EXHIBIT 10.30

 

Confidential Treatment Requested.

 

Certain material (indicated by asterisks) has been omitted from this document
and filed separately with the Securities and Exchange Commission pursuant to a
request for confidential treatment.

 

CREDIT CARD PROGRAM AGREEMENT

 

by and among

 

THE NEIMAN MARCUS GROUP, INC.

 

BERGDORF GOODMAN, INC.

 

HSBC BANK NEVADA, N.A.

 

and

 

HOUSEHOLD CORPORATION

 

Dated as of June 8, 2005

 

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Table of Contents

 

 

 

 

Page

 

 

 

ARTICLE I DEFINITIONS

 

1

1.1

Generally

 

1

1.2

Miscellaneous

 

13

 

 

 

ARTICLE II ESTABLISHMENT OF THE PROGRAM

 

14

2.1

Credit Program

 

14

2.2

Exclusivity.

 

14

 

 

 

ARTICLE III PROGRAM MANAGEMENT AND ADMINISTRATION

 

16

3.1

Program Objectives

 

16

3.2

Management Committee

 

17

3.3

Program Relationship Managers; Program Team

 

21

 

 

 

ARTICLE IV PROGRAM OPERATIONS

 

22

4.1

Operation of the Program

 

22

4.2

Certain Responsibilities of the NMG Companies

 

22

4.3

Certain Responsibilities of Bank

 

24

4.4

Ownership of Accounts; Account Documentation

 

24

4.5

Branding of Accounts/Credit Cards/Cardholder Documentation/Solicitation
Materials

 

26

4.6

Underwriting and Risk Management

 

26

4.7

Cardholder Terms.

 

27

4.8

Internet Services.

 

27

4.9

Sales Taxes

 

28

4.10

Participation in Reversals

 

29

4.11

Interest Free Accounts

 

29

 

 

 

ARTICLE V MARKETING

 

30

5.1

Promotion of Program

 

30

5.2

Marketing Commitment

 

30

5.3

Communications with Cardholders.

 

31

5.4

Additional Marketing Support.

 

31

5.5

Approved Ancillary Products

 

33

5.6

Marketing Plan.

 

33

 

 

 

ARTICLE VI CARDHOLDER INFORMATION

 

34

6.1

Customer Information

 

34

6.2

Cardholder Data

 

35

6.3

NMG Shopper Data; NMG Prospect Data

 

38

 

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ARTICLE VII OPERATING STANDARDS

 

41

7.1

Reports

 

41

7.2

Servicing

 

41

7.3

Service Level Standards

 

43

7.4

Credit Systems

 

43

7.5

Systems Interface; Technical Support

 

44

7.6

Customer Management Systems

 

45

 

 

 

ARTICLE VIII MERCHANT SERVICES

 

45

8.1

Transmittal and Authorization of NMG Charge Transaction Data

 

45

8.2

POS Terminals

 

46

8.3

In-Store Payments

 

46

8.4

Settlement Procedures

 

46

8.5

Bank’s Right to Charge Back

 

47

8.6

Exercise of Chargeback

 

48

8.7

No Merchant Discount

 

48

 

 

 

ARTICLE IX PROGRAM ECONOMICS

 

48

9.1

NMG Compensation

 

48

9.2

Dispute Resolution

 

49

 

 

 

ARTICLE X INTELLECTUAL PROPERTY

 

49

10.1

The NMG Licensed Marks

 

49

10.2

The Bank Licensed Marks

 

50

10.3

Intellectual Property

 

51

 

 

 

ARTICLE XI REPRESENTATIONS, WARRANTIES AND COVENANTS

 

52

11.1

General Representations and Warranties of NMG

 

52

11.2

General Representations and Warranties of the Bank Companies

 

54

11.3

No other Representations or Warranties

 

57

11.4

General Covenants of the NMG Companies.

 

57

11.5

General Covenants of the Bank Companies.

 

58

 

 

 

ARTICLE XII ACCESS, AUDIT AND DISPUTE RESOLUTION

 

59

12.1

Access Rights

 

59

12.2

Audit Rights

 

60

12.3

Accounting Dispute Resolution.

 

60

12.4

Dispute Resolution

 

62

 

 

 

ARTICLE XIII CONFIDENTIALITY

 

63

13.1

General Confidentiality.

 

63

13.2

Use and Disclosure of Confidential Information.

 

64

13.3

Unauthorized Use or Disclosure of Confidential Information

 

65

13.4

Return or Destruction of Confidential Information

 

65

 

 

 

ARTICLE XIV RETAIL PORTFOLIO ACQUISITIONS

 

65

14.1

Retailer that Operates a Credit Card Business

 

65

14.2

Retailer that has a Credit Card with another Issuer

 

66

 

ii

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14.3

Retailer that has a Credit Card with Bank

 

66

14.4

Co-Branded Credit Card

 

66

14.5

Conversion of Purchased Accounts

 

67

14.6

No Other NMG Obligations

 

67

 

 

 

ARTICLE XV EVENTS OF DEFAULT; RIGHTS AND REMEDIES

 

68

15.1

Events of Default

 

68

15.2

Defaults by Bank

 

68

15.3

Defaults by the NMG Companies

 

69

15.4

Remedies for Events of Default

 

70

 

 

 

ARTICLE XVI TERM/TERMINATION

 

70

16.1

Term

 

70

16.2

Termination by NMG Prior to the End of the Initial Term or a Renewal Term

 

70

16.3

Termination by Bank Prior to the End of the Initial Term or a Renewal Term

 

71

16.4

Automatic Termination

 

71

 

 

 

ARTICLE XVII EFFECTS OF TERMINATION

 

72

17.1

General Effects.

 

72

17.2

The NMG Companies’ Option to Purchase the Program Assets.

 

72

17.3

Fair Market Value

 

73

17.4

Dedicated Program Personnel

 

74

17.5

Rights of Bank if Purchase Option Not Exercised.

 

74

 

 

 

ARTICLE XVIII INDEMNIFICATION

 

75

18.1

NMG Indemnification of Bank

 

75

18.2

Bank Companies’ Indemnification of the NMG Companies

 

76

18.3

Procedures.

 

77

18.4

Notice and Additional Rights and Limitations.

 

78

 

 

 

ARTICLE XIX MISCELLANEOUS

 

78

19.1

Precautionary Security Interest

 

78

19.2

Securitization, Participation or Pledge of Cardholder Indebtedness.

 

78

19.3

Assignment

 

79

19.4

Sale or Transfer of Accounts

 

79

19.5

Subcontracting

 

79

19.6

Sales and Use Tax

 

79

19.7

Amendment

 

79

19.8

Non-Waiver

 

80

19.9

Severability

 

80

19.10

Waiver of Jury Trial and Venue

 

80

19.11

Governing Law; Compliance with Law.

 

80

19.12

Specific Performance

 

80

19.13

Captions

 

81

19.14

Notices

 

81

 

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19.15

Coordination of Consents and Approvals

 

81

19.16

Further Assurances

 

82

19.17

No Joint Venture

 

82

19.18

Press Releases

 

82

19.19

No Set-Off

 

82

19.20

Conflict of Interest

 

82

19.21

Third Parties

 

83

19.22

Force Majeure

 

83

19.23

Entire Agreement

 

83

19.24

Binding Effect

 

83

19.25

Counterparts/Facsimiles

 

84

19.26

Survival

 

84

 

iv

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CREDIT CARD PROGRAM AGREEMENT

 

This Credit Card Program Agreement is made as of the 8th day of June, 2005, by
and among The Neiman Marcus Group, Inc., a Delaware corporation (“NMG”),
Bergdorf Goodman, Inc., a New York corporation (“BG, and together with NMG, the
“NMG Companies”), HSBC Bank Nevada, N.A., a national credit card bank (“Bank”),
and Household Corporation, a Delaware corporation (“Primary Servicer”).

 

WITNESSETH:

 

WHEREAS, the NMG Companies are engaged in, among other activities, operating
retail department stores and the Credit Card Business (as hereinafter defined);

 

WHEREAS, concurrently with the execution of this Agreement, the NMG Companies,
Bank and Bank Parent (as hereinafter defined) are entering a purchase and sale
agreement (the “Purchase Agreement”) pursuant to which Bank shall purchase
specified assets related to the NMG Companies’ Credit Card Business, including
certain Credit Card and payment plan accounts and associated receivables
(“Purchased Accounts”);

 

WHEREAS, the NMG Companies have requested that Bank establish a program pursuant
to which, following the Effective Date of this Agreement, Bank shall issue NMG
Credit Cards (as hereinafter defined) and Non-Card Payment Plans (as hereinafter
defined) to be serviced, marketed and promoted in accordance with the terms
hereof; and

 

WHEREAS, the Parties hereto agree that the goodwill associated with the NMG
Licensed Marks (as hereinafter defined) contemplated for use hereunder are of
substantial value that is dependent upon the maintenance of high quality
services and appropriate use of the trademarks pursuant to this Agreement;

 

NOW, THEREFORE, in consideration of the terms, conditions and mutual covenants
contained herein, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1 Generally. The following terms shall have the following meanings when used
in this Agreement:

 

“Account” means any account (including any Private Label Account, Non-Store
Account or Non-Card Payment Plan account) under which a purchase, cash advance,
convenience check or balance transfer transaction may be or has been made by or
to a Person (or any Person authorized by such Person) pursuant to a Cardholder
Agreement established pursuant to the terms of this Agreement or acquired
pursuant to the Purchase Agreement. For the avoidance of doubt, the term Account
shall include the Purchased Accounts.

 

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“Account Documentation” means, with respect to an Account, any and all
documentation relating to that Account, including Cardholder Documentation,
checks or other forms of payment with respect to an Account, notices to
Cardholders, adverse action notices, change of terms notices, other notices,
correspondence, memoranda, documents, stubs, instruments, certificates,
agreements, magnetic tapes, disks, hard copy formats or other computer-readable
data transmissions, any microfilm, electronic or other copy of any of the
foregoing, and any other written, electronic or other records or materials of
whatever form or nature, including tangible and intangible information, arising
from or relating or pertaining to any of the foregoing to the extent related to
the Program; provided that Account Documentation shall not include NMG’s or any
of its Affiliates’ register tapes, invoices, sales or shipping slips, delivery
or other receipts or other indicia of the sale of NMG Goods and Services, any
reports, analyses or other documentation prepared by any of the NMG Companies or
their Affiliates for use in the retail business operated by the NMG Companies
and their Affiliates regardless of whether derived in whole or in part from the
Account Documentation or any other document not directly related to the Credit
Card Business.

 

“Accountants” has the meaning set forth in Section 12.3 hereof.

 

“Affiliate” means, with respect to any Person, each Person that controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, “control” of a Person means the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.

 

“Agreement” means this Program Agreement, together with all of its schedules and
exhibits, as modified, altered, supplemented, amended and/or restated from time
to time.

 

“Applicable Law” means all applicable federal, state and local laws (including
common law), statutes, regulations, written regulatory guidance, orders or
directives, as may be amended and in effect from time to time during the Term,
including (i) the Truth in Lending Act and Regulation Z; (ii) the Equal Credit
Opportunity Act and Regulation B; (iii) the Fair Debt Collection Practices Act;
(iv) the Fair Credit Reporting Act; (v) the Gramm-Leach-Bliley Act; (vii) the
USA PATRIOT Act; and (vii) the Unfair and Deceptive Trade Practices Act, and, in
each case, any implementing regulations or interpretations issued thereunder.

 

“Applicable Order” means, with respect to any Person, a judgment, injunction,
writ, decree or order of any Governmental Authority, in each case legally
binding on that Person or on any material amount of its property.

 

“Application” means the credit application that must be completed and submitted
in order to establish an Account (including any such application submitted at
the POS, by phone or via the Internet).

 

“Approved Ancillary Products” means any Credit Card enhancement and other
products (other than the NMG Credit Cards and the Non-Card Payment Plans)
approved by the Management Committee for offering under the Program from time to
time.

 

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“Average Interest Free Receivables” means, for any Fiscal Year, the average for
each Fiscal Month occurring in such Fiscal Year of the Fiscal Month-end Billed
Cardholder Debt under Private Label Accounts that do not bear interest (other
than CCCS Accounts and Accounts for which a payment plan was instituted in
connection with the servicing and collection thereof).

 

“Average Private Label Receivables” means, for any Fiscal Year, the average for
each Fiscal Month occurring in such Fiscal Year of the Fiscal Month-end Billed
Cardholder Debt under Private Label Accounts.

 

“Bank” has the meaning set forth in the preamble hereof.

 

“Bank Companies” means, collectively, Bank and Primary Servicer.

 

“Bank Event of Default” means the occurrence of any one of the events listed in
Section 15.2 hereof or an Event of Default where a Bank Company is the
defaulting Party.

 

“Bank Guaranty” means the Guaranty by Bank Parent of Bank’s and Primary
Servicer’s obligations under this Agreement and the Servicing Agreement.

 

“Bank Licensed Marks” means the trademarks, tradenames, service marks, logos and
other proprietary designations of Bank listed on Schedule 1.1(a) and licensed to
the NMG Companies under Section 10.2 hereof.

 

“Bank Matters” has the meaning set forth in Section 3.2(g) hereof.

 

“Bank Parent” means HSBC Finance Corporation, a Delaware corporation.

 

“Bank Systems” means Systems owned, leased or licensed by and operated by or on
behalf of Bank or any of its Affiliates.

 

“Bankruptcy Code” means Title 11 of the United States Code, as amended, or any
other applicable state or federal bankruptcy, insolvency, moratorium or other
similar law and all laws relating thereto.

 

“BG” has the meaning set forth in the preamble hereof.

 

“Billed Cardholder Debt” means (i) all amounts charged and owing to Bank by
Cardholders that were billed with respect to the Private Label Accounts
(including principal balances from outstanding charges, charges for Approved
Ancillary Products, finance charges, NSF fees, late charges, pay-by-phone fees
and any other fees and charges), less (ii) the amount of any credit balances
owing by Bank to such Cardholders, including in respect of any payments and any
credits associated with returns of NMG Goods and Services and other credits and
adjustments, in each case, that were reflected in the Billing Statement with
respect to the Account.

 

“Billing Cycle” means the interval of time between regular periodic Billing
Dates for an Account.

 

3

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“Billing Date” means, for any Account, the day as of when the Account is billed.

 

“Billing Statement” means a summary of Account credit and debit transactions for
a Billing Cycle including a descriptive statement covering purchases, charges,
past due account information and Loyalty Program information.

 

“Business Day” means any day, other than (i) a Saturday or Sunday, or (ii) a day
on which financial institutions in New York or Texas are authorized by law to
close; provided that for purposes of Sections 8.4 and 9.1, “Business Day” shall
exclude any day on which the Fedwire system is closed.

 

“Card Association” means American Express, Visa International Inc., Visa
U.S.A., Inc. or MasterCard International Inc., or any other payment system that
is generally acceptable to sellers of goods and services.

 

“Cardholder” means any Person who has been issued an NMG Credit Card or Non-Card
Payment Plan (including any guarantor of the Account related to such NMG Credit
Card) and includes authorized user(s).

 

“Cardholder Agreement” means the agreement between Bank and a Cardholder (and
any replacement of such agreement), governing the use of an Account, together
with any amendments, modifications or supplements that now or hereafter may be
made to such Cardholder Agreement (and any replacement of such agreement).

 

“Cardholder Data” means all personally identifiable information about a
Cardholder (A) received by or on behalf of Bank (including by NMG Servicer in
its capacity as such) in connection with the Cardholder’s application for use of
an NMG Credit Card, Non-Card Payment Plan or Account or (B) otherwise obtained
by or on behalf of Bank (including information obtained by NMG Servicer in its
capacity as such) for inclusion in its database of Cardholder information
(including information about a Cardholder purchased by Bank), including all
transaction and experience information collected by or on behalf of Bank
(including by NMG Servicer in its capacity as such) with regard to each purchase
charged by a Cardholder using his or her NMG Credit Card, Non-Card Payment Plan
or Account (including NMG Charge Transaction Data with respect to charges on
Private Label Accounts and transaction and experience information with respect
to charges on Non-Store Accounts).

 

“Cardholder Documentation” means, with respect to the Accounts, all
Applications, Cardholder Agreements, NMG Credit Cards, Loyalty Cards and Billing
Statements relating to such Accounts.

 

“Cardholder Indebtedness” means all amounts charged and owing to Bank by
Cardholders with respect to Accounts (including principal balances from
outstanding charges, charges for Approved Ancillary Products, finance charges,
NSF fees, late charges, pay-by-phone fees and any other fees and charges),
whether or not billed, less the amount of any credit balances owing by Bank to
Cardholders, including in respect of any payments and any credits associated
with returns of goods and/or services and other credits and adjustments, whether
or not billed.

 

4

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“Cardholder List” means any list (whether in hardcopy, magnetic tape, electronic
or other form) that identifies Cardholders, including any such listing that sets
forth the names, addresses, email addresses (as available), telephone numbers or
social security numbers of any or all Cardholders.

 

“Change of Control” means, with respect to NMG or Bank, as the case may be, (the
“subject Person”), (i) a Person or group becomes the “beneficial owner” (as
defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934
(except that a Person or group shall be deemed to own all securities it has the
right to acquire)), directly or indirectly, of more than fifty percent (50%) of
the total voting power of the subject Person, (ii) such subject Person merges,
consolidates, acquires, is acquired by, or otherwise combines with any other
Person in a transaction in which the subject Person is not the surviving entity
or which constitutes a “merger of equals”, it being understood that a subject
Person shall not be considered the “surviving entity” of a transaction if either
(A) the members of the Board of Directors of the subject Person immediately
prior to the transaction constitute less than a majority of the members of the
Board of Directors of the ultimate parent entity of the entity surviving or
resulting from the transaction or (B) the Persons who were beneficial owners of
the outstanding voting securities of the subject Person immediately prior to the
transaction beneficially own less than fifty percent (50%) of the total voting
power of the ultimate parent entity of the entity surviving or resulting from
the transaction, or (iii) the subject Person sells all or substantially all of
its assets to a Person that is not an Affiliate of the subject Person.

 

“Closing” has the meaning set forth in the Purchase Agreement.

 

“Co-Branded Credit Card” means a Credit Card that bears a NMG Licensed Mark and
the trademarks, tradenames, service marks, logos and other proprietary
designations of a Card Association, including any Dual-Line Credit Card.

 

“Comparable Partner Programs” means from time to time other major Credit Card
programs of Bank designated annually by the Management Committee that are
comparable to the Program in terms of program size, public profile and brand
image. As of the date hereof, the “Comparable Partner Programs” include those
listed on Schedule 1.1(b).

 

“Competing Retail Programs” means from time to time major retailer Credit Card
programs other than the Program, whether or not Bank or any of its Affiliates
participate in such other programs.

 

“Competitive” with respect to any feature or aspect of the Program, means that
such feature or aspect is both (i) no less favorable to the NMG Companies than
comparable aspects and features of the Comparable Partner Programs and
(ii) consistent and competitive with the comparable aspects and features of the
Competing Retail Programs (to the extent publicly known in the case of Competing
Retail Programs in which neither of the Parties or their respective Affiliates
are participants).

 

“Confidential Information” has the meaning set forth in Section 13.1 hereof.

 

5

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“CPI” means the Consumer Price Index for All Urban Consumers (CPI-U) for the
U.S. City Average for All Items, as published by the United States Department of
Labor Bureau of Labor Statistics, or any successor organization.

 

“Credit Card” means a credit card pursuant to which the cardholder or authorized
user may purchase goods and services, obtain cash advances or convenience
checks, and transfer balances through open-end revolving credit, commonly known
as a credit or charge card; provided that the term does not include: (i) any
gift card; (ii) any debit card, stored value card, electronic or digital cash
card or any other card that does not provide the holder thereof with the ability
to obtain credit other than through an overdraft line or similar feature; or
(iii) any card issued to the holder of a securities brokerage account that
allows the holder to obtain credit through a margin account.

 

“Credit Card Business” means the business relating to the ownership,
administration and management of the Accounts and Receivables (including the
extension of credit to Cardholders, the processing of transactions under the
Accounts and the servicing of the Accounts) and, following the Effective Date,
includes all activities relating to the Program established pursuant to this
Agreement.

 

“Credit Card Production Services” has the meaning set forth in the Servicing
Agreement.

 

“Customer Management System” means the Systems developed by the Bank with the
features set forth on Schedule 7.6.

 

“Development Period” has the meaning set forth in Section C of Schedule
2.2(c)(i).

 

“Disclosing Party” has the meaning set forth in Section 13.1(d) hereof.

 

“Documentation Services” has the meaning set forth in the Servicing Agreement.

 

“Documentation Services Transition Date” has the meaning set forth in
Section 7.2(d) hereof.

 

“Dual-Line Card Deadline” has the meaning set forth in Section C of Schedule
2.2(c)(i)..

 

“Dual-Line Credit Card” means a Credit Card that (i) bears a NMG Licensed Mark
and the trademarks, tradenames, service marks, logos and other proprietary
designations of a Card Association and (ii) is linked to a Non-Store Account and
a Private Label Account.

 

“Dual-Line Testing Date” has the meaning set forth in Section C of Schedule
2.2(c)(i).

 

“Effective Date” means the Closing Date as the term is defined in the Purchase
Agreement.

 

“Event of Default” means the occurrence of any one of the events listed in
Section 15.1 hereof.

 

“Fair Market Value” has the meaning set forth in Section 17.3 hereof.

 

6

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“Federal Funds Rate” means the offered rate as reported in The Wall Street
Journal in the “Money Rates” section for reserves traded among commercial banks
for overnight use in amounts of one million dollars or more or, if no such rate
is published for a day, the rate published for the preceding Business Day,
calculated on a daily basis based on a 365 day year.

 

“Finance Charge Reversal Percentage” means, with respect to any Fiscal Year, an
amount, expressed as a percentage, equal to (i) the aggregate amount of all
finance charges that had been assessed on the Accounts and then reversed by NMG
during such Fiscal Year, divided by (ii) the aggregate amount of all finance
charges assessed on the Accounts during such Fiscal Year; provided, however,
that, for purposes of arriving at the foregoing percentage, the finance charges
assessed and reversed on any Accounts that have undergone any change in any of
the terms set forth in Schedule 4.7 in such Fiscal Year shall be excluded from
both the numerator and denominator during the period of one hundred twenty (120)
days after the effective date of such terms change.

 

“Fiscal Month” means each four (4) or five (5) week period designated as such in
the calendar published by the National Retail Federation for retailers on a
Fiscal Year-reporting basis; provided that the Fiscal Month in which the
Effective Date occurs shall be deemed to begin on the Effective Date.

 

“Fiscal Quarter” means each three (3) Fiscal Month period set forth in the
calendar published by the National Retail Federation for retailers on a Fiscal
Year-reporting basis; provided that the Fiscal Quarter in which the Effective
Date occurs shall be deemed to begin on the Effective Date.

 

“Fiscal Year” means the fiscal year set forth in the calendar published by the
National Retail Federation setting forth the fiscal year for retailers on a
52/53 week fiscal year ending on the Saturday closest to July 31; provided that
the first Fiscal Year under this Program shall be the period beginning on the
Effective Date and ending on the Saturday closest to July 31, 2006.

 

“Force Majeure Event” has the meaning set forth in Section 19.22 hereof.

 

“Future Subcontractors” has the meaning set forth in Section 6.2(g)(i) hereof.

 

“GAAP” means United States generally accepted accounting principles,
consistently applied.

 

“Governmental Authority” means any federal, state or local domestic, foreign or
supranational governmental, regulatory or self-regulatory authority, agency,
court, tribunal, commission or other governmental, regulatory or self-regulatory
entity.

 

“Gross Receivables” means amounts owing (net of credit balances) from
cardholders with respect to accounts in a Credit Card portfolio (including
outstanding loans, cash advances and other extensions of credit; billed or
unbilled finance charges and late charges; and any other billed or unbilled
fees, charges and interest assessed on such accounts).

 

“High Collar” has the meaning set forth on Schedule 1.1(f) hereto

 

7

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“Indemnified Party” has the meaning set forth in Section 18.3 hereof.

 

“Indemnifying Party” has the meaning set forth in Section 18.3 hereof.

 

“Initial Term” has the meaning set forth in Section 16.1 hereof.

 

“Inserts” has the meaning set forth in Section 5.3 hereof.

 

“In-Store Payment” means any payment on an Account made in a retail store owned
or operated by NMG or any of its Subsidiaries by a Cardholder or a person acting
on behalf of a Cardholder.

 

“Intellectual Property” means, on a worldwide basis, all intellectual property,
including (i) rights associated with works of authorship, including copyrights,
moral rights and mask-works; (ii) trademarks, service marks and other source
indicators and the goodwill associated therewith; (iii) trade secret rights;
(iv) patents, designs, algorithms and other industrial property rights;
(v) other intellectual and industrial property rights of every kind and nature,
however designated, whether arising by operation of law, contract, license or
otherwise; and (vi) applications, registrations, renewals, extensions,
continuations, divisions or reissues thereof now or hereafter in force
(including any rights in any of the foregoing).

 

“Interchange Fees” means the interchange fees or interchange reimbursement fees
paid or payable to Bank (i) by the Card Association with respect to the Accounts
or (ii) in connection with Cardholder usage of the Accounts.

 

“Internet Services” has the meaning set forth in Section 4.8.

 

“Joint Marketing Fund” has the meaning set forth in Section 5.2(d) hereof.

 

“Joint Marketing Commitment” means the obligation of the Bank to fund the amount
per Fiscal Year set forth on Section B of Schedule 5.2 for the purposes set
forth in Section 5.2(d).

 

“Knowledge” means, with respect to any of the NMG Companies or Bank Companies,
the actual knowledge of the executive officers of the organization who have
managerial responsibility for the Program, after reasonable inquiry.

 

“Late Fee Reversal Percentage” means, with respect to any Fiscal Year, an amount
equal to (i) the aggregate amount of all late fees that had been assessed on the
Accounts and then reversed by NMG or its Subsidiaries during such Fiscal Year,
divided by (ii) the aggregate amount of all late fees assessed on the Accounts
during such Fiscal Year; provided, however, that, for purposes of arriving at
the foregoing percentage, the late fees assessed and reversed on any Accounts
that have undergone any change in any of the terms set forth on Schedule 4.7 in
such Fiscal Year shall be excluded from both the numerator and denominator
during the period of one hundred twenty (120) days after the effective date of
such terms change.

 

“Legal Opinion” means a written opinion of counsel to a Party in form and
substance reasonably acceptable to the other Party and given by counsel (which,
subject to the proviso below may be internal counsel) selected by the Party
obtaining the opinion and reasonably

 

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acceptable to the other Party; provided that the Party receiving any such
opinion may require (and it shall be deemed reasonable to so require) any
opinion rendered pursuant to this Agreement to be rendered by outside counsel
selected by the Party obtaining the opinion and reasonably acceptable to the
Party receiving the opinion.

 

“Licensee” means any Person authorized by NMG or any of its Subsidiaries to
operate in and sell NMG Goods and Services from the NMG Channels under the NMG
Licensed Marks, solely with respect to such Person’s or any of its Subsidiaries’
operation in and sale of NMG Goods and Services from the NMG Channels or under
the NMG Licensed Marks.

 

“Low Collar” has the meaning set forth on Schedule 1.1(f) hereto.

 

“Loyalty Card” means a card issued for the Program pursuant to any Loyalty
Program providing for access to an Account, including the Loyalty Cards listed
in Section B of Schedule 1.1(c) hereto.

 

“Loyalty Programs” means a points-based system that rewards Credit Card usage or
customer spending with points that may be redeemed for goods and/or services.

 

“Management Committee” has the meaning set forth in Section 3.2 hereof.

 

“Manager” has the meaning set forth in Section 3.3(a) hereof.

 

“Marketing Plan” means the document that outlines the objectives, strategies and
tactics of new account solicitation, usage and awareness programs for the
applicable Fiscal Year.

 

“Merchant Discount” means a discount rate generally applied against settlements
due to merchants for transactions with respect to the use of a Credit Card,
which includes the Interchange Fees as well as any other transaction fees.

 

“Monthly Settlement Sheet” has the meaning set forth in Section 7.1(b) hereof.

 

“Net Credit Sales” means, (i) for any Business Day, an amount equal to (A) gross
credit sales on Accounts (including gift card sales, sales tax, delivery
charges, Licensee sales and any other amount included in the full amount charged
by Cardholders) reflected in the NMG Charge Transaction Data since the preceding
Business Day, minus (B) the sum of credits for returned goods and cancelled
services and other credits (such as concessions, discounts and adjustments) on
Accounts reflected in the NMG Charge Transaction Data since the preceding
Business Day and (ii) for any Fiscal Year, an amount equal to (A) gross credit
sales on Accounts (including gift card sales, sales tax, delivery charges,
Licensee sales and any other amount included in the full amount charged by
Cardholders) reflected in the NMG Charge Transaction Data since the preceding
Fiscal Year, minus (B) the sum of credits for returned goods and cancelled
services and other credits (such as concessions, discounts and adjustments) on
Accounts reflected in the NMG Charge Transaction Data since the preceding Fiscal
Year.

 

“Net Yield” means, with respect to any Fiscal Year, the dollar amount equal to
(a) the sum of assessed finance charges and late fees under the Program during
such Fiscal Year, minus (b) the sum of all concessions, reversals and write-offs
of such finance charges and late fees

 

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during such Fiscal Year minus (c) the aggregate amount of all other Billed
Cardholder Debt (other than that referred to in clause (b)) written-off during
such Fiscal Year, net of all recoveries of Billed Cardholder Debt during such
Fiscal Year.

 

“New Bank Mark” has the meaning set forth in Section 10.2(b) hereof.

 

“New NMG Mark” has the meaning set forth in Section 10.1(b) hereof.

 

“New Portfolio” has the meaning set forth in Section 14.1 hereof

 

“NMG” has the meaning set forth in the preamble hereof.

 

“NMG Channels” means (i) all retail establishments owned or operated by NMG or
its Affiliates (including Licensee departments therein), (ii) all websites owned
or operated by NMG or its Affiliates or their Licensees, and (iii) all mail
order, catalog and other direct access media that are owned or operated by NMG
or its Affiliates or their Licensees.

 

“NMG Charge Transaction Data” means the transaction information (in the form of
electronic information) with regard to a charge on an Account with respect to
each purchase of NMG Goods and Services or Approved Ancillary Products by a
Cardholder on credit and each return of NMG Goods and Services or Approved
Ancillary Products for credit.

 

“NMG Companies” has the meaning set forth in the preamble hereof.

 

“NMG Credit Card” means a (i) Private Label Credit Card or (ii) Dual-Line Credit
Card after Dual-Line Credit Cards are offered pursuant to the terms of this
Agreement;

 

“NMG Event of Default” means the occurrence of any one of the events listed in
Section 15.3 hereof or an Event of Default where an NMG Company is the
defaulting Party.

 

“NMG Goods and Services” means the products and services sold, charged or
offered by or through NMG Channels, including for personal, household, or
business purposes, and including accessories, delivery services, protection
agreements, gift cards, shipping and handling, and work or labor to be performed
for the benefit of customers of the NMG Channels.

 

“NMG Licensed Marks” means the trademarks, tradenames, service marks, logos and
other proprietary designations of the NMG Companies listed on Schedule
1.1(d) and licensed to Bank by the NMG Companies under Section 10.1 hereof.

 

“NMG Marketing Commitment” means the obligation of the Bank to fund the amount
per Fiscal Year set forth in Section B of Schedule 5.2 for the purposes set
forth in Section 5.2(b).

 

“NMG Marketing Fund” means an accounting entry on the books of Bank representing
the unused portion of the NMG Marketing Commitment, as set forth in
Section 5.2(a).

 

“NMG Matters” has the meaning set forth in Section 3.2(f) hereof.

 

“NMG Prospect List” has the meaning set forth in Section 6.3(b) hereof.

 

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“NMG Servicer” means NMG or such of its Affiliates responsible for performing
the Services referred to in the Servicing Agreement.

 

“NMG Shopper” means any Person who makes purchases of NMG Goods and Services or
otherwise uses or accesses NMG Channels.

 

“NMG Shopper Data” means all personally identifiable information regarding an
NMG Shopper that is obtained by (or on behalf of) NMG or any of its Affiliates
at any time (including prior to the date hereof), including personally
identifiable information obtained in connection with such NMG Shopper making a
purchase of NMG Goods and Services.

 

“NMG Systems” means Systems owned, leased or licensed by and operated by, or on
behalf of, NMG or its Affiliates.

 

“NMG Transaction” means any purchase, exchange or return of NMG Goods and
Services by a Cardholder using an Account.

 

“Nominated Purchaser” has the meaning set forth in Section 17.2(a) hereof.

 

“Non-Card Payment Plan” means the payment plans referred to in Section A of
Schedule 1.1(e) and such other payment plans not associated with a Credit Card
as may be offered by NMG pursuant to which the obligor thereunder may purchase
NMG Goods and Services through revolving credit or pursuant to a retail
installment sale arrangement.

 

“Non-Store Account” means an Account linked to any Dual-Line Credit Card and
usable solely for the purpose of financing purchases (and all fees and charges
relating thereto) of goods and services through sellers or channels other than
the NMG Channels.

 

“Operating Procedures” means the operating procedures for the Program in effect
from time to time in accordance with Section 4.1(b) hereof.

 

“Parties” means the collective reference to the NMG Companies and the Bank
Companies; and unless the context otherwise requires, “Party” means either the
collective reference to the NMG Companies, on the one hand, or the Bank
Companies, on the other hand.

 

“Person” means any individual, corporation, business trust, partnership,
association, limited liability company or similar organization, or any
Governmental Authority.

 

“POS” means point of sale.

 

“Previously Disclosed” has the meaning set forth in the Purchase Agreement.

 

“Privacy Policy” means the privacy policy and associated disclosures to be
provided by Bank to Cardholders in connection with the Program.

 

“Private Label Accounts” means (i) the Accounts linked to Private Label Credit
Cards and (ii) Accounts linked to Dual-Line Credit Cards solely for the purpose
of financing the purchase of NMG Goods and Services (and all fees and charges
relating thereto) through any NMG Channel.

 

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“Private Label Credit Card” means a Credit Card that bears an NMG Licensed Mark
and may be used solely to finance purchases of NMG Goods and Services through
any NMG Channel, including the Private Label Credit Cards listed in Section B of
Schedule 1.1(e). Each Private Label Credit Card is linked to solely a Private
Label Account (and not a Non-Store Account).

 

“Program” means the program established pursuant to this Agreement.

 

“Program Assets” means the Accounts, Account Documentation, Cardholder Data,
Solicitation Materials and all Cardholder Indebtedness (whether held by Bank or
a third party).

 

“Program Fee Percentage” has the meaning set forth on Schedule 9.1(a)(i) hereof.

 

“Program Loyalty Program” means the InCircle Rewards Program and the Bergdorf
Goodman Rewards Program described in Section A of Schedule 1.1(c) or any other
annual points-based loyalty program implemented pursuant to Article III from
time to time and tied to the NMG Credit Cards.

 

“Program Objectives” has the meaning set forth in Section 3.1 hereof.

 

“Program Purchase Date” has the meaning set forth in Section 17.2(c) hereof.

 

“Program Website” has the meaning set forth in Section 4.8(a) hereof.

 

“Purchase Agreement” has the meaning set forth in the recitals hereof.

 

“Receiving Party” has the meaning set forth in Section 13.1(d) hereof.

 

“Renewal Term” has the meaning set forth in Section 16.1 hereof.

 

“Retail Merchants” has the meaning set forth in Section 8.1 hereof.

 

“Risk Management Policies” means the underwriting and risk management policies,
procedures and practices applicable to the Program and adopted in accordance
with the terms of this Agreement, including policies, procedures and practices
for credit and Account openings, transaction authorization, collections, credit
line assignment, increases and decreases, over-limit decisions, Account
closures, payment crediting and charge-offs.

 

“Sales Tax Refunds” means refunds, rebates, credits or deductions of sales and
use tax by any taxing authority in respect of an Account, and all allowable
interest relating thereto.

 

“Second-Look Credit Card Program” has the meaning set forth in
Section 2.2(b) hereof.

 

“Services” means the services required to be performed by NMG pursuant to the
Servicing Agreement or the Primary Servicer pursuant to Article VII hereof.

 

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“Servicing Agreement” means the Servicing Agreement, dated as of the Effective
Date, between NMG and Bank, in the form set forth as Annex E to the Purchase
Agreement.

 

“SLA” means each individual performance standard set forth on Schedule
7.3(a) and Schedule 2.04(a) of the Servicing Agreement.

 

“Solicitation Materials” means documentation, materials, artwork and copy, in
any format or media (including television and radio), used to promote or
identify the Program to Cardholders and potential Cardholders, including direct
mail solicitation materials and coupons.

 

“Special Discounts” means non-POS discounts that are given to the customers
specified in Schedule 1.1(g).

 

“Subsidiary” when used with respect to any Person, means another Person, an
amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its board of
directors or similar governing body (or if there are not such voting interests,
more than fifty percent (50%) of the equity interest of which) is owned directly
or indirectly by such first Person or by another Subsidiary of such Person.

 

“Systems” means software, databases, computers, systems and networks.

 

“Systems Transition Date” has the meaning set forth in Section 7.4(a) hereof.

 

“Term” means the Initial Term and each Renewal Term.

 

“Termination Period” means the period beginning on the earlier of the date of
expiration of this Agreement or the date of any notice of termination pursuant
to Article XV and ending on either (i) the date the Program Assets are
repurchased pursuant to Section 17.2, if NMG or a Nominated Purchaser purchases
the Program Assets, or (ii) the date that either (A) the NMG Companies deliver
written notice to Bank of their election not to purchase the Program Assets or
(B) the right of the NMG Companies to purchase the Program Assets expires in
accordance with the terms of this Agreement.

 

“Trademark Style Guide” means any rules governing the manner of usage of
trademarks, tradenames, service marks, logos and other proprietary designations.

 

“Unapproved Matter” has the meaning set forth in Section 3.2(e)(ii)(B) hereof.

 

“Yearly Settlement Sheet” has the meaning set forth in Section 7.1(c) hereof.

 

1.2 Miscellaneous. As used herein: (a) all references to the plural number shall
include the singular number (and vice versa); (b) all references to “herein,”
“hereunder,” “hereof” or like words shall refer to this Agreement as a whole and
not to any particular section, subsection or clause contained in this Agreement;
(c) all references to “include,” “includes” or “including” shall be deemed to be
followed by the words “without limitation”; (d) unless specified as Business
Days or Fiscal Months, all references to days or months shall be deemed
references to calendar days or months; and (e) all references to “$” or
“dollars” shall be deemed references to United States dollars.

 

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ARTICLE II

ESTABLISHMENT OF THE PROGRAM

 

2.1 Credit Program.

 

(a) General. Beginning as of the Effective Date, Bank shall offer the NMG Credit
Cards and the Non-Card Payment Plans. Bank shall promptly open a new Account and
issue a new NMG Credit Card and/or Non-Card Payment Plan with respect to each
Application approved in accordance with the Risk Management Policies. Following
the issuance of Dual-Line Credit Cards by Bank and NMG under the Program, Bank
shall promptly open a new Account and issue a new Dual-Line Credit Card with
respect to each Application approved in accordance with the Risk Management
Policies. To the extent approved in accordance with the terms of this Agreement,
the Program shall include and the Bank shall offer such other Approved Ancillary
Products and other payment products as shall be incorporated in the Program in
the future.

