT PROCESSORS. INVOICE CLOUD AND ITS LICENSORS AND PAYMENT PROCESSORS DO NOT REPRESENT OR WARRANT THAT (A) THE USE OF THE SERVICE WILL BE UNINTERRUPTED OR ERROR-FREE, OR OPERATE IN COMBINATION WITH ANY OTHER HARDWARE, SOFTWARE, SYSTEM OR DATA, (B) THAT THE SERVICE WILL NOT DELAY IN PROCESSING OR PAYING, OR (C) THE SERVICE WILL MEET REQUIREMENTS WITH RESPECT TO SIZE OR VOLUME.Invoice Cloud's service may be subject to limitations,delays,and other problems inherent in the use of the interne and electronic communications.Invoice cloud is not responsible for any delays,delivery failures,or other damage resulting from such problems. Biller represents and warrants that Biller has not falsely identified itself nor provided any false information to gain access to the Service and that Biller's billing information is correct. 9. Biller's Responsibilities. Biller represents and warrants that it has the legal power and authority to enter into this Agreement.Biller is responsible for all activity occurring under Biller's accounts and shall abide by all applicable laws, and regulations in connection with Biller's and/or its customers' and a payers'use of the Service,including those related to data privacy,communications,export or import of data and the transmission of technical,personal or other data.Biller shall:(i)notify Invoice Cloud immediately of any unauthorized use of any password or account or any other known or suspected breach of security;(ii)report to Invoice Cloud and immediately stop any copying or distribution of Content that is known or suspected to be unauthorized by Biller or Biller's Users;and(iii)not impersonate another Invoice Cloud user or provide false identity information to gain access to or use the Service.Invoice Cloud is not responsible for any Biller postings in error due to delayed notification from credit card processor,ACH bank and other related circumstances. Biller is required to ensure that it maintains a fair policy with regard to the refund, return or cancellation of services and adjustment of Transactions. Biller is also required to disclose a refund, return or cancellation policies to Invoice Cloud and any applicable payment processors and Biller's Customers,as requested.Any change in a return/cancellation policy must be submitted to Invoice Cloud,in writing, not less than 21 days prior to the effective date of such change. If Biller allows or is required to provide a price adjustment,or cancellation of services in connection with a Transaction previously processed,Biller will prepare and deliver to Invoice Cloud Transaction Data reflecting Biller Agreement Rev 2.0 The complete Biller Agreement includes the Biller Order Form,the Online Terms and Conditions and this Agreement Page 12 Biller Agreement • such refund/adjustment within 2 days of resolution of the request resulting in such refund/adjustment.The amount of the refund/adjustment cannot exceed the amount shown as the total on the original Transaction Data. Biller may not accept cash or any other payment or consideration from a Customer in return for preparing a refund to be deposited to the Customer's account;nor may Biller give cash/check refunds to a Customer in connection with a Transaction previously processed,unless required by applicable law 10.Indemnification.Invoice Cloud shall indemnify and hold Biller,employees,attorneys,and agents,harmless from any losses, liabilities, and damages (including, without limitation, Biller's costs, and reasonable attorneys' fees) arising out: (i) failure by Invoice Cloud to implement commercially reasonable measures against the theft of the Customer Data; or(ii) its total failure to deliver funds processed by Invoice Cloud as required hereunder(which relates to payments due from Invoice Cloud for Transaction Data).This indemnification does not apply to any claim or complaint relating to Biller's failure to resolve a payment dispute concerning debts owed to Biller or Biller's negligence or willful misconduct or violation of any applicable agreement or law. Biller shall indemnify and hold Invoice Cloud, its licensors and Invoice Cloud's, subsidiaries, affiliates, officers, directors, employees, attorneys, agents, and payment processors harmless from and against any and all claims, costs, damages, losses, liabilities and expenses (including attorneys' fees and costs) arising out of or in connection with any claim, cause of action, lawsuit, administrative or criminal investigation,charge,action or claim alleging:(i)that use of the Customer Data infringes the rights of a third party;(ii)a violation by Biller of Biller's representations and warranties or the breach by Biller or Biller's Users of this Agreement including without limitation incomplete or inaccurate Transaction Data;or(iii)relating directly or indirectly to Biller's or its authorized users'use of the Service. 11.Limitation of Liability.INVOICE CLOUD'S AGGREGATE LIABILITY SHALL BE UP TO AND NOT EXCEED THE AMOUNTS ACTUALLY PAID BY AND/OR DUE FROM BILLER IN THE TWELVE(12)MONTH PERIOD IMMEDIATELY PRECEDING THE EVENT GIVING RISE TO SUCH CLAIM. IN NO EVENT SHALL INVOICE CLOUD AND/OR ITS LICENSORS BE LIABLE TO ANYONE FOR ANY INDIRECT, PUNITIVE, SPECIAL, EXEMPLARY, INCIDENTAL, CONSEQUENTIAL (INCLUDING LOSS OF DATA, REVENUE, PROFITS, USE OR OTHER ECONOMIC ADVANTAGE)ARISING OUT OF, OR IN ANY WAY CONNECTED WITH THIS SERVICE,EVEN IF THE PARTY FROM WHICH DAMAGES ARE BEING SOUGHT OR SUCH PARTY'S LICENSORS HAVE BEEN PREVIOUSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. Certain states and/or jurisdictions do not allow the exclusion of implied warranties or limitation of liability for incidental,consequential or certain other types of damages,so the exclusions set forth above may not apply to Biller. 12.Export Control.The Biller agrees to comply with United States export controls administered by the U.S.Department of Commerce,the United States Department of Treasury Office of Foreign Assets Control,and other U.S.agencies. 13.Notice.Either party may give notice by electronic mail to the other party's email address(for Biller,that address on record on the Biller Order Form,or by written communication sent by first class mail or pre-paid post to the other party's address on record in Invoice Cloud's account information for Biller,and for Invoice Cloud,to Invoice Cloud,Inc.,35 Braintree Hill Office Park,Suite 100,Braintree,MA 02184 Attention:Client Services. Such notice shall be deemed to have been given upon the expiration of 48 hours after mailing or posting(if sent by first class mail or pre-paid post)or 12 hours after sending(if sent by email). 14. Assignment. This Agreement may not be assigned by either party without the prior written approval of the other party, but may be assigned without such party's consent to(i)a parent or subsidiary, (ii)an acquirer of assets, or(iii)a successor by merger.Any purported assignment in violation of this section shall be void. 15.Insurance. Invoice Cloud agrees to maintain in full force and effect during the term of the Agreement,at its own cost,the following coverages: a. Commercial General or Business Liability Insurance with minimum combined single limits of One Million ($1,000,000) each occurrence and One Million($1,000,000)general aggregate. b. Automobile Liability Insurance with minimum combined single limits for bodily injury and property damage of not less than One Million ($1,000,000) for any one occurrence, with respect to each of the Invoice Cloud's owned, hired or non-owned vehicles assigned to or used in performance of the Services. c. Errors and Omissions Insurance(Professional Liability and Cyber Insurance)with limits of liability of at least One Million Dollars ($1,000,000)per claim and in the aggregate. 16. Immigration Laws. For Services performed within the United States,Invoice Cloud will assign only personnel who are either citizens of the United States or legally eligible to work in the United States. Invoice Cloud represents and warrants that it has complied and will comply with all applicable immigration laws with respect to the personnel assigned to the Biller. 17.General.With respect to agreements with municipalities,localities or governmental authorities,this Agreement shall be governed by the law of the state wherein such municipality,locality or governmental authority is established,without regard to the choice or conflicts of law Biller Agreement Rev 2.0 The complete Biller Agreement includes the Biller Order Form,the Online Terms and Conditions and this Agreement P e g e 13 Biller Agreement provisions of any jurisdiction.With respect to Bitters who are not with municipalities,localities or governmental authorities,this Agreement shall be governed by Massachusetts law and controlling United States federal law,without regard to the choice or conflicts of law provisions of any jurisdiction.No text or information set forth on any other purchase order,preprinted form or document(other than an Biller Order,if applicable) shall add to or vary the terms and conditions of this Agreement. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable,then such provision(s)shall be construed,as nearly as possible,to reflect the intentions of the invalid or unenforceable provision(s), with all other provisions remaining in full force and effect. No joint venture, partnership, employment,or agency relationship exists between Biller and Invoice Cloud as a result of this agreement or use of the Service.The failure of either party to enforce any right or provision in this Agreement shall not constitute a waiver of such right or provision unless acknowledged and agreed to by Invoice Cloud in writing. All rights and obligations of the parties in Sections 4, 6, 10, 11, 13 and 17 shall survive termination of this Agreement. This Agreement,together with any applicable Biller Order Form, comprises the entire agreement between Biller and Invoice Cloud and supersedes all prior or contemporaneous negotiations, discussions or agreements, whether written or oral between the parties regarding the subject matter contained herein.Biller agrees that Invoice Cloud can disclose the fact that Biller is a paying customer and the edition of the Service that Biller is using. Additional terms and conditions and defmitions applicable to this Agreement and the Biller Order Form are found at www.invoicecloud.com/tennsandconditions and are agreed to by Invoice Cloud and the Biller. Biller Agreement Rev 2.0 The complete Biller Agreement includes the Biller Order Form,the Online Terms and Conditions and this Agreement Page 14 t 111VO1C @� o L� ,,, Biller Order Form verz9 Sales Information {J� kles11111 Jason Baker Sales Partner: Iftvize Partner: Advanced Mr --- ': '411MIEh 8;INNIS WOW allidall III '•ducts: ® EBPP ❑ Cloud Store ❑ Cloud Pay ® IVR ® OBD ❑ Kiosk 'rvices: ® Visa/MasterCard/Discover American Express ® ACH/EFT Biller Information Ownership Type: Local Government Biller Contacts Legal Name: City of Farmington Implementation; - Notes/Special Han• • Address 1: 430 Third Street 651-280-6880 Ext. Address 2: Email Address: rhanso . •.. City: Farmingtc State: Zip: 55024 Pam Kummer,LOGIS Phone# 651-280-6880 Fax#: 763 543-2645 Ext. Mill Website URL: www.ci.farmingbn.mn.us Address: pkumm- , •• • • Business Open Date: 1872 ikkarketing: Robin Federal Tax ID#: Phone Number: 651-280-6880 Ext. Mill Note.Federal Tax ID and Legal Name must match on all documents. Email Address: I ALL_z cumen Signatory rTl ' .' ® Fin aance Direcr Phone Number: ;1 Ext. Email Address: rhanson @ci.farmingtrn.mn.us Notes/Special Handling min ,iiiMr: The city w ould like to implement OBD(i.e.third party check consolidation)as soon as possible,recurring ACH as early as feasible and electronic bill presentment and eCheck and debit/credit card processing implementation w ould coincide with the termination of the city's current Paymentus contract. Existing recurring ACH w ould be billed at$.25. New Biller Implementation: $ 0 Paperless Presentment: © 1 Per Item includes 3 email notifications Biller Portal Access: $• 1n' h.tu1• •••.Go Mobile Gateway $ •. ..Invoice Presentment: • © 1 11 Per Item Charge © 10.00 Per Item ilDED BUSINESS CHECK OR BAIL ASH"ACCOUNT) Name of City of Farmington Bank _ .. Address: 324 Oak St,Farmingbn,MN 55024 Phone: (651)463-7161 Depository Routing#: Account#: Your Invoice payment collections will be electronicall de•osited into this account. Fees Routing#: Account#: Invoice and payment processing fees will be electronically deducted from this account. InvoiceCiou Biller Order Form v.,z9 CERTIFICATION AND AGREEMENT A. By signing below, the Biller hereby authorizes Invoice Cloud, Inc. ("Invoice Cloud") to initiate and execute debit/credit entries to its checking/deposit account(s) indicated above at the depository financial institution(s) named above and to debit/credit the same such account(s).The Biller acknowledges that the origination of ACH transactions to its account(s)must comply with the provisions of U.S.law. This authority is to remain in full force and effect until(i) Invoice Cloud has received written notification (by electronic or U.S.mail) from the Biller of its revocation in such time and manner as to allow Invoice Cloud a reasonable opportunity to act on it,but not less than 10 business days' notice; and (ii) all obligations of the Biller to Invoice Cloud that have arisen under this Agreement and all other agreements have been paid in full.The Biller must also notify Invoice Cloud, in writing, (by electronic or U.S. mail) when a change in account number(s) or bank has occurred at which time this authorization shall apply to such new/changed account.This notification must be received within 10 business days of change.A fee will be charged for any returned ACH debits. B. By signing below, the Biller named: (1) has read, agreed to, and acknowledges receipt of the terms and conditions of the Biller Agreement, attached hereto, as well as the terms and conditions at www.invoicecloud.com/termsandconditions, all of which is incorporated herein by reference (2) certifies to Invoice Cloud that he/she is authorized to sign this Biller Order Form; (3) certifies that all information and documents submitted in connection with this Order Form are true and complete; (4) authorizes Invoice Cloud or its agent to verify any of the information given,including credit references,and to obtain credit; (5)agrees to pay the Monthly Access Fee through the last day of the month following the effective date of termination as provided in the Billing Agreement; (6) agrees that Biller and each transaction submitted will be bound by the Biller Order Form and the Biller Agreement in its entirety; (7) agrees that Biller will submit transactions only in accordance with the information in this Biller Order Form and Biller Agreement and will immediately inform Invoice Cloud,by email(contracts @invoicecloud.com)if any information in this Biller Order Form changes.The terms and conditions and this Biller Order Form, the Biller Agreement and the terms and conditions at www.invoicecloud.com/termsandconditions constitute the entire integrated Biller Agreement by and between Biller and Invoice Cloud.If any provision of this agreement hereunder is held by a court of competent jurisdiction to be invalid or unenforceable,then such provision(s)shall be construed,as nearly as possible,to reflect the intentions of the invalid or unenforceable provision(s),with all other provisions remaining in full force and effect. and (8) the Biller agrees and understands that outstanding sums due and owing to Invoice Cloud.,will be charged daily or monthly and debited from its current depository account. Non-sufficient funds for these debits are grounds for a change in fees or termination of this Agreement. In the event of non-payment of any sums due,Invoice Cloud reserves the right to withdraw such sums from the current depository account at any time to ensure payment of the same. C. By signing below, the Biller hereby gives permission to Invoice Cloud to access his/her credit history via Trans Union, Equifax, or other credit-reporting agency D. The Biller Order Form and the Biller Agreement will become effective only when counter-signed by Invoice Cloud and upon execution by the Biller of such third party agreement required by Invoice Cloud to permit use of the payment function of the Service. In WITNESS WHEREOF,the parties hereto have executed this Agreement as of this day) Accepted by biller: Accepted by Invoice Cloud: XI XI Corporate Officer 1 Robin Hanson I Bob Lapides Printed Name Printed Name IFinance Director I EVP Title Title InvoiceCioud' Biller Order Form sc.2A Invoice Parameters Invoice Type: Water,Sbrm Water,Sewer,Solid Waste&Street Light Dote: 10/26/2015 Invoicin• Parameters sheet must be corn•leted for each invoice •e. Filler Software: Advanced Pr odel Non-Submitter •yment Methograg Visa ® MasterCard ® Discover ®Amex ®EFT/ACH lirvices& Products: _1 ®EBPP ❑Cloud Store ❑Cloud Pay ® OBD ® IVR ❑Kiosk II 1111111111111ucigsLetgaa..._ Billing Frequency: Quarterly Number of Bills: 7000 Number of Cycles: Number of Installments: 3 Average Invoice Amount: 215.00 Highest Invoice Amount: II 600.00 Billing Months(please select the applicable months below): DJan El Feb ❑Mar ❑Apr ❑May DJun ❑ Jul ❑ Aug ❑ Sept ❑Oct ❑ Nov El Dec ►_0 All 11 1 1 . 111 . ted BiliWil 4i Bill Mailin El 1st-10th ❑ 11th-20th ❑210-31st Mho will provide proVideliiiiiiieS, ❑ Biller ❑ Template Z Bill Print Vendor(please complete below) 111Print Vendor: IMPACT Conta Laura hone No y.Hardware a Hardware: Choose an item. QTY Choose an item. Provided by: ❑ Sales Rep ❑ Operations Per Unit Price: © Shipping Address: © (if different than location address) Total Due: iiiii .„ Services Fees ,Select from the below to indicate if the servi ;, will be paid by the Payer or if Biller will absorb fee. Item Paid b •a er Item Paid b Biller ❑ Credit Card: El Credit Interchange,fees,dues assessments+ Card: Authorization $ J + %BP ❑ EFT/ACH: $ per item ❑ EFT/ACH: $ per item ❑ Flex Pay ACH: $ per item © Flex Pay ACH: $ per item Item Paid b •a er Item Paid b Biller ❑ Credit Card: Credit interchange,fees,dues assessments+ %with$ Minimum _ (Without Visa Acceptance) Card: Authorization $ + %BP ❑ EFT/ACH: $ Per item ® EFT/ACH: $ Per Item WEIMIIIIIIIIIIIIMMIMEat Rate t''' j pqy r)_. ® Credit Card Service Fee: $ 2.50 Max Cap for Credit Cards: $ 600.00 ® EFT/ACH: Service Fee: $ 1.50 ❑ Paid by payer ❑ Paid by Biller orb- AMP vt.: IYR Yem IVR TECH ❑ Paid by payer - - - ® Paid by Biller © 0100 per item surcharge 'al AUTO Pays(ACH Only)will be @$.25 Billed b the biller. 1/1/2016 Requested by: Robin H Please note the above requested date is not guaranteed. The implementation time frame is not guaranteed subject to change and delays to workload,s stems/data re.uirements,biller coo•eration and other factors. SaY 7750 Old Meadow Road VIRTUAL CHECK MERCHANT PROCESSING APPLICATION Suite 300 Reterrat McLean,VA 22102 SAGE pAYMENTSOLl7170N5 Phone:(600)251-0240 Lead Source: None Office: Invoice Cloud,Inc. Office Phone: 7818483733233 Application ID: 210532 Application Dale 10128/2015 3:13:49 PM Contractor Name: Carolyn Ambrose Association Invoice Cloud,Inc General Infarmatron 'V F ii 3 Type or Ownership: Government(Fed,St,Local) Business Opon 1/1/1900 Existing MID: Legal Business Name: City of Farmington Business Name: City of Farmington Malling1Billing Address: 430 Third Street Location Address: 430 Third Street city: Farmington State: MN Zip 55024 City: Farmington State MN Zip 55024 Phone: (651)280-6880 Fax: (651)280-6880 Phone: (651)280-6880 Fax (651)280-6880 Contact: Robin Hanson Email: rhanson @ci,farmington.mn.us Customer Service Number: (651)280-6880 Federal Toxin: falls. D&B: Web Site: www.ci.farmington.mn.us General Comments: Utility MCC Code 4900&Please apply for the Visa Utility Program /Tax Information .i 1, Name(as It appears on your Federal Tax Return): City of Farmington Federal Tax 10: 416005151 State Filed: MN Type of Ownership: Government(Fed,St,Local) ❑ I CERTIFY THAT IAM A FOREIGN ENTITY!NON-RESIDENTALIEN ® I CERTIFY THAT I AM PROVIDING AUTHORIZATION FOR THE ELECTRONIC ISSUANCE OF IRS FORM 1099 1r OwnerfOfficerl 50X ' Owner(OfFicer2 0% TradeReferepce Name: Robin Hanson Name: Name: Title: Finance Director Title: Title: Address: 430 Third Street Address: • Address: City: Farmington Slate: MN City: State: City: State: Zip: 55024 Phone: (651)280-6880 Zip: Phone: Zip: Phone: Email: Email: Email: SSN: 999-99-9999 DOB: SSN: DOB: �Underwriting Proflie ; .,ra. .. r e jFhlty,(in*nisi a}p i�'r 1(}r)i 1 t ;i fs ri F'4} S xty t`I rrt ' L ::,i)fA,., um.,.., ,it,l.t',.NA,,,.! : ••Rilw?.15. „,,,,N,,,,'.. Type Of Business: Retail Seasonal: False Seasonal High Months: Business Description: Utilities(Water,Stormwater,Sewer,Solid Waste and Street Lights) Return Policy: Other Days Until Product Delivery: 0 'Company has obtained written authorization from the consumer to debit/credit consumer's depository account. "Company has obtained verbal authorization from the consumer to debit/credit consumer's depository account,but does not have written authorization. Annual Volume: 90411.01111111,Average Ticket: $215.00 Highest Ticket: $600.00 n "Non-Written: 0% Merchant: 0% Consigner: 0% 'Written: 0/o j r hc r s - ' Authoizatton to ACH(mUSt IncUdevided bhsiness cek)' l, p,{J i, . .. . . f .„ .) Bank Name: Anchor Bank Phone: (651)463- City: Farmington State: MN Zip: 55024 Depository I Routing#: 411111.11111111. Account#: !Fees I Routing#: 011111111. Account#: iVirtualCheck;Foes :: , r n Descapfrdd'r'rn .. a 11z r qI t 1."'t/Price TransactlonFees liranFoe'- i Rate Miscellaneous Fees Total:-_ CCD Written 0.25 0.00 Statement Fee: 0.00 CCD Non-Written 0.25 0.00 Minimum Fee: 0.00 PPD Written 0.25 0.00 File Fee: 0.00 PPD Non-Written 0.25 0.00 Reject Fee: 10.00 WEB 0.25 0.00 Gateway Fee: 0.00 ARC 0.25 0.50 Maintenance Fee: 0.00 Collection of Startup Fees will be via ACH-Merchant drafted by Sage Payments Bil'icg Cycle: Monthly gVlrival C(teck'Originators IMPORTANT NOTES: APPLICATION FEE INCLUDES CREATION OF UP TO FIVE(5)ORIGINATOR ID'S AS INDICATED BELOW. FEES WILL BE ASSESSED FOR ADDITIONAL ORIGINATOR ID'S. A VOIDED CHECK FOR EACH BANK ACCOUNT LISTED BELOW MUST BE ATTACHED. rljrtlots� 'r!,Ct.4:4 , 5*.•= ).;ii Y1R.e.MV ._1 lomments ( ..�;i.,it�..u2`)r�s .1. 0-4,45 Fee I,R loch . . '�a"5f�`' u " n max.- 4 i-r. acv-�ys, rk ii'F f Execution of Agreement By signing this agreement,the company certifies to Sage that it is authorized to sign this agreement.This agreement,together with the terms and conditions attached hereto,and incorporated herein by reference, constitutes the entire agreement between the parties pertaining to the subject matter hereof and supersedes all prior agreements.The company hereby egress to abide by all the provisions of this agreement. 1.All of the Company's application and expedite(if applicable)fee(s)will he non-refundable if Company cancels the Agreement before credit approval andlor Installation. 2.This Agreement is not considered received until all documentation requirements and requests have been fulfilled by the Company. 3.The Signatory hereby glees permission to Sage to access his/her credit history via Trans Union,Equifax or other credit-reporting agency. 