Document:

Exhibit
10.21

 

***
Where this marking appears through this Exhibit 10.22, information has
been omitted pursuant to a request for confidential treatment; a complete copy
of this agreement has been filed separately with the Securities and Exchange
Commission.

 

CARD PROGRAM MANAGEMENT AGREEMENT

 

This
Card Program Management Agreement (the “Agreement”)
dated as of February 1, 2010 is entered into by and between Skylight Financial, Inc. whose address is 1455 Lincoln
Parkway, Suite 600, Atlanta, Georgia 30346 (“Program
Manager”) and MetaBank, dba Meta Payment
Systems, whose address is 5501 S. Broadband Lane, Sioux Falls, South
Dakota 57108 (“Bank”) (each of Bank and
Program Manager, a “Party” and collectively, the “Parties”).

 

WHEREAS, Bank is a federally-chartered savings association,
a member of Visa, MasterCard, Discover and various other card associations and
electronic payment networks, and, among other things, issues prepaid cards and
establishes settlement accounts for the settlement of card transactions;

 

WHEREAS, Bank has developed, and shall continue to develop,
various prepaid card programs, under which it shall issue fixed and variable
denomination, reloadable and non-reloadable prepaid cards, as well as a series
of card-related products and services in conjunction therewith;

 

WHEREAS, Program Manager is in the business of marketing and
distributing prepaid cards and can provide services, either directly or through
subcontractors, to support prepaid card programs; and

 

WHEREAS, Bank desires to engage Program Manager to provide
certain program management services in connection with the Program as further
described herein, including, without limitation, the exclusive marketing and
distribution of the Cards issued by Bank under the Card Programs contemplated herein,
and Program Manager wishes to provide such services as set forth herein;

 

NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties, intending
to be legally bound, hereby agree as follows:

 

ARTICLE I — DEFINITIONS

 

SECTION 1.1
— Definitions

 

Except
as otherwise specifically indicated, the following terms shall have the
following meanings in this Agreement (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):

 

“ACH Transactions” has the meaning
set forth in Section 4.7(c).

 

“Affiliate” means, with respect to
any Person, any other Person that directly or indirectly Controls, is
Controlled by, or is under common Control with such Person.

 

“Applicable Law” means (i) System
Rules, (ii) any applicable rule or requirement of the National
Automated Clearinghouse Association, (iii) the published policies and
procedures of Bank, as promulgated by Bank’s Board of Directors in good faith
to ensure the continued safety and soundness of Bank, and (iv) any and all
laws, treaties, rules, regulations, regulatory guidance, determinations of (or
agreements with) an arbitrator or governmental agency or authority and
mandatory written direction from (or agreements with) any arbitrator or
governmental agency or authority, including, without limitation, the Bank
Secrecy Act, any and all sanctions or regulations enforced by OFAC, and statutes
or regulations of any state relating to gift cards, money transmission or
unclaimed property, that are applicable to the marketing, issuance, sale,
authorization or usage of the Cards, or otherwise applicable to any of the
Parties by law or made applicable to any Party as specifically provided for in
this Agreement, as the same may be amended and in effect from time to time
during the Term.

 

 

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“ATM” means automated teller machine.

 

“BIN” means the bank identification
number assigned to Bank by Visa U.S.A., Inc., the Interbank Card
Association number assigned to Bank by MasterCard International, Inc., the
Institution Identification Number assigned to Bank by Discover Network, Inc.,
or similar identifier assigned to Bank by other card associations or payment
systems for the purposes of identifying and routing electronic payment
transactions.

 

“Business Day” means any day
other than a Saturday, Sunday or holiday recognized by the Federal Reserve
Board.

 

“Card” means a reloadable or non-reloadable
prepaid card or other access device issued by Bank as a product of the Bank in
connection with a card program managed by the Program Manager, and pursuant
both to this Agreement and under authority from the System.  For purposes of this Agreement, a “Card” does
not include any credit card or product that accesses credit.

 

“Card Program Account Manager” has
the meaning set forth in Section 4.6.

 

“Cardholder” means (i) a
person who is issued a Card, and/or (ii) uses the Card to effect a
Transaction.

 

“Cardholder Account” has the meaning
set forth in Section 4.4.

 

“Cardholder Agreement” means a
written agreement between Bank and the Cardholder, which includes (i) the
terms and conditions applicable to such Card, and (ii) any other notices
or documents related to such Card as may be required by Bank or Applicable Law,
including, but not limited to, those disclosures required under the Electronic
Fund Transfer Act, 15 USC § 1693 et seq., and Regulation E.

 

“Cardholder Data” means any data or
information of any Cardholder that is provided to or obtained by any Party in
the performance of its obligations under this Agreement or otherwise, including
but not limited to, all lists of Cardholders, former Cardholders, and all
information relating to and identified with such Cardholders, including, but
not limited to account transaction and balance data, and “non-public personal
information” as defined by the Gramm-Leach-Bliley Act and its implementing
regulations, as amended, including but not limited to postal and e-mail
addresses and associated data (including any personally identifiable
information, personal account information, financial information, account
numbers, personal identification numbers and other related information, social
security numbers, or other non-public business or personal or financial
information) provided by the Cardholders to any Party.

 

“Cardholder Funds” means those
funds which have been received from or on behalf of a Cardholder for purposes
of being loaded to a Card, but which have not yet been redeemed.

 

“Change of Control” means, with
respect to any Person, (i) an acquisition of the voting control of such
Person (i.e., the ability to elect a majority of the members of the Board of
Directors or similar governing body of such Person) by another entity or group
(as such term is defined in Rule 13d-5 under the Securities Exchange Act
of 1934, as amended) by means of any transaction or series of transactions
(including, without limitation, any reorganization, merger or consolidation) or
(ii) a sale of all or substantially all of the assets of such Person to
any entity or entities in which the equityholders of such Person, directly or
indirectly, do not have voting control (i.e., the ability to elect a majority
of the members of the Board of Directors or similar governing body of such
entity).

 

“Claim” has the meaning set forth in Section 14.1.

 

“Confidential Information” has the
meaning set forth in Section 11.1

 

“Customer Care Center” has the
meaning set forth in Section 3.5.

 

“Discloser” has the meaning set forth
in Section 11.1.

 

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“Dispute” has the meaning set forth
in Section 14.4.

 

“***”
has the meaning set forth in Section 10.2(e).

 

“Effective Date” has the meaning set
forth in Section 10.1.

 

“GLBA” means, collectively, Title V —
Privacy of the Gramm-Leach-Bliley Act, P.L. 106-102, the Privacy Regulations
and implementing regulations promulgated thereunder, and the standards for
safeguarding customer information set forth in 12 CFR Part 364 and 16 CFR Part 314,
all as they may be amended, supplemented and/or interpreted in writing from
time to time by any federal Regulatory Authority.

 

“Gross Dollar Volume” has the meaning
set forth in Section 2.1(b).

 

“Guidelines” means the Interagency
Guidelines Establishing Standards for Safeguarding Customer Information.

 

“Indemnified Party” has the meaning
set forth in Section 14.1.

 

“Indemnifying Party” has the meaning
set forth in Section 14.1.

 

“Interchange” means the fee
paid to the issuer of a Card by a System in connection with a Transaction.

 

“Initial Term” has the meaning set
forth in Section 10.1.

 

“Mark” means the service marks and
trademarks of a Bank, Program Manager or a System, including but not limited
to, the names and other distinctive marks or logos, which identify Bank,
Program Manager or a System.

 

“Material Adverse Change” means, with
respect to either Party, an event, change or occurrence which, individually or
together with any other event, change or occurrence, has a material adverse
impact on the ability of such Party to perform its obligations under this
Agreement.

 

“Monthly System Fees” has the meaning
set forth in Section 8.2(d).

 

“***” has the meaning set forth in Section 2.1(b).

 

“NetSpend” means NetSpend
Corporation, a Delaware corporation.

 

“NetSpend ODFI Agreement” means the
ODFI Originator Agreement, dated as of January 30, 2009, by and between
NetSpend and Bank, as amended and/or restated from time to time.

 

“Nonreloadable Card” means a Card
issued under a Program that is a fixed denomination, non-reloadable Card.

 

“OFAC” has the meaning set forth in Section 4.3.

 

“OTS” means the Office of Thrift
Supervision.

 

“Person” means an individual,
corporation, partnership, limited liability company, limited liability
partnership, syndicate, trust, association, organization or other entity, or
any governmental authority.

 

“Processing Services” means those
services which are necessary to issue and service a Card and process a
Transaction in accordance with Applicable Law.

 

“Program” means a system of services
as mutually agreed by Program Manager and Bank and provided by Program Manager
and Bank pursuant to the terms of this Agreement under which Cardholders
subject to a Cardholder Agreement for such Program utilize a Card to submit
Transactions into a System utilizing a Settlement Account established by Bank
to access Cardholder Funds. This Agreement contemplates that Program Manager
may be permitted by Bank to offer multiple Programs 

 

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hereunder,
each subject to the terms hereof and the prior written approval of Bank.

 

“Program Affiliate” means a party
with whom Program Manager contracts for the purpose of marketing the Cards,
including, without limitation, (i) entities that Program Manager contracts
for the purpose of marketing the Cards to employees and/or independent
contractors of such entities (“Employers”),
and (ii) entities that Program Manager contracts for the purpose of
referring Employers to Program Manager (including referral companies and
financial institutions) (“Referral Companies”).

 

“Program Revenue” means all
income derived from a Cardholder’s use of a Card or participation in a Program,
net any amounts payable to Program Affiliates.

 

“Program Telephone Numbers and Websites” has the
meaning set forth in Section 10.3(c).

 

“Recipient” has the meaning set forth
in Section 11.1.

 

“Regulation E” means 12 CFR Part 205
and its successor provisions.

 

“Regulatory Authority” means, as the
context requires, any System, the National Automated Clearing House
Association, and any federal or state agency having jurisdiction or regulatory
powers over Bank, Program Manager, the Cards or a Program.

 

“Reloadable Card” means a Card issued
under a Program which allows a Cardholder to add additional funds to such Card
following the initial sale and loading of such Card.

 

“Renewal Term” has the meaning set
forth in Section 10.1.

 

“Settlement” means the movement and
reconciliation of funds between Bank and System members in accordance with the
System Rules to settle Transactions.

 

“Settlement Account” means the
account maintained by Bank used for Settlement of all Transactions initiated by
use of a Card(s) by or on behalf of a Cardholder.

 

“Skylight ABA Number” has the meaning
set forth in Section 4.7(b).

 

“Solicitation Notice” has the meaning
set forth in Section 2.1(c).

 

“Successor Bank” has the meaning set
forth in Section 10.3.

 

“Switchover Date” has the meaning set
forth in Section 10.3.

 

“System” means Visa U.S.A., Inc.,
MasterCard International, Inc., Discover Network, Inc., American
Express Travel Related Services Company, Inc., or any other card network
selected by Bank and agreed to by Program Manager.

 

“System Rules”  means the bylaws, operating rules and
regulations of System or any other card association operating a payment network
which is utilized by any Party hereto for the purposes of fulfilling such Party’s
obligations hereunder.

 

“Term” has the meaning set forth in Section 10.1.

 

“Third
Party Program Manager” means a third party program manager of
prepaid cards or other payment devices issued by Bank.

 

“Third
Party Processor” a third party that serves as processor with
respect to prepaid cards or other payment devices issued by Bank.

 

“***” has the meaning set forth in ***.

 

“***” has the meaning set forth in ***.

 

“Transaction” means using a
Card to: (i) make a purchase; (ii) obtain a credit for a previous
purchase; (iii) obtain cash from a an ATM; (iv) make a bill payment
or other payment to a third party; or (v) engage in any other activity
which may positively or negatively impact the balance of Cardholder 

 

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Funds
associated with such Card.

 

“Transition Period” means the period
commencing on the termination or expiration of this Agreement and continuing
for three hundred sixty five (365) calendar days, unless, to the extent
permitted by Applicable Law, such longer period is required for Program Manager
to (i) sell all remaining Cards in its inventory which contain Bank’s
Marks or (ii) complete the transfer of the Cards and Program(s) to a
Successor Bank or the wind-down of the Program(s) pursuant to Section 10.3,
in which case such period shall extend to such date that such items are
completed.

 

“U.S. Bank” means U.S. Bank National
Association.

 

“U.S. Bank Programs” means the
prepaid card programs of U.S. Bank with respect to which Program Manger serves
as the program manager.

 

“Well-Capitalized Institution” has
the meaning set forth in Section 6.2(e).

 

ARTICLE II — GENERAL DESCRIPTION OF PROGRAMS

 

SECTION 2.1
— Appointment of Program Manager

 

(a)           Bank hereby (i) appoints
Program Manager as its authorized delegate and representative to (A) assist
Bank in the development and marketing of the Program(s), (B) market and
sell Cards on behalf of Bank that meets Bank requirements, and (C) perform
services that are necessary or appropriate to support the Cards and Program(s),
solely in accordance with the terms of this Agreement; and (ii) grants
Program Manager the right to offer the Cards for sale on behalf of Bank.  Bank further appoints Company as its agent or
authorized delegate, as the case may be, for the purpose of compliance with
state money transmitter statutes and the Bank Secrecy Act.

 

(b)           Subject to Section 3.1(a),
Bank agrees to reasonably cooperate with Program Manager in the execution of
such agreements or provision of such extensions of agency, commitments,
assurances, references or such other similar items as may be requested by
Program Manager or required under Applicable Law or by any Regulatory Authority
for Program Manager and any Program Affiliate to market the Cards in any state
or territory of the United States or otherwise perform their respective
obligations hereunder, unless otherwise prohibited by Bank’s charter
restrictions, Applicable Law or any Regulatory Authority directive.

 

(c)           So long as Program Manager
is an Affiliate of NetSpend, Bank will use its commercially reasonable efforts
to promote and recommend Program Manager as a preferred program manager and
processor for payroll card programs with respect to which Bank will serve as
the issuing bank.  Without limiting the
generality of the foregoing:

 

(i)            Bank will not
directly solicit any current or prospective Program Affiliate to enter into any
agreement or other relationship with Bank or any Third Party Program Manager or
Third Party Processor pursuant to which Bank or such Third Party Program
Manager or Third Party Processor would directly (A) provide program
management and/or processing services to such Program Affiliate or (B) market,
distribute and/or reload payroll cards through such Program Affiliate.

 

(ii)           Bank further
agrees to promptly notify Program Manager in the event that any Program
Affiliate as of the Effective Date solicits Bank to provide program management
and/or processing services for such Program Affiliate in connection with the
marketing, distribution and/or reload of payroll cards that could reasonably be
construed to compete with Cards or the 

 

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Program
(a “Solicitation Notice”), unless Bank
is prohibited from providing such notice by a nondisclosure agreement entered
into by and between Bank and such Program Affiliate prior to July 1,
2009.  Bank shall not enter into a
nondisclosure agreement with an entity that is a Program Affiliate as of the
Effective Date unless such nondisclosure agreement allows Bank to provide a
Solicitation Notice to Program Manager in accordance with the immediately
preceding sentence.

