EXHIBIT 10.31


 


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.


 


SERVICING AGREEMENT


 


between


 


THE NEIMAN MARCUS GROUP, INC.


 


and


 


HSBC BANK NEVADA, N.A.


 


Dated as of July 7, 2005


 

















 


TABLE OF CONTENTS


 


	
   

  	
  Page

  
	
  ARTICLE I

  	
   

  
	
  DEFINITIONS AND
  INTERPRETATION

  	
   

  
	
   

  	
   

  
	
  Section 1.01.

  	
  Defined Terms

  	
  1

  
	
  Section 1.02.

  	
  Certain Interpretive
  Matters

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  SERVICING

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
  Appointment

  	
  3

  
	
  Section 2.02.

  	
  Servicer Compensation

  	
  3

  
	
  Section 2.03.

  	
  Services

  	
  4

  
	
  Section 2.04.

  	
  Service Level Standards

  	
  5

  
	
  Section 2.05.

  	
  Use of Subservicers

  	
  5

  
	
  Section 2.06.

  	
  Disaster Recovery

  	
  5

  
	
  Section 2.07.

  	
  Inventory

  	
  6

  
	
  Section 2.08.

  	
  Securitization

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
  Representations and
  Warranties of Servicer

  	
  6

  
	
  Section 3.02.

  	
  Representations and
  Warranties of Bank

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
  ADDITIONAL
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
  Further Assurances

  	
  9

  
	
  Section 4.02.

  	
  Modifications

  	
  9

  
	
  Section 4.03.

  	
  Correction of Errors

  	
  9

  
	
  Section 4.04.

  	
  Changes in Law

  	
  9

  
	
  Section 4.05.

  	
  Cooperation

  	
  9

  
	
  Section 4.06.

  	
  Facilities and
  Equipment

  	
  9

  
	
  Section 4.07.

  	
  Insurance

  	
  10

  
	
  Section 4.08.

  	
  Customer Information

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  DEFAULT;
  REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
  Servicer Default

  	
  10

  
	
  Section 5.02.

  	
  Remedies

  	
  11

  



 


i

















 


	
  Section 5.03.

  	
  Non-Starred SLAs

  	
  12

  
	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  TERM

  	
   

  
	
   

  	
   

  
	
  Section 6.01.

  	
  Term of Agreement

  	
  12

  
	
  Section 6.02.

  	
  Servicer Termination
  Events

  	
  12

  
	
  Section 6.03.

  	
  Termination by Bank

  	
  13

  
	
  Section 6.04.

  	
  Effect of Termination

  	
  13

  
	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  
	
  Section 7.01.

  	
  Indemnification

  	
  13

  
	
  Section 7.02.

  	
  Procedure for
  Indemnification

  	
  14

  
	
  Section 7.03.

  	
  Notice and Additional
  Rights and Limitations.

  	
  15

  
	
  Section 7.04.

  	
  Limits on
  Indemnification

  	
  15

  
	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  Section 8.01.

  	
  Confidentiality

  	
  15

  
	
  Section 8.02.

  	
  Access Rights

  	
  18

  
	
  Section 8.03.

  	
  No Waiver; Remedies;
  Amendment

  	
  18

  
	
  Section 8.04.

  	
  Independent Contractor

  	
  18

  
	
  Section 8.05.

  	
  No Joint Venture

  	
  18

  
	
  Section 8.06.

  	
  Payment Terms

  	
  18

  
	
  Section 8.07.

  	
  Entire Agreement

  	
  19

  
	
  Section 8.08.

  	
  No Set-Off

  	
  19

  
	
  Section 8.09.

  	
  Notices

  	
  19

  
	
  Section 8.10.

  	
  Severability

  	
  20

  
	
  Section 8.11.

  	
  Headings

  	
  20

  
	
  Section 8.12.

  	
  Survival

  	
  20

  
	
  Section 8.13.

  	
  Costs and Expenses

  	
  20

  
	
  Section 8.14.

  	
  Drafting

  	
  20

  
	
  Section 8.15.

  	
  Counterparts

  	
  20

  
	
  Section 8.16.

  	
  Assignment; Successors

  	
  20

  
	
  Section 8.17.

  	
  Governing
  Law

  	
  21

  
	
  Section 8.18.

  	
  Waiver of Jury Trial
  and Venue

  	
  21

  
	
   

  	
   

  
	
  SCHEDULES

  	
   

  
	
   

  	
   

  
	
  Schedule 1.01(a)

  	
  Services

  	
   

  
	
  Schedule 2.03(e)

  	
  Monthly Reports

  	
   

  
	
  Schedule 2.04(a)

  	
  Service Level Standards

  	
   

  
	
  Schedule 5.02

  	
  Remedies

  	
   

  
	
  Schedule 7.04

  	
  Indemnity Matters

  	
   

  
				



 


ii

















 


SERVICING AGREEMENT


 


This
Servicing Agreement (as amended from time to time, this “Agreement”),
dated as of July 7, 2005, is between The Neiman Marcus Group, Inc., a
Delaware corporation (“Servicer”), and HSBC Bank Nevada, N.A., a
national credit card bank (“Bank”).


 


WHEREAS,
Servicer and certain of its subsidiaries (together, “Sellers”) have
entered into a Purchase, Sale and Servicing Transfer Agreement with Bank and
HSBC Finance Corporation, a Delaware corporation (“Bank Parent”), dated
as of July 7, 2005 (as amended from time to time, the “Purchase Agreement”),
pursuant to which Sellers will sell, and Bank will purchase, specified assets
related to Sellers’ consumer private label credit card business;


 


WHEREAS,
Servicer and certain of its subsidiaries (together, the “NMG Companies”)
are entering into a Program Agreement, dated as of June 8, 2005 (as amended
from time to time, the “Program Agreement”), with Bank and Household
Corporation, a Delaware corporation (“Primary Servicer”, and together
with Bank, the “Household Companies”) which shall govern the operation
of such credit card business and the rendering of marketing and other services
by the parties thereto; and


 


WHEREAS,
Bank wishes to retain Servicer to provide, and Servicer wishes to provide,
certain servicing and administration activities relating to the Accounts and
the Program, all pursuant to the terms and conditions set forth herein.


