Exhibit 10.4
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED
PROVISIONS OF THIS AGREEMENT. THE REDACTED PROVISIONS ARE INDICATED
BY THREE ASTERISKS ENCLOSED BY BRACKETS AND UNDERLINED. THE
CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Confidential
Cash Card
Issuer Agreement
This Cash Card Issuer Agreement ("Agreement") is entered into as
of October 11 , 2002 ("Effective Date"), by and between NBO
Systems, Inc., a Maryland corporation, whose address is 3676 West
California Avenue, Building D, Salt Lake City, UT 84104 ("Issuer")
and Discover Financial Services, Inc. ("DFS"), a Delaware
Corporation, whose address is 2500 Lake Cook Road, Riverwoods,
Illinois 60015.
Recitals
A.
Issuer will design, market, and make available Cards to
various individuals.
B.
Issuer may offer Cards directly to consumers for sale on
its website, through a call center, at NBO controlled Counter Top
distribution points in malls and shopping centers, and through
other distribution channels, as approved by DFS.
C.
DFS operates a Network that will allow Cardholders to
purchase goods or services from participating Merchants using Cards
issued by Issuer.
D.
Merchants will comply with Network operating regulations
and Authorize according to their contracts.
E.
Purchase value or sales are based on the amounts
allocated to the card, pursuant to the following terms governing
the creation and use of these cards.
F.
Cardholders shall be able to use the Cards to make
purchases, within the amounts allocated to the Cards, at Merchants
honoring Discover Cards. Cardholders shall not have the ability to
make cash withdrawals unless specifically authorized by DFS under
Program provisions and tested for such functionality.
[ * * * ] * * * 1.0Definitions
The following definitions apply to the terms outlined within
this Agreement and shall have the following meanings:
a.
Account Number means the unique 16-digit number
assigned by Issuer to a Card and Card Account, as derived from the
BIN.
b.
Agent means a Person approved and/or certified by
DFS that will perform specified functions on behalf of Issuer.
c.
Agreement means this "Cash Card Issuer Agreement"
between the Issuer and DFS and shall include any attachments,
appendices, schedules, addenda, and amendments thereto.
d.
Authorization or Authorize means the
process whereby Issuer, by itself, or through one or more agents
(including, without limitation, DFS, in the course of performing
stand-in Authorization functions as described in Section 4.0 of the
Operating Regulations), determines whether to approve or decline a
Card Sale.
e.
[ * * * .]
f.
Card means either a stored-value (i) plastic card
displaying the Discover/NOVUS Acceptance Mark, or (ii) Card Account
that may be used for purchases in situations in which the
Cardholder is not physically present at a Merchant's retail
location. Cards must be produced by an authorized production
facility, and must comply with the specifications of the Technical
Specifications Manual.
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g.
Card Account means the stored-value account
represented by the Account Number assigned by Issuer.
h.
Card Sale means a Card Transaction by a
Cardholder that is either: (a) the purchase of goods or services,
or (b) the receipt of a Cash Advance.
i.
Cardholder means a person who has purchased a
Card issued by Issuer, or any person who receives or uses a card.
The person in possession of the card is the Cardholder.
j.
Card Transaction means a transaction involving a
Card, including, without limitation, any of the following: a Card
Sale, a Cash Advance, a Credit/return, a Chargeback, or an
Adjustment, as such terms are defined herein or in the Issuer
Operating Regulations
k.
Client means a Person with whom Issuer has entered into
an agreement to provide Cards to certain groups of specified
individuals or for a particular marketing program.
l.
Client Program means each separate and discrete
Card marketing or other program that Issuer has agreed to provide
in connection with a Client. [ * * * ]
m.
Discover/NOVUS Acceptance Mark means the logo
designated in the Technical Specifications Manual under Graphic
Guidelines that indicates that a Card may be used for purchases in
the Network.
n.
Governmental Requirements means any local, state
or federal laws that are applicable to the Program.
o.
Issuer Operating Regulations shall mean the
document incorporated by reference into this Agreement as Exhibit B
that describe certain of Issuer's duties and obligations with which
it must comply in order to issue Cards that may be used in the
Network.
p.
Merchant means a party who has entered into a
Merchant Services Agreement and/or a Cash Advance Participation
Agreement with Discover Financial Services, Inc., that provides the
terms and conditions governing the acceptance and Settlement of
Card Transactions between DFS and such Merchant.
q.
Network means the Discover/NOVUS Network of
Merchants.
r.
Open environment means use of gift/cash cards
bearing the Discover/NOVUS Acceptance Marks that can be used at any
participating Merchant.
s.
