Motion,Ex Parte: GOLDEN PACIFIC BANK, N.A. VS. BILLFLOAT, INC. ET AL

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                                BRUCE A. SCHEIDT, State Bar No. 155088
bscheidt@kantg.com

CHRISTOPHER ONSTOTT, State Bar No. 225968

constott@kmtg.com
ERROL C. DAUIS, State Bar No. 279313
edauis@kmtg.com

KRONICK, MOSKOVITZ, TIEDEMANN & GIRARD

A Professional Corporation
400 Capitol Mall, 27" Floor
Sacramento, California 95814
Telephone: (916) 321-4500
Facsimile: (916) 321-4555

Attorneys for Plaintiff/Cross-Defendant
GOLDEN PACIFIC BANK, N.A.

ELECTRONICALLY

FILED

Superior Court of Califomia,
County of San Francisco

07/20/2016
Clerk of the Court
BY-:ROMY RISK

Deputy Clerk

SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO

GOLDEN PACIFIC BANK, N.A.,
Plaintiff,
v.

BILLFLOAT, INC., RYAN GILBERT, SEAN
O'MALLEY, and DOES 1-50, inclusive,

Defendants.

BILLFLOAT, INC.
Cross-Complainant,
v.

GOLDEN PACIFIC BANK, N.A., and ROES
1-50,

Cross-Defendants.

1468689.1 14023-004

 

Case No. CGC-16-549804

REQUEST FOR JUDICIAL NOTICE IN
SUPPORT OF GOLDEN PACIFIC
BANK'S DEMURRER TO CROSS-
COMPLAINT

Judge: Hon. Hon. Harold E. Kahn
Date: August 19, 2016

Time: 9:30 a.m.

Dept: 302

Reservation No. 07190819-14

Case Transferred
from Sacramento County: January 11, 2016

Trial Date: None Set

 

REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF GOLDEN PACIFIC BANK'S
DEMURRER TO CROSS-COMPLAINToe YN Dw PF ww

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In support of Plaintiff and Cross-Defendant GOLDEN PACIFIC BANK's ("Golden
Pacific") Demurrer to Cross-Complaint, Golden Pacific hereby requests that the Court take
judicial notice of the following documents pursuant to California Evidence Code sections 452 and
453 and California Rules of Court, Rule 3.1306:

Attachment 1: Defendant and Cross-Complainant BILLFLOAT, INC.'s ("BillFloat")
Complaint for Declaratory Relief and Judicial Reference, filed in the Superior Court of the State of
California, County of San Francisco ("San Francisco Superior Court") Case No. CGC-15-547679,
on August 28, 2015.

Attachment 2: BillFloat's Memorandum of Points and Authorities in Support of
Defendants' Motion to Change Venue, filed in the Superior Court of the State of California,
County of Sacramento ("Sacramento Superior Court"), Case No. 34-2015-00185106, on
November 10, 2015. |

Attachment 3: Sacramento Superior Court's Order Granting Defendants' Motion to
Change Venue, issued in Case No. 34-2015-00185106, on December 11, 2015.

Attachment 4: BillFloat's First Amended Complaint, filed in San Francisco Superior
Court, Case No. CGC-15-547679, on November 3, 2015.

Attachment 5: San Francisco Superior Court's Order Granting Plaintiff's Application to
Substitute Defendants’ (Does 1 through 5) True Names, issued in Case No. CGC-15-547679, on
November 5, 2015.

Attachment 6: Golden Pacific's Notice of Motion and Motion to Change Venue, filed in
San Francisco Superior Court, Case No, CGC-15-547679, on November 23, 2015.

Attachment 7: San Francisco Superior Court's Order Granting Defendants’ Motion to
Change Venue to Sacramento County Superior Court, issued in Case No. CGC-15-547679, on
January 7, 2016.

Attachment 8; San Francisco Superior Court's Dismissal Without Prejudice of First

Amended Complaint, issued in Case No. CGC-15-547679, on January 22, 2016.

Attachment 9: BillFloat's Cross-Complaint, filed in this action and with this Court on
February 8, 2016.
1468689.1 14023-004 1

 

REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF GOLDEN PACIFIC BANK'S
DEMURRER TO CROSS-COMPLAINTo Oe YN A HW BY Ww

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Attachment 10: BillFloat's Complaint, filed in Superior Court of the State of California,
County of Contra Costa ("Contra Costa Superior Court"), Case No. C16-00250, on February 8,
2016.

Attachment 11: Memorandum of Points and Authorities in Support of Defendants!
Motion to Change Venue and Request for Sanctions, filed in Contra Costa Superior Court, Case
No. C16-00250, on February 23, 2016.

Attachment 12: Contra Costa Superior Court's Order Granting Defendants' Motion to
Change Venue to Sacramento County Superior Court, issued in Case No. C16-00250, on April 27,
2016.

Attachment 13: Contra Costa Superior Court's Dismissal With Prejudice, filed in Contra
Costa Superior Court, Case No. C16-00250, on May 25, 2016.

Attachment 14: Defendants' Memorandum of Costs (Summary), filed in Contra Costa
Superior Court, Case No. C16-00250, on June 9, 2016.

LAW AND ARGUMENT

‘Evidence Code section 452(d) allows a party to request that a court take judicial notice of
"[rJecords of (1) any court of this state or (2) any court of record of the United States..."
Furthermore, Evidence Code section 452(h) provides that judicial notice may be taken of "[flacts
and propositions that are not reasonably subject to dispute and are capable of immediate and
accurate determination by resort to sources of reasonably indisputable accuracy." A court may
take judicial notice of a legally operative document “not only of the fact of the document and its
recording or publication, but also facts that clearly derive from its /egal effect." (Scott v.
JPMorgan Chase Bank, N.A, (2013) 214 Cal. App.4th 743, 754, as modified on denial of reh'g
(Apr. 16, 2013), review denied (June 12, 2013) (emphasis in the original) [citing Fontenot v. Wells
Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265].)

