Interactive Marketing Agreement - priceline.com Inc. and First USA Bank NA
EXECUTION COPY
INTERACTIVE MARKETING AGREEMENT
This INTERACTIVE MARKETING AGREEMENT (this "Agreement"), made this
31st day of March, 1999, by and between PRICELINE.COM INCORPORATED, a
Delaware corporation having its principal office at Five High Ridge Park,
Stamford, Connecticut 06905 (the "Company"), and FIRST USA BANK, N.A., a
national banking association having its principal office at Three Christina
Centre, 201 North Walnut Street, Wilmington, Delaware 19801 ("FUSA",
together with the Company, the "Parties" and each individually a "Party").
RECITALS
WHEREAS, FUSA desires to make its consumer credit card products and
related services (hereinafter referred to as "Credit Card(s)") available to
the on-line visitors, telephone callers and customers of the Company (the
"Company Customers") through the Internet and/or Websites currently or
hereafter owned, maintained, managed or controlled by or on behalf of the
Company (the "Company Site(s)") and through the Company's inbound and
outbound telephone services (the "Company Phone Services" and, together
with the Company Site(s), the "Company Services"); and
WHEREAS, the Company has agreed to actively market and offer Credit
Card(s) and other credit related products to and among Company Customers,
subject to the terms and conditions hereinafter contained.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the Parties herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. Unless the context requires otherwise, the
capitalized terms set forth herein shall have the meanings set forth on
Schedule A hereto.
Section 1.2 Interpretation. Definitions in this Agreement shall apply
equally to the singular and plural forms of the defined terms. The words
"include" and "including" shall be deemed to be followed by the phrase
"without limitation" where such phrase does not otherwise appear. The words
"herein", "hereof", "hereinafter" and words of similar import refer to this
Agreement as a whole and not to any particular Articles or Sections of this
Agreement. Except as otherwise specifically indicated, all references in
this Agreement to Articles and Sections refer to Articles and Sections of
this Agreement, and all references to Exhibits or Schedules refer to
Exhibits or Schedules attached hereto, and all such Exhibits and Schedules
are incorporated herein by reference.
ARTICLE II
CO-MARKETING PROGRAM
For the Initial Term and any Renewal Term of this Agreement, and in
accordance with the terms and conditions of this Agreement, the Company
shall implement and support a program (the "Program") to market FUSA Credit
Cards to Company Customers, and FUSA shall make available certain
promotional, informational and application materials required by the
Company to implement and support the Program and shall review applications
from, and issue FUSA Credit Cards to, Company Customers qualifying for such
Credit Cards.
ARTICLE III
COMPANY RIGHTS AND OBLIGATIONS
Section 3.1 Company Direct Promotions. In furtherance of the Program,
the Company shall, subject to FUSA's standard policies and to reasonable
restrictions set forth by FUSA, solicit applications, directly and
indirectly, for FUSA Credit Cards from Company Customers ("Company Direct
Promotions"). The Company shall submit any marketing materials developed by
the Company for Company Direct Promotions in writing to FUSA, and FUSA
shall promptly review and approve such materials as FUSA deems acceptable
in FUSA's sole discretion for marketing to Company Customers, prior to
their use by the Company; provided, however, that any Credit Card
applications used in connection with the Program must be supplied to the
Company by FUSA, and FUSA shall use commercially reasonable efforts to
provide the Company with a Credit Card application form that is
functionally efficient for customer use. The Company shall be authorized to
solicit Account applications from Company Customers whether or not such
customers hold FUSA accounts, and FUSA shall make its Account approval
decisions with respect to such Account applications consistent with FUSA's
normal credit approval standards and safe and sound banking practices,
subject to normal multi-account limits imposed by FUSA with regard to
customers who already hold FUSA accounts. Unless otherwise agreed to by
FUSA in FUSA's sole discretion, all expenses incurred by the Company in
connection with Company Direct Promotions shall be borne solely by the
Company.
Section 3.2 Company Programs and Value-Added Enhancements. The
Company shall, in the Company's discretion, fund, develop and support
premium and other incentive programs (including any promotional subsidies
that the Company may determine to offer) specifically targeted at
generating FUSA Credit Card applications, FUSA Credit Card usage, card
value-added offers and card balance-building activities, and the Company
shall use commercially reasonable efforts to maximize Company Customer
acceptance of such program offerings. The Parties shall also market test a
variety of value-added enhancements, as mutually agreed to by the Parties,
which such value-added enhancements may include cash rebate offers and
"Instant Rewards" programs. The aggregate retail value of such programs and
rewards shall be equal to at least (i) [**] during the first 12-month
billing cycle for each such Account and (ii) the amount of the Usage Fee
paid with respect to each such Company-Sourced Account for each 12-month
billing cycle thereafter.
Section 3.3 Company Customer Information. (a) The Company may, at its
option, provide to FUSA the names and addresses of those Company Customers
who fail to apply for FUSA Credit Cards upon visiting the Company Site(s)
or through Company Phone Services for the sole purpose of FUSA's screening
such Company Customers for subsequent pre-approved credit offers. Those
Company Customers that pass such screening may be subject to market-test
programs designed to provide such Company Customers with incentives to
return to a Company Site(s), apply for a pre-approved FUSA Credit Card and
receive a Company benefit or reward (paid for by the Company). The terms of
any such test-market program or promotion shall be the subject of a
separate agreement between the Parties containing a mutually agreed
performance-based payment structure.
FUSA and the Company mutually acknowledge that, given the nature of
the industry, additional or various marketing vehicles not specifically
addressed in this Agreement may require additional Company Customer
information. As a result, the Company and FUSA shall each use commercially
reasonable efforts to provide the other with all necessary and relevant
Company Customer information as requested by either Party from time to
time, subject to such Party's privacy policy and all legal and regulatory
requirements and restrictions.
Section 3.4 License to Use Marks. (a) During the Initial Term and any
Renewal Term of this Agreement, to the extent required by FUSA in
connection with the performance of its obligations under this Agreement or
any additional marketing activity contemplated by Article VII, the Company
grants to FUSA the right and license to use the current and future
respective name, trademarks, service marks, copyrights and logo of the
Company (collectively, the "Company Marks"), subject to the review and
prior approval of the Company, solely in connection with the Program and
any transactions contemplated by Article VII. Such right and license shall
be restricted to the products and services described or contemplated herein
and shall not apply or extend to any other product or service offered by
FUSA. Except for amounts paid to the Company pursuant to Article V and
Schedule B hereto, FUSA shall not be required to pay any additional amounts
to the Company, or on account of the Company, in connection with the use of
the Company Marks in conjunction with the Program. Subject to and
consistent with the rules and regulations of Visa and MasterCard, FUSA
shall comply with the standards established by the Company with respect to
the form of the Company Marks and their usage.
(b) Notwithstanding the provisions of Section 3.4(a), the Company is
and shall remain the owner of all rights in and to its name and logo and
all other intellectual property owned or licensed by the Company, as the
same now exist or as they may hereafter be modified, including all rights
in and to any copyright, trademark, service mark and similar rights
pertaining thereto. Any and all rights to Company Marks and other Company
intellectual property not herein specifically granted and licensed to FUSA
are reserved to the Company. Except as otherwise specifically provided for
herein, upon the termination of this Agreement, all rights conveyed by the
Company to FUSA with respect to the use of the Company Marks and other
Company intellectual property shall cease, and all such rights shall revert
to the Company. Upon termination of this Agreement, FUSA shall have no
further right to utilize the Company Marks; provided, however, that nothing
contained herein shall require FUSA, upon termination of this Agreement, to
cancel any Account or to terminate or replace any Credit Card issued in
connection with this Agreement.
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[**] = Confidential treatment requested for redacted portion.
ARTICLE IV
FUSA RIGHTS AND OBLIGATIONS
Section 4.1 Offering and Issuance of Credit Cards. In furtherance of
the Program, FUSA shall offer Credit Card(s) to Company Customers in
accordance with the following provisions:
Subject to Section 4.1(d), FUSA shall assist the Company with the
design and development of such marketing, promotion and solicitation
materials as the Parties mutually agree are appropriate to promote the
Program among Company Customers, it being understood and acknowledged by
the Parties that FUSA shall be given the opportunity, and the Company shall
cooperate and assist FUSA with respect thereto, to market FUSA Credit Cards
at any and all points and potential points during a Company Customer's
visit to any location upon any Company Site(s), subject to the mutual
agreement of the Parties, which agreement shall not be unreasonably
withheld, and in a manner and form subject to testing and refinement by
mutual agreement of the Parties. FUSA reserves the right to limit its
solicitation materials to those Company Customers deemed to be creditworthy
in accordance with FUSA's normal credit criteria and credit practices and
with safe and sound banking practices.
Subject to federal, state and local law and any other rules and
regulations applicable to FUSA, including MasterCard or Visa operating
regulations, the holders of all approved Accounts shall receive Credit
Card(s) issued by FUSA which contain marks or design elements that would
distinguish such Credit Cards from other Credit Cards issued by FUSA not in
connection with the Program. FUSA shall have the right to designate on all
of its Credit Cards, including, without limitation, all Credit Cards issued
in connection with this Program, such information as FUSA shall, in its
sole discretion, deem appropriate.
(c) FUSA reserves the right to, and may in FUSA's sole discretion,
communicate such information to the Credit Card holders that FUSA normally
sends to its other cardmembers, without having to obtain the prior approval
of the Company.
(d) Credit Cards issued by FUSA pursuant to the Program shall be
governed by the terms of the cardmember agreement to be entered into
between each such person and FUSA.
Each such cardmember agreement shall specify that the laws of the State of
Delaware, and as applicable, Federal law, shall govern the terms and
conditions of such Account and the extension of credit by FUSA to the
cardmember. Notwithstanding anything to the contrary contained herein, FUSA
shall have the right to amend such cardmember agreements at any time in
accordance with applicable law, including, without limitation, changing the
basic pricing on individual Accounts at any time, including, without
limitation, in the event of late payments, non-payments, delinquency,
payment by checks that fail to clear, default, bankruptcy or other
consistent or substantial failure by any Program cardmember to perform in
accordance with the terms of the cardmember agreement; provided that such
amendments are not made in a manner that is inconsistent with the manner in
which FUSA determines to amend FUSA cardmember agreements that are not
generated through the Program.
(e) The Parties acknowledge that the Company does not intend to issue
Credit Cards or act as a banking institution pursuant to this Agreement.
The Parties further acknowledge that if, at any time during the Initial
Term or any Renewal Term of this Agreement, the obligations of the Company
under this Agreement subject the Company to any rule, regulation or statute
governing Credit Card issuers or banking institutions, the Company shall
not be required (subject to Section 14.2(b)) to fulfill any such
obligation, and the Parties shall negotiate in good faith to amend this
Agreement to the extent necessary to permit the Company to be able to
fulfill its obligations under this Agreement without having to be subject
to any such rule, regulation or statute.
