Exhibit 10.1

Confidential      

Execution Copy

AMENDED AND RESTATED

MERCHANT SERVICES AGREEMENT

This AMENDED AND RESTATED MERCHANT SERVICES AGREEMENT (“Agreement”) made as of
February 1, 2004, by and between CITIBANK USA, N.A. (“Bank”), a national banking
association organized and existing under the laws of the United States, with its
principal place of business at Sioux Falls, South Dakota, and OFFICE DEPOT,
INC., for itself and its Subsidiaries, as hereafter defined (“Company”), a
corporation organized and existing under the laws of the State of Delaware, with
its offices at 2200 Old Germantown Road, Delray Beach, Florida 33445.

WITNESSETH:

WHEREAS, Bank and Company entered into the Merchant Services Agreement
Commercial Accounts dated as of September 30, 1999, as amended, and the Merchant
Services Agreement (Consumer) dated as of December 23, 1999, as amended
(collectively the “Prior Agreements”); and

WHEREAS, Bank and Company wish to amend and restate the Prior Agreements in this
Amended and Restated Merchant Services Agreement, superceding herewith all Prior
Agreements and all amendments thereto; and

WHEREAS Bank and Company desire that Bank retain the funds currently held in the
Reserve Fees Account and the Marketing Fund established under the Prior
Agreements for purposes of funding the Reserve Fees Account and the Marketing
Fund established under this Agreement; and

WHEREAS, Bank issues private label credit cards for use at specific retail
establishments, and desires to offer to certain consumers and businesses
(“Company Customers”) the ability to use a Bank-issued credit card with
Company’s name and logo appearing on such card for the purchase of goods and
services normally and customarily offered by Company; and

WHEREAS, Company is in the business of offering goods and services for sale at
retail stores and via mail, telephone and Internet sales and desires to offer
its customers the convenience of using a Bank-issued credit card with Company’s
name and logo appearing on such card in payment therefor; and

WHEREAS, Bank directly or through its designee will operate and administer a
merchant authorization and settlement program whereby, subject to certain
conditions, Bank will authorize certain Bank-issued credit card transactions for
Company and Company or its designated agent will present Bank with transaction
records for payment.

NOW, THEREFORE, in consideration of the foregoing premises and mutual covenants
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Bank and Company agree as
follows:

ARTICLE I - DEFINITIONS

1.1 Definitions. Except as otherwise specifically indicated, the following terms
will have the meaning specified herein:

“Account” means a Card account. An Account may have more than one Card issued
for it. All Accounts are deemed to be the property of Bank. Bank will determine
the terms and conditions under which Accounts will be established and
maintained.

 

-1-

--------------------------------------------------------------------------------

“Active Account” means any Account that has not been written off and that has a
debit or credit balance at any time during a billing period.

“Affiliate Locations” means Computers4sure.com, Solutions4sure.com, Tech Depot
and Office Tech Center, and such other additional affiliate locations as Company
may acquire in the future.

“Applicable Law” means, with respect to a party, any law, ordinance, statute,
rule, regulation, issuance or other determination or finding of any Governmental
Authority or final and binding determination of any arbitrator applicable to or
binding upon such party or to which such party is subject, whether federal,
state, county or local (including, without limitation, usury laws, the federal
Truth-In-Lending Act, the federal Fair Debt Collection Practices Act, the USA
Patriot Act, the federal Equal Credit Opportunity Act, the federal Fair Credit
Reporting Act, the Gramm-Leach-Bliley Financial Modernization Act of 1999,
Regulations of the Board of Governors of the Federal Reserve System, the
Policies of the Federal Financial Institutions Examination Council and the
Magnuson-Moss Warranty Act).

“Application” means Bank’s credit application which must be completed by persons
and companies that wish to become Cardholders and which must be submitted to
Bank for review.

“Authorization” means permission from Bank to make a Card Sale.

“Authorization Center” means the facility designated by Bank as the facility at
which Card Sales are authorized.

“Authorized Goods and Services” means those goods and services offered by
Company in the ordinary course of Company’s current business.

“Average Annual Spend” means, as of any calendar year, the aggregate dollar
amount of net Card Sales on all Commercial Invoice Plan Accounts for the
calendar year divided by the Average Monthly Ending Active Accounts.

“Average Daily Receivables” means, as of any calendar year, the sum of the
outstanding debt owed to Bank on all Commercial Invoice Plan Accounts for each
day during said calendar year, divided by 365.

“Average Daily Sales Outstanding” means, as of any calendar year (the Average
Daily Receivables divided by the aggregate dollar amount of net Card Sales on
all Commercial Invoice Plan Accounts for the same calendar year) multiplied by
365.

“Average Monthly Ending Active Accounts” means, as of any calendar year, the sum
of the number of Ending Active Commercial Invoice Plan Accounts for each month
during the calendar year divided by twelve (12).

“Bank’s Debt Rating” means the current senior unsecured debt rating according to
Standard & Poor’s for Bank’s publicly traded parent.

 

-2-

--------------------------------------------------------------------------------

“Book Value” means the current outstanding balances on the Accounts excluding
Accounts more than one hundred eighty (180) days contractually delinquent or
previously charged off as uncollectible as of the calculation date plus accrued
but unbilled finance charges and fees on Accounts.

“BSD Accounts” means an Account issued under the BSD Program, pursuant to which
Company solicited certain of its Business Services Division customers for
Accounts that are no-interest, full-balance due Accounts.

“Business Day” means Mondays through Fridays except days when Bank is closed for
business.

“Card” means a credit card issued by Bank with Company’s name and logo appearing
on such card or with such other design as is mutually acceptable to the parties,
which evidences an Account.

“Card Plan” means the program under which Accounts will be established and Cards
issued to qualified applicants including, without limitation, the Commercial
Revolve Card Plan, the Commercial Invoice Card Plan, the Commercial Revolve No
Fee Plan, the Consumer Revolve Plan and The Special Credit Plans.

“Card Sale” means any sale of Authorized Goods and Services that Company makes
to a Cardholder pursuant to this Agreement that is charged to an Account.

“Cardholder” means (i) a business or consumer in whose name an Account is
maintained and (ii) an authorized user of an Account.

“Chargeback” means the refusal of Bank to pay Company for a Card Sale or the
return to Company and reimbursement to Bank of a Card Sale for which Company was
previously paid.

“Commercial Invoice Plan” means special Cardholder programs which are made
available by Bank for Company to offer to business customers under which
Accounts will be established by Bank and the Cardholder will be required to pay
the amount of the invoice or statement on the due date applicable to such
Accounts and government or other specified Accounts which are no interest, full
balance due Accounts.

“Commercial Revolve Plan” means a program under which (i) the Cardholder is a
business; and (ii) the Cardholder is required to make only a minimum monthly
payment on an Account.

“Commercial Revolve No Fee Plan” means special cardholder programs (as
established by Bank from time to time) in which the cardholder will be required
to pay the amount of the invoice or statement on the due date applicable to such
Accounts, School Accounts, or other specified Accounts (which are no interest,
full balance due).

“Company’s Debt Rating” means the Company’s current senior unsecured debt rating
according to Standard & Poor’s.

“Company Mark” means any name, logo, trademark, service mark or other
proprietary designation selected for use in connection with the Card Plan. The
Company Marks are set forth in Schedule A, as amended from time to time.

 

-3-

--------------------------------------------------------------------------------

“Consumer Revolve Plan” means a program under which (i) the Cardholder is a
consumer (i.e. obtains the Card for personal, family or household use) and
(ii) the Cardholder is required to make only minimum monthly payments on an
Account.

“Credit” means a non-cash refund issued by Company to a Cardholder of all or a
portion of the amount of a Card Sale.

“Credit Slip” means evidence of a Credit in paper form.

“Daily Sales Outstanding” means the ending outstanding balance divided by net
Card Sales on the Commercial Revolve No Fee Plan for the billing period
multiplied by the number of days in the month.

“Ending Active Account” means, as of any month, an Account that has not been
written off and that has a debit or credit balance at any time during the month.

“Effective Date” means the date set forth in Section 6.2(a) of this Agreement.

“Electronic Location” means a Company location at which there is an Electronic
Terminal.

“Electronic Terminal” means an electronic terminal or computer capable of
communicating by means of an on-line or dial-up electronic link (whether routed
through Bank’s facilities or otherwise) with an Authorization Center to obtain
Authorization. Electronic Terminals used hereunder by Company shall be at
Company’s expense and shall be otherwise reasonably acceptable to Bank.

“Floor Limit” means the United States dollar amount designated by Bank from time
to time, at or above which Authorization must be obtained to make a Card Sale.

“Losses” means the total balance of Card Sales, interest and fees included in
any Account or invoice on an Account which is more than one hundred eighty
(180) days past due, or which Bank writes off as an uncollectible Account or
writes off an invoice on an Account prior to one hundred eighty (180) days past
due. Accounts may be deemed uncollectible as a result of certain events,
including without limitation, lack of a Cardholder signature on an Account
Application which is not remedied within ninety (90) days after a reasonable
effort to collect has been made, fraud, undue hardship, bankruptcy or death of a
Cardholder.

“Material Adverse Change” as to Company means Company’s Debt Rating and as to
Bank means Bank’s Debt Rating, becomes the equivalent of B+ or worse,
respectively, or Company or Bank, respectively, ceases to have a public debt
rating.

“Net Card Sales” means the total amount of Card Sales properly remitted to Bank
minus the total amount of Credits properly remitted to Bank.

“Operating Regulations” means the standard operating procedures of Bank, as they
may be changed by Bank from time to time in accordance with Section 3.4 of this
Agreement. The current version of the Operating Regulations is attached hereto
as Schedule B. For purposes of this Agreement, the Operating Regulations are
deemed an integral part of this Agreement and references to this Agreement will
be deemed to include the Operating Regulations.

 

-4-

--------------------------------------------------------------------------------

“Required Disclosures” means forms of credit disclosures and disclosure
documents provided by Bank which must be used by Company in accordance with
Bank’s instructions in connection with advertising, marketing and promoting the
Card Plan, accepting Applications and making Card Sales.

“Required Reserve Amount” means, at any point in time, the sum of the then
applicable Reserve Percentage multiplied by the Account balances.

“Reserve Percentage” means a percentage determined according to the following:

 

Company’s Debt Rating

  

Applicable Reserve Percentage

BBB+ or better    2.5% BB through BBB    3% BB- or worse    5%

“Sales Data” means the electronic data transmission of Card transactions (e.g.,
Card Sales and Credits).

“Sales Slip” means evidence of a Card Sale in paper form.

“School Account” means an Account (i) in the name of a school entity; (ii) that
is not issued a card; and (iii) which may be paid by purchase order.

“Settlement” means the reimbursement to Company for the Net Card Sales.

“Settlement Account” means the deposit account(s) at the financial
institution(s) designated by Company as the account(s) to be debited and/or
credited, as applicable, for the Settlement of Card transactions and the payment
of any fees, charges or other amounts due hereunder. Company shall be solely
responsible for all fees and costs associated with the Settlement Account.

“Special Credit Plan” means “No Interest for 90 Days”, “No Interest for Six
Months” and “No Interest for 12 Months”, and such other credit plans as the
parties may offer in the future. Special Credit Plans shall accrue finance
charges during the promotional period but the finance charges will not be added
to the Cardholder’s Account if the Cardholder pays the full amount of the
Special Credit Plan purchase by the end of the promotional period and makes all
required payments on the Cardholder’s Account when due. Minimum monthly payments
may be required by Bank on all Special Credit Plan purchases starting from the
date of purchase. Special Credit Plans shall have other characteristics as
described in this Agreement.

“Store” means a retail store in the United States owned and operated by Company
and Company’s mail, call center and Internet sales locations.

“Subsidiaries” means Computers4SURE.com, Solutions4SURE.com, TechDepot and
Office Tech Center, and such other subsidiary and affiliate companies as Company
may have in the future.

 

-5-

--------------------------------------------------------------------------------

1.2 Additional Definitions. The following terms shall have the definition that
is assigned to them in the section indicated for each:

 

Term

  

Section

Assets    6.2(e)(i) Buyer      6.2(e)(iv) Calendar Quarter    2.4(a)    
Cardholder Lists    2.6(a)     Co-Branded Card    2.2(b)     Code    3.6(b)    
Commercial Paper Rate    4.1(c)(i)   Company Customers            Fourth Recital
Confidential Information    6.5(a)     Credit Committee    2.5(a)     Credit
Exception Account    3.1(d)     Fair Market Value      6.2(e)(iv) Increased
Floor Limit    3.6(b)     Initial Money Rate    4.1(c)(i)  Marketing Fund   
4.3           Merchant Fee    4.1(a)(ii) Negative Merchant Fee    4.1(a)(i) 
Network Services    3.6(e)       Program Committee    2.5(b)       Prior
Agreements        First Recital Promotional Materials    2.2(c)       Purchase
Active    4.3           Qualified Card Sale    3.6(b)       Reserve Fees   
4.2           Reserve Fees Account    5.1(a)       Special Program Fee   
4.1(a)(iv) Term    6.2(a)       Unamortized Premium    4.4          

1.3. Construction. Unless the context otherwise clearly indicates, words used in
the singular include the plural and words used in the plural include the
singular.

ARTICLE II - CARD PLAN PROMOTION; PROGRAM MANAGEMENT; PROMOTION OF

AUTHORIZED GOODS AND SERVICES

2.1 Limited License. Company hereby authorizes Bank for purposes of this
Agreement to use the Company Marks on the Cards and in advertising, marketing,
promoting and administering the Card program and Card Plan, subject to Company’s
prior written approval, which shall not unreasonably be withheld or delayed.
Company shall be entitled to review materials bearing Company Marks for
compliance with its corporate trademark standards in its sole discretion. Bank
shall not be required to submit to Company for its review and approval materials
bearing Company Marks to the extent that the same materials have been previously
approved by Company unless a specific request is made by Company. In addition,
Company authorizes Bank and Bank’s affiliates to identify Company as a client in
advertising and promotional material, and to use pictures or representations of
the Card, upon the prior written approval of Company’s Director of Public
Relations.

 

-6-

--------------------------------------------------------------------------------

2.2 Promotion of the Card Plan.

(a) Plan Promotion. Company shall actively and consistently promote, participate
in and support the Card Plan throughout the Term. In consultation with Bank,
Company shall establish annual Store credit goals for number of Applications
approved and/or improved credit penetration rate. Company shall prominently
display at each of its Stores advertising and promotional materials relating to
the Card Plan, including without limitation, take-one Applications for the Card.
Further, Company shall advertise and promote the Card Plan at least to the same
extent as it advertises and promotes the most favored of other credit cards,
charge cards or credit plans. Company shall use or display promotional materials
relating to the Card Plan only in accordance with this Agreement, the Operating
Regulations and any specifications provided by Bank. Company shall use and
distribute Required Disclosures, as such may change from time to time, in
accordance with Bank’s requirements. Company shall encourage customers to apply
for Cards and shall encourage Cardholders to use Cards for purchases of
Authorized Goods and Services. In addition to the Marketing Fund established in
Section 4.3 of this Agreement, in each year of the Term of this Agreement
Company shall spend at least One million, five hundred thousand dollars
($1,500,000) on the promotion of the combined Consumer and Commercial Plans.

(b) Plan Exclusivity. During the Term, neither Company nor any other party on
behalf of Company will enter into any arrangement or agreement with a third
party provider under which Company issues, sponsors, participates in or accepts
another private label credit card, or private label credit account, including
any credit card or account under any of Company’s names or logos or any other
credit card or account that would otherwise compete with the Card Plan except
for a commercial co-branded general purpose credit card issued by a third party
or Company (“Co-branded Card”). Notwithstanding the foregoing, nothing contained
in this Agreement will be construed to prohibit Company from accepting any major
general purpose credit card (e.g., NOVUS, American Express, Mastercard or Visa)
as a means of payment by customers for purchases of Authorized Goods and
Services. Company agrees that Bank shall have the right to review, and approve
or decline each Application submitted by a customer or prospective customer of
Company before such Application is provided to any other party. Subject to the
foregoing sentence, Company may offer secondary sources of financing to those of
its customers that do not qualify for an Account, provided Company does not
issue, arrange to issue, or accept any private label credit card or private
label credit account in connection with such financing.

(c) Promotional Materials. Bank and Company shall mutually develop the
advertising, marketing, and promotional materials (in whatever media form), as
well as operating forms and other materials which promote the Card and any
Card-related programs (collectively or individually, the “Promotional
Materials”). The cost of any Promotional Materials provided to Company by Bank
shall be charged directly to and paid for by Company or, if mutually agreed in
writing by Bank and Company, from the Marketing Fund. Promotional Materials
shall not be used by either party following termination of this Agreement.
Company acknowledges and agrees that it will present all Promotional Materials
to Bank, in writing, for Bank’s review and written approval as follows:

(i) Company will deliver Promotional Materials to Bank at least five
(5) Business Days prior to the last date upon which preliminary changes can be
made to such materials. Company will allow itself sufficient time to make
changes as required by Bank including time to provide Bank with the revised
Promotional Materials for Bank’s review and written approval before such
materials are utilized.

 

-7-

--------------------------------------------------------------------------------

(ii) Company will deliver Promotional Materials in the form and/or format in
which they are intended to be utilized. A written transcript shall accompany
non-printed Promotional Materials.

(iii) Company shall not use, publish, or distribute (in any media form) any
Promotional Materials without the prior written approval of Bank.

(iv) Notwithstanding anything else to the contrary herein, (1) Company will be
solely responsible for, and will indemnify Bank (subject to Section 6.1) against
any claim and any expense incurred by Bank as a result of Company’s use of
materials not approved by Bank in accordance with the terms of this Section 2.2;
and (2) Bank will have the option to terminate this Agreement immediately if
Bank reasonably believes that Company’s failure to comply with the terms of this
Section 2.2 places Bank at risk.

2.3 Cardholder Solicitation. For purposes of mutually agreed upon solicitations
for prospective Cardholders, Company shall provide Bank with its customer lists
and any other lists of consumers and businesses that Company owns or has a right
to use. The list of Company Customers provided pursuant to this section shall
remain the sole property of Company, and shall be returned by Bank upon the
termination of this Agreement. Bank and Company shall mutually agree in writing
upon plans for solicitation of Company’s customers and the actual solicitation
material sent to Company Customers. Company shall be responsible for the costs
of providing such lists and any solicitations which may be mutually agreed upon
in writing by Bank and Company. Any such Cardholder solicitations of Company’s
customers or any other consumers by Bank shall be in accordance with Applicable
Law and Bank’s policies and procedures, and subject to Bank’s credit analysis
and determination.

