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Exhibit 10.5
EXHIBIT 10.5 CERTAIN PORTIONS OF
THIS EXHIBIT HAVE BEEN OMITTED AND
FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE SYMBOL
"****" HAS BEEN INSERTED IN PLACE
OF THE PORTIONS SO OMITTED.
AGREEMENT
This Agreement ("Agreement") is made as of the 1st day of March, 1999, by and
among MasterCard International Incorporated, a Delaware corporation having its
principal place of business at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxx, XX 00000-0000
("MasterCard") and Citibank, N.A., a national banking association, having its
principal place of business at 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000, Citibank
(South Dakota), N.A., a national banking association having its principal place
of business at 000 Xxxx 00xx Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000, Citibank
(Nevada), N.A., a national banking association having its principal place of
business at 0000 Xxxx Xxxxxx Xxxxxxxxx, Xxx Xxxxx, XX 00000, Universal Bank,
N.A., a national credit card bank, having its principal place of business at 000
Xxxxxxxxxx Xxxxxx, Xxxxxxxx, XX 00000, Universal Financial Corp., a Delaware
corporation having its principal place of business at 0000 Xxxxxx Xxxxxxx Xxxxx,
Xxxxx 0000, Xxxx Xxxx Xxxx, XX 00000, The Travelers Bank USA, a national bank,
having its principal place of business at 000 Xxxxxxxx Xxxxx, Xxxxxx, XX 00000,
and Travelers Bank & Trust, FSB, a federal savings bank, having its principal
place of business at 000 Xxxxxxxx Xxxxx, Xxxxxx, XX 00000, for themselves and on
behalf of their Affiliates as defined below and pursuant to Section 3.8 (the
foregoing entities and such Affiliates being individually and collectively
referred to herein as "Citibank").
WHEREAS, certain Affiliates of Citibank are members of MasterCard and are
licensed by MasterCard to issue MasterCard Cards (defined below) pursuant to
MasterCard's Bylaws, rules and regulations; and
WHEREAS, the parties desire to provide terms for an arrangement for Citibank to
issue MasterCard as its exclusive brand for Cards (defined below), except as
otherwise expressly permitted herein,
NOW, THEREFORE, the parties do hereby agree as follows:
1. DEFINITIONS
As used herein, the following terms shall have the indicated meanings:
1.1 "Affiliate" shall mean with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries,
controls, or is controlled by or is under common control with, such
Person. The term "control" (including, with its correlative meanings,
"controlled by" or "under common control with") means possession,
directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise) and
shall additionally include relationships involving "control" within the
meaning of the Bank Holding Company Act, 12 U.S.C. Section 1841 et seq.
1.2 "Brand on the Back" shall have the meaning set forth in Section 2.2.
1.3 "Card" shall mean a MasterCard card or any general purpose card, which
shall mean any charge, credit, or point of sale debit program, or any
combination thereof. Card shall also include the account number or
alternative modes of access to the underlying credit, debit or charge
account (e.g., a convenience check). Card shall not include a Diners
Club or Xxxxx Xxxxxxx card.
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1.4 "Core Services" shall consist of ****.
1.5 "Issuer Fees" shall mean MasterCard issuer fees and assessments on
MasterCard Volume that MasterCard imposes on its member institutions
that issue MasterCard Cards, but shall not include any foreign exchange
(FX) fees or merchant investment fees that are collected at the time of
or in connection with interchange revenue received by the issuer.
1.6 "MasterCard Brand on the Back Cards" shall mean MasterCard Cards issued
with Brand on the Back as set forth in Section 2.2.
1.7 "MasterCard Card" shall mean a Card containing the name, logo,
hologram, or service marks of MasterCard including, without limitation,
MasterCard, Maestro, Cirrus or other MasterCard brand, and shall be
issued in accordance with MasterCard rules, procedures, regulations and
standards in effect from time to time. However, Maestro and Cirrus
Cards shall not be included within MasterCard Cards for the purpose of
calculating MasterCard Volume.
1.8 "Citibank MasterCard Volume Share" shall have the meaning set forth in
Section 3.3.
1.9 "Citibank MasterCard Volume Targets" shall mean, for each successive
12-month period during the Term commencing July 1, 1999 (each such
period a "Measuring Period"), minimum Citibank MasterCard Volume in the
amounts set forth on Exhibit A attached hereto.
1.10 "Other Services" shall mean all member-specific optional services as
they exist today and all future optional member services provided or
conducted by MasterCard in connection with any aspect of the conduct or
processing of MasterCard transactions, the costs of which are charged
or apportioned among participating MasterCard member institutions,
other than Core Services, and shall include, without limitation,
customized, user-based or member-specific services.
1.11 "Person" means an individual, corporation, partnership, trust,
unincorporated organization, government or any agency or political
subdivision thereof or any other entity that may be treated as a person
under applicable law.
1.12 "Standard MasterCard Pricing" shall mean the Issuer Fees that would
apply to Citibank for the period in issue in the absence of this
Agreement, including any incentive arrangements that would otherwise
apply.
1.13 "Test Cards" shall mean a limited number of MasterCard Brand on the
Back Cards issued by Citibank under the terms of Section 2.2B.
1.14 "U.S." shall mean the states of the United States of America and the
District of Columbia.