Section 4.2 On-line Credit Approval. Both Parties shall use
commercially reasonable efforts to implement a system whereby FUSA is able
to provide prompt on-line, credit approval decisions to Account applicants
during a Company Site visit, such that any Company Customer whose
application is approved during such visit is able to open an Account and,
immediately after such Account is opened, charge Company Site purchases to
such Account (subject to the terms and conditions of such Account and the
related cardmember agreement, including, without limitation, the credit
limit established with respect to such Account). Subject to any legal or
regulatory requirements or restrictions, FUSA shall use commercially
reasonable efforts to provide the Company with technical support and
regular updates that will allow the Company on a real-time basis to
determine (subject to receipt of such updates) whether a Company Customer
using a Non-FUSA Credit Card for a Company Site purchase also holds a FUSA
account, and, if so, (a) whether sufficient credit is available to charge
the current purchase on such FUSA Credit Card; (b) whether sufficient
credit is available for a balance transfer; (c) whether such Company
Customer's FUSA account is active or dormant; and (d) what the valid
account number is for such FUSA account. The Company agrees that (i) its
use of the information provided pursuant to the previous sentence shall be
solely for the purposes set forth herein and (ii) the Company's use of such
information shall be subject to the confidentiality provisions set forth in
Article XII. In addition, FUSA agrees to perform a more detailed review and
scoring of any Account application that has been rejected through the
on-line approval process to determine if such application should be
subsequently approved consistent with FUSA's normal credit approval
standards and safe and sound banking practices. When on-line account
approval capabilities have been established in connection with the Company
Site(s), the Company shall use commercially reasonable efforts to persuade
Company Customers to charge their Company Site purchases or any other
charge to a Company-Sourced Account.
Section 4.3 License to Use Marks. (a) During the Initial Term and any
Renewal Term of this Agreement, FUSA hereby grants to the Company the right
and license to use the current and future respective name, trademarks,
service marks, copyrights and logo of FUSA (collectively, the "FUSA
Marks"), subject to the review and prior approval of FUSA, solely in
connection with the Program and any transactions contemplated by Article
VII. Such right and license are restricted to the products and services
described and contemplated herein and shall not apply or extend to any
other product or service offered by the Company. The Company shall not be
required to pay any amount to FUSA, or on account of FUSA, in connection
with the use of the FUSA Marks in conjunction with the Program. Subject to
and consistent with the rules and regulations of Visa and MasterCard, the
Company shall comply with the standards established by FUSA with respect to
the form of the FUSA Marks and their usage.
(b) Notwithstanding the provision of Section 4.3(a), FUSA is and
shall remain the owner of all rights in and to its name and logo and all
other intellectual property owned or licensed by FUSA, as the same now
exist or as they may hereafter be modified, including all rights in and to
any copyright, trademark, service mark and similar rights pertaining
thereto. Any and all rights to FUSA Marks and other FUSA intellectual
property not herein specifically granted and licensed to the Company are
reserved to FUSA. Except as otherwise specifically provided for herein,
upon the termination of this Agreement, all rights conveyed by FUSA to the
Company with respect to the use of the FUSA Marks and other FUSA
intellectual property shall cease, and all such rights shall revert to
FUSA. Upon termination of this Agreement, the Company shall have no further
right to utilize the FUSA Marks; provided, however, that nothing contained
herein shall require FUSA, upon termination of this Agreement, to cancel
any Account or to terminate or replace any Credit Card issued in connection
with this Agreement.
Section 4.4 Statement Messages/Inserts. (a) Subject to reasonable
space, weight, size, content and scheduling restrictions, and upon FUSA's
prior review and approval, FUSA may periodically include Company
informational inserts or statement messages ("Messages/Inserts") in
Company-Sourced Account cardmember statements mailed by FUSA to its FUSA
brand cardholders (as opposed to cardholders of credit cards issued in
conjunction with a third party).
(b) The Company shall bear the costs of preparing and producing the
actual Messages/Inserts. FUSA shall pay for the normal cost of mailing
Messages/Inserts; provided, however, that if the Messages/Inserts increase
the postal expense incurred by FUSA to mail statements with such
Messages/Inserts, then FUSA shall inform the Company in advance and, if the
Company agrees to reimburse FUSA for such incremental postage expense, FUSA
shall use commercially reasonable efforts to include such Messages/Inserts
in such mailing.
ARTICLE V
COMPENSATION AND PAYMENT
Section 5.1 Fees. During the Initial Term and any Renewal Term of
this Agreement, and subject to the terms and conditions set forth herein,
FUSA shall pay to the Company certain fees, commissions and bonuses
(collectively, the "Fees") as set forth on Schedule B hereto.
Section 5.2 Substitute Accounts. Notwithstanding anything else
contained herein, FUSA shall not be obligated to pay to the Company any
duplicate Account Origination Fee or duplicate Value-Added Payment in the
event that any account that forms the basis upon which such Account
Origination Fee or Value-Added Payment is calculated represents a
substitute account, which includes, without limitation, any account
established due to the loss or theft of a cardmember's existing Credit Card
and any account established as a result of former joint cardmembers'
requesting individual accounts.
Section 5.3 Payment Terms. FUSA shall provide the Company with a
reconciliation report within 15 days following the end of each month
setting forth the amount of Fees earned by the Company during such month.
Any amounts owing to the Company and payable pursuant to the terms of this
Article V shall be paid to the Company within 15 days following the end of
each calendar quarter. The Parties shall meet periodically to discuss
payment methodologies and mechanisms that reflect estimated payments based
on mutually agreed payment criteria and metrics. If any such methodology
proves not accurately to reflect the Parties' actual payment experience,
the Parties shall negotiate revisions in future payments and estimated
payments to reflect such actual experience.
Section 5.4 Payment Upon Termination. FUSA's obligation to pay any
Fees to the Company shall cease immediately upon the expiration or
termination of this Agreement for any reason whatsoever; provided that such
Fees shall be reconciled and paid with respect to all amounts earned by the
Company up to the effective date of such expiration or termination; and
provided further that FUSA shall continue to pay Usage Fees to the Company
in accordance with Paragraph 6 of Schedule B following the expiration or
termination of this Agreement, but (a) only to the extent, and in the
amount, that such Usage Fees are directly used by the Company to support
value-added enhancements implemented pursuant to Section 3.2 prior to such
termination or expiration and (b) only for so long as FUSA has a positive
return on the Company-Sourced Account Portfolio.
Section 5.5 Marketing Costs. Other than the Fees provided for in
Schedule B hereto, FUSA shall not be obligated to pay the Company any
advertising costs or fees or any payments related to promotional visibility
or premium cost reimbursement or any up-front payments whatsoever, it being
understood and agreed to by the Parties that the Company will bear all
marketing costs incurred by the Company (including, without limitation,
premium costs related to ticket subsidies and rebates) in connection with
the generation of Credit Card applications from Company Customers under
this Agreement. Notwithstanding the foregoing, FUSA may, if FUSA chooses,
in FUSA's sole discretion, reimburse the Company for any or all costs
related to the Company's Program testing and management or to support
marketing efforts proposed by the Company.
Section 5.6 Fee Adjustments. (a) Upon written notice from FUSA to the
Company given at any time after the one-year anniversary of the Effective
Date, the Parties shall attempt to renegotiate, in good faith, (i) any or
all of the Fees set forth in Schedule B and (ii) the terms of this Article
V.
(b) In addition, it is the Parties' intent that (i) the five-year
average Return on Average Outstandings, as measured based on the Pro Forma
Vintage Profit and Loss Statement for the Company Program (the "ROO"), be
greater than or equal to 3%, as measured by FUSA on a consistent basis with
the methodology used on other similar accounts, and (ii) the NPV/CPA Ratio
be greater than or equal to the NPV/CPA Ratio of alternative competitive
investment opportunities for FUSA, as measured by FUSA on a consistent
basis with the methodology used on other similar accounts ("Competitive
Opportunities"). Calculation of the ROO shall take into account all sources
of revenue, including late-fee income, fee-based services and association
income, as well as any traditional avoided costs, including lower
chargeoffs. In the event that, upon the one-year anniversary of the
Effective Date, (x) the ROO, as measured by FUSA on a consistent basis with
the methodology used on other similar accounts, falls below this 3% minimum
or (y) the NPV/CPA Ratio, as measured by FUSA on a consistent basis with
the methodology used on other similar accounts, falls below the NPV/CPA
Ratio of Competitive Opportunities, the Company and FUSA shall negotiate
promptly in an effort to reach agreement on the modification of one or more
terms of future compensation in an effort to return the ROO and the NPV/CPA
Ratio to acceptable levels. If, on the other hand, the ROO, as measured by
FUSA, is in excess of 3%, FUSA shall increase, in good faith, the
compensation metrics to the Company by an amount corresponding to such
excess, such that the Company and FUSA share equally in such excess.
(c) Any Fee adjustment made pursuant to this Agreement, including
pursuant to this Section 5.6 or Exhibit B hereto, shall be made on a
prospective basis only.
(d) In the event the Parties are unable to negotiate in good faith
any Fee adjustment provided for herein within 30 days of a written request
by FUSA for such adjustment, FUSA shall have the right, in FUSA's sole
discretion, to terminate this Agreement in accordance with Section 10.6.
ARTICLE VI
OWNERSHIP RIGHTS
Section 6.1 Account Ownership. The Company shall not possess or claim
any ownership interest in Credit Cards issued or accounts established
pursuant to this Agreement and all rights related thereto (collectively,
the "Accounts") or in any FUSA Customer Financial Information. Without
limiting the foregoing, any and all outstanding balances with respect to
the Accounts, including, without limitation, all amounts owing for the
payments of goods and services, periodic finance charges, late and other
charges and all documents and records developed and retained by FUSA in
connection therewith, including, without limitation, all FUSA Customer
Financial Information, shall be the sole property of FUSA or its assigns,
and the Company shall have no rights or interests therein. Notwithstanding
the foregoing, and subject to the provisions of Sections 7.3 and 14.1, (a)
the Company shall retain the right to offer to any Company Customer whose
Account application has been rejected by FUSA, Credit Cards issued by other
issuers, including issuers specializing in high-risk issuance; and (b) the
Company shall have the right to offer to any Company Customer that has
chosen not to apply for a FUSA MasterCard or Visa Credit Card after the
Company's first two clearly presented and discrete offers of such FUSA
MasterCard or Visa Credit Card to such Company Customer during such Company
Customer's visit(s) to a Company Site, no more than four other credit or
charge cards not offered by FUSA, including such cards issued by American
Express or Discover ("Other Credit Cards") upon such Company Customer's
subsequent visit(s) to any Company Site(s), up to a maximum of two offers
of each of the four such Other Credit Cards; provided that the Company
shall not offer any Other Credit Card in a manner that features such Other
Credit Card more prominently located or displayed than, or in a position
superior to, the Company's offer of any FUSA Credit Card; and provided
further that in no event shall the Company have the right to offer to any
Company Customer (other than a Company Customer described in Section 6.1(a)
or pursuant to Section 7.3(c)), at any time during the Initial Term or any
Renewal Term of this Agreement, any Visa or MasterCard credit or charge
card product that is not provided by FUSA; and provided further that if a
Company Customer that is offered any Other Credit Card by the Company
pursuant to Section 6.1(b) chooses not to apply for any such Other Credit
Card upon the Company's first two offers of each of the four Other Credit
Card(s) to such Company Customer, the Company shall be required to comply
again with the procedures for offering FUSA MasterCard and Visa Credit
Cards set forth in Section 6.1(b) above. It is the intention of the parties
that the Company will not offer Other Credit Cards to Account holders and
will not use FUSA Customer Financial Information or a list of Account
holders provided to the Company for the purpose of marketing Other Credit
Cards. The Company will use commercially reasonable efforts to design and
implement systems technology that will enable the Company to exclude
Account holders from promotions for Other Credit Cards and to prevent the
use of FUSA Customer Financial Information or a list of Account holders in
the promotion of Other Credit Cards.
