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EXECUTION COPY EXHIBIT 10.4
AMENDED AND RESTATED ACCOUNT ORIGINATION AGREEMENT
This AMENDED AND RESTATED ACCOUNT ORIGINATION AGREEMENT ("Agreement") is
made as of this 21st day of May, 1999, by and between NEXTCARD, INC., a Delaware
corporation ("NextCard") (as successor to NextCard, Inc., a California
corporation), NEXTCARD FUNDING CORP., a Delaware corporation ("Funding"), and
HERITAGE BANK OF COMMERCE, a California state-chartered bank (the "Bank").
W I T N E S S E T H:
WHEREAS, NextCard, Funding and the Bank are parties to that certain
Account Origination Agreement dated as of December 29, 1998 (the "Original
Agreement") and desire to amend and restate the Original Agreement as specified
herein; and
WHEREAS, the Bank is a licensed member of Visa, U.S.A., Inc. ("Visa")
and authorized to issue credit cards;
NOW, THEREFORE, in consideration of the premises and mutual covenants
included in this Agreement and for other goods and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, NextCard, Funding and
the Bank agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms have the meanings indicated
below.
"ACCOUNT" means an open-end, revolving Visa account opened by the Bank
pursuant to the Program on and after November 16, 1998, pursuant to which one or
more Credit Cards are
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issued to a Cardholder, including any and all rights, remedies, benefits,
interests and entitlements with respect thereto.
"BANK MARKS" has the meaning specified in Section 3.1(c).
"CARDHOLDER" means an individual in whose name an Account is
established.
"CARDHOLDER AGREEMENT" means an agreement between the Bank and a
Cardholder for the extension of credit in connection with an Account.
"CARDHOLDER-SPECIFIC INFORMATION" means Cardholder names, postal and
electronic mail addresses, telephone numbers and Cardholder-specific transaction
information.
"CONFIDENTIAL INFORMATION" has the meaning specified in Section 3.4.
"CREDIT CARD" or "CARD" means each Visa card issued by the Bank pursuant
to this Agreement.
"CREDIT CARD GUIDELINES" means the Credit Card Guidelines attached
hereto as Exhibit A, as amended from time to time with the prior approval of
NextCard and the Bank.
"EVENT OF DEFAULT" has the meaning specified in Section 6.2(a).
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") for such day, and if none is set forth for such
day, the rate set forth for the preceding Business Day, in each case opposite
the caption "Federal Funds (Effective)".
"EXTENSION FEE" has the meaning specified in Section 6.1(a).
"INDEMNIFIED PARTY" has the meaning specified in Section 7.4.
"INDEMNIFYING PARTY" has the meaning specified in Section 7.4.
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"INITIAL AGREEMENT" means that certain Consumer Credit Card Program
Agreement dated November 25, 1997 between NextCard and the Bank.
"INITIAL TERM" has the meaning specified in Section 6.1.
"LOSSES" has the meaning specified in Section 7.3.
"NEXTCARD MARKS" has the meaning specified in Section 3.1(a).
"PROGRAM" means the credit card program conducted pursuant to the terms
of this Agreement and specifically excludes the program conducted pursuant to
the Initial Agreement.
"PROGRAM INFORMATION" means all information, other than
Cardholder-Specific Information, acquired through the operation of this
Agreement or concerning the Accounts. Program Information includes
Cardholder-Specific Information to the extent that the Cardholder-Specific
Information is redacted to mask any correlation between the Cardholder-Specific
Information and the identity of any specific Cardholder.
"PROGRAM MATERIALS" means any applications, marketing materials,
advertising, Web sites and content, disclosures, Account agreements, Account
statements, billing and collection notices used in connection with the Program,
as developed by NextCard from time to time.
"PURCHASE PRICE" means, as of any day with respect to any Receivables,
(a) the sum of [*] minus (b) any credits and payments to the related Accounts.
"RECEIVABLES" means all amounts owing to the Bank on the Accounts
including, without limitation, principal balances from outstanding purchases,
balance transfers and cash advances, accrued finance charges, late charges,
returned check charges, interchange income and any other charges and fees,
whether or not billed, as of the close of business on a given day.
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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"SETTLEMENT AMOUNT" means, as of any day with respect to any
Receivables, (a) the Purchase Price of such Receivables minus (b) the amount of
any fees, charges or other income, including amounts payable to Funding pursuant
to Section 2.11, paid by other parties with respect to the Receivables, all of
which are payable to Funding hereunder, to the extent not previously netted out
of a Settlement Amount.
"SETTLEMENT DATE" shall have the meaning specified in Section 4.1(a).
"THIRD PARTY PROCESSOR" means any third party providing any data
processing services with respect to the Accounts or the Receivables.
1.2 Construction. Unless the context otherwise clearly indicates,
words used in the singular include the plural and words used in the plural
include the singular.
ARTICLE II
ESTABLISHMENT OF ACCOUNTS
2.1 Solicitation of Accounts.
(a) NextCard shall have the sole and exclusive right to
solicit applications for Credit Cards on behalf of the Bank.
(b) NextCard will use the Internet to solicit potential
applicants to submit applications to open Accounts. NextCard's Internet
marketing activities may include, in NextCard's discretion, targeted e-mail
solicitations, banner advertising, hyperlinks and agreements with other sites
and companies on the Internet. The Accounts and Cards will include
Internet-enhanced features, including online approval, online balance transfers
and online customer service. NextCard may from time to time implement additional
Internet-enhanced features.
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(c) All advertising and marketing materials will indicate
that the Bank is the issuer of Cards and the party with whom the Accounts are
maintained.
(d) NextCard does not warrant or guarantee that it will
generate any particular number of Accounts or amount of Receivables.
2.2 Applications.
(a) NextCard shall ensure that the form of the application
for a Credit Card and all other Program Materials, including without limitation
solicitation materials, are in compliance with all material applicable laws and
regulations.