 

(b) Notice to Cardholders. Substantially concurrently with the Effective Date,
Bank and NMG shall prepare jointly a form or forms of notices to each Cardholder
to the effect that such Cardholder’s Account has been acquired by Bank and, if
applicable, also containing any change of terms notices with respect to any
change of terms that the Parties mutually agree to implement. Such notice shall
be in the form approved by both Parties, which approval will not be unreasonably
withheld or delayed, and will comply with all requirements of Applicable Law.
Bank shall issue new Private Label Credit Cards in accordance with Schedule
2.1(b) and shall maintain existing Account numbers on the Accounts. The costs of
preparation and mailings of such notices and new Private Label Credit Cards
shall be borne by Bank. The mailings shall be made in such manner and at such
time as Bank and NMG may mutually agree.

 

2.2 Exclusivity.

 

(a) General. Except as otherwise provided in this Section 2.2 and without
limiting NMG’s right to arrange the purchase of the Program Assets by a
Nominated Purchaser pursuant to Section 17.2, during the Term, each of the NMG
Companies agrees that it shall not, by itself or in conjunction with or pursuant
to agreements with any bank or other Credit Card issuer, offer or market in the
United States (i) a Private Label Credit Card, (ii) a Co-Branded Credit Card or
(iii) a Non-Card Payment Plan, in each case, other than through the Program.

 

(b) Second-Look Credit Card Program. Notwithstanding Section 2.2(a), NMG and its
Affiliates shall have the right at any time during the Term to establish a
program (a “Second-Look Credit Card Program”) for (i) issuing Credit Cards,
including Private Label Credit Cards and Dual-Line Credit Cards, using the NMG
Licensed Marks, or (ii) opening Non-Card Payment Plans, in each case, to
customers whose Applications have been declined by Bank; provided, however, that
Bank shall have a right of first offer to develop the Second-Look Credit Card
Program as follows. NMG shall provide notice to Bank indicating the intention of
NMG or its applicable Affiliate(s) to establish the Second-Look Credit Card
Program. Not later than the 20th day following receipt of the notice by Bank,
Bank may make an offer to NMG with respect to the establishment of the
Second-Look Credit Card Program, which offer shall remain open for a

 

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period of not less than forty-five (45) days. NMG shall be under no obligation
to accept such offer or to provide Bank with any right to match any offer
received by NMG from any third party. NMG may elect to (A) accept the offer made
by Bank, (B) establish the Second-Look Credit Card Program directly or through
any of its Affiliates, or (C) enter into an arrangement with any third party
Credit Card issuer providing for the establishment of a Second-Look Credit Card
Program to be issued by such issuer; provided that NMG may not enter into any
such arrangement with any such third party Credit Card issuer unless the
financial terms and conditions offered to NMG by such Credit Card issuer are
substantially more favorable to NMG in the aggregate to the terms and conditions
offered to NMG by Bank. If NMG elects to establish a Second-Look Credit Card
Program pursuant to clause (B) or (C) above, upon the request of any NMG
Company, Bank shall forward to the NMG Companies or a provider of secondary
financing the Applications received by Bank with respect to such customers and
shall cooperate in good faith with the NMG Companies in order to facilitate the
issuance of Credit Cards or Non-Card Payment Plans, as applicable, to such
customers pursuant to such program.

 

(c) Dual-Line/Co-Branded Program.

 

(i) Beginning as of the Effective Date, Bank, at its own expense, shall perform
the product design and consumer research set forth in Section A of Schedule
2.2(c)(i) of Dual-Line Credit Card products designated in such schedule or
otherwise approved by the Management Committee. Bank shall use its best efforts
to ensure that the personnel used to conduct such product design and consumer
research has relevant experience in the department store industry, comparable
customer demographics and loyalty programs and that the other resources
(including Systems and other technology resources) used to conduct such research
are Competitive. Bank shall complete the product design and consumer research
testing set forth in Section A of Schedule 2.2(c)(i) by the Dual-Line Testing
Date.

 

(ii) In the event that NMG decides to test Dual-Line Credit Cards following such
consumer research, NMG shall provide Bank notice of such desire. Within the
Development Period, Bank shall commence the testing set forth in Section B of
Schedule 2.2(c)(i) of Dual-Line Credit Cards having the terms set forth in
Schedule 2.2(c)(ii) and such other and/or additional terms as may be approved by
the Management Committee. In the event that Bank fails to commence offering
Dual-Line Credit Cards on the terms set forth in Schedule 2.2(c)(ii) by the
Dual-Line Card Deadline or otherwise breaches any of its obligations pursuant to
this Section 2.2, NMG shall be free to issue Co-Branded Credit Cards itself or
through an Affiliate or enter into an arrangement with any third party to issue
Co-Branded Credit Cards. Upon such an event, the restrictions of
Section 2.2(a) shall not apply to any such issuance of Co-Branded Credit Cards.

 

(d) Acceptance of Non-NMG Credit Cards. The NMG Companies’ right to accept
Credit Cards other than NMG Credit Cards shall be limited as set forth in
Section A of Schedule 2.2(d).

 

(e) Retail Portfolio Acquisition. Notwithstanding Section 2.2(a), Bank’s sole
rights with respect to Credit Card portfolios acquired by NMG during the Term
are set forth in Article XIV hereof.

 

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(f) Other Products. Except to the extent expressly set forth in this
Section 2.2, NMG and its Affiliates shall not be restricted in any way with
respect to any activities or payment products. For the avoidance of doubt, NMG
and its Affiliates shall be free to do any of the following at any time:

 

(i) issue, offer or market any payment products not expressly covered in this
Section 2.2 (e.g., NMG and its Affiliates shall not be restricted from issuing,
accepting or otherwise taking action with respect to (A) gift cards, pre-paid
cards or stored value cards, or (B) debit cards, in each case, whether or not
bearing an NMG Licensed Mark);

 

(ii) participate in rewards programs and promotions by card associations or for
cards not branded with any of the NMG Licensed Marks (e.g., American Express
Membership Rewards); or

 

(iii) offer its customers rewards or promotional programs or other value
propositions, including Loyalty Programs, of any type; provided that, except to
the extent approved by a majority of the members constituting the full
Management Committee (including any vacancies), (A) the Program Loyalty Programs
shall remain the primary Loyalty Programs for the NMG Channels and any changes
to the Program Loyalty Programs shall be made in accordance with Article III,
and (B) except to the extent set forth in Section B of Schedule 2.2(d), no
Loyalty Program other than the Program Loyalty Programs shall (x) award points
based on the participant’s choice of tender or payment method or (y) provide
awards on an annual basis upon reaching specific spending tiers.

 

ARTICLE III

PROGRAM MANAGEMENT AND ADMINISTRATION

 

3.1 Program Objectives. In performing its responsibilities with respect to the
management and administration of the Program, each Party shall be guided by the
following Program objectives (the “Program Objectives”):

 

(a)           to enhance the experience of NMG Shoppers;

 

(b)          to increase retail sales of the NMG Companies;

 

(c)           to maintain or improve customer insight through data acquisition
and analysis;

 

(d)          to maximize Program economics while minimizing operational costs or
complexity; and

 

(e)           to leverage the Program to identify existing and potential NMG
Shoppers, develop and deepen relationships with NMG Shoppers and finance retail
sales growth.

 

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3.2 Management Committee.

 

(a) Establishment of the Management Committee. NMG, on behalf of the NMG
Companies, and Bank hereby establish a committee (the “Management Committee”) to
oversee and review the conduct of the Program pursuant to this Agreement and to
perform any other action that, pursuant to any express provision of this
Agreement, requires its action.

 

(b) Subcommittees of the Management Committee. The Management Committee may
designate additional committees (which may include persons who are not members
of the Management Committee) with responsibility for overseeing and
administering specified aspects of the Program (e.g., marketing, underwriting
and risk management); provided, however, that approval of any matter expressly
required by this Agreement to be approved by the Management Committee shall not
be delegated to any subcommittee or other body.

 

(c) Composition of the Management Committee. The Management Committee shall
consist of eight (8) members, of whom four (4) members shall be nominated by NMG
(the “NMG Designees”) and four (4) members shall be nominated by Bank (the “Bank
Designees”). The initial NMG Designees and Bank Designees will be designated
prior to the Effective Date. Each Party shall designate its Managers to serve as
one of its designees on the Management Committee. Each Party shall at all times
have as one of its designees the Person with overall responsibility for the
performance of the Program within his or her respective corporate organization,
which in the case of Bank, shall be the Chief Financial Officer or Chief
Operating Officer of the private label Credit Card business of Bank. NMG shall
designate among its designees to the Management Committee the senior executive
of NMG responsible for the Program Loyalty Programs and at least one executive
officer of NMG. Bank and NMG may each substitute its designees to the Management
Committee from time to time so long as their designees continue to satisfy the
above requirements, provided that each Party shall provide the other Party with
as much prior notice of any such substitution as is reasonably practicable under
the circumstances.

 

(d) Functions of the Management Committee. The Management Committee shall:

 

(i)

oversee Program marketing activities, including review and approval of the
Marketing Plan;

 

 

(ii)

review collection strategies and collection metrics;

 

 

(iii)

monitor activities of competitive programs and identify implications of market
trends;

 

 

(iv)

approve the use of any third party (e.g., subcontractor or outsourced service
provider), other than any Affiliate of NMG or Bank, as the case may be, to
perform any of the obligations to be performed by Bank or the NMG Companies
under the Program, in each case, except to the extent (x) subcontracted or
outsourced as of the Effective Date or (y) such subcontracted or outsourced
service would not involve direct contact between such third party and any
Cardholder (i.e., in person, via telephone or in writing) it being agreed and
understood that the subcontracting or outsourcing of such services (which may
include print shops and mail vendors) would be within the sole discretion of the
respective Party who elects to subcontract or outsource such service;

 

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(v)

evaluate and approve changes to any of the following:

 

 

 

(A)

offering of new Credit Cards or Approved Ancillary Products, including
Co-Branded Credit Cards, Non-Card Payment Plans or other payment products;

 

 

 

 

(B)

changes in Account terms, including any of the terms set forth on Schedule 4.7;

 

 

 

 

(C)

changes to the Risk Management Policies (which shall be submitted to the
Management Committee together with the expected pro forma effects of such
changes on the Program);

 

 

 

 

(D)

changes to the Operating Procedures; and

 

 

 

 

(E)

changes to the SLAs applicable to the Program;

 

 

 

(vi)

approve the design of Cardholder Documentation and any changes thereto;

 

 

(vii)

review customer service, collections and other servicing performance and
reporting aspects of the Program against SLAs and other requirements of this
Agreement;

 

 

(viii)

oversee compliance with Applicable Law, the Risk Management Policies, Operating
Procedures and other Program operations and procedures;

 

 

(ix)

carry out such other tasks as are assigned to it by this Agreement or jointly by
the Parties; and

 

 

(x)

pursuant to Section 12.4(b)(i)(B), resolve disputes that arise among the Parties
with regard to the Program from time to time.

 

(e)               Proceedings of the Management Committee.

 

(i) Meetings and Procedural Matters. The Management Committee shall meet (in
person or telephonically) not less frequently than monthly, provided that unless
otherwise agreed by all Management Committee members, not less than one meeting
per quarter shall be in person. In addition, any member of the Management
Committee may call a special meeting by delivery of at least five (5) Business
Days’ prior notice to all of the other members of the Management Committee,
which notice shall specify the purpose for such meeting. Except to the extent
expressly provided in this Agreement, the Management Committee (and any
subcommittee formed by it) shall determine the frequency, place (in the case of
meetings in person) and agenda for its meetings, the manner in which meetings
shall be called and all procedural matters relating to the conduct of meetings
and the approval of matters thereat.

 

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(ii) Actions.

 

(A) Management Committee and subcommittee action shall be taken by majority vote
of the committee members constituting the full committee (including any
vacancies).

 

(B) If a majority of the Management Committee members constituting the full
Management Committee (including any vacancies) fail to agree on any matter of
significance to the Program (an “Unapproved Matter”) within ten (10) Business
Days after the relevant initial vote (and in the case of a subcommittee vote,
the Management Committee has attempted to resolve such matter for at least ten
(10) Business Days after the relevant subcommittee vote and has failed to so),
then initially the Chief Executive Officer of HSBC Retail Services and Senior
Vice President, General Counsel and Secretary of NMG (or any other similarly
ranking officer of Bank or NMG, as the case may be, who is not a Management
Committee member and shall have been designated in writing by NMG or Bank, as
applicable, to the other Party) shall in good faith attempt to resolve the
matter. Any such resolution by such senior officers shall be deemed to be the
action and approval of the Management Committee for purposes of this Agreement.
If after ten (10) Business Days, the Unapproved Matter remains unresolved by
such senior officers of NMG and Bank, the failure to agree shall constitute a
deadlock. In the event of a deadlock, the final decision shall rest with NMG in
the case of NMG Matters and with Bank in the case of Bank Matters, each of which
shall, except as otherwise provided herein, exercise its discretion reasonably
and in good faith. If a deadlock should occur with respect to a matter that is
neither an NMG Matter nor a Bank Matter, the matter shall be deemed rejected by
the Management Committee.

 

(C) Notwithstanding the foregoing, no changes to the Account terms or any other
Program terms described in Section 3.2(d)(v) shall be made before the first
anniversary of the Effective Date without the approval by majority vote of the
committee members constituting the full Management Committee (including any
vacancies); provided, however, that (i) if a Party concludes that such a change
is required by Applicable Law (as evidenced by a Legal Opinion), such Party may
make such change without regard to this clause (C) if such Party would have
final decision-making authority with respect to such change following the first
anniversary of the Effective Date and (ii) at the request of NMG, Bank shall
make the changes referred to in Schedule 3.2(e).

 

(D) Notwithstanding anything to the contrary contained herein, Bank shall not
override any vote of the NMG Designees in a way that would result in any aspect
of the Program being more onerous or less beneficial to the Cardholders or the
NMG Companies than Comparable Partner Programs unless (i) Bank’s position on the
issue is required by Applicable Law and (ii) Bank adopts, and certifies to the
NMG Companies that it has adopted, the same position with respect to each of its
other Comparable Partner Programs that are similarly impacted by such Applicable
Law or to which such Applicable Law could similarly be applied.

 

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(iii) Customer Service Disputes. If at any time there shall be a material change
in customer dispute patterns or volume, as evidenced by the monitoring
procedures set forth in the Dispute Resolution and Service Profile Report
Process section of the Operating Procedures, (A) NMG shall call, and the Parties
shall attend, one or more Management Committee meetings to consider and vote
upon a plan to remediate such customer service or other disputes, (B) the
Parties shall negotiate in good faith for a period ending not less than ten
(10) days following the date of such meeting, to arrive at a mutually agreeable
remediation plan (or a shorter period if such a remediation plan is agreed to
prior to the 10th day), and (C) in the event such remediation plan is voted upon
and approved, the Parties shall promptly implement such plan; provided, that in
the event that such customer service or other disputes arise from a change in
Account terms, NMG may request that any such Account terms be restored to the
terms in effect prior to such customer service or other disputes and Bank shall
implement such change in Account terms to the extent permitted by Applicable
Law. If such changes in Account terms are implemented, the amount payable by
Bank to NMG under Section 9.1(a)(i) shall be adjusted to reinstate the amounts
previously payable pursuant to this Agreement in connection with such reinstated
terms. If such customer service or other disputes remain uncured on the tenth
(10th) day following the implementation of such Management Committee-approved
remediation plan or such other date determined by the Management Committee as
reasonably required to implement such remediation plan, NMG shall call, and the
Parties shall attend, one or more Management Committee meetings to consider and
vote upon an alternative plan to remediate such customer service or other
disputes. In the event that the Management Committee is unable to agree to a
plan to remediate such customer service or other disputes within the ten
(10) days following any meeting called by NMG pursuant to this
Section 3.2(e)(iii), it shall be considered an Unapproved Matter.

 

(f) NMG Matters. In accordance with and subject to this Section 3.2, NMG shall
have the ultimate decision making authority with respect to any Unapproved
Matters in respect of the following matters (the “NMG Matters”):

 

(i) design of the Cardholder Documentation and collateral aesthetics; provided
that changes to the design or content of Cardholder Documentation (other than
Billing Statements) that require a material increase in production costs beyond
the per unit cost in effect as of January 1, 2005 (as adjusted by CPI) shall not
be adopted as an NMG Matter but shall require the approval of the Management
Committee pursuant to Section 3.2(e)(ii)(A) unless NMG agrees to pay the cost of
such increase;

 

(ii) look, feel and content of Billing Statements, except for content that is
dictated by legal or regulatory requirements, as evidenced by a Legal Opinion;

 

(iii) the Marketing Plan and marketing and promotion of the Program;

 

(iv) any maintenance of, and improvements to, the NMG Systems used in connection
with the Program, including any conversion to any Bank systems and any capital
expenditures of NMG and its Affiliates for maintenance of, and improvements to,
the NMG Systems used in connection with the Program;

 

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(v) the approval (in the sole discretion of NMG) of any new Credit Card
products, including Co-Branded Credit Cards, Approved Ancillary Products,
Non-Card Payment Plans or other products and services proposed to be offered to
Cardholders and, in each case, the approval of any compensation payable to the
NMG Companies in respect thereof; provided, that the economic terms and
compensation arrangements related to such new products or services shall be
acceptable to both Parties;

 

(vi) the design, implementation, modification or any changes to any terms of any
Program Loyalty Program; provided that NMG shall continue to offer one or more
Program Loyalty Programs to Cardholders throughout the Term and unless approved
by majority vote of the full Management Committee (including any vacancies),
such Program Loyalty Programs shall be the primary Loyalty Programs for the NMG
Channels; and

 

(vii) communications and/or contacts with Cardholders (other than as required to
service the Accounts, comply with Applicable Law or as otherwise provided in
this Agreement), including use of telemarketing techniques by Bank.

 

(g) Bank Matters. In accordance with and subject to this Section 3.2, Bank shall
have the ultimate decision making authority with respect to any Unapproved
Matters in respect of the following matters (the “Bank Matters”):

 

(i) changes to Risk Management Policies (A) to the extent required by Applicable
Law or safety and soundness considerations, in each case, as evidenced by a
Legal Opinion or (B) in response to changes in the credit profiles for Account
applicants from the profile specified in Schedule 3.2(g)(i);

 

(ii) changes to Account terms required by Applicable Law as evidenced by a Legal
Opinion;

 

(iii) capital expenditures for maintenance of, and improvements to, the Bank
Systems used in connection with the Program; and

 

(iv) content of Cardholder Documentation and Solicitation Materials that is
dictated by Applicable Law, as evidenced by a Legal Opinion.

 

3.3 Program Relationship Managers; Program Team.

 

(a) The NMG Companies and Bank shall each appoint one Program relationship
manager (each, a “Manager”). The Managers shall exercise day-to-day operational
oversight of the Program, subject to the actions and decisions of the Management
Committee, and coordinate the partnership efforts between the NMG Companies and
Bank, shall report to the designees on the Management Committee of the Party
appointing such Manager and shall conduct their Program responsibilities in
accordance with the actions and decisions of the Management Committee. The NMG
Companies and Bank shall endeavor to provide stability and continuity in the
Manager positions and each Party’s other Program personnel.

 

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(b) The initial Manager of the NMG Companies is set forth in Schedule 3.3.

 

(c) The initial Manager of Bank is set forth in Schedule 3.3. The Bank’s Manager
shall report directly to the Bank’s Managing Director-Client Relations. The
Bank’s Manager’s performance-based compensation shall be based upon the Program
Objectives and other specific annual targets and objectives set by the
Management Committee, including Program profitability targets. The appointment
of a new Manager by Bank is subject to the prior approval of NMG. With respect
to future Bank Manager candidates, Bank shall seek to propose candidates with
substantial Program relevant experience, including experience with the
department store industry, comparable customer demographics and loyalty
programs.

 

(d) Bank shall maintain a Program team having Competitive expertise and
experience and meeting the requirements and specifications set forth in Schedule
3.3. No member of the Bank’s Program team shall be reassigned to any program
operated by Bank or any of its Affiliates pursuant to any agreement or
arrangement with any retail store competitor designated annually by the
Management Committee, including those listed in Schedule 3.3(d), without the
approval of NMG.

 

ARTICLE IV

PROGRAM OPERATIONS

 

4.1 Operation of the Program.

 

(a) Each of the Parties hereto shall perform its obligations under this
Agreement (i) in compliance with the terms and conditions of this Agreement, the
Risk Management Policies, the Operating Procedures and any other policies,
procedures and practices adopted pursuant to this Agreement, (ii) in good faith,
(iii) in accordance with Applicable Law, and (iv) in a manner consistent with
the Program Objectives.

 

(b) The initial Operating Procedures applicable to various aspects of the
operation of the Program shall be the operating procedures adopted by NMG, its
Affiliates and the Licensees prior to the Effective Date (which operating
procedures are attached hereto as Schedule 4.1(b)). Changes to such Operating
Procedures shall only be made with the approval of the Management Committee;
provided that changes to the Risk Management Policies may be made in accordance
with Section 4.6 and Article III.

 

(c) Except as expressly provided otherwise in this Agreement, Bank shall use
commercially reasonable efforts to ensure that the personnel and other resources
(including Systems and other technology resources) devoted by Bank to the
Program shall be Competitive.

 

4.2 Certain Responsibilities of the NMG Companies.

 

(a) In addition to its other obligations set forth elsewhere in this Agreement,
NMG agrees that during the Term it shall, either itself or through the
Affiliate(s) to which it subcontracts the relevant functions:

 

(i) as provided in the Servicing Agreement, in its capacity as NMG Servicer,
maintain a System to process Applications, using the underwriting and credit
limit assignment policy set forth in the Risk Management Policies and the
Operating Procedures, as maintained by NMG in effect as of January 1, 2005;

 

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(ii) as provided in the Servicing Agreement, in its capacity as NMG Servicer,
maintain call centers to respond to inquiries from Cardholders and to deal with
billing related claims and adjustments (including by making finance charge and
late fee reversals), establish new Accounts or Account types, authorize
transactions, and assign, increase and decrease credit lines, all in accordance
with the Risk Management Policies and the Operating Procedures, in each case, as
performed by NMG prior to January 1, 2005;

 

(iii) as provided in the Servicing Agreement, in its capacity as NMG Servicer,
provide Account monitoring services, including identifying delinquencies,
identifying collection efforts required, implementing credit-line adjustments,
over limit authorizations and Account deactivation or cancellation;

 

(iv) as provided in the Servicing Agreement, in its capacity as NMG Servicer,
handle collection and recovery efforts in respect of Accounts;

 

(v) solicit new Accounts through in-store instant credit procedures (in
accordance with this Agreement) and display of Solicitation Materials (or
Applications) in the NMG Channels pursuant to the Marketing Plan;

 

(vi) implement and administer the Marketing Plan in accordance with this
Agreement;

 

(vii) receive In-Store Payments in accordance with procedures that comply with
Applicable Law, subject to reimbursement from Bank for the processing of such
payments as provided in this Agreement;

 

(viii) pay sales associate compensation relating to the solicitation of new
Accounts;

 

(ix) continue to make available a Program Loyalty Program;

 

(x) as provided in the Servicing Agreement, in its capacity as NMG Servicer,
process remittances from Cardholders;

 

(xi) until the Documentation Services Transition Date, as provided in the
Servicing Agreement, in its capacity as NMG Servicer, prepare, process and mail
Cardholder Billing Statements, Inserts, privacy policy notices, change in terms
notices and other communications to Cardholders; and

 

(xii) as provided in the Servicing Agreement, in its capacity as NMG Servicer,
produce and issue all new, replacement and reissued credit card plates related
to the NMG Credit Cards and the Loyalty Cards.

 

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4.3 Certain Responsibilities of Bank.

 

(a) In addition to its other obligations set forth elsewhere in this Agreement,
Bank agrees that during the Term it shall:

 

(i) extend credit (or cause one of its Affiliates to extend credit) on newly
originated and existing Accounts in accordance with the Risk Management Policies
and Operating Procedures;

 

(ii) comply (and cause its applicable Affiliates to comply) with the terms of
the Cardholder Agreements, the Program Privacy Policies and all Cardholder
opt-outs;

 

(iii) after the Systems Transition Date, provide any Account information
required for the NMG Companies’ administration of any Loyalty Program;

 

(iv) in accordance with Section 7.2, after the Documentation Services Transition
Date, prepare, process and mail Cardholder Billing Statements, Inserts, privacy
policy notices, change in terms notices and other communications to Cardholders
and perform any other Services required to be performed pursuant to this
Agreement from time to time;

 

(v) provide training with respect to Program operations, including training of
POS personnel and NMG Servicer personnel in the Bank’s policies and procedures
with respect to the Program and in the use of any Bank Systems utilized in the
Program;

 

(vi) to the fullest extent permitted by Applicable Law and Bank’s or its
Affiliate’s agreements with third parties, as requested from time to time by
NMG, provide transaction and experience information about cardholders of Bank’s
and its Affiliates’ other Credit Card programs and customers of Bank’s and its
Affiliates’ other consumer loan programs and assist the NMG Companies and their
Affiliates in using such information to develop marketing plans for their
businesses; and

 

(vii) to the fullest extent permitted by Applicable Law and Bank’s or its
Affiliate’s agreements with third parties, as requested from time to time by
NMG, permit the NMG Companies to solicit or offer NMG Goods and Services to
cardholders of Bank’s and its Affiliates’ other Credit Card programs and
customers of Bank’s and its Affiliates’ other consumer loan programs.

 

4.4 Ownership of Accounts; Account Documentation.

 

(a) Except to the extent of the NMG Companies’ ownership of the NMG Licensed
Marks, Bank shall be the sole and exclusive owner of all Accounts and Account
Documentation and shall have all rights, powers, and privileges with respect
thereto as such owner; provided that Bank shall exercise such rights consistent
with the provisions of this Agreement and Applicable Law. All purchases of NMG
Goods and Services in connection with the Accounts and the Cardholder
Indebtedness shall create the relationship of debtor and creditor between the
relevant Cardholder and Bank, respectively. The NMG Companies acknowledge and
agree that (i) they have no right, title or interest (except for their right,
title and interest in the NMG Licensed Marks and their option to purchase the
Program Assets under Section 17.2) in or to, any of the Accounts or Account
Documentation or any proceeds of the foregoing, and (ii) Bank extends credit
directly to Cardholders.

 

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(b) Except as expressly provided herein, Bank shall be entitled to (i) receive
all payments made by Cardholders on Accounts and (ii) retain for its account all
Cardholder Indebtedness and all other fees and income authorized by the
Cardholder Agreements and collected with respect to the Accounts and Cardholder
Indebtedness. Bank shall retain for its account any income from selling Approved
Ancillary Products as shall have been approved by the Management Committee in
connection with the approval of the offering of such Approved Ancillary
Products.

 

(c) Bank shall fund all Cardholder Indebtedness on the Accounts.

 

(d) Bank shall have the exclusive right to effect collection of Cardholder
Indebtedness, except as set forth in the Servicing Agreement, and shall notify
Cardholders to make payment directly to it in accordance with its instructions;
provided, however, that Bank at its option may make all collections for its
account using a Program name which includes the name of NMG and, if Bank so
elects, the name of Bank, and may direct all checks to be made payable to “NMG”
or, with NMG approval, another name combined with the name NMG. NMG grants to
Bank a limited power of attorney (coupled with an interest) to sign and endorse
NMG’s name upon any form of payment that may have been issued in NMG’s name in
respect of any Account.

 

(e) Notwithstanding the foregoing, the NMG Companies shall accept payments made
with respect to an Account (i) in an NMG Store as provided in Section 8.3,
(ii) by telephone through the ACH Pay by Phone system and (iii) online through
the NMG Companies’ websites.

 

(f) With respect to all Account Documentation, and notwithstanding the purchase
of such Account Documentation by Bank as of the Effective Date, NMG Servicer,
shall continue to hold and retain the Account Documentation following the
Effective Date as bailee for the sole benefit of Bank.

 

(i) From time to time following the Effective Date, NMG Servicer shall deliver
such Account Documentation as requested by Bank. NMG Servicer will use
reasonable efforts to accommodate Bank’s shorter requested time frames, but in
any event such deliveries will be made no later than the following time frames:
(i) for statements, 15 days; (ii) for non-cash payment information, 10 days;
(iii) for cash payment information, 5 Business Days, (iv) for application
information, 20 days; (v) for sales slips, 20 days; and (vi) for all other
Account Documentation, 30 days. NMG Servicer shall effect delivery of the
requested Account Documentation at its sole cost and expense, unless otherwise
determined by the Management Committee; provided, that in connection with any
litigation, all Account Documentation shall be provided within fifteen (15) days
rather than the timeframes set forth above.

 

(ii) In discharging its bailment duties hereunder, NMG Servicer agrees to
utilize such document storage, safekeeping and security methods in accordance
with Applicable Law. All Account Documentation shall be housed at NMG Servicer’s
operations centers or other facilities designated by NMG Servicer. Without
limiting any of their obligations under this Agreement, NMG agrees to maintain
the Account Documentation for a period that complies with the document retention
policy set forth in Schedule 4.4(f).

 

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4.5 Branding of Accounts/Credit Cards/Cardholder Documentation/Solicitation
Materials.

 

(a) The Cardholder Documentation and the Solicitation Materials shall be in the
design and format proposed by the NMG Companies and approved by the Management
Committee; provided that Bank shall be responsible for ensuring that the
Cardholder Documentation and the Solicitation Materials comply with Applicable
Law and for ensuring that the Solicitation Materials comply with the Cardholder
Documentation.

 

(b) Bank shall be responsible for, and bear the cost of the design, development
and delivery (other than delivery at NMG Channels) of the Cardholder
Documentation; provided that, to the extent that changes to the design or format
of Cardholder Documentation results in the per unit cost of such Cardholder
Documentation being materially greater than (i) in the case of Cardholder
Documentation other than Billing Statements, the cost in effect as of January 1,
2005 (as adjusted by CPI), and (ii) in the case of Billing Statements, the
greater of such cost and the cost of producing statements having the
specifications set forth in Schedule 7.3(a), the Management Committee shall
allocate the increased costs resulting from such changes in Cardholder
Documentation between the Parties.

 

(c) Bank shall issue a renewal NMG Credit Card and/or Loyalty Card to each
Cardholder in accordance with the terms of any Loyalty Program at each scheduled
NMG Credit Card and/or Loyalty Card renewal date (or earlier, at the direction
of any NMG Company, if the Cardholder qualifies for an upgrade in any Loyalty
Program).

 

(d) NMG Licensed Marks shall appear prominently on the face of the NMG Credit
Cards. The NMG Credit Cards shall not bear Bank’s Licensed Marks except, in the
case of a Dual-Line Credit Card, as required by the applicable Card Association;
provided, however, the Bank’s name will appear on the back of the card in order
to identify Bank as the credit provider under the Program, together with any
other disclosures required by Applicable Law, and in the case of a Dual-Line
Credit Card, as required by the applicable Card Association.

 

4.6 Underwriting and Risk Management.

 

(a) Bank shall accept or reject any Application based solely upon application of
the then-current Risk Management Policies applicable to the relevant channel.
Upon satisfaction of the applicable credit criteria set forth in the Risk
Management Policies, Bank shall promptly establish a Private Label Credit
Account, a Non-Store Account and/or a Non-Card Payment Plan, as applicable. The
procedures for determining what type(s) of NMG Credit Cards and Accounts shall
be issued upon receipt of each Application are set forth in the Risk Management
Policies. Bank shall have the right, power and privilege to review periodically
the creditworthiness of Cardholders to determine the range of credit limits to
be made available to an individual Cardholder and whether or not to suspend or
terminate credit privileges of such Cardholder; provided, however, that Bank
shall only decrease credit limits or suspend or terminate credit privileges on
an individual, case-by-case basis consistent with the then-current Risk
Management Policies and Operating Procedures and in no event in a manner less
favorable, in the aggregate, than its exercise of similar rights in connection
with the Comparable Partner Programs.

 

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(b) The initial Risk Management Policies to be in effect as of the Effective
Date are contained in the initial Operating Procedures. Each Party may propose
modifications of any aspect of the Risk Management Policies, which modifications
shall be made only upon approval in accordance with Article III.

 

(c) If the approval rate targets and other metrics referred to in Schedule
4.6(c) are not met and the credit profile of Account applicants has not
adversely changed from that specified in Schedule 4.6(c), then Bank shall have
thirty (30) days to modify the Risk Management Policies or otherwise adjust its
practices to achieve such targets. If Bank does not make any such adjustments,
or if such adjustments fail to result in all approval rate targets and other
metrics once again being met by the 90th day after the implementation of such
adjustments, the NMG Companies shall have the right to terminate this Agreement
pursuant to Section 15.2(h).

 

(d) The Parties shall each perform all commercially reasonable security
functions in accordance with the Risk Management Policies to minimize fraud in
the Program due to lost, stolen or counterfeit cards and fraudulent
applications. The Parties each agree to use commercially reasonable efforts to
cooperate with each other in such functions.

 

4.7 Cardholder Terms.

 

(a) The terms and conditions of all Purchased Accounts shall be the terms and
conditions applicable to the Account type immediately prior to the Effective
Date, including the terms and conditions set forth on Schedule 4.7, provided
that, at the request of NMG, the Parties shall take such actions in accordance
with this Agreement as may be required to convert the Accounts specified in
Schedule 4.7 to the new terms and conditions specified in Schedule 3.2(e).
Additional changes to the terms and conditions of the Accounts may be made only
in accordance with Article III.

 

(b) The account numbers and BINs of all Purchased Accounts shall remain the same
after the Effective Date.

 

4.8 Internet Services.

 

(a) Cardholder Website. Bank shall develop and maintain an NMG-branded website
for Cardholders and potential Cardholders to be effective as of the Systems
Transition Date, with the look and feel consistent with the NMG Companies’
websites (“Program Website”). The Program Website shall be accessed solely by
means of links from the NMG Companies’ websites and shall contain or otherwise
be associated with only such material and links as shall be agreed by the
Management Committee from time to time. The NMG Companies will provide such
links on (i) their home pages, (ii) their check-out pages, and (iii) such other
pages as the Management Committee shall determine from time to time. The Program
Website shall also include links back to the NMG Companies’ websites, on the
Program Website home page and such other pages as the Management Committee shall
determine from time to time. The Program Website shall include the following
functions, and such other functions as may be approved by the Management
Committee from time to time (the Program Website and such functionality,
collectively, the “Internet Services”).

 

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(i) Applications. The Program Website shall permit potential Cardholders to
access an Application, to complete and submit the Application online and receive
real-time approvals or denials of such Application in accordance with the Risk
Management Policies and Operating Procedures. Without limiting the foregoing,
the Application function on the Program Website shall have at a minimum all
features and functionality available on any NMG Company’s website prior to the
Effective Date.

 

(ii) Cardholder Customer Service. The Program Website shall permit Cardholders
to (A) view the Cardholder’s Account information and Billing Statements
(including any Loyalty Program information, NMG Transaction information, and all
other information contained in such Billing Statement); (B) to the extent
requested by, and provided to the Bank by, NMG, view electronic copies of sales
slips or other documents or data relating to the Cardholder’s NMG transactions,
including the Cardholder’s signature; and (C) make payments on the Cardholder’s
Account via automated clearing house transfer or other payment mechanism.

 

(b) Performance Standards. Bank shall provide the Internet Services consistent
with the SLAs set forth on Schedule 4.8(b) and in accordance with industry
standards.

 

(c) Customer Privacy. Bank shall ensure that the Privacy Policy is clearly and
prominently posted on the pages of the Program Website.

 

(d) Internet Services Representations and Warranties. Bank represents and
warrants as of the Systems Transition Date and during the Term of this Agreement
that:

 

(i) the Program Website is solely under Bank’s control (subject to the NMG
Companies’ rights under this Agreement); and

 

(ii) Bank has the license, right or privilege to use the hardware, software and
content acquired from third parties for use in the Internet Services, and that
it is the owner of all other hardware, software and content used in the Internet
Services and that neither the Internet Services as a whole, nor any part
thereof, infringes upon or violates any patent, copyright, trade secret,
trademark, invention, proprietary information, nondisclosure or other rights of
any third party.

 

4.9 Sales Taxes. NMG and its Subsidiaries shall pay when due any sales taxes
relating to the sale of NMG Goods and Services. To the extent permitted by the
Applicable Law of the relevant states, NMG shall use commercially reasonable
efforts to recover sales taxes charged to any Account that has been written off
by Bank. Bank shall notify the NMG Companies of any amounts written-off on
Accounts by Bank, identified by Account, and shall sign such forms and provide
any such other information as requested by NMG to enable the NMG Companies to
pursue any such recoveries. NMG shall pay to Bank an amount equal to recovered
sales taxes. To the extent Bank is permitted by Applicable Law to directly
recover sales taxes charged to any Account written off by Bank, the NMG
Companies shall sign such forms and provide any such other information as
reasonably requested by Bank to enable Bank

 

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to pursue any such recoveries. In the event NMG is audited or assessed by a
state, and as a result any amount of sales tax previously recovered is repaid to
the state, Bank shall repay such amount to NMG. NMG shall use commercially
reasonable efforts to negotiate such audit or assessment. Bank also shall fully
cooperate in any such audit or assessment and shall pay the costs and expenses
of NMG incurred in connection with negotiating any tax audit or assessment or
analyzing or pursuing any bad debt claims.

 

4.10 Participation in Reversals.

 

(a) Reporting of Reversals. Each Year-End Settlement Statement shall set forth a
calculation of the applicable Finance Charge Reversal Percentage and Late Fee
Reversal Percentage for the preceding Fiscal Year and such other calculations as
are necessary to calculate the payment in respect thereof to be made by the
Parties pursuant to this Section 4.10. All amounts payable pursuant to this
Section shall be netted against each other so that only a single payment shall
be made pursuant to this Section.

 

(b) Finance Charge Reversals. If the Finance Charge Reversal Percentage with
respect to the Private Label Accounts reflected in the Year-End Settlement
Statement with respect to the preceding Fiscal Year is greater than the
applicable High Collar, the NMG Companies shall pay Bank an amount equal to
(A) the Finance Charge Reversal Percentage with respect to the Private Label
Accounts minus the applicable High Collar, multiplied by (B) the aggregate
amount of all finance charges assessed on the Private Label Accounts during such
preceding Fiscal Year. If the Finance Charge Reversal Percentage with respect to
the Private Label Accounts for such Fiscal Year is less than the applicable Low
Collar, Bank shall pay the NMG Companies an amount equal to (A) the applicable
Low Collar minus the Finance Charge Reversal Percentage with respect to the
Private Label Accounts, multiplied by (B) the aggregate amount of all finance
charges assessed on the Private Label Accounts during such preceding Fiscal
Year.

 

(c) Late Fee Reversals. If the Late Fee Reversal Percentage with respect to the
Private Label Accounts reflected in the Year-End Settlement Sheet with respect
to the preceding Fiscal Year is greater than the applicable High Collar, the NMG
Companies shall pay Bank an amount equal to (A) the Late Fee Reversal Percentage
with respect to the Private Label Accounts minus the applicable High Collar,
multiplied by (B) the aggregate amount of all late fees assessed on the Private
Label Accounts during such preceding Fiscal Year. If the Late Fee Reversal
Percentage with respect to the Private Label Accounts for such Fiscal Year is
less than the applicable Low Collar, Bank shall pay the NMG Companies an amount
equal to (A) the applicable Low Collar minus the Late Fee Reversal Percentage
with respect to the Private Label Accounts, multiplied by (B) the aggregate
amount of all late fees assessed on the Private Label Accounts during such
preceding Fiscal Year.