2.4 Performance Standards.

(a) Bank shall adhere to the Performance Standards set forth in Schedule C. If
Bank fails to meet any of the four Performance Standard categories for any
Calendar Quarter, Bank shall report to Company the reasons for such failure and
propose a plan for taking such action as Bank deems appropriate to meet such
Performance Standard. In the event that Bank fails to meet the same Performance
Standard category in any subsequent Calendar Quarter, Bank shall pay Company
$5000 per category missed for that quarter. In the event that Bank fails to meet
the same Performance Standard category for two or more consecutive subsequent
Calendar Quarters, Bank agrees to pay Company $10,000 per category missed for
the second and each consecutive quarter thereafter that Bank fails to meet the
category. Notwithstanding the foregoing, in the event of extraordinary
quantities or concentrations of call or application volume, or a significant
upgrade to the systems related to the operation of the Card Plan, the parties
shall confer and mutually agree upon the extent, if any, to which the
Performance Standards shall apply due to such event. For purposes of this
Section, “Calendar Quarter” shall mean the periods January through March, April
through June, July through September and October through December of each year.
In addition, Bank represents and warrants that it shall comply with all
Applicable Laws with regard to performance of its obligations hereunder.

(b) Bank and Company will conduct customer satisfaction surveys in an effort to
provide a mutually acceptable way for the parties to track and improve the
performance of the Card Plan.

2.5 Program Management.

(a) Credit Committee. The ongoing operation of the Card Plan will be subject to
the management of a Credit Committee. The Credit Committee will consist of
dedicated representatives of

 

-8-

--------------------------------------------------------------------------------

both Company and Bank. The parties shall mutually agree on the number and
make-up of the representation on the Credit Committee. The initial members of
the Credit Committee shall be those persons or roles listed on Schedule D. Each
party shall be entitled to change its representation on the Credit Committee
during the Term upon written notice to the other party. The Credit Committee
shall meet in person or via conference call or videoconference at least every
other month, or upon such other frequency as the parties may agree, in such
manner and at such location as the Credit Committee shall agree. The Credit
Committee shall engage in open discussion of marketing and operational issues in
order to enhance the Card Plan. Each of Bank and Company shall be entitled to
one vote with respect to all matters to be decided by the Credit Committee. Any
matter requiring the approval of the Credit Committee shall require the
affirmative vote of both Bank and Company. Subject to the oversight of the
Program Committee, the Credit Committee will be the principal management
interface between Company and Bank with respect to the day-to-day operations of
the Card Plan. Without limitation, the Credit Committee shall:

(i) Establish an annual marketing plan for the Card Plan, which shall include
Store credit goals, the marketing activities in which the parties plan to engage
in order to meet the goals, and the expenditure of the Marketing Fund. Each
marketing plan shall be submitted to the Program Committee for its approval. The
initial marketing plan shall include the commitments contained on Schedule E,
attached hereto;

(ii) Establish promotional and credit training materials to be provided to all
Stores and Company employees;

(iii) Review and approve any proposal concerning promotion of Authorized Goods
and Services to customers of Bank and it affiliates;

(iv) Discuss issues related to processing and servicing Applications, the
Accounts, the Cardholders and the Stores;

(v) Discuss and develop proposals for new Credit Plans and other proposals and
programs to maximize Card Sales; and

(vi) Review Bank’s performance relative to the Performance Standards and
Company’s performance against the store credit goals, and recommend remedial
measures to address deficiencies and/or to improve performance against the
Performance Standards and the goals.

(b) Program Oversight Committee. For the purpose of approving expenditures of
the Marketing Fund that are proposed by the Credit Committee, approving the
annual marketing plan and/or material changes thereto, periodically reviewing
the Card Plan and resolving any matter relating to the Plan management that
cannot be resolved by the Credit Committee, Company and Bank shall establish and
maintain a Program Oversight Committee (the “Program Committee”). The Program
Committee shall consist of an equal number of senior management representatives
of Company and Bank. Company and Bank shall mutually agree on the number of
representatives on the Program Committee. Initially each of Company and Bank
shall appoint three (3) representatives to the Program Committee, which members
are listed on Schedule D hereto. Each party shall be entitled to change its
representation on the Program Committee during the Term upon written notice to
the other party. The Program Committee shall meet (in person or via telephone or
video conference) at such times and places as may be decided by the members of
the Program Committee; provided, however, that unless the Program Committee
shall agree otherwise, the Program Committee shall meet: (i) at least

 

-9-

--------------------------------------------------------------------------------

semi-annually to discuss the status of the Card Plan; (ii) within five (5) days
after either party advises the other of a matter that cannot be resolved by the
Credit Committee; and (iii) as often thereafter as may be necessary to review
such matter and negotiate in good faith in an effort to resolve such matter as
promptly and efficiently as reasonably possible. Each of Company and Bank shall
be entitled to one vote with respect to all matters upon which the Program
Committee must vote. The members of the Program Committee shall appoint an
acting chairperson and shall adopt such other rules to facilitate the conduct of
meetings as may be deemed necessary. The presence of a representative of each of
Company and Bank shall constitute a quorum for the conduct of the business of
the Program Committee. Any matter requiring approval of the Program Committee
shall require the affirmative vote of both Company and Bank. The Program
Committee shall maintain minutes of its proceedings which shall be reviewed and
approved by a representative of each of Company and Bank.

(c) Dispute Resolution. Any dispute which cannot be resolved by the Program
Committee in accordance with the provisions of Section 2.5 (b) shall be resolved
in accordance with the provisions of Section 6.15 of this Agreement.

2.6 Promotion of Authorized Goods and Services.

(a) Cardholder Lists. The Accounts and Cardholder information compiled by Bank
in connection with this Agreement (“Cardholder Lists”) are the property of Bank
and, unless all Accounts are purchased by Company as provided in this Agreement,
shall be retained by Bank. Subject to Applicable Law, Company may use Cardholder
names and addresses to conduct promotional programs for Authorized Goods and
Services during the Term, upon notifying Bank in writing prior to such use.
Cardholder Lists may be used by Bank to offer financial products and services
that do not significantly compete with Company’s business, provided that Bank
must obtain Company’s prior written consent for each such use.

(b) Bank Supported Promotions. Bank may make available to Company the
opportunity to include promotional offers for Authorized Goods and Services in
customer communications to certain customers of Bank and its affiliates,
including, at Bank’s election, statement inserts, statement messages, card
carriers, websites, emails, and stand-alone communications. Bank shall determine
in its sole discretion the channels that are available, the timing of any
promotional communication and the customers to which Company promotional offers
shall be made. The parties shall define each promotional offer in an addendum to
this Agreement or in a separate letter agreement.

(i) Approval of Products and Materials. Bank or its affiliate shall have the
right of prior review and approval of the products or services to be promoted
pursuant to this Section 2.6(b) and the promotional materials to be used.
Company shall comply with Bank’s specifications as to size and weight of
promotional materials. All products to be promoted hereunder and all promotional
materials to be used shall be submitted to Bank or Bank’s affiliate at least
fourteen (14) days before the materials are finalized for use. Company shall
incorporate at Company’s cost any revisions required by Bank or its affiliate as
a condition of approval.

(ii) Promotion of Card Plan. Unless Bank expressly agrees to the contrary, any
Company promotional materials used pursuant to this Section 2.6(b) shall also
encourage applications for or use of the Card Plan or one of Bank’s affiliates’
financial products.

 

-10-

--------------------------------------------------------------------------------

(iii) Costs; Compensation. Company shall bear all costs associated with
producing the promotional materials to be utilized pursuant to this
Section 2.6(b), including the cost of printing and delivering promotional
materials to the distribution site(s) designated by Bank or its affiliate. Bank
or Bank’s affiliate shall bear the costs associated with insertion of the
promotional materials in Bank’s customer communications and the normal cost of
postage provided, however, that if Company’s promotional materials cause an
increase in the postage cost to Bank to send Bank’s customer communication,
Company shall bear such incremental postage cost. Company shall be solely
responsible for all costs associated with any stand-alone communications to
which Bank and Company may agree. Company and Bank or Bank’s affiliate shall
mutually agree upon the compensation to be paid to Bank or to Bank’s affiliate
for the promotional activity set forth in this Section 2.6(b).

(c) Compliance with Laws; Indemnification. Company represents, warrants and
covenants that all promotional offers prepared in connection with this
Section 2.6 are and shall be true, fair, accurate and complete. Company shall
comply with Applicable Law in making any promotional offer and in providing the
related goods and/or services pursuant to this Section. Company shall indemnify
and hold harmless Bank and Bank’s affiliates against all claims arising from
Company’s alleged wrongful acts or omissions in conducting the promotional
activities under this Section 2.6 and against all claims relating to Company’s
goods or services sold hereunder pursuant to the provisions of Section 6.1 of
this Agreement.

ARTICLE III - ISSUANCE OF ACCOUNTS AND ACCEPTANCE OF CARDS

3.1 Conditions of Opening Accounts. Subject to the terms and conditions of this
Agreement, Bank shall receive Applications for Accounts and approve or decline
Accounts in Bank’s sole discretion and in accordance with Bank’s Account
issuance criteria. Failure of Company to adhere to the procedures set forth
below and/or in the Operating Regulations may result in a Chargeback in
accordance with Section 3.10 of this Agreement.

(a) Written Applications. Applications which are received by Bank through the
mail or via facsimile transmission and are not made contemporaneously with a
sale will be reviewed in accordance with Bank’s customary practice for written
Applications.

(b) Applications with Accompanying Sale. Applications submitted to Bank via
telephone or by other electronic transmission in a mutually acceptable manner
and format in conjunction with a sale will be reviewed by Bank in accordance
with Bank’s Account issuance criteria. Company shall be responsible for the
following:

(i) Providing all information required on the Application or which has been
requested by Bank’s representative.

(ii) Obtaining positive identification and verification of the person applying
for the Account in accordance with the Operating Regulations, which shall
include but is not limited to obtaining the driver’s license number or
state-issued identification card number of the person submitting the
application, the taxpayer identification and/or employer identification number
of the applicant(s), and such other identifying information as Bank may
reasonably require.

(iii) Obtaining the signature on the Application: (A) for consumer Accounts, of

 

-11-

--------------------------------------------------------------------------------

all persons whose names will appear on the Account or who will be responsible
for the Account and (B) for business Accounts, of a person or persons (officer,
partner, owner or sole proprietor) with authority to bind the business Customer
and of all persons whose names will appear on the Account.

(iv) Sending the original Application to Bank at the designated address within
five (5) Business Days of either approval or decline. In addition, Company shall
retain a copy of the completed Application in its credit files for a period of
ninety (90) days for purposes of coordination with Bank’s review and booking
process.

(v) Entering the sale and the approval code provided by Bank to Company into
Company’s Electronic Terminal.

(vi) Providing to each applicant a copy of the Citibank USA, N.A. Credit Card
Agreement and any other Required Disclosures Bank provides to Company for
distribution to applicants and approved Cardholders.

(c) Applications Submitted via the Internet. Applications transmitted by a
customer directly to Bank via the Company website linked to Bank shall be
considered and decisioned by Bank using its standard credit granting criteria,
provided that the customer submits all of the following to Bank:

 

  (i) All information requested on the Application or otherwise by Bank;

 

  (ii) An acknowledgement that he or she has received, read and downloaded or
printed all of the terms and conditions that apply to the Account;

 

  (iii) A ship-to address that matches the applicant’s verifiable business
address; and

 

  (iv) If a personal guaranty is required by Bank to approve the Account, a
signature of a person (including digital signatures as they become available)
authorized by the business at issue to apply for the Account.

(d) Credit Exception Accounts. Effective on and after Bank’s conversion of the
Accounts to the system operated by First Data Resources, in the event that Bank,
in the application of its Account issuance and management criteria, shall
decline an Application for a Consumer Account or take adverse action relative to
an established Consumer Account, Company may notify Bank of its election to have
any Losses arising in connection with the issuance of a Card to such applicant
or the continuation of such established Account paid from the Reserve Fee
Account (a “Credit Exception Account”). In such event, Bank shall open an
Account on such Application or keep an existing Account open in reliance upon
such request. The management of such Credit Exception Accounts (Including but
not limited to line assignment, authorization strategy, etc.) shall be within
Bank’s sole discretion. A Credit Exception Account cannot be withdrawn from
coverage by the Reserve Fees Account until the balance on such Account has been
paid to $0 and the Account has been closed to future charges. The existing
Consumer Accounts for which Company has accepted responsibility shall be deemed
Credit Exception Accounts and shall be treated in accordance with the provisions
of this Section. Company shall execute any further or additional documents
required by Bank’s Credit Exception Account process as may be necessary from
time-to-time to implement such process. Nothing contained herein shall require
Bank to open an Account that does not meet its non-credit based Account opening
standards, including but not limited to all applicable OFAC and fraud reviews.
Company shall be entitled to establish Credit Exception Accounts under the Card
Plan with aggregate credit balances not to exceed $1 million. Either party may
elect to discontinue the establishment of Credit Exception Accounts upon thirty
(30) days written notice to the other party, provided however that any such
discontinuance shall not affect: (i) the coverage of existing Credit Exception
Accounts by the Reserve Fee Account; nor (ii) Bank’s right to require the
establishment of a reserve against such Accounts pursuant to Section 4.2 of this
Agreement.

 

-12-

--------------------------------------------------------------------------------

3.2 Honoring of Cards.

(a) Conditions for Honoring Cards. Subject to the terms and conditions of this
Agreement, Company agrees to accept the Card for payment of Authorized Goods and
Services in those instances when a Cardholder wishes to charge the purchase of
Authorized Goods and Services to his/her Account and Company shall not attempt
to suppress or discriminate against use of a Card by a Cardholder. Company shall
accept the Card at all of its Stores in the United States for the purchase of
Authorized Goods and Services. All Sales Data resulting from such acceptance of
the Card shall be submitted to Bank in United States dollars. If any facility or
service is operated on Company premises under a franchise, lease or license from
Company and such franchisee, lessee or licensee (which is not a party to a
merchant services agreement with Bank) agrees with Company to accept Cards, Card
transactions made at such facility or service will be subject to the terms and
conditions of this Agreement and must be handled through Company as if Company
had transacted such Card transactions. Company shall be obligated to pay its
franchisee, lessee or licensee with respect to such Card transactions.

(b) Commencement of Card Acceptance. Acceptance of Cards by Company will
commence on the Effective Date of this Agreement and will continue until the
termination of this Agreement.

3.3 Acceptance of Cards. Company shall accept any Card presented by a Cardholder
as payment for Authorized Goods and Services provided that all of the following
conditions and all of the procedures set forth elsewhere in this Agreement and
in the Operating Regulations relating to the acceptance of Cards are met with
respect to each Card Sale:

(a) The Card is presented to Company on or before the expiration date, if any,
shown on its face;

(b) The Card is used as payment for Authorized Goods and Services purchased by a
Cardholder;

(c) Company will not accept a Card for the purpose of advancing money to a
Cardholder or paying money to a Cardholder for any amount that is included in a
Card Sale;

(d) Company has followed the procedures for the completion of Sales Slips as set
forth in Section 3.5 of this Agreement; and

(e) Company has obtained Authorization for the Card Sale if required pursuant to
Section 3.6 of this Agreement.

3.4 Operating Regulations. The Operating Regulations may be changed by Bank from
time to time upon not less than sixty (60) days prior written notice to Company,
provided, however, that changes which do not require major systems or
operational modifications and changes required for security measures shall
become effective as soon as possible following Company’s receipt of written
notice thereof but in all events shall become effective within thirty (30) days
of Company’s receipt of written notice thereof. In the event of any conflict or
inconsistency between the terms of this Agreement and those of the Operating
Regulations, the provisions of this Agreement shall govern.

 

-13-

--------------------------------------------------------------------------------

3.5 Completion of Sales Slips.

(a) General Requirements. For each Card Sale, Company shall prepare a Sales Slip
using a form that is mutually acceptable to Bank and Company. Each Sales Slip
must be legible and fully completed with the information required under
Section 3.5(b) or Section 3.5(c) of this Agreement, as applicable. Company shall
include all Authorized Goods and Services purchased in a single transaction on
one Sales Slip.

(b) Mail/Telephone/Internet Orders. For each mail/telephone/Internet order Card
Sale, Company shall record the following on the Sales Slip:

(i) The date and location (city/state) of the Card Sale, unless otherwise
provided to Bank, e.g. batch reports, etc.;

(ii) A brief description of the Authorized Goods and Services;

(iii) The total amount of the Card Sale, including tax;

(iv) The Account number;

(v) The expiration date, if any, of the Card;

(vi) The Authorization number or code (where applicable);

(vii) Company’s merchant number, unless otherwise provided to Bank, e.g. batch
reports;

(viii) The shipping address;

(ix) The shipping date; and

(x) Company’s sale identifying number (ticket number, transaction number, etc.).

(c) Retail Sales. Each Sales Slip must be legible and fully completed with the
same information required for mail/telephone/Internet Card Sales (specified in
Section 3.5(b) of this Agreement) excluding information pertaining to a shipping
address or shipping date. Each Sales Slip relating to a Card transaction made at
a retail location must be imprinted to obtain a clear imprint of the Card;
provided that in the case of Sales Data which are electronically produced by
Company, Company shall not be required to obtain an imprint of the Card. For
each Card Sale, a Sales Slip must be signed by the Cardholder in the presence of
an authorized representative or employee of Company at the time the Card Sale is
made. The signature on the Sales Slip must be reasonably similar to the
signature appearing on the signature panel of the Card. After completion of the
Card Sale, Company shall provide a legible and completed copy of the Sales Slip
to the Cardholder. If Company fails to obtain the signature of the Cardholder on
a Sales Slip and the Cardholder has not authorized the Card Sale or denies the
validity of the Card Sale, the Card Sale shall be subject to Chargeback pursuant
to Section 3.10 of this Agreement.

 

-14-

--------------------------------------------------------------------------------

3.6 Authorization.

(a) General Requirements. In accordance with the terms of this Section 3.6,
Company must obtain Authorization for each proposed Card Sale at or above the
Floor Limit. For purposes of this Agreement, the purchase of one or more items
or other Authorized Goods and Services made by a Cardholder at one Company Store
and at one time will be deemed to constitute a single Card Sale.

(b) Floor Limit. The Floor Limit is $0. Bank may change the Floor Limit upon
thirty (30) days prior written notice to Company. Notwithstanding the foregoing,
in the event Company is unable to obtain an electronic Authorization due to
(i) Bank’s inability to provide electronic Authorizations or (ii) Company’s
electronic capability to obtain an Authorization not being operational, the
Floor Limit shall be one hundred dollars ($100.00) (“Increased Floor Limit”),
provided that each time an Increased Floor Limit is necessitated, Company agrees
to conform to the following procedures: Company shall establish a six digit
numeric code (“Code”) for each Card Sale that is equal to or under one hundred
dollars ($100.00) (“Qualified Card Sale”). The Code shall be mutually agreed
upon by Bank and Company. This Code will appear on the Sales Slip, thereby
identifying the Card Sale as one that was made when electronic Authorizations
could not be provided or obtained. If the Code does not appear on the Sales Slip
for a Qualified Card Sale, Bank may process a Chargeback for such Qualified Card
Sale pursuant to Section 3.10 below. For all Card Sales greater than one hundred
dollars ($100.00), Company shall obtain a non-electronic Authorization, in
accordance with Section 3.6(c)(ii), below. Bank may audit Company’s records from
time to time in order to verify that (i) the Increased Floor Limit and the Code
are used only for Qualified Card Sales when electronic Authorizations could not
be provided by Bank or obtained by Company and (ii) only Qualified Card Sales
are eligible for the Increased Floor Limit. In the event that Bank determines
that the Increased Floor Limit and the Code were used when electronic
Authorizations could be provided by Bank or obtained by Company, the Increased
Floor Limit was applied to Card Sales other than Qualified Card Sales, or
Company did not conform to the procedures set forth above, Bank may (i) process
a Chargeback for such Qualified Card Sale or Card Sale pursuant to Section 3.10
below or (ii) decrease the Increased Floor Limit to $0.