Person means any individual human being, or any
individual created at law, including without limitation, a
partnership or corporation.
t.
Processor means a certified processor of Card
Transactions on the Discover/NOVUS Network, including, without
limitation, Authorizations and the appropriate response to be sent
to the Merchant.
u.
Processing Services means those services listed
in Exhibit A of this Agreement.
v.
Program means the plan, described in this
Agreement and the Operating Regulations, pursuant to which Issuer
shall; (i) issue Cards to Cardholders; and (ii) use the services
offered by Discover Financial Services, Inc. to facilitate the
Authorization and Settlement of Card Transactions.
w.
Reserve Account shall have the meaning given that
term in Section 2.2.f.
x.
Reserve Account Agreement means the agreement
entered into between Issuer, DFS and the financial institution at
which the Reserve Account will be established with respect to the
terms of the Reserve Account.
y.
Settle means the act of making a
Settlement payment.
z.
Settlement means respectively, (i) for DFS,
amounts DFS is required to pay Merchants for Card Transactions, and
(ii) for Issuer, an amount payable by Issuer to DFS for Card
Transactions, as more fully described in this Agreement and Section
7.0 of the Operating Regulations.
aa.
Start-up Date means the date on which both the
Processor and the Network are ready to and capable of accepting and
processing transactions [ * * * .].
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bb. Stored Value Account shall have the meaning given to
that term in Section 2.2.f. Stored Value Account is also sometimes
referred to as "Activity Account."
cc. Technical Specifications Manual means the document
incorporated by reference into this Agreement as Exhibit C that
contains technical specifications applicable to the Program.
2.0 Provision of Services
2.1. Responsibilities of DFS.
2.1.a DFS shall provide Cardholders with point of sale access to
Merchants pursuant to current contractual arrangements with such
Merchants. DFS does not guaranty that all Merchants will accept
Cards, or that Merchants will accept all Card Transactions. In
order to be used in the Network, Cards must have the capability to
communicate with a Processor for its Authorization and Settlement
services.
2.1.b For each Card Sale, DFS will be responsible for Settlement
of the amount of such Card Sale to the Merchant pursuant to the
terms of DFS' Merchant Services Agreement with the Merchant.
2.1.c DFS will submit to Issuer or Issuer's Agent a Settlement
transmittal file (in the form and format specified in the Technical
Specifications Manual) in order for Issuer to pay DFS for Card
Transactions.
2.1.d DFS grants Issuer a [ * * * ] license to use
Account Numbers that DFS assigns to it for the Program under this
Agreement. [ * * * ], an additional allocation will
be granted to Issuer if Issuer is in compliance with the terms of
this agreement and the remaining terms of this agreement is not
less than six (6) months.
2.1.e DFS will provide Issuer with a copy of Technical
Specifications Manual that contains the graphic specifications for
the display of the Discover/NOVUS Acceptance Mark and usage of such
mark on the Card. DFS will review all card art, packaging, and
advertising and marketing materials provided by Issuer within ten
(10) Business Days of receipt, provided that DFS must receive from
Issuer and approve all card art, packaging, and advertising and
marketing materials, that show the Discover/NOVUS logo prior to
Issuer using such materials for any Cards. Items that do not
mention Discover name or brand, or the Discover/NOVUS Network, or
that do not contain the Discover/NOVUS acceptance mark do not need
to be reviewed by DFS.
2.1.f DFS has provided Issuer with a list of the names of
Processors that DFS has certified as of the date of this Agreement
to provide processing to issuers within the Network. Only certified
Processors may process transactions on the Discover/NOVUS
Network.
2.1.g DFS will provide Issuer with information, in the form of
DFS reports, with respect to the transaction fees, license fees,
and revenue share accrued and owed to DFS by Issuer for each month
by the twentieth (20 th ) day of the next succeeding
month.
2.1.h DFS will provide notification and documentation to
Merchants regarding disputes, ticket retrieval and Chargeback
requests. Issuer may not contact Merchants with respect to any
disputes, ticket retrievals or Chargeback.
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2.1.i DFS will administer the dispute process, determine the
application of Chargeback, and provide the Issuer notification of
the resolution disputes, in accordance with the Operating
Regulations and Technical Specifications Manual.
2.1.j DFS shall route Card Transaction data to Issuer or
Issuer's Agent in the manner specified in the Operating Regulations
and Technical Specifications Manual.
2.1.k DFS agrees that it will not attempt to convert any of
Issuer's Clients to an "Open" environment stored value card program
operated by DFS once Issuer has entered into an agreement with such
Client, and notified the DFS program manager of its relationship
with the Client.