 


NOW,
THEREFORE, in consideration of the mutual agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereby agree as follows:


 


ARTICLE I


 


DEFINITIONS AND INTERPRETATION


 


Section 1.01.
Defined Terms. Wherever used in this Agreement, unless the context
otherwise requires, the following terms shall have the meanings set forth
below. Capitalized terms used but not defined in this Agreement shall have the
meanings given them in the Program Agreement.


 


“Agreement”: As
defined in the preamble hereof.


 


“Bank”: As defined
in the preamble hereof.


 


“Bank Parent”: As
defined in the recitals hereof.


 


“Credit Card
Production Services”: The Services set forth in paragraph 2 of Section I
of Schedule 1.01(a).


 


“Confidential
Information”: As defined in Section 8.01(a)(i) hereof.


 


“Damages”: As
defined in Section 7.01(a) hereof.


 

















 


“Data
Processing Services”: The Services set forth in paragraph 4 of Section I
of Schedule 1.01(a).


 


“Deductible
Amount”: As defined in Schedule 7.04.


 


“Disclosing
Party”: As defined in Section 8.01(a)(iv) hereof.


 


“Documentation
Services”: The Services set forth in paragraph 1 of Section I of
Schedule 1.01(a).


 


“Household
Companies”: As defined in the recitals hereof.


 


“Initial
Penalty Amount”: As defined in Schedule 5.02.


 


“Late
Stage Collection Services”: The Services set forth in paragraph 3 of Section I
of Schedule 1.01(a).


 


“NMG
Companies”: As defined in the recitals hereof.


 


“Non-Starred
SLAs”: Any SLA on Schedule 2.04(a) that is not a Starred SLA.


 


“Other
Services”: The Services set forth in Section II of Schedule 1.01(a).


 


“Party”:
When used in the singular, either Servicer or Bank or, when used in the plural,
both Servicer and Bank.


 


“Primary
Servicer”: As defined in the recitals hereof.


 


“Program
Agreement”: As defined in the recitals hereof.


 


“Purchase
Agreement”: As defined in the recitals hereof.


 


“Receiving
Party”: As defined in Section 8.01(a)(iv) hereof.


 


“Regulatory
Failure”: As defined in Section 5.01(b) hereof.


 


“Regulatory
SLA”: As defined in Section 5.01(b) hereof.


 


“Securitization
Documents”: As defined in the Purchase Agreement.


 


“Sellers”:
As defined in the recitals hereof.


 


“Servicer”:
As defined in the preamble hereof.


 


“Servicer
Default”: As defined in Section 5.01 hereof.


 


“Servicer
Event of Default”: The occurrence of any one of the events listed in Section 6.02.


 


2

















 


“Services”:
As defined in Section 2.02(a) hereof.


 


“Significant
Failure”: As defined in Section 5.01(a) hereof.


 


“SLA”:
Each individual performance standard set forth on Schedule 2.04(a).


 


“Solvent”:
When used with respect to any Person, that (a) the present fair salable
value of such Person’s assets exceed the total amount of its liabilities, (b) such
Person is able to pay its debts as they become due and (c) such Person
does not have unreasonably small capital to carry on its business as
theretofore operated and all business in which such Person is about to engage.


 


“Starred
SLA”: On Schedule 2.04(a), SLA number 1 of Section A, SLA number 1 of Section B,
SLA number 6 of Section C and SLA numbers 2 and 6 of Section D.


 


“Subsequent
Failure”: As defined in Section 5.02(b) hereof.


 


“Subsequent
Penalty Amount”: As defined in Schedule 5.02.


 


“Term”:
As defined in Section 6.01 hereof.


 


“Transaction
Document”: The Purchase Agreement, the Program Agreement and this Agreement
and the agreements, instruments, schedules and other documents to be delivered
pursuant thereto and hereto.


 


Section 1.02.
Certain Interpretive Matters. 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) all references to “$” or “dollars” shall be deemed
references to United States dollars; and (e) all references to a
particular agreement, instrument or document shall include all renewals,
extensions, modifications, amendments and restatements of such agreement,
instrument, or document.


 


ARTICLE II


 


SERVICING


 


Section 2.01.
Appointment. Subject to the terms and conditions of this Agreement, Bank
hereby appoints Servicer as of the Effective Date as the servicer of the
Accounts (excluding Non-Store Accounts associated with Dual-Line Credit Cards)
and Cardholder Indebtedness and Servicer hereby accepts such appointment.


 


Section 2.02.
Servicer Compensation. As compensation for provision of the Services
hereunder, Servicer shall receive payment of the payment calculated by
reference to the Servicing Fee Percentage as set forth in Schedule 9.1(a)(i) of
the Program Agreement. Upon transfer of any of the Services to Primary Servicer
in accordance with Section 2.03(b), the


 


3

















 


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.


 


Section 2.03.
Services.


 


(a) Commencing
on the Effective Date and continuing until the date, if any, upon which any
listed type of Service enumerated below is transferred to Primary Servicer as
provided in this Agreement, Servicer shall perform the following services
(collectively, the “Services”): (i) the Documentation Services; (ii) the
Late Stage Collection Services; (iii) the Credit Card Production Services;
(iv) the Data Processing Services; and (v) the Other Services, in
each case in accordance with this Agreement and the Risk Management Policies
and Operating Procedures. Servicer shall service the Accounts in compliance
with Applicable Law, in such a way as to not disparage or embarrass the
Household Companies or either of their names, with a level of service to
Cardholders and with no less care and diligence than the degree of service,
care and diligence employed by Servicer prior to the Effective Date.
Notwithstanding anything to the contrary contained herein, Bank shall be solely
responsible for monitoring legal developments applicable to the operation of
the Credit Card Business, although Servicer shall promptly apprise Bank of any
such legal developments of which it becomes aware.