Dated: July 20, 2016 | KRONICK, MOSKOVITZ, TIEDEMANN & GIRARD

 

Bruce A. Scheidt, Attorneys for Plaintiff/Cross-
Defendant GOLDEN PACIFIC BANK, N.A.

1468689.1 [4023-004 2

REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF GOLDEN PACIFIC BANK'S.
DEMURRER TO CROSS-COMPLAINTATTACHMENT 1BY FAX

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WILLIAM T. WEBB #193832 ;
JENNIFER D. YU #291603 FL. L E D
155 Montgomery Street, Suite 1200 Suny of San Eomornla
San Francisco, CA 94104
(418) 277-7200 . AUG 28 2015
(415) 277-7210 (fax) CLERK,OF THE COURT
Attorneys for BILLFLOAT, INC. BY

Deputy Glerk

SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE COUNTY OF SAN FRANCISCO
(Unlimited Jurisdiction)

BILLFLOAT, INC., a Delaware corporation, } Case NolQl" 15-5 4767 9
doing business as Better Finance, 7
PLAINTIFF BILLFLOAT, INC.’S
Plaintiff _ | COMPLAINT FOR:

v. 1. DECLARATORY RELIEF; AND
2. JUDICIAL REFERENCE
GOLDEN PACIFIC BANK, N.A., a National
Bank, and DOES 1-50, inclusive,

Defendants.

 

Plaintiff BILLFLOAT, INC., a Delaware corporation doing business as Better Finance
{“Plaintiff’ or “Better Finance”), by counsel, hereby states its Complaint against GOLDEN
PACIFIC BANK, N.A., a National Bank (“Defendant” or “GPB”) and DOES 1-50 (collectively
“Defendants”), inclusive, and alleges as follows.

PRELIMINARY ALLEGATIONS

1. Plaintiff Better Finance has its principal place of business in the City and County
of San Francisco, California.

2. Under information and belief, Defendant GPB has its principal place of business in
Sacramento County, California.

3. Better Finance and GPB are sometimes collectively referred to herein as the
“Parties.” ;

4, A justiciable controversy has arisen between Plaintiff and Defendant regarding the

meaning and import of a certain contract the Parties have entered into, and as to the rights and
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obligations of the Parties thereunder, as set forth herein, entitling Plaintiff to a declaration of the
rights and obligations of the Parties.

5. In addition, GPB has asserted a claim to a sum of money that requires the
examination of a long account, and Better Finance therefore is entitled to a judicial reference
pursuant to California Code of Civil Procedure section 639, subdivisions (a)(1) and (a)(2).

6. Defendants DOES 1 through 50, inclusive, are sued herein by such fictitious
names because their true names and capacities are unknown to Plaintiff. Plaintiff will seek leave
to amend this Complaint when said Defendants’ names and capacities have been ascertained,
Upon information and belief, Plaintiff alleges that said fictitiously named Defendants are in some
manner legally liable for the actions, conduct and damages hereinafter alleged.

7 Plaintiff is informed and believes and thereon alleges that at all times herein
mentioned, each Defendant, both fictitiously and actually named, was the principal, agent, or
employee of the other Defendants, and acting as either such principal or within the course and
scope of such employment or agency, took some part in the acts or omissions hereinafter set forth
by reason of which each Defendant, both fictitiously and actually named, is liable to Plaintiff for
the relief prayed for herein.

8. Venue is proper in this Court pursuant to California Code of Civil Procedure
section 395, subdivision (a), because the obligation was entered into, and to be performed, in the
City and County of San Francisco.

SPECIFIC ALLEGATIONS

A. Better Finance develops a business plan to facilitate U.S. Small Business
Administration 7(a) Loans

9. The United States Small Business Administration (“SBA”) organizes a number of
loan guaranty programs designed for business owners who may have difficulty qualifying fora
traditional bank loan. While lenders originate the loans, the SBA promulgates certain
underwriting requirements. Ifa loan application meets or exceeds these requirements, it may be
eligible to be guaranteed by the SBA, provided that such loan application also meets the criteria
that the lender applies to its non-SBA loans. Each lender’s own criteria for non-SBA loans may
be unique. One SBA loan program is called the ““7(a) program” and an SBA-guaranteed loan
issued thereunder is known as an “SBA 7(a) Loan.”

10. Various lenders in the United States offer SBA 7(a) Loans as a financial product.

11. Prior to the events at issue, Better Finance developed a business plan that involves
two primary aspects. First, Better Finance intended to enter into referral agent and packaging

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agent relationships with small businesses that wish to apply for SBA 7(a) loans. Better Finance
developed proprietary referral and packaging software to enable applicants to accelerate an
otherwise often burdensome application process. Second, Better Finance intended to, and did,
develop software designed to speed and reduce the lenders’ costs of underwriting and loan
origination for SBA 7(a) loans through a proprietary software system (the “BELIEF System,”
described herein). In such a manner, Better Finance planned to speed up and facilitate an
otherwise burdensome and challenging application experience for small businesses, while at the
same time enabling lenders to streamline the underwriting, loan origination, and account
statement provisioning process.