2.2. Responsibilities of Issuer.
2.2.a Issuer will issue Cards [ * * * ] assigned
by DFS. Issuer must obtain DFS' prior approval of any Clients with
whom Issuer desires to create a Client Program. Issuer may make
sales presentations to any mall operating company prior to
obtaining DFS approval of the specific client. Initially approved
Clients include those listed or described in Exhibit A. Issuer may
distribute Cards pursuant to the terms of a Client Program. Issuer
is responsible for overall creative development, design and
marketing of Cards for its Clients, including creative development
of Cards and related marketing and sales materials. Issuer agrees
that the design of Cards must comply with the card specifications
outlined in the Technical Specifications Manual. Issuer must
provide all marketing materials, containing the Discover/NOVUS
acceptance mark, and Card designs to DFS for approval prior to
print or distribution.
2.2.b Cards issued by Issuer may not be used at ATMs or for any
other form of cash withdrawal without a specific additional
agreement with DFS. Cards will also be unable to be activated or
loaded with value at Merchants, and Cardholders will be unable to
obtain balance information at Merchants. The remaining balance will
be passed back to the Merchant and Cardholder in the authorization
number, which will be sent to the Merchant following a transaction
subject to the Merchant having appropriate hardware
functionality.
2.2.c Issuer agrees to comply with the Operating Regulations and
the Technical Specifications Manual. DFS may change the Operating
Regulations or Technical Specifications Manual from time to time by
sending written notice to Issuer ninety (90) days in advance.
However, certain changes to the Operating Regulations may become
effective immediately for security reasons. If there is any
conflict between this Agreement and the Operating Regulations or
Technical Specifications Manual, the terms of this Agreement will
govern.
2.2.d Issuer may designate or utilize subcontractors or Agents,
as provided in the Operating Regulations to perform its obligations
under the Agreement, provided that Issuer has first advised DFS and
received DFS' approval of any such subcontractor or Agent. DFS
acknowledges notification and approval of the Designated Processor
listed in Exhibit A. Any Agent or third party used or designated by
Issuer to perform services shall be deemed an Agent of Issuer for
all such purposes and not DFS' Agent. Issuer shall be solely
responsible for the payment of such subcontractors or Agents.
2.2.e The Issuer will approve or decline Card Sales based on the
funds value available for the Card or Card Account being offered
for use at a Merchant, and will respond with appropriate codes as
set forth in the Technical Specifications Manual. The Issuer must
pay DFS the amounts identified in
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the daily Settlement file via Fed wire or any other payment
method approved by DFS to the account and by not later than the
time specified by DFS.
2.2.f Issuer shall be responsible for obtaining the funds that
represent the stored value of each Card that it issues to a
Cardholder, and Issuer shall hold such funds in an account at a
reputable financial institution (the "Stored Value Account" or
"Activity Account"). Such amount may change from time to time
depending upon the level of value of all activated Cards. Issuer
will maintain accurate records of the value balances on each Card.
Issuer will also maintain funds in a reserve account ("Reserve
Account") at a financial institution agreed upon with DFS in an
amount specified in Exhibit A. Issuer shall not have access to the
Reserve Account, except as permitted pursuant to the terms of the
Reserve Account Agreement, and shall not remove funds from the
Stored Value Account, except through the actions of the Processor
or financial institution holding the Stored Value Account to pay
DFS any amounts Issuer owes DFS, to distribute earned fees and
funds from expired cards to Issuer and to refund excess amounts to
Issuer when approved by DFS. Issuer grants DFS a right to offset
amounts from the Reserve Account and Stored Value Account for the
purposes set forth in Section 4.0 for amounts owed by Issuer to
DFS.
2.2.g Issuer will maintain all funds received to establish the
value of Cards in a segregated account at a reputable financial
institution, and shall hold such funds pending issuance of an
Authorization for an expenditure of such funds and Issuer's
Settlement obligation to DFS for such funds that have been the
subject of a Card Sale. Issuer will remain responsible for
Settlement to DFS until all amounts have been paid to DFS.
2.2.h Issuer will be responsible for providing all customer
service to Cardholders with respect to Cards. Issuer shall provide
a Cardholder agreement with each Card that is sold or distributed
to a Cardholder, and such Cardholder agreement shall disclose all
rules, terms, limitations and conditions of use of the Card to the
Cardholder, including any mandated by Governmental Requirements.
