Exhibit 10.7

 

PRIVATE LABEL CREDIT CARD PROGRAM AGREEMENT

 

This Private Label Credit Card Program Agreement (“Agreement”) is entered into
as of the 1st day of March, 2007 (“Effective Date”), by and among Citi Commerce
Solutions of Canada Ltd., an Ontario corporation, having its principal place of
business at One Toronto Street, Suite 1200, Toronto, Ontario M5C 2V6 (“Citi
Commerce”), Zale Canada Co., a corporation organized and existing under the laws
of Nova Scotia, having its principal place of business for North America at 901
W. Walnut Hill Lane, Irving, Texas, U.S.A. 75038 (“Zale”) for the purposes set
forth herein and TXDC, L.P., a limited partnership organized and existing under
the laws of the State of Texas, in the United States of America (“TXDC”).

 

CONTEXT OF AGREEMENT

 

A.                                   Zale is engaged, among other activities, in
the retail sale of certain goods and services at its retail Stores in Canada
under the Brand names ‘Peoples’, ‘Peoples II’, ‘Mappins’, and ‘Youngs Jewellers’
(such Brand names, and any other Brand name or names adopted in the future by
Zale, hereinafter called the “Brand Names”, collectively, and the “Brand Name”,
individually) and wishes to offer to its customers the convenience of using a
Credit Card (as defined below) as the method of payment for those goods and
services.

 

B.                                     Zale wishes to grant to Citi Commerce,
and Citi Commerce wishes to have, the exclusive right to own and operate the
Private Label Program (as defined below), including the right to issue new
Credit Cards in substitution of and/or replacement for existing private label
credit cards bearing a Brand Name that were issued by Citi Commerce under the
Prior Agreement (as defined below), the right to all future receivables
originated pursuant to the Private Label Program, and the right to use the Brand
Names in connection with the Private Label Program, all in accordance with the
terms and conditions of this Agreement.

 

In consideration of the mutual covenants and provisions contained herein and the
sum of two dollars ($2.00), now paid by each of the Parties to the other, the
receipt and sufficiency of which are acknowledged by each Party, and other
valuable consideration exchanged between them, Citi Commerce and Zale agree as
follows:

 

1.                                      Definitions and Interpretation:

 

(a)                                  For all purposes of this Agreement, the
following terms will have the following meanings:

 

“Account” means a credit card account (including any credit card account that
has expired or been terminated or canceled) opened by Citi Commerce in the name
of an Applicant on which one or more Credit Cards have been issued to
Cardholders by Citi Commerce, such credit card account containing a record of
credit and charge activity with respect to any Credit Card, including all
Receivables thereon, on which a transaction may be or has been made by a
Cardholder (or by a Person authorized by a Cardholder) or former Cardholder
pursuant to a Credit Card.

 

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“Account Issuance Criteria” means the Citi Commerce defined procedures on
adjudicating new Account applications, making fair and impartial decisions on
applications, and the management of credit lines based on defined lending
criteria, as amended or replaced from time to time.

 

“Affiliate” means, with respect to a Party, any individual or entity, as
applicable, directly or indirectly controlling, controlled by, or under common
control with, such Party.

 

“Agreement” means this Private Label Credit Card Program Agreement, including
any Attachments appended hereto, as it may be amended from time to time in
accordance herewith.

 

“Ancillary Products and Services” mean any and all ancillary products and
services that may be offered from time to time to Cardholders, including but not
limited to, Financial Services Products, but excluding Credit Insurance.

 

“Annual Measurement Period” has the meaning set out in Section 3. of Attachment
D.

 

“Answer” has the meaning set out in Section 6.(b) of Attachment I.

 

“Applicable Law” means all applicable laws and regulations of any jurisdiction,
including banking laws, Consumer Protection Laws, Income Tax Act, Language Laws,
Privacy Laws, securities laws, tax laws, tariff and trade laws, ordinances,
judgments, decrees, injunctions, issuances, writs and orders or like actions of
any Governmental Authority.

 

“Applicant” means an individual who has applied to Citi Commerce for an Account,
using the form of Application prescribed by Citi Commerce for that purpose.

 

“Application” means Citi Commerce’s prescribed form of application for an
Account that must be completed and signed by an Applicant and then submitted to
Citi Commerce for its review and approval or declination.

 

“Approved Sales Channel” means a Store, or any other Zale sales channel (e.g.
Zale catalogues, Zale internet site(s) and Zale telephone/mail ordering systems)
approved for use as a sales channel by the Parties from time to time, through
which Authorized Goods and Services are offered for sale by Zale to Cardholders
and the public in Canada.

 

“Arbitration” means arbitration pursuant to Section 12.(b).

 

“Arbitrator” has the meaning set out in Section 1. of Attachment I.

 

“Assistance Period” has the meaning set out in Section 15.(c).

 

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“Authorization” means an electronic or voice credit authorization given by Citi
Commerce to Zale for the dollar amount of a Card Sale that exceeds the Floor
Limit.

 

“Authorized Goods and Services” means all merchandise and services, including
Credit Insurance, offered from time to time by Zale for sale to the public in
the ordinary course of business at or through Approved Sales Channels.

 

“Bankruptcy Act” means the Bankruptcy and Insolvency Act (Canada), the
Winding-Up and Restructuring Act (Canada) or the Companies’ Creditors
Arrangement Act (Canada), as amended or replaced from time to time, and any
other applicable insolvency or other similar law of any jurisdiction.

 

“Brand Name” and “Brand Names” have the meanings set out in Recital A. of this
Agreement.

 

“Business Day” means any day other than a Saturday, Sunday, or other day on
which banks in Toronto, Ontario are required or authorized to close.

 

“Card Sale” means a Transaction in which an Account or a Card is used by a
Cardholder and accepted by Zale as the method of payment therefor.

 

“Cardholder” means an individual to whom Citi Commerce has issued a Credit Card
and who is obligated under a Cardholder Agreement with respect to the Credit
Card and the Account on which that Credit Card has been issued.

 

“Cardholder Agreement” means an agreement between Citi Commerce and a Cardholder
establishing the terms and conditions that govern an Account and under which a
Credit Card is issued, as such agreement may be amended from time to time.

 

“Cardholder Development” means any activity that encourages Cardholders to use,
build, or maintain balances on, or retain Accounts, including Account
activation, Account retention, and Account stimulation.

 

“Cardholder Information” means the following information about a Cardholder, if
the Cardholder has provided it to Citi Commerce in his or her capacity as a
Cardholder or a prospective Cardholder, as well as any other information that
the Cardholder has provided to Citi Commerce in such capacity from time to
time:  name; postal address and electronic mail address, as applicable;
telephone number; date of birth; social insurance number (optional); Account
information; and any other personal information.

 

“Cardholder List” means a listing of Cardholder names, telephone numbers, and
postal addresses and electronic mail addresses, as applicable.

 

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“Chargeback” means:

 

 

(i)

the refusal of Citi Commerce to pay Zale, in whole or in part, for a Card Sale,
or

 

 

 

 

(ii)

the return to Zale of previously purchased Authorized Goods and Services by a
Cardholder and the reimbursement by Zale to Citi Commerce of any amount
previously paid by Citi Commerce to Zale in consideration of the related Card
Sale,

 

all as provided for in Section 2.(b)(xii) and Attachment A.

 

“Chargeback Report” has the meaning set out in Section 2.(b)(xii)(3).

 

“Citi Commerce” means Citi Commerce Solutions of Canada Ltd., a corporation
organized under the laws of Ontario.

 

“Citi Property” has the meaning set out in Section 6.(a)(i).

 

“Citigroup Information Security Standards” means the document set out in
Attachment J, as the same may be revised from time to time in Citi Commerce’s
sole discretion.

 

“Claim” means any claim, demand, liability, allegation, assertion, offset,
defence, counterclaim, proceeding, action, suit or other right of action.

 

“Claim Statement” has the meaning set out in Section 6.(a) of Attachment I.

 

“Client Relationship Team” has the meaning set out in Section 4(a)(i).

 

“Complainant” has the meaning set out in Section 4. of Attachment I.

 

“Complaint” has the meaning set out in Section 4. of Attachment I.

 

“Confidential Information” has the meaning set out in Section 7.(a).

 

“Consumer Protection Laws” means the Consumer Protection Act (Ontario) and any
equivalent or similar federal or provincial laws enacted for the protection of
consumers, including the Privacy Laws.

 

“Contractor” means any contractor or subcontractor, as applicable, that performs
services, directly or indirectly, for a Party in accordance with this Agreement

 

“Counter-Complaint” has the meaning set out in Section 6.(e). of Attachment I.

 

“Credit Card” means a credit card displaying any one or more Brand Names (or
such other design mutually acceptable to the Parties) or Zale Marks that is
issued by Citi Commerce on an Account to a Cardholder and entitles the
Cardholder to use that credit card in a Card Sale.

 

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“Credit Insurance” means a credit insurance product, the proceeds of which are
paid to a creditor and which offers specific disability, involuntary
unemployment, death or other benefits pursuant to which a Cardholder’s
outstanding indebtedness owed to Citi Commerce may be satisfied in whole or in
part.

 

“Designated Third Party” has the meaning set out in Section 15.(b).

 

“Disapproved Matter” has the meaning set out in Section 4.(b)(ii).

 

“Disclosing Party” has the meaning set out in Section 7.(a).

 

“Dispute” has the meaning set out in Section 4.(b)(i).

 

“Dissatisfied Party” has the meaning set out in Section 12.(c)(i).

 

“EBITDAR” means,

 

 

(i)

For the immediately preceding four (4) fiscal quarters, Total Revenue minus Cost
of Sales, minus Selling, General and Administrative Expenses (such expenses not
to include depreciation and amortization expenses), minus Cost of Insurance
Operations, plus

 

 

 

 

(ii)

Total Rent Expense Less Rentals Based on Sales.

 

For the purposes hereof, Total Revenue, Cost of Sales, Selling, General and
Administrative Expenses, and Cost of Insurance Operations have the dollars and
cents meaning designated under such titles or other equivalent titles in the
corresponding financial statements for those four (4) fiscal quarters for the
ultimate parent legal entity owning or controlling Zale.  Total Rent Expense and
Rentals Based on Sales mean the relevant rent expenses for the prior fiscal year
and have the dollars and cents meaning designated under such titles or other
equivalent titles in the most recent annual financial statements for the
ultimate parent legal entity owning or controlling Zale.

 

“EFT” means electronic funds transfer.

 

“Effective Date” means the date first set out in the preamble of this Agreement.

 

“Event of Default” has the meaning set out in Section 13.(a).

 

“Executive Officer” means, with respect to Citi Commerce, the President of Citi
Commerce and, with respect to Zale, means the Chairman, Chief Operating Officer
or President of Zale, or if these positions at a Party do not exist, the senior
officer of the Party who carries out the functions of the applicable officer of
that Party as of the Effective Date.

 

“Facilitator” has the meaning set out in Section 12.(c)(iii).

 

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“Fair Market Value” has the meaning set out in Section 15.(b).

 

“Financial Services Products” means any financial services or products,
including but not limited to loan and credit products, deposit products,
insurance products and services, credit protection products, and investment and
securities products and services.

 

“Fixed Charge Ratio” means, with respect to the ultimate parent legal entity
owning or controlling Zale, as of the end of any fiscal quarter, a numerator of
EBITDAR and a denominator of the sum of:

 

(i)                                     the Net Interest Expense for the
immediately preceding four (4) fiscal quarters, and,

 

(ii)                                  the Total Rent Expense less Rentals Based
on Sales, as defined in EBITDAR.

 

For the purposes hereof, Net Interest Expense has the dollars and cents meaning
designated under ‘Interest Expense, Net’ or other equivalent title in the
corresponding financial statements for those four (4) fiscal quarters for the
ultimate parent legal entity owning or controlling Zale.

 

Zale may, on occasion, submit a request to Citi Commerce to adjust the
calculation of the Fixed Charge Ratio for any fiscal quarter due to the
occurrence of one-time, extraordinary items that are not representative of
normal on-going Zale operations.  Upon receipt of such request, Citi Commerce
will, in its sole discretion (but acting reasonably), determine if a Fixed
Charge Ratio calculation adjustment will be made in the aforesaid circumstances.

 

“Floor Limit” means:

 

 

(i)

for an Approved Sales Channel which is not equipped with the REPOS Service at
the time a Card Sale is processed by the Approved Sales Channel in the manner
prescribed by Section 2.(b)(iv) and Section 2.(b)(vii), the sum of One Hundred
and Fifty Dollars ($150.00),

 

 

 

 

(ii)

for an Approved Sales Channel which is equipped with the REPOS Service at the
time a Card Sale is processed by the Approved Sales Channel in the manner
prescribed by Section 2.(b)(iv) and Section 2.(b)(vii), the sum of Zero Dollars
($0.00), and

 

 

 

 

(iii)

for an Approved Sales Channel which is equipped with the REPOS Service at the
time a Card Sale is processed by the Approved Sales Channel in the manner
prescribed by Section 2.(b)(iv) and Section 2.(b)(vii), the sum of One Hundred
and Fifty Dollars ($150.00), if the Approved Sales Channel is unable for any
reason whatsoever to access the REPOS Service,

 

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such sum (determined, as the case may be, in accordance with (i), (ii) or (iii),
above) being the maximum amount that a Cardholder may charge for any single Card
Sale without the Approved Sales Channel being required to obtain Citi Commerce’s
prior Authorization pursuant to Section 2.(b)(vii).

 

“Force Majeure” means an occurrence beyond the control and without the fault or
negligence of the Party affected and which said Party is unable to prevent or
provide against by the exercise of reasonable diligence including but not
limited to:  acts of God or the public enemy; expropriation or confiscation of
facilities; changes in Applicable Law; war, terrorism, rebellion, civil
disturbances, sabotage, riots, floods, or unusually severe weather that could
not reasonably have been anticipated; fires, explosions or other catastrophes;
strikes or any other concerted acts of workers; other similar occurrences; but
lack of finances will in no event be deemed to be a cause beyond a Party’s
control.

 

“40 DP Losses” has the meaning set out in Section 5.(d).

 

“40% Down Payment Program” has the meaning set out in Section 5.(d).

 

“GAAP” means generally accepted accounting principles in Canada, in effect from
time to time, as set forth in the opinions and pronouncements of the Canadian
Institute of Chartered Accountants.

 

“Governmental Authority” means any government, any province or any other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
in each case whether federal, provincial or local.

 

“Hearing” has the meaning set out in Section 6.(h)(i) of Attachment I.

 

“Incident” has the meaning set out in Section 7.(h).

 

“includes” or “including” means includes or including without limitation.

 

“Income Tax Act” means the Income Tax Act (Canada).

 

“Indemnified Party” has the meaning set out in Section 11.(c).

 

“Indemnifying Party” has the meaning set out in Section 11.(c).

 

“Initial Term” means the period commencing on the Effective Date and ending on
March 8, 2011.

 

“In-Store Payment” has the meaning set out in Section 2.(b)(xi).

 

“Language Laws” means the laws and regulations of the Province of Québec
relating to language.

 

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“Late Fee Revenue Rebate” means, in respect of any one (1) calendar month, the
product obtained by multiplying the amount of the Net Late Fees earned by Citi
Commerce in respect of Accounts under the Private Label Program during that
calendar month by twenty-five percent (25%).

 

“Lien” means any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, lien, charge, claim, security interest (including, without
limitation, any interest of a buyer of accounts or chattel paper), easement,
encumbrance, preference, priority, or other security agreement, lease or
preferential arrangement of any kind or nature whatsoever.

 

“Liquidation Period” means the period commencing on the date of termination of
this Agreement and ending on the expiration of twelve (12) months after the
effective date of the termination of this Agreement.

 

“Losses” means any and all demands, claims (including Claims), actions or causes
of action, assessments, damages, liabilities, interest, penalties, costs and
expenses (including reasonable disbursements and legal fees (on a
solicitor-client basis) incurred in connection therewith and in seeking
indemnification therefor, and any amounts or expenses required to be paid or
incurred in connection therewith and in seeking indemnification therefor, and
any amounts or expenses required to be paid or incurred in connection with any
action, suit, proceeding, claim, appeal, demand, assessment or judgment) imposed
upon or incurred by any Person entitled to be indemnified under this Agreement;
provided that in no event will “Losses” include consequential damages or lost
profits unless they are awarded pursuant to a Party’s indemnification
obligations hereunder.

 

“Magnetic Stripe Reading Terminal” means a terminal that accepts a Credit Card
as a payment method and has the capability of reading magnetic stripe tracks 1
and 2 of the Credit Card.

 

“Material Change” means any change, event, condition or occurrence, other than
one required by Applicable Law or a change in Citi Commerce credit policy, as
described in Section 2.(b)(i), which could reasonably be expected to (a) cause a
material decrease in any or all of the following:  (i) the number of
Applications, (ii) use of Credit Cards by Cardholders, or (iii) Card Sales;
(b) have a material adverse effect on the Private Label Program; or (c) require
material changes to or otherwise materially affect Zale’s existing procedures,
operations, hardware or software.

 

“Matter” has the meaning set out in Section 2. of Attachment I.

 

“Merchant Fees” means the merchant fees which Citi Commerce charges to Zale, and
rebates to Zale, in respect to the Settlement of Net Card Sales, such fees being
set out in Attachment B.

 

“Net Card Sales” means, for any given period, the total dollar amount of all
Card Sales made during the period (including, without limitation, Card Sales
made

 

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pursuant to any Second Look Program) properly remitted by Zale to Citi Commerce,
minus the total dollar amount of Returns properly remitted by Zale to Citi
Commerce.

 

“Net Credit Loss” has the meaning set out in Section 3. of Attachment D.

 

“Net Late Fees” means, during any calendar month, all late fees assessed during
the month less any late fees waived or reversed as a result of charging off a
Cardholder Account or customer service activity.

 

“New Account Acquisition” means all activities connected with the development
and implementation of marketing programs for the opening of new Accounts,
including creative development, production, and distribution of advertising and
marketing Solicitations offering Accounts to prospective customers and
fulfillment packages to new Cardholders.

 

“New Account Approval Rate Baseline” has the meaning set out in Section 3. of
Attachment D.

 

“New Account Approval Rate Standard” has the meaning set out in Section 3. of
Attachment D.

 

“New Respondents” has the meaning set out in Section 6.(g) of Attachment I.

 

“Operating Regulations” mean the standard operating regulations and procedures
mutually developed and agreed to by the Parties, as amended or replaced from
time to time, that apply to the Private Label Program, the initial operating
regulations and procedures being set out in Attachment A.

 

“Order” has the meaning set out in Section 6.(g) of Attachment I.

 

“Other Party” has the meaning set out in Section 12.(c)(i).

 

“Party” means Citi Commerce or Zale, as applicable, and “Parties” means Citi
Commerce and Zale.

 

“Person” means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any group or political subdivision thereof.

 

“Personal Information” has the meaning set out in Section 2.(h)(i).

 

“POS Authorization Service” means the electronic Card Sale authorization, data
capture and routing system, including host processors and communications ports
and merchant link interfaces to the POS Merchant Link used by Citi Commerce (or
by its designated Contractor) for the purposes of this Agreement, but does not
include the POS Merchant Link, the REPOS Service or any other computer systems
of Zale (or its designated Contractor).

 

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“POS Merchant Link” means the communication link developed and used by Zale
according to Citi Commerce’s approved specifications, connecting the POS
Authorization Service and the REPOS Service.

 

“Pricing” means the annual service fee (if any), interest rates, grace period
for charges, minimum finance charge, method of computing the minimum payment due
on balances outstanding, non-sufficient funds fee, cash advance transaction fee,
over the credit limit fee and any other pricing provision relating to an Account
that is provided for in a Cardholder Agreement.

 

“Prime Rate” means the annual rate of interest announced by Royal Bank of Canada
from time to time as a reference rate then in effect for determining interest
rates on Canadian dollar commercial loans in Canada.

 

“Prior Agreement” the private label credit card agreement made and entered into
between the Parties dated May 5, 1999, as amended in accordance with the
provisions thereof.

 

“Privacy Laws” means the Personal Information Protection and Electronic
Documents Act (Canada), the Act respecting the protection of personal
information in the private sector (Quebec) and the Personal Information
Protection Acts (Alberta and British Columbia) and any equivalent or similar
provincial legislation.

 

“Privacy Officer” has the meaning set out in Section 2.(h)(viii).

 

“Private Label Card Documentation” means, with respect to an Account, all
Applications, Cardholder Agreements, Credit Cards, Sales Drafts, Credit Vouchers
and Account billing statements relating to such Account.

 

“Private Label Portfolio” means the Accounts and all Receivables and Related
Account Rights (excluding any Zale Customer Information).

 

“Private Label Program” means the Zale private label credit card program
evidenced by and continued under this Agreement whereby Citi Commerce will:

 

 

(i)

adjudicate Applications and open Accounts for Applicants,

 

 

 

 

(ii)

market, offer, issue and maintain and service Accounts and Credit Cards for
Cardholders, and

 

 

 

 

(iii)

provide merchant acquiring and settlement services (including Settlement) and
related merchant services to Zale,

 

all in accordance with the other terms and conditions of this Agreement.

 

“Program Committee” has the meaning set out in Section 4.(b)(i).

 

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“Purchase Assets” has the meaning set out in Section 16(a).

 

“Purchase Date” has the meaning set out in Section 15(c).

 

“Purchase Option” has the meaning set out in Section 15(a).

 

“Purchase Price” has the meaning set out in Section 15(a).

 

“Purchaser” has the meaning set out in Section 18.(b).

 

“REAP” has the meaning set out in Attachment A.

 

“Receivables” means any and all amounts owing by a Cardholder on an Account to
Citi Commerce.

 

“Receiving Party” has the meaning set out in Section 7(a).

 

“Related Account Rights” means any and all claims, contract rights,
documentation, intangibles, remedies, indemnities, guarantees, credits,
deposits, intellectual property and other rights related to an Account and any
other rights and interest of Citi Commerce in the Credit Cards and the Accounts.

 

“Renewal Term” means any term of two (2) years following the completion of the
Initial Term or another Renewal Term during which this Agreement remains in
effect.

 

“Reply” has the meaning set out in Section 6.(d) of Attachment I.