B. Better Finance creates the BELIEF System Software and the Trade Name
“SmartBiz”

12. Prior to the events at issue, Better Finance had created financial technology known
as the BillFloat Electronic Loan Investigation and Evaluation Framework System (the “BELIEF
System.” The BELIEF System is software that is licensed to lenders that includes (i) an
underwriting system, (ii) an origination management and recordkeeping system, and (iii) a
dashboard system for loan account statement, The BELIEF System can implement the unique
underwriting criteria of each lender,

13. Better Finance had also developed a brand that it calls “SmartBiz,” for which it
filed certain SmartBiz trademarks. Together, the SmartBiz brand and SmartBiz trademarks are
referred to herein as the “SmartBiz Brand IP.”

: C.  GPBIs an SBA Preferred Lender

14. Many traditional lenders do not offer SBA 7(a) Loans because of the difficulty,
and resulting cost, in underwriting them. Even lenders that do offer SBA 7(a) Loans often do not
provide such loans in amounts of $25,000 and lower.

15. Atall relevant times, GPB held a Preferred Lender Program (“PLP”) license with
the SBA, permitting it to originate all forms of SBA loans, including SBA 7(a) Loans in amounts
ranging from $5,000 to $5,000,000.

D. Better Finance seeks lenders to license the BELIEF System

16. In or about 2013, Better Finance sought lenders interested in licensing the BELIEF
System. Better Finance approached lenders, and indicated that it was interested in licensing the
BELIEF System to lenders to enable them to underwrite SBA loans more rapidly, with greater

regulatory compliance, and at a lower cost.WEBB LEGAL GROUP
(415) 277-7200

155 Montgomery Street, Suite 1200
San Francisco, CA 94104

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E GPB expresses interest in working with Better Finance; the Parties develop an
underwriting algorithm called the “GOLD Standard”
17. Defendant GPB was among the first lenders to express an interest in working with

Better Finance. From the start, GPB represented that its Board of Directors had only authorized it
to enter into loans valued between $5,000 and $25,000.

18. Accordingly, the Parties discussed the mechanics of how GPB would utilize the
BELIEF System software specifically to underwrite SBA 7(a) Loans. Out of these discussions,
the Parties jointly developed a set of underwriting criteria that would implement GPB’s small
business loan underwriting standards at that time using the BELIEF System software. The Parties
ultimately named these criteria the Guarantor Owner Liquidity Debt-coverage Standard (the
“GOLD Standard”). :

19. | GPB viewed the GOLD Standard as a potential source of additional revenue, and
requested that Better Finance offer to license the GOLD Standard to other lenders with whom
Better Finance might do business. The Parties agreed to share in certain costs and revenues
associated with the ongoing improvement and marketing of the GOLD Standard and the SmartBiz

 

Brand IP and business development that could lead to more loan applications that could be
submitted to GPB.

20. On July 25, 2013, Better Finance and GPB signed a document the Parties termed a
“Key Agreements Summary.” The recitals in the Key Agreements Summary include the
following:

A Lender desires to engage in the origination, marketing, underwriting, and funding
of loans, as well as the servicing, management, and liquidation of the subsequently
resulting loan portfolios, funded and created under the U.S. Small Business
Administration (“SBA”) 7(a) Loan Program (the “7(a) Program”).

In other words, the Key Agreements Summary provides that the Parties’ deal concerns the
financial product known as SBA 7(a) Loans, which the SBA guarantees in amounts ranging from
$5,000 to $5,000,000 and subject to all the loan permutations permissible under the SBA
Standard Operating Procedures. Notably, the Key Agreements Summary does not define the
“7{a) Program” as only applying to loans in the amount of $5,000 to $25,000 or having a specific
use of proceeds or collateral requirements.

21. In the ensuing months, the Parties decided to implement the Key Agreements
Summary by executing two contracts, 7
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K The Parties execute the License Agreement
22. The Parties first executed a Software License, Maintenance and Support

Agreement (the “License Agreement”), whereby GPB would license the BELIEF System
platform for use in its own origination of SBA 7(a) loans. The Parties signed the License
Agreement on November 6, 2013.

23. The Licensing Agreement provides that the licensed technology — i.e. the BELIEF
System — belongs to Better Finance. It grants GPB a non-exclusive and limited license to use the
BELIEF System platform for underwriting “SBA-guaranteed loans,” without any restriction on
the type of SBA Ioan or on the size of such SBA loan. The Parties equally understood that Better
Finance was in the process of entering into similar licensing agreements with other lenders.

G. The Parties execute the Marketing Agreement

24. In addition, on December 5, 2013, the Parties executed a second agreement,
termed the “Draft [sic] Joint Marketing and Joint Technology Improvement Agreement” (the
“Marketing Agreement”), Although the parties failed to remove the word “Draft” from the title
of the document, the document was fully executed by both Parties as a final agreement,

25. The Marketing Agreement memorialized the Parties’ agreements concerning
revenue sharing and cost sharing between the Parties related to the GOLD Standard. It provided
that the GOLD Standard technology was jointly owned, and anticipated further development of
such technology. It also provided that the Parties would each receive income when other banks
licensed the GOLD Standard.

26. The Marketing Agreement also provided that the Parties jointly share in certain
profits related to licensing the SmartBiz Brand IP. It provided for certain cost and revenue
sharing regarding the improvement and licensing of the SmartBiz Brand IP to other lenders.

27. The Marketing Agreement required Better Finance to refer 70% of all SBA 7(a)
Loan applications to GPB each month, regardless of the loan amount sought, if such application
would meet GPB’s underwriting criteria, Even though the Marketing Agreement required Better
Finance to refer 70% of all SBA 7(a) Loan applicants, GPB continued to accept only loan
applications in the $5,000 to $25,000 range.

H. The Parties begin doing business even before the License Agreement and the

- Marketing Agreement are signed
28. Even before the License Agreement and Marketing Agreement were signed, in

September 2013, GPB began accepting loan applications from applicants referred to GPB by

Better Finance, GPB told Better Finance that it only wanted to be referred SBA 7(a) loan
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applications seeking $5,000 to $25,000 because it perceived this to be a good market opportunity.
Better Finance requested that GPB accept SBA 7(a) loan applications for larger loan amounts, but
GPB did not want to do so at that time.