4.An authorized Officer of the Company has read and hereby acknowledges receipt of the terms and conditions to It. In witness whereof the parties hereto have caused this agreement(inducing funds transfertnsirudions included herein)to be executed by their duly authorized representatives lobe effective on the date net out below. By signing this Agreement,the Company understands that outstanding sums due and owing to Sage,will be charged daily or monthly and debited from its current depository account.Non-sufficient funds for these debits are grounds for a change in Fees or termination of this Agreement,per the attached Terms and Conditions.In the event of non-payment of any sums due,Sage reserves the right to withdraw such sums from the current depository account at any time to ensure payment of the same.By signing below,the Company represents that the Information it has provided on this Agreement is complete and accurate. • Company Name: _ SAGE PA` LUTIONS OWNER PARTNER J OFFICER 1 OWNER PARTNER J OFFICER 2 Signature: Signature: Signature: Printed Name: Printed Name: Printed Name: Tolle: Title: Title: Date: Date: Date: Asa primary Inducement to Sage to enter into this Agreement,I,the undersigned Guarantor,absolutely and unconditionally guarantee the full and prompt payment of all Company's Indebtedness and liabilities,and the performance of all Company's obligations,to Sege under this Agreement(the'Obligations').I agree that upon Company's default I will pay Sage,In accordance with the terms and conditions of this Agreement,all fees and other sums payable by Company under this Agreement.Further.I acknowledge and agree that(t)this Guaranty wit continue anti the Obligations are fully end finally performed;(ii)this is a guaranty of payment and performance and not of collection,and in no case will Sage be required to attempt collection from Company or pursue any other remedy or action before collection from me;(iii)the provisions of the Agreement may be modified or waived without notice to or consent by me end without invalidating this Guaranty;(iv)this Guaranty will be governed by and construed in accordance with the laws of the Commonwealth of Virginia;(v)Sage Is authorized to investigate any and all credit information pertaining to this Guaranty;(A)!will be responsible for all legal fees and other costs that Sage Incurs enforcing this Guaranty. Signature: !Social Security le Affiliation with Company. EARLY TERMINATION:If Company cancels this Agreement during the term or any agreed upon extension term,applicable early termination fees shall be due Sage.See Article V Section 5.01 of the attached terms and conditions for additional details. • Silo Inspact(oi7 By the signature below,signatory verities that(i)he/she has physically inspecled the Business Premises;and(ii)the information staled in this Agreement Is correct.to the best of his/her knowledge and is represented by her/his Company. Sales Representative-Signature: Sales Representative-Printed Name: !Date: TERMS AND CONDITIONS FOR SAGE PAYMENT SOLUTIONS VIRTUAL CHECK The following terms and conditions govern Company's use of Sage Payment Solutions'ACH Processing Services(the"Services")for its virtual check products. The term "Sage"means"Sage Payment Solutions",a Virginia corporation. The term"Company"refers to the merchant receiving the Services. These are the terms and conditions referred to in the Sage Payment Solutions Virtual Check Merchant Processing Agreement attached hereto,the provisions of which are incorporated herein by reference.These terms and conditions and the attached application constitute the entire agreement between Sage and Company with respect to the subject matter hereof. Sage is providing an Internet gateway to enable Company's customers to pay for goods and services by means of the Automated Clearing House("ACH")process. This Agreement and Sage's Web site includes important disclosures and regulatory information that are associated with the Services. The Services allow Company to collect periodic payment receivables from its customer accounts("Customer Accounts")through Sage Virtual Check and/or transfer credits to its customers through use of the ACH process;Sage will act as Company's agent to initiate credit,debit and adjustment Entries through an Originating Depository Financial Institution(the"Bank"),all pursuant to the terms of this Agreement,the provisions of Title 31 Code of Federal Regulations Part 210 and the operating rules of the National Automated Clearing House Association,as amended from time to time (collectively referred to herein as the"Rules"). Company agrees that it entering into this Agreement,that it will be bound by the Rules. Company understands that in order for the Services,including future services that may be available,to perform,Company is solely responsible for the hardware,software or other technology it uses to access the Services,which will be processed via ACH. Sage will not be responsible for any service difficulties resulting from Company's failure to possess technology adequate to use the Services. TERMS&CONDITIONS the Rules,or if any Debit Entries originated by you for two (2) years after termination or revocation of were unauthorized,Sage reserves the right to charge such authorization,or in the case of an authentication 1. Definitions. Except as otherwise defined herein, the amount of such Debit Entries to the Authorized made via telephone, the Internet or other on-line capitalized terms shall have the meanings provided in Account. All Net Settlement Amounts (as defined in network, the Company must retain a copy of the the Rules. The term"Entries"shall have the meaning Section 16 below)shall be deposited into the account authorization and a recorded record of the provided in the Rules and shall also mean the data at the financial institution designated in the authentication. The foregoing authorizations shall be received from the Company hereunder from which Application attached hereto to which Sage and the provided to Sage upon request.The Company agrees Sage prepares Entries. Company are parties ("Authorized Account"). (b) that, at its cost, it will periodically review its Credits. Provided the Company delivers the necessary authentication techniques to ensure that its security 2. Transmittal of Entries by Company. The data in accordance with the processing instructions measures are adequate, and make all necessary Company will use reasonable efforts to provide and in an acceptable format and deposits immediately changes, to ensure that all authentication techniques computer readable information that is accurate, available funds into the Agent Account(as hereinafter are in accordance with all applicable laws,regulations current and in the format specified in the Rules and in defined)in an aggregate amount equal to the Entries and statutes and the Rules. Sage may,at its option, conformance with other requirements set forth by to be transmitted,Sage shall initiate credit Entries to initiate a pre-notification entry for any ACH Sage,as the same may be amended from time to time, electronically credit Customer Accounts for settlement transaction. If Sage chooses to transmit pre- necessary to prepare debit and credit Entries in order on the Effective Entry Date(or next banking day in notification entries, it will not initiate live dollar to effect collection from and credit to Customer the event that the Effective Entry Date falls on a non- entries until at least six(6)banking days following the Accounts of the following types: ARC, PPD, WEB, banking day at the customer's depository institution). settlement date of the pre-notification entry. Such CCD,TEL,POP, RCK. The Company shall update Unless such funds are timely received, Sage shall be notice shall be provided to the Bank in the format and such information from time to time in order that it under no obligation to transmit the related Entry(ies). on the medium provided in the Rules.After Sage has remains current and accurate at all times. The Once an Entry is transmitted by Sage,the Company received notice that any such notification has been Company hereby authorizes Sage to initiate ACH shall have no right to the cancellation or amendment rejected by a receiving financial institution,or that a credits, debits and adjustments to the Authorized of any Entry after its receipt by the Bank.However, receiving financial institution will not receive Entries Account. This authorization will remain in effect after Sage shall use reasonable efforts to act on a request by without having first received a copy of the termination of this Agreement until all of the the Company for cancellation of such Entry(ies)prior authorization signed by its customer, Sage will not Company's obligations to Sage have been paid in full. to crediting a Receiver's account. Except in the case of initiate any Entry to such customer unless and until Confirmation from Sage of a credit or debit ACH payroll entries,the total dollar amount of Credit Entries the Company provides Sage and the receiving fmancial transaction does not constitute a warranty that the transmitted by the Company to the Bank on any one day institution with such authorization within the time Company will be paid for the transaction. shall not exceed Three Thousand U.S. Dollars($3,000). limits provided by the Rules. If individual ACH The Company acknowledges and agrees that, if an transaction values or the monthly total of the 3. Processing and Transmittal of Entries. (a) Entry describes its customer or other Receiver Company's ACH Debits and Credits exceeds Sage's Debits. Sage shall process Entries received from the inconsistently by name and account number,payment standard limits, Company may request Sage to Company to conform with the file specifications set of the Entry transmitted to the Receiving Depository increase these limits by agreeing to additional forth in the Rules,transmit such Entries to the Bank Financial Institution might be made by the Receiving underwriting review to be performed by Sage. If for re-transmittal to the ACH Operator or other Depository Financial Institution(or by the Bank in the Rejects or Returns exceed two percent(2.0%)of total location designated by the Bank,all in accordance with case of an"on-us"Entry)on the basis of the account monthly transaction volume,Sage reserves the right to the Rules and applicable regulations and operating number even if it identifies a person different from the (i) adjust transaction fees and rates, (ii) require circulars adopted or issued by the Federal Reserve named customer or Receiver,and that the Company's reserves, or additional reserves as defined in this Board or applicable Federal Reserve Bank,as in effect obligation to pay the amount of the Entry to Sage is Agreement; or (ill) to cease providing the Services from time to time. Each Entry or File shall be not excused in such circumstances. Company agrees described hereunder if Sage in its sole discretion delivered to Sage by an authorized representative of that Sage may withhold any amounts due to the determines that the Services provided to the Company the Company in accordance with the processing Company from subsequent payments in the event of an hereunder contribute to an unacceptable volume of instructions attached hereto. Provided the Company overpayment by Sage to Company. ACH returned items. Additional factors that may delivers the necessary data in accordance with the determine adjustment of fees, potential reserves or processing instructions and in an acceptable format, 4. Authorizations: Prenotifications. The Company cancellation include average sale amount,processing Sage shall initiate debit Entries to electronically debit will obtain written authorizations for each requested volume, credit volume, and other factors that may Customer Accounts for settlement on the Effective Entry that it has received from its customers,or,in the affect the risk of fraud or merchant instability,in the Entry Date(or next banking day in the event that the event of an authorization for a TEL entry, the sole discretion of Sage. Effective Entry Date falls on a non banking day at the minimum information requirements in accordance with customer's depository institution), however if any the Rules must be provided to Sage. The Company 5.Rejects/Returns/Revocations of Authorization; Debit Entries are returned to Sage in accordance with shall further retain the original or a microfilm record Reserve Account. Sage shall notify the Company by Sage Merchant Agreement Page 1 of 1 Rev 11.11 ptEASENOTE The complete VIRTUAL CHECK Merchan t Agreement includes these terms and conditions and an apphcatlon on three(3)additional pages. fax or electronic transmission of the receipt of a or reinitiate an Entry without confirmation that the Gateways,(the"Sage Marks").The Company will use returned Entry from the ACH Operator no later than Entry is accurate. the Sage Marks only in a manner and form approved two(2)business days after such receipt. Except for an by Sage. Company is granted by Sage the right to use Entry transmitted by the Company in accordance with 6.01 IRS Withholdings and Reporting. Section the Sage logo unaltered on its web-site in the Section 3,Sage shall have no obligation to re-transmit 6050W of the Internal Revenue Code ("Code") reasonable representation of the Company's use of the a returned Entry or reinitiate an Entry without further requires payment providers and third party payment Services until such time as this Agreement is evidence of valid authorization.All returned Entries are networks,such as Sage,to report payment settlement terminated and solely in the connection with the each sulject to an additional $5.00 return fee, unless amounts to the Internal Revenue Service("IRS")for solicitation of its customers' agreement to utilize the otherwise stated in this agreement. Company hereby each Company processing through Sage. Company Services provided hereunder.All right,title,ownership agrees,if so requested by Sage,to maintain a reserve shall verify its identity by providing Sage with a Tax and interest in and to the Sage Marks remain with with Sage with a sufficient balance in Sage's sole Identification Number ("TIN") such as a Social Sage, and upon termination of this Agreement, the discretion to cover Returns, NSF, reversal of ACH Security Number (SSN) or Employer Identification Company shall have no further right to the use of the transactions and similar debits and fees payable Number (EIN) for each Company Account. In the Sage Marks, shall immediately cease all use and hereunder and any other liabilities of Company as event Company fails to provide its TIN, Sage will display thereof, and shall return to Sage all such specified in Section 16("Reserve Account").Company place a restriction on Company's Account and may marketing materials provided by Sage and remaining authorizes Sage to establish and maintain reserves in restrict the receipt of funds into Company's Account, in Company's possession. If at any time during the such Reserve Account by means of offset from daily or withhold a percentage of payments deposited into term of this Agreement, Sage determines that the settlement activity or provide such reserve funds Company's Account in order to satisfy the backup Company is not utilizing the Sage Marks in accordance requested by Sage within 48 hours of the request withholding requirements of the IRS. with the terms of this Agreement,Sage may demand Company will pay to Sage the amount of any returned that the Company cease and desist from all use of the debit that cannot,for any reason in part or in whole,be 7. Rejected Entries. Sage shall use reasonable Sage Marks and return all such marks directly to Sage. debited against Company.Company understands that efforts to notify the Company of a rejected Entry by The Company is fully responsible for the content of its electronic funds transfers can be "charged back" or fax or electronic transmission no later than the web site and for the advertising and promotion "returned" against the Originating Financial following business day such Entry would have been through any media of all of its offerings. The Depository Institution's account for up to 60 days transmitted by Bank or ACH Operator to Sage. Company certifies and represents to Sage that it is the following the statement date of the receiving Regardless of the reason for a rejected Entry,it shall owner or that it has full right and authority to use and institutions' transaction notification to customers' be the responsibility of the Company to remake such disseminate all information,data,graphics,text,video, accounts for debit and credit entries.If the Company Entries or provide sufficient data for Sage to remake music or other intellectual property which either forms wishes to revoke an authorization, (other than for a the same;provided, however, that Sage shall remake a part of its web-site,which is provided by Company to POP,TEL and Single Entry WEB entries)it must do such Entries in any case where such rejection by the its consumers, or which is used by Company in its so directly with Sage and provide an executed affidavit ACH was due to mishandling of such Entries by Sage advertising or promotion. to the RDFI that the debit entry has been revoked and sufficient data is available to Sage to permit it to directly with Sage. Sage's Bank may request a copy of remake such Entries.The Company shall retain and 10. Acceptance of ACH Rules. In order to facilitate the affidavit within one(1)year of the date on which provide Sage on request all information necessary to the Company's compliance hereunder with the Rules the adjustment entry was initiated by the RDFI. remake any file of Entries for three(3)days after the and with applicable law,subject to the limitations set midnight of the Settlement Date. forth in Paragraph 6, Sage may provide certain 6. Compliance with Laws and the Rules; materials, and forms ("Materials") and may make Notification of Change. The Company and its 8. Reversals: Erroneous Entries. The Company available appropriate personnel as it deems appropriate principals understand the Rules,agree to be bound by, shall be responsible for monitoring the accuracy of all to assist the Company to maximize their use of the and shall comply with the Rules. Furthermore, the transmittals and of notifying Sage of any duplication Services offered hereunder. The Company further Company agrees to comply with all applicable Federal, or error requiring correction. The Company shall not acknowledges that it is an Originator under the Rules. state and local laws,rules and regulations as amended knowingly transmit any false information. Sage may All Materials are provided solely for the convenience from time to time regarding the subject matter of this assess a processing fee of up to$500 per occurrence for of the Company,and Sage makes no representation or Agreement, including but not limited to the Federal each instance in which it proves that the Company has warranty as to the legal sufficiency thereof and Fair Credit Reporting Act and Regulation E, 12 CFR knowingly transmitted false information as part of an assumes no liability therefore, and Company 205 et seq.,Regulation CC,Articles 4 and 4A of the Entry. If the Company discovers that any Entry it has represents and warrants that it will have its own legal Uniform Commercial Code,and the Electronic Funds initiated was in error,it must notify Sage within 24 counsel review the sufficiency thereof and will rely on Transfer Act. The specific duties of the Company hours of the discovery of the error. If such notice is its own business and legal judgment in determining to provided in this Agreement in no way limit the received no later than three hours prior to the ACH what,if any,extent it wishes to utilize Sage Materials. foregoing undertaking. The Company agrees that it receiving deadline,Sage will utilize reasonable efforts All such forms shall be printed at the sole expense of will promptly respond to all Reports of Possible ACH to initiate a reversing Entry or stop payment of any the Company and all unused Materials shall be Rules Violation to Sage. Company bears the final "on us"Entry within the time limits provided by the returned to Sage or destroyed by the Company upon responsibility to ensure that its consumers'policies and Rules. If such notice from the Company is received termination of this Agreement procedures meet the requirements of the Rules. The after the time provided above,Sage would utilize its Company agrees to consult with its counsel regarding reasonable efforts on behalf of the Company. Except 11. Data Retention:Verification and Security. The compliance of its authorization and payment for an Entry transmitted by the Company in Company shall retain data on file adequate to permit procedures and its compliance with the Rules, and accordance with Section 3,Sage shall have no liability remaking of Entries for seven (7) banking days shall not rely on Sage for any advice with respect to for and shall be indemnified(including attorneys'fees following the date of their transmittal by Sage as compliance with the Rules,or any Federal, state, or and costs)by the Company for its efforts to affect an provided herein,and shall provide such data to Sage local rule,statute,regulation or law. adjusting Entry or stop payment upon its request. For Internet-initiated Entries, the Company represents and warrants that it shall ensure Sage shall make reasonable attempts to provide the 9. Marketing Materials: Use of Sage Marks; that the fmancial information it receives is protected Company with a notification of change("NOC")from Company's Marks. The Company shall have a non- by security practices and procedures that include (i) the ACH Operator within two (2) business days exclusive license to use Sage marketing materials physical security to protect against theft,tampering or following the Bank's receipt of same,if the Bank has containing the Sage name,service mark,symbols,and damage, (ii)personnel and access controls to protect provided Sage with the NOC. Sage shall, following logos associated therewith as may be supplied by Sage against unauthorized access and use, (iii) network receipt of an NOC,reserve the right not to re-transmit from time to time including but not limited to security to ensure secure capture, storage and EFTCas/ze Sager"', Sage Virtual CheckTM, and Sage distribution, (iv) 128-bit encryption technology for Sage Merchant Agreement Page 2 of 2 Rev 11.11 PLwASENOTE The complete VIRTUAL CHECK Merchant Agreement includes these teens mid conditions and an application on have(3)additional pages. Internet transactions, (v) commercially reasonable are limited to those types of credit and debit Entries SERVICE, ITS USE AND THE RESULTS OF fraud detection systems, (vi) procedures to verify set forth in Schedule A,and is for an amount which,as SUCH USE. Without limiting the foregoing, Sage routing numbers and authenticate consumer identity, of the applicable Settlement Date, will be due and specifically disclaims any warranty(i)that the service and procedures to establish credit-worthiness and owing,has been specified to be paid,or is a correction will be uninterrupted or error-free,(ii)that defects will exposure limits for its customers. Company agrees of a previously transmitted erroneous Entry; (1)except be corrected,(iii)that security methods employed will that it shall conduct or have conducted annual audits as otherwise notified by Company, each of the be sufficient,or(iv)the service will be correct,accurate to ensure that the fmancial information it obtains from Customer Accounts is a"consumer account"within the or reliable. In addition, Sage shall be excused from its customers is protected by security practices and meaning of Federal Reserve Board Regulation E; (m) failing to transmit or delay in transmitting an Entry if procedures that include, at a minimum level, the all transactions submitted hereunder are bona fide;(n) such transmittal would result in the Bank's having practices set forth in(i)through(iii),hereinabove. For Company has never been terminated for cause from an exceeded any limitation upon its intra-day net funds each Entry initiated in response to a telephone agreement in which the Services contemplated herein position established pursuant to Federal Reserve authorization from a consumer, Company represents are provided;(o)this Agreement