Section 6.2 Customer Lists and Data. FUSA and its affiliates may
maintain separately all information that is submitted or obtained as a
result of an Account relationship or an application for an Account
relationship with a Company Customer (collectively, "Customer Data").
"Customer Data" includes, without limitation, information provided to FUSA
or any of its agents by a Company Customer for storage and subsequent use
by a Company Customer on the Internet, including a Company Customer's
identity, address, credit card number(s), personal information, purchasing
preferences or history and similar information and all FUSA Customer
Financial Information. Customer Data obtained by FUSA pursuant to this
Program shall be owned solely by FUSA and shall become a part of FUSA's own
records and files.
ARTICLE VII
ADDITIONAL PRODUCT MARKETING
In addition to the Parties' obligations under the Program and the
market test programs described in Section 3.3, the Parties may offer or
support additional products and marketing efforts, including those set
forth in this Article VII, as part of the Program or as stand-alone
activities, subject to separate agreements:
Section 7.1 Co-branding. The Parties acknowledge that the Company
does not currently have, nor does the Company have any plans to create, a
co-branded credit or charge card. If the Company determines, in its sole
discretion, to offer such a co-branded credit or charge card during the
Initial Term or any Renewal Term of this Agreement, FUSA shall have the
exclusive right to provide such co-branded credit or charge card; provided
that if FUSA determines, in its sole discretion, not to provide such
co-branded credit or charge card, the Company shall be permitted to seek a
co-branded credit or charge card from another provider, subject to a right
of first refusal by FUSA. If, during the Initial Term or any Renewal Term,
the Company and FUSA determine to offer a co-branded credit or charge card
to Company Customers as provided for herein, this Agreement shall be
amended accordingly.
Section 7.2 No-Fee Products. The Company understands and acknowledges
that FUSA may choose to offer to Company Customers a wide range of
market-competitive, no-fee consumer products that will enable FUSA to
achieve the highest possible Account approval rates. The Company agrees
further that any such no-fee product that is not market-competitive may be
market-tested to Company Customers subject to the Company's prior approval
of such market testing, which approval shall not be unreasonably withheld;
provided, however, that neither (a) any application for any such no-fee
product that is not market-competitive nor (b) FUSA's approval of any such
application, shall be included in the calculation of the 50% approval rate
that FUSA is required to achieve pursuant to Paragraph 3 of Schedule B
hereto. In addition, unless otherwise agreed to by the Parties, FUSA shall
not offer any product to Company Customers that includes a fee for balance
transfers.
Section 7.3 Additional Programs and Marketing. (a) The parties intend
to seek mutually acceptable ways to expand their business relationship to
include additional relevant products and service categories. Without
limiting the generality of the foregoing, the Company shall work in good
faith with FUSA and its affiliates to enable FUSA and/or such affiliates
(i) to participate in all financial service products offered by the Company
or through the Company Services, including, without limitation, automobile
loans, home equity loans, home mortgages and mortgage refinancings and
other loan products and (ii) to make the FUSA Wallet available to Company
Customers. In addition, in the event the Company decides to introduce any
current, new or unaddressed product, service, property or entity relating
to credit products, banking products or related services (the "New
Product(s)"), by itself or through another entity, the Company shall give
FUSA prompt notice of the same, and the Parties shall negotiate in good
faith an agreement whereby FUSA shall have the right to provide some or all
of the New Products as a preferred provider through or on behalf of the
Company. Notwithstanding the foregoing, nothing contained in this Section
7.3(a) shall be deemed to give FUSA preferred status in any such programs,
and FUSA's participation in such programs shall be subject to the execution
of a separate agreement with respect to each such program. FUSA
acknowledges that the Company operates a promotion with a third party
pursuant to which the Company makes available to users of the Company
Services certain mortgage loan, home equity loan and home equity line of
credit products (which products do not include Credit Cards) and that
nothing in this Agreement shall preclude the Company from continuing to
fulfill its obligations under that promotion.
(b) Without limiting the generality of the foregoing, if and when
FUSA develops a corporate credit card product, the Company shall use
commercially reasonable efforts to identify corporate Company Customers and
shall target corporate credit card offers to such corporate Company
Customers.
(c) Without limiting the generality of the foregoing, in the event
that the Company decides to offer to Company Customers a "name-your-price"
balance transfer or debt consolidation product, FUSA and the Company shall
negotiate in good faith to include FUSA as a preferred provider with
respect thereto.
(d) The Parties understand and acknowledge that, as of the date of
this Agreement, the Company does not permit advertising on any Company
Site(s), except that, as an adaptive marketing sponsor, FUSA shall be
identified clearly by name on the Company Site(s), including by means of a
FUSA logo. If, at any time during the Initial Term or any Renewal Term of
this Agreement, the Company determines to permit advertising on any Company
Site or through any Company Phone Services, or any such advertising
otherwise is permitted on any Company Site or through any Company Phone
Services, FUSA shall have a right of first offer to be the exclusive credit
card issuer to advertise on such Company Site or through such Company Phone
Services, and the Company shall, on an on-going basis, provide FUSA with
advertising space on such Company Site(s) and through such Company Phone
Services in accordance with terms to be mutually agreed to by the Parties
at such time; provided, however, that if FUSA determines not to advertise
on such Company Site or through such Company Phone Services or the Parties
are unable to agree in good faith on acceptable terms pursuant to which
FUSA shall advertise on such Company Site or through such Company Phone
Services, the Company shall be permitted to offer advertising space to
Other Credit Card issuers, subject to FUSA's right of first refusal.
(e) The Parties understand and acknowledge that participation in each
such product offering or marketing effort described or referred to in this
Section 7.3 shall be implemented under separate agreement and shall not be
part of the Program.
ARTICLE VIII
COMPANY REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to FUSA as of the date of this
Agreement as follows:
Section 8.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized, is duly qualified and in
good standing as a foreign corporation in every state in which the
character of its business requires such qualification (except where the
failure to obtain such foreign qualification would not have a material
adverse effect on the Company's business) and has the power to own its
property and carry on its business as now conducted.
Section 8.2 Due Authorization. The execution and delivery by the
Company of this Agreement, the performance by the Company of the
transactions contemplated hereby and compliance by the Company with the
terms of this Agreement, (a) are within the Company's power and authority
and (b) have been duly authorized by all necessary action. This Agreement
has been duly executed and delivered by the Company and constitutes a valid
and binding agreement of the Company, enforceable in accordance with its
terms.
Section 8.3 Consents. Neither the execution and delivery of this
Agreement by the Company nor the performance by the Company of its
obligations hereunder requires any consent, authorization, approval, notice
to or other action by or in respect of, or filing with, any third party or
any governmental body or agency.
Section 8.4 No Conflicts. Neither the execution, delivery and
performance by the Company of this Agreement nor compliance by the Company
with the terms of this Agreement shall contravene, violate or conflict
with, or constitute a default or breach under, any provision of any law,
statute, rule or regulation to which the Company or any of its properties
is subject, or under any governing documents, charter or bylaw or any
agreement, judgment, injunction, order, decree or other instrument binding
on the Company.
Section 8.5 Intellectual Property Rights. The Company owns, or has
the right to use under valid and enforceable agreements, the Company Marks
and all other intellectual property necessary to conduct the Company's
business, and, except as set forth on Schedule D hereto, the Company is not
currently aware of any material claims, and is not currently involved in
any material litigation, challenging the Company's ownership of, or
claiming infringement with respect to, the Company Marks or any other
intellectual property necessary to conduct the Company's business.
Section 8.6 Litigation. Except as set forth on Schedule D hereto, the
Company is not aware of any claims, and is not currently involved in any
litigation, challenging the Company's access to the WorldWide Web or the
Internet.
ARTICLE IX
FUSA REPRESENTATIONS AND WARRANTIES
FUSA represents and warrants to the Company as of the date of this
Agreement as follows:
Section 9.1 Organization and Qualification. FUSA is a national
banking association duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized, is duly
qualified and in good standing as a foreign corporation in every state in
which the character of its business requires such qualification (except
where the failure to obtain such qualification would not have a material
adverse effect on FUSA's business) and has the power to own its property
and carry on its business as now conducted.
Section 9.2.Due Authorization. The execution, delivery and
performance by FUSA of this Agreement and compliance by FUSA with the terms
of this Agreement (a) are within FUSA's corporate power and authority and
(b) have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by FUSA and constitutes a
valid and binding agreement of FUSA, enforceable in accordance with its
terms.
Section 9.3 Consents. Neither the execution and delivery of this
Agreement by FUSA nor the performance by FUSA of its obligations hereunder
require any consent, authorization, approval, notice to or other action by
or in respect of, or filing with, any third party or governmental body or
agency (other than informational filings required by MasterCard or Visa).
Section 9.4 No Conflicts. Neither the execution and delivery of this
Agreement by FUSA nor the performance by FUSA of its obligations hereunder
shall contravene, violate or conflict with, or constitute a default or
breach under, any provision of any law, statute, rule or regulation to
which FUSA or any of its properties is subject or of the charter or by-laws
of FUSA or of any agreement, judgment, injunction, order, decree or other
instrument binding upon FUSA.
Section 9.5 Intellectual Property Rights. FUSA owns, or has the right
to use under valid and enforceable agreements, the FUSA Marks and all other
intellectual property necessary to conduct FUSA's business, and FUSA is not
currently aware of any material claims, and is not currently involved in
any material litigation, challenging FUSA's ownership of, or claiming
infringement with respect to, the FUSA Marks or any other intellectual
property necessary to conduct FUSA's business.
ARTICLE X
TERM AND TERMINATION
Section 10.1 Term. The term of this Agreement shall commence as of the
date of this Agreement and shall continue, subject to the provisions of
this Article X, for five years therefrom (the "Initial Term"). Promptly
upon the execution of this Agreement, the Parties shall work together and
shall use their commercially reasonable efforts to enable the Effective
Date to commence immediately upon the termination of the Company's
promotion with Capital One Bank, which promotion the Company acknowledges
is the only preferred status arrangement that the Company has with any
Other Credit Card issuer as of the date of this Agreement. Subject to the
provisions of this Article X, upon the expiration of the Initial Term, this
Agreement shall be automatically renewed for successive renewal terms of
two years each (the "Renewal Terms"), unless, at least 180 days prior to
the expiration of the Initial Term or the then current Renewal Term, either
Party shall have notified the other in writing of its decision not to renew
this Agreement.
Section 10.2 Termination for Breach. If there is a material breach by
either Party of this Agreement, and such breach shall continue uncured for
a period of 30 days after receipt by the breaching Party of written notice
thereof from the non-breaching Party (setting forth in detail the nature of
such breach), then this Agreement shall terminate at the option of the non-
breaching Party as of the 31st day following the receipt of such written
notice. If, however, the breach cannot be remedied within such 30-day
period, such time period shall be extended for an additional period of not
more than 30 days, so long as the breaching Party has notified the non-
breaching Party in writing and in detail of its plans to initiate
substantive steps to cure the breach and diligently thereafter pursues the
same to completion within such additional 30-day period. Notwithstanding
the foregoing, in the event any representation or warranty set forth in
this Agreement is breached, the non-breaching Party shall have the right to
terminate this Agreement immediately upon written notice to the breaching
Party.