29. In April 2014, the GPB Board of Directors authorized GPB to start preliminarily
exploring the possibility of originating SBA 7(a) loans in excess of $25,000 in the indeterminate
future.

L Better Finance enters into an agreement with Celtic Bank

30. In or around early 2014, Better Finance informed GPB that it intended to enter into
an agreement with Celtic Bank, as was its right to do, and to refer to Celtic Bank SBA 7(a) Loan
applicants seeking loans in the $25,000 to $150,000 range, including loans secured by real estate
and those underwritten using different criteria than the GOLD Standard. More than a month after
so notifying GPB, on March 17, 2014, Better Finance executed a contract with Celtic Bank to this
effect. Celtic Bank began originating SBA 7(a) loans referred by Better Finance in April 2014,

31. In June and/or July 2014, Better Finance notified GPB that Celtic Bank intended to
increase the size of SBA 7(a) loans referred by Better Finance that Celtic would underwrite to
$350,000. Based on a referral from Better Finance, Celtic Bank issued its first SBA 7(a) Loan
with a value between $151,000 to $350,000 in August 2014.

i GPB asks to renegotiate the terms of the Marketing Agreement

32. Prior to July 23, 2014, GPB asked Better Finance to re-structure the Marketing
Agreement. On July 23, 2014, the Parties executed a First Amended Joint Marketing Agreement
{the “Amended Marketing Agreement”), a copy of which is attached hereto as Exhibit 1, and
incorporated herein. The Parties’ relationship was materially amended in two ways. First, GPB
received additional compensation under the Amended Marketing Agreement. Second, the
Amended Marketing Agreement placed an upward size limitation on the types of SBA 7(a) loan
applications that Better Finance was obliged to refer to GPB. Henceforth, Better Finance would
only be obligated to refer to GPB 70% of SBA loan applications seeking loans of $25,000 or less,
if such loan applications met GPB’s underwriting criteria,

K. Better Finance begins working with First Home Bank

33. Prior to June 2015, Better Finance provided GPB notice that it intended to refer
loans to First Home Bank, as is its right to do, including loans underwritten using different
criteria than the GOLD Standard. In June 2015, First Home Bank originated its first loans, in the
$25,000 to $350,000 range.WEBB LEGAL GROUP
155 Montgomery Street, Suite 1200
San Francisco, CA 94104

(415) 277-7200

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K. GPB’s regulator tells GPB to restructure the Marketing Agreement to eliminate its
ibility for costs

34. Under information and belief, at some point in or prior to January 2015, a
regulator of GPB — probably the Office of the Comptroller of the Currency (“OCC”) — expressed
concern to GPB about its spending on cost sharing under the Amended Marketing Agreement. At
this point in time, GPB could have simply approached Better Finance with a request to terminate
the Amended Marketing Agreement pursuant to section 7 of the Amended marketing Agreement,
based on regulatory concerns about GPB’s capital inadequacy. Instead, it asked Better Finance to
further amend the Marketing Agreement to address the regulator’s concerns.

35. Specifically, on January 8, 2015, GPB asked Better Finance to amend the Parties’
relationship, and in support of the request, stated in part as follows in an e-mail to Better Finance:

The bank is currently losing approximately $60-70K/ month ($40-50K net from the
Marketing Agreement settlement, $20+K from the depreciation of the software asset), and
the pro-forma that was prepared by Better Finance for 2015 indicates the Bank is expected
to experience marketing agreement losses greater than $300K+ in addition to-the Bank’s
projected $250K software asset depreciation expense. This creates a situation where our
core bank operations, which after much effort is slightly net positive, swings to a net loss
for the Bank in 2015, with the impact of the Marketing Agreement losses.

36. Better Finance agreed in principal to again re-negotiate the Amended Marketing
Agreement, and has done so in good faith. As set forth herein, the Parties have not agreed upon
terms of any such amendment.

37, From January 2015, the Parties have engaged in several rounds of negotiations.
Each time the parties would reach agreement on the terms of an amended agreement, GPB would
tenege at the last minute and demand new concessions when presented with a final draft of an
agreement. In short, GPB has refused to negotiate in good faith.

38. As an example of its refusal to negotiate in good faith, in July 2015, GPB failed to
make payment to Better Finance for monies owing under the License Agreement and monics
GPB was legally obligated to send to Better Finance from loan disbursements as payment for
teferral and packaging fees owed to Better Finance, in a ploy to exert leverage on Better Finance
to concede material points in negotiations. GPB only made the payment after Better Finance
provided it with a notice of breach of contract.

L. __ GPB foments a dispute simply to exert pressure on Better Finance to amend the
terms of the deal — something Better Finance is under no Segal obligation to do
39. Solely in order to exert pressure on Better Finance to amend the Amended

Marketing Agreement, on August 17, 2015, GPB caused its attorneys to send a notice of default

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to Better Finance, alleging four instances where Better Finance is alleged to have breached the
Amended Marketing Agreement (the “Alleged Breaches”), A copy of this notice is attached
hereto as Exhibit 2, and is incorporated herein, without admitting or adopting the allegations
therein, all of which Better Finance expressly denies (the “Notice of Default”). The Notice of
Default constitutes and/or evidences a genuine dispute as to the rights and obligations of the
Parties concerning each of the Alleged Breaches, entitling Better Finance to a declaration as to
the rights and obligations of the Parties concerning them, as set forth herein.