 

“REPOS Service” means the retail electronic point of sale data capture, routing
and authorization system used by Zale which is linked to and communicates with
the POS Authorization Service through the POS Merchant Link for the purpose of
permitting an Approved Sales Channel to request and receive Citi Commerce’s
positive or negative electronic credit authorization in respect of a Card Sale,
to transmit Sales Data to (and, if applicable, receive Sales Data from) Citi
Commerce, and to capture Transaction data in respect thereto for purposes of
computing Settlement amounts due and payable hereunder and for all other
purposes permitted under this Agreement.  For greater certainty, the REPOS
Service includes Zale’s (and its designated Contractor’s, if any) host
processors and communications ports and interfaces to, and including, the POS
Merchant Link, but does not include the POS Authorization Service or any other
computer systems of Citi Commerce or its designated Contractors.

 

“Representative” means, with respect to any Party or Affiliate, as applicable,
an officer, director, employee, or agent of such Party or Affiliate.

 

“Respondent” has the meaning set out in Section 4. of Attachment I.

 

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“Retail Master Record” means the computer files containing the Cardholder List
data and the most recently-posted financial and Account status information with
respect to all of the Accounts, including, without limitation, active, inactive
and recovery Accounts, which computer files represent the aggregate amount of
Receivables on the date the computer files are created, together with a
corresponding copy of that portion of the trial balance that reflects the
Receivables, record file description and definitions and other files reflecting
unbilled charges.

 

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

 

“Return Voucher” means evidence of a Return in paper form.

 

“Revenue Sharing Payments” has the meaning set out in Section 2. of Attachment
B.

 

“Sales Data” means the electronic data transmission of Card transactions from
Zale to Citi Commerce, including Card Sales and Returns.

 

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

 

“Second Look Notice” has the meaning set out in Section 5.(c).

 

“Second Look Program” means any one or more credit programs established by the
Parties under this Agreement for certain Applicants pursuant to Section 5.(c).

 

“Security Breach” has the meaning set out in Section 10.(b).

 

“Service Level and Performance Standards” mean the service level and performance
standards mutually developed and agreed to by the Parties, as amended or
replaced from time to time, that apply to the Private Label Program, the initial
service level and performance standards being set out in Attachment D.

 

“Settlement” means a payment in respect to Net Card Sales made by Citi Commerce
to Zale pursuant to Section 2.(b)(viii).

 

“Settlement Account” means the deposit account maintained by Zale at a Canadian
financial institution that Zale has designated as the account to be debited
and/or credited, as applicable, by Citi Commerce for Settlement transactions and
Merchant Fees, and for other amounts due and payable by Zale to Citi Commerce
from time to time under this Agreement.

 

“Solicitation” means any application, offer or invitation, made by any means, to
any individual to establish an Account

 

“Store” means a retail store owned and operated by Zale in Canada bearing one or
more Brands.

 

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“Tax” or “Taxes” means any federal, provincial, local or foreign income, goods
and services, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, custom duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, ad valorem, real property, personal property, sales,
use, workers compensation, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty or addition thereto, whether disputed or not, imposed by any
Canadian federal, provincial, territorial, local or foreign taxing authority.

 

“Tax Return” has the meaning set out in Section 16.(d).

 

“Term” means the Initial Term together with any Renewal Term.

 

“Transaction” means a purchase of Authorized Goods and Services by a Cardholder
from or through an Approved Sales Channel.

 

“TXDC” means TXDC, L.P., a limited partnership organized and existing under the
laws of the State of Texas, in the United States of America.

 

“Valid” has the meaning set out in Attachment A.

 

“Zale” means Zale Canada Co., a corporation organized under the laws of Nova
Scotia.

 

“Zale Branded Materials” has the meaning set out in Section 9.(b).

 

“Zale Credit Information” has the meaning set out in Section 8(a).

 

“Zale Customer Information” means the following information about a Cardholder,
if a Cardholder has provided it to Zale in his or her capacity as a Zale
customer or prospective customer, as well as any other information that the
Cardholder has provided to Zale in such capacity from time to time:  name;
postal address and electronic mail address, as applicable; telephone number;
date of birth; and any other personal information.

 

“Zale Marks” mean all of the trade names, trade-marks, service marks and
associated trade dress (including Brands) set out in Attachment E, and any
successor or replacement trade names, trade-marks, service marks and associated
trade dress (including Brands) for the trade names, trade-marks, service marks
and associated trade dress (including Brands) set out in Attachment E.  In the
event that Zale or TXDC (or both Zale and TXDC) grant(s) to Citi Commerce a
license to use any new or additional trade names, trade-marks, service marks and
associated trade dress (including Brands) licensed to or owned by Zale or TXDC,
as the case may be, pursuant to the provisions of Section 9., such new or
additional trade names, trade-marks, service marks and associated trade dress
(including Brands) will be deemed to be “Zale Marks”.

 

13

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“Zale Privacy Promise” means the document set out in Attachment F, as the same
may be revised from time to time in Zale’s sole discretion.

 

“Zale Property” has the meaning set out in Section 6.(b)(i).

 

“Zale Representative” has the meaning set out in Attachment A.

 

(b)                                 The division of this Agreement into Articles
and Sections, the insertion of headings, and the provision of any table of
contents are for convenience of reference only and will not affect the
construction or interpretation of this Agreement.

 

(c)                                  Unless the context requires otherwise,
words importing the singular include the plural and vice versa and words
importing gender include all genders.

 

(d)                                 Except as otherwise expressly provided in
this Agreement, all dollar amounts referred to in this Agreement are stated in
Canadian Dollars and any payment contemplated by this Agreement will be made by
EFT, cash, certified cheque or any other method that provides immediately
available funds.  If any payment is required to be made or other action is
required to be taken pursuant to this Agreement on a day which is not a Business
Day, then such payment or action will be made or taken on the next Business
Day.  In calculating interest payable under this Agreement for any period of
time, the first day of such period will be included and the last day of such
period will be excluded.

 

(e)                                  Any reference in this Agreement to any
statute or any section thereof will, unless otherwise expressly stated, be
deemed to be a reference to such statute or section as amended, restated or
re-enacted from time to time.

 

(f)                                    Unless the context requires otherwise,
references in this Agreement to Sections, Attachments or Schedules are to
Sections, Attachments or Schedules of this Agreement.

 

(g)                                 This Agreement is the product of
negotiations between the Parties and their respective attorneys, and no
provision will be construed for or against any Party by reason of ambiguity in
language, rules of construction against the draftsman, or similar doctrine.

 

(h)                                 The following Attachments are attached
hereto and incorporated by reference into and made part of this Agreement:

 

 

Attachment A

-

Operating Regulations

 

 

 

 

 

Attachment B

-

Merchant Fees and Revenue Sharing

 

 

 

 

 

Attachment C

-

MIS Reports

 

 

 

 

 

Attachment D

-

Service Level and Performance Standards

 

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Attachment E

-

Zale Marks

 

 

 

 

 

Attachment F

-

Zale Privacy Promise

 

 

 

 

 

Attachment G

-

Account Pricing and Payment Terms

 

 

 

 

 

Attachment H

-

Program Committee

 

 

 

 

 

Attachment I

-

Arbitration Procedures

 

 

 

 

 

Attachment J

-

Citigroup Information Security Standards

 

 

 

 

 

Attachment K

-

Form of Cardholder Agreement

 

 

 

 

 

Attachment L

-

Third Party Retailer List

 

 

 

 

 

Attachment M

-

Insurance Administrative Services Agreement

 

2.                                      Private Label Program Operations:

 

(a)                                  Existing Accounts, Credit Cards and
Settlement:  The Parties acknowledge and agree that all private label credit
card accounts, credit cards and cardholders that existed prior to the Effective
Date and were governed by the Prior Agreement will be treated for all purposes
as Accounts, Credit Cards and Cardholders and will be governed under this
Agreement as of the Effective Date.  Moreover, Citi Commerce agrees to make
Settlements to Zale for all Card Sales made by cardholders using such private
label credit card accounts and credit cards in accordance with the terms and
conditions hereof.

 

(b)                                 Establishment and Operation of Private Label
Program:

 

(i)                                     General:  During the Term of this
Agreement, Citi Commerce agrees to establish, operate and maintain the Private
Label Program, adjudicate Applications, issue Credit Cards, maintain the
Accounts, provide merchant acquiring and settlement services (including
Settlement) and related merchant services to Zale, and perform and comply with
all of its other obligations and covenants hereunder, all in accordance with the
terms and conditions of this Agreement, including (without limitation) the
Operating Regulations and the Service Level and Performance Standards.

 

Except as otherwise expressly provided in this Agreement, Citi Commerce will at
all times control, with appropriate input from Zale, all aspects of the
operation of the Private Label Program, including Account Issuance Criteria
standards and credit policy, (e.g., the decision whether or not to extend credit
for any Applicant for a Credit Card, and if so, the amount of credit to be
extended, and whether or not to continue or terminate any individual Account),
customer service operations, collections policy and operations, marketing
fulfillment operations, and accounting operations. 

 

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Except as otherwise provided in this Agreement, Citi Commerce will be the sole
and exclusive owner of all materials used in connection with the operation of
the Private Label Program.

 

(ii)                                  Opening Accounts:

 

(1)           Applications By Mail:  Applications that are received by Citi
Commerce through the mail and not made contemporaneously with a proposed Card
Sale will be reviewed and adjudicated by Citi Commerce in accordance with its
Account Issuance Criteria in effect from time to time (as solely determined by
Citi Commerce, acting reasonably), and in compliance with the Operating
Regulations and the Service Level and Performance Standards, and will be
approved or declined in accordance therewith.  In this regard, and subject to
the Privacy Laws, Citi Commerce will advise Zale in accordance with this
Agreement whether such Applications have been approved or declined.

 

(2)           Applications with Accompanying Proposed Card Sale:  Applications
telephoned to Citi Commerce, or otherwise electronically transmitted to Citi
Commerce, in accordance with the Operating Regulations in conjunction with a
proposed Card Sale will be reviewed and adjudicated by Citi Commerce in
accordance with its Account Issuance Criteria in effect from time to time (as
solely determined by Citi Commerce, acting reasonably), and in compliance with
the Operating Regulations and the Service Level and Performance Standards, and
will be approved or declined in accordance therewith.  In this regard, and
subject to the Privacy Laws, Citi Commerce will advise Zale in accordance with
this Agreement whether such Applications have been approved or declined.

 

(3)          Zale Obligations Regarding Applications:  Zale will perform the
following obligations in connection with a telephone, electronic or other
transmission of an Application to Citi Commerce for review and adjudication
under Section 2.(b)(ii)(2):

 

 

(I)

ensure that all Cardholder Information has been provided on the Application by
the Applicant,

 

 

 

 

(II)

provide to each Applicant a copy of any required disclosures that Citi Commerce
provides to Zale for distribution to Applicants,

 

 

 

 

(III)

obtain identification and verification of the individual Applicant in accordance
with the Operating Regulations,

 

16

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(IV)

provide a written acknowledgement, in the designated space on each Application,
that Zale has reviewed the items of personal identification required to be
produced by the Applicant pursuant to the Operating Regulations, such written
acknowledgement to include the initials and employee ID number of the Zale
employee who actually performed such review, provided, however, that failure to
do so, in and of itself, will not be a basis for any Chargeback,

 

 

 

 

(V)

obtain the Applicant’s signature in the designated space on each Application,

 

 

 

 

(VI)

whether such Application is approved or declined by Citi Commerce, retain the
original of each Application in the Stores in a secure manner for a designated
period of time, as mutually agreed to by Zale and Citi Commerce, and ship the
physical applications to Citi Commerce on a frequency that is mutually agreed to
by Zale and Citi Commerce, all at Zale’s sole cost and expense, and

 

 

 

 

(VII)

in the event that such Application is approved, enter any ensuing Card Sale into
the REPOS Service in accordance with Section 2.(b)(iv) (even though a Credit
Card may not be presented) and, if requested to do so by Citi Commerce, enter
the Application approval code provided by Citi Commerce to Zale into the REPOS
Service.

 

 

 

 

Any failure by Zale to comply with this Section 2.(b)(ii)(3) may result in a
Chargeback in accordance with Section 2(b)(xii).

 

(iii)          Issuance:  As of the Effective Date, and continuing throughout
the Term of this Agreement, Citi Commerce will offer and issue Credit Cards,
fund the Receivables and take or cause to be taken all actions necessary to
maintain and operate the Accounts and the Credit Cards in accordance with this
Agreement except for those actions required to be performed by Zale pursuant to
this Agreement.  Citi Commerce will own all Receivables generated under the
Accounts and all Related Account Rights in respect of the Accounts.  Beginning
as of the Effective Date, Citi Commerce will have the exclusive right during the
Term of this Agreement to issue within Canada private label credit cards hearing
any of the Zale Marks or other trade name, trade-mark, service mark and
associated trade dress licensed to or owned by Zale or TXDC, and used or
proposed to be used in connection with the sale of merchandise and/or services
by Zale to the public in Canada.

 

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(iv)                              Credit Card Acceptance and Related
Procedures:  As of the Effective Date, Zale will, subject to the terms and
conditions of this Agreement, accept each Credit Card or Account number (in the
event that a Credit Card has not yet been issued or is not otherwise available
for presentation) upon its presentation by a Cardholder as the method of payment
for a Transaction.  In doing so, Zale will comply with the following procedures:

 

 

(1)

comply with the procedures applicable to the acceptance and processing of the
Credit Card (or Account number, as the case may be) and the Transaction as a
Card Sale, as set out in this Section 2.(b)(iv) and the Operating Regulations,

 

 

 

 

(2)

obtain identification and verification of the Cardholder in accordance with the
Operating Regulations,

 

 

 

 

(3)

complete the Card Sale at a price or prices not in excess of the ticketed or
posted price(s) for the Authorized Goods and Services being purchased by the
Cardholder in the Transaction,

 

 

 

 

(4)

except as otherwise agreed by the Parties, not impose any fee or other charge
(except for any retailer administration fee disclosed by Zale to the Cardholder
at the time of any Card Sale and charged by it in connection with a deferred
interest and/or payment program) to the Cardholder for using their Credit Card
as the method of payment, for the Card Sale,

 

 

 

 

(5)

except as otherwise agreed by the Parties and when specifically disclosed to the
Cardholder as a minimum purchase amount established for special credit plans or
in connection with advertised merchandise offers, not require a minimum dollar
amount for the Card Sale from the Cardholder as a condition precedent to the
acceptance of the Credit Card as the method of payment for the Transaction by
the Cardholder,

 

 

 

 

(6)

use the REPOS Service for the purpose of processing the Transaction being
charged by the Cardholder with the Credit Card as a Card Sale, provided Zale is
able to access the REPOS Service at the time of processing, and

 

 

 

 

(7)

obtain Citi Commerce’s credit authorization for the dollar amount of each Card
Sale exceeding the Floor Limit which the Cardholder has charged with the Credit
Card, such authorization to be obtained by Zale in the manner prescribed by
Section 2.(b)(vii).

 

 

 

 

For greater certainty, Citi Commerce agrees that nothing set out in this
Section 2.(b)(iv) will preclude Zale from granting a discount, award or bonus
for payment in cash for any Authorized Goods and Services sold or performed in
any Transaction processed as a Card Sale, as long as such

 

18

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discount, award or bonus is clearly advertised in-Store or otherwise by or
through an Approved Sales Channel through which the Card Sale is made.

 

(v)                                 Terminal System Warranty:  Zale warrants to
Citi Commerce that the Magnetic Stripe Reading Terminal system used by each
Store has the capability of:

 

 

(1)

reading the magnetic stripe track 2 of a retail private label Credit Card,

 

 

 

 

(2)

performing data capture of the Credit Card account number, the Transaction data
and the Transaction amount in respect of any Card Sale,

 

 

 

 

(3)

validating the service code for three (3) numeric characteristics, and

 

 

 

 

(4)

validating the Credit Card account number and, if applicable, the expiry date of
the Credit Card.

 

(vi)                              Completion and Retention of Sales Drafts and
Return Vouchers:  In respect of any Transaction processed as a Card Sale or a
Return, Zale will complete a Sales Draft and/or a Return Voucher, as applicable,
provide one (1) copy thereof to the Cardholder, retain one (1) copy thereof, and
comply with the following requirements:

 

 

(1)

General Requirements: Each Sales Draft and/or Return Voucher must be legible and
fully completed with the information required under this Section 2.(b)(vi), as
applicable.

 

 

 

 

(2)

Mail/Telephone/Internet Transactions: For each Card Sale and/or Return effected
by mail, telephone or internet, Zale will record the following information on
the Sales Draft and/or Return Voucher:

 

 

 

 

 

(I)

the date on which the Card Sale and/or Return occurred,

 

 

 

 

 

 

(II)

the name and location (city and province) of the Cardholder to whom the bill for
the Card Sale and/or Return will be sent, unless otherwise provided to Citi
Commerce (e.g. batch reports, etc.),

 

 

 

 

 

 

(III)

a brief and itemized description of the Authorized Goods and Services to which
such Card Sale and/or Return relates,

 

 

 

 

 

 

(IV)

the total amount of the Card Sale and/or Return including a breakdown of the
price for the related Authorized Goods and Services and all applicable Taxes,

 

19

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(V)

the Cardholder’s Account number,

 

 

 

 

 

 

(VI)

the Authorization number (if any) provided by Citi Commerce,

 

 

 

 

 

 

(VII)

the shipping address (if applicable), and

 

 

 

 

 

 

(VIII)

the shipping date (if applicable).

 

(3)                                  In-Store Transactions:  For Card Sales
and/or Returns occurring in Stores, each Sales Draft and/or Return Voucher must
contain the same information required for Card Sales and Returns by mail,
telephone and internet (as specified in Section 2.(b)(vi)(2)), except that the
name and location of the Cardholder to whom the bill for the Card Sale or Return
will be sent and the shipping address and shipping date will not be required.  A
Sales Draft or Return Voucher (as the case may be) must be signed by a
Cardholder for each Store Card Sale or Store Return at the time such Card Sale
or Return (as the case may be) is made and in the presence of a Representative
of Zale.  For Card Sales and Returns to or by, as the case may be, the
individual representing himself to be the individual Cardholder named on the
Card, when the Card is physically presented to a Zale Representative, such
Representative must check to determine whether, in such Representative’s
judgment, the signature on the Sales Draft or Return Voucher (as the case may
be) is reasonably similar to the signature, if any, appearing on the signature
panel of the Credit Card.  After completion of the Card Sale or Return Voucher,
Zale will provide a legible and completed copy of the Sales Draft or Return
Voucher to the Cardholder.

 

(4)                                  Signature:  Except as otherwise provided in
the Operating Regulations, the Sales Draft or Return Voucher for each in-Store
transaction referenced in Section 2.(b)(vi)(3) must include the signature of the
Cardholder, and the Sales Draft or Return Voucher for each mail, telephone, and
internet transaction referenced in Section 2.(b)(vi)(2), must include the
signature of the Cardholder or a member of the Cardholder’s household (including
without limitation any domestic employee) accepting delivery.

 

(5)                                  Retention of Sales Drafts and Return
Vouchers:  Zale will retain the original of each Sales Draft and Return Voucher
for not less than two (2) years from the Transaction date printed on such Sales
Draft or Return Voucher.  Electronic signatures which comply with Applicable Law
shall be deemed to be signatures for all purposes of this sub-Section 2.(b)(vi).

 

20

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(vii)                           Floor Limit and Authorization Procedures:  If
the dollar amount of a Card Sale which a Cardholder wishes to charge with a
Credit Card exceeds the Floor Limit, Zale agrees that it will obtain Citi
Commerce’s prior Authorization for the dollar amount of the Card Sale, such
Authorization to be obtained as follows:

 

(1)                                  in the case of a Card Sale being processed
through access to the REPOS Service, Citi Commerce’s Authorization (whether
granted or declined) will, subject to Section 2.(b)(vii)(2), be provided
electronically through the REPOS Service, and

 

(2)                                  in the case of a Card Sale not being
processed through the REPOS Service by reason of the Approved Sales Channel not
being equipped with the REPOS Service or such Approved Sales Channel, being so
equipped, being unable to access such REPOS Service for such Card Sale
processing purposes or to receive Citi Commerce’s positive or negative
Authorization, Citi Commerce’s Authorization (whether granted or declined) will
be provided by a Representative of Zale telephoning, at no expense to Zale, Citi
Commerce’s Authorization Department at the number supplied by Citi Commerce to
Zale for that purpose in accordance with the Operating Regulations.

 

If Citi Commerce’s Authorization in respect of such Card Sales dollar amount is
granted pursuant to either of the foregoing Card Sale Authorization processing
methods, the Authorization number provided by Citi Commerce relative thereto
must appear on the Sales Draft for such Card Sale in the space reserved
therefor.  Zale (including its Approved Sales Channels) will not to reveal the
Floor Limit to any Cardholder at any time.

 

(viii)                        Settlement for Net Card Sales:

 

(1)                                  Except as otherwise expressly provided for
herein, Zale will submit all Transactions processed as Card Sales to Citi
Commerce for Settlement purposes through the REPOS Service.

 

(2)                                  Citi Commerce will not be obligated to make
a Settlement payment to Zale in respect of any Card Sale which is not submitted
to Citi Commerce through the REPOS Service within thirty (30) Business Days of
the date the Card Sale was incurred; or the date the Authorized Goods and
Services to which that Card Sale relates were delivered by Zale to, or performed
by Zale for, the Cardholder, whichever is later.

 

(3)                                  With respect to Card Sales processed by
Zale through the REPOS Service and received by Citi Commerce before 12:00hrs.
Eastern

 

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Time on any Business Day, Citi Commerce will initiate a Settlement payment to
Zale in the form an EFT credit to the Settlement Account in the amount of the
Settlement owing by 14:00hrs Eastern Time on the Business Day immediately
following the Business Day on which Citi Commerce received the related Sales
Data for those Card Sales.  Citi Commerce will make such payment by crediting
the Settlement Account with the amount of the Settlement owing (representing the
subject Business Day’s Net Card Sales) via such EFT.

 

With respect to Card Sales processed through the REPOS Service and received by
Citi Commerce after 12:00hrs. Eastern Time on any Business Day, Citi Commerce
will initiate a Settlement payment to Zale in the form of an EFT credit to the
Settlement Account in the amount of the Settlement owing by 14:00hrs. Eastern
Time on the second Business Day immediately following the Business Day on which
Citi Commerce received the related Sales Data for those Card Sales.  Citi
Commerce will make such payment by crediting the Settlement Account with the
amount of the Settlement owing (representing the subject Business Day’s Net Card
Sales) via such EFT.

 

Each EFT required to be made under this Agreement will be at Citi Commerce’s
sole cost and expense.