 

4.11 Interest Free Accounts. Bank shall offer and support interest free Accounts
in accordance with this Agreement and, subject to the limitations set forth in
this Section 4.11, the cost of maintaining such interest free Accounts shall be
borne by Bank. The Year-End Settlement Sheet for each Fiscal Year shall set
forth, (i) Average Private Label Receivables, (ii) Average Interest Free
Receivables and (iii) the Net Yield for such Fiscal Year calculated on all
Billed Cardholder Debt. If the dollar amount of Average Interest Free
Receivables as a

 

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percentage of Average Private Label Receivables for such Fiscal Year exceeds the
applicable High Collar, there shall be included on the Year-End Settlement Sheet
for such Fiscal Year (and the NMG Companies shall pay to Bank) an amount equal
to (A) Net Yield, divided by (B) the Average Private Label Receivables less
Average Interest Free Receivables for such Fiscal Year, multiplied by (C) the
dollar amount by which Average Interest Free Receivables for such Fiscal Year
exceeded the High Collar. If the dollar amount of Average Interest Free
Receivables as a percentage of Average Private Label Receivables for such Fiscal
Year is less than the Applicable Low Collar, there shall be included on the
Year-End Settlement Sheet (and Bank shall pay to the NMG Companies) an amount
equal to (A) Net Yield, divided by (B) the Average Private Label Receivables
less Average Interest Free Receivables for such Fiscal Year, multiplied by
(C) the dollar amount by which Average Interest Free Receivables for such Fiscal
Year was less than the Low Collar.

 

ARTICLE V

MARKETING

 

5.1 Promotion of Program. In accordance with the Marketing Plan, the NMG
Companies and Bank shall cooperate with each other and actively support and
promote the Program to both existing and potential Cardholders.

 

5.2 Marketing Commitment.

 

(a) On the Effective Date and no later than the first (1st) Business Day of each
subsequent Fiscal Year, Bank shall pay to NMG an amount equal to the NMG
Marketing Commitment for such Fiscal Year, which amount shall be deposited into
a marketing fund maintained by NMG (the “NMG Marketing Fund”).

 

(b) The NMG Marketing Fund shall be used by NMG and its Affiliates in the sole
discretion of NMG for such incremental marketing of the Program and the Credit
Card Business as NMG and its Affiliates shall undertake from time to time.

 

(c) Each Monthly Settlement Sheet shall set forth an accounting of the costs
incurred, if any, by NMG and its Affiliates in the prior Fiscal Month which were
paid out of the NMG Marketing Fund. To the extent that the expenditures of the
NMG Marketing Commitment by NMG and its Affiliates in any Fiscal Year exceed the
amount in the NMG Marketing Fund, the NMG Companies shall be entitled to
reimbursement from the NMG Marketing Fund for the following Fiscal Year but not
in excess of 10% of such Fiscal Year’s NMG Marketing Fund. Any amount in the NMG
Marketing Fund for a given Fiscal Year that is not spent in that Fiscal Year
shall remain available for use during the Term.

 

(d) Bank hereby agrees to credit a joint marketing fund maintained by Bank (the
“Joint Marketing Fund”), no later than the first (1st) Business Day of each
Fiscal Year, with an amount equal to the Joint Marketing Commitment. The Joint
Marketing Commitment shall be used as set forth in the Marketing Plan and as
otherwise directed by the Management Committee from time to time. The NMG
Companies and Bank shall each provide to the other for inclusion in the Monthly
Settlement Sheet, an accounting of such Party’s and its Affiliates’ use of the
Joint

 

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Marketing Commitment in the prior Fiscal Month, and Bank shall reimburse the NMG
Companies for such amounts used by NMG and its Affiliates, and shall reduce the
amount remaining in the Joint Marketing Fund by the amounts used by Bank and its
Affiliates. Any amount in the Joint Marketing Fund for a given Fiscal Year that
is not spent in that Fiscal Year shall remain available for use at the direction
of the Management Committee during the Term.

 

5.3 Communications with Cardholders.

 

(a) NMG Inserts. NMG and its Affiliates shall have the exclusive right to
communicate with Cardholders, except for any message required by Applicable Law,
through use of inserts, fillers and bangtails (which shall be included on all
billing envelopes) (collectively, “Inserts”), including Inserts selectively
targeted for particular segments of Cardholders, in any and all Billing
Statements (including electronic Billing Statements) and envelopes, subject to
production requirements contained in the Operating Procedures and Applicable
Law. Except as otherwise provided in the Marketing Plan, and except for Inserts
required by Applicable Law (which shall be paid for by Bank), the NMG Companies
shall be responsible for the content of, and the cost of preparing and printing,
any such Inserts. If the insertion of Inserts in particular Billing Statements
would increase the postage costs for such Billing Statements, the NMG Companies
agree to either pay for the incremental postage cost or prioritize the use of
Inserts to avoid postage cost over-runs. The NMG Companies shall retain all
revenues they receive from all Inserts (other than any Inserts promoting the NMG
Credit Cards or Approved Ancillary Products that the NMG Companies may permit to
be produced and distributed in accordance with the Marketing Plan). Subject to
NMG’s prior written approval, which shall not be unreasonably withheld, Bank may
communicate with Cardholders in the Inserts about the Program as necessary for
Bank to comply with its obligations under this Agreement.

 

(b) Billing Statement Messages. NMG and its Affiliates shall have the exclusive
right to use Billing Statement (including electronic Billing Statement) messages
and Billing Statement envelope (or electronic mail) messages in each Billing
Cycle to communicate with Cardholders, subject to production requirements
contained in the Operating Procedures and Applicable Law. Such messages shall be
included at no cost to the NMG Companies. Notwithstanding the foregoing, any
message required by Applicable Law shall take precedence over NMG’s and its
Affiliates’ messages. Subject to NMG’s prior written approval, which shall not
be unreasonably withheld, Bank may communicate with Cardholders about the
Program in the Billing Statements as necessary for Bank to comply with its
obligations under this Agreement.

 

5.4 Additional Marketing Support.

 

(a) Upon the request of NMG from time to time, Bank shall perform the following
marketing functions at no cost or expense to the NMG Companies:

 

(i) subject to Applicable Law and any contractual prohibitions to which Bank or
its Affiliates are subject:

 

(A)

use Bank’s and its Affiliates’ databases, analytic tools and market research and
Bank’s marketing support services to assist NMG and its Affiliates in their
promotion of the NMG Channels, or the marketing and promotion of NMG Goods and
Services, the NMG Credit Cards or the Non-Card Payment Plans;

 

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(B)

conduct mailings and other related marketing efforts on behalf of NMG and its
Affiliates, which may include marketing materials promoting the Program, the NMG
Credit Cards and Non-Card Payment Plans, the NMG Channels and/or the NMG Goods
and Services at NMG’s option, based upon the customer databases and customer
database analysis tools maintained by Bank and its Affiliates, including
nonpersonally identifiable transaction and experience data from Bank’s and its
Affiliates’ Credit Card, other consumer loan portfolio and other customer
databases; provided that (unless such amounts are paid out of the NMG Marketing
Fund or are paid out of the Joint Marketing Fund pursuant to the Marketing Plan)
the NMG Companies shall be responsible for all out-of-pocket expenses of all
marketing materials and mailing services at cost;

 

(ii) provide such reasonable assistance to NMG and its Affiliates as NMG may
request in connection with the training of personnel of NMG and its Affiliates
regarding the Program, including providing training materials developed by Bank
and approved by the Management Committee;

 

(iii) collaborate with the NMG Companies to identify and test marketing
initiatives (using Bank’s resources); provided that (unless such amounts are
paid out of the NMG Marketing Fund or are paid out of the Joint Marketing Fund
pursuant to the Marketing Plan) the NMG Companies shall be responsible for all
out-of-pocket expenses of test marketing at cost requested in connection with
the Program; and

 

(iv) provide models and modeling support, which may include Cardholder attrition
models, prospect marketing models and other tools designed to improve Program
performance.

 

(b) Following the Effective Date, Bank shall, at its sole expense, retain a
mutually agreed upon third party to conduct surveys of Cardholder perception and
satisfaction on a regular, periodic basis regarding the NMG Credit Cards and the
Program but in no event less frequently than annually. Such surveys shall be in
a form and employ reasonable methodologies developed in consultation with the
NMG Companies and shall provide for a level of information reasonably acceptable
to NMG. Bank shall make available to the NMG Companies the results of such
surveys as well as all associated work papers promptly following completion
thereof.

 

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5.5 Approved Ancillary Products. Except for the Approved Ancillary Products, the
NMG Credit Cards and the Non-Card Payment Plans, Bank and its Affiliates shall
not offer (except as directed by NMG) any goods or services to Cardholders or
through the Program. From time to time, Bank may propose to solicit Cardholders
for products or services other than the foregoing. If the NMG Companies, in
their sole and absolute discretion, agree to permit such solicitation, such
solicitation shall only be permitted on the terms (including terms relating to
the compensation of the NMG Companies with respect thereto) agreed by the NMG
Companies.

 

5.6 Marketing Plan.

 

(a) Following the date hereof NMG, in consultation with Bank, shall develop a
proposed Marketing Plan for the first Fiscal Year. Within thirty (30) days after
the Effective Date, the Management Committee shall approve such Marketing Plan
for the first Fiscal Year. For each Fiscal Year following the first Fiscal Year,
the NMG Companies shall develop, in consultation with Bank, and on or before
ninetieth (90th) day prior to the commencement of such Fiscal Year, the
Marketing Committee shall approve a Marketing Plan for such Fiscal Year.

 

(b) At least once per calendar year, the Management Committee shall consider (to
the extent such terms and conditions are publicly known or otherwise known and
not subject to any confidentiality obligations on the part of either Party)
features, terms, conditions and other aspects of other Comparable Partner
Programs and Competing Partner Programs in order to identify marketplace
developments for possible inclusion in the Program to ensure that the Program
remains Competitive. If the Management Committee determines that a change to the
Program may be required, Bank shall develop a plan with respect to
implementation of such change, including the impact the proposed change would
have, if any, on the revenue share, and shall present such plan to the
Management Committee for its review and decision. The Management Committee shall
decide whether to test or launch any such Program changes for Cardholders or
potential Cardholders.

 

(c) Each Marketing Plan shall outline, for each NMG Channel, all programs, to
the extent established and mutually agreed upon by the NMG Companies and Bank,
and shall include at least the following information for each program:

 

(i) description of offer(s), cost per unit, expected response rate and other
performance projections with respect thereto;

 

(ii) description of target audience;

 

(iii) planned budget, specifying Bank’s share and the NMG Companies’ share, if
any;

 

(iv) distribution among the NMG Channels and types of Accounts; and

 

(v) target implementation date (e.g., mailing dates, calling dates, delivery
dates).

 

(d) Each Marketing Plan shall address development of Solicitation Materials and
Account Documentation; new Account acquisition strategies, including direct
mailing;

 

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preparation of unique collateral materials for the NMG Companies’ employees;
activation, retention and usage; statement design and messaging; advertising of
the Program; and such other marketing matters as the Parties shall agree to.

 

(e) Each Marketing Plan shall specify which Party is responsible for each
Marketing Plan item and shall contain a budget specifying the Parties’ financial
responsibilities during the applicable Fiscal Year.

 

(f) Any Marketing Plan may be modified or supplemented by the Parties from time
to time upon mutual agreement, provided such modifications or supplements, as
the case may be, are approved by the Management Committee.

 

(g) To the extent practicable, all significant marketing initiatives developed
under this Agreement shall contain unique marketing source codes to facilitate
post-marketing research and analysis.

 

ARTICLE VI

CARDHOLDER INFORMATION

 

6.1 Customer Information.

 

(a) All sharing, use and disclosure of Cardholder Data and NMG Shopper Data
under this Agreement shall be subject to the provisions of this Article VI. The
Parties acknowledge that the same or similar information may be contained in the
Cardholder Data, the NMG Shopper Data, and other data and that each such pool of
data shall therefore be considered separate information subject to the specific
provisions applicable to that data hereunder.

 

(b) NMG and Bank shall each maintain an information security program that is
designed to meet all requirements of Applicable Law, including, at a minimum,
maintenance of an information security program that is designed to: (i) ensure
the security and confidentiality of the Cardholder Data and the NMG Shopper
Data; (ii) protect against any anticipated threats or hazards to the security or
integrity of the Cardholder Data and the NMG Shopper Data; (iii) protect against
unauthorized access to or use of the Cardholder Data and the NMG Shopper Data;
and (iv) ensure the proper disposal of Cardholder Data and NMG Shopper Data.
Additionally, such security measures shall meet current industry standards and
shall be at least as protective as those used by each Party to protect its other
confidential customer information. Each Party shall use the same degree of care
in protecting the Cardholder Data and the NMG Shopper Data against unauthorized
disclosure as it accords to its own confidential customer information, but in no
event less than a reasonable standard of care. In particular, Bank shall treat
NMG Shopper Data as if it were “customer information” for purposes of the
regulations above. In the event a Party becomes aware of any unauthorized use of
or access to Cardholder Data, such Party shall immediately notify the other
Party and shall cooperate with such other Party, as it deems necessary or as
required by Applicable Law, (x) to assess the nature and scope of such incident,
(y) to contain and control such incident to prevent further unauthorized access
to or use of Cardholder Data, and (z) to provide prompt notice to affected
Cardholders to the extent required by Applicable Law or otherwise with the
approval of the Management

 

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Committee. In the event Bank becomes aware of any unauthorized use of or access
to NMG Shopper Data, Bank shall immediately notify the NMG Companies and shall
cooperate with them, as they deem necessary or as required by Applicable Law,
(x) to assess the nature and scope of such incident, (y) to contain and control
such incident to prevent further unauthorized access to or use of NMG Shopper
Data, and (z) to provide prompt notice to affected NMG Shoppers to the extent
required by Applicable Law or otherwise with the approval of the Management
Committee. The cost and expenses of any such notice shall be borne solely by the
Party that experienced the unauthorized use of or access to Cardholder Data or
NMG Shopper Data.

 

(c) The NMG Companies shall, subject to Applicable Law, promptly provide to Bank
a complete list of any Persons who (i) after the Effective Date, have requested
to be on the NMG Companies’ “do not call” list and/or (ii) have requested to be
on “do not mail” lists (or other similar lists), and Bank shall promptly comply
with such requests with respect to its solicitation of NMG Credit Cards and
Approved Ancillary Products. Bank shall, subject to Applicable Law, promptly
provide to the NMG Companies a complete list of any Cardholders who (i) after
the Effective Date, have requested to be on Bank’s “do not call” list and/or
(ii) have requested to be on “do not mail” lists (or other similar lists) in
connection with their Cardholder relationship with Bank and the NMG Companies
shall promptly comply with such requests with respect to its solicitations.

 

6.2 Cardholder Data.

 

(a) As among the Parties hereto, the Cardholder Data shall be the property of
and exclusively owned by Bank.

 

(b) The Program Privacy Policy applicable to the Cardholder Data is attached as
Schedule 6.2 hereto. Any modifications to the Program Privacy Policy shall be
approved by the Management Committee, provided that the Program Privacy Policy
shall comply with Applicable Law at all times.

 

(c) Bank shall not use, or permit to be used, the Cardholder Data, except as
provided in this Section 6.2. Bank may use the Cardholder Data in compliance
with Applicable Law and the Program Privacy Policy solely (i) for purposes of
soliciting or marketing (in each case, solely as directed by the NMG Companies
or the Management Committee) or servicing customers listed in the Cardholder
Data for NMG Credit Cards, Approved Ancillary Products, and any other products
and services approved by the Management Committee, (ii) as otherwise necessary
to carry out its obligations or exercise its rights hereunder, or (iii) as
required by Applicable Law. Bank has no rights to use the Cardholder Data for
marketing purposes except as expressly provided herein.

 

(d) Bank shall not disclose, or permit to be disclosed, the Cardholder Data,
except as provided in this Section 6.2. Bank shall not, directly or indirectly,
sell or otherwise transfer any right in or to the Cardholder Data other than to
NMG or any of its Affiliates. Bank may disclose the Cardholder Data in
compliance with Applicable Law and the Program Privacy Policy solely:

 

(i) to its authorized subcontractors in connection with a permitted use of such

 

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Cardholder Data under this Section 6.2, provided that each such authorized
subcontractor agrees in a written agreement satisfactory to NMG and Bank to
maintain all such Cardholder Data as strictly confidential and not to use or
disclose such information to any Person other than Bank or an NMG Company,
except as required by Applicable Law or any Governmental Authority (after giving
Bank and the NMG Companies prior notice and an opportunity to defend against
such disclosure); provided, further, that each such authorized subcontractor
maintains, and agrees in writing to maintain, an information security program
that is designed to meet all requirements of Applicable Law, including, at a
minimum, maintenance of an information security program that is designed to:
(w) ensure the security and confidentiality of the Cardholder Data; (x) protect
against any anticipated threats or hazards to the security or integrity of the
Cardholder Data; (y) protect against unauthorized access to or use of the
Cardholder Data; and (z) ensure the proper disposal of Cardholder Data; and
provided, further, that each such authorized subcontractor agrees to notify
promptly Bank and the NMG Companies of any unauthorized disclosure, use, or
disposal of, or access to, Cardholder Data and to cooperate with Bank and the
NMG Companies in any investigation thereof and remedial action with respect
thereto;

 

(ii) to its Affiliates, and its and such Affiliates’ employees, attorneys and
accountants with a need to know such Cardholder Data in connection with a
permitted use of such Cardholder Data under this Section 6.2; provided that
(A) any such Person is bound by terms substantially similar to this Section 6.2
as a condition of employment or of access to Cardholder Data or by professional
obligations imposing comparable terms; and (B) Bank shall be responsible for the
compliance by each such Person with the terms of this Section 6.2;

 

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

 

(iv) to the extent permitted in the Risk Management Policies and Operating
Procedures, to any consumer reporting agency in accordance with the federal Fair
Credit Reporting Act.

 

(e) To the extent Bank has access to the following information in accordance
with the provisions of this Agreement and subject to Applicable Law and the
Program Privacy Policy, Bank shall transmit to the NMG Companies at such times
as may be requested by NMG and in formats agreed to by the Parties in advance
from time to time:

 

(i) for any customer who has applied for an NMG Credit Card, regardless of the
marketing channel of such application: (A) the customer’s name, address, email
address, telephone number, social security number and all other information
supplied on the application or prescreened response submitted by the customer;
(B) an indication of whether or not the customer has been approved for an NMG
Credit Card; and (C) if the customer has been approved for an NMG Credit Card or
Non-Card Payment Plan, the NMG Credit Card or Non-Card Payment Plan issued (or
to be issued) to such customer;

 

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(ii) for each Cardholder, joint-Cardholder and authorized buyer, (1) such
person’s name, address, email address, telephone number, social security number
and Account number; (2) any reported change to any of the foregoing information;
(3) transaction and experience data; and (4) any such other Cardholder Data as
the NMG Companies may reasonably request;

 

(iii) the Cardholder’s name and account number for any Account that is
delinquent;

 

(iv) the Cardholder’s name and account number for any Account that has been
closed; and

 

(v) the Cardholder Data for all categories of information available on the NMG
Companies’ credit Systems as of the date hereof.

 

Notwithstanding the foregoing, no Party hereto shall be required to provide any
information on a personally identifiable basis if the provision of such
personally identifiable information would cause such Party to be considered a
“consumer reporting agency” for purposes of the Fair Credit Reporting Act.

 

(f) Bank shall cooperate with the NMG Companies to provide NMG and its
Affiliates with the maximum ability permissible under Applicable Law and the
Program Privacy Policy to receive, use and disclose the Cardholder Data,
including, as necessary or appropriate, through use of consents or opt-out
provisions, in each case as directed by the NMG Companies. Without limiting the
foregoing, NMG and each of its Affiliates may receive, use and disclose the
Cardholder Data in compliance with Applicable Law and the Program Privacy Policy
(i) for purposes of promoting the Program or promoting NMG Goods and Services,
(ii) as otherwise necessary to carry out its obligations under this Agreement,
and (iii) as otherwise permitted by Applicable Law.

 

(g) The NMG Companies may use the Cardholder Data in compliance with Applicable
Law and the Program Privacy Policy. Each of the NMG Companies may disclose the
Cardholder Data in compliance with Applicable Law and the Program Privacy Policy
solely:

 

(i) to its existing subcontractors as of the Effective Date and to authorized
subcontractors that enter into agreements with an NMG Company after the
Effective Date (“Future Subcontractors”) in connection with a permitted use of
such Cardholder Data under this Section 6.2, provided that each such existing
subcontractor and Future Subcontractor agrees in a written agreement
satisfactory to NMG and Bank to maintain all such Cardholder Data as strictly
confidential in perpetuity and not to use or disclose such information to any
Person other than an NMG Company or Bank, except as required by Applicable Law
or any Governmental Authority (after giving the NMG Companies prior notice and
an opportunity to defend against such disclosure); provided, further, that each
such existing subcontractor and Future Subcontractor maintains, and agrees in
writing to maintain, an information security program that is designed to meet
all requirements of Applicable Law, including, at a minimum, maintenance of an

 

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information security program that is designed to: (w) ensure the security and
confidentiality of the Cardholder Data; (x) protect against any anticipated
threats or hazards to the security or integrity of the Cardholder Data;
(y) protect against unauthorized access to or use of the Cardholder Data; and
(z) ensure the proper disposal of Cardholder Data; and provided, further, that
each such existing subcontractor and Future Subcontractor agrees to notify
promptly Bank and the NMG Companies of any unauthorized disclosure, use, or
disposal of, or access to, Cardholder Data and to cooperate with Bank and the
NMG Companies in any investigation thereof and remedial action with respect
thereto;

 

(ii) to its Affiliates, and its and such Affiliates’ employees, attorneys and
accountants with a need to know such Cardholder Data in connection with a
permitted use of such Cardholder Data under this Section 6.2; provided that
(A) any such Person is bound by terms substantially similar to this Section 6.2
as a condition of employment or of access to Cardholder Data or by professional
obligations imposing comparable terms; and (B) the NMG Companies shall be
responsible for the compliance by each such Person with the terms of this
Section 6.2; or

 

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

 

(h) With respect to the sharing, use and disclosure of the Cardholder Data
following the termination of this Agreement:

 

(i) the rights and obligations of the Parties under this Section 6.2 shall
continue through any Termination Period;

 

(ii) if NMG exercises its rights under Section 17.2, Bank shall transfer its
right, title and interest in the Cardholder Data to NMG or its Nominated
Purchaser as part of such transaction, and Bank’s right to use and disclose the
Cardholder Data shall terminate upon the termination of the Termination Period;
and

 

(iii) if NMG provides notice that it shall not exercise its rights under
Section 17.2, NMG and its Affiliates’ right to use and disclose the Cardholder
Data hereunder shall terminate upon the termination of the Termination Period.

 

6.3 NMG Shopper Data; NMG Prospect Data.

 

(a) Bank acknowledges that the NMG Companies gather information about purchasers
of NMG Goods and Services and that NMG and its Affiliates have rights to use and
disclose such information independent of whether such information also
constitutes Cardholder

 

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Data. As between the NMG Companies and Bank, all the NMG Shopper Data shall be
owned exclusively by the NMG Companies. Bank acknowledges and agrees that it has
no proprietary interest in the NMG Shopper Data. To the extent Bank is the
direct recipient of such data, it shall provide such data to the NMG Companies
in such format and at such times as shall be specified by NMG. Bank shall
cooperate in the maintenance of the NMG Shopper Data and other data, including
by incorporating in the Application and Cardholder Agreement provisions mutually
agreed to by the Parties pursuant to which applicants and Cardholders shall
agree that they are providing their identifying information and all updates
thereto and all transaction data from NMG Channels to both Bank and NMG and its
Affiliates. For the avoidance of doubt, the following information shall be
deemed NMG Shopper Data:

 

(i) for any customer who has applied for an NMG Credit Card, regardless of the
channel through which such application was completed or submitted (1) the
customer’s name, address, email address, telephone number, social security
number and all other commercially reasonable information supplied on the
application or prescreened response submitted by the customer; and (2) an
indication of whether or not the customer has been approved for an NMG Credit
Card; and

 

(ii) for any Cardholder, (1) the Cardholder’s name, address, email address,
telephone number, social security number and Account number; (2) any reported
change to any of the foregoing information; and (3) Cardholder transaction and
experience data in the NMG Channels at a detailed, line-item and SKU level that
provides all detail provided to NMG and its Affiliates prior to the Effective
Time.

 

(b) Subject to compliance with Applicable Law, NMG’s privacy policies, the
Marketing Plan and such criteria (including format) as may be mutually agreed to
from time to time, the NMG Companies shall make available to Bank, free of
charge, a list of customers of NMG and its Subsidiaries who the NMG Companies
have determined are available to be solicited for Accounts under the Program
(the “NMG Prospect List”). As between the NMG Companies and Bank, the NMG
Prospect List shall be owned exclusively by the NMG Companies. Bank acknowledges
and agrees that it has no proprietary interest in the NMG Prospect List.

 

(c) Bank shall not use, or permit to be used, directly or indirectly, the NMG
Shopper Data, except to transfer such data to the NMG Companies to the extent
received by Bank. Bank shall not use, or permit to be used, the NMG Prospect
List except as provided in this Section 6.3(c). Bank may use the NMG Prospect
List in compliance with Applicable Law solely for purposes of soliciting
customers listed in the NMG Prospect List for Accounts or as required by
Applicable Law.

 

(d) Bank shall not disclose, or permit to be disclosed, the NMG Shopper Data or
the NMG Prospect List, except as provided in this Section 6.3. Bank shall not,
directly or indirectly, sell or otherwise transfer any right in or to the NMG
Shopper Data or the NMG Prospect List (all such rights belonging exclusively to
the NMG Companies). Bank may disclose the NMG Shopper Data and the NMG Prospect
List in compliance with Applicable Law solely:

 

(i) to its authorized subcontractors in connection with a permitted use of such

 

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NMG Shopper Data or NMG Prospect List under this Section 6.3, provided that each
such authorized subcontractor agrees in writing to maintain all such NMG Shopper
Data or NMG Prospect List as strictly confidential in a manner satisfactory to
NMG and not to use or disclose such information to any Person other than Bank or
an NMG Company, except as required by Applicable Law or any Governmental
Authority (after giving Bank and the NMG Companies prior notice and an
opportunity to defend against such disclosure); provided, further, that each
such authorized subcontractor maintains, and agrees in writing to maintain, an
information security program that is designed to meet all requirements of
Applicable Law, including, at a minimum, maintenance of an information security
program that is designed to: (w) ensure the security and confidentiality of the
NMG Shopper Data and NMG Prospect List; (x) protect against any anticipated
threats or hazards to the security or integrity of the NMG Shopper Data and NMG
Prospect List; (y) protect against unauthorized access to or use of the NMG
Shopper Data and the NMG Prospect List; and (z) ensure the proper disposal of
NMG Shopper Data and the NMG Prospect List; and provided, further, that each
such authorized subcontractor agrees to notify promptly Bank and the NMG
Companies of any unauthorized disclosure, use, or disposal of, or access to, NMG
Shopper Data or the NMG Prospect List and to cooperate with the Bank and the NMG
Companies in any investigation thereof and remedial action with respect thereto;

 

(ii) to its Affiliates, and its and such Affiliates’ employees, attorneys and
accountants, with a need to know the NMG Shopper Data or NMG Prospect List in
connection with a permitted use of the NMG Shopper Data or NMG Prospect List
under this Section 6.3; provided that (A) any such Person is bound by terms
substantially similar to this Section 6.3 as a condition of employment, of
access to the NMG Shopper Data or NMG Prospect List or by professional
obligations imposing comparable terms; and (B) Bank shall be responsible for the
compliance by each such Person with the terms of this Section 6.3; or

 

(iii) to any Governmental Authority with authority over Bank (A) in connection
with an examination of Bank; or (B) pursuant to a specific requirement to
provide the NMG Shopper Data or NMG Prospect List by such Governmental Authority
or pursuant to compulsory legal process; provided that Bank seeks the full
protection of confidential treatment for any disclosed NMG Shopper Data or NMG
Prospect List, as the case may be, to the extent available under Applicable Law
governing such disclosure, and with respect to clause (B), to the extent
permitted by Applicable Law, Bank (1) provides at least ten (10) Business Days’
prior notice of such proposed disclosure to NMG if reasonably possible under the
circumstances, and (2) seeks to redact the NMG Shopper Data or NMG Prospect List
to the fullest extent possible under Applicable Law governing such disclosure.

 

(e) Upon the termination of this Agreement, without limiting Bank’s rights and
obligations with respect to the Cardholder Data pursuant to Section 17.5, Bank’s
rights to use and disclose the NMG Shopper Data and NMG Prospect List shall
terminate. Promptly following such termination, Bank shall return or destroy all
the NMG Shopper Data and NMG Prospect Lists and shall certify such return or
destruction to the NMG Companies upon request.

 

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ARTICLE VII

OPERATING STANDARDS

 

7.1 Reports.

 

(a) Within fifteen (15) days after the end of each Fiscal Month or such other
time as may be agreed by the Parties with respect to particular reports, Bank
shall provide to the Management Committee and NMG the reports specified in
Schedule 7.1(a)(i) (which reports shall be reported on a Fiscal Month, calendar
month or cycles-basis, as agreed upon by the parties), and such other reports as
are mutually agreed to by the Parties from time to time. Within fifteen (15)
days after the end of each Fiscal Month or such other time as may be agreed by
the Parties with respect to particular reports, NMG shall provide to the
Management Committee and Bank the reports specified in Schedule
7.1(a)(ii) (which reports shall be reported on a Fiscal Month, calendar month or
cycles-basis, as agreed upon by the parties), and such other reports as are
mutually agreed to by the Parties from time to time.

 

(b) Within fifteen (15) days after the end of each Fiscal Month other than the
last Fiscal Month of each Fiscal Year, NMG Servicer shall deliver to Bank a
statement, in the form set forth on Schedule 7.1(b), setting forth all
information required to determine the payments to be made by the Parties
pursuant to this Agreement in respect of such Fiscal Month. Each such statement
shall be known as a “Monthly Settlement Sheet.”

 

(c) Within thirty (30) days after the end of each Fiscal Year, NMG Servicer
shall deliver to Bank a statement, in the form set forth on Schedule 7.1(c),
setting forth all information required to determine the payments to be made by
the parties pursuant to this Agreement in respect of the last Fiscal Month of
such Fiscal Year and any annual payments to be made in respect of such Fiscal
Year. Each such statement shall be known as a “Year-End Settlement Sheet”.

 

7.2 Servicing.

 

(a) As Services are transferred by NMG to Primary Servicer pursuant to the
Servicing Agreement, Primary Servicer shall perform such transferred Services in
accordance with the terms and conditions of this Agreement, the Risk Management
Policies and the Operating Procedures. Without limiting the foregoing, Primary
Servicer shall service the Accounts in compliance with Applicable Law, in such a
way as to not disparage or embarrass the NMG Companies or their names, with a
level of service to Cardholders and with no less care and diligence than the
degree of care and diligence employed by NMG prior to the Effective Date. In
addition, without limiting the foregoing, with respect to the Services to be
performed by Primary Servicer, Primary Servicer agrees that it shall perform
such functions with no less care and diligence than that degree of care and
diligence employed by it in servicing the Comparable Partner Programs.

 

(b) Upon transfer by NMG of any services pursuant to the Servicing Agreement,
the Primary Servicer shall accept appointment as servicer with respect to such
Services and shall be required to meet the SLAs applicable to Primary Servicer
for such Services set forth in Schedule

 

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7.3(a) (as such SLAs may be amended from time to time in accordance with this
Agreement). Upon the date of the foregoing transfer, NMG shall be released from
any further obligation with respect to the performance of such Services. In the
event that customer service is transferred to Primary Servicer as a transferred
Service in accordance with the Servicing Agreement and this Section 7.2(b),
Primary Servicer shall continue to monitor the customer disputes in
substantially the same manner as is described in the Dispute Resolution and
Service Profile Report Process section of the Operating Procedures.

 

(c) Upon transfer of any of the Services to Primary Servicer in accordance with
Section 2.03(b) of the Servicing Agreement and Section 7.2(b), the amount
payable to Servicer set forth in Schedule 9.1(a)(i) shall be adjusted as set
forth in Schedule 9.1(a)(i) in order to reflect the reduction of Services being
performed by Servicer and the assumption of the performance of such Services by
Primary Servicer, which transferred Services shall be performed at the sole cost
and expense of the Primary Servicer.

 

(d) Notwithstanding Section 7.2(b), Primary Servicer and NMG agree that the
Documentation Services shall be transferred to Primary Servicer as soon as
practicable after the date hereof (the date of such transfer, the “Documentation
Services Transition Date”) and, upon such transfer, Primary Servicer shall be
required to meet the SLAs applicable to the Documentation Services set forth in
Schedule 7.3(a).

 

(e) Primary Servicer shall maintain records relating to its performance of the
Services in accordance with the record retention policies set forth on Schedule
4.4(f). Records may be kept in either paper or electronic form. Primary Servicer
shall retrieve, reproduce and deliver to NMG any records reasonably requested
from time to time by NMG for the purpose of providing customer assistance or
resolving customer disputes, and NMG shall compensate Primary Servicer on demand
for the reasonable costs and expenses associated with such retrieval,
reproduction and delivery.

 

(f) Primary Servicer shall have the right to perform any portion of the Services
through one or more subservicers; provided that (i) any subservicer that is not
an Affiliate of Primary Servicer shall be subject to approval pursuant to
Article III and (ii) Primary Servicer shall remain fully responsible to NMG for
the portion of the Services performed by any subservicer(s) (including its
Affiliates). Notwithstanding the foregoing, to the extent Primary Servicer
subcontracts or outsources to any third party any Services as of the date
hereof, Primary Servicer may continue to subcontract or outsource such Services
to such third party (and Primary Servicer shall be fully responsible for the
performance of such subcontracted or outsourced Services).

 

(g) Notwithstanding any arrangement whereby Bank provides any Services through
an Affiliate (or third party as permitted under Section 7.2(f)), Bank shall
remain obligated and liable to the NMG Companies for the provision of such
Services without diminution of such obligation or liability by virtue of such
arrangement.

 

(h) This Section 7.2, Section 7.3 and the Servicing Agreement shall only apply
to the servicing of all Accounts other than the Non-Store Accounts.

 

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7.3 Service Level Standards.

 

(a) Primary Servicer shall perform the applicable Services in accordance with
the SLAs set forth on Schedule 7.3(a).

 

(b) Primary Servicer shall report to the NMG Companies monthly, in a mutually
agreed upon format and on a calendar month basis, Primary Servicer’s performance
under each of the SLAs set forth on Schedule 7.3(a). If Primary Servicer fails
to meet any SLA, Primary Servicer shall (i) immediately report to the Management
Committee the reasons for the SLA failure(s); and (ii) promptly take any action
reasonably necessary to correct and prevent recurrence of such failure(s).

 

(c) With respect to any SLA set forth on Schedule 7.3(a), the provisions set
forth in Schedule 7.3(c) shall apply.

 

(d) Throughout the Term, Primary Servicer shall maintain a disaster recovery and
business continuity plan that complies with Applicable Law and is consistent
with plans maintained for its Comparable Partner Programs. Primary Servicer
shall be prepared to and have the ability to implement such plan if necessary.
Primary Servicer shall provide NMG with access to review such plan upon request.
Primary Servicer shall test the plan annually and shall promptly implement such
plan upon the occurrence of a disaster or business interruption. Primary
Servicer shall be excused from its failure to meet any applicable SLAs that
result directly from the failure of any of the NMG Systems.

 

7.4 Credit Systems.

 

(a) The NMG Companies and Bank shall work together (including through a
subcommittee of the Management Committee formed for this purpose) to develop a
mutually agreeable plan relating to the Credit Systems, which may include a
conversion plan designed to convert such data to the Bank Systems. Subject to
the satisfaction of each of the requirements set forth in Section 7.4(b), at
such time, if any, when both NMG and Bank are satisfied with the terms of such
conversion plan and have concluded that such conversion will further the Program
Objectives and provide cost efficiencies and features and functionality superior
to those available on the NMG Systems without an unacceptable level of Program
disruption, such conversion shall be implemented (the date of any such
conversion the “Systems Transition Date”). Bank shall bear all out-of-pocket
costs and expenses associated with the Systems conversion (whether incurred by
Bank or any of its Affiliates or NMG or any of its Affiliates).

 

(b) The Parties acknowledge and agree that no Systems conversion shall occur
pursuant to Section 7.4(a) in absence of satisfaction of each of the following
requirements:

 

(i) Bank shall ensure that all identified features and functionality available
on the NMG Systems prior to the Systems Transition Date (including data
gathering, interface capabilities with the NMG Companies’ other Systems, Loyalty
Program support and core systems/customer service functionality) are available
on the Bank Systems as of the Systems Transition Date to the extent the NMG
Systems are to be converted to the Bank Systems;

 

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(ii) Bank shall ensure that all features and functionality set forth in Schedule
7.4(b) are available on the Bank Systems as of the Systems Transition Date;

 

(iii) all existing credit data feeds used by NMG or any of its Affiliates in
connection with the Credit Card Business or otherwise prior to the Effective
Date shall have been replicated on the Bank Systems prior to the Systems
Transition Date; and all data feeds necessary to provide NMG with the
information necessary to prepare the Monthly Settlement Sheets and Yearly
Settlement Sheets pursuant to Section 7.1 shall have been created prior to the
Systems Transition Date;

 

(iv) Bank shall provide and the Bank Systems shall support the Internet Services
described in Section 4.8;

 

(v) Bank shall keep the same structure of Account numbers;

 

(vi) without limiting the foregoing, the Bank Systems shall interface with the
NMG Systems that are not converted to Bank Systems in a manner reasonably
acceptable to NMG;

 

(vii) Bank shall have a disaster recovery and business continuity plan
applicable to the Bank Systems as set forth in Section 7.3(d) and the Bank shall
be prepared to and have the ability to implement such plan if necessary;

 

(viii) Bank shall have identified and implemented all hardware and other Systems
changes necessary to ensure that the Bank Systems will be compatible with those
NMG Systems that will interface with the Bank Systems, including the POS Systems
of NMG and its Affiliates; and

 

(ix) Bank shall provide training to all employees of NMG, its Subsidiaries and
its Licensees who use the Bank Systems.

 

(c) Prior to the Systems Transition Date, the Parties shall agree on a statement
of work covering the development and testing of, and conversion to, the Bank
Systems.

 

(d) Neither Party shall make any change to any of its Systems that would render
them incompatible in any way with the other Party’s or its Affiliates’ Systems
or require the other Party or its Affiliates (or the Retail Merchants) to make
any change to any of their Systems (including any POS terminals) or reduce or
restrict interfacing or System feeds, in any such case without the prior
approval of the Management Committee. Neither Party will make any material
change to its Systems with respect to the Program without the prior approval of
the Management Committee.

 

7.5 Systems Interface; Technical Support.

 

(a) Required Interfaces.