(b) In the event that an applicant for a Card does not
satisfy the requirements of the Credit Card Guidelines, NextCard shall notify
the applicant in accordance with applicable laws and regulations.
2.3 Issuance of Credit Cards. So long as no Event of Default shall
have occurred, the Bank shall issue Credit Cards to each applicant for a Card
who qualifies for such type of Card under the Credit Card Guidelines and such
underwriting algorithms as are approved in writing by the Bank and NextCard from
time to time. Subject to Section 6.4 hereof, the Bank shall extend credit with
respect to such Credit Cards in accordance with the Credit Card Guidelines.
NextCard shall design and provide the Credit Cards in forms consistent with Visa
guidelines. NextCard, on behalf of the Bank, shall automatically issue a renewal
card to each qualified Cardholder at each scheduled Credit Card renewal date.
2.4 Establishment of Accounts.
(a) Upon approval of an application, the Bank shall
establish an Account for the applicant.
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(b) NextCard shall prepare and provide, or cause to be
provided to each Cardholder a Cardholder Agreement and disclosure statement and
such other notices or documents related to such Cardholder's Account as are
required from time to time under applicable laws and regulations.
2.5 Account Terms. Certain terms and conditions for the Credit Cards
applicable to the Accounts are set out in the Credit Card Guidelines. NextCard
shall ensure that the Credit Card Guidelines and the other terms and conditions
for the Credit Cards (including, without limitation, the interest rates, fees,
charges and disclosures) are in compliance with all material applicable laws and
regulations.
2.6 Servicing. NextCard shall be responsible for servicing and
maintaining the Accounts, processing payments thereon and collections efforts
with respect thereto, either by itself or through Third Party Processors. Such
servicing shall include maintaining a customer service website, maintaining all
communications with Cardholders and modifying the terms and conditions of any
Account. All costs relating to servicing the Accounts shall be paid by NextCard.
2.7 Other Bank Obligations
(a) Visa Membership. The Bank shall maintain its membership
in Visa. The Bank shall be responsible for making all reports to Visa which may
be required by its membership therein and shall comply with the operating rules
and regulations of Visa in connection with the Program. Any termination of the
Bank's membership in Visa shall be grounds for termination of this Agreement
pursuant to Section 6.2(b).
(b) Board Approval. This Agreement and all sales of
Receivables and
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Accounts pursuant to this Agreement shall be approved by the Board of Directors
of the Bank and such approval is or will be reflected in the minutes of the
Board of Directors. The Bank shall provide copies of such resolutions of the
Board of Directors, certified by the Secretary or other officer of the Bank, as
may be reasonably requested by NextCard. The Bank shall maintain such
resolutions in its permanent official records continuously from the time of
their adoption.
(c) Other Requirements. The Bank shall comply with all
regulatory and administrative requirements applicable to it, and shall be solely
responsible for its Community Reinvestment Act compliance requirements as they
relate to the Program.
(d) Opinion. Prior to the effectiveness of this Agreement,
the Bank shall deliver to Funding, NextCard and any provider of financing for
the Receivables an opinion of counsel substantially in the form set forth on
Exhibit B.
(e) Recordkeeping. The Bank shall maintain adequate and
sufficient records so that at all times it is possible to distinguish the
Accounts from any other credit card accounts owned or serviced by the Bank.
(f) UCC-1 Financing Statement. The Bank shall execute and
deliver to Funding for filing with the California Secretary of State a UCC-1
financing statement evidencing the sale of Receivables to Funding pursuant to
this Agreement.
2.8 Reports, Information and Materials.
(a) NextCard shall provide to the Bank periodic reports
(through Third Party Processors or otherwise) as the Bank may reasonably request
from time to time.
(b) NextCard shall furnish to the Bank all information
concerning the Accounts as may be required by law or necessary to enable to the
Bank to satisfy its obligations
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under this Agreement. NextCard will cooperate with the Bank in connection with
any regulatory examination or audit of the Program.
(c) NextCard shall not change the Credit Card Guidelines or
the Program Materials without the prior written consent of the Bank.
2.9 Expenses. NextCard agrees to reimburse the Bank for (a)
out-of-pocket expenses incurred in the maintenance of the Program, including, if
the Bank is not already a member of Visa, the costs associated with the Bank
becoming and maintaining a membership in Visa, (b) any taxes payable by the Bank
resulting from the sale of Receivables other than income taxes, (c) the funding
costs relating to the Receivables prior to their purchase pursuant to this
Agreement at the Federal Funds Rate or such other rate as may be agreed to by
NextCard and the Bank and (d) reasonable legal fees not to exceed $12,500 in
connection with this Amended and Restated Account Origination Agreement.
2.10 Origination Fees. NextCard shall pay to the Bank on a monthly
basis a one-time fee of [*] for each Account that is (a) booked on the system of
the Third Party Processor that books Accounts and (b) sold on NextCard's system
on or after January 1, 1999. Such payments shall be made no later than the
fifteenth day of each calendar month for all Accounts opened during the
preceding calendar month. If by September 30, 1999 NextCard has not paid the
Bank at least [*] pursuant to this Section 2.10, NextCard shall pay to the Bank
the difference between [*] and the actual amount paid by NextCard to the Bank
pursuant to this Section 2.10. This obligation will survive any earlier
termination of this Agreement pursuant to Section 6.2(d).
2.11 Visa Revenues. Any rebates, marketing fees, revenues or other
fees or discounts
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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that are paid or granted by Visa to the Bank with respect to the Accounts shall
be paid over to Funding upon receipt by the Bank on a daily basis as additional
consideration under this Agreement.
2.12 Nature of Arrangement. During the term of this Agreement
NextCard shall be the exclusive fee-for-origination credit card originator for
the Bank. NextCard may enter into other fee-for-origination agreements with
other financial institutions.