 

(d)           Program Manager will use its
commercially reasonable efforts to promote Bank as a preferred issuing bank and
sponsor for payroll card programs with respect to which Program Manager serves
as program manager and processor.

 

(e)           On a monthly basis (or such
other period as the Parties may agree), the Parties will meet in good faith by
telephone or otherwise as mutually agreed (each, a “Prospect
Meeting”) to discuss the origination, and the status of the
engagement of, of Prospects and Program Manager Prospects.

 

ARTICLE III - DUTIES OF PROGRAM MANAGER

 

SECTION 3.1
— Marketing

 

(a)           Program Manager shall, in accordance
with Bank’s policies and procedures as communicated to Program Manager by Bank,
select the entities to participate in the Program as Program Affiliates.  Program Manager is hereby authorized to enter
into agreements with each Program Affiliate which sets forth the terms by which
such Program Affiliate shall be compensated for its services related to the
Program.  The Parties acknowledge and
agree that prior to any Program Affiliate offering the Cards for sale, or
distributing the Cards, if in its sole discretion Bank approves of such Program
Affiliate, which approval will not be unreasonably withheld or delayed.

 

(b)           Program Manager shall
develop Programs and promote and market Cards and Programs to prospective
Cardholders in accordance with the Bank’s instructions and the terms of this
Agreement.  Program Manager acknowledges
and agrees that Bank may require Program Manager to suspend the use of any
Program marketing materials and the issuance of Cards in a Program as may be
necessary to comply with Applicable Law or any change in a Regulatory Authority’s
interpretation of Applicable Law; provided, however, that in such event, Bank
and Program Manager will agree to an implementation process that enables
Program Manager to utilize any existing inventories of such materials to the
extent practicable and allowable under Applicable Law and System Rules.

 

SECTION 3.2
— Printing of Cards and Cardholder Agreements

 

(a)           The terms and conditions
contained in the Cardholder Agreements, including any applicable fees charged
with respect to all Cards issued hereunder, shall be determined by Bank, in
consultation with Program Manager, and may be amended by Bank from time to
time, in consultation with Program Manager, upon such notice to each Cardholder
as required by Applicable Law.  Program
Manager shall develop and submit to the Bank for final review and approval one
or more proposed Card designs and proposed terms of the Cardholder Agreement
for each Program.  From time to time,
Program Manager may submit additional or alternative Card designs and
Cardholder Agreements for each Program.

 

(b)           Bank shall be the
contracting party under all Cardholder Agreements, and shall enter into a
Cardholder Agreement with each Cardholder. 
During the Term, the relationship with each Cardholder shall be owned by
Bank.  All Cards, Cardholder Agreements
or other Program materials, including, without limitation, all marketing
materials, shall (i) identify the Bank as the issuing bank of the Cards, (ii) include
any such names, Marks, and disclosures as may be required to conform to Graphic
Standards and 

 

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Applicable
Law, and (iii) be subject to prior approval by Bank and System prior to
use.  Bank shall review and approve or
reject, with such approval not to be unreasonably withheld or delayed, those
Cardholder Agreements and Program materials proposed by Program Manager, and
obtain System approval where such approval is required under the System Rules to
implement the use of such proposed Cardholder Agreements or Program materials,
within a reasonable amount of time following receipt of the same from Program
Manager.

 

(c)           Program Manager shall
arrange and pay for production and delivery of the Cards, Card packaging,
informational disclosures, marketing materials and Cardholder Agreements;
provided, however, that Bank shall be responsible for any costs associated with
any changes to the Cards, Card packaging, informational disclosures, marketing
materials and Cardholder Agreements required by Bank, which are not required by
Applicable Law or any change in a Regulatory Authority’s interpretation of
Applicable Law.  In the event of any
modification to the Cards, Card packaging, informational disclosures, marketing
materials or Cardholder Agreements, Bank and Program Manager will agree to an
implementation process that enables Program Manager to utilize any existing
inventories of such materials to the extent practicable and allowable under
Applicable Law and System Rules.

 

SECTION 3.3 — Processing Services

 

Program
Manager, at its sole expense, shall provide for Processing Services. Any
processor retained by Program Manager to provide Processing Services must be
approved in advance by Bank, and must have executed a Processing Services
agreement with Bank.  A list of
pre-approved processors may be obtained from Bank, upon Program Manager’s
request. All Processing Services related to the Programs shall be provided
pursuant to that certain Processor Servicing Agreement, dated as of the date
hereof, between Bank and Program Manager (“Processing Agreement”),
or as otherwise mutually agreed by the Parties. 
In the event of any conflict between this Agreement and the Processing
Agreement, the terms of this Agreement shall control to the extent of such
conflict.

 

SECTION 3.4
— Accounting

 

Program Manager shall be responsible for all
accounting related to the Cards.  The
Parties agree that all accounting calculations relating to this Agreement will
be performed in accordance with generally accepted accounting principles in the
United States.  The Parties further agree
to work together in good faith to reconcile any accounting discrepancies.

 

ARTICLE IV - DUTIES OF BANK

 

SECTION 4.1
— Memberships in System

 

Bank,
as a principal member of System, shall support the sponsorship and registration
of Program Manager as a marketing agent or service provider of Bank with each
System, as applicable. However, the Parties hereto acknowledge and agree that
Program Manager assumes all risk that the Program Manager or any Program may
not be approved by any System.  Bank will
promptly provide to Program Manager copies of all correspondence and forms
relating to any Program which are submitted to or received from any
System.   Bank acknowledges and agrees
that Program Manager is entitled to enter into arrangements with the Systems
pursuant to which the Systems agree to provide Program Manager with incentives
to market and promote System-branded Cards and that Bank has no right to any portion
of such incentives.

 

SECTION 4.2
— Assessment, Development and Approval of Programs

 

(a)           Bank
shall work closely with Program Manager to develop Programs that meet Bank’s
strategic objectives and customer goals. 
Any Programs proposed by Program Manager shall be reviewed 

 

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and assessed by Bank, and shall be promptly approved
or declined in Bank’s sole discretion. Bank shall work diligently with Program
Manager to implement any approved Programs.

 

(b)           Subject
to Applicable Law, including applicable Regulatory Authority restrictions,
and the sole discretion of Bank, Bank
will use commercially reasonable efforts to support such products and features
proposed by Program Manager and approved by Bank with respect to any Program,
including, without limitation, convenience check functionality.

 

SECTION 4.3
— Issuer of Cards and Approval of Cardholders

 

Bank
shall sponsor one or more BINs for the Cards and will maintain one or more
Programs whereby it is the issuer of all Cards marketed and distributed by
Program Manager pursuant to this Agreement and in accordance with Applicable
Law.   In addition, with respect to
Programs that establish an ongoing relationship with the Cardholder, Bank shall
review customer information regarding each such Cardholder, and shall be
responsible for ensuring that each such Cardholder meets Bank’s Customer
Identification Program as required by Applicable Law.  Bank will also regularly screen all
Cardholders through Bank’s screening system implemented to comply with
Applicable Law, including, without limitation, any and all regulations enforced
by the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”).

 

SECTION 4.4 — Remittance
and Handling of Cardholder Funds; Settlement

 

(a)           All Cardholder Funds shall
be held in a pooled custodial account in which Bank shall hold all Cardholder
Funds in a fiduciary or custodial manner for the benefit of Cardholders, in
accordance with Applicable Law (the “Cardholder Account”).

 

(b)           Company and Bank acknowledge
and agree that (i) all Cardholder Funds shall be held in trust for the
benefit of the Cardholders, (ii) neither Bank nor Company have an
equitable interest in the Cardholder Funds, and (iii) the Cardholder Funds
will not be used for any other purpose.  Bank shall transfer Cardholder
Funds from the Cardholder Account to Settlement Accounts in an amount adequate
to facilitate Settlement with the System on a daily basis or as otherwise determined
by Bank.  The Parties acknowledge and
agree that Bank shall be responsible for compliance with state unclaimed
property laws as they relate to the Cards and Cardholder Funds.

 

(c)           With respect to all
Reloadable Cards, Bank shall structure the Cardholder Account in a manner
sufficient to allow for pass-through federal deposit insurance coverage under
Federal Deposit Insurance Corporation regulations.  Program Manager shall be responsible for
maintaining accurate books and records of Cardholders and Cardholder Funds that
are sufficient under Applicable Law, including, without limitation, 12 CFR §
330.5, to permit the Cardholder Funds associated with Reloadable Cards to
qualify for pass-through federal deposit insurance coverage.

 

(d)           Bank shall provide for and
facilitate Settlement of Card Transactions for all Cards issued by Bank.  To facilitate such Settlement, Bank has
established or will establish one or more Settlement Account(s) owned by
Bank.  To reflect such Settlement, Bank
shall update its account records with respect to the Cardholder Account on each
Business Day to reflect all such Settlement activity pursuant to information
provided by Program Manager.  If
necessary, Bank shall enter into an inter-bank settlement agreement with one or
more financial institutions issuing stored value cards pursuant to any card
program managed by Program Manager to facilitate settlement of transactions
effected by Bank’s Cardholders and those of such financial institution(s).

 

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SECTION 4.5
— Customer Service Standards

 

Bank
shall develop, or cause Program Manager to develop with Bank’s approval,
customer service standards for servicing that are designed to promote customer
satisfaction and to promote the preservation and growth of the customer
base.  Bank may require additional
customer service standards; if the Bank receives any guidance, complaints or
comments from any Regulatory Authority or System or is required to do so by
Applicable Law, Bank, in its sole discretion, shall cause the Program Manager
to alter or amend such customer service standards as necessary.

 

SECTION 4.6
— Bank Support

 

Within
ten (10) Business Days after the Effective Date, the Bank will designate
one of its employees as the “Card Program Account
Manager.”  The Card
Program Account Manager will serve as the single point of contact for Bank with
respect to the Program(s) and will have day-to-day authority for
undertaking to ensure Bank fulfills its obligations hereunder in a timely
manner.  The Card Program Account Manager
will be responsible for ensuring that all proposed Programs and Program changes
are promptly reviewed and approved, or, if not approved, declined with notice
detailing the reasons why.

 

SECTION 4.7
— Transition of U.S. Bank Programs; Skylight ABA Number

 

(a)           Bank agrees to use
commercially reasonable efforts to effect a smooth and orderly transition of
the U.S. Bank Programs to Bank by July 1, 2010.

 

(b)           With respect to the
transition of the U.S. Bank Programs to Bank, Bank’s obligations under Section 4.7(a) will
include, except where prohibited by Applicable Law: (i) accepting the
transfer to Bank of all cardholder funds on deposit at U.S. Bank with respect
to the U.S. Bank Programs, (ii) assuming all of U.S. Bank’s rights, duties
and obligations with respect to all U.S. Bank Program prepaid cards, cardholder
agreements and cardholder data, effective as of the transfer date, provided,
however, for the sake of clarity, that the obligations and liabilities assumed
by Bank shall not include any of U.S. Bank’s obligations and liabilities that
arose prior to the transfer date, (iii) making any and all regulatory
filings necessary to effect the transition of the U.S. Bank Programs to Bank, (iv) making
all filings and taking all other actions necessary to effect the transfer by
U.S. Bank of the related BINs and an ABA routing and transit number to Bank
(the “Skylight ABA Number”), (v) executing
and delivering, if necessary or appropriate, an account transfer agreement
containing terms and conditions generally consistent with banking industry
practice for the transfer of accounts between institutions, and (vi) executing
such other documents as may reasonably be necessary or appropriate for Bank to effect
the transition of the U.S. Bank Programs to Bank.

 

(c)           Bank will maintain the
Skylight ABA Number at all times during the Term exclusively for the Program
and any prepaid card program with respect to which NetSpend serves as program
manager and processor.   Bank will
provide Fedline terminal access to Program Manager and NetSpend that will allow
Program Manager and NetSpend to process Automated Clearing House transactions (“ACH Transactions”) using the
Skylight ABA Number, and the Parties acknowledge and agree that such ACH
Transactions will not be subject to, and will not constitute “Transactions” for
purposes of, the NetSpend ODFI Agreement or any agreement Program Manager
enters into with Bank for the processing of ACH Transactions.

 

ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PROGRAM MANAGER

 

SECTION 5.1
— Program Manager Representations and Warranties

 

Program
Manager represents and warrants to Bank as follows:

 

(a)           Program Manager is a
corporation duly incorporated, validly existing and in good

 

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standing
under the laws of Delaware and is authorized to conduct business as defined
within the Agreement in each state in which the nature of Program Manager’s
activities hereunder makes such authorization necessary.

 

(b)           Program Manager has the full power
and authority to execute and deliver this Agreement, to perform all its
obligations under this Agreement and other agreements which must be executed to
effect the services contemplated herein. 
The provisions of this Agreement and the performance by Program Manager
of its obligations under this Agreement are not in conflict with the Program
Manager’s certificate of incorporation, bylaws or any other organizational
document, agreement, contract, lease or obligation to which Program Manager is
a party or by which it is bound.

 

(c)           Except as otherwise disclosed,
neither Program Manager nor any principal of Program Manager has been subject
to the following:

 

(i)            Criminal conviction (except minor
traffic offenses and other petty offenses);

 

(ii)           Any unpaid
Federal or state tax lien;

 

(iii)          Administrative
or enforcement proceedings commenced by the Securities and Exchange Commission,
any state securities regulatory authority, Federal Trade commission, federal or
state bank regulator, or any other state or federal regulatory agency; or

 

(iv)          Restraining
order, decree, injunction, or judgment in any proceeding or lawsuit, alleging
fraud or deceptive practice on the part of Program Manager or any principal
thereof.

 

For
purposes of this subparagraph, the word “principal” shall include (x) any
person directly or indirectly owning ten percent (10%) or more of Program
Manager, (y) any officer or director of the Program Manager, or (z) any
person actively participating in the control of Program Manager’s business.

 

(d)           There is not pending, or to Program
Manager’s actual knowledge threatened, against Program Manager any litigation
or proceeding, judicial, tax or administrative, the outcome of which could
reasonably be expected to have a Material Adverse Effect with respect to the
continuing operations of Program Manager.

 

(e)           Program Manager has, on or prior to
the Effective Date, delivered to Bank complete and correct copies of its most
recent balance sheets and related statements of income and cash flow.  Program Manager’s financial statements,
subject to any limitation stated therein, which have been or which hereafter
will be furnished to Bank will fairly represent the financial condition of the
Program Manager as of the date of such financial statements.