 

(i) The NMG Companies and Bank shall identify, prior to the Effective Date, the
Systems interfaces required to be sustained among the NMG Companies and Bank.
The

 

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NMG Companies and Bank shall maintain such interfaces and cooperate in good
faith with each other in connection with any modifications to such interfaces as
may be requested by either Party from time to time.

 

(ii) Each of the NMG Companies and Bank agrees to maintain at its own expense
its respective Systems interfaces so that the operation of the Systems as a
whole is at all times no less functional than prior to the Effective Date. Bank
agrees to provide sufficient personnel to support the Systems interfaces
required to be sustained among the NMG Companies and Bank.

 

(b) Additional Interfaces; Interface Modifications. All requests for new
interfaces, modifications to existing interfaces and terminations of existing
interfaces shall be presented to the Management Committee for approval. Upon
approval, the Parties shall work in good faith to establish the requested
interfaces or modify or terminate the existing interfaces, as applicable, on a
timely basis. Except as otherwise provided herein (including in Section 7.4),
all costs and expenses with respect to any new interface or interface
modification or termination shall be borne by the requesting Party unless
otherwise determined by the Management Committee.

 

(c) Secure Protocols. The Parties shall use secure protocols for the
transmission of data from Bank and its Affiliates, on the one hand, to NMG and
its Affiliates, on the other hand, and vice versa.

 

7.6 Customer Management Systems. Bank hereby agrees to establish the Customer
Management System with the features set forth in Schedule 7.6 by the dates
specified in such schedule. The Customer Management System shall be established
and maintained by Bank at its own expense in order to support NMG in the
marketing of the Program and the Credit Card Business.

 

ARTICLE VIII

MERCHANT SERVICES

 

8.1 Transmittal and Authorization of NMG Charge Transaction Data. NMG shall, and
shall cause its Subsidiaries and Licensees (such Subsidiaries and Licensees,
together with NMG, the “Retail Merchants”) to, accept the NMG Credit Cards or
Non-Card Payment Plans for NMG Goods and Services. The Retail Merchants shall
transmit NMG Charge Transaction Data for authorization of NMG Transactions to
Bank as provided in the Operating Procedures. NMG Servicer, on Bank’s behalf,
shall authorize or decline NMG Transactions on a real time basis as provided in
the Operating Procedures, including transactions involving split-tender (i.e., a
portion of the total transaction amount is billed to an NMG Credit Card or
Non-Card Payment Plan and the remainder is paid through one or more other forms
of payment), transactions over the phone, on-line or hand keyed, as applicable,
or down-payments on NMG Goods and Services for later delivery. If any Retail
Merchant is unable to obtain authorizations for NMG Transactions for any reason,
such Retail Merchant may complete such NMG Transactions without receipt of
further authorization as provided in the Operating Procedures.

 

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8.2 POS Terminals. The Retail Merchants shall maintain POS terminals capable of
processing NMG Credit Card, Non-Card Payment Plan and Account transactions as
handled as of the Effective Date. To the extent that the Retail Merchants are
required to make changes to any POS terminal (including hardware and software)
in order to process NMG Transactions and transmit NMG Charge Transaction Data
under this Agreement as a result of any System conversion contemplated by
Section 7.4 or any other change or modification to any Bank System or a new Bank
System approved by the Management Committee, Bank shall pay the costs and
expenses associated with such changes.

 

8.3 In-Store Payments. The Retail Merchants may accept In-Store Payments from
Cardholders on their Accounts in accordance with the Operating Procedures, the
Risk Management Policies and any procedures required under Applicable Law. The
Retail Merchants shall, as necessary, provide proper endorsements on such items.
If the Retail Merchants receive any In-Store Payments, NMG shall, directly or
through its Affiliates, be deemed to hold such In-Store Payments in trust for
Bank until such Payments are either delivered to Bank or applied to reduce
amounts payable by Bank to NMG pursuant to Section 8.4(b). Bank hereby grants to
each of the NMG Companies and the Retail Merchants a limited power of attorney
(coupled with an interest) to sign and endorse Bank’s name upon any form of
payment that may have been issued in Bank’s name in respect of any Account. The
NMG Companies and Bank shall jointly develop procedures in the Operating
Procedures with respect to the manner in which such In-Store Payments shall be
processed (it being understood that such procedures shall provide for immediate
credit toward the applicable open-to-buy limits of the respective Account upon
receipt of an In-Store Payment). The NMG Companies, on behalf of the Retail
Merchants, shall notify Bank upon receipt of In-Store Payments and Bank shall
include the NMG Charge Transaction Data related to such In-Store Payments in the
net settlement in respect of the day immediately following such receipt on the
same basis as other NMG Charge Transaction Data. The Retail Merchants shall
issue receipts for such payments in compliance with Applicable Law.

 

8.4 Settlement Procedures.

 

(a) NMG shall transmit NMG Charge Transaction Data to Bank in accordance with
the Operating Procedures on each day on which such Retail Merchants are open for
business, other than Sunday. If NMG Charge Transaction Data is received by
Bank’s processing center on or before 6:00 am (Central time) on any Business Day
on which Bank is open for business, Bank shall process the NMG Charge
Transaction Data and initiate a wire transfer of the payment in respect thereof
before 1:00 pm (Central time) on the same Business Day. If the NMG Charge
Transaction Data is received after 6:00 am (Central time) on any day a Retail
Merchant is open, or at any time on a day other than a Business Day, Bank shall
process the NMG Charge Transaction Data for payment by 1:00 pm (Central time) on
the following Business Day.

 

(b) Bank shall remit to NMG, for itself and the Retail Merchants, an amount
equal to (i) the total amount of charges identified in all NMG Charge
Transaction Data not yet paid in accordance with Section 8.4(a) less (ii) the
sum of (A) the total amount of any credits included in such NMG Charge
Transaction Data, plus (B) the total amount of In-Store Payments (if any), plus
(C) any amounts charged back to such Retail Merchants pursuant to Section 8.5.
The total amount of charges reflected in the NMG Charge Transaction Data shall
include the amount of all Special Discounts such that upon daily settlement of
such NMG Charge Transaction Data in

 

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accordance with this Section 8.4(b), Bank shall pay NMG the price of the NMG
Goods and Services without giving effect to such discount(s). NMG shall
reimburse Bank for the amount of such discounts on a monthly basis as set forth
in Section 8.4(c).

 

(c) Not more than five (5) days after the end of each Fiscal Month, NMG Servicer
shall deliver or cause to be delivered to Bank a report for such preceding
Fiscal Month of all Special Discounts reflected in the NMG Charge Transaction
Data and paid for by Bank in such preceding Fiscal Month (and, in the case of
NMG Charge Transaction Data for a credit to an Account, all reversals of Special
Discounts reflected in the credits included in such NMG Charge Transaction
Data). The sum of (i) the net amount of Special Discounts paid by Bank with
respect to such Special Discounts during such Fiscal Month, as reflected on such
report (after deducting any Special Discounts reversed in respect of NMG Goods
and Services for which a credit was issued), plus (ii) an amount equal to the
product of such net amount of Special Discounts and the Program Fee Percentage
shall be paid by NMG to Bank within three (3) Business Days of such report.

 

(d) NMG shall be responsible for allocating such remittances among the Retail
Merchants as appropriate and Bank shall have no responsibility or liability in
connection therewith (it being agreed that Bank has no obligation to accept NMG
Charge Transaction Data directly from, or make remittances to, any person other
than NMG).

 

8.5 Bank’s Right to Charge Back. Bank shall have the right to charge back to NMG
the amount of any Cardholder Indebtedness, including Cardholder Indebtedness
incurred prior to the Effective Date with respect to Purchased Accounts,
relating to NMG Charge Transaction Data if with respect to the related NMG
Transaction:

 

(a) The Cardholder refuses to pay the charge based on a dispute regarding the
quality or delivery of NMG Goods and Services representing a valid defense to
payment consistent with Applicable Law; provided that any such refusal
constitutes a bona fide claim presented by the Cardholder in good faith in the
reasonable opinion of NMG, after consultation with Bank;

 

(b) The Cardholder refuses to pay the charge based on a claim of unauthorized
use of the NMG Credit Card at a Retail Merchant; provided that any such refusal
constitutes a bona fide claim presented by the Cardholder in good faith in the
reasonable opinion of NMG, after consultation with Bank;

 

(c) The charge was not for a bona fide sale or delivery of NMG Goods and
Services by or through a NMG Channel;

 

(d) The charge slip is a duplicate of a charge slip previously paid;

 

(e) The price of NMG Goods and Services shown on the charge slip differs from
the amount shown on the Cardholder’s copy of the charge slip;

 

(f) The charge or Account arose from fraud of any employee or agent in a Retail
Merchant; or

 

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(g) The Cardholder refuses to pay the charge based on a dispute regarding
accuracy of the material NMG Charge Transaction Data or the charge slip is
illegible with respect to such NMG Charge Transaction Data or is missing
information in any material respect.

 

8.6 Exercise of Chargeback. If Bank exercises its right of chargeback, Bank may
set off all amounts charged back against any sums due to the NMG Companies under
this Agreement, or Bank may demand payment from NMG for the full amount of such
chargeback. In the event of a chargeback pursuant to this Article VIII, upon
payment in full of the related amount by NMG, Bank shall immediately assign to
NMG or the relevant Retail Merchant, without any representation, warranty or
recourse, (i) all right to payments of amounts charged back in connection with
such Cardholder charge, and (ii) any security interest granted by the NMG
Companies under Section 19.1. Bank shall cooperate fully in any effort by the
NMG Companies to collect the chargeback amount, including by executing and
delivering any document necessary or useful to such collection efforts.

 

8.7 No Merchant Discount. None of NMG, its Affiliates or the Retail Merchants
shall be required to pay any Merchant Discount on any NMG Transaction. Bank
shall directly process the NMG Transactions such that the Retail Merchants do
not incur any merchant acquirer/processor or similar fees.

 

ARTICLE IX

PROGRAM ECONOMICS

 

9.1 NMG Compensation.

 

(a) Payments.

 

(i) Not later than 1:00 pm (Central time) on each Business Day, Bank shall pay
to NMG an amount equal to the amount set forth on Schedule 9.1(a)(i) with
respect to the Accounts other than the Non-Store Accounts.

 

(ii) Not later than 1:00 pm (Central time) on the tenth (10th) Business Day
after the end of each Fiscal Month, Bank shall pay NMG the amounts determined in
accordance with Schedule 9.1(a)(ii) with respect to the Accounts other than the
Non-Store Accounts.

 

(iii) Not later than 1:00 pm (Central time) on the tenth (10th) Business Day
following the receipt of the Year-End Settlement Sheet, each Party shall pay to
the other Party the amounts, if any, determined in accordance with such Year-End
Settlement Sheet.

 

(iv) On the dates and times agreed to by the Parties with respect to the
Dual-Line Credit Cards pursuant to Section 2.2(c)(ii), Bank shall pay to NMG the
amounts payable with respect to such Dual-Line Credit Cards.

 

(v) Such amounts shall be paid to NMG or Bank, as the case may be, regardless of
whether any amounts are disputed by Bank or NMG. For the avoidance of doubt, any
such payment shall not be deemed a waiver of, or in any other way limit, a
Party’s right to pursue any dispute with respect to such payment in accordance
with the terms of this Agreement and each of Bank or NMG may invoke the dispute
resolution procedures set forth herein following payment of such amounts.

 

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(b) Form of Payment. All payments pursuant to this Section 9.1 shall be made by
wire transfer of immediately available funds to an account designated in writing
by NMG or Bank, as the case may be, unless otherwise agreed upon by the Parties
in writing.

 

9.2 Dispute Resolution. Any disputes regarding the amounts owed under this
Agreement shall be resolved in accordance with Section 12.3.

 

ARTICLE X

INTELLECTUAL PROPERTY

 

10.1 The NMG Licensed Marks.

 

(a) Grant of License to Use the NMG Licensed Marks. Subject to the terms and
conditions of this Agreement, NMG hereby grants to Bank a non-exclusive,
royalty-free, non-transferable right and license to use the NMG Licensed Marks
(i) with respect to the Program in the United States in connection with the
creation, establishment, marketing and administration of, and the provision of
services related to, the Program and (ii) in connection with any sale permitted
by this Agreement of the Accounts and Cardholder Indebtedness to third parties
for liquidation. All use of the NMG Licensed Marks shall be in accordance with
this Agreement and any Trademark Style Guide delivered by NMG to Bank from time
to time (which NMG shall so deliver). All uses of the NMG Licensed Marks shall
require the prior written approval of NMG. To the extent Bank delegates any of
its rights or obligations hereunder to any authorized Affiliate and/or
authorized third party in accordance with the terms and conditions of this
Agreement, Bank may sublicense its rights in the NMG Licensed Marks hereunder to
such authorized Person; provided that such Person shall agree to comply with all
of the terms and conditions of the use of the NMG Licensed Marks hereunder and
Bank shall remain liable for such Person’s failure to so comply. Except as
expressly set forth in this Section 10.1, the rights granted pursuant to this
Section 10.1 are solely for use of Bank and may not be sublicensed without the
prior written approval of NMG.

 

(b) New NMG Marks. If NMG or any of its Subsidiaries adopts a trademark, service
mark or other source indicator that is a successor to an NMG Licensed Mark or
that NMG has otherwise elected to use in connection with the Program but which
is not listed on Schedule 1.1(d) hereto (a “New NMG Mark”), Bank may request
that NMG add such New NMG Mark to Schedule 1.1(d) hereto and license its use
hereunder; NMG shall not unreasonably fail to do so, and upon NMG’s written
approval of the addition of such New NMG Mark, such New NMG Mark shall be deemed
added to Schedule 1.1(d).

 

(c) Termination of License. Except to the extent otherwise provided in
Section 17.5, the license granted in this Section 10.1 shall terminate upon the
termination or expiration of this Agreement or, if the purchase option under
Section 17.2 is exercised, the Program Purchase Date. Upon termination of the
license granted in this Section 10.1, all rights in the NMG Licensed Marks
granted hereunder shall revert to NMG and Bank shall: (i) discontinue

 

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immediately all use of the NMG Licensed Marks, or any of them, and any colorable
imitation thereof; and (ii) destroy all unused NMG Credit Cards, Applications,
Account Documentation, Solicitation Materials, periodic statements, materials,
displays, advertising and sales literature and any other items bearing any of
the NMG Licensed Marks; provided that if the purchase option under Section 17.2
is exercised, at NMG’s election, such items shall constitute Program Assets and
will be transferred and delivered to NMG or its Nominated Purchaser pursuant to
Section 17.2.

 

(d) Ownership of the NMG Licensed Marks. Bank acknowledges that (i) the NMG
Licensed Marks, all rights therein, and the goodwill associated therewith, are,
and shall remain, the exclusive property of NMG, (ii) it shall take no action
which shall adversely affect NMG’s exclusive ownership of the NMG Licensed
Marks, or the goodwill associated with the NMG Licensed Marks (it being
understood that the collection of Accounts, adverse action letters, and changes
in terms of Accounts as required by Applicable Law do not adversely affect
goodwill, if done in accordance with the terms of this Agreement), and (iii) any
and all goodwill arising from use of the NMG Licensed Marks by Bank shall inure
to the benefit of NMG. Nothing herein shall give Bank any proprietary interest
in or to the NMG Licensed Marks, except the right to use the NMG Licensed Marks
in accordance with this Agreement, and Bank shall not contest NMG’s title in and
to the NMG Licensed Marks.

 

(e) Infringement by Third Parties. Bank shall use reasonable efforts to notify
NMG, in writing, promptly upon acquiring Knowledge of any infringing use of any
of the NMG Licensed Marks by any third party. If any of the NMG Licensed Marks
is infringed, NMG alone has the right, in its sole discretion, to take whatever
action it deems necessary to prevent such infringing use; provided, however,
that if NMG fails to take reasonable steps to prevent infringement of the NMG
Licensed Marks and such infringement has an adverse effect upon the Program or
the rights of Bank hereunder, Bank may request that NMG take action necessary to
alleviate such adverse impact. Bank shall reasonably cooperate with and assist
NMG, at NMG’s expense, in the prosecution of those actions that NMG determines,
in its sole discretion, are necessary or desirable to prevent the infringing use
of any of the NMG Licensed Marks.

 

10.2 The Bank Licensed Marks.

 

(a) Grant of License to Use the Bank Licensed Marks. Subject to the terms and
conditions of this Agreement, Bank hereby grants to the NMG Companies a
non-exclusive, royalty-free, non-transferable right and license to use the Bank
Licensed Marks in the United States in connection with the creation,
establishment, marketing and administration of, and the provision of services
related to, the Program. All uses of the Bank Licensed Marks shall be in
accordance with this Agreement and any Trademark Style Guide delivered by Bank
to NMG from time to time (which Bank shall so deliver). All uses of the Bank
Licensed Marks shall require the prior written approval of Bank. To the extent
the NMG Companies delegate any of their rights or obligations hereunder to any
authorized Affiliate and/or authorized third party in accordance with the terms
and conditions of this Agreement, the NMG Companies may sublicense their rights
in the Bank Licensed Marks hereunder to such authorized Person; provided that
such Person shall agree to comply with all of the terms and conditions of the
use of the Bank Licensed Marks hereunder and the NMG Companies shall remain
liable for such Person’s failure to so comply. Except as expressly set forth in
this Section 10.2, the rights granted pursuant to this Section 10.2 are solely
for use of the NMG Companies and may not be sublicensed without the prior
written approval of Bank.

 

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(b) New Bank Marks. If Bank adopts a trademark, service mark or other source
indicator that is not listed on Schedule 1.1(a) hereto (for purposes of this
Section 10.2, a “New Bank Mark”), NMG may request that Bank add such New Bank
Mark to Schedule 1.1(a) hereto and license its use hereunder; Bank shall not
unreasonably fail to do so, and upon Bank’s written approval of the addition of
such New Bank Mark, such New Bank Mark shall be deemed added to Schedule 1.1(a).

 

(c) Termination of License. The license granted in this Section 10.2 shall
terminate upon the termination or expiration of this Agreement or, if the
purchase option under Section 17.2 is exercised, six (6) months after the
Program Purchase Date. Upon the termination of the license granted in this
Section 10.2, all rights in the Bank Licensed Marks granted hereunder shall
revert to Bank and the NMG Companies shall: (i) discontinue immediately all use
of the Bank Licensed Marks, or any of them, and any colorable imitation thereof;
and (ii) destroy all unused NMG Credit Cards, Applications, Account
Documentation, Solicitation Materials, periodic statements, materials, displays,
advertising and sales literature and any other items, in each case, bearing any
of the Bank Licensed Marks.

 

(d) Ownership of the Bank Licensed Marks. Each of the NMG Companies acknowledges
that (i) the Bank Licensed Marks, all rights therein, and the goodwill
associated therewith, are, and shall remain, the exclusive property of Bank,
(ii) it shall take no action which shall adversely affect Bank’s exclusive
ownership of the Bank Licensed Marks or the goodwill associated with the Bank
Licensed Marks, and (iii) any and all goodwill arising from use of the Bank
Licensed Marks by the NMG Companies shall inure to the benefit of Bank. Nothing
herein shall give the NMG Companies any proprietary interest in or to the Bank
Licensed Marks, except the right to use the Bank Licensed Marks in accordance
with this Agreement, and the NMG Companies shall not contest Bank’s title in and
to the Bank Licensed Marks.

 

(e) Infringement by Third Parties. Each of the NMG Companies shall use
reasonable efforts to notify Bank, in writing, promptly upon acquiring Knowledge
of any infringing use of any of the Bank Licensed Marks by any third party. If
any of the Bank Licensed Marks is infringed, Bank alone has the right, in its
sole discretion, to take whatever action it deems necessary to prevent such
infringing use; provided, however, that if Bank fails to take reasonable steps
to prevent infringement of the Bank Licensed Marks and such infringement has an
adverse effect upon the Program or the rights of the NMG Companies hereunder,
the NMG Companies may request that Bank take action necessary to alleviate such
adverse impact. The NMG Companies shall reasonably cooperate with and assist
Bank, at Bank’s expense, in the prosecution of those actions that Bank
determines, in its sole discretion, are necessary or desirable to prevent the
infringing use of any of the Bank Licensed Marks.

 

10.3 Intellectual Property.

 

(a) Independently-Owned Intellectual Property. Each Party shall continue to own
all of its Intellectual Property that existed as of the Effective Date. Each
Party also shall own all right, title and interest in the Intellectual Property
it develops or creates independently of the other Party during the Term.

 

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(b) Joint Intellectual Property. Each Party shall have the right to use, license
and otherwise exploit jointly owned Intellectual Property without any
restriction or obligation to account to the other Party; provided, however, that
no such jointly owned Intellectual Property shall be used by Bank in connection
with any Comparable Partner Program or Competing Retail Program without the
prior written consent of NMG. Patents and patentable inventions shall be deemed
to be owned jointly, as between the Parties, only if the respective personnel of
each Party are deemed co-inventors under the patent law, and (ii) software and
other works of authorship and associated copyrights shall be deemed to be
jointly owned only if the Parties are deemed co-authors or co-owners of such
software or other work of authorship under the copyright law. Any other
Intellectual Property developed by a substantially equal investment of time,
human, intellectual and financial resources by each Party during the Term of
this Agreement shall be owned jointly by the Parties. By way of example and not
of limitation, a Party shall not be a joint owner of any such Intellectual
Property if its contribution thereto consists solely of data, unless that is the
only contribution of the other Party. Otherwise, all patents, patentable
inventions, software, other works of authorship and related copyrights and all
other Intellectual Property (and any improvements thereto) shall be deemed to be
owned solely by one Party. Thus, to the extent that a work created by one Party
is based on or incorporates Intellectual Property of the other Party, but the
Parties are not joint owners as set forth above, then one Party shall be the
sole owner of the Intellectual Property in the underlying work and the other
Party shall be the sole owner of the Intellectual Property in the new work. Any
information or data provided by or on behalf of one Party to the other Party
remains, as between the Parties, the sole property of the providing Party, and
if applicable, shall be considered “Confidential Information” under
Section 13.1. Any Intellectual Property, systems or networks of a Party used to
process, store or analyze information or data of the other Party remain, as
between the Parties, the sole property of the first Party.

 

(c) During and after the Term of this Agreement, each Party may use, license or
otherwise exploit (or permit others to do so) any jointly owned Intellectual
Property referenced herein solely at its own risk.

 

ARTICLE XI

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

11.1 General Representations and Warranties of NMG. Except as Previously
Disclosed, NMG makes the following representations and warranties to the Bank
Companies as of the date hereof and as of the Effective Date:

 

(a) Corporate Existence. Each NMG Company: (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; (ii) is duly licensed or qualified to do business and is in good
standing as a foreign corporation in all jurisdictions in which the conduct of
its business or the activities in which it is engaged makes such licensing or
qualification necessary, except to the extent that its non-compliance would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the

 

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NMG Companies’ ability to perform their obligations hereunder; and (iii) has all
necessary licenses, permits, consents or approvals from or by, and has made all
necessary filings and registrations with, all governmental authorities having
jurisdiction, to the extent required for the ownership, lease or conduct and
operation of its business, except to the extent that the failure to obtain such
licenses, permits, consents or approvals or to make such filings or
registrations would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect upon the NMG Companies, the Program, the
Accounts, Cardholder Indebtedness or the NMG Companies’ ability to perform their
obligations under this Agreement.

 

(b) Capacity; Authorization; Validity. Each NMG Company has all necessary
corporate power and authority to (i) execute and enter into this Agreement, and
(ii) perform the obligations required of such NMG Company hereunder and the
other documents, instruments and agreements relating to the Program and this
Agreement executed by such NMG Company pursuant hereto. The execution and
delivery by the NMG Companies of this Agreement and all documents, instruments
and agreements executed and delivered by the NMG Companies pursuant hereto, and
the consummation by the NMG Companies of the transactions specified herein, have
been duly and validly authorized and approved by all necessary corporate actions
of the NMG Companies. This Agreement (i) has been duly executed and delivered by
the NMG Companies, (ii) constitutes the valid and legally binding obligation of
the NMG Companies, and (iii) is enforceable in accordance with its terms
(subject to applicable bankruptcy, insolvency, reorganization, receivership or
other laws affecting the rights of creditors generally and by general equity
principles including those respecting the availability of specific performance).

 

(c) Conflicts; Defaults; Etc. Subject to receipt of any licenses and
qualifications required for NMG to perform its servicing obligations under the
Servicing Agreement, the execution, delivery and performance of this Agreement
by each of the NMG Companies, their compliance with the terms hereof, and
consummation of the transactions specified herein will not (i) conflict with,
violate, result in the breach of, constitute an event which would, or with the
lapse of time or action by a third party or both would, result in a default
under, or accelerate the performance required by, the terms of any contract,
instrument or agreement to which NMG or any of its Subsidiaries is a party or by
which they are bound, or to which any of the assets of NMG or any of its
Subsidiaries are subject; (ii) conflict with or violate the articles of
incorporation or by-laws, or any other equivalent organizational document(s), of
the NMG Companies; (iii) breach or violate any Applicable Law or Applicable
Order, in each case, applicable to the NMG Companies; (iv) require the consent
or approval of any other party to any contract, instrument or commitment to
which any NMG Company is a party or by which it is bound; or (v) require any
filing with, notice to, consent or approval of, or any other action to be taken
with respect to, any Governmental Authority, except, in the cases of clauses
(i) and (iii)-(v), for such conflicts, breaches, defaults, violations or
failures to obtain such consents or approvals or make or obtain such filings,
notices, consents and approvals as would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect upon the NMG
Companies, the Program, the Accounts, Cardholder Indebtedness or the NMG
Companies’ ability to perform their obligations under this Agreement.

 

(d) No Litigation. No action, claim, litigation, proceeding, arbitration or
investigation is pending or, to the Knowledge of NMG, threatened against NMG or
any of its Subsidiaries, at law, in equity or otherwise, by or before any
Governmental Authority, to which

 

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NMG or any of its Subsidiaries is a party, which would reasonably be expected to
have, individually or in the aggregate, a material adverse effect upon the NMG
Companies, the Program, the Accounts, Cardholder Indebtedness or the NMG
Companies’ ability to perform their obligations under this Agreement.

 

(e) Compliance with Laws. Except to the extent that any of the following would
not reasonably be expected to have, individually or in the aggregate, a material
adverse effect upon the Program or the ability of the NMG Companies to perform
their obligations under this Agreement, the NMG Companies are in compliance with
all requirements of Applicable Law relating to the Credit Card Business and
neither of the NMG Companies nor any of their Affiliates is subject to any
order, directive or restriction of any kind issued by any Governmental Authority
that restricts in any respect its ability to perform its obligations under the
Program.

 

(f) Servicing Qualifications. NMG is or will be at the Effective Date licensed
and qualified in all jurisdictions necessary to service the Accounts in
accordance with all Applicable Laws, except where the failure to be so qualified
would not reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the ability of NMG to perform its obligations under
this Agreement.

 

(g) Books and Records. All books and records of the NMG Companies related to the
Credit Card Business have been maintained accurately and in accordance with all
requirements of Applicable Law applicable to the NMG Companies and the Credit
Card Business, except for any instances of inaccuracy or noncompliance that
would not reasonably be expected to have a material adverse effect on the
ability of the NMG Companies to perform their obligations under this Agreement.

 

(h) Insurance. The NMG Companies maintain insurance policies with respect to
their properties under such terms and conditions as are (i) commercially
reasonable and available from time to time and (ii) customary for similarly
situated Persons engaged in similar business, except in each case for insurance
which a failure to maintain would not reasonable be expected to have a material
adverse effect on the ability of the NMG Companies to perform their obligations
under this Agreement.

 

(i) The NMG Licensed Marks. NMG has the right, power and authority to grant the
rights to use the NMG Licensed Marks expressly granted herein.

 

11.2 General Representations and Warranties of the Bank Companies. Except as
Previously Disclosed, the Bank Companies hereby make the following
representations and warranties to the NMG Companies as of the date hereof and as
of the Effective Date:

 

(a) Corporate Existence. Each Bank Company: (i) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation; and (ii) is duly licensed or qualified to do business and is in
good standing as a foreign entity in all jurisdictions in which the conduct of
the its business or the activities in which it is engaged, or proposes to engage
pursuant to this Agreement, makes such licensing or qualification necessary,
except to the extent that its non-compliance would not reasonably be expected to
have, individually or in the aggregate, a material adverse effect upon the Bank
Companies, the Program, the Accounts,

 

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Cardholder Indebtedness or the Bank Companies’ ability to perform their
obligations under this Agreement. The Bank Companies have all necessary
licenses, permits, consents or approvals from or by, and have made all necessary
filings and registrations with, all governmental authorities having
jurisdiction, to the extent required for the ownership, lease or conduct and
operation of their businesses and the Credit Card Business pursuant to this
Agreement, except to the extent that the failure to obtain such licenses,
permits, consents or approvals or to make such filings or registrations would
not reasonably be expected to have, individually or in the aggregate, a material
adverse effect upon the Bank Companies, the Program, the Accounts, Cardholder
Indebtedness or the Bank Companies’ ability to perform their obligations under
this Agreement.

 

(b) Capacity; Authorization; Validity. Each Bank Company has all necessary
corporate or similar power and authority to (i) execute and enter into this
Agreement, and (ii) perform the obligations required of such Bank Company
hereunder and the other documents, instruments and agreements relating to the
Program and this Agreement executed by such Bank Company pursuant hereto. The
execution and delivery by the Bank Companies of this Agreement and all
documents, instruments and agreements executed and delivered by the Bank
Companies pursuant hereto, and the consummation by the Bank Companies of the
transactions specified herein, have been duly and validly authorized and
approved by all necessary corporate or similar actions of the Bank Companies.
This Agreement (i) has been duly executed and delivered by the Bank Companies,
(ii) constitutes the valid and legally binding obligation of the Bank Companies,
and (iii) is enforceable in accordance with its terms (subject to applicable
bankruptcy, insolvency, reorganization, receivership or other laws affecting the
rights of creditors generally and by general equity principles including those
respecting the availability of specific performance).

 

(c) Conflicts; Defaults; Etc. The execution, delivery and performance of this
Agreement by each of the Bank Companies, their compliance with the terms hereof,
and the consummation of the transactions specified herein will not (i) conflict
with, violate, result in the breach of, constitute an event which would, or with
the lapse of time or action by a third party or both would, result in a default
under, or accelerate the performance required by, the terms of any contract,
instrument or agreement to which any of Bank Parent or any of its Subsidiaries
is a Party or by which they are bound, or to which any of the assets of Bank
Parent or any of its Subsidiaries are subject; (ii) conflict with or violate the
articles of incorporation or by-laws, or any other equivalent organizational
document(s), of the Bank Companies; (iii) breach or violate any Applicable Law
or Applicable Order, in each case, applicable to the Bank Companies;
(iv) require the consent or approval of any other Party to any contract,
instrument or commitment to which any Bank Company is a Party or by which it is
bound; or (v) require any filing with, notice to, consent or approval of, or any
other action to be taken with respect to, any Governmental Authority, except, in
the cases of clauses (i) and (iii)-(v), for such conflicts, breaches, defaults,
violations or failures to obtain such consents or approvals or make or obtain
such filings, notices, consents and approvals as would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect
upon the Bank Companies, the Program, the Accounts, Cardholder Indebtedness or
the ability of the Bank Companies to perform their obligations under this
Agreement.

 

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(d) No Litigation. No action, claim, litigation, proceeding, arbitration or
investigation is pending or, to the Knowledge of Bank, threatened against Bank
Parent or any of its Subsidiaries, at law, in equity or otherwise, by or before
any Governmental Authority, to which Bank Parent or any of its Subsidiaries is a
Party, which would reasonably be expected to have, individually or in the
aggregate, a material adverse effect upon the Bank Companies, the Program, the
Accounts, Cardholder Indebtedness or the ability of the Bank Companies to
perform their obligations under this Agreement.

 

(e) Compliance with Laws.

 

(i) Except to the extent that any of the following would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect
upon the Program or the ability of the Bank Companies to perform their
obligations under this Agreement,

 

(A) the Bank Companies are in compliance with all requirements of Applicable Law
relating to their Credit Card business; and

 

(B) none of the Bank Companies or any of their Affiliates is subject to any
capital plan or supervisory agreement, cease-and-desist or similar order or
directive or memorandum of understanding between it and any Governmental
Authority or issued by any Governmental Authority, nor has any of them adopted
any board resolutions at the request of any Governmental Authority.

 

(ii) None of the Bank Companies or any of their Affiliates is subject to any
order, directive or restriction of any kind issued by any Governmental Authority
that restricts in any respect its operation of their Credit Card business; and
the Bank Companies are not aware of any fact or circumstance that would in any
way delay or impede their ability to perform all of their obligations under the
Program.

 

(f) Servicing Qualifications. The Bank Companies are licensed and qualified in
all jurisdictions necessary to service the Accounts in accordance with all
Applicable Laws, except where the failure to be so qualified would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the ability of the Bank Companies to perform their obligations
under this Agreement. Primary Servicer has all necessary facilities, equipment,
supplies and such other resources as are reasonably necessary to provide any
Services required to be provided by it pursuant to Section 7.2.

 

(g) Bank Licensed Marks. Bank has the right, power and authority to grant the
rights to use the Bank Licensed Marks expressly granted herein.

 

(h) Books and Records. All books and records of the Bank Companies and their
Affiliates related to their Credit Card business have been maintained accurately
and in accordance with all requirements of Applicable Law applicable to Bank and
its Credit Card business, except for any instances of inaccuracy or
noncompliance that would not reasonably be expected to have a material adverse
effect on the ability of the Bank Companies to perform their obligations under
this Agreement.

 

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(i) Insurance. The Bank Companies maintain insurance policies with respect to
their properties under such terms and conditions as are (i) commercially
reasonable and available from time to time and (ii) customary for similarly
situated Persons engaged in similar business, except in each case for insurance
which a failure to maintain would not reasonable be expected to have a material
adverse effect on the ability of the Bank Companies to perform their obligations
under this Agreement.

 

11.3 No other Representations or Warranties. Except as expressly set forth in
Sections 11.1 and 11.2, neither Bank nor NMG has made or makes any other express
or implied representations, or any express or implied warranty, either written
or oral, with respect to the Credit Card Business, the Program, the Bank
Companies or the NMG Companies, or as to any other matter whatsoever.

 

11.4 General Covenants of the NMG Companies.

 

(a) Litigation. Each of the NMG Companies promptly shall notify Bank in writing
if it receives written notice of any litigation that, if adversely determined,
would reasonably be expected to have a material adverse effect on the Program,
the Accounts in the aggregate or the NMG Companies’ ability to perform their
obligations hereunder.

 

(b) Reports and Notices. Each of the NMG Companies shall provide Bank with a
facsimile notice specifying the nature of any NMG Event of Default, or any event
which, with the giving of notice or passage of time or both, would constitute an
NMG Event of Default, or any development or other information which is likely to
have a material adverse effect on the Program, the Accounts, Cardholder
Indebtedness or the NMG Companies’ ability to perform their obligations pursuant
to this Agreement. Notices pursuant to this Section 11.4(b) relating to NMG
Events of Default shall be provided within two (2) Business Days after any of
the NMG Companies has Knowledge of the existence of such default. Notices
relating to all other events or developments described in this
Section 11.4(b) shall be provided (i) promptly after any of the NMG Companies
has Knowledge of the existence of such event or development if such event or
development has already occurred, and (ii) 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 shall be confirmed in
writing to Bank within five (5) Business Days after the transmission of the
initial notice.

 

(c) Applicable Law/Operating Procedures. The NMG Companies shall at all times
during the Term comply in all material respects with Applicable Law affecting
their obligations under this Agreement and the Operating Procedures.

 

(d) Servicing Qualifications. NMG shall at all times during the Term remain
licensed and qualified in all jurisdictions necessary to service the Accounts in
accordance with all Applicable Laws, except where the failure to be so qualified
would not reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the ability of NMG to perform its obligations under
this Agreement.

 

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(e) Disputes with Cardholders. The NMG Companies shall cooperate with Bank in a
timely manner (but in no event less promptly than required by Applicable Law) to
resolve all disputes with Cardholders.

 

(f) Financial Statements. If at any time during the Term, NMG does not publicly
file periodic reports with the Securities and Exchange Commission, NMG shall
provide to Bank (i) its audited consolidated annual financial statements within
90 days of the end of each Fiscal Year, and (ii) its unaudited consolidated
quarterly financial statements within 60 days of the end of each Fiscal Quarter.
Such statements shall include the consolidated balance sheet, income statement
and statement of cash flows and financial position, all prepared in accordance
with GAAP applied on a consistent basis (except for normal year end adjustments
and the absence of footnotes on the quarterly statements).

 

(g) Books and Records. NMG shall keep adequate records and books of account with
respect to the Accounts and Cardholder Indebtedness in which proper entries,
reflecting all of NMG’s financial transactions relating to the Program, are made
in accordance with GAAP and the requirements of this Agreement. NMG shall keep
adequate records and books of account with respect to its activities in
connection with the Program, in which proper entries reflecting all of NMG’s
financial transactions are made in accordance with GAAP.

 

(h) Program Support. NMG shall not take any action that Bank reasonably
concludes is materially inconsistent with the Program Objectives or otherwise
materially adversely affects the Program or Bank’s private label Credit Card
business.

 

11.5 General Covenants of the Bank Companies.

 

(a) Litigation. Bank shall notify NMG in writing if it receives written notice
of any litigation that, if adversely determined, would reasonably be expected to
have a material adverse effect on the Program, the Accounts in the aggregate or
any Bank Company’s ability to perform its obligations hereunder.

 

(b) Reports and Notices. Bank shall provide NMG with a facsimile notice
specifying the nature of any Bank Event of Default, or any event which, with the
giving of notice or passage of time or both, would constitute a Bank Event of
Default, or any development or other information which is likely to have a
material adverse effect on the Program, the Accounts or Bank’s ability to
perform its obligations pursuant to this Agreement. Notice pursuant to this
Section 11.5(b) relating to Bank Events of Default shall be provided within two
(2) Business Days after any Bank Company has Knowledge of the existence of such
default. Notices relating to all other events or developments described in this
Section 11.5(b) shall be provided (i) promptly after any Bank Company obtains
Knowledge of the existence of such event or development if such event or
development has already occurred, and (ii) 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 shall be confirmed in
writing to NMG within five (5) Business Days after transmission of the initial
notice.

 

(c) Applicable Law/Operating Procedures. The Bank Companies shall at all times
during the Term comply in all material respects with Applicable Law affecting
their obligations

 

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under this Agreement and the Operating Procedures. Bank shall at all times
during the Term maintain a federal bank charter and continue its existence as a
bank under the laws of the United States.

 

(d) Books and Records. The Bank Companies shall keep adequate records and books
of account with respect to the Accounts and Cardholder Indebtedness in which
proper entries, reflecting all of the financial transactions relating to the
Program, are made in accordance with GAAP and the requirements of this
Agreement. The Bank Companies shall keep adequate records and books of account
with respect to their activities, in which proper entries reflecting all of the
financial transactions are made in accordance with GAAP.

 

(e) Servicing Qualifications. The Bank Companies shall at all times during the
Term remain licensed and qualified in all jurisdictions necessary to service the
Accounts in accordance with all Applicable Laws, except where the failure to be
so qualified would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the ability of the Bank Companies to
perform their obligations under this Agreement. Primary Servicer shall at all
times during the Term maintain the necessary facilities, equipment, supplies and
such other resources in good working order as are reasonably necessary to
provide any Services required to be provided by it pursuant to Section 7.2 in
accordance with the SLAs set forth in Schedule 7.3(a).