(c) Obtaining Authorization.

(i) Electronic Locations. To obtain Authorization for Card Sales made at
Electronic Locations, Company shall utilize an Electronic Terminal in accordance
with procedures applicable for the use of that terminal. Company agrees that the
Electronic Terminals it uses will be those provided to Company by Bank or its
designee (at Company’s expense) or will be otherwise reasonably acceptable to
Bank. At an Electronic Location, if a referral code is displayed on an
Electronic Terminal, Company shall telephone Bank to obtain further
instructions, using a toll-free telephone number provided by Bank for such
purpose.

(ii) Non-Electronic Authorization. To obtain Authorization when Bank’s
electronic capability to provide Authorization or Company’s electronic
capability to obtain Authorization is not operational, Company shall contact
Bank using a toll-free telephone number provided by Bank for such purpose. If
the Authorization Center approves the Card Sale, Company will be given an
Authorization code or number, which must be written on the Sales Slip.

(d) Right of Chargeback. If Authorization for any Card Sale is not obtained by
Company, or requested by Company but declined by Bank, Bank may process and
Company shall accept a Chargeback for such Card Sale pursuant to Section 3.10 of
this Agreement.

 

-15-

--------------------------------------------------------------------------------

(e) Network Services. The parties agree and acknowledge that, notwithstanding
anything to the contrary in this Agreement, Bank is not required to provide
Network Services to Company. For purposes of this Agreement, Network Services”
means the electronic processing of point-of-sale transactions, including
authorization network services, systems integration, depot maintenance,
application development, project management, POS help desk, POS software
downloads and other specifically requested network services.

3.7 Settlement of Card Transactions.

(a) Remittance of Sales Data by Company. For each day on which there is Card
Sale or Credit activity, Company shall submit daily Card Sales, return and
Credit totals for Bank’s use in confirming settlement amounts. Each Business
Day, Company shall remit Sales Data to Bank. Company shall remit no Card Sale to
Bank more than sixty (60) days after the date of such Card Sale. All such
remittances must be in Bank’s form and format. Remittances of Sales Data must
contain all of the information specified in this Agreement and the Operating
Regulations. Upon receipt thereof, Bank will balance and edit the data submitted
and make appropriate adjustments for errors or invalid or incomplete
transactions. In the event all or a portion of the required data is not received
by Bank or such data is unreadable, Bank shall not be required to process the
Sales Data containing the missing or unreadable data, but shall promptly inform
Company or its designated agent of the missing or unreadable data. Company shall
be responsible for retrieving and resubmitting the Sales Data in completed form.
Company shall be responsible for the loss, damage or destruction of Sales Data
until such Sales Data is received by Bank or by Bank’s designated processor.

(b) Obligation to Reimburse Company for Sales Data. Subject to Bank’s right of
Chargeback, Bank shall reimburse Company for all Card Sales properly remitted by
Company and received by Bank. Bank will pay Company an amount equal to the total
amount of Card Sales submitted to and received by Bank, less the amount of
Credits, if any, submitted by Company, plus or minus the applicable amount, if
any, for other adjustments to the amounts so submitted. Bank may also adjust any
remittance hereunder for any Merchant Fees owed by Company and any other fees or
charges provided for in this Agreement. Bank will not be required to reimburse
Company for any Card Sale not submitted within sixty (60) days of the date of
the Card Sale, and may charge back any such Card Sale for which reimbursement
has already been made.

(c) Method and Timing of Settlement. For each electronic remittance of Sales
Data received in Bank’s form and format by 3:00 p.m. Eastern Time on a Business
Day at the location specified by Bank, Bank will initiate the appropriate credit
or debit, as applicable, to the Settlement Account through Fed Wire to allow
Company to receive its funds by the following Business Day provided, however,
that in the case of Subsidiaries, Bank will use commercially reasonable effort
to initiate the appropriate credit or debit (to the settlement account
designated for the Subsidiaries) through the Automated Clearing House Network
(“ACH Network”) by the following Business Day. With respect to each such
remittance of Sales Data received by Bank after 3:00 p.m. Eastern Time on a
Business Day, Bank will use its best efforts to initiate the appropriate credit
or debit, as applicable, to the Settlement Account through Fed Wire to allow
Company to receive its funds by the second Business Day after the date of
receipt provided, however, that in the case of Subsidiaries, Bank will use
commercially reasonable effort to initiate the appropriate credit or debit (to
the settlement account designated for the Subsidiaries) through the ACH Network
by the second Business Day after the date of receipt. Bank will not accept
remittance of Card transaction data in paper form (hard copy). Company hereby
(i) agrees to be bound by the terms of the operating rules of the National
Automated Clearing House Association, as

 

-16-

--------------------------------------------------------------------------------

in effect from time to time, and (ii) authorizes Bank and its designated agents
and representatives to initiate credit or debit entries and adjustments to the
Settlement Account (including the settlement account designated for the
Subsidiaries) without regard to the source of any monies in the Settlement
Account. This authority will remain in effect for a period of five (5) Business
Days after Bank receives written notice from Company of its cancellation of such
authorization. Bank shall not be liable for any delays in receipt of funds or
errors in Settlement Account entries caused by the actions or inactions of
Company or any third parties. Company shall not close the Settlement Account (or
the settlement account designated for the Subsidiaries) without providing Bank
at least five (5) Business Days prior written notice of such closure and
substitution of another account. Upon termination of this Agreement, Company
agrees to maintain the Settlement Account (and the settlement account designated
for the Subsidiaries) with sufficient funds until such time as Bank advises
Company that Bank has processed all Chargebacks and other adjustments and
Company agrees to permit Bank to credit and debit such Settlement Account until
all charges, Chargebacks and other adjustments are settled as provided for in
this Agreement. The foregoing obligations of Company will survive the
termination of this Agreement.

3.8 Cardholder Credits and Payments. Unless specifically required by Applicable
Law, Company shall not give cash refunds to any Cardholder in connection with a
Card Sale. For each Credit issued by Company, Company shall prepare and deliver
to the Cardholder a Credit Slip which Company shall complete in accordance with
the Operating Regulations. Company shall submit Sales Data evidencing each
Credit to Bank within seven (7) days after the Credit is issued in order that
the appropriate Credit may be entered on the Cardholder’s Account. Company shall
not accept any payment on an Account.

3.9 Billing Inquiries and Cardholder Disputes. Bank will notify Company on a
current basis when a Cardholder makes a billing inquiry or files a billing error
notice relating to a Card Sale made by Company. Company shall investigate and
make a good faith effort to resolve each billing inquiry or dispute referred to
it by Bank or received directly from a Cardholder. Within fifteen (15) Business
Days from the receipt of the billing inquiry or dispute by Company, Company
shall notify Bank in writing of the resolution thereof or the action Company
will take to resolve the billing inquiry or dispute. Company shall provide Bank
with all such information as Bank may reasonably request in connection
therewith.

3.10 Chargeback Rights and Procedures.

(a) Chargeback Rights. (i) If Company has not complied with the terms of this
Agreement or with the Operating Regulations with respect to either the opening
of an Account or a Card Sale made by Company, or (ii) if, at the end of the
fifteen (15) Business Day billing inquiry/dispute resolution period specified in
Section 3.9 of this Agreement, the billing inquiry or dispute has not been
resolved in writing by Company (or Bank has not been informed of the resolution
or the action Company will take to resolve the billing inquiry or dispute), or
if the Accountholder disputes the amount or existence of an Account, Bank may
process a Chargeback to Company for the amount of the Card Sale, the Account
balance or the disputed portion thereof, as applicable. If Bank processes a
Chargeback and the Cardholder subsequently pays the charged back amount, and
Bank is aware that such payment is of a previously charged back amount, Bank
will reimburse Company for the charged back amount.

(b) Method of Recourse. Bank is not required to pay Company for a Card Sale
which is being charged back. If Bank has already paid Company for such Card
Sale, Bank, at its sole discretion, may deduct the amount to be charged back
from the Settlement Account or offset such amount from a future payment to
Company. Alternatively, Bank may demand that Company pay Bank the amount of the
Chargeback and Company shall make such payment within three (3) Business Days of
such demand. Any Chargebacks which are not paid by the aforesaid means shall be
due and payable by Company promptly on demand.

 

-17-

--------------------------------------------------------------------------------

(c) Compliance with Laws. Notwithstanding anything to the contrary contained
herein, in the event a Cardholder, in accordance with the provisions of
applicable state law or the federal Truth in Lending Act and Regulation Z, as
they may be amended from time to time, files with Bank a billing error inquiry
or alleges a quality dispute with respect to goods or services purchased from
Company, Bank has the right of Chargeback against Company with respect to the
Card Sale which is the subject of such inquiry or dispute.

(d) Chargeback Timeframe. Bank’s right to Chargeback Card Sales will be limited
to a period of three (3) years from the date such Card Sale first appeared on an
Account statement or invoice, for Commercial Accounts and twelve (12) months
from the date upon which the first Cardholder payment was due for Consumer
Accounts.

3.11 Representations and Warranties. Company makes the following representations
and warranties to Bank with respect to each Account, all Sales Data remitted to
Bank, and as to each Card transaction evidenced thereby. Each and all of the
representations and warranties made by Company will survive the termination of
this Agreement.

(a) The information set forth on each Application is true, accurate and complete
as provided by the applicant and each Application has been completed in
compliance with this Agreement and the Operating Regulations.

(b) The Sales Data represents a bona fide sale made at a Store by Company of
Authorized Goods and Services, not previously submitted, and is originated by
Company in compliance with this Agreement and the Operating Regulations. Unless
otherwise expressly agreed by Bank, no Sales Data is submitted on behalf of a
third party.

(c) The Card transaction represents obligations of the Cardholder for the
amounts in the transaction and only for Authorized Goods and Services actually
sold and delivered or actually rendered (including taxes) and does not involve
any element of credit for any other purpose.

(d) The Sales Data is free from any alteration not authorized by the Cardholder.

(e) The transaction is in compliance with all Applicable Laws.

(f) The indebtedness represented by the Sales Data has not been pledged as
collateral for payment of any indebtedness or obligation of Company or any other
person.

(g) Company has no knowledge or notice of information that would lead it to
believe that the enforceability or collectibility of the Sales Data is in any
manner impaired.

(h) With respect to any transaction in which a Card is not physically presented
to Company, the Card and Account information contained in the Sales Data is
accurate and correct and Company has taken reasonable measures to verify that
the Card Sale is authorized by a Cardholder.

3.12 Books and Records. Company shall retain an original copy of each Sales Slip
and Credit Slip for one hundred and eighty (180) days following the date of the
Card Sale and a microfilm or other copy thereof for a total of seven (7) years.
Company shall send to Bank the original or a legible copy of any Sales Slip,
Credit Slip or any other record relating to this Agreement retained by Company
within fifteen (15) Business Days of a written request from Bank. For requests
made by Bank beyond three (3) years from the date of the Card Sale, Bank shall
pay Company’s reasonable costs of providing a copy.

 

-18-

--------------------------------------------------------------------------------

3.13 Reports.

(a) Bank shall continue to supply Company with the level and amount of monthly
information which it currently provides. Company may elect to receive additional
reports available from Bank at Bank’s then current price for such reports.

(b) Company shall supply Bank with quarterly report(s) containing information
regarding total Company Card Sales broken down by channel, store or other
mutually agreed upon segment.

3.14 Account Ownership. It is the understanding and intent of the parties that
Company shall have no ownership or other interest in any of the Accounts or
related information, including receivables, credit information, and account
records, unless and until Company purchases the Accounts as provided for in this
Agreement. However, the parties understand that ownership of assets (or
transfers thereof) may be inferred or implied in certain circumstances. In order
to effectuate this Agreement and to assure that no such inference or implication
can be made, Company does hereby sell, transfer and assign to Bank all right,
title or interest Company or any of its affiliates has or may be deemed to have
in any of the Accounts or related property. Furthermore, in the event that,
notwithstanding the intent of the parties, any of the property is held to be
property of Company or any of its affiliates, then Company for itself and its
Subsidiaries does hereby grant a security interest to Bank in all of their
right, title and interest in and to the Accounts and related property and all
proceeds thereof, as security for all amounts to be received by Bank as
contemplated by this Agreement. Furthermore, this Agreement shall be deemed to
be a security agreement within the meanings of Section 8 and 9 of the New York
Uniform Commercial Code. Company agrees that it shall, upon the written request
of Bank, take such actions as may be necessary to ensure that, if this Agreement
were deemed to create a security interest in any of the Accounts, related
information or the proceeds thereof, such security interest would be deemed to
be a perfected security interest of first priority under applicable law and will
be maintained as such throughout the term of the Agreement. It is the intent of
the parties that such a security interest would be effective whether the
Accounts and related property are sold, pledged or assigned by Bank. Company
also agrees that Bank shall have the right to file all UCC financing statements
which may be required to perfect, and to maintain the perfection of, Bank’s
interest in the Accounts.

ARTICLE IV - FEES AND INCENTIVES

4.1 Fees.

(a) Commercial Account Fees.

(i) Commercial Revolve Plan. For all Card Sales made by Company on the
Commercial Revolve Plan, Bank shall pay to Company monthly a negative merchant
fee (the “Negative Merchant Fee”, or “NMF”) of (1.00%) of Net Card Sales. The
NMF shall be reconciled and settled monthly by the sixth (6th) Business Day of
the following month. The NMF shall be subject to adjustment based on Monthly Net
Card Sales on the Commercial Revolve Plan calculated as follows:

 

Monthly Net Sales

   NMF%  

Up to $85,000,000

   (1.00 %) (i.e. no adjustment)

$85,000,001 - $100,000,000

   (1.20 %)

$100,000,001 - $115,000,000

   (1.35 %)

$115,000,001 - $130,000,000

   (1.50 %)

$130,000,001 and above

   (1.60 %)

 

-19-

--------------------------------------------------------------------------------

For example, at the conclusion of month one, Bank determines that total Net Card
Sales on the Commercial Revolve Plan totaled $90,000,000. Bank will pay to
Company an NMF totaling (1.20%), or a total of $1,080,000, on or before the
sixth Business Day of month two.

(ii) Commercial Invoice Plan. For each Card Sale made by Company on the
Commercial Invoice Plan and for any remaining BSD Accounts which have not been
converted to other Card Plans, Bank shall charge and Company shall pay a
Merchant Fee in an initial amount equal to 2.83% of the Card Sale. The Merchant
Fee for the Commercial Invoice Plan shall be reconciled and settled monthly by
the sixth (6th) Business Day of the following month. Within thirty (30) days
after each calendar year, beginning in calendar year 2005, Bank shall determine
the Average Daily Sales Outstanding and the Average Annual Spend for said
calendar year and shall, upon written notice to Company which shall include the
details of such determination, adjust the Merchant Fee applicable to Card Sales
under the Commercial Invoice Card Plan in accordance with the provisions of the
attached Schedule F; provided, however, that, notwithstanding anything in this
Agreement to the contrary, in the event the Average Daily Sales Outstanding for
said calendar year is less than 34 days or greater than 49 days or the Average
Annual Spend for said calendar year is less than $2250 or greater than $5249,
then Bank and Company shall mutually negotiate the amount of the Commercial
Invoice Card Plan Merchant Fee. In the event Bank and Company are not able to
agree on the amount of the Commercial Invoice Card Plan Merchant Fee in
accordance with the preceding sentence, then Bank and Company agree that the
Commercial Invoice Card Plan shall cease being offered and the Merchant Fee
applicable to Card Sales made in the relevant calendar year shall be determined
in accordance with the attached Schedule F. Any adjustment to the Merchant Fee
made in accordance with this Section shall apply to all Card Sales made under
the Commercial Invoice Card Plan in the relevant calendar year and the following
calendar year until further adjusted as provided herein. Company shall pay Bank
within thirty (30) days of receipt of a detailed invoice for any shortfall
between the adjusted Merchant Fee and the Merchant Fee actually paid during the
calendar year and the following calendar year, and Bank shall pay Company for
any overpayment between the adjusted Merchant Fee and the Merchant Fee actually
paid during the relevant calendar year and the following calendar year, as the
case may be, within thirty (30) days of Bank’s determination of the adjusted
Commercial Invoice Card Plan Merchant Fee.

(iii) Commercial Revolve No Fee Plan. For each Card Sale made by Company on the
Commercial Revolve No Fee Plan, Bank shall charge and Company shall pay a fee in
an amount equal to 2.43% of the Card Sale. The

 

-20-

--------------------------------------------------------------------------------

Merchant Fee for the Commercial Revolve No Fee Plan shall be reconciled and
settled monthly by the sixth (6th) Business Day of the following month. At any
time, but at least semi-annually, the Merchant Fee payable under the Commercial
Revolve No Fee Plan may be adjusted upon at least thirty (30) days prior written
notice to Company based upon changes in the Daily Sales Outstanding for all
Commercial Revolve No Fee Plan Accounts to the rate reflected on Schedule G. Any
such adjustment shall apply to Card Sales occurring on and after the effective
date of any such adjustment.

(iv) Special Credit Plans. For each Card Sale made by Company under the
Commercial Revolve Special Credit Plans listed below, Bank shall charge and
Company shall pay the following fees (“Special Program Fee”) in lieu of the
Merchant Fee otherwise stated in this Agreement:

 

Special Credit Plan (all require min. payments)

  

Special Program Fee

   Min Purchase
Amount

90 Days No Interest

   0.45% of each Card Sale    $ 299.00

Six Months No Interest

   2.58% of each Card Sale      499.00

12 Months No Interest

   4.90% of each Card Sale      699.00

The Merchant Fee for the Special Credit Plans shall be reconciled and settled
monthly by the sixth (6th) Business Day of the following month. Bank may adjust
the Commercial Special Program Fees upon at least thirty (30) days prior written
notice to Company. Any such adjustment shall not be subject to the limitations
contained in Section 4.1 (c)(ii), below.

(b) Consumer Account Fees.

(i) Consumer Revolve Plan. For each Card Sale made by Company under the Consumer
Revolve Plan, Bank shall charge and Company shall pay a fee in an amount equal
to .80% of the Card Sale, which Merchant Fee will be subject to adjustment as
provided herein. The Merchant Fee for the Consumer Revolve Plan shall be
reconciled and settled monthly by the sixth (6th) Business Day of the following
month.