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1.15 "Volume" shall mean for the period of calculation (e.g., a calendar
quarter), the aggregate U.S. dollar amount reflecting all activity on
or in association with U.S.-issued Cards, such activity to include
purchases of goods and services charged to U.S.-issued, consumer and
commercial credit and off-line (e.g., signature-based CVM, dual
message, 0200 format) debit MasterCard Cards (not including Cirrus or
Maestro) the principal amount of cash advances charged to such
MasterCard Cards, and other activity billed or satisfied through a
MasterCard relationship (e.g., balance consolidations, payoffs) in
association with the appurtenant accounts. However, Volume shall not
include account fees, finance charges, delinquency, over-the-limit
fees, NSF check fees, and similar penalties or charges levied by
Citibank by reason of the Cardholder's payment behavior or performance
of Citibank Card obligations. References to "Citibank Card Volume"
shall mean the U.S. dollar amount of all such activity on all Citibank
Cards (subject to Section 3.3A), without regard to brand, and
references to "Citibank MasterCard Volume" shall mean the U.S. dollar
amount of all such activity on Citibank MasterCard Cards, other than
Maestro or Cirrus Cards.
1.16 "1998 Citibank Card Volume" shall have the meaning set forth in Section
2.1.
2. GENERAL OBLIGATIONS OF MASTERCARD
In consideration of Citibank's full and timely performance of this Agreement,
MasterCard shall provide the following consideration to Citibank:
2.1 Standard MasterCard Pricing shall apply for the period through and
including May 1, 1999. Commencing thereafter, Citibank Issuer Fees for
Citibank MasterCard Volume shall be subject to the following
alternative rates in lieu of Standard MasterCard Pricing, all Issuer
Fees to be paid by Citibank at such intervals and in the manner
provided for payment of Issuer Fees published and applicable to
MasterCard members generally from time to time. These rates shall apply
to Volume on Citibank MasterCard Cards issued and owned exclusively by
Citibank (which, shall include co-branded Citibank MasterCard Cards in
which the co-brander reserves an interest in the Citibank MasterCard
Cards upon termination of the co-branding relationship but only for the
duration of the Citibank/co-brander MasterCard Card issuance
relationship). The rates shall remain in effect as long as Citibank
MasterCard Volume for each Measuring Period is at least equal to or
exceeds the Citibank MasterCard Volume Targets, and Citibank otherwise
complies with all material requirements of this Agreement. In the event
Citibank fails to meet any Citibank MasterCard Volume Target in any
Measuring Period, the provisions of Section 3.3 shall apply. While in
effect, the following rates shall also be inclusive of all MasterCard
charges for Core Services and MasterCard shall make no incremental,
additional charge to Citibank for any such Core Services. In addition,
MasterCard shall make no material changes in the definition, nature and
scope of Core Services for purposes of this Agreement without the
consent of Citibank. Citibank shall be liable under MasterCard rules,
regulations and Bylaws for any penalties or other charges in connection
with MasterCard Card transactions under such rules, regulations and
Bylaws, except as provided and in the event of an extraordinary event
or circumstance requiring a cost or expense outside MasterCard's budget
or reserves established for such purpose, MasterCard shall have the
right to issue special assessments to Citibank on a basis proportionate
to MasterCard voting rights with all other MasterCard issuers. The
alternative rates shall be as follows:
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A. Commencing on May 1, 1999, and continuing for the period
through and including the conclusion of the calendar month in
which Citibank begins full implementation of the systematic
conversion of Citibank Visa Cards to MasterCard Cards as
plastics expire or are reissued ("Conversion Implementation
Date"), Citibank's Issuer Fees shall be calculated as **** of
Citibank MasterCard Volume.
B. Effective after the Conversion Implementation Date, and
continuing, if at all, until the beginning of the calendar
quarter, if any, when Citibank issues the initial MasterCard
Brand on the Back Card other than Test Cards (as described in
Section 2.2B), Citibank's Issuer Fees shall be calculated as
**** of Citibank MasterCard Volume. However, in the event
Citibank issues any MasterCard Brand on the Back Card, other
than Test Cards pursuant to Section 2.2B, then in lieu of the
**** rate if then in effect, Citibank's Issuer Fees shall
convert to the below-stated rates based on the MasterCard
brand share percentage of overall Citibank Card Volume
("Conversion Thresholds"), starting with the calendar quarter
in which the first such Brand on the Back Card is issued:
Citibank Rate on All
Volume Conversion Thresholds Citibank MasterCard Volume
---------------------------- --------------------------
Citibank MasterCard Volume ****
is less than 60% of
Citibank Card Volume*
Citibank MasterCard Volume ****
is 60% to 80% of
Citibank Card Volume*
Citibank MasterCard Volume ****
is greater than 80% of
Citibank Card Volume*
*Citibank Card Volume, for purposes of this calculation,
includes all Citibank Visa Card Volume, whether or not
converted to MasterCard pursuant to Section 3.1.
C. Subject to Citibank timely providing the reports required by
Section 3.6, MasterCard shall perform a quarterly
reconciliation of Citibank's Issuer Fees and each party agrees
to promptly make an appropriate reimbursement to the other
party to account for any excess sum that may have erroneously
been generated in its favor as demonstrated by such
reconciliation.
D. Citibank acknowledges that outside of the U.S., Issuer Fees
shall be set and established by the applicable MasterCard
Board of Directors and charges for non-U.S. issued-Cards shall
be subject to Issuer Fees and charges as so set and
established by such Boards. Similarly, Core Services shall not
be deemed to be included in non-U.S. Issuer Fees and Citibank
agrees to comply with the procedures and charges for such Core
Services as are established outside of the U.S.
E. Citibank acknowledges that MasterCard shall establish fees for
all Other Services (U.S. and non-U.S.) from time to time and
Citibank shall comply with the procedures and charges for
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Other Services as may be so established for Other Services
utilized by Citibank. However, MasterCard shall not assess
fees for Other Services to Citibank other than on the most
favorable terms made available to other MasterCard issuers
based on comparable MasterCard Volume.