 

Neither Citi Commerce nor Zale will be liable to the other Party for any delays
in receipt of Settlement funds or errors in Settlement Account entries caused by
a third party not specifically engaged as a Contractor by either of Citi
Commerce or Zale to perform its obligations hereunder.

 

Except for a Card Sale, the amount of which Citi Commerce has properly made the
subject of a Chargeback to Zale pursuant to Section 2.(b)(xii), Zale will not
have any right to receive a Settlement payment in respect of any Card Sale from
any party except Citi Commerce unless and until the Card Sale has been assigned
by Citi Commerce to Zale pursuant to Section 2.(b)(xii).

 

(ix)           Payment of Merchant Fees:  Except as otherwise provided in this
Agreement, Citi Commerce will deduct from any Settlement payable to Zale under
Section 2.(b)(viii) any Merchant Fees that are payable in respect of the Net
Card Sales remitted during the period for which Settlement is being made.  Citi
Commerce will provide Zale with the details of each Merchant Fees deduction in
the form and within the time mutually agreed to by the Parties from time to
time.

 

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If any Settlement payment to be made to Zale by Citi Commerce under
Section 2.(b)(viii) is insufficient to cover the Merchant Fees payable by Zale
to Citi Commerce under this Section 2.(b)(ix), the deficiency will constitute a
debt of Zale to Citi Commerce that is due and payable on demand.  Without
restricting such other of its legal rights or remedies as may exist, Citi
Commerce may, upon notice to Zale, offset such deficiency against future
Settlement payments to be made by Citi Commerce to Zale under
Section 2.(b)(viii) or, in its discretion (acting reasonably), demand payment of
that debt.  For each demand made by Citi Commerce hereunder, Zale will repay
such debt to Citi Commerce within five (5) Business Days of the date such demand
is made; provided, however, that once such demand is made Citi Commerce may not
otherwise offset such debt against any future payments to Zale unless,
contemporaneously with such deduction and offset, it immediately credits the
invoice sent to Zale demanding such payment

 

Neither Citi Commerce nor Zale will be liable to the other Party for any delays
in receipt of funds or errors in account entries caused by a third party not
specifically engaged as a Contractor by either of Citi Commerce or Zale to
perform its obligations hereunder.

 

(x)                                   Revenue Sharing Payments:  Citi Commerce
will make the Revenue Sharing Payments due and owing to Zale via an EFT credit
to the Settlement Account at the rates and times prescribed by Attachment B.

 

(xi)           Cardholder Payments:  Zale, directly at its head office or at any
Store location, may from time to time accept payments (“In-Store Payments”) on
an Account, provided such acceptance is recorded and accounted for by Zale in
accordance with the applicable provisions of the Operating Regulations.  Zale
will notify Citi Commerce, in reasonable detail (including, without limitation,
the name and Account number of the Cardholder making an In-Store Payment and the
amount thereof) and by electronic transmission, of any In-Store Payments so
received within one (1) Business Day after receipt thereof, and Citi Commerce
may offset the amount of each such In-Store Payment from any Settlement amount
due to Zale on the Business Day immediately following Citi Commerce’s receipt of
such notice from Zale, and Zale will retain and become the rightful owner of
such In-Store Payment.  In connection therewith, Citi Commerce hereby
constitutes and appoints Zale and its Representatives, or any of them, as Citi
Commerce’s attorneys-in-fact for the limited purpose of accepting cash and
negotiating any and all other instruments received in connection with such
In-Store Payments, and hereby authorizes Zale and its Representatives, or any of
them, to take such action or actions as they, or any of them, may deem necessary
or appropriate in connection therewith.  To the extent any cheque or other
negotiable instrument is tendered and accepted as an In-Store Payment and is
dishonoured for any reason whatsoever, and Citi Commerce has offset the amount
thereof as

 

23

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provided herein, Citi Commerce will promptly pay or credit Zale with the amount
of such dishonoured cheque or other negotiable instrument, plus a recovery fee
of Twenty-Five Dollars ($25.00) per incident, in accordance with the provisions
of the Operating Regulations.

 

(xii)                             Chargeback Rights and Procedures:

 

(1)                                  To the extent (and only to the extent) that
a Chargeback condition specified in Attachment A has occurred, Citi Commerce may
process a Chargeback to Zale, in the form of an EFT debit to the Settlement
Account, for the amount of a Card Sale or an Account balance, or any disputed
portion thereof, to which the Chargeback relates, but only if and to the extent
Citi Commerce has suffered financial loss.  However, in no event will Citi
Commerce have the right to process any Chargeback more than twelve (12) months
after the Transaction date of the Card Sale giving rise to such Chargeback (plus
the period of any special credit plan applicable to such Card Sale that provides
for deferral of principal payments).

 

(2)                                  Except to the extent required by Applicable
Law, Citi Commerce will not process any Chargeback to Zale under this
Section 2.(b)(xii) based upon a Card Sale merchandise or billing dispute by a
Cardholder without first giving Zale written notice of such dispute.

 

(3)                                  Citi Commerce will, on a monthly basis,
provide Zale electronically with a chargeback report (the “Chargeback Report”),
in such format as is mutually agreed to by the Parties from time to time, of all
Chargebacks processed in the form of an EFT debit to the Settlement Account by
Citi Commerce under this Section 2.(b)(xii) during the immediately preceding
month (such Chargeback Report to specify in reasonable detail the name and
Account number of each Cardholder with respect to which such Chargeback is being
processed, the amount of such Chargeback, the reasons for such Chargeback, the
applicable Chargeback code prescribed therefor by Attachment A, and whether Citi
Commerce has previously paid Zale for the related Card Sale).

 

(4)                                  If Citi Commerce processes a Chargeback to
Zale under this Section 2.(b)(xii) and the disputed amount is subsequently paid
to Citi Commerce by the Cardholder, Citi Commerce will promptly, and in any
event within three (3) Business Days of Citi Commerce’s receipt of such payment
(in cleared funds), reimburse Zale for the amount so paid by Cardholder.

 

(5)                                  Zale will have the right to pursue and
collect any amount from a Cardholder to the extent Citi Commerce has processed a

 

24

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Chargeback to Zale under this Section 2.(b)(xii), and upon any such Chargeback
being so processed, Citi Commerce hereby automatically and without any further
action assigns to Zale all of Citi Commerce’s right, title and interest in, to
and under all such amounts which are the subject of a Chargeback hereunder and
constitutes and appoints Zale and its Representatives, or any one of them, as
its attorneys-in-fact for the limited purposes of collecting each and every such
amount, which payments and credits will be the sole property of and for the
benefit of Zale.

 

(6)                                  Chargeback amounts charged back to Zale by
Citi Commerce under this Section 2.(b)(xii) will not include any Citi
Commerce-imposed fees or finance charges, and will be increased or reduced, as
the case may be, by any amount previously charged or credited to Zale, as
Merchant Fees or other fees in respect of any amount included in a Chargeback. 
If Citi Commerce has previously paid to Zale the amount which was the subject of
the Chargeback, Zale will repay such amount to Citi Commerce.  All credits and
charges occurring since the end of the period covered by the last Chargeback
Report will be reflected in each Chargeback Report (except that the first
Chargeback Report will reflect Chargebacks since the Effective Date).

 

(7)                                  Citi Commerce is not required to pay Zale
for any Card Sale which is the subject of a Chargeback that Citi Commerce is
permitted to process to the Settlement Account under this Section 2.(b)(xii). 
If Citi Commerce has already paid Zale for such Card Sale, Zale will pay Citi
Commerce, within thirty (30) days after receipt of each Chargeback Report, the
full amount of the Chargebacks due to Citi Commerce as reflected in such
Chargeback Report, unless Zale disputes Citi Commerce’s right to make such
Chargeback.  If Zale disputes a Chargeback, it will so notify Citi Commerce of
such dispute and Citi Commerce and Zale will attempt to resolve such dispute in
accordance with the dispute resolution procedures set out in Section 12. 
Notwithstanding anything contained herein to the contrary, Chargebacks will not
be subject to offset against any Settlement amounts payable to Zale from time to
time under Section 2.(b)(viii).

 

(xiii)                          Document Retrievals:

 

(1)                                  Zale agrees to respond in a timely manner
to the requests of Citi Commerce for originals or copies of Applications, Sales
Drafts and Return Vouchers.  When Zale receives an initial request from Citi
Commerce, Zale will only be obligated, regardless of whether such request is for
an original or a copy, to provide Citi Commerce with a copy of the requested
Application, Sales Draft or Return

 

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Voucher, so long as Citi Commerce’s request occurs within the agreed-upon
document retention period specified in Section 2.(b)(ii)(3)(VI) for Applications
or in Section 2.(b)(vi)(5) for Sales Drafts and Return Vouchers.  If Citi
Commerce is subsequently required by the Cardholder to provide an original of
such Application, Sales Draft or Return Voucher, Citi Commerce will make a
subsequent request to Zale for the original and Zale will provide such original
to Citi Commerce, provided, once again, the subsequent request occurs within the
agreed-upon document retention period.

 

(2)           Citi Commerce will present all requests for originals or copies of
Applications, Sales Drafts or Return Vouchers in the format outlined in, and in
accordance with, the Operating Regulations.

 

(3)           At the time Zale provides Citi Commerce with an original or copy
of a Sales Draft, Zale will also provide Citi Commerce with the Authorization
number of the Card Sale if the Approved Sales Channel received verbal positive
Authorization for such Card Sale at the time it was incurred.

 

(4)           Citi Commerce will have full Chargeback recourse to Zale under
Section 2.(b)(xii) with respect to any Card Sale for which Zale does not supply
the original or copy of a Sales Draft within thirty (30) days of the request
therefor by Citi Commerce in accordance with this Section 2.(b)(xiii), unless
the Parties agree to an extension.

 

(5)           Citi Commerce will have full Chargeback recourse to Zale under
Section 2.(b)(xii) with respect to any Card Sale for which Zale does not supply
the original or copy of an Application to which the provisions of
Section 2.(b)(ii)(2) apply within thirty (30) days of the request therefor by
Citi Commerce in accordance with this Section 2.(b)(xiii), unless the Parties
agree to an extension.

 

(xiv)                         Cardholder Claims and Complaints:

 

(1)                                  Zale will deal with any and all Cardholder
Claims or complaints regarding Authorized Goods and Services purchased from Zale
pursuant to a Card Sale.  Citi Commerce is prohibited from dealing with any such
Cardholder Claim or complaint and will forthwith direct all such Cardholder
Claims and complaints to Zale.

 

(2)           Zale agrees that all Cardholder refund Claims and billing disputes
(including errors and/or omissions) respecting the underlying Transaction for
any Card Sale must be settled directly between Zale and the Cardholder;
provided, however, that if any refund or

 

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other monetary adjustment is properly payable by Zale to the Cardholder, such
refund or adjustment will be made by means of Zale issuing a Return Voucher in
respect thereto in the prescribed manner.

 

(c)                                  Ownership of Accounts, etc.:  Citi Commerce
will be the sole and exclusive owner of the Accounts and the Related Account
Rights, the Credit Cards, the Cardholder Agreements, the Receivables, the
Cardholder List and the Cardholder Information.  Citi Commerce and its
Affiliates will be entitled to utilize the Cardholder List and Cardholder
Information in connection with the operation of the Private Label Program, the
marketing of Ancillary Products and Services and products and services offered
by Citi Commerce’s Affiliates, and for such other purposes as may be authorized
pursuant to this Agreement.  Citi Commerce will include on the system record for
the Accounts a specific portfolio identifier, the purpose of which is to
identify the Accounts as being originated pursuant to the Private Label
Program.  The system record identifier for the Accounts originated pursuant to
the Private Label Program will be different from the system record identifier
used by Citi Commerce for any other credit cards, plans or programs that it owns
or operates during the term of this Agreement.  During the Term of this
Agreement, Citi Commerce will not sell, lease, transfer or otherwise dispose of
all or any part of the Accounts or the Related Account Rights, the Cardholder
Agreements, the Receivables, the Cardholder List or the Cardholder Information
or any interest therein; provided, however, that Citi Commerce may:

 

(i)            subject to Applicable Law, securitize all or a portion of the
Accounts (including all Cardholder Information in respect thereto) and their
Related Account Rights and Receivables at any time, and

 

(ii)           sell charged-off Accounts (including all Cardholder Information
in respect thereto) and their Related Account Rights and Receivables in the
ordinary course of its collection strategies and otherwise in accordance with
its credit policies as in effect from time to time.

 

During the Term of this Agreement, Zale will not use or permit any of its
Affiliates to use, or authorize any third party to use, the Cardholder List or
any Cardholder Information for any purpose without the prior written consent of
Citi Commerce (such consent not to be unreasonably withheld or delayed), such
use to be made (if at all) subject to and in compliance with the Privacy Laws.

 

Zale will be the sole and exclusive owner of all Zale Customer Information at
all times and, subject to the Privacy Laws, may use the same for Private Label
Program marketing and promotion under Section 3.

 

(d)                                 Credit Card Terms:  The Pricing and payment
terms to be offered by Citi Commerce on Accounts as of the Effective Date are
set out in Attachment G.  Citi Commerce will have the sole authority, with
reasonable input from Zale, to determine and modify from time to time the
Pricing and payment terms of the

 

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Accounts and Cardholder Agreements, including interest rates, service fees and
other charges, expiration date, revolving terms (if any), balance and finance
charge calculations, minimum payment requirements, payment dates, grace periods
(if any), and credit limits.  Zale will have sole authority, within Applicable
Law and with reasonable input from Citi Commerce, to determine and modify, from
time to time, any administration fee charged at the point of sale and evidenced
on a Sales Draft to a Cardholder related to a credit plan.

 

Citi Commerce will provide not less than sixty (60) days prior written notice to
Zale of any proposed changes to the Pricing and payment terms of the Cardholder
Agreements.  The Parties agree that a shorter written notice period may apply to
a proposed change to the Pricing and payment terms of the Cardholder Agreements
if required by Applicable Law.  Moreover, notwithstanding any other provision
hereof to the contrary, the parties agree that during the Term of this
Agreement, the Pricing and payment terms hereunder will not competitively
disadvantage Zale as to the pricing and payment terms offered by a majority of
specialty jewellery retailers and department stores as outlined in Attachment
L.  The identified retailers outlined in Attachment L are subject to change,
from time to time, as mutually agreed upon by the parties and the agreed upon
list in Attachment L is not to exceed seven (7) retailers.

 

The Parties agree that, subject to Zale’s prior written approval (such approval
not to be unreasonably withheld or delayed), cash advance services on Accounts
may be offered to Cardholders in the future.  If the Parties agree to offer cash
advance services to Cardholders (and Zale has approved the same), the credit
line assignment on an Account will include a separate credit limit for Card
Sales and cash advances.

 

(e)                                  Credit Card Plastics:  Citi Commerce will
be responsible for the printing and distribution of card plastics for Credit
Cards (including the issuance of replacement or renewal card plastics in the
ordinary course of the operation of the Private Label Program) and for all costs
and expenses related thereto.  Citi Commerce will be responsible for determining
any necessary legal disclosures that should appear on the card plastic for
Credit Cards and the technical specifications for the card plastic (including
size and magnetic stripe requirements), it being understood that such technical
specifications must be consistent with Zale’s point-of-sale network
requirements.  The card plastic design will be subject to the prior review and
approval of Zale, which approval will not be unreasonably withheld or delayed. 
In the event that Zale notifies Citi Commerce in writing of its desire to
(i) change the Brand identity or design of the card plastic from the Brand
identity or design approved by Zale and used by Citi Commerce as of the
Effective Date, or (ii) add a Brand to the Private Label Program, Citi Commerce
agrees to use commercially reasonable efforts to begin to issue the
re-Branded/redesigned/new cards with such new Brand identity or redesign within
three (3) months following receipt of such written notice, which notice will be
accompanied by camera-ready artwork and design specifications.  In the event
that the new Brand or re-Branded/redesigned plastics are to be

 

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utilized for a re-issue to existing cardholders, Citi Commerce agrees to use its
commercially reasonable efforts to re-issue the re-Branded/redesigned cards with
such new Brand identity or redesign within six (6) months, following receipt of
such written notice, which notice will be accompanied by camera-ready artwork
and design specifications.  The design of the re-Branded/redesigned card plastic
will be subject to approval of Citi Commerce, which approval will not be
unreasonably withheld or delayed.  Zale will be responsible for all costs and
expenses associated with the design, printing and distribution of the
new/re-Branded/redesigned Credit Cards pursuant to this Section 2.(e) (other
than the issuance by Citi Commerce of replacement or renewal card plastics in
the ordinary course of the operation of the Private Label Program).

 

Notwithstanding the foregoing, all costs and expenses to issue or re-issue card
plastics for Credit Cards that would be incurred as part of a marketing
initiative under the Private Label Program will be subject to separate financial
analytics to support the financial contribution each Party is willing to make to
such re-issuance.  Each Party will share the key assumptions of its analysis
with the other Party.

 

(f)                                    Credit Criteria and Review:  Subject to
the terms and conditions of this Agreement, Citi Commerce will receive
Applications for Card Accounts and approve or decline Accounts in accordance
with its prevailing Account Issuance Criteria.

 

Citi Commerce, in its sole discretion and acting reasonably, will make fair and
impartial decisions on the adjudication of Applications and the management of
credit lines based on defined lending criteria, to minimize the risk to the
Receivables and to acquire and maintain customers for Zale and Citi Commerce. 
Credit policies and business practices of Citi Commerce must comply with both
Canadian federal and provincial/territorial legislation.  Citi Commerce may make
changes to the lending criteria from time to time as Citi Commerce reasonably
deems necessary, and such changes will not require the approval of Zale;
provided however, that Citi Commerce will give Zale at least thirty (30) days
notice of any such change that is a material change.  Citi Commerce will
decision each Application in accordance with the terms hereof (including the
Service Level and Performance Standards) as set out in Section 5.(b) of this
Agreement.

 

(g)                                 Customer Satisfaction:  At all times during
the Term of this Agreement, Citi Commerce will maintain or provide for the
necessary telephone lines, computer and equipment capacity, application software
and adequately trained staff necessary to provide service to Cardholders and new
Account applicants, all in accordance with the Operating Regulations and the
Service Level and Performance Standards.

 

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(h)                                 Privacy:  During the Term of this Agreement:

 

(i)            Each of the Parties agrees to comply with its own privacy
policies and guidelines, the Privacy Laws and this Section 2.(h).  Each Party
will use all personal information, within the meaning of the Privacy Laws, about
Applicants and Cardholders collected or received by it from the other Party or
handled or processed by it on behalf of the other Party under this Agreement
(hereinafter referred to as “Personal Information”) only for the purposes
authorized in this Agreement, and will not, for any reason, use the Personal
Information for other, or its own purposes.  Each Party will have the right, on
reasonable notice, to audit or review the other Party’s processes and procedures
to ensure that Personal Information is not being collected, used or disclosed in
an unauthorized manner, and that the provisions of this Agreement are being
fully complied with.

 

(ii)           Each Party will ensure that all Personal Information collected,
received, handled or processed by it under this Agreement, irrespective of the
format in which it is contained, is protected by security safeguards appropriate
to the sensitivity, amount, distribution, format and method of storage of that
Personal Information, in accordance with all applicable federal and provincial
legislation relating to privacy of information, including but not limited to the
Privacy Laws.

 

(iii)          Each Party acknowledges that it will, or has implemented policies
and procedures with respect to its own collection, use, disclosure, retention
and destruction of any Personal Information, and agrees, for the purposes of
this Agreement, to comply with such policies and procedures, as they may be
developed and revised from time to time.  Further, each Party agrees to protect,
and not disclose, the other Party’s Personal Information with procedures and
security safeguards which provide at least the same level of protection as
afforded by that Party with respect to the same or similar use of its most
sensitive Personal Information.  Each Party agrees that, from time to time, it
will review its procedures and security safeguards, through risk assessments,
benchmarking or other means, to determine whether they are still consistent with
applicable privacy legislation, appropriate to the risks, and consistent with
best practices, and if not, agrees to revise same as required.  Each Party
agrees to provide not less than thirty (30) days advance written notice to the
other Party of any change that may be required, and the Parties must mutually
agree to the change prior to its implementation.  However, in the case of a
change that is a regulatory mandated change, each Party must provide written
notice of the change to the other Party as promptly as possible before its
implementation.

 

(iv)          Depending on the determination of the sensitivity of Personal
Information, each Party will implement appropriate methods of protection for
that Personal Information, including, if applicable, physical measures (such as
locked cabinets and restricted office access), organizational measures (such as
use of non-disclosure agreements, security clearances, limiting

 

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access on a “need to know” basis), and technological measures (such as use of
passwords and encryption).  In addition, each Party will ensure that appropriate
disaster recovery and back-up plans and procedures are in place with respect to
Personal Information in its possession.

 

(v)                                 Each Party will ensure that the Personal
Information collected, handled, or processed by it under this Agreement is as
accurate, complete and up-to-date as is reasonably necessary for the purposes
for which it is to be used, and can be retrieved upon request within a
reasonable period of time.

 

(vi)                              In the event that either Party receives a
request from an individual for access to, or information about their Personal
Information, or a complaint about how their Personal Information has been
handled, and such Personal Information is in the possession of the other Party,
such other Party will retrieve within a reasonable period of time any and all of
such Personal Information and provide it, along with any further assistance
required, to the other Party or the individual requestor, at all times acting in
accordance with the applicable Privacy Laws.

 

(vii)         The Parties acknowledge and agree that injunctive relief will be
available at any time in the event of any misuse of Personal Information by a
Party, or the breach of confidentiality and privacy obligations set out in this
Agreement.  In no event will any dispute between the Parties hereto, including
with respect to fees and payment thereof, allow either Party to deny access to,
or retain custody of Personal Information.

 

(viii)        If either Party becomes aware of any breach of confidentiality and
privacy relating to the Personal Information it has collected from, or on behalf
of the other Party, it will, within forty-eight (48) hours of discovering the
breach, notify the other Party’s designated Privacy Officer (the “Privacy
Officer”) of same.

 

(ix)           Upon expiry or earlier termination of this Agreement, each Party
will promptly return to the other Party all Personal Information collected from,
or on behalf of, the other Party still in its possession, or destroy same, in
accordance with the other Party’s express instructions.  Except as otherwise
provided for in this Agreement and the Privacy Laws, no Party will retain any
Personal Information after the expiry or termination of this Agreement.

 

(x)            Each Party will indemnify and hold harmless the other Party
against any and all Claims, penalties, damages or costs of any kind (including,
without limitation, legal fees on a solicitor-client basis) incurred by or
assessed against it as a result of the other Party’s collecting, handling or
processing of Personal Information in contravention of the provisions of this
Agreement.

