Exhibit
10.34


 


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.


 


AMENDED AND RESTATED CREDIT CARD
PROGRAM AGREEMENT


 


by and among


 


THE NEIMAN MARCUS GROUP, INC.


 


BERGDORF GOODMAN, INC.


 


HSBC BANK NEVADA, N.A.


 


and


 


HSBC CARD SERVICES INC.


 


Dated as of September 23rd, 2010


 

















 


Table of Contents


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I
  DEFINITIONS

  	
  1

  
	
   

  	
  1.1

  	
  Generally

  	
  1

  
	
   

  	
  1.2

  	
  Miscellaneous

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II
  ESTABLISHMENT OF THE PROGRAM

  	
  28

  
	
   

  	
  2.1

  	
  Credit Program

  	
  28

  
	
   

  	
  2.2

  	
  Exclusivity

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III
  PROGRAM MANAGEMENT AND ADMINISTRATION

  	
  32

  
	
   

  	
  3.1

  	
  Program
  Objectives

  	
  32

  
	
   

  	
  3.2

  	
  Management
  Committee

  	
  32

  
	
   

  	
  3.3

  	
  Program
  Relationship Managers; Program Team

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV
  PROGRAM OPERATIONS

  	
  40

  
	
   

  	
  4.1

  	
  Operation of the
  Program

  	
  40

  
	
   

  	
  4.2

  	
  Certain
  Responsibilities of the NMG Companies

  	
  40

  
	
   

  	
  4.3

  	
  Certain
  Responsibilities of Bank

  	
  41

  
	
   

  	
  4.4

  	
  Ownership of
  Accounts; Account Documentation

  	
  42

  
	
   

  	
  4.5

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

  	
  44

  
	
   

  	
  4.6

  	
  Underwriting and
  Risk Management

  	
  44

  
	
   

  	
  4.7

  	
  Cardholder Terms

  	
  52

  
	
   

  	
  4.8

  	
  Internet Services

  	
  54

  
	
   

  	
  4.9

  	
  Sales Taxes

  	
  55

  
	
   

  	
  4.10

  	
  Participation in
  Reversals

  	
  56

  
	
   

  	
  4.11

  	
  Interest Free
  Receivables

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V
  MARKETING

  	
  56

  
	
   

  	
  5.1

  	
  Promotion of
  Program

  	
  56

  
	
   

  	
  5.2

  	
  Marketing
  Commitment

  	
  57

  
	
   

  	
  5.3

  	
  Communications
  with Cardholders

  	
  57

  
	
   

  	
  5.4

  	
  Additional
  Marketing Support

  	
  58

  
	
   

  	
  5.5

  	
  Approved
  Ancillary Products

  	
  59

  
	
   

  	
  5.6

  	
  Marketing Plan

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI
  CARDHOLDER INFORMATION

  	
  61

  
	
   

  	
  6.1

  	
  Customer
  Information

  	
  61

  
	
   

  	
  6.2

  	
  Cardholder Data

  	
  62

  
	
   

  	
  6.3

  	
  NMG Shopper Data;
  NMG Prospect Data

  	
  66

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII
  OPERATING STANDARDS

  	
  68

  
	
   

  	
  7.1

  	
  Reports

  	
  68

  
	
   

  	
  7.2

  	
  Servicing

  	
  69

  
	
   

  	
  7.3

  	
  Service Level
  Standards

  	
  70

  



 


i

















 


	
   

  	
  7.4

  	
  Credit Systems

  	
  71

  
	
   

  	
  7.5

  	
  Systems
  Interface; Technical Support

  	
  72

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII
  MERCHANT SERVICES

  	
  72

  
	
   

  	
  8.1

  	
  Transmittal and
  Authorization of NMG Charge Transaction Data

  	
  72

  
	
   

  	
  8.2

  	
  POS Terminals

  	
  73

  
	
   

  	
  8.3

  	
  In-Store Payments

  	
  73

  
	
   

  	
  8.4

  	
  Settlement
  Procedures

  	
  73

  
	
   

  	
  8.5

  	
  Bank’s Right to
  Charge Back

  	
  74

  
	
   

  	
  8.6

  	
  Exercise of
  Chargeback

  	
  75

  
	
   

  	
  8.7

  	
  No Merchant
  Acquirer/Processor Fees

  	
  75

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX
  PROGRAM ECONOMICS

  	
  76

  
	
   

  	
  9.1

  	
  NMG Compensation

  	
  76

  
	
   

  	
  9.2

  	
  Dispute
  Resolution

  	
  77

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X
  INTELLECTUAL PROPERTY

  	
  77

  
	
   

  	
  10.1

  	
  The NMG Licensed
  Marks

  	
  77

  
	
   

  	
  10.2

  	
  The Bank Licensed
  Marks

  	
  79

  
	
   

  	
  10.3

  	
  Intellectual
  Property

  	
  80

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI
  REPRESENTATIONS, WARRANTIES AND COVENANTS

  	
  81

  
	
   

  	
  11.1

  	
  General
  Representations and Warranties of NMG

  	
  81

  
	
   

  	
  11.2

  	
  General
  Representations and Warranties of the Bank Companies

  	
  83

  
	
   

  	
  11.3

  	
  No other
  Representations or Warranties

  	
  85

  
	
   

  	
  11.4

  	
  General Covenants
  of the NMG Companies

  	
  86

  
	
   

  	
  11.5

  	
  General Covenants
  of the Bank Companies

  	
  87

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII
  ACCESS, AUDIT AND DISPUTE RESOLUTION

  	
  88

  
	
   

  	
  12.1

  	
  Access Rights

  	
  88

  
	
   

  	
  12.2

  	
  Audit Rights

  	
  88

  
	
   

  	
  12.3

  	
  Accounting
  Dispute Resolution

  	
  89

  
	
   

  	
  12.4

  	
  Dispute
  Resolution

  	
  90

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII
  CONFIDENTIALITY

  	
  92

  
	
   

  	
  13.1

  	
  General
  Confidentiality

  	
  92

  
	
   