Section 10.3 Termination for Bankruptcy. This Agreement shall be
deemed immediately terminated, without the requirement of further action or
notice by either Party, in the event that either Party, or a direct or
indirect holding company of either Party, shall become subject to voluntary
or involuntary bankruptcy, insolvency, receivership, conservatorship or
similar proceedings (including, without limitation, the takeover of such
Party by the applicable regulatory agency) pursuant to applicable state or
Federal law.
Section 10.4 Change in Law. In the event that any change in any
federal, state or local law, statute, operating rule or regulation or any
change in any operating rule or regulation of either MasterCard or Visa,
makes the continued performance of this Agreement under the then current
terms and conditions commercially unreasonable, then FUSA shall have the
right to terminate this Agreement upon 90-days' prior written notice to the
Company. Such written notice shall include a detailed explanation and
evidence of the burden imposed as a result of such change.
Section 10.5 Sale or Business Combination. (a)(i) In the event that
the Company enters into any merger, acquisition, transfer of control or
sale of substantially all of its assets to, or any similar transaction
with, any competitor of FUSA or any entity that owns a competitor of FUSA,
then FUSA shall have the right to terminate this Agreement immediately upon
written notice to the Company. (ii) In the event that the Company enters
into any merger, acquisition, transfer of control or sale of substantially
all of its assets to, or any similar transaction with, any entity that, due
to its products, services or reputation, creates a demonstrable and
material conflict of interest for FUSA, then FUSA shall have the right to
terminate this Agreement upon 90-days' prior written notice to the Company.
(b)(i) In the event that FUSA enters into any merger, acquisition,
transfer of control or sale of substantially all of its assets to, or any
similar transaction with, any competitor of the Company or any entity that
owns a competitor of the Company, then the Company shall have the right to
terminate this Agreement immediately upon written notice to FUSA. (ii) In
the event that FUSA enters into any merger, acquisition, transfer of
control or sale of substantially all of its assets to, or any similar
transaction with, any entity that, due to its products, services or
reputation, creates a demonstrable and material conflict of interest for
the Company, then the Company shall have the right to terminate this
Agreement upon 90-days' prior written notice to FUSA.
Section 10.6 Failure to Renegotiate Fees. In the event that the
Parties are unable to renegotiate in good faith the Fees to be paid by FUSA
to the Company, as provided for in Section 5.6, and Paragraph 2 of Schedule
B, within the time period specified in such Section or Paragraph, FUSA
shall have the right, in FUSA's sole discretion, after the expiration of
such time period, to terminate this Agreement upon 60-days' prior written
notice to the Company. During any Fee renegotiation provided for in this
Agreement, the Fees to be paid the Company shall remain unchanged until the
earlier to occur of (a) the Parties' agreement to adjust any of such Fees
and (b) the date of the termination of this Agreement.
Section 10.7 Procedures Upon Termination. Upon the expiration or
earlier termination of this Agreement for any reason whatsoever, (a) the
Company and FUSA shall work together to ensure an orderly termination of
the Program; (b) the Company and FUSA shall each promptly return to the
other all materials, if any, that have been supplied by each to the other;
and (c) all Accounts that have been opened pursuant to the terms hereof,
together with all Accounts for which applications have been received but
not yet processed by FUSA as of the effective date of such expiration or
termination, shall remain the sole and exclusive property of FUSA. Except
for those provisions which by their terms shall survive the expiration or
termination of this Agreement, all obligations of FUSA to the Company shall
cease after the effective date of such expiration or termination.
ARTICLE XI
INDEMNIFICATION
Section 11.1 Company Indemnification. The Company shall indemnify,
defend and hold FUSA and its affiliates, and their successors and assigns,
harmless from and against all claims (including, without limitation,
third-party claims), actions, suits or other proceedings, and any and all
losses, judgments, damages, expenses or other costs (including, without
limitation, reasonable attorneys' fees and disbursements), arising from or
in any way relating to (a) any actual or alleged breach or inaccuracy of
any representation or warranty of the Company contained in this Agreement,
(b) any actual or alleged infringement of any trademark, copyright, trade
name or other proprietary ownership interest resulting from the use by FUSA
of the Company Marks as contemplated by this Agreement, (c) any third-party
action, suit or other proceeding to which FUSA is made a party alleging
infringement by the Company of any proprietary ownership right in
connection with the Company's business (other than as provided for in
Section 11.2(b)), (d) any matter set forth on Schedule D hereto and (e) any
negligent or grossly negligent act or omission or willful misconduct of the
Company or its directors, officers, employees, agents or assigns in
connection with the entry into or performance of this Agreement.
Section 11.2 FUSA Indemnification. FUSA shall indemnify, defend and
hold the Company, its affiliates and their successors and assigns, harmless
from and against all claims (including, without limitation, third-party
claims), actions, suits or other proceedings, and any and all losses,
judgments, damages, expenses or other costs (including reasonable
attorneys' fees and disbursements), arising from or in any way relating to
(a) any actual or alleged breach or inaccuracy of any representation or
warranty of FUSA contained in this Agreement, (b) any actual or alleged
infringement of any trademark, copyright, trade name or other proprietary
ownership interest resulting from the use by the Company of the FUSA Marks
as contemplated by this Agreement, (c) any act or omission of FUSA in
connection with the issuance of Credit Card(s) or the administration of
Accounts which constitutes a violation of state or Federal banking or
consumer credit laws or regulations, (d) any third-party action, suit or
other proceeding to which the Company is made a party alleging infringement
by FUSA of any proprietary ownership right in connection with the FUSA's
business (other than as provided for in Section 11.1(b)) and (e) any
negligent or grossly negligent act or omission or willful misconduct of
FUSA or its directors, officers, employees, agents or assigns in connection
with the entry into or performance of this Agreement.
Section 11.3 Indemnification Procedures. If a Party (the "Indemnified
Party") seeks indemnification under this Article XI, (a) the Indemnified
Party shall notify in writing the indemnifying party (the "Indemnifying
Party") within 30 days after learning of the occurrence of any event that
is asserted to be an indemnifiable event pursuant to this Agreement (a
"Claim Notice"). If such event involves the claim of any third party and
the Indemnifying Party confirms in writing its responsibility for such
liability, if established, the Indemnifying Party shall be entitled to
participate in and, to the extent it desires, assume control over (in which
case the Indemnifying Party shall assume all expense with respect to) the
defense, settlement, adjustment or compromise of such claim.
(b) The Indemnified Party shall have the right to employ separate
counsel in any action or claim and to participate in the defense thereof at
the expense of the Indemnifying Party (i) if the retention of such counsel
has been specifically authorized by the Indemnifying Party or (ii) if such
counsel is retained because the Indemnifying Party does not notify the
Indemnified Party within 20 days after receipt of a Claim Notice that it
elects to undertake the defense thereof. The Indemnified Party shall have
the right to employ counsel at the Indemnified Party's own expense and to
participate in such action or claim, including settlement or trial, so long
as such participation does not substantially interfere with the
Indemnifying Party's defense of such claim or action.
(c) The Indemnifying Party shall obtain the prior written approval of
the Indemnified Party before entering into any settlement, adjustment or
compromise of such claim or ceasing to defend against such claim, if,
pursuant to or as a result of such settlement, adjustment, compromise or
cessation, (i) injunctive or other relief would be imposed against the
Indemnified Party or (ii) such settlement, adjustment, compromise or
cessation does not include a complete and unconditional release of the
Indemnified Party with respect to such claim.
(d) If the Indemnifying Party does not assume control over the
defense of such claim as provided in Section 11.3(a), the Indemnified Party
shall have the right to defend the claim in such manner as it may deem
appropriate, at the cost and expense of the Indemnifying Party, and with
the consent of the Indemnifying Party, to settle, adjust or compromise such
claim. The Indemnified Party may settle, adjust or compromise any such
claim without the consent of the Indemnifying Party if the Indemnified
Party waives indemnification for such claim.
(e) The Indemnifying Party shall remit payment for the amount of a
valid and substantiated claim for indemnification hereunder promptly upon
receipt of written notice therefor from the Indemnified Party. Upon the
payment in full of any claim hereunder, the Indemnifying Party shall be
subrogated to the rights of the Indemnified Party against any person with
respect to the subject matter of such claim.
(f) In the event that the Indemnifying Party reimburses the
Indemnified Party for any third-party claim, the Indemnified Party shall
remit to the Indemnifying Party any reimbursement that the Indemnified
Party subsequently receives for such third-party claim.
ARTICLE XII
CONFIDENTIALITY
Section 12.1 Protection. (a) The Parties acknowledge and agree
that the terms of this Agreement and all information provided or disclosed
to or in connection with either Party's performance under this Agreement or
to which a Party gains access in connection with this Agreement shall be
deemed confidential and proprietary information ("Confidential
Information") and shall not be disclosed by a Party receiving any such
Confidential Information (the "Receiving Party") to any third party without
the prior written consent of the Party providing or disclosing the
Confidential Information (the "Disclosing Party"). Confidential Information
shall include, without limitation: (i) names, addresses and demographic,
behavioral and credit information relating to FUSA cardmembers or potential
FUSA cardmembers; (ii) cardmember communication materials and issuance
strategies or methods; (iii) business objectives, assets and properties;
and (iv) programming techniques and technical, developmental, cost and
processing information.
(b) For the term of this Agreement and for a period of two years
thereafter, the Receiving Party shall: (i) receive all Confidential
Information in confidence; (ii) use reasonable efforts to maintain the
confidentiality of such Confidential Information and not disclose such
Confidential Information to any third party (except for the Receiving
Party's employees, representatives, authorized agents and contractors or
subcontractors who have a need to know, are under a duty of non-disclosure
and are acting for the sole benefit of the Receiving Party), which efforts
shall accord such Confidential Information at least the same level of
protection against unauthorized use and disclosure that the receiving party
customarily accords its own information of a similar nature; (iii) use or
permit the use of such Confidential Information solely in accordance with
the terms of this Agreement; and (iv) promptly notify the Disclosing Party
in writing of any loss or unauthorized use, disclosure of or access to the
Disclosing Party's Confidential Information of which the Receiving Party
becomes aware and take all steps reasonably requested by the Disclosing
Party to limit, stop or otherwise remedy such misappropriation, disclosure
or unauthorized use. Each party shall abide by and reproduce and include
any restrictive legends or confidential rights notices (although such
restrictive legends or confidential rights notices are not required for
Confidential Information to be afforded the protection provided for under
this Section) that appear in or on any Confidential Information of the
other Party which it is authorized to reproduce. Neither party shall
remove, alter, cover or distort any confidential rights notices, legends,
symbols or labels appearing in any Confidential Information of the other
Party. For purposes of this Agreement, a "need to know" means that the
employee, representative, authorized agent, contractor or subcontractor
requires the Confidential Information to perform his or her
responsibilities in connection with the Program.