 

SECTION 5.2 — Bank Representations and
Warranties

 

Bank hereby warrants and represents to Program Manager as follows:

 

(a)           Bank is a federally-insured
financial institution validly existing, in good standing and authorized to perform
all activities contemplated by this Agreement.

 

(b)           Bank has the full power and authority
to execute and deliver this Agreement and to perform all its obligations under
this Agreement.  The provisions of this
Agreement and the performance by Bank of its obligations under this Agreement
are not in conflict with the Banks charter, bylaws or any other organizational
document, agreement, contract, lease or obligation to which Bank is a party or
by 

 

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which
it is bound.

 

(c)           Except as otherwise disclosed,
neither Bank nor any principal of Bank has been subject to the following:

 

(i)            Criminal conviction (except minor
traffic offenses and other petty offenses);

 

(ii)           Any unpaid
Federal or state tax lien;

 

(iii)          Administrative
or enforcement proceedings commenced by the Securities and Exchange Commission,
any state securities regulatory authority, Federal Trade commission, federal or
state bank regulator, or any other state or federal regulatory agency; or

 

(iv)          Restraining
order, decree, injunction, or judgment in any proceeding or lawsuit, alleging
fraud or deceptive practice on the part of Program Manager or any principal
thereof.

 

For
purposes of this subparagraph, the word “principal” shall include (x) any
person directly or indirectly owning ten percent (10%) or more of Bank, (y) any
officer or director of the Bank, or (z) any person actively participating
in the control of Bank’s business.

 

(d)           There is not pending or threatened
against Bank, any litigation or proceeding, judicial, tax or administrative,
the outcome of which might materially adversely affect the continuing
operations of Bank.

 

(e)           Bank’s deposits are insured by the
Federal Deposit Insurance Corporation to the full extent permitted by
Applicable Law, and no proceeding has been instituted to revoke such insurance.

 

ARTICLE VI — COVENANTS

 

SECTION 6.1 — Covenants of Program Manager

 

Program
Manager covenants and agrees with Bank as follows:

 

(a)           Program Manager will, not less than
once each calendar year, provide Bank with a copy of Program Manager’s updated
balance sheet and related statements of income and cash flow.

 

(b)           Program Manager shall catalog and
maintain copies of all written consumer complaints and responses relating to
the Card or its use which are received by Program Manager.  Bank (i) shall have access to such
complaints and responses during Program Manager’s normal operating hours, and (ii) may
audit a reasonable number of such complaints. 
Program Manager acknowledges that Bank will institute a system for
tracking and resolving consumer complaints involving Cards and Programs
hereunder in a timely manner and will provide an annual report regarding consumer
complaints and their resolution to the Bank’s board of directors.

 

(c)           All material written consumer
complaints received by Program Manager relating to the Card or its use will be
reported to Bank as soon as reasonably practicable.  Any litigation or court proceedings filed
against Program Manager, relating to the Card or its use, will be immediately
reported to Bank.  Such report shall
include a copy of the court papers or proceedings, together with a summary of
the Program Manager’s position with respect to the matter, the name and address
of Program Manager’s counsel handling the matter, and the estimated likelihood
of settlement of such matter.

 

(d)           Program Manager shall obtain Bank’s
written approval prior to engaging in any oral or written correspondence
related to any Program with any Regulatory Authority having jurisdiction over 

 

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Bank.

 

(e)           Program Manager shall remain in good
standing with (i) each Regulatory Authority with jurisdiction over it, and
(ii) each System or other electronic payment network with which it may be
registered from time to time as a marketing representative, agent or service
provider.

 

(f)            Program Manager shall provide notice
to Bank within a reasonable amount of time following the occurrence of a
Material Adverse Change with respect to Program Manager.

 

SECTION 6.2 — Covenants of Bank

 

Bank
covenants and agrees with Program Manager as follows:

 

(a)           Any litigation or court proceedings
filed against Bank, relating to the Card or its use, will be immediately
reported to Program Manager.  Such report
shall include a copy of the court papers or proceedings, together with a
summary of the Bank’s position with respect to the matter, the name and address
of Bank’s counsel handling the matter, and the estimated likelihood of
settlement of such matter.

 

(b)           Bank shall promptly notify Program
Manager after Bank engages in any written correspondence related to any Program
with any Regulatory Authority having jurisdiction over Program Manager, and
shall provide Program Manager with copies of any such written correspondence
unless such disclosure is prohibited by Applicable Law.

 

(c)           Bank shall remain (i) a
federally-chartered, federally-insured financial institution, and (ii) in
good standing with (A) each Regulatory Authority with jurisdiction over
it, and (B) each System or other electronic payment network which it may
be a member of or registered with from time to time.

 

(d)           Bank shall ensure that its deposits
remain insured by the Federal Deposit Insurance Corporation in accordance with
Applicable Law.

 

(e)           Bank shall (i) maintain
sufficient capital to support its deposits and assets, (ii) remain a
well-capitalized institution, as defined under the prompt corrective actions
provisions of the Federal Deposit Insurance Act, 12 U.S.C. § 1831o and 12
C.F.R. Part 565 as enacted as of the Effective Date (a “Well-Capitalized Institution”),
provided, however, that the failure of Bank to remain a Well-Capitalized
Institution shall not constitute a breach of this Section 6.2(e)(ii) unless
such failure could reasonably be expected to have a material adverse impact on
the Program or Bank’s ability to perform its obligations hereunder, and (iii) provide
notice to Program Manager within a reasonable amount of time following the
occurrence of a Material Adverse Change with respect to Bank.

 

ARTICLE VII - COMPLIANCE

 

SECTION 7.1 — Bank Products

 

(a)            For
the avoidance of doubt, Bank and Program Manager hereby acknowledge and agree
that (i) the Cards are products of Bank, a federally-chartered financial
institution, (ii) Program Manager is Bank’s authorized delegate and
program manager, to which Bank has delegated specific responsibilities relating
to the management of the Program(s), including the marketing and sale of the
Cards, (iii) that Bank has established the Program(s), and the Program(s) will
be subject to Bank’s continued oversight and control, and (iv) Program
Manager shall submit to Bank’s oversight and control in connection with all
aspects of the Program(s) to the extent not otherwise expressly provided
herein or agreed to by the Parties, including but not limited to Program
Manager’s performance of services hereunder. 
Bank shall review reports and
financials from the Program(s), and shall meet regularly with Program Manager,
on at least an annual basis, to discuss the results of the Program(s) (including
any problems, losses or

 

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complaints, and any changes or modifications
that may be necessary to ensure the viability of the Program(s).

 

(b)           Program Manager
acknowledges that Bank has provided the Program Manager with information and
training designed to insure that Program Manager will be adequately educated
about the Bank’s products and services offered hereunder, including the
distinctions between insured and non-insured products, and relevant law that
may apply to the marketing, solicitation, and customer service activities
instituted on behalf of Bank hereunder. 
Program Manager further acknowledges that Bank will review and update
the training material on an annual basis and will take reasonable steps to
ensure that Program Manager receives training as needed.  Program Manager’s training records will be
made available for review by Bank’s Regulatory Authority.

 

(c)            Program Manager
acknowledges that Bank must adopt a compliance program to ensure adequate
monitoring, supervision, and control over the Program Manager and the
activities that the Program Manager performs on behalf of the Bank.  Such oversight includes ensuring Program
Manager’s anti-money laundering compliance programs are detailed, thorough, and
implemented accurately and fully.

 

SECTION 7.2 — Legal Compliance

 

(a)           Each Party agrees that it will comply
with the System Rules and Applicable Law in the performance of its
obligations hereunder.

 

(b)           Without limiting subsection (a) above,
the Parties acknowledge and agree that (i) Bank may delegate all or a
portion of its anti-money laundering compliance obligations under Applicable
Law, including, without limitation, the Bank Secrecy Act, to Program Manager,
and (ii) Program Manager shall develop, implement and maintain an anti-money
laundering compliance program, approved in writing by Bank, which addresses
such delegated obligations.

 

(c)           Program Manager acknowledges the
statutory authority of Bank’s federal regulator to regulate and examine and
take an enforcement action against the Program Manager with respect to the
activities performed by Program Manager as agent or representative of the
Bank.  Program Manager further
acknowledges that such Regulatory Authority (i) retains the rights to (A) require
that Bank obtain the Regulatory Authority’s approval (or non-objection) before
entering into a contractual arrangement with Program Manager and (B) approve
specific contractual language, and (ii) may institute any other
requirements or conditions relating to this Agreement that the Regulatory
Authority deems appropriate.

 

SECTION 7.3 — Audits and Regulatory Examinations

 

(a)           Program Manager agrees to: (i) submit
to any audit or examination of Program Manager’s facilities, records, and
personnel regarding the Program which may be required by any auditing function
of Bank or any Regulatory Authority or System with audit and examination
authority over Bank, to the fullest extent required by such Regulatory
Authority or System; (ii) promptly provide to Bank any information that
may be required by any auditor, Regulatory Authority or System in connection with
their audit or review of Bank or the Program(s) and reasonably cooperate
with such auditor, Regulatory Authority or System in connection with such any
audit or review; and (iii) promptly provide such other information as
Bank, System or any Regulatory Authority may from time to time reasonably
request with respect to the financial condition of Program Manager.  Bank may, upon ten (10) Business Days
prior written notice, require an annual operational audit of Program Manager’s
operations to be performed during normal business hours by Bank or a third
party designated by Bank.

 

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Bank
shall be responsible for all costs and expenses associated any inspection,
audit or examination conducted pursuant to this subsection (a).  In the event that any audit or examination
under this Section 7.3(a) is initiated or required by any Regulatory
Authority or System, Bank and Program Manager will each be responsible for 50%
of all third-party costs and expenses associated with any such audit or
examination.  In the event that any audit
or examination under this Section 7.3(a) is initiated by Bank and is
not required by any Regulatory Authority or System, Bank will be responsible
for all costs and expenses associated with any such audit or examination;
provided, however, that if such audit or examination is being conducted as a
result of a Material Adverse Change with respect to Program Manager, Program
Manager will be responsible for all costs and expenses associated any such
audit or examination.

 

(b)           Bank agrees to (i) promptly
provide Program Manager any information that may be required by any auditor,
Regulatory Authority or System in connection with any inquiry directed to
Program Manager, or their audit or review of Program Manager and reasonably
cooperate with such auditor, Regulatory Authority or System in connection with
such any inquiry, audit or review; and (ii) promptly provide such other
information as Program Manager may from time to time reasonably request
relating to the Bank or the Program(s). 
With respect to clause (i) of the foregoing, Bank and Program
Manager will each be responsible for 50% of all third-party costs and expenses
associated therewith.  With respect to clause
(ii), Program Manager will be responsible for all costs and expenses associated
therewith; provided, however, that if request is made by Program Manager a
result of a Material Adverse Change with respect to Bank, Bank will be
responsible for all costs and expenses associated any such audit or
examination.

 

SECTION 7.4 — Access to Program Documents and Information

 

(a)            Bank shall at all
times have reasonable access to and have the right to make abstracts from all
information and documents it reasonably requires with respect to the Program
which may be in the control and possession of Program Manager, including, but
not limited to, information and documents concerning Program revenues or
transactions and agreements affecting the management and administration of the
Program(s), and any other books, accounts, data, reports, papers, and computer
records directly pertaining to the subject matter of this Agreement.

 

(b)           Program Manager will
also provide to the Bank any other information requested by Bank in accordance
with industry or national banking standards as may be required, from time to
time by the System or Regulatory Authorities, to ensure that safe and sound
business practices are being followed concerning processing, Settlement and
income to the Bank.

 

ARTICLE VIII - COMPENSATION
AND EXPENSES

 

SECTION 8.1
— Expenses of Bank

 

Bank
shall be solely responsible for the following expenses:

 

(a)           Membership fees related to Bank’s own membership in the
System.

 

(b)           All fees, fines and penalties assessed by any Regulatory
Authority or System due to Bank’s actions, inactions or omissions, except to
the extent of any indemnification of Bank by Program Manager as provided in Section 14.1.

 

(c)           Bank’s own costs and overhead generated from its review,
assessment and development of the Program(s), and from its supervision and
oversight of Program Manager and the results of the 

 

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Program(s).

 

(d)           Compensation of Program Manager for its services as set
forth in Section 8.3.

 

(e)           Bank’s own internal costs and expenses incurred in
connection with maintaining the Cardholder Accounts and, except as may be
otherwise agreed herein, its own internal monitoring of the Program(s).

 

(f)            Such other services and expenses that Bank may deem
necessary or appropriate for the Program(s) and which are not the
obligation of Program Manager hereunder.

 

SECTION 8.2
— Expenses of Program Manager

 

Program Manager shall be solely responsible for the following:

 

(a)           Advertising and other expenses
associated with the marketing of Cards to potential Cardholders.

 

(b)           All fees, fines and penalties
assessed by any Regulatory Authority or System (other than Bank) due to Program
Manager’s actions, inactions, or omissions. except to the extent of any
indemnification of Program Manager by Bank as provided in Section 14.1.

 

(c)           All System fees including ATM
interchange due, ISO registration fees, program BINs/IINs fees, and
transaction fees, assessed to the Bank daily shall be paid on a daily pass
through basis.

 

(d)           All System fees assessed to the Bank
monthly (the “Monthly System Fees”),
subject to Bank’s provision to Program Manager with the Monthly Statement of a
detailed invoice setting forth such amounts and explaining each such fee or
charge.

 

(e)           All expenses associated with and
losses resulting from over limit processing, Cardholder fraud, value load
processing, value load fraud and under floor limit processing shall be paid on
a daily basis.

 

(f)            Any fees charged by a System in
relation to Program Manager’s registration, as applicable, as a marketing agent
or service provider of Bank.

 

(g)           All expenses associated with
establishing and maintaining any accounts with, or receiving services from, any
financial institution providing Settlement and all expenses in providing Bank
with account balances.

 

(h)           All
reasonable expenses incurred in connection with Bank’s completion of a due
diligence review of any third party proposed by Program Manager to perform any
of Program Manager’s obligations hereunder, which shall not exceed Five
Thousand Dollars ($5,000) for any specific matter without the prior written
approval of Program Manager.

 

(i)            All
expenses associated with Program Manager’s retention, oversight and supervision
of a processor providing Processing Services.

 

SECTION 8.3
— Compensation Payable to Program Manager

 

Program
Manager shall be entitled to the compensation as defined in Schedule A.