 

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x

(i)            Zale Privacy Promise:  Zale has made a formal privacy promise to
its customers regarding the use of personal information about those customers. 
A copy of that formal privacy promise is attached as Attachment F.  Citi
Commerce has reviewed the Zale Privacy Promise and will not take any action that
would result in Zale being in violation of Section 2.(h).

 

(j)            MIS Reporting:  Citi Commerce will provide the management
information reports listed in Attachment C to Zale, all in the format mutually
agreed to by the Parties from time to time and with the frequency prescribed by
Attachment C.

 

3.                                      Private Label Program Marketing:

 

(a)                                  New Account Acquisition and Cardholder
Development:

 

(i)                                     Marketing Plans:  Citi Commerce and Zale
will meet on a periodic basis to review the marketing plan for New Account
Acquisition and Cardholder Development.

 

(ii)                                  Implementation of Marketing Plans:  Citi
Commerce and Zale will be responsible for implementation of the marketing plans
and may contract with one or more third parties in connection with the
implementation of such plans.  Citi Commerce will control, with reasonable input
from Zale, the design and production of all materials (including all
Solicitation, telemarketing scripts and fulfillment materials) for New Account
Acquisition marketing and Cardholder Development; provided that such materials
that include any of the Zale Marks will be presented to Zale for its review and
approval pursuant to Section 9.(b).  Zale agrees to cooperate with Citi Commerce
to provide reasonable access to relevant data and information, if any,
maintained by Zale that may be of assistance to Citi Commerce in connection with
the development and implementation of New Account Acquisition plans; provided
that any such access will be subject to such limitations, restrictions and
prohibitions as may be imposed by contracts by which Zale is bound and/or by
Applicable Law.

 

(b)                                 In-bound Telephone Calls:  Citi Commerce
will maintain at its cost and expense a toll-free telephone number for purposes
of accepting in-bound telephone and Approved Sales Channels in-store
Applications for Credit Cards.

 

(c)                                  Account Statements and Account Statement
Messages:  Citi Commerce will control (with reasonable input from Zale) the
form, format, design and content, including any legally required (as determined
by Citi Commerce) disclosures or descriptions, of the Cardholder Account
statements.  All Account statement marketing or promotional messages that
include any of the Zale Marks will be provided to Zale for its review and
approval pursuant to Section 9.(b).  Citi Commerce will be entitled to include
any of the Zale Marks on the Cardholder Account statement messages to individual
Cardholders for operational purposes,

 

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Cardholder Development purposes, Ancillary Products and Services purposes or any
other Private Label Program-related purpose.

 

(d)                                 Account Statement Inserts:  Subject to the
requirements of this Section 3.(d), Zale will be periodically entitled to
include Account statement inserts in Cardholder Account statements from time to
time during the Term of this Agreement for purposes of promotions associated
with Authorized Goods and Services or its Brand image, the timing and frequency
of such Account statement insert inclusions to be mutually determined and agreed
to by the Parties from time to time.

 

Zale will be responsible for all costs and expenses related to the development
and printing of inserts, and delivery of such Account statement inserts to the
location designated by Citi Commerce at least ten (10) Business Days prior to
the scheduled insertion date.  All proposed inserts must comply with Citi
Commerce’s standard insert specifications (including but not limited to
specifications relating to size and weight) which may be modified from time to
time by Citi Commerce in its sole discretion; provided, however, that Citi
Commerce will provide Zale with not less than ninety (90) days advance written
notice of any change in the specifications.  Citi Commerce will control, with
reasonable input from Zale, the priority and timing of any proposed statement
insert, it being understood that any inserts of legal notices or information (as
reasonably determined by Citi Commerce) will have priority over any Zale
insert.  Zale will notify Citi Commerce not less than thirty (30) days prior to
the calendar month it desires to include any statement inserts in the upcoming
calendar quarter.  Except as expressly stated in this Agreement, Citi Commerce
will control, with reasonable input from Zale, all statement inserts and
ancillary materials included in Cardholder account statements.  Citi Commerce
will provide to Zale on a monthly basis a copy of all inserts included in
Cardholders account statements for the preceding month.

 

(e)                                  Take-One Applications:  Citi Commerce will
control (with reasonable input from Zale) the form, format, design and content,
including any legally required (as determined by Citi Commerce) disclosures or
descriptions, of the take-one Applications; provided that take-one Applications
that include any of the Zale Marks will be provided to Zale for its review and
approval pursuant to Section 9.(b).  Citi Commerce will be responsible for all
costs and expenses of printing take-one Applications and delivering such
take-one Applications to Store locations; provided, however, that in the event
that Zale requests that Citi Commerce reprint take-one Applications in
connection with any new Brand image or redesign (other than in connection with a
normal reprinting and resupply by Citi Commerce), Zale will be responsible for
all such printing and delivery costs and expenses.  All costs and expenses of
printing and distributing such take-one Applications must be agreed to by the
Parties before such costs and expenses are incurred.

 

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(f)            In-Store Promotions:  Zale will use commercially reasonable
efforts to market and promote the Private Label Program and the use of Credit
Cards through point-of-sale promotions at or through Approved Sales Channels. 
In this regard, Zale agrees to reasonably cooperate with Citi Commerce in
connection with the development of customary in-store and point-of-sale
promotional materials (including but not limited to counter displays and tent
cards, in-store banners, store signage, etc.).  Such promotional materials will
be deemed to be Zale Branded Materials and will be subject to review and
approval by Zale pursuant to Section 9.(b).  All costs and expenses of printing
and distributing such customary in-store and point-of-sale promotional materials
must be agreed to by the Parties before such costs and expenses are incurred.

 

(g)                                 Zale Marketing Initiatives:  In the event
that Zale desires to market Authorized Goods and Services to Cardholders using
the Cardholder List, Citi Commerce will not unreasonably withhold its consent
for such products and services and will cooperate with Zale to implement and
administer, either directly or indirectly through a third party selected by Citi
Commerce for this purpose, such marketing initiatives on behalf of Zale, subject
to the following:

 

(i)                                     Zale will be responsible for all costs
and expenses (including Citi Commerce’s internal costs and expenses) relating to
Citi Commerce’s cooperation, implementation and administration of such Zale
marketing initiatives,

 

(ii)           such marketing initiatives will be limited to not more than one
(1) per calendar quarter except for the fourth calendar quarter in which Zale
will have the right to undertake up to two (2) such marketing initiatives.  All
materials related to a Zale marketing initiative pursuant to this
Section 3.(g) will be subject to the review and approval of Citi Commerce
pursuant to Section 9.(c), and

 

(iii)          Zale will use the applicable forms of required disclosures
provided by Citi Commerce to Zale if Zale includes a reference to any special
financing plans offered by Citi Commerce in advertisements of Authorized Goods
and Services by Zale to Cardholders and the general public in Canada.

 

(h)                                 Ancillary Products and Services:  Citi
Commerce and its Affiliates will have the exclusive right to market Ancillary
Products and Services to Cardholders using the Cardholder List.  Citi Commerce
and its Affiliates will have exclusive control over the development of marketing
plans for Ancillary Products and Services, the creation, development and
production of all promotional materials for Ancillary Products and Services, and
the distribution and frequency of such marketing efforts.  Any solicitation of a
Cardholder for an Ancillary Product or Service that includes any of the Zale
Marks, will be provided to Zale for its review and approval pursuant to
Section 9.(b).  Citi Commerce will obtain the approval of Zale for any plan or
marketing materials related to the offering of Ancillary Products and Services,
such approval not to be unreasonably withheld or delayed. 

 

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All costs and expenses related to the marketing of Ancillary Products and
Services will be borne by Citi Commerce and its Affiliates.

 

(i)                                     Marketing of Credit Insurance:  During
the term of this Agreement and subject to the Privacy Laws, Zale will have the
exclusive right to market Credit Insurance to Applicants, using Citi Commerce’s
standard form of Application for that purpose.  All text about Credit Insurance
to be included on Citi Commerce’s standard form of Application (or in any other
Zale solicitations or other marketing materials referenced in Section 9.(c))
must comply with Applicable Law and is subject to the prior written approval of
Citi Commerce, such approval not to be unreasonably withheld or delayed.

 

Zale agrees that Citi Commerce will deduct and retain a fee equal to the
mutually agreed to percentage of the net billed premium earned on the sale of
Credit Insurance to Cardholders under this Agreement, as set out in the
Insurance Administrative Services Agreement in Attachment M.  In doing so, it is
understood and agreed by the parties that no Merchant Fees will apply to
insurance premiums on Credit Insurance charged to Accounts under this Agreement.

 

(j)                                     Prohibition on Marketing Other Cards: 
During the term of this Agreement, Zale will not, without the prior written
approval of Citi Commerce, issue, market, promote or offer within Canada any
general purpose or private label credit card (excepting Credit Cards) or any
consumer financing plan, and will not enter into any agreement or arrangement
with any Affiliate or third party that provides for the issuance, marketing,
promotion or offering within Canada of any general purpose or private label
credit card or any consumer financing plan; provided, however, that nothing in
this Section 3.(j) or any other provision of this Agreement will prohibit Zale
from:

 

·                                          accepting any payment method (e.g.
American Express, Diners Club/enRoute, Interac Direct Payment, MasterCard,
NOVUS/Discover or VISA) in payment for Authorized Goods and Services,

 

·              displaying at any point of purchase signs or decals indicating
the types of payment accepted at that location, and

 

·                                          participating in a Second Look
Program with another Person, as permitted by Section 5.(c).

 

(k)                                  Ownership and Marketing Materials:  Citi
Commerce will be the sole and exclusive owner of all designs, graphic layouts
and materials developed by Citi Commerce in connection with all of the marketing
and promotional activities contemplated pursuant to this Section 3.; provided,
however, that Zale will be the sole and exclusive owner of any card plastic
design, including all copyrights to the card plastic design, all Account
statement messages and Account statement inserts developed by it pursuant to
Section 3.(c) and Section 3.(d), all materials

 

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used in connection with Zale marketing initiatives pursuant to Section 3.(g),
and all Zale Marks.  In the event that Zale develops a unique or original
marketing idea or process associated with the marketing of Credit Cards, Zale,
in its sole discretion, may offer Citi Commerce a license to use such marketing
idea or process.

 

(l)                                     Inactive Accounts:  Citi Commerce will
not purge any Account from its operating system because of lack of debit or
credit activity, excepting any such Account which has not had any debit or
credit activity for a period of at least thirty-six (36) consecutive months, or
such other period as may be agreed to by the Parties.

 

4.                                      Client Relationship Team and Program
Committee:

 

(a)                                  Client Relationship Team:

 

(i)                                     Structure:  The ongoing operations of
the Private Label Program will be subject to the continuing review of a client
relationship team (the “Client Relationship Team”).  The Client Relationship
Team will consist of Representatives of both Zale and Citi Commerce.  Each of
Citi Commerce and Zale will be entitled to remove one or more of its
Representatives and appoint substitute Representatives at any time and from time
to time during the Term hereof upon written notice to the other Party.

 

(ii)                                  General Responsibility:  The Client
Relationship Team will be the principal management interface between the Parties
with respect to the day-to-day operations of the Private Label Program.  The
Client Relationship Team will cooperate and work together to expeditiously
resolve problems which arise from time to time in connection with the
implementation and operation of the Private Label Program and to facilitate the
exchange of information between Citi Commerce and Zale.  Responsibilities of the
Client Relationship Team will include, without limitation, approving annual
business plans and goals for operating performance, monitoring actual operating
results against milestones and expectations, dealing with day-to-day operational
matters that arise in connection with the Private Label Program, reviewing and
approving Material Changes to the Private Label Program proposed by Citi
Commerce, identifying market trends and analyzing the implications thereof for
the Private Label Program, and sponsoring Private Label Program improvement
opportunities.  Citi Commerce agrees that, upon Zale’s reasonable request and
subject to the Privacy Laws, it will provide three (3) of Zale’s Client
Relationship Team members with read-only online access to Citi Commerce’s
Cardholder records and that, to the full extent permitted by Applicable Law,
Citi Commerce will disclose any or all of such Cardholder records to such
designated members for reasons of Account dispute resolution, issues regarding
Returns and Chargebacks, Party disputes and similar purposes.

 

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(iii)                               Specific Duties:  Citi Commerce agrees that
it will not make any Material Change without giving the Client Relationship Team
prior notice of such change at such time and in such manner as to allow the
Client Relationship Team an opportunity to discuss the proposed Material Change
and its likely implications, and to secure the approval or disapproval, as the
case may be, of the Client Relationship Team in connection therewith.  Without
limiting the generality of any of the foregoing, in addition to the
responsibilities provided herein, the Client Relationship Team will serve as the
forum in which Zale and Citi Commerce will at the appropriate time, or from time
to time, as the case may be:

 

(1)           review and approve New Account Acquisition and Cardholder
Development plans proposed by Citi Commerce and/or Zale and any marketing plans
and related implementation schedules as developed by Zale;

 

(2)                                  review and approve any proposal concerning
special inserts, messages or letters to be included in Account statements to the
extent such proposal is required to be approved by the Client Relationship Team
as provided herein;

 

(3)                                  discuss and approve any proposals for new
Card products;

 

(4)           discuss and approve or disapprove, as the case may be, any
Material Changes proposed by Citi Commerce and/or Zale;

 

(5)           discuss issues related to processing and servicing the Accounts,
Cardholders and Approved Sales Channels;

 

(6)           discuss and recommend actions to achieve improvement in the
effectiveness and efficiency of Private Label Program operations;

 

(7)           discuss plans for major systems changes which are not also
Material Changes affecting the Private Label Program and recommend action as
needed;

 

(8)                                  manage priorities and approve the
implementation of any systems interface between Zale and Citi Commerce or
designees of either Party;

 

(9)                                  determine Card specifications, including
size, type of plastic, encoding and magnetic stripe;

 

(10)         discuss and develop proposals for new credit plans and other
proposals and programs to maximize Card Sales;

 

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(11)         discuss and approve language and terms related to the Private Label
Program, use of the Cards to purchase Authorized Goods and Services, and any
terms and conditions to be included in Zale print, televised or other
advertisements and catalogues governing or inviting purchases of, as the case
may be, Authorized Goods and Services;

 

(12)         discuss such other marketing and operational matters in respect of
the Private Label Program as are deemed appropriate by the Client Relationship
Team or the Parties hereto;

 

(13)         discuss unsatisfactory performance relative to the Private Label
Program and develop plans and proposals to address such unsatisfactory
performance;

 

(14)                            discuss and approve any changes to Settlement or
reconciliation files; and

 

(15)                            conduct periodic portfolio performance reviews.

 

(iv)                              Operational Oversight; Meetings; Voting and
Records:

 

(1)           The Client Relationship Team members will interface regularly as
may be necessary or appropriate to achieve the purposes set forth above, and
will work closely on all operational matters pertaining to the Private Label
Program.

 

(2)                                  Each of Zale and Citi Commerce will be
entitled to one vote with respect to all matters to be voted upon by the Client
Relationship Team, regardless of the number of members each Party has
representing it on the Client Relationship Team.  Any one of the representatives
of Zale and Citi Commerce may cast the vote allocated to Zale or Citi Commerce,
as the case may be, in the manner determined by such Representatives.  Any
matter requiring approval of the Client Relationship Team will require the
affirmative vote of both Zale and Citi Commerce, and failure to gain the
affirmative vote of each Party will constitute disapproval of such matter.  Upon
any such disapproval, either Party may reintroduce such matter, with such
modification or amendment deemed appropriate by such Party in its reasonable
discretion.  If such matter is once again disapproved, at the option of the
introducing Party, it will become a Dispute to be resolved by the Program
Committee in accordance with Section 4.(b)(ii).

 

(b)                                 Program Committee:

 

(i)                                     Structure:  For the purpose of
periodically reviewing the Private Label Program and resolving any claim,
controversy or dispute between Citi

 

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Commerce and Zale arising out of relating to, or in connection with this
Agreement or the agreements and transactions contemplated hereby, including the
interpretation, validity, termination or breach of this Agreement and any
deadlock of the Client Relationship Team (any such claim, controversy or dispute
hereinafter called a “Dispute”), Citi Commerce and Zale will establish and
maintain a Program Committee (the “Program Committee”).  The Program Committee
will consist of an equal number of senior management Representatives of both
Zale and Citi Commerce.  The Program Committee will establish the number of
Representatives to be appointed to the Program Committee from time to time;
provided, however, that each of Citi Commerce and Zale will always have an equal
number of Representatives.  The initial number of such Representatives for each
of Zale and Citi Commerce will be three (3), and the initial members of the
Program Committee will be those individuals occupying the positions listed in
Attachment H.  Each of Zale and Citi Commerce will be entitled to remove one or
more of its Representatives and appoint substitute Representatives at any time
and from time to time during the term hereof upon written notice to the other
Party.

 

(ii)                                  Program Committee Meetings:  The Program
Committee will meet (in person or by telephone or video conference) at such
times and places as may be decided by the members of the Program Committee;
provided, however, that the Program Committee will meet (1) unless otherwise
agreed by the Parties, at least semi-annually to discuss the status of the
Private Label Program; (2) within five (5) days after either Party notifies the
other Party of a Dispute; and (3) as often as may be reasonably necessary to
gather information with respect to the matter which is the subject of any such
Dispute and which is appropriate and germane to its resolution.  The Program
Committee will discuss each such Dispute and negotiate in good faith in an
effort to resolve such Dispute as promptly and efficiently as reasonably
possible.  The members of the Program Committee will appoint an acting chairman
and adopt such other rules to facilitate the conduct of meetings as are agreed
to by the members from time to time.  Each of Zale and Citi Commerce will be
entitled to one vote with respect to all matters to be voted upon by the Program
Committee.  Any one of the Representatives of Zale and Citi Commerce may cast
the vote allocated to Zale or Citi Commerce, as the case may be, in the manner
determined by such Representatives.  The presence of a Representative of both
Zale and Citi Commerce who is authorized to vote will constitute a quorum for
meetings of the Program Committee.  Any matter requiring approval of the Program
Committee will require the affirmative vote of both Zale and Citi Commerce, and
failure to gain the affirmative vote of each Party will constitute disapproval
of such matter (a “Disapproved Matter”).  The Program Committee will keep a
written record of its proceedings, which record will be reviewed and approved by
one Representative of each of Zale and Citi Commerce designated by the
respective Parties for such purpose.

 

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(iii)          Unresolved Disputes and Disapproved Matters:  Any Dispute that
cannot be resolved by the Program Committee, and each Disapproved Matter, will
be resolved in accordance with the dispute resolution procedures prescribed by
Section 12.

 

5.                                      Operating Regulations; Service Level and
Performance Standards; Second Look Program; 40% Down Payment Program:

 

(a)                                  Operating Regulations:  Citi Commerce and
Zale have established certain operating procedures setting out in greater detail
the technical standards, obligations and responsibilities of Citi Commerce and
Zale with respect to Card Sale Authorization, sales data capture, processing and
routing system requirements, Application, Sales Draft and Return Voucher
retrievals and Chargeback procedures, such operating procedures being set out in
Attachment A.  The Parties will maintain and perform their obligations under
this Agreement in compliance with the Operating Regulations.

 

Citi Commerce reserves the right to amend the Operating Regulations from time to
time during the Term of this Agreement, but no such amendment will be binding on
Zale until the amendment (including its effective date) has been approved by the
Program Committee.  However, in the case of an amendment to the Operating
Regulations that is a regulatory mandated change, the Program Committee will
work to implement such change within the mandated timeframe.  Zale will receive
written notice of the amendment as promptly as practicable before its
implementation.

 

(b)                                 Service Level and Performance Standards: 
Except as may otherwise be expressly provided in this Agreement, Citi Commerce
will maintain and perform its obligations in compliance with the Service Level
and Performance Standards in respect of the Private Label Program in accordance
with Attachment D throughout the Term of this Agreement.  The performance of
Citi Commerce against the Service Level and Performance Standards will be
reported by Citi Commerce to Zale on a monthly basis (no later than 30 days
after the end of each month provided the data is available) during the Term of
this Agreement.  The Service Level Standards may, from time to time, be revised
upon the mutual agreement of the Parties.

 

(c)                                  Second Look Program:  At any time during
the Term of this Agreement, Zale may request in writing that Citi Commerce work
with Zale to develop one or more `Second Look Programs’ (each a “Second Look
Program”) which are designed to offer credit services to certain Applicants who
do not otherwise qualify for the issuance of an Account under Citi Commerce’s
then current Account Issuance Criteria.  In such event, Citi Commerce will use
good faith efforts to develop and present to Zale, no later than ninety (90)
days after the date of any such request, an initial draft of the Second Look
Program; provided that this provision will not be deemed to create any
obligation on the part of Citi Commerce or Zale to implement such a Second Look
Program.  If, after the expiration of any such 90-day

 

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period Citi Commerce notifies Zale that Citi Commerce cannot or will not develop
a Second Look Program, or Zale and Citi Commerce attempt to negotiate the terms
and conditions of such a Second Look Program but are unable to do so within a
reasonable period of time (not to exceed 45 days after presentation of a
proposed Second Look Program by Citi Commerce to Zale), then Zale will be free
to negotiate and enter into a Second Look Program with any other Person.

 

Notwithstanding the foregoing, if Zale proposes to enter into a Second Look
Program with a Person other than Citi Commerce, Zale will notify Citi Commerce
in writing of the material terms of such proposal (“Second Look Notice”), and
Citi Commerce will have a right for a period of ten (10) Business Days from
receipt of Zale’s aforesaid notice to agree to enter into the Second Look
Program with Zale upon the same terms and conditions as those set forth in
Zale’s aforesaid notice.  Citi Commerce will notify Zale within such ten
(10) Business Day-period whether it desires to enter into the Second Look
Program with Zale upon the same terms and conditions as those set forth in the
Second Look Notice.  If Citi Commerce notifies Zale that it elects not to enter
into such Second Look Program, or if Citi Commerce fails to so notify Zale
within such ten (10) Business Day-period (in which case, Citi Commerce will be
deemed to have elected not to enter into the Second Look Program with Zale),
Zale will be free to enter into the Second Look Program with another Person upon
terms and conditions no less favourable to Zale than those specified in the
Second Look Notice.  If Citi Commerce notifies Zale that Citi Commerce desires
to enter into a Second Look Program upon terms and conditions no less favourable
to Zale than those specified in the Second Look Notice, Citi Commerce and Zale
will negotiate in good faith the terms of a definitive agreement evidencing such
Second Look Program.  If Zale and Citi Commerce are unable to negotiate a
definitive agreement within thirty (30) days from Zale’s receipt of Citi
Commerce’s notice that Citi Commerce wishes to provide the Second Look Program,
Zale will be free to enter into an agreement evidencing a Second Look Program
with another Person upon terms and conditions no less favourable to Zale than
those specified in the Second Look Notice.