M. First Alleged Breach: alleged failure to provide more detail ling proposed joint
intellectual property scopes of work
40. —_Inits first alleged breach, GPB argues that Better Finance failed to provide certain

paperwork allegedly required by the Amended Marketing Agreement regarding proposed joint
intellectual property scopes of work (called “Joint IP SOW’s” in the Amended Marketing
Agreement) at points in time when GPB had submitted the paperwork. At the time the paperwork
had been submitted, GPB raised no objection to its form and accepted the paperwork and
submitted payment. Better Finance reasonably relied on GPB’s acceptance of its paperwork and
payment in response. GPB now argues that it is necessary for Better Finance to go back and re-
do the paperwork simply to create busywork and to burden and harass Better Finance in
retaliation for not acquiescing in GPB’s demands to further amend the Parties’ agreement.
Accordingly, Better Finance seeks a declaration that it is under no obligation to perform
unnecessary work after GPB has already accepted the paperwork offered.

N. Second Alleged Breach: alleged failure to account for improvement costs related to
the Parties’ joint intellectual property

41. For its second allegation of breach of contract, GPB alleges that Better Finance
improperly charged it for certain items when it submitted statements to GPB for improvement
costs related to the Parties’ joint intellectual property, calied “Joint JP” in the Amended
Marketing Agreement.

42. Without admitting the truth of such allegation, Better Finance submits that any
such sums owed would be dependent upon an examination of a long account of not only the
improvement costs, but also of revenues paid by Better Finance to GPB, and asserts that these
amounts are also subject to an examination of a long account, and in all likelihood have been
overpaid.

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oO. Third Alleged Breach: alleged failure to refer loan applicants

43. For its third allegation of breach, GPB alleges that Better Finance has failed to
refer it sufficient business, based on an alleged “lack of deal flow.” It asserts that Better Finance

 

must:

provide GPB with a list of all applicants who have submitted information for a loan to BF
since July 23, 2014. This list shall include the name of each funding source to which such
loan application was submitted for funding, the amount of loan applications that were
directed to each funding source, and the underwriting criteria that was used to assign that
referral. Include all funding sources, not just limited to insured institutions.

See Exhibit 2, p. 3. The information sought in this request is referred to herein as the “Demanded
List.”

44, The Amended Marketing Agreement does not require Better Finance to track or
provide the Demanded List. GPB has sought the Demanded List simply to harass, vex, and
burden Better Finance.

45. An actual controversy exists as to whether GPB is entitled to the Demanded List
pursuant to the Amended Marketing Agreement. ;

46. Better Finance is entitled to a declaration as to the rights and responsibilities of the
Parties as to whether Better Finance has a duty to provide the Demanded List.

N. Fourth Alleged Breach: alleged failure to accord GPB “most favored nation” status
regarding alleged “future” financial products
47, For its fourth allegation of breach, GPB asserts, “Section 3.1 of the Agreement

provides that ‘GPB shall have “most favored nation” status with respect to any future small
business lending products or services BillFloat may offer to or through a depository institution ...”
and that loans in excess of $25,000 (including loans involving real estate over $250,000)
constitute a “future small business lending product[] or service[].”

48. In addition, GPB argues that Better Finance has a duty to

provide details of loan volume from July 23, 2014 to date showing how many loan
referrals and/or packages were sent to every funding source, including, but not limited to,
Celtic Bank and First Home Bank, and the date of that referral. Such information shall
include the requested loan amount and underwriting criteria used to direct the loan
application to any funding source.

See Exhibit 2, p. 3. The information sought in this request is referred to herein as the “Demanded
Loan Volume Information.”WEBB LEGAL GROUP
155 Montgomery Street, Suite 1200
San Francisco, CA 94104
(415) 277-7200

 

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49. Better Finance asserts that such loans are not new or “future” financial products;
that they are all SBA Loans, and that GPB is not entitled to “most favored nation” regarding
every SBA 7(a) Loan inquiry Better Finance receives.

50. Anactual controversy exists as to whether SBA Loans constitute a “future”
financial product to which GPB is entitled to “most favored nation” status.

51. Moreover, Better Finance asserts that the Amended Marketing Agreement does not
require Better Finance to track or disclose the Demanded Loan Volume Information, GPB has
sought the Demanded Loan Volume Information simply to harass, vex, and burden Better
Finance.

52. Anactual controversy exists as to whether GPB is entitled to the Demanded Loan
Volume Information pursuant to the Amended Marketing Agreement.

53. Better Finance is entitled to a declaration as to the rights and responsibilities of the
Parties as to whether Better Finance has a duty to provide the Demanded Loan Volume
Information.

CAUSES OF ACTION
FIRST CAUSE OF ACTION
(or Declaratory Relief — by Plaintiff against Defendants GPB and DOES 1 — 50)

54. Plaintiff re-alleges all paragraphs in this Complaint, and incorporates them by
reference herein.

55. An actual, justiciable controversy exists between the Parties as to their respective
rights and obligations arising under the Amended Marketing Agreement, requiring declaratory
relief,

- WHEREFORE, Plaintiff prays for judgment against Defendants as set forth in the Prayer
for Relief below.
SECOND CAUSE OF ACTION

(for Judicial Reference necessitated by examination of a long account -- by Plaintiff against
Defendants GPB and DOES 1 — 50)

56. Plaintiff re-alleges all paragraphs in this Complaint, and incorporates them by
reference herein.
57. The Court should appoint a referee pursuant to Code of Civil Procedure section
639 because the trial of an issue of fact requires the examination of a long account.
58. The taking ofan account is necessary for the information of the Court before
judgment, and/or for carrying a judgment or order into effect.
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WHEREFORE, Plaintiff prays for judgment against Defendants as set forth in the Prayer

for Relief below.
PRAYER FOR RELIEF

WHEREFORE, Plaintiff prays for judgment as follows:

1. For declarations of the rights and liabilities of the Parties;

2. For judicial reference; and

3. For such other and further relief as the Court deems just and proper.
Date: August 28, 2015 Respectfully submitted,

WILLIAM T. WEBB #193832
JENNIFER D. YU #291603
Attomeys for BILLFLOAT, INC.

ll
‘PLAINTIFF BILLFLOAT, INC.’S COMPLAINT FOR DECLARATORY RELIEF AND JUDICIAL REFERENCEWEBB LEGAL GROUP
155 Montgomery Street, Suite 1200
San Francisco, CA 94304
(415) 277-7200

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JURY TRIAL REQUEST
Plaintiff requests trial by jury.
Date: August 28, 2015 Respectfully submitted,

    

ILLIAM T, WEBB #193832
JENNIFER D. YU #291603

Attorneys for BILLFLOAT, INC,

12
PLAINTIFF BILLFLOAT, INC,'S COMPLAINT FOR DECLARATORY RELIEF AND JUDICIAL REFERENCEExhibit 1Joint Marketing and Joint Technology
Improvement Agreement

Table of Contents
1. Definitions ......sesecses re
2. Joint IP Ownership and Licensing.
3. Technology Development,
4. Insolvency..
5, Confidentiality.
6, Termination ..,
7. Applicable Regulatio:
8. Notices...
9. Force Majeure.
10, Choice of Law ..
11. Dispute Resolution and Deadioc!
12, Entire Agreement..
13, ili
14.
15,
16.
17.
Exhibit A: GOLD Standard Joint Technology Functionality.
Exhibit B: Mutual Development Plans............ssssessseesThis FIRST AMENDED JOINT MARKETING AGREEMENT (the “Marketing
Agreement”) is entered into between BiliFloat, Inc. a Delaware corporation with its
principal place of business located at 417 Montgomery St., Suite 500, San Francisco, CA
94104 (“BillFloat”), and Golden Pacific Bank, NA, a National Bank, with its principal
offices located at 980 9th St., Sacramento, CA 95814 (“GPB”), effective July 23, 2014.
The terms “GPB” shall also include the Gold Country Bank division of GPB.

This Marketing Agreement supercedes and wholly replaces the JOINT MARKETING
AGREEMENT between BillFloat and GPB, effective 2013 (the “Original Agreement”,

In consideration of valuable consideration in the mutual promises herein contained, GPB-
and BillFloat (each, a “Party”; and collectively, “the Parties”) agree as follows:

1. Definitions

The following terms, when used in this Agreement, shall have the following meanings:

1.1 “Business Development” refers to the development and ongoing
maintenance of relationships, funded by a Joint IP SOW, with
Business Development Sources,

1.2 “Business Development Source” refers to entities that, through ongoing
Business Development, either introduce BillFloat to or hire BillFloat
to find Introduced Businesses that it will refer to GPB.

1.3 “Improvement Expense” refers to the cost of a Joint IP SOW. Exhibit D
provides an illustrative list of the types of expenses that may constitute
an Improvement Cost.

1.4 | “Introduced Business” refers to a small business introduced to BillFloat by
an entity that is, at the time of suck introduction, a Business
Development Source.

1.5 “Joint IP” refers to a combination of the Joint Technology and the
SmartBiz brand and SmartBiz Marks.

1.6 “Joint IP SOW” refers to a plan to maintain and operate, improve, or
increase the value of or add to the Joint IP, including, but not limited
to, promoting the SmartBiz Marks and brand and Business
Development. Each Joint IP SOW shall include proposed schedules
which outline the dates of deliverables and the dates that payments are
due from the Parties to fund the work contemplated by such SOW, and
a budget, including timing and type of payments to be made by the
parties, deliverables and criteria for evaluating functionality.

1.7 “Joint Technology” refers to a method for applying certain underwriting
criteria for small business lending, as further described in Exhibit A,
so it can be run ona software platform (e.g., the Licensed Software
described in the License Agrecment) in a manner that meets the
underwriting standards of the United States Smali Business
Administration for its 7(A) Program.

18 “Joint Technology Development Costs” refers to the cost of developing
the Joint Technology prior to the date of this Agreement.1.9 “Level Two Improvement Costs” refers to new Improvement Costs of a
Joint IP SOW for a Mutual Development as to which GPB’s half
would exceed $50,000 in a particular month.

1.10 “License Agreement” refers to the Parties’ Software Licens¢,
Maintenance, and Support Agreement of November 6, 2013.

1,11 “Outstanding Improvement Expenses” shall refer to Improvement Costs
owed to a Party that have not yet been paid either by (i) the other
Party, or (ii) through income from licensing the Joint IP to third
parties.

1.12 “Proceeds” shall refer to a total of BiliFloat’s revenues from a particular
activity.

1.13. “Proposer” refers to a Party that presents a Joint IP SOW.

1.14 “Qualified Introduced Business” refers to an Introduced Business that
qualifies for, under the GOLD Standard, and is seeking a SBA 7(A)
loan.

1.15 “Referral Assistance Expenses” refers to fees paid on a per loan or per
introduction basis by BillFloat to Business Development Sources who
introduce BillFloat to small businesses that become SmartBiz
registered users and retain BillFloat to refer such small businesses to a
Tender.

1.16 “Return on Unilateral Improvement Expenses” is defined as one times
(1x) the amount of Outstanding Improvement Expenses multiplied by
the number of months that such Outstanding Improvement Expenses
remain unpaid,

1.17 “SmartBiz Marks” refers to all trademarks and service marks containing
the phrase “SmartBiz” owned by BillFloat, regardless of whether such
marks have been formally registered.