2.13 Minimum Account Allocation. If between the period from February
1, 1999 and September 30, 1999 NextCard enters into other fee-for-origination
agreements with other financial institutions, NextCard shall nonetheless ensure
that at least [*] of the Accounts originated on a monthly basis through a
NextCard program during such period are established by the Bank; provided,
however, that this Section 2.13 shall not be applicable to any Accounts
established by a wholly-owned subsidiary of NextCard. Furthermore, the Bank will
be the exclusive originator of NextCard accounts during the period from January
1, 1999 to and including January 31, 1999.
2.14 Clearing Accounts. The Bank shall maintain cash clearing
accounts necessary to settle amounts paid and received on the Accounts prior to
their posting on the system of the Third Party Processor. NextCard shall
reimburse the Bank for its reasonable costs relating to such cash clearing
accounts.
2.15 Marketing to Cardholders. NextCard may from time to time solicit
Cardholders for goods and services and place solicitation or promotional
materials in communications to Cardholders, and any income and fees resulting
from the foregoing solicitations and promotions shall be paid directly to
NextCard. The Bank shall not solicit Cardholders, other than any
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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Cardholder that was a customer of the Bank prior to the date of this Agreement
or a Cardholder that has a relationship with the Bank that develops or was
developed independently of the Program, for any purpose.
ARTICLE III
INTELLECTUAL PROPERTY
3.1 Trademarks.
(a) The Bank acknowledges that, as between NextCard and the
Bank, NextCard owns and will own the service marks "NextBank," "NextCard,"
"Credit Choice," and derivatives of the foregoing, and any other presently
existing or future trademarks, service marks, trade names, rights in packaging,
rights of publicity, merchandising rights, advertising rights, and similar
rights by which the Program is or becomes known or with which the Program is or
becomes associated, other than the xxxx "Heritage" and derivatives thereof
(collectively, the "NextCard Marks").
(b) The Bank acknowledges that, as between NextCard and the
Bank, NextCard owns all rights in the URL addresses used in conjunction with the
Program, including without limitation "xxxxxxxx.xxx," "XxxxXxxx.xxx," and
"xxxxxxxxxxxx.xxx."
(c) NextCard acknowledges that, as between NextCard and the
Bank, the Bank owns the service xxxx "Heritage" and derivatives thereof
(collectively, the "Bank Marks").
(d) All goodwill that is or becomes associated with the
above-referenced marks as a result of the use of such marks in association with
the Program will accrue solely to the benefit of the respective owner of such
marks. After termination of this Agreement, any party may use its marks free of
any claim whatsoever of ownership or interest by the other party.
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(e) The Bank hereby licenses to NextCard during the term of
this Agreement the use of the "Heritage" xxxx solely in connection with the
performance of its marketing and other obligations hereunder. Specifically for
purposes of identifying the Visa card issuer, NextCard may use the "Heritage"
xxxx in any marketing or advertising materials relating to the Program. NextCard
will follow the Bank's instructions regarding the appearance, use and display of
such xxxx, subject to any requirements of Visa and any regulatory requirements.
(f) NextCard hereby licenses to the Bank during the term of
this Agreement the use of the Program Materials and the xxxx "NextCard" to
identify the Card and the Program. The Bank will follow NextCard's instructions
regarding the appearance, use, and display of such xxxx, subject to any
requirements of Visa and any regulatory requirements.
3.2 Copyright. NextCard will own all copyrights in all Program
Materials and derivative works thereof.
3.3 Ownership and Use of Information.
(a) Cardholder-Specific Information will be owned by
Heritage. Heritage hereby grants to NextCard a perpetual unrestricted license
(i) during the term of this Agreement, to use the Cardholder-Specific
Information for Program purposes, including but not limited to the servicing of
the Accounts, and (ii) following the termination of this Agreement, unless
NextCard purchases the Cardholder-Specific Information pursuant to Section
4.2(b) hereof, to use the Cardholder-Specific Information only for statistical
and analytic purposes.
(b) NextCard and Heritage will own jointly the Program
Information, and each party may use the Program Information for its own
purposes; provided, that each party will treat any Program Information in its
possession at any time as Confidential Information.
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(c) Heritage and NextCard (i) acknowledge that the Program
Information will be used by each of them to create certain analyses and
statistical models that may have predictive value beyond the Program, and (ii)
agree that such analyses and statistical models will be the sole and exclusive
property of the party creating such analyses and statistical models and will be
treated as Confidential Information. NextCard represents and warrants to
Heritage that no such analyses or statistical models will include information
that is identified with any specifically identifiable Cardholder.
3.4 Confidential Information. All material and information supplied
by one party to the other party in the course of the negotiation of this
Agreement and its performance hereunder, including, but not limited to,
information concerning any party's marketing plans, technological developments,
objectives and results and financial results are confidential and proprietary to
the disclosing party ("Confidential Information"). Confidential Information does
not include any information that was (a) known to the receiving party at the
time of disclosure or developed independently by such party without violating
the terms herein; (b) in the public domain at the time of disclosure or enters
the public domain following disclosure through no fault of the receiving party;
or (c) disclosed to the receiving party by a third party that is not prohibited
by law or agreement from disclosing the same. In particular, the
Cardholder-Specific Information and the Program Information shall be deemed
Confidential Information owned by NextCard.
3.5 Protection of Confidential Information. Confidential Information
shall be used by each party solely in the performance of its obligations
pursuant to this Agreement. Each party shall receive Confidential Information in
confidence and not disclose Confidential Information to any third party, except
as may be necessary to perform its obligations pursuant to this Agreement
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and any agreement relating to the financing of the Receivables and except as may
be required by law or agreed upon in writing by the other party; provided,
however, that no party may disclose Confidential Information in violation of any
confidentiality or privacy guidelines or regulations imposed by federal or state
authorities. Each party shall take all reasonable steps to safeguard
Confidential Information disclosed to it so as to ensure that no unauthorized
person shall have access to any Confidential Information. Each party shall,
among other safeguards which it may consider necessary, require its employees,
agents, and subcontractors having access to Confidential Information to enter
into appropriate confidentiality agreements containing such terms as are
necessary to satisfy its obligation herein. Each party shall promptly report to
the other party any unauthorized disclosure or use of any Confidential
Information of that party of which it becomes aware. Upon request or upon
termination of this Agreement, each party shall return to the other party all
Confidential Information in its possession or control. No disclosure by a party
hereto of Confidential Information of such party shall constitute a grant to the
other party of any interest or right whatsoever in such Confidential
Information, which shall remain the property solely of the disclosing party.