constitutes the legal, Board guidelines or if Sage otherwise would cause the and warrants that its has employed commercially binding and enforceable obligation of Company, violation of any provision of any risk control program reasonable procedures to verify the identity of the enforceable in accordance with its terms; (p) each of the Federal Reserve Board or any rule or regulation consumer, and that it has utilized commercially Entry conforms in all respects to the Rules and of any other US governmental regulatory authority. reasonable procedures to verify that each routing applicable law; and (q) Company authorizes Sage to Sage's liability for loss of interest resulting from its number is valid. audit its records to confirm compliance with this unexcused error or delay shall be calculated by using a Agreement.All Sage instructions as set forth in this rate equal to the average Federal Funds rate at the 12. Representations and Warranties of Company. Agreement or in any schedule shall be complied with Federal Reserve Bank of New York for the period The Company represents,warrants and agrees that(a) by Company.Non-compliance may result in immediate involved. At Sage's option,payment of such interest All information contained in this Agreement, any implementation of non-compliance fines and/or may be made by crediting the Authorized Account application or in any other documents delivered to cessation of service by Sage. resulting from any claim for which Sage is liable for Bank and/or Sage in connection therewith is true and under this Section 18. complete and properly reflects Company's business, 13. Liability;Limitations on Liability. Sage shall be financial condition and principal partners,owners or responsible only for performing the Services expressly 14. Indemnification.The Company shall be liable for officers; (b) this Agreement (i) has been duly provided for in this Agreement,and may be liable only and shall indemnify and hold harmless Sage and the authorized,and delivered by the Company;(ii)is in full for its gross negligence in performing those Services. Bank and their employees, officers, directors, agents force and effect; (iii) the person executing this Sage shall not be responsible for the acts or omissions and affiliates from and against any claim,loss,damage, Agreement is duly authorized to bind the Company to of the Company or its owners, directors, officers, penalty,cost or expense(including attorneys'fees and all provisions of this Agreement;and(iv) such person employees or representatives (including without expenses)resulting or arising from(a)any breach of is authorized to execute any and all documents and to limitation the amount, accuracy, timeliness of any of the representations,warranties and agreements take any action on behalf of the Company which may transmittal or due authorization of any Entry received of the Company contained in this Agreement, (b)any be required by Sage now or in the future; (c) this from the Company) or those of any other person, claim of any person whatsoever of whatever nature Agreement does not violate any law or conflict with including, without limitation, the Bank, any Federal arising out of this Agreement, and for all attorneys' any other agreement to which the Company is bound; Reserve Bank or transmission or communications fees and other costs or expenses paid by Sage in the (d)There is no action,suit or proceeding pending or facility, any Receiver or Receiving Depository enforcement of this Agreement, including, but not threatened which if decided adversely would impair Financial Institution(including without limitation the limited to those resulting from any transaction Company's ability to carry on its business substantially return of an Entry by such Receiver or Receiving processed under this Agreement and/or(c)any costs as it is now being conducted; (e) the Company has Depository Financial Institution),and no such person or expenses incurred by Sage related to any obtained all necessary regulatory approvals, licenses shall be deemed Sage's agent. Sage also will not be bankruptcy filing that Company may file. If any of the and certificates to provide any services that it intends responsible for any loss, liability or delay caused by Entries that are on Sage's system belonging to to offer,(f)the Company shall perform its obligations fires, earthquakes, wars, civil disturbances, power Company are subpoenaed by legal process or under this Agreement in accordance with all surges or failures,acts of government,labor disputes, otherwise,Sage shall use reasonable efforts to notify applicable laws and regulations, regardless of the failures in communication,networks,legal constraints Company. If Company does not respond in a timely nature of the laws and regulations,and shall continue or other events beyond its control. Because of the manner,and/or thirty (30) days elapses from Sage's to comply with all applicable laws and regulations that difficulty of determining actual damages for any failure receipt of subpoena, Sage may produce records in may apply to it in the future; (g) Company shall be of Sage to perform its obligations under this accordance with the subpoena. Notwithstanding the bound by and comply with the Rules as in effect from Agreement, the parties agree that the extent of any foregoing, should Company request that Sage not time to time and acknowledges that Entries may not damages hereunder,if any,shall be limited in amount produce any records in response to a valid subpoena, be initiated that violate the Rules, or laws of the to the greater of the Minimum Transaction Processing Company shall indemnify and pay all costs incurred, United States; (h) it shall pay all taxes and other Fees or the amount of the Transaction Processing including attorneys'fees that Sage incurs in opposing charges imposed by any governmental authority on Fees based upon the Schedule of Charges (Fees) the subpoena. Sage shall estimate the costs and the Services provided under this Agreement (i) each attached to this Agreement paid for the one calendar attorneys'fees of opposing the subpoena,and Company person shown as the Receiver on an Entry received by month preceding the month in which the loss shall pay those fees and costs to Sage BEFORE Sage Sage from Company has authorized the initiation of occurred. IN NO EVENT SHALL SAGE BE has any obligation to take any action to oppose the such Entry and the crediting and/or debiting of such LIABLE FOR ANY CONSEQUENTIAL,SPECIAL, subpoena. If Company fails to pay the costs and fees in person's account in accordance with the Rules, by PUNITIVE OR INDIRECT LOSS OR DAMAGE advance,Sage shall have no obligation to oppose the Regulation E or other applicable law and this WHICH THE COMPANY MAY INCUR OR subpoena and may respond to it in accordance with its Agreement in the amount and on the Effective Entry SUFFER IN CONNECTION WITH THE terms. Should Company pay Sage's fees and costs in Date shown on such Entry, and the Company will PERFORMANCE OF THIS AGREEMENT, advance,Sage shall oppose the subpoena but does not retain all of such authorizations for a period of six(6) INCLUDING ANY LOSS OR DAMAGE FROM warrant whether it will be successful in doing so. years after their termination or revocation or for such SUBSEQUENT WRONGFUL DISHONOR longer period as may be required by the Rules or RESULTING FROM SAGE's ACtS OR 15. Compensation. The Company shall pay Sage the applicable law and provide a copy to Sage upon OMISSIONS PURSUANT TO THIS AGREEMENT. fees and charges for the Services rendered hereunder request;(j)such authorization is valid at the time of SAGE DISCLAIMS ALL WARRANTIES,EXPRESS in accordance with the Fees and Charges as set forth in transmittal or crediting/debiting by Sage as provided OR IMPLIED, INCLUDING THOSE OF this Agreement. Such fees and charges do not include, herein and has not been revoked by operation of law or MERCHANTIBILITY AND FITNESS FOR A and Company shall be responsible for payment of,any otherwise;(k)Entries transmitted to Sage by Company PARTICULAR PURPOSE,IN RELATION TO THE sales,use,excise,value added,utility or other similar Sage Merchmt Agreement Page 3 of 3 Rev 11.11 PLEASE NOTE The complete VIRTUAL CfECKMerchantAgreement includes these teens and conditions and an application on three(3)additional pages. taxes relating to the Services provided for herein,and and Sage shall be excused from any further termination by Company will not affect Sage's rights any fees or charges provided for in any related account performance hereunder. or obligations arising before the termination. agreement with the Bank. The fees and charges are subject to change upon 30 days'prior written 17. Term. Except as otherwise provided herein for 19. Status of Sage. The parties hereto acknowledge police(by electronic or U.S.mail)to the Company. earlier termination,the initial term of this Agreement and agree that Sage is acting solely in the capacity of Upon receipt of any notice of fee increase, the shall be three(3)years commencing as of the Effective data processing agent for the Company, has no Company may,by written notice to Sage given at least Date hereof and shall be automatically renewed for responsibility for providing any funds to the Bank to 10 days prior to the effective date of any such fee additional two(2)year terms,unless either party gives cover any Entry it transmits on behalf of the increase, terminate this Agreement as set forth in to the other party written notice of its intention not to Company,and the Company,any accounts established Paragraph 17. In such event no cancellation fees will renew at least ninety(90)days prior to the expiration by the Company,hereunder or otherwise,and/or the be charged. The effective date of termination shall be of the then current term. The effective date("Effective Guarantors) are liable for any and all compensation no later than 90 days following the date of the Date") shall be defined by the date the contract is due Sage for its Services as agent. Company's notice.Any such fee increase shall not be ratified by Sage. Upon receipt of any material effective with respect to the Company during the moderation to this Agreement as set forth in Paragraph 14 20. Security Procedures: Confidentiality. The notice period. If Company does not terminate the the Company may terminate this Agreement within seven Company agrees to comply with the procedures Agreement,it shall be deemed to have accepted the fee calendar days after delivery of notice of termination to Sage. established by Sage or the Bank for security as are and cost increase. Notwithstanding the foregoing,this Agreement shall communicated to it either orally or in writing and will not terminate beyond the term of Sage's agreement contact Sage immediately if it has reason to believe 16. Collection of Amounts from Debit Entries and with the Bank for the origination of ACH entries. that confidentiality has been or is likely to be breached. ees. Concurrent with the execution and delivery of this Agreement,Sage shall have established a fiduciary 18. Default:Termination. Sage shall have the right 21. otices. All notices, requests and other account and a ledger account on its books in to immediate termination of this Agreement if the communications under or in connection with this connection with its master account, titled "Sage Company's representations and warranties contained Agreement shall be in writing and shall be given by Corporation/Fiduciary" (the "Agent Account") with in this Agreement are not true and correct both on the electronic mail,facsimile transmission,express carrier the Bank(s)into which funds received from Customer day made and at any time during the term of this or United States registered or certified mail,addressed Accounts shall be credited and from which funds may Agreement. Sage may also cancel any account for any to the applicable party or parties at the address be debited by Sage for settlement in accordance with customer of Company or Company if it participates in provided to the other or as set forth above,or at such this Agreement.Within 5 days of the Settlement Date any illegal, unethical or other unacceptable behavior other address as may be designated by notice as of the respective debit Entries initiated by it hereunder that Sage, in its sole discretion, deems to adversely provided herein. Any such communication shall be (or such longer period as may be required by Sage as a reflect on Sage's reputation, and either party may effective upon its receipt. condition to acceptance of this Agreement,which shall terminate this Agreement if the other party (i) is in be specified in a written notice to the Company),Sage default of any obligation under this Agreement(which 22. Binding Agreement Third Party Beneficiary. shall direct the remittance to the Company of the shall include nonpayment of fees and charges)and such The terms of this Agreement shall be binding upon aggregate amount of such debit Entries less (i) all default has continued for fifteen (15) days following and inure to the benefit of each party hereto and its applicable fees and charges payable to Sage under this notice and opportunity to cure,(ii)files or suffers the respective successors and permitted assigns. The Agreement or required by Sage to fund or replenish filing of a petition for relief under the bankruptcy laws Company agrees that the Bank shall be a third party the reserve established hereunder and(ii)the amount or (iii)makes an assignment of all or substantially all beneficiary of this Agreement and,without limitation of rejected Entries and returns of debit Entries (the of its assets for the benefit of creditors. Any as to other rights as a third party beneficiary,shall be "Net Settlement Amount"). Periodic and other single termination of this Agreement shall not affect any of entitled to rely on the representations,warranties and charges payable hereunder shall be deducted from the the obligations of either party arising prior to such agreements of the Company as if made in a written first transmittal of Entries received during the period termination. Notice of termination must be given in agreement directly between the Bank and the in which the fee or charge is payable. From time to writing by Company. Upon termination of this Company. Except as expressly contemplated by time, Sage shall debit the Agent Account, the Agreement by Company during the Initial Term or herein,this Agreement shall not benefit or create any Authorized Account, or related clearing account for any Renewal Term, Company shall pay to Sage a right or cause of action in or on behalf of any person fees and charges earned under this Agreement and for Termination Fee of Twenty-Five($25.00)Dollars other than the parties hereto and the Bank. any returns not previously deducted. The Company for every month remaining in any such term authorizes Sage and Bank to debit via ACH the Agent ("Termination Fee"), except that a Termination 23. Amendment. From time to time Sage may Account, the Authorized Account, the Reserve Fee shall not be owed to Sage in the event of a amend any of the terms and conditions contained in Account, any other account the Company has with termination for a fee increase as set forth in this Agreement, including without limitation, any Sage,an affiliate or subsidiary of Sage,Bank or at any Paragraph 16. Upon termination as set forth in this cut-off time,any business day in order to comply with other financial institution as an offset for any amount Paragraph, the Company shall notify Sage of the modifications to applicable laws and regulations and the Company owes under this Agreement or under an y effective date of such termination,and any processing the Rules. Such amendments shall become effective other contract,note,guaranty,or dealing of any kind fees due to Sage must immediately be paid upon notice upon receipt of notice by the Company or such later now existing or later entered into between the of cancellation.Sage shall retain in the Agent Account date as may be stated in Sage's notice to the Company. Company and Sage or any subsidiary or affiliate, for a period of no less than one hundred fifty (150) whether the Company's obligation is direct,indirect, days following termination an amount in reserve 24. Assignment. The Company may not assign this primary,secondary,fixed,contingent,joint or several. sufficient, in its sole discretion, to pay for any items Agreement or any of the rights or obligations In the event such ACH does not fully reimburse Sage returned subsequent to the effective date of hereunder,without the prior written consent of Sage, and Bank for the amount owed, the Company will termination to cover return items. Accounts are not which consent shall not be unreasonably withheld. immediately pay Sage and Bank such amount. The closed until the account balance is paid in full.Sage is Company acknowledges that this Agreement is an hereby authorized to draft from Company's bank 25. Entire -gree ent: Headings. The terms and agreement pursuant to which Sage is extending the account the amount of all fees due upon cancellation. conditions contained herein together with the Agent Company financial accommodations within the During this period,Sage shall forward to the Company Account, application, Authorized Account and any meaning of Section 366(c)of the Bankruptcy Code. return item verifications as they are received. At the exhibits hereto constitute the entire agreement In the event Company becomes a debtor in any expiration of such period, Sage shall return any between the parties hereto relating to the subject bankruptcy or similar proceeding, this Agreement remaining funds owed the Company or invoice the matter hereof and supersede any prior agreement or cannot be assumed or enforced by any other person Company for any return item amount still due it.Any understanding and except as set forth herein,may only be modified in writing executed by all parties. In the Sage Merchant Agreement Page 4 of 4 Rev 11.11 PL&ISENOTE•The complete VIRTUAL CHECKMerchmuAgreement includes these terms and conditions and an application on three(3)additional pages. event of any inconsistency between the terms of this deemed an original,but all of which together shall be all varying transfers, the consumer may elect to Agreement and any Materials/Instructions provided deemed to be one and the same instrument. A receive notice only when a transfer does not fall within by Sage, the terms of this Agreement shall govern. facsimile signature will be binding and legal in all a specified range of amounts; or, alternately, the Headings contained in this Agreement are used for respects as if it were an original signature to the consumer may elect to receive notice only when a reference purposes only and are not a part and shall Agreement transfer differs from the most recent transfer by more not affect the construction or interpretation of this than an agreed upon amount Agreement. 31. Consent to E-Mail Communications. By entering into this Agreement with Sage the Company 35. Attorneys Fees. Company will be liable for and 26. Credit and Financial Inquiries. (a) Company is consenting to the receipt of electronic mail("e-mail") will indemnify and reimburse Sage for all attorneys' authorizes Sage to make, at any time, any credit from Sage. fees and other costs and expenses paid or incurred by inquiries which either may consider necessary to Sage in the enforcement of this Agreement, or in accept or review acceptance of this Agreement 32. Ton-Compliance. Non-compliance with the collecting any amounts due from the Company to Sage subsequent to Sage's acceptance of this Agreement terms of this Agreement could result in immediate or resulting from any breach by Company of this Such inquiries shall include,but are not limited to,a implementation of non-compliance fines to Company Agreement credit check of the business including its proprietor, and/or cessation of the service described hereunder by partners,principal owners or officers. If requested to Sage. 36. Security Interest TO SECURE ALL do so by Sage, Company shall provide the written OBLIGATIONS OF COMPANY TO SAGE consent of any person for which an inquiry has been or 33. Appointment as Agent The Company desires to ARISING FROM THIS AGREEMENT,COMPANY is to be made if such person has not executed this effect settlement of credits and debits from the clearing HEREBY GRANTS SAGE A LIEN AND Agreement and will provide any fmancial statements account of Sage by means of ACH as anticipated by SECURITY INTEREST IN ALL TRANSACTIONS income tax and business tax returns and other Agreement. In accordance with this desire, the AND ITEMS SUBMITTED FOR PROCESSING, financial information as Sage may consider necessary Company authorizes Sage to initiate debit and credit ALL RIGHTS RELATED TO THIS AGREEMENT, to perform initial or periodic reviews of Merchant's entries to the Authorized Account By signing this INCLUDING WITHOUT LIMITATION ALL financial stability and business practices authorization,the Company states that it has authority AMOUNTS DUE COMPANY, ALL DEPOSITS to agree to such transactions and that the Authorized REGARDLESS OF SOURCE, TO ANY OF 27. Severability. In the event performance of the Account indicated is a valid and legitimate account for COMPANY'S ACCOUNTS ESTABLISHED AS SET Services required hereunder would result in a violation the handling of these transactions.This authority is to FORTH IN THIS AGREEMENT OR OF ANY of any present or future statute, regulation or remain in effect until Sage receives written notice from PARTY SIGNING THIS AGREEMENT government policy to which Sage is subject,then any the Company withdrawing it This authorization is for PERSONAL GUARANTY (THE "SECURED provision of this Agreement the performance of which the payment of fees, returns, credit collections, and ASSETS"). Said security interest may be set off or would constitute such a violation shall be deemed null disbursements. The Company also certifies that the otherwise be exercised by Sage without notice or and void, and this Agreement shall be deemed appropriate authorizations are in place to allow the demand of any kind. The exercise of this security amended to the extent necessary to comply with such Company to authorize this method of settlement interest shall be addition to any other rights of Sage statute,regulation or policy,and Sage shall incur no under the Uniform Commercial Code,this Agreement, liability to the Company as a result of its performance 34. Authorization and Notification Requirements. applicable laws or in equity. The parties specifically in accordance with any such amendment Transactions processed through the Automated acknowledge and affirm that pursuant to the Uniform Clearing House (ACH) are strictly controlled by Commercial Code of Virginia, this Agreement shall 28. Survival. All representations, warranties, Governmental Regulations and monitored by the constitute a security agreement and that Sage has a covenants,and agreements of the Company contained Federal Reserve.The Company must have appropriate general lien upon the accounts described in this herein shall survive the execution, delivery and authorization from Receivers for initiation of Entries. Agreement and right of offset against all funds that termination of this Agreement The following directive is offered to promote accuracy may be due to Company, which shall stand as one and standardization for authorization requirements:A continuing collateral security for the timely 29. Governing Law: Jurisdiction: Waiver of Jury statement authorizing the Originator (Company) to performance of Company's obligations to Sage. Sage Trial. This Agreement shall be governed by and initiate credit or debit entries to the consumer's shall also have the right to require the