 

Citi Commerce’s obligation under this Section 5.(c) will be satisfied, and as a
result, the Parties expressly acknowledge that Zale will not have any future
right to negotiate a proposal for a Second Look Program with any other Person
during the term of the Agreement, if

 

(1)                                  Zale does not enter into such an agreement
within one hundred and twenty (120) days after the expiration of such thirty
(30) day period.  Provided that the parties are negotiating in good faith, Zale
may request up to two (2) extensions of thirty (30) days under this
Section 5.(c)(1), or

 

(2)           the Parties negotiate an agreement to provide a Second Look
Program.  However, the Parties expressly acknowledge that such Second Look
Program agreement may contain provisions to allow Zale future rights to

 

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negotiate a proposal for a Second Look Program with another Person under
conditions which would be specified in such agreement.

 

(d)                                 40% Down Payment Program:  The Parties agree
that Zale may offer a ‘40% Down Payment Program’, as described in the Operating
Regulations (“40% Down Payment Program”) to Cardholders during the Term of this
Agreement. In consideration of the foregoing, Zale will indemnify Citi Commerce
for all 40 DP Losses suffered or incurred by Citi Commerce on an Account.

 

In this Section 5.(d), “40 DP Losses” mean, in respect to an Account to which
the 40% Down Payment Program applies, all amounts (excluding interest and
service charges) owing by a Cardholder on the Account that exceed 110% of the
Citi Commerce-assigned credit limit on the Account where:  (i) the Account is
contractually delinquent for at least one hundred and eighty (180) days, or
(ii) the Cardholder has declared bankruptcy.

 

6.                                      Covenants, Representations and
Warranties:

 

(a)                                  Covenants of Zale:  To induce Citi Commerce
to enter into, and consummate the transactions contemplated by this Agreement,
Zale makes the following covenants to Citi Commerce, each and all of which will
survive the execution and delivery of this Agreement:

 

(i)                                     Maintenance of Existence and Conduct of
Business:  Zale will preserve and keep in full force and effect its corporate
existence and will remain engaged in the business of selling Authorized Goods
and Services on Accounts either directly or indirectly through its Affiliates. 
Zale will not transact business so as to represent itself as the owner of the
Accounts, the Credit Cards, the Cardholder List, the Receivables and Related
Account Rights or any other agreement, document, asset or property owned by Citi
Commerce or its Affiliates and used in connection with the Private Label Program
(collectively, “Citi Property”).

 

(ii)                                  Books and Records:  Zale will keep
adequate records and books of account with respect to the Accounts and the
payments it receives from Citi Commerce under this Agreement, and the In-Store
Payments it receives from Cardholders under Section 2.(b)(xi) and Zale will
ensure that all such books and records are made in accordance with GAAP and
reflect all of Zale’s financial transactions with respect to the Accounts and
the Private Label Program.

 

(iii)                               Litigation:  Zale will promptly notify Citi
Commerce in writing if it receives notice of any litigation that, if adversely
determined, would have a material and adverse effect on the Private Label
Program, the Accounts or Zale’s ability to perform any of its obligations under
this Agreement.

 

(iv)                              Enforcement of Rights:  Zale, acting
reasonably, will enforce its rights against third parties, including, without
limitation, Approved Sales

 

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Channels, to the extent that a failure to enforce such rights could reasonably
be expected to materially and adversely affect the Private Label Program, the
Accounts or Zale’s ability to perform its obligations under this Agreement. 
Zale, acting reasonably, will not take or omit to take any action, which could
reasonably be expected to have a material and adverse effect on Citi Commerce,
the Private Label Program, the Accounts, the Receivables, the Related Account
Rights or Citi Commerce’s ability to perform its obligations under this
Agreement.

 

(v)                                 No Liens:  Effective on the date hereof,
Zale will not create or (due to any action or inaction on the part of Zale or
any of its Affiliates) cause or permit any Lien in and to the Accounts, the
Receivables, the Related Account Rights or any other Citi Property.

 

(vi)                              Reports and Notices:  Zale will provide Citi
Commerce with a notice specifying the nature of any Zale Event of Default, any
event which, with the giving of notice would constitute a Zale Event of Default
or any development or other information which could have a material and adverse
effect on the Accounts or the value thereof, title of either Citi Commerce or
its Affiliates to any Citi Property or Zale’s ability to perform its obligations
under this Agreement.  Notices pursuant to this Section 6.(a)(vi) relating to
Zale Events of Default will be provided as soon as reasonably practicable but in
any event no later than ten (10) Business Days after Zale becomes aware of the
existence of such default.  Notices relating to all other events or developments
described in this Section 6.(a)(vi) will be provided (1) as soon as reasonably
practicable but in any event no later than five (5) Business Days after Zale
becomes aware of the existence of such event or development if such event or
development has already occurred, and (2) with respect to events or developments
that have yet to occur, as early as reasonably practicable under the
circumstances.  Any notice provided under this Section 6.(a)(vi) will be
confirmed in writing to Citi Commerce as soon as reasonably practicable but in
any event no later than ten (10) Business Days after the delivery of the initial
notice.  If Zale becomes aware of any failure by Citi Commerce to comply with
any Service Level and Performance Standards in any material respect, Zale will
notify Citi Commerce thereof within a reasonable time thereafter, but its
failure to so notify Citi Commerce will not limit any rights Zale may have with
respect thereto under this Agreement.

 

(vii)         Compliance with Laws:  Zale and its Representatives and
Contractors will comply in all material respects with all Applicable Laws
governing the performance of their obligations in respect to the Private Label
Program under this Agreement.

 

(viii)        Compliance with Citigroup Information Security Standards:  Zale
will not take any action, and will ensure that its Representatives and
Contractors authorized to assist in the fulfillment of its obligations hereunder
will not

 

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take any action that, if taken by a Citi Commerce Affiliate, would violate the
Citigroup Information Security Standards incorporated herein by reference, made
a part of this Agreement and as may be revised by Citi Commerce from time to
time in its sole discretion; provided, however, that (1) Citi Commerce will use
commercially reasonable efforts to provide Zale with as much prior notice of any
such changes as possible, (2) Zale will use commercially reasonable efforts to
comply with such changes as promptly as possible, and (3) Zale’s inability to
comply with any such change without material burden or expense (as documented to
Citi Commerce) will not be deemed a breach of this Agreement.

 

(ix)           GST/QST Registration:  Zale is a registrant under Part IX of the
Excise Tax Act (Canada) and under the Act Respecting the Quebec Sales Tax. 
Zale’s GST registration number is 866038425RT0001 and its QST registration
number is 1022399507.

 

(x)            Solicitation of Citi Commerce Employees:  While the Private Label
Program is in effect and for a period of twelve (12) months after the
termination of this Agreement, Zale will not hire or solicit the employment of
any Person whom Citi Commerce employed during the Term of this Agreement and who
was involved in the establishment, promotion, maintenance or operation of the
Private Label Program without the approval of Citi Commerce, which approval will
not be unreasonably withheld or delayed.

 

(xi)           Maintenance of Licenses, Etc.:  Zale will maintain in good
standing all licenses, consents, approvals, certificates of authority, orders
and other qualifications that are necessary for it to pay, perform and observe
its obligations under this Agreement.

 

(xii)          Citi Commerce Policies:  Zale, its Affiliates, Representatives,
Contractors and their respective employees will reasonably comply with Citi
Commerce’s on-site policies while on Citi Commerce’s premises, using facilities
or equipment of Citi Commerce or its Affiliates, or acting for, on behalf of, or
in conjunction with Citi Commerce.  Citi Commerce may require Zale to remove
from its premises any employee, Representative, or Contractor of Zale or its
Affiliates who fails to comply with such policies or any portion thereof.

 

(xiii)         Zale Branded Materials:  All Zale Branded Materials and other
marketing materials prepared or provided by Zale in connection with this
Agreement will be accurate, complete and substantiated, and, upon Citi
Commerce’s request, Zale will deliver to Citi Commerce within three (3) Business
Days accurate and complete substantiation of each claim made in such Zale
Branded Materials and other marketing materials used or proposed for use in
connection with the Private Label Program, provided that the foregoing will not
apply to any information contained in such Zale Branded

 

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Materials and other marketing materials that is provided by Citi Commerce.

 

(xiv)        To the extent that such financial statements are not publicly
available, during the Initial Term and any Renewal Term of this Agreement, Zale
will provide to Citi Commerce, promptly following the preparation thereof but in
no event more than sixty (60) days following the end of the period for which
such financial statements are prepared:

 

(1)                                  the annual audited financial statements for
the ultimate parent legal entity owning or controlling Zale, prepared by its
independent auditor or accountant, and

 

(2)                                  the quarterly unaudited financial
statements for the ultimate parent legal entity or controlling Zale, as reviewed
by its independent auditor or accountant.

 

(b)                                 Covenants of Citi Commerce:  To induce Zale
to enter into, and consummate the transactions contemplated by this Agreement,
Citi Commerce makes the following covenants to Zale, each and all of which will
survive the execution and delivery of this Agreement:

 

(i)                                     Maintenance of Existence and Conduct of
Business:  Citi Commerce will preserve and keep in full force and effect its
corporate existence and will either directly or indirectly through its
Affiliates remain in the business of servicing the Accounts.  Citi Commerce will
not transact business so as to represent itself as the owner of Zale Customer
Information or any other agreement, document, asset or property owned by Zale,
and used by Zale in connection with the Private Label Program (collectively
“Zale Property”).

 

(ii)                                  Books and Records:  Citi Commerce will
keep adequate records and books of account with respect to the Accounts, the
Receivables and remittances it receives from Zale, in which proper entries,
reflecting all of Citi Commerce’s financial transactions relating to the Private
Label Program, are made in accordance with GAAP.

 

(iii)                               Litigation:  Citi Commerce promptly will
notify Zale in writing if it receives notice of any litigation that, if
adversely determined, would have a material and adverse effect on the Private
Label Program, the Accounts, the Receivables or Citi Commerce’s ability to
perform any of its obligations under this Agreement.

 

(iv)          Enforcement of Rights:  Citi Commerce, acting reasonably, will
enforce its rights against third parties to the extent that a failure to enforce
such rights could reasonably be expected to materially and adversely affect the
Private Label Program or Citi Commerce’s ability to perform its obligations
under this Agreement.  Citi Commerce, acting reasonably, will not take or omit

 

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to take any action which could reasonably be expected to have a material and
adverse effect on Zale, the Private Label Program, the Accounts, the
Receivables, the Related Account Rights or Zale’s ability to perform its
obligations under this Agreement.

 

(v)                                 Reports and Notices:  Citi Commerce will
provide Zale with notice specifying the nature of any Citi Commerce Event of
Default, any event which, with the giving of notice would constitute a Citi
Commerce Event of Default, or any development or other information which is
likely to have a material and adverse effect on the Private Label Program or
Citi Commerce’s ability to perform its obligations pursuant to this Agreement. 
Notice pursuant to this Section 6.(b)(v) relating to Citi Commerce Events of
Default will be provided as soon as reasonably practicable but in any event no
later than ten (10) Business Days after Citi Commerce becomes aware of the
existence of such default.  Notices relating to all other events or developments
described in this Section 6.(b)(v) will be provided (1) within five (5) Business
Days after Citi Commerce becomes aware of the existence of such event or
development if such event or development has already occurred, and (2) with
respect to events or developments that have yet to occur, as early as reasonably
practicable under the circumstances.  Any notice produced under this
Section 6.(b)(v) will be confirmed in writing to Zale as soon as reasonably
practicable but in any event no later than ten (10) Business Days after delivery
of the initial notice.  If Citi Commerce becomes aware of any failure by Zale to
comply with any of the Operating Regulations in any material respect, Citi
Commerce will notify Zale thereof within a reasonable time thereafter, but its
failure to so notify Zale will not limit any rights Citi Commerce may have with
respect thereto under this Agreement.

 

(vi)                              Compliance with Laws:  Citi Commerce and its
Representatives and Contractors will comply in all material respects with all
Applicable Laws, and each of the Accounts and the terms, finance charges, fees
and other charges in connection therewith (including the Pricing and payment
terms set out in Attachment G) will comply in all material respects with all
Applicable Laws.  Each new Cardholder will enter into a Cardholder Agreement on
terms and conditions substantially in the form attached as Attachment K, or as
the same may be modified by Citi Commerce from time to time.

 

(vii)                           Zale Policies:  Citi Commerce, its Affiliates,
Representatives, Contractors and their respective employees will reasonably
comply with Zale’s code of conduct (as communicated in writing by Zale to Citi
Commerce from time to time) while on Zale’s premises, using Zale’s facilities or
equipment, or acting for, on behalf of, or in conjunction with Zale.  Zale may
require Citi Commerce to remove from Zale’s premises any employee,
Representative, or Contractor of Citi Commerce or its Affiliates who fails to
comply with such policies or any portion thereof.

 

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(viii)                      Privacy:  Citi Commerce will not take any action
that would result in Zale being in violation of Section 2.(h).

 

(ix)                              Solicitation of Zale Employees:  While the
Private Label Program is in effect and for a period of twelve (12) months after
the termination of this Agreement, Citi Commerce will not hire or solicit the
employment of any Person whom Zale has employed during the Term of this
Agreement and who was involved in the establishment, promotion, maintenance or
operation of the Private Label Program without the approval of Zale which
approval will not be unreasonably withheld or delayed.

 

(x)                               Maintenance of Licenses; Etc.:  Citi Commerce
will maintain in good standing all licences, consents, approvals, certificates
of authority, orders and other qualifications that are necessary for it to pay,
perform and observe its obligations under this Agreement.

 

(xi)                            Private Label Program:  Citi Commerce will
implement the Private Label Program with respect to Cardholders in accordance
with the applicable Cardholder Agreement.  It will promptly advise Zale in the
event of new or modified regulatory and statutory requirements that may
necessitate a Material Change in the Private Label Program or the manner in
which Citi Commerce implements the Private Label Program, and will comply with
such new and modified requirements in a timely manner.  It will take appropriate
measures to ensure that all aspects of Citi Commerce’s operation of the Private
Label Program (including all aspects implemented or maintained by Citi
Commerce’s Representatives and Contractors) comply fully with all requirements
of Applicable Law (as exists on the Effective Date and as may subsequently be
amended, modified or developed), including the Income Tax Act, the Privacy Laws,
the Consumer Protection Laws and the Language Laws.

 

(xii)        Marketing Materials:  All Private Label Program marketing materials
prepared or provided by Citi Commerce in connection with this Agreement will be
accurate, complete and substantiated, and, upon Zale’s request, Citi Commerce
will deliver to Zale within three (3) Business Days accurate and complete
substantiation of each claim made in such marketing materials used or proposed
for use in connection with the Private Label Program, provided that the
foregoing will not apply to any information contained in such marketing
materials that is provided by Zale.

 

(xiii)        GST Registration:  Citi Commerce is a registrant under Part IX of
the Excise Tax Act.  Citi Commerce’s GST registration number is R102257854RT.

 

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(c)                                  Representations and Warranties of Zale: 
Zale hereby represents and warrants to Citi Commerce as follows:

 

(i)                                   Organization:  It is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
incorporation, and has full corporate power and authority to conduct its
business as it is presently being conducted;

 

(ii)                                Authorization:  It has all necessary
corporate authority and has taken all corporate action necessary to enter into
this Agreement, to consummate the transactions contemplated hereby and thereby
and to perform its obligations hereunder and thereunder.  This Agreement has
been duly executed and delivered by Zale and is a legal, valid and binding
obligation of Zale, enforceable against it in accordance with its terms, except
as the enforcement thereof may be limited by applicable bankruptcy, insolvency,
rearrangement, reorganization or similar debtor relief legislation affecting the
rights of creditors generally from time to time in effect and by general
principles of equity (regardless of whether such enforcement is sought in a
proceeding at law or in equity) and the discretion of the court before which any
proceeding therefor may be brought;

 

(iii)                             Absence of Conflicts:  The execution and
delivery of this Agreement by Zale and the performance by Zale of its
obligations hereunder will not result in:

 

(1)                                a violation of Zale’s articles of
incorporation or charter,

 

(2)                                a breach of, or a default under, any term,
provision of any contract, agreement, indebtedness, lease, commitment,
franchise, license, permit or authorization to which Zale is a party or by which
its assets are bound, which breach or default would have a material adverse
effect on its business or financial condition or its ability to consummate the
transactions contemplated hereby or thereby, or

 

(3)                                a violation by Zale of any statute, rule,
regulation, ordinance, code, order, judgment, injunction, decree or award, which
violation would have a material adverse effect on its business or financial
condition or its ability to consummate the transactions contemplated hereby;

 

(iv)                            Consents and Approvals:  No consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority, or any other Person, is required to be made or obtained
by Zale in connection with the execution, delivery and performance of this
Agreement and the performance of its obligations hereunder, except for such
consents, approvals, authorizations, filings and registrations as have been
obtained or made prior to the Effective Date;

 

(v)                               Litigation:  There is no action, order, writ,
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, labor dispute, arbitral

 

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action or investigation pending, or to the knowledge of Zale threatened, against
or relating to:

 

(1)                                Zale which has a reasonable possibility of an
adverse determination and which, if adversely determined, would be likely to
have a material adverse effect on Zale, or

 

(2)                                this Agreement, or the transactions
contemplated hereby;

 

(vi)                            Trade-marks:  Zale and TXDC are, collectively,
the sole and exclusive owners of the Zale Marks and, collectively, have the
power and authority to grant to Citi Commerce the license to use the Zale Marks
as provided in this Agreement.  The Zale Marks are not subject to any liens,
mortgages, pledges or restriction that would adversely affect the license
granted to Citi Commerce pursuant to Section 9.  Neither Zale nor TXDC has
granted to any other Person a license to use the Zale Marks or any other trade
names, trademarks, service marks and associated trade dress licensed to or owned
by Zale or TXDC in connection with the issuance, marketing, promotion or
offering of private label credit cards within Canada.  With respect to the Zale
Marks, neither Zale nor TXDC has been charged, nor to its best knowledge is
threatened to be charged, with infringement of any unexpired trade-mark,
trade-mark registration, trade name, service mark, copyright, copyright
registration or other proprietary right of any other Person.  With respect to
any new or additional Zale Marks for which a license is granted pursuant to
Section 9., the representations and warranties contained in this
Section 6.(c)(vi) will apply to the new or additional Zale Marks as of the date
the license for such new or additional Zale Marks is granted;

 

(vii)                         Brokers:  Zale has not employed and is not subject
to any valid claim of any broker, finder, consultant or other intermediary in
connection with the transactions contemplated by this Agreement who will be
entitled to a fee or commission in connection with such transactions.

 

(d)                               Representations and Warranties of Citi
Commerce:  Citi Commerce hereby represents and warrants to Zale as follows:

 

(i)                                   Organization:  It is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
incorporation, and has full corporate power and authority to conduct its
business as it is presently being conducted;

 

(ii)                                Authorization:  It has all necessary
corporate authority and has taken all corporate action necessary to enter into
this Agreement, to consummate the transactions contemplated hereby and thereby
and to perform its obligations hereunder and thereunder.  This Agreement has
been duly executed and delivered by Citi Commerce and is a legal, valid and
binding

 

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obligation of Citi Commerce, enforceable against it in accordance with its
terms, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, rearrangement, reorganization or similar debtor relief
legislation affecting the rights of creditors generally from time to time in
effect and by general principles of equity (regardless of whether such
enforcement is sought in a proceeding at law or in equity) and the discretion of
the court before which any proceeding therefor may be brought;

 

(iii)          Absence of Conflicts:  The execution and delivery of this
Agreement by Citi Commerce and the performance by Citi Commerce of its
obligations hereunder will not result in:

 

(1)                                a violation of Citi Commerce’s articles of
incorporation or charter,

 

(2)                                a breach of, or a default under, any term,
provision of any contract, agreement, indebtedness, lease, commitment,
franchise, license, permit or authorization to which Citi Commerce is a party or
by which its assets are bound, which breach or default would have a material
adverse effect on its business or financial condition or its ability to
consummate the transactions contemplated hereby or thereby, or

 

(3)                                a violation by Citi Commerce of any statute,
rule, regulation, ordinance, code, order, judgment, injunction, decree or award,
which violation would have a material adverse effect on its business or
financial condition or its ability to consummate the transactions contemplated
hereby;

 

(iv)                            Consents and Approvals:  No consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority, or any other Person, is required to be made or obtained
by Citi Commerce in connection with the execution, delivery and performance of
this Agreement and the performance of its obligations hereunder, except for such
consents, approvals, authorizations, filings and registrations as have been
obtained or made prior to the Effective Date;

 

(v)                               Litigation:  There is no action, order, writ,
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, labor dispute, arbitral action or investigation pending, or to the
knowledge of Citi Commerce threatened, against or relating to:

 

(1)                                Citi Commerce which has a reasonable
possibility of an adverse determination and which, if adversely determined,
would be likely to have a material adverse effect on Citi Commerce, or

 

(2)                                this Agreement, or the transactions
contemplated hereby;

 

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(vi)                            Brokers:  Citi Commerce has not employed and is
not subject to any valid Claim of any broker, finder, consultant or other
intermediary in connection with the transactions contemplated by this Agreement
who will be entitled to a fee or commission in connection with such
transactions.

 

7.                                      Confidentiality and Non-Disclosure:

 

(a)                              The terms of this Agreement and all information
provided pursuant to or in connection with either Party’s performance under this
Agreement, including information concerning Accounts, Applicants and Cardholders
(“Confidential Information”) is confidential and proprietary to the Party
providing the Confidential Information (“Disclosing Party”) to the other Party
(“Receiving Party”).  Without limiting the generality of the foregoing, the term
Confidential Information includes business strategies and plans, marketing
plans, promotional materials, promotional strategies, Cardholder Information and
any other information or materials relating to Cardholders (including
behavioral, spending, statistical and demographic information), Zale Customer
Information and any other information or materials relating to Zale customers
(including behavioral, spending, statistical and demographic information), and
promotional arrangements with third parties related to the Credit Cards.  The
Cardholder Information, the Account information of each Cardholder and any other
information or materials relating to Cardholders compiled by Citi Commerce
(including behavioral, spending, statistical and demographic information) is
part of Citi Commerce’s file and exclusive property.  The Zale Customer
Information, and information and materials relating to Zale customers compiled
by Zale (including behavioral, spending, statistical and demographic
information) are part of Zale’s file and exclusive property.  All Zale Customer
Information is subject to and shall be treated in accordance with the Privacy
Laws.  Notwithstanding the foregoing, Confidential Information will not include
information which:

 

(i)                                   is or hereafter becomes part of the public
domain through no unauthorized act of the Receiving Party;

 

(ii)                                is rightfully received from a third party
without any duty of confidentiality to the Disclosing Party;

 

(iii)                           is independently developed by the Receiving
Party without use of or reference to the Disclosing Party’s Confidential
Information; or

 

(iv)                            is disclosed pursuant to a requirement of
Applicable Law.