Nothing contained herein shall limit a party's rights to use its Confidential
Information in any manner whatsoever.
3.6 Survival. The terms of this Article 3 shall survive the
termination of this Agreement; provided, however, that upon the termination of
this Agreement each party will discontinue immediately the use of any trade or
service marks licensed from the other except to the extent necessary to satisfy
their respective obligations under Section 6.4 hereof following the termination
of this Agreement.
ARTICLE IV
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PURCHASE AND SALE OF RECEIVABLES AND ACCOUNTS
4.1 Purchase and Sale of Receivables.
(a) Funding hereby purchases from the Bank, and the Bank
hereby sells to Funding, all of the Receivables, whether now in existence or
hereafter arising, for the Purchase Price. The Receivables shall be transferred
to Funding on a daily basis or such other frequency as may be agreed to by the
Bank and Funding. On each day when Receivables are transferred to Funding
pursuant to this Agreement (the "Settlement Date"), the Bank shall notify
Funding of the Settlement Amount for such day as specified in paragraph (b)
below and shall pay to the Bank such Settlement Amount. After the Settlement
Date for any Receivables, the Bank shall have no further economic interest in
such Receivables. NextCard shall provide Funding and the Bank with a report
setting forth the calculation of the Settlement Amount on each Settlement Date.
(b) No later than 10:00 a.m., California time, on each
Settlement Date, the Bank shall notify Funding of the Settlement Amount due to
or owed by Funding or the Bank for such day. Payments due for any day shall be
made by the appropriate party by wire transfer no later than 1:00 p.m.,
California time, unless the Bank is late in providing notice of the Settlement
Amount due for any day, in which case the appropriate party shall use all
reasonable efforts to send the wire transfer as soon thereafter as possible.
(c) In the event that Funding has reason to dispute the
accuracy of the Settlement Amount reported by the Bank, Funding shall promptly
so notify the Bank. In the event it is determined that either party shall not
have remitted to the other party the proper Settlement Amount, such party shall
promptly remit to the other party any additional amount due
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the other party, together with interest at the Federal Funds Rate.
(d) Subject to Section 6.4 hereof, the Bank shall remain the
owner of all Accounts, notwithstanding any sale of any Receivables to Funding
under this Section 4.1. Funding shall not be deemed to have assumed any
obligations of the Bank with respect to the Accounts by virtue of any purchase
of Receivables hereunder.
(e) Subject to Section 6.4(b) hereof, the Bank shall not
sell any Receivables or any interest therein to any third party without the
prior written consent of Funding.
(f) The sale of Receivables contemplated herein shall occur
upon settlement therefor by or on behalf of Funding and no additional documents
shall be required by the parties to effect any such sale. Notwithstanding the
foregoing, if, in the reasonable judgment of either party, in connection with
any such purchase and sale, any additional instrument, document, or certificate
is required to further evidence such purchase and sale, the other party shall
execute and deliver any such document.
4.2 Sale of Accounts.
(a) Subject to Section 6.4, the Bank shall not sell or
transfer any Account created under the Program, or any interest therein, to any
third party without the prior written consent of Funding.
(b) At any time or from time to time, Funding or its
assignee shall have the right, exercisable by providing written notice to the
Bank at least thirty (30) business days prior to the settlement date for such
purchase, to purchase all of the Accounts and the Cardholder-Specific
Information relating thereto then owned by the Bank or to arrange for said
purchase by another party. The purchase price for the Accounts shall be ten
cents per Account and the
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purchase price for the Cardholder-Specific Information shall be a total of $50.
4.3 Covenants of the Bank. Except as contemplated by this Agreement,
the Bank (a) shall not create or suffer to exist any lien, pledge, security
interest or other encumbrance on any of the Receivables or Accounts, (b) shall
not take any action, or fail to take any action, that could result in the Bank
no longer being the exclusive owner of the Accounts and Receivables, (c) shall
not take any action, or fail to take any action, that could prevent the Bank
from having the absolute right and authority to sell the Accounts and
Receivables and (d) unless the Bank shall have provided Funding with at least
thirty (30) days prior notice thereof and executed such financing statements and
other instruments as Funding reasonably deems necessary or desirable to maintain
a perfected interest in the Receivables, shall not move its principal place of
business and chief executive office outside the State of California.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Bank. The Bank hereby
represents and warrants to NextCard and Funding as follows:
(a) Organization. The Bank is a bank duly organized, validly
existing and in good standing under the laws of the State of California.
(b) Capacity; Authority; Validity. The Bank has all
necessary corporate power and authority to enter into this Agreement and to
perform all of the obligations to be performed by it under this Agreement. This
Agreement and the consummation by the Bank of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Bank, and this Agreement has been duly executed and delivered by the Bank
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and constitutes the valid and binding obligation of the Bank and is enforceable
in accordance with its terms (except as such enforceability may be limited by
equitable limitations on the availability of equitable remedies and by
bankruptcy and other laws affecting the rights of creditors generally).