 

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ARTICLE IX - LIMITATION OF
LIABILITY

 

SECTION 9.1 — Limitation of Liability

 

NEITHER PARTY, NOR THEIR RESPECTIVE SUBSIDIARIES,
PARENTS OR AFFILIATES SHALL BE LIABLE TO THE OTHER PARTY TO THIS AGREEMENT OR
ITS SUBSIDIARIES, PARENT OR AFFILIATES, WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE, FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE
OR EXEMPLARY DAMAGES, INCLUDING LOST PROFITS (EVEN IF SUCH DAMAGES ARE
FORESEEABLE, AND WHETHER OR NOT ANY PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES), ARISING FROM OR RELATING TO THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, THE WRONGFUL DEATH OR INJURY OF ANY PERSON.  NOTWITHSTANDING THE FOREGOING, THE
LIMITATIONS CONTAINED IN THIS SECTION 9.1 SHALL NOT APPLY TO ANY CLAIM
THAT (A) IS SUBJECT TO INDEMNIFICATION UNDER SECTION 14.1, (B) ARISES
OUT OF A BREACH OF CONFIDENTIALITY UNDER ARTICLE XI OR A BREACH OF
INFORMATION SECURITY UNDER ARTICLE XII, OR (C) WITH RESPECT TO ANY
PARTY, ARISES OUT OF SUCH PARTY’S GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR
FRAUD.

 

SECTION 9.2 — Disclaimer of Warranties

 

ALL SERVICES PROVIDED BY THE PARTIES HEREUNDER ARE PROVIDED ON AN “AS
IS” AND “AS AVAILABLE” BASIS, AND EXCEPT AS OTHERWISE EXPRESSLY SET FORTH
HEREIN, NEITHER PARTY, NOR THEIR RESPECTIVE AFFILIATES MAKES ANY
REPRESENTATIONS OR WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES,
EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, RELATING TO OR ARISING OUT OF
THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES
ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.

 

ARTICLE X - TERM AND
TERMINATION

 

SECTION 10.1
— Term

 

The
term of this Agreement shall commence on February 1, 2010 (the “Effective Date”) and continue for
five (5) years (the “Initial Term”)
unless terminated earlier as provided below. 
After the Initial Term, the Agreement shall automatically extend for
additional periods of one year each (each, a “Renewal
Term”)(the Initial Term, collectively with any Renewal Terms,
the “Term”) unless either party
terminates this Agreement for any reason by providing written notice to the
other at least one hundred twenty (120) days prior to the commencement of the
next Renewal Term.

 

SECTION 10.2
— Termination of Agreement

 

(a)           Either Bank or Program Manager shall
have the right to terminate this Agreement upon occurrence of one or more of
the following events:

 

(i)            Failure by the
other Party to observe or perform, in any material respect, that Party’s
obligations to the other Party hereunder, so long as such failure is not due to
the actions or failure to act of the terminating Party, but only if the failure
continues for a period of (A) thirty (30) days after the non-performing
Party receives written notice from the other Party specifying the failure in
the case of a failure not involving the payment of money, or (B) ten (10) days
after the non-performing Party receives written notice from the other Party
specifying the failure in the

 

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case
of a failure to pay any amount then due hereunder; provided, however, that
either Party, in its sole discretion, may terminate this Agreement without such
a cure period if there is a repeated failure by the other Party to perform that
Party’s obligations hereunder in a manner that, in the aggregate, has a
material adverse impact on the terminating Party or the Program, so long as the
failure is not due to the actions or failure of the terminating Party.

 

(ii)           In the event any
financial statement, representation, warranty, statement or certificate
furnished to it by the other Party in connection with or arising out of this
Agreement is materially adverse to the terminating party and is untrue,
misleading or omits material information, as of the date made or delivered.

 

(iii)          The other Party (A) voluntarily
or involuntary (and such involuntary petition or proceeding is not dismissed
within sixty (60) days) commences (or is the subject of, as the case may be)
any proceeding or filing any petition seeking relief under Title 11 of the
United States Code or any other Federal, state or foreign bankruptcy,
insolvency, liquidation or similar law, (B) applies for or consents to the
appointment of a receiver, trustee, custodian, sequestrator or similar official
for such party or for a substantial part of its property or assets, (C) makes
a general assignment for the benefit of creditors, (D) commences the
winding up or liquidation of its business or affairs, or (E) takes
corporate action for the purpose of effecting any of the foregoing.

 

(iv)          Upon any change to
or enactment of or change in interpretation or enforcement of any law or
regulation which would have a material adverse effect upon such Party’s ability
to perform its obligations or such Party’s costs/revenues with respect to the
Program(s), provided that the Parties cannot find a legally workable solution
to the change in law or regulation within a reasonable amount of time.

 

(v)            Violation of any federal or state law relating to the
performance of this Agreement rendering any of the Parties unable to
substantially perform this Agreement, provided that the Parties cannot find a
legally workable solution to avoid violating the law or regulation within a
reasonable amount of time.

 

(vi)           Upon direction from any Regulatory Authority or System to
cease or materially limit performance of the rights or obligations under this
Agreement.

 

(vii)          In the event that any Regulatory Authority requires the
alteration of specific language contained in this Agreement, or imposes other
requirements or conditions relating to this Agreement, which would have a
material adverse effect upon such Party’s ability to perform its obligations or
such Party’s costs/revenues with respect to the Program(s), provided that the
Parties cannot find a legally workable solution to alteration or imposition
within a reasonable amount of time.

 

(b)           Program Manager may
immediately terminate this Agreement in the event that Bank fails to achieve
the ratios set forth on Schedule B hereto as of the end of two (2) consecutive
calendar quarters.

 

(c)           Program Manager may
immediately terminate this Agreement in the event that Bank or MFG undergoes a
Change of Control, if such Change of Control has a material adverse impact on
the Bank’s or MFG’s ability to fulfill the obligations set forth in this
Agreement.  Notwithstanding the
foregoing, if Bank or MFG undergoes a Change of Control whereby Control is
assumed by a direct competitor of Program Manager, Program Manager may
immediately terminate this Agreement.

 

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SECTION 10.3 — Termination and Transition Assistance

 

(a)           With respect to each
Program terminated as a result of the expiration or termination of this
Agreement, Program Manager may elect to either transition such Program in
accordance with Applicable Law to an alternative card issuer pursuant to Section 10.3(b) or
wind down such Program in accordance with Applicable Law pursuant to Section 10.3(c).  Each Party acknowledges that the two goals of
the Transition Period are to benefit the Cardholders by minimizing any possible
burdens or confusion and to protect and enhance the names and reputations of
the Parties, each of whom have invested their names and reputations in the
Program(s) and Cards issued hereunder. 
Unless otherwise required by Applicable Law or any Regulatory Authority,
upon the expiration or termination of this Agreement for any reason, the
Parties agree to cooperate in good faith to wind down or transition all
affected Programs in a commercially reasonable way as soon as reasonably
possible to provide for a smooth and orderly transition or wind-down.  Such cooperation will include continued
acceptance of Cards presented for payment until such Cards expire or are
cancelled as set forth below, and continued provision of customer service to
all outstanding Cardholders in accordance with the terms of this Agreement up
until the Cards expire, are terminated, or transitioned to another bank or
financial institution.

 

(b)           With respect to
Programs that Program Manager elects to transition to another card issuer
pursuant to Section 10.3(a), Bank’s obligations pursuant to Section 10.3(a) will
include, without limitation:  (A) transferring
all Cardholder Funds on deposit at Bank to another federally-insured financial
institution designated by Program Manager, which institution shall assume
responsibility for all obligations and liabilities which arise after transfer
of the Program to a successor bank (such institution, a “Successor
Bank”) including those with respect to payment of the Cardholder
Funds to Cardholders and Settlement of Transactions with the appropriate
System(s), (B) assigning all of Bank’s rights, duties and obligations with
respect to all Cards, Cardholder Agreements, Cardholder Data, and the Bank’s
relationship with each Cardholder to such Successor Bank, (C) making any
and all regulatory filings necessary to effect the transition of its
undertakings in connection with this Agreement to such Successor Bank, (D) making
all filings and taking all other actions necessary to transfer the related BINs
and the Skylight ABA Number to such Successor Bank, (E) executing and
delivering, if necessary or appropriate, an account transfer agreement
containing terms and conditions generally consistent with banking industry
practice for the transfer of accounts between institutions, and (F) executing
other documents as may reasonably be necessary for Bank to perform its
obligations under this Section 10.3. 
Bank shall provide such services without charge, provided that Program
Manager reimburses Bank for any expenses reasonably incurred by Bank in the
performance of its obligations under this Section 10.3(b).  During the Transition Period, the Parties
shall continue to be bound by and comply with the terms of this Agreement and
perform all of their obligations hereunder until such date as Program Manager
notifies Bank that the transition of the Program(s) to the Successor Bank
is complete.

 

(c)           In the event of an
expiration or termination of this Agreement, the Parties agree to use the
following process or such other similar processes that are mutually agreed by
Bank and Program Manager at such time:

 

(i)            As
soon as reasonably possible after expiration of this Agreement or receipt or
delivery of a termination notice, Program Manager, or Bank, as applicable, will
provide to the other Party in writing a proposed transition plan, detailing (A) for
each Program, whether the Program is to be wound down or transferred to a
Successor Bank; and (B) a proposed timeline, which shall designate a
schedule of dates as of which each Program will be wound down or transferred
from Bank to a Successor Bank (each, a “Switchover Date”).  Bank and Program Manager shall meet promptly
thereafter to finalize a mutually agreed transition plan and Switchover
Date.  Bank shall use commercially
reasonable efforts to obtain all approvals from any System or Regulatory Authority
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Transition Period to be sufficient to permit Program Manager to sell
all remaining unsold Cards which contain Bank’s Marks.

 

(ii)           As
soon as possible, but no later than ten (10) Business Days, after the
Switchover Date, each of Bank and Program Manager shall submit to the other an
invoice for any costs, expenses or other amounts due and owing by the other as
of the Switchover Date, which amounts shall be netted and the Party owing the
greater amount shall pay the net amount to the other Party within thirty (30)
calendar days thereafter.

 

(iii)          If
Program Manager elects not to transition an affected Program to a Successor
Bank pursuant to Section 10.3(a), Bank and Program Manager shall continue
to be bound by and comply with the terms of this Agreement and perform all of
their obligations hereunder during the Transition Period until such time as all
Cards expire or are canceled pursuant to and consistent with the Cardholder
Agreements, or such earlier date, as permitted by Applicable Law, and as
mutually agreed by Bank and Program Manager; provided that the Parties agree
that such Cards will be treated in accordance with the following principles:

 

(A)          With respect to Reloadable Cards, the affected Cardholders
will be given at least sixty (60) calendar days notice of termination; and

 

(B)           With respect to Nonreloadable Cards, the Cards will be
permitted to “wind down” until all of such Nonreloadable Cards have expired in
accordance with their terms or the balance related to such Cards has been
depleted, whichever occurs first.

 

During the Transition Period, Program Manager agrees to continue to
provide customer service to the affected Cardholders in accordance with the
terms of this Agreement.  In the event
that Program Manager elects not to transition an affected Program to a
Successor Bank pursuant to Section 10.3(a) or Program Manager fails
to continue to provide customer service to the affected Cardholders during the
Transition Period in accordance with the terms of this Agreement, Program
Manager shall, in its sole discretion, either (i) transfer to Bank control
of the toll free telephone numbers and websites used by Program Manager with
respect to such Program (the “Program Telephone Numbers
and Websites”) or (ii) re-direct Cardholders using the
Program Telephone Numbers and Websites to such toll-free telephone numbers and
websites as designated by Bank.

 

(f)    In no event will any Party
make any public statement or customer communication regarding the termination
or wind-down of this Agreement, or any Cards or Programs without the express
prior written approval of the other Party, which approval shall not be unreasonably
withheld or delayed.  Notwithstanding the
foregoing, each Party may communicate the termination or expiration of this
Agreement to any third party with which it has contracted to provide services
for the affected Cards and/or Programs (e.g., affected Systems) and Program
Manager may communicate the termination or expiration of this Agreement to any
third party with which it desires to negotiate to serve as the Successor Bank
for the affected Program(s).

 

ARTICLE XI — CONFIDENTIALITY &
DATA SECURITY

 

SECTION 11.1
— Confidential Information

 

The
term “Confidential Information”
shall mean this Agreement and any schedule, exhibit, attachment or amendment
hereto; any information concerning any Program, the objectives of any Program
and the financial results of the Program(s); any marketing plan for any Program
and any marketing materials for any Program which are not publicly available;
and all proprietary information, 

 

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data,
trade secrets, business information and other information of any kind
whatsoever which a Party (“Discloser”)
discloses, in writing, orally or visually, to another Party (“Recipient”) or to which Recipient
obtains access in connection with the negotiation and performance of this
Agreement. Cardholder Data shall not be Confidential Information, but rather
shall be subject to the provisions of Article XII below.  Confidential Information shall not include
information that: (i) is already rightfully known to the Recipient at the
time it obtains Confidential Information from the Discloser; (ii) is or
becomes generally available to the public other than as a result of disclosure
in breach of this Agreement or any other confidentiality obligations; (iii) is
lawfully received on a non-confidential basis from a third party authorized to
disclose such information without restriction and without breach of this
Agreement; (iv) is contained in, or is capable of being discovered through
examination of publicly available records or products; or (v) is developed
by Program Manager or Bank without the use of any proprietary, non-public
information provided by the other Party.

 

SECTION 11.2 — Use and
Disclosure of Confidential Information

 

(a)           Each Recipient
shall use and disclose the Confidential Information of the Discloser only for
the purpose of performing its obligations or enforcing its rights with respect
to any Program or as otherwise expressly permitted by this Agreement, and shall
not accumulate in any way, disclose or make use of such Confidential
Information for any other purpose.  Each
Recipient may disclose Confidential Information to the extent such Confidential
Information is required to be disclosed by Applicable Law, including in the
course of an examination by a Regulatory Authority; provided (i) that,
except in connection with disclosure in the ordinary course of an examination
by a Regulatory Authority, the Party subject to such Applicable Law shall
notify the Discloser of any such use or requirement prior to disclosure of any
Confidential Information obtained from the Discloser in order to afford the
Discloser an opportunity to seek a protective order to prevent or limit
disclosure of the Confidential Information to third parties and (ii) that
the Party subject to such Applicable Law shall disclose Confidential
Information of the Discloser only to the extent required by such Applicable
Law.

 

(b)           Each Recipient
shall (i) limit access to the Discloser’s Confidential Information to
those employees, authorized agents, vendors, consultants, service providers and
subcontractors who have a reasonable need to access such Confidential
Information in connection with the Agreement and applicable Program(s); and (ii) ensure
that any person with access to the Discloser’s Confidential Information is
bound to maintain the confidentiality of Confidential Information and maintains
the existence of this Agreement and the nature of their obligations hereunder
strictly confidential.