Section 12.2 Exclusions. The restrictions on disclosure set forth in
this Article XII shall not apply when, and to the extent that, the
Confidential Information: (a) is or becomes generally available to the
public through no fault of the Receiving Party (or any person or entity
acting on its behalf); (b) was previously rightfully known to the Receiving
Party free of any obligation to keep it confidential; (c) is subsequently
disclosed to the Receiving Party by a third party who may rightfully
transfer and disclose such information without restriction and free of any
obligation to keep it confidential; (d) is independently developed by the
Receiving Party or a third party without reference to the Disclosing
Party's Confidential Information; or (e) is required to be disclosed by the
Receiving Party as a matter of law or by valid court or governmental agency
order or request; provided that the Receiving Party shall use all
reasonable efforts to provide the Disclosing Party with at least 10-days'
prior written notice of such disclosure and the Receiving Party shall only
disclose that portion of the Confidential Information that is legally
required to be furnished pursuant to the opinion of legal counsel of the
Receiving Party, it being understood and acknowledged by FUSA that the
Company has disclosed, and shall continue to be permitted to disclose, the
existence of this Agreement in its filings with the Securities and Exchange
Commission (and will file this Agreement as an exhibit to such filings),
without requiring the Company to provide an opinion of legal counsel with
respect to any disclosures made pursuant to such filings.
Section 12.3 Equitable Relief. Each Party agrees that any unauthorized
use or disclosure of Confidential Information may cause immediate and
irreparable harm to the Disclosing Party for which money damages may not
constitute an adequate remedy. In that event, each Party agrees that
injunctive relief may be warranted in addition to any other remedies the
Disclosing Party may have.
Section 12.4 Disposition of Confidential Information. Upon either
Party's demand, or upon the termination or expiration of this Agreement,
the Parties shall comply with each other's reasonable instructions
regarding the disposition of Confidential Information, which instructions
may include the prompt return or destruction of any and all Confidential
Information, without the retention of any copies or reproductions thereto.
Upon the request of either Party, such compliance shall be certified in
writing to the other Party, including a statement that no copies of
Confidential Information have been kept.
Section 12.5 Use of Name. Except as necessary for its performance
under this Agreement or as required by law, neither party shall use the
name of the other party, its affiliates or subsidiaries in connection with
any representation, publication or advertisement, or make any public
statement relating to the other party, its affiliates or subsidiaries,
without the prior full disclosure of same to the other party and the prior
written consent of the other party.
Section 12.6 Survival of Obligations. The obligations set forth in
this Article XI shall survive the termination of this Agreement for a
period of two years.
ARTICLE XIII
DISPUTE RESOLUTION
Any dispute, controversy, claim or disagreement between the Parties
arising from, relating to or in connection with this Agreement, any
agreement, certificate or other document referred to herein or delivered in
connection herewith or the relationships of the parties hereunder or
thereunder, including questions regarding the interpretation, meaning or
performance of this Agreement, and including claims based on contract,
tort, common law, equity, statute, regulation, order or otherwise (a
"Dispute") shall be resolved in accordance with Schedule C.
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Rights of First Offer and First Refusal. Except as
otherwise expressly provided herein, during the Initial Term and any
Renewal Term of this Agreement, FUSA shall have the right of first offer
and the right of first refusal with respect to the performance and
provision of the credit card services contemplated by this Agreement,
including, without limitation, the right of first offer and the right of
first refusal with respect to the offering, review and processing of all
Credit Card applications generated by the Company through any marketing
program, including, without limitation, through any Company Phone Services.
Section 14.2 Records. (a) During the Initial Term and any Renewal Term
of this Agreement, FUSA shall maintain accurate records with respect to all
Accounts established pursuant to this Agreement and copies of all documents
and other material related to FUSA's obligations to the Company under this
Agreement. Within 10 days of the Company's written request to FUSA, the
Company, by its duly authorized agents and representatives, shall have the
right to inspect such records, documents and material from time to time
during ordinary business hours and to make copies of such records,
documents and other materials, subject to (i) such security procedures as
FUSA may reasonably impose and (ii) such limitations as may be required
under applicable rules, regulations or statutes governing the conduct of
FUSA's business; provided, however, that FUSA shall have no obligation to
disclose to the Company, and the Company shall not have any right to
inspect or copy, or any other right of access to, any FUSA Customer
Financial Information or any records, documents or other material subject
to FUSA's corporate privacy policy, except with respect to any disclosure
required by any regulatory agency with jurisdiction over the Company.
(b) During the Initial Term and any Renewal Term of this Agreement,
the Company shall keep full and accurate books of account and copies of all
documents and other material related to the Company's obligations to FUSA
under this Agreement at the Company's principal office. Within 10 days of
FUSA's written request to the Company, FUSA, by its duly authorized agents
and representatives, shall have the right to audit such books, documents
and other material from time to time and shall have access thereto during
ordinary business hours, and shall be at liberty to make copies of such
books, documents and other material, subject to (i) such security
procedures as the Company may reasonably impose and (ii) such limitations
as may be required under applicable rules, regulations or statutes
governing the conduct of the Company's business; provided, however, that
the Company shall have no obligation to disclose to FUSA, and FUSA shall
not have the right to audit, or any other right of access thereto any
information, records, documents or other material subject to the Company's
corporate privacy policy, except with respect to any disclosure required by
any regulatory agency with jurisdiction over FUSA.
Section 14.3 Non-Competition. Except as otherwise expressly provided
in this Agreement, with respect to all Accounts established pursuant to
this Agreement, the Company agrees that neither the Company nor any entity
that the Company controls shall by itself or in conjunction with others,
directly or indirectly, during the Initial Term or any Renewal Term of this
Agreement, and for a period of one year following the expiration or earlier
termination of this Agreement, for any reason specifically target any offer
of a credit or charge card or credit or charge card related product to any
cardmember possessing an Account, which offer the Company does not also
simultaneously make to all Company Customers.
Section 14.4 Personnel. Each Party shall provide appropriately trained
and experienced dedicated personnel to support the success of the Program
and perform its obligations under this Agreement in a commercially
reasonable manner, and FUSA further shall provide personnel support, the
nature and level of which shall be at FUSA's sole discretion. Nothing in
this Agreement shall be construed to create an employment relationship
between either of the Parties and employees of the other Party, and each
Party shall comply with all laws, statutes, rules, regulations,
administrative orders and applicable judicial decisions relating to
insurance, hours at labor, wages, working conditions and other
employer-employee related subjects.
Section 14.5 Notices. Unless otherwise specifically provided in this
Agreement, every notice or other communications required or permitted under
this Agreement shall be valid only if in writing and shall be delivered
either by personal delivery; by facsimile, telegram, mailgram or telecopy;
by nationally recognized overnight courier service; or by certified or
registered mail, return receipt requested, addressed as follows:
If to FUSA, to:
FIRST USA BANK, N.A.
Three Christina Centre
201 North Walnut Street
Wilmington, DE 19801
Attention: Kurt Campisano
Senior Vice President
Fax. No. (302) 282-2014
with a copy to:
General Counsel
Fax No. (302) 884-8361
If to the Company, to:
PRICELINE.COM INCORPORATED
Five High Ridge Park
Stamford, CT 06905
Attention: Jim Accomando
Senior Vice President
Fax No. (203) 595-0160
with a copy to:
General Counsel
Fax No. (203) 595-8345
or to such other person or address as either Party shall have previously
designated to the other by written notice given in the manner set forth
above. With respect to any notice that requires a response in 10 or fewer
business days, such notice shall be sent by hand delivery, facsimile,
overnight courier or telecopy only. Notices shall be deemed given (a) one
day after sent if sent by facsimile, telegram, mailgram, telecopy or by
overnight courier; (b) upon printed confirmation of delivery to the correct
facsimile number if sent by facsimile; (c) when delivered and receipted for
if hand delivered; or (d) when receipted for (or upon the date of attempted
delivery when delivery is refused) if sent by certified or registered mail,
return receipt requested.
Section 14.6 Entire Agreement; Amendment. This Agreement, including the
Exhibits and Schedules hereto, constitutes the entire understanding between
the Parties with respect to the subject matter hereof and supersedes all
prior written and oral proposals, understandings, agreements and
representations, all of which are merged herein. No amendment to or
modification of this Agreement shall be effective unless in writing and
executed by both Parties.
Section 14.7 Non-Waiver of Default. The failure of either Party to
insist, in any one or more instances, on the performance of any term or
condition of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future performance
of any such term or condition, and the obligations of the non-performing
Party with respect thereto shall continue in full force and effect.
Section 14.8 Relationship. Nothing in this Agreement is intended to or
shall be construed to constitute or establish an agency, joint venture,
partnership or fiduciary relationship between the Parties, and neither
Party shall have the right or authority to act for or on behalf of the
other Party.
Section 14.9 Severability. In the event that any term, provision or
restriction of this Agreement, or any Exhibit or Schedule hereto, shall,
for any reason, be deemed to be invalid, void or unenforceable, the
remaining provisions, terms and restrictions of this Agreement and such
Exhibits and Schedules shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
Section 14.1 Governing Law. This Agreement shall be governed by,
interpreted under and construed and enforced in accordance with, the laws
of the State of Delaware, without giving effect to any conflicts of law
principles thereof.
Section 14.1 Assignment. Neither Party may assign this Agreement
without the prior written consent of the other Party; provided, however,
that either Party may assign this Agreement, and all of its rights and
obligations hereunder, to a parent, subsidiary or affiliate of such Party
without the prior written consent of the other Party.
Section 14.1 Further Assurances. Each Party agrees to take, or cause
to be taken, all such further or other actions as may be reasonably
necessary to make effective, consummate or perform the undertakings and
obligations contemplated by this Agreement.
Section 14.1 Headings. The headings used in this Agreement are for
convenience only and are not be construed to have any legal significance.
Section 14.1 Public Statements. Except as may be required by law,
regulation or any governmental authority or as otherwise expressly
permitted pursuant to Section 12.2, neither the Company nor any of its
affiliates or their representatives shall issue a press release or make any
public statement, announcement or disclosure to any third party regarding
the existence of this Agreement, the terms hereof or the transactions
contemplated hereby without the prior written consent of FUSA.
[Execution page follows]
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as
of the day and year first above written.
PRICELINE.COM INCORPORATED
By: /s/ Jay S. Walker
--------------------------------
Name: Jay S. Walker
Title: Vice Chairman
FIRST USA BANK, N.A.
By: /s/ Kurt M. Campisano
-------------------------------
Name: Kurt M. C ampisano
Title: Senior Vice President
SCHEDULE A
DEFINITIONS
"AAA" shall mean the American Arbitration Association.
"AAA Rules" shall have the meaning set forth in Paragraph 4(b) of
Schedule C.
"Account Origination Fee" shall have the meaning set forth in
Paragraph 1 of Schedule B.
"Account Reactivation Fee" shall have the meaning set forth in
Paragraph 10 of Schedule B.
"Accounts" shall have the meaning set forth in Section 6.1.
"Acquisition Balance Transfer Commission" shall have the meaning
set forth in Paragraph 7 of Schedule B.
"Acquisition Bonus Payment" shall have the meaning set forth in
Paragraph 4 of Schedule B.
"Agreement" shall mean this Interactive Marketing Agreement, dated as
of the day and year first above written, by and between the Company and
FUSA, as the same may be amended from time to time.
"Application Volume" shall have the meaning set forth in
Paragraph 3 of Schedule B.
"Arbitrators" shall have the meaning set forth in Paragraph 4(c)
of Schedule C.