 


(b) Servicer
may elect upon not less than thirty (30) days’ written notice to Bank to
transfer (i) any one or more type of Services referenced in clauses (i) through
(iv) of Section 2.03(a) or (ii) following conversion to the
Bank Systems, all of the Services being performed hereunder, to Primary
Servicer, in which event Primary Servicer shall accept appointment as servicer
with respect to such Services and shall be required to comply with the
provisions of the Program Agreement in connection with the performance of such
Services, including the requirement to meet the SLAs applicable to Primary
Servicer for such Service set forth in Schedule 7.3(a) of the Program
Agreement. Upon the date of the foregoing transfer, Servicer shall be released
from any further obligation with respect to the performance of such Services.


 


(c) Notwithstanding
Section 2.03(b), Bank and Servicer agree that the Documentation Services
shall be transferred to Primary Servicer as soon as practicable after the date
hereof and, upon such transfer, Primary Servicer shall be required to comply
with the provisions of the Program Agreement in connection with the performance
of such Services, including the requirement to meet the SLAs applicable to the
Documentation Services set forth in Schedule 7.3(a) of the Program
Agreement.


 


(d) 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) of
the Program Agreement. Records may be kept in either paper or electronic form.
Servicer shall retrieve, reproduce and deliver to Bank any records reasonably
requested from time to time by Bank for the purpose of providing customer
assistance or resolving customer disputes, and Bank shall compensate Servicer
on demand for the reasonable costs and expenses associated with such retrieval,
reproduction and delivery.


 


4
















 


(e) Within
fifteen (15) days after the end of each Fiscal Month, Servicer shall provide to
Bank the reports specified in Schedule 2.03(e) and such other reports as
are mutually agreed to by the Parties from time to time.


 


(f) Bank
shall train personnel of Servicer on Bank’s systems and processes that are
related to or that interface with, but that are not components of, the Services
to the extent necessary for Servicer to perform the Services. Servicer shall
train personnel of Bank on Servicer’s systems and processes that are related to
the Services being provided under this Agreement.


 


(g) Bank
shall cooperate, and shall ensure that each of its Affiliates shall cooperate,
with Servicer in all matters relating to Servicer’s performance of the Services
at Servicer’s reasonable request. Such cooperation shall be provided at the
expense of Bank and shall include providing Servicer with reasonable access to
the personnel, records, systems, technology and information of the Household
Companies and their Affiliates relating to the Accounts. Servicer shall obtain
all licenses and authorizations necessary to perform the Services that it
provides hereunder.


 


Section 2.04.
Service Level Standards.


 


(a) Servicer
shall perform the applicable Services in accordance with the SLAs set forth on
Schedule 2.04(a).


 


(b) Servicer
shall report to Bank monthly, in a mutually agreed upon format, Servicer’s
performance under each of the SLAs set forth on Schedule 2.04(a). If Servicer
fails to meet any SLA, Servicer shall (i) immediately report to the
Management Committee the reasons for the SLA failure(s); and (ii) promptly
take commercially reasonable action to correct and prevent recurrence of such
failure(s).


 


Section 2.05.
Use of Subservicers. 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 Servicer shall be subject to approval
pursuant to Article III of the Program Agreement and (ii) Servicer
shall remain fully responsible to Bank for the portion of the Services
performed by any such subservicer(s) (including its Affiliates).
Notwithstanding the foregoing, to the extent Servicer subcontracts or
outsources to any third party any Services as of the date hereof, Servicer may
continue to subcontract or outsource such Services to such third party.


 


Section 2.06.
Disaster Recovery. For as long as Servicer is providing services
hereunder, Servicer shall continue to maintain the disaster recovery plan in
effect on the Effective Date. Servicer shall be prepared to and have the
ability to implement such plan if necessary. Servicer shall provide Bank with
access to review such plan upon request. Servicer shall test the plan annually
and shall promptly implement such plan upon the occurrence of a disaster or
business interruption.  Servicer
shall be excused from its failure to meet any applicable SLAs that result
directly from the failure of any of the Bank Systems. If in the event of a
disaster or severe business interruption Servicer fails to take reasonable
steps to respond to such disaster or severe business interruption, Bank shall
have reasonable access to Servicer’s systems, technical personnel and disaster
recovery resources, so as to ensure continuity of business and systems required
to service the Accounts.


 


5

















 


Section 2.07.
Inventory. The Parties hereby agree that all paper, envelopes and
plastic reasonably required for production and mailing of Cardholder
Documentation and Loyalty Cards will be either (i) purchased by Servicer
in consultation with Bank, in which case Servicer shall invoice Bank directly
for such purchases and Bank shall pay Servicer for such invoices (including
shipping and taxes), or (ii) purchased by Bank in consultation with
Servicer at Bank’s sole cost and expense, provided that material qualities and
quantities must be reasonably satisfactory to Servicer.


 


Section 2.08.
Securitization.


 


(a) As
part of the Services hereunder, Servicer hereby agrees to continue and to have
its Subsidiaries continue to perform for the benefit of Bank and Bank Parent on
a subservicing basis, the servicing functions set forth under the
Securitization Documents with respect to the Accounts and receivables generated
thereunder that are subject to such Securitization Documents, from and after
the Closing Date, including the execution and delivery of all certificates and
reports as required by such Securitization Documents, which certificates and
reports shall be addressed to HSBC Finance Corporation, a Delaware corporation
as the Servicer.


 


(b) Servicer
hereby acknowledges and agrees that HSBC Finance Corporation shall be entitled
to rely on such reports and certificates as a basis for issuing any of its own
reports and certificates under the Securitization Documents. In addition,
Servicer hereby agrees to use commercially reasonable efforts to cause
Servicer’s independent public accountants to issue the reports required by the
Securitization Documents and deliver such reports to HSBC Finance Corporation
for the period starting October 31, 2004 and ending on the Closing Date,
such reports to be delivered by such independent public accounting firm on or
before October 31, 2005.


 


(c) Servicer
shall cooperate with Bank and Bank Parent to correct any errors or deficiencies
discovered in any of the reports referred to in this Section 2.08.


 


ARTICLE III


 


REPRESENTATIONS AND WARRANTIES


 


Section 3.01.
Representations and Warranties of Servicer. Servicer represents and
warrants to Bank as follows:


 


(a) Organization.
Servicer (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 its ability to


 


6

















 


perform its 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
on its ability to perform its obligations under this Agreement.