 

(c)           Each Recipient
agrees that any unauthorized use or disclosure of Confidential Information of
the Discloser might cause immediate and irreparable harm to the Discloser for
which money damages might not constitute an adequate remedy.  In that event, the Recipient agrees that
injunctive relief may be warranted in addition to any other remedies the
Discloser may have.  In addition, the
Recipient agrees promptly to advise the Discloser by telephone and in writing
via facsimile of any security breach that may have compromised any Confidential
Information, of any unauthorized misappropriation, disclosure or use by any
person of the Confidential Information of the Discloser which may come to its
attention and to take all steps at its own expense reasonably requested by the
Discloser to limit, stop or otherwise remedy such misappropriation, disclosure
or use.

 

SECTION 11.3 — Return of
Confidential Materials

 

Upon the termination or expiration of this Agreement and any applicable
Transition Period, or at any time upon the reasonable request of a Discloser,
the Recipient shall return (or destroy if so directed by the Discloser) all
Confidential Information in the possession of the Recipient or in the
possession of any representative, contractor or third party of the Recipient.  Notwithstanding the foregoing, a Recipient in
possession of tangible property containing the Discloser’s Confidential
Information may retain one archived copy of such material, subject to the terms
of this Agreement, which may be used solely for regulatory purposes and may not
be used for any other purpose. 
Compliance with this Section 11.3 shall

 

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be
certified in writing, including a statement that no copies of Confidential
Information have been retained, except as necessary for regulatory purposes.

 

SECTION 11.4
— Non-Solicitation of Employees

 

Each
Party agrees that during the term of this Agreement it will not seek out or
induce any person (by offering employment or otherwise) who is an employee of
the other Party to terminate their employment with the other Party.  For purposes of clarity, this
non-solicitation provision does not apply to those employees responding to a
general advertisement.

 

SECTION 11.5
— Media Releases

 

All
media releases, public announcements and public disclosures by Bank or Program
Manager, or their representatives, employees or agents, relating to this
Agreement or the name or Marks of Bank or Program Manager, any Bank or Program Manager
affiliate or supplier, including, without limitation, promotional or marketing
material, but not including any disclosure required by legal, accounting or
regulatory requirements beyond the reasonable control of the releasing Party,
shall be coordinated with and approved by Program Manager or Bank,
respectively, in writing prior to the release thereof.

 

ARTICLE XII — DATA SECURITY

 

SECTION 12.1 — General

 

The
purpose of this Article XII is to ensure that this Agreement conforms to
the applicable provisions of the Gramm-Leach-Bliley Act and the System Rules and
otherwise set forth the Parties’ agreement with respect to the shared use and
disclosure of Cardholder Data.  All
sharing, use and disclosure of Cardholder Data under this Agreement shall be subject
to the provisions of this Article XII. 
Each Party will establish and maintain appropriate administrative,
technical and physical safeguards designed to (i) protect the security,
confidentiality and integrity of the Cardholder Data, (ii) ensure against
any anticipated threats or hazards to its security and integrity, (iii) protect
against unauthorized access to or use of such information or associated records
which could result in substantial harm or inconvenience to any Cardholder or
applicant; and (iv) ensure the proper disposal of Cardholder Data.  Such safeguards shall be established in
accordance with Applicable Law, including, without limitation, Section 501
of GLBA and the Interagency Guidelines Establishing Standards for Safeguarding
Customer Information adopted pursuant to Section 501 of GLBA.  Each Party shall use the same degree of care
in protecting the Cardholder Data against unauthorized disclosure as it accords
to its other confidential customer information, but in no event less than a reasonable
standard of care.  In the event either
Bank or Program Manager becomes aware of any unauthorized use, modification,
destruction or disclosure of, or access to, Cardholder Data, such Party shall
immediately notify the other Party and shall cooperate with such other Party, (x) to
assess the nature and scope of such incident, (y) to contain and control
such incident to prevent further unauthorized access to or use of Cardholder
Data, and (z) to provide prompt notice to affected Cardholders.  The Party through which such unauthorized
use, modification, destruction, disclosure or access occurred shall bear the
cost and expenses of any notice or other action required due to unauthorized
use, modification, destruction or disclosure of, or access to, Cardholder Data.

 

SECTION 12.2
— Ownership of Cardholder Data and Privacy Policy

 

As
between the Parties, during the Term of this Agreement, the Cardholder Data
shall be the property of and owned by Bank and shall be subject to Bank’s
Privacy Policy.  Bank agrees that at all
times its Privacy Policy shall permit (i) Bank to share Cardholder Data
with Program Manager and each person or entity with which Program Manager
contracts to perform services in connection with the applicable Program, and (ii) Program
Manager to use such Cardholder Data to market other products and services to
Cardholders.  Bank shall develop, and
Program Manager shall provide Cardholders with, such

 

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notices,
opt-ins, opt-outs and other disclosures to the extent necessary to permit,
subject to Applicable Law, Bank to share such information with Program Manager
and to permit Program Manager to use and disclose such information for
marketing purposes in each of the jurisdictions where Cards are offered,
subject to Applicable Law.  During normal
business hours and upon ten (10) calendar days prior written notice, Bank
has the right to inspect Program Manager’s records to ensure that Program
Manager complies with the opt-out elections made by Cardholders.  Products or services provided to a Cardholder
by Program Manager, and any information regarding such Cardholder obtained by
Program Manager in connection therewith, which are outside the scope of this
Agreement, will, following the termination or expiration of this Agreement,
remain the property of Program Manager.

 

SECTION 12.3
— Use and Disclosure of Cardholder Data

 

(a)           Neither Party shall use, or
permit to be used, the Cardholder Data, except as provided in this Article XII.    Bank agrees that, during and after the Term
of this Agreement, it shall not use, nor permit any third party other than
Program Manager or its designated Program Affiliate(s) to use, any
Cardholder Data other than as necessary to perform Bank’s regulatory
obligations hereunder or as required to comply with Applicable Law.

 

(b)           Each Party, and each Person
with which either Party contracts to perform any portion of such Party’s
obligations hereunder may receive, use and disclose the Cardholder Data with
respect to the relevant Program(s) solely to the extent permitted by this Article XII
and in compliance with Applicable Law and the Privacy Policy (i) for
purposes of promoting the Cards and Programs, (ii) as otherwise necessary
to carry out its obligations under this Agreement, and (iii) as otherwise
permitted by the Privacy Policy and Applicable Law.   Neither Party shall, directly or indirectly,
sell or otherwise transfer any right in or to the Cardholder Data other than as
provided herein.

 

(c)           During the Term of this
Agreement, the Cardholder Data shall be owned by Bank, but the manner in which
such Cardholder Data may be used, shared and disclosed by the Parties and/or
the customer during the Term shall be as set forth herein.

 

(d)           Each Party may disclose the
Cardholder Data in compliance with Applicable Law and the Privacy Policy
solely:

 

(i)            to any System
or other entity to which disclosure is necessary in connection with the
processing a Transaction;

 

(ii)           to its
subcontractors in connection with a permitted use of such Cardholder Data under
this Article XII, provided that each such subcontractor agrees in writing
to maintain all such Cardholder Data as strictly confidential in perpetuity and
not to use or disclose such information to any person other than Program
Manager or Bank, except as required by Applicable Law or any Regulatory
Authority (after giving Bank or Program Manager ,as applicable, prior notice
and an opportunity to defend against such disclosure); provided, further, that
each such subcontractor maintains, and agrees in writing to maintain, an
information security program that is designed to protect Cardholder Data and
information related to Transactions, and which complies with the requirements
under Applicable Law;

 

(iii)          to its
employees, consultants, attorneys and accountants with a need to know such
Cardholder Data in connection with a permitted use of such Cardholder Data
under this Article XII; provided that (A) any such person is bound by
terms substantially similar to this Article XII as a condition of
employment or of access to Cardholder Data or by professional

 

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obligations
imposing comparable terms; and (B) such Party shall be responsible for the
compliance by each such person with the terms of this Article XII

 

(iv)          to any
Regulatory Authority with authority over Program Manager (A) in connection
with an examination of either Party; or (B) pursuant to a specific
requirement to provide such Cardholder Data by such Regulatory Authority or
pursuant to compulsory legal process; provided that such Party seeks the full
protection of confidential treatment for any disclosed Cardholder Data to the
extent available under Applicable Law governing such disclosure, and with
respect to clause (B), to the extent permitted by Applicable Law, such Party (1) provides
at least ten (10) Business Days’ prior notice of such proposed disclosure
to the other Party if reasonably possible under the circumstances, and (2) seeks
to redact the Cardholder Data to the fullest extent possible under Applicable
Law governing such disclosure;

 

(e)           Notwithstanding the
foregoing, Program Manager shall be permitted to disclose the Cardholder Data
in compliance with Applicable Law and the Privacy Policy to any third party for
purposes of marketing other goods or services to the extent permissible under
Applicable Law and the Privacy Policy.

 

SECTION 12.4
— Treatment of Cardholder Data Upon Expiration or Termination

 

With
respect to the sharing, use and disclosure of Cardholder Data following the
expiration or termination of this Agreement in its entirety:

 

(a)           the rights and obligations
of the Parties under this Article XII with respect to affected Cardholder
Data shall continue through any Transition Period; and

 

(b)           The manner in which
Cardholder Data may be used, shared and disclosed by the Parties and/or the
customer after the expiration or termination of this Agreement shall be as set
forth herein.

 

SECTION 12.5
— Additional Products & Services

 

During
the Term of this Agreement and with Bank’s approval, which shall not be
unreasonably withheld or delayed, Program Manager shall be permitted to offer
and market, consistent with Applicable Law and the Privacy Policy, additional
products and services that are not included in an existing Program, including,
without limitation, third party products and services, to all or a portion of
existing Cardholders.

 

SECTION 12.6
— Data Security

 

Program
Manager agrees to and represents to Bank that it (and/or any of its
subcontractors) has implemented a security program including measures designed
to meet the objectives of the Guidelines. 
At all times during the Term, Program Manager shall be in compliance
with all information and data security requirements promulgated by the System
and applicable to card issuers (as set forth in the System Rules), the Payment
Card Industry Data Security Standard and the Guidelines, as the same may be
revised from time to time.  Program
Manager shall provide Bank with copies of all reports on compliance, quarterly
and annual status forms and other reports filed by Program Manager with any
System in accordance with the System Rules. 
During normal business hours and upon twenty (20) calendar days prior
written notice, or such other time as required by Applicable Law or the
Regulatory Authority, Bank has the right to inspect, no more than once during
any consecutive twelve (12) month period unless required more frequently by
Applicable Law or the Regulatory Authority, Program Manager’s security program,
associated audit reports, summaries of test results or equivalent measure taken
by Program Manager , and any third party engaged by Program Manager to perform
any of Program Manager’s

 

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obligations
hereunder, to ensure that its security measures meet the objectives of the
Guidelines in accordance with the System Rules and this Agreement.

 

ARTICLE XIII - INSURANCE

 

SECTION 13.1 — Insurance

 

Each
Party shall maintain, throughout the Term, appropriate comprehensive general
liability (which shall include contractual liability), errors and omissions,
bodily injury, property damage, and employee theft and dishonesty insurance
policies, the limit of which shall be no less than a combined single limit of
One Million Dollars ($1,000,000) per occurrence.

 

ARTICLE XIV - GENERAL PROVISIONS

 

SECTION 14.1 — Indemnification

 

(a)           Program Manager covenants
and agrees to indemnify and hold harmless Bank, its parent, subsidiaries or
affiliates, and their respective officers, directors, employees and permitted
assigns, as such, against any and all liability, damages, costs, expenses,
including reasonable legal fees and expenses, for any third party claim or
demand, including, without limitation, any fees or penalties assessed by any
System or Regulatory Authority (“Claim”),
arising out of or related to: (i): Program Manager’s breach of a
representation, warranty, covenant or obligation under this Agreement, (ii) the
gross negligence, fraud or willful misconduct of Program Manager, (iii) any
claim relating to obligations owed to or by Program Manager  or any third party retained by it. This
provision shall not apply to the extent Bank is obligated to provide indemnity
under sub paragraph (b) below.  In
the event of any conflict between this Section 12.1 and any other
provision of this Agreement, this Section 12.1 shall control.

 

(b)           Bank covenants and agrees to
indemnify and hold harmless Program Manager, its parent, subsidiaries or
affiliates, and their respective officers, directors, employees and permitted
assigns, as such, against any Claim arising out of or related to: (i): Bank’s
breach of a representation, warranty, covenant or obligation under this
Agreement, (ii) the gross negligence, fraud or willful misconduct of Bank,
(iii) any claim relating to obligations owed to or by Bank or any third
party retained by it. This provision shall not apply to the extent Program
Manager is obligated to provide indemnity under sub paragraph (a) above.

 

(c)           If any Claim is asserted
against any party or parties (individually or collectively, the “Indemnified Party”) by any person
who is not a Party to this Agreement in respect of which the Indemnified Party
may be entitled to indemnification under the provisions of subsections (a), (b) or
(c) above, written notice of such Claim shall promptly be given to any
Party or Parties (individually or collectively, the “Indemnifying
Party”) from whom indemnification may be sought.  The Indemnifying Party shall have the right,
by notifying the Indemnified Party within ten (10) Business Days of its
receipt of the notice of the Claim, to assume the entire control (subject to
the right of the Indemnified Party to participate at the Indemnified Party’s
expense and with counsel of the Indemnified Party’s choice) of the defense,
compromise or settlement of the matter, including, at the Indemnifying Party’s
expense, employment of counsel of the Indemnifying Party’s choice.  If the Indemnifying Party gives notice to any
Indemnified Party that the Indemnifying Party will assume control of the
defense, compromise or settlement of the matter the Indemnifying Party will be
deemed to have waived all defenses to the claims for indemnification by the
Indemnified Party with respect to that matter. 
Any damage to the assets or business of the Indemnified Party caused by
a failure of the Indemnifying Party to defend, compromise or settle a claim or
demand in a reasonable and expeditious manner, after the Indemnifying Party has
given notice that it will assume control of the defense, shall be included in
the damages for which the Indemnifying Party shall be obligated to indemnify
the Indemnified Party.  The Indemnifying
Party shall not compromise or settle a Claim against the Indemnified Party
without the Indemnified Party’s consent, which shall not be unreasonably
withheld or delayed.

 

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SECTION 14.2
— Disclosure

 

(a)           Each Party shall promptly
notify the other of any action, suit, proceeding, facts and circumstances, and
the threat of reasonable prospect of same, which might give rise to any
indemnification hereunder or which might materially and adversely affect either
Party’s ability to perform this Agreement.

 

(b)           Each Party represents and
warrants to the other that it has no knowledge of any pending or threatened
suit, action, arbitration or other proceedings of a legal, administrative or
regulatory nature, or any governmental investigation, against it or any of its
affiliates or any officer, director, or employee which has not been previously
disclosed in writing and which would materially and adversely affect its
financial condition, or its ability to perform this Agreement.