Issuer shall also provide a toll-free telephone number and/or
Internet site access to enable the Cardholder to obtain customer
service and to complete ordinary service functions such as checking
Card balance, last transactions, etc. In all cases, Issuer will
insure that it provides an appropriate level of security for all
such inquiries and customer service issues. Issuer will provide
live operator customer service availability for not less than eight
(8) hours per day Monday through Friday, and will deliver such
customer service using service standards at least equal to those
being provided by others in the industry. Automated Response
customer support will be available at all other times. Both DFS and
Issuer will monitor call volume during non-serviced hours. Hours
will be adjusted during peak call volume times and if call volume
warrants adjustment.
2.2.i Issuer will respond to any inquiries or disputes in
accordance with the procedures specified in the Operating
Regulations and Technical Specifications Manual, and Issuer shall
adhere to any final DFS' decision with respect to a resolution of a
dispute even though such decision may require payment of amounts by
Issuer.
2.2.j Issuer will electronically submit a Client Program Plan
Description in the form of Appendix E for each Client Program [
* * * ].
2.3 Issuer Use of a Processor
2.3.a If Issuer elects to utilize the services of a Processor,
Issuer must designate the Processor where indicated on Exhibit A,
and the Processor must be approved by DFS, enter into an agreement
with
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DFS and must be tested and certified that it complies with the
applicable provisions of the Operating Regulations and the
Technical Specifications Manual.
2.3.b Issuer may elect to have a Processor perform additional
services such as, Card personalization/production, IVR support
(with not more than an eight second response time), call center
support (at least 14 hours per day), and web development, and the
like. The specific services to be provided by the Processor must be
set forth where designated on Exhibit A.
3.0 Warranties
3.1. Issuer warrants to DFS that:
3.1.a. It is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland, and has
its principal office in the State of Utah;
3.1.b. It has the corporate and legal authority and power to
enter into this Agreement and to perform its obligations under the
Program as outlined in this Agreement;
3.1.c. That all financial statements furnished to DFS are
accurate in all material respects and fairly represent, in all
material respects, the financial condition of Issuer, including
contingent liabilities of every type, which financial condition has
not changed materially or adversely as of the date of this
Agreement;
3.1.d. It owns, has licensed, or otherwise has the right to use
any trademarks, service marks, patents or other intellectual
property that are necessary for it to use in order to operate the
Program and any Client Program, and any such use will not infringe
upon the rights of any third party;
3.1.e. It operates its business in a safe and sound manner, and
adheres to all applicable federal, state and local laws and
regulations;
3.11 It is not the subject of any litigation, infringement, or
enforcement action by any Person or governmental body, except as
noted on Schedule 3.1 (f);
3.1.g. It has obtained all necessary licenses; consents or
permissions needed from any applicable governing authority to
perform its duties set forth in this Agreement.
3.2. DFS warrants to Issuer that:
3.2.a It is a corporation duly organized and validly existing
under the laws of Delaware, and has its principal office in the
State of Illinois,
3.2.b It has the corporate and legal authority and power to
enter into this Agreement and perform its obligations under the
Program as outlined in this Agreement and the Operating
Regulations,
3.2. c It owns or has the right to use, and to authorize the
limited use by Issuer of, the trademarks, service marks or other
intellectual property that is necessary for it and the Issuer to
use in order to operate the Program.
4.0 Term and Termination
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4.1. This Agreement shall commence on the Effective Date and
shall remain in force for a period of three (3) years thereafter
("Initial Term"). After the Initial Term, this Agreement shall
automatically renew for subsequent terms of one year each (each a
"Subsequent Term") unless earlier terminated by one of the parties
as set forth below.
4.2 This Agreement may be terminated:
4.2.a By either party, immediately upon notice to the other
party in the event that the other party shall be wound up or
dissolved; become insolvent; suffer a material, adverse change in
its financial condition, or repeatedly fail to pay its debts as
they come due; make an assignment for the benefit of creditors;
file a voluntary petition in bankruptcy or for reorganization or be
adjudicated as bankrupt or insolvent; or have a liquidator or
trustee appointed over its affairs and such appointment shall not
have been terminated and discharged within thirty (30) days; or
4.2.b By DFS upon two (2) business days' notice to Issuer in any
case where Issuer is not maintaining the agreed upon amount in the
Reserve Account or Stored Value Account, or Issuer has failed to
pay Settlement when due; or
4.2.c By either party upon thirty (30) days' prior written
notice to the other party in the event of any material breach of
this Agreement by such other party; provided, however, that this
Agreement shall not terminate at the end of said thirty day notice
period, if in the discretion of the party seeking to terminate, the
party in breach has cured the brea