(ii) Consumer Special Credit Plans. For each Card Sale made by Company under the
Consumer Revolve Special Credit Plans listed below, Bank shall charge and
Company shall pay the following Special Program Fee in lieu of the Merchant Fee
otherwise stated in this Agreement:

 

Special Credit Plan

  

Special Program Fee

   Min Purchase
Amount

Six Months Same as Cash

   2.15% of each Card Sale    $ 299

12 Months with Payments

   5.95% of each Card Sale      299

The Merchant Fee for the Consumer Special Credit Plans shall be reconciled and
settled monthly by the sixth (6th) Business Day of the following month. Bank may
adjust the Consumer Special Program Fees upon at least thirty (30) days prior
written notice to Company. Any such adjustment shall not be subject to the
limitations contained in Section 4.1(c)(ii), below.

 

-21-

--------------------------------------------------------------------------------

(iii) Sales Growth Incentive Discount. For each year in which Company’s total
Consumer program Card Sales are at least five percent (5%) higher than the Card
Sales for the prior year, Bank shall adjust the Consumer Merchant Fees set forth
in (b)(i) and (ii) above in accordance with the following table. The adjusted
Merchant Fee shall apply to Card Sales occurring on and after the effective date
of any such adjustment. Sales Growth shall be measured in calendar years and any
adjustment shall be effective as of January 1 in the year of the adjustment.
Sales growth for calendar year 2004 shall be measured against calendar year
2003.

 

Consumer Sales Growth

   Revolve     180 Day     360 Day  

At least 5% but less than 10%

   0.78 %   2.11 %   5.83 %

At least 10% but less than 15%

   0.76 %   2.04 %   5.65 %

At least 15% but less than 20%

   0.73 %   1.96 %   5.41 %

20% or greater

   0.70 %   1.87 %   5.18 %

For example, Consumer Card Sales for 2004 reflect a 12% growth over 2003.
Effective January 1, 2005, Consumer Card Sales shall be at the reduced Merchant
Fees set forth in the table above for growth between 10% and 15% (Revolve:
0.76%; 180 Day: 2.04%; 360 Day: 5.65%). If in 2005 Consumer Card Sales fail to
show at least 5% growth over 2004, the Consumer Merchant Fees will revert to the
Fees set forth in Sections (b)(i) and (ii), above (Revolve: 0.80%; 180 Day:
2.15%; 360 Day: 5.95%) effective January 1, 2006.

(c) Merchant Fee and NMF Adjustment.

(i) Money Cost Adjustment. The foregoing NMF and Merchant Fees shall be based on
the rate for high-grade unsecured notes with thirty (30) day terms sold through
dealers by major corporations in multiples of one thousand dollars ($1000.00) as
reported in the “Money Rates” section of The Wall Street Journal (the
“Commercial Paper Rate”) of 0.98% (98 basis points), (the “Initial Money Rate”).
For every month during the Term in which the Commercial Paper Rate on the last
day of the month exceeds the initial Money Rate by more than 0.50% (50 basis
points), Bank shall assess an additional fee calculated by multiplying the
average aggregate balance of all Accounts during the month by the percentage
difference by which the Commercial Paper Rate exceeds the Initial Money Rate by
more than 50 basis points, and dividing the product by twelve (12). The Money
Cost Adjustment shall not be subject to the limitations contained in subsection
(ii), below.

(ii) Other Proaram Adjustment. Upon at least thirty (30) days prior written
notice, Bank shall have the right to adjust the Merchant Fee(s) and/or NMF for
the Commercial Revolve, Commercial Revolve No Fee and Consumer Revolve based
upon actual performance of the Card Plan. Notwithstanding the foregoing,
however, (A) no such increase shall be implemented without consultation and
input from Company and (B) if Bank decreases the NMF contained in
Section 4.l(a)(i) or increases the Merchant Fees contained in Sections
4.l(a)(ii) or (iii) or Section 4.l(b)(i) by an amount greater than 0.10% (ten
basis points) during any six (6) month period (excluding any adjustment made
pursuant to the provisions of subsection (i), above), Company may terminate this
Agreement upon ninety (90)

 

-22-

--------------------------------------------------------------------------------

days prior written notice to Bank. In the event Company provides notice of
termination due to an increase under this Section 4.l(c)(ii), Bank may, within
thirty (30) days of receiving Company’s notice of termination, rescind that
portion of the increase that gave rise to Company’s termination and Company’s
notice of termination shall be of no effect. Factors which may result in an
adjustment to the NMF and/or Merchant Fee(s) include, but are not limited to,
differences between the actual performance of the Card Plan and any of the
assumptions upon which the NMF and/or Merchant Fee(s) are based, as set forth in
Schedule H.

(d) For each electronic or tape remittance of Sales Data made to Bank in
accordance with Section 3.7(c) of this Agreement, Bank will determine the amount
of net Card Sales made by Company and then calculate each of the applicable
Merchant Fees, NMF and Reserve Fees (as set forth in Section 4.2 below. Each
month on or before the sixth of the month, Bank shall reconcile and either
collect from or pay to Company the net amount due in Merchant Fees, NMF and
Reserve Fees based upon the total of Merchant Fees charged to Company and
Negative Merchant Fee credited to Company for the previous month’s Card Sales.

(e) Bank may offset the amount of the Merchant Fee, fees specified in Schedule I
and any other amounts owed by Company under this Agreement from the Settlement
amount and/or from amounts calculated pursuant to Section 4.1 (a)(i), above due
Company, or Bank may debit the Settlement Account in the amount of the Merchant
Fee and any other amounts owed by Company under this Agreement. If Bank elects
the former and the Settlement amount due Company is insufficient to cover the
Merchant Fee and any other amounts owed under this Agreement, Bank, at its
option, may offset the amounts owed under this Agreement or any remaining
portion thereof from subsequent amounts due Company or debit the Settlement
Account. Any amounts owed which cannot be paid by the aforesaid means shall be
due and payable by Company upon Bank’s written demand.

4.2 Reserve Fee. In addition to the fees set forth in Section 4.1, above, Bank
shall collect from Company, in accordance with Sections 4.l(d) and (e) above, an
amount equal to .95% of all Commercial Revolve Card Plan and Commercial Revolve
No Fee Card Plan Card Sales, .40% of all Commercial Invoice Card Plan Card Sales
and 1.39% of all Card Sales made at Affiliate Locations (collectively the
“Reserve Fees”). Bank may adjust each of the Reserve Fee percentage requirements
in accordance with Section 5.1 below in order to maintain the proper Reserve
Percentage as described therein. In the event that Bank determines, in its sole
discretion, that there has been a material increase in the exposure presented to
Bank by the Credit Exception Accounts (such as, by way of example only and not
by way of limitation, due to an increase in the balances of Credit Exception
Accounts in excess of $1 million or a downgrade in Company’s Debt Rating), then
Bank may require and Company shall pay an additional reserve into the Reserve
Fee Account in an amount to be determined by Bank.

4.3. Marketing Fund. The Marketing Fund maintained pursuant to the Prior
Agreements shall be held by Bank and shall constitute the opening balance of the
Marketing Fund established pursuant to this Agreement. Bank will credit .05%
from each net Card Sale made under the Commercial Revolve Plan and the Consumer
Revolve Plan to a marketing fund to promote incremental sales growth for the
Card Plan (the “Marketing Fund”). Bank will credit $20 for each new Account
approved under the Commercial Revolve Plan (excluding Accounts acquired via
credit pre-screened solicitations) and $0.25 monthly for each Purchase Active
Account under the Commercial Revolve Plan (subject to meeting in each such month
a minimum of 260,000 Purchase Active Accounts). For purposes of this Section,
“Purchase Active” shall mean that the Account was used to make a purchase in the
relevant month. Upon at least thirty (30) days prior written notice, Bank shall
have the right to adjust or curtail the new Account payment to the Marketing
Fund in the event that the percentage of new Commercial Revolve

 

-23-

--------------------------------------------------------------------------------

Accounts that become Purchase Active within one hundred twenty (120) days of
opening falls below sixty seven percent (67%). Bank and Company shall mutually
agree upon programs to be paid for through the Marketing Fund. The Marketing
Fund shall remain the sole and exclusive property of Bank and shall be retained
by Bank upon termination of this Agreement.

4.4 Bonus Payments. Upon execution of this Agreement, Bank shall pay to Company
the sum of Eight Million Dollars ($8,000,000) as a signing bonus. In addition,
Bank will credit to the Marketing Fund the sum of Five Hundred Thousand Dollars
($500,000) upon execution of this Agreement and an additional Five Hundred
Thousand Dollars ($500,000) on the first anniversary of the Effective Date of
this Agreement. In the event that this Agreement terminates prior to
September 30, 2011 for any reason other than a termination by Company pursuant
to Sections 4.l(c)(ii) or 6.2(b)(iii), Company shall pay to Bank an amount equal
to $97,826.09 multiplied by the number of months remaining on the Term (the
“Unamortized Premium”). Bank may offset any amount owed by Company pursuant to
this Section 4.4 from the Settlement Account.

ARTICLE V - RESERVE FEES ACCOUNT

5.1 Reserve Fees Account Handling.

(a) Bank shall maintain an accounting of the Reserve Fees paid by Company as set
forth in Section 4.2, above, which shall be identified as the Reserve Fees
Account. The Reserve Fees Account maintained pursuant to the Prior Agreements
shall be held by Bank and shall constitute the opening balance of the Reserve
Fees Account established pursuant to this Agreement. Each month Bank will charge
against the Reserve Fees Account the Losses during the previous month (which
shall include all amounts that are due or accrued under the Accounts) of all
Accounts in each of the Commercial Revolve Card Plan, Commercial Revolve No Fee
Plan, Commercial Invoice Card Plan and Credit Exception Accounts. . Each month
Bank shall also credit to the Reserve Fees Account any amounts recovered and
received during the previous month by Bank for Losses previously charged against
the Reserve Fees Account, less applicable collection expenses, including
collection agency fees, reasonable legal costs and court costs.

(b) Upon each change in the Reserve Percentage, Bank will determine if the
balance of the Reserve Fees Account (adjusted as provided herein) is greater or
less than the Required Reserve Amount. If such balance is greater, Bank shall
promptly rebate to Company the excess amount of the Reserve Fees Account
balance. If such balance is less, Bank may, at its sole option, either promptly
charge such shortfall to the Settlement Account or otherwise collect such
amounts from Company.

5.2 Survival and Rebate of the Reserve Fees Account. The Reserve Fees Account
shall be held and managed by Bank. Upon termination of this Agreement, Bank will
rebate to Company the amount remaining in the Reserve Fees Account when the
balances of all Accounts becomes zero or when all Account receivables have been
purchased by Company, if permitted under this Agreement. The terms of this
Article V shall survive termination of this Agreement.

ARTICLE VI - MISCELLANEOUS

6.1 Indemnification; Survival.

(a) Indemnification by Company. Company shall be liable to and shall indemnify,
defend and hold harmless Bank and its officers, employees and directors from any
losses, damages, claims or complaints (including reasonable outside attorney’s
fees and disbursements) incurred by Bank or its respective officers, employees
and directors arising out of:

(i) Any claim, complaint or setoff made by or on behalf of a Cardholder arising
out of any alleged wrongful act or omission by Company with respect to Card
Sales or Credits submitted by Company pursuant to this Agreement;

 

-24-

--------------------------------------------------------------------------------

(ii) Any alleged wrongful act or omission of Company in connection with the
furnishing of any Authorized Goods and Services purchased by Cardholders
pursuant to this Agreement;

(iii) The death or injury to any person or the loss, destruction or damage to
any property arising out of the furnishing by Company of any Authorized Goods
and Services purchased with the Card;

(iv) Any claim or complaint of a third party in connection with the use of any
Company Mark on the Card or in advertising, marketing, promoting or
administering the Card program and Card Plan; or

(v) Any breach by Company of an obligation under this Agreement.

(b) Indemnification by Bank. Bank shall be liable to and shall indemnify, defend
and hold harmless Company and its officers, employees and directors from any
losses, damages, claims or complaints (including reasonable outside attorney’s
fees and disbursements) incurred by Company or its officers, employees and
directors arising out of any claim or complaint by a Cardholder with respect to:
(i) any alleged wrongful act or omission by Bank in connection with such
Cardholder’s Account; (ii) any alleged wrongful act or omission by Bank in
connection with Bank’s advertising, marketing or promoting the Card or the Card
Plan; (iii) any claim or complaint of a third party in connection with the use
of any of Bank’s trademarks or intellectual property related thereto; or
(iv) any breach by Bank of an obligation under this Agreement. Notwithstanding
the foregoing, the indemnification by Bank shall not apply to any claim or
complaint relating solely to Company’s failure to resolve a billing inquiry or
dispute with a Cardholder.

(c) Notice of Claim. If any claim is made or any suit or action is commenced
against a party in respect of which indemnification may be sought under this
Section 6.1, the indemnified party shall promptly give the indemnifying party
written notice thereof and the indemnifying party will be entitled to assume the
defense thereof and to take over and control the settlement thereof at the
indemnifying party’s cost and expense by giving written notice of its intention
to do so to the indemnified party within thirty (30) days after receipt by the
indemnifying party of notice of the claim, suit or action. If the indemnifying
party assumes the defense of any claim, suit or action, it shall not settle such
claim, suit or action unless the indemnified party consents to such settlement,
which consent shall not unreasonably be withheld, conditioned or delayed.
Notwithstanding the assumption by the indemnifying party of the defense of any
claim, suit or action, the indemnified party will be permitted to participate in
the defense thereof and to employ counsel at its own cost and expense. If the
indemnifying party fails to notify the indemnified party of its desire to assume
the defense of any claim, suit or action or notifies the indemnified party that
it will not assume the defense thereof, then the indemnified party may assume
the defense thereof, subject to the right to seek recovery of its costs and
expenses from the indemnifying party. Any settlement or compromise of, or any
final judgment entered on or in, any claim, suit or action which the
indemnifying party declines to defend in accordance with this Agreement, will be
deemed to have been consented to by, and will be binding upon, the indemnifying
party as fully as if the indemnifying party had assumed the defense thereof and
a final judgment or decree had been entered in such suit or

 

-25-

--------------------------------------------------------------------------------

proceeding, or with regard to such claim, by a court of competent jurisdiction
for the amount of such settlement, compromise, judgment or decree. In any case,
the indemnifying party and the indemnified party shall cooperate (at no cost to
the indemnified party) in the settlement or defense of any such claim, suit or
action.

(d) Payment of Indemnified Amounts. The indemnified party shall notify the
indemnifying party of any amounts due and owing by the indemnifying party under
this Section 6.1 and the indemnifying party shall pay such amounts to the
indemnified party within thirty (30) days after receipt of such notice.

(e) Survival. Except for this Section 6.1 and Sections 3.7, 3.10, 3.1 1, 6.2,
6.5 and Article V, no other terms of this Agreement will survive the termination
of this Agreement.

6.2 Term and Termination.

(a) Term. This Agreement will be effective as of February 1, 2004 (the
“Effective Date”). Subject to earlier termination as provided herein, this
Agreement will remain in effect through September 30, 2011 (the “Term”).
However, either party may terminate this Agreement effective at the close of
business on September 30, 2009 upon at least twelve (12) months prior written
notice to the other party. The parties shall meet at least one (1) year prior to
the end of the Term to discuss their intentions with respect to the renewal of
this Agreement. The termination of this Agreement will not affect the rights and
obligations of the parties with respect to transactions and occurrences which
take place prior to the effective date of termination, except as otherwise
provided herein.

(b) Termination. This Agreement may otherwise be terminated:

(i) by Bank or Company upon notice to the other in the event the other party
elects to wind up or dissolve its operation or is wound up and dissolved;
becomes insolvent or repeatedly fails to pay its debts as they become due; makes
an assignment for the benefit of creditors; files a voluntary or involuntary
petition in bankruptcy or for reorganization or is adjudicated as bankrupt or
insolvent; or has a liquidator or trustee appointed over its affairs and such
appointment continues for more than thirty (30) days.

(ii) by Bank or Company upon notice to the other party in the event the other
party suffers a Material Adverse Change.

(iii) by Bank or Company upon not less than thirty (30) days notice to the other
in the event the other materially breaches its obligations hereunder provided
that such termination will be deemed ineffective if the breaching party cures
its breach within the thirty (30) day period.

(iv) by Bank or Company upon thirty (30) days notice to the other party in the
event the other party or the other party’s parent sells, merges, consolidates or
transfers twenty percent (20%) or more of the other party’s business or assets
without obtaining the prior written consent, as required under Section 6.7 of
this Agreement.

(v) by Bank upon thirty (30) days prior notice to Company in the event that
Company closes or otherwise ceases operation at such number of its Stores that
the number of Stores remaining in operation is 700 or fewer.

 

-26-

--------------------------------------------------------------------------------

(c) Termination of Card Acceptance. Bank, upon notice to Company, may elect to
terminate acceptance of the Card at a particular Company Store if acceptance of
the Card at such Store is subject to high fraudulent activity, excessive
Chargebacks or other course of business conduct that is injurious to the
business relationship between Bank and Company or Bank and Cardholders.
Termination of Card acceptance at an individual Company Store will not affect
this Agreement unless such termination materially affects the volume of Card
Sales made by Company, in which event Bank may elect to terminate this Agreement
upon not less than thirty (30) days prior written notice to Company.

(d) Duties Upon Termination. Upon termination of this Agreement:

(i) all amounts payable by Company shall be due and payable in full without
demand or notice of any kind and Company shall promptly submit to Bank all Sales
Data for Card transactions made up to the date of termination;

(ii) Bank shall have the right to use the Company Marks to service and
administer any Accounts remaining in Bank’s possession after termination of this
Agreement until Company purchases all Accounts pursuant to Section 6.2(e)
hereof, or until all such Accounts are finally liquidated;

(e) Purchase Requirements.

(i) If Company terminates this Agreement pursuant to Section 6.2(b), then
Company may, but shall not be obligated to, purchase all, but not less than all,
of the Accounts, Customer Lists, outstanding Card receivables, Unamortized
Premium and all other related assets (collectively the “Assets”);

(ii) If Bank terminates this Agreement pursuant to Sections 6.2(b), then at
Bank’s sole election, Company shall be obligated to purchase all, but not less
than all, of the Assets.

(iii) If Company or Bank, as the case may be, elects to cause the purchase and
sale of the Assets under subsections (i)through (ii) above, the party so
electing shall deliver its notice of such election together with its notice of
termination. If the portfolio sale event arises by virtue of Company’s
termination pursuant to Section 4.1 (c)(ii), then Bank’s notice of election to
cause Company to purchase the portfolio shall be served by Bank within thirty
(30) days of receipt of Company’s notice of termination. Once given, a party’s
notice of election to purchase or cause the purchase of the Assets shall be
irrevocable unless the parties mutually agree to its revocation. The purchase
and sale of the portfolio shall occur as provided for herein.

(iv) Calculation of Purchase Price.

(A) Upon a portfolio sale event as described in Section 6.2(e)(i), above, the
purchase price shall be determined in accordance with the following provision:

(1) Company or Company’s designated buyer (in either event, the “Buyer”) and
Bank shall meet in good faith for a period of thirty (30) days following the
delivery of the notice described in subsection (iii), above to reach agreement
on the purchase price of the Assets. If Bank and the Buyer are able to agree
upon the purchase price, it shall constitute the Purchase Price for the Assets.

