Marketing And Product Development Agreement

MARKETING AND PRODUCT DEVELOPMENT AGREEMENT


This Marketing and Product Development Agreement (the "Agreement") is made as of this 21st day of August, 1996, by and among First Virtual Holdings Incorporated, a Delaware corporation ("First Virtual"), and First Data Corporation, a Delaware corporation ("FDC"). First Virtual and FDC shall sometimes be referred to herein as the "Parties."


Recitals


1. As of August 21, 1996, First Virtual and FDC entered into a Series D Stock Purchase Agreement ("Stock Purchase Agreement"), whereby FDC agreed to purchase shares of First Virtual's Series D Preferred Stock.


2. Pursuant to the Stock Purchase Agreement, First Virtual has agreed to issue a warrant to purchase up to 1,500,000 shares of its Common Stock in the form attached hereto as Exhibit A, the exercise of which is contingent upon FDC's development and implementation of an integrated marketing plan mutually acceptable to First Virtual and FDC and the activation of such a specified number of First Virtual VirtualPINs distributed pursuant to such plan. The goal of the marketing plan is to maximize the penetration of activated VirtualPIN accounts among holders of payment cards serviced by FDC.


3. First Virtual and FDC are interested in cooperating on certain mutually beneficial marketing programs and in working together to co-develop new products and services.


In consideration of the mutual promises in this Agreement, and for other good and valuable consideration, the Parties agree as follows:


Section 1. FDC's VirtualPIN Marketing Plan.


1.1 Overview of Plan. Upon the execution of this Agreement, FDC shall commence development of a mutually agreed upon First Virtual VirtualPIN marketing plan ("Marketing Plan"). The goal of the Marketing Plan shall be to maximize the penetration rate of activated VirtualPIN numbers among the 120 million credit Cardholder accounts ("FDC Cardholder Accounts") serviced by FDC, its subsidiaries and affiliates ("FDC Entities") and to encourage issuers of credit cards serviced by FDC (the "Affiliate Banks") to participate in the Marketing Plan and distribute VirtualPINs to their cardholders (Affiliate Banks electing to so participate are hereinafter referred to as "Participating Banks").


1.2 Plan Development. The Marketing Plan shall be developed by FDC and shall be subject to First Virtual's approval, which approval shall not be unreasonably withheld. 2
1.3 Plan Requirements. The Marketing Plan will consist of strategic initiatives involving Affiliate Banks and FDC Cardholders. All costs related to the development and implementation of the Marketing Plan, and each part of it, shall be borne solely by FDC. All advertising and promotional materials employed pursuant to the Marketing Plan shall be subject to First Virtual's prior approval, which shall not be unreasonably withheld.


1.4 Marketing Expenditure. At a minimum, the Marketing Plan shall provide for, and FDC shall incur, minimum out-of-pocket media, publicity and advertising development expenditures of $1,000,000 prior to December 30, 1997 (the "Minimum Marketing Expenditure"). The parties agree that First Virtual's sole remedy with respect to any failure by FDC to comply with this Section 1.4 shall be for FDC to pay to First Virtual no later than January 30, 1998, an amount equal to 50% of the difference between the Minimum Marketing Expenditure and FDC's actual out-of-pocket media, publicity and advertising development expenditures prior to December 30, 1997.


In order to accurately measure the number of VirtualPINs distributed pursuant to the Marketing Plan for the purposes of FDC's exercise of the warrant issued by First Virtual, FDC shall pay to First Virtual a monthly amount equal to $37,500 in cash for the four-month period commencing on September 1, 1996. Such amounts shall be used to develop and implement an automated system, including but not limited to software, the goal of which is to enable First Virtual and FDC to identify the cardholders of the Affiliate Banks that have activated VirtualPINs. First Virtual shall retain title and all intellectual property rights to such system, and shall grant a non-exclusive license to FDC to use the system through the later of December 30, 1997 or the date on which the Marketing Plan expires. The amounts paid by FDC to First Virtual for such four-month period shall be considered part of the Minimum Marketing Expenditure.