(c) Conflicts; No Defaults. Neither the execution and
delivery of this Agreement by the Bank nor the consummation of the transactions
contemplated herein by the Bank will (i) conflict with, result in the breach of,
constitute a default under, or accelerate the terms of any contract, instrument
or commitment to which the Bank is a party or by which the Bank is bound, (ii)
violate the articles of incorporation or bylaws, or any other equivalent
organizational document, of the Bank, (iii) result in the creation of any lien,
charge or encumbrance upon any of the Accounts or the Receivables (except
pursuant to the terms hereof), or (iv) require the consent or approval of any
other party to any contract, instrument or commitment to which the Bank is a
party or by which it is bound. The Bank is not subject to any agreement with any
regulatory authority that would prevent the consummation by the Bank of the
transactions contemplated by this Agreement.
(d) Litigation. There is no claim, litigation, proceeding,
arbitration, investigation or material controversy pending before any
governmental agency to which the Bank is a party that adversely affects the
ability of the Bank to consummate the transactions contemplated hereby, and, to
the best of the Bank's knowledge, no such claim, litigation, proceeding,
arbitration, investigation or controversy has been threatened or is
contemplated.
(e) No Consent, Etc. No consent of any person (including
without limitation, any stockholder or creditor of the Bank) and no consent,
license, permit or approval or
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authorization or exemption by notice or report to, or registration, filing or
declaration with, any governmental authority is required (other than those
previously obtained and delivered to NextCard) in connection with the execution
or delivery of this Agreement by the Bank, the validity of this Agreement with
respect to the Bank, the enforceability of this Agreement against the Bank, the
consummation by the Bank of the transactions contemplated hereby, or the
performance by the Bank of its obligations hereunder; provided, however, that
the Bank makes no representation as to whether any consent from Visa is
required.
(f) Memberships. The Bank is, and at all times during the
term hereof will remain, a member of the Federal Deposit Insurance Corporation
and the Visa system.
(g) Commercial Matters. (i) This Agreement was undertaken in
the ordinary course of business, not in contemplation of insolvency of the Bank,
and with no intent to hinder, delay, or defraud the Bank or its creditors; (ii)
this Agreement represents a bona fide and arm's length transaction; (iii)
Funding is not an insider or affiliate of the Bank; (iv) this Agreement was
entered into in return for adequate consideration; (v) this Agreement was
entered into before the first transfer of Receivables will be effected pursuant
to this Agreement; and (vi) the Bank's principal place of business and chief
executive office is located in the State of California.
5.2 Representations and Warranties of NextCard. NextCard hereby
represents and warrants to the Bank and Funding as follows:
(a) Organization. NextCard is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
(b) Capacity; Authority; Validity. NextCard has all
necessary corporate power and authority to enter into this Agreement and to
perform all of the obligations to be
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performed by it under this Agreement. This Agreement and the consummation by
NextCard of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of NextCard, and this Agreement
has been duly executed and delivered by NextCard and constitutes the valid and
binding obligation of NextCard and is enforceable in accordance with its terms
(except as such enforceability may be limited by equitable limitations on the
availability of equitable remedies and by bankruptcy and other laws affecting
the rights of creditors generally).
(c) Conflicts; No Defaults. Neither the execution and
delivery of this Agreement by NextCard nor the consummation of the transactions
contemplated herein by NextCard will (i) conflict with, result in the breach of,
constitute a default under, or accelerate the performance of the terms of any
contract, instrument or commitment to which NextCard is a party or by which it
is bound, (ii) violate the articles of incorporation or bylaws of NextCard or
(iii) require the consent or approval of any other party to any contract,
instrument or commitment to which NextCard is a party or by which it is bound.
NextCard is not subject to any agreement with any regulatory authority that
would prevent the consummation by NextCard of the transactions contemplated by
this Agreement.
(d) Litigation. There is no claim, litigation, proceeding,
arbitration, investigation or material controversy pending before any
governmental authority to which NextCard is a party that adversely affects
NextCard's ability to consummate the transactions contemplated hereby and, to
the best of NextCard's knowledge, no such claim, litigation, proceeding,
arbitration, investigation or controversy has been threatened or is
contemplated.
(e) No Consent, Etc. No consent of any person or entity
(including without
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limitation, Visa and any stockholder or creditor of NextCard) and no consent,
license, permit or approval or authorization or exemption by notice or report
to, or registration, filing or declaration with, any governmental authority is
required in connection with the execution or delivery of this Agreement by
NextCard, the validity or enforceability of this Agreement against NextCard, the
consummation of the transactions contemplated thereby, or the performance by
NextCard of its obligations hereunder.
(f) Compliance. All terms of the Accounts and the Cardholder
Agreements and all Program Materials comply in all material respects with
applicable law and regulations.
(g) Commercial Matters. (i) This Agreement was undertaken in
the ordinary course of business, not in contemplation of insolvency of the Bank,
and with no intent to hinder, delay, or defraud the Bank or its creditors; (ii)
this Agreement represents a bona fide and arm's length transaction; (iii) this
Agreement was entered into in return for adequate consideration; and (iv) this
Agreement was entered into before the first transfer of Receivables will be
effected pursuant to this Agreement.
5.3 Representations and Warranties of Funding. Funding hereby
represents and warrants to the Bank and NextCard as follows:
(a) Organization. Funding is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
(b) Capacity; Authority; Validity. Funding has all necessary
corporate power and authority to enter into this Agreement and to perform all of
the obligations to be performed by it under this Agreement. This Agreement and
the consummation by Funding of the transactions contemplated hereby have been
duly and validly authorized by all necessary action
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on the part of Funding, and this Agreement has been duly executed and delivered
by Funding and constitutes the valid and binding obligation of Funding and is
enforceable in accordance with its terms (except as such enforceability may be
limited by equitable limitations on the availability of equitable remedies and
by bankruptcy and other laws affecting the rights of creditors generally).
(c) Conflicts; No Defaults. Neither the execution and
delivery of this Agreement by Funding nor the consummation of the transactions
contemplated herein by Funding will (i) conflict with, result in the breach of,
constitute a default under, or accelerate the performance of the terms of any
contract, instrument or commitment to which Funding is a party or by which it is
bound, (ii) violate the articles of incorporation or bylaws of Funding or (iii)
require the consent or approval of any other party to any contract, instrument
or commitment to which Funding is a party or by which it is bound. Funding is
not subject to any agreement with any regulatory authority that would prevent
the consummation by Funding of the transactions contemplated by this Agreement.