 

SECTION 14.3 — Use of Marks

 

(a)            Bank’s Marks.  Bank hereby grants to Program Manager during
the Term, and any wind-down or Transition Period, a non-exclusive,
royalty-free, non-assignable license, in the United States, to use Bank’s Marks
(and the copyrights that exist in such Marks, if any) as the Bank authorizes in
connection with the Program(s), including on the Cards, on account statements,
on Cardholder Agreements, and in other communications to Cardholders and
prospective Cardholders.  Bank’s Marks
shall be used only in the forms and format expressly approved by Bank, which
approval shall not be unreasonably withheld, condition or delayed.  Except as provided herein, it is expressly
agreed that neither Program Manager nor any Cardholder is acquiring any right,
title or interest (other than the foregoing license rights) in Bank’s Marks,
which shall remain the property and/or rights of Bank.  Program Manager agrees that it shall not
challenge the title or any rights of Bank in and to Bank’s Marks.

 

(b)           Processor Marks.  Program Manager hereby grants to Bank during
the Term, and any wind-down or Transition Period, a non-exclusive,
non-assignable license, in the United States, to use Program Manager’s Marks
(and the copyrights that exist in such Marks, if any) as Program Manager
authorizes in connection with the Program(s), including on the Cards, on
account statements, on Cardholder Agreements, and in other communications to
Cardholders and prospective Cardholders. 
Program Manager’s Marks shall be used only in the forms and format
expressly approved by Program Manager, which approval shall not be unreasonably
withheld, condition or delayed.  Except
as provided herein, it is expressly agreed that neither Bank nor any Cardholder
is acquiring any right, title or interest (other than the foregoing license
rights) in Program Manager’s Marks, which shall remain the property and/or
rights of Program Manager.  Bank agrees
that it shall not challenge the title or any rights of Program Manager in and
to Program Manager’s Marks.

 

SECTION 14.4  — Third Party Services

 

Program Manager shall obtain Bank’s prior written approval, which Bank
may grant or deny in its reasonable discretion, before retaining any Program
Affiliate, and will assist Bank in obtaining such due diligence materials from,
or agreements with, any proposed Program Affiliate that Bank may deem
reasonably necessary or that may otherwise be required by Applicable Law.  Bank’s approval of any proposed Program
Affiliate shall not in any way relieve Program Manager of its duties and
obligations under this Agreement, nor shall such approval constitute a
representation or warranty by the Bank that the services to be performed or
products to be furnished by such Program Affiliate will be performed as agreed
or represented.

 

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SECTION 14.5
— Relationship of Parties

 

Bank
and Program Manager agree they are independent contractors to each other in
performing their respective obligations hereunder.  Nothing in this Agreement or in the working
relationship being established and developed hereunder shall be deemed, nor
shall it cause, Bank and Program Manager to be treated as partners, joint
ventures, or otherwise as joint associates for profit.  Notwithstanding the foregoing, to extent
required by Applicable Law, Bank’s appointment of Program Manager as Bank’s
authorized representative will establish an agency relationship, limited
strictly to the rights, duties and obligations as set forth herein.  Accordingly, Program Manager hereby agrees as
follows:

 

(a)           Program Manager shall serve
as Bank’s representative or agent for purposes of rendering the marketing,
solicitation, sales and distribution services and other related services as set
forth herein.

 

(b)           Program Manager acknowledges
Bank’s right to monitor and review the activities Program Manager performs for
Bank hereunder;

 

(c)           Program Manager acknowledges
the statutory authority of Bank’s Regulatory Authority to regulate and examine
and take an enforcement action against the Program Manager with respect to the
activities performed by Program Manager as agent or representative of the Bank;

 

(d)           Program Manager acknowledges
that Bank has provided the Program Manager with information and training
designed to insure that Program Manager will be adequately educated about the
Bank’s products and services offered hereunder, including the distinctions
between insured and non-insured products, and relevant law that may apply to
the marketing, solicitation, and customer service activities instituted on
behalf of Bank hereunder;

 

(e)           Program Manager acknowledges
that Bank will review and update the training material on an annual basis and
will ensure that Program Manager receives training as needed; Program Manager’s
training records will be made available for review by Bank’s Regulatory
Authority;

 

(f)            Program Manager acknowledges
that Bank must adopt a detailed compliance program to ensure adequate
monitoring, supervision, and control over the Program Manager and the
activities that the Program Manager performs on behalf of the Bank.  Such oversight includes ensuring Program
Manager’s own anti-money laundering compliance programs are detailed, thorough,
and implemented accurately and fully.

 

(g)           Program Manager acknowledges
that Bank will undertake an annual review of the compliance program conducted
under the auspices of the Bank’s compliance officer to determine if Program
Manager is operating in compliance with the Bank’s established policies and
procedures regarding the marketing, solicitation, customer service, or other
activities related to the Bank’s authorized banking products or services;

 

(h)           Program Manager acknowledges
that Bank will institute a system for tracking and resolving consumer
complaints involving Cards and Programs hereunder in a timely manner and will
provide an annual report regarding consumer complaints and their resolution to
the Bank’s board of directors;

 

(i)            Program Manager acknowledges
that a review and approval process will be undertaken by Bank for all Card and
Program disclosures, advertising, and other promotional material;

 

(j)            Program Manager acknowledges
that the Bank and Program Manager, in its capacity as the Bank’s authorized delegate
and representative, are both subject to control and supervision by Bank’s
Regulatory Authority.  This control and
supervision includes, but is not limited to, the ability to require that Bank
obtain it’s Regulatory Authority’s approval (or non-objection) before entering
into a contractual arrangement with Program Manager and the right of Bank’s
Regulatory Authority to approve specific contractual language;

 

(k)           Program Manager acknowledges
that Bank’s Regulatory Authority may require both Bank and the Program Manager,
in its capacity as the Bank’s authorized delegate and representative to submit
periodic reports to Bank’s Regulatory Authority;

 

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(l)            Program Manager acknowledges
that Bank’s Regulatory Authority may require the Bank to modify or terminate
its relationship with the Program Manager at any time; and

 

(m)          Bank’s Regulatory Authority
may institute any other requirements or conditions that it deems appropriate
for that particular purpose.

 

SECTION 14.6
— Governing Law

 

The
Parties acknowledge that Bank, as a federally charted savings bank, is
regulated by the OTS, and is therefore subject to federal law, and entitled to
preemption from state laws to the fullest extent permitted by law.  In any matters not so preempted (if any) this
Agreement shall be governed by the internal laws, and not by the laws regarding
conflicts of laws, of the State of South Dakota.  Each Party hereby submits to the jurisdiction
of the courts of such state, and (subject to the Bank’s reservation of
preemption rights above) waives any objection to venue with respect to actions
brought in such courts.

 

SECTION 14.7 — Force Majeure

 

No Party shall be liable for any failure or delay on its part to
perform, and shall be excused from performing any of its non-monetary
obligations hereunder if such failure, delay or non-performance results in
whole or in part from any cause beyond the absolute control of the Party,
including without limitation, any act of God, act of war, riot, actions of
terrorists, earthquake, fire, explosion, natural disaster, flooding, embargo,
sabotage, government law, ordinance, rule, regulation, order or actions.  Any Party desiring to rely upon any of the
foregoing as an excuse for failure, default or delay in performance shall, when
the cause arises, give to the other Parties prompt notice in writing of the
facts which constitute such cause; and, when the cause ceases to exist, give
prompt notice thereof to the other Parties. 
This Section 14.7 shall in no way limit the right of any Party to
this Agreement to make any claim against third parties for any damages suffered
due to said cause.  If any performance
under this Agreement is postponed or extended for longer than sixty (60)
calendar days any Party may, by written notice to the other Parties, terminate
this Agreement immediately.

 

SECTION 14.8
— Severability

 

In
the event that any part of this Agreement is deemed by a court, Regulatory
Authority, System, or other public or private tribunal of competent
jurisdiction to be invalid or unenforceable, such provision shall be deemed to
have been omitted from this Agreement. The remainder of this Agreement shall
remain in full force and effect, and shall be modified to any extent necessary
to give such force and effect to the remaining provisions, but only to such
extent.

 

SECTION 14.9
— Survival

 

The
Parties agree that the following sections will survive termination:  Article IX (Limitation of Liability); Section 10.3
(Termination and Transition Assistance); Article XI (Confidentiality); Article XII
(Data Security); Section 14.1 (Indemnification); Section 14.3 (Use of
Marks); Section 14.6 (Governing Law); and Sections 14.8 through 14.16.

 

SECTION 14.8
— Successors and Third Parties

 

Except as limited by Section 14.9, this Agreement and the rights
and obligations hereunder shall bind, and inure to the benefit of the Parties
and their successors and permitted assigns.

 

SECTION 14.9
— Assignments

 

Neither Party may assign this Agreement or any of
its rights or obligations hereunder, by operation of law or otherwise, without
the prior written consent of the other Party, which consent shall not

 

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be
unreasonably withheld, provided that the non-assigning Party’s consent need not
be obtained in connection with the assignment of this Agreement pursuant to a
merger by the assigning Party with, or sale of all or substantially all of its
assets, stock or securities to, any entity or controlled affiliate thereof that
(a) has a net worth and cash flow as of the date of the merger or sale at
least as much as the net worth and cash flow of the assigning Party on such
date; and in each case (b) is not currently subject to any written order
or action by any Regulatory Authority. 
Notwithstanding the foregoing, Bank may not assign this Agreement or any
of its rights or obligations hereunder other than to a federally-chartered,
federally-insured financial institution.

 

SECTION 14.10
— Notices

 

All
notices, requests and approvals required by this Agreement shall be in writing
addressed/directed to the other Party at the address and facsimile set forth
below, or at such other address of which the notifying Party hereafter receives
notice in conformity with this section. 
All such notices, requests, and approvals shall be deemed given upon the
earlier of receipt of facsimile transmission during the normal business day or
actual receipt thereof.  All such
notices, requests and approvals shall be addressed as follows:

 

	
  If to Bank:

  	
  MetaBank
  dba Meta Payment Systems

  
	
   

  	
  5501
  S. Broadband Lane

  
	
   

  	
  Sioux
  Falls, SD 57108

  
	
   

  	
  Attention:
  General Counsel

  
	
   

  	
  Facsimile
  Number: (605) 338-0596

  
	
   

  	
   

  
	
  If to Program Manager:

  	
  Skylight
  Financial, Inc.

  
	
   

  	
  c/o
  NetSpend Corporation

  
	
   

  	
  701
  Brazos St., Suite 1200

  
	
   

  	
  Austin,
  Texas 78701

  
	
   

  	
  Attention:
  General Counsel

  
	
   

  	
  Facsimile
  Number: (512) 469-9951

  

 

SECTION 14.11 — Waivers

 

Neither
Party shall be deemed to have waived any of its rights, power, or remedies
hereunder except in writing signed by an authorized agent or representative of
the Party to be charged.  Either Party
may, by an instrument in writing, waive compliance by the other Party with any
term or provision of this Agreement on the part of the other Party to be
performed or complied with.  The waiver
by either Party of a breach of any term or provision of this Agreement shall
not be construed as a waiver of any subsequent breach.

 

SECTION 14.12
— Entire Agreement; Amendments

 

This
Agreement constitutes the entire Agreement between the Parties and supersedes
all prior agreements, understandings, and arrangements, oral or written,
between the Parties with respect to the subject matter hereof.  This Agreement may not be modified or amended
except by an instrument or instruments in writing signed by the Party against
whom enforcement of any such modification or amendment is sought.

 

SECTION 14.13 — Counterparts

 

This
Agreement may be executed and then delivered via facsimile transmission, via
the sending of PDF or other copies thereof via email and in one or more
counterparts, each of which shall be an

 

28

 

***  Confidential Treatment
Requested

 

original but all of which taken together
shall constitute one and the same Agreement.

 

SECTION 14.14 — Disputes

 

(a)           Duty to Notify.  In the event of any dispute, controversy, or
claim arising out of or relating to this Agreement or the construction,
interpretation, performance, breach, termination, enforceability or validity
thereof (hereinafter, a “Dispute”),
the Party raising such Dispute shall notify the other promptly and no later
than sixty (60) days from the date of its discovery of the Dispute.  In the case of a Dispute relating to account
or transaction statements or similar matter, the failure of a party to notify
the other party of such Dispute within sixty (60) days from the date of its
receipt shall result in such matter being deemed undisputed and accepted by the
party attempting to raise such Dispute.

 

(b)           Cooperation to
Resolve Disputes.  The Parties
shall cooperate and attempt in good faith to resolve any Dispute promptly by
negotiating between persons who have authority to settle the Dispute and who
are at a higher level of management than the persons with direct responsibility
for administration and performance of the provisions or obligations of this
Agreement that are the subject of the Dispute.

 

(c)           Confidentiality
of Proceedings.  The
proceedings contemplated by this Section shall be as confidential and
private as permitted by law.  To that
end, the Parties shall not disclose the existence, content or results of any
proceedings conducted in accordance with this Section, and materials submitted
in connection with such proceedings shall not be admissible in any other
proceeding, provided, however, that this confidentiality provision shall not
bar disclosures required by any laws or regulations.

 

SECTION 14.15 — Headings

 

The headings, captions, headers, footers and
version numbers contained in this Agreement are inserted for convenience only
and shall not affect the meaning or interpretation of any provision of this
Agreement.  References in this Agreement
to any Article or Section are to such Article or Section of
this Agreement.

 

SECTION 14.16 — Drafting Presumption

 

Program Manager and Bank agree that they participated in the drafting
of this Agreement and, in the event that any dispute arises in the
interpretation or construction of this Agreement, no presumption shall arise that either one party or the other
drafted this Agreement.

 

[Signature
page to follow]

 

29

 

***  Confidential Treatment
Requested

 

IN WITNESS WHEREOF, this Agreement is executed
by the Parties’ authorized officers or representatives and shall be effective
as of the date first above written.

 

 

	
  Skylight
  Financial, Inc.

  	
   

  	
  MetaBank,
  dba Meta Payment Systems

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Kevin Lee

  	
   

  	
  By:

  	
  /s/
  Brad C. Hanson

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Kevin
  Lee

  	
   

  	
  Name:

  	
  Brad
  C. Hanson

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  CEO

  	
   

  	
  Title:

  	
  President

  

 

 

***  Confidential Treatment
Requested

 

SCHEDULE A

Flow of Funds, Revenues and Compensation

 

I.  Flow of Funds

 

A.            All Cardholder
Funds hereunder shall be collected and forwarded to the Cardholder Account.

 

B.            All Program
Revenues shall accrue to the benefit of the Bank, provided that from such
Program Revenues Bank shall pay compensation to Program Manager as set forth in
Section II below.