Company to construed in accordance with the laws of the account and authorizing the RDFI to accept and post furnish such other and different security,as Sage shall Commonwealth of Virginia without giving effect to them to such account including (i) Account and deem appropriate in its sole discretion in order to choice of law rules. The Company consents to the Routing numbers must be accurately stated;(ii)date secure Company's obligations under this Agreement jurisdiction and venue of the United States District and signature(s)are required,except that in the case of Company agrees to execute any documents or take any Court for the Eastern District of Virginia and the Internet or other electronically initiated transactions, actions required in order to comply with and perfect courts of general jurisdiction of Fairfax County, there must be evidence of similar authentication by the any security interest under this Section at Company's Virginia as applicable, to the exclusion of all other Receiver; (iii) Originators (Companies) must ensure cost. To the extent permitted by law, Company forums. EACH PARTY HERETO IRREVOCABLY that the consumer is completely aware of the nature of authorizes Sage to execute any financing statement or WAIVES ALL RIGHTS IT MAY HAVE TO the product or service that he or she is purchasing;(iv) other documents relating to this security interest TRIAL BY JURY IN ANY ACTION, provisions that permit the consumer to terminate the Company represents and warrants that no other party PROCEEDING OR CLAIM OF ANY NATURE authorization by written notification to the Originator has a security interest or lien in the Secured Assets. ARISING OUT OF,BY VIRTUE OF,OR IN ANY (Company) in such time and manner to afford the WAY CONNECTED TO THIS AGREEMENT, Originator (Company) and the RDFI reasonable 37. Force ajeure. Sage shall not have any ANY DOCUMENT EXECUTED IN opportunity to act on such notification. In an responsibility and shall incur no liability for any failure CONNECTION HEREWITH, ANY application where the debit amount varies, specific to carry out,or any delay in carrying out,any of its AMENDMENT OR SUPPLEMENT HERETO OR additional requirements apply. If a pre-authorized obligations under this Agreement resulting from acts, THERETO, OR ANY OF THE TRANSACTIONS debit transfer varies from a previous transfer relating omissions,or inaccuracies of third parties not under its CONTEMPLATED HEREBY OR THEREBY. to the same authorization or from a fixed pre- reasonable control, acts of God (including, but not COMPANY ACKNOWLEDGES THAT THE authorized amount, the Originator (Company) must limited to,fire,floods or adverse weather conditions), FOREGOING WAIVER IS KNOWING AND mail to the customer or deliver to him written notice of labor difficulty, legal constraint, war, terrorism, the VOLUNTARY. the amount and scheduled date of the transfer at least unavailability or interruption of transmission or ten (10) calendar days before the scheduled transfer communication facilities or utilities, equipment or 30. Counterparts. This Agreement may be executed date. Additionally, if the Originator (Company) other technological failure, emergency conditions or in any number of counterparts,each of which shall be informs the consumer of the right to receive notice of any other cause beyond its reasonable control. Sage Merchant Agreement Page 5 of 5 Rev 11.11 PLFA.SENOTE T he complete VIRTUAL CHECK Merchant Agreement includes these teens and conditions and an application on three(3)additional pages. MERCHANT PROCESSING APPLICATION SEkP 1750 Old Meadow Road Referral: Suite 300 McLean VA 22102 Phone:(800 )201.0240 Lead Source: None SAGE s:iVMFT,rsOLUnONS1 Sage Payment Solutions is a registered ISO/MSP of BMO Harris Bank N.A.® Settlement Bank: BMO Harris Bank N.A. Auth Network: VisaneUTSYS Settle Network: Vital Office: Invoice Cloud,Inc. Office Phone: 7818483733233 IAppkation ID: 210532 Application Date: 10/28/2015 3:13:49 PM Contractor Name: Carolyn Ambrose nsso:cation: Invoice Cloud,Inc. pOen rat inlormatton '. `i `+ i Type of Ownership: Government(Fed,Sl,Local) Business Open 1)111900 Existing MID: Legal Business Name: City of Farmington Business Name: City of Farmington Mailing/Billing Address: 430 Third Street Location Address: 430 Third Street City: Farmington Slate: MN Zip 55024 City: Farmington State MN Zip 55024 Phone: (651)280-6880 Fair: (651)280-6880 Phone: (651)280-6880 Fax (651)280-6880 Contact: Robin Hanson Email: rhanson@ci.farmington.mn.Us Customer Service Number: (651)280-6880 D&B: Web Site: www.cl.farminglon.mn.us Number of Locations: .. -- ' ,_ - — -- �. r + n i, s, `Gtr , 4 r-.r f - Tax biforniation ....: • <i. ,it `.:.s�(.5. .'��...,..,}t..i„+nEp,. : Nance(as it appears on your Federal Tax Return): City of Farmington Federal Tax ID: talffille Slate Flied: MN Type of Ownership: Government(Fed,St,Local) ❑ I CERTIFY THAT I AM A FOREIGN ENTITY!NON-RESIDENT ALIEN I CERTIFY THAT t AM PROVIDING AUTHORIZATION FOR THE ELECTRONIC ISSUANCE 01-1[2S FORM 1099 r f, er j i` !+ b',3rr q a�VViler/Officer l 5,5956 -t�' �f;. ! S ;l ik). ,:10111ccr 2 0% r r`, {{ Name: Robin Hanson Name: -title: Finance Director Title: Address: 430 Third Street Address: City: Farmington Stole: MN City: Stein: Zip: 55024 Phone; (651)280-6880 ZIp: Phone: Email: Emell: SSN; 999-99-9999 DOB: SSN: DOB: tsal ,... erBank(Acgeirer)Informalton IlmportantMemberBank(Acquirer)Responetbtlites , Acquirer Name: BMO Harris Bank N.A 1.A DiscoverMsaf MasterCard!American Express Member is the only entity approved to extend acceptance of cq DiscoverMsa/MasterCerd/Ariterican Express products dreclly to a merchant. Acquirer Address: 150 N.Martindale Rd Suite 900 2.A DisooverNisefMasterCard/American Express Member must be a principal(signer)to your Merchant Agreement. Acquirer City: Schaumburg 3.The DiscoverMsa!MasterCerdlAmedcan Express Member Is responsible for educating Merchant on the pertinent cq Y rg DiscoverMsalMaslerCardtAmericen Express Operating Regulations with which the Merchant must comply. Acquirer State,Zip: IL,60173 4.The DiscoverMsa/MasterCard/Amedcan Express Member Is responsible for and must provide settlement funds to the merchant. Acquirer Phone: (847)240-6600 5.The DiscooerMSalMasterCard/Amedcan Express Member is responsible for all funds held In reserve that are derived from settlement. (Merchant Information I Important Merchant Responsibalites Merchant Name: City of Farmington 1.Ensure compliance with cardholder data security and storage requirements Merchant Address: 430 Third Street 2.Maintain fraud and chargebadc thresholds. Merchant City: Farmington 3.Review and Understand the terms of the Merchant Agreement Merchant Stale,Zip: MN,55024 4.Comply with Discover/Visa/MasterCard Operating Regulations. Merchant Phone: (651)280-6880 THE RESPONSIBILITIES LISTED ABOVE DO NOT SUPERCEDE TERMS OF THE MERCHANT AGREEMENT AND ARE PROVIDED TO ENSURE THE MERCHANT UNDERSTANDS SOME IMPORTANT OBLIGATIONS OF EACH PARTY AND THAT THE DISCOVERNISA/MASTERCARD MEMBER(ACQUIRER)IS THE ULTIMATE AUTHORITY SHOULD THE MERCHANT HAVE ANY PROBLEMS. X MERCHANT SIGNATURE MERCHANT PRINTED NAME&TITLE DATED Merchant Agreement Page 1 of 4 PLEASE NOTE The complete Merchant Agreement includes this application and the terms end conditions on eight(8)additional pages. e D MO d Harris Bank SEIge UnderWrding Profile a .., _ . ......< Typo Of Business: Retail Seasonal: I-else Seasonal Nigh Months: Business Description: Ulilltles(Water,Stormwaler,Sewer,Solid Waste and Street Lights) Return Policy: Other Days Until Product Delivery: 0 Monthly Volume: $99,330.00 Method uJ Sales %of Products"Sold s r-:s Average Ticket: $216,00 Card Present Swiped 0% Consumer Sales 80% Highest Ticket: $600.00 Card Present keyed 10% Business Sales 20% Discount Paid: Monthly Card Not Present 60% Government Sales 0% IBdbg944as :.*.,e - •l�� Please explain your biting 1 delivery policy: • Full payment upfront with days until product/service delivery. Partial payment required up front with %end within days until final product f service delivery. D Payment received after product(service is provided. - - If product/service delivery requires recurring bitting,please explain available billing options: Monthly 0 Quarterly D Semi-Annually 0 Annually Is any part of your business oulsourced to a third-party? YES NO If YES,please explain: JAuttlonzatroh to/tCf){Checkln 1 accounts only.Must.inciudo voided business check for each account) Bank Name: Anchor Bank Phone: (651)463- tsly Farmington State: MN zip: 55024 Depository Routing It etallialria Account ft: igiift Foes I Routing It 41101111111111110 P.rcountrI: NEW Cost Plus(CP) J] Interchange at pass-through(MT) ® FAN F CP/CNP(Varies') *' 'i'r'C?gt •FANF CP and FANF CRP are based on prior month's Visa CNP volume,number of locations processing Visa and Tax ID.For further Information on the FANF and MSP Network Fee,please go to www.merchantnetworkfee.com. 7t .P x Catd n . Rafa�)our + F�", :_Olscd arrlWln Qualitication Excephons(BApplicab(f j RatCA Plus ® Visu 2.500% Bankcard =0.000 Bankcard:Rale I=•0.000%+$0.00,Rate 2=0.000%+$0.00,Rate 3=0.000%+50.00,Intl\EonStd=0.000%+50.00,Boo- 0.000%+$0.00,API--0.000% Check Card =0.000 Checkcard:Rate 1=0.000%+$0.00,Rate 2=0.000%+$0.00,Rale 3=0.000%+$0.00,IntlNonStd=0.000%+$0.00,Bus= 0.000%+$0.00 IN MasterCard 2.500% Bankcard =0.000 Bankcard:Rate 1=0.000%+$0.00,Rate 2=0.000%+$0.00,Rate 3=0.000%+$0.00,InfiNonStd=0.000%+$0.00,Bus 0,000%+$0.00,NABU=0.000% Check Card =0.000 Checkcard:Rate 1=0.000%+$0.00,Rate 2=0.000%+$0.00,Rale 3=0.000%+$0.00,IntlNonStd=0.000%+$0.00,Bus= 0.000%+$0.00 ® Discover 2.500% Bankcard =0.000 Bankcard:Rale 1=0.000%+$0.00,Rate 2=0.000%+$0.00,Rate 3=0.000%+$0.00,InttNonSld=0.000%+$0.00,Bus= 0.000%+$0.00 Check Card =0.000 Checkcard:Rate 1=0.000%+$0.00,Rate 2=0.000%+$0.00,Rale 3=0.000%+$0.00,Int'INonStd=0.000%+$0.00,Bus= 0.000%+$0.00 ® AMEX 2.500% Bankcard =0.000 Bankcard:Rate 1=0.000%+$0.00,Rate 2=0.000%+$0.00.Rate 3=0.000%+$0.00,IntlNonStd=0.400%+$0.00,Bus= 0.000%+$0.00 Check Card =0.000 Checkcard:Rate 1=0.000%+$0.00,Rale 2=0.000%+$0.00,Rale 3=0.000%+$0.00,IntINonStd=0.000%+$0.00,Bus= 0.000%+$0.00 Ei By cheddng this box merchant opts out of receiving future commercial marketing communications from American Express. *Nate that you may continue to receive marketing communications while American Express updates its records to reflectyourcheice.Opting out of commercial marketing communications will not preclude you from receiving Important transactional or relationship messages from American Express Aulhprrzatron Fees ` ,, Other Entitlements IfirO ' PRE6'.?fide'f14ik>xWilaa,,`gan tk- Status 400.. r'r- "x._, Visa/MasterCard Auth:$0.00 AV>F ea:5 0.000 American Express New Discover Auth:$0.00 Carle Blanche None Pin Debit Auth:$0.45 JCB None EBT Auth:$0.00 Discover New American Express Auth:$0.00 Cede Blanche Auth:$0.00 JCB Auth:$0.00 ARU Auth:$0.00 Voice Auth Auth:$0.75 Merchant Agreement Pogo 2 of 4 PLEASE IjOTF the complete Merchant Agreement includes this application and the terms and conditions on eight(8)additional pages. 0a,,o Harris Bank Sa:Je Startup Fces ,t.-,}S., `.`t Monthly Foes ,1 c) , :;MlscotWh @dile(:bras ti,'_,j�}„ r, rescjlpll �Iyr Price FeB Desbrip{(op �, I/lrtlauR Descr'p1 on Amoufli Sage Virtual Terminal 1 0.00 Visa Acquirer Processing Fee 0.0200 Standard Shipping/1-3 Day 1 0.00 MasterCard Network Access&Brand Usage 0.0200 Total: 2 0.00 Visa Data Integrity Fee 0,1000 Chargebeck 10.0000 Signature Plan% 2.5000 Amex Non-Swiped/Digital Wallet Fee 0.0035 Amex Network Fee 0.0015 Complimentary Online Reporting 0.0000 ASSESSMENTS I VISA©(CREDIT CARD TRANSACTIONS 0.1300 ASSESSMENTS I VISA©(CHECK CARD TRANSACTIONS 0.1100 ASSESSMENTS I MASTERCARD@% 0.1200 ASSESSMENTS I MASTERCARDFI I LARGE TICKET($1K 0.1300 MASTERCARDO DIGITAL ENABLEMENT FEE% 0.0100 ASSESSMENTS I DiSCOVERO% 0.0000 Discover Data Usage Fee 0.0000 Collection of Startup Fees will be via ACH-Merchant drafted by Sage Payments Equipment - - TQgar e j *LC r-s, - '1011A-It fat .Z '14�5?lA�h i(" ': �"` � '"£MI1 * W 'dYa�� p. a rr Sage Virtual Terminal VAR 1 STAGE �COrtificatipn and Agrcomenl ;r -.,i l' By signing below,the merchant named:(1)certifies to Sage Payment Solutions that he/she Is authori,ed to sign this agreement;(2)certifies that all information and documents submitted in connection with this application are true and complete;(3)authorizes bank or its agent to verify any of the Information given,Including credit references,and to obtain credit reports(including a spouse gin a community properly stale);(4)has read,agreed to.and acknowledges receipt of the terms and conditions of the merchant processing agreement,attached hereto and Incorporated herein by reference.The terms and conditions and this application constitute the entire integrated merchant processing agreement by and between merchant,Sage Payment Solutions and bank;(5)agrees that merchant and each transaction submitted to bank will be bound by the agreement in its entirety;arc (6)agrees that merchant will submit transactions to bank only in accordance with the information in this application and will immediately Inform Sage Payment Solutions in writing at the address above if any Information in this application changes.The agreement will become effective only when signed by bank and Sage Payment Solutions.Merchant further acknowledges that,as used in this paragraph,"bank'means the banking institution Indicated by appropriate mark In one of the check boxes located at the top of the first page of ills document. By signing below,I represent that the Information t have provided on the Appfication is complete and accurate and I authorize American Express Travel Related Services Company,Inc(American Express)to verify the Information on this Application and to receive and exchange information about me,including,requesting reports from consumer reporting agendas.If I ask American Express whether or not a consumer report was requested,American Express will tell me,and If American Express received a report,American Express will give me the name and address of the agency that furnished it.I understand that upon American Express' approval of the business entity Indicated above to accept the American Express Card,the Terms and Conditions for American Express Card Acceptance('Terms and Conditions')will be sent to such business entity along with a Welcome Letter.By accepting the American Express card for the purchase of goods and/or services,you agree to be bound by the Terms and Conditions. IN WITNESS WHEREOF,the parties hereto have executed this Agreement as of this day, Merchant: By; X By: Merchant Principal or Corporate Officer Merchant Principal or Corporate Officer Print Name Print Name Accepted by Bank By' Accepted by Sage Payment Solutions: By' Merchant Agreement Page 3 of 4 PLEASE NOTE The complete Merchant Agreement includes this application and the terms and conditions on eight(8)additional pages. AA iV H 0 M. :, Harris Bank SEW Personal Guaiamtya '' t..r:. _.r In consideraron of Bank and Sage Payment Solutions''au;eptanser of the Agrer:numl,the undersigned Guarantor Qolntly and severally If route than one)unconditionally guarantees the performance of all obligations of Merchant to Bank and Sege Payment Solutions under the Agreement,and payment of all sums due thereunder,and in the event of default,hereby waives notice of default and agrees to indemnify Bank and Sage Payment Solutions for all funds due from Merchant pursuant to the terms of the Agreement.This is a guaranty or payment and performance and not of collection,and In no case will Sage Payment Solutions be required to attempt collection from Company or pursue any other remedy or action before collection from Guarantor.Guarantor waives any and all rights of subrogation,reimbursement or Indemnity derived from Merchant and all other rights and defenses available to Guarantor under applicable law,Including California Civil Code Sections 2787 to 2856,inclusive(or any similar suretyship laws),and further waives any and all rights,defenses or notices arising by reason of any modification or change in the terms of the Agreement whatsoever,Including,without limitation,the renewal,extension,acceleration,or other change In the time any payment or other performance thereunder is due,and!or any change in any interest or discount rale or fee thereunder.Guarantor confirms that Guarantor,collectively or individually,is an officer or shareholder to the Merchant and party to the Agreement,end unconditionally and specifically authorizes Bank,or its authorized agent,to debit any overdue fees,costs,chargebacks,fines,penalties,expenses or obligations under the Agreement and I or my contractual relationship with Bank or Sage Payment Solutions from any personal checking account or other account owned or controlled by Guarantor,and further to report any default hereunder on Guarantor's personal Credit Bureau Report. Guarantor agrees to pay all costs and expenses of whatever nature,including attorneys'fees and other legal expenses,Incurred by or on behalf of Bank or Sage Payment Solutions In connection with the enforcement of this Guaranty.Guarantor further acknowledges that,as used in this paragraph,'Bank'means the banking institution indicated by appropriate mark in one of the check boxes located at the top of the first page of this document. X ,An Individual Dale ,An Individual Date Signature Signature Print Name Print Name "EARLY TERMINATION:If Company cancers this Agreement during the term or any agreed upon extension term,applicable early termination lees shall be due Sage.See Article V Section 5.01 of the attached terms and conditions for additional details. Site inspection Intorm'allon _(To be carr?ptete�by SalpF M(ep) I 1 I HAVE PERSONALLY CONDUCTED ASITE INSPECTION FOR THIS MERCHANT,VISUALLY INSI'1'(:11 li i HC Mi3RCi1AN('S INVEft l ORY(IF APPLICABLE)AN()REPRESENT Ti IE INFORMATION IN TIIlS MERCHANT APPLICATION IS ACCURATE AND COMPLETE Location Type: ❑ Retail Store [] Office Industrial ❑ Residence ❑ Trade ❑ Other(describe) Merchant: [J Owns [J Lease Business SALES REPRESENTATIVE-SIGNATURE SALES REPRESENTATIVE PRINTED NAME&TITLE DATED Merchant Agreement Page 4 of 4 PLEASE NOTE The complete Merchant Agreement Includes This application and the terms and conditions on eight(81 additional pages. ® w ,, ®A Harris Bank • TERMS AND CONDITIONS OF MERCHANT AGREEMENT These are the Terms and Conditions of Merchant Agreement referred to in the Merchant Processing Application("Application")by and between Sage Payment Solutions,Inc.("SPS"),BMO Harris N.A.("Bank"),and the applicant("Merchant")who has submitted the executed Application. ARTICLE I—ADDITIONAL DEFINITIONS 1.01 "Account"means a bank account maintained by Merchant as set forth in Section 6.10 for the crediting of collected funds and the debiting of fees and charges pursuant to this Agreement. 1.02 "ACH"means the Automated Clearing House paperless entry system operated by the Federal Reserve. 1.03 "Agreement"means the Application including the Schedule of Fees,these Terms and Conditions of Merchant Agreement with all exhibits and attachments,and any supplementary documents indicated herein,as amended from time to time,all of which constitute the Agreement. 1.04 "American Express"means American Express Travel Related Services Company,Inc. 1.05 "American Express Merchant Operating Guide"means the rules and regulations available at www.americanexpress.com/merchantopguide(or any successor or replacement website),as they may be amended from time to time by American Express. 1.06 "Authorization"means a computerized function or a direct phone call to a designated number to obtain credit approval for individual Transactions from the Card Issuer. 1.07 "Card"means any account or evidence of an account issued to a Cardholder under license from a Payment Brand,any or representative or member of a Payment Brand,that Merchant accepts as payment from Cardholders for goods or services. Cards include,but are not limited to,credit and debit/check cards,stored value cards,loyalty cards,electronic gift cards,authorized account or access numbers,paper certificates,and credit accounts and any other payment instrument with an embedded microcomputer EMV chip. 1.08 "Cardholder"(also referred to as"Card Member"in some Payment Brand materials)means the person whose name is embossed upon the face of the Card and who purports to be the person in whose name the Card is issued. 1.09 "Card Issuer"means the financial institution or company,which has provided a Card to the Cardholder. 1.10 "Chargeback"means the procedure by which,and the value of,a Sales Draft(or disputed portion thereof)returned to Bank by a Card Issuer. 1.11 "Credit Voucher"means a document executed by a Merchant evidencing any refund or price adjustment relating to Cards to be credited to a Cardholder account. 1.12 "Debit Card"means a plastic card used to initiate a debit Transaction,used primarily to purchase goods or services and obtain cash,for which the Cardholder's bank account is debited by the issuer. 1.13 "Discount Fee"means a fee charged on all Transactions that is payable by Merchant to SPS for processing Merchant's Transactions. 1.14 "Discover"means DFS Services,LLC. 1.18 "EMV"means Europay,MasterCard and Visa. 1.18 "Imprint"means:(i)an impression on a Sales Draft manually obtained from a Card through the use of an imprinter,or(ii)the electronic equivalent obtained by swiping a Card through a terminal and electronically printing a Sales Draft. 1.17 "MasterCard"means MasterCard International Incorporated. 1.18 "Payment Brand"means any payment method accepted by SPS for processing,including,without limitation,Visa,MasterCard,Discover,American Express and other credit and debit card providers,debit network providers,gift card,and other stored value and loyalty program providers. 1.19 "PCI DSS"means the Payment Card Industry Data Security Standards available at)ittp://www.pcisecuritystandards.org,as amended from time to time. 1.20 "Reserve Account"has the meaning set forth in Section 6.06. 1.21 "Rules"means the rules,regulations,and other requirements of any Payment Brand or related authority,including,without limitation,those of the PCI Security Standards Council,LLC and the National Automated Clearing House Association,as amended from time to time. "Rules"includes without limitation the Visa USA,Inc.Operating Regulations,Visa International Operating Regulations,MasterCard Rules,Discover Operating Regulations,and the American Express Merchant Operating Guide. Capitalized terms not defined herein shall have the meanings set forth in the Rules. 1.22 "Sales Draft"means the paper form approved in advance by SPS,whether such form is electronically or manually imprinted,evidencing a sale Transaction. 1.23 "Transaction"means any retail sale of goods or services,or credit for such,from Merchant for which the customer makes payment through the use of any Card and which is presented to Bank for collection. 