All other terms in this Marketing Agreement shall have the same meaning as the License
Agreement.

2, Joint IP Ownership and Licensing

2.1 Ownership of Joint Technology.

BillFloat and GPB (or their affiliates) have collaboratively developed the Joint
Technology. The Joint Technology is jointly owned by both Parties. Each Party’s
ownership interest in the Joint Technology is equivalent to that of a co-inventor’s interest
in a patent, Each Party agrees not to practice the Joint Technology except as provided in
this Marketing Agreement. Each Party agrees to maintain the Joint Technology as a trade
secret, adopting precautions and safeguards that are at least reasonable (under the
circumstances) against the non-disclosure and unauthorized use of the Joint Technology.

2.2 Joint IP Licensing, BillFloat shall provide to GPB a non-exclusive, fully paid up
non-revocable license to the SmartBiz brand and SmartBiz Marks, subject to the
requirements for usage described in Exhibit C to this Agreement, which may be amended
as the parties may reasonably agree from time to time. BillFloat agrees to take judiciousand prompt action to secure Federal trademark protection for the SmartBiz Brands and
implement and maintain appropriate policies and procedures to protect the SmartBiz
Brands, including both licensed use and policing against third-party infringement.
BiltFloat agrees that it will not sell its rights in the SmartBiz brands without offering
GPB a right of first refusal to purchase the SmartBiz Marks on terms the same or more
preferable to BillFlout.

2.3 Reseller. GPB appoints BillFloat as the exclusive agent for sublicensing GPB’s
tights and interest in the Joint Technology and maintaining, and hosting the Joint
Technology for third party depository institutions,

2.4 Banking Industry Contacts. GPB shall utilize its banking industry contacts,
including those if its employees, directors, and agents, to assist BillFloat in promoting the
Joint IP and SmartBiz Marks and brand.

2.5 Licensing the Joint IP. The Reseller will sublicense the Joint IP to third party
depository institutions who wish to underwrite certain small business loans using
underwriting criteria embodied in the Joint Technology (the “Third Party Joint IP
License”), After payment from the Proceeds of any (i) Outstanding Improvement
Expenses, (ii) Level Two Improvement Costs, and (iii) unpaid Retums on Unilateral
Improvement Expenses thereon, the Parties will split equally the Proceeds earned by
BillFloat on a monthly basis from:

1, licensing the Joint Technology to third party lenders;

2. referral of SmartBiz registered users, net of any Referral Assistance Expenses, for
SBA 7(A) loans funded by third party lenders who will underwrite such loans
using the Joint Technology, unless the referral to the third party lender arises out
of the inability or unwillingness of GPB te underwrite an SBA loan to such
SmartBiz registered user in the amount sought and pursuant to the terms sought
by such registered user;

3. lHcensing of the SmartBiz Marks or SmartBiz brand; and,

4. referral of SmartBiz registered users to third party non-SBA lenders for small
business loans net of any Referral Assistance Expenses.

For example, if there are no Outstanding Improvement Expenses, no Level Two
Improvement Costs owed to BillFloat, and no unpaid Returns on Unilateral Improvement
expenses, and a SmartBiz registered user is referred to a third party SBA lender because
GPB is unable or unwilling to fund an SBA loan to such user, then BillFloat would
receive packaging fees from the borrower, and from the Proceeds referral fees net of
applicable Referral Assistance Expenses, after which BillFloat and GPB would share
equally in technology license fees paid by the third party SBA lender to BillFloat.

For example, if there are no Outstanding Improvement Expenses, no Level Two
Improvement Costs owed to BillFioat, and no unpaid Returns on Unilateral Improvement
expenses, and a SmartBiz registered user is referred to a third party SBA lender for an
SBA loan that GPB was willing and able to fund such SmartBiz registered user, then
BillFloat would receive packaging fees from the borrower, and BillFloat and GPB wouldshare equally in referral fees net of applicable Referral Assistance Expenses, and
technology license fees paid by the third party SBA lender to BillFloat.

For example, if there are no Outstanding Improvement Expenses, no Level Two
Improvement Costs owed to BillFloat, and no unpaid Returns on Unilateral Improvement
expenses, and a SmartBiz registered user is referred to a third party non-SBA lender, then
BillFloat would receive packaging fees from the borrower, and Billfloat and GPB would
share equally in the referral fees net of applicable Referral Assistance Expenses.

 

SBA Loans . SBA Loans Non-SBA
underwritten | underwritten | Loans to

by third party | by third party | SmartBiz
lender because | despite Registered
GPB is unable | willingness Users

or unwilling to | and ability of | underwritten

 

underwrite GPB to by Third
underwrite Parties
Before Outstanding Improvement Expenses,

distributing Level Two Improvement Costs owed to BiliFloat,
Proceeds, net | Unpaid Retums on Unilateral Improvement
out: Expenses

 

Referral Fee | To BillFloat net | BillFloat and BillFloat and
of Referral GPB split it net | GPB split it net
Assistance Fees | of Referral of Referral
Assistance Fees | Assistance Fees

 

License Fee Billfloat and Billfloat and NIA
GPB split it GPB split it

 

 

Packaging Fee | To Billfloat To Billfloat To Billfloat
(from
borrower)

 

 

 

 

 

 

3. Preferred Relationships

3.1 GPB‘s “Most Favored Nation" Status. GPB shall have “most favored nation” status
with respect to any future small business lending products or services BillFloat may offer
to or through a depository institution (the “Future Services”), The Future Services may
include third party products or services that BillFloat brings to GPB with shared
economics. GPB shall be BillFloat’s Preferred Banking Partner, which means BillFloat
will negotiate first in good faith with GPB to jointly offer new small business and other
lending products developed by BillFloat.