"Balance Transferring Account" shall have the meaning set forth
in Paragraph 4 of Schedule B.
"Basic Qualifications" shall have the meaning set forth in
Paragraph 4(c) of Schedule C.
"Claim Notice" shall have the meaning set forth in Section 11.3.
"Company" shall mean priceline.com Incorporated, a Delaware
corporation.
"Company Customers" shall have the meaning set forth in the
Recitals.
"Company Direct Promotions" shall have the meaning set forth in
Section 3.1.
"Company Marks" shall have the meaning set forth in Section 3.4.
"Company Phone Services" shall have the meaning set forth in the
Recitals.
"Company Services" shall have the meaning set forth in the Recitals.
"Company Site(s)" shall have the meaning set forth in the Recitals.
"Company-Sourced Account" shall have the meaning set forth in
Paragraph 1 of Schedule B.
"Company-Sourced Account Portfolio" shall have the meaning set forth
in Paragraph 2 of Schedule B.
"Competitive Opportunities" shall have the meaning set forth in
Section 5.6.
"Confidential Information" shall have the meaning set forth in
Section 12.1.
"CPA" shall mean the "cost per account", which, for the Company, is
measured by dividing the total cost of acquiring a given tranche of
Company-Sourced Accounts by the total number of Company Sourced Accounts in
such tranche.
"Credit Card(s)" shall have the meaning set forth in the Recitals.
"Customer Data" shall have the meaning set forth in Section 6.2.
"Disclosing Party" shall have the meaning set forth in Section 12.1.
"Dispute" shall have the meaning set forth in Article XIII.
"Effective Date" shall mean the date upon which a FUSA Credit Card is
first offered by the Company to any Company Customer, which offer shall be
made by the Company as soon as reasonably practicable following the
execution of this Agreement.
"Fees" shall have the meaning set forth in Section 5.1.
"FUSA" shall mean First USA Bank, N.A., a national banking association.
"FUSA Customer Financial Information" shall mean information
submitted by a Company Customer or any other customer (each a "Customer")
which FUSA has acquired from a third party (other than the Company)
reflecting FUSA's or any of its affiliates transactions with a customer or
which is otherwise generated or developed by FUSA, to the extent that such
information relates to (a) such Customer's application for a FUSA Credit
Card, (b) credit bureau data and other information or analysis used to
determine whether such Customer will be issued a FUSA Credit Card, (c) the
credit limit for any FUSA Credit Card issued to a Customer, (d) FUSA's
internal credit scoring with respect to such Customer usage history (other
than usage related to the Company's services), (e) such Customer's
transaction and payment history, (f) FUSA's internal profitability
analysis, (g) FUSA's pricing strategies, (h) FUSA's marketing and incentive
strategies, (i) customer service and customer dispute information, (j) any
other aspects of FUSA's credit card business or any other services provided
by FUSA or any affiliate (whether under this Agreement or otherwise) and
(k) any other similar information with respect to Customers or FUSA's
Credit Card business, including, without limitation, any information
derived or generated from, or related to, any such Customer or FUSA
information.
"FUSA Marks" shall have the meaning set forth in Section 4.3.
"FUSA Wallet" shall mean an electronic wallet to be branded by FUSA
or its wallet partners, as FUSA may determine from time to time.
"Incident Rate" shall have the meaning set forth in Paragraph 4 of
Schedule B.
"Indemnified Party" shall have the meaning set forth in Section 11.3.
"Indemnifying Party" shall have the meaning set forth in Section 11.3.
"Initial Term" shall have the meaning set forth in Section 10.1.
"Level 1 Dispute Review" shall have the meaning set forth in
Paragraph 1 of Schedule C.
"Level 1 Dispute Termination Date" shave have the meaning set
forth in Paragraph 2 of Schedule C.
"Level 2 Dispute Review" shall have the meaning set forth in
Paragraph 2 of Schedule C.
"Level 2 Dispute Termination Date" shall have the meaning set forth
in Paragraph 3 of Schedule C.
"Messages/Inserts" shall have the meaning set forth in Section
4.4.
"Minimum Fee" shall have the meaning set forth in Paragraph 3 of
Schedule B.
"New Product(s)" shall have the meaning set forth in Section 7.3.
"Nominal Account" shall have the meaning set forth in Paragraph 2 of
Schedule B.
"NPV" shall mean the Present Value of the Pro Forma Vintage Profit
and Loss Statement, less the CPA, using FUSA's prevailing discount rate
across FUSA's business.
"NPV/CPA Ratio" shall mean the ratio obtained by dividing the NPV of
a given tranche of Company-Sourced Accounts by the CPA of the same tranche
of Company-Sourced Accounts.
"Other Credit Cards" shall have the meaning set forth in Section
6.1.
"Panel" shall have the meaning set forth in Paragraph 4(c) of
Schedule C.
"Party" shall mean each of FUSA and the Company and, taken together,
the "Parties".
"Portfolio Balance Transfer Commission" shall have the meaning
set forth in Paragraph 8 of Schedule B.
"Present Value" shall mean the calculation of the present value of
the Pro Forma Vintage Profit and Loss Statement, using FUSA's prevailing
discount rate across FUSA's business.
"Pro Forma Vintage Profit and Loss Statement" shall mean the pro
forma profit and loss statement of the Program with respect to a given
tranche of similar-aged Accounts, as such statement is calculated and
prepared by FUSA.
"Program" shall have the meaning set forth in Article II.
"Rate of Return Shortfall Remedial Period" shall have the meaning set
forth in Paragraph 2 of Schedule B.
"Reactivated Account" shall have the meaning set forth in
Paragraph 10 of Schedule B.
"Receiving Party" shall have the meaning set forth in Section 12.1.
"Renewal Terms" shall have the meaning set forth in Section 10.1.
"ROO" shall have the meaning set forth in shall Section 5.6.
"Usage Fee" shall have the meaning set forth in Paragraph 6 of
Schedule B.
"Value-Added Payment" shall have the meaning set forth in Paragraph
5 of Schedule B.
SCHEDULE B
FEES
During the Initial Term and any Renewal Term of this
Agreement, FUSA agrees to pay to the Company the following Fees, in
accordance with the terms of the Agreement and this Schedule B:
1. Account Origination Fees. Subject to Paragraphs 2 and 3 of this
Schedule B, FUSA shall pay to the Company a $[**] fee (the "Account
Origination Fee") for every FUSA Account opened for which (a) the
application was generated by marketing programs conducted through the
Company Services and (b) at least one statement with a balance due has been
sent to the Company Customer for such Account (each, a "Company-Sourced
Account"). Such payments shall be made in accordance with the provisions of
Section 5.3.
2. Nominal Accounts. In the event that FUSA, from time to time at
any time after the Effective Date, makes a good faith determination that
Account Origination Fees payable to the Company with respect to any
Company-Sourced Account (a) (i) initially statemented with a balance of
less than $[**] or (ii) for which the Company Customer has paid in full the
amount due on the initial statement and (b) that is not used again for a
period of three months immediately following the cutoff date of the initial
statement for such Company-Sourced Account (each such account described in
subsection (a)(i) or (ii) and (b) hereof, a "Nominal Account"), are
adversely affecting the profitability to FUSA of the portfolio of
Company-Sourced Accounts (the "Company-Sourced Account Portfolio") such
that the ROO, as measured by FUSA, falls below 3% or the NPV/CPA Ratio, as
measured by FUSA, falls below the NPV/CPA Ratio of Competitive
Opportunities, FUSA shall so notify the Company in writing. The Company
shall have 30 days (the "Rate of Return Shortfall Remedial Period") from
receipt of such notice to implement remedial program(s) in order to reduce
the number of Nominal Accounts and to increase the ROO and the NPV/CPA
Ratio. If, (i) after expiration of 60 days from the implementation of any
such remedial program or (ii) after expiration of the Rate of Return
Shortfall Remedial Period in the event that no such remedial program is
implemented, the ROO has not increased to 3% or the NPV/CPA Ratio is not
greater than or equal to the NPV/CPA Ratio of Competitive Opportunities,
the Parties shall in good faith, and within 30 days thereafter, negotiate a
reasonable modification to the Account Origination Fee or other
modification to the Fees going forward such that the ROO and the NPV/CPA
Ratio are at acceptable levels. If such Fee modification(s) is not mutually
agreed to within such 30-day period, FUSA shall have the right, in FUSA's
sole discretion, to terminate this Agreement in accordance with Section
10.6.
3. Application Volume. (a) In the event that the Company generates
at least [**] completed and valid Account applications, net of
duplications, for no-fee, unsecured Credit Cards per calendar quarter for
review by FUSA (the "Application Volume") but FUSA does not approve at
least 50% of such applications, the total amount owed to the Company in
Account Origination Fees under Paragraph 1 of this Schedule B for such
calendar quarter shall be calculated to equal the amount that would have
been payable to the Company if 50% of such applications had been approved
by FUSA and had resulted in Company-Sourced Account (the "Minimum Fee"). In
the event of such occurrence, FUSA agrees to use commercially reasonable
efforts subsequently to increase its credit approval rates, including,
without limitation, through more detailed review and scoring of Account
applications.
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[**] = Confidential treatment requested for redacted portion.
(b) If the Company does not achieve the Application Volume for any
calendar quarter, the Company shall not be entitled to the Minimum Fee
provided for in Paragraph 3(a) of this Schedule B for the subsequent
calendar quarter. If the Company fails to achieve the Application Volume
for two or more consecutive calendar quarters or if the ROO falls below 3%,
FUSA shall have the right to eliminate the 50% application approval
threshold and related Minimum Fee provision set forth in Paragraph 3(a) of
this Schedule B for all quarterly periods thereafter; provided, however,
that FUSA's exercise of such right shall simultaneously relieve the Company
of its preference and first refusal obligations to FUSA set forth in this
Agreement.
(c) Notwithstanding the foregoing, FUSA shall be solely responsible
for all approval and other credit decisions relating to the applications
sourced by the Company, and nothing set forth herein shall be deemed to
require FUSA to make any approval or credit decision that is not consistent
with FUSA's normal credit approval standards and safe and sound banking
practices.
4. Acquisition Bonus Payment. In addition to any other payment to
which the Company is entitled under this Agreement, FUSA shall pay to the
Company a $[**] bonus (the "Acquisition Bonus Payment") for every
Company-Sourced Account as to which the Account obligor has transferred,
from any source, an outstanding balance for payment due (a "Balance
Transferring Account"); provided, however, that (a) the Company shall not
be entitled to any such Acquisition Bonus Payment unless and until the
percentage found by dividing (i) the total number of Balance Transferring
Accounts over the previous 12 consecutive billing cycles by (ii) the total
number of Company-Sourced Accounts over such previous 12 consecutive
billing cycles (the "Incident Rate"), is greater than or equal to 40% and
(b) the Acquisition Bonus Payment shall only be paid with respect to the
number of Balance Transferring Accounts that exceed such 40% Incident Rate.