 

-27-

--------------------------------------------------------------------------------

(2) If Bank and the Buyer are unable to agree upon the Purchase Price, the
Purchase Price shall be the Fair Market Value of the Assets determined as
detailed herein. Fair Market Value shall be determined by three (3) independent
appraisers each of whom is a recognized expert in valuing Consumer and
Commercial private label portfolios within the private label credit card
industry and each of whom has demonstrated experience in participating in the
valuation of similar transactions related to the sale of private label credit
card portfolios. No later than thirty (30) days following the end of the
exclusive negotiation period described in subsection (iv)(A) above, each of Bank
and the Buyer shall select a single appraiser, and the two appraisers so chosen
together shall select a third appraiser. The appraisers shall be instructed to
assume an arms-length transaction between a willing buyer and a wiling seller
and shall take into consideration, among other things, the amount of the
outstanding receivables, the aggregate number of Accounts, and the value of an
ongoing card plan relationship with Company. Bank and Buyer shall each bear the
cost of retaining their own appraiser and one-half the cost of retaining the
third appraiser. Bank and the Buyer shall each be responsible for its own usual
and customary costs incurred in connection with the sale of the Assets
(including, without limitation, closing costs and reasonable attorney fees).
Interim servicing costs following closing shall be borne by the Buyer. Each
appraiser shall separately render its valuation determination no later than
fifteen (15) days following the retention of the third appraiser. The Fair
Market Value of the Assets shall be the average of the three appraisals;
provided, however, that if the high or low appraisal shall deviate more than
fifteen percent (15%) from the middle appraisal, such high or low appraisal(s)
shall be disregarded and the Fair Market Value shall be either the average of
the two remaining appraisals or, if both the high and low appraisal deviated by
more than fifteen percent (15%) from the middle appraisal, the amount of the
middle appraisal.

(B) Upon a portfolio sale event as described in Section 6.2(e)(ii), above, the
Purchase Price shall consist of the Book Value of the Assets (including the
Unamortized Premium) as of the closing date of the purchase.

(v) Promptly following determination of the Purchase Price, Bank shall provide
Company or the Buyer, as the case may be, a purchase and sale agreement and an
interim servicing agreement containing reasonable and customary terms for
accomplishing the sale and transfer of the Assets, and which shall be mutually
agreed to by the parties. The parties shall negotiate in good faith to reach
agreement on the purchase and sale and interim servicing agreements with which
to conclude the purchase and sale. Such purchase and sale agreement shall
establish a closing date that allows Bank sufficient time, consistent with
industry practices, to remove the Accounts and the associated balances from any
applicable loan or asset securitization trust. Company understands that any
removal of Accounts from securitization is subject to the approval of the rating
agencies then rating the securitization transaction. Bank shall utilize its
commercially reasonable best efforts to expedite such removal and to cause a
smooth transition of the Assets to the Buyer.

 

-28-

--------------------------------------------------------------------------------

6.3 Status of the Parties. In performing their responsibilities pursuant to this
Agreement, Bank and Company are in the position of independent contractors. This
Agreement is not intended to create, nor does it create and shall not be
construed to create, a relationship of partner or joint venture or an
association for profit between Bank and Company. Further, notwithstanding
anything to the contrary contained in this Agreement, any third party designated
by Company to perform obligations or functions of Company under this Agreement,
including without limitation, obtaining Authorization or performing data
capture, remittance or Settlement functions, will be subject to the approval of
Bank and will be deemed to be the agent of Company for all such purposes and not
the agent of Bank and Company shall be fully liable for the fees and actions of
any such third party with respect to the performance of such functions.

6.4 Force Majeure. Neither party to this Agreement will be liable to the other
by reason of any failure in performance of this Agreement in accordance with its
terms if such failure arises solely out of causes beyond the reasonable control
and without the fault or negligence of such party. Such causes may include, but
are not limited to acts of God or of the public enemy, acts of civil or military
authority, fires, strikes, unavailability of energy resources, material delay in
transportation, riots or war. In the event of any force majeure occurrence, the
disabled party shall use its best efforts to meet its obligations as set forth
in this Agreement. The disabled party shall promptly and in writing advise the
other party if it is unable to perform due to a force majeure event, the
expected duration of such inability to perform, and of any developments (or
changes therein) that appear likely to affect the ability of that party to
perform any of its obligations hereunder in whole or in part.

6.5 Confidentiality.

(a) In performing its obligations under this Agreement, each party may have
access to and receive certain confidential or proprietary information about the
other party, including, but not limited to: This Agreement, a party’s marketing
philosophy and objectives, competitive advantages and disadvantages, Cardholder
and customer names and addresses, financial results, technological development,
Store locations, sales volume(s), merchandise mix or other information of the
business or affairs of each party, its parent company, or its affiliated and
subsidiary companies, which that party reasonably considers confidential and/or
proprietary (collectively referred to as “Confidential Information”). Each party
agrees that it will reveal such Confidential lnformation only to those of its
directors, officers, employees (or, with regard to Company, directors, officers
or employees of any of its operating divisions/subsidiaries which accept or may
consider accepting the Card, and, with regard to Bank, directors, officers,
employees of Bank, or its affiliates which are involved in the development of
the Card program and Card Plan) who are engaged in the implementation of
policies, programs or procedures with regard to the acceptance of the Card by
Company. Each party agrees not to use such Confidential lnformation or to
disclose Confidential lnformation to any third party, except as may be necessary
for that party to perform its obligations pursuant to this Agreement and except
as may be agreed upon by the parties. If either should disclose Confidential
lnformation to a third party, such party shall cause said third party to agree
to the confidentiality provisions set forth in this Section 6.5.

(b) Confidential lnformation does not include information that was: (i) in the
public domain at the time of disclosure; (ii) published or otherwise became a
part of the public domain after disclosure to the receiving party through no
fault of the receiving party; (iii) already known by the party receiving the
information prior to commencing the discussions that led to this Agreement; and
(iv) information lawfully obtained from a third party.

(c) In addition to the provision of Section 6.5 (a) and (b) above, Company
specifically agrees that it will not, without the prior written consent of Bank,
disclose to any third party the terms and

 

-29-

--------------------------------------------------------------------------------

conditions of this Agreement or the nature of the relationship established by
this Agreement, except to the extent such disclosure is required by law or order
of a court or governmental agency. In the event that either party receives a
subpoena or other request of a court of governmental agency, such party shall
give the other party prompt prior notice and permit the other party a reasonable
opportunity to obtain a protective order or otherwise protect the
confidentiality of the Confidential Information.

(d) Company agrees to comply with the “Citigroup Privacy Promise for Consumers”,
attached to this Agreement as Schedule J and incorporated herein. Bank shall be
entitled at Bank’s expense to audit Company for compliance with said privacy
policy at a mutually agreed upon date and time which shall not unreasonably be
delayed following Company’s receipt of Bank’s written notice, provided, however,
that any such inspection and audit will be conducted during regular business
hours and in such a manner as not to interfere with the normal business
activities of Company.

(e) Notwithstanding anything to the contrary herein, the terms of this
Section 6.5 will survive the termination of this Agreement.

6.6 Financial Information. To the extent such statements are not publicly
available, during the Term and upon written request of a party, each party shall
provide to the other party, promptly following preparation thereof but in no
event more than sixty (60) days following the end of the period for which such
statement is prepared: (a) 10-K Annual Audited statement prepared by its
independent auditor or accountant; and (b) 10-Q quarterly Unaudited statements.
In the case of Bank, such statements shall be the statements of Bank’s publicly
traded parent.

6.7 Assignability; Successors and Assigns. This Agreement and any of the rights,
interests and obligations of either of the parties hereunder may be assigned to
a parent, subsidiary, or affiliate of either party, provided that any such
assignee shall have as of the date of assignment a financial net worth equal to
or greater than the assigning party had as of the Effective Date and provided
further that any such permitted assignee expressly assumes all of the assignor’s
obligations under this Agreement. This Agreement may not otherwise be assigned
without the prior written consent of the non-assigning party, which consent
shall not be unreasonably withheld or delayed. The rights and obligations of the
parties hereto will inure to the benefit of and will be binding upon the
successors and permitted assigns of each of them.

6.8 Amendment. Except as otherwise provided herein, neither this Agreement nor
any of its provisions will be amended or modified except in writing executed by
a duly authorized officer of each party.

6.9 Severability. If any provision, or portion thereof, of this Agreement is
held invalid, illegal, void or unenforceable by reason of any rule or law,
administrative order, judicial decision or public policy, all other provisions
of this Agreement will nevertheless remain in full force and in effect.

6.10 Entire Agreement. This Agreement, including the Operating Regulations and
any schedules, exhibits and documents referenced herein, constitutes the entire
agreement between the parties in connection with the Card program and Card Plan
and supersedes all prior agreements, negotiations and communications on such
subject matter.

6.1 1 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without regard to that state’s
conflict of laws provisions.

6.12 Applicable Law or Resolution. It is expressly understood that changes in
the performance

 

-30-

--------------------------------------------------------------------------------

of either party’s obligations under this Agreement necessitated by a change in
interpretation of any applicable federal or state statute or regulation will not
constitute a breach of this Agreement.

6.13 Non-Waiver. The failure of either party to insist, in any one or more
instances, on the performance of any terms or conditions of this Agreement shall
not be construed as a waiver or relinquishment of any rights granted hereunder
or of the future performance of any such term or condition, and the obligations
of the non-performing party with respect thereto shall continue in full force
and effect.

6.14 Notices. Whenever notice or demand under this Agreement is given to or made
upon either party by the other party, such notice or demand must be given in
writing, either (i) by depositing it in the United States mail addressed to such
party at its address as set forth below, with postage thereon prepaid, and any
notice or demand so mailed will be deemed to have been given at the time when it
was mailed, or (ii) by courier, or similar method, and such notice or demand
will be deemed to have been given when the writing or other form of notice or
demand is either personally delivered to the party or delivered to the address
set forth below. Notwithstanding the foregoing, notice of intent to terminate
this Agreement and notice of default must be sent by certified or registered
mail, return receipt requested and will be deemed given when so mailed.

 

If to Bank:   Citibank USA, N.A.   701 E. 60th Street North   Sioux Falls, South
Dakota 57104   Attn: Senior Vice President With a copy to:   Citi Commerce
Solutions, Inc.   Four Parkway North   Deerfield, Illinois 60015   Attn: Legal
Department If to Company:   Office Depot, Inc.   2200 Old Germantown Road  
Delray Beach, Florida 33445   Attn. Senior Vice President Finance/Controller
With a copy to:   Office Depot, Inc.   2200 Old Germantown Road   Delray Beach,
Florida 33445   Attn. Sr. Manager – Customer Programs and   Office Depot, Inc.  
2200 Old Germantown Road   Delray Beach, Florida 33445   Attn. Office of General
Counsel

Either party may change the address to which notice must be sent by giving
written notice of such change to the other party in the manner provided herein.

6.15 Dispute Resolutions; Litigation; and Waiver of Jury Trial. Each party
commits that in the event a dispute should arise under this Agreement or
relating in any manner hereto, the parties shall first

 

-31-

--------------------------------------------------------------------------------

endeavor to resolve their dispute by good faith negotiations between or among
the parties. If the parties are unable to resolve their dispute, then the matter
shall be reviewed by a senior level executive of each party (in the case of
Company by a Vice President of the company, or higher). In the event these
senior officers are unable to resolve the matter, the parties agree to attempt
to mediate their dispute within thirty (30) days after the dispute initially
arose, using a third party mediator. All mediation proceedings shall be
confidential, and no information exchanged in such mediation shall be
discoverable or admissible in any litigation involving the parties.

In the event the parties are unable to mediate their dispute to satisfactory
resolution, then any litigation between the parties shall be conducted in
federal court, if the dispute satisfies the jurisdictional amount, and if there
is diversity between the parties. If such conditions are not satisfied, then the
matter may be litigated in state court. IN ANY SUCH PROCEEDINGS, EACH OF THE
PARTIES HEREBY KNOWINGLY AND WILLING WAIVES AND SURRENDERS SUCH PARTY’S RIGHT TO
TRIAL BY JURY AND AGREES THAT SUCH LITIGATION SHALL BE TRIED TO A JUDGE SITTING
ALONE AS THE TRIER OF BOTH FACT AND LAW, IN A BENCH TRIAL, WITHOUT A JURY.

6.16 Limitation of Damages. EXCEPT FOR THE INDEMNIFICATION OBLIGATIONS CONTAINED
IN SECTION 6.1, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES, OR
FOR ANY LOSS OF PROFITS OR REVENUE, REGARDLESS OF WHETHER SUCH PARTY KNEW OR
SHOULD HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES. Notwithstanding the
foregoing, either party shall be entitled to seek indirect or consequential
damages and lost profits resulting from a breach by the other party of
Section 6.5 of this Agreement.

6.17 No Third-Party Rights. Nothing in this Agreement shall create or be deemed
to create any third-party beneficiary rights in any person not party to this
Agreement.

6.18 Captions. The captions used in this Agreement have been inserted for
convenience and for reference only and will not be deemed to limit or define the
text of this Agreement.

6.19 Counterparts. This Agreement may be executed in separate counterparts, each
of which will constitute an original but all of which will constitute one and
the same Agreement.

6.20 Records and Audit Rights. Bank shall be responsible for accounting and
maintaining records for all Cardholder Accounts. Upon Company’s written request,
but no more frequently than twice in any twelve (12) month period, Bank shall
permit Company to engage, at Company’s expense, an independent certified public
accountant from KPMG, PriceWaterhouseCoopers or Deloitte & Touche, LLP to verify
the accuracy of Banks records relating to Card Sales, Chargebacks and Credits,
Fee and Incentive reporting, Bank’s recovery and collection of receivables on
Commercial Revolve, Commercial Invoice and Commercial Revolve No Fee Accounts
and charges to the Reserve Fees Account, to the extent same may be disclosed by
Bank without violating any Applicable Law or any legal rights of any third
party. Any such audit shall be upon not less than five (5) days prior advance
written notice provided, however, that any such audit will be conducted during
regular business hours and in such a manner as not to interfere with the normal
business activities of Bank and provided further that any such independent
certified public accountant agrees to maintain the confidentiality of such books
and records of Bank.

[Signatures appear on following page]

 

-32-

--------------------------------------------------------------------------------

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

LOGO [g49882ex10_1-new.jpg]

 

-33-

--------------------------------------------------------------------------------

SCHEDULE A

COMPANY MARKS

Office DEPOT

What you need. What you need to know:

 

-34-

--------------------------------------------------------------------------------

SCHEDULE B

OPERATING REGULATIONS

[Attached at Tabs 2 and 3]

--------------------------------------------------------------------------------

SCHEDULE C

PERFORMANCE STANDARDS

All Performance Standards shall be measured by Bank over each calendar
quarter-year

Category

 

1. Average speed of answer (ASA) standards for total telephone calls to the
following areas:

 

A.    New Accounts    40 Seconds or less B.    Authorizations    40 Seconds or
less C.    Cardholder Services    40 Seconds or less

 

2. Average Turnaround time standards when responding to the following methods of
submitting credit applications on Business Days:

 

A.    REAP    2 Hours or less* B.    Facsimile (sale pending)    2 Hours or
less* C.    Internet    2 Hours or less* D.    Facsimile (no sale pending)    48
Hours or less E.    U.S. Mail    48 Hours from receipt or less

 

* 20 minute average turnaround time on completed, decisionable sale-pending
applications, based on normal sales volumes.

 

3. Average Fulfillment standards for deliverables to cardholders, expressed in
Business Days:

 

A.    Posting of clean payments within 2 Business Days of receipt. B.    Account
statements sent within 5 Business Days of billing date. C.    New card plastics
and replacement plastics within 7 Business Days of Account issuance or
replacement requests.

 

4. Account Management Team.

 

A.    One full-time Account Manager. B.    One full-time Client Services
Manager. C.    One full-time Client Marketing Manager.

 

-36-

--------------------------------------------------------------------------------

SCHEDULE D

Credit Committee Members

 

Company

  

Bank

Representatives from:    CCS Client Team

Finance

  

Marketing

  

Merchandise

  

Operations

  

Program Oversight Committee Members

 

Company

  

Bank

VP Financial Services

   GM/President

Chief Marketing Officer

   SVP, Commercial

VP Operations

   VP Commercial

 

-37-

--------------------------------------------------------------------------------

SCHEDULE E

INITIAL MARKETING PLAN

The initial marketing plan shall address the following matters:

 

1. Promotion of a commercial revolve customer incentive (money off, percentage
off, etc.) in all channels and credit materials—Applications, store signage,
catalog and web homepage—subject to such limitations as may be established by
the Credit Committee and Program Committee

 

2. Establishment of monthly store credit goals for number of approved
Applications and/or improved credit penetration rates.

 

3. Employee credit training in all retail stores, mail, call centers and
Internet sales locations.

 

4. Promotion of Consumer program during key selling seasons throughout the year,
and strengthening the promotion of the Special Credit Plans in retail stores to
maximize sales in other months

 

5. Expenditures of Marketing Fund (subject to Credit Committee and Program
Committee approval) shall include:

 

  •  

Commercial Revolve Application Incentive expenditures on customer incentives (up
to $20 per approved account)

 

  •  

Retail store/call center employee incentives and bonuses (up to $10 per approved
account)

 

  •  

Reactivation monthly mailings

 

  •  

Tabling events in retail store locations (based on first quarter 2004 test
results)

 

  •  

Research—value of business credit customer

 

  •  

FDR enhancements

 

-38-

--------------------------------------------------------------------------------

SCHEDULE F

 

I. If the Average Daily Sales Outstanding for the relevant calendar year is less
than 38 days, then the Merchant Fee shall be determined in accordance with the
following, based on the Average Annual Spend for said calendar year:

 

Average Annual Spend

   Merchant Fee  

$0-$2,744

   3.56 %

$2,750-$3,249

   3.07 %

$3,250-$3,749

   2.71 %

$3,750-$4,249

   2.45 %

$4,250-$4,749

   2.24 %

$4,750 or greater

   2.08 %

 

II. If the Average Daily Sales Outstanding for the relevant calendar year is at
least 38 days but less than 42, then the Merchant Fee shall be determined in
accordance with the following, based on the Average Annual Spend for said
calendar year:

 

Average Annual Spend

   Merchant Fee  

$0-$2,744

   3.68 %

$2,750-$3,249

   3.18 %

$3,250-$3,749

   2.83 %

$3,750-$4,249

   2.56 %

$4,250-$4,749

   2.36 %

$4,750 or greater

   2.19 %

 

III. If the Average Daily Sales Outstanding for the relevant calendar year is at
least 42 days but less than 46, then the Merchant Fee shall be determined in
accordance with the following, based on the Average Annual Spend for said
calendar year:

 

Average Annual Spend

   Merchant Fee  

$0-$2,744

   3.79 %

$2,750-$3,249

   3.30 %

$3,250-$3,749

   2.94 %

$3,750-$4,249

   2.68 %

$4,250-$4,749

   2.47 %

$4,750 or greater

   2.31 %

 

IV. If the Average Daily Sales Outstanding for the relevant calendar year is 46
days or more, then the Merchant Fee shall be determined in accordance with the
following, based on the Average Annual Spend for said calendar year:

 

Average Annual Spend

   Merchant Fee  

$0-$2,744

   3.90 %

$2,750-$3,249

   3.41 %

$3,250-$3,749

   3.06 %

$3,750-$4,249

   2.79 %

$4,250-$4,749

   2.59 %

$4,750 or greater

   2.42 %

 

-39-

--------------------------------------------------------------------------------

SCHEDULE G

 

 

COMMERCIAL REVOLVE NO FEE PLAN PRICING

DSO = Daily Sales Outstanding

 

DSO

  

FEE

45

   2.29

50

   2.43

55

   2.70

60

   2.96

65

   3.23

70

   3.49

75

   3.76

80

   4.02

 

-40-

--------------------------------------------------------------------------------

SCHEDULE H

ASSUMPTIONS

 

Commercial Revolve Program Assumptions      1.    Anticipated Card Sales/Active
Account    $  2,675      2.    Anticipated Average Balance per Active Account   
  648      3.    Average Ticket      131      4.    Percentage of new Accounts
becoming Purchase Active within one hundred twenty (120) days of opening      67
% or greater Consumer Program Assumptions      1.    Anticipated Card
Sales/Active Account    $ 732      2.    Anticipated Average Balance per Active
Account      670      3.    Average Ticket      146      4.    Annual Net
Charge-Off rate (average outstanding balances divided by annual net charge-offs)
     12.33 %

 

-41-

--------------------------------------------------------------------------------

SCHEDULE I

FEES

 

ITEM

   AMOUNT

1.