  	
  13.2

  	
  Use and Disclosure
  of Confidential Information

  	
  93

  
	
   

  	
  13.3

  	
  Unauthorized Use
  or Disclosure of Confidential Information

  	
  93

  
	
   

  	
  13.4

  	
  Return or
  Destruction of Confidential Information

  	
  94

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIV RETAIL PORTFOLIO ACQUISITIONS

  	
  94

  
	
   

  	
  14.1

  	
  Retailer that
  Operates a Credit Card Business

  	
  94

  
	
   

  	
  14.2

  	
  Retailer that has
  a Credit Card with another Issuer

  	
  95

  
	
   

  	
  14.3

  	
  Retailer that has
  a Credit Card with Bank

  	
  95

  
	
   

  	
  14.4

  	
  Co-Branded Credit
  Card

  	
  95

  
	
   

  	
  14.5

  	
  Conversion of
  Purchased Accounts

  	
  96

  
	
   

  	
  14.6

  	
  No Other NMG
  Obligations

  	
  96

  



 


ii

















 


	
  ARTICLE XV
  EVENTS OF DEFAULT; RIGHTS AND REMEDIES

  	
  96

  
	
   

  	
  15.1

  	
  Events of Default

  	
  96

  
	
   

  	
  15.2

  	
  Defaults by Bank

  	
  97

  
	
   

  	
  15.3

  	
  Defaults by the
  NMG Companies

  	
  98

  
	
   

  	
  15.4

  	
  Remedies for
  Events of Default

  	
  99

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVI
  TERM/TERMINATION

  	
  99

  
	
   

  	
  16.1

  	
  Term

  	
  99

  
	
   

  	
  16.2

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

  	
  99

  
	
   

  	
  16.3

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

  	
  101

  
	
   

  	
  16.4

  	
  Effective Date of
  Termination

  	
  102

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVII
  EFFECTS OF TERMINATION

  	
  102

  
	
   

  	
  17.1

  	
  General Effects

  	
  102

  
	
   

  	
  17.2

  	
  The NMG
  Companies’ Option to Purchase the Program Assets

  	
  103

  
	
   

  	
  17.3

  	
  Card Acceptance
  and Loyalty Program During Wind-Down

  	
  108

  
	
   

  	
  17.4

  	
  Dedicated Program
  Personnel

  	
  108

  
	
   

  	
  17.5

  	
  Rights of Bank if
  Purchase Option Not Exercised

  	
  108

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVIII
  INDEMNIFICATION

  	
  110

  
	
   

  	
  18.1

  	
  NMG
  Indemnification of Bank

  	
  110

  
	
   

  	
  18.2

  	
  Bank Companies’
  Indemnification of the NMG Companies

  	
  111

  
	
   

  	
  18.3

  	
  Procedures

  	
  112

  
	
   

  	
  18.4

  	
  Notice and
  Additional Rights and Limitations

  	
  113

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIX
  MISCELLANEOUS

  	
  113

  
	
   

  	
  19.1

  	
  Precautionary
  Security Interest

  	
  113

  
	
   

  	
  19.2

  	
  Securitization,
  Participation or Pledge of Cardholder Indebtedness

  	
  114

  
	
   

  	
  19.3

  	
  Assignment

  	
  114

  
	
   

  	
  19.4

  	
  Sale or Transfer
  of Accounts

  	
  114

  
	
   

  	
  19.5

  	
  Subcontracting

  	
  115

  
	
   

  	
  19.6

  	
  Sales and Use Tax

  	
  115

  
	
   

  	
  19.7

  	
  Amendment

  	
  115

  
	
   

  	
  19.8

  	
  Non-Waiver

  	
  115

  
	
   

  	
  19.9

  	
  Severability

  	
  115

  
	
   

  	
  19.10

  	
  Waiver of Jury
  Trial and Venue

  	
  115

  
	
   

  	
  19.11

  	
  Governing Law;
  Compliance with Law

  	
  116

  
	
   

  	
  19.12

  	
  Specific
  Performance

  	
  116

  
	
   

  	
  19.13

  	
  Captions

  	
  116

  
	
   

  	
  19.14

  	
  Notices

  	
  116

  
	
   

  	
  19.15

  	
  Coordination of
  Consents and Approvals

  	
  117

  
	
   

  	
  19.16

  	
  Further
  Assurances

  	
  117

  
	
   

  	
  19.17

  	
  No Joint Venture

  	
  117

  
	
   

  	
  19.18

  	
  Press Releases

  	
  117

  
	
   

  	
  19.19

  	
  No Set-Off

  	
  118

  



 


iii

















 


	
   

  	
  19.20

  	
  Conflict of
  Interest

  	
  118

  
	
   

  	
  19.21

  	
  Third Parties

  	
  118

  
	
   

  	
  19.22

  	
  Force Majeure

  	
  118

  
	
   

  	
  19.23

  	
  Entire Agreement

  	
  119

  
	
   

  	
  19.24

  	
  Binding Effect

  	
  119

  
	
   

  	
  19.25

  	
  Counterparts/Facsimiles

  	
  119

  
	
   

  	
  19.26

  	
  Survival

  	
  119

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XX
  RECOURSE CREDIT PROGRAM

  	
  120

  
	
   

  	
  20.1

  	
  Recourse Credit
  Program

  	
  120

  
	
   

  	
  20.2

  	
  NMG Obligations

  	
  120

  
	
   

  	
  20.3

  	
  Collection of
  Charged-Off Partial Recourse Accounts and Purchased Full Recourse Accounts

  	
  120

  
	
   

  	
  20.4

  	
  Performance

  	
  121

  
	
   

  	
  20.5

  	
  Reports

  	
  121

  
	
   

  	
  20.6

  	
  Termination

  	
  121

  
	
   

  	
  20.7

  	
  Portfolio Cap

  	
  121

  
	
   

  	
  20.8

  	
  Removals from
  Recourse Portfolio

  	
  121

  
	
   

  	
  20.9

  	
  Annual Review

  	
  121

  



 


iv

















 


AMENDED AND RESTATED


 


CREDIT CARD PROGRAM AGREEMENT


 


This Amended and Restated
Credit Card Program Agreement is made as of the 23rd day of September,
2010, 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 HSBC Card Services Inc. (formerly merged
with HSBC Private Label Corporation, which was formerly known as Household
Corporation), a Delaware corporation (“Primary Servicer”).