 

(f) Program Support. The Bank Companies shall not take any action that NMG
reasonably concludes is materially inconsistent with the Program Objectives or
otherwise materially adversely affects the Program or NMG’s retail business or
relations with its customers in any material respect.

 

(g) Disputes with Cardholders. The Bank Companies shall cooperate with the NMG
Companies in a timely manner (but in no event less promptly than required by
Applicable Law) to resolve all disputes with Cardholders.

 

(h) Card Association. From and after the issuance of a Dual-Line Credit Card
between NMG and Bank, Bank shall be a member in good standing of the relevant
Card Association on the Dual-Line Credit Card throughout the Term.

 

ARTICLE XII

ACCESS, AUDIT AND DISPUTE RESOLUTION

 

12.1 Access Rights. Each Party shall permit the other Party and its
representatives and regulators to visit its facilities related to the Program
during normal business hours with reasonable advance notice. The reviewing Party
shall employ such reasonable procedures and methods as are necessary and
appropriate in the circumstances, minimizing interference to the extent
practicable with the reviewed Party’s normal business operations. The reviewed
Party shall use commercially reasonable efforts to facilitate the reviewing
Party’s review, including making reasonably available such personnel of the
reviewed Party and its service providers to assist the reviewing Party and its
representatives as reasonably requested. Each Party shall also permit the other
Party and its representatives and regulators to review (during normal business

 

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hours) and obtain copies of the books and records relating to the Program;
provided that neither Party shall be required to provide access to records to
the extent that (a) such access is prohibited by Applicable Law, (b) such
records are legally privileged, (c) such records are company planning documents
of such Party or any of its Affiliates, operating budgets, management reviews or
employee records, (d) such records relate to other customers of, or credit
programs operated by, Bank or the NMG Companies (except as may be necessary or
appropriate in connection with any consideration of the terms and conditions of
Comparable Partner Programs and Competing Retail Programs as contemplated by
this Agreement to the extent such terms and conditions are publicly known or
otherwise known and not subject to any confidentiality obligations on the part
of either Party) or (e) such records relate to other customers or operations of
such Party other than the Program or to personnel records not normally disclosed
in connection with audits.

 

12.2 Audit Rights. Twice per year or at any time that a Party disputes the
amount of any monies owed by either Party to the other hereunder, such Party, at
its sole cost and expense and upon five (5) days’ prior notice to the other
Party, may conduct an audit of those of the other Party’s financial and
operational records that are under the control and/or direction of the audited
Party and relate to the Program or can be reasonably segregated. Such audit
shall be conducted during normal business hours in accordance with generally
accepted auditing standards and the auditing Party shall employ such reasonable
procedures and methods as are necessary and appropriate in the circumstances,
minimizing interference to the extent practicable with the audited Party’s
normal business operations. The audited Party shall use commercially reasonable
efforts to facilitate the auditing Party’s review, including making reasonably
available such personnel of the audited Party and its service providers to
assist the auditing Party and its representatives as reasonably requested. The
audited Party shall deliver any document or instrument necessary for the
auditing Party to obtain such records from any Person maintaining records for
the audited Party and shall maintain records pursuant to its regular record
retention policies. For purposes of this provision, the audited Party also shall
be required to provide records relating to the Program held by Persons
performing services in connection with the Program at the auditing Party’s
request. Notwithstanding the generality of the foregoing, the audited Party
shall not be required to provide access to records to the extent that (a) such
access is prohibited by Applicable Law, (b) such records are legally privileged,
(c) such records are company planning documents of such Party or any of its
Affiliates, operating budgets, management reviews or employee records, (d) such
records relate to other customers of, or credit programs operated by, Bank or
the NMG Companies (except as may be necessary or appropriate in connection with
any consideration of the terms and conditions of Comparable Partner Programs and
Competing Retail Programs as contemplated by this Agreement to the extent such
terms and conditions are publicly known or otherwise known and not subject to
any confidentiality obligations on the part of either Party) or (e) such records
relate to other customers or operations of such Party other than the Program or
to personnel records not normally disclosed in connection with audits.

 

12.3 Accounting Dispute Resolution.

 

(a) Any dispute with respect to amounts of $1 million or less due or payable
under this Agreement or other calculations hereunder of amounts of $1 million or
less between the Parties arising out of or relating to this Agreement shall be
resolved as provided in this Section 12.3.

 

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The Parties agree to attempt in good faith to resolve any such disputes. Except
with respect to any indemnification claim arising under Article XVII, which
shall not be subject to the procedures of this Section 12.3, in the event the
Parties are unable to resolve any such dispute, after negotiating in good faith
for a period of not less than ten (10) Business Days, either Party may request a
nationally recognized firm of independent accountants mutually agreeable to the
Parties (the “Accountants”) to reconcile any amounts in dispute; provided,
however, that the Accountants’ determination shall be limited to the amount
disputed by the Parties and in no event shall such determination provide for a
payment to any Party higher than the amount claimed by the Party to be owed to
such Party. Any such request shall be in writing and shall specify with
particularity the disputed amounts being submitted for determination. Each Party
agrees to promptly and in good faith take all necessary action to designate the
Accountants no later than ten (10) Business Days after a request that such a
designation be made. The Parties shall cooperate fully in assisting the
Accountants in their review, including by providing the Accountants full access
to all files, books and records (including work papers of internal and
independent accountants of the Parties) relevant thereto and providing such
other information as the Accountants may reasonably request in connection with
any such review. Notwithstanding the generality of the foregoing, the Parties
shall not be required to provide the Accountants with access to records to the
extent that (i) such access is prohibited by Applicable Law, (ii) such records
are legally privileged or (iii) such records relate to other customers of, or
credit programs operated by, the Party (except as may be necessary or
appropriate in connection with any consideration of the terms and conditions of
Comparable Partner Programs and Competing Retail Programs as contemplated by
this Agreement to the extent such terms and conditions are publicly known or
otherwise known and not subject to any confidentiality obligations on the part
of either Party). In the event the determination made by the Accountants
requires either Party to make payment to the other Party of any additional
amount, such Party shall make such payment no later than five (5) Business Days
following receipt from the Accountants of written notice to the Parties of such
determination plus interest at the Federal Funds Rate on any such amount due
computed from and including the date such amount should have been paid through
and excluding the date of payment. The fees and expenses of such Accountants
arising out of such reviews shall be borne by the Parties in proportion to the
relative difference between their respective claims regarding the amount in
dispute and the amount determined by the Accountants. The determination of the
Accountants shall be final and binding on the Parties subject to the correction
of obvious errors.

 

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12.4 Dispute Resolution.

 

(a) Generally. Any dispute among the Parties arising out of or relating to this
Agreement, including with respect to the interpretation of any provision of this
Agreement and with respect to the performance by NMG or Bank hereunder that is
not otherwise required to be submitted for resolution under Section 12.3 shall
be resolved as provided in this Section 12.4; provided, however, that this
provision shall not limit either Party’s right to obtain any provisional or
other remedy, including, without limitation, specific performance or injunctive
relief from any court of competent jurisdiction, as may be necessary, in the
aggrieved Party’s sole discretion, to protect its rights under this Agreement.
This Section 12.4 does not apply to disputes among the Management Committee
members with respect to decisions expressly allocated to the Management
Committee pursuant to this Agreement (other than matters submitted to the
Management Committee pursuant to the dispute resolution procedure referred to in
Section 12.4(b)(i)(B)). Such disputes shall be resolved in accordance with
Section 3.2.

 

(b) Informal Dispute Resolution.

 

(i) Prior to the initiation of formal dispute resolution procedures, the Parties
shall first attempt to resolve their dispute informally, as follows:

 

(A) Managers. Upon the written request of either Party containing a short
statement as to the nature of the dispute and the requesting Party’s position
with respect thereto, the Managers shall meet for the purpose of negotiating in
good faith to seek resolution of such dispute.

 

(B) Management Committee. If, after a period of five (5) Business Days, the
Managers are unable to resolve the dispute to the satisfaction of NMG and Bank,
the dispute shall be brought before the Management Committee in accordance with
Section 3.2(e); provided, however, if the Management Committee cannot resolve
the dispute within five (5) days, the dispute shall not be considered an
Unapproved Matter.

 

(C) Appointment of Representatives. If, after a period of five (5) Business
Days, the Management Committee is unable to resolve the dispute to the
satisfaction of both the NMG Companies and Bank, each Party shall appoint a
designated knowledgeable, responsible representative who is one of the top five
highest executives in the Credit Card division of Bank and one of the top five
executives of NMG and who does not devote substantially all of his or her time
to performance under this Agreement, whose task it will be to meet for the
purpose of negotiating in good faith to seek resolution of the dispute.

 

With respect to clauses (A), (B) and (C) above, discussions, documents and
correspondence exchanged among the Managers and representatives, or submitted to
the Management Committee for purposes of these negotiations, shall be treated as
Confidential Information developed for purposes of settlement, exempt from
discovery and production, which shall not be admissible in any lawsuit without
the concurrence of the Parties. Documents identified in or provided with such
communications, which were not prepared for the purposes of the negotiations,
are not so exempted and may, if otherwise admissible, be admitted in evidence in
any lawsuit.

 

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(ii) Formal proceedings for the resolution of the dispute shall not be commenced
until the earlier of:

 

(A) either of the designated representatives concludes in good faith that
amicable resolution through continued negotiation of the dispute does not appear
likely and so states in a notice to the other designated representative or in a
joint declaration signed by each of them; or

 

(B) twenty (20) Business Days after the appointment of designated
representatives pursuant to Section 12.4(b)(i)(C) above (it being understood
that this period shall be deemed to run notwithstanding any claim that the
process described in this Section 12.4 was not followed or completed).

 

(iii) This Section 12.4 shall not be construed to prevent a Party from
instituting, and a Party is authorized to institute, formal proceedings earlier
than provided in clause (ii) above, to avoid the expiration of any applicable
limitations period or to preserve a superior position with respect to other
creditors.

 

ARTICLE XIII

CONFIDENTIALITY

 

13.1 General Confidentiality.

 

(a) For purposes of this Agreement, “Confidential Information” means any of the
following: (i) information that is provided by or on behalf of either NMG or
Bank to the other Party or its agents in connection with the Program (including
information provided prior to the date hereof or the Effective Date);
(ii) information about NMG or Bank or their Affiliates, or their respective
businesses or employees, that is otherwise obtained by the other Party in
connection with the Program, in each case including: (A) information concerning
marketing plans, objectives and financial results; (B) information regarding
business systems, methods, processes, financing data, programs and products;
(C) information regarding any products offered or proposed to be offered under
the Program or the manner of offering of any such products; (D) information
unrelated to the Program obtained by NMG or Bank in connection with this
Agreement, including by accessing or being present at the business location of
the other Party; and (E) proprietary technical information, including source
codes, or other proprietary information developed in connection with the
Program; (iii) the terms and conditions of this Agreement; and (iv) the
Marketing Plan. The provisions of this Article XIII governing Confidential
Information shall not govern Cardholder Data, NMG Shopper Data or NMG Prospect
Data, which shall be governed by the provisions of Article VI.

 

(b) The restrictions on disclosure of Confidential Information under this
Article XIII shall not apply to information received or obtained by NMG or Bank,
as the case may be, that: (i) is or becomes generally available to the public
other than as a result of disclosure in breach of this Agreement or any other
confidentiality obligations; (ii) is lawfully received on a non-confidential
basis from a third party authorized to disclose such information without
restriction and without breach of this Agreement; (iii) is contained in, or is
capable of being discovered

 

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through examination of, publicly available records or products; (iv) is required
to be disclosed by Applicable Law; provided that the Party subject to such
Applicable Law shall use reasonable efforts to avoid such disclosure and notify
the other Party of any such use or requirement prior to disclosure of any
Confidential Information obtained from the other Party in order to afford such
other Party an opportunity to seek a protective order to prevent or limit
disclosure of the Confidential Information to third Parties; provided, further,
that such information shall be disclosed only to the extent required by such
Applicable Law and shall otherwise remain Confidential Information; or (v) is
developed by NMG or Bank, as the case may be, without the use or knowledge of
any proprietary, non-public information provided by the other Party under, or
otherwise made available to such Party as a result of, this Agreement. Nothing
herein shall be construed to permit the Receiving Party (as defined below) to
disclose to any third party any Confidential Information that the Receiving
Party is required to keep confidential under Applicable Law.

 

(c) The terms and conditions of this Agreement and the Marketing Plan and all of
the items referred to in clauses (A) through (B) of Section 13.1(a) shall each
be the Confidential Information of NMG and Bank and each of the Parties to this
Agreement shall be deemed to be a Receiving Party of each of them; provided,
however, that the terms of this Agreement may be filed by either Party with any
Governmental Authority (including public filings with the Securities and
Exchange Commission) to the extent required by Applicable Law.

 

(d) If the NMG Companies, on the one hand, or Bank, on the other hand, receives
Confidential Information of the other Party (“Receiving Party”), the Receiving
Party shall do the following with respect to the Confidential Information of the
other Party (“Disclosing Party”): (i) keep the Confidential Information of the
Disclosing Party secure and confidential; (ii) treat all Confidential
Information of the Disclosing Party with the same degree of care as it accords
its own Confidential Information, but in no event less than a reasonable degree
of care; and (iii) implement and maintain commercially reasonable physical,
electronic, administrative and procedural security measures, including
commercially reasonable authentication, access controls, virus protection and
intrusion detection practices and procedures.

 

13.2 Use and Disclosure of Confidential Information.

 

(a) Each Receiving Party shall use and disclose the Confidential Information of
the Disclosing Party only for the purpose of performing its obligations or
enforcing its rights with respect to the Program or as otherwise expressly
permitted by this Agreement, and shall not accumulate in any way or make use of
such Confidential Information for any other purpose.

 

(b) Each Receiving Party shall: (i) limit access to the Disclosing Party’s
Confidential Information to those employees, authorized agents, vendors,
consultants, service providers, accountants, advisors and subcontractors who
have a reasonable need to access such Confidential Information in connection
with the Program, the sale of Program Assets or other assets of NMG and its
Affiliates or the establishment of a new Credit Card or other program or
arrangement for an NMG Company, in each case in accordance with the terms of
this Agreement, and (ii) ensure that any Person with access to the Disclosing
Party’s Confidential Information agrees to be bound by a confidentiality
agreement containing the restrictions set forth in this Article XIII.

 

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

 

13.4 Return or Destruction of Confidential Information. Upon the termination or
expiration of this Agreement, the Receiving Party shall comply with the
Disclosing Party’s reasonable instructions regarding the disposition of the
Disclosing Party’s Confidential Information, which may include return of any and
all the Disclosing Party’s Confidential Information (including any electronic or
paper copies, reproductions, extracts or summaries thereof); provided, however,
that the Receiving Party in possession of tangible property containing the
Disclosing Party’s Confidential Information may retain one archived copy of such
material, subject to the terms of this Agreement, which may be used solely for
regulatory purposes and may not be used for any other purpose. Such compliance
shall be certified in writing, including a statement that no copies of
Confidential Information have been kept, except as necessary for regulatory
purposes.

 

ARTICLE XIV

RETAIL PORTFOLIO ACQUISITIONS

 

14.1 Retailer that Operates a Credit Card Business. If NMG or any of its
Subsidiaries acquires or otherwise combines with (including by merger,
consolidation or other business combination) a retail department store business
that directly or through an Affiliate issues a Credit Card in the United States,
unless such transaction is one giving right to a termination by NMG pursuant to
Section 16.2(c) and as to which NMG has exercised such right, Bank shall have a
right of first offer to acquire the related Credit Card business offered for
sale by such retailer in connection with NMG’s or its Subsidiary’s acquisition
of the retail department store business (such Credit Card business accounts, the
“New Portfolio”) as follows. Prior to or promptly following the consummation of
the acquisition, NMG shall provide notice to Bank indicating its intention to
engage in, or the consummation of, as the case may be, such acquisition and
shall provide Bank with a reasonable opportunity to conduct due diligence, and
for this purpose NMG shall provide Bank and its representatives with reasonable
access to the records and accounts (including the master file) relating to such
New Portfolio, subject to the execution of a confidentiality agreement
reasonably satisfactory to NMG. Not later than the 20th day following receipt by
Bank of due diligence information reasonably requested by Bank and available to
NMG, Bank may make an offer to NMG with respect to the purchase of such New
Portfolio, which offer shall be required to remain open for a period of not less
than forty-five (45) days. NMG shall be under no obligation to accept such offer
or to provide Bank with any right to match any offer received by NMG from any
third party. NMG may elect to (A) accept

 

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the offer made by Bank, (B) keep such New Portfolio or (C) offer such New
Portfolio for sale to a third party; provided that NMG shall not sell such New
Portfolio to a third party unless such third party makes an offer having
financial terms and conditions (including terms relating to the manner in which
the conversion costs relating to the contemplated transaction are to be
allocated among the Parties) substantially more favorable in the aggregate than
the terms and conditions offered by Bank. If NMG does not sell such New
Portfolio to Bank (whether because NMG elects to keep such New Portfolio or sell
it to a third party), the restrictions of Section 2.2 shall not apply to the
Credit Card business associated with such New Portfolio, including any growth
thereof.

 

14.2 Retailer that has a Credit Card with another Issuer. If NMG or any of its
Subsidiaries acquires or otherwise combines with (including by merger,
consolidation or other business combination) a retail department store business
that through an unaffiliated Person (other than Bank or any of its Affiliates)
issues a Credit Card in the United States, unless such transaction is one giving
right to a termination by NMG pursuant to Section 16.2(c) and as to which NMG
has exercised such right, Bank agrees that it shall negotiate in good faith for
the purchase of the retailer’s Credit Card portfolio from such unaffiliated
issuer associated with the retail assets being acquired. Prior to or promptly
following the consummation of the acquisition, NMG shall provide notice to Bank
indicating its intention to engage in, or the consummation of, as the case may
be, such acquisition and shall cooperate to the extent practicable to provide
Bank with a reasonable opportunity to conduct due diligence. In the event that
Bank is unsuccessful in its bid for the Credit Card portfolio, NMG may offer the
Credit Card program of such unaffiliated issuer until the expiration of the
agreement governing such program, and Bank shall negotiate in good faith for the
purchase of the Credit Card portfolio at that time; provided, however, that if
Bank is unable to agree to the terms of the purchase of such Credit Card
portfolio prior to the time that notice of termination or election to extend the
term, as applicable, is due under such program agreement, NMG shall have the
right to continue to operate such Credit Card portfolio under the existing
program agreement or to purchase and operate such retailer’s Credit Card
business itself or to engage a third party to do so; provided, however, that NMG
shall not engage a third party other than Bank unless the financial terms and
conditions (including terms relating to the manner in which the conversion costs
relating to the contemplated transaction are to be allocated among the Parties)
pursuant to which such third party is to operate such Credit Card business are
substantially more favorable in the aggregate to NMG than the terms and
conditions offered by Bank. If NMG or any of its Subsidiaries, directly or with
a third Person, acquires the Credit Card business of another retailer pursuant
to this provision and this Agreement remains in effect, Section 2.2 shall not
apply to such acquired Credit Card business or to the associated acquired retail
operations, including any growth thereof.

 

14.3 Retailer that has a Credit Card with Bank. If NMG or any of its
Subsidiaries acquires (including by merger, consolidation or other business
combination) a retail department store business that through Bank or any of its
Affiliates issues a Credit Card in the United States, Bank and NMG shall assess
and mutually agree whether to integrate such Credit Card portfolio with the
Program or operate such portfolio separately as provided in Section 14.5 below.

 

14.4 Co-Branded Credit Card. Except as provided in Section 14.5, neither Bank
nor NMG shall have any obligation under this Article XIV with respect to any
co-branded Credit

 

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Card unless (i) Bank is already providing a Dual-Line Credit Card program for
the NMG Companies at the time of the proposed acquisition or (ii) NMG has
already given notice to Bank of its desire to issue a Dual-Line Credit Card
pursuant to Section 2.2(c)(ii) and Bank is fully committed to issuing, and able
to issue, such Dual-Line Credit Card within the Development Period.

 

14.5 Conversion of Purchased Accounts.

 

(a) If Bank acquires any Credit Card portfolio pursuant to Section 14.1 or 14.2,
or operates a Credit Card portfolio as set forth in Section 14.3, NMG and Bank
shall negotiate in good faith in order to arrive at mutually agreeable terms
pursuant to which the acquired Credit Card portfolio would be integrated into
the Program, it being understood that, absent unique characteristics of the
accounts acquired or impediments under Applicable Law or the cardholder
agreements applicable to the acquired accounts, it is the mutual intent of the
Parties that the acquired accounts be integrated as follows; provided, however,
that if based on the foregoing principles and pursuant to such good faith
negotiations the Parties determine that the terms of this Agreement should not
apply to such acquired assets, the acquired accounts shall be governed by such
other and/or additional terms as the Parties shall agree; provided that accounts
in any portfolio operated by Bank and acquired pursuant to Section 14.3 shall
continue to be governed by the agreement then in effect with respect to such
accounts. Subject to the foregoing:

 

(i) Private label Credit Card accounts shall be converted to Accounts
established under the Program, which converted Accounts shall be subject to the
same terms and conditions as the Accounts and to this Agreement, and participate
in the Program, as if they were originated under this Agreement.

 

(ii) If the NMG Companies have a Dual-Line Credit Card program with Bank at the
time of such purchase, purchased co-branded Credit Card accounts shall be
converted to Non-Store Accounts to the extent permitted by Card Association
rules, which converted accounts shall be subject to the same terms and
conditions and participate in such program as if they were originated under this
Agreement.

 

(iii) If the NMG Companies do not have a Dual-Line Credit Card program with Bank
at the time of such purchase, purchased co-branded Credit Card accounts shall
continue under the same terms and conditions being offered to the purchased
retailer’s customers, or such other terms and conditions upon which NMG and Bank
shall mutually agree.

 

(b) Bank shall cover all costs related to conversions pursuant to this
Section 14.5, including replacement of Credit Cards, notices to Cardholders and
complying with other requirements of Applicable Law.

 

14.6 No Other NMG Obligations. Except as set forth in this Article XIV, the NMG
Companies shall have no obligation to include in the Program any Credit Card
portfolios acquired in connection with any merger, consolidation, acquisition or
other transaction or otherwise cause them to be transferred to the NMG Companies
or otherwise transfer any such program to Bank. Except to the extent included in
the Program, an acquired portfolio may be operated free of the exclusivity
restrictions set forth in this Agreement.

 

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ARTICLE XV

EVENTS OF DEFAULT; RIGHTS AND REMEDIES

 

15.1 Events of Default. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an Event of Default
by a Party hereunder:

 

(a) Such Party shall fail to perform, satisfy or comply with any obligation,
condition, covenant or other provision contained in this Agreement (other than
failure to comply with any SLAs), and (i) such failure shall remain unremedied
for a period of thirty (30) days after the other Party shall have given written
notice thereof specifying the nature of such failure in reasonable detail,
provided that if such failure cannot be cured in a commercially reasonable
manner within such time, such failure shall not constitute an Event of Default
if the defaulting Party shall have initiated and diligently pursued a cure
within such time and such cure is completed within ninety (90) days from the
date of written notice regarding such failure, and (ii) such failure shall
either have a material adverse effect on the licensed marks of the
non-defaulting Party, or materially diminish the economic value of the Program
to the non-defaulting Party.

 

(b) Any representation or warranty by such Party contained in this Agreement
shall not be true and correct in any respect as of the date when made, and
(i) the Party making such representation or warranty shall fail to cure the
event giving rise to such breach within thirty (30) days after the other Party
shall have given written notice thereof specifying the nature of such breach in
reasonable detail, provided that if such failure cannot be cured in a
commercially reasonable manner within such time, such breach shall not
constitute an Event of Default if the defaulting Party shall have initiated a
cure within such time and such cure is completed within ninety (90) days from
the date of written notice regarding such breach, and (ii) such failure shall
either have a material adverse effect on the Program or the licensed marks of
the non-defaulting Party or materially diminish the economic value of the
Program to the non-defaulting Party.

 

15.2 Defaults by Bank. The occurrence of any one or more of the following events
(regardless of the reason therefor) shall constitute an event of default by Bank
hereunder:

 

(a) Bank shall fail to settle NMG Charge Transaction Data and make payment in
full therefor within two (2) Business Days after such settlement payment is due
pursuant to Section 8.4.

 

(b) Bank shall fail to make payment in full of any amount set forth on a Monthly
Settlement Sheet or Yearly Settlement Sheet when due and payable.

 

(c) Bank shall fail to make payment in full of any amount due to NMG pursuant to
Schedule 7.3(c) within two (2) Business Days after such payment is due pursuant
to Schedule 7.3(c).

 

(d) Bank Parent shall fail to make payment in full of any amount owed under the
Bank Guarantee to one or more of the NMG Companies when due and payable.

 

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(e) Any Bank Company or Bank Parent shall no longer be solvent or shall fail
generally to pay its debts as they become due or there shall be a substantial
cessation of such Bank Company’s or Bank Parent’s regular course of business.

 

(f) Any regulatory authority having jurisdiction over a Bank Company or Bank
Parent shall order the appointment of a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of such Bank Company or
Bank Parent, as the case may be, or of any substantial part of its properties,
or order the winding-up or liquidation of the affairs of any Bank Company or
Bank Parent, and such order shall not be vacated, discharged, stayed or bonded
within sixty (60) days from the date of entry thereof.

 

(g) Any Bank Company or Bank Parent shall (i) consent to the institution of
proceedings specified in paragraph (f) above or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of such entity or of any substantial part of
its properties, or (ii) take corporate or similar action in furtherance of any
such action.

 

(h) Bank shall fail to meet the approval rate targets and other metrics set
forth in Schedule 4.6(c) and such failure shall have resulted in a termination
right pursuant to the terms of Section 4.6(c).

 

(i) Primary Servicer shall fail to meet one or more SLAs expressly giving rise
to the right to terminate hereunder in accordance with Section 7.3 and Schedule
7.3(c).

 

(j) As a result of the regulatory status of a Bank Company or Bank Parent or any
constraints imposed on a Bank Company or Bank Parent by any Governmental
Authority, the benefits of the Program to the NMG Companies are materially
diminished or the NMG Companies experience a material decline in customer
satisfaction, unless such constraint, diminishment or decline would be incapable
of being eliminated or mitigated if NMG were to terminate this Agreement and/or
repurchase the Program Assets (either for itself and its Affiliates or in order
to enter into alternative program arrangements with a third party other than
Bank).

 

(k) The Bank Guaranty shall expire or terminate or otherwise fail to be in full
force and effect or Bank Parent shall disaffirm, disclaim, repudiate or reject,
in whole or in part, or challenge the validity, enforceability or effectiveness
of, the Bank Guaranty.

 

15.3 Defaults by the NMG Companies. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an event
of default by the NMG Companies hereunder:

 

(a) NMG shall fail to make payment in full of any amount set forth on a Monthly
Settlement Sheet or Yearly Settlement Sheet when due and payable.

 

(b) A petition under the U.S. Bankruptcy Code or similar law shall be filed
against NMG and not be dismissed within sixty (60) days.

 

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(c) A decree or order by a court having jurisdiction (i) for relief in respect
of NMG pursuant to the Bankruptcy Code or any other applicable bankruptcy or
other similar law, (ii) for appointment of a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of NMG or of any
substantial part of its properties, or (iii) ordering the winding-up or
liquidation of the affairs of NMG shall, in any such case be entered, and shall
not be vacated, discharged, stayed or bonded within sixty (60) days from the
date of entry thereof.

 

(d) NMG shall (i) file a petition seeking relief pursuant to the Bankruptcy Code
or any other applicable bankruptcy or other similar law, (ii) consent 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 official) of NMG or
any substantial part of its properties, or (iii) take corporate or similar
action in furtherance of any such action.

 

(e) NMG shall fail to meet one or more SLAs expressly giving rise to the right
to terminate hereunder in accordance with Section 5.02 of the Servicing
Agreement.

 

15.4 Remedies for Events of Default. In addition to any other rights or remedies
available to the Parties at law or in equity, upon the occurrence of an Event of
Default pursuant to Section 15.1, 15.2 or 15.3, the non-defaulting Party shall
be entitled to collect from the defaulting Party any amount indisputably in
default plus interest based on the Federal Funds Rate.

 

ARTICLE XVI

TERM/TERMINATION

 

16.1 Term. This Agreement shall continue in full force and effect for five
(5) years from the Effective Date (the “Initial Term”). The Agreement shall be
renewed by mutual agreement of the Parties for successive three (3) year terms
(each, a “Renewal Term”) at least six (6) months prior to the expiration of the
Initial Term or current Renewal Term, as the case may be. If the Parties do not
agree to renew the Agreement at least six (6) months prior to the expiration of
the Initial Term or the current Renewal Term, as the case may be, the Agreement
shall automatically terminate at the end of the Initial Term or current Renewal
Term, as the case may be.

 

16.2 Termination by NMG Prior to the End of the Initial Term or a Renewal Term.
NMG, on behalf of the NMG Companies, may terminate this Agreement upon written
notice prior to the end of the Initial Term or any Renewal Term:

 

(a) after the occurrence of a Bank Event of Default;

 

(b) upon thirty (30) days’ prior written notice if (i) there is a Change of
Control of Bank Parent or (ii) one or more Persons that is not an Affiliate of
Bank on the date of this Agreement acquires a direct or indirect controlling
interest in Bank or any other Person conducting a substantial part of the Credit
Card business conducted within the corporate group of Bank Parent or such
corporate group otherwise disposes of or terminates a substantial part of such
Credit Card business;

 

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(c) upon thirty (30) days’ prior written notice following a Change of Control of
NMG if the other Party to the business combination transaction which resulted in
or constituted such Change of Control issues, offers or otherwise provides
(either itself or through Affiliates) or is Party to any contractual arrangement
with any other Person to issue, offer or otherwise provide, any Credit Card in
the United States; provided, that if this Agreement is terminated pursuant to
this Section 16.2(c), NMG shall pay Bank the amount set forth in Schedule
16.2(c).

 

(d) upon thirty (30) days’ prior written notice if there is a change in
Applicable Law which reduces or could reasonably be expected to reduce in any
material respect the ability of NMG or any of its Subsidiaries to gain access
to, or to use, any Cardholder Data, NMG Shopper Data or NMG Charge Transaction
Data below the level of access and use permitted under Applicable Law
immediately prior to the date of this Agreement, unless such reduction in access
would be incapable of being eliminated or mitigated if NMG were to terminate
this Agreement and/or repurchase the Program Assets (either for itself and its
Affiliates or in order to enter into alternative program arrangements with a
third party other than Bank); provided, however, that prior to delivering a
notice of termination pursuant to this Section 16.2, NMG shall engage in good
faith negotiations with Bank to modify the Program in a way that would preserve
at least the same level of access and use of such data for the benefit of NMG
and its Affiliates following the relevant change in Applicable Law as was
permissible prior to the date of this Agreement, such negotiations not to
terminate (in the absence of an agreement between the Parties on any
modification) earlier than thirty (30) days after the earlier of (i) the date on
which one of the Parties delivers a notice to the other that the relevant change
in Applicable Law is likely to occur or (ii) the date on which the relevant
change in Applicable Law takes effect; or

 

(e) upon thirty (30) days’ prior written notice if there have been more than
three (3) Unapproved Matters within the last twelve (12) Fiscal Months; provided
that if the Management Committee votes on an identical matter more than one time
and fails to reach agreement on such identical matter without any change in the
circumstances surrounding such matter, for purposes of this Section 16.2(e),
such matter will only count as one (1) Unapproved Matter.

 

16.3 Termination by Bank Prior to the End of the Initial Term or a Renewal Term.
Bank may terminate this Agreement upon written notice prior to the end of the
Initial Term or any Renewal Term:

 

(a) after the occurrence of an NMG Event of Default; or

 

(b) upon six (6) months’ prior written notice following the end of a Fiscal
Year, if during such Fiscal Year, NMG has not maintained the retail store square
footage set forth on Schedule 16.3(b).

 

16.4 Automatic Termination. Upon termination of the Purchase Agreement without
the occurrence of the Closing, this Agreement shall automatically terminate and
shall be null and void.

 

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ARTICLE XVII

EFFECTS OF TERMINATION

 

17.1 General Effects.

 

(a) All solicitations, marketing and advertising of the Program, other than
acceptance of applications through NMG Channels in the ordinary course of
business consistent with past practice, shall cease upon the expiration or
termination of this Agreement, except as the Parties may otherwise mutually
agree, provided that the Parties shall continue to operate the Program in
accordance with the terms of this Agreement and service the Accounts in good
faith and in the ordinary course of their respective businesses, subject to the
terms of this Agreement, until the provisions of Section 17.2 are satisfied. The
Parties shall cooperate to ensure the orderly wind-down or transfer of the
Program.

 

(b) Upon the satisfaction of the provisions of Section 17.2, all obligations of
the Parties under this Agreement shall cease, except that the provisions
specified in Section 19.26 shall survive.

 

17.2 The NMG Companies’ Option to Purchase the Program Assets.

 

(a) If this Agreement expires or is terminated by either Party for whatever
reason, NMG has the option to purchase, or arrange the purchase by a third party
nominated by NMG (a “Nominated Purchaser”), of the Program Assets from Bank.

 

(b) The purchase option given by Section 17.2(a) is exercisable by NMG or the
Nominated Purchaser serving notice on Bank no later than sixty (60) days after
the receipt of the information with respect to the Program Assets required to be
delivered by Bank pursuant to Section 17.2(e); provided, however, that NMG shall
request such information with respect to the Program Assets within ten (10) days
following either (i) the date on which the Parties’ right to agree to renew the
Agreement pursuant to Section 16.1 has expired without such renewal having
occurred or (ii) the date any Party receives written notice of the exercise of
the other Party’s termination rights pursuant to Article XVI.

 

(c) If such purchase option is exercised, NMG or the Nominated Purchaser must
complete the purchase of the Program Assets within one hundred eighty (180) days
after the notice has been given pursuant to Section 17.2(b); provided, that if,
in connection with the purchase of the Program Assets by a Nominated Purchaser,
any required regulatory approvals or rating agency consents are not received
within one hundred eighty (180) days after notice has been given pursuant to
Section 17.2(b), NMG shall complete the purchase of the Program Assets on behalf
of the Nominated Purchaser within two hundred seventy (270) days after notice
has been given pursuant to Section 17.2(b). The date of the completion of any
purchase under this Section 17.2(c) shall be the “Program Purchase Date.”

 

(d) The purchase price for the Program Assets purchased, payable on the Program
Purchase Date, shall be equal to the sum of (i) the par value of the Cardholder
Indebtedness related to the Private Label Accounts and Non-Card Payment Plans at
the time of repurchase excluding written-off Cardholder Indebtedness (in
accordance with the write-off policy then

 

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applicable to the Program) plus (ii) the Fair Market Value of the Non-Store
Accounts, except that if the repurchase right arises as a result of (A) an early
termination of this Agreement by Bank for an NMG Event of Default pursuant to
Section 16.3 or (B) an early termination by the NMG Companies pursuant to
Section 16.2(c), then such purchase price for the Program Assets shall be an
amount equal to the sum of (x) the par value of the Cardholder Indebtedness
related to the Private Label Accounts and Non-Card Payment Plans at the time of
repurchase excluding written-off Cardholder Indebtedness (in accordance with the
write-off policy then applicable to the Program), plus (y) the Fair Market Value
of the Cardholder Indebtedness related to the Non-Store Accounts plus
(z) de-conversion costs of the Bank in an amount not to exceed $1 million.

 

(e) The Parties shall use commercially reasonable efforts to minimize
transaction costs and Bank shall provide NMG and the Nominated Purchaser and
their respective representatives reasonable access to the records and accounts
relating to the Program Assets for the purpose of conducting due diligence
investigations to determine whether they wish to purchase the Program Assets and
shall provide as soon as reasonably practicable (but in no event more than
fifteen (15) days) following a request therefor from NMG or its Nominated
Purchaser a master file of the Accounts (which shall include data for at least
the twelve (12) month period preceding the month in which the master file is
requested and shall be updated upon request of NMG); provided, however, that
Bank shall be entitled to require any Nominated Purchaser to enter into
customary confidentiality arrangements before providing it with such access. The
Parties shall promptly negotiate in good faith and execute a purchase agreement
for the Program Assets to be repurchased, which shall contain terms and
conditions substantially similar to those in the Purchase Agreement (if
applicable). Bank shall provide reasonable assistance in connection with the
conversion of the Program Assets to the Systems of NMG or the Nominated
Purchaser, including provision of interim services in accordance with the
provisions of this Agreement until such conversion occurs; provided, however,
that Bank shall not be obligated to provide such interim services for more than
(i) two hundred seventy (270) days after notice has been given pursuant to
Section 17.2(b) in connection with a purchase of the Program Assets by a
Nominated Purchaser or (ii) one year after the execution date of the purchase
agreement with respect to the repurchase of the Program Assets by NMG subject to
a reasonable servicing fee. The Parties shall not unreasonably withhold or delay
execution of such purchase agreement or any other documents necessary to
effectuate such sale. The Parties shall use reasonable efforts to ensure that
the Program Purchase Date occurs as promptly as reasonably practicable following
the execution of such purchase agreement.

 

17.3 Fair Market Value. In the event that this Agreement terminates and, if NMG
notifies Bank that it shall purchase the Program Assets, Bank and NMG (or its
Nominated Purchaser) shall attempt to mutually determine the fair market value
of the Non-Store Accounts (“Fair Market Value”). If the Parties cannot reach
such agreement, each Party shall nominate an investment banker who together
shall select a third investment banker to value the Non-Store Accounts. In
determining the Fair Market Value of the Non-Store Accounts, the investment
bankers shall assume that (a) the terms and conditions of this Agreement,
including all financial terms and conditions, Bank’s right to use the NMG
Licensed Marks in accordance with this Agreement and all other material elements
of the transactions contemplated by this Agreement, shall continue in respect of
the Non-Store Accounts being purchased during the period of valuation and
(b) the Non-Store Accounts being purchased shall continue to operate on an
ongoing basis in accordance with past practice. In such case, the Fair Market
Value shall be the

 

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average of the two closest valuations provided by the investment bankers;
provided, however, if the median valuation is within plus or minus twenty (20)
percent of the mean of the three valuations, the Fair Market Value shall be the
mean. NMG may in its sole discretion select any purchaser to purchase the
Non-Store Accounts, provided that the Bank shall receive an amount equal to the
purchase price as determined above.

 

17.4 Dedicated Program Personnel. Upon termination or expiration of the Program
for any reason and until the date that is ninety (90) days after Bank ceases to
provide any services hereunder, NMG shall have the right to offer employment to
employees and independent contractors of Bank and any of Bank’s Affiliates that
perform all or substantially all of their work for Bank or its Affiliates in
connection with the Program.