   Cards and Card Carriers, in-store forms including Applications, point-of-sale
forms, Sales Slips and Credit Slips and postage increases    Cost plus 15%

2.

   System changes requested by Company    At Bank’s cost

3.

   Business reply mail and special handling    Pass-through costs and
Expenses

 

-42-

--------------------------------------------------------------------------------

SCHEDULE J

Citigroup Privacy Promise for Consumers

While information is the cornerstone of our ability to provide superior service,
our most import asset is our customers’ trust. Keeping customer information
secure and using it only as our customers would want us to, is a top priority
for all of us at the Citigroup family of companies.

Here, then, is our promise to our individual customers:

 

1 We will safeguard, according to strict standards of security and
confidentiality, any information our customers share with us.

 

2 We will limit the collection and use of customer information to the minimum we
require to deliver superior service to our customers, which includes advising
our customers about our products, services and other opportunities, and to
administer our business.

 

3 We will permit only authorized employees, who are trained in the proper
handling of customer information, to have access to that information. Employees
who violate our Privacy Promise will be subject to our normal disciplinary
process.

 

4 We will not reveal customer information to any external organization unless be
have previously informed the customer in disclosures or agreements, have been
authorized by the customer, or are required by law.

 

5 We will always maintain control over the confidentiality of our customer
information. We may, however, facilitate relevant offers from reputable
companies. These companies are not permitted to retain any customer information
unless the customer has specifically expressed interest in their products or
services.

 

6 We will tell customers in plain language initially and at least once annually,
how they may remove their names from marketing lists. At any time, customers can
contact us to remove their names from such lists.

 

7 Whenever we hire other organizations to provide support services, we will
require them to conform to our privacy standards and to allow us to audit them
for compliance.

 

8 For purposes of credit reporting, verification and risk management, we will
exchange information about our customers with reputable reference sources and
clearinghouse services.

 

9 We will not use or share – internally or externally – personally identifiable
medical information for any purpose other than underwriting or administration of
a customer’s policy, claim, or account, or as disclosed to the customer when the
information is collected, or to which the customer consents.

 

10 We will attempt to keep customer files complete, up to date, and accurate. We
will tell our customers how and where to conveniently access their account
information (except when we’re prohibited by law), and how to notify us about
errors which we will promptly correct.

 

-43-

--------------------------------------------------------------------------------

CITIBANK USA, N.A.

COMMERCIAL CREDIT CARD OPERATING REGULATIONS

REVISED 03/16/04

--------------------------------------------------------------------------------

1001 COMPANY SERVICE CALLS

Card Services, as agent for Bank, will staff a Service Department to handle all
service call inquiries from 7:30 a.m. to 7:00 p.m. (central time), Monday
through Friday, on all business days (legal holidays excluded).

 

1002 CARD LOGO

The Company will properly display the appropriate Card logo on promotional
materials to inform the public that the Card will be honored at the Company’s
place(s) of business. Use of decals, signs, and print and broadcast materials
which bear the Card logo must comply with the specifications provided to the
Company. The Company may use the Card logo or the Card name or representations
thereof, on promotional, print or broadcast materials to indicate that the Card
is accepted.

 

1003 ALTERED AND COUNTERFEIT CARDS

Company’s employees and representatives should be familiar with the appearance
of a valid Card and the validity of Card Account numbers as issued by Bank and
must check each Card and Card Account number presented for signs of
counterfeiting or alterations. Company’s employees and representatives should
exercise reasonable care in checking each Card and Card Account number. Sales
transacted with obviously invalid Cards and/or Card Account numbers are subject
to chargeback.

At such time in the future when the Bank provides written notification to the
Company regarding the Bank’s ability to confirm transactions using CVC
technology, the Company shall have one hundred twenty (120) days from such
notification to begin transmitting the CVC value in all transactions to the
Bank. Should the Company fail to transmit the CVC value after such timeframe,
the Company will be responsible for all counterfeit transactions. Once the
Company begins transmitting the CVC value to the Bank, the Company will be
responsible for all losses associated with counterfeit transactions where the
Bank notified the company that the CVC value was missing or inaccurate. After
Bank notifies Company that Bank can verify CVC, Bank will refer all POS
transactions where CVC is not present, and work with Cardholders to replace any
Cards without CVC.

 

1004 PREPARATION OF SALES SLIP AND CREDIT SLIP

For purchases made at Company’s retail locations, the Company’s employees and
representatives shall provide the Cardholder with a completed copy of the sales
or credit slip, as applicable, at the time of each completed Card transaction.
For purchases made through Company’s catalogue, if applicable, Company’s
employees and representatives shall provide the Cardholder with a completed copy
of the sales or credit slip, as applicable with the merchandise. Such sales or
credit slips shall contain the following information:

 

  1. The Cardholder’s Account number.

--------------------------------------------------------------------------------

  2. The Company’s name.

 

  3. The description of Merchandise or Service purchased.

 

  4. The total amount of the transaction (including sales tax).

 

  5. The transaction date.

 

  6. The Cardholder’s signature. (The telephone orders without the Cardholder’s
signature must designate the words “phone order” in the signature block.)

 

  7. Authorization Code.

 

  8. For credits, original sales date and reason for refund.

 

1005 AUTHORIZATION REQUIREMENTS

Company understands and agrees to inform its franchisees, participating
merchants, licensees, independent marketers or dealers, if any, that Cardholders
may only use their Account or the Card for business purposes. A Card Sale
knowingly made in violation of the above stated business purpose use, shall be
subject to chargeback.

Card Services will provide Authorization service to Company’s locations located
within the United States. Company’s employees and representatives shall obtain
an electronic authorization using a suitable point-of-sale terminal. In the
event authorizations can not be obtained electronically, Card Services will
provide telephone authorizations through an Authorization Center. Bank will
advise Company of the Authorization Center business hours. The following
information must be entered into the terminal or disclosed to the Authorization
Center, as applicable, when requesting an authorization:

 

  1. Cardholder’s Account number.

 

  2. The total amount of the transaction (including sales tax).

 

  3. The transaction date.

 

  4. Company’s Store number.

In the event an authorization is obtained by telephone from the Authorization
Center, Company’s employees or representatives must enter the above information
into the terminal and include the authorization code provided by the
Authorization Center.

 

1006 REQUEST FOR NEW ACCOUNT AT POINT-OF-SALE

For applications taken at Company’s retail locations the applicant should be
encouraged to complete the application in its entirety. The identity of the
person submitting the application must be verified and the persons I.D. recorded
on the application. If the application includes a personal guarantor, the I.D.
of the personal guarantor as well as the personal guarantor’s home address, date
of birth and social security number must

 

-3-

--------------------------------------------------------------------------------

be recorded on the application. Two pieces of I.D. is required for each person
applying for the account. For persons residing in all states or territories
except New Jersey, the first piece of identification must have the person’s
picture on it and must be a valid (as hereinafter defined) driver’s license,
state-issued I.D., military I.D., resident alien card or voter registration
card. For purposes of this paragraph, the term “valid” means (i) that the person
must be a resident of the state for which the identification was issued, if
applicable; (ii) the address on the identification must match the address on the
application unless the person (Personal guarantor only) has represented on the
application that he/she has lived at the place of residence listed on the
application for six (6) months or less; and (iii) the identification must not
have expired. The second piece of identification can be any other form of
identification that identifies the person, contains the person’s signature and
contains information that is consistent with the information on the first piece
of identification. For persons residing in the state of New Jersey, the first
piece of identification must be a valid driver’s license, state-issued I.D.,
military I.D., or resident alien card. The second piece of identification can be
any other form of identification that identifies the applicant, contains the
person’s signature and contains information that is consistent with the
information on the first piece of identification. If the second form of
identification is a credit card, Company’s employees or representatives cannot
write down such credit card number. Company’s employees or representatives must
then compare the pictures, if applicable and signatures on the forms of
identification with the persons and the person’s signature. If Company’s
employee or representative fails to obtain and verify the appropriate
identification, Bank may issue a Chargeback if Bank is unable to enforce
collection due to Company’s employee’s or representative’s alleged failure in
obtaining and verifying the appropriate identification.

The application must contain the signatures of all persons who will be
authorized to make purchases on the Card Account. Company’s employees or
representatives must provide a copy of the Credit Card Agreement to the
applicant. Failure to provide a copy at point-of-sale may result in a
chargeback; (i) should the applicant challenge or dispute any portion of the
Agreement and allege non-receipt of such Agreement, and (ii) the Bank is unable
to enforce collection due to such alleged failure to provide a copy of the
Agreement.

The Company’s employees or representatives must: (1) verify that the person
signing on behalf of the applicant is an authorized agent or officer of the
applicant; and (2) identify the applicant’s authorized Account users and verify
that any such persons have reached the age of majority by viewing a valid
driver’s license or photo I.D. with state of issuance along with one other item
of suitable identification which will identify said person.

The following procedure will be utilized:

 

  1. The new accounts operator will initially request verification of signature
and I.D. information (including verification that the applicant’s authorized
user(s) has/have reached the age of majority).

 

  2. Company’s employee or representative will be prompted to provide the
required information contained in the application, including the net amount of
the sale and the applicant’s tax identification number.

 

  3.

If approved, the operator will provide the account number, credit limit and
authorization

 

-4-

--------------------------------------------------------------------------------

 

code to Company’s employee or representative; however, if Company uses the MRO
link, the authorization code will be received via the point-of-sale terminal and
not the operator.

 

  4. If declined or unable to render an immediate decision, Company’s employee
or representative will be provided with an application pending number to be
placed in the designated area on the application. The applicant will be notified
by mail of the final decision.

 

  5. ALL APPROVED, DECLINED OR PENDING APPLICATIONS, INCLUDING THE INFORMATION
CONTAINED IN THOSE APPLICATIONS RECEIVED BY TELEPHONE, MUST BE SENT BY EACH
COMPANY LOCATION TO THE DESIGNATED CARD OPERATIONS CENTER ON A WEEKLY BASIS AND
ALL APPLICATIONS MUST BE INCLUDED IN THE SAME ENVELOPE AND NOT MAILED
INDIVIDUALLY, unless an alternate method of shipment is specified by Bank and
agreed upon by Company.

 

1007 REQUEST FOR NEW ACCOUNT OVER THE PHONE IN CONJUNCTION WITH A PURCHASE

A business may apply for an account over the phone and if approved at the same
time make a purchase on that Account only if the applicant received the full
Cardholder Agreement in a catalogue. If such business was not on Company’s list
of those who received a catalogue containing the Cardholder Agreement, Company
or Company’s employees or representatives may not authorize the sale on the
Account. Authorization of such sale may result in a chargeback; (i) should the
applicant challenge or dispute any portion of the Cardholder Agreement and
allege non- receipt of such Cardholder Agreement, and (ii) Bank is unable to
enforce collection due to such alleged failure to provide a copy of the
Cardholder Agreement.

 

1008 SPECIAL CREDIT PLANS

In the event that Bank and Company agree to offer a Special Credit Plan to
Cardholders, and Bank provides Company with a point of sale disclosure
describing the terms of such Special Credit Plan, Company must, or must ensure
that its employees, provide Cardholders who make a purchase under a Special
Credit Plan with such point of sale disclosure prior to the time the sale is
completed. Failure to provide a Cardholder with such point of sale disclosure
prior to the time the sale is completed may result in a chargeback; (i) should
the Cardholder challenge or dispute the purchase made under the Special Credit
Plan and allege non-receipt of the point of sale disclosure, and (ii) Bank is
unable to enforce collection due to such alleged failure to provide a copy of
the point of sale disclosure.

 

1009 ADD-ON SALE AUTHORIZATION

The point-of-sale terminal is the proper vehicle to use to obtain add-on sale
authorization. The “800” voice authorization system is available as a back-up
authorization measure in the event of system/terminal problems or if the
terminal displays a “call center” message. Bank will advise Company of voice
authorization system’s particular features. The Cardholder’s signature on the
sales slip must match the name on the face of the Card and signature on the back
of the Card. Failure to follow this procedure may cause a chargeback in the
event the Cardholder disputes the transaction.

 

-5-

--------------------------------------------------------------------------------

1010 SALE WITHOUT A CARD

To accommodate a Cardholder’s request to use his or her Account without having a
Card or a Card Account number (in the case of purchases made over the phone) in
his or her immediate possession, the Company employee should take the following
precaution against misuse or potential fraud:

 

  1. For purchases made at Company’s retail locations:

 

  a. Unless Bank advises Company, or Company’s employees or representatives to
the contrary, the Company employee or representative must verify that the person
attempting to make a purchase on a Card Account is an authorized user of the
Card Account. The person attempting to make a purchase must produce some
identification containing a picture of that person, and the identification
number must be reflected on the sales ticket. A driver’s license or state-issued
identification is the preferred form of identification; however, a military
identification is acceptable.

 

  2. For purchase made via the telephone:

 

  a. Unless Bank advises Company or Company’s employee or representatives to the
contrary, the following information must be obtained from the representative of
the Cardholder and reflected on the Cardholder’s sales ticket:

 

  (i) Cardholder’s full address.

 

  (ii) Name of any authorized user of the Cardholder’s account.

The Authorization Center must be contacted to obtain the Account number and
sales authorization. The name of the calling Company employee or representative,
store number, total amount of the sale and a description of the identification
presented or obtained over the telephone will be requested.

Any purchases made under these conditions will be subject to the normal
chargeback provisions.

At such time in the future when the Bank provides written notification to the
Company regarding the Bank’s ability to confirm transactions using CVC 2
technology, Bank and Company shall mutually agree upon a process and a timeframe
for Company to begin transmitting the CVC 2 value in all transactions to the
Bank. Once the Company begins transmitting the CVC 2 value, the Company will be
responsible for all losses associated with counterfeit transactions where the
Bank notifies the Company that the CVC 2 value is missing or inaccurate. After
Bank notifies Company that Bank can verify CVC 2, Bank will refer all Card not
present transactions where CVC 2 is not present, and work with Cardholders to
replace any Cards without CVC 2. [Chargeback Code: 19]

At such time in the future when the Bank provides the ability to validate the
Billing Address provided by the Cardholder via an Address Verification value
(AVS), the Company shall accept responsibility for all unauthorized transactions
where the goods were shipped to an address other than the Cardholders billing
address as verified by the AVS value. [Chargeback Code 11].

 

-6-

--------------------------------------------------------------------------------

1011 REQUEST FOR CANCELLATION OF AUTHORIZATION

If a Company employee or representative, or a Cardholder cancels a sales
transaction prior to its completion and an Authorization was previously obtained
for such a sale, Company’s employee or representative should call the
Authorization Center and request a cancellation of the previous Authorization.
An Authorization can only be canceled on the same day it is made.

 

1012 “CODE 10” ALERT

A Company employee or representative who is suspicious of the validity of a Card
or Card Account number or the presenter of the Card or Card Account number for
any reason should notify the Authorization Center via the “Code 10” Alert. The
“Code 10” Alert should be used regardless of the dollar amount of the sale. The
simple procedure is as follows:

 

  1. Call the Authorization Center (as designated by the Card Operations Center)
and ask for a “Code 10” Authorization.

 

  2. The Authorization Center operator will request the Cardholder’s Account
number and the Company’s name and will immediately alert the Security
Department.

 

  3. Security Department personnel will ask a brief series of Yes or No
questions about the Card or the presenter, or may ask the Company employee to
attempt to obtain confirming I.D. from the presenter.

 

  4. If the Security Department is able to confirm the identity of the presenter
as a valid Cardholder or authorized user of the Card, approval for the sale will
be given and the presenter will not be aware that anything unusual has
transpired.

 

  5. IF, ON THE OTHER HAND, THE COMPANY’S EMPLOYEE OR REPRESENTATIVE IS
INSTRUCTED TO RETAIN THE CARD, OR NOT AUTHORIZE THE SALE, DO SO, BUT ONLY BY
PEACEFUL AND REASONABLE MEANS.

 

1013 CREDIT ISSUED FOR RETURNED MERCHANDISE AND ADJUSTMENTS

When merchandise or services originally purchased with the Card are returned for
refund, the Company employee or representative shall not make any cash refund
but shall promptly issue a credit slip. The refund or adjustment amount
indicated on the credit slip may not exceed the original Card transaction
amount.

 

1014 PAYMENTS

Company is not allowed to receive or process any monies representing a
Cardholder’s payment to Bank unless such is specifically authorized in the
Merchant Services Agreement.

 

1015 CHARGEBACK REASON CODES

In addition to the reasons for chargebacks identified in the following sections,
Card Services may

 

-7-

--------------------------------------------------------------------------------

chargeback any transaction with respect to which the Company, or Company’s
employees or representatives fail to comply with the terms and conditions set
forth in the Merchant Services Agreement or as otherwise contained in these
Operating Regulations.

 

1016 DECLINED AUTHORIZATION—Reason Code 02

Any purchase which is completed after the Company has received a decline message
from the Authorization Center is subject to Chargeback.

 

1017 INVALID CARDHOLDER ACCOUNT NUMBER—Reason Code 03

Transactions improperly captured by the Company for which there is no valid
Account. This chargeback will be exercised if the cardholder account number
supplied cannot be matched to a valid Account.

No Cardholder documentation is required to support this chargeback.

 

1018 LATE PRESENTATION OF TRANSACTION—Reason Code 04

Transactions submitted to Card Services for posting which have a transaction
date earlier than sixty (60) calendar days from the date received at Card
Services processing center or as otherwise provided in the Company’s Merchant
Services Agreement. Card Services will make every effort to honor such
transactions; however, if the transaction cannot be posted to the Cardholder’s
Account or collected promptly from the Cardholder, it may be charged back.