 


W  I  T  N  E  S  S  E  T
H:


 


WHEREAS, the NMG Companies are
engaged in, among other activities, operating retail department stores;


 


WHEREAS, the Parties are party to a
Credit Card Program Agreement, dated as of June 8, 2005 (the “Original
Agreement”), pursuant to which the Parties established a program pursuant
to which Bank issues 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 thereof;


 


WHEREAS, the Parties hereto wish to
amend, restate and extend the Agreement as set forth herein;


 


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:


 


“ABA Delinquency Forecast”
means, with respect to any month, the American Banker Association’s (ABA)
forecast of bankcard delinquency rates designated  “ABA Delinquency Rate: Bank Card Loans - Open
End, (% of $ Volume 30+ Days Past Due, SA) (FABABCVOL.US)” “baseline scenario”
as most recently published in the Moody’s publication “Economy.com”.


 


“ABA Delinquency Forecast
Condition” means:


 


(i)  with respect to each month
during the period from the Effective Date through February 2012, the
period commencing on the first date on which the forecast for any month in the
first [***] forecast in the ABA Delinquency Forecast published for the most
recently completed month is more than [***] greater than the forecast for any
corresponding month in the 


 

















 


ABA Delinquency Forecast published
for March 2010 (as set forth in Schedule 1.1(a)) and ending on the first
date thereafter when the forecast for each of the first [***] reported in the
ABA Delinquency Forecast published for the most recent month is less than [***]
greater than the forecast for the corresponding month in the ABA Delinquency
Forecast published for March 2010 (as set forth in Schedule 1.1(a)).


 


(ii)  with respect to each
month during the period from March 2012 through the end of the Term, the
period commencing on the first date on which the forecast for any month in the
first [***] forecast in the ABA Delinquency Forecast published for the most
recently completed month is in excess of [***] and ending on the first date
thereafter when the forecast for each of the first [***] forecast in the ABA
Delinquency Forecast published for the most recent month is less than or equal
to [***].


 


“Account” means any Private
Label Account or Non-Card Payment Plan account under which a purchase
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.


 


“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.


 


“Account Terms Negotiation Period”
has the meaning set forth in Section 4.7(c)(v).


 


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


 


“Active Account” means for
any period, an Account with a non-zero account balance or other financial
activity during such period.


 


“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.


 


2

















 


“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.


 


“All Time High Account Balance”
means, with respect to any Account, the highest balance ever owed under such
Account since the opening of such Account.


 


“Alternative Risk Change Payment
Arrangement”  means an arrangement,
as described in Schedule 4.6(f), pursuant to which NMG shall make payments to
Bank, as calculated and described in such schedule, [***] affecting certain
segments of RAM Deficient Accounts.


 


“Annual Servicing Fee Rate”
means the sum of [***] and the Incremental Annual Servicing Fee Rate, as
reduced, if applicable, pursuant to Section 2.03(b) of the Servicing
Agreement.


 


“Annualized” means, for any
calculation or measurement made over any period, multiplying the calculation or
measurement by three-hundred-sixty-five (365) and dividing by the number of
days in such period.  For example, (i) if
such period is the full months of March and April, then the calculation or
measurement would be multiplied by three-hundred-sixty-five (365) and divided
by 61 (which is the equivalent of multiplying the measurement or calculation by
5.984) and (ii) if such period is the full months of September 2010
through December 2011, then the calculation or measurement would be
multiplied by 365 and divided by the sum of 365 and the number of days in September 2011
through December 2011 (or 122) (which is the equivalent of multiplying the
measurement or calculation by 0.749).


 


“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, including the Credit Card Accountability
Responsibility and Disclosure Act of 2009 (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; (vi) the USA PATRIOT Act; (vii) the Unfair and Deceptive Trade
Practices Act; and (viii) the Dodd-Frank Wall Street Reform and Consumer
Protection 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.


 


“Applicable Request Date”
means, in connection with a request for Program Asset Information, the
following applicable date: (i) in connection with an expected expiration
of this Agreement at the end of a Term, the date that is one year prior to the
end of the Term; (ii) the date on which Bank proposes a change in Risk
Management Policies that NMG reasonably believes would, if implemented, permit
NMG to terminate this Agreement pursuant to Section 16.2(f) (other
than Section 16.2(f)(ii)(B)); (iii) in connection with a proposal by
Bank that would permit NMG to terminate this Agreement pursuant to Section 16.2(f)(ii)(B),
the Risk Information Date; (iv) in connection with a circumstance that
could give rise to a possible termination by 


 


3

















 


NMG pursuant to Section 16.2(i) or
by Bank pursuant to Section 16.3(c) or (d), the [***] day prior to
the end of the Account Terms Negotiation Period or the negotiation period
pursuant to Section 2.2(d), as the case may be; or (v) with respect
to any other termination, the date on which the notice of termination is
delivered or received by NMG, as applicable;


 


“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).


 


“Approval Rate” with respect
to any segment or group of Applications submitted during any particular
measurement period pursuant to this Agreement, a percentage equivalent of a
fraction the numerator of which is the number of Applications in such segment
that were approved during such measurement period and the denominator of which
are all Applications of such segment or group submitted by an Applicant during
such measurement period; provided, however, that (i) any Application that
would have been declined solely due to a requirement imposed pursuant to a
Change in Law enacted after the Effective Date (i.e., an Application that would
have been approved in absence of such Change in Law but was required to be
declined pursuant to such Change in Law) shall be considered approved (and
included in the numerator) for purposes of calculating the foregoing fraction
and (ii) any Application that would have been approved solely due to a
requirement imposed pursuant to a Change in Law enacted after the Effective
Date (i.e., an Application that would have been declined in absence of such
Change in Law but was required to be approved pursuant to such Change in Law)
shall be considered disapproved (and excluded from the numerator) for purposes
of calculating the foregoing fraction.