(d) Litigation. There is no claim, litigation, proceeding,
arbitration, investigation or controversy pending before any governmental
authority to which Funding is a party that adversely affects Funding's ability
to consummate the transactions contemplated hereby and, to the best of Funding's
knowledge, no such claim, litigation, proceeding, arbitration, investigation or
controversy has been threatened or is contemplated.
(e) No Consent, Etc. No consent of any person (including
without limitation, any stockholder or creditor of Funding) and no consent,
license, permit or approval or authorization or exemption by notice or report
to, or registration, filing or declaration with, any governmental authority is
required in connection with the execution or delivery of this
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Agreement by Funding, the validity or enforceability of this Agreement against
Funding, the consummation of the transactions contemplated thereby, or the
performance by Funding of its obligations hereunder.
(f) Ability to Finance Purchases. Funding shall at all times
maintain a credit facility sufficient to finance its obligation to purchase
Receivables hereunder.
(g) Commercial Matters. (i) This Agreement was undertaken in
the ordinary course of business, not in contemplation of insolvency of the Bank,
and with no intent to hinder, delay, or defraud the Bank or its creditors; (ii)
this Agreement represents a bona fide and arm's length transaction; (iii)
Funding is not an insider or affiliate of the Bank; (iv) this Agreement was
entered into in return for adequate consideration; and (v) this Agreement was
entered into before the first transfer of Receivables will be effected pursuant
to this Agreement.
(h) Manner of Foreclosure. Funding will not attempt to
foreclose on the Receivables or the proceeds thereof after the appointment of
the Federal Deposit Insurance Corporation (the "FDIC") as conservator or
receiver for the Bank (i) in a manner that is not commercially reasonable, (ii)
in a manner that requires the involvement of the FDIC, (iii) in a manner that
requires judicial action, (iv) without the existence of an event of default
other than the appointment of a conservator or receiver for the Bank or the
insolvency of the Bank, or (v) in a manner that does not comply with any
applicable law (not including the receivership and conservatorship provisions of
the Federal Deposit Insurance Act, as amended).
ARTICLE VI
TERM AND TERMINATION
6.1 Term. This Agreement shall commence on the date first above
written and, unless
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otherwise terminated as provided in Section 6.2 herein, shall continue in full
force and effect until December 31, 1999 (the "Initial Term"), provided,
however, that the Bank's obligation to establish new Accounts and the related
obligation of NextCard to solicit new Accounts shall terminate on September 30,
1999. After the Initial Term, subject to Section 6.4, this Agreement may be
extended at the written request of Funding for one month periods until December
31, 2001 upon the payment by Funding of an extension fee equal to [*] per month
(the "Extension Fee"). The Extension Fee for each month shall be payable upon
the first day of such month. In addition, Funding shall pay the Bank a fee of
[*] per month for each calendar month this Agreement is in effect during the
period from October 1, 1999 through and including December 31, 1999. The
termination of this Agreement shall not terminate, affect or impair any rights,
obligations or liabilities of any party hereto that may accrue prior to such
termination or that, under the terms of this Agreement, continue after the
termination or otherwise affect the rights and obligations of the parties
hereunder except as provided in this Article VI.
6.2 Termination. Subject to Section 6.4, any party to this Agreement
may terminate this Agreement, reserving all other remedies and rights hereunder
in whole or in part, under the following conditions:
(a) Event of Default. Subject to Section 6.4, upon the
occurrence of an Event of Default, a nondefaulting party may terminate this
Agreement by giving fifteen (15) days' written notice to the defaulting party of
its intent to terminate this Agreement. For purposes of this Agreement, an
"Event of Default" hereunder shall occur in the event any party defaults in the
performance of any of its material duties or obligations under this Agreement
and fails to correct the default, to the reasonable satisfaction of the other
party, within a thirty (30) day cure period
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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commencing upon receipt of notice from the other party.
(b) Bankruptcy. Subject to Section 6.4, any party may
terminate this Agreement, at any time upon notice to the other parties, after
the filing by any other party of any petition in bankruptcy or for
reorganization or debt consolidation under the federal bankruptcy laws or under
any comparable law, or upon any other party's making of an assignment of its
assets for the benefit of creditors, or upon the application of any other party
for the appointment of a receiver or trustee of its assets.
(c) Changes in Laws or Regulations. This Agreement may be
terminated by any party on or after the ninetieth (90th) day following the
giving of notice by such party that such party's performance is rendered
(through no act or omission of such party) illegal or impermissible for that
party due to changes in laws or regulations applicable to the terminating party
or a determination by a governmental authority having jurisdiction over such
party.
(d) Accounts Purchased. This Agreement may be terminated
immediately upon the purchase by NextCard, Funding or any assignee of all the
Accounts pursuant to Article IV.
6.3 Duties After Termination. Upon termination of this Agreement, in
order to preserve the goodwill of Cardholders, both parties shall cooperate in
order to ensure a smooth and orderly termination of their relationship and a
transition of Accounts. The Bank shall transfer to NextCard or any successor or
assignee all books and records relating to the Accounts and Receivables in its
possession, subject to any regulatory obligations relating to retaining
duplicate books and records, and each party shall return all property belonging
to the other party that is in its possession or control at the time of
termination and shall discontinue the use of and
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return to the other party, or at the request of the other party destroy, all
written and printed materials bearing the other party's name and logo. In
connection with any termination of this Agreement, the Bank agrees to make
reasonable efforts to assist Funding in the orderly transition of the Accounts
and Receivables acquired by Funding, including sending to Funding any payments
on Accounts that may be received by the Bank after the purchase date.
6.4 Right to Purchase Accounts and Receivables Continues; Duties
Upon Termination.