Evidence of the date of the Card Sale will be provided to support this
chargeback.

 

1019 TRANSACTION WITHOUT REQUIRED AUTHORIZATION—Reason Code 05

Any transaction for which a required Authorization was not obtained. This
chargeback will be exercised only when such transaction cannot be promptly
collected from the Cardholder. However, if Bank determines such transaction to
be fraudulent or places the account in an overlimit status, Bank may charge back
the transaction in its discretion at any time and without regard to
collectibility.

 

1020 CARDHOLDER DISPUTE—Reason Code 06

For reasons of clarification, this chargeback reason has been broken into the
following seven (7) subcategories:

 

  6.0 Cardholder Disputes Merchandise/Services Rendered

This chargeback reason code will be used for any Cardholder dispute regarding
the quality, receipt or non-receipt of merchandise/services purchases or any
portion thereof.

A copy of the Cardholder letter of complaint will be provided to support this
chargeback.

 

  6.1 Alteration of Amount

 

-8-

--------------------------------------------------------------------------------

This reason code will only apply to Cardholder disputes claiming that the
purchase amount for which the Cardholder signed was altered after the Cardholder
signed the sales slip and without his/her consent or direction. Only the
difference can be charged back.

This chargeback will be supported by a copy of the Cardholder’s signed receipt.

 

  6.2 Duplicate Processing

Cardholder complains that he or she has been charged twice for a transaction.

This chargeback will be supported by copies of sales detail or deposit reports
and/or a copy of the Cardholder’s statement(s).

 

  6.3 Non-Receipt of Credit

Cardholder claims that a credit issued by the Company has never been posted to
the Cardholder’s Account. The chargeback is limited to the amount of the credit.
Reasonable evidence of the credit will be supplied as supporting documentation
for this chargeback.

 

  6.4 Unauthorized Purchase

The Cardholder, in writing, claims that neither the Cardholder nor any party
authorized by the Cardholder, participated in the transaction and that the
Cardholder has no knowledge of it.

Written notification in the form of a signed affidavit or letter from the
Cardholder will be supplied to support this chargeback.

Unauthorized transactions will be tracked and the Cardholder accounts flagged as
a potential chargeback by the Operations Center. The sale amount, date, and
reference number will be tracked and reported to the client.

The total transaction amount is subject to chargeback if unauthorized.

Attempts will be made to bill and collect unauthorized transactions prior to
chargeback unless otherwise specified by the Merchant Services Agreement.

Unauthorized transactions will be subject to automatic chargeback at ninety
(90) days delinquent.

 

  6.5 Mail or Telephone Orders

To the extent Company provides merchandise to Cardholder by mail or telephone
orders, or where the shipment of merchandise or the provision of goods or
services by Company will not be made contemporaneously with the Card Sale,
Company shall not submit the Card Sale to Bank for settlement until such time as
merchandise is shipped to the address provided by Cardholder or the goods or
services are otherwise provided to the Cardholder.

 

-9-

--------------------------------------------------------------------------------

In the event Company submits a Card Sale in which the goods or services were not
shipped or otherwise provided to the Cardholder and the Cardholder disputes the
Card Sale or advises Bank that the Cardholder has not received the goods or
services, the Card Sale is subject to immediate chargeback.

 

  6.6 Tax-Exempt Status

Cardholder submits proof that it is a tax-exempt entity but has been charged on
its Card Account a tax which it is not required to pay.

The chargeback amount shall be any tax improperly imposed. This chargeback shall
be supported by a copy of a document from the appropriate taxing authority
indicating the taxes which the Cardholder is not required to pay.

 

1021 SPLIT SALE (where applicable) - Reason Code 07

Any transaction requiring Authorization which is split into two or more parts to
avoid obtaining Authorization.

Copies of the multiple sales slips will be provided to support this chargeback.

 

1022 NO CARD APPLICATION - Reason Code 08

Unless Bank advises otherwise, any transaction made by a Cardholder for whom a
written Card application has not been submitted prior to the time such
transaction is to be billed to the Cardholder.

 

1023 MISMATCHED APPLICATION INFORMATION - Reason Code 09

Application information provided by the Company employee or representative at
the point of sale for telephone approvals will be matched against the written
application information provided by the applicant. The following items that do
not match will cause the Account to be flagged for potential chargeback and be
subject to chargeback in case of non-payment by Cardholder:

 

  1. Type of Business and tax identification number

 

  2. Length of time in Business

 

  3. Name, Address and telephone number of Business

 

  4. Banking Relationship

 

  5. Identification of person authorized to make purchases for Business

 

  6. Absence of authorized Card Account user’s Signature

 

-10-

--------------------------------------------------------------------------------

1024 REVERSALS OF CHARGEBACKS

If Bank decides to reverse a chargeback, a separate credit for that chargeback
will be issued to the Company.

Company may request the reversal of a chargeback by Bank by submitting the
following to the Card Operations Center:

 

  1. The original sales slip; and

 

  2. Documentation to support the request for reversal of the chargeback.

Bank will advise Company of the location where such chargeback reversal requests
should be sent. Bank exercising its reasonable judgment, shall decide whether
any chargeback will be reversed.

 

1025 Claim by Cardholder of Non-Receipt of Purchase

If a Cardholder advises Bank that he or she did not receive a purchase which was
billed to his or her Account, Bank will make a reasonable investigation. If,
after investigation, Bank cannot determine that the Cardholder actually received
the purchase, Bank shall remove the amount of the purchase from the Cardholder’s
Account and charge that amount back to Company.

 

1026 IMPORTANT NOTIFICATION

Card Operations Center is providing the Company with fifteen (15) business days
to review and respond to any Cardholder billing inquiry or dispute. The Card
Sale may, at Bank’ option, be charged back if the inquiry or dispute is not
resolved or if the Company fails to notify the Card Operations Center of the
resolution by the end of the fifteenth (15th) business day.

Cardholder accounts will be periodically purged from the active files in
conjunction with Bank guidelines. Bank shall inform the Company prior to
initiating the account purging process.

 

1027 Company Employee Fraud

Bank and Company will work together to minimize possible fraud by Company
employees. Company employees must not issue or accept temporary credit cards.
The store manager must either mail in or phone in to the Operations Center
employee applications for a Card. The Company may not store either the original
application or a copy of the application at any store or corporate locations.
All applications must be shipped to the Bank as described in 1006 item 5 of this
document.

If Company suspects that one of its employees is involved with or may be
involved with fraud relating to the Card Plan, Company must notify Bank within
forty-eight (48) hours of its discovery of the possible fraud and provide Bank
with the employee’s name and address, the reasons why Company suspects the
employee and any documentation Company has relating to the possible fraud.
[Chargeback Codes: 14 and 26]

 

-11-

--------------------------------------------------------------------------------

ClTlBANK USA, N.A.

CONSUMER OPERATING REGULATIONS

REVISED 3/16/04

 

1

--------------------------------------------------------------------------------

1001 Company Service Calls

Bank, directly or through its servicer will staff a service department to handle
all new Accounts, Authorization and Cardholder inquiries. The service department
will handle Cardholder inquiries from 9:00 a.m. to 5:00 p.m. (local time),
Monday through Friday, on all Business Days.

 

1002 Card Logo

Company will properly display the appropriate Card logo on promotional materials
to inform the public that the Card will be honored at Company’s place(s) of
business. Use of decals, signs, and print and broadcast materials which bear the
Card logo must comply with the specifications provided to Company. Company may
use the Card logo or the Card name or representations thereof, on promotional,
print or broadcast materials to indicate that the Card is accepted. All
advertisements for the Card Plan or promotional uses of the Card must be done in
accordance with the Merchant Services Agreement.

 

1003 Altered and Counterfeit Cards

Company’s employees and representatives should be familiar with the appearance
of a valid Card and the validity of Card Account numbers as issued by Bank and
must check each Card and Card Account number presented for signs of
counterfeiting or alterations. Company’s employees and representatives should
exercise reasonable care in checking each Card and Card Account number. Bank may
issue a Chargeback if Company’s employees or representatives process a Card Sale
with invalid Cards or Card Account numbers. [Chargeback Code: 19]

At such time in the future when the Bank provides written notification to the
Company regarding the Bank’s ability to confirm transactions using CVC
technology, the Company shall have one hundred twenty (120) days from such
notification to begin transmitting the CVC value in all Store POS transactions
to the Bank. Should the Company fail to transmit the CVC value after such
timeframe, the Company will be responsible for all counterfeit transactions.
Once the Company begins transmitting the CVC value to the Bank, the Company will
be responsible for all losses associated with counterfeit transactions where the
Bank notified the company that the CVC value was missing or inaccurate.
[Chargeback Code: 19] After Bank notifies Company that Bank can verify CVC, Bank
will refer all POS transactions where CVC is not present, and work with
Cardholder to replace any and all Cards without CVC.

 

1004 Preparation of Sales Slip and Credit Slip

Company’s employees and representatives must provide the Cardholder with a
completed copy of the Sales Slip or Credit Slip at the time of each completed
Card transaction. For purchases made over the telephone, via Company’s Internet
website or

 

2

--------------------------------------------------------------------------------

through Company’s catalog, if applicable, Company’s employees and
representatives must provide the Cardholder with a completed copy of the Sales
Slip or Credit Slip with the merchandise. Sales Slips or Credit Slips must
contain the following information:

 

  1. The Cardholder’s Account number.

 

  2. Company’s name and store location (city/state).

 

  3. The description of merchandise or service purchased.

 

  4. The total amount of the transaction (including sales tax).

 

  5. The transaction date.

 

  6. The Cardholder’s signature. (For telephone orders, Internet order,
facsimile orders and mail orders without the Cardholder’s signature must
designate the words “phone order”, “Internet order,” “fax order” or “mail order”
in the signature block.) The signature block must never be left blank.

 

  7. Authorization code.

 

  8. For credits, original sales date and reason for refund.

 

  9. Company’s Store number.

 

  10. “Ship to” address, if applicable.

 

1005 Authorization Requirements

Company will inform its franchisees, participating merchants, licensees,
independent marketers or dealers, if any, that Cardholders may only use their
Account or the Card for personal, family, household and charitable purposes.
Bank may issue a Chargeback if Company’s employees or representatives knowingly
process a Card Sale in violation of the above stated consumer use. [Chargeback
Code: 20]

Bank, directly or through its servicer will provide Authorization services to
Company’s locations located within the United States. Company’s employees and
representatives will obtain an electronic Authorization using a point-of-sale
terminal certified by Bank or its servicer. In the event Authorizations cannot
be obtained electronically, each Operations Center will provide telephone
Authorizations through the Authorization department. Bank will advise Company of
the Authorization department’s business hours. Company’s employees and
representatives must enter the following information into the terminal for
electronic Authorization:

 

  1. The Cardholder’s Account number.

 

  2. The total amount of the transaction (including sales tax).

If Company’s employees and representatives cannot obtain an electronic
Authorization, Company’s employees and representatives must obtain Authorization
by telephone from the Authorization department, and must provide the following
information to the Authorization department:

 

  1. The Cardholder’s Account number.

 

  2. The total amount of the transaction (including sales tax).

 

  3. Company’s Store number.

 

  4. Credit Plan number, if applicable.

Company’s employees or representatives must enter the above information into the
terminal and include the Authorization code provided by the Authorization
department.

 

3

--------------------------------------------------------------------------------

1006 Request for New Account at Point-of-Sale

For applications taken at Company’s retail locations the applicant must complete
the application in its entirety, and sign the application. Both applicants must
sign the application if it is a request for a joint Account. Company’s employees
or representatives must provide a copy of the Citibank Card Agreement (the
“Cardholder Agreement”) to the applicant. If Company’s employees or
representatives fail to provide a copy of the Cardholder Agreement at the
point-of-sale, Bank may issue a Chargeback if: (i) the applicant challenges or
disputes the terms of the Cardholder Agreement and alleges that he/she did not
receive the Cardholder Agreement, and (ii) Bank is unable to enforce collection
because Company’s employees or representatives allegedly failed to provide the
Cardholder with a copy of the Cardholder Agreement. [Chargeback Codes: 10, 21]

Company’s employees or representatives must ask the applicant (both applicants
if a Joint Account) for two (2) pieces of identification to verify the
applicant’s identity. For applicants residing in all states or territories
except New Jersey, the first piece of identification must have the applicant’s
picture on it and must be a valid (as hereinafter defined) driver’s license,
state-issued I.D., military I.D., resident alien card or voter registration
card. For purposes of this paragraph, the term “valid” means (i) that the
applicant must be a resident of the state for which the identification was
issued, if applicable; (ii) the address on the identification must match the
address on the application unless the applicant has represented on the
application that he/she has lived at the place of residence listed on the
application for six (6) months or less; and (iii) the identification must not
have expired. The second piece of identification can be any other form of
identification that identifies the applicant, contains the applicant’s signature
and contains information that is consistent with the information on the first
piece of identification. For applicants residing in the state of New Jersey, the
first piece of identification must be a valid driver’s license, state-issued
I.D., military I.D., or resident alien card. The second piece of identification
can be any other form of identification that identifies the applicant, contains
the applicant’s signature and contains information that is consistent with the
information on the first piece of identification. If the second form of
identification is a credit card, Company’s employees or representatives cannot
write down such credit card number. Company’s employees or representatives must
then compare the pictures, if applicable and signatures on the forms of
identification with the applicant and the applicant’s signature. If Company’s
employee or representative fails to obtain and verify the appropriate
identification, Bank may issue a Chargeback if Bank is unable to enforce
collection due to Company’s employee’s or representative’s alleged failure in
obtaining and verifying the appropriate identification. [Chargeback Code: 22]

Then, the following procedure will be utilized:

 

  1. Bank’s New Accounts associate will request verification of signature and
I.D. information. If the application is processed through Remote Entry
Application Process (REAP), Company’s employees or representatives must verify
signature and I.D. information. In addition, Bank may require additional
information from the store associate such as the form number of the application
that the applicant filled out.

 

4

--------------------------------------------------------------------------------

  2. Company’s employee or representative will be prompted to provide the
required information contained in the application, and the total amount of the
sale including applicable sales tax and any service, shipping, warranties, and
handling costs.

 

  3. If approved, Bank’s New Accounts associate will provide the Account number
and credit limit to Company’s employee or representative. In order to obtain
Authorization for the Card Sale, Company’s employee or representative must enter
the Account number and total amount of the Card Sale into the point-of-sale
terminal.

 

  4. If Bank declines an application or is unable to render an immediate
decision, Bank will provide Company’s employee or representative with an
application pending number that Company’s employee or representative must place
in the designated area on the application. Company’s employee or representative
must then advise the applicant that Bank will notify the applicant of the final
decision by mail.

If the total amount of the Card Sale exceeds the line of credit offered to the
applicant, Bank’s associate will communicate the Bank’s counteroffer for a lower
line of credit to Company’s employee or representative, who must communicate it
to the applicant. Bank will provide Company’s employee or representative with an
application pending number to place in the designated area on the application.
Company’s employee or representative must then notify Bank’s associate of the
applicant’s decision to accept or decline the counteroffer for a lower line of
credit within twenty-four (24) hours of the initial credit offer. If the
applicant declines the counteroffer, Company’s employee or representative must
treat the application as if Bank declined the application.

 

  5. EACH COMPANY LOCATION MUST SEND ALL APPROVED, DECLINED OR PENDING
APPLICATIONS, INCLUDING THE INFORMATION CONTAINED IN THOSE APPLICATIONS RECEIVED
BY TELEPHONE, TO THE DESIGNATED CARD OPERATIONS CENTER ON A WEEKLY BASIS AND
INCLUDE ALL APPLICATIONS IN THE SAME ENVELOPE UNLESS AN ALTERNATE METHOD OF
SHIPMENT IS SPECIFIED BY BANK and agreed to by Company. IF BANK DOES NOT RECEIVE
THE APPLICATIONS ON A WEEKLY BASIS, or after requested from Company after twenty
(20) days, BANK MAY ISSUE A CHARGEBACK FOR THOSE ACCOUNTS THAT ARE DISPUTED BY
THE CARDHOLDER. [Chargeback Code: 13]

 

1007 Request for New Account by the Telephone in Conjunction with a Purchase

Bank will consider a consumer’s application for an Account made via the Internet
or by telephone. For Internet applications, the Cardholder Agreement shall be
transmitted to the consumer by Bank through the website. If approved, Accounts
opened via the Internet application process are immediately available for Card
Sales. For applications made in conjunction with the consumer’s catalog order to
Company, the Account will be immediately available for Card Sales only if the
consumer received the full Cardholder Agreement in the catalog. If the consumer
applies for an Account by telephone and did not receive a catalog containing the
Cardholder Agreement, Company’s employee or

 

5

--------------------------------------------------------------------------------

representative may not process the Card Sale on the Account opened via telephone
until the consumer receives a written copy of the Cardholder Agreement by mail
or express delivery. If Company delivers the Cardholder Agreement to the
consumer by next-day delivery, the Card Sale for such purchase will be processed
by Bank on the same day that the Cardholder Agreement is received by the
Cardholder. If Company delivers the Cardholder Agreement to the consumer via
standard U.S. Mail, Company shall submit the Card Sale to Bank for processing
one (1) day after mailing the Cardholder Agreement, and Bank will post the Card
Sale to the Cardholder’s Account three (3) days later. For Card Sales made
pursuant to this paragraph, Bank may issue a Chargeback for such Card Sale if:
(i) the Cardholder challenges or disputes any portion of the Cardholder
Agreement, (ii) or alleges non-receipt of the Cardholder Agreement and Bank is
unable to enforce collection due to Company’s employee’s or representative’s
alleged failure to provide a copy of the Cardholder Agreement to the Cardholder.
[Chargeback Code: 21]

 

1008 Special Credit Plans

Company must provide Cardholders who make a purchase under a Special Credit Plan
with the point-of-sale disclosure that Bank provides to Company prior to the
time Company’s employee or representative completes the Card Sale. If Company’s
employee or representative fails to provide a Cardholder with the point-of-sale
disclosure prior to the time the Card Sale is completed, Bank may issue a
Chargeback if: (i) the Cardholder challenges or disputes the purchase made under
the Special Credit Plan and alleges that he/she did not receive the
point-of-sale disclosure, and (ii) Bank is unable to enforce collection because
Company’s employee or representative did not give the Cardholder the
point-of-sale disclosure. [Chargeback Codes: 17 and 18]

 

1009 Add-On Sale Authorization

Company’s employees or representatives must complete a Sales Slip and obtain an
Authorization for every sale made on the Card prior to concluding the
transaction. If Company’s employees or representatives receive a “call center”
message on the point-of-sale terminal, or a Company’s employee or representative
cannot obtain an electronic Authorization, Company’s employees or
representatives must obtain Authorization via the “800” Authorization system. If
Company’s employees or representatives fail to follow this procedure Bank may
issue a Chargeback if: (i) the Cardholder challenges or disputes the purchase,
and (ii) Bank is unable to collect the Card Sale because Company’s employees or
representatives did not provide the disclosure. [Chargeback Codes: 1 and 2]

 

1010 Add-On Sale without a Card

 

  1. For purchases made at Company’s retail locations:

If a Cardholder wants to make a purchase at a retail location of Company and
does not have his/her Card, Company’s employee or representative must obtain two
(2) pieces of acceptable identification (as set forth in paragraph 1006, above)
from the Cardholder and verify the Cardholder’s identity. Company’s employee or
representative must notate on

 

6

--------------------------------------------------------------------------------

the sales slip the two (2) types of identification (i.e., driver’s license
number and type of credit card) and that no card was present at the time of
sale. If state law prohibits recording a driver’s license number or credit card
number, then the Company’s employee must write down that they saw a driver’s
license or credit card. Then, Company’s employee or representative must call the
Operations Center to obtain the Cardholder’s Card number.