 


“Approved Ancillary Products”
means any Credit Card enhancement and similar products approved by the
Management Committee for offering under the Program from time to time.


 


“Average Daily Gross Receivables”
means, for any measurement period in respect of any segment of Accounts, the
sum of the Gross Receivables in respect of such segment of Accounts outstanding
as of each day during such measurement period divided by the number of days in
such measurement period.


 


“Average Gross Receivables”
means, for any measurement period in respect of any segment of Accounts, the
average of the Gross Receivables in respect of such Accounts on the last day of
each calendar month, Fiscal Month or Program Month, as the case may be, during
such measurement period.


 


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


 


“Average Interest Free
Receivables” means, for any Program Year, the average for each Program
Month occurring in such Program Year of the Program Month-end Billed Cardholder
Debt as to which no interest will accrue in accordance with the terms of credit
plans in effect in connection with the Account under which such Billed
Cardholder Debt was incurred.


 


4

















 


“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 and/or Bank Parent listed on Schedule 1.1(b) 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.


 


“Bank’s Expanded Revenue
Shortfall Notice” has the meaning set forth in Section 2.2(d)(iii) hereof.


 


“Benchmark Population” means
all Persons who submitted an Application at a retail establishment, although
excluding Internet and catalog channels, owned or operated by the NMG Companies
or their Affiliates (including at a Licensee department therein) during the
period from [***] through [***], provided, however, that for purposes of
reporting on and evaluating any proposed modification to the Risk Management
Policies for which the information required pursuant to Section 4.6(c) must
be submitted prior to [***], the Benchmark Population means all such Persons
who submitted such an Application through the end of the month ended prior to
the Risk Information Date.


 


“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 and Non-Card Payment Plans
(including principal balances from outstanding charges, charges for Approved
Ancillary Products, interest, 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.


 


5
















 


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


 


“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.


 


“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 or Non-Card Payment Plan (including
NMG Charge Transaction Data with respect to charges on Private Label 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, interest, 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.


 


“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, 


 


6

















 


email addresses (as available),
telephone numbers or social security numbers of any or all Cardholders.


 


“Change in Law” means any of
the events or circumstances specified in subsections (a) through (c) below,
if such event occurs after the Effective Date:


 


(a)  the enactment or
promulgation of (i) a new federal, state or local statute, law or
regulation, or a modification to any such statute, law or regulation, in each
case binding on Bank or the NMG Companies, or (ii) any implementing
regulations or interpretations issued under any such statute, law or regulation
referred to in clause (i) that are binding on Bank or the NMG Companies;


 


(b)  the issuance, enactment or
promulgation of a written directive, guidance, order or interpretation with
respect to a statute, law or regulation by a 
Governmental Authority that has jurisdiction, authority or control over
Bank or the NMG Companies, as the case may be, which directive, guidance, order
or interpretation is either (i) specifically directed at and binding upon
Bank or the NMG Companies; (ii) while not specifically directed at Bank or
the NMG Companies, either (A) is directed at and binding upon all
institutions, including Bank or the NMG Companies, similarly situated as Bank
or the NMG Companies (e.g. OCC directive to all banks over which the OCC
exercises authority) or (B) would, based upon a Legal Opinion delivered by
Bank’s counsel, be likely to subject Bank to monetary liability or a
disciplinary, enforcement or similar regulatory action by a Governmental
Authority if Bank or NMG were to fail to comply with such directive, guidance,
order or interpretation; or


 


(c)  a decision, order, decree,
ruling or opinion of a United States federal or state court containing an
interpretation of a statute, law or regulation; but only to the extent that
Bank is advised pursuant to a Legal Opinion of Bank’s counsel that such
decision, order decree, ruling or opinion is binding on Bank’s or the NMG
Companies’ business and operations, or that failure to adhere to such decision,
order, ruling or opinion is likely to subject Bank to monetary liability or a
disciplinary, enforcement or similar regulatory action by a Governmental
Authority;


 


[***]


 


7

















 


“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.


 


“CIL Decline” means the
existence of all of the following conditions: (i) a Change in Law (other
than a Repeat Change in Law (as defined below)) 
(A) was enacted, promulgated or implemented within the most recent
[***] and (B) remains in effect, (ii) the effect of applying such
Change in Law on a pro forma basis to the [***] completed months immediately
preceding such implementation would have been to (A) decrease [***] for
such period by more than [***] and (B) cause a [***] to have been in
effect during the duration of such period and (iii) Bank shall have
delivered a written certification with respect to the foregoing in accordance
with Section 4.6(j).  As used
herein, “Repeat Change in Law” means any Change in Law as to which the
substantive requirements thereof applicable to Bank or the NMG Companies, as
the case may be, shall have been the subject of a prior certification pursuant
to Section 4.6(j).  For example, in
the event that Bank shall have certified upon enactment of a particular statute
as to a CIL Decline, implementation of such statute or regulation implementing
or interpreting the requirements of such statute would be a Repeat Change in
Law and would not be considered a Change in Law for purposes of clause (i) above.
[***].


 


8

















 


“CIL Negotiation Period”
means the period of [***] commencing with the date on which Bank provides
written notice to NMG of a CIL Decline pursuant to Section 4.6(j).


 


“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 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.


 


“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(c).


 


“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”
means (i) other than for purposes of Section 3.2(g)(iv), (ix) or
4.7, with respect to any feature or aspect of the Program, that such feature or
aspect is both (A) no less favorable to the NMG Companies than comparable
aspects and features of the Comparable Partner Programs and (B) 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) and (ii) for purposes of Sections 3.2(g)(iv), (ix) and
4.7, (A) with respect to each Account term referenced in the definition of
“Existing Terms Change” other than the Standard APR, that such term is no less
favorable to the Cardholder (e.g. imposes no greater expense, obligation or
burden on the Cardholder) than the least favorable corresponding term
implemented by any of the NMG Primary Competitors and [***].