 

If the Receiving Party asserts that any exception set out in the preceding
sentence allows the disclosure of any Confidential Information, it will promptly
submit to the Disclosing Party written documentation demonstrating the
applicability of the claimed exception.

 

(b)                               The Receiving Party will not use any
Confidential Information provided by the Disclosing Party for any purposes other
than as permitted or required under this

 

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Agreement and will not accumulate in any way or make use of the Disclosing
Party’s Confidential Information for any other purpose, including the marketing
or cross-selling of any program, other than as authorized by the Disclosing
Party.

 

(c)                                Without the express written consent of the
Disclosing Party, the Receiving Party will not disclose or provide access to,
directly or indirectly, and will not add to, modify, append, or alter in any way
any Confidential Information provided by the Disclosing Party or any of the
terms of this Agreement to any Person, with the exception of disclosure to any
Affiliate, Representative, or Contractor that has a need to know, for the
purposes of complying with its obligations hereunder, the specific Confidential
Information and that has agreed to keep confidential such Confidential
Information.  In doing so, the Receiving Party will notify the Disclosing Party
of the name of the Person to whom any Confidential Information was provided, the
date of the disclosure, a description of the Confidential Information so
provided, and the purpose for the disclosure.

 

(d)                               The Receiving Party will take reasonable
measures, using the same care taken by such Party to safeguard its own
confidential and proprietary information (but in no event less than reasonable
care), to prevent unauthorized disclosure by its Representatives and Contractors
of any Confidential Information.

 

(e)                                Upon the termination of this Agreement, the
Receiving Party will, upon reasonable request from the Disclosing Party, return
or destroy all Confidential Information provided by the Disclosing Party,
including any summaries thereof, and all copies and duplicates thereof (in
whatever form maintained).  Each Party may retain a single copy of all such
Confidential Information for the term of any applicable statute of limitations
under Applicable Law, after which such Confidential Information will be
destroyed or returned to the Disclosing Party at such Disclosing Party’s option.

 

(f)                                  Neither Party will disclose, distribute or
otherwise use any Confidential Information that is personal information of a
Person if the Party knows or has reason to believe that such Person has not
consented to any such disclosure, distribution or use, or has withdrawn his or
her consent to any such disclosure, distribution or use.  The Receiving Party
may assume, unless it knows otherwise, that any personal information of a Person
provided to such Receiving Party by the Disclosing Party was provided with the
informed consent of such Person to the disclosure, distribution and use by such
Receiving Party.

 

(g)                               The Parties acknowledge that the Confidential
Information provided by the Disclosing Party constitutes confidential and
proprietary information of the Disclosing Party and that use or disclosure
thereof by the Receiving Party or any Representative or Contractor of such
Receiving Party, other than in accordance with the express terms of this
Agreement or as otherwise authorized in writing by a senior officer of the
Disclosing Party, constitutes a material breach of the Agreement or, after the
termination of this Agreement, of such Disclosing Party’s continuing rights.  In
such event, the Parties acknowledge that such Disclosing

 

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Party may be immediately and irreparably harmed, that money damages may not
provide full and appropriate relief, and that such Disclosing Party may
therefore obtain an order for appropriate injunctive relief.

 

(h)                               Each Party acknowledges and agrees that any
unauthorized disclosure of the other’s Confidential Information and/or any
Security Breaches or other breach whatsoever in the Receiving Party’s security
system (an “Incident”) may cause irreparable harm to the other Party and that
time is of the essence in mitigating the effects of such harm.  Accordingly, the
Receiving Party shall immediately advise the Client Relationship Team members of
the Disclosing Party of the occurrence of an Incident.  The Parties agree that
the provisions of Section 11. of this Agreement will apply to any Losses
suffered or incurred by the Disclosing Party as a result of the occurrence of an
Incident caused by the Disclosing Party or any of its Affiliates or
Representatives.

 

(i)                                   Except as required by law or as otherwise
expressly permitted herein, neither Party will use the other Party’s name or the
name of an Affiliate of the Party in any advertisement or make any public
statement or respond to any third-party inquiry relating to the other Party or
its Affiliates without obtaining the other Party’s prior written consent. 
Neither Party nor any of its Representatives or Contractors will discuss or
disclose publicly or discuss with any third party the compensation terms of the
Agreement as between Citi Commerce and Zale (including Merchant Fees), facts
relating to the other Party’s marketing activities (including expenditures), and
possible future commitments of the Parties in connection with the Private Label
Program.

 

(j)                                   In the event that either Party receives a
subpoena, court order or other similar process purporting to require it to
disclose Confidential Information, it will provide the other Party with written
notice and documentation thereof as soon as practicable, and will cooperate with
the other Party in the event that such other Party determines to seek a
protective order or other remedy with regard to such disclosure.

 

8.                                      Collection and Use of Zale Credit
Information:  From time to time,

 

(a)                                Citi Commerce may collect credit and other
financially-related information (including information related to Zale’s
transactions) about Zale (“Zale Credit Information”) from Zale, from service
arrangements Zale has made with or through Citi Commerce, from credit bureaux
and other financial institutions, from credit grantors and from references Zale
has provided to Citi Commerce;

 

(b)                               Citi Commerce may use Zale Credit Information
as follows:

 

(i)                                   Upon obtaining Zale’s prior written
consent, which shall be given or withheld in Zale’s sole discretion, make it
available to credit bureaux, financial institutions, or Persons with whom Zale
has or may have financial or other business dealings,

 

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(ii)                                to assess Zale’s financial situation,

 

(iii)                             to provide Zale with the services it receives
from Citi Commerce, and

 

(iv)                            give it to anyone who works with or for Citi
Commerce, but only as needed for providing the services Zale receives from Citi
Commerce;

 

(c)                                Citi Commerce may also use Zale Credit
Information for the following purposes, (so long as Zale has given its prior
written approval to do so):

 

(i)                                   to promote its services to Zale and add it
to client lists Citi Commerce prepares and uses for this purpose, and

 

(ii)                                to share it with other Citigroup companies
(where the law allows this) so that they may promote their services to Zale.

 

Zale may tell Citi Commerce to stop using Zale Credit Information in the ways
described in Section 8.(c) at any time by giving notice in writing to Citi
Commerce and Citi Commerce will comply with the notice within ten (10) Business
Days of receipt of that notice.  Citi Commerce acknowledges that the use of Zale
Credit Information in the ways described in Section 8.(c) is at Zale’s option
and that Zale will not be refused credit or other services just because it has
told Citi Commerce to stop using it in those ways.

 

For the purposes of Section 8.(c)(ii), other Citigroup companies include
Affiliates of Citi Commerce which are engaged in the business of providing any
one or more of the following services to the public in Canada:  deposits, loans
and other commercial or personal financial services; credit, charge and payment
card services; insurance services.

 

If Zale is no longer a client of Citi Commerce or this Agreement terminates,
Citi Commerce may keep Zale Credit Information in its records for so long and
only for so long, as it is needed for the purposes described in
Section 8.(b) hereof so long as such Zale Credit Information is not disclosed to
any third party without Zale’s prior written consent.

 

9.                                      Trademark Licensing and Related
Matters:  With respect to the licensing, use and display of Zale Marks, and the
review and approval of Zale Branded Materials and Zale marketing initiatives,
Citi Commerce, Zale and TXDC agree together as follows:

 

(a)                                Grant of License to Citi Commerce:  Subject
to the provisions of this Section 9., Zale and, to the extent applicable, TXDC
hereby grant to Citi Commerce a nonexclusive, limited and terminable license to
use the Zale Marks during the term of this Agreement in connection with, and
solely in connection with, the activities contemplated herein with respect to
the Private Label Program and the marketing of Ancillary Products and Services
(but not Credit Insurance) to Cardholders using the Cardholder List.  In the
event Zale or an Affiliate uses or proposes to use any new or additional trade
names, trade-marks, service marks and associated trade dress licensed to or
owned by Zale or an Affiliate in connection with Zale’s specialty jewellery or
other businesses in Canada, Zale or,

 

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to the extent applicable, TXDC will grant to Citi Commerce pursuant to this
Section 9. a non-exclusive, limited and terminable license to use such new or
additional Zale Marks during the term of this Agreement for the purpose of the
Private Label Program (including the marketing of Ancillary Products and
Services, but not Credit Insurance), and such license will be governed by the
terms and conditions of this Agreement.  The license(s) granted to Citi Commerce
hereby will be exclusive for purposes of issuing, marketing, promoting, offering
or servicing of Credit Cards, Accounts and Cardholders under the Private Label
Program within Canada, and will be exclusive for the marketing of Ancillary
Products and Services (but not Credit Insurance) to Cardholders using the
Cardholder List.  During the term of this Agreement, Zale or an Affiliate will
not grant to any other Person (except Authorized Sales Channels) any license to
use the Zale Marks for purposes of the issuance, marketing, promoting or
offering of credit cards within Canada.  The licenses granted to Citi Commerce
pursuant to this Section 9. are personal and will not be assignable or
transferable, by operation of law or otherwise, without the prior written
consent of Zale; provided, however, that Citi Commerce may assign to an
Affiliate any license granted hereunder without the consent of Zale or TXDC in
accordance with the assignment provisions of Section 18.(f).

 

(b)                               Review and Approval of Zale Branded
Materials:  Any goods, services, Solicitations, Cardholder communications,
presentations or other marketing materials bearing a Zale Mark (“Zale Branded
Materials”) will be submitted to Zale for its prior review and approval pursuant
to the provisions of this Section 9.(b).  Zale will be entitled to review Zale
Branded Materials for compliance with its corporate trade-mark standards and may
disapprove the use of the Zale Marks on such materials to the extent that use,
in the reasonable opinion of Zale, does not comply with its corporate trade-mark
standards or if Zale reasonably determines that such materials are inconsistent
with its corporate image or may otherwise cause harm to Zale.  Citi Commerce
will not be required to submit to Zale for its review and approval Zale Branded
Materials to the extent that substantially similar Zale Branded Materials have
been previously approved by Zale unless a specific request for such review and
approval is made by Zale.

 

Zale must respond to any request for approval of Zale Branded Materials within
four (4) Business Days following receipt of such request from Citi Commerce or
Citi Commerce will be deemed to have approved such materials.

 

(c)                                Review and Approval of Zale Marketing
Initiatives:  Any solicitations or other marketing materials related to Zale
marketing initiatives contemplated pursuant to Section 3.(g), or any other
marketing initiatives proposed by Zale related to Credit Cards, will be
submitted to Citi Commerce for its prior review and approval, which approval
will not be unreasonably withheld or delayed.  Citi Commerce must respond to any
request for approval of such solicitation or marketing materials within five
(5) Business Days (within ten (10) Business Days for French language materials)
following receipt of such request from Zale.

 

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10.                               Reviews and Audits:

 

(a)                                Each Party will maintain true and complete
books of account at its premises containing an accurate record of all data
necessary to ascertain the proper implementation of this Agreement including,
without limitation, the computation of payments due by Citi Commerce and all
expenditures required of both Parties hereunder.  To verify compliance with this
Agreement, either Party or its authorized Representatives and Contractors will
have the right, at such Party’s sole expense, to conduct performance audits at
the other Party’s premises.  Each Party may conduct such audit (i) on an annual
basis (except, with respect to Zale, during the months of November and
December and the first month following Zale’s fiscal year end and, with respect
to Citi Commerce, during the first two (2) months after Citi Commerce’s fiscal
year end), and (ii) after each reasonably substantiated notice by Zale or Citi
Commerce that such Party reasonably believes the other Party has materially
failed to comply with its obligations hereunder.  The auditing Party will give
the other Party advance notice of any audit, and the Parties will schedule,
within five (5) Business Days from the date of the notice, a mutually convenient
time at which such audit may commence.  In addition, each audit will be
conducted during the audited Party’s normal business hours and in a manner which
will not materially interfere with its business.  The audit may include
inspection and review of such aspects of the audited Party’s business practices
as are related to such Party’s implementation of this Agreement.  The audited
Party will cooperate fully with the auditing Party and will give such Party and
its auditors reasonable access to its premises for conducting an audit.  Such
cooperation will include the maintenance of true and complete books of account
and other appropriate records, containing an accurate record of all expenditures
by the audited Party required hereunder.

 

(b)                               Without limiting the foregoing, in the event
either Party believes in good faith there may exist a security breach by the
other Party with respect to any Cardholder Information, Personal Information or
Confidential Information (a “Security Breach”), such Party or its designated
Representatives and Contractors will have the right to conduct a reasonable
security investigation of the Private Label Program-related operations,
facilities, systems, and personnel directly relating to the suspected Security
Breach upon three (3) Business Days prior written notice to the Party to be
audited (which notice will describe in reasonable detail the suspected Security
Breach) for the purpose of protecting against possible unauthorized or irregular
activity with respect to wrongful disclosure or use of Cardholder Information,
Personal Information or Confidential Information.  Any such investigation will
be coordinated with the audited Party’s Privacy Officer and may include
procedures to control, police, and monitor access to Cardholder Information,
Personal Information or Confidential Information and other matters relating to
the security, accessibility, vulnerability, or integrity of Cardholder
Information, Personal Information or Confidential Information or databases from
which such Cardholder Information, Personal Information or Confidential
Information can be derived or obtained.  The audited Party will provide the full
cooperation of its Representatives and Contractors in the conduct

 

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of any such investigation; provided, however, that each such investigation will
be conducted during such Party’s normal business hours and in a manner which
will not materially interfere with its business.  The auditing Party will pay to
the audited Party the reasonable costs incurred by such Party in cooperating in
the conduct of an investigation pursuant to this Section 10.(b) to the extent
the investigation is not the first investigation conducted by such Party in the
then current calendar year, and the investigation does not reveal a material
Security Breach by the audited Party.

 

(c)                                If any audit or security investigation under
this Section 10. leads the auditing Party to conclude that the audited Party has
breached the provisions of this Agreement, or that any of its business practices
related to its implementation of this Agreement or administration of the Private
Label Program presents a risk of unauthorized use or disclosure of Cardholder
Information, Personal Information or Confidential Information, the audited Party
will use commercially reasonable efforts to change such business practices
promptly to the reasonable satisfaction of the auditing Party, and provide such
Party with regular status reports until resolution of the problem.

 

(d)                               Citi Commerce agrees, upon Zale’s request from
time to time but no more frequently than once during any consecutive twelve (12)
month period, to deliver to Zale a certification of an officer of Citi Commerce
(i) as to the date on which the last internal controls audit of Citi Commerce
was conducted with respect to the Private Label Program, and (ii) whether such
audit revealed any default by Citi Commerce hereunder (and, if so, a reasonable
description of such default) or contained any information which would suggest
that Citi Commerce is not capable of performing its obligations hereunder and,
if so, the reasonable details regarding such information.

 

(e)                                Zale agrees, upon Citi Commerce’s request
from time to time but no more frequently than once during any consecutive twelve
(12) month period, to deliver to Citi Commerce a certification of an officer of
Zale (i) as to the date on which the last internal controls audit of Zale was
conducted with respect to the Private Label Program, and (ii) whether such audit
revealed any default by Zale hereunder (and, if so, a reasonable description of
such default) or contained any information which would suggest that Zale is not
capable of performing its obligations hereunder and, if so, the reasonable
details regarding such information.

 

(f)                                  Apart from the audits provided for in
Section 10.(a) and Section 10.(b), Zale may undertake one (1) or more
operational site visits of the operations and facilities of Citi Commerce
related to the operation of the Private Label Program throughout each year, the
timing of each such visit to be mutually agreed to by the Parties.

 

(g)                               For purposes of assisting Zale and its
auditors, Citi Commerce will make available, upon reasonable advance notice in
writing, a designated Person from Citi Commerce’s internal auditing department
(or another appropriate employee

 

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or outside accountant) for the purpose of reviewing Citi Commerce’s internal
controls in connection with the subject matter of this Agreement.  For purposes
of assisting Citi Commerce and its auditors, Zale will make available, upon
reasonable advance notice in writing, a designated Person from Zale’s internal
auditing department (or another appropriate employee or outside accountant) for
the purpose of reviewing Zale’s internal controls in connection with the subject
matter of this Agreement.

 

11.                               Indemnification:

 

(a)                                Indemnification by Zale:  Subject to any
limitations on Zale’s liability as provided for in this Agreement, Zale will
indemnify and hold harmless Citi Commerce and its Affiliates, and their
respective Representatives, from and against any Losses arising from or by
reason of or related to:

 

(i)                                   any acts or omissions by Zale or any of
its Affiliates or its Contractors or agents (including any fraudulent,
deliberate or criminal acts or omissions) in the performance of this Agreement
or the breach by Zale of any of its representations, warranties, covenants or
agreements herein contained; or

 

(ii)                                the violation by Zale or any of its
Contractors or agents of any Applicable Law;

 

provided that in no event will Zale be obligated under this Section 11.(a) to
indemnify or hold harmless Citi Commerce or any of its Affiliates, or their
respective directors, officers, employees, insurers or agents, for any Losses
which result from the negligent or willful omissions or acts of Citi Commerce or
any of its Affiliates, or any of their respective Representatives or
Contractors.

 

(b)                               Indemnification by Citi Commerce:  Subject to
any limitations on Citi Commerce’s liability as provided for in this Agreement,
Citi Commerce will indemnify and hold harmless Zale and its Affiliates, and
their respective Representatives, from and against any Losses arising from or by
reason of or related to:

 

(i)                                   any acts or omissions by Citi Commerce or
any of its Affiliates or its Contractors or agents (including any fraudulent,
deliberate or criminal acts or omissions) in the performance of this Agreement
or the breach by Citi Commerce of any of its representations, warranties,
covenants or agreements herein contained;

 

(ii)                                the violation by Citi Commerce or any of its
contractors, subcontractors or agents of any Applicable Law; or

 

(iii)                             the ownership or operation by Citi Commerce of
the Accounts, Credit Cards, Cardholder Lists, and the Cardholder Agreements;

 

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provided that in no event will Citi Commerce be obligated under this
Section 11.(b) to indemnify or hold harmless Zale or any of its Affiliates, or
their respective directors, officers, employees, insurers or agents, for any
Losses which result from the negligent or willful omissions or acts of Zale or
any of its Affiliates, or any of their respective Representatives or
Contractors, except for Citi Commerce.

 

(c)                                Procedure for Claims:  Whenever a claim
arises for indemnification under this Agreement, the Party claiming a right to
indemnification (the “Indemnified Party”) will promptly notify the Party from
whom the Indemnified Party is claiming indemnification (the “Indemnifying
Party”) of such claim and, when known, the facts constituting the basis for such
claim; provided that the failure to notify the Indemnifying Party will not
relieve the Indemnifying Party of any liability that it may have to the
Indemnified Party except to the extent the Indemnifying Party demonstrates that
it is prejudiced thereby.  In the event of any such claim for indemnification
resulting from or arising in connection with a claim, suit or action by a third
party, the Indemnifying Party may (but need not) defend or participate in the
defense of any such claim, suit, or action.  The Indemnifying Party will be
entitled to select counsel and take all steps necessary in the defense thereof;
provided, however, that the Indemnified Party will have the right, at its
expense, to participate in any such defense with the counsel of its choice but
the fees and expenses of such counsel will be at the expense of the Indemnified
Party.  All fees and expenses will be paid periodically as incurred.  So long as
the Indemnifying Party is in good faith defending such claim or proceeding, the
Indemnified Party will not compromise or settle such claim without the prior
written consent of the Indemnifying Party.  The Indemnifying Party will not
without the prior written consent of the Indemnified Party, effect any
settlement of any such claim unless such settlement includes an unconditional
release of the Indemnified Party from all Losses that are the subject of or
constitute a portion of such claim.  If the Indemnified Party desires to
compromise or settle any claim and gives written notice of such settlement or
compromise to the Indemnifying Party, but the Indemnifying Party refuses to
consent to such compromise or settlement, the Indemnifying Party will indemnify
the Indemnified Party for any Losses in excess of the compromise or settlement
proposed by the Indemnified Party without regard to whether the Indemnified
Party is otherwise entitled to such indemnification under Section 11.(a) or
Section 11.(b) of this Agreement, as applicable.  If the Indemnifying Party does
not assume the defense of any such claim, suit or action in accordance with this
Section 11.(c), the Indemnified Party may, at the Indemnifying Party’s expense,
defend against such claim, suit or action in such manner as it may deem
appropriate, including, but not limited to, settling such claim, suit or action
(after giving prior written notice of the same to the Indemnifying Party) on
such terms as the Indemnified Party may deem appropriate.  Any such settlement
or compromise of, or any final judgment or decree entered on or in, any claim,
suit or action which the Indemnified Party has defended in accordance herewith,
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

 

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decree had been entered in such suit or action, or with regard to such claim, by
a court of competent jurisdiction for the amount of such settlement, compromise,
judgment or decree.  The Indemnified Party and the Indemnifying Party will
cooperate, without prejudice to any rights they may have against each other, in
the compromise or defense of any third party claim that is not entirely subject
to indemnification by a single Indemnifying Party.  If, after the Indemnifying
Party elects to assume the defense of a claim, it is determined by dispute
resolution in accordance with Section 12. of this Agreement that the Indemnified
Party is not entitled to indemnification with respect thereto, the Indemnifying
Party will discontinue the defense thereof

 

(d)                               Subrogation:  In the event that Zale
indemnifies Citi Commerce (or any of its Affiliates or any of their respective
directors, officers, employees or agents) pursuant to Section 11.(a), or Citi
Commerce indemnifies Zale (or any of its Affiliates or any of their respective
directors, officers, employees or agents) pursuant to Section 11.(b), the
Indemnifying Party will be subrogated to any claims or rights of the Indemnified
Party as against any other Persons with respect to any amount paid by the
Indemnifying Party under this Section 11.  The Indemnified Party will cooperate
with the Indemnifying Party, at the expense of the Indemnifying Party, in the
assertion by the Indemnifying Party of any such claims against such other
Persons.