 


(b) Capacity;
Authorization; Validity. Servicer has all necessary corporate power and
authority to (i) execute and enter into this Agreement, and (ii) perform
its obligations hereunder and the other documents, instruments and agreements
relating to this Agreement executed by it pursuant hereto. The execution and
delivery by Servicer of this Agreement and all documents, instruments and
agreements executed and delivered by Servicer pursuant hereto, and the
consummation by Servicer of the transactions specified herein, have been duly
and validly authorized and approved by all necessary corporate actions of
Servicer. This Agreement (i) has been duly executed and delivered by
Servicer, (ii) constitutes the valid and legally binding obligation of
Servicer, 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
Servicer, its 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 Servicer is a party or by which it is bound, or to which any of the
assets of Servicer is subject; (ii) conflict with or violate the articles
of incorporation or by-laws of Servicer; (iii) breach or violate any
Applicable Law or Applicable Order, in each case, applicable to Servicer; (iv) require
the consent or approval of any other party to any contract, instrument or
commitment to which Servicer 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 Servicer’s ability to perform its obligations under this Agreement.


 


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


 


7

















 


(e) Facilities
and Equipment. Servicer has all necessary facilities, equipment, supplies
and such other resources as are reasonably necessary to provide the Services
under this Agreement.


 


(f) Solvency.
Servicer is Solvent.


 


Section 3.02.
Representations and Warranties of Bank. Bank represents and warrants to
Servicer as follows:


 


(a) Organization.
Bank (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 its ability to perform its 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 on its ability to perform its obligations
under this Agreement.


 


(b) Capacity;
Authorization; Validity. Bank has all necessary corporate power and
authority to (i) execute and enter into this Agreement, and (ii) perform
its obligations hereunder and the other documents, instruments and agreements
relating to this Agreement executed by it pursuant hereto. The execution and
delivery by Bank of this Agreement and all documents, instruments and
agreements executed and delivered by Bank pursuant hereto, and the consummation
by Bank of the transactions specified herein, have been duly and validly
authorized and approved by all necessary corporate actions of Bank. This
Agreement (i) has been duly executed and delivered by Bank, (ii) constitutes
the valid and legally binding obligation of Bank, 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
Bank, its 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 Bank is a party or by which it is bound, or to which any of the assets
of Bank is subject; (ii) conflict with or violate the articles of
incorporation or by-laws of Bank; (iii) breach or violate any Applicable
Law or Applicable Order, in each case, applicable to Bank; (iv) require
the consent or approval of any other party to any contract, instrument or
commitment to which Bank 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,


 


8

















 


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 Bank’s ability
to perform its obligations under this Agreement.


 


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


 


(e) Solvency.
Bank is Solvent.


 


ARTICLE IV


 


ADDITIONAL COVENANTS


 


Section 4.01.
Further Assurances. From time to time after the execution of this
Agreement, as and when requested by either Party, the other Party shall execute
and deliver, or cause to be executed and delivered, all such documents and
instruments as may be reasonably necessary to consummate the transactions
contemplated by this Agreement.


 


Section 4.02.
Modifications. Except as permitted by this Agreement, the Program
Agreement, the Risk Management Policies or the Operating Procedures, Servicer
shall not enter into any agreement or arrangement reducing amounts payable by
Cardholders.


 


Section 4.03.
Correction of Errors. Each of the Parties shall correct or cause to be
corrected as promptly as practicable any data processing or billing errors of
which it receives knowledge that occur in the performance of the Services.


 


Section 4.04.
Changes in Law. Bank shall notify Servicer from time to time, in a
timely manner, of the expiration, revocation or amendment of, or other material
developments relating to, any requirements of Applicable Law affecting the
provision by Servicer of the Services. If such changes in law materially
increase Servicer’s cost of providing the Services, the Management Committee
shall meet to discuss the increased cost and shall determine the allocation of
such increased cost between the Parties.


 


Section 4.05.
Cooperation. Each Party covenants that it shall use commercially
reasonable efforts to cooperate with the other Party in the servicing of the
accounts.


 


Section 4.06.
Facilities and Equipment.


 


(a) For
as long as Servicer is providing Services hereunder, Servicer shall maintain in
good working order all necessary facilities, equipment, supplies and such other
resources as are reasonably necessary to provide any Services in accordance
with the SLAs under this Agreement.


 


9

















 


(b) Servicer
shall provide Bank with written notice prior to opening a new servicing
facility for the purpose of providing the Services.


 


Section 4.07.
Insurance. Servicer shall maintain insurance policies (in any event
including error and omissions liability insurance and fiduciary liability
insurance) with respect to its employees and 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
Servicer to perform its obligations under this Agreement.


 


Section 4.08.
Customer Information. Servicer shall 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 customer information; (ii) protect
against any anticipated threats or hazards to the security or integrity of such
information; (iii) protect against unauthorized access to or use of such
information; and (iv) ensure the proper disposal of such information.
Additionally, such security measures shall meet current industry standards and
shall be at least as protective as those used by Servicer to protect its other
confidential customer information. Servicer shall use the same degree of care
in protecting the customer information against unauthorized disclosure as it
accords to its own confidential customer information, but in no event less than
a reasonable standard of care. In the event Servicer becomes aware of any
unauthorized use of or access to customer information, Servicer shall
immediately notify Bank and shall cooperate with Bank, 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 such information, and (z) to provide
prompt notice to affected customers to the extent required by Applicable Law or
otherwise with the approval of the Management Committee.


 


ARTICLE V


 


DEFAULT; REMEDIES


 


Section 5.01.
Servicer Default. It shall be a “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 Servicer (i) is more than 20% 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 Servicer fails to meet an SLA designated as a regulatory-based
SLA on Schedule 2.04(a) (each, a “Regulatory SLA”) and such failure
results in a breach by Servicer of Applicable Law (such failure, a “Regulatory
Failure”).


 


10

















 


Section 5.02.
Remedies.