 


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


 


“Control Group” means a
segment of Cardholders to which a proposed Risk Management Policy change with
respect to or affecting existing Accounts will not be applied, which shall be a
randomly selected segment that is representative of the Cardholders to which
such modification is proposed to be applied, and that is large enough to
achieve statistically significant test results.


 


“Control Population” has the
meaning set forth in Section 4.7(c)(iii) hereof.


 


9

















 


“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 includes all activities relating to the Program maintained
pursuant to this Agreement.


 


“Current Receivables” means,
as of any date, Gross Receivables less the portion of such Gross Receivables
that are past due beyond the payment due date thereof.


 


“Delinquency Condition” means
any time commencing on the first date on which the Rolling 6 Month Delinquency
Rate for the most recently completed calendar month was greater than [***] and
ending on the first date thereafter on which the Rolling 6 Month Delinquency
Rate for the most recently completed calendar month was equal to or less than
[***].


 


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


 


“Downgrade Event” means NMG’s
Corporate Family Rating by two of the three of the Rating Agencies shall be at
or below the rating designated as “Downgrade Trigger” below:


 


	
  Rating Agency

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  
	
  Standard & Poor’s

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  
	
  Fitch

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  
	
  Moody’s

  	
   

  	
  [***]

  



 


“Due Diligence Period” means (i) in
connection with a termination of this Agreement by NMG pursuant to Section 16.2(f),
the period commencing on the Risk Information Date and ending on the date that
is [***] following the Risk Information Date; (ii) in the case of a
termination by NMG pursuant to Section 16.2(i), the period commencing on
the date on which NMG delivers its notice of termination and ending on the date
that is [***] thereafter; (iii) in the case of the expiration of this
Agreement at the end of a Term or any termination by NMG other than pursuant to
Section 16.2(f) or (i), the period commencing on the date on which
all of the Program Asset Information has been delivered to NMG and the
prospective Nominated Purchasers identified to Bank by NMG and ending on the
date that is [***] following such date; 


 


10

















 


and (iii) in the case of a
termination of this Agreement by Bank prior to the end of the Term, the period
commencing on the receipt by NMG of the notice of termination and ending on the
date that is [***] following such date. 
In addition, in the event of any extension of NMG’s purchase option
pursuant to Section 17.2(b), the Due Diligence Period shall also include
the period commencing on the commencement of such extension and ending on the
date on which NMG makes its election with respect to its purchase of the Program
Assets or such extension expires, as the case may be.


 


“Effective Annual Servicing Fee
Rate” has the meaning ascribed to it in the Servicing Agreement.


 


“Effective Date” means July 7,
2010.


 


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


 


“Existing Account Reserve Amount”
means an amount equal to the lesser of (i) [***] and (ii) the Risk
Change Shortfall.


 


“Existing Term Change” means
any modification of any of the following terms of the Accounts from those in
effect on the Effective Date: (i) Standard APR, (ii) Method of
Computing the Balance for Purchases, (iii) Minimum Interest Charge, (iv) Grace
Period for the Repayment of Purchases, (v) Returned Payment Fees, (vi) Grace
Period for the Imposition of Late Fees, (vii) Minimum Payment Amount and (viii) Late
Payment or Late Fee (at cycle), each as set forth on Schedule 4.7; it being
understood for the avoidance of doubt that any change other than those
expressly described above shall be considered implementation of a New Account
Term.


 


“Expanded Acceptance Revenue
Shortfall” has the meaning set forth in Section 2.2(d)(iii).


 


“External Trigger Condition”
means a condition whereby both of the following conditions referred to in
clause (i) and (ii) shall be in existence:  (i) an External Trigger RAM Condition
and (ii) any one or more of an Unemployment Forecast Condition, an ABA
Delinquency Forecast Condition or a Housing Price Forecast Condition.


 


“External Trigger RAM Condition”
means the period commencing on the first date on which the Rolling 3-Month Post
MP RAM was less than [***] for the two most recently completed calendar months
and ending on the first date thereafter on which the Rolling 3-Month Post MP
RAM was equal to or greater than [***] for the two most recently completed
calendar months.


 


“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.


 


11

















 


“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 Season” means either
the period of the first and second Fiscal Quarter of a Fiscal Year or the third
and fourth Fiscal Quarter of a Fiscal Year.


 


“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, 2011.


 


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


 


“[***]” means any time commencing on
the first date on which the Rolling 3 Month Post MP RAM for the [***] most
recently completed calendar months was less than [***] and ending on the first
date thereafter on which the Rolling 3 Month Post MP RAM for the two most
recently completed calendar months was [***] and [***] or greater.


 


“[***]” means the period of [***]
commencing with the date on which Bank provides written notice to NMG of a
[***] pursuant to Section 4.6(o).


 


“Fraud Loss” means, during
any period, actual fraud loss incurred by Bank during such period net of
chargebacks to the NMG Companies during such period.


 


“Funding Costs” means for
each calendar month during any period, [***].


 


“Full Recourse Accounts”
means (a) Accounts issued pursuant to Applications that NMG requests Bank
to approve that Bank would otherwise decline under the Risk Management Policies
then in effect, (b) Accounts where NMG requests Bank to grant a credit
line increase that would otherwise be denied by Bank due to the Risk Management
Policies then in effect and (c) Accounts that have been closed by the
customer that are not eligible for reinstatement or by Bank (or that would be
closed by Bank) in accordance with the Risk Management Policies then in effect
but which NMG requests to be re-opened by Bank or that Bank refrain from
closing at the request of NMG.


 


12

















 


“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 Financing Income” means, with respect to any period, an
amount equal to the sum of assessed or accrued Net Interest Income, late fees,
NSF fees and any other interest or fees payable under the Program and any
amounts paid by NMG to Bank pursuant to Section 4.10 or 4.11 during such
period less the sum of fee waivers and the amount required under GAAP to be
amortized by Bank as deferral amortization pursuant to Financial Accounting
Standard No. 91 during such period. 
Fees from Approved Ancillary Products are not included as part of Gross
Financing Income.