 

12.                               Dispute Resolution:

 

(a)                                Resolution of Disputes:  The Parties will
make all reasonable efforts to resolve any and all Disputes amicably through
good faith mutual consultation of the members of the Program Committee or other
appropriate officers of each Party.  The consultations will include, at a
minimum, two stages of negotiations, the first of which will require the Program
Committee members of both Parties and, if necessary, the second of which will
require the Executive Officer or other designated senior officer of both Parties
to engage in negotiations.

 

(b)                               Arbitration:  If a Dispute is not resolved by
a unanimous decision of the Program Committee members or, as applicable, the
Executive Officers or other designated senior officers of both Parties within
thirty (30) Business Days from the date the Dispute arose, then either Party may
submit the Dispute to Arbitration pursuant to Attachment I for the purposes of
determining whether a breach occurred and the Parties’ obligations in respect of
such breach, but not for the purpose of determining the specific course of
action required to be taken by a Party in order to remedy such breach.  The
Dispute will not be made the subject matter of any action in any court by any
Party unless the Dispute has first been submitted to Arbitration and finally
determined by the arbitrator.  Any action commenced after the Arbitration may
only be for the purpose of enforcing the decision of the arbitrator and recovery
of the costs incidental to the action.  In any action, the decision of the
arbitrator will be conclusively deemed to determine the interpretation of this
Agreement and the rights and liabilities as between the Parties in respect of
the matter in Dispute.

 

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(c)                                Operating Regulations/Service Level and
Performance Standards Disputes:

 

(i)                                   Either Party (in this Section 12.(c), the
“Dissatisfied Party”) may, at any time and from time to time, notify the other
Party (in this Section 12.(c), the “Other Party”) in writing that the Other
Party is not performing one or more of its obligations under this Agreement in
accordance with the Operating Regulations or the Service Level and Performance
Standards.  In this notice, the Dissatisfied Party will describe the nature of
the breach and such details of the breach as it reasonably has available.

 

(ii)                                Within five (5) Business Days of delivery of
a notice by the Dissatisfied Party to the Other Party under Section 12.(c)(i),
the Other Party will notify the Dissatisfied Party that it either agrees that it
was in breach, in which case the provisions of Section 12.(a) will apply, or
that it disagrees that it was in breach.

 

(iii)                             If the Other Party disagrees that it was in
breach, then either Party may submit its disagreement to such mutually
acceptable Person as the Parties may mutually agree from time to time, failing
which such Person as is selected by Arbitration (in this Section 12.(c), the
“Facilitator”).  The Facilitator will hear the disagreement within five
(5) Business Days (or such longer period as both Parties may agree) of either
Party submitting the dispute to the Facilitator, during which hearing each of
Zale and Citi Commerce will be entitled to outline its arguments and such facts
as are related to the performance of its obligations under this Agreement in
accordance with the Operating Regulations or the Service Level and Performance
Standards.  After hearing the arguments of both Parties, the Facilitator will
immediately determine whether the Other Party was in breach and, if so, will
suggest steps that the Parties may undertake to remedy the breach as the
Facilitator sees fit.

 

(iv)                            If the Facilitator determines that the Other
Party was in breach and recommends corrective action by the Other Party, the
Other Party will, within five (5) Business Days after delivery of the
Facilitator’s decision, either undertake this corrective action or notify the
Dissatisfied Party of the corrective action it proposes to undertake to remedy
the breach.

 

(v)                               Within two (2) Business Days following receipt
of the Other Party’s notice that it plans to undertake a different remedy than
that suggested by the Facilitator, the Dissatisfied Party may notify the Other
Party that it disagrees with the Other Party’s remedy and may immediately submit
the dispute to resolution pursuant to Section 12.(a).  If the Dissatisfied Party
either does not respond within this two (2) Business Day period or notifies the
Other Party that it agrees with the Other Party’s suggested remedy, the Other
Party will immediately undertake the suggested remedy.

 

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(vi)                            Nothing in this Section 12.(c) limits any other
remedy that either Party may have in law or in equity in respect of the other’s
breach including, but not limited to, any right to terminate this Agreement.

 

13.                               Events of Default; Rights and Remedies:

 

(a)                                Events of Default:  The occurrence of any one
or more of the following events (regardless of the reason therefor) will
constitute an “Event of Default” hereunder:

 

(i)                                   Non-Payment:  A Party fails to make
payment when due of any amounts (other than amounts subject to a bona fide
dispute) in an outstanding aggregate of at least One Million Dollars
($1,000,000.00) due and payable pursuant to this Agreement and such failure
remains unremedied for a period of two (2) Business Days after the
non-defaulting Party has given written notice thereof by facsimile transmission
to the address for defaulting Party specified in Section 18.(o).  If the failure
to pay referred to in this Section 13(a)(i) is a result of an event of Force
Majeure or other event that cannot be remedied within such two (2) Business Day
period, an Event of Default will not be deemed to have occurred if the
defaulting Party used commercially reasonable efforts to initiate a cure within
such time and the failure is completely cured within, in the case of an event of
Force Majeure, two (2) Business Days after the Force Majeure event ceases and,
in all other cases, ten (10) Business Days from the date of written notice
regarding such failure.

 

(ii)                                Non-Performance:  A Party fails to perform,
satisfy or comply with any material obligation, condition, covenant or other
provision contained in this Agreement or is in default under this Agreement and,
in each case, (1) such failure remains unremedied (if capable of being remedied)
for a period of thirty (30) days after the other Party has given written notice
thereof or, if the same cannot be cured in a commercially reasonable manner
within such time, the same will not constitute an Event of Default if the Party
has initiated a cure within such time and the failure is completely cured within
sixty (60) days from the date of written notice regarding such failure, except
if there is a second or subsequent failure of a similar nature within a six
(6) month period after the first failure, and the second or subsequent failure
is not cured within thirty (30) days after the date of written notice, and
(2) such failure will either have a material and adverse effect on the Private
Label Program or materially diminishes the economic value of the Private Label
Program to the other Party.

 

(iii)                             Representations Not True:  Any representation
or warranty contained in this Agreement is not true and correct in any material
respect as of the date when made, and both (1) the Party making such
representation or warranty fails to cure (if capable of being cured) the event
giving rise to such breach within thirty (30) days after the other Party has
given written notice

 

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thereof or, if the same cannot be cured in a commercially reasonable manner
within such time, the same will not constitute an Event of Default if the Party
has initiated a cure within such time and the failure is completely cured within
sixty (60) days from the date of written notice regarding such breach and
(2) such failure will either have a material and adverse effect on the Private
Label Program or materially diminishes the economic value of the Private Label
Program to another Party.

 

(iv)                            Intervention by Governmental Authority:  Any
Governmental Authority having jurisdiction over a Party orders the appointment
of a custodian, receiver, liquidator, assignee, trustee or sequestrator (or
similar official) of the Party or of any substantial part of its properties, or
orders the winding-up or liquidation of the affairs of the Party, and such order
is not vacated, discharged, stayed or bonded within sixty (60) days from the
date of entry thereof.

 

(v)                               Consent to Proceedings:  A Party (1) consents
to the institution of proceedings specified in Section 13(a)(iv) or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of the Party or any
substantial part of its properties or (2) takes corporate action in furtherance
of any such action.

 

(vi)                            Bankruptcy Petition:  A petition under the
Bankruptcy Act or similar law is filed against a Party and is not dismissed
within sixty (60) days.

 

(vii)                         Appointment of Receiver, Trustee, etc.:  The
appointment of a receiver, manager, trustee or receiver-manager in respect of
the Party or of any substantial part of its property.

 

(viii)                      Bankruptcy Proceeding Against a Party:  The
commencement of a case or proceeding against a Party seeking a decree or order
by a court having jurisdiction (1) for relief in respect of a Party pursuant to
the Bankruptcy Act or any other applicable bankruptcy or other similar law in
any jurisdiction in respect of itself, (2) for appointment of a custodian,
receiver, liquidator, assignee, trustee, or sequestrator (or similar official)
of the Party or of any substantial part of its properties, or (3) ordering the
winding-up or liquidation of the affairs of the Party will be entered, and will
not be vacated, discharged, stayed or bonded within ten (10) days from the date
of entry thereof

 

(ix)                              Bankruptcy Proceeding by a Party:  A Party
(1) commences a proceeding (including, without limitation, the filing of a
petition, an assignment, a proposal or a notice of intention to make a proposal)
under the Bankruptcy Act or any other similar law in any jurisdiction in respect
of itself, (2) consents to the institution of proceedings pursuant thereto or to
the filing of any such petition or to the appointment of or taking possession by
a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar

 

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official) of the Party or any substantial part of its properties, or (3) takes
corporate action in furtherance of any such action.

 

(x)           Unenforceability of Provisions:  Any provision of this Agreement
ceases to be enforceable against any Party obligated thereunder and such
cessation will either have a material and adverse effect on the Private Label
Program or will materially diminish the economic value of the Private Label
Program to the other Party.

 

(xi)          Material Adverse Change:  There is a Material Change affecting a
Party that will have a material and adverse effect on the Private Label Program
or will materially diminish the economic value of the Private Label Program to
the other Party.

 

(xii)                           Failure to Maintain Fixed Charge Ratio:  The
ultimate parent legal entity owning or controlling Zale fails to maintain a
Fixed Charge Ratio of at least 1.60 for two (2) consecutive fiscal quarters.

 

(xiii)                        Exit from Canadian Retail Market:  Zale has sold
to an unrelated third party, de-Branded or discontinued the operation of Twenty
Percent (20%) or more of its Stores in Canada.

 

(xiv)                       Change of Control:

 

(1)                                In the case of Zale, unless the prior written
approval of Citi Commerce is obtained, there is a sale by the shareholders of
Zale of all or substantially all of the outstanding shares of Zale, or by Zale
of all or substantially all of the assets of Zale, in either case, to a Person
which is not an Affiliate of Zale; and

 

(2)                                In the case of Citi Commerce, unless the
prior written approval of Zale is obtained or as otherwise permitted in this
Agreement, there is a sale:

 

(I)                                  by the shareholder of Citi Commerce of all
or substantially all of the outstanding shares of Citi Commerce, or by Citi
Commerce of all or substantially all of the assets of Citi Commerce to a Person
which is not an Affiliate of Citi Commerce; or

 

(II)                              by Citi Commerce of all or substantially all
of its rights and interests in the Private Label Portfolio to any Person which
is not an Affiliate of Citi Commerce.

 

(b)                               Remedies for Events of Default:  In addition
to, and without prejudice to, any other rights or remedies available to the
Parties at law or in equity, including, without limitation, any rights to
damages, the following remedies will be available provided that the
non-defaulting Party provides notice to the defaulting

 

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Party of the Event of Default and of its exercise of that non-defaulting Party’s
rights set out below within thirty (30) days of the date on which the
non-defaulting Party first becomes aware of the occurrence of the Event of
Default:

 

(i)                                   Interest:  Upon the occurrence of an Event
of Default, the non-defaulting Party will be entitled, in addition to its
remedies under Sections 13.(b)(ii) or 13.(b)(iii), to collect any amount
indisputably in default plus interest, equal to the Prime Rate plus two percent
(2%) divided by three-hundred-and-sixty-five (365) multiplied by the number of
twenty-four hour periods such amounts are in default multiplied by the value of
any such amounts, payable in arrears on demand and compounded monthly on the
last day of each calendar month.

 

(ii)                                Citi Commerce Event of Default:  Upon the
occurrence of a Citi Commerce Event of Default that continues beyond all
applicable grace periods, Zale may, at Zale’s option, terminate this Agreement
and the rights of Citi Commerce under this Agreement.

 

(iii)                             Zale Event of Default:  Upon the occurrence of
a Zale Event of Default that continues beyond all applicable grace periods, Citi
Commerce may, at its option, (1) cease establishing new Accounts and/or making
advances or generating new Receivables on existing Accounts, or (2) terminate
this Agreement and the rights of Zale under this Agreement.

 

(c)                                Force Majeure:  No delay or failure in
performance by any Party of its obligations under this Agreement will constitute
an Event of Default of that Party or give rise to any Claim for Loss, or Losses
by any other Party if, and to the extent, such delay or failure is caused by
Force Majeure.  Unless such Force Majeure substantially frustrates performance
of either Party’s obligations, Force Majeure will not operate to excuse, but
only to delay, performance.

 

If any Party is delayed in the performance of its obligations under this
Agreement by Force Majeure, such Party will promptly notify the other Party with
full particulars of such event or cause.  The Parties will make reasonable
efforts to minimize the effects of Force Majeure.

 

14.                               Term and Termination:

 

(a)                                Term:  This Agreement will continue in full
force and effect during the Initial Term and will be renewed automatically for
successive Renewal Terms thereafter, unless this Agreement is terminated or not
renewed as a result of any of the following:

 

(i)                                   a Party provides written notice to the
other Party no less than two hundred and seventy (270) days prior to the end of
the then current Term that that Party does not desire to renew this Agreement;

 

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(ii)                                a Party provides written notice to the other
Party that an Event of Default has occurred and has continued beyond all
applicable grace periods with respect to a defaulting Party under Section 13. or

 

(iii)                             a Party provides written notice to the other
Party that that this Agreement is otherwise terminated or not renewed in
accordance with the terms of this Agreement.

 

(b)                               Termination:

 

(i)                                   Event of Default:  Notwithstanding the
provisions of Section 13.(b), upon the occurrence of an Event of Default under
Sections 13.(a)(iv) to 13.(a)(xiv) of this Agreement (during the Initial Term or
any Renewal Term), at the option of a non-defaulting Party, this Agreement may
be terminated upon thirty (30) days prior written notice to the defaulting
Party.

 

(ii)                                Changes in Laws Affecting Citi Commerce:  If
any Governmental Authority with legislative, rulemaking, or judicial authority
enacts a rule or law or issues an order which in Citi Commerce’s good faith
opinion acting reasonably when compared to comparable providers of private label
credit card programs in Canada, will prevent Citi Commerce from engaging in any
material activity required under this Agreement, or which materially restricts
Citi Commerce’s ability to price, bill and collect on private label credit card
accounts (including Accounts), or otherwise operate its private credit card
business (including the Private Label Program), Citi Commerce may terminate this
Agreement effective immediately upon providing not less than sixty (60) days
prior written notice of termination to Zale.

 

(iii)                             Changes in Laws Affecting Zale:  If any
Governmental Authority with legislative, rulemaking, or judicial authority
enacts a rule or law or issues an order which in Zale’s good faith opinion will
prevent Zale from engaging in any material activity required under the
Agreement, or which materially restricts Zale’s ability to participate in the
Private Label Program, Zale may terminate this Agreement effective immediately
upon providing not less than sixty (60) days prior written notice of termination
to Citi Commerce.

 

(iv)                            Changes Affecting Citi Commerce:  In the event
there is (1) any Material Change to the operation or nature of Zale’s Brand Name
businesses in Canada (which includes the sale of Authorized Goods and Services)
that substantially and adversely affects the growth or maintenance of the number
of Accounts and is likely to cause Citi Commerce substantial harm or (2) any
Approved Sales Channel ceases to accept Credit Cards for purchases of Authorized
Goods and Services, Citi Commerce may

 

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terminate this Agreement upon one hundred twenty (120) days prior written notice
to Zale.

 

(v)                               Changes Affecting Zale:  In the event there is
any substantial change to the Pricing and payment terms on Accounts (including
the terms set out in Attachment M) or other material terms of the Private Label
Program or the servicing of the Accounts (excepting in all cases any change
required by Applicable Law or a change in Citi Commerce credit policy, as
described in Section 2.(b)(i)), that substantially and adversely affects the
growth or maintenance of the number of Accounts in the Private Label Program and
is otherwise likely to cause Zale substantial harm, Zale may terminate this
Agreement upon one hundred twenty (120) days prior written notice to Citi
Commerce.

 

(c)                                Effects of Termination:  Upon any termination
of this Agreement, the Parties will have all the rights and remedies described
herein.  No termination of this Agreement will affect the rights or obligations
of either Party which have or may have arisen or occurred prior to the effective
date of such termination.  For greater certainty, upon termination of this
Agreement, all amounts payable by Zale to Citi Commerce, or by Citi Commerce to
Zale, will continue to be due and payable in full accordance with this Agreement
without demand or notice of any kind.  Upon such termination of this Agreement,
all obligations of the Parties under this Agreement will cease, except that any
provision of this Agreement which must survive termination to be given effect
shall so survive such termination, including, without limitation, the
following:  Section 2.(h), Section 2.(i), Section 2.(j), Section 6.(a)(ii),
Section 6.(a)(ix), Section 6.(b)(ii), Section 6.(b)(viii), Section 6.(c),
Section 6.(d), Section 7., Section 11., Section 13.(b), Section 14.(c),
Section 18.(h), Section 18.(n), Section 18.(q), Section 18.(r), Section 18.(t),
Section 18.(u) and Section 18.(w).

 

15.                             Option to Purchase:

 

(a)                                Purchase Option:  In the event of the
termination, non-renewal or expiration of this Agreement pursuant to any of the
provisions of this Agreement other than pursuant to Section 14.(b)(i) of this
Agreement resulting from a Zale Event of Default, Zale has the option (the
“Purchase Option”) to purchase, or to arrange for an Affiliate of Zale or for a
third party to purchase, the Purchase Assets (as defined in Section 16.(a)) at
an aggregate purchase price determined in accordance with Section 15.(b) (the
“Purchase Price”).

 

The Purchase Option granted by this Section 15.(a) will terminate on the earlier
of the date on which Zale delivers to Citi Commerce a notice that Zale does not
intend to exercise such Purchase Option and (i) in the case of the termination,
non-renewal or expiration of this Agreement pursuant to Section 14.(a)(i) or
Section 14.(a)(iii), no less than one hundred and twenty (120) days prior to the
end of the then-current Term, and (ii) in the case of termination of this
Agreement

 

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pursuant Section 14.(a)(ii) (in the case of a Citi Commerce Event of Default)
and Section 14.(b), one hundred and twenty (120) days after the date of such
notice.

 

(b)                               Calculation of Purchase Price:  Any purchase
of the Purchase Assets pursuant to this Section 15. will be at a Purchase Price
to be agreed upon by Citi Commerce and Zale; provided, however, that if Citi
Commerce and Zale cannot so agree upon a Purchase Price for such Purchase Assets
within ten (10) Business Days following notice of the exercise of the Purchase
Option by Zale to Citi Commerce pursuant to Section 15.(a), the Purchase Price
will be the value to Citi Commerce, as determined using a discounted cash flow
methodology, of the outstanding Receivables on a going concern basis (the “Fair
Market Value”) as of the date of scheduled transfer arrived at by a neutral,
independent public accounting firm which does not represent either of the
Parties or any of their Affiliates, and which is qualified to provide valuation
services similar to those to be provided hereunder (the “Designated Third
Party”), the identity of which Designated Third Party will be agreed upon by
Citi Commerce and Zale.  Citi Commerce and Zale agree to provide the Designated
Third Party with such information as is reasonably necessary to assist in such
valuation.  Such information will be deemed to be Confidential Information of
the disclosing Party, provided that Zale may share the results of such valuation
with a bona fide prospective purchaser of all or any portion of the Purchase
Assets, and, provided further, that such prospective purchaser first executes a
reasonable confidentiality and non-disclosure agreement in favour of the owner
of such information.  The expense of such valuation by the Designated Third
Party will be shared equally by Citi Commerce and Zale.  The “discounted cash
flow methodology” used to calculate the Fair Market Value assigned to the
outstanding Purchase Assets will employ a discount rate based on the then
current Prime Rate.  It is also understood and agreed by the Parties that, in
determining the Fair Market Value for the Purchase Assets, any Accounts aged
over one-hundred-and-eighty (180) days past due or any ineligible Receivables
which include any Receivable which is not the legal, valid and binding
obligation of a Cardholder by reason that, as of the Purchase Date, such
Cardholder, (i) is deceased, (ii) is a minor under the laws of his/her province
or territory of residence, (iii) is not competent to enter into a contract or
incur debt, (iv) is dissolved, or (v) is the subject of any proceedings under
the Bankruptcy Act, as shown on the books and records of Citi Commerce, without
bad debt reserves, will be deemed to have a book balance and value of zero
($0.00).

 

(c)                                Assistance Period:  If Zale exercises the
option granted in Section 15.(a), then the Term of this Agreement will be
automatically extended by a period (the “Assistance Period”) of not more than
six (6) months from the date of expiration, non-renewal or termination. 
Notwithstanding the foregoing, each Party will be entitled to pursue any other
remedy, in law or in equity, available to it against the other including,
without limitation, seeking damages for breach of any provision of this
Agreement.  Within thirty (30) days of the date upon which Zale exercises the
option granted in Section 15.(a), Citi Commerce, Zale and the purchaser will
agree on a closing date (the “Purchase Date”) for the purchase transaction,
which will occur within such six (6) month Assistance Period.  During the period

 

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commencing on the original termination or expiry date and ending on the later of
(i) the Purchase Date, and (ii) the date (within the six (6) month Assistance
Period) upon which Zale and the purchaser notify Citi Commerce that its
assistance is no longer required, Citi Commerce will work with Zale and the
purchaser to enable the Accounts and the related Receivables to be converted to
the purchaser’s system.

 

The Parties further agree that, unless otherwise agreed to in writing by both
Parties, the closing of any of the transactions contemplated by this Section 15.
will not occur during the period from November 1 of one year through March 1 of
the following year, but to the extent it would otherwise have occurred during
such period, they will occur instead on March 2.

 

16.                             Transfer of Purchase Assets:

 

(a)                                Sale of Purchase Assets:  On the Purchase
Date, Citi Commerce will sell, assign, and transfer to Zale, an Affiliate of
Zale, or any third party designated by Zale free and clear of all Liens, all of
the following assets of Citi Commerce and its Affiliates existing as of the
Purchase Date (collectively, the “Purchase Assets”):

 

(i)                                   all Accounts (including related Account
rights) as of the Purchase Date;

 

(ii)                                originals or copies of all Private Label
Card Documentation and the Retail Master Record (other than legally privileged
documents) relating to the Private Label Program other than information,
documents and materials:  (1) that are proprietary (which includes credit
ratings, credit reports, internal correspondence, marketing materials, marketing
plans, plans and budgets relating to the Private Label Program), (2) that are
not required to run the Private Label Program, (3) that are not required to be
kept or are required to be kept confidential by Citi Commerce, or (4) that are
in the possession of a Cardholder or a third party;

 

(iii)                             any contracts with Contractors related to the
Accounts or to the Credit Cards requested to be assigned by Zale, provided that
such contracts (1) are not with Affiliates of Citi Commerce and do not also
apply or relate to services provided by a Contractor in relation to accounts
other than the Accounts or credit cards other than the Credit Cards, or (2) are
not assignable or are not assignable without the consent of the related third
party which consent is not provided; and

 

(iv)                            all pending Applications.