 


(a) In
the event of a Significant Failure, Servicer shall: (A) promptly report to
the Management Committee 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 Servicer deems necessary to correct and prevent
recurrence of such failure(s); and (C) subject to Bank’s agreement,
implement the remediation plan as soon as practicable. However, under no
circumstances shall the time period between Bank’s agreement to the remediation
plan and completion of such plan exceed two (2) months.


 


(b) If
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, Servicer shall pay Bank the Initial Penalty Amount,
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,
Servicer shall pay Bank the Subsequent Penalty Amount, 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, Bank 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 Servicer, in which event the parties shall have the
rights set forth in Article XVII of the Program Agreement; provided,
however, that prior to either Party electing to transfer the provision
of such Services pursuant to Section 5.02(e) below or 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 (except in the case of a Regulatory Failure, in which event
no Management Committee meeting shall be required as a condition to
transferring the affected Services pursuant to Section 5.02(e)). If the
Management Committee determines that such SLA shall be modified, then Bank
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; and provided,
further, that for purposes of transferring Services pursuant to this Section 5.02(d) or
Section 5.02(e), an SLA that is both a Starred SLA and a Regulatory SLA
shall be deemed to be a Regulatory SLA.


 


(e) Notwithstanding
the foregoing, in the case of any Servicer Default with respect to any type of
Service, after the Management Committee meeting referred to above (except in
the case of a Regulatory Failure) and assuming that no SLA is modified, in lieu
of terminating the Program Agreement, either Party may elect to cause the
Services subject to such Servicer Default to be transferred to Primary Servicer
pursuant to the Program Agreement.


 


(f) No
servicing transfer or termination of this Agreement pursuant to Section 5.02(d) or
Section 5.02(e) above shall be effective until either assumption by
the Bank or its


 


11

















 


Affiliate of the
provision of the Services or the appointment by Bank of a successor servicer
reasonably satisfactory to Servicer pursuant to a servicing agreement
reasonably satisfactory to Servicer. Following the delivery by the applicable
Party of written notice of a servicing transfer or termination, Bank shall have
reasonable access to Servicer’s operations and systems to ensure continuity of
business and systems required to service the Accounts until such time as Bank
or its Affiliate assumes the provision of the Services or appoints a successor
servicer reasonably satisfactory to Servicer. Both Parties shall use
commercially reasonable efforts and cooperate with each other to ensure
continuity of business during any transfer of Services.


 


Section 5.03.
Non-Starred SLAs. For purposes of this Article V, “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.


 


ARTICLE VI


 


TERM


 


Section 6.01.
Term of Agreement. The term of this Agreement shall commence on the date
hereof and expire simultaneously with the termination of the Program Agreement
or the termination pursuant to Section 2.03(b), 5.02(d) or 5.02(e) (the
“Term”).


 


Section 6.02.
Servicer Termination Events. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an event
of default by Servicer hereunder:


 


(a) Servicer
shall fail to make payment in full of any amount due to Bank pursuant to Section 5.02
within two (2) Business Days after such payment is due pursuant to Section 5.02.


 


(b) Servicer
shall fail to comply with Section 4.06, 4.07 or 4.08 and such failure
shall materially impair the quality of the Services hereunder.


 


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


 


(d) A
decree or order by a court having jurisdiction (i) for relief in respect
of Servicer 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 Servicer or of any
substantial part of its properties, or (iii) ordering the winding-up or
liquidation of the affairs of Servicer 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.


 


(e) Servicer
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


 


12

















 


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 Servicer or any substantial part of its
properties, or (iii) take corporate or similar action in furtherance of
any such action.


 


Section 6.03.
Termination by Bank. Bank may terminate this Agreement upon written
notice prior to the end of the Term after the occurrence of a Servicer Event of
Default. No such termination shall be effective until either assumption by Bank
or its Affiliate of the provision of the Services pursuant to the Program
Agreement or the appointment by Bank of a successor servicer reasonably
satisfactory to Servicer pursuant to a servicing agreement reasonably
satisfactory to Servicer. Following the delivery by Bank of written notice of a
servicing transfer or termination, Bank shall have reasonable access to Servicer’s
operations and systems to ensure continuity of business and systems required to
service the Accounts until such time as Bank or its Affiliate assumes the
provision of the Services or appoints a successor servicer reasonably
satisfactory to Servicer. Both Parties shall use commercially reasonable
efforts and cooperate with each other to ensure continuity of business during
any transfer of Services.


 


Section 6.04.
Effect of Termination.


 


(a) If
this Agreement terminates for any reason, the Parties shall cooperate to ensure
an orderly transfer of servicing as provided in subsection (b) below.


 


(b) If
this Agreement is terminated pursuant to Section 5.02(e) or Section 6.03,
Servicer shall take all commercially reasonable steps necessary to effectuate a
transfer of the Services to Primary Servicer or any other applicable successor
servicer. To the extent that compliance with this Section 6.04(b) shall
require Servicer to disclose to a successor servicer any Confidential
Information (as defined in the Program Agreement), the successor servicer shall
be required to enter into a confidentiality agreement satisfactory in form and
substance to Servicer. Bank agrees that so long as the Program is in effect, it
shall perform, or require any successor servicer to perform, the Services in
accordance with the provisions of Sections 7.2 and 7.3 of the Program
Agreement.


 


ARTICLE VII


 


INDEMNIFICATION


 


Section 7.01.
Indemnification By Servicer. Servicer agrees to 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 (collectively, “Damages”), which are caused or incurred
by, result from, arise out of or relate to:


 


(a) the
breach of any of Servicer’s representations or warranties made in this
Agreement;


 


13
















 


(b) the
failure by Servicer to perform any of its covenants or agreements contained in
this Agreement, except to the extent such failure to perform is caused by (i) the
failure of any of the Household Companies to perform its obligations under any
Transaction Document or (ii) any actions or omission by Servicer taken or
not taken at any Household Companies’ written request or direction pursuant to
any Transaction Document;


 


(c) any
fines or penalties imposed by a Governmental Authority on the basis of a Regulatory
Failure;


 


(d) any
lawsuit, legal proceeding, arbitration proceeding, claim, dispute, complaint or
setoff by a Cardholder with respect to anything actually or allegedly done or
not done by Servicer in connection with the Services, excluding anything
actually or allegedly done or not done by Servicer that (A) is required or
expressly permitted under the Risk Management Policies, the Operating
Procedures or any Transaction Document or (B) is done at the express
direction of Bank.