3.2, BillFloat's "Most Favored Nation" Status. BillFloat shall have “most favored
nation” status with respect to any future small business lending products or services GPBseeks to offer (“Future Bank Products”). The Future Bank Products may include third
party products or services that GPB brings to BillFloat with shared economics. BillFloat
shall be GPB’s Preferred Technology Partner, which means GPB will first negotiate in
good faith with BillFloat to enable BillFloat to provide technology for new small
business and other lending products.

3.3. Referrals of Introduced Businesses, If there are no Outstanding Improvement
Expenses and unpaid Returns on Unilateral Improvement Expenses and GPB has the
capacity and wherewithal to promptly underwrite such a loan, then BillFloat will refer to
GPB each month seventy percent (70%) of Qualified Introduced Businesses seeking an
SBA loan of $25,000 or less before referring the same Qualified Introduced Business to
another lender for an SBA 7(a) loan. This allocation of referrals between GPB and the
other lender shall be on a basis that does not disadvantage GPB with respect to the quality
of the Qualified Introduced Business.

3.4 BillFloat shall provide thirty (30) days prior written notice to GPB before entering
into a bank license agreement or other arrangement with any other lender for
underwriting SBA 7(a) loans, BillFloat shall provide any such license agreement or
other arrangement to GPB. GPB shall have the right at reasonable times, from time to
time, but not more often than once a quarter, to audit the books and records of BillFloat
related to any such lender arrangement to confirm compliance with all of the provisions
of this Section at GPB’s sole expense. Notwithstanding the foregoing, ifa third party
licensee of the Joint Technology is a Business Development Source, then all Introduced
Businesses introduced from that source shall be referred first to such Licensee,

4, Technology Development

4.1 Improvement Expenses from January 2014 through June, 2014, In order for GPB
and BillFloat to equally own the Joint Technology, each Party will be responsible for half
of the Joint Improvement Expenses. Exhibit B outlines GPBs portion of the Joint
Technology Improvement Expenses from January 2014 to June 2014.

4.2 Joint Technology Updates and Improvements,
a. Mutual Consent. Either Party, in the role of Proposer, may propose a Joint IP SOW to
improve or add to the value of the Joint IP. Each proposed Joint IP SOW shall be
provided by the Proposer to the other Pasty no later than the fifteenth (15°) day of the
month prior to the month in which the work related to the Joint IP SOW would
commence. Prior to the commencement of the work related to such Joint IP SOW, if the
other Party agrees to pay haif of the Improvement Cost, this shall be deemed a “Mutual
Development.” For a Mutual Development in which one Party pays more than half of
the Improvement Cost, the other Party shall pay its half of the Improvement Cost within
the later of: (i) one month of such expenses, or (ii) a payment schedule mutually agreed
upon by the Parties and documented in the Joint IP SOW. In the event that one Party has
not paid its half of the Improvement Cost of a Mutual Development upon or before the
date such payment is due, the amount owing shail be deemed an Outstanding
Improvement Expense. If mutually agreed upon and specified in the Joint IP SOW,either party may pay its contribution in kind, such as through the provision of Business
Development or software development resources, In the event that the parties
underestimate the cost of a Mutual Development, both parties shall contribute equally for
any additional expenses. GPB shall have the option to-not pay Level Two Improvements
Costs and instead allow Bil!Float to recoup such Costs from the Proceeds under Section
2.5,

b. Unilateral Developments. In the event that a Proposer proposes a Joint IP SOW and
the other Party does not agree within three business days to fund half of the Improvement
Cost, this shall be deemed a “Unilateral Development.” For a Unilateral Development,
the Proposer may fund the entire Improvement Cost itself and such cost shall be deemed
an Outstanding Improvement Expense.

c. Development and Marketing Expenses, When proposing a Joint IP SOW, the
Proposer must denote any proposed expenses that are deemed to be a Business
Development or marketing expense. A preliminary assessment of Business
Development or marketing expenses will be reviewed by the Parties on a quarterly basis
that precedes the delivery of the Joint IP SOW.

4.3 Ownership of Improvements and Additions to Joint Technology. The parties agree
that any intellectual property created as a deliverable of a Joint IP SOW (including
Unilateral Developments once the costs for such developments have been recouped by
the Proposer) will be owned jointly by the Parties,

4.4 SmartBiz Brand Development. in the event that the Parties wish to increase the value
of the SmartBiz brand and SmartBiz Marks through further investment, the Parties will
mutually agree, in advance, on both a statement of work (the “SmartBiz Brand SOW”)
and delivery and payment schedule for doing so. Unless otherwise provided, the cost of
performing the SmartBiz Brand SOW shall be split evenly between the Parties. In the
event that one Party has not paid its apportioned cost for the SmartBiz Brand SOW as
provided in such statement of work, the amount owing sball be deemed an Outstanding
Improvement Expense. The Parties will mutually agree on a delivery and payment
schedule for this work,

5. Insolvency

5.1 In the event one Party is insolvent or in receivership, the other Party may propose to
purchase all of the rights to the Joint Technology from the insolvent Party.

5.2 Inthe event-that BillFloat ceases to license the Licensed Software to third party
depository institution licensees of the Joint Technology-due to insolvency of BillFloat
and this Agreement is not terminated, GPB shall be able to request permission from
BillFloat for GPB to sublicense its Mirror Image. BillFloat shall not unreasonably deny
such request, In the event that GPB utilizes the Mirror Image to enable another financial
institution to sublicense or otherwise utilize the Joint Technology (each such entity shall
be deemed a “Third Party Licensed Software User’), GPB shall ensure that BillFloat is
paid an amount equal to or greater than the Licensed