 

(b)                               Contractors:  In connection with the sale of
the Purchase Assets, Citi Commerce will not be required to sell, assign or
transfer any contracts with Contractors related to the Accounts or to the Credit
Cards requested to be assigned by Zale that also apply or relate to services
provided by a Contractor in relation to accounts other than the Accounts or
credit cards other than the Credit Cards.  Citi Commerce will, however, enter
into a transitional services agreement with Zale,

 

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its Affiliate or the purchaser, as the case may be, pursuant to which Citi
Commerce will use commercially reasonable efforts to provide, on a temporary
basis only, such Contractor services on terms and conditions agreed to by Zale
and Citi Commerce.

 

(c)                                Payment:  Zale will pay or will cause to be
paid to Citi Commerce the Purchase Price, in immediately available funds, on the
Purchase Date in consideration for the purchase of the Purchase Assets.

 

(d)                               Cooperation:  In the event of termination,
expiration or non-renewal of this Agreement, Zale and Citi Commerce will
cooperate fully with each other and make available to each other in a timely
fashion such data and other information as may be reasonably required, including
providing access to financial and other records of each of the Parties strictly
relating to the Private Label Program, for the preparation of any tax return,
which will include all returns, reports, declarations, designation, elections,
notices, filings, information returns, and statements filed in respect of Taxes
(“Tax Return”).  Any information obtained pursuant to this Section 16.(d) will
be treated as Confidential Information, except as may be necessary in connection
with the filing of any Tax Returns or claims for refunds or in connection with
any audit or other proceeding.  Each Party will provide cooperation and
information required by this Section 16.(d) at its own expense.

 

17.                             Liquidation and Survival of Obligations:

 

(a)                                Liquidation Right:  Upon any termination of
this Agreement and in the event that Zale does not, or is not entitled to,
purchase or arrange for the purchase of the Purchase Assets pursuant to
Section 15., Citi Commerce will have the right during the Liquidation Period, in
addition to and retaining all other rights it may have under the terms of this
Agreement or Applicable Law:

 

(i)            to liquidate the remaining Accounts in any lawful manner that may
be expeditious, or economically advantageous to Citi Commerce;

 

(ii)           to sell, transfer, assign, or otherwise dispose of the remaining
Accounts to a third party in any lawful manner that may be expeditious, or
economically advantageous to Citi Commerce;

 

(iii)          to issue a replacement or substitute card issued by Citi Commerce
or an Affiliate of Citi Commerce, provided that such card does not display any
Zale Marks; and

 

(iv)          to use the right granted to Citi Commerce pursuant to
Section 18(c) of this Agreement.

 

Zale will accept and will cause all Approved Sales Channels to accept the
then-existing Credit Cards until the termination or expiration of this
Agreement.

 

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(b)                               Termination of Agreement:  Except as otherwise
expressly provided herein, the expiration, non-renewal or termination of this
Agreement will in no way affect or impair the powers, obligations, duties,
rights and liabilities of Zale or Citi Commerce relating to any transaction or
event occurring prior to such expiration or termination.

 

18.                             Miscellaneous:

 

(a)                                Mutual Covenants and Agreements:  Zale, TXDC
(to the extent applicable) and Citi Commerce herby agree that:

 

(i)            Co-operation:  Each of the Parties will co-operate fully with the
other of them in furnishing any information or performing any reasonable action
requested by such Party, which information or action is necessary to the speedy
and successful consummation of the transactions specified in this Agreement.

 

(ii)           Other Required Information:  Each of the Parties will furnish to
the other all information concerning itself and its Affiliates as is required or
requested to be set forth by the other Party in any application or statement to
be filed with any Governmental Authority in connection with the regulatory
approval or review of the transactions contemplated in this Agreement.

 

(iii)          Applications:  Each of the Parties will cooperate in the
preparation of applications to any regulatory authorities that may have
jurisdiction for such approvals as may be required to be obtained to carry out
the transactions contemplated by this Agreement.  Such applications will be
filed as soon as practicable after the date of this Agreement, and each of the
Parties will use their reasonable commercial efforts to cause such applications
to be approved; provided, that the foregoing will not require a Party or any of
its Affiliates to commit to or effect the sale or other disposition of any of
its or its Affiliates’ assets or businesses or limit or restrict the operations
of any such businesses.

 

(iv)                              Further Assurances:  Each of the Parties will
give such further assurances to each other, produce, execute, acknowledge and
deliver all such acknowledgements and other instruments and take such further
actions as may be reasonably necessary and appropriate to carry out fully and
effectively the transactions contemplated in this Agreement.

 

(v)                                 Press Releases:  Zale and Citi Commerce each
will obtain the prior written approval of the other Party with regard to the
substance and timing of any press releases regarding the Private Label Program,
which prior approval will not unreasonably be withheld or delayed.  The
foregoing notwithstanding, it is understood that none of the Parties will be
required to consult with the other Party with regard to publications regarding
the

 

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Private Label Program prepared solely by and for employees of Zale or Citi
Commerce, or their respective Affiliates, all of which may be issued without
prior consultation with, or the prior written consent of, the other Party.

 

(vi)                            Advice of Changes:  Each Party will promptly
advise the other in writing of any material fact which, if existing or known at
the date hereof, would have been required to be set forth or disclosed in or
pursuant to this Agreement or of any material fact which, if existing or known
at the date hereof, would have made any of the representations or warranties
contained in this Agreement untrue.

 

(vii)                         Contingency and Disaster Recovery Plans:  When
requested by Citi Commerce, a summary or portion of the Zale disaster recovery
plan as it relates to the Private Label Program, the REPOS Service and the
Approved Sales Channels will be provided by Zale to Citi Commerce at any time
during the Term.  When requested by Zale, a summary or portion of Citi
Commerce’s disaster recovery plan as it relates to the Private Label Program
will be provided by Citi Commerce to Zale at any time during the Term:

 

To ensure that there is no disruption of operations with respect to each Party’s
implementation of services to be provided under this Agreement, each Party
agrees to implement, when necessary, contingency and disaster recovery plans.

 

Each Party will assign one or more technical liaison(s) in its respective
organization to respond to technical inquiries and issues (including website and
service related issues) of the other Party relating to this Agreement.  Each
Party’s technical liaison(s) will be knowledgeable about the Private Label
Program, will promptly respond to inquiries from the other Party, and will use
good faith efforts to resolve such inquiries within two (2) Business Days.

 

(b)                               Sale of Business by a Party:  In the event
that a Party transfers or disposes of any part of the business or businesses
carried on by it from time to time to any Person (the “Purchaser”), such Party
may, upon written notice to the other Parties, disclose any Confidential
Information that is the Confidential Information of the other Party and such
Party to any Purchaser or potential Purchaser who agrees in writing to keep such
Confidential Information confidential in accordance with the standards set out
in Section 7.; provided that, such Party may not disclose any such Confidential
Information to any Person who provides or any of whose Affiliates provides
services that are similar to the services performed by the other Party under
this Agreement without the prior consent of the other Party, such consent not to
be unreasonably withheld.

 

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(c)                                Use of Zale’s Name:  From and after the
Effective Date, Citi Commerce may take any and all steps, in Zale’s name and on
its behalf, necessary or desirable in Citi Commerce’s opinion, reasonably
required to collect on or assist their designee to collect on any Account,
including, without limitation, endorsing Zale’s name on cheques and instruments
submitted by a Cardholder as payment on any such Account.

 

(d)                               Use of Citi Commerce’s Name:  From and after
Zale’s exercise of the Purchase Option pursuant to Section 15. of this
Agreement, after a purchase by Zale (or its designee) of the Purchase Assets,
Zale may take any and all steps, in Citi Commerce’s name and on its behalf,
necessary or desirable in Zale’s opinion, reasonably required to collect on or
assist its designee to collect on any Account purchased by Zale pursuant to
Section 15. of this Agreement, including, without limitation, endorsing Citi
Commerce’s name on cheques and instruments submitted by a Cardholder as payment
on any such Account.

 

(e)                                Employees, Representatives and Contractors:

 

(i)                                   Employees:  During the term of this
Agreement, no employee of Zale or a Contractor contracted by Zale other than
those expressly hired by Citi Commerce will be deemed to be an employee of Citi
Commerce.  No employee of Citi Commerce or a Contractor contracted by Citi
Commerce other than those expressly hired by Zale will be deemed to be an
employee of Zale.

 

(ii)                                Zale Representatives and Contractors:  Any
Representative or Contractor that Zale utilizes to implement this Agreement
will:  (1) comply with all applicable terms of this Agreement; and (2) except
with respect to employees, officers and directors of Zale, have entered into an
agreement with Zale establishing standards of care in the handling of
information that are consistent with the standards established by this
Agreement.  To the extent that any Zale Representative or Contractor, excluding
any Contractor or Representative working onsite at Zale locations and employees,
officers and directors of Zale, will store or process any Cardholder
Information, Zale will inform Citi Commerce in advance of the identity of such
Representative or Contractor and such Representative or Contractor will execute
a written agreement to comply with the requirements of this Agreement and
Applicable Laws, including the Privacy Laws.  In addition, Citi Commerce will
have the right to consent to any Representative or Contractor, excluding any
Contractor or Representative working onsite at Zale locations or any employees,
officers or directors of Zale, who will store or process such Cardholder
Information; provided, however, that such consent (1) will not be unreasonably
withheld, and (2) will be deemed to be granted unless Citi Commerce notifies
Zale in writing of its disapproval of such Representative or Contractor, as well
as the grounds for its disapproval, within thirty (30) days of the date Citi
Commerce receives from Zale the

 

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completed Security Audit Questionnaire with respect to such Representative or
Contractor.  Zale will remain primarily responsible to Citi Commerce for the
performance or non-performance of all of its Representatives or Contractors who
are utilized by Zale to implement this Agreement and for their compliance with
the applicable requirements of this Agreement.  Citi Commerce will have the
right to require Zale to replace any such Representative or Contractor, except
with respect to employees, officers and directors of Zale, within thirty (30)
days of Citi Commerce’s notice for failure to perform in accordance with this
Agreement in the event that such Representative or Contractor fails to cure such
failure within ten (10) days of Citi Commerce’s notice.

 

(iii)                             Citi Commerce Representatives and
Contractors:  Any Representative or Contractor that Citi Commerce utilizes to
implement this Agreement will:  (1) comply with all applicable terms of this
Agreement; (2) not take any action that would result in Zale being in violation
of the Zale Privacy Promise; and (3) have entered into an agreement with Citi
Commerce establishing standards of care in the handling of information that are
consistent with the standards established by this Agreement.  To the extent that
Citi Commerce’s Representative or Contractor will store or process any Zale
Customer Information, Citi Commerce will inform Zale in advance of the identity
of such Representative or Contractor and such Representative or Contractor will
execute a written agreement to comply with the requirements of this Agreement
and Applicable Laws, including the Privacy Laws.  In addition, Zale will have
the right to consent to any Citi Commerce Representative or Contractor,
excluding any Contractor or Representative working onsite at Zale locations or
any employees, officers or directors of Citi Commerce, who will store or process
such Zale Customer Information; provided, however, that such consent (1) will
not be unreasonably withheld, and (2) will be deemed to be granted unless Zale
notifies Citi Commerce in writing of its disapproval of such Representative or
Contractor, as well as the grounds for its disapproval, within thirty (30) days
of the date Citi Commerce receive from Zale the completed Security Audit
Questionnaire with respect to such Representative or Contractor.  Citi Commerce
will remain primarily responsible to Zale for the performance or non-performance
of all of its Representatives or Contractors who are utilized by Citi Commerce
to implement this Agreement and for their compliance with the applicable
requirements of this Agreement.  Zale will have the right to require Citi
Commerce to replace any such Representative or Contractor, except with respect
to employees, officers and directors of Citi Commerce, within thirty (30) days
of Zale’s notice for failure to perform in accordance with this Agreement;
provided, however, that such Representative or Contractor fails to cure such
failure within ten (10) days of Zale’s notice.

 

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(f)                                    Assignment:

 

(i)                                    No Assignment:  Except as permitted in
this Section 18.(f), no Party may assign its rights or benefits under this
Agreement.  Each Party may assign all (but not less than all) of its rights and
benefits under this Agreement provided that:

 

(1)                                 the assignment is made to an Affiliate of
such Party;

 

(2)                                 such Affiliate agrees to perform functions
within guidelines established by such Party; and

 

(3)                                such Party will be responsible for functions
performed by such Affiliate to the same extent such Party would be responsible
if it performed such functions itself.

 

(ii)                                 Assignment by Zale:  Subject to the
provisions of this Section 18.(f)(ii) and Section 13.(a)(xiv), Zale may assign
all (but not less than all) of its rights and obligations under this Agreement
with the consent of Citi Commerce which consent will not be unreasonably
withheld or delayed if:

 

(1)                                the assignment is to a purchaser of all or
substantially all of the assets used by Zale in its Brand Name business in
Canada; and

 

(2)                              the assignee undertakes to Citi Commerce to
assume all of the obligations and restrictions applicable to Zale under this
Agreement.

 

Upon the completion of such assignment, Zale will be relieved of its obligations
arising pursuant to this Agreement after the effective date of the assignment
other than the obligations contained in Section 2.(h) and Section 7. of this
Agreement.

 

(iii)                              Assignment by Citi Commerce:  Subject to the
provisions of this Section 18.(1)(ii) and Section 13.(a)(xiv), Citi Commerce may
assign all (but not less than all) of its rights, interests and obligations
under this Agreement with the consent of Zale which consent will not be
unreasonably withheld or delayed if:

 

(1)                                the assignment is to a purchaser of all or
substantially all of the private label credit card business of Citi Commerce;
and

 

(2)                                the assignee undertakes to Zale to assume all
of the obligations and restrictions applicable to Zale under this Agreement.

 

Upon the completion of such assignment, Citi Commerce will be relieved of its
obligations arising pursuant to this Agreement after the effective date of the

 

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assignment other than the obligations contained in Section 2.(h) and Section 7.
of this Agreement.

 

(g)                                Taxes:  All fees and other amounts payable
pursuant to this Agreement are exclusive of any applicable Taxes, which Taxes
will be paid by the Party required to pay such fees or other amounts at the same
time as the payment of such fees or other amounts, unless otherwise specified in
this Agreement.

 

(h)                                Non-Waiver:  No delay by a Party hereto in
exercising any of its rights under the Transaction Agreements, or partial or
single exercise of such right, will operate as a waiver of that or any other
right.  The exercise of one or more of a Party’s rights under this Agreement
will not be a waiver of, or preclude the exercise of any rights or remedies
available to such Party under this Agreement or in law or at equity.  Any waiver
of a right or remedy under this Agreement must be in writing and signed by the
Party to be bound by such waiver.

 

(i)                                    Amendment:  This Agreement may not be
amended, supplemented or otherwise modified except by a written instrument
signed by Citi Commerce and Zale.

 

(j)                                    Limitation on Rights of the Parties: 
Nothing expressed or implied in this Agreement is intended or will be construed
to confer upon or give any Person, firm or corporation other than the Parties
hereto, their permitted successors or assigns, and their respective shareholders
any rights or remedies under or by reason of this Agreement or any transaction
specified in this Agreement.

 

(k)                                 Time of the Essence:  Time is of the essence
in this Agreement.

 

(l)                                    Counterparts:  This Agreement may be
executed in one or more counterparts each of which will be an original, and all
of which together will constitute one and the same instrument.

 

(m)                              Severability:  Wherever possible, each
provision of this Agreement will be interpreted in such a manner as to be
effective and valid under Applicable Law, but if any provision of this Agreement
is or becomes prohibited by or invalid under Applicable Law, such provision will
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

 

(n)                                Waiver of Jury Trial:  The Parties hereto
waive all right to trial by jury in any action or proceeding to enforce or
defend any rights under this Agreement.

 

(o)                                Notices:

 

(i)                                    Addresses:  All notices, approvals,
acceptances, consents, directions and instruments required or permitted under
this Agreement will be in writing to the other Party and/or TXDC, as the case
may be and will be delivered in person or sent by telecopier or other similar
form of communications to the Parties and/or TXDC, as the case may be at the
following addresses:

 

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If to Zale:

Zale Credit Services

 

901 West Walnut Hill Lane

 

Irving, Texas U.S.A. 75038

 

Attention:

Vice President, Credit Services

 

Facsimile:

(972) 580- 5123

 

 

 

If to TXDC:

TXDC, L.P.

 

c/o Zale Credit Services

 

901 West Walnut Hill Lane

 

Irving, Texas U.S.A. 75038

 

Attention:

Vice President, Credit Services

 

Facsimile:

(972) 580- 5123

 

 

 

If to Citi

Citi Commerce Solutions of Canada Ltd.

Commerce:

One Toronto Street, Suite 1200

 

Toronto, Ontario Canada M5C 2V6

 

Attention:  Vice President, Client Development

 

Facsimile:  (416) 369-3652

 

 

With a

Citi Commerce Solutions of Canada Ltd.

copy to:

One Toronto Street, Suite 1200

 

Toronto, Ontario Canada M5C 2V6

 

Attention:  General Counsel

 

Fax:  416-369-2362

 

(ii)                                Delivery:  Any notice, approval, acceptance,
consent, direction or instrument required or permitted under this Agreement
will:

 

(1)                                if delivered, be deemed to have been given or
made at the time of delivery; and

 

(2)                                if sent by telecopier or other similar form
of communication, be deemed to have been given or made on the first Business Day
following the day on which it was sent.

 

(iii)                             Change of Address:  Any Party and/or TXDC, as
the case may be may give written notice of change of address in the same manner
described in this Section 18.(o), in which event all subsequent written
communications will be given to that Party and/or TXDC, as the case may be at
the changed address.

 

(p)                                Set-off:  Except as otherwise provided under
this Agreement, each of the Parties reserves the right to set-off any amounts
that remain owing, overdue and unpaid by one Party to the other Party against
any amounts that such Party owes to the other Party under this Agreement.

 

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(q)                                No Joint Venture:  Nothing contained in this
Agreement will be deemed or construed by the Parties or any third party to
create the relationship of principal and agent, partnership, joint venture or of
any association between Zale and Citi Commerce, and no act of either Party will
be deemed to create any such relationship.  Citi Commerce and Zale each agree to
such further actions as the other may request to evidence and affirm the
non-existence of any such relationship.

 

(r)                                   Obligations Subject to Law: 
Notwithstanding any other provision of this Agreement, all of each Party’s
obligations under this Agreement will be subject to the Applicable Laws.

 

(s)                                 Continued Liability for Goods and Services: 
Notwithstanding any other provision of this Agreement, (i) Zale will remain
liable under any agreement with any Cardholder that relates to the Authorized
Goods and Services purchased by such Cardholder and Zale will perform all of its
duties and obligations pursuant thereto to the same extent as if this Agreement
had not been executed; (ii) Citi Commerce will not have any obligation or
liability of any nature, secured or unsecured, whether fixed, contingent or
otherwise, with respect to any Authorized Goods and Services, other than those
arising in connection with the repossession of goods by Citi Commerce or its
Affiliates or designees and provided that Zale will retain all rights it may
have against any Person with respect to Authorized Goods and Services
manufactured or sold by such Person.

 

(t)                                   Entire Agreement:  This Agreement
supersedes any other agreement, whether written or oral, that may have been made
or entered into by Zale and Citi Commerce (or by any officer or employee of
either of such Parties) relating to the matters contemplated hereby, and
(together with the other agreements, attachments, certificates and reports
referred to in this Agreement) constitute the entire agreement by the Parties
related to the matters contemplated hereby or therein.

 

(u)                                Binding Effect; Effectiveness:  This
Agreement will be binding on and will inure to the benefit of the Parties hereto
and their respective successors and permitted assigns.

 

(v)                                Business Ethics:

 

(i)                                  Each Party hereto agrees to comply in all
material respects with all Applicable Laws applicable to any activities carried
out by such Party under this Agreement.

 

(ii)                              Each Party hereto agrees that all financial
statements, billings and reports rendered to the other Parties hereto under this
Agreement will, to the best of such Party’s knowledge, be true and correct.

 

(iii)                           Each Party hereto agrees to notify the other
Party hereto promptly upon the discovery of any instance where the notifying
Party fails to comply

 

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with Section 18.(v)(i) or where the notifying Party has reason to believe that
data covered by Section 18.(v)(ii) is no longer accurate and complete.

 

(w)                              Governing Law:  This Agreement will be governed
by and construed and interpreted in accordance with the internal laws of the
Province of Ontario, without regard to principles of conflicts of laws.

 

(x)                                  Third Party Beneficiaries:  Unless
specifically provided otherwise, nothing in this Agreement whether express or
implied, shall be deemed to confer on any Person, other than the Parties hereto
and their successors and permitted assigns, any right, obligation, remedy or
liability.  In addition to the foregoing limitations on third party
beneficiaries, TXDC will have no rights, remedies, obligation or liabilities
under this Agreement except those expressly granted to TXDC in Section 9.

 

IN WITNESS WHEREOF, the Parties have executed this Private Label Credit Card
Program Agreement as of the Effective Date.

 

CITI COMMERCE SOLUTIONS OF CANADA LTD.

 

 

ZALE CANADA CO.

 

 

 

 

 

 

 

 

By:

/s/ Bruce Clark

 

By:

/s/ Rodney Carter

 

Name:

Bruce Clark

 

 

Name:

Rodney Carter

 

Title:

President

 

 

Title:

Group Senior Vice President

 

 

 

 

& Chief Financial Officer

 

 

 

 

 

 

 

 

By:

/s/ Diane Ferri

 

 

 

 

Name:

Diane Ferri

 

 

 

 

Title:

Vice President, Client Development

 

 

 

 

 

 

 

 

 

 

 

TXDC, L.P.

 

 

 

By:  Zale Delaware, Inc., its general partner

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Rodney Carter

 

 

 

 

Name:

Rodney Carter

 

 

 

 

Title:

Group Senior Vice President & Chief Financial Officer

 

 

 

 

(With respect to Section 9., and as expressly granted in Section 18.)

 

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