 


(e) any
lawsuit, legal proceeding, arbitration proceeding or claim by a third party
alleging any material inaccuracy in the information provided pursuant to Section 2.08.


 


Section 7.02.
Procedure for Indemnification.


 


(a) In
case any claim is made, or any suit or action is commenced against Bank in
respect of which indemnification may be sought by it under this Section 7.02,
Bank shall promptly give Servicer notice thereof and Servicer shall be entitled
to participate in the defense thereof and, with prior written notice to Bank
given not later than twenty (20) days after the delivery of the applicable
notice from Bank, to assume, at Servicer’s expense, the defense thereof, with
counsel reasonably satisfactory to Bank. After notice from Servicer to Bank of
its election so to assume the defense thereof, Servicer shall not be liable to
Bank under this Section for any attorneys’ fees or other expenses
subsequently incurred by Bank in connection with the defense thereof, except as
set forth in Section 7.02(b), other than reasonable costs of
investigation.


 


(b) Bank
shall have the right to employ its own counsel if Servicer elects to assume
such defense, but the fees and expenses of such counsel shall be at Bank’s
expense, unless (i) the employment of such counsel has been authorized in
writing by Servicer, (ii) Servicer 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) Bank has reasonably concluded that the interests of
the Parties are conflicting such that it would be inappropriate for the same
counsel to represent both parties (in which case Servicer shall not have the
right to direct the defense of such action on behalf of Bank), in any of which
events the attorneys’ fees and expenses of counsel to Bank shall be borne by
Servicer.


 


(c) Bank
or Servicer may at any time notify the other of its intention to settle or
compromise any claim, suit or action against Bank in respect of which payments
may be sought by Bank hereunder, and (i) Servicer may settle or compromise
any such claim, suit or action solely for the payment of money damages for
which Bank will be fully indemnified


 


14

















 


hereunder and given a
full and complete release of any and all liability by all relevant parties
relating to such claim, suit or action, but shall not agree to any other
settlement or compromise unless Bank consents in writing, which consent shall
not be unreasonably withheld (it being agreed that any failure of an Bank to
consent to any settlement or compromise involving relief other than monetary
damages shall not be deemed to be unreasonably withheld), and (ii) Bank
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 Servicer, which consent
shall not be unreasonably withheld.


 


Section 7.03.
Notice and Additional Rights and Limitations.


 


(a) If
Bank fails to give prompt notice of any claim being made or any suit or action
being commenced in respect of which indemnification under this Section 7.03
may be sought, such failure shall not limit the liability of Servicer; provided,
however, that this provision shall not be deemed to limit Servicer’s
rights to recover from Bank for any loss, cost or expense which it can
establish resulted from such failure to give prompt notice.


 


(b) This
Section 7.03 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 Bank shall have become liable to a third party for such amounts.


 


Section 7.04.
Limits on Indemnification. Notwithstanding anything to the contrary set
forth in this article, Servicer shall not have any obligation to indemnify Bank
in respect of any breach of a representation or warranty under Section 7.01(a) unless
and until the Deductible Amount of Damages has been incurred in the aggregate
by Bank in respect of breaches of representations and warranties under Section 7.01(a).
After Bank incurs in aggregate the Deductible Amount of Damages in respect of
breaches of representations and warranties under Section 7.01(a), Servicer
shall indemnify Bank in accordance with this Article VII to the extent of
the full amount of such Damages.


 


ARTICLE VIII


 


MISCELLANEOUS


 


Section 8.01.
Confidentiality


 


(a) General
Confidentiality.


 


(i) For purposes of
this Agreement, “Confidential Information” means any of the following: (i) information
that is provided by or on behalf of either Servicer or the Household Companies
to the other Party or its agents in connection with providing Services
hereunder (including information provided prior to the date hereof or the
Effective Date); (ii) information about Servicer or the Household
Companies or their


 


15

















 


Affiliates, or their respective businesses or
employees, that is otherwise obtained by the other Party in connection with
providing Services hereunder, 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 Agreement or the manner of offering of any such
products; (D) information unrelated to the Program obtained by Servicer or
the Household Companies 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; and (iii) the terms and
conditions of this Agreement.


 


(ii) The
restrictions on disclosure of Confidential Information under this Section 8.01
shall not apply to information received or obtained by Servicer or the
Household Companies, 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 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 Servicer or the Household Companies, 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.


 


(iii) The terms and
conditions of this Agreement shall each be the Confidential Information of
Servicer and the Household Companies 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.


 


(iv) If Servicer, on
the one hand, or the Household Companies, 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


 


16

















 


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.


 


(b) Use
and Disclosure of Confidential Information.


 


(i) 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.


 


(ii) 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
provision of the Services hereunder, 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 Section 8.01.


 


(c) 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.


 


(d) 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.


 


17

















 


Section 8.02.
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 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
hours) and obtain copies of the books and records relating to the Program,
including any audit results of subcontractors that provide Services; 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, the Household Companies or Servicer 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.


 


Section 8.03.
No Waiver; Remedies; Amendment.


 


(a) Failure
or delay on the part of either Party to exercise any right provided for herein
shall not act as a waiver thereof, nor shall any single or partial exercise of
any right by either Party preclude any other or further exercise thereof.


 


(b) Remedies
provided in this Agreement shall be the exclusive remedies of the Parties for
breaches of, or claims relating to, this Agreement.


 


(c) In
no event shall a term or provision of this Agreement be deemed to have been
waived, modified or amended, unless a waiver, modification or amendment is in
writing and signed by the Parties hereto.


 


Section 8.04.
Independent Contractor. In the performance of its duties or obligations
under this Agreement, Servicer shall not be deemed to be the agent of Bank and
Bank shall not be deemed to be the agent of Servicer and each Party shall at
all times take whatever measures as are necessary to ensure that its status
shall be that of an independent contractor.