 


“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 interest and late charges;
and any other billed or unbilled fees, charges and interest assessed on such
accounts).


 


“Gross Write Off” means, with
respect to Accounts that have been written off in a particular period in
accordance with the credit and collection policies contained in the Risk
Management Policies, the portion of the total Gross Receivables charged off as
uncollectible in accordance with such credit and collection policies (and not
as a result of fraud) during such period.


 


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


 


“Housing Price Forecast”
means, with respect to any month, the forecast of housing prices designated “FHFA
Conventional and Conforming Home Price Index, (Index, 1980Q1 = 100, NSA)” “FHOFHOPI.US”
as most recently published in the Moody’s publication “Economy.com”.


 


“Housing Price Forecast Condition”
means:


 


(i)  with respect to each month
during the period from the Effective Date through February 2012, the
period commencing on the first date on which the forecast for any month in the
first [***] forecast in the Housing Price Forecast published for the most
recently completed month is less than the amount that is [***] less than the
forecast for the corresponding month in the Housing Price Forecast published
for March 2010 (as set forth in Schedule 1.1(e)) and ending on the first
date thereafter when the forecast for each of the first [***] forecast in the
Housing Price Forecast published for the most recently completed month is equal
to or greater than the amount that is [***] less than the forecast for the corresponding
month in the Housing Price Forecast published for March 2010 (as set forth
in Schedule 1.1(e)).


 


(ii)  with respect to each
month during the period from March 2012 through the end of 


 


13

















 


the Term, the period commencing on
the first date on which the forecast for any month in the first [***] forecast
in the Housing Price Forecast published for the most recently completed month
is less than the greater of (x) the amount that is [***] less than the forecast
for the corresponding month in the Housing Price Forecast published for March 2012
and (y) [***] and ending on the first date thereafter when the forecast
for each of the months in the [***] period reported in the Housing Price
Forecast for the most recent month is equal to or greater than the greater of (A) [***]
and (B) the amount that is [***] less than the forecast for the
corresponding month in the Housing Price Forecast published for March 2012
(as set forth in Schedule 1.1(e)).


 


“Imputed Income Model” means
a model designed to estimate income of a Person in accordance with Applicable
Law based on certain attributes available to Bank or NMG without contacting
such Person, such as demographic qualities and/or information in a consumer’s credit
report.


 


“Incremental Annual Servicing Fee
Rate” means, at any time, the excess, if any, by which the Annual Servicing
Fee Rate calculated in accordance with Section 4.04 of the Servicing
Agreement exceeds [***].


 


“Incremental Servicing Expenses”
means, with respect to any measurement period, the Annualized percentage
equivalent of a fraction equal to (A) (i) the Incremental Annual
Servicing Fee Rate for such period, multiplied by (ii) the Active Accounts
for such period, divided by (B) the Average Daily Gross Receivables of all
Accounts for such period.


 


“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(a) 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).


 


“Interest Free Receivables”
means Gross Receivables incurred pursuant to active credit plans that do not
bear interest or pursuant to Accounts of Cardholders as to which Interest has
been permanently waived (other than Gross Receivables incurred pursuant to CCCS
Accounts or 


 


14

















 


Accounts for which a payment plan
was instituted in connection with the servicing and collection thereof).


 


“Interest Reversal Percentage”
means, with respect to any Program Year, the 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 Program Year, divided by (ii) the
aggregate amount of all finance charges assessed on the Accounts during such
Program 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 Existing Term Change or change in New Account
Terms in such Program Year shall be excluded from both the numerator and
denominator during the period of [***] after the effective date of such terms
change.


 


“Interim Servicing Agreement”
has the meaning set forth in Section 17.2(f).


 


“Internal Trigger Condition”
means a condition whereby one of the following conditions referred to in clause
(i) or (ii) is then in effect: (i) a Delinquency Condition or (ii) a
Write-Off Condition.


 


“Internet” means the global
communication network that allows computers not connected by a network to
connect and exchange information and which includes but is not limited to
websites owned or operated by NMG, the NMG Companies, Bank or their respective
Affiliates or their Licensees and websites of Persons linked or unlinked to
same.


 


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


 


“Investment Grade Credit Rating”
means, with respect to any Rating Agency, a credit rating by such Rating Agency
specified as follows:


 


	
  Rating Agency

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  
	
  Standard & Poor’s

  	
   

  	
  [***];

  
	
   

  	
   

  	
   

  
	
  Fitch

  	
   

  	
  [***];

  
	
   

  	
   

  	
   

  
	
  Moody’s

  	
   

  	
  [***].

  



 


“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 Program Year, the percentage 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 Program Year, divided by (ii) the
aggregate


 


15
















 


amount of all late fees assessed on
the Accounts during such Program 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 Existing Term Change or change
in New Account Terms in such Program Year shall be excluded from both the
numerator and denominator during the period of [***] 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 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.


 


“Liquidity Premium” means a
component of Bank’s internal charge for cost of funds calculated in the normal
course of business [***].


 


“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(f) 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(a) hereof.


 


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


 


“Marketing Expense” means,
during any period, actual marketing expenses incurred by Bank or reimbursements
made by Bank to NMG of marketing expenses incurred by NMG during such period,
in each case that satisfy the marketing commitments set forth in Schedule 5.2
hereto.


 


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


 


16

















 


“Merchant Discount” means a
discount rate or transaction fees generally applied against settlements due to
merchants for transactions with respect to the use of a Credit Card.


 


“Merchant Participation”
means, for any measurement period, the amount paid by Bank to NMG pursuant to Section 9.1(a)(i) and
Schedule 9.1(a)(i), as such amount may be reduced and adjusted pursuant to Section 9.1(c)(ii)(B) and
as such amount is adjusted on a quarterly and annual basis as set forth in
Schedules 9.1(a)(iii) and 9.1(a)(iv), respectively.


 


“Merchant Participation Rate”
means, for any measurement period, Merchant Participation divided by Net Credit
Sales.


 


“Merchant Participation Yield”
means, for any measurement period, Merchant Participation divided by Average
Daily Gross Receivables, which shall be Annualized.