5. Value-Added Payment. In addition to any other payment the Company
is entitled to under this Agreement, FUSA shall make to the Company a
payment of $[**] (a "Value-Added Payment") for every approved Account
application at the time such Account application is approved by FUSA. Such
Value-Added Payment shall be paid to the Company in lieu of the Usage Fee
otherwise payable (pursuant to Paragraph 6 of this Schedule B) for the
first 12 billing cycles after any such Company-Sourced Account is opened;
provided, however, that the Company shall be entitled to such Value-Added
Payment only with respect to the first five-million Accounts opened during
the term of this Agreement; and provided further that if, after Value-Added
Payments have been made by FUSA for the first one-million Accounts, FUSA
determines that such Value-Added Payments have resulted in a ROO of less
than 3% or an NPV/CPA Ratio that is below the NPV/CPA Ratio of Competitive
Opportunities, FUSA may pay to the Company, in lieu of such Value-Added
Payment, a Usage Fee (calculated in accordance with Paragraph 6 of this
Schedule B) with respect to the remaining four-million Accounts for which a
Value-Added Payment would have been earned but for this proviso.
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[**] = Confidential treatment requested for redacted portion.
6. Usage Fee. In addition to any other payment the Company is
entitled to under this Agreement, the Company shall be paid a fee (a "Usage
Fee") for every Company-Sourced Account equal to, (a) if the net retail
purchases for such period are equal to or less than $1,000 for such
Account, 0.50% of the net retail purchases made and statemented every 12
billing cycles on each Company-Sourced Account or, (b) if the net retail
purchases for such period on such Company-Sourced Account exceed $1,000, an
amount equal to the sum of (i) $[**] plus (ii) [**]% of the net retail
purchases made and statemented every 12 billing cycles for such
Company-Sourced Account, to the extent such net retail purchases exceed
$1,000 for such Account. FUSA shall pay Usage Fees to the Company quarterly
and shall pay such fees within 15 days of the end of each calendar quarter
with respect to such calendar quarter, in accordance with the terms of
Article V. Notwithstanding the foregoing, with respect to any Account for
which the Company receives a Value-Added Payment, FUSA shall not be
required to pay to the Company any Usage Fee for the first 12 billing
cycles after such Account is opened.
7. Acquisition Balance Transfer Commission. In addition to any other
payment the Company is entitled to receive under this Agreement, FUSA shall
pay to the Company a commission (an "Acquisition Balance Transfer
Commission") equal to the sum of (a)[**]% of all balance dollars
transferred to Balance Transferring Accounts at non-introductory rates, not
to exceed $[**] balance dollars transferred per Account per annum, and (b)
an amount equal to[**]% of the amount that is (i) the difference between
the actual Incident Rate (expressed as a percentage) and [**]% (which
number shall never be less than zero), multiplied by (ii) the total number
of balance dollars transferred; provided, however, that in calculating such
amount of balance dollars transferred, the maximum number of balance
dollars transferred to be counted for any Account shall not exceed $[**].
8. Portfolio Balance Transfer Commission. In addition to any other
payment the Company is entitled to receive under this Agreement, FUSA shall
pay the Company a commission (a "Portfolio Balance Transfer Commission")
equal to [**]% of all balance dollars transferred to any FUSA account
(whether or not such account was sourced by the Company) at
non-introductory rates, which balance transfer the Company has marketed and
sourced, it being understood and agreed to by the Parties that the Company
shall not be entitled to any Portfolio Balance Transfer Commission with
respect to any balance transfers sourced by FUSA to any account, including,
without limitation, any Company-Sourced Account; provided that such
Portfolio Balance Transfer Commission shall be paid only (a) if such
balance dollars transferred equal or exceed $[**] per account per annum and
(b) in no event with respect to more than $[**] balance dollars transferred
per account per annum; and provided further that no Portfolio Balance
Transfer Commission shall be paid with respect to any balance transfer for
which the Company receives an Acquisition Balance Transfer Commission.
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9. Balance Retention Bonus. In addition to any other payment to
which the Company is entitled under this Agreement, with respect any
Company-Sourced Account that has remained open and available for charging
activity for 12 billing cycles from such Company-Sourced Account's initial
billing statement, FUSA shall pay to the Company a one-time "Balance
Retention Bonus" equal to [**]% of the amount by which the actual balance
remaining on such Account at the end of such 12-month period exceeds 80% of
the highest balance reached at any time on such account during such prior
12-month period.
10. Account Reactivation Fee. FUSA shall pay the Company an "Account
Reactivation Fee" for every FUSA account that the Company causes to be
reactivated if such reactivated account (a) had been dormant, i.e., had
generated no debit-based statement, during the six months immediately prior
to reactivation and (b) reaches billing activity of $1,000 or more, in the
aggregate, at any time during the first six billing cycles immediately
following reactivation (a "Reactivated Account"). The Account Reactivation
Fee shall be equal to (i) $[**] for every Reactivated Account that had been
dormant for 13 or more consecutive billing cycles immediately prior to
reactivation, (ii) $[**] for every Reactivated Account that had been
dormant for no fewer than nine and no more than 12 of the consecutive
billing cycles immediately prior to reactivation and (iii) $[**] for every
Reactivated Account that had been dormant for no fewer than six and no more
than eight consecutive billing cycles immediately prior to reactivation. To
the extent that any Reactivation Account also qualifies the Company to
receive a Portfolio Balance Transfer Commission pursuant to Paragraph 8 of
this Schedule B, the Company shall be entitled to receive the greater of
the Account Reactivation Fee and the Portfolio Balance Transfer Commission,
but not both.
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SCHEDULE C
DISPUTE RESOLUTION
1. Level 1 Dispute Review. Upon the written request of either Party,
the Company and FUSA shall each appoint a designated representative whose
task shall be to meet the other Party's designated representative (by
conference telephone call or in person at a mutually agreeable site) in an
endeavor to resolve any Dispute ("Level 1 Dispute Review"). The designated
representatives shall meet as often as the parties reasonably deem
necessary to discuss the Dispute and negotiate in good faith in an effort
to resolve the Dispute without the necessity of any formal proceeding.
2. Level 2 Dispute Review. If resolution of the Dispute cannot be
resolved within the earlier of (a) 15 days from the first Level 1 Dispute
Review meeting and (b) such time as when either Party gives the other
written notice of an impasse ("Level 1 Dispute Termination Date"), a chief
executive officer (or a functional equivalent) of each of the Company and
FUSA shall meet (by conference telephone call or in person at a mutually
agreeable site) within 72 hours after the Level 1 Dispute Termination Date
for the purpose of resolving such unresolved Dispute ("Level 2 Dispute
Review").
3. Submission of Dispute to Mediation. If the Parties are unable to
resolve the Dispute within a reasonable period after commencement of the
Level 2 Dispute Review, the Parties shall give each other written notice of
the existence of a continuing impasse (the date on which both Parties are
in receipt of such notice, the "Level 2 Dispute Termination Date") and
shall thereafter immediately submit the Dispute to mediation in accordance
with the Commercial Mediation Rules of the AAA and shall bear equally the
costs of the mediation. The Parties will act in good faith to jointly
appoint a mutually acceptable mediator, seeking assistance in such regard
from the AAA within 15 days of the Level 2 Termination Date. The Parties
agree to participate in good faith in the mediation and negotiations
related thereto for a period of 30 days commencing with the selection of
the mediator and any extension of such period as mutually agreed to by the
Parties.
4. Arbitration. (a) If the Parties cannot agree to a mediator within
15 days of the Level 2 Dispute Termination Date or if the Dispute is not
resolved within 30 days after the beginning of the mediation and any
extension of such periods as mutually agreed to by the Parties, the Dispute
shall be submitted to, and finally determined by, binding arbitration in
accordance with the following provisions of this Schedule, regardless of
the amount in controversy or whether such Dispute would otherwise be
considered justiciable or ripe for resolution by a court or arbitration
panel.
(b) Any such arbitration shall be conducted by the AAA in
accordance with its current Commercial Arbitration Rules (the "AAA Rules"),
except to the extent that the AAA Rules conflict with the provisions of
this Schedule, in which event the provisions of this Schedule shall
control.
(c) The arbitration panel (the "Panel") shall consist of three
neutral arbitrators ("Arbitrators"), each of whom shall be an attorney
having five or more years experience in the primary area of law as to which
the Dispute relates, and shall be appointed in accordance with the AAA
Rules (the "Basic Qualifications").
(d) Should an Arbitrator refuse or be unable to proceed with
arbitration proceedings as called for by this Schedule, a substitute
Arbitrator possessing the Basic Qualifications shall be appointed by the
AAA. If an Arbitrator is replaced after the arbitration hearing has
commenced, then a rehearing shall take place in accordance with the
provisions of this Schedule and the AAA Rules.
(e) The arbitration shall be conducted in Wilmington, Delaware;
provided that the Panel may from time to time convene, carry on hearings,
inspect property or documents and take evidence at any location that the
Panel deems appropriate.
(f) The Panel may, in its discretion, order a pre-exchange of
information, including production of documents, exchange of summaries of
testimony or exchange of statements of position, and shall schedule
promptly all discovery and other procedural steps and otherwise assume case
management initiative and control to effect an efficient and expeditious
resolution of the Dispute.
(g) At any oral hearing of evidence in connection with any
arbitration conducted pursuant to this Schedule, each Party and its legal
counsel shall have the right to examine its witnesses and to cross-examine
the witnesses of the other party. No testimony of any witness shall be
presented in written form unless the opposing party shall have the
opportunity to cross-examine such witness, except as the parties otherwise
agree in writing and except under extraordinary circumstances where, in the
opinion of the Panel, the interests of justice require a different
procedure.
(h) Within 15 days after the closing of the arbitration
hearing, the Panel shall prepare and distribute to the parties a written
award, setting forth the Panel's findings of facts and conclusions of law
relating to the Dispute, including the reasons for the giving or denial of
any requested remedy or relief. The Panel shall have the authority to award
any remedy or relief that a court of competent jurisdiction could order or
grant and shall award interest on any monetary award from the date that the
loss or expense was incurred by the successful party. In addition, the
Panel shall have the authority to decide issues relating to the
interpretation, meaning or performance of this Agreement, any agreement,
certificate or other document referred to herein or delivered in connection
herewith or the relationships of the parties hereunder or thereunder, even
if such decision would constitute an advisory opinion in a court proceeding
or if the issues would otherwise not be ripe for resolution in a court
proceeding, and any such decision shall bind the parties in their
performance of this Agreement and such other documents.
(i) Except as necessary in court proceedings to enforce this
arbitration provision or an award rendered hereunder, or to obtain interim
relief, no party nor any arbitrator shall disclose the existence, content
or results of any arbitration conducted hereunder without the prior written
consent of the other parties.
(j) To the extent that the relief or remedy granted in an award
rendered by the Panel is relief or a remedy on which a court could enter
judgment, a judgment upon the award rendered by the Panel may be entered in
any court having jurisdiction thereof. Otherwise, the award shall be
binding upon the Parties in connection with their obligations under this
Agreement and in any subsequent arbitration or judicial proceedings between
the Parties.
(k) The Parties agree to share equally the cost of any
arbitration, including the administrative fee, the compensation of the
arbitrators and the costs of any neutral witnesses or proof produced at the
direct request of the Panel.
(l) Notwithstanding the choice of law provision set forth in
Section 14.10 of this Agreement, The Federal Arbitration Act, 9 U.S.C.
ss.ss.1 to 14, except as modified hereby, shall govern the enforcement of
Article XIII and this Schedule.