 

C.            Bank shall
transfer Cardholder Funds from the Cardholder Account to Settlement Accounts in
an amount adequate to facilitate Settlement with the System on a daily basis or
as otherwise determined by Bank.

 

II.                    Compensation
to Program Manager.

 

A.                    MONTHLY
STATEMENTS.  Program
Manager’s compensation for any month shall be equal to: ***.  Bank
shall provide Program Manager a monthly electronic statement (the “Monthly Statement”), no later than
the fifteenth (15th) day of each
month (if a business day, or if not, the next business day), setting forth the
*** for the immediately preceding month. 
As Program Manager’s compensation for the immediately preceding month,
Program Manager shall be entitled to retain in the Operating Account an amount
equal to *** for such month.  Within ten
(10) days after the delivery of the Monthly Statement to Program Manager,
Bank shall debit a bank account designated by Program Manager (the “Operating Account”) by an amount
equal to ***.

 

B.            ***

 

C.            ***

 

D.            ***

 

 

***  Confidential Treatment
Requested

 

SCHEDULE B

Ratios

 

	
  Metric

  	
   

  	
  Threshold

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ***

  	
   

  	
  ***

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  ***

  	
   

  	
  ***

  	
  %Exhibit
10.02

 

Carmen L. Diersen

 

Tornier Employment Agreement

 

 

TORNIER, INC.

 

EMPLOYMENT AGREEMENT

 

THIS
EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into
effective as of June 21, 2010, between Tornier, Inc., a Delaware
corporation (the “Company”), and Carmen Diersen (the “Global CFO;
Global Chief Financial Officer”).

 

R  E
C  I  T  A  L  S:

 

WHEREAS,
the Company recognizes that the future growth, profitability and success of the
Company’s business will be substantially and materially enhanced by the
employment of the Executive by the Company; and

 

WHEREAS,
the Company desires to employ the Executive and the Executive has indicated her
willingness to provide her services to the Company, on the terms and conditions
set forth herein;

 

NOW,
THEREFORE, on the basis of the foregoing premises and in consideration of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:

 

Section 1.  Employment.  The Company hereby agrees to employ the
Executive and the Executive hereby accepts employment with the Company, on the
terms and subject to the conditions hereinafter set forth.  The Executive shall serve as the Global Chief
Financial Officer, and in such capacity, shall report directly to the President
and Chief Executive Officer and shall have such duties as are typically
performed by the Global Chief Financial Officer of a corporation.  The Executive shall take the office of Global
Chief Financial Officer effective June 21, 2010.  The principal location of the Executive’s employment
shall be at the Company’s principal executive office located in Minnesota,
although the Executive understands and agrees that she may be required to
travel from time to time for Company business reasons.

 

Section 2.  Term. 
Unless terminated pursuant to Section 6 hereof, the Executive’s
employment hereunder shall commence on the date hereof and shall continue
during the period ending on the third anniversary of the date hereof (the “Initial
Term”).  Thereafter, the Executive’s
employment term shall extend automatically for consecutive periods of one year
unless either party shall provide notice of termination not less than sixty
(60) days prior to an anniversary date of this Agreement.  The Initial Term, together with any extension
pursuant to this Section 2, is referred to herein as the “Employment
Term.”  The Employment Term shall
terminate upon any termination of the Executive’s employment pursuant to Section 6.

 

Section 3.  Compensation.  During the Employment Term, the Executive
shall be entitled to the following compensation and benefits:

 

(a) 
Salary.  As compensation for the
performance of the Executive’s services hereunder, the Company shall pay to the
Executive a base salary (the “Salary”) of $325,000 per year (which is
not subject to a cap or a maximum) with increases, if any, as may be approved
by the Board of Directors or the Compensation Committee of the Board.  The Salary shall be 

 

 

payable in accordance
with the customary payroll practices of the Company as the same shall exist
from time to time.  In no event shall the
Salary be decreased during the Employment Term,

 

(b) 
Bonus.  During the Employment
Term, in addition to Salary, the Executive shall be eligible to participate in
such bonus plans as may be adopted from time to time by the Board of Directors
for other officers of the Company (the “Bonus”) for each such calendar
year ending during the Employment Period; provided that, unless the Board of
Directors or the Compensation Committee of the Board determines otherwise, the
Executive must be employed on the last day of such calendar year in order to
receive the Bonus attributable thereto. 
The bonus of the Global Chief Financial Officer shall be initially
targeted at 50% of her base salary at 100% achievement.  The Executive’s entitlement to the Bonus for
any particular calendar year shall be based on the attainment of performance
objectives established by the President and CEO or the Compensation Committee
of the Board in any such bonus plan.  In
no event shall the bonus target be decreased during the employment term.

 

(c) 
Benefits.  Except as otherwise
provided in this Agreement, in addition to the Salary and Bonus, if any, the
Executive shall be entitled during the Employment Term to participate in
health, insurance, retirement, disability, and other benefit programs provided
to other officers of the Company on terms no less favorable than those
available to the other officers of the Company. 
The Executive shall also be entitled to the same number of vacation
days, holidays, sick days and other benefits as are generally allowed to other
senior executives of the Company in accordance with the Company’s policies in
effect from time to time.  The Global
Chief Financial Officer shall be initially entitled to 5 weeks of accrued
vacation for immediate use under this Agreement.

 

(d) 
Stock Options.  The Executive
shall be granted stock options (the “Option”) to acquire 450,000 of the
shares of Common Stock of TMG B.V., a company organized under the laws of the
Netherlands (the “Parent Corporation”) at a price equal to Fair Market
Value in effect on the Price Date.  All
of the terms and conditions relating to the Option, including the vesting and
expiration dates, are set forth in the Stock Option Agreements executed by the
Parent Corporation and the Executive (the “Stock Option Agreements”).

 

Section 4.  Exclusivity.  During the Employment Term, the Executive
shall devote her full time to the business of the Company and its subsidiaries,
shall faithfully serve the Company and its subsidiaries, shall in all respects
conform to and comply with the lawful and reasonable directions and
instructions given to her by the President and CEO in accordance with the terms
of this Agreement, shall use her best efforts to promote and serve the
interests of the Company and its subsidiaries and shall not engage in any other
business activity, whether or not such activity shall be engaged in for
pecuniary profit, except that the Executive may (i) participate in the
activities of professional trade organizations related to the business of the
Company and its subsidiaries, (iii) participate in the activities on non
profit organizations (iii) engage in personal investing activities and (iv) serve
on the board of directors of not more than two (2) other companies whose
businesses are not in competition with the business interests of the Company or
any of its subsidiaries or affiliates, provided that the activities set forth
in these clauses (i), (ii), (iii) and (iv), either singly or in the
aggregate, do not interfere in any material respect with the services to be
provided by the Executive hereunder.

 

2

 

Section 5.  Reimbursement for Expenses.  During the Employment Term, the Executive is
authorized to incur reasonable expenses in the discharge of the services to be
performed hereunder, including expenses for travel, entertainment, lodging and
similar items in accordance with the Company’s expense reimbursement policy, as
the same may be modified by the Company from time to time.  The Company shall reimburse the Executive for
all such proper expenses upon presentation by the Executive of itemized
accounts of such expenditures in accordance with the financial policy of the
Company, as in effect from time to time.

 

Section 6.  Termination and Default.

 

(a) 
Death.  The Executive’s employment
shall automatically terminate upon her death and upon such event, the Executive’s
estate shall be entitled to receive the amounts specified in Section 6(e) below.

 

(b) 
Disability.  If the Executive is
unable to perform the duties required of her under this Agreement because of
illness, incapacity, or physical or mental disability, the Employment Term
shall continue and the Company shall pay all compensation required to be paid
to the Executive hereunder, unless the Executive is disabled such that the
Executive would be entitled to receive disability benefits under the Company’s
long-term disability plan, or if no such plan exists, the Executive is unable
to perform the duties required of her under this Agreement for an aggregate of
180 days (whether or not consecutive) during any 12-month period during the
term of this Agreement, in which event the Executive’s employment shall
terminate.

 

(c) 
Cause.  The Company may terminate
the Executive’s employment at any time, with or without Cause.  In the event of termination pursuant to this Section 6(c) for
Cause (as defined below), the Company shall deliver to the Executive written
notice setting forth the basis for such termination, which notice shall
specifically set forth the nature of the Cause which is the reason for such
termination.  Termination of the
Executive’s employment hereunder shall be effective upon delivery of such
notice of termination.  For purposes of
this Agreement, “Cause” shall mean: 
(i) the Executive’s failure (except where due to a disability
contemplated by subsection (b) hereof), neglect or refusal to perform her
duties hereunder which failure, neglect or refusal shall not have been
corrected by the Executive within 30 days of receipt by the Executive of
written notice from the Company of such failure, neglect or refusal, which
notice shall specifically set forth the nature of said failure, neglect or
refusal, (ii) any willful or intentional act of the Executive that has the
effect of injuring the reputation or business of the Company or its affiliates
in any material respect; (iii) any continued or repeated absence from the
Company, unless such absence is (A) approved or excused by the Board of
Directors or (B) is the result of the Executive’s illness, disability or
incapacity (in which event the provisions of Section 6(b) hereof
shall control); (iv) use of illegal drugs by the Executive or repeated
drunkenness; (v) conviction of the Executive for the commission of a felony;
or (vi) the commission by the Executive of an act of fraud or embezzlement
against the Company.

 

(d) 
Resignation.  The Executive shall
have the right to terminate her employment at any time by giving notice of her
resignation.

 

3

 

(e) 
Payments.  In the event that the
Executive’s employment terminates for any reason, the Company shall pay to the
Executive all amounts and benefits accrued but unpaid hereunder through the
date of termination in respect of Salary or unreimbursed expenses, including
accrued and unused vacation.  In
addition, in the event the Executive’s employment is terminated by the Company
without Cause, whether during or upon expiration of the then current term of
this Agreement, in addition to the amounts specified in the foregoing sentence,
(i) the Executive shall continue to receive the Salary (less any
applicable withholding or similar taxes) at the rate in effect hereunder on the
date of such termination periodically, in accordance with the Company’s
prevailing payroll practices, for a period of twelve (12) months following the
date of such termination (the “Severance Term”) and (ii) to the
extent permissible under the Company’s health and welfare plans, the Executive
shall continue to receive any health and welfare benefits provided to her as of
the date of such termination in accordance with Section 3(c) hereof
during the Severance Term, on the same basis and at the same cost as during the
Employment Term.  Further, in the event
the Executive’s employment is terminated without Cause by reason of the Company
having notified the Executive that this Agreement will not be extended pursuant
to Section 2, the Executive shall be entitled to receive a pro-rated
amount of the Bonus in a lump sum based on the Executive’s period of employment
during the calendar year in which such termination occurs (less any applicable
withholding or similar taxes).  Following
the end of the Severance Term, the Executive shall be entitled to elect health
care continuation coverage permitted under Section 601 through 608 of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
as if her employment had then terminated. 
In the event the Executive accepts other full time employment or engages
in her own business prior to the last date of the Severance Term, the Executive
shall forthwith notify the Company and the Company shall be entitled to set off
from amounts and benefits due the Executive under this Section 6(e) (other
than in respect of the Bonus) the amounts paid to and benefits received by the
Executive in respect of such other employment or business activity.  Amounts owed by the Company in respect of the
Salary, Bonus or reimbursement for expenses under the provisions of Section 5
hereof shall, except as otherwise set forth in this Section 6(e), be paid
promptly upon any termination.  The
payments and benefits to be provided to the Executive as set forth in this Section 6(e) in
the event the Executive’s employment is terminated by the Company without
Cause:  (i) shall be lieu of any and
all benefits otherwise provided under any severance pay policy, plan or program
maintained from time to time by the Company for its employees, and (ii) shall
not be paid to the extent that Executive’s employment is terminated following a
Change in Control under circumstances entitling the Executive to the benefits
described in Section 6(f).

 

(f) 
Change in Control Benefit.  In the
event that the Executive’s employment is terminated by the Company without Cause
or by the Executive for Good Reason, as defined below, during the 12-month
period immediately following a Change in Control, as defined below, whether
during or upon expiration of the then current term of this Agreement:  (i) the Company shall pay to the
Executive all amounts and benefits accrued but unpaid hereunder through the
date of termination in respect of Salary or unreimbursed expenses, including
accrued and unused vacation (less any applicable withholding or similar taxes),
(ii) all unvested shares that are subject to the Options shall become
immediately vested and exercisable as set forth in the Stock Option Agreements,
(iii) the Company shall pay to Executive a lump sum payment equal to 12
months of her Salary at the rate in effect hereunder on the date of such
termination, plus her full target Bonus for the year in which the Change in
Control occurs (less any applicable withholding or similar taxes), and (iv) to
the extent permissible under the Company’s health and 

 

4

 

welfare plans, the
Executive shall continue to receive, at the Company’s cost, any health and
welfare benefits provided to her as of the date of such termination for the
12-month period following her termination of employment.  Following the end of the 12-month period
described in clause (iv) of the preceding sentence, the Executive shall be
entitled to elect health care continuation coverage permitted under Sections
601 through 608 of ERISA as if her employment with the Company then terminated.