 


“Monthly Servicing Fee” means
the number of Active Accounts with respect to such month multiplied by the
Annual Servicing Fee Rate divided by twelve (12).


 


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


 


“Net Credit Sales” means, for
any period, 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 with respect to such period, 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 with respect to such period.


 


“Net Interest Income” means
the total dollar amount of revenue received as a result of interest assessed
upon Cardholders, less any interest waivers granted.


 


“Net Write-Offs” means, with
respect to Accounts that have been written off in a particular period in
accordance with the credit and collection policies contained in the Risk
Management Policies, (a) the portion of the total Gross Receivables
charged-off as uncollectible to the written-off Accounts in accordance with
such credit and collection policies (and not as a result of fraud losses)
during such period minus (b) any recoveries, including sales tax
recoveries, received during such period on previously written-off Accounts (net
of amounts payable to collection agencies in connection with such recoveries).


 


“Net Yield” means the dollar
amount equal to (a) the sum of assessed interest, late fees and other fees
under the Program during such Program Year, minus (b) the sum of all
concessions, reversals and write-offs of such interest, late fees and other
fees during such Program Year.


 


“New Account Loss Reserve Amount”
means (i) with respect to each Program Month occurring during the Reserve
Period, the lesser of (A) all Merchant Participation payable pursuant to Section 9.1(a)(i) during
such Program Month and (B) [***] and (ii) with respect to any Program
Month occurring during the Reserve Period that is less than a full calendar
month, the lesser of (A) all Merchant Participation payable pursuant to Section 9.1(a)(i) during
such 


 


17

















 


period and (B) [***] divided
by the full number of days in such Program Month and multiplied by
the number of days in such Program Month occurring during such [***].


 


“New Account Policy” has the
meaning set forth in Section 4.6(c)(v).


 


“New Account Terms” means any
terms or conditions of an Account other than (i) those terms and
conditions set forth in Schedule 4.7 (as such schedule may be amended from time
to time in accordance with Article III) and (ii) such other terms and
conditions as are in effect with respect to the Accounts on the Effective Date.


 


“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
Credit Card offered or maintained pursuant to this Agreement 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 Credit Cards listed in Section B
of Schedule 1.1(g).


 


“NMG Credit Event” means the
occurrence and continuance of any of the following:  (i) the amount available for borrowing
by the NMG Companies and their subsidiaries under their asset based lending
credit facility is equal to or less than [***], (ii) a Downgrade Event or (iii) the
NMG Companies shall have defaulted on the payment of principal or interest on
indebtedness for borrowed money and as a result of such default indebtedness
shall have become or been declared due and payable and such default remains in
effect and uncured.  Notwithstanding
anything to the contrary in this definition, following the occurrence of a
circumstance described in clause (i) above, the NMG Credit Event that
shall occur as a result of such event shall be deemed to continue until such
circumstance shall have ceased to be in effect for [***] consecutive days.


 


“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.


 


18

















 


“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(h) 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 A 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 Schedule 5.2.


 


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


 


“NMG Primary Competitors”
means Saks Fifth Avenue, Barneys New York, Nordstrom and Bloomingdale’s and any
successors to any of the foregoing; provided that if there are less than
three (3) such Persons in existence at any time during the Term, the NMG
Primary Competitors shall include such additional Persons, if any, as shall be
determined by the Management Committee.


 


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


 


“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(g) 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.


 


19

















 


“Non-Transactor
Gross Receivables” means, with respect to any calendar month, total Average
Daily Gross Receivables in such month less the portion of such Average Daily
Gross Receivables that are Transactor Gross Receivables.


 


“One-Month
LIBOR” means, as of any day, the rate for Eurodollar deposits having a
one-month maturity that is published and designated by Bloomberg Financial
Markets as “US0001M” on that day (or on the most recent date of publication if
such day is not a business day on which Bloomberg Financial Markets is
published).


 


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


 


“Par Value” means the
Cardholder Indebtedness related to the Private Label Accounts and Non-Card
Payment Plans at the time of any purchase of the Program Assets, or Wind-Down
Assets, as the case may be, excluding written-off Cardholder Indebtedness (in
accordance with Bank’s write-off policy then applicable to the Program).


 


“Partial Recourse Accounts”
means an Account as to which NMG has requested that Bank approve a credit line
increase beyond the credit line that would be approved by Bank pursuant to the
Risk Management Policies then in effect.


 


“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.


 


“Post MP / Pre Servicing RAM”
means, for any measurement period, (i) the Profit Sharing Post-MP RAM for
such measurement period, plus (ii) the Incremental Servicing Expenses for
such measurement period.


 


“Post MP RAM” means, for any
measurement period, (i) the Profit Sharing Post-MP RAM for such
measurement period, plus (ii) the Profit Sharing Differential for such
measurement period.


 


“Preliminary Non-Purchase Event”
means the occurrence of either of the following events (i) the delivery by
NMG to Bank of a notice that it does not intend to exercise its option to
purchase, or arrange the purchase of, the Program Assets pursuant to Section 17.2(a) or
(ii) the expiration of the time period during which such option is
exercisable pursuant to Section 17.2(b) (without regard to the
proviso therein permitting extension of such period) without NMG having served
notice on Bank that it intends to exercise such purchase option.


 


“Pre-Tax Income Excluding
Operating Expense “ means with respect to any measurement period, the (A) Gross
Financing Income for such period, minus (B) Net Write-Offs for such
period, minus (C) Funding Costs for such period, minus (D) Marketing
Expenses for 


 


20

















 


such period, minus (E) the
total of all amounts payable by Bank to NMG for such period pursuant to Article IX,
minus (F) Fraud Loss for such period.


 


“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 the Accounts linked to NMG Credit Cards.