(a) NextCard, Funding and their assignees shall have the
exclusive right to purchase all Accounts, Cardholder-Specific Information and
Receivables pursuant to Article IV hereof for a period of one year from the
termination of this Agreement, but not later than December 31, 2001 (the
"Exercise Period").
(b) During the Exercise Period, subject to the next
sentence, the Bank will fund, and Funding or its assignees will purchase,
additional Receivables generated under Accounts originated prior to the Exercise
Period in compliance with the terms of this Agreement. If (i) the Extension Fee
is not paid when due, (ii) Funding or its assignees fails to purchase
Receivables on any day or (iii) the Bank reasonably believes that Funding or its
assignees will not have the ability to purchase any Receivables, then the Bank
may, subject to compliance with applicable law, (1) cease originating additional
Receivables under existing Accounts; (2) reduce outstanding credit limits under
the Accounts to the then current balance of the Receivables; (3) close Accounts
with zero balances; and/or (4) sell the Accounts, together with the related
Receivables. In the event the Bank exercises its rights under clause (4) above,
NextCard and Funding shall cooperate in effecting all such sales. Except as
otherwise provided in this Section
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6.4(b), the obligations of NextCard, Funding and the Bank, as the case may be,
under the second sentence of Section 2.3, Article IV, Section 6.3, this Section
6.4, Article VII and any other provisions of this Agreement that by its terms
extends beyond the termination of this Agreement shall remain in full force and
effect following the termination of this Agreement.
ARTICLE VII
INDEMNIFICATION
7.1 NextCard Indemnification. Except to the extent of any Losses
that arise from the willful misconduct or gross negligence of the Bank or its
directors, officers, employees, agents or affiliates, NextCard shall indemnify
and hold harmless the Bank and its respective directors, officers, employees and
agents from and against any and all Losses resulting from (a) any failure of
NextCard to comply with any of the terms and conditions of this Agreement, (b)
any inaccuracy of a representation or warranty made by NextCard herein, (c) any
infringement or alleged infringement of any of the NextCard Marks, or the use
thereof hereunder, on the rights of any third party, (d) any failure of NextCard
to comply, in respect of its obligations in connection with the Program
hereunder, with any applicable laws or regulations, including without limitation
any consumer lending law or regulation, or (e) any failure of any Program
Materials to comply with any applicable laws, including without limitation any
consumer lending law or regulation.
7.2 Bank Indemnification. Except to the extent of any Losses that
arise from the acts or omissions of NextCard, Funding or their directors,
officers, employees, agents or affiliates, the Bank shall indemnify and hold
harmless NextCard, Funding and their respective directors, officers, employees,
agents and assigns from and against any and all Losses resulting from
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(a) any failure of the Bank to comply with any of the terms and conditions of
this Agreement, (b) the inaccuracy of any representation or warranty made by the
Bank herein, (c) any infringement or alleged infringement of any of the Bank
Credit Card Marks, or the use thereof hereunder, on the rights of any third
party, or (d) any failure of the Bank to comply, in respect of its obligations
in connection with the Program hereunder, with any applicable laws or
regulations.
7.3 Definition of Losses. For the purposes of this Agreement, the
term "Losses" shall mean all out-of-pocket costs, damages, losses, fines,
penalties, judgments, settlements, and expenses whatsoever, including, without
limitation, outside attorneys' fees and disbursements and court costs reasonably
incurred by the Indemnified Party.
7.4 Procedures for Indemnification.
(a) Notice of Claims. In the event any claim is made or any
suit or action is commenced as to which a party (the "Indemnified Party")
intends to seek indemnification, the Indemnified Party shall give notice to the
party from whom indemnification is sought (the "Indemnifying Party") as promptly
as practicable, but, in the case of lawsuit, in no event later than the time
necessary to enable the Indemnifying Party to file a timely answer to the
complaint. The Indemnified Party shall make available to the Indemnifying Party
and its counsel and accountants at reasonable times and for reasonable periods,
during normal business hours, all books and records of the Indemnified Party
relating to any such possible claim for indemnification, and each party
hereunder will render to the other such assistance as it may reasonably require
of the other in order to insure prompt and adequate defense of any suit, claim
or proceeding based upon a state of facts which may give rise to a right of
indemnification
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hereunder.
(b) Defense and Counsel. Subject to the terms hereof, the
Indemnifying Party shall have the right to defend any suit, claim or proceeding.
The Indemnifying Party shall notify the Indemnified Party via facsimile
transmission, within ten (10) days of having been notified pursuant to Section
7.4(a) if the Indemnifying Party elects to employ counsel and assume the defense
of any such claim, suit or action. The Indemnifying Party shall institute and
maintain any such defense diligently and reasonably and shall keep the
Indemnified Party fully advised of the status thereof. The Indemnified Party
shall have the right to employ its own counsel if the Indemnified Party so
elects to assume such defense, but the fees and expense of such counsel shall be
at the Indemnified Party's expense.
(c) Settlement of Claims. The Indemnifying Party shall have
the right to compromise and settle any suit, claim or proceeding in the name of
the Indemnified Party. The Indemnifying Party shall be subrogated to any claims
or rights of the Indemnified Party as against any other Persons with respect to
any amount paid by the Indemnifying Party under this Section 7.4.
(d) Indemnification Payments. Amounts owing under Section
7.4 shall be paid promptly upon written demand for indemnification containing in
reasonable detail the facts giving rise to such liability, provided, however,
that if the Indemnifying Party notifies the Indemnified Party within thirty (30)
days of receipt of such demand that it disputes its obligation to indemnify and
the parties are not otherwise able to reach agreement, the controversy shall be
settled by final judgment entered by a court of competent jurisdiction.
7.5 Survival. The terms of this Article VII shall survive the
termination of this
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Agreement for a period of five years.
ARTICLE VIII
MISCELLANEOUS
8.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without regard to its
conflict of laws rules.