1.24 "Visa"means Visa Inc. 1.25 "Voice Authorization"means a direct phone call to a designated number to obtain credit approval on a Transaction. ,ARTICLE II-MERCHANT REPRESENTATIONS.WARRANTIES.COVENANTS AND AGREEMENTS 2.01 Honoring Cards. (a)Merchant will accept,without discrimination,all valid Cards properly presented for payment for bona fide,legitimate business transactions arising out of Merchant's usual trade or business and for Transactions originated by Merchant;(b)U.S.retailers may require a minimum purchase amount on credit card Transactions.The minimum purchase amount must not exceed$10.00(ten dollars)and does not apply to transactions made with a Debit Card. Maximum transactions amounts may be established by Federal agencies and institutions of higher learning;(c)Merchant shall not require any Cardholder to pay any part of any fee imposed upon Merchant by this Agreement,whether through any increase in price or otherwise require a customer presenting a Card to pay any charge as a condition of sale that is not also required from a customer paying cash.However,Merchant may offer discounts to customers for cash purchases.Merchant may also charge a service fee on Transactions if Merchant charges a service fee:(i)for all payment methods(check,credit card,etc.)or(ii)for a specific payment mode(telephone)and not for other payment modes(face-to-face);(d)Merchant shall not accept a Card as payment(other than to the extent permitted by this Agreement),if the person seeking to use the Card does not present the Card to permit Merchant to examine it and obtain an Imprint or otherwise use the physical Card to complete the Transaction.Merchant shall not deposit any Transaction for the purpose of obtaining or providing a cash advance either on Merchant's Card or the Card of any other party.Merchant agrees that any such deposit shall be grounds for immediate termination.Merchant shall not obtain under any circumstance Authorization for,nor process a sale on,any Card that Merchant is authorized to use.Processing Merchant's own Card is grounds for immediate termination. 2.02 Card Acceptance. When accepting a Card for a face-to-face Transaction,Merchant will follow the steps provided by Bank and SPS,and will:(a) Examine the Card for the Cardholder's signature and if the Card is not signed,request identification to confirm that the Cardholder is the person he/she purports to be and determine in good faith and to the best of its ability that the Card is valid on its face;(b)Check the effective date(if any)and the expiration date of the Card,examine any card security features(such as a hologram)included on the Card;and(c)Obtain Authorization before completing any Transaction(where Authorization is obtained,Merchant will be deemed to warrant the true identity of the customer as the Cardholder);(d)Unless the Sales Draft is electronically generated or is the result of an Internet,mail,telephone or preauthorized order,obtain an Imprint of the Card;(e)Enter a description of the goods or services sold and the price thereof(including any applicable taxes);(f)As required by the Rules,obtain the Cardholder's signature on the Sales Draft and compare that signature to the signature on the Card;(g)Deliver a true and completed copy of the Sales Draft to the Cardholder at the time of delivery of the goods or performance of the services,or if the Sales Draft is prepared by a point-of-sale terminal,at the time of the sale;(h)Provide the Sales Draft to the Cardholder following the purchase;and(i)Legibly reproduce the Cardholder's name,account number,expiration date,and the Merchant's name and place of business if that information is not legibly imprinted on the Sales Draft.In addition,for MasterCard Transactions,Merchant will legibly reproduce the name of the Card Issuer as it appears on the face of the Card.Each Sales Draft presented to Bank for collection shall be genuine and will not be the result of any fraudulent Transaction or telemarketing sale and shall not be deposited on behalf of any business other than Merchant. 2.03 Authorization,(a)Merchant will obtain a prior Authorization for all Card sales.If Merchant cannot,for any reason,obtain an electronic Authorization, Merchant will request a Voice Authorization from the designated authorization center,and will legibly print the authorization number on the Sales Draft; Sage Merchant Agreement Page 1 of 9 Revision 20150806 PLEASE NOTE:The complete BANKCARD Merchant Agreement includes these terms and conditions and an application on three(3)additional pages. (b)Merchant will not obtain or attempt to obtain Authorization unless Merchant intends to submit a Transaction for the authorized amount;(c)Merchant will not divide a single Transaction between two or more Sales Drafts or two or more Cards;(d)Merchant will not attempt to obtain Authorization on an expired Card;(e)Merchant acknowledges that an Authorization provides only that the Cardholder account has sufficient credit available to cover the amount of the current sale,that an Authorization is not a guarantee of payment,and that an Authorization will not waive any provision of this Agreement or otherwise validate a fraudulent Transaction or a Transaction involving the use of an expired Card.Receiving an Authorization shall not relieve the Merchant of liability for Chargeback on any Transaction;(f)Transactions will be deemed invalid on Cards that are expired,whether or not an Authorization has been obtained;(g)If Authorization is granted,Merchant shall print the Authorization number,or ensure that it appears legibly in the appropriate location on the Sales Draft;and (h)If Authorization is denied,Merchant shall not complete the Transaction and shall follow any instructions from the authorization center, (i)Merchant shall not obtain or attempt to obtain Authorization for a Transaction that it knows or should have known to be either fraudulent or not authorized by the Cardholder. 2.04 Retention and Retrieval of Cards.(a)Merchant shall use its best efforts,by reasonable and peaceful means,to retain or recover a Card upon receiving such instructions when making a request for Authorization or if Merchant has reasonable grounds to believe that the Card is counterfeit,fraudulent or stolen;(b)The obligation of Merchant imposed by this Section to retain or recover a Card does not authorize a breach of the peace or any injury to persons or property and Merchant will hold Bank and SPS harmless from any claim arising from any injury to person or property,or other breach of the peace in connection with the retention or recovery of a Card. 2.06 Compliance with Law: Payment Card Industry Data Security Standards; Non-Disclosure and Storage of Cardholder and Transaction ,Information Requirements. (a)Merchant confirms that it is,and shall be,in full compliance during the term of this Agreement with all laws,statutes and federal and/or state regulations,as well as the Rules as may be applicable to Merchant,its business and any Transaction (b)Internet Merchants shall,at a minimum,include the following information and processes on their Internet sites,(i)prominent display of Merchant's name as"merchant"and as the name that will appear on the Cardholder statement,(ii)a complete description of goods or services offered;(iii)delivery standards including method and time for delivery;(iv)terms and conditions of purchase,and export or legal descriptions;(v)return/refund policy described in reasonable detail;(vi)opportunity to view and confirm order before order submission;(vii)secure method for payment data transmission;(viii)currency of transaction provided(USD);(ix) disclosure of Merchant's outlets to country of origin;(x)display of card association or payment network logos;(xi)clear disclosure of Merchant's privacy policy;(xii)alternate Merchant contact info options;and(xiii)display of web hosting company contact information;(c)Merchant hereby certifies that it (and any outside agent or contractor that it may utilize to submit Transactions to SPS)complies and will comply with the PCI DSS and Merchant hereby agrees to pay any fines and penalties that may be assessed by a Payment Brand as a result of Merchant's noncompliance with the requirements of PCI DSS), any data breaches,or by its failure to accurately validate its compliance. Merchant will review and monitor the PCI DSS and other related Rules in order to determine the timeframes and mandates for compliance under PCI DSS. The foregoing is an ongoing obligation during the term of this Agreement and as this Agreement may be renewed. Merchant acknowledges and understands that Merchant may be prohibited from participating in Payment Brand programs if it is determined that Merchant is non-compliant. The following lists certain(but not all)of the current PCI DSS requirements,all of which Merchant shall comply with,if applicable:(i)install and maintain a working network firewall to protect data accessible via the Internet(ii)keep security patches up-to-date;(iii)encrypt stored data (iv)encrypt data sent across networks;(v)use and regularly update anti-virus software;(vi)restrict access to data to business"need to know;"(vii)assign a unique ID to each person with computer access to data;(viii)do not use vendor supplied defaults for system passwords and other security parameters;(ix)track access data by unique ID;(x)maintain a policy that addresses information security for employees and contractors;and(xi)restrict physical access to Cardholder information. Merchant shall notify SPS if it utilizes any third party that provides payment related services,directly or indirectly and/or stores transmits,or processes Cardholder data and Merchant is responsible ensuring compliance of any such third parties with PCI DSS. (d)To the extent Merchant is required under the Rules,or Merchant otherwise elects,to utilize EMV chip-capable terminals,all EMV chip-capable terminals used by Merchant must appear on the EMV co-approved terminal list maintained by the Payment Brands. (e) In the event of the failure,including bankruptcy,insolvency,or other suspension of Merchant's business operations,Merchant shall not sell,transfer,or disclose any materials that contain Cardholder account numbers,personal information,or other Transaction information to third parties.Merchant and/or its agent shall either return this information to SPS or provide SPS with acceptable proof of destruction of this information. (f)If Merchant is undergoing a forensic investigation regarding PCI DSS compliance at the time Merchant executes this Agreement,then Merchant shall fully cooperate with the investigation until completed. SPS warrants that it complies with the applicable required PCI DSS regulations and that SPS is a PCI DSS Validated Service Provider. 2.06 Returns and Adjustments.(a)Merchant's policy for the exchange or return of goods sold and the adjustment for services rendered shall be established and posted in accordance with the Rules.If applicable,Merchant agrees to disclose to a Cardholder before a Card sale is made,that if merchandise is returned: (i)no refund,or less than a full refund,will be given;(ii)returned merchandise will only be exchanged for similar merchandise and of comparable value;(iii) only a credit toward purchases will be given;or(iv)special conditions or circumstances apply to the sale(e.g.,late delivery,charges,or other noncredit terms);(b)Such disclosures must be made on all copies of Sales Drafts in letters approximately%a inches high in close proximity to the space provided for the Cardholder's signature on the Sales Draft and issued at the time of sale;(c)If Merchant does not make these disclosures,a full refund in the form of a credit to the Cardholder's Card account must be given.Merchant shall not refund cash to a Cardholder who paid for the item by Card;(d)Credits must be made to the same Card account number on which the original sale Transaction was processed. 2.07 Merchant's Business. (a)Merchant shall provide Bank and SPS with immediate notice of its intent to(i)transfer or sell any substantial part of its total assets,or liquidate;(ii)change the basic nature of its business,including selling any products or services not related to its current business;(iii)change fifty percent(80%)or more of the ownership or transfer control of its business;(iv)enter into any joint venture,partnership or similar business arrangement whereby any person or entity not a party to this Agreement assumes any interest in Merchant's business;or(v)alter in any way Merchant's approved monthly volume and average ticket;(b)Failure to provide notice as required above may be deemed a material breach and shall be sufficient grounds for termination of this Agreement,or,at SPS's option may result in SPS amending the terms of this Agreement,holding funds and/or altering the Merchant funding schedule if SPS and Bank deem it necessary to protect against financial loss.If any of the changes listed above occur,Bank and SPS shall have the option to amend the terms of this Agreement or immediately terminate this Agreement;(c)Merchant will immediately notify SPS,with a copy to Bank,of any bankruptcy,receivership,insolvency or similar action initiated by or against Merchant or any of its principals.Merchant will include Bank and SPS on the list of creditors filed with the Bankruptcy Court,whether or not a claim exists at the time of filing;(d)Merchant must notify SPS,with a copy to Bank, in writing of any changes to the information in the Application,including but not limited to:a change to Merchant's financial condition(within 3 days),any additional location or new business,the identity of principals and/or owners,the form of business organization,type of goods and services provided,and the manner in which sales are completed.Merchant must also notify SPS in writing,with a copy to Bank,if Merchant sells or closes its business.Except for a change to the financial condition,SPS and Bank must receive all such notices 7 days prior to the change and otherwise upon request from SPS.Merchant is liable to SPS and Bank for all losses and expenses incurred by SPS and Bank arising out of Merchant's failure to report changes.SPS and Bank may immediately terminate this Agreement upon a change to the information in the Application,whether SPS and Bank independently discover such change or whether Merchant notifies SPS and Bank of such change. 2.08,Advertising. (a)Merchant will prominently display the promotional materials provided by Bank and SPS in its place(s)of business. Use of promotional materials and use of any trade name,trademark,service mark or logotype("Marks")associated with Card(s)shall be limited to informing the public that Card(s)will be accepted at Merchant's place(s)of business. Merchant's use of promotional materials and Marks is subject to the direction of Bank and SPS and must be utilized in accordance with the Rules;(b)Merchant may use promotional materials and Marks during the term of this Agreement and shall immediately cease use and return any inventory to Bank or SPS upon any termination thereof;(c)Merchant shall not use any promotional materials or Marks associated with any Payment Brand in any way which implies that the Payment Brand endorses any goods or services other than Card services and Merchant shall not refer to any Payment Brand in stating eligibility for Merchant's products or services. Merchant's rights to use the Marks shall terminate with termination of this Agreement and Merchant will cease all use of the Marks upon notification by the applicable Card Sage Merchant Agreement Page 2 of 9 Revision 20150806 PLEASE NOTE:The complete BANKCARD Merchant Agreement includes these terms and conditions and an application on three(3)additional pages. association to discontinue use. Merchant shall be fully liable to Bank and/or SPS for any and all loss,cost and expenses suffered or incurred by Bank and/or SPS,arising out of failure to return or destroy such materials following termination or Merchant's misuse of the Marks. If Merchant is a`Direct Mail Cardholder Solicitation Merchant,"then Merchant acknowledges that the trademark'MasterCard'and the corresponding logotype are the property of MasterCard International Incorporated(herein,`the Corporation").Merchant shall not infringe upon the mark or logo,nor otherwise use the mark or logo in such a manner as to create the impression that Merchant's products or services are sponsored,produced,affiliated with,offered,or sold by this Corporation. Merchant shall not use the mark or logo on its stationery,letterhead,envelopes,or the like nor in its solicitation;provided,however,that Merchant may use one of the mark or logo in close proximity to the payment or enrollment space in the solicitation in a size not to exceed 1 1/4 inches in horizontal length if a logo is employed,or,if a mark is used,in type not to exceed the size of the type used in the major portion of the text on the same page;provided further that the legend,'Accepted for Payment'must accompany the mark or logo used and must be the equivalent size of the mark or logo. In no case,however,shall Merchant use any of the logo on the front or first page of its solicitation.One truthful statement that Merchant is directing or limiting its offer to MasterCard cardholders may appear in the body of the solicitation,other than in close proximity to the payment or enrollment space, subject to the limitation that(i).only the word mark may be used;(ii)the word mark may not(1)exceed in type size the size of any other type on the same page,(2)differ in color from the type used in the text(as differentiated from the titles)on the same page,(3)be as large or as prominent as the name of Merchant,(4)be the first item appearing on any page,nor(5)in any other way be the most prominent element of the page;(iii)Merchant's name and/or logo must appear prominently on the same page as the mark;and(iv)the following disclaimer must appear in close proximity to the mark on the same page and in an equal size and type of print:'MasterCard International Incorporated is not affiliated in any way with Merchant and has not endorsed or sponsored this offer.'Merchant further agrees to submit its first direct mail solicitation(s),prior to mailing,to the MasterCard Law Department,to be reviewed only for compliance with this Corporation's trademark rules and shall furthermore not distribute in any manner such solicitations until Merchant shall have obtained the Corporation's written approval of the manner in which it uses MasterCard mark and logo on such solicitations. Merchant shall likewise,upon request,submit to the Corporation any amended solicitations prior to mailing. 2.09 Representations and Warranties of Merchant. Merchant represents and warrants to Bank and SPS at the time of execution and during the term of this Agreement that:(a)All information contained in the Application or any other documents delivered to Bank and/or SPS in connection therewith is true and complete and properly reflects Merchant's business,fmancial condition and principal partners,owners or officers;(b)Merchant has the power to execute, deliver and perform this Agreement,and this Agreement is duly authorized,and does not and will not violate any provisions of federal or state law or regulation,or conflict with any other agreement to which Merchant is subject;(c)Merchant has all licenses,if any,required to conduct its business and is qualified to do business in every jurisdiction where it is required to do so;(d)There is no action,suit or proceeding now pending or to Merchant's knowledge, threatened by or against or affecting Merchant which would substantially impair its right to carry on its business as now conducted or adversely affect its financial condition or operations;(e)Merchant has performed and will perform all of its obligations to the Cardholder in connection with the Transaction evidenced by each Sales Draft;(f)Unless Merchant notifies SPS in writing(either on the Application or otherwise),no other processing relationship exists between Merchant and another bankcard processing institution,for this,or any other business run or owned by Merchant;(g)With respect to all Transactions that Merchant requests SPS and Bank to originate,Merchant continuously represents and warrants to Bank and SPS that(i)Each Cardholder has authorized the debiting and/or crediting of its account;(ii)Each entry is for an amount the Cardholder has agreed to;and(iii)Each entry is in all other respects properly authorized;and(h)Merchant will not sell,purchase,provide or exchange any Cardholder's account name or number information in any form to any third party except to Bank or to SPS or pursuant to written government request,and then only upon prior notice to SPS given in sufficient time to permit SPS to file a protective motion. 2.10 Merchant Processing, Merchant will tender to SPS for processing all of Merchant's Transactions from all Merchant locations. Merchant will not use the services of any bank,corporation,or person other than SPS for Authorization or processing of Transactions during the term of this Agi Bement unless Merchant notifies SPS in writing and receives written approval from SPS prior to processing with another institution. 2.11 Additional Requirements for T&E Merchants. If Merchant is a Travel and Entertainment(T&E)merchant providing lodging the terms of this Section shall apply.Merchant must inform Cardholder of the following regarding reservations as applicable:(a)total obligation,(b)reserved rate and the Transaction amount,(c)exact name and location of lodging company,(d)that accommodations will be held for the number of nights paid for,and(e) Merchant's cancellation policy. Merchant must determine the T&E Advance Deposit Transaction amount,not to exceed the cost of the intended length of stay,not to exceed 14 nights lodging. Deposit amounts must be applied to the total obligation. Merchant must provide a confirmation code,an advance deposit amount,cancellation policy and the actual date that cancellation privileges expire. Merchant must advise the Cardholder that it will hold accommodations according to the reservation and provide written confirmation of a Cardholder reservation if requested. Merchant must advise the Cardholder that it will retain the entire T&E Advance Deposit Transaction amount or the amount specified in Merchant's stated policy if the Cardholder does not check in by check-out time the day following the last night of lodging used to determine the deposit or cancel the reservation within the specified time frame. Merchant must complete a Transaction receipt with the following information:(i)advance deposit amount,(ii)the words`Advance Deposit" on the Transaction receipt signature line,(iii)confirmation code,(iv)scheduled check in,and(v)date and time that cancellation privileges(if any)expire without forfeiture.Merchant must mail the Cardholder a Transaction receipt copy within 3 days from the Transaction Date. Merchant shall mail to the Cardholder a Transaction receipt for cancellations within 3 days of the Transaction date. If the reserved accommodations are unavailable,Merchant must, at no charge,provide a complete refund of any deposit,comparable accommodations at an alternative establishment for the number of reserved nights not to exceed 14 or until the reserved accommodation become available,and transportation and two 3-minute telephone calls to the alternative establishment. Any Central Reservation Service must have a written contract with the lodging establishment executed by an officer of the hotel and must accept full responsibility for resolving Cardholder problems related to T&E Advance Deposit Service. The Rules include additional requirement for T&E merchants that provide car rentals or cruises. ARTICLE III-PRESENTMENT.PAYMENT.CHARGEBACK:RESERVE ACCOUNTS:TYPES OF TRANSACTIONS 3.01 Acceptance. Bank and SPS shall accept from Merchant all valid Sales Drafts deposited by Merchant and shall present the same to the appropriate Card Issuers for collection against Cardholder accounts.All presentment and assignment of Sales Drafts,collection therefore and re-assignment or rejection of such Sales Drafts are subject to the terms of this Agreement and the Rules.Bank shall only provisionally credit the value of collected Sales Drafts to the Account and reserves the right to adjust amounts collected to reflect the value of Chargebacks,fees,penalties,late submission charges and items for which Bank did not receive final payment.Settlement of funds will be in United States Dollars.Bank and SPS may refuse to accept any Sales Draft or revoke its prior acceptance of a Sales Draft in the following circumstances:(a)the Transaction giving rise to the Sales Draft was not made in compliance with all terms and conditions of this Agreement;(b)the Cardholder disputes his liability to Bank for any reason,including but not limited to those Chargeback rights enumerated in the Rules;or(c)the Transaction giving rise to the Sales Draft was not directly between Merchant and the Cardholder. Bank will offset from payments due to Merchant,any amount previously credited to Merchant for a Sales Draft not accepted or later revoked by Bank and SPS.Merchant shall regularly and promptly review all statements of account,banking statements,and other communications sent to Merchant and shall immediately notify SPS if any discrepancy exists between Merchant's records and those provided by SPS,the Merchant's bank,or with respect to any transfer that Merchant believes was not authorized by Merchant or Cardholder.If Merchant fails to notify SPS in writing within fourteen(14)calendar days after the date that SPS mails or otherwise provides a statement of account or other report of activity to Merchant,Merchant will be solely responsible for all losses or other costs associated with any erroneous or unauthorized transfer.The foregoing does not limit in any way Merchant's liability for any breach of this Agreement. 