1.5 Assignment of VirtualPINs. If so requested by a Participating Bank, First Virtual will assign to each Cardholder of each Participating Bank a unique VirtualPIN to facilitate implementation of the Marketing Plan. FDC shall be solely responsible for all expenses connected with the transmission of all necessary Participating Bank credit card information into First Virtual's system for the purposes of assigning VirtualPINs. FDC and First Virtual will cooperate to ensure that VirtualPIN data are supplied to Participating Banks for distribution to Cardholders.


1.6 Customer Support. FDC and First Virtual will develop a mutually cooperative plan for providing customer support to facilitate the establishment and activation of VirtualPIN accounts assigned to Cardholder of Participating Banks. This plan will include setting up and managing customer service support centers and systems to answer customer questions. FDC shall be responsible for all expenses connected with provision of customer support services pursuant to such plan. Access to the support centers will be by various channels, including toll-free numbers, Websites, e-mail and regular mail.


1.7 Payment Processing Services. First Virtual agrees that any of the FDC Entities, including merchant bank alliances, may act as payment card transaction acquirors and provide payment processing services in connection with First Virtual transactions.


-2- 3 Section 2. Foreign Exchange Processing.


2.1 Development. Within 180 days of the date of this Agreement, FDC will present to First Virtual a proposal ("FX Proposal") to assume all of First Virtual's foreign exchange settlement transactions ("FX Transactions") for as long as FDC is capable of doing so on commercially reasonable terms or until December 22, 1999, whichever occurs first. The FX Proposal shall provide for the deposit of payments to overseas merchants directly to local bank accounts of such merchants in their respective currencies. All costs and expenses incurred for preparing the FX Proposal shall be the sole responsibility of FDC. In the event FDC does not have a satisfactory interface with First Virtual to facilitate FX Transactions within 240 days after the date of this Agreement, all rights of FDC to conduct the FX Transactions shall terminate.


2.1.1 Approval by First Virtual. After receiving the FX Proposal, First Virtual shall have the right, in its sole discretion, for any reason or for no reason, to accept or reject FDC as a provider of FX Transactions. In all cases, legally binding obligations concerning FX Transactions will arise only in the event that FDC and First Virtual negotiate and execute a definitive agreement ("FX Agreement"). Nothing in this Agreement shall imply any obligation on the part of First Virtual or FDC to approve any FX Proposal or to enter into an FX Agreement.


Section 3. Digital Currency.


3.1 Development. Following the date of this Agreement, FDC will begin to negotiate an agreement ("Development Agreement") by which First Virtual and FDC will develop a proprietary Internet-based "digital currency" payment system ("Digital Currency") allowing consumers to use pre-paid credit units to instantaneously purchase goods and services from Web merchants. It is anticipated that First Virtual will be primarily responsible for developing the Digital Currency, but that FDC will reimburse First Virtual, on a monthly basis, for all costs, consulting and licensing fees associated with such development and a reasonable allocation of overhead costs. In the event First Virtual and FDC are unable to agree upon a Development Agreement within 270 days of the date of this Agreement, neither Party shall have any obligations to the other in connection with Digital Currency. Nothing in this Agreement shall imply an obligation on the part of FDC or First Virtual to enter into a Development Agreement or to otherwise develop and market a Digital Currency. Each of FDC and First Virtual may decline to enter into a Development Agreement or otherwise develop and market a Digital Currency in its sole discretion, for any reason or for no reason.


3.2 Exclusivity. During the term of this Agreement, FDC shall be the sole credit provider with respect to any digital currency system developed pursuant to any Development Agreement entered into by FDC and First Virtual, for so long as it is able and willing to provide such credit on competitive terms. The interest float generated by any such digital currency system shall be shared in equal parts by FDC and the Company.


Section 4. FDC Representations and Warranties.


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FDC hereby represents and warrants as follows:


(a) It and all FDC Entities performing services hereunder are duly organized and validly existing corporations, in good standing under the laws of all countries and states in which they do business.


(b) It and all FDC Entitles performing services hereunder have all requisite corporate power, authority and capacity to enter into this Agreement and the execution of this Agreement does not violate any agreements to which it or the FDC Entities are a party.


(c) The obligations set forth or contemplated by this Agreement of it and all FDC Entities are not and will not be in violation of any applicable charter, certificate of incorporation, bylaw, mortgage, indenture, agreement, instrument, judgment, decree, order, stat ...