 

17.5 Rights of Bank if Purchase Option Not Exercised.

 

(a) If this Agreement expires or is terminated and the NMG Companies give
written notice that they shall not exercise their option referred to in
Section 17.2 or otherwise fail to exercise their option within the time period
specified in Section 17.2, the NMG Companies shall have no further rights
whatsoever in the Program Assets. In such event, Bank shall have the right in
its sole discretion on or after the expiration or termination of this Agreement
to:

 

(i) issue to Cardholders a replacement or substitute Credit Card (which card
must not bear any NMG Licensed Marks or any other trademarks or source
indicators confusingly similar thereto) with such characteristics as Bank
considers appropriate (the cost of card re-design and re-issue being borne by
Bank); provided that the replacement or substitute Credit Card shall not be
issued in cooperation with any retailer; provided, further, that the NMG
Companies shall be permitted to add an enclosure to the last two (2) Billing
Statements to the effect that the Program has been terminated;

 

(ii) subject to Applicable Law, notify Cardholders that Bank shall cease
providing credit under the Accounts and require repayment of all amounts
outstanding on all Accounts until all associated receivables have been repaid;

 

(iii) sell the Accounts and associated receivables to a third party purchaser,
other than a competitor of NMG and its Affiliates selected by Bank at a price
agreed between Bank and the purchaser; or

 

(iv) any combination of (i), (ii) and (iii).

 

(b) Notwithstanding the foregoing, in no event shall Bank use or disclose or
permit any of its Affiliates to use or disclose the Cardholder Data to market or
promote a Credit Card or ancillary product together with any retailer.

 

(c) If this Agreement expires or is terminated and the NMG Companies give
written notice that they shall not exercise their option referred to in
Section 17.2 or otherwise fail to exercise their option within the time period
specified in Section 17.2, the NMG Companies shall provide reasonable assistance
in connection with the conversion of any Program Assets resident on NMG Systems
to the Bank Systems, including provision of interim services in accordance with
the provisions of this Agreement until such conversion occurs, which shall not
be later than

 

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one hundred eighty (180) days after the NMG Companies give written notice that
they shall not exercise their option referred to in Section 17.2 or after the
time period for the NMG Companies to exercise such option shall have expired.
Bank shall bear all costs and expenses of any such conversion and the
transitioning of services performed by the NMG Companies to the Bank.

 

(d) Within sixty (60) days (or one hundred twenty (120) days in the case of
Dual-Line Cards) after the NMG Companies give written notice that they shall not
exercise their option referred to in Section 17.2 or after the time period for
the NMG Companies to exercise such option shall have expired, Bank shall no
longer use any of the NMG Licensed Marks (or any other trademarks or source
indicators confusingly similar thereto) and must rebrand the NMG Credit Cards;
provided that thereafter Bank may continue to use the NMG Licensed Marks solely
to the extent necessary to identify the Accounts in connection with the billing
and collection thereof and as otherwise required by Applicable Law.

 

ARTICLE XVIII

INDEMNIFICATION

 

18.1 NMG Indemnification of Bank. From and after the Effective Date, the NMG
Companies shall indemnify and hold harmless Bank, its Affiliates, and their
respective officers, directors and employees from and against and in respect of
any and all losses, liabilities, damages, costs and expenses of whatever nature,
including reasonable attorneys’ fees and expenses, which are caused or incurred
by, result from, arise out of or relate to:

 

(a) any Retail Merchant’s negligence or recklessness or willful misconduct
(including acts and omissions) relating to the Program;

 

(b) any breach by an NMG Company of any of the material terms, covenants,
representations, warranties or other provisions contained in this Agreement;

 

(c) any actions or omissions by Bank taken or not taken at an NMG Company’s
written request or direction pursuant to this Agreement except where Bank would
have been otherwise required to take such action (or refrain from acting) absent
the request or direction of the NMG Companies;

 

(d) dishonest or fraudulent acts by a Retail Merchant, or any of its agents or
employees, in connection with the Program (except to the extent of any amount
charged back pursuant to Section 8.5);

 

(e) any failure by the Retail Merchants to satisfy any of their obligations to
third parties with respect to the sale by them to such third parties of NMG
Goods and Services;

 

(f) any Solicitation Materials distributed by an NMG Company and not
(i) approved by the Management Committee or (ii) provided by Bank;

 

(g) any claim, suit or proceeding by any third party arising out of the failure
of a Retail Merchant to comply with Applicable Law in connection with the
Program or the Operating Procedures, unless such failure was the result of any
action taken or not taken by such Retail Merchant at the written request or
direction of Bank;

 

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(h) the NMG Companies’ Inserts or Billing Statement messages; and

 

(i) allegations by a third party that the use of the NMG Licensed Marks
constitutes infringement of any Intellectual Property right of such third party.

 

18.2 Bank Companies’ Indemnification of the NMG Companies. From and after the
Effective Date, the Bank Companies’ shall indemnify and hold harmless NMG, its
Affiliates and their respective officers, directors and employees from and
against and in respect of any and all losses, liabilities, damages, costs and
expenses of whatever nature, including reasonable attorneys’ fees and expenses,
which are caused or incurred by, result from, arise out of or relate to:

 

(a) Bank’s or its Affiliate’s negligence or recklessness or willful misconduct
(including acts and omissions) relating to the Program;

 

(b) any breach by Bank or any of its Affiliates, employees or agents of any of
the material terms, covenants, representations, warranties or other provisions
contained in this Agreement or any Cardholder Agreement;

 

(c) any actions or omissions by any of the NMG Companies taken or not taken at
the Bank Companies’ written request or direction pursuant to this Agreement,
except where the NMG Companies would have been otherwise required to take such
action (or refrain from acting) absent the request or direction of any Bank
Company;

 

(d) dishonest or fraudulent acts by Bank, or any of its Affiliates, agents or
employees, in connection with the Program;

 

(e) any failure by the Bank Companies to satisfy any of their obligations to
(i) Cardholders with respect to the Program or the Accounts, whether pursuant to
the Cardholder Agreements or otherwise or (ii) any other third parties in
connection with its provision of other products and services to such third
parties;

 

(f) any Account Documentation and Solicitation Materials approved by the
Management Committee and used by any of the NMG Companies in that form and in
accordance with Bank’s instructions and/or the Operating Procedures that fails
to comply with Applicable Law, other than any content in the Solicitation
Materials that primarily relates to Loyalty Programs and was included in the
Solicitation Materials in the form provided by NMG without any input from Bank
with respect to Applicable Law;

 

(g) any claim, suit or proceeding by any third party arising out of the failure
of the Bank Companies to comply with Applicable Law in connection with the
Program or the Operating Procedures unless such failure was the result of any
action taken or not taken by the Bank Companies at the specific written request
or direction of the NMG Companies;

 

(h) Bank’s Inserts or Billing Statement messages; and

 

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(i) allegations by a third party that the use of the Bank Licensed Marks
constitutes infringement of any Intellectual Property right of such third party.

 

18.3 Procedures.

 

(a) In case any claim is made, or any suit or action is commenced, against a
Party (the “Indemnified Party”) in respect of which indemnification may be
sought by it under this Article XVIII, the Indemnified Party shall promptly give
the other Party (the “Indemnifying Party”) notice thereof and the Indemnifying
Party shall be entitled to participate in the defense thereof and, with prior
written notice to the Indemnified Party given not later than twenty (20) days
after the delivery of the applicable notice from the Indemnified Party, to
assume, at the Indemnifying Party’s expense, the defense thereof, with counsel
reasonably satisfactory to such Indemnified Party. After notice from the
Indemnifying Party to such Indemnified Party of its election so to assume the
defense thereof, except as set forth in Section 18.3(b), the Indemnifying Party
shall not be liable to such Indemnified Party under this Section for any
attorneys’ fees or other expenses subsequently incurred by such Indemnified
Party in connection with the defense thereof, other than reasonable costs of
investigation.

 

(b) The Indemnified Party shall have the right to employ its own counsel if the
Indemnifying Party elects to assume such defense, but the fees and expenses of
such counsel shall be at the Indemnified Party’s expense, unless (i) the
employment of such counsel has been authorized in writing by the Indemnifying
Party, (ii) the Indemnifying Party has not employed counsel to take charge of
the defense within twenty (20) days after delivery of the applicable notice or,
having elected to assume such defense, thereafter ceases its defense of such
action, or (iii) the Indemnified Party has reasonably concluded that there may
be defenses available to it which are different from or additional to those
available to the Indemnifying Party (in which case the Indemnifying Party shall
not have the right to direct the defense of such action on behalf of the
Indemnified Party), in any of which events the attorneys’ fees and expenses of
counsel to the Indemnified Party shall be borne by the Indemnifying Party.

 

(c) The Indemnifying Party shall promptly notify the Indemnified Party if the
Indemnifying Party desires not to assume, or participate in, the defense of any
such claim, suit or action.

 

(d) The Indemnified Party or Indemnifying Party may at any time notify the other
of its intention to settle or compromise any claim, suit or action against the
Indemnified Party in respect of which payments may be sought by the Indemnified
Party hereunder, and (i) the Indemnifying Party may settle or compromise any
such claim, suit or action solely for the payment of money damages for which the
Indemnified Party will be fully indemnified hereunder, but shall not agree to
any other settlement or compromise without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld (it being
agreed that any failure of an Indemnified Party to consent to any settlement or
compromise involving relief other than monetary damages shall not be deemed to
be unreasonably withheld), and (ii) the Indemnified Party may settle or
compromise any such claim, suit or action solely for an amount not exceeding One
Thousand Dollars ($1,000), but shall not settle or compromise any other matter
without the prior written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld.

 

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18.4 Notice and Additional Rights and Limitations.

 

(a) If an Indemnified Party fails to give prompt notice of any claim being made
or any suit or action being commenced in respect of which indemnification under
this Article XVIII may be sought, such failure shall not limit the liability of
the Indemnifying Party; provided, however, that this provision shall not be
deemed to limit the Indemnifying Party’s rights to recover from the Indemnified
Party for any loss, cost or expense which it can establish resulted from such
failure to give prompt notice.

 

(b) This Article XVIII shall govern the obligations of the Parties with respect
to the subject matter hereof but shall not be deemed to limit the rights that
either Party might otherwise have at law or in equity.

 

(c) Notwithstanding anything to the contrary in this Agreement, no Party shall
be liable to the other for punitive or exemplary damages relating to or arising
out of this Agreement, any breach hereof or any of the transactions provided for
therein, unless the Indemnified Party shall have become liable to a third party
for such amounts.

 

ARTICLE XIX

MISCELLANEOUS

 

19.1 Precautionary Security Interest. The NMG Companies and Bank agree that this
Agreement contemplates the extension of credit by Bank to Cardholders and that
the NMG Companies’ submission of NMG Charge Transaction Data to Bank shall
constitute assignment by the NMG Companies of any and all right, title and
interest in such NMG Charge Transaction Data and the Cardholder Indebtedness
reflected therein. However, as a precaution in the unlikely event that any
person asserts that Article 9 of the UCC applies or may apply to the
transactions contemplated hereby, and to secure the NMG Companies’ payment of
and performance of all obligations of the NMG Companies to Bank, the NMG
Companies hereby grant to Bank a first priority present and continuing security
interest in and to the following, whether now existing or hereafter created or
acquired: (i) all Accounts, Cardholder Indebtedness, Account Documentation and
NMG Charge Transaction Data, (ii) all deposits, credit balances and reserves on
the Bank’s books relating to the Program, and (iii) all proceeds of the
Cardholder Indebtedness. In addition, the NMG Companies agree to take any
reasonable action requested by Bank, at Bank’s expense, to establish the first
lien and perfected status of such security interest. Upon the termination or
expiration of this Agreement, Bank shall execute such releases and file such
notices as the NMG Companies may request to evidence the termination of the
security interest provided for in this Section 19.1.

 

19.2 Securitization, Participation or Pledge of Cardholder Indebtedness.

 

(a) Bank shall have the right to securitize, participate or pledge the
Cardholder Indebtedness or any part thereof by itself or as part of a larger
offering at any time, in such a manner that allows Bank to obtain cash flows
representing all or most of the economic benefits of owning such Cardholder
Indebtedness. Such securitization, participation or pledge shall not affect the
NMG Companies’ rights or Bank’s obligations hereunder. Bank shall not
securitize,

 

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participate or pledge the Cardholder Indebtedness in any manner that may
encumber any of the NMG Companies’ rights hereunder to purchase Program Assets.
All uses of the NMG Licensed Marks in any securitization document shall be made
in accordance with Section 10.1 and with the prior written approval of NMG.

 

(b) In the event the NMG Companies elect to purchase the Program Assets pursuant
to Section 17.2 and Bank has securitized, participated or pledged any of the
Cardholder Indebtedness included in the Program Assets, the Parties will
cooperate to transfer such assets, or Bank’s interest in and servicing rights
with respect to such assets, to NMG or its Nominated Purchaser on reasonable
terms pursuant to instruments in form and substance satisfactory to the Parties,
and the purchase price set forth in Section 17.2(d) shall be reduced by the
outstanding principal balance of such obligations on the Program Purchase Date.

 

19.3 Assignment. None of the NMG Companies, on the one hand, and the Bank
Companies, on the other hand, shall assign this Agreement or any of its rights
hereunder without the prior written consent of the other Party, except to the
extent (i) the Cardholder Indebtedness is securitized as permitted pursuant to
Section 19.2 or (ii) otherwise permitted under the Servicing Agreement.

 

19.4 Sale or Transfer of Accounts. Bank shall not sell or transfer in whole or
in part any Accounts; provided, however, that this Section 19.4 shall not
restrict the ability of Bank to securitize, participate or pledge the Cardholder
Indebtedness pursuant to Section 19.2. Bank may from time to time propose to NMG
the terms under which it desires to sell any NMG Accounts that have been
written-off in accordance with the Risk Management Policies, including the
payments proposed to be made to NMG and Bank in connection with any such sale.
NMG shall consider any such proposal in good faith but shall be entitled to
accept or reject any such proposal in its sole discretion.

 

19.5 Subcontracting. Except as approved by the Management Committee, it is
understood and agreed that, in fulfilling its obligations under this Agreement,
no Person other than a Party hereto or its Affiliates may perform such Party’s
functions; provided that, to the extent a Party is not required to obtain
Management Committee approval under Section 3.2(d)(iv) to outsource or
subcontract a service, the Parties and their Affiliates may subcontract or
outsource such service to such third party. Each Party hereto shall be
responsible for functions performed by such Affiliates or other Persons to the
same extent the Party would be responsible if it performed such functions
itself.

 

19.6 Sales and Use Tax. This Agreement is intended to be a tax included contract
for Texas sales and use taxes due on the taxable Texas portion of the Services
performed by NMG that benefit Bank in Texas. Bank shall provide to NMG a
multi-state benefit exemption certificate and a letter instructing NMG to pay
directly to the State of Texas the Texas sales and use tax due under this
Agreement.

 

19.7 Amendment. Except as provided herein, this Agreement may not be amended
except by a written instrument signed by each of the Bank Companies and each of
the NMG Companies.

 

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19.8 Non-Waiver. No delay by a Party hereto in exercising any of its rights
hereunder, or partial or single exercise of such rights, shall operate as a
waiver of that or any other right. The exercise of one or more of a Party’s
rights hereunder shall 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.

 

19.9 Severability. In case any one or more of the provisions contained herein
shall be invalid, illegal or unenforceable in any respect under any law, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, and this Agreement
shall be reformed, construed and enforced as if such invalid, illegal or
unenforceable provision or portion of any provision had never been contained
herein and there had been contained herein instead such valid, legal and
enforceable provisions as would most nearly accomplish the intent and purpose of
such invalid, illegal or unenforceable provision.

 

19.10 Waiver of Jury Trial and Venue.

 

(a) Each Party hereby waives all right to trial by jury in any action or
proceeding to enforce or defend any rights under this Agreement.

 

(b) Each Party hereby irrevocably submits to the jurisdiction of the United
States District Court for the State of Delaware or, if such federal jurisdiction
is unavailable, in the state courts of the State of Delaware over any action
arising out of this Agreement, and each Party hereby irrevocably waives any
objection which such Party may now or hereafter have to the laying of improper
venue or forum non conveniens. Each Party agrees that a judgment in any such
action or proceeding may be enforced in other jurisdictions by suit on the
judgment or in any manner provided by law. Any and all service of process and
any other notice in any such suit, action or proceeding with respect to this
Agreement shall be effective against a Party if given as provided herein.

 

19.11 Governing Law; Compliance with Law.

 

(a) This Agreement and all rights and obligations hereunder, including matters
of construction, validity and performance, shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
to be performed within such State and applicable federal law.

 

(b) Each Party shall comply in all material respects with Applicable Law in
connection with its activities and the exercise of its rights and performance of
its obligations hereunder.

 

19.12 Specific Performance. The Parties agree that money damages would not be a
sufficient remedy for any breach of Article VI, X or XIII or the failure of a
Party to perform any of its material obligations hereunder, and that, in
addition to all other remedies, each Party will be entitled to seek specific
performance and to seek injunctive or other equitable relief as a remedy for any
such breach or failure to perform its material obligations hereunder. Each Party
waives any requirements for the securing or posting of any bond in connection
with such remedy.

 

80

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19.13 Captions. Captions of the articles and sections of this Agreement are for
convenient reference only and are not intended as a summary of such articles or
sections and do not affect, limit, modify or construe the contents thereof.

 

19.14 Notices. Any notice, approval, acceptance or consent required or permitted
under this Agreement shall be in writing to the other Party and shall be deemed
to have been duly given when delivered in person or, if sent by United States
registered or certified mail, with postage prepaid, or by a nationally
recognized overnight delivery service, when received, addressed as follows:

 

If to the NMG Companies:

c/o The Neiman Marcus Group, Inc.
One Marcus Square
1618 Main Street
Dallas, Texas 75201
Attention: General Counsel
Facsimile: (214) 573-5354

 

 

 

c/o The Neiman Marcus Group, Inc.
One Marcus Square
1618 Main Street
Dallas, Texas 75201
Attention: Credit Card Program Manager
Facsimile: (214) 743-7646

 

 

With a copy to:

Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention: Maripat Alpuche, Esq.
Facsimile: (212) 455-2502

 

 

If to the Bank Companies:

c/o HSBC Bank Nevada, N.A.
2700 Sanders Road
Prospect Heights, Illinois 60070
Attention: Managing Director -
Client Relations, HSBC Retail Services
Facsimile: (908) 203-4217

 

 

With a copy to:

HSBC Retail Services
2700 Sanders Road
Prospect Heights, Illinois 60070
Attention: General Counsel, Retail Services Division
Facsimile: (847) 205-7417

 

19.15 Coordination of Consents and Approvals. With respect to any consent or
approval to be given by the NMG Companies, NMG may give consents or approvals on
behalf of the other NMG Company and Bank shall be entitled to rely on any such
consent or approval of NMG acting on behalf of any or all of the NMG Companies.

 

81

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19.16 Further Assurances. The NMG Companies and Bank agree to produce or execute
such other documents or agreements as may be necessary or desirable for the
execution and implementation of this Agreement and the consummation of the
transactions specified herein and to take all such further action as the other
Party may reasonably request in order to give evidence to the consummation of
the transactions specified herein.

 

19.17 No Joint Venture. Nothing contained in this Agreement shall 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
the NMG Companies and the Bank Companies, and no act of either Party shall be
deemed to create any such relationship. The NMG Companies and the Bank Companies
each agree to such further actions as the other may request to evidence and
affirm the non-existence of any such relationship.

 

19.18 Press Releases. The NMG Companies, on the one hand, and the Bank
Companies, on the other hand, each shall obtain the prior written approval of
the other Party with regard to the substance and timing of any press releases
which announce the execution of this Agreement or the transactions specified
herein, which prior approval shall not unreasonably be withheld. At all times
thereafter, the NMG Companies and the Bank Companies, prior to issuing any press
releases concerning this Agreement or the transactions specified herein, shall
consult with each other concerning the proposed substance and timing of such
releases and give due consideration to the comments of the other Party relating
thereto. The foregoing notwithstanding, it is understood that neither Party
shall be required to obtain any prior consent, but shall consult with each other
to the extent practicable, with regard to (a) filings, press releases and other
announcements as may be required by Applicable Law or the applicable rules and
regulations of any governmental agency or stock exchange and (b) publications
prepared solely by and for employees of any of the NMG Companies or the Bank
Companies, or their respective Affiliates.

 

19.19 No Set-Off. The NMG Companies and the Bank Companies agree that each Party
has waived any right to set-off, combine, consolidate or otherwise appropriate
and apply (i) any assets of the other Party held by the Party or (ii) any
indebtedness or other liabilities at any time owing by the Party to the other
Party, as the case may be, against or on account of any obligations owed by the
other Party under this Agreement, except as expressly set forth herein.

 

19.20 Conflict of Interest. Each Party hereto, in performing it obligations
hereunder, shall establish and maintain appropriate business standards,
procedures and controls designed to ensure that such Party shall perform and
conduct its operations in a manner consistent with the Program Objectives and in
such a way as not to disparage or embarrass or otherwise adversely affect the
other Party and its Affiliates. Each Party shall review such standards,
procedures and controls with reasonable frequency during the Term including
those related to the activities of its employees and agents in their relations
with the employees, agents and representatives of the other Party hereto and
with other third parties.

 

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19.21 Third Parties . There are no third-party beneficiaries to this Agreement.
Except for the Indemnified Parties with respect to indemnity claims pursuant to
Article XVII, the Parties do not intend: (i) the benefits of this Agreement to
inure to any third party; or (ii) any rights, claims or causes of action against
a Party to be created in favor of any person or entity other than the other
Party.

 

19.22 Force Majeure. If performance of any service or obligation under this
Agreement is prevented, restricted, delayed or interfered with by reason of
labor disputes, strikes, acts of God, floods, lightning, severe weather,
shortages of materials, rationing, utility or communication failures,
earthquakes, war, revolution, civil commotion, acts of public enemies, terrorist
attacks, blockade, embargo or any law, order, proclamation, regulation,
ordinance, demand or requirement having legal effect of any government or any
judicial authority or representative of any such government, or any other act
whatsoever, whether similar or dissimilar to those referred to in this clause,
which are beyond the reasonable control of a Party and could not have been
prevented by reasonable precautions, (each, a “Force Majeure Event”) then such
Party shall be excused from such performance to the extent of and during the
period of such Force Majeure Event. A Party excused from performance pursuant to
this Section 19.22 shall exercise all reasonable efforts to continue to perform
its obligations hereunder, including by implementing its disaster recovery and
business continuity plan as provided in Section 7.3(d), and shall thereafter
continue with reasonable due diligence and good faith to remedy its inability to
so perform except that nothing herein shall obligate either Party to settle a
strike or other labor dispute when it does not wish to do so. Notwithstanding
the foregoing, if a condition constituting a Force Majeure Event with respect to
the Bank Companies, on the one hand, or the NMG Companies, on the other hand,
exists for more than thirty (30) consecutive days (or five (5) days in the case
of any payment obligation) and such Party is unable to perform a material
obligation (which shall be deemed to include any payment obligation pursuant to
Article VIII or Article IX) under this Agreement due to such Force Majeure
Event, then the other Party shall have the right to terminate this Agreement
upon written notice to the Party subject to such Force Majeure Event; provided,
however, that (i) prior to delivering written notice of termination in respect
of such Force Majeure Event, the Party seeking to terminate this Agreement shall
call, and the Parties shall attend one or more Management Committee to consider
and vote upon a plan to outsource the material obligation that such Party is
unable to perform and (ii) in the event such outsourcing arrangement is agreed
to, the Parties shall promptly implement such arrangement and this Agreement may
not be terminated unless such Force Majeure Event continues on the fifteenth
(15th) day following approval of such outsourcing arrangement.

 

19.23 Entire Agreement. This Agreement, together with the Schedules hereto which
are expressly incorporated herein by reference, supersedes any other agreement,
whether written or oral, that may have been made or entered into by the NMG
Companies and Bank (or by any officer or employee of any such Parties) relating
to the matters specified herein, and constitutes the entire agreement by the
Parties related to the matters specified herein or therein.

 

19.24 Binding Effect. This Agreement shall be binding upon and shall inure to
the benefit of the Parties hereto and their respective successors and permitted
assigns. This Agreement is the product of negotiation by the Parties having the
assistance of counsel and other advisers. It is the intention of the Parties
that this Agreement not be construed more strictly with regard to one Party than
with regard to the other.

 

83

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19.25 Counterparts/Facsimiles. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one and the same
instrument, but in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart. Any facsimile of an
executed counterpart shall be deemed an original.

 

19.26 Survival. Upon the expiration or termination of this Agreement, the
Parties shall have the rights and remedies described herein. Upon such
expiration or termination, all obligations of the Parties under this Agreement
shall cease, except that the obligations of the Parties pursuant to Article VI
(Cardholder Information), Section 8.5 (Bank Right to Charge Back), Article X
(Intellectual Property), Article XII (Access, Audit and Dispute Resolution),
Article XIII (Confidentiality), Article XVII (Effects of Termination),
Article XVIII (Indemnification), Section 19.1 (Precautionary Security Interest),
Section 19.6 (Sales and Use Tax), Section 19.10 (Waiver of Jury Trial and Venue)
and Section 19.11 (Governing Law; Compliance with Law) shall survive the
expiration or termination of this Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

84

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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be duly
executed as of the date first above written.

 

 

THE NEIMAN MARCUS GROUP, INC.

 

 

 

 

By:

/s/ Steven P. Dennis

 

Name:

Steven P. Dennis

 

Title:

Senior Vice President, Strategy,
Business Development and Multichannel Marketing

 

 

 

 

BERGDORF GOODMAN, INC.

 

 

 

 

By:

/s/ Nelson A. Bangs

 

Name:

Nelson A. Bangs

 

Title:

Senior Vice President

 

 

 

 

HSBC BANK NEVADA, N.A.

 

 

 

 

By:

/s/ Joseph W. Hoff

 

Name:

Joseph W. Hoff

 

Title:

Executive Vice President

 

 

 

 

HOUSEHOLD CORPORATION

 

 

 

 

By:

/s/ Joseph W. Hoff

 

Name:

Joseph W. Hoff

 

Title:

President

 

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

 

SCHEDULE 1.1(a)

 

Bank Licensed Marks

 

Mark

 

Serial/Registration
Number

 

 

 

HSBC Card Services

 

 

[***]

HSBC Bank Nevada

 

 

[***]

HSBC Finance Corporation

 

 

[***]

HSBC Retail Services

 

 

[***]

 

 

 

 

HSBC [g261021lm01i001.jpg]

 

 

 

 

 

 

[***]

 

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

 

SCHEDULE 1.1(b)

 

Comparable Partner Programs

 

Saks Incorporated

Domain

Helzberg Diamonds

Liz Claiborne

 

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

 

SCHEDULE 1.1(c)

 

Program Loyalty Program and Loyalty Cards

 

Section A: Description of Current Program Loyalty Programs

 

Neiman Marcus InCircle Rewards Program

The Neiman Marcus InCircle Rewards program has successfully driven the use of
the NM Card and has stimulated ongoing retail sales for over 20 years. The
Neiman Marcus InCircle Rewards Program applies automatically to any NM Card (in
limited cases, InCircle Rewards can be awarded to select AMEX cards enrolled in
the program by a customer). Under the current InCircle Rewards Program, each
time a customer uses the NM Card, the customer earns one point for each dollar
spent. Once a customer accumulates 5,000 points during an annual period, the
customer automatically becomes a member of the InCircle Rewards program and
receives an InCircle Rewards card.

 

With membership come certain special privileges, as determined by NMG. In the
past those privileges have included the following, subject to changes made by
NMG from time to time: two publications and a newsletter, complimentary gift
packaging on purchases over $25, Hertz double upgrade/discount, double InCircle
Reward points on the customer’s birthday and $25 dinner certificate for Smith &
Wollensky restaurant. Also cardholders receive advance notice of sales and
special events at Neiman Marcus. NMG will periodically have double-point days at
Neiman Marcus stores when cardholders can earn two points for every dollar spent
on the card, driving more customer traffic into the stores.

 

Once a customer earns 100,000 InCircle Rewards points within the annual program
period, the customer becomes a Platinum Preference Award member and receives
unlimited double InCircle Rewards points on all NM Card purchases for that
annual period. The customer also receives special privileges, as determined by
NMG. In the past, these privileges have included the following, subject to
changes made by NMG from time to time: customer selected rewards for redemption,
1,000 InCircle Reward points on the customer’s birthday, complimentary
subscriptions, memberships to Latitude global services, MEDJET ASSISTANCE,
bottle of champagne, cruise gift certificate and $100 dinner gift certificate to
Smith & Wollensky restaurant. If the customer reaches 1,500,000 InCircle Rewards
points, the customer becomes a member of the Chairman’s Circle and the special
privileges become even more exceptional.

 

A member’s account must be in good standing and at the current point level for
thirty days to be eligible to redeem points for rewards. Merchandise returns and
other financial adjustments are deducted from the InCircle Rewards account
points. Corporate and employee accounts are not eligible to participate in the
InCircle Rewards programs.

 

All point redemptions for InCircle Rewards must be made during the annual
program period (which lasts for fourteen months from January to the following
March 1st). After March 1st, 25% of unredeemed InCircle Rewards points (up to a
maximum of 5,000 points) will be carried over into the next annual program
period. Points are not earned on sales tax, beauty salons, delivery and
processing, alterations, gift packaging charges or NM Gift Cards®. Points are
not

 

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

 

convertible to cash or payment on Neiman Marcus accounts. Customers are
responsible for all federal, state, and local taxes; for delivery, processing,
and handling fees; and for insurance. NMG also offers special privileges
determined by NMG from time to time (such as personal shopper services,
invitations to exclusive events, free consultations and private shopping hours)
as well as InCircle Rewards points to AMEX Centurion (“Black”) and Platinum
cardholders.

 

The InCircle Rewards program also permits point owners to convert points from
InCircle Rewards points to points for other programs, including United and
American Airlines (point for point). The InCircle Program has relationships with
third parties where InCircle points are rewarded to customers of those third
parties in connection with the purchase of certain goods and services from such
parties. In addition, the InCircle Program rewards points to couples who have
registered at NMG for items purchased off their wedding registry regardless of
tender type.

 

Bergdorf Goodman Card Rewards Program

The Bergdorf Goodman Rewards program currently operates differently than the
Neiman Marcus InCircle Rewards program. Beginning in January 2005, the Bergdorf
Goodman Rewards program permits select AMEX cards (Centurion and Platinum
cardholders only) to be enrolled in the Bergdorf Goodman Rewards program. Every
Bergdorf Goodman card account is automatically enrolled in the program. A
Bergdorf Goodman card receives Bergdorf Goodman Rewards points if it is used at
either Bergdorf Goodman or a Neiman Marcus store (but not a Neiman Marcus
Clearance Center) on a one point per dollar basis. Beginning in January 2006,
the Bergdorf Goodman Rewards program will be rolled into the InCircle Rewards
program.

 

 

Section B: Loyalty Cards

 

InCircle Rewards Card

InCircle Platinum Rewards Card

Bergdorf Goodman Rewards Card

 

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

 

SCHEDULE 1.1(d)

 

NMG Licensed Marks

 

 

 

Serial/Registration

 

Applicable Retail

 

Mark

 

Number

 

Division/NMG Channel

 

BERGDORF GOODMAN

 

1902799

 

 

 

BERGDORF GOODMAN

 

0992733

 

 

 

IN CIRCLE IN and Design (Circle around IN)

 

1337166

 

 

 

INCIRCLE REWARDS

 

2442806

 

 

 

NEIMAN MARCUS

 

2209260

 

 

 

NEIMAN MARCUS

 

0934177

 

 

 

NEIMAN MARCUS

 

SN 78/374184

 

 

 

NEIMAN MARCUS (stylized)

 

1733202

 

 

 

NEIMAN-MARCUS

 

1154006

 

 

 

NM

 

1558605

 

 

 

PLATINUM PREFERENCE REWARDS

 

SN 78/420272

 

 

 

 

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

 

SCHEDULE 1.1(e)

 

Non-Card Payment Plans and Private Label Credit Cards

 

Section A: Non-Card Payment Plans

 

Signature Accounts

Commercial or Corporate Accounts

Studio Accounts

Club Accounts

 

Section B: Private Label Credit Cards

 

Neiman Marcus

Neiman Marcus Card

Neiman Marcus Gold Card

 

Bergdorf Goodman

Bergdorf Goodman Card

 

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

 

SCHEDULE 1.1(f)

 

“High Collar” means (i) with respect to the Finance Charge Reversal Percentage
applicable to the Private Label Accounts, [***], (ii) with respect to the Late
Fee Reversal Percentage applicable to the Private Label Accounts, [***], (iii)
with respect to the dollar amount of Average Interest Free Receivables as a
percentage of Average Private Label Receivables, [***]%, or, in each case, such
other level as may from time to time be set by the Management Committee.

 

“Low Collar” means (i) with respect to the Finance Charge Reversal Percentage
applicable to the Private Label Accounts, [***], (ii) with respect to the Late
Fee Reversal Percentage applicable to the Private Label Accounts, [***], (iii)
with respect to the dollar amount of Average Interest Free Receivables as a
percentage of Average Private Label Receivables, [***], or, in each case, such
other level as may from time to time be set by the Management Committee.

 

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

 

SCHEDULE 1.1(g)

 

Special Discounts

 

[***]

 

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

 

SCHEDULE 2.1(b)

 

Private-Label Credit Card Re-issuance

 

For the initial Private Label Credit Card re-issuance, preliminary and on-going
meetings between Bank and NMG must take place to discuss the criteria for
Cardholders receiving the re-issued Private Label Credit Card mailing. During
the initial meetings, timeframes must be reviewed in order to avoid a
significant increase in customer service call volume. At a minimum, the Private
Label Credit Card re-issuance shall (i) take place in separate mailings across a
90-120 day minimum timeframe based on account status and (ii) be structured such
that active cardholders receive the re-issued Credit Cards first followed by
in-active Cardholders in equally-staged mailings. In addition to defining the
testing and project plan to be implemented in connection with this re-issuance,
other considerations to be addressed by the Management Committee include a
potential account purge of some inactive Accounts, the development of fraud
prevention steps and the coding for Credit Card activation at the POS (or
through the IVR/VRU). In accordance with the design of the Cardholder
Documentation associated with the re-issuance pursuant to Section 4.5, Bank will
be responsible for the production, mailing, audit reporting and communication of
the appropriate loyalty-level Private Label charge cards and related materials
to all cardholders. In addition to the staged mailing process, Bank must work
with NMG to ensure that the Private Label Credit Cards and related materials
meet NMG standards in order to address the customer service impact of the
re-issuance. Prior to any mailing of re-issued Private Label Credit Cards, Bank
and NMG must discuss and agree upon the maximum daily mailing volumes in this
staged process.

 

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

 

SCHEDULE 2.2(c)(i)

 

Dual-Line Credit Card Testing

 

Section A: Dual-Line Credit Card Development and Product Design

 

Bank shall perform consumer research and product design including initial design
and proposal of Cardholder terms and conditions, Account acquisition and
activation value proposition, integration with current Private Label program,
and integration with current Program Loyalty Program, all subject to review and
approval by NMG. Bank and NMG will jointly develop the Dual-Line/Co-Brand Risk
Management Policies, Marketing Plan, implementation schedule, look and feel of
the Solicitation Material, including Dual-Line/Co-Brand program collateral
(i.e., cards, welcome kit, applications), and Cardholder and store
communications.

 

Section B: Dual-Line Credit Card Testing

 

Bank and NMG will jointly develop and the Management Committee will approve a
live test plan, such plan to include channel, geographic and customer
segmentation strategies, (if applicable), and which may include, among other
items, direct mail to existing Private Label Cardholders and/or placing
Dual-Line/Co-Brand applications in select test stores. The Management Committee
will approve the live test plan, including identifying, setting and reporting of
the metrics used to measure the success of the test, as well as the length of
time of the test period; provided, that such test period will commence no later
than the Dual-Line Card Deadline and after conversion to the Bank Systems.

 

Section C: Dual-Line Credit Card Definitions

 

“Development Period” means the period beginning on the day that NMG provides
notice of its desire to test Dual-Line Cards pursuant to Section 2.2(c)(ii) and
ending on the ninetieth (90th) day following such notice.

 

“Dual-Line Card Deadline” means June 30, 2006, as may be extended in NMG’s sole
discretion.

 

“Dual-Line Testing Date” means December 31, 2005.

 

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

 

SCHEDULE 2.2(c)(ii)

 

Dual-Line Credit Card Terms

 

[***] branded

 

[***] general-purpose credit line

 

No Merchant Discount in the Retail Merchants

 

Tied to a Program Loyalty Program

 

Economics to be agreed between NMG and Bank, including compensation for Program
Loyalty Program points with respect to all spending and marketing outside of the
NMG Channels

 

Servicing and service level standards to be mutually agreed upon by NMG and Bank

 

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

 

SCHEDULE 2.2(d)

 

Section A: Non-NMG Credit Cards

 

The NMG Companies shall have the right to accept Credit Cards other than NMG
Credit Cards except that, with respect to the Neiman Marcus store line
(excluding NM Direct, NM Online, Last Call and Bergdorf Goodman stores), only
the NMG Credit Cards and American Express Credit Cards shall be accepted, except
that any or all Credit Cards may be accepted in (i) [***], (ii) [***] and (iii)
[***].

 

Section B: Permitted Loyalty Program Arrangements

 

[***]

 

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

 

SCHEDULE 3.2(e)

 

Initial Program Changes

 

Annual Fee

 

No annual fee, except for $50 NM Gold Card program membership fee.

 

 

 

Late Payment or Late Fee (at cycle)

 

Based upon two prior month’s statement balance:

 

 

·                  $20-$49 Balance = $5

 

 

·                  $50-$149 Balance = $15

 

 

·                  $150-$299 Balance = $20

 

 

·                  $300+ Balance = $29

 

 

 

Returned Check Fees (BG to be standardized as NM)

 

$25 per returned check

 

 

 

Minimum Payment Amount (BG to be standardized as NM)

 

10% of billed balance (but at least $25 and, for closing balances of $250 or
more, rounded up to the nearest $10).

 

 

 

Minimum Finance Charge

 

$.50

 

 

 

Standard APR

 

21.0% APR for all residents (or at NMG’s election, all residents other than
1,500 VIP Accounts plus up to 5,000 other Accounts) except in two states to be
agreed upon; [TBD%] plus Prime variable APR for two states to be agreed upon.

 

 

 

Grace Period for the Repayment of Purchases

 

27 days

 

 

 

Method of Computing the Balance for Purchases

 

Average Daily Balance (including new purchases)

 

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

 

SCHEDULE 3.2(g)(i)

 

Private Label Account Profiles

 

Bank may make changes to the Risk Management Policies with respect to a channel
in response to changes in the credit profiles for Account applicants in such
channel if the Population Stability Index (PSI) based on the Fair, Isaac Score
indicates a change in excess of [***] in such channel for two consecutive months

 

·                  For purposes of determining the PSI benchmark: NMG will send
to Equifax the through-the-door (TTD) application population for the most recent
quarter

·                  Equifax will access both NMG’s and Bank’s current scoring
methodology and develop a cross-talk table to translate NMG’s current scores to
Bank’s scores

·                  The scores will be used to develop the PSI

 

The objective of the Population Stability Index (PSI) is to answer the question
‘Is the current application population scoring differently from a Benchmark
population’. The PSI is designed to indicate the level of change in the
applicant population. The Index can be interpreted as follows:

 

[***]

 

The NMG application file will be used to benchmark the PSI by Next Gen, FICO
Score and New Account Scorecard Score if contractually allowed by FICO. The
historical approval rates for NMG for the past 12 months will be used to
indicate the seasonal trend in credit quality and approval experience by NMG.
The information would be segmented by channel and monitored on a monthly basis.

 

The PSI would be developed jointly over the first six months following the
Effective Date with the Risk Management Policies remaining unchanged during this
time.