 

For
purposes of this Agreement, “Change in Control” shall mean:

 

(i)  The acquisition
by any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more (on a fully diluted basis)
of either (A) the then outstanding shares of common stock of the Parent
Corporation, taking into account as outstanding for this purpose such common
stock issuable upon the exercise of options or warrants, the conversion of
convertible stock or debt, and the exercise of any similar right to acquire
such common stock (the “Outstanding Parent Corporation Common Stock”) or
(B) the combined voting power of the then outstanding voting securities of
the Parent Corporation entitled to vote generally in the election of directors
(the “Outstanding Parent Corporation Voting Securities”); provided,
however, that for purposes of this subsection (i), the following acquisitions
shall not constitute a Change in Control: 
(x) any acquisition by the Parent Corporation or any “affiliate” of
the Parent Corporation, within the meaning of 17 C.F.R. § 230.405 (an “Affiliate”),
(y) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Parent Corporation or any Affiliate of the
Parent Corporation, (z) any acquisition by any corporation or business
entity pursuant to a transaction which complies with clauses (A), (B) and (C) of
subsection (ii) of this Section 6(f) (persons and entities
described in clauses (x), (y) and (z) being referred to herein as “Permitted
Holders”); or

 

(ii)  The
consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Parent Corporation
(a “Business Combination”), in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Parent Corporation Common Stock and Outstanding Parent Corporation Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns
the Parent Corporation or all or substantially all of the Parent Corporation’s
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Parent Corporation Common Stock and Outstanding
Parent Corporation Voting Securities, as the case may be, and (B) no
Person (excluding any Permitted Holder) beneficially owns, directly or
indirectly, 50% or more (on a fully diluted basis) of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination, taking into account as outstanding for this purpose such
common stock issuable upon the exercise of options or warrants, the conversion
of convertible stock or debt, and the exercise of any similar right to 

 

5

 

acquire such common stock, or the combined voting power
of the then outstanding voting securities of such corporation except to the
extent that such ownership existed prior to the Business Combination and (C) at
least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the incumbent Board of
Directors of the Parent Corporation at the time of the execution of the initial
agreement providing for such Business Combination; or

 

(iii)  Approval by
the shareholders of the Parent Corporation of a complete liquidation or
dissolution of the Parent Corporation; or

 

(iv)  The sale of at
least 80% of the assets of the Parent Corporation to an unrelated party, or
completion of a transaction having a similar effect; or

 

(v)  For purposes of
this Agreement, “Good Reason” shall mean, without the Executive’s prior
written consent, (i) a substantial diminution in the Executive’s
authority, duties or responsibilities as in effect prior to the Change in
Control, (ii) a reduction by the Company in the Executive’s base Salary or
Bonus as in effect immediately prior to the Change in Control or as thereafter
increased, (iii) the failure by the Company to cover the Executive under
employee benefit plans that, in the aggregate, provide substantially similar
benefits to the Executive and/or her family and dependents at a substantially
similar total cost to the Executive (e.g., premiums, deductibles, co-pays, out
of pocket maximums, required contributions, taxes and the like) relative to the
benefits and total costs under such benefit plans in which the Executive
(and/or her family or dependents) was participating at any time during the
90-day period immediately preceding the Change in Control, or (iv) the
Company’s requiring the Executive to be based at any office or location that is
more than fifty (50) miles further from the office or location thereof
immediately preceding a Change in Control; provided, however,
Good Reason shall not include any of the circumstances or events described
herein unless the Executive has first provided written notice of such
circumstance or event and the Company has not corrected such circumstance or
event within thirty (30) days of receipt by the Company of such written notice
from the Executive.

 

(g) 
Survival of Operative Sections. 
Upon any termination of the Executive’s employment, the provisions of
Sections 6(e), 6(f), and 7 through 18 of this Agreement shall survive to the
extent necessary to give effect to the provisions thereof.

 

Section 7.  Secrecy and Non-Competition.

 

(a) 
No Competing Employment.  The
Executive acknowledges that the agreements and covenants contained in this Section 7
are essential to protect the value of the Company’s, or any of its subsidiaries’
or affiliates’, business and assets and by her current employment with the
Company and its subsidiaries, the Executive has obtained and will obtain such
knowledge, contacts, know-how, training and experience and there is a
substantial probability that such knowledge, know-how, contacts, training and
experience could be used to the substantial advantage of a competitor of the
Company or any of its subsidiaries or affiliates and to the Company’s, or any
of its subsidiaries’ or affiliates’, substantial detriment.  Therefore, the Executive agrees that for the
period commencing on the date of this Agreement and ending on the first
anniversary of the termination of the Executive’s employment hereunder (such
period 

 

6

 

is hereinafter referred
to as the “Restricted Period”) with respect to any State in which the
Company is engaged in business during the Employment Term, the Executive shall
not participate or engage, directly or indirectly, for herself or on behalf of
or in conjunction with any person, partnership, corporation or other entity,
whether as an employee, agent, officer, director, partner or joint venturer, in
any business activities if such activity consists of any activity undertaken or
expressly contemplated to be undertaken by the Company or any of its subsidiaries
or by the Executive at any time during the last three (3) years of the
Employment Term.  The foregoing
restrictions contained in this Section 7(a) shall not prevent the
Executive from accepting employment with a large diversified organization with
separate and distinct divisions that do not compete, directly or indirectly,
with the Company or any of its subsidiaries or affiliates, so long as prior to
accepting such employment the Company receives separate written assurances from
the prospective employer and from the Executive, satisfactory to the Company,
to the effect that the Executive will not render any services, directly or
indirectly, to any division or business unit that competes, directly or
indirectly, with the Company or any of its subsidiaries or affiliates.  During the Restricted Period, the Executive
will inform any new employer, prior to accepting employment, of the existence
of this Agreement and provide such employer with a copy of this Agreement.

 

(b) 
Nondisclosure of Confidential Information.  The Executive, except in connection with her
employment hereunder, shall not disclose to any person or entity or use, either
during the Employment Term or at any time thereafter, any information not in
the public domain or generally known in the industry that the Company any of
its subsidiaries or affiliates treats as confidential or proprietary, in any
form, acquired by the Executive while employed by the Company or any
predecessor to the Company’s business or, if acquired following the Employment
Term, such information which, to the Executive’s knowledge, has been acquired,
directly or indirectly, from any person or entity owing a duty of
confidentiality to the Company or any of its subsidiaries or affiliates,
relating to the Company, its subsidiaries or affiliates, including but not
limited to information regarding customers, vendors, suppliers, trade secrets,
training programs, manuals or materials, technical information, contracts,
systems, procedures, mailing lists, know-how, trade names, improvements, price
lists, financial or other data (including the revenues, costs or profits
associated with any of the Company’s, or any of its subsidiaries’ or affiliates’,
products or services), business plans, code books, invoices and other financial
statements, computer programs, software systems, databases, discs and
printouts, plans (business, technical or otherwise), customer and industry
lists, correspondence, internal reports, personnel files, sales and advertising
material, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the business of the
Company or any subsidiaries or affiliates thereof.  The Executive agrees and acknowledges that
all of such information, in any form, and copies and extracts thereof, are and
shall remain the sole and exclusive property of the Company any of its
subsidiaries or affiliates, and upon termination of her employment with the
Company, the Executive shall return to the Company any of its subsidiaries or affiliates
the originals and all copies of any such information provided to or acquired by
the Executive in connection with the performance of her duties for the Company,
and shall return to the Company any of its subsidiaries or affiliates all
files, correspondence and/or other communications received, maintained and/or
originated by the Executive during the course of her employment.

 

7

 

(c) 
No Interference.  During the
Restricted Period, the Executive shall not, whether for her own account or for
the account of any other individual, partnership, firm, corporation or other
business organization (other than the Company), directly or indirectly solicit,
endeavor to entice away from the Company or any of its subsidiaries or
affiliates, or otherwise directly interfere with the relationship of the
Company or any of its subsidiaries or affiliates with any person who, to the
knowledge of the Executive, is employed by or otherwise engaged to perform
services for the Company or any of its subsidiaries or affiliates (including,
but not limited to, any independent sales representatives or organizations) or
who is, or was within the then most recent twelve-month period, a customer or
client of the Company, its predecessors or any of its subsidiaries or
affiliates.  The placement of any general
classified or “help wanted” advertisements and/or general solicitations to the
public at large shall not constitute a violation of this Section 7(c) unless
the Executive’s name is contained in such advertisements or solicitations.

 

(d) 
Inventions, etc.  The
Executive hereby sells, transfers and assigns to the Company or any of its
subsidiaries or affiliates or to any person or entity designated by the Company
all of the entire right, title and interest of the Executive in and to all
inventions, ideas, disclosures and improvements, whether patented or
unpatented, and copyrightable material, made or conceived by the Executive,
solely or jointly, during her employment by the Company which relate to
methods, apparatus, designs, products, processes or devices, sold, leased, used
or under consideration or development by the Company or any of its subsidiaries
or affiliates, or which otherwise relate to or pertain to the business,
functions or operations of the Company or any of its subsidiaries or affiliates
or which arise from the efforts of the Executive during the course of her
employment for the Company.  The
Executive shall communicate promptly and disclose to the Company, in such form
as the Company requests, all information, details and data pertaining to the
aforementioned inventions, ideas, disclosures and improvements; and the
Executive shall execute and deliver to the Company such formal transfers and
assignments and such other papers and documents as may be necessary or required
of the Executive to permit the Company or any of its subsidiaries or affiliates
or any person or entity designated by the Company to file and prosecute the
patent applications and, as to copyrightable material, to obtain copyright
thereof.  Any invention relating to the
business of the Company or any of its subsidiaries or affiliates and disclosed
by the Executive within one year following the termination of her employment
with the Company shall be deemed to fall within the provisions of this
paragraph unless proved to have been first conceived and made following such
termination.  The foregoing requirements
of this Section 7(d) shall not apply to any invention for which no
equipment, supplies, facility or trade secret information of the Company was
used and which was developed entirely on the Executive’s own time, and (i) which
does not relate directly to the Company’s, or any of its subsidiaries’ or
affiliates’, business or to the Company’s, or any of its subsidiaries’ or
affiliates’, actual or demonstrably anticipated research or development, or (ii) which
does not result from any work the Executive performed for the Company or any of
its subsidiaries or affiliates.

 

Section 8.  Injunctive Relief.  Without intending to limit the remedies
available to the Company or any of its subsidiaries or affiliates, the
Executive acknowledges that in the event of a breach of any of the covenants
contained in Section 7 hereof may result in material irreparable injury to
the Company or its subsidiaries or affiliates for which there is no adequate
remedy at law, that it will not be possible to measure damages for such
injuries precisely and 

 

8

 

that, in the event of such a breach or threat
thereof, the Company shall be entitled to obtain a temporary restraining order
and/or a preliminary or permanent injunction, without the necessity of proving
irreparable harm or injury as a result of such breach or threatened breach of Section 7
hereof, restraining the Executive from engaging in activities prohibited by Section 7
hereof or such other relief as may be required specifically to enforce any of
the covenants in Section 7 hereof.

 

Section 9.  Representations and Warranties of the
Executive.  The Executive represents
and warrants to the Company as follows:

 

(a) 
This Agreement, upon execution and delivery by the Executive, will be duly
executed and delivered by the Executive and (assuming due execution and
delivery hereof by the Company) will be the valid and binding obligation of the
Executive enforceable against the Executive in accordance with its terms.

 

(b) 
Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby nor the performance of this Agreement in
accordance with its terms and conditions by the Executive (i) requires the
approval or consent of any governmental body or of any other person or (ii) conflicts
with or results in any breach or violation of, or constitutes (or with notice
or lapse of time or both would constitute) a default under, any agreement,
instrument, judgment, decree, order, statute, rule, permit or governmental
regulation applicable to the Executive. 
Without limiting the generality of the foregoing, the Executive is not a
party to any non-competition, non-solicitation, no hire or similar agreement
that restricts in any way the Executive’s ability to engage in any business or
to solicit or hire the employees of any person.

 

The
representations and warranties of the Executive contained in this Section 9
shall survive the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby.

 

Section 10.  Representations and Warranties of the
Company.  The Company represents and
warrants to the Executive as follows:

 

(a) 
This Agreement, upon execution and delivery by the Company, will be duly
executed and delivered by the Company and (assuming due execution and delivery
hereof by the Executive) will be the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.

 

(b) 
Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby nor the performance of this Agreement in
accordance with its terms and conditions by the Company (i) requires the
approval or consent of any governmental body or of any other person or (ii) conflicts
with or results in any breach or violation of, or constitutes (or with notice
or lapse of time or both would constitute) a default under, any agreement,
instrument, judgment, decree, order, statute, rule, permit or governmental
regulation applicable to the Company.

 

9

 

The
representations and warranties of the Company contained in this Section 10
shall survive the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby.

 

Section 11.  Successors and Assigns; No Third-Party
Beneficiaries.  This Agreement shall
inure to the benefit of, and be binding upon, the successors and assigns of
each of the parties, including, but not limited to, the Executive’s heirs and
the personal representatives of the Executive’s estate; provided, however,
that neither party shall assign or delegate any of the obligations created
under this Agreement without the prior written consent of the other party.  Notwithstanding the foregoing, the Company
shall have the unrestricted right to assign this Agreement and to delegate all
or any part of its obligations hereunder to any of its subsidiaries or
affiliates, but in such event such assignee shall expressly assume all
obligations of the Company hereunder and the Company shall remain fully liable
for the performance of all of such obligations in the manner prescribed in this
Agreement.  Nothing in this Agreement
shall confer upon any person or entity not a party to this Agreement, or the
legal representatives of such person or entity, any rights or remedies of any
nature or kind whatsoever under or by reason of this Agreement.

 

Section 12.  Waiver and Amendments.  Any waiver, alteration, amendment or
modification of any of the terms of this Agreement shall be valid only if made
in writing and signed by the parties hereto; provided, however,
that any such waiver, alteration, amendment or modification is consented to on
the Company’s behalf by the Board of Directors. 
No waiver by either of the parties hereto of their rights hereunder
shall be deemed to constitute a waiver with respect to any subsequent
occurrences or transactions hereunder unless such waiver specifically states
that it is to be construed as a continuing waiver.

 

Section 13.  Severability and Governing Law.  The Executive acknowledges and agrees that
the covenants set forth in Section 7 hereof are reasonable and valid in
geographical and temporal scope and in all other respects.  If any of such covenants or such other
provisions of this Agreement are found to be invalid or unenforceable by a
final determination of a court of competent jurisdiction (a) the remaining
terms and provisions hereof shall be unimpaired and (b) the invalid or
unenforceable term or provision shall be deemed replaced by a term or provision
that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED,
HOWEVER, THE PROVISIONS OF THIS AGREEMENT RELATING TO THE OPTION UNDER SECTION 3(d) HEREOF
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.

 

Section 14.  Notices.

 

(a) 
All communications under this Agreement shall be in writing and shall be
delivered by hand or mailed by overnight courier or by registered or certified
mail, postage prepaid:

 

10

 

(i)  If to the
Executive, at such other address as the Executive may have furnished the
Company in writing, and

 

(ii)  If to the
Company, at Minnesota Headquarters, marked for the attention of the Chief
Executive Officer, or at such other address as it may have furnished in writing
to the Executive.

 

(b) 
Any notice so addressed shall be deemed to be given:  if delivered by hand, on the date of such
delivery; if mailed by courier, on the first business day following the date of
such mailing; and if mailed by registered or certified mail, on the third
business day after the date of such mailing.

 

Section 15.  Section Headings.  The headings of the sections and subsections
of this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof, affect the meaning or interpretation of this
Agreement or of any term or provision hereof.

 

Section 16.  Entire Agreement.  This Agreement, including the Exhibits
hereto, constitutes the entire understanding and agreement of the parties
hereto regarding the employment of the Executive.  This Agreement supersedes all prior negotiations,
discussions, correspondence, communications, understandings and agreements
between the parties relating to the subject matter of this Agreement.

 

Section 17.  Severability.  In the event that any part or parts of this
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not effect the
remaining provisions of this Agreement which shall remain in full force and
effect.

 

Section 18.  Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.

 

[Remainder of Page Intentionally Left Blank]

 

11

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.

 

	
   

  	
  TORNIER, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Doug Kohrs

  
	
   

  	
   

  	
  Name:
  Doug Kohrs

  
	
   

  	
   

  	
  Title:
  President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CARMEN
  DIERSEN

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Carmen Diersen

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