5. Recourse to Courts and Other Remedies. Notwithstanding the
Dispute resolution procedures contained in this Schedule, any Party may
apply to any court having jurisdiction (a) to enforce this Agreement to
arbitrate, (b) to seek provisional injunctive relief so as to maintain the
status quo until the arbitration award is rendered or the Dispute is
otherwise resolved, (c) to avoid the expiration of any applicable
limitation period, (d) to preserve a superior position with respect to
other creditors or (e) to challenge or vacate any final judgment, award or
decision of the Panel that does not comport with the express provisions of
this Schedule.
6. Attorneys' Fees. If any action, suit or proceeding is
commenced to establish, maintain or enforce any right or remedy under this
Agreement, the party not prevailing therein shall pay, in addition to any
damages or other award, all reasonable attorneys' fees and litigation
expenses incurred therein by the prevailing party.
7. Affiliates. Each party hereto agrees that for purposes of
Article XIII and this Schedule, references to the Parties shall also
include their respective controlled affiliates, who shall be subject to the
Dispute resolution procedures of Article XIII and this Schedule to the same
extent as the Parties.
SCHEDULE D
LITIGATION
See attached.
other federal or state laws. Such action could severely interfere with
the conduct of the priceline.com business.
LendingTree provides the mortgage brokerage services offered
through the priceline.com home mortgage service on priceline.com's Web site
and is responsible for maintaining the necessary and appropriate state
registrations and licenses associated with LendingTree's provision of those
mortgage brokerage services. If a federal or state regulatory authority, or
an aggrieved customer, should in the future claim that LendingTree has
failed to comply fully with applicable federal or state law requirements
pertaining to LendingTree's provision of mortgage brokerage services, the
priceline.com home mortgage service could be materially and adversely
affected and priceline.com may be unable to continue to make its home
mortgage services Web site available, either to residents of affected
state(s) or on a national basis.
Consumer Protection and Related Laws
All of priceline.com's services are subject to federal and
state consumer protection laws and regulations prohibiting unfair and
deceptive trade practices. Priceline.com is also subject to related "plain
language" statutes in place in many jurisdictions, which require the use of
simple, easy to read, terms and conditions in contracts with consumers.
Although there are very few laws and regulations directly
applicable to the protection of consumers in an online environment, it is
possible that legislation will be enacted in this area and could cover such
topics as permissible online content and user privacy, including the
collection, use, retention and transmission of personal information
provided by an online user. Furthermore, the growth and demand for online
commerce could result in more stringent consumer protection laws that
impose additional compliance burdens on online companies. Such consumer
protection laws could result in substantial compliance costs and interfere
with the conduct and growth of the priceline.com business.
Business Qualification Laws
Because priceline.com's service is available over the Internet
in multiple states, and because it sells to numerous consumers resident in
such states, such jurisdictions may claim that priceline.com is required to
qualify to do business as a foreign corporation in each such state.
Priceline.com is qualified to do business in a limited number of states,
and failure by priceline.com to qualify as a foreign corporation in a
jurisdiction where it is required to do so could subject priceline.com to
taxes and penalties for the failure to so qualify and limit its ability to
conduct litigation in such states.
International Expansion
Priceline.com intends to explore opportunities for expanding
the priceline.com business into international markets. It is possible,
however, that the priceline.com demand collection system will not be
readily adaptable to regulatory environments of certain foreign
jurisdictions. In addition, there are various other risks associated with
international expansion. They include language barriers, unexpected changes
in regulatory requirements, trade barriers, problems in staffing and
operating foreign operations, changes in currency exchange rates,
difficulties in enforcing contracts and other legal rights, economic and
political instability and problems in collection.
LEGAL PROCEEDINGS
On January 6, 1999, priceline.com received notice that a third
party patent applicant and patent attorney, Thomas G. Woolston, purportedly
had filed in December 1998 with the United States Patent and Trademark
Office a request to declare an "interference" between a patent application
filed by Woolston describing an electronic market for used and collectible
goods and priceline.com's core buyer-driven commerce patent. Priceline.com
has received a copy of a Petition for Interference from Woolston, the named
inventor in at least three United States Patent applications titled
"Consignment Nodes," one of which has issued as a patent (U.S. Patent
Number: 5,845,265). Priceline.com currently is awaiting information from
the Patent Office regarding whether it will initiate an interference
proceeding concerning Woolston's patent application and priceline.com's
core buyer-driven commerce patent. An interference is an administrative
proceeding instituted in the Patent Office to determine questions of
patentability and priority of invention between two or more parties
claiming the same patentable invention. There is no statutory period within
which the Patent Office must act on an interference request. If an
interference is declared and proceeds through a final hearing in the Patent
Office, a final judgment is made by the Patent Office as to inventorship.
Following such final judgment, appeals could be made in Federal court.
While there can be no certainty as to time periods, interference
proceedings typically take years to resolve.
As a threshold to the initiation of an interference proceeding,
Woolston must show that his patent application supports claims that he
copied from the priceline.com core buyer-driven commerce patent. In order
to make this showing, he would have to prove, among other things, that he
invented the subject matter of the priceline.com claims before the
inventors of the priceline.com patent. If the Patent Office were to find
that Woolston's patent application supported the copied priceline.com
claims, it would resolve the interference by awarding inventorship to the
party with the earliest proven date of invention. Woolston recently
announced an agreement to license his issued patent and pending patent
applications to the owner of an Internet travel service that, according to
such announcement, commenced on-line operations in the fourth quarter of
1998 and purports to compete with priceline.com.
While the interference process is still at an early stage,
priceline.com believes that it has meritorious defenses to Woolston's
claim, which it intends to pursue vigorously. Among other things,
priceline.com believes that the Woolston patent application does not
disclose the inventions covered by the priceline.com patent claims.
However, it is impossible to predict the outcome of an interference with
certainty. While Woolston claims to have an earlier invention date by a
period of approximately sixteen months, the final decision as to priority
of invention would be made by the Patent Office after considering facts
provided by each party during the interference proceeding. If an
interference is declared and thereafter resolved in favor of Woolston, such
resolution could result in an award of some or all of the disputed patent
claims to Woolston. If, following such award, Woolston were successful in a
patent infringement action against priceline.com, including prevailing over
all defenses available to priceline.com such as those of non-infringement
and invalidity, this could require priceline.com to obtain licenses from
Woolston and pay damages from the date such patent issued at a cost which
could significantly adversely affect priceline.com's business. If Woolston
prevailed in both an interference and an infringement action, then
priceline.com could be enjoined from conducting business through the
priceline.com service to the extent covered by the patent claims awarded to
Woolston. In addition, defense of the interference action may be expensive
and may divert management attention away from priceline.com's business.
On January 19, 1999, a lawsuit was filed in the United States
District Court for the Northern District of California by Marketel
International, Inc., a California corporation, under the caption Marketel
International Inc. v. Priceline.com et. al., No. C-99-1061 (N.D. CA 1999),
against priceline.com, Priceline Travel, Walker Asset Management, Walker
Digital, Mr. Jay S. Walker, priceline.com's Founder and Vice Chairman, and
Mr. Andre Jaeckle, an individual who made a $1 million loan to
priceline.com bearing interest at a rate of 6% per year, and in connection
therewith, received warrants, which have subsequently been fully exercised,
to purchase 62,500 shares of our common stock. On February 22, 1999,
Marketel filed an amended and supplemental complaint. The amended complaint
filed by Marketel, which joins as defendants Mr. Timothy G. Brier, our
Executive Vice President, Travel, Mr. Bruce Schneier, an individual and
consultant to Walker Digital, and Mr. James Jorasch, an individual and
employee of Walker Digital, alleges causes of action for, among other
things, misappropriation of trade secrets, breach of contract, conversion,
breach of confidential relationship, copyright infringement, fraud, unfair
competition, and false advertising, and seeks injunctive relief and damages
in an unspecified amount. In its amended complaint, Marketel alleges, among
other things, that the defendants conspired to misappropriate Marketel's
business model, which it describes as a buyer-driven electronic marketplace
for travel services and its appurtenant techniques, market research, forms,
plans and processes, and which an executive of Marketel allegedly provided
to Messrs. Walker and Jaeckle in confidence approximately ten years ago.
The amended complaint also alleges that three former Marketel employees are
the actual sole inventors or co-inventors of US patent No. 5794207, which
was issued on August 11, 1998 with Jay S. Walker, Bruce Schneier and James
Jorasch listed as the inventors and which patent has been assigned to
priceline.com. Marketel asks that the patent's inventorship be corrected
accordingly.
Based upon publicly available information, priceline.com
believes that Marketel's fax and fee-based business was launched in 1991
and ceased operations seven months later. Priceline.com's Internet-based
model was independently developed by Walker Digital and priceline.com, and
practiced by priceline.com starting in 1998. Based on publicly available
information and Marketel's complaint, priceline.com understands that
Marketel operated a fax-based travel information service which offered
consumers, travel agents and/or consolidators the opportunity to purchase
specially printed forms. These forms, when accompanied by an additional
non-refundable fee, allowed prospective ticket buyers to fax to Marketel
credit-card guaranteed bids for airline travel at a bid price specified by
the buyer. Priceline.com believes that Marketel has not engaged in any
regular commercial activities since ceasing operations in 1992. Based upon
publicly available information, Marketel reactivated its active status as a
corporation by satisfying its back-due tax obligations to the State of
California shortly after the filing of its complaint.
On February 5, and February 10, 1999, the defendants filed
their answer and amended answer, respectively, to the amended complaint, in
which they denied the material allegations of liability in the complaint.
Priceline.com and all other defendants strongly dispute the material legal
and factual allegations contained in Marketel's amended complaint and
believe that the amended complaint is without merit. Priceline.com intends
to defend vigorously against the action. Defending the law suit may involve
significant expense and, due to the inherent uncertainties of litigation,
there can be no certainty as to the ultimate outcome. Pursuant to the terms
of the indemnification obligations contained in the Purchaser and
Intercompany Agreement with Walker Digital, Walker Digital has agreed to
indemnify priceline.com for damages, liability and legal expenses incurred
in connection with the Marketel litigation.
From time to time priceline.com has been and expects to
continue to be subject to legal proceedings and claims in the ordinary
course of business, including claims of alleged infringement of third party
intellectual property rights by the company. Such claims, even if not
meritorious, could result in the expenditure of significant financial and
managerial resources.
EMPLOYEES
Currently, priceline.com has 194 full-time employees. In
addition, through an Intercompany Agreement with Walker Digital
Corporation, priceline.com receives a variety of services, including
research and development, patent and other intellectual property services
and technical support. Priceline.com also employs independent contractors
to support its customer service and system support functions. See "Certain
Transactions."
Priceline.com has never had a work stoppage and its employees
are not represented by any collective bargaining unit. It considers its
relations with its employees to be good. Priceline.com's future success
will depend, in part, on its ability to continue to attract, integrate,
retain and motivate highly qualified technical and managerial personnel,
for whom competition is intense.
FACILITIES
Priceline.com's executive, administrative and operating offices
are located in approximately 35,000 square feet of leased office space
located in Stamford, Connecticut. Priceline.com is subleasing this office
space from Walker Digital on a month-to-month basis. Priceline.com also has
guaranteed Walker Digital's obligations under a lease of office space in
New York City that is used by both companies. Priceline.com anticipates
that it will require additional space within the next 12 months to
accommodate its anticipated growth and that suitable office space will be
available on commercially reasonable terms.