3.02 Endorsement. The presentment of Sales Drafts for collection and payment is Merchant's agreement to sell and assign its right,title and interest in each Sales Draft completed in conformity with Bank's and SPS's acceptance procedures,and shall constitute an endorsement by Merchant to Bank of such Sales Drafts.Merchant hereby authorizes Bank to supply such endorsement on Merchant's behalf.Merchant agrees that this Agreement is a contract of financial accommodation within the meaning of the Bankruptcy Code,11 U.S.C.Sec.365,as amended from time to time.Merchant acknowledges that its obligation to Bank and SPS for all amounts owed under this Agreement arise out of the same transaction as Bank's obligation to deposit funds to the Account. Sage Merchant Agreement Page 3 of 9 Revision 20150806 PLEASE NOTE:The complete BANKCARD Merchant Agreement includes these terms and conditions and an application on three(3)additional pages. 3.03 Transmission Method. If Merchant utilizes electronic authorization and/or data capture services,Merchant will enter the data related to a sales or credit Transaction into a computer terminal or magnetic stripe reading terminal no later than the close of business on the date the Transaction is completed. If Merchant provides its own electronic terminal or similar device,such terminals must meet SPS's and Bank's requirements for processing Transactions. Information regarding a sales or credit Transaction transmitted with a computer or magnetic stripe reading terminal will be transmitted by Merchant to SPS or its agent(s)in the form SPS from time to time specifies,or as required under the Rules.If Bank and SPS request a copy of a Sales Draft,credit voucher or other Transaction evidence,Merchant will provide it within 3 business days following the request.The means of transmission indicated in the Application shall be the exclusive means utilized by Merchant until Merchant has provided SPS with at least 30 days prior written notice,with a copy to Bank,of Merchant's intention to change the means of such delivery or otherwise to alter in any material respect Merchant's medium of transmission of data to SPS. 3.04 Chargebacks. (a)Simultaneously with each Cardholder Transaction,a contingent and unmatured claim for Chargeback accrues against Merchant in favor of SPS and Bank if under the Rules,SPS or Bank is required,or has the right,to pay to any Payment Brand any fees,discounts,customer credits and adjustments,charges,fines,assessments,penalties or other items which may be charged back to Merchant by SPS and Bank. Merchant agrees that it is fully liable to Bank and SPS for all Chargebacks,and that Bank and SPS are authorized to offset from incoming Transactions and to debit via ACH the Account,the Reserve Account,or any other account held at any other fmancial institution in the amount of any Chargeback.Merchant agrees to accept for Chargeback any sale for which the Cardholder disputes the validity of the sale according to the Rules;or SPS and Bank determine that Merchant has in any way failed to comply with the Rules,this Agreement or SPS's procedures,including but not limited to the following:(i)The Sales Draft is illegible,not signed by the Cardholder or has not been presented to Bank within the required time-frames;(ii)The Sales Draft does not contain the Imprint of a valid, un-expired Card;(iii)A valid Authorization number has not been correctly and legibly recorded on the Sales Draft;(iv)The Sales Draft is a duplicate of a prior Transaction or is the result of two or more Transactions generated on one Card for a single sale;(v)The Cardholder alleges that he or she did not participate in the sale,authorize the use of the Card,receive goods or services purchased,or receive a required credit adjustment,or disputes the quality of the goods or services purchased;(vi)The price of goods or services on the Sales Draft differs from the amount which Merchant presents for payment;(vii) The Transaction results from an Internet,mail,phone or preauthorized order and the Cardholder disputes entering into or authorizing the Transaction or the Transaction has been made on an expired or non-existing account number;(viii)SPS and Bank believe,within their sole discretion,that Merchant has violated any provision of this Agreement;(ix)SPS determines that the Transaction record is fraudulent or that the Transaction is not bona fide or is subject to any claim of illegality,cancellation,rescission,avoidance or offset for any reason whatsoever,including without limitation negligence,fraud or dishonesty on the part of Merchant or Merchant's agents or employees;(x)Merchant fails to provide a Sales Draft or legible copy thereof to Bank and SPS in accordance with this Agreement.(b)Merchant acknowledges that SPS and Bank shall have full recourse to charge back the amount of a Card sale for which the Cardholder disputes that he/she did not authorize the charge if(i)the Imprint of the Card or(ii)the signature of the Cardholder was not obtained by Merchant;and(iii)Merchant shall not initiate a Transaction in an attempt to collect a Chargeback. Merchant shall be liable for all fees arising out of the Chargeback dispute processes under the Rules. 3.06 Processing Limits. Merchant's"Approved Monthly Volume"for sales drafts is that monthly volume set forth in the Application or as otherwise set forth in the Merchant account approval letter from SPS to Merchant or as may be later changed by SPS from time to time upon notice to Merchant. If Merchant exceeds the Approved Monthly Volume,either in the aggregate or with respect to any"method of sale":(i)SPS and Bank may suspend processing, hold the funds over the Approved Monthly Volume,and/or return all Sales Drafts evidencing funds over the Approved Monthly Volume to Merchant;and (ii)Merchant is subject to a 5%fee on all monies processed over the Approved Monthly Volume. 2.06 Additional Requirements for Acceptance of Debit Cards. Merchant may honor at the locations set forth on the Application debit cards("Debit Card")serviced by the electronic funds transfer networks in connection with the sales("Debit Card Sale")of merchandise or services to the holders of such Debit Cards("Debit Cardholders"). Bank and/or SPS agree to accept from Merchant via electronic transmission documents evidencing such Debit Card Sales("Sales Transmittal")and Adjustment Drafts(as defined below). (a)Compliance;Authorization;Other Requirements.Merchant agrees to comply(and assume all liability for failure to comply)with the Rules of the Debit Card networks("Networks")as amended from time to time. Any Authorization must be obtained immediately for every Debit Card Sale as directed by Bank and/or SPS("Authorization"). When Authorization is obtained,Merchant will electronically print the authorization number on the Sales Transmittal.Merchant agrees that: (i)for each Debit Card Sale,the Debit Cardholder must enter his Personal Identification Number("PIN")through a PIN pad located at the point of sale("POS");(ii)each PIN pad will be situated to permit Debit Cardholders to input their PINs without revealing them to other persons,including Merchant's personnel;(iii)Merchant will instruct personnel(a)that they may not ask any Debit Cardholder to disclose the PIN and(b)in the event that any of Merchant's personnel nevertheless becomes aware of any Debit Cardholder's PIN,such personnel will not use such PIN or create or maintain any record of such PIN,and will not disclose such PIN to any other person;(iv)the PIN message must be encrypted from the PIN pad to the POS terminal and from the POS terminal to the Network and back so that the PIN message will not be in the clear at any point in the Transaction; (v)Merchant will comply with any other requirements relating to PIN security as required by Bank or by any Network;(vi)for each Debit Card Sale a Transaction receipt in conformity with Regulation E of the Board of Governors of the Federal Reserve System will be made available to the Debit Cardholder,(vii)Merchant may not collect tax as a separate cash transaction;and(viii)POS terminals,including hardware and software,must be certified for use by Bank and by all of the Networks. POS terminals must include encrypted PIN pads which allow entry of up to sixteen character PINs,printers and a keyboard lock function. Merchants are responsible for compliance with all Rules regarding the use of POS terminals,regardless of whether such POS terminals are obtained through Bank or through SPS. Merchant will promptly initiate a refund to the customer(which may be made in cash,by an Adjustment Draft or with a check or cashier's check,as permitted by the Rules)whenever Merchant determines that a Debit Card Sale should be canceled or reversed.Merchant will cooperate with Bank and SPS,to resolve any alleged errors relating to Debit Card Sales. Merchant will maintain adequate records to assist in error resolution;records will be maintained for two years or the period required by the Rules,whichever is greater. Merchant will permit and will pay all expenses of periodic examination and audit of functions at such frequency,as SPS deems appropriate. Audits will meet SPS's standards,and the results will be made available to SPS. Merchant will not accept cash,checks or other negotiable items from any Debit Cardholder and forward a credit through any network(i.e.,as a purported payment or deposit to an account maintained by the Debit Cardholder). Merchant will not forward through any network any Transaction or initiate any reversal of a Transaction that did not originate between Merchant and the Debit Cardholder. (b)Prevention of Fraud. Merchant will fully cooperate with SPS and Bank in the event that Bank or SPS determines that there is a substantial risk of fraud arising from Merchant's access to the network.Merchant will take whatever actions Bank or SPS reasonably deem necessary in order to protect SPS and/or the Bank. Neither SPS,Bank nor any of their respective personnel will have any liability to Merchant for any action taken in good faith. (c)Display of Network Trademark(s);Protection of Trade Secrets. In order to inform Debit Cardholders that Debit Card Sales may be transacted at Merchant's locations,Merchant will prominently display the trademark and/or service mark of each network at each location and will display signage of each network at the entrance,near all POS terminals and on the window of such location. All uses by Merchant of any trademark and/or service mark will comply with the applicable Rules. Merchant acknowledges and agrees that in displaying any such trademark and/or service mark,Merchant will be acting under SPS's and/or Bank's control and subject to approval by the applicable network. Merchant will not be deemed,under any circumstances,a licensee or sub-licensee of any trademark or service mark of any network,nor will Merchant otherwise be deemed to have or to acquire any right,title or interest in trademarks or service marks. (d)Returns and Adjustments.Merchant will attempt to settle in good faith any dispute between it and a Debit Cardholder involving a Debit Card Sale. Merchant will establish a fair,consistent policy for the exchange and return of merchandise and for the adjustment of amounts due on Debit Card Sales.Merchant will not make any cash refunds or payments for returns or adjustments on Debit Card Sales but will instead complete a form provided or approved by Bank("Adjustment Draft"). The Sales Transmittal for any Debit Card Sale for which no refund or return will be accepted by Merchant must be clearly and conspicuously marked(including on the Debit Cardholder's copy)as"final sale"or"no return"and must comply with the Rules. Sage Merchant Agreement Page 4 of 9 Revision 20150806 PLEASE NOTE:The complete BANKCARD Merchant Agreement includes these terms and conditions and an application on three(3)additional pages. (e)Presentation of Sales Transmittals and Adjustment Drafts.Merchant will electronically transmit to Bank all Sales Transmittals or Adjustment Drafts in a manner acceptable to Bank.Merchant will make a good faith effort to electronically transmit data within one banking business day after the Transaction date. Merchant will not extend the time of payment for or extend credit for any part of a Debit Card Sale. Merchant represents and warrants that the electronic transmission of each Sales Transmittal and Adjustment Draft will evidence a true record of the Debit Card Sale Transaction reflected on the document Bank will process Debit Card Sales transmitted by Merchant,and Bank will promptly credit,debit or charge,as applicable,the appropriate amount to the Account Within a reasonable time after the end of each calendar month,Bank will calculate the applicable amount of fees and other charges owed by Merchant,and Bank will debit the Account in the amount of such fees and other charges. The amount of such fees to be paid by Merchant are set forth on Schedule of Fees in the Application. Such fees may be amended at any time by Bank and/or SPS upon written notice to Merchant Bank may refuse to accept or may revoke its acceptance of any Sales Transmittal or Adjustment Draft,and Bank may debit,charge or credit the Account in the corresponding amount,if (i)the Debit Card was completed without prior Authorization; (ii)the Sales Transmittal or Adjustment Draft involved circumstances constituting a breach of any agreement,representation,or warranty by Merchant; (iii)the Debit Card Sale was in violation of applicable law, the Rules or regulations; (iv)the Debit Cardholder is Merchant,any partner of or shareholder in Merchant,or any affiliate,spouse or immediate family member of any of them; (v)the Debit Card Sale was not made in connection with the sale of goods or services by Merchant.Bank may refuse or revoke the acceptance of any Sales Transmittal or Adjustment of Sales Transmittal upon the occurrence of any of the following events,and Bank may charge,debit or credit the Account in the corresponding amount if: (a)Merchant defaults in paying when due any obligation to Bank or SPS;(b)any material adverse change in Merchant's financial condition occurs;(c)any deposit account at Bank or any of Merchant's property in the possession of Bank is garnished or attached; (d)Merchant assigns its assets generally for the benefit of creditors;(e)a proceeding is commenced by or against it under any bankruptcy,insolvency or similar law seeking an order to adjudicate it a bankrupt or insolvent or other relief;or seeking appointment of a receiver or similar official for Merchant or for any substantial part of Merchant's assets. Merchant will notify Bank and/or SPS in writing immediately upon becoming aware that any such event has occurred or is likely to occur.Bank will notify Merchant promptly of all Adjustment Drafts. Additionally,Bank will advise Merchant on each debit,charge and credit processed to the Account Merchant authorizes Bank to charge debits arising from this Agreement against any credit due Merchant,whether or not such charges create overdrafts or a debit balance in the Account Merchant agrees to pay Bank or SPS,as applicable,the full amount of any such overdraft or debit balance or to replenish the Account in an amount sufficient to permit the amount of the charge to be made,as applicable,promptly upon request.Merchant further authorizes Bank to suspend in a segregated account amounts which otherwise would be credited to the Account if Bank or SPS reasonably believe that the Sales Transmittals submitted by Merchant are fraudulent. Bank or SPS will notify Merchant of the suspension of such amounts within a reasonable time;provided,however,that such notice will not be required if the appropriate law enforcement agency has been notified of the suspected fraud. ,ARTICLE IV—GATEWAY PROGRAMMING 4.01 Applicability to this Agreement. In addition to all the other provisions of this Agreement,the provisions of this Article IV shall apply if Merchant utilizes web services from SPS, including the SPS payments gateway,vault services, any application program interface,code samples,web services, integration specifications,and any offline components(collectively"Web Services"). 4.02 Programming of Web Site, While SPS provides specific API's or programming scripts to Merchant or Merchant's Web site programmer(s), Merchant acknowledges that such sample programming scripts are insufficient in and of themselves to allow Merchant's Web site to function with the Web Services.Programming of Merchant's Web site and its functionality are the sole responsibility of Merchant. 4.03 Merchant's Programming Agent. Merchant has the sole responsibility to select and employ any competent programming agent to accomplish the programming required to make Merchant's Web site function correctly with the Web Services. 4.04 Fees Subject to Fluctuation. Fees for the electronic commerce payment system offered by SPS may be based on the number and/or volume of monthly transactions processed by the Merchant Thus,notwithstanding anything to the contrary herein,the provisions of this Agreement which require notice prior to a change in fees shall not apply to any transactions or services covered by this Article 4. 4.06 Technical Support, Merchant shall be solely responsible for all technical support for Web site-related issues. 4.06 Shut Downs/Updates. SPS reserves the right,from time to time,without prior notice,to shut down and restart the Web Services for maintenance and/or Web Services upgrades or updates from time to time.SPS will use commercially reasonable efforts to keep service shut downs as brief as possible. Merchant must monitor updates and upgrades to the Web Services and update Merchant's Web site and programming accordingly. 4.07 Disclaimer. SPS AND ITS LICENSORS MAKE NO REPRESENTATION,WARRANTY,OR GUARANTY AS TO THE RELIABILITY, TIMELINESS,QUALITY,SUITABILITY,TRUTH,AVAILABILITY,ACCURACY OR COMPLETENESS OF THE WEB SERVICES OR ANY CONTENT STORED THEREIN. SPS AND ITS LICENSORS DO NOT REPRESENT OR WARRANT THAT(A)THE USE OF THE WEB SERVICES WILL BE SECURE,TIMELY, UNINTERRUPTED OR ERROR-FREE OR OPERATE IN COMBINATION WITH ANY OTHER HARDWARE, SOFTWARE, SYSTEM OR DATA, OR (B) THE WEB SERVICES WILL MEET MERCHANTS REQUIREMENTS OR EXPECTATIONS. THE WEB SERVICES ARE PROVIDED ON AN "AS IS" BASIS. ALL CONDITIONS, REPRESENTATIONS AND WARRANTIES,WHETHER EXPRESS,IMPLIED,STATUTORY OR OTHERWISE,INCLUDING,WITHOUT LIMITATION,ANY IMPLIED WARRANTY OF MERCHANTABILITY,FITNESS FOR A PARTICULAR PURPOSE,OR NON-INFRINGEMENT OF THIRD PARTY RIGHTS, ARE HEREBY DISCLAIMED TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW BY SPS AND ITS LICENSORS. ARTICLE V-TERMINATION AND EFFECT OF TERMINATION 6.01 Term:Termination. (a)Sage Merchant Processing Account shall have an initial term of three(3)years and Sage Mobile Payments Account shall have an initial term of one(1)month(respectively the"Initial Term")and shall commence on the earlier of(i)SPS's acceptance hereof(evidenced by the execution of the Agreement by SPS);(ii)the date of written notice from SPS that Merchant's application is approved for processing or(iii)the date on which Merchant's first Transaction is processed,and(iv)shall automatically renew as follows:(1)Sage Merchant Processing Account shall renew for consecutive(2)year terms;and(2)Sage Mobile Payments Account shall renew on a month-to-month basis(respectively the"Renewal Term"),and unless terminated as set forth below;(b)This Agreement may be terminated by any party effective at the end of the Initial or any Renewal Term by providing written notice to the other parties of its intent not to renew no less than thirty(30)days prior to the expiration of the then-current term.Additionally,this Agreement may be terminated:(i)by SPS and Bank at any time with or without cause,and without prior notice,and(ii)by Merchant in the event of a material breach of the terms of this Agreement by SPS and Bank,provided Merchant provides SPS and Bank written notice of the alleged breach and the breach remains uncured for a period of 30 days following receipt of written notice by the breaching party. (c)Upon early termination of this Agreement by Merchant,or by SPS should Merchant breach any of the terms of this Agreement during the Initial Term or any Renewal Term,Merchant shall pay to SPS an early termination fee equal to(i)Sage Merchant Processing Account—twenty-five dollars($25.00)for every month remaining in any such Term or Renewal Term for each Merchant location;(ii)Sage Mobile Payments Account-no early termination fee(respectively the"Early Termination Fee"). In addition to the Early Termination Fee,Merchant shall pay any fees,fines,third party costs or penalties which SPS may be assessed due to Merchant's breach of this Agreement and/or early termination. To the extent that applicable state law mandates lesser termination fees,the Early Termination Fee shall be the maximum allowed by applicable law. Merchant will not owe the Early Termination Fee if Merchant elects not to renew the Agreement upon the expiration of the then current term by providing written notice in accordance with this paragraph.All rights and obligations of the parties existing as of the effective time of termination will survive termination;(d)Within SPS's and Bank's sole discretion,if Merchant's or any of its principal(s)'business or personal credit deteriorates,if any significant circumstances exist that would create harm or loss to the goodwill of a card association or payment network system,or if any case or proceeding is commenced by or against Merchant under any federal or state law dealing with insolvency,bankruptcy, receivership or other debt relief,this Agreement shall simultaneously therewith automatically terminate,and any amounts due to Bank and SPS shall accelerate and become immediately due and payable,without the necessity of any notice,declaration or other act whatsoever by Bank and SPS.Merchant agrees to notify SPS and/or Bank immediately of any bankruptcy,receivership,insolvency or similar action initiated by or against Merchant Sage Merchant Agreement Page 5 of 9 Revision 20150806 • PLEASE NOTE:The complete BANBCARD Merchant Agreement includes these terms and conditions and an application on three(3)additional pages. 