 

  2. For catalog purchases and all other purchases made by phone or facsimile:

Company’s employees or representatives must obtain the following additional
information from the Cardholder and reflect such information on the Sales Slip:

 

  (i) The Cardholder’s full address.

 

  (ii) The Cardholder’s telephone number.

If Company’s employees or representatives fail to follow these procedures, Bank
may issue a Chargeback if the Cardholder disputes the transaction. [Chargeback
Codes: 23 and 24]

At such time in the future when the Bank provides written notification to the
Company regarding the Bank’s ability to confirm transactions using CVC2
technology, the Company shall have one hundred twenty (120) days from such
notification to begin transmitting the CVC 2 value in all transactions to the
Bank. Should the Company fail to transmit the CVC 2 value, the Company will be
responsible for all counterfeit transactions. Once the Company begins
transmitting the CVC 2 value, the Company will be responsible for all losses
associated with counterfeit transactions where the Bank notifies the Company
that the CVC2 value is missing or inaccurate. [Chargeback Code: 19]. After Bank
notifies Company that Bank can verify CVC 2, Bank will refer all card not
present transactions where CVC 2 is not present, and work with Cardholders to
replace any Cards without CVC 2.

At such time in the future when the Bank provides the ability to validate the
Billing Address provided by the Cardholder via an Address Verification value
(AVS), the Company shall accept responsibility for all unauthorized transactions
where the goods were shipped to an address other than the Cardholders billing
address as verified by the AVS value. [Chargeback Code: 11]

 

1011 Request for Cancellation of Authorization

If a Company employee or representative, or a Cardholder cancels a Card Sale
before Company’s employee or representative completes the Card Sale and
Company’s employee or representative previously obtained an Authorization for
the Card Sale, Company’s employee or representative must call the Authorization
Center and cancel the previous Authorization. Company can only cancel an
Authorization on the same day it is made.

 

7

--------------------------------------------------------------------------------

1012 “Code 10” Alert

A Company employee or representative who is suspicious of the validity of a Card
or Card Account number or the presenter of the Card or Card Account number for
any reason should notify the Authorization Center via the “Code 10” Alert. The
“Code 10” Alert should be used regardless of the dollar amount of the sale. The
procedure is as follows:

 

  1. Call the Authorization Center and ask for a “Code 10” Authorization.

 

  2. The Authorization Center associate will request the Cardholder’s Account
number and Company’s name and will immediately alert the Fraud Department.

 

  3. The Fraud Department personnel will ask a brief series of Yes or No
questions about the Card or the presenter, or may ask the Company employee to
attempt to obtain a photo I.D. from the presenter.

 

  4. If the Fraud Department is able to confirm the identity of the presenter as
a valid Cardholder or authorized user of the Card, Bank will approve the Card
Sale. The presenter should not be aware that any-thing unusual has transpired.

 

  5. IF, ON THE OTHER HAND, COMPANY’S EMPLOYEE OR REPRESENTATIVE IS INSTRUCTED
TO RETAIN THE CARD, OR NOT AUTHORIZE THE SALE, THE COMPANY’S EMPLOYEE OR
REPRESENTATIVE SHOULD DO SO, BUT ONLY BY PEACEFUL AND REASONABLE MEANS.

 

1013 Credit Issued for Returned Merchandise and Adjustments

Bank will honor Company’s return policy as long as the policy complies with all
federal, state and local laws and Company clearly posts or otherwise notifies
the Cardholder of the policy at the time of the Card Sale. Company must not give
cash refunds to any Cardholder in connection with a Card Sale. If a Cardholder
returns goods or services purchased with a Card at Company’s retail
establishments in accordance with Company’s policy, Company’s employees or
representatives must give a Credit to the Cardholder’s Account by completing a
Credit Slip, as described in Section 1004. If a Cardholder receives merchandise
or services that are defective or not as agreed upon at the time of the Card
Sale and Cardholder requests a Credit, Company must give the Cardholder the
Credit. Employees or representatives must send the Bank Sales Data for each
Credit within 7 calendar days after Company’s employees or representatives issue
the Credit to the Cardholder. [Chargeback Codes: 5 and 8]

 

1014 Payments

Company is not allowed to receive or process a Cardholder’s payment to Bank
unless the Merchant Services Agreement specifically authorizes Company to
process Cardholder payments.

 

8

--------------------------------------------------------------------------------

1015 Ticket Retrievals

Company has fifteen (15) Business Days to review and respond to any Cardholder
billing dispute. Bank may issue a Chargeback if the inquiry or dispute is not
resolved or if the Company fails to notify the Card Operations Center that it
resolved the dispute by the end of the fifteenth (15th) Business Day.
[Chargeback Code: 16]

 

1016 Forms

Company must use the Credit Card Applications and Disclosures (“Card forms”)
provided by Bank as soon as Bank provides the forms to Company. Company must
destroy all Card forms that Bank replaces. If Company fails to abide by this
requirement, Bank may process a Chargeback for the amounts uncollectible if the
reason Bank is unable to collect is directly attributed to Company using
incorrect Card forms. [Chargeback Code: 25]

 

1017 Chargebacks

Under certain circumstances Bank may return a Card Sale to Company unpaid, or
Bank may return a previously paid Card Sale to Company for repayment to Bank.
These returned charges are called “Chargebacks”. If a billing error is asserted
by a Cardholder with respect to a Card Sale, or if a Cardholder complains to
Bank about the quality of goods or services obtained with the Card at Company’s
establishment, Company agrees to act in good faith to attempt to resolve the
problem with the Cardholder. If the Cardholder refuses to pay Bank for goods or
services due to a quality dispute, Bank will process a Chargeback for the charge
or disputed portion of it. If Bank is involved in a lawsuit with a Cardholder
relating to a Card Sale made at Company’s establishment, Company agrees to
cooperate with Bank and to provide any assistance to Bank. If Company does not
follow all the terms of the Merchant Services Agreement and these Operating
Regulations when making a transaction with a Card, or if a Card Sale which is
the subject of a billing dispute or quality dispute is subject to Chargeback as
specified in these Operating Regulations or the Merchant Services Agreement,
Bank may refuse to pay Company for the Card Sale or the disputed portion of it.
If Bank has already paid Company, Company must immediately pay the amount it
owes Bank on demand, or Bank may deduct the amount in question from Company’s
Settlement Account or from future payments that they would otherwise owe
Company. Bank will notify Company of Card Sales that are subject to Chargeback
as they arise, but in some instances Bank may process Chargebacks prior to
notification as specified in these Operating Regulations. If Company and a
Cardholder resolve a billing inquiry or dispute on a Card Sale for which Bank
issued a Chargeback, and Bank is permitted by law to rebill the Cardholder for
all or a portion of the disputed amount, Bank will reimburse Company for the
portion of the Chargeback which Bank can rebill to the Cardholder, provided
Company requests the reimbursement within ninety (90) days from the date of
Chargeback. If, due to federal or state laws, or both, Bank is not permitted to
rebill a Cardholder for all or a portion of a disputed transaction, Bank will
not be required to reimburse Company for the Chargeback, even if Company has
complied with the terms of the Merchant Services Agreement and the procedures as
outlined in the Operating Regulations. Attached as Exhibit A is a chart
summarizing Chargeback Codes,

 

9

--------------------------------------------------------------------------------

Definitions, Explanations and Required Documentation to support or refute
Chargebacks. For purposes of Exhibit A the phrase “promptly collected from the
Cardholder” means that Bank has attempted to collect from the Cardholder for at
least fifty-nine (59) consecutive days. Bank’s failure to issue a Chargeback to
Company immediately after the fifty-nine (59) consecutive days have passed does
not mean that Bank has forfeited its right to charge back the transaction to
Company.

 

1018 Reversals of Chargebacks

If within ninety (90) days from the date of the Chargeback, Company has been
unable to resolve the dispute with the Cardholder, Company may request a
Chargeback reversal from Bank. Bank will review all relevant facts and
circumstances pertaining to Company and the Cardholder and determine if Bank
should reverse the Chargeback. If Bank determines that it should reverse the
Chargeback, Bank will issue a separate credit to the Company and debit the
Cardholder. Company must not submit a new Card Sale transaction in an identical
amount in order to recover from a Cardholder for a transaction for which Bank
has issued a Chargeback. Company may request a reversal of a Chargeback by
submitting to Bank a copy of the original Sales Slip and documentation to
support the request for reversal of the Chargeback as set forth in Exhibit A.
Bank will advise Company where it should send Chargeback reversal requests.
Bank, exercising its reasonable judgment, will decide whether it will reverse
any Chargeback.

 

1019 Telephone Monitoring

Company must notify its associates and, where required by applicable law, obtain
each associate’s written consent that, from time to time, Bank or its processor
may monitor and tape record telephone calls between Company’s associates and
Bank’s or its processor’s associates for training purposes.

 

1020 Company Employee Fraud

Bank and Company will work together to minimize possible fraud by Company
employees. Company employees must not issue or accept temporary credit cards.
The store manager must either mail in or phone in to the Operations Center
employee applications for a Card. At such time when the Bank provides the
ability for the Company to fax applications to the Bank or its designee for
record retention purposes, the Company will have ten (10) days to destroy the
original application once a report confirming the receipt of the application has
been provided to the Company from the Bank or its designee.

If Company suspects that one of its employees is involved with or may be
involved with fraud relating to the Card Plan, Company must notify Bank within
forty-eight (48) hours of its discovery of the possible fraud and provide Bank
with the employee’s name and address, the reasons why Company suspects the
employee and any documentation Company has relating to the possible fraud.
[Chargeback Codes: 14 and 26]

 

1021 Claim by Cardholder of Non-Receipt of Purchase

If a Cardholder advises Bank that he or she did not receive a purchase which was
billed

 

10

--------------------------------------------------------------------------------

to his or her Account, Bank will make a reasonable investigation. If, after
investigation, Bank cannot determine that the Cardholder actually received the
purchase, Bank shall remove the amount of the purchase from the Cardholder’s
Account and charge that amount back to Company. [Chargeback Code 11]

Capitalized terms used herein and not otherwise defined will have the meanings
given to them in the Merchant Services Agreement. If there are any conflicts
between the terms of the Merchant Services Agreement and these Operating
Regulations, the former shall govern.

 

11

--------------------------------------------------------------------------------

EXHIBIT A

 

Code

  

Definition

  

Explanation

  

Documentation to
Support Chargeback

  

Documentation to
Reverse Chargeback

01    Transaction without Required Authorization    A valid Authorization was
not obtained. This Chargeback will only be exercised when such transaction
cannot be promptly collected from the Cardholder.    DO2 Authorization Report
for Sales Data; Cardholder Statement.    None 02    Declined Authorization   
The transaction was completed after the Company received a decline. This
Chargeback will be exercised only when such transaction cannot be promptly
collected from the Cardholder.    DO2 Authorization Report showing Decline;
Cardholder Statement.    Sales Ticket 03    Invalid Cardholder Account Number   
The transaction was submitted using an Account number for which no valid Account
exists or can be located.    R15 Reject-Re-entry Report; Purged Account Report.
   None 04    Late Presentation of Transaction    The time from transaction date
to date of processing exceeds the 60-day limit allowed by Bank, and the
transaction cannot be promptly collected from the Cardholder. In the event the
Company’s employees or representatives accept payments at Company’s retail
locations and such payment is returned to Company for insufficient funds,
Company must present Bank with the insufficient funds item within fourteen (14)
days of Company’s receipt of the item from its bank.    Sales Ticket: Cardholder
Statement.    None 05    Cardholder Disputes Merchandise/Services    The
Cardholder disputes the quality of merchandise purchased or service rendered or
any portion thereof, and Company has not responded to such dispute in accordance
with Section 2.9 of the Merchant Services Agreement.    Written Cardholder
Claim.    Resolution of dispute by Company within time frame set forth in
section 2.9 of the Merchant Services Agreement evidenced by a signed agreement.
Partial/Full Credit posted to Account. 06    Alteration of Amount    The
Cardholder claims that the purchase amount for which the Cardholder signed was
altered after the Cardholder signed the Sales Slip and without the Cardholder’s
consent or direction. Only the difference will be charged back to the Company.
   Cardholder’s Receipt does not match copy of Sales Ticket received from
Company or the Bank’s Transaction Report.    POS Transaction Log proving
Cardholder altered the amount. 07    Duplicate Processing    Cardholder claims
they have been charged twice for a transaction.    Cardholder statement(s).   
Production of two Sales Slips with different authorization codes. POS
Transaction Log 08    Non-Receipt of Credit    Cardholder claims that a Credit
issued by the Company has never been posted to the Cardholder’s Account or
Cardholder received a cash refund in connection with a Card Sale and the
Cardholder did not pay the Bank for such Card Sale. The
Chargeback is limited to the amount of the Credit.    Cardholder’s Credit Slip
and Credit was not posted to Cardholder’s Account.    None

 

12

--------------------------------------------------------------------------------

09    Unauthorized Purchase    The Cardholder, in writing, claims that neither
the Cardholder nor any party authorized by the Cardholder participated in the
transaction and that the Cardholder has no knowledge of the transaction.   
Written claim from Cardholder and copy of Sales Slip from Company. Bank compares
signature on the Cardholder letter with signature on Sales Slip. Additional
investigation may also be necessary.    None 10    Missing Signature    The
Application or the Sales Slip is missing the Cardholder signature and the
Cardholder does not recognize the Card Sale.    Unsigned Sales Slip/ Unsigned
Application.    None 11    Non-Receipt of Goods or Services    Company submitted
a Card Sale in which the goods or services were not yet shipped or otherwise
provided to the Cardholder or the Cardholder claims they have not received the
goods or services for which they have been charged.    Written Cardholder
Complaint.    Shipping Invoice Signed Delivery Ticket 12    Split Sale (where
applicable)    A purchase for a single item cannot be split between the Card and
another credit card or financing vehicle. However, the purchase can be split
between the Card and cash or check or the Card and an unsecured general purpose
bank card such as Visa, MasterCard or a NOVUS brand card.    Sales Slip; Written
Cardholder Claim.    None 13    No Card Application    Any transaction made by a
Cardholder for whom a written Card application has not been submitted in
accordance with Section 1006, paragraph 5, above, and the Cardholder claims they
did not open an Account.    Written Cardholder Claim.    Copy of the Application
14    Sale made with a Temporary Credit Card    Any transaction made with a
temporary credit card.    Card type listed on Sales Slip.    Sales Slip with
Card Swipe 15    Mismatched or Incomplete Application   

One or more of the following items on the Application provided by the Company
employee or representative at the point-of-sale for telephone approvals or REAP
approvals does not match the written application information provided by the
applicant.

 

1. Type of Residence

 

2. Length of time at Residence

 

3. Employment information

 

4. Banking relationship

 

5. Applicant’s and Joint Applicant’s identification

 

6. Absence of Primary and/or Joint Applicant’s signature

 

7. Income

   Application copy; NAPS record.    None 16    Non-Receipt of Requested
Document    Sales Slip or Credit Slip has not been provided within 15 business
days in response to ticket retrieval request or within any other date as
otherwise specified in the Merchant Services Agreement.    Request made to
Company and Sales Slip or Credit Slip is not received within specified time.   
None

 

13

--------------------------------------------------------------------------------

17    Non-Receipt of Special Credit Plan Disclosure    Cardholder claims they
have not received a point-of-sale disclosure describing the terms of the Special
Credit Plan. This Chargeback will be exercised only when such transaction cannot
be promptly collected from the Cardholder.    Written Cardholder Claim.    Set
procedure in place and written documentation regarding point-of-sale
disclosures. 18    Invalid Credit Plan    Company charged a sale to an invalid
credit plan or misrepresented the type of the credit plan to the Cardholder and
the Cardholder claims they were told the plan was either valid or for a longer
period of time.    Monetary File/Authorization Report reveals an invalid credit
plan number; Written Customer complaint.    None 19    Altered or Counterfeit
Cards    Card Sale made with invalid Cards and/or Card Account number. This
Chargeback will only be exercised when such transaction cannot be promptly
collected from the Cardholder.    Record of decline authorization or no record
of authorization.    A valid authorization from bank is required 20    Improper
Card Use    Card use for purposes other than personal, family, household and
charitable purposes.    Name on Application is a business name.    None 21   
Failure to Give Cardholder Agreement to Cardholder    The Cardholder claims that
they did not receive the Cardholder Agreement at the point-of-sale for a new
Account or that the Cardholder did not receive a catalog containing the
Cardholder Agreement prior to opening an Account over the telephone in
conjunction with a catalog order. This Chargeback will only be exercised when
such transaction cannot be promptly collected from the Cardholder.    Written
Cardholder Claim.    Well-documented procedure in place and training regarding
handing out cardholder agreements and forms. 22    No Proper Identification For
New Account Application    Company submitted an application that did not contain
evidence that Company’s employees or representatives obtained and verified the
appropriate identification for a New Account application. This Chargeback will
only be exercised when such transaction cannot be promptly collected from the
Cardholder.    Application Copy; NAPS record of verification of identification.
   None 23    No Proper Identification For an Add-On-Sale without a Card   
Company’s employee or representative failed to note on the sales slip the two
(2) types of identification used and that no card was present at the time of the
sale. This Chargeback will only be exercised when such transaction cannot be
promptly collected from the Cardholder.    Sales Slip.    Sales Slip with
identification notation. 24    No Proper Identification For Catalog, Phone or
Fax Purchase    Company’s employee or representative failed to note on the sales
slip the Cardholder’s full address and telephone number for a catalog, phone or
fax purchase. This Chargeback will only be exercised when such transaction
cannot be promptly collected from the Cardholder.    Sales Slip.    None 25   
Expired Cardholder Forms    Company’s employees or representatives used Card
forms that have expired or have been otherwise replaced by new forms by Bank.
Only the portion of the transaction affected by the expired forms will be
charged back to Company. This Chargeback will only be exercised when such
transaction cannot be promptly collected from the Cardholder.    Copy of
Application-Form number indicates date on Form; Written Cardholder Claim.   
None

 

14

--------------------------------------------------------------------------------

26    Employee Fraud    Company’s employee or representative involved in fraud
relating to the Card Plan.    Copy of Cardholder forms indicating Employee or
Former-employee involvement.    None

 

15