 


Section 8.05.
No Joint Venture. Nothing in this Agreement or any Transaction Document
shall be deemed to create a partnership or joint venture between Servicer and
Bank. Except as expressly set forth herein, no Party shall have any authority
hereunder to bind or commit the other Party.


 


Section 8.06.
Payment Terms. All payments to be made by either Party pursuant to this
Agreement shall be made by wire transfer in lawful money of the United States,
immediately available funds, to such account as the receiving Party shall
specify prior to noon, New York time, two Business Days prior to the date
payment is required. Any payment required to be made on a day that is not a
Business Day shall be made on the next succeeding Business Day.


 


18

















 


Section 8.07.
Entire Agreement. Each Party acknowledges that no representations, agreements,
or promises were made to it by the other Party other than those
representations, agreements or promises specifically contained in this
Agreement and in the Transaction Documents and in a separate confidentiality
letter signed by Bank dated March 9, 2005. This Agreement and the other
Transaction Documents and such confidentiality letter set forth the entire
understanding between the Parties hereto with respect to the subject matter
hereof and thereof.


 


Section 8.08.
No Set-Off. The Parties 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
in connection with this Agreement, except as expressly set forth herein.


 


Section 8.09.
Notices. All notices, requests, demands and other communications which
are required or permitted to be given under this Agreement shall be in writing
and shall be deemed to have been duly given upon the delivery or receipt
thereof, as the case may be, sent by registered or certified mail, return
receipt requested, via overnight delivery service, postage prepaid, or by
facsimile transmission (receipt confirmed) to:


 


(a)           In the case of Servicer:


 


c/o The Neiman Marcus
Group, Inc.


One Marcus Square


1618 Main Street


Dallas, Texas 75201


Attention: General
Counsel


Facsimile: (214) 573-5354


 


With a copy to:


 


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


 


19

















 


(b)          In the case of Bank:


 


HSBC Bank Nevada, N.A.


2700 Sanders Road


Prospect Heights,
Illinois 60070


Attention: Chief
Operating Officer, HSBC Retail Services


Facsimile: (847) 205-7441


 


With a copy to:


 


HSBC Retail Services


2700 Sanders Road


Prospect Heights,
Illinois 60070


Attention: General
Counsel, Retail Services Division


Facsimile: (847) 205-7417


 


Section 8.10.
Severability. To the fullest extent permitted by law, any term or
provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement in such jurisdiction or in
any other jurisdiction.


 


Section 8.11.
Headings. The headings and recitals contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.


 


Section 8.12.
Survival. The provisions of Section 2.02, Section 6.02(a), Section 6.02(b),
Section 6.04, Section 8.01, Section 8.08, Section 8.12, Section 8.13,
Section 8.17 and Section 8.18 and Article VII shall survive any
termination of this Agreement.


 


Section 8.13.
Costs and Expenses. Except as expressly provided otherwise in this
Agreement, the Risk Management Policies, the Operating Procedures or any other
Transaction Document, each Party shall bear all costs and expenses incurred by
such Party in connection with its performance of its duties hereunder
(including, in the case of Servicer, all costs and expenses incurred by it in
connection with its performance of the Services) or otherwise.


 


Section 8.14.
Drafting. Each Party acknowledges that its legal counsel participated in
the drafting of this Agreement. The Parties hereby agree that the rule of
construction that ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement to favor one
Party over the other.


 


Section 8.15.
Counterparts. This Agreement may be executed in one or more
counterparts, each of which counterparts shall be deemed to be original, and
all such counterparts shall constitute one and the same instrument.


 


Section 8.16.
Assignment; Successors. This Agreement shall not be assigned by either
Party without the prior written consent of the other, except that (a) Servicer
shall have the right to assign its rights and obligations hereunder to any
Affiliate of Servicer and (b) Bank shall


 


20

















 


have the right to assign
its rights and obligations hereunder to an Affiliate. This Agreement is
intended for the exclusive benefit of the Parties hereto and their respective
successors and permitted assigns, and shall not create any rights in or be
enforceable by any other Person whomsoever, other than any Person entitled to
indemnification from Servicer pursuant to Article VII hereof, it being the
intention of the Parties that no other Person shall be deemed to be a third
party beneficiary of this Agreement. This Agreement shall be binding on, and
enforceable against, the successors and permitted assigns of the Parties.


 


Section 8.17.
Governing Law. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed within such State,
and the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.


 


Section 8.18.
Waiver of Jury Trial and Venue.


 


(a) Each
party hereto 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 hereto 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 hereto 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 hereto 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 any party hereto if given as provided
herein.


 


21

















 


IN
WITNESS WHEREOF, the Parties have caused their respective duly authorized
representatives to execute this Agreement as of the date first written above.


 


	
   

  	
  THE NEIMAN MARCUS
  GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Steven P. Dennis

  
	
   

  	
  Name:

  	
  Steven
  P. Dennis

  
	
   

  	
  Title:

  	
  Senior
  Vice President, Strategy & Business Development

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC BANK NEVADA, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Charles A. Colip

  
	
   

  	
  Name:

  	
  Charles
  A. Colip

  
	
   

  	
  Title:

  	
  Executive
  Vice President 

  



 


22
















 


SCHEDULE
1.01(a)


 


Services


 


I.   The Services that may be
transitioned to Bank are defined as follows:


 


1.     Documentation Services — The Statement
Mailing responsibilities include preparing, processing and mailing customer
billing statements with related and appropriate inserts including but not
limited to privacy policies and term notifications. Additional credit
correspondence may also be included. There are non-credit functions (i.e. store
and marketing mailings) not included in a transfer of Documentation
Services.  The ability for Universal
Agents to retrieve copies of customer billing statements through the SystemWare
XNET or comparable system must also be done as part of this transition. The
cardholder remittance processing (Payment Processing) functionality related to
receiving and processing all incoming charge payments, except those payments
received in the store, may also be transitioned.  The Payment Processing transition must
include a daily feed of NM and BG payments separately as a TRAMS input feed
into the NMG PaySys system until the Bank PaySys system is used.