5.02 Effect of Termination. (a)In the event of termination for any reason,Merchant expressly authorizes Bank and SPS to withhold and discontinue the disbursement for all Cards and other payment Transactions of Merchant in the process of being collected and deposited;(b)Collected funds will be placed in the Reserve Account(defined below)until Merchant pays any equipment and processing cancellation fees and any outstanding charges,losses or amounts for which Merchant is liable under this Agreement.Further,Bank reserves the right to require Merchant to deposit additional amounts based upon Merchant's processing history and/or anticipated risk of loss to Bank into the Reserve Account.The Reserve Account shall be maintained a minimum of 270 days after the termination date and for any reasonable period thereafter,during which Cardholder disputes may remain valid under the Rules.The provisions of this Agreement relating to the debiting and crediting of the Account shall be applied to the Reserve Account and shall survive termination of this Agreement until Bank terminates the Reserve Account.Any balance remaining after Chargeback rights have expired and all other expenses,losses and damages have been paid will be disbursed to Merchant(c) Merchant expressly acknowledges that the MATCH system and Early Termination File (collectively,the'MATCH")is a maintained by MasterCard and Visa and contains the business name and the names and identification of principals of Merchant which have been terminated for one or more of the reasons specified in the Rules.Such reasons include,but are not limited to:fraud,counterfeit paper,unauthorized Transactions,excessive Chargebacks or highly suspect activity.Merchant acknowledges that SPS and Bank are required to report the business name of the Merchant and the names and identification of its principals to MATCH when Merchant is terminated for such reasons.Merchant consents to such reporting to the card associations and/or payment networks as applicable by Bank and SPS.Further,Merchant waives and will hold harmless Bank and SPS from any claims that Merchant may raise because of such reporting,(d)Upon termination for any reason,Merchant will immediately cease requesting Authorizations and will cease transmitting Sales Drafts to Bank and SPS. In the event Merchant obtains any Authorization after termination,Merchant expressly acknowledges and agrees that the fact that any Authorization was requested or obtained shall not operate to reinstate this Agreement;(e)Following termination,Merchant shall upon request provide Bank and SPS with all original and microfilm copies of Sales Drafts and Credit Vouchers to be retained as of the date of termination. ARTICLE VI-ACCOUNTS:SECURITY INTERESTS:INDEMNIFICIATION 6.01 Accounting Monitoring. (a) Merchant agrees that SPS and Bank may suspend,within their sole discretion,the disbursement of Merchant's funds for any reasonable period of time required to investigate suspicious or unusual deposit activity.SPS and Bank will make good faith efforts to notify Merchant promptly. SPS and Bank shall have no liability for any losses,either direct or indirect, which Merchant may attribute to any suspension of funds disbursement;(b)In the event of unusual Transactions that have been"suspended"and cannot be verified as valid sales or have been verified as Cardholder disputes,Merchant agrees that a security processing fee not to exceed 110%of the unusual Transaction(s)may be assessed;(c)Merchant's presentation to SPS and Bank of Excessive Activity will be a breach of this Agreement and cause for immediate termination of this Agreement.'Excessive Activity"rgers to any period of two or more calendar months during which Merchant has a Chargeback ratio that exceeds 1%by number of Transactions or a Chargeback ratio that exceeds 1%by dollar volume.Merchant authorizes,upon the occurrence of Excessive Activity,Bank and SPS to take additional actions as either of them may deem necessary,including,but not limited to,suspension of processing privileges,increase of any fees that may be charged to Merchant and/or creation or maintenance of a Reserve Account in accordance with this Agreement. 6.02 Forms. Merchant shall use only such forms or modes of transmission of Sales Drafts and Credit Vouchers as are provided or approved in advance by SPS and Bank,and Merchant shall not use forms provided by Bank and SPS other than in connection with Transactions without SPS's and Bank's prior written consent. 6.03 Records. In addition to any records routinely furnished to SPS and Bank under this Agreement,Merchant shall preserve a paper or electronic copy of all actual paper Sales Drafts,Credit Vouchers and Debit Card Sales and,if a mail,phone order or preauthorized order is involved,the Cardholder's signed authorization for the Transaction,for at least 3 years after the date Merchant presents the Transaction. If Records and/or data on SPS's system associated with Merchant are subpoenaed by legal process or otherwise,SPS shall produce such records in accordance with the subpoena without notice to Merchant. 6.04 Requests for Copies. Within S days of receipt of any written or verbal request by Bank and SPS,Merchant shall provide either the actual paper Sales Draft,Credit Voucher and/or Debit Card Sales or a legible copy thereof(in size comparable to the actual voucher or draft)and any other documentary evidence available to Merchant and reasonably requested by Bank or SPS to meet Bank's obligations under law(including its obligations under the Fair Credit Billing Act)or otherwise to respond to questions concerning Cardholder accounts. 6.06 IRS Withholdings and Reporting. Section 6050W of the Internal Revenue Code("Code")requires payment providers and third party payment networks,such as SPS,to report payment settlement amounts to the Internal Revenue Service("IRS")for each Merchant processing through SPS.Merchant shall verify its identity by providing SPS with a Tax Identification Number("TIN")such as a Social Security Number(SSN)or Employer Identification Number(EIN)for each Merchant Account. In the event Merchant fails to provide its TIN,SPS will place a restriction on Merchant's Account and may restrict the receipt of funds into Merchant's Account,or withhold a percentage of payments deposited into Merchant's Account in order to satisfy the backup withholding requirements of the IRS. 6.06 Security Interests.Reserve Account,Recoupment and Set-Off. (a)This Agreement is a security agreement under the Uniform Commercial Code. Merchant grants to Bank and SPS a security interest in and lien upon:(i)the Account(as set forth in Section 6.10)and all funds at any time in the Account, whatever the source of such funds,(ii)the Reserve Account(as defined below)and all funds at any time in the Reserve Account,whatever the source of such funds,(iii)future Sales Drafts,(iv)all Merchant's rights relating to this Agreement including,without limitation,all rights to receive any payments or credits under this Agreement;and(v)all Merchant deposit accounts now owned or hereafter acquired and the proceeds of all of the foregoing(collectively, the"Secured Assets").Upon request of Bank and SPS,Merchant will execute one or more financing statements or other documents to evidence this security interest.Merchant irrevocably authorizes bank to execute any fmancing statements or other documents necessary related to this security interest.Merchant represents and warrants that no other party has a security interest in the Secured Assets.These security interests and liens will secure all of Merchant's obligations under this Agreement and any other agreements between Merchant,SPS and Bank including,but not limited to,Merchant's obligation to pay any amounts due to Bank and SPS.With respect to such security interests and liens,Bank and SPS will have all rights afforded under the Uniform Commercial Code,any other applicable law and in equity.Merchant will obtain from Bank and SPS written consent prior to granting a security interest of any kind in the Secured Assets to a third party;(b)SPS may establish and maintain a non-interest bearing account("Reserve Account")in the name of Bank at any federally insured fmancial institution,with sums provided by Merchant that are sufficient to satisfy Merchant's current or future obligations as determined by Bank and SPS:(i)Bank and SPS shall have the right to initiate a debit to the Account or any other account at any institution to establish or maintain funds in the Reserve Account.Bank or SPS may deposit into the Reserve Account funds they would otherwise be obligated to pay Merchant,for the purpose of establishing or maintaining the Reserve Account in accordance with this Section,if they determine such action is reasonably necessary to protect their interests;(ii)Bank,on its own behalf or at SPS's request,may,without notice to Merchant,apply deposits in the Reserve Account against any outstanding amounts Merchant owes under this Agreement or any other agreement between Merchant and Bank or SPS.SPS or Bank may exercise their rights under this Agreement to collect any amounts due to Bank or SPS including,without limitation,rights of set-off and recoupment.Merchant shall have no right to withdraw funds or debit the Reserve Account. In the event of a bankruptcy proceeding,Bank and SPS may exercise their rights under this Agreement to debit the Reserve Account for amounts due Bank and SPS regardless of the pre-petition or post-petition nature of the amount due Bank and/or SPS.In the event of a bankruptcy proceeding,Merchant also agrees that it will not contest any Motion for Relief from the Automatic Stay,which Bank and SPS may file to debit the Reserve Account.As set forth in Section 5.02,funds in the Reserve Account will remain in the Reserve Account for a minimum of 270 days following termination.Bank will have sole control of the Reserve Account.In the event of a bankruptcy proceeding,Bank and SPS do not consent to the assumption of this Agreement.Nevertheless if this Agreement is assumed Merchant agrees that,in order to establish adequate assurance of future performance within the meaning of 11 U.S.C.Sec.365,as amended from time to time,Merchant must establish or maintain a Reserve Account in an amount satisfactory to Bank and SPS; (c) Bank and SPS have the right of recoupment and set-off. This means that they may offset any outstanding/uncollected amounts owed to them from:(i)any amounts they would otherwise be obligated to deposit into the Account,and(ii)any other amounts SPS and Bank may owe Merchant under this Agreement or any other agreement;(d)The rights conferred upon Bank and SPS in this Section are Sage Merchant Agreement Page 6 of 9 Revision 20150806 PLEASE NOTE:The complete BANKCARD Merchant Agreement includes these terms and conditions and an application on three(3)additional pages. not intended to be exclusive of each other or of any other rights and remedies of Bank and SPS under this Agreement,at law or in equity.Rather,each and every right of Bank and SPS at law or in equity will be cumulative and concurrent and in addition to every other right. 6.07 Third Parties. (a)Merchant may be using special services or software provided by a third party to assist Merchant in processing Transactions, including authorizations and settlements,or accounting functions.Merchant is responsible for ensuring compliance with the requirements of any third party in using their products.This includes making sure Merchant has and complies with any software updates.SPS and Bank have no responsibility for any transaction until that point in time SPS receives data about the transaction;(b)Merchant will notify SPS immediately if Merchant decides to use electronic authorization or data capture terminals or software provided by any entity other than SPS or its authorized designee("third party terminals")to process Transactions.If Merchant elects to use third party software or terminals,Merchant agrees(i)the third party providing the software or terminals will be Merchant's agent in the delivery of Transactions to Bank via Visa Net or a similar data processing system or network;and(ii)to assume frill responsibility and liability for any failure of that third party to comply with the Rules or this Agreement.Neither Bank nor SPS will be responsible for any losses or additional fees incurred by Merchant as a result of any error by a third party agent or a malfunction in a third party's software or terminal. 6.08 Modifications to Agreement. This Agreement is subject to amendment by SPS to conform to the Rules.Further,SPS and Bank may,from time to time,amend any provision of this Agreement,including,without limitation,those relating to the discount rate or to other fees and charges payable by Merchant by providing written notice,including electronic written notice,to Merchant of the amendment,and the amendment shall become effective unless Bank and SPS receive Merchant's notice of termination of this Agreement within 7 days.Amendments due to changes in a Payment Brand's fees,interchange, assessments,Rules or any law,regulation or judicial decision may become effective on such shorter period of time as SPS and Bank may specify if necessary to comply with the applicable Rule,law,regulation,decision or other change. 6.09 Limitation of Liability:Indemnity. (A)THE LIABILITY,IF ANY,OF BANK AND SPS UNDER THIS AGREEMENT WHETHER TO MERCHANT OR TO ANY OTHER PARTY,WHATEVER THE BASIS OF THE LIABILITY,SHALL NOT EXCEED IN THE AGGREGATE THE DIFFERENCE BETWEEN(I)THE AMOUNT OF FEES PAID BY MERCHANT TO SPS AND BANK DURING THE MONTH IN WHICH THE TRANSACTION OUT OF WHICH THE LIABILITY AROSE OCCURRED,AND(II)ASSESSMENTS,CHARGEBACKS,AND ANY OFFSLLS AUTHORIZED UNDER THIS AGREEMENT AGAINST SUCH FEES WHICH AROSE DURING SUCH MONTH.IN THE EVENT MORE THAN ONE MONTH IS INVOLVED,THE AGGREGATE AMOUNT OF SPS AND BANK'S LIABILITY SHALL NOT EXCEED THE LOWEST AMOUNT DETERMINED IN ACCORD WITH THE FOREGOING CALCULATION FOR ANY ONE MONTH INVOLVED.IN NO EVENT WILL BANK, SPS, NOR ITS OR THEIR OFFICERS, AGENTS, DIRECTORS, OR EMPLOYEES BE LIABLE FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES; (B) MERCHANT HEREBY AGREES TO INDEMNIFY AND HOLD BANK, SPS AND ITS AND/OR THEIR OFFICERS,DIRECTORS,EMPLOYEES AND AGENTS(THE"INDEMNIFIED PARTIES")HARMLESS FROM ANY CLAIM RELATING TO:, (I)ANY DISPUTE BETWEEN MERCHANT AND A CARDHOLDER WITH RESPECT TO THE ALLEGED OR ACTUAL FAILURE BY MERCHANT TO PROCESS A TRANSACTION AS REQUESTED BY SUCH CARDHOLDER OR TO PROVIDE PHYSICAL SECURITY AT OR NEAR ANY TERMINALS OR OTHER PREMISES OF MERCHANT,OR THE TRANSMISSION OR DISCLOSURE OF ANY INFORMATION BY OR THROUGH SPS, (II) THE TRANSMISSION OF ANY INCORRECT OR INCOMPLETE INFORMATION TO A CUSTOMER OF ANY NETWORK MEMBER THROUGH THE NETWORK REGARDING AN ACCOUNT MAINTAINED BY SUCH CUSTOMER, OR THE DISCLOSURE THROUGH SUCH NETWORK TO ANY PARTY OF INFORMATION RELATING TO ANY SUCH ACCOUNT;AND (III)MERCHANTS FAILURE TO COMPLY WITH ANY OF THE PROVISIONS OF THIS AGREEMENT AND APPLICABLE LAWS,RULES AND/OR REGULATIONS,INCLUDING WITHOUT LIMITATION DISPUTES RESULTING FROM MERCHANTS FAILURE TO PROVIDE A SALES TRANSMITTAL. MERCHANT FURTHER AGREES TO INDEMNIFY AND HOLD THE INDEMNIFIED PARTIES HARMLESS FROM ALL CLAIMS,LIABILITY AND EXPENSES ARISING OR RESULTING FROM ANY DISPUTE OR CLAIM MADE AGAINST BANK AND/OR SPS BY ANY THIRD PARTY ARISING OUT OF MERCHANTS BREACH OF THIS AGREEMENT OR THE RULES.FURTHER, MERCHANT SHALL REIMBURSE BANK OR SPS,AS THE CASE MAY BE,FOR ALL EXPENSES AND COSTS,INCLUDING ATTORNEY'S FEES,WITH REGARD TO THE FORGOING,(C)NEITHER BANK NOR SPS MAKE ANY OTHER WARRANTY,EXPRESS OR IMPLIED, REGARDING ANY SERVICES IT PERFORMS IN ACCORDANCE WITH THIS AGREEMENT, AND NOTHING CONTAINED IN THE AGREEMENT WILL CONSTITUTE SUCH A WARRANTY.SPS AND BANK DISCLAIM ALL IMPLIED WARRANTIES,INCLUDING THOSE OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.THIS SECTION SHALL SURVIVE TERMINATION OF THIS AGREEMENT. 6.10 Account. (a)Merchant will establish and maintain an account at Bank or at any federally insured fmancial institution("Account")reasonably approved by Bank in the United States.Merchant will maintain sufficient funds in the Account to satisfy all obligations,including fees,contemplated by this Agreement.Merchant irrevocably authorizes SPS and/or Bank to debit the Account for Chargebacks,fees and any other penalties or amounts owed under this Agreement.Merchant must obtain prior written consent from Bank and SPS to change the Account.If Merchant does not obtain that consent,SPS or Bank may immediately terminate the Agreement and may take other action necessary,as determined by them within their sole discretion;(b)Bank will deposit all Sales Drafts to the Account subject to Section 3.01 of this Agreement.Merchant authorizes Bank and SPS to initiate reversal or adjustment entries and initiate or suspend such entries as may be necessary to grant Merchant conditional credit for any entry;(c)Bank,in its sole discretion,may grant Merchant provisional credit for Transaction amounts in the process of collection,subject to receipt of final payment by Bank and SPS and subject to all Chargebacks and other amounts owed to Bank and SPS under this Agreement;(d)Merchant shall promptly examine all statements relating to the Account,and immediately notify SPS and Bank in writing of any errors.Merchant's written notice must include:(i)Merchant name and account number, (ii)the dollar amount of the asserted error,(iii)a description of the asserted error,and(iv)an explanation of why Merchant believes an error exists and the cause of it,if known.That written notice must be received by SPS and Bank within 60 days after Merchant received the periodic statement containing the asserted error and failure to provide such notice shall bar any claim of errors.MERCHANT MAY NOT MAKE ANY CLAIM AGAINST BANK OR SPS FOR ANY LOSS OR EXPENSE RELATING TO ANY ASSERTED ERROR FOR 60 DAYS IMMEDIATELY FOLLOWING RECEIPT OF MERCHANTS WRITTEN NOTICE.During that 60 day period,SPS and Bank will be entitled to investigate the asserted error,and Merchant will not incur any cost or expense in connection with the asserted error without notifying SPS;(e)Merchant will indemnify and hold SPS and Bank harmless for any action they take against the Account pursuant to this Section.Merchant will also indemnify and hold harmless the institution at which Merchant maintains the Account for acting in accordance with any instruction from Bank or SPS regarding the Account This Section will survive termination of this Agreement;(f)Merchant authorizes Bank and SPS to initiate debit/credit entries to the Account,as the Account may be changed from time to time,and to any other account maintained by Merchant at any institution that is a receiving bank of ACH,all in accordance with this Agreement.In the event Merchant changes the Account,Merchant will notify SPS,with a copy to Bank,and this authorization will apply to the new Account This authorization will be effective until both:(i)SPS and Bank have received written notification from Merchant terminating this authorization,and(ii)all obligations of Merchant to SPS and Bank have been paid in full.Merchant will provide to SPS and Bank a voided Account check,and will fill in the Account numbers on the Application. 6.11 fees and Other Amounts Owed. (a)Merchant shall pay the fees and charges as set forth on the Schedule of Fees included on the Application,the provisions of which are incorporated herein by reference.Unless otherwise noted,Merchant shall pay all fees monthly,with the exception of the Discount Fee and/or interchange,which shall be paid either monthly or daily,as determined by SPS in its sole discretion.Merchant may choose,however,to pay the discount fee on a daily basis by notice to SPS.The Account will be debited through ACH for such amounts and for any other fees,charges or adjustments incurred by Merchant and associated with processing services.Merchant is also obligated to pay all taxes and other charges imposed by any governmental authority on the services provided under this Agreement Bank and SPS shall have the right to change fees,including adding fees for additional services utilized by Merchant,in accordance with Section 6.08. Interchange Pass Through pricing("IPT")as specified on Application is comprised of interchange, fees,dues,and assessments assessed by card association. Cost-Plus pricing("CP")is comprised of IPT plus the Cost Plus Rate set forth on your Application, which is charged to each settled Card and Debit Card Transaction. Merchant may call SPS customer service with any questions regarding pricing, Sage Merchant Agreement Page 7 of 9 Revision 20150806 ,PLEASE NOTE:The complete BANKCARD Merchant Agreement includes these terms and conditions and an application on three(3)additional pages. qualifications exceptions,and billing.SPS does not refund fees for returns;(b)Merchant will immediately pay SPS and Bank any amount incurred by SPS attributable to this Agreement or any other agreement between Merchant and SPS or any subsidiary or affiliate of SPS,including but not limited to equipment fees,Chargebacks,fines imposed by a third party,non-sufficient fund fees,and ACH debits that overdraw the Account,Reserve Account,or are otherwise dishonored.Merchant authorizes SPS and Bank to debit via ACH the Account,Reserve Account,any other account Merchant has with SPS,an affiliate or subsidiary of SPS,Bank or at any other fmancial institution for any amount Merchant owes under this Agreement or under any other contract, note,guaranty,or dealing of any kind now existing or later entered into between Merchant and SPS or any subsidiary or affiliate,whether Merchant's obligation is direct,indirect,primary,secondary,fixed,contingent,joint or several.In the event such ACH does not fully reimburse SPS and Bank for the amount owed,Merchant will immediately pay SPS and Bank such amount, 6.12 Costs. Merchant will be liable for and will indemnify and reimburse SPS and Bank for all costs paid or incurred by SPS or Bank in the enforcement of this Agreement,including but not limited to attorneys'and investigators'fees,or in collecting any amounts due from Merchant or resulting from any breach by Merchant of this Agreement. ARTICLE VII-MISCELLANEOUS 7.01 Waiver. Failure by Bank or SPS to enforce one or more of the provisions of this Agreement shall not constitute a waiver of the right to enforce the same or other provision in the future.The waiving party must sign all waivers. 7.02 Notices. All notices and other communications required or permitted under this Agreement shall be deemed delivered when sent by e-mail or mailed, postage prepaid,addressed as follows: If to SPS: If to Bank: Sage Payment Solutions BMO Harris N.A. 12120 Sunset Hills Rd STE 600 111 W.Monroe Reston,Virginia 20190 Chicago,Il 60608 Attn:Chief Financial Officer Attn.Customer Service If to Merchant,at the address provided as the billing address and to the contact listed on the Application or e-mail. 7.03 Choice of Law:Jurisdiction,This Agreement and all matter related thereto shall be construed in accordance with the laws of the Commonwealth of Virginia except those rules relating to conflicts of laws.Any action or proceeding arising out of or related to this Agreement shall be brought only in a court located in located in Fairfax County,Virginia. Each party expressly consents to the jurisdiction of such courts. 7.04 Entire Agreement:Assignability. This Agreement,including the Application,these Terms and Conditions of Merchant Application and any supplementary documents indicated herein,expresses the entire understanding of the parties with respect to its subject matter and except as provided herein, may be modified only in writing executed by all parties. This Agreement may be assigned by SPS and Bank,but may not be assigned by Merchant,directly or by operation of law,without the prior written consent of Bank and SPS. In the event,for whatever reason,Application does not meet standard underwriting criteria,and satisfies only sub-standard underwriting criteria,Merchant acknowledges the completed Application may be forwarded to an alternative Member processor for review and approval. If Merchant nevertheless assigns this Agreement without such consent,the Agreement will be binding on the assignee.This Agreement shall be binding upon and inure to the benefit of the parties'respective successors and permitted assigns.. 