 

Attached is an example of a PSI.

 

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

 

SCHEDULE 3.3

 

Program Relationship Managers; Partner Program Team

 

1.                                       Initial Manager of NMG: Steven Dennis

 

2.                                       Initial Manager of Bank: To be
determined by the Parties prior to Closing.

 

3.                                       Bank’s Program Team Requirements and
Specifications

 

(a)                                  Fully-Dedicated Team Members: Bank shall
ensure that the following full-time employees, in each case having the
experience and skills referred to below shall devote 100% of their work efforts
to the Program:

 

(i) Two (2) marketing strategists with cumulative experience in the credit card
or retail marketing industry of at least 15 years, or such other experience
acceptable to NMG; and

 

(ii) Two (2) fully-trained data mining analysts

 

The foregoing dedicated employees shall devote substantially all of their
efforts to performing Bank’s obligations pursuant to Section 5.4.

 

(b) Other Program team requirements:

 

Each Program team member would have a minimum of five (5) years of relevant
experience working with similar programs.

 

Upon mutual agreement of NMG and Bank, two (2) of the team members, including
one of the marketing strategists, would be located at the NMG offices in Dallas.

 

Bank will identify and assign a lead technology and a lead risk management
representative to work with the Program team members. Each lead representative
will be the functional subject matter expert relative to the Program and will be
assigned for a period of time to provide consistency in knowledge and experience
to the Program team members.

 

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

 

SCHEDULE 3.3(d)

 

List of Retailers

 

Saks

Nordstrom

Barney’s

Coach

Jeffrey

Tiffany

Holt Renfrew

Fred Segal

Stanley Korshak

Scoop

LVMH

Prada Group

PPR Group

Federated

 

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

 

SCHEDULE 4.1(b)

 

Operating Procedures

 

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

 

Schedule 4.1(b)

Risk Management Policies and

Operating Procedures

 

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

 

New Account

Risk Management Policies and
Operating Procedures

 

A-1

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

 

[***]

 

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

 

Multiple PaySys CDM Screen Prints showing full
application flow will be attached.

 

B-1

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

 

[***]

 

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

 

Authorizations

Risk Management Policies and
Operating Procedures

 

C-1

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

 

[***]

 

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

 

Multiple PaySys Custom Rescore Screen Prints
showing rescore matrixes and parameters
will be attached.

 

D-1

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

 

[***]

 

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

 

Customer Service/InCircle
Risk Management Policies and
Operating Procedures

 

E-1

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

 

[***]

 

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

 

Collections
Risk Management Policies and
Operating Procedures

 

F-1

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

 

POPULATION STABILITY COMPARISON

Benchmark vs Current Month Application Data

 

[***]

 

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

 

SCHEDULE 4.4(f)

 

Document Retention Policy

 

Beginning as of the Effective Date, NMG shall comply with the following document
retention policy:

 

Title

 

Description

 

Retention

Regulatory Complaints

 

Complaint resolutions resulting from complaints to any regulatory agency.

 

[***]

Customer Application & Agreement Forms

 

Samples of forms used for customers applying for credit. Forms include two
parts: 1) Application form and 2) cardholder agreement and disclosures

 

[***]

General Customer Correspondence

 

Retention of customer correspondence that is currently required in writing,
including name changes, FTC dispute letters, bankruptcy filings and deceased
notifications. Other customer correspondence including address changes, credit
limit change requests and financial adjustment requests are not retained since
these requests can be accepted verbally today.

 

[***]

Sales Slips (Signature Slips)

 

Signature slips that show the transaction total, tender information and customer
signature but not the transaction detail.

 

[***]

GI.B Privacy Opt Outs

 

Opt-out code will be retained on-line for [***] months and opt-out reply notices
will be retained on paper for [***] months

 

[***] Months (on-line opt-out code) and [***] Months (opt-out reply notices)

Completed Approved Applications

 

All new applications that are signed by the applicant

 

60 Months

Customer Inquiry Decline Reason Response

 

After applicant receives initial new account decline letter, decline reason
response generally handled via phone but follow-up letters mailed explaining
specifics are not retained although noted on the application on-line for [***]
months. Existing cardholders inquiry as to a declined authorization is also
handled verbally in most cases with follow-up letters, if necessary, not
retained although noted on the account.

 

[***] Months for new account declined application signed by applicants, [***]
Months for other customer inquiry decline reason responses

Adverse Action Letters

 

On-line letter code notations on the declined application or existing account
that had a declined sale, declined application or their account closed, and the
template of the adverse action letter.

 

[***] Months

Approvals - Credit Line Increase Request

 

The date implemented and the revised credit guideline is retained on-line

 

[***] Months

Overlimit Report

 

Retained on-line through current SystemWare RDS platform but not stored on paper

 

[***] Months

 

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

 

Resolved Disputes

 

On-line history of each Adjustment Jacket dispute including resolution stored in
Forms Database

 

[***] Months

 

Title

 

Description

 

Retention

Credit Bureau Change Request/Correction

 

Currently do not keep any paperwork but the electronic consumer dispute
verification (CDV) is stored on-line for [***] days from date of submission

 

[***] Months

Currency Transaction Report

 

Currently stored within each Store Cash Office but transitioning to centralized
filing process

 

[***] Months

Suspicious Activity Reports

 

Currently not done but will be instituting process similar to

Currency Transaction Report with a centralizing filing and reporting control

 

[***] Months

OFAC Reporting

 

Foreign OFAC reporting currently in place but new reporting to be developed for
all new applicants going forward

 

[***] Months

USA Patriot Act Customer Identification Information

 

Account opening information such as: Name, Date of Birth, Social Security Number
and Physical Address are stored on-line but not all information is necessarily
required to open new account

 

[***] Months after the account is closed (on-line)

USA Patriot Act Customer Identification Information

 

Pass/fail indicators of each new account reason is stored on the on-line
application record although no specific beyond this indicator except any notes
made by Universal Agent are retained.

 

[***] Months after account opening (on-line)

Customer Identification Program Reporting

 

Exception reports to identify customer program reporting is not existing at this
time other than an internal fraud file that can refer a new application for
manual intervention. NM Direct channel has additional fraud prevention
capabilities.

 

TBD

Cash Payment Reporting

 

See above Currency Transaction Report

 

[***] Months

Performance Reports

 

Various daily, weekly, monthly or cycle reports used to measure performance in
various credit department functions that are retained on-line through SystemWare
XNET or RDS platform

 

[***] Months

 

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

 

SCHEDULE 4.6(c)

 

Risk Management Policies Targets

 

 

[***]

 

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

 

SCHEDULE 4.7

 

Cardholder Terms

 

 

[***]

 

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

 

SCHEDULE 4.8(b)

 

Internet Services

 

All Internet-based system functionality provided and maintained by the Bank must
be available to cardholders 24 hours a day, 7 days a week with a minimum [***]
system availability. Scheduled system maintenance not exceeding 4 hours is
allowed per month during the hours of 12 am and 6 am CST. Internet functionality
shall include:

 

·                  Real-Time Application Processing with Fraud Authentication –
Provided Bank product offers extended application functionality beyond NM Online
real-time application process (to be implemented in June 2005), Bank application
processing product must be submitted through CDM or comparable system and
completely processed back to Internet within 45-second window. Authentication
product is a necessity to release new account number immediately back to
Internet applicant. Authentication product must give NMG the ability to
influence question weighting structure and type of demographic or credit
bureau-related questions asked. Detailed fraud reporting and if available, the
ability for Universal Agents to quickly view applicant’s category questions
whenever necessary are other requirements. In the event that fraud expenses
increase for 2 consecutive months compared to fraud expenses from Fiscal Year
2004 as a result of authentication changes by moving from the NMG to the Bank
authentication and system platform, formal discussion with the Management
Committee must be held to discuss alternatives and implement new fraud
strategies to either enhance or replace current authentication tools. The
authentication tools would also be beneficial in other application arenas if
available.

 

·                  Real-Time Authorization Processing (on NM/BG revolving/option
accounts) - Direct communication to and from NM Direct/On-line CMOS system with
a less than 2-second response time per authorization request is a requirement.
Current or comparable system over-limit percentage parameters and rescore tier I
and II matrix guideline increase processes must be in place to eliminate as much
manual intervention as reasonably possible. Authorization processing through
this channel must be done from a line or ticket-level authorization prior to the
item being shipped instead of at order time or as a total authorization request.
If items including drop ship or back-ordered items are not shipped within 30
days of the authorization request, the item must be re-sent through the systemic
authorization processes for re-authorization. All authorizations not able to be
approved systemically will require a batch or queue-related decision process
with NMG Credit Services to manually decision pending transactions. If approved
manually by the Universal Agent on the same day as the sale date, an immediate
release of that order within the CMOS system must occur as it does today.

 

·                  Signature Account (SIG600) Functionality – On furniture and
Home Décor items, upon NMG’s request, Bank shall offer NM On-line customers a
6-month, no finance charge Signature Account tender option for those purchases
over $600 dollars. The real-time authorization processing for these Accounts
must allow for these requests to be sent to NMG Credit Services for manual
intervention. SIG600 accounts are setup to bill 1/6th of the billed balance to
ensure that 6 equal payments exist for each item based on item ship date. The
Signature Account Agreement and terms letter following a Signature Account
approval must be automated within the respective credit systems. SIG600 denials
will automatically receive appropriate adverse action letter. If the Bank system
can support a signature sale

 

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

 

initiated as a secondary plan on the option/revolving account, this option will
be used instead of a secondary account upon mutual agreement by Bank and NMG in
writing. Should this one-account option be used, no further Signature Account
Agreement forms or terms letter will be required for NM On-line customers.

 

·                  New Account Prescreening or Prospecting – In coordination
with NM On-line personnel, new account and existing account prescreening options
on the web will be discussed by NMG and Bank The Parties intend to encourage
creditworthy third party customers, either during the check-out process or
afterwards through an e-mail confirmation, to open an NM or BG charge account
with or without a promotion (i.e. bonus InCircle points or free shipping). Other
prospecting options to encourage existing NM or BG cardholders to use their
charge card to shop will also be discussed by NMG and Bank with input from NM
On-line personnel with respect to specifications and design of such options.

 

·                  E-Pay Functionality – Electronic payment functionality must
give the cardholder the ability to pay their bill on-line, even on their closing
or due date, until 7 p.m. CST if not later and be posted with this same date by
the next business day. The MOD-10 check-digit routine and other NMG account
number logic (i.e. account must begin with 04 or 05, be 12-digits) must be part
of initial process to eliminate “account not found” transactions. Should an
on-line customer request to change or cancel their payment on the same day,
Universal Agents must have an ability to correct these payments. Daily
transmissions of these electronic payments will be submitted through TRAMS or
comparable receivable system to post payments regularly. Returned payment
transmission or reporting must be given to NMG daily to immediately reverse
payment transaction. Initial ACH Authorization Form requirements to initiate an
e-pay request must be explored further between Bank and NMG. Recurring payment
functionality with this e-pay product would also be included if Bank has such
capability. As a note, NMG currently utilizes several ACH vendors through the
IVR including Harbor Payments (Bank of New York) that can be used for this e-pay
process fairly easily.

 

·                  E-Bill Functionality - On-line bill presentment must be
readily available to cardholders within 24 hours of each cycle close and should
contain at a minimum all data that is currently printed on the NM or BG monthly
billing statement. Billing functionality should allow cardholders to view up to
12 months of their billing statements on-line. The Parties will cooperate to
implement the ability to display sub-total amounts per item in addition to
selective marketing and InCircle loyalty messages and displays. Universal Agents
must have ability to view and discuss on-line e-bill functionality with
cardholders whenever necessary.

 

·                  E-Service Functionality – The Parties will also cooperate to
provide real-time memo and cycle-to-date balance information as well as customer
address maintenance and credit card re-ordering capabilities provided these
on-line requests do not immediately update cardholder credit system data.
Instead, a security question (i.e. last four digits of SSN) will be asked of
cardholder at time of entry and updated data sent to a credit queue for manual
approval before actually updating the credit system. Upon such time, if any.
review would be required until NMG Credit Services is comfortable with
customer-initiated updates received from the on-line channel and manual control
could be eliminated.

 

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

 

SCHEDULE 5.2

 

Marketing Commitments

 

Section A: NMG Marketing Commitment

 

The NMG Marketing Commitment for each Fiscal Year shall be equal to (i) [***],
plus (ii) in the case of any Fiscal Year following the first Fiscal Year, [***]
multiplied by the applicable Program Growth Percentage for such Fiscal Year.

 

The “Program Growth Percentage” is, for each Fiscal Year after the first Fiscal
Year of the Program, the percentage by which Net Credit Sales for such Fiscal
Year exceed Net Credit Sales for NMG’s Fiscal Year ended July 31, 2005.

 

Section B: Joint Marketing Commitment

 

The Joint Marketing Commitment for each Fiscal Year shall be equal to (i) [***],
plus (ii) in the case of any Fiscal Year following the first Fiscal Year, [***]
multiplied by the applicable Program Growth Percentage for such Fiscal Year.

 

The “Program Growth Percentage” is, for each Fiscal Year after the first Fiscal
Year of the Program, the percentage by which Net Credit Sales for such Fiscal
Year exceed Net Credit Sales for NMG’s Fiscal Year ended July 31, 2005.

 

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

 

SCHEDULE 6.2

 

Program Privacy Policy

 

HSBC Bank Nevada, N.A.

A Privacy Statement for Neiman Marcus and Bergdorf Goodman Cardholders

 

Introduction – Our Commitment to You

 

HSBC Bank Nevada, N.A. (“HSBC”) is proud to be the issuer of the Neiman Marcus
and the Bergdorf Goodman private label credit card, each of which allows you to
charge purchases from The Neiman Marcus Group, Inc. (“Neiman Marcus Group”),
which includes Bergdorf Goodman, Inc., and their various affiliated companies.
This Privacy Statement describes the collection, use, and protection of
information about you and your Neiman Marcus and/or Bergdorf Goodman credit card
account. This policy has been in effect as of [date]. [to be updated as
appropriate]

 

HSBC is part of a financial services organization that has been providing
superior products and services to its customers for more than 150 years. We
greatly appreciate the trust that you and millions of customers have placed in
us, and we will protect that trust by continuing to respect the privacy of all
our applicants and customers even if our formal customer relationship ends.

 

What Information We Collect

 

It is important for you to know that in order to ensure that our customers get
the very best service and the highest quality products, HSBC collects
demographic information (such as your name and address) and credit information
(such as information related to your accounts with us and others). This
information is collected from the following sources:

 

·                  Information we receive from you on your application or other
form;

·                  Information you provide by telephone or in person to a Neiman
Marcus sales associate, Bergdorf Goodman sales associate or other
representative;

·                  Information about your transactions on your account with us,
or our affiliates;

·                  Information from an outside source such as your credit bureau
report;

·                  [Information from list vendors;]

·                  [Information from public sources;] and

·                  Information about your Internet usage if you visit our
website.

 

How We Share Information with Neiman Marcus Group

 

In order to provide you with the benefits and services available to you as a
Neiman Marcus or Bergdorf Goodman cardholder, it is necessary for HSBC to share
certain information about you with Neiman Marcus Group. Neiman Marcus Group
includes Neiman Marcus Stores, Neiman Marcus Direct (including Horchow), and
neimanmarcus.com, in addition to Bergdorf Goodman, Inc. including Bergdorf
Goodman Stores, Bergdorf Goodman Direct and bergdorfgoodman.com.

 

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

 

Your Neiman Marcus or Bergdorf Goodman credit card can be used to make purchases
at all of these locations.

 

The information we share with Neiman Marcus Group may come from your
application, such as your name, address, e-mail address, telephone number, and
social security number. Neiman Marcus Group may have also received some or all
of this information from you. The information we share may also come from your
transactions with us, such as your account number, information about your credit
card purchases and your account performance. Neiman Marcus Group uses the
information we share solely in connection with providing the benefits and
services available to you as a Neiman Marcus or Bergdorf Goodman cardholder.

 

Except for accounts with Vermont mailing addresses, we may also share non-public
personal information about you with Neiman Marcus Group which Neiman Marcus
Group may use to provide you with information about benefits and services
available to you as a Neiman Marcus Group customer, but that are not necessarily
related to your account with us.  This information comes from the sources
described above and may include your name, address, and account experience with
us.

 

You may tell us not to share information with Neiman Marcus Group as set forth
in the immediately preceding paragraph by completing the form below. For
Vermont, state law requires us to obtain your permission in order to share
information about you in this way, and we will not share information about you
in this way unless you authorize us to do so. We will automatically treat
accounts with Vermont mailing addresses as if they have opted out of such
information sharing.

 

How We Share Information with Companies Affiliated with HSBC

 

From time to time, for general business purposes such as fraud control, or when
we think it may benefit you, we share certain information with our companies in
our corporate family (e.g., Affiliates), except as prohibited by applicable law.
These affiliated companies, doing business under the HSBC name, all provide
financial services, such as banking, insurance, mortgage, and brokerage
services. The information we share might come from your application, such as
your name, address, telephone number, and e-mail address. Also, the information
we share could include your transactions with us or our Affiliates (such as your
account balance, payment history, and parties to the transaction), your Internet
usage, or credit card usage.

 

How We Share Information with Other Third Parties

 

We may provide information to non-affiliated companies that perform operational,
collection, or fraud control services related to your account. The sharing of
information with these types of companies is permitted by law. Such a company
might include a financial company (such as an insurance service provider) or a
non-financial company (such as a data processor or internet service provider)
with whom we have a service agreement. These companies are contractually
obligated to protect the information that they receive from us and may not use
it for any other purpose other than for performance of services on behalf of
HSBC. The information we may

 

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

 

share also comes from the sources described above and might include your name,
address, phone number, and account experience with us.

 

Finally, we may provide information about you to non-affiliated companies such
as credit reporting agencies and companies which provide services related to
your account. This information sharing is also permitted by law.

 

Security of Your Information

 

Safekeeping of your non-public personal information is a high priority. We
maintain physical safeguards, such as secure areas in buildings; electronic
safeguards, such as passwords and encryption; and procedural safeguards, such as
customer authentication procedures to detect identity theft. We restrict access
to information about you to only those who need to know that information to
provide products or services to you. We carefully select and monitor outside
service providers, such as mail vendors, who have access to customer
information, and we require them to keep it safe and secure. We do not allow
them to use or share the information for any purpose other than to perform the
service for which they are engaged. We train our employees with respect to
security procedures and monitor compliance therewith.

 

How to Opt-Out of Information Sharing with Our Affiliates (Applicable to
residents of all states except Vermont)

 

If you prefer that we not disclose nonpublic personal information about you to
our Affiliates, you may opt out of those disclosures, that is, you may direct us
not to make those disclosures (other than disclosures permitted by law) by
completing this detachable reply form and mailing it to the following address:

 

The Neiman Marcus Group, Inc.

P.O. Box 720937

Dallas, Texas 75372-0937

 

We will be happy to comply with your request. This request will not apply to
information about your transactions or experience with HSBC (such as account
information, account usage, or payment history) and will only apply to the
private label accounts you have with HSBC. Private Label accounts are not
general purpose accounts such as MasterCard® or Visa®, but are accounts that may
be used only at the specific merchant(s) named on the credit card. An opt-out
request by any party on a joint account will apply to all parties on the joint
account. Vermont residents are automatically opted-out of credit information
sharing with our Affiliates.

 

How to Opt-Out of Information Sharing with Neiman Marcus Group (Applicable to
residents of all states except Vermont)

 

If you do not want us to share your non-public personal information with Neiman
Marcus Group for purposes that are unrelated to your account with us, please let
us know by completing this detachable reply form and mailing it to the following
address:

 

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

 

The Neiman Marcus Group, Inc.

P.O. Box 720937
Dallas, Texas 75372-0937

 

We will be happy to comply with your request. Your request will not apply to the
sharing of information which we are permitted or required by law to share, and
will only apply to the private label accounts you have with HSBC. If your
account with HSBC is a joint account, an opt-out by any party on the joint
account will apply to all parties on the account. Vermont residents are
automatically opted-out of information sharing with Neiman Marcus Group that is
not otherwise permitted or required by applicable law.

 

Changes to Privacy Statement

 

We reserve the right to modify or supplement our Privacy Statement at any time.
If we make material changes, we will provide our current customers with a
revised notice that describes our new practices. The current Privacy Statement
applicable to Neiman Marcus and Bergdorf Goodman credit cards will always be
available at the neimanmarcus.com web site.

 

The Neiman Marcus Group Privacy Policy

 

Neiman Marcus Group also wants you to be aware that whenever you shop with
Neiman Marcus or Bergdorf Goodman – online, through their catalogs, or in the
stores – Neiman Marcus Group obtains information from you needed to complete the
transaction, including the specific products or services you purchase or use,
which is shared among Neiman Marcus corporate affiliates. A separate privacy
policy describing the collection, use, and protection of this and other
information about you and your relationship to the Neiman Marcus Group companies
is available at neimanmarcus.com, at any Neiman Marcus or Bergdorf Goodman
location, or by writing to Neiman Marcus, P.O. Box 720937, Dallas, Texas
75372-0937.

 

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SCHEDULE 7.1(a)(i)

 

Bank Reports

 

Department

 

Report

 

Description

Late Stage Collections

 

Roll Rates

 

Trial Balance By Cycle

Trial Balance By Balance Range

Roll Rate

 

 

Dialer Reports

 

 

 

 

Collection QA Reports

Agency Batch Track Analysis

Write-Off Performance

Agency Placement Strategies

Calling Strategies

 

Debt Management Inventory Report

 

Outbound/Inbound Dialer Volume

Collection Productivity Reports

 

Job Performance Summary

Monthly Job Performance Summary

Monthly System Performance Summary

Monthly System Completion Code Summary

Monthly Job Completion Code Summary

NM Monitoring Form

 

 

 

Billing Calendar - Dialer Work Schedule

 

Payment Plans

CCCS Inventory

Refer to Dialer Reports

Collector Synopsis Summary Reports (By Team)

 

 

 

 

 

Payment Processing Image RPS Reports

 

 

 

 

 

 

 

 

 

 

Statistical Reports

 

Cash Letter

Reject Items Report

Deposit Report

Client Total Items

Host File Batch Summary Report

 

Payment Distribution Report

NTN 100D

15,000+ Report

Consolidated Cover Report

Collection Report

Transmission Report

Image RPS Operators Report

Encoding Errors Report

Opener Statistics

 

Listing of checks to be deposited in pocket cut
Displays item rejected by machine or operator
Pocket cut totals

Pass I Pocket totals

NM & BG Batch listing for host file

NM & BG Batch payment distribution by amount paid (PIF, min payment, etc.)

NCR Payment Processing Control Listing

Payments in excess of 15,000

Cash Letter Listing Foreign Conversions

Collection Letter

Printout of transmission and acceptance of file (to host)

Statistics on each operator

Monthly Quantity of keying errors

Monthly Report on quantity and rate of envelopes opened

 

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

 

Statement Mailing

 

Statement Count Recap

Detail Statistics By Package

Statement of Mailing

Statistical Totals

Cass Report

Reprint Statement

Tray Labels

Misc. Excel Schedules

 

 

 

 

 

 

 

 

Total Number of Cycles Processed

Total Number of Statements

 

 

 

 

Total Hours Processing Time

Average Cycle Processing Time

Average Statements Per Hour

Number of Statements Mailed Same Day

Number of Statements Mailed Within 24 Hours

Number of Statements Mailed Within 48 Hours

Number of Statements Mailed After 48 Hours

Total Postage by Presort/USPS

Explanations for Missed SLA’s

 

 

 

 

 

Credit Card Issuance

 

Data Card Audit File

Misc. Excel Schedules

 

 

Total Number of Jobs Processed

Total Number of Cards & Customers

Total Hours Processing Time

Average Job Processing Time By Type

Average Cards Per Hour By Type

Number of Cards Mailed Same Day

Number of Cards Mailed Within 24 Hours

Number of Cards Mailed Within 48 Hours

Number of Cards Mailed After 48 Hours

Postage Reconciliation

Total Postage By Card Type

Cards & Forms Reconciliation

Explanations for Missed SLA’s

 

Note: In the event of a transfer of service, the reports provided by Bank shall
be mutually agreed upon by NMG and Bank.

 

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

 

SCHEDULE 7.1(a)(ii)

 

NMG Reports

 

Department

 

Hotel Report

 

Brookline Equivalent

Collections

 

Roll Rates

 

Trial Balance By Cycle

 

 

 

 

Trial Balance By Balance Range

 

 

 

 

Roll Rate

 

 

Dialer Reports

 

Job Performance Summary

 

 

 

 

Monthly Job Performance Summary

 

 

 

 

Monthly System Performance Summary

 

 

 

 

Monthly System Completion Code Summary

 

 

 

 

Monthly Job Completion Code Summary

 

 

Collection QA Reports

 

NM Monitoring Form

 

 

Collection Agency Audit Packages

 

Collection Agency Account Audit

 

 

 

 

e.g. Attorney Placement Summary (Strong Law Firm)

 

 

Collection Bureau Disputes

 

Report Card Information; Summary of Responses

 

 

Calling Strategies

 

Billing Calendar - Dialer Work Schedule

 

 

Block Code Report

 

Blocked Account Report

 

 

Block Code/User Code Report

 

No applicable Report

 

 

Debt Management Inventory Report

 

Payment Plans

 

 

 

 

CCCS Inventory

 

 

Outbound/Inbound Dialer Volume

 

Refer to Dialer Reports

 

 

Collection Productivity Reports

 

Collector Synopsis Summary Reports (By Team)

 

 

 

 

 

Credit

 

Override Report

 

Credit Application Processing System CAPS Listing

 

 

Credit Line Increases

 

New Accounts With Guidelines Exceeding $

 

 

 

 

Credit Limit Change Report

 

 

Forced Authorization Report

 

Daily Approval Override Code Usage - Manager Overrides

 

 

 

 

Daily Approval Override Code Usage - Credit Center Overrides

 

 

 

 

Authorization Production By Operator ID

 

 

 

 

Auto & Manual Decline Transactions

 

 

Reinstatement Report

 

No applicable Report

 

 

Application Decision Timing

 

No applicable Report

 

 

Adverse Action Timing

 

Adverse Action Letter Generation

 

 

Decline Reason Timing

 

Adverse Action Letter Generation

 

 

 

 

 

Fraud

 

New Fraud Claims Report

 

CAPS - Real-Time Fraud Detection Payment Report Model

 

 

 

 

Pending Fraud Write-Off

 

 

Fraud By Name Plate Report

 

Fraud Expense Forecast

 

 

 

 

Fraud Expense By Location

 

 

Fraud Block Code Vintage Report

 

No applicable Report

 

 

Fraud By Type

 

Fraud Loss By Type

 

 

Fraud Write-Off Policies

 

No applicable Report

 

 

 

Fraud Investigation Procedures

 

Loss Prevention Training Program - Module 5/Fraud Investigators

 

 

SAR Reporting Timelines

 

No applicable Report

 

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

 

Customer Service

 

Credit Balance Refund Aging Report

 

Credit Balance Report

 

 

 

 

Check Register

 

 

Dispute Aging Report

 

Neiman Marcus FCBA Log

 

 

 

 

Service Profile By Division

 

 

 

 

Fiscal 2005 YTD Totals

 

 

 

 

Dispute Items Report

 

 

Lost/Stolen Account Maintenance

 

Accounts Transferred Today

 

 

 

 

Transactions On Transfers

 

 

SSCRA Reporting

 

No applicable Report

 

 

Repeat Credit Bureau Disputes

 

No applicable Report

 

 

QA Monitoring

 

Credit Services Quality Assurance Form

 

 

Key Performance Measures

 

Service Levels - Credit Call Center

 

 

Telephone Statistics Summary

 

Split/Skill Summary Monthly Authorizations

 

 

 

 

Split/Skill Summary Monthly Infobot

 

 

 

 

Split/Skill Summary Monthly Incircle/Gold

 

 

 

 

Split/Skill Summary Monthly Incircle/Platinum

 

 

 

 

Split/Skill Summary Monthly - NMD/NMO Referrals

 

 

 

 

Split/Skill Summary Monthly Customer Service Help

 

 

Dispute Processing & Procedures

 

Dispute Resolution Process

 

 

 

 

 

Compliance

 

Right to Financial Privacy

 

Subpoena Log

 

 

Compliance Training

 

No applicable Report

 

 

Escalated Complaint Reporting

 

No applicable Report

 

 

Cash Payment Monitoring

 

Reporting Monies Received on In-Store Cash Payments

 

 

OFAC Exception Reporting

 

Report Distribution Change Request

 

 

High Risk Country Reporting

 

No applicable Report

 

 

CIP Exception Reporting

 

No applicable Report

 

 

 

 

 

A/R System

 

Activity Recap Report (R16)

 

Activity Recap Report (R16)

 

 

Reject Re-Entry Report (R15)

 

Reject Re-Entry Report (R15)

 

 

Warehoused Transactions (D10)

 

Warehoused Transactions (D10)

 

 

Blocked Account Report (O07)

 

Blocked Account Report (O07)

 

 

Trial Balance by Account (O08)

 

Trial Balance by Account (O08)

 

 

Charged Off Accounts Report (D09)

 

Charged Off Accounts Report (D09)

 

 

Audit Exception Report (D15)

 

Audit Exception Report (D15)

 

 

Generated Transaction Journal (D11)

 

Generated Transaction Journal (D11)

 

 

Daily Balancing Report (R32)

 

Daily Balancing Report (R32)

 

 

Accounts Transferred Today (O24)

 

Accounts Transferred Today (O24)

 

 

 

 

 

Risk/Portfolio Management

 

Application Result Summary

 

CAPS Listing

 

 

Key Portfolio Statistics

 

Customer Aging Report (CAR)

 

 

Authorization Summary

 

Daily Authorization Totals

 

 

 

 

Rescore Summary Report

 

 

 

 

Rescore With Limit Increase/Decrease - Tier I

 

 

 

 

Rescore Tier II With Limit Increase

 

 

 

 

Rescore Without Limit Increase/Decrease

 

 

 

 

Rescore Tier II Without Increase By Reason Code

 

 

Charge-Off & Recovery Trends

 

Bad Debt Provision

 

 

 

 

Primary Collection Agency Performance Report

 

 

 

 

Secondary Agency & Bankruptcy Performance Report

 

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

 

 

 

 

 

Bankruptcy Analysis

 

 

 

 

Bankruptcy Write-Off Analysis

 

 

Behavior Score Control Chart

 

No applicable Report

 

 

 

 

Credit Reclassification Summary Report

 

 

FICO Score Control Chart

 

No applicable Report

 

 

Custom Score Control Chart

 

Population Stability Report Final Scores

 

 

Account Review Analysis

 

Quest Totals

 

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SCHEDULE 7.1(b)

 

Monthly Settlement Sheet

 

The Monthly Settlement Sheet shall set forth:

 

(a)           the aggregate of all Joint Marketing Commitment Amounts spent by
the NMG Companies in such Fiscal Month;

 

(b)           the number of In-Store Payments received by any of the NMG
Companies in such Fiscal Month; and

 

(c)           any other amounts owed to the NMG Companies as explicitly provided
herein or as otherwise agreed by the parties in writing with line item
specificity, which amounts may be netted.

 

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SCHEDULE 7.1(c)

 

Yearly Settlement Sheet

 

The Yearly Settlement Sheet shall set forth:

 

(a)           the aggregate of all [***] spent by the NMG Companies in the last
Fiscal Month of such Fiscal Year;

 

(b)           the number of In-Store Payments received by any of the NMG
Companies in the last Fiscal Month of such Fiscal Year;

 

(c)           the Finance Charge Reversal Percentage for such Fiscal Year and
the calculation of any amounts due pursuant to Section 4.10(b);

 

(d)           the Late Fee Reversal Percentage for such Fiscal Year and the
calculation of any amounts due pursuant to Section 4.10(c);

 

(e)           Average Private Label Receivables, (ii) Average Interest Free
Receivables and (iii) the Net Yield for such Fiscal Year calculated on all
Billed Cardholder Debt and the calculation of any amounts due pursuant to
Section 4.11; and

 

(f)            any other amounts owed to the NMG Companies as explicitly
provided herein or as otherwise agreed by the parties in writing with line item
specificity, which amounts may be netted.

 

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SCHEDULE 7.3(a)

 

Primary Servicer Service Level Standards

 

For the Initial Term and each Renewal Term, the following Servicing Levels will
be maintained by Bank if they are providing such Services:

 

A. Documentation Services Bank will meet the following service levels on average
each month:

 

1.              Percentage of all billing statements that will be mailed out
within 4 days of cycle close date provided that this standard shall not apply if
a NMG systems problem prevents communication of the credit input data to Bank’s
credit operations (monthly reporting will be completed on an Excel spreadsheet):
[***] * [Regulatory SLA]

 

2.              Statement Mailing Services and Credit Card Production Services
paper quality for multi-color statements, carriers and matching window envelopes
must meet minimum specifications: Ziegler 24-pound, 8 1/2” x 11” virgin white
stock, maximum blank white perforated paper

 

3.              Term notifications and privacy and other inserts included in
mailings use minimum paper specifications: 60-pound offset

 

4.              Statement programming developed must produce the following
billing statement capabilities: multi-color and multiple, selective messaging
billing statement capabilities along with an upgraded (from 3 of 9) insertion
barcode. Current or upgraded (as approved by NMG) loyalty point information must
also be included on the billing statement.

 

5.              Statement insert dimension specifications: Correlate with
billing statement size but must continue to meet single-page 1.000 ounce
discounted qualification postal rate

 

6.              Percentage of daily payments that will be processed within 48
hours of receipt (functionality includes desktop image archive capability up to
2 years for browse access): [***]

 

B. Credit Card Production Services Bank will meet the following service levels
on average each month:

 

1.              Percentage of all new account and replacement credit cards,
including any Program Loyalty Program Cards, that will be mailed out within 4
business days after they are requested (monthly reporting will be completed on
an Excel spreadsheet): [***] *

 

C. Late and Early-Stage Collections Bank will meet the following service levels
on average each month:

 

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

 

1.              The percentage of time that Bank shall make its collections
operations available during the following times: [***]

 

Monday through Thursday 7:00 a.m. to 11:00 p.m.

Friday 7:00 a.m. to 5:00 p.m.

Saturday 7:00 to 11:00 a.m.

Sunday closed

 

2.              The percentage of time that Bank shall complete the following
minimum number of Account reviews for those accounts without a contact or
tentative agreement still in the CTA sub-system: [***]

 

·

 

Mid balances [***]

 

every 3 days

·

 

Balances [***]

 

every 3 days

·

 

Balances greater than [***]

 

every 3 days

 

3.              Percentage of time that Bank shall maintain a [***] monthly
promise to pay ratio of accounts worked from the auto-dialer: [***]

 

4.              Percentage of time that Bank shall maintain a [***] monthly
contact ratio of accounts worked from the auto-dialer: [***]

 

5.              Percentage of time that Bank shall maintain a [***] cure rate
for Accounts worked excluding Accounts with balances greater than [***]: 98% *

 

6.              Percentage of Accounts (greater than [***] balance) which
initially enter the collections queue and are worked within [***] hours of such
entry into the collections queue: [***]

 

D. Credit Processing Services & Customer Service Services Bank will meet the
following service levels on average each month:

 

1.              Percentage of all customer service inquiry batch-work
correspondence (including address or name changes or credit bureau inquiries)
that will be opened and reviewed within 5 days of receipt: [***]

 

2.              Authorization, Customer Service and InCircle calls will be
answered on a monthly average within the following timeframes after the call
first becomes available for a Universal Agent to answer:

 

·                  [***] during the months of April through October;

 

·                  [***] during the months of November through February; and

 

·                  [***] during March or during a month when there is a
significant promotion, sale event or another special event including the annual
InCircle, Platinum and Gold charge card re-issuance (and the

 

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Management Committee has been notified of such promotion, sale or special
event).

 

If more than half of all Accounts receive a Change of Terms, then these
standards will not be applied for the months during which the Change of Terms is
becoming effective and one month after the Change of Terms has become effective.
*

 

3.              Percentage of all adverse action letters that will be mailed out
within 21 days after the adverse decision was made: [***] [Regulatory SLA]

 

4.              Upon the request of a Cardholder or upon the end of the fourth
cycle for any Account with a Credit Balance up to [***], the percentage of
Credit Balance refunds requested verbally or systemically that will be sent out
within 3 days of such request or cycle end date provided that no Credit Balance
refund will be sent out for a Credit Balance under [***] [Regulatory SLA]

 

5.              Upon the request of a Cardholder or upon the end of the fourth
cycle for any Account with a Credit Balance up to [***], the percentage of
Credit Balance refunds requested by mail correspondence that will be sent out
within 7 days of such request or cycle end date provided that no Credit Balance
refund will be sent out for a Credit Balance under [***] [Regulatory SLA]

 

6.              The percentage of Fair Credit billing and all other customer
initiated disputes that are addressed within 60 days of receipt of notification:
[***] * [Regulatory SLA]

 

7.              The percentage of time that Bank shall make its customer service
operations available from Monday through Friday from 8:00 a.m. CST to 7:00 p.m.
CST and Saturday from 9:00 a.m. CST to 1:00 p.m.: [***]

 

8.              The percentage of time that Bank shall make its authorizations
and new account operations available from Monday through Friday from 9:00 a.m.
CST to 11:00 p.m. CST, Saturday from 9:00 a.m. CST to 11:30 p.m. CST and Sunday
from 9:00 a.m. CST to 10:30 p.m. CST (and will extend these hours to accommodate
the store operations when formal store hours are extended due to special sales
events and seasonal demands): [***]

 

V. Systems Bank will meet the following service levels on average each month:

 

1.              Percentage of time that all Internet-based system functionality
provided and maintained by Bank will be available to cardholders 24 hours a day,
7 days a week (other than scheduled system maintenance not exceeding four
(4) hours per month during the hours of 12 am and 6 am CST: [***]

 

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

* Denotes a Starred SLA

 

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SCHEDULE 7.3(c)

 

Primary Servicer Defaults

 

I.                                        Primary Servicer Default. It shall be
a “Primary Servicer Default” if either of the events set forth below shall occur
and be continuing and remain unremedied prior to the expiration of the specified
period:

 

(a)           Significant Failure. If Primary Servicer (i) is more than [***]
below the target for any Starred SLA in any Fiscal Month, (ii) fails to meet any
individual Starred SLA in two (2) consecutive Fiscal Months or (iii) fails to
meet any Starred SLA four (4) times in any twelve (12) Fiscal Month period
(including multiple breaches of the same and individual breaches of different
Starred SLAs) (each, a “Significant Failure”).

 

(b)           Regulatory Failure. If Primary Servicer fails to meet an SLA
designated as a regulatory-based SLA on Schedule 7.3(a) (a “Regulatory SLA”) and
such failure results in a breach by Primary Servicer of Applicable Law (such
failure, a “Regulatory Failure”).

 

II.                                    Remedies.

 

(a)           In the event of a Significant Failure, Primary Servicer shall:
(A) promptly report to NMG the reasons for the Starred SLA failure(s);
(B) within thirty (30) days of such Significant Failure, propose a remediation
plan for taking such action as Primary Servicer deems necessary to correct and
prevent recurrence of such failure(s); and (C) subject to NMG’s agreement,
implement the remediation plan as soon as practicable. However, under no
circumstances shall the time period between NMG’s agreement to the remediation
plan and completion of such plan exceed two (2) months.