 


2.     Credit Card Production Services — The
production and issuance of all new, replacement and reissued credit card plates
related to the following credit card programs (Neiman Marcus, Bergdorf Goodman,
NM Gold, NM InCircle, NM Platinum).  In
addition to the embossed credit cards, the production services group generates
non-embossed gift cards with the 16-digit gift card number coded in the
magnetic stripe.  The timeline for the
potential transition of gift card issuance and additional costs incurred, if
any, will be mutually agreed upon by Bank and NMG prior to such conversion.


 


3.     Late Stage Collections — Collection
accounts greater than or equal to 120 contractual days delinquent including
charged-off (P&L) accounts.  Customer
contact may include the use of power dialing equipment, generated collection
letters in addition to outbound phone contact with the customer. Post
Charge-off (P&L) Collection Services include the administration, maintenance
and placement of accounts to outside attorneys and agencies on a contingency
fee basis.


 


4.     Data Processing Services — Credit card
data processing involves retail cardholder account data storage and
maintenance, transaction authorizing and posting, fraud and risk management
strategies and settlement.


 

















 


II.  Services not considered for
transfer to the Bank includes:


 


On
collection accounts less than 120 contractual days delinquent (Early Stage Collections), services include providing account
monitoring, identifying over-extended accounts and initiating the appropriate
collection efforts.


 


Credit
Processing Services include the processing, primarily through store
referral call interaction, and decisioning of new applications and pending sale
transactions on existing accounts. Both of these underwriting processes are
governed by the risk management policies and operating procedures.


 


Customer
Service Services has multiple areas of functionality.  The call center responds and resolves
cardholder and store inquiries and handles card program billing-related claims
for Neiman Marcus, Bergdorf Goodman and the InCircle loyalty program.   Other support groups involved in the
customer resolution process include Bill Adjustments, Media Retention and
Retrieval, Accounts Receivable reconciliation, Third Party Charge-backs as well
as various clerical responsibilities.


 


2

















 


SCHEDULE
2.03(e)


 


Monthly
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
  

  	
   

  	
  Application Result
  Summary

  	
   

  	
  CAPS Listing

  
	
  Management

  	
   

  	
  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

  



 


2

















 


	
   

  	
   

  	
  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

  



 


3





















 


SCHEDULE
2.04(a)


 


Service
Level Standards


 


For
the Term, the following Servicing Levels will be maintained by Servicer as
noted:


 


A.            Documentation
Services Servicer
will meet the following service levels on average each month (as measured by
Servicer’s standard practices):


 


1.     Percentage of all billing
statements that will be mailed out within 5 days of cycle close date provided
that this standard shall not apply if a systems problem prevents communication
of the credit input data to Servicer’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 statements, carriers and
matching window envelopes must meet the following minimum specifications:
70-pound Cougar smooth natural/cream design


 


3.     Term notifications and
privacy and other inserts included in mailings must meet the following minimum
paper specifications: 60-pound offset


 


4.     Metavante CSF programming is
used to produce the following billing statements: one-color billing statements
with 3 of 9 insertion barcode instructions


 


5.     The following are the
statement insert dimensions specifications: no larger than 5 1⁄2” long and 3 1⁄4”
wide with a maximum insert weight of .150 ounces; total single-page statement
mailing package per envelope must not exceed 1.000 ounce to qualify for
discounted 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  Servicer
will meet the following service level on average each month (as measured by
Servicer’s standard practices):


 


1.     Percentage of all new
account and replacement credit cards, including any Program Loyalty Program
Cards that will be mailed out within 5 business days after they are requested
(monthly reporting will be completed on an Excel spreadsheet): [***] *


 


C.            Late
and Early-Stage Collections
Servicer will meet the following service levels on average each month (as
measured by Servicer’s standard practices):


 


2.     Percentage of time that
Servicer 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


 


3.     Percentage of time that
Servicer shall complete the following minimum number of Account reviews per day
for those accounts without a contact or tentative agreement still in the CTA
sub-system: [***]


 


	
  Mid
  balances ($[***] to $[***])

  	
  every
  3 days

  
	
  Balances
  $[***] to $[***]

  	
  every
  3 days

  
	
  Balances
  greater than $[***]

  	
  every
  3 days

  



 


4.     Percentage of time that
Servicer shall maintain a [***] monthly promise to pay ratio of accounts worked
from the autodialer: [***]


 


5.     Percentage of time that Servicer
shall maintain a [***] monthly contact ratio of accounts worked from the
autodialer: [***]


 


6.     Percentage of time that
Servicer shall maintain a [***] cure rate for Accounts worked excluding
Accounts with balances greater than $[***]: [***] *


 


7.     Percentage of Accounts
(greater than $[***] balance) which initially enter the collections queue will
be worked within 48 hours of such entry into the collections queue: [***]


 


D.            Credit
Processing Services & Customer Service Services Servicer will
meet the following service levels on average each month (as measured by
Servicer’s standard practices):


 


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:


 


·      [***]
(“[***] ASA”)
during the months of April through October;


·      [***]
(“[***] ASA”)
during the months of November through February; and


·      [***]
(“[***] ASA”)
during March and 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 Management Committee has been notified of
such promotion, sale event 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. If the initial charge
card re-issuance (with Bank information on back of charge cards) is not sent to
all cardholders with the Change of Terms notice, then these ASA standards will
not be applied for the 


 


2

















 


months in which the
re-issued charge cards are sent and one month after all re-issued charge cards
have been mailed to all cardholders. *


 


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 5  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 9 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.     Percentage of Fair Credit
billing and all other customer initiated disputes are handled [resolved] within
60 days of receipt of notification: [***] * [Regulatory SLA]


 


7.     Percentage of time that
Servicer shall make its customer service operations 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.     Percentage of time that
Servicer 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): [***]


 






*
Denotes a Starred SLA


 


3

















 


SCHEDULE
5.02


 


Remedies


 


“Initial
Penalty Amount”: [***].


 


“Subsequent
Penalty Amount”: [***].


 


4

















 


SCHEDULE
7.04


 


Indemnity
Matters


 


“Deductible Amount”: [***].


 


5