7.06 Credit and Financial Inquiries: Inspections. (a)Merchant authorizes Bank and SPS to make,at any time,any credit inquiries which either may consider necessary to accept or review acceptance of this Agreement or investigate Merchant's deposit or Card acceptance subsequent to acceptance of this Agreement.Such inquiries shall include,but are not limited to,a credit check of the business including its proprietor,partners,principal owners or officers. If requested to do so by Bank or SPS,Merchant shall provide the written consent of any person for which an inquiry has been or is to be made if such person has not executed this Agreement and will provide any fmancial statements,income tax and business tax returns and other financial information as Bank or SPS may consider necessary to perform initial or periodic reviews of Merchant's fmancial stability and business practices;(b)Merchant may honor Cards only at locations approved by SPS and Bank.Additional locations may be added,subject to SPS and Bank's written approval.All current and future locations are bound by the terms and conditions of this Agreement.Either Merchant or SPS may delete any location by providing notice as provided in this Agreement; (c)Merchant agrees to permit Bank or SPS at any time from time to time,to inspect locations to confirm that Merchant has or is adhering to the terms of this Agreement and is maintaining the proper facilities,equipment,inventory,records and license or permit(where necessary)to conduct its business. However,nothing in this Section shall be deemed to waive Merchant's obligation to comply in all respects with the terms of this Agreement; (d) Representatives of Bank or SPS may,during normal business hours,inspect,audit and make copies of Merchant's books,accounts,records and files pertaining to any Transaction. 7.06 Marketing of Non-Bankcard Services by SPS. From time to time,SPS may offer to Merchant certain additional products and services which may or may not be related to the processing of Transactions. Merchant consents to receipt of promotional materials via email and fax regarding such other products and services. 7.07 Attorneys'Fees. Merchant will be liable for and will indemnify and reimburse bank and/or SPS for all attorneys'fees and other costs and expenses paid or incurred by Bank and/or SPS in the enforcement of this Agreement,or in collecting any amounts due from merchant to Bank and/or SPS or resulting from any breach by Merchant of this Agreement. 7.08 American Express Card Acceptance. In addition to other applicable provisions of this Agreement,the following provisions apply to Merchant's acceptance of American Express Cards: (a)This Agreement governs Merchant's acceptance of American Express Cards under American Express's `OptBlue Program". If and when the Transactions submitted by American Express Cardholders exceed the charge volume eligibility criteria for the OptBlue Program,American Express may require Merchant to convert to a direct Card Acceptance Agreement with American Express. If this occurs, upon such conversion,(i)Merchant will be bound by American Express's then-current Card Acceptance Agreement;and(ii)American Express will determine the pricing and other fees payable by Merchant under the Card Acceptance Agreement;(b)Merchant's participation in the OptBlue Program is subject to the approval of American Express. Merchant authorizes SPS and/or its affiliates to submit Transactions to,and receive settlement on such Transactions from,American Express on behalf of Merchant;(c)Merchant shall not assign to any third party any payments due to it for American Express Card Transactions,and all indebtedness arising from such Transactions will be for bona fide sales of goods and services(or both)at its business locations and free of liens,claims,and encumbrances other than ordinary sales taxes;provided,however,that Merchant may sell and assign future receivables to SPS,its affiliated entities and/or any other cash advance funding source that partners with SPS or its affiliated entities;(d)American Express shall have third-party beneficiary rights,but not obligations,to enforce the terms of this Agreement applicable to American Express Card acceptance against Merchant;(e)Merchant may opt out of accepting American Express Cards under this Agreement by providing so days'notice to SPS without directly or indirectly affecting its rights to accept other Payment Brand Cards;(f)Except as provided in Section 7.08(g),SPS may disclose to American Express information regarding Merchant and Merchant's Transactions to American Express,and American Express may use such information to(i)perform its responsibilities in connection with American Express Card acceptance,(ii)promote American Express,(iii)perform analytics and create reports,and(iv)for any other lawful business purposes,including commercial marketing communications purposes within the parameters of American Express Card acceptance,and to provide important transactional or relationship communications from American Express.American Express may also use such information about Merchant obtained in connection with this Agreement at the time of setup to screen and/or monitor Merchant in connection with American Express marketing and administrative purposes;(g)Merchant may opt-out of receiving American Express commercial marketing communications about products and services by selecting the opt-out option on its Application or subsequently by providing written notice to its primary relationship contact at SPS. Merchant may continue to receive such communications from American Express after opting out while American Express Sage Merchant Agreement Page 8 of 9 Revision 20150806 PLEASE NOTE:The complete BAN%CARD Merchant Agreement includes these terms and conditions and an application on three(3)additional pages. updates its records to reflect Merchant's opt-out choice;and(h)Merchant may not bill or attempt to collect from any Cardholder for any American Express Transaction unless a Chargeback has been exercised,Merchant has fully paid for such Chargeback,and it otherwise has the right to do so. 7.09 Signature. Merchant represents and warrants that the person executing this Agreement is duly authorized to bind Merchant to all provisions of this Agreement,and that such person is authorized to execute any documents and to take any action on behalf of Merchant,which may be required by SPS now or in the future.Merchant will execute a separate Entity Certification,as set out below,if requested to do so by SPS and Bank. 7.10 Force Majeure.The delay or inability of party to perform its obligations hereunder when required(other than Merchant's payment obligations)if caused by events of Force Majeure,as defined herein,shall not constitute a breach or default and shall not subject such party to liability to any other party so long as such Force Majeure event exists. Force Majeure events shall include,without limitation,civil disturbances,epidemics,natural disasters,wars, acts of terrorism,acts of God,economic downturn and all other such events outside the control of the parties that make it impossible for one party to comply with its obligations hereunder. 7.11 General. If any provision of this Agreement is illegal or unenforceable,the invalidity of that provision will not affect any of the remaining provisions and this Agreement will be construed as if the illegal provision is not contained in the Agreement.Merchant is responsible for its employees'actions while in its employ.The parties do not intend to confer any benefits on any person or entity other than Merchant,Bank and SPS.Article I,Sections 8.02,8.04, Article V,Article VI,Article VII and any other provision that by their nature should survive termination will survive expiration or termination of this Agreement. Sage Merchant Agreement Page 9 of 9 Revision 20150806 PLEASE NOTE:The complete BANKCARD Merchant Agreement includes these terms and conditions and an application on three(3)additional pages. �oEE ii, City of Farmington 4 j` p 430 Third Street , j - Farmington,Minnesota , r ;' 651.280.6800 -Fax 651.280.6899 *P.4FRIO-. www.cifarmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Robin Hanson SUBJECT: Fund Balances-Committed DATE: November 9,2015 INTRODUCTION This past April the city council reviewed and approved an updated Fund Balance Policy, a copy of which is attached. This policy was based on the Governmental Accounting Standards Board's (GASB) Statement No. 54,Fund Balance Reporting and Governmental Fund Type Definitions and prioritizes fund balance classifications as follows: 1.Nonspendable, 2. Restricted, 3. Committed,4. Assigned, and 5. Unassigned. The policy, adopted earlier this year, was retroactively implemented with the exception of the designation of committed balances. The reason for this is for fund balances to be committed (ie. internally restricted) GASB 54 requires council to take formal action before the end of the reporting period to specify the committed amounts. While the action must occur prior to the end of the reporting period, the amount subject to the constraint,may be determined in the subsequent period. DISCUSSION It is important to properly classify the city's fund balances so that the reader of the financial statements has a clear understanding of the city's intent. This statement classification only applies to the governmental funds (ie. general, special revenue, debt service and capital projects funds). It does not apply to the enterprise(ie. liquor or utilities)or internal service funds. To the extent not otherwise classified as nonspendable or restricted, the fund balance for each of the funds designated below is to be classified as committed: Fund Name Purpose Special Revenue Funds: Economic Development Future economic development Park Improvement Future park improvements Ice Arena Future operation and maintenance of the arena Capital Projects Funds: Sanitary Sewer Trunk Future sanitary sewer trunk construction and improvement projects Cable Communication Current and future construction and improvement projects related to the provision of cable communications for public access State Aid Construction First, ensure timely and full repayment of the related debt service (aka Road&Bridge) fund bonds and secondly,provide funds for the city's Streets CIP Fire Capital Current and future fire capital projects Storm Water Trunk Construction and improvement of storm water trunk infrastructure projects Recreation Capital Current and future construction and improvement projects for Projects city owned recreation facilities Permanent Improvement Current and future street construction projects Revolving Fund General Capital Current and future governmental fund's capital equipment needs Equipment Maintenance Fund Current and future seal coating, trail maintenance,building maintenance and street construction and improvement projects. For the Private Capital Projects Fund staff recommends council designate an amount of the fund balance equal to the deposits payable line item as committed. The remainder of the fund balance is assigned. BUDGET IMPACT NA ACTION REQUESTED Adopt the attached resolution designating the various fund balances as committed as described in this memo. ATTACHMENTS Type Description © Backup Material City's Fund Balance Policy D Resolution Resolution-Fund Balance Classification- Committed CITY OF FARMINGTON FUND BALANCE POLICY I. PURPOSE The purpose of this policy is to establish specific guidelines the City of Farmington will use to classify fund balances of the Governmental Funds into categories based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in these funds can be spent.The policy only applies to governmental funds,not enterprise funds. The policy also establishes specific guidelines the City will use to maintain an adequate level of fund balance to provide for cash flow requirements and contingency needs. II. CLASSIFICATION OF FUND BALANCE Governmental Accounting Standards Board's (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions defines the following fund balance classifications: 1. Nonspendable • This category includes fund balance that cannot be spent because it is either(i)not in spendable form or(ii)is legally or contractually required to be maintained intact. Examples include long-term receivables,inventories and prepaid amounts. 2. Restricted • Fund balance should be reported as restricted when constraints placed on those resources that are either(i) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (ii) imposed by law through constitutional provisions or enabling legislation. 3. Committed • Fund balance that can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision-making authority (City Council). The committed amounts cannot be used for any other purpose unless the government removes or changes the specified use by taking the same type of action it employed to commit those amounts. • The City's highest level of decision making authority will annually or as deemed necessary commit specific revenue sources for specified purposes by resolution if they so choose. This formal action must occur prior to the end of the reporting period, however,the amount to be subject to the constraint, may be determined in the subsequent period. - 1 - II. CLASSIFICATION OF FUND BALANCE-CONTINUED 4. Assigned • Amounts that are constrained by the government's intent to use for specified purposes, but are neither restricted nor committed. Assigned fund balance in the General fund includes amounts that are intended to be used for specific purposes. • The City Council has delegated the authority to assign and remove assignments of fund balance amounts for specified purposes to the City Administrator, Finance Director or his/her designee. 5. Unassigned • Unassigned fund balance represents the residual classification for the General Fund. This is fund balance that has not been reported in any other classification. The General Fund is the only fund that can report a positive unassigned fund balance. A negative residual amount may not be reported as restricted, committed, or assigned fund balances. Other governmental funds would report deficit fund balances as unassigned. III. GOVERNMENTAL FUNDS 1. General Fund The General Fund is established to account for all revenues and expenditures which are not required to be accounted for in other funds. Revenue sources include property taxes, licenses, permits and fees, intergovernmental revenues, charges for services, fines and forfeitures, franchise fees, investment earnings, and transfers. The General Fund's resources finance a wide range of functions including general government administration, public safety, public works, parks and recreation and economic and community development. The General Fund may have a portion of its fund balance classified as nonspendable if there are long term receivables,inventories or prepaid items on the balance sheet. The City will strive to maintain an unrestricted (committed, assigned and unassigned) fund balance in the General Fund of an amount not less than 40%and not greater than 50% of the next year's budgeted expenditures of the General Fund. This will assist in maintaining an adequate level of fund balance to provide for cash flow requirements and contingency needs. -2- III. GOVERNMENTAL FUNDS-CONTINUED 2. Special Revenue Funds Special Revenue Funds are used to account for and report the proceeds of specific revenue sources that are restricted,committed or assigned to expenditures for specified purposes other than debt service or capital projects. Governmental Accounting Standards require that substantial inflows of revenues into a Special Revenue Fund be either restricted or committed in order for the fund to be considered a Special Revenue Fund. The City has the following Special Revenue Funds: i. Economic Development Fund—the fund balance may be both restricted and committed. Grant awards would be restricted by legal agreement. The remaining revenues are committed by the City Council for future economic development endeavors. ii. Tax Increment Financing Fund —the fund balance is considered restricted pursuant to state statute. iii. Police Donations & Forfeitures —the fund balance is restricted. Forfeitures are restricted in accordance with state statute and donations are restricted by the donor. iv. Park Improvement Fund—the fund balance is both restricted and committed by legal agreement and by the City Council. The developer agreements restrict the use of park dedication fees. Special assessment and other revenues are committed by the City Council for future park improvements. v. Ice Arena — the fund balance is considered committed. The revenues are committed by the City Council for operation and maintenance of the City's Ice Arena and other uses as authorized within budget. 3. Debt Service Funds Debt Service Funds account for the accumulation of resources for the payment of long- term debt principal and interest maturing in current and future years. All of the City's Debt Service fund balances are considered restricted pursuant to state statutes and their respective debt agreements. 4. Capital Project Funds Capital Project Funds account for financial resources that are being accumulated for current and future projects. The fund balances in the Capital Project Funds are appropriated to and therefore considered restricted or committed for these purposes: capital outlay expenditures, acquisition or construction of capital facilities, and other capital assets. Bond proceeds are considered restricted. -3 - III.GOVERNMENTAL FUNDS-CONTINUED i. Sanitary Sewer Trunk Fund—the fund balance is committed by City Council for current and future sanitary sewer trunk construction and improvement projects. ii. Cable Communications Fund—the fund balance may be both restricted and committed by City Council for current and future construction and improvement projects related to the provision of cable communications for public access. The P.E.G. (public, educational and governmental) fees would be restricted by legal agreement. Franchise fees would be committed by Council. iii. State Aid Construction (Road & Bridge) Fund — the fund balance is committed by City Council for future debt service payments on the related bonds. iv. Fire Capital Projects Fund—the fund balance is committed by City Council for current and future fire capital projects. v. Storm Water Trunk Fund—the fund balance is committed by City Council for current and future construction of storm water trunk infrastructure projects within the City. vi. Recreation Capital Projects Fund—the fund balance is committed by City Council for current and future construction of City owned recreation facilities. vii. Private Capital Projects Fund — the fund balance is committed by City Council to current and future development in the City. viii. Permanent Improvement Revolving Fund —the fund balance is committed by City Council for current and future street construction projects. ix. General Capital Equipment Fund —the fund balance is committed by City Council for current and future governmental fund's capital equipment needs. x. Maintenance Fund — the fund balance is restricted by legal agreement and committed by City Council for current and future seal coating, trail maintenance, building maintenance and street construction and improvement projects. Unspent bond proceeds are restricted. IV. PROCEDURES FOR AVAILABLE RESOURCES When both restricted and unrestricted resources are available for use, it is the City's policy to first use restricted resources,and then use unrestricted resources as they are needed. When unrestricted resources are available for use, it is the City's policy to use resources in the following order; 1.)committed 2.)assigned and 3.)unassigned. -4- V. STABILIZATION ARRANGEMENTS Stabilization arrangements are defined as formally setting aside amounts for use in emergency situations or when revenue shortages or budgetary imbalances arise. The City may set aside amounts by resolution as deemed necessary that can only be expended when certain specific circumstances exist. The resolution will identify and describe the specific circumstances under which a need for stabilization arises. The need for stabilization will only be utilized for situations that are not expected to occur routinely. Approved and Adopted April 20,2015,for retroactive implementation effective December 31,2014 -5- RESOLUTION NO.Rxx-xx DESIGNATION OF COMMITTED FUND BALANCES IN ACCORDANCE WITH GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB)NO. 54 Pursuant to due call and notice thereof a regular meeting of the City Council of the City of Farmington,Minnesota was held in the Council Chambers of said City on the 16th day of November 2015 at 7:00 p.m. Members present: Members absent: Member introduced and Member seconded the following resolution: WHEREAS, due to the GASB No. 54 requirement that the designation of committed fund balances should occur before year-end at the highest level of decision-making authority. NOW,THEREFORE,BE IT RESOLVED by the City Council of the City of Farmington, that: 1. To the extent the fund balance is not otherwise classified as nonspendable or restricted the fund balance for each of the special revenue funds will be designated as committed. 2. To the extent the fund balance is not otherwise classified as nonspendable or restricted the fund balance for each of the capital projects funds,with the exception of the Private Capital Projects Fund,will be designated as committed. 3. To the extent the fund balance is not otherwise classified as nonspendable or restricted, for the Private Capital Projects Fund an amount equal to deposits payable will be classified as committed and the remainder shall be unrestricted. This resolution is adopted by recorded vote of the City of Farmington City Council in open session on the 16th day of November,2015. Mayor Todd Larson Attested to the day of November,2015 David McKnight, City Administrator SEAL 41144/4 City of Farmington 430 Third Street Farmington, Minnesota 651.280.6800 -Fax 651.280.6899 ' r.4 , ,. www.cifarmington.mn.us TO: Mayor, Councilmembers and City Administrator FROM: Brenda Wendlandt,Human Resources Director SUBJECT: City Logo Discussion DATE: November 9,2015 INTRODUCTION The purpose of this memorandum is to provide updated information regarding the project to change the city's logo and present the revised designs for review and comment. DISCUSSION City staff presented new logo options at the October 5, 2015 Council meeting and received further direction. After that meeting, staff developed a survey that was placed on the website and social media to gather more input regarding the city's logo. CivicLive, the consultant designing the logo,worked with staff to review all information and are making changes to the logo designs based on that information. During this meeting, staff will present the revised logo options for further review and comment. ACTION REQUESTED For council to reach a consensus regarding the city's logo. Decision Making Work towards consensus,which is defined as nearly 100%(quorum minus 1)of members in agreement at or above a 3 level on a scale of 1 to 5,visualized by raising a corresponding number of fingers on one hand. 1. Strongly dislike 2. Dislike 3. Neutral—I can live with it 4. Like 5. Strongly like • • •• M I N N E S O T A FARMINGTON M I N N E S O T A FARM I NGTON Ca 4Y. `x+ % rya FARM NGT N M I N N E S O T A C b FARmINGTON M I N N E S O T A F10/ o�c 141 Lu 3r) 1plp w ' A PROM�S`� s IE 1 r B. _ r um fgt., - 1872 0 _� c��,. -, FA i_ NINGToN 101(114 TO THE FUTURE•ROOTED IN THE PAST %.,400Pv- limik ,