 

(b)           If Primary Servicer has an additional failure of any of the same
Starred SLA(s) (“Subsequent Failure”) during the twelve (12) Fiscal Months
following the occurrence of any Significant Failure, Primary Servicer shall pay
NMG Two Hundred Thousand Dollars [***], within fifteen (15) days of the end of
such Fiscal Month, for each such Subsequent Failure.

 

(c)           Upon the occurrence of the second Subsequent Failure and each
additional Subsequent Failure of the same Starred SLA during the twenty four
(24) Fiscal Months following a Significant Failure or upon the occurrence of a
Regulatory Failure, Primary Servicer shall pay NMG Five Hundred Thousand Dollars
[***], within fifteen (15) days of the end of such Fiscal Month, per each
additional Subsequent Failure.

 

(d)           Upon the occurrence of (i) the third and each additional
Subsequent Failure of the same Starred SLA during the twenty four (24) Fiscal
Months following a Significant Failure or (ii) a second Regulatory Failure of
the same Regulatory SLA, NMG shall, in addition to payment as provided in
paragraph (c) above, have the right to terminate the Program Agreement by
providing thirty (30) days prior written notice to Bank, in which event the
parties shall have the rights set forth in Article XVII; provided, however, that
prior to NMG electing to terminate the Program Agreement, the Management
Committee shall meet to discuss the occurrence of the Subsequent Failure and
shall determine whether such SLA should be modified. If the Management Committee
determines that such SLA shall be modified, then NMG shall not be entitled to
terminate the Program Agreement as a result of the Subsequent Failure discussed
at the meeting of the

 

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

 

Management Committee unless and until an additional Subsequent Failure of the
same Starred SLA occurs.

 

(e)               Notwithstanding the foregoing, in the case of any Primary
Servicer Default, after the Management Committee meeting referred to above and
assuming that no SLA is modified, in lieu of terminating the Program Agreement,
NMG may elect to cause the Services subject to such Servicer Default or all of
the Services being provided by Primary Servicer to be transferred to NMG or
another party designated by NMG; provided, that for purposes of transferring
Services pursuant to this paragraph (n), an SLA that is both a Starred SLA and a
Regulatory SLA shall be deemed to be a Regulatory SLA.

 

(f)               No such servicing transfer or termination of this Agreement
pursuant to paragraph (e) above shall be effective until either assumption by
NMG of the provision of the Services or the appointment by NMG of a successor
servicer reasonably satisfactory to Bank pursuant to a servicing agreement
reasonably satisfactory to Bank. Following the delivery by the applicable Party
of written notice of a servicing transfer or termination, NMG shall have
reasonable access to Primary Servicer’s operations and systems to ensure
continuity of business and systems required to service the Accounts until such
time as NMG assumes the provision of the Services or appoints a successor
servicer reasonably satisfactory to Bank.

 

III.                                Non-Starred SLAs. For purposes of this
Schedule 7.3(c), “Starred SLA” shall be deemed to include Non-Starred SLAs in
the event that there have been more than eight (8) Significant Failures in any
twelve (12) month period with respect to any Non-Starred SLAs; provided, that in
the event there are no Significant Failures in the immediately following twelve
(12) month period with respect to any of the Non-Starred SLAs, then such
Non-Starred SLAs shall no longer be deemed to be Starred SLAs.

 

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

 

SCHEDULE 7.4(b)

 

Bank Systems

 

The system conversion date to the Bank PaySys environment is dependent on the
following requirements:

 

1.               NMG is currently using PaySys Release 2.59. Bank PaySys
platform must have exact or enhanced screen and programming functionality. If
newer release is offered, PaySys functionality in this new release must be
conducive to a retail environment in all aspects related to all sub-system
functionality.

 

2.               Whether Universal Agents will be GUI-based screens or mainframe
(green) screens, primary ‘work’ screen must have combined authorizations and
customer service functionality to be able to decision majority of pending
authorizations and perform generalized customer service non-financial
maintenance and financial adjustments without further screen toggling.

 

3.               All PaySys customization (see attached customized programming
and reporting list by sub-system) currently used in the NMG PaySys environment
must be converted to the Bank PaySys platform unless an enhanced product offered
by Bank and mutually agreed upon can be substituted instead.

 

4.               All credit system interfaces (see attached batch and on-line
credit system interface lists) including POS, Sales Audit, CMOS and InCircle
must continue without interruption or delayed service during and after PaySys
system conversion.

 

5.               Upgraded real-time adherence and/or call management technology
that enhances NMG environment including Witness call monitoring software or a
similar product with comparable technology must be converted at same time (if
not sooner) as PaySys system conversion.

 

6.               Updated technology associated with re-developing score models
through StrategyWare initiatives or a comparable product with similar technology
related to new account scorecards, restore matrixes or internal behavioral
scores will be explored. This could potentially eliminate the need to convert
current customization from NMG PaySys platform.

 

7.               Explore and determine if other technological enhancements
including fraud detection and Internet-related products can be utilized and
upgraded immediately following PaySys system conversion.

 

8.               Independent of the conversion to the Bank PaySys environment,
the Parties shall have ongoing discussions regarding potential conversion of
other credit systems used by Universal Agents that can be converted separately
from the PaySys conversion. Regardless of whether other systems are converted,
the Parties shall discuss the impact that the Bank PaySys conversion will have
on these other systems and appropriate action shall be taken to minimize any
effect of such conversion on these other systems. These systems include the
check authorization system, gift card maintenance system, InCircle loyalty point
redemption system, XNET signature slip, statement viewer and numerous other
miscellaneous systems.

 

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

 

PaySys Release 2.59

Custom Functionality & Reporting
(excluding any batch or on-line interfaces and
any customization for other credit systems used)

 

NMG will review Bank’s current solution for a fit to the NMG business need. If
NMG agrees that Bank functionality fulfills the NMG requirement, the enhancement
request will be marked as “not required”. If NMG determines that Bank
functionality does not fulfill the NMG requirement, NMG will then decide if the
function is a “must have” for conversion, or is a candidate for a
post-conversion implementation. Prior to any custom functionality or enhancement
being deemed for a post-conversion implementation, NMG must be satisfied with
the Bank timeline for implementation and Bank must use commercially reasonable
efforts to implement such functionality within the proposed timeline. If Bank
does not implement such functionality within the agreed-upon timeline (and
allowing for a thirty (30) day grace period), such failure will be escalated to
the Management Committee for an appropriate resolution. NMG’s prior written
consent must be obtained in order to waive the implementation of any custom
functionality detailed below. Prior to any conversion to the Bank Systems, NMG
may specify additional custom functionalities that are required for a PaySys
conversion as long as such functionalities are part of the NMG Systems prior to
such conversion.

 

Credit Management System (CMS)

 

1.              A special function within the POS System accesses the PaySys
System for POS account look-up using various search criteria (i.e. name,
address, phone, social security number) and responds back with up to 4 matching
account numbers for selection.

2.              Upgraded ARNL account look-up functionality to be able to search
by social security number and through various phonetic methods. Retrieved
account data on page 1 also displays account status code, block codes, current
balance and the ability to view total balance owed on a customer with multiple
accounts (revolving, signature, etc).

3.              Old 9-digit account numbers are automatically run through the
Mod-10 check-digit routine to define the full 12-digit account number when
assessed through ARIQ.

4.              Enhanced the customer statement formatting product (Metavante
CSF) to re-design the statement for NMG (including InCircle point information
and messages).

5.              Custom late fee calculation method to assess the fee based on a
percentage of the previous statement balance. Enhanced PaySys to accommodate
late payment fees in addition to late fees with logic to only assess one fee per
billing. Additionally, customers paying in full, regardless of delinquency
level, will not be assessed a late payment fee.

6.              Added a new screen to add a plan segment to an account without
need for a sale (logic module 01) first.

7.              New fields calculating last year’s total sales tax and this
year’s total sales tax is displayed on each account.

8.              High payment all-time date now displayed next to high payment
all-time amount.

9.              Added new screen ACH Pay by Phone functionality to authorize
documentation of customer bank information and ACH history in order for
customers to perform ACH payments.

10.        Permanently display new account scorecard, new account score, credit
bureau risk score (at time of opening) as well as high activity and updated
credit bureau risk scores with dates with semi-annual portfolio reviews are
done.

 

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

 

11.        Foreign address logic at statement, credit card and letter
correspondence time to suppress the ‘XX’ state and ‘99999’ zip code fields based
on the ‘1’ in the language indicator field is done. The user demo 1 field
housing the country is displayed instead.

12.        E-mail information currently stored in the employer field has been
expanded to 40 characters. A ‘Do Not E-Mail’ field is also being stored and will
be sent to marketing channels. New e-mail update date and an e-mail share field
that is also sent to marketing channels.

13.        Store number data contained in the employee code field automatically
stops a credit card from being issued and sends a message to the InCircle system
to stop employee point redemption. When this store number is removed from this
field as an employee leaves the Company, a credit card is automatically mailed
to the customer. This field is also being expanded to 3-digits.

14.        Upgraded ARML25 credit classification tables to measure ‘N’ class
based on credit bureau risk score and remaining classes on risk score in
additional to performance ratios.

15.        On embossing screen, updated functionality for Universal Agents to
define embossing card type (i.e. Regular, Gold, Platinum) to be mailed to the
customer by the Credit Card Processing Department. New credit cards mailed out
contain full customer name in mag-stripe.

16.        Zero balance statements are not printed and sent to the customer.

17.        CRM complimentary gifts scanned at the POS as a transaction code are
delivered through the PaySys System as a ‘memo’ transaction for $0 that is
eventually displayed on the billing statement as such.

18.        Universal Agent keying and storage of GLB privacy sharing, California
SB1 sharing restriction, Do Not Mail and affiliated credit bureau sharing codes
and dates. In some instances, this information is passed to external systems for
appropriate compliance.

19.        Multiple new transaction codes in 100-300 series setup for both
organizations (NM and BG) with GL level setup at a store level.

20.        Specialized messaging for sales tax and InCircle customers done upon
request to either replace existing mass marketing message temporarily and as an
additional message on the billing statement.

21.        Custom Reporting

[***]

 

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[***]

 

Credit Decision Management (CDM)

 

1.              Usage of 4 distinct Fair Isaacs (FICO) new account scorecard
models separated based on the applicant’s time on file with the credit bureau
and net fraction revolving burden. Each new account scorecard has different
characteristics, point measurements and cut-off scores associated with overall
risk.

2.              Customized PaySys System to interface with the FICO Search model
to retrieve a credit bureau report and accommodate cradle to grave application
processing was built to stream-line application process and communicate back to
the POS or NM Direct CMOS channels.

3.              New account credit bureau reports received from TransUnion
contain both an Empirica risk score and a TransRisk New Account (TRNA) Score for
thin file application decisioning. If no Empirica is available, TRNA score acts
as primary score.

4.              POS Express Application input data populates PaySys screens
automatically with name, address, phone, date of birth, driver’s license
information, e-mail address and social security number.

5.              POS Express Application process to link POS application input to
CDM cradle to grave process. Delivery of either the account number or the
application referral number is generated at POS within a 45-second window. On
the NM Direct side, this same process is handled within a 45-second window but
through the CMOS channel.

6.              As ARMO7 billing records are being updated with last cycle
billed data, APTM17 new account cycle assignment for all CDM types is
automatically updated with appropriate next billing cycle to be used.

7.              Internal fraud file utilized within the cross-checks process to
refer those applicants with matching name, address, phone or social security
number criteria.

8.              Authentication pass/fail referral housed within the cross-checks
section will indicate to Universal Agents to proceed to TransUnion website and
obtain specific applicant questions and answers related to NM On-line
application submission. [June 2005]

9.              Duplicate account referral in cross-checks validates whether
subscriber number used to pull bureau report (NM or BG) already has a trade-line
on the bureau for that

 

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organization. If so, the referral is created to ensure this account cannot be
re-used before setting up a duplicate new account.

10.        Date of birth provided on the bureau report is reformatted into the
MMDDYYYY format to coincide with PaySys date of birth fields.

11.        Multiple fraud custom referrals built to measure California 3-ID
checks, address mismatches as well as bureau delivered fraud and consumer
messages.

12.        Customized age variance and 3-day retail specific inquiry counter
referrals developed through FICO and utilized as an effective retail fraud
predictor today.

13.        Signature adverse action CDM types setup by new and existing accounts
to input proposed sale date and whether the sale is store or customer initiated.
If the signature request is declined or the customer walks away from a
“customer-initiated” sale and the proposed sale data has elapsed, an adverse
action letter is sent to the customer.

14.        When both of the bureau agencies are down, “time out waiting on
bureau” applications stored during this downtime are not automatically being
processed through when bureaus are back up.

15.        Custom Reporting

[***]

 

Financial Authorization System (FAS)

 

1.              Authorization credit bureau reports received from TransUnion
contain both an Empirica risk score and a Horizon bankruptcy indicator score.

2.              In-house behavioral score model developed by Experian updated
monthly at billing to recalculate customer payment and purchase behavior.

3.              A customized initial 6-digit POS referral number that can
eventually lead to an authorization approval code generated in Central Credit
requires forced compliance input at the POS. Outside of system generated
approval code, a ‘daily override code’ allows for approval at POS beyond the
compliance input approval code.

4.              Return and payment transactions go through same POS to FAS
(OFAA) authorization process as a sale transaction does to ensure account number
is validated before completing credit transaction.

 

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

 

5.              Customized ‘Pay Review’ authorization referral and on-line
reporting process for check-paying customers over-paying their last statement
balance or for newer accounts paying before being billed.

6.              Warning codes (housed on ARMB1) for Mr. and/or Mrs. Only, Credit
Card Only or Check ID restrictions are prompted at the POS for selling
associates to confirm acceptance before proceeding with the sale.

7.              Separation of ‘open-to-buy’ versus an ‘open-to-buy, credit
bureau exists’ referral to advise Universal Agent of when an existing credit
bureau report (currently retained for 90 days) is still on file.

8.              A specialized ‘excessive amount approved’ referral to
automatically refer all customers who have had memo or same day transactions
approved totaling over [***] for manual review.

9.              An ‘irregular bureau’ referral was developed for those bureaus
that either have no risk score, limited trade-line data or special
considerations (i.e. mixed file possibility).

10.        A ‘zip code check’ referral to compare the address on file to the
newly pulled bureau address particularly on inactive customers is done to ensure
we have the correct billing address.

11.        A ‘time out’ referral that coincides with FICO Search automatic move
to our secondary bureau (CBI Equifax) should TransUnion be down may occur if the
delay is too significant. If so, this eliminates any transactions from being
“hung” and allows Central Credit to call for immediate problem resolution
support.

12.        FACT Act fraud detection custom authorization referrals to trigger
those customers who are changing their billing address, then ordering a credit
card (and vice versa) in the designated period of time. In addition to referring
the first purchase after receiving the credit card, the credit card mail-out
date may be delayed intentionally until such time that the customer receives and
can appropriate respond to an address change and credit card ordering
confirmation letter.

13.        FACT Act fraud detection custom authorization referrals to review
address discrepancies (ADI) between the address on file and the address on the
bureau as well as HAWK or other fraud messages on the bureau.

14.        Ability for Universal Agents to see dual referral reasons on all
authorization referrals. Additionally, some referrals are combined (i.e. HAWK,
ADI or HAWK/ADI referrals) to display more than two reasons when pertinent.

15.        Real-time daily sales tracking screen to view up-to-date sales and
transaction counts across all stores. This helps in forecasting scheduling
needs, particularly on sale days, for the remainder of the day.

16.        On-line total account relationship screen for high-balance customers
being built to quickly decipher customer status and indebtedness based on
pertinent balance and payment information displayed. [June 2005]

17.        Custom Reporting

[***]

 

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[***]

 

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Rescore Custom System (RCS)

1.               Sub-system completely customized with POS to PaySys/RCS
interface so when a customer hits their account open-to-buy, a bureau is
automatically pulled through FICO Search and the account attempts to go through
rescore.

2.               Various screen parameters to fully control which accounts can
go through rescore tier I and II by block code and other factors including high
payment all-time and bureau risk score are used.

3.               Using (ARML25) credit classification score, the Empirica or
Beacon risk score and net fraction revolving burden (revolving debt ratio), 24
3-dimensional rescore tier I matrixes (separated first by credit classification
score) contain new guideline assignments. Provided the rescore guideline is
sufficient to approve the pending sale at POS, the approval back to POS is
systemically done and the account guideline increased.  If not, POS generates a
6-digit referral number for manual handling.

4.               In most cases where rescore tier I was not sufficient or a
bureau is already on file for a customer (in which case they will not go through
rescore tier I), rescore tier II customized tables can be utilized. First, a
customized scorecard using a point accumulated system determines which of the 5
rescore tier II tables a customer goes through (1 being the best, 5 the worst).
The rescore tier II tables are 2-dimensional based on a Horizon bankruptcy score
and the customer’s last 6-months payments. These two variables result in a
multiplier (i.e. 3.5%) amount that is then used to calculate against the last
6-months payments. Provided this calculation is enough the automatically proceed
at the POS with approving the pending transaction and increasing the account
guideline, it is done. Otherwise, POS generates a 6-digit referral number for
manual handling.

5.               If an existing credit bureau is still on file, before
proceeding with ordering a new bureau report, a message asks the Universal Agent
if they are sure a new bureau needs to be ordered.

6.               The ability to release a California or Texas freeze file bureau
report provided the customer gives us their PIN number is available.

7.               Custom Reporting

[***]

 

Account Services Management (ASM)

1.               Customized Universal Agent screen to perform authorization
referrals and most customer service inquiries from one screen with limited, if
any toggling to other screens needed. PaySys screens ASMW, ARMN, ARIH, ASSD,
OFCP and OFRS useful information are contained on this customized screen. ASMN
custom screen allows for account

 

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

 

maintenance including name or address changes, guideline or block code updates,
ASM action code utilization and statement re-print ordering. Most authorization
referrals are made from this screen and include the ability, if so desired, to
notate why the decision was made and what manager, if any, assisted in the
approval or denial. However, all customer service maintenance or authorization
decisions made on this screen are automatically notated within ASHI with a
before and after recap (i.e. block code changed from ‘E’ to ‘F’ or AGM approved
a $15,564.48 sale on 5/11/05 at 3 pm for store 1, referred for HAWK/ADI and OTB,
TU score of 712, manager DCV approved).

2.               Pending FCRA screens by state that control address change, then
credit card reorder requests within a specified period of time. A special ASM
queue to manually release credit card requests once the customer has responded
to the FCRA confirmation letter was built and is used today.

3.               Custom Reporting

a.               Custom Balancing Report — Summary [NCRM5932-1]

 

Collections Tracking System (CTA)

1.               Replaced a PC client server RecoverMaster System and migrated
the functionalities into CTA.

2.               GUI-based front-end interface for Avaya auto-dialer.

3.               Custom Reporting

[***]

 

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

 

Letter Tracking System (LTS)

1.               Modified bracketed key words to correctly print foreign country
letters similar to billing statements and other correspondence.

 

Transaction Management System (TRAMS)

1.               Modified the NM Direct/On-line interface to accept full catalog
descriptions and purchase order numbers which are passed to CMS, statement
history screens and displayed on customer billing statements.

2.               Automated $50 annual Gold fee assessment to customers with a
plan segment automatically added.

3.               Custom Reporting

[***]

 

Security Supervisor (SSSR)

1.               Automatic monthly purge of any users not accessing PaySys ID
for one of the following reasons: (a) Have not used their ID ever and the first
30 days has elapsed; (b) Have not used their ID at least once in the last 90
days; (c) ID has been set to ‘9’ purge.

2.               Custom Reporting

[***]

 

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

 

Credit Batch Interfaces

 

Internal NMG &
Vendor
Interface
Systems

 

Credit
Application

 

Data Stream

 

Input/Output
Feed

 

Frequency

 

Processing
Time-frame

[***]

 

TRAMS (front-end transaction processor)

 

Feeds NM full-line & clearance stores sales/returns/payment financial
transactions

 

Input

 

Daily

 

Nightly

[***]

 

TRAMS (front-end transaction processor)

 

Feeds BG full-line stores sales/returns/payment financial transactions

 

Input

 

Daily

 

Nightly

[***]

 

TRAMS (front-end transaction processor)

 

Feeds NMO (web-site) and NMD (catalog) sales/returns financial transactions

 

Input

 

Daily

 

Nightly

[***]

 

TRAMS (front-end transaction processor)

 

Feeds NM & BG mailed-in payments

 

Input

 

Mon-Fri

 

Afternoon

[***]

 

TRAMS (front-end transaction processor)

 

Feeds NM & BG ACH payments

 

Input

 

Mon-Fri

 

Morning

[***]

 

TRAMS (front-end transaction processor)

 

Feeds NM & BG ACH payments

 

Input

 

Mon-Fri

 

Morning

[***]

 

TRAMS (front-end transaction processor)

 

Feeds NM & BG ACH IVR payments

 

Input

 

Mon-Fri

 

Nightly

[***]

 

TRAMS (front-end transaction processor)

 

Feeds NM employee credit card payments

 

Input

 

Weekly

 

Nightly

[***]

 

TRAMS (front-end transaction processor)

 

Feeds BG employee credit card payments

 

Input

 

Every 2 wks.

 

Nightly

[***]

 

TRAMS (front-end transaction processor)

 

Feeds NM retired employee credit card customers medical insurance payments.

 

Input

 

Monthly

 

Nightly

[***]

 

TRAMS (front-end transaction processor)

 

Feeds Payments for customers requesting Incircle ‘Gold; card status.

 

Input

 

Daily

 

Nightly

[***]

 

TRAMS (front-end transaction processor)

 

Feeds NM & BG P&L accounts recovered payments and non-financial txns.

 

Input

 

Weekly

 

Nightly

 

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

 

[***]

 

Billing

 

Feeds Harbor with updated ACH IVR accounts billing balance and minimum payment
information.

 

Output

 

Each billing cycle

 

Morning

[***]

 

Billing

 

Provide outside P&L collection agencies with new assigned NM & BG P&L accounts
for collection recovery.

 

Output

 

Each billing cycle

 

Morning

[***]

 

Customer Service

 

Feeds Harbor with new accounts that applied-for-ACH IVR payment processing.

 

Output

 

Mon-Fri

 

Nightly

 

 

 

 

 

 

 

 

 

 

 

[***]

 

Posting

 

Sends Chase an ACH payment file for NM/BG payments that are being posted to the
customer’s account that require ACH clearing. Receive Chase files that identify
NM/BF accounts that were processed or are NSF status.

 

Output/Input

 

Mon-Fri

 

Nightly/Morning

[***]

 

Posting

 

Feeds Incircle system with posted NM sales/return txns.

 

Output

 

Daily

 

Nightly

[***]

 

Posting

 

Feeds NM customers that reached Incircle status for new credit card generation.

 

Input

 

Daily

 

Nightly

[***]

 

A/R

 

Feeds the EDW system with new account information and existing account
demographic changes.

 

Output

 

Daily

 

Nightly

[***]

 

Posting

 

Updates the NMG Credit customer database for accounts that opted for the ‘Do Not
Call’.

 

Input

 

Monthly

 

Nightly

[***]

 

Statements

 

Provides Credit with an Incircle points file that will display a customer’s
point information on a their billing statement.

 

Input

 

Daily

 

Nightly

 

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

 

[***]

 

Statements

 

Provides Credit with a BG Rewards file that will display a customer’s point
information on a their billing statement.

 

Input

 

Daily

 

Nightly

[***]

 

Statements

 

Interface with Metavante CSF product to format the billing statement.

 

Input

 

Daily

 

Nightly

[***]

 

Statements

 

Interface with Code 1 & Mailstream for billing statement address correction and
pre-sort mailing.

 

Input

 

Daily

 

Nightly

[***]

 

Credit Cards

 

Transmits credit card file (new accounts, replacements, Incircle, etc.) to
produce NM & BG charge cards and mailers.

 

Output

 

Daily

 

Morning

[***]

 

A/R

 

Sends LP an extract file of the credit active database to identify employee
accounts.

 

Output

 

Weekly

 

Nightly

[***]

 

A/R

 

Provide a monthly file of all NM & BG demographic and financial account
information to the credit bureaus for credit reporting update.

 

Output

 

Monthly

 

Nightly

[***]

 

A/R

 

Create a monthly file with NM & BG customers that’opted-out’ from mailing
promotion as part of the GLB bill.

 

Output

 

Monthly

 

Nightly

[***]

 

A/R

 

Send a file to Trans Union with NM & BG customers for credit limit/score review
and receive back a file with credit limit, bureau & horizon score adjustments.

 

Output/Input

 

Semi-annual

 

Nightly

 

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

 

[***]

 

A/R

 

Send a file to Donnelley with NM & BG accounts that require name, address &
phone verification and apply the changes received from Donnelley to our customer
database.

 

Output/Input

 

Semi- annual

 

Nightly

[***]

 

Check Authorization

 

Provides a national negative check account file that is used-to-update the
credit check authorization system.

 

Input

 

Tues-Sat

 

Nightly

[***]

 

Check Authorization

 

Provide eFunds Scan with an daily bad check file (adds/deletes) of NM/BG check
customers.

 

Output

 

Mon-Fri

 

Nightly

[***]

 

A/R

 

Provides a feed of NM survey response with e-mail addresses that update the
credit database.

 

Input

 

Weekly

 

Nightly

[***]

 

A/R

 

Provides a feed of Incircle customers that registered via Web-site with e-mail
addresses.

 

Input

 

Monthly

 

Nightly

[***]

 

A/R

 

Provides a feed of all Incircle customers that will remain or lose their
Incircle status based on the points that have been accrued this year.

 

 

 

Yearly in April

 

Nightly

[***]

 

A/R

 

FTP an extract file of BG Reward account information based upon selected account
numbers provided to us by BG.

 

Output

 

Daily

 

Nightly

[***]

 

A/R

 

Provide BG Marketing system with new account information and existing account
demographic changes

 

Output

 

Daily

 

Nightly

 

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

 

[***]

 

A/R

 

Provide InCircle with new account information and existing account demographic
changes

 

Output

 

Daily

 

Nightly

[***]

 

A/R

 

Receives update from InCircle when a customer achieves one of the elite status
(InCircle or Platinum), to create a new credit card. The embossing file is sent
to InCircle for processing.

 

Input/Output

 

Daily

 

Nightly

[***]

 

Collection

 

Receive a file (upload to the mainframe) from the autodialer identifying
collection accounts that were not reached (i.e. left message to call, no contact
etc.). Send a new autodailer file (download to RT) listing new accounts that
need to be contacted and reschedule existing collection accounts that were not
reached.

 

Input/Output

 

Daily

 

Nightly/Morning

[***]

 

 

 

Sends credit sale slips scanned to be uploaded to the mainframe.

 

Input

 

Daily

 

Evening

[***]

 

A/R

 

Access (read only) the Credit customer database and extrapolate specific
information for reporting purposes.

 

Output

 

System specific (i.e. daily, weekly, monthly or on request)

 

Varies (i.e. morning, evening, weekends)

 

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

 

Credit Online Interfaces

 

Internal NMG
Interface
Systems

 

Credit
Application

 

Data Stream

 

External Interface
Systems

 

Output
Response

 

Response
Time

 

Frequency

 

Processing
Time-frame **

POS Store System - POS Express (new apps)

 

New Application

 

Receives transaction from the POS store register to process a new application
credit card request.

 

Fair Isaac - formats a credit bureau inquiry, sends the data and formats the
credit bureau reporting response for evaluation and new application decision
processing.

 

Reply back to the POS register with an approval or referral response.

 

[***] seconds

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NMD - (new apps)

 

New Application

 

Receives transaction from the NMD catalog division to process a new application
credit card request.

 

Fair Isaac - formats a credit bureau inquiry, sends the data and formats the
credit bureau reporting response for evaluation and new application decision
processing.

 

Reply back to NMD with an approval or referral response.

 

[***] seconds

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NMO Web Acct Applications - [***] (new apps) - (In development)

 

New Application

 

Receives transaction from Web server to process new acct applications

 

Fair Isaac - formats a credit bureau inquiry, sends the data and formats the
credit bureau reporting response for evaluation and new application decision
processing.

 

Reply back to the Web server with an approval or referral response.

 

[***] seconds

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

POS Store System - POS Express (account look- up)

 

CMS

 

Receives transaction from the POS store register to process either a name,
address, phone or SSN# account lookup.

 

None

 

Reply back to the POS register with account number or not found.

 

[***] seconds

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM

 

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

 

POS Store System - Sales Authorization (NM & BG charge cards)

 

Authorization

 

Receives transaction from the POS store register to process a NM or BG
purchase/return transaction.

 

Access the Fair Isaac system for credit reporting information if the account
exceeds their OTB or had no activity over 12 months for evaluation and
establishing new credit limit.

 

Reply back to the POS register with an approval, referral or decline response.

 

[***]

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

POS Store System - Sales Authorization (3rd party charge cards)

 

Authorization

 

Receives transaction from the POS store register to process 3rd party charge
cards for purchase/return transaction.

 

Format the transaction and send the authorization request to AMEX or FNBO (Visa,
MC, etc.) for processing.

 

Reply back to the POS register with an approval, referral or decline response.

 

[***]

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NMD - Sales Authorization (NM & BG charge cards)

 

Authorization

 

Receives batched transactions on an hourly basis from NMD to process
purchase/return transaction.

 

Access the Fair Isaac system for credit reporting information if the account
exceeds their OTB or had no activity over 12 months for evaluation and
establishing new credit limit.

 

Reply back to NMD with an approvals, referrals or decline response.

 

[***]

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

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

 

NM Sales Check Recon

 

Customer Service

 

Access the NM Sales Check Recon system to look up a customer’s credit sales
slip.

 

 

 

 

 

< [***] seconds

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

System Authorization [***]

 

In-house Credit System

 

Create a daily system authorization override code.

 

 

 

Download the system authorization [***] code to each POS store system RS/6000
box.

 

 

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM Nightly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systemware - Xnet Access

 

 

 

Access Systemware using Xnet to view NM & BG customer statements on-line (9
months) and reprint if necessary.

 

 

 

Statement view.

 

< [***] seconds

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM Nightly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systemware - Xnet Access

 

 

 

Access Systemware using Xnet to view NM & BG customer’s credit signature sale
slip.

 

 

 

Credit signature sales slip view.

 

< [***] seconds

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM Nightly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systemware - Xnet Access

 

 

 

Access Systemware using Xnet to view NM & BG customer POS journal tape roll.

 

 

 

POS journal tape roll view.

 

< [***] seconds

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM Nightly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Account new app validation

 

In-house Credit System

 

Receive from the customer a 3rd party credit card and [***]

 

[***]

 

[***]

 

< [***] seconds

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM Nightly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gift Card

 

 

 

Access the system to perform Gift Card maintenance.

 

 

 

 

 

< [***] seconds

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM Nightly

 

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

 

Incircle

 

 

 

Access the Credit database to identify any Incircle delinquent accounts and
lookup name and address information.

 

 

 

 

 

< [***] seconds

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intervoice (IVR) customer inquiry

 

 

 

Access the Credit database to inquiry on the customer’s balance, purchase and
payment activity and gift card information.

 

 

 

Send response back to the IVR based on the IVR option request.

 

< [***] seconds

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BGMS Sales Check Recon

 

Customer Service

 

Access the BG Sales Check Recon system to look up a customer’s credit sales
slip.

 

 

 

 

 

< [***] seconds

 

Mon-Sat Sun

 

7 AM - 11 PM 10 AM - 11 PM

 

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

** Credit online system availability is extended to 2 AM on special Incircle
events.

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

SCHEDULE 7.6

 

Customer Management Systems

 

·

Mass Personalization

·

Empowering the Sales Associate

·

Turbo Charging the Segment of One

 

PHASE I — As long as the NMG resources required for the change of terms are
available, the Documentation Services and then the Credit Card Production
Services operations, including statement mailing, payment processing and credit
card processing activities, may, at NMG’s option, be converted to Bank systems.
The delivery date depends on the complexity of the interfaces and would be
agreed upon by Bank and NMG. As a statement processing enhancement, HSBC would
provide “Mass Personalization” via color/graphical statement marketing
capabilities driven by NMG’s current segmentation.

 

PHASE II — Portfolio (PaySys) Conversion delivery date to be determined and
agreed upon by HSBC and NMG. Delivery date is contingent upon completing all
batch and on-line interfaces, customization enhancements and satisfaction of the
other requirements of Section 7.4.

 

PHASE III — Subsequent to the systems and portfolio conversion, in the event
that NMG determines that any functionality set forth below would be
(i) beneficial, (ii) feasible based on system requirements and (iii) able to
interface to other affected systems as of the implementation date, Bank shall
implement such functionality. Either Bank or NMG may propose other enhancements
or modifications than those listed below (excluding any enhancement or
modification set forth on a different Schedule) and the Parties may mutually
agree to replace any of the functionalities listed below with such other
modifications or enhancements. Bank and NMG shall agree on the delivery date of
any functionality item, including any agreed upon enhancement or modification
not listed below, which delivery date will be dependent on, among other
considerations, the complexity of the interfaces and functionality.

 

·“Empowering the Sales Associate”

·    Ability to select standard or personalized statement marketing/messages
from the POS

·    Ability to select standard or personalized letters, postcards, and eMail
from the POS.

·    Ability to select standard or personalized eCare marketing/messages from
the POS

 

·“Multi-Channel Mass Personalization” using Brookline’s current segmentation
characteristics.

·    Centralized ability to drive standard letters, postcards, and eMail. (may
be additional cost)

·    Centralized ability to drive standard eCare marketing/messages.

 

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

 

·    Centralized ability to drive standard Customer Service marketing/messages.

 

· Internet Capabilities and Various Scoring, Fraud or Other Enhancements

·    Refer to Schedules 4.8(b) and 7.4(b) for all functionalities

 

· “Turbo Charging the Segment of One”.

·    Ability to create individual customer profiles based upon number and value
of purchases, product type, department, manufacturer, etc.

·    Ability to drive the “Empowering of the Sales Associate” based on the above
profiles.

·    Ability to drive the “Multi-Channel Mass Personalization based on the above
profiles.

 

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

 

SCHEDULE 9.1(a)(i)

 

Daily NMG Compensation

 

Bank shall pay to NMG an amount equal to the aggregate for all Private Label
Accounts and Non-Card Payment Plans of the following:

 

For each such Private Label Account or Non-Card Payment Plan, the product of
(A) the sum of (x) the Program Fee Percentage applicable to such Account and
(y) the Servicing Fee Percentage and (B) Net Credit Sales under such Account
reflected in all NMG Charge Transaction Data required to be paid for by Bank on
such Business Day pursuant to Section 8.4.

 

Determination of Program Fee Percentage

 

The “Program Fee Percentage” with respect to each Account means [***]. The
Program Fee Percentage applicable to an Account shall be increased on the
effective date of any of the following change in terms applicable to such
Account to [***] plus the amount set forth in the column designated “Program Fee
Increase Amount” below and shall remain at such increased percentage until
further changed as set forth below:

 

[***]

 

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

 

The Program Fee Percentage shall be increased for changes in APR and fee terms
changes on a cumulative basis. For example, if (i) an APR on an Account is
changed to a variable rate based on the Prime Rate plus a [***] margin and
(ii) the late fee on such Account is changed so that it is assessed within 5
days after the end of the applicable late period, then the Program Fee
Percentage with respect to such Account would be [***]. With respect to any
Fixed Rate option set forth above, if the one month LIBOR rate increases beyond
[***], the Parties will negotiate in good faith to adjust the Program Fee
Percentage.

 

“Prime Rate” means the “Prime Rate” as such rate is reported in the Consumer
Rates column of The Wall Street Journal or as determined in such other mutually
acceptable manner as the parties agree if The Wall Street Journal is no longer
reporting such rate.

 

In the event that all of the Services set forth below are transferred to Bank
and the Servicing Agreement is terminated, the Program Fee Percentage applicable
to all Accounts shall be increased by [***].

 

Determination of Servicing Fee Percentage

 

The “Servicing Fee Percentage” means [***]. The Servicing Fee Percentage
applicable to all Accounts shall be decreased on the date that Bank begins
providing the following Services to the Program:

 

[***]

 

During the Term, while NMG is providing the Services set forth above, a portion
of some of the Services may be subject to sales and use tax in Texas. Refer to
Section 19.6 for treatment of sales and use tax on these Services.

 

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

 

SCHEDULE 9.1(a)(ii)

 

Monthly NMG Compensation

 

(a)           Marketing Reimbursement. The aggregate of all Joint Marketing
Commitment amounts spent by the NMG Companies in the prior Fiscal Month.

 

(b)           In-Store Payment Reimbursement. An amount equal to [***] (which
amount shall increase by CPI on each anniversary of the Effective Date, with the
increased amount remaining in effect until the following anniversary) per
In-Store Payment received by any of the NMG Companies in the prior Fiscal Month.

 

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

 

SCHEDULE 16.2(c)

 

If this Agreement is terminated pursuant to Section 16.2(c) prior to the end of
the Initial Term, NMG shall pay Bank the sum of (i) the NMG Marketing Commitment
for the Fiscal Year prior to such termination (or the NMG Marketing Commitment
for the first Fiscal Year if this Agreement is terminated prior to the end of
the first full Fiscal Year of the term), (ii) the Joint Marketing Commitment for
the Fiscal Year prior to such termination (or the Joint Marketing Commitment for
the first Fiscal Year if this Agreement is terminated prior to the end of the
first full Fiscal Year of the term), and (iii) the following amount:

 

Date of Termination

 

Amount

 

Prior to the first anniversary of the Effective Date:

 

$

[***]

 

On or after the first anniversary of the Effective Date and prior to the second
anniversary of the Effective Date:

 

$

[***]

 

On or after the second anniversary of the Effective Date and prior to the third
anniversary of the Effective Date:

 

$

[***]

 

On or after the third anniversary of the Effective Date and prior to the fourth
anniversary of the Effective Date:

 

$

[***]

 

On or after the fourth anniversary of the Effective Date and prior to the fifth
anniversary of the Effective Date:

 

$

[***]

 

 

4

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

 

SCHEDULE 16.3(b)

 

Bank may terminate this Agreement in accordance with Section 16.3(b), if NMG has
not maintained on average during such Fiscal Year full-line, retail store square
footage of at least 4,250,00 square feet.

 

The following stores were included in the calculation of square footage:

 

Dallas, Texas (Downtown)

Dallas, Texas (North Park)

Houston, Texas (Galleria)

Bal Harbour Florida

Atlanta, Georgia

St. Louis, Missouri

Northbrook, Illinois

Fort Worth, Texas

Washington, D.C.

Newport Beach, California

Beverly Hills, California

Westchester, New York

Las Vegas, Nevada

Oak Brook, Illinois

San Diego, California

Fort Lauderdale, Florida

San Francisco, California

Chicago, Illinois (Michigan Avenue)

Boston, Massachusetts

Palo Alto, California

McLean, Virginia

Denver, Colorado

Minneapolis, Minnesota

Scottsdale, Arizona

Troy, Michigan

Short Hills, New Jersey

King of Prussia, Pennsylvania

Paramus, New Jersey

Honolulu, Hawaii

Palm Beach, Florida

Plano, Texas (Willow Bend)

Tampa, Florida

Coral Gables, Florida

Orlando, Florida

Bergdorf Goodman, New York City (Women’s Store)

Bergdorf Goodman, New York City (Men’s Store)

 

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