8.2 Press Releases. No party hereto shall issue a press release or
make a public announcement or any disclosure to any third party related to the
terms of this Agreement without the prior consent of the other parties hereto
unless any such release, announcement or disclosure is required by any
applicable law or regulatory authority.
8.3 Relationship of the Parties. The Bank, Funding and NextCard
agree that in performing their responsibilities pursuant to this Agreement they
are in the position of independent contractors. This Agreement is not intended
to create, nor does it create and shall not be construed to create, a
relationship of partners or joint ventures or any association for profit among
the Bank, Funding and NextCard.
8.4 Force Majeure. In the event that any party fails to perform its
obligations under this Agreement in whole or in part as a consequence of events
beyond its reasonable control (including, without limitation, acts of God, fire,
explosion, public utility failure, accident, floods, embargoes, epidemics, war,
nuclear disaster or riot), such failure to perform shall not be considered a
breach of this Agreement during the period of such disability. In the event of
any force majeure occurrence as set forth in this Section, the disabled party
shall use its best effort to meet its obligations as set forth in this
Agreement. The disabled party shall promptly and in writing advise the other
party if it is unable to perform due to a force majeure event, the expected
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duration of such inability to perform and of any developments (or changes
therein) that appear likely to affect the ability of that party to perform any
of its obligations hereunder a whole or in part.
8.5 Books and Records. Each party shall maintain books of account
and records, in accordance with standard accounting practices and procedures, of
all financial transactions arising in connection with its obligations pursuant
to this Agreement for a period of not less than five years from the date last
recorded or created, and after such time the other party will be offered a
reasonable opportunity to take possession of such records at its expense prior
to their destruction. In addition to and notwithstanding the foregoing, to the
extent any party has sole possession of any records required to be maintained by
the other party pursuant to applicable state or federal laws or regulations, the
party with possession shall maintain such records in such form and for such time
periods as are provided for in such laws and regulations.
8.6 Notices. All notices, requests and approvals required by this
Agreement shall be in writing and shall be deemed to have been given upon
delivery thereof at the addresses of the parties as follows, or such other
address as any party may specify in writing:
To Bank: 000 Xxxxxxx Xxxx.
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx, Executive Vice President
To NextCard: 000 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx, Chief Financial Officer
With a copy to Xxxxxx Xxxxxxxxx, Esq., General Counsel
To Funding: 000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx, Chief Financial Officer
With a copy to Xxxxxx Xxxxxxxxx, Esq., General Counsel
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8.7 Modification and Changes. This Agreement constitutes the entire
agreement among the parties relating to the subject matter herein. This
Agreement may only be amended by a written document signed by all parties.
8.8 Assignment. This Agreement and the rights and obligations
created under it shall be binding upon and inure solely to the benefit of the
parties hereto and their respective successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. Except as
otherwise provided herein, this Agreement shall not be assigned by any party
except with the written consent of each other party hereto.
8.9 Waivers. None of the parties shall be deemed to have waived any
of its rights, powers or remedies hereunder unless such waiver is approved in
writing by the waiving party.
8.10 Severability. If any provision of this Agreement or portion
thereof is held invalid, illegal, void or unenforceable by reason of any rule of
law, administrative or judicial provision or public policy, all other provisions
of this Agreement shall nevertheless remain in full force and effect.
8.11 Headings. The headings contained herein are for convenience of
reference only and are not intended to define, limit, expand or describe the
scope or intent of any provision of this Agreement.
8.12 Integration. This Agreement states the entire agreement between
the parties with respect to the subject matter hereof, and all prior or
contemporaneous written or oral agreements and understandings other than the
Initial Agreement are merged herein and superseded hereby. The parties
acknowledge that the Initial Agreement remains in full force and effect.
8.13 No Set-Off. The Bank agrees not to set off the obligations of
NextCard under the
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Initial Agreement against any payments required to be made to NextCard or
Funding under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
HERITAGE BANK OF COMMERCE NEXTCARD, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxxx
------------------------------- -------------------------------------
Name: Xxxxxxx X. Xxxxxxxx Name: Xxxx X. Xxxxxxx
Title: Senior Vice President Title: Chief Financial Officer
NEXTCARD FUNDING CORP.
By: /s/ Xxxx X. Xxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer
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EXHIBIT A - CREDIT CARD GUIDELINES
UNDERWRITING APPROVALS FOR ELIGIBLE RECEIVABLES
1. Application Information Decline Criteria
a) Certain information must be completed to form a valid
application. NextCard will not accept an application that is not
considered valid. The information required from the applicant
includes items such as the following:
- Applicant's first and last name;
- Home address;
- Social security number;
- Date of birth; and
- [*]
b) Once NextCard receives a valid application, we will review the
data and may decline an applicant if they do not meet the
following requirements (pre-bureau criteria):
- Applicant [*]; or
- Applicant [*]
c) Excessive applications or accounts per customer and/or household
policy.
- NextCard will decline an applicant if they exceed the
number of allowable accounts per customer and/or
household (currently one account per customer).
- NextCard may decline an applicant if they have [*].
- NextCard may decline an applicant if they have [*].
2. Credit Bureau Authentication Review
- NextCard requires a certain level of authentication of
the bureau files. If this requirement is not met, the
applicant will be declined. Currently, NextCard requires
a minimum of [*] bureau matches for an application to
-----------------------------
[*]
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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be considered authentic.
- Further, if NextCard receives certain alert messages
regarding the validity of the bureau file, based on the
message received, NextCard will [*]
3. Credit Bureau Underwriting Criteria
NextCard approves/declines applicants based upon a combination of their
[*], their [*] and, in certain cases,
[*]
Each of these components is discussed below.
a) [*]
[*]
[*]
[*]
b) [*]
[*]
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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[*]
c) [*]
"An asterisk [*] indicates that certain information has been omitted from this
agreement pursuant to a request for confidential treatment and has been filed
separately with the Securities and Exchange Commission."
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