F. ****.
2.2 A. MasterCard shall develop and present to its Global Board of
Directors (the "Board"), a proposal to revise its Rules,
regulations, guidelines and standards relating to Card face
and reverse side design (currently set forth in Article 2 of
the MasterCard Rules and applicable procedures and
regulations). Such revisions shall permit Citibank to test
and, subject to the test being successful in the reasonable
opinion of Citibank under commercially reasonable standards
and the results of the test being shared with MasterCard,
issue MasterCard Brand on the Back Cards with a Citibank name
or marks on the front, and the MasterCard name and marks to be
depicted on only the back of the MasterCard Card, provided
that the MasterCard name, hologram, and marks are depicted on
the reverse side thereof, upon such reasonable conditions,
rules, brand identification requirements and transition
procedures as MasterCard may require for the purpose of
mitigating customer confusion and maintaining MasterCard brand
value, good will and the integrity of the MasterCard
acceptance brand ("Brand on the Back"). If such proposal is
approved, Citibank shall undertake at its expense such
advertising, promotion, and education programs (excluding
internal MasterCard rules changes and related communications
to MasterCard members) to its customers concerning such
MasterCard Brand on the Back Cards change in card design and
acceptance procedures relating to the issuance, acceptance or
use of Citibank MasterCard Brand on the Back Cards, as it
shall consider appropriate provided such programs meet
requirements adopted or authorized by the Board. The parties
shall undertake to cause all MasterCard Brand on the Back
Cards to continue to maintain all MasterCard brand
functionality. Except as otherwise provided in this Agreement,
the MasterCard xxxx shall be the sole acceptance xxxx for
MasterCard Brand on the Back Cards at point-of-sale and
point-of-transaction. The failure of the Board to approve such
MasterCard Brand on the Back proposal shall not constitute a
default or breach of this Agreement by MasterCard, ****.
To the extent other MasterCard issuers issue
MasterCard Brand on the Back Cards commencing at or about the
same time as Citibank commences to issue such Cards,
MasterCard shall use commercially reasonable efforts to cause
such other issuers to assume costs of education programs to
their customers concerning such MasterCard Brand on the Back
Cards.
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B. Prior to issuing MasterCard Brand on the Back Cards generally,
and subject to the Board's approval, Citibank shall have the
right to conduct such tests as it deems commercially
reasonable of MasterCard Brand on the Back Cards by issuing
Test Cards provided that total Test Cards shall not exceed
25,000 Cards. The provisions of Section 2.2A shall apply to
the issuance of Test Cards and the conduct of the test. If,
upon conclusion of the tests, Citibank elects not to issue
MasterCard Brand on the Back Cards, Citibank shall replace all
Test Cards not later than the reissue date of outstanding Test
Card plastics, and Citibank shall not issue any additional
MasterCard Brand on the Back Cards. Provided that Citibank
complies with these conditions, the issuance of Test Cards and
the conduct of the related tests shall not cause the pricing
provisions of Section 2.1B to apply.
2.3 On or prior to November 30, 1999, MasterCard will modify the
restriction of "any airline, no blackout dates" that precludes Citibank
AAdvantage Card from qualifying as a World MasterCard Card program and,
as applicable, a MasterCard Corporate Card program, provided that
Citibank meets all program requirements of World MasterCard Card and
MasterCard Corporate Card other than the requirements of "any airline,
no blackout dates" on its World MasterCard Card reward feature
(however, at minimum, a single airline reward feature shall be
required). To the extent MasterCard so qualifies the Citibank
AAdvantage Card as a World MasterCard Card program and Corporate Card
program and Citibank meets the other program requirements, Citibank
shall be entitled to issue such Cards with the benefits and features of
such MasterCard programs.
2.4 Any and all taxes due on any payments made to MasterCard by Citibank,
including but not limited to any sales, use, excise, income or similar
taxes that may be due thereon, shall be apportioned, allocated,
reported and remitted in accordance with MasterCard rules and
regulations applicable to MasterCard members generally with respect to
such transactions.
3. CITIBANK'S BRAND EXCLUSIVITY AND OTHER OBLIGATIONS
3.1 ****.
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3.2 A. Citibank shall use commercially reasonable efforts to support,
incent and retain all MasterCard Cards and shall maintain all
MasterCard Cards as MasterCard Cards for the duration of the
cardholders' relationship with Citibank during the Term of
this Agreement. Additionally, in no event, and at no time
during the Term (except as permitted by this Agreement), shall
Citibank issue any Card other than a MasterCard Card nor
convert, directly or indirectly, any MasterCard Card (without
regard to when or by what entity such MasterCard Card was
established, whether prior to or during the Term of this
Agreement) to any Card brand other than a MasterCard Card.
B. In the event Citibank sells or transfers any Citibank
MasterCard Cards to any Person, Citibank shall at its option:
i) affirmatively cause the brand-maintenance obligations of
Section 3.2(A) to be binding upon and expressly assumed by
such Person and provide in the sale agreement for MasterCard
to have the right to enforce such brand-maintenance obligation
directly against the purchaser/transferee (and no act or
omission of Citibank shall constitute a defense thereto); or
ii) Citibank shall have the right to discharge the obligations
of Section 3.2(A) with respect to the transferred Cards by
paying to MasterCard an Exit Fee for each Card to be so
transferred as follows:
1. In the event that subtracting the Citibank MasterCard
Volume for the prior Measuring Period on the
MasterCard Cards
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transferred would cause Citibank's remaining Citibank
MasterCard Volume for such Measuring Period to fall
below the Citibank MasterCard Volume Target for such
Measuring Period, the Exit Fee shall be calculated
for each MasterCard Card transferred as the product
obtained by multiplying: (i) the Citibank MasterCard
Volume for each Card transferred for: (a) the
36-month period preceding the date of such transfer
if such transfer occurs within five (5) years from
the date hereof, or (b) the 24-month period preceding
the date of such transfer if such transfer occurs
after five (5) years from the date hereof, times (ii)
the difference between the Issuer Fees charged to
Citibank hereunder and the Standard MasterCard
Pricing for each transferred MasterCard Card for the
period in issue. If this Agreement has been in effect
less than 36-months prior to the date of transfer,
then the parties will extrapolate from Citibank's
Citibank MasterCard Card Volume to date to determine
what the Volume would be had the applicable 36-month
anniversary date been reached and such figure will be
used for the calculation described above.
2. In the event that subtracting the Citibank MasterCard
Volume for the prior Measuring Period on the
MasterCard Cards transferred would not cause the
remaining Citibank MasterCard Volume for such
Measuring Period to fall below the Citibank
MasterCard Volume Target for such Measuring Period,
no Exit Fee shall be required.
MasterCard acknowledges and agrees that the Exit Fee represents
MasterCard's sole remedy for Citibank's failure to cause MasterCard
brand exclusivity for the transferred MasterCard Cards during the Term.
Citibank acknowledges and agrees that this represents an accommodation
to Citibank by MasterCard and is not intended to, and shall not,
constitute a benchmark for adequate valuation or full compensation to
MasterCard for the wrongful establishment of or conversion of
MasterCard Cards to any other Card brand, or any other breach of this
Agreement.
3.3 A. ****.
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B. ****.
C. In the event Citibank fails to meet or maintain the Citibank
MasterCard Volume Share in any calendar quarter, Citibank
shall have a period of two calendar quarters to cure the
failure, except that no right of cure shall apply if the
Citibank MasterCard Volume Share is less than **** such
calendar quarter. Citibank's failure to meet the Citibank
MasterCard Volume Share (or its failure to cure, if
applicable) or Citibank's failure to meet the Citibank
MasterCard Volume Targets in any Measuring Period, shall
constitute a material breach of this Agreement, provided that:
i) without limitation to MasterCard's remedies for such breach
(including, but not limited to, the remedy of injunctive
relief), Citibank's Issuer Fees shall revert to Standard
MasterCard Pricing commencing for the calendar year in which
Citibank so fails to meet the Citibank MasterCard Volume Share
requirement; and ii) in the event Citibank is unable to meet
the Citibank MasterCard Volume Target in any Measuring Period
due entirely to economic circumstances wholly beyond the
control of Citibank, such failure shall not be deemed a breach
of this Agreement for the Measuring Period, but Standard
MasterCard Pricing shall apply at MasterCard's option. In the
event MasterCard elects to not terminate this Agreement for
Citibank's breach of the foregoing requirements, MasterCard
shall make available to Citibank prospectively the Issuer Fees
provided in Section 2.1, provided that Citibank again meets
the Citibank MasterCard Volume Share requirement at all times
and fully compensates MasterCard for MasterCard's loss in
transaction revenue during the period in which Citibank failed
to meet such requirement and for any successive period(s) in
which it fails to do so. In the event Standard MasterCard
Pricing is made applicable to Citibank at any time during the
Term, Citibank shall receive credit against such Standard
MasterCard Pricing to the extent it has prepaid any element of
Standard MasterCard Pricing for the period in issue.
3.4 Citibank agrees to abide by all present and future MasterCard rules,
regulations, Bylaws, policies and guidelines in effect from time to
time, including by way of example and not limitation, those relating to
the identification and promotion of the Citibank MasterCard Cards as
MasterCard Cards. Citibank further agrees to take no act that could
reasonably be expected to have the effect of damaging MasterCard or any
MasterCard brand, financial operations or revenue streams in the
management or operations of MasterCard, provided, however, that
neither: i) the consummation of the transactions provided for in this
Agreement (including, by way of example, the issuance of MasterCard
Brand on the Back Cards upon the terms provided herein); nor ii) the
promotion by Citibank of any of Citibank's proprietary names, marks or
systems in a manner consistent with the requirements of this Agreement
and the By-Laws, rules and regulations of MasterCard, shall
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constitute a violation of its obligation under this sentence.
MasterCard shall not knowingly adopt any rule, by-law or regulation
that would meaningfully preclude or frustrate Citibank's performance of
its obligations or Citibank's receipt of the benefits hereunder,
without which Citibank would be deprived of the essence of what it has
contracted for, and, if any proposed MasterCard rule or regulation
would have such effect, Citibank shall so advise MasterCard and
MasterCard shall work with Citibank to amend the proposed rule or
regulation prior to its adoption to eliminate such effect. If
MasterCard does not amend the proposed rule or regulation in such
manner, Citibank shall have the right to terminate this Agreement
pursuant to the provisions of Section 4.1A.
3.5 Except as permitted by this Agreement, Citibank shall not issue,
market, operate or promote any product or service that is branded or
marked with or utilizes a name, xxxx or system of American Express,
Visa International, Visa U.S.A., Discover, JCB, or any general purpose
Card-based payment system, (other than Citibank Diners Club and
non-Card-based products, services or devices not labeled or promoted
with any such name, xxxx or system) provided that the use of the
acceptance xxxx of a regional network system (e.g., NYCE) on a Citibank
Card shall not be deemed a violation hereof. However, Citibank shall
have the right to enter into or maintain an agreement with American
Express Travel Related Services provided that such relationship is
limited exclusively to travel and/or insurance services (other than in
association with a Card program) and the operation and promotion of the
relationship is not done in such a manner that could reasonably be
expected to: i) suggest a false origin or association of any American
Express Card product or service with Citibank or any of Citibank's
products, services, facilities or activities; ii) cause confusion or
uncertainty about MasterCard's exclusive relationship with Citibank; or
iii) misappropriate goodwill otherwise derived from this Agreement.
3.6 As a condition to MasterCard's obligations under Section 2.1, within
fifteen (15) days following the close of each calendar quarter
("Performance Quarter"), Citibank shall report in appropriate detail in
the MasterCard Program Quarterly Statistics Report and such other
reports as MasterCard may reasonably request, information concerning
the actual number of Cards established and converted, total Cards
issued and Volume for the preceding Performance Quarter, itemized by
Card brand and program. MasterCard and its designated auditors shall
have the right to audit Citibank's books and records relating to any
information contained in such reports by giving prior notice of the
scope and nature of the review and not less than thirty (30) days
notice to Citibank. Such audit shall be conducted at MasterCard's
expense and shall be for the purpose of verifying such information and
Citibank's compliance with this Agreement. Citibank shall cooperate,
and cause the cooperation of its independent auditors and other
necessary personnel, in the conduct of any such audit by MasterCard and
the audit shall be done in a manner as to not unreasonably interfere
with the normal business and operations of Citibank. In the event any
such audit reveals a discrepancy or the overpayment or underpayment of
any sums owing hereunder, the party involved shall promptly pay the
other party all amounts determined by the audit to be due or owing to
the other party by reason thereof. In the event such discrepancy or
underpayment by Citibank exceeds ten percent of the Issuer Fees due
from Citibank for any calendar quarter, Citibank shall reimburse
MasterCard for the reasonable costs and expenses of the audit.
3.7 Nothing contained in this Agreement shall prohibit, preclude or limit
Citibank from acting as an
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acquirer of merchant transactions in a manner consistent with all
present and future MasterCard rules, regulations, Bylaws, policies and
guidelines in effect from time to time in its merchant processing
business or operations, provided that Citibank shall not discriminate
against MasterCard in the conduct of such business and operations, as
provided in the MasterCard By-laws.
3.8 Citibank agrees that the obligations stated herein shall be binding
upon, and Citibank shall cause the express execution of the terms
hereof by, any Affiliate of Citibank that now or at any time during the
Term issues, acquires, markets or services any U.S.-issued Card or Card
issued to any U.S. resident, within thirty (30) days of the Affiliate's
commencement of such activity. However, nothing contained herein shall
preclude any Citibank Affiliate from acting solely as an administrator,
trustee, obligor, indenture holder, paying agent, investment advisor or
similar service provider or holder of securitized receivables of a
non-Affiliate provided that such Affiliate takes no part in the
management or brand decision of the non-Affiliate's Card business or
operations other than to exercise customary securitization functions in
a manner consistent with securitization activity generally. The
signatories to this Agreement shall cause all such Affiliates to affirm
to MasterCard their consent to and compliance with this Agreement at
such times and in such form as MasterCard may reasonably request.
Citibank agrees and acknowledges that compliance with the obligations
of this Agreement by all Citibank Affiliates as provided above is a
material term of this Agreement.
TERM AND TERMINATION
4.1 This Agreement shall be for a Term commencing as of the date hereof and
continuing for a period through and including June 30, 2009 ("Term"),
provided that the obligations set forth in Articles 5, and 6, and
Sections 7.1, 7.2, 7.4 and 7.8 shall survive the expiration or
termination of this Agreement, and further provided that the
obligations set forth in Section 3.6 shall survive for a period of six
(6) months after termination and Citibank shall thereafter, for as long
as Citibank is a MasterCard member, make such periodic reports as are
required of MasterCard members generally. Prior to the expiration of
the Term, either party may terminate this Agreement by giving notice to
the other party, such termination to be effective upon a date not less
than 90 days after the date of such notice, under the following
circumstances:
A. Should the other party fail to observe or perform any of its
obligations of this Agreement, which failure is not cured
within thirty (30) days after notice thereof, or if cure
cannot be effected in such time, such additional time as is
necessary to cure using commercially reasonable efforts,
provided that the failure of the cure period to expire shall
not preclude either party from seeking an order of injunctive
relief with respect to any breach or threatened breach,
provided, however, that no cure right shall apply to any of
the obligations stated in Section 3.3 except for the cure
right provided therein; or
B. In the event any of the following occur: (i) a party (the
"defaulting party") admits in writing its inability to pay its
debts generally as they become due; (ii) the defaulting party
becomes insolvent (whether by balance sheet insolvency or a
failure to meet obligations in the ordinary course) or makes
an assignment for the benefit of creditors or calls a meeting
of creditors; (iii) the defaulting party files any voluntary,
or if there is filed against such party an involuntary,
petition in bankruptcy under the U.S. Bankruptcy Code, or any
similar state
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or local bankruptcy or insolvency laws (as now or in the
future enacted or amended) or if the defaulting party makes an
admission seeking relief as therein allowed; provided, that in
the event of any involuntary petition, the defaulting party
shall have a period of sixty (60) days from the date of filing
thereof to discharge the same; (iv) the defaulting party
consents to the appointment of a receiver for all or a
substantial portion of its property or in the event such party
is the subject of a takeover or extraordinary regulatory
action such as a memorandum of understanding, by its
applicable regulator; and/or (v) a court of competent
jurisdiction assumes custody, attaches or sequesters all or a
material portion of the defaulting party' property or assets,
which custody, attachment or sequestration is not suspended or
terminated within sixty (60) days from the inception thereof.
4.2 Citibank shall have the sole right to terminate this Agreement without
penalty effective on or after November 30, 1999, in the event of a
MasterCard Non-Action as contemplated by Section 2.2A, provided that,
to exercise this right, Citibank must give MasterCard 90 days prior
notice of its intention to so terminate. Such right to terminate shall
expire, if not earlier exercised, ninety (90) days after the passing of
the deadline date for the MasterCard Non-Action (if not cured during
such period) that is relied upon in the notice of termination.
4.3 Citibank shall have the right to terminate this Agreement without
penalty in the event the any of the following actions fail to take
place as of the indicated dates: ****
4.4 The parties acknowledge that any issuance of Cards by Citibank other
than MasterCard Cards except as permitted by this Agreement, any brand
conversion of MasterCard Cards, any failure to meet the Citibank
MasterCard Volume Targets, or any uncured failure to meet the
MasterCard Volume Share requirements of Section 3.3, may cause
immediate and irreparable damages to MasterCard, its brand, and its
goodwill, which damage may not be fully compensable in money damages.
Accordingly, MasterCard shall have the right to seek an order for
injunctive relief in any court of competent jurisdiction. In connection
with any such proceeding for injunctive relief, Citibank hereby waives
any requirement for MasterCard to post a bond or other undertaking in
connection with the application for any such relief.
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4.5 The above provisions shall be in addition to all other rights and
remedies provided hereunder or that such party may otherwise possess at
law or in equity. In any action or proceeding pursuant to this
Agreement or the subject matter hereof, the prevailing party shall be
entitled to a recovery of its costs and attorney's fees from the
non-prevailing party.
4.6 In the event that: (A) (i) MasterCard ceases to provide (through no act
or omission of Citibank) Card services substantially similar to those
services it provides as of the date hereof; (ii) MasterCard's role in
the conduct and operations of Card-based payment systems generally in
the United States (measured by its available industry-wide
functionalities and giving consideration to association transaction
volumes) is materially diminished from its role as of the date hereof;
(iii) MasterCard ceases to be a commercially viable entity in the
provision of general purpose payment systems in the U.S.; or (iv) a
governmental body with legislative, rule making or judicial authority
enacts a final, non-appealable rule or law or issues an order which
will, in a material way, prevent Citibank from engaging in essential
activities necessary for it to receive the benefits of this Agreement;
and (B) as a direct result of such event or circumstance, Citibank's
ability to effectively compete against similarly-situated financial
institutions in consumer payments is materially and adversely affected
( (A)(i), (ii), (iii), (iv) and (B) collectively the "Industry
Issues"), the parties shall meet within a period of thirty (30) days of
the event or circumstance in an effort to reconsider the terms of this
Agreement and resolve the Industry Issues in a mutually-agreeable
manner to better enable Citibank to effectively compete in the
marketplace. Senior corporate executives of the parties shall
personally conduct such negotiations. In doing so, the parties shall
verify and consider the severity of each Industry Issue through use of
statistical and qualitative analysis. If the senior executives are
unable to reach a mutually acceptable resolution within sixty (60)
days, the parties shall retain a mutually-agreed upon, disinterested,
recognized banking industry expert (whose fees and expenses shall be
shared equally), and the parties shall evaluate alternative
relationship structures and other solutions to the Industry Issues
proposed by such expert on the basis of the expert's qualitative and
quantitative research. The parties shall require the expert to issue
the evaluation on or prior to sixty (60) days from retention. If: (i)
the parties are unable to agree in good faith to an acceptable expert
within a thirty (30) day period following the period for negotiations;
or ii) an alternative solution proposed by the expert, or other
acceptable arrangement, is not agreed to within a period of sixty (60)
days from submission of the expert's final report, either party shall
thereupon have the option of terminating this Agreement by giving the
other party not less than thirty (30) days notice of termination, such
notice to be given, if at all, within the ensuing 45-day period
following the failure to agree upon an expert or the expert's final
report, as applicable. The parties may, by mutual agreement, extend any
of the above-referenced time periods.
4.7 In the event that either party sells all or substantially all of its
assets to, or has a majority interest in its equity transferred to or
obtained by any Person, the other party may terminate this Agreement
upon providing ninety (90) days written notice.
5. INDEMNIFICATION
5.1 Citibank agrees, at its own expense, to defend, protect, indemnify, and
hold MasterCard, its Affiliates, and any of their directors, officers,
employees and agents harmless from and against any action or threatened
action, suit, claim or proceeding, whether or not well grounded,
arising out of any alleged act or omission of Citibank, its or any of
their employees, agents, and subcontractors relating to the subject
matter of this Agreement and against any and all expenses (including
reasonable attorney's fees), judgments, fines, costs, amounts paid in
settlement or any
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loss or damage incurred by MasterCard, its Affiliates, or any of the
above-named indemnified parties relating thereto. MasterCard shall give
prompt notice to Citibank of any event or circumstance that it believes
gives right to an obligation of indemnity and MasterCard shall
cooperate with Citibank in the defense and resolution thereof.
5.2 MasterCard agrees, at its own expense, to defend, protect, indemnify
and hold Citibank, and any of their directors, officers, employees and
agents harmless from and against any action or threatened action, suit,
claim or proceeding, whether or not well grounded, arising out of any
alleged act or omission of MasterCard, its employees, agents and
subcontractors relating to the subject matter of this Agreement and
against any and all expenses, (including reasonable attorney's fees),
judgments, fines, costs, amounts paid in settlement or any loss or
damage incurred by Citibank, its Affiliates, or any of the above-named
indemnified parties relating thereto. Citibank shall give prompt notice
to MasterCard of any event or circumstance that it believes gives right
to an obligation of indemnity and Citibank shall cooperate with
MasterCard in the defense and resolution thereof.
5.3 Failure to give timely notice shall not excuse any obligation of
indemnity provided that the indemnifying party obtains actual knowledge
of the event or circumstance, except to the extent an indemnifying
party's ability to eliminate or mitigate any claim or loss is
prejudiced thereby. If an expense or cost is found to be associated
with an indemnified party's failure to give timely notice to the
indemnifying party, the indemnified party shall pay such expense or
cost; provided, that in agreeing to pay such expense or cost the
indemnified party shall not be deemed in any way to have waived its
right to indemnification hereunder, net of any such expense or cost.
6. CONFIDENTIALITY
6.1 Both parties agree that all Confidential Information of the other
party, as well as the terms and conditions of this Agreement, shall be
treated as confidential, shall be disclosed only to those individuals
with a reasonable need to know within their organizations (provided
such individuals agree to be bound by the confidentiality obligations
herein), and shall not be disclosed or communicated to third parties,
without the other party's prior written approval, except that each
party may disclose the same to its auditors, Board members and outside
counsel. "Confidential Information" means all, or any part of, and
originals or copies of, any information, in whatever form embodied
(e.g., oral, written, electronic) that by its nature and substance is
known, or should reasonably have been known by the other party to be
confidential at the time of disclosure and all similar information
concerning such party's past, current, and planned products, services,
fees, member institutions, concepts, methodologies, research, services,
business activities, marketing plans, other proprietary information and
the like. Without limitation to the generality of the foregoing, the
terms of this Agreement shall be deemed to be Confidential Information.
6.2 The restrictions on the use or disclosure of Confidential Information
shall not apply to any Confidential Information: (i) that is lawfully
received free of restriction from another source; (ii) that is
generally available to the public independent of this Agreement; (iii)
that, at the time of disclosure, was already known to the recipient as
evidenced by documentation in its possession which was not subject to a
confidentiality obligation inuring to the benefit of the party/owner of
the Confidential Information; (iv) which is ordered to be released
pursuant to a court order or regulatory order or which a party, in good
faith and under advice of counsel, determines is necessary or advisable
to disclose in connection with any court or regulatory proceeding or
threat
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thereof, provided that such disclosure shall be made only pursuant to
an appropriate confidentiality order or protection to the extent such
protection is available; or (v) which the parties agree in writing is
free of such restrictions. Prior to the disclosure of Confidential
Information pursuant to clause (iv) above, the disclosing party shall,
to the extent reasonably practicable, provide the other party with the
opportunity to contest disclosure.
6.3 The parties acknowledge that, in the event of a breach of Section 6 of
this Agreement, the non-breaching party may suffer immediate and
irreparable damage that cannot be fully remedied by monetary damages.
Therefore, in addition to any remedy or termination right provided for
hereunder, or which the non-breaching party may possess pursuant to
applicable law, the non-breaching party retains the right to seek
injunctive relief against any such breach in any court of competent
jurisdiction and the other party hereby waives any requirement for the
party commencing such proceeding to post a bond or other undertaking in
connection with the application for any such relief. In the event any
such breach results in a claim by any third party, the breaching party
shall indemnify, defend and hold harmless the non-breaching party from
any claims, damages, interest, reasonable attorneys' fees, penalties,
costs, and expenses arising out of such third-party claim(s).
6.4 Neither party shall issue any public announcements or make any
published statements regarding this Agreement or the subject matter
hereof, without the prior written consent of the other party; provided
however that the parties shall work together in good faith to develop
mutually-agreed-upon responses to media inquiries concerning this
Agreement. Without limiting the generality of the foregoing, MasterCard
and Citibank shall work together to develop and implement an
appropriate plan to inform and/or provide a copy of this Agreement to
the U.S. Department of Justice.
7. MISCELLANEOUS PROVISIONS
7.1 Unless otherwise expressly provided herein, all notices, consents or
other communications required or permitted to be given pursuant to this
Agreement, must be in writing and shall be deemed duly given upon hand
delivery or upon receipt if sent by an overnight courier delivery
service of general commercial use and acceptance (such as Airborne,
Federal Express or UPS) to the following addresses or such other
address as may hereafter be designated by notice given by such party:
TO CITIBANK AT THE ADDRESSES SET FORTH ABOVE FOR NOTICE, IN EACH
INSTANCE TO THE ATTENTION OF THE GENERAL COUNSEL, WITH COPY TO:
Citigroup, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: U.S. Consumer Banking Senior Executive
TO MASTERCARD:
MasterCard International Incorporated
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Attn: Executive Vice President, U.S. Region
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With copy to U.S. Region Counsel & Assistant General Counsel at the
same address.
7.2 The obligations stated herein shall be binding upon and inure to the
benefit of each of the parties and their respective successors and
assigns, provided that neither party shall have the right to assign to
any third party any of its rights against the other party, or the
benefit hereof. If any Person acquires any interest in this Agreement
or the subject matter hereof in any manner, whether by voluntary or
involuntary transfer, operation of law or otherwise, such interest
shall be held subject to all of the terms of this Agreement and by
taking or holding such interest, such Person shall be conclusively
deemed to have agreed to be bound by, and to comply with, all of the
terms and obligations of this Agreement.
7.3 A failure or delay of either party to this Agreement to enforce at any
time any of the provisions hereof, or the failure to exercise any right
which is herein provided or to require at any time performance of any
of the provisions hereof shall in no way be construed to be a waiver of
such provisions of this Agreement in the event of a continuation or
repetition of the circumstances which gave rise to such right. Except
as otherwise expressly provided herein, no waiver shall be effective
unless made in writing. No action, conduct or course of dealing by
either party hereto, and no failure, refusal or restraint from taking
any action by either party hereto, shall constitute any amendment,
modification, supplement or other change to any of the terms,
conditions or provisions of this Agreement.
7.4 If one or more of the provisions contained herein shall, for any
reason, be held by a court of competent jurisdiction to be
unenforceable or invalid in any respect under the law of any state or
of the United States of America, such unenforceability or invalidity
shall not affect any other provision of this Agreement, and this
Agreement shall then be construed as if such unenforceable or invalid
provisions had never been contained herein and the parties shall
immediately commence negotiations in good faith to reform this
Agreement to make alternative provisions herein that reflect the
intentions and purposes of the severed provisions in a manner that does
not run afoul of the basis for such unenforceability or invalidity.
However, in the event Section 3.3, or any part thereof, is so held
unenforceable or invalid and severed from this Agreement, and the
parties are unable to so reform this Agreement within a period of six
(6) months from the date of final, unappealable declaration of
unenforceability or invalidity, MasterCard shall have the right to
terminate this Agreement within the succeeding 90-day period by giving
not less than 90 days notice of termination to Citibank during such
90-day period.
7.5 The captions in this Agreement are included for convenience only and
shall not affect the meaning or interpretation of this Agreement.
7.6 Neither party shall be held responsible for any delay or failure in
performance to the extent such delay or failure is caused by fire,
flood, explosion, war, strike, embargo, government requirement, civil
or military authority, act of God, act or omission of carriers or other
similar causes beyond its control, that was not reasonably foreseeable
or avoidable, and without the fault or negligence and/or lack of
diligence of the delayed party ("force majeure condition"). If any
force majeure condition occurs, the party delayed or unable to perform
shall give written notice to the other party, stating the nature of the
force majeure condition, the steps the party has or will take to
minimize the effect of that condition, and the amount of time the delay
is expected to last. Thereafter, the time to perform the acts or
obligations that were delayed by such condition (and any corresponding
acts or obligations of the non-delayed party) shall be extended by the
length of time the force majeure condition endured, provided the
delayed party has used best efforts to
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overcome or resolve the force majeure condition, further, provided,
however, that the non-delayed party shall have the right to terminate
this Agreement if such force majeure condition endures for more than
one hundred forty (140) days upon providing at least thirty (30) days
written notice to the delayed party.
7.7 This Agreement evidences the entire agreement and understanding between
MasterCard and Citibank with respect to the transactions contemplated
hereby and supercedes all prior agreements between the parties. All
prior agreements between Citibank and MasterCard including, but not
limited to, that certain agreement between Universal Card Services Corp
and MasterCard made as of November 3, 1998 ("UCS Agreement"), are
hereby superceded and merged herein, provided, however, that: (i) the
obligations set forth in Section 2.5 and 8 of the UCS Agreement and, if
this Agreement is terminated, then the obligations set forth in Section
3; and ii) any other surviving obligations of any other agreements (to
the extent not in direct conflict with any provision hereof) shall so
survive and continue as independent obligations of the parties hereto.
No modification, amendment, supplement to or waiver of this Agreement
shall be binding upon the parties hereto unless made in writing and
duly signed by both parties.
7.8 This Agreement and the respective rights and obligations of the parties
hereto shall be governed to the laws of the State of New York,
excluding any "conflict of laws" or similar provisions that would
mandate or permit application of the substantive law of any other
jurisdiction. Any action or proceeding to enforce this Agreement or any
obligation stated herein shall be commenced and prosecuted, if at all,
only in a federal or state court located within the State of New York
and each party hereby irrevocably agrees to consent to jurisdiction in
any such court and to accept process in such action in the manner set
forth for notices herein. IN ANY ACTION OR PROCEEDING OF OR RELATING TO
THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY NOW HAVE OR HEREAFTER POSSESS TO A
TRIAL BY JURY.
7.9 Both parties agree at all times to comply with all applicable laws and
regulations applicable to the performance of this Agreement. The
parties shall perform all services hereunder as independent
contractors, and nothing contained herein shall be deemed to create any
employment, partnership, or relationship of principal and agent or
master and servant between the parties hereto or to provide either
party with the right, power or authority, whether express or implied,
to bind or create any duty or obligation on behalf of the other party.
7.10 This Agreement is the product of negotiations between the parties
hereto and their respective counsel. No provision or section of this
Agreement shall be read, construed or interpreted for or against either
party by reason of ambiguity of language, rule of construction against
the draftsman, or any similar doctrine.
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7.11 This Agreement may be executed in one or more counterparts, each of
which, taken together, shall constitute but one original document.
IN WITNESS WHEREOF, a duly authorized representative of each of the
parties has executed this Agreement in duplicate, as of the date last
signed below.
MASTERCARD INTERNATIONAL INCORPORATED CITIBANK (SOUTH DAKOTA), N.A.
/s/ Xxxxxx X. Xxxxxxxx /s/ Xxxxxx Xxxxx
------------------------------------- --------------------------------------
By: By: Xxxxxx Xxxxx
Title: Title
Date: Date:
CITIBANK, N.A. CITIBANK (NEVADA), N.A.
-------------- -----------------------
/s/ Xxxxx Xxxxx /s/ Xxxxxx Xxxxx
------------------------------------- --------------------------------------
By: Xxxxx Xxxxx By: Xxxxxx Xxxxx
Title: Executive Vice President Title: Vice President/Chief Executive
Officer
Date: 2/26/99 Date:
UNIVERSAL BANK, N.A. UNIVERSAL FINANCIAL CORP.
-------------------- -------------------------
/s/ Xxxxxxxx X. Xxxxxxx /s/ Xxxxxxx X. Xxxxxx
------------------------------------- --------------------------------------
By: Xxxxxxxx X. Xxxxxxx By: Xxxxxxx X. Xxxxxx
Title: President and COO Title: President & CEO
Date: February 25, 1999 Date: February 25, 1999
TRAVELERS BANK & TRUST, F.S.B. THE TRAVELERS BANK U.S.A
/s/ X. X. Xxxxxxx /s/ X. X. Xxxxxxx
------------------------------------- --------------------------------------
By: X. X. Xxxxxxx By: X. X. Xxxxxxx
Title: Vice President Title: Vice President
CITIBANK ALLIANCE 26
19
EXHIBIT A - MINIMUM MASTERCARD VOLUME TARGETS (IN $ BILLIONS)
MEASURING
PERIOD* 7/99-6/00** 7/00-6/01 7/01-6/02 7/02-6/03 7/03-6/04 7/04-6/05 7/05-6/06 7/06-6/07 7/07-6/08 7/08-6/09
------- ----------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
MASTERCARD 62 100 141 183 194 205 216 228 240 254
VOLUME TARGET
----------
* Initial Measuring Period commences as of July 1, 1999