 


“Profit Sharing Differential”
means, with respect to any measurement period, the Annualized percentage
equivalent of a fraction equal to (i) (A) the Quarterly RAM Sharing
Amount (in the case of a quarterly period) or Annual RAM Sharing Amount (in the
case of an annual period) calculated in accordance with the provisions of
Schedule 9.1(a)(iii) or (iv) and using the Post MP / Pre Servicing
RAM in place of the Profit Sharing Post MP RAM, minus (B) the Quarterly
RAM Sharing Amount (in the case of a quarterly period) or Annual RAM Sharing
Amount (in the case of an annual period) divided by (ii) the Average Daily
Gross Receivables for such period.


 


“Profit Sharing Post MP RAM”
means Risk Adjusted Margin for such measurement period, minus Merchant
Participation Yield for such measurement period minus Incremental
Servicing Expenses for such measurement period.


 


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


 


“Program Asset Information”
means records, accounts and information regarding the Accounts, Program and
Program Assets reasonably requested by NMG or any prospective Nominated
Purchaser in connection with their due diligence investigation of a possible
program relationship with NMG and the purchase of the Program Assets, which Program
Asset Information shall include portfolio-level performance data and a master
file of the Accounts (both of which shall include data for at least the [***]
period preceding the month in which the data is requested).


 


“Program Asset Information Date”
means the date on which Bank has delivered to NMG (i) all of the
information required to be delivered by Bank pursuant to Section 17.2 and (ii) a
certification signed by an authorized officer of Bank certifying that Bank has
delivered to NMG all of the information required to be delivered by Bank
pursuant to Section 17.2.


 


“Program Assets” means the
Accounts, Account Documentation, Cardholder Data, Solicitation Materials and
all Cardholder Indebtedness (whether held by Bank or a third party); provided,
however, for purposes of Section 17.5, Program Assets shall not include
any of the foregoing with respect to the Accounts required to be purchased by
the NMG Companies or a Nominated Purchaser pursuant to Section 17.5(a).


 


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


 


21

















 


“Program Month” means (i) the
period from the Effective Date through the end of the first calendar month
thereafter, (ii) each full calendar month thereafter occurring when this
Agreement is in effect and (iii) the period from the end of the calendar
month immediately preceding the effective date of the termination of this
Agreement and ending on such effective date of termination.


 


“Program Quarter” means (i) the
period from the Effective Date through the third (3rd) calendar month-end occurring after the Effective Date, (ii) each
period thereafter commencing on the day after a Program Quarter and ending on
the third calendar month thereafter (or, if earlier, ending on the effective
date of the termination of this Agreement).


 


“Program Year” means (i) the
period from the Effective Date through the twelfth (12th) calendar month-end occurring after the Effective Date and (ii) each
period thereafter commencing on the day after the end of a Program Quarter and
ending on the end of the twelfth (12th) calendar month thereafter (or, if earlier, ending on the
effective date of termination of this Agreement.


 


“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.


 


“Protection Through MP Reduction”
has the meaning set forth in Section 4.6(f).


 


“Purchase Agreement” means
the purchase and sale agreement, dated as of June 8, 2005, among the NMG
Companies, Bank and the other parties thereto.


 


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


 


“RAM Condition” means any
time commencing on the first date on which the Rolling 3 Month Post MP RAM for
the [***] most recently completed calendar months was less than [***] and
ending on the first date thereafter on which the Rolling 3 Month Post MP RAM
for the two most recently completed calendar months was [***] or greater.


 


“RAM Deficient Account” means
an Account in any segment of Accounts as to which the forecasted Post MP RAM
for such segment for the period from the occurrence of a Preliminary
Non-Purchase Event through the [***] thereafter (which forecast shall be
derived using the methodology set forth in Schedule 1.1(i) and in
accordance with Section 17.2(g) and which shall be certified as set
forth in such Schedule) is less than [***]. Notwithstanding anything to the
contrary contained in this Agreement, Accounts designated as “Q-Block Accounts”
or “VIP Accounts” in accordance with the Risk Management Policies shall be
deemed not to constitute “RAM Deficient Accounts.”


 


“Rating Agencies” means the
collective reference to each of Standard & Poor’s Ratings Services, a
division of The McGraw-Hill Companies, Inc., Moody’s Investors Service, Inc.
and Fitch, Inc. and any successors to any of the foregoing.


 


22

















 


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


 


“Recourse Accounts” has the
meaning set forth in Section 20.1(a).


 


“Recourse Portfolio” means,
at any time, the combination of those Accounts that are Full Recourse Accounts
and those that are Partial Recourse Accounts at such time.


 


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


 


“Reserve Period” means the
period commencing on the date on which NMG delivers a notice of termination to
Bank pursuant to Section 16.2(f)(ii)(B) and ending on the effective
date of the termination of this Agreement; provided, however, that
there shall be excluded from the Reserve Period (and the number of days in the
Reserve Period shall be correspondingly reduced) by the number of days during
the period, if any, commencing on the date NMG elects to extend the period
during which the purchase option referred to in Section 17.2 is
exercisable and ending on the date on which NMG elects to purchase the Program
Assets or such option to purchase the Program Assets expires without being
exercised.


 


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


 


“Risk Adjusted Margin” means,
with respect to any segment of Accounts for any period, the Annualized
percentage equivalent of a fraction equal to (A) (i) Gross Financing
Income for such Accounts for such period, minus (ii) Net Write-Offs with
respect to such Accounts for such period (provided, however, that to the extent
any Net Write-Offs with respect to the portion of any Recourse Account that is
recourse to NMG are subtracted pursuant to this clause (ii), then there shall
be added back and netted from such Net Write-Off amount the aggregate amount of
all payments of NMG pursuant to Article XX in respect of such Account),
minus (iii) Funding Costs for such period times a fraction the numerator
of which is the Average Daily Gross Receivables in respect of such Accounts of
such segment during such period and the denominator of which is the Average
Daily Gross Receivables of all Accounts during such period, plus (iv) the
total of all amounts paid by NMG pursuant to Section 9.1(c)(ii)(A),
divided by (B) the Average Daily Gross Receivables in respect of such
Accounts in such segment for such period.


 


“Risk Change Compensation Amount”
means, with respect to any segment of Accounts, the product of (i) a
percentage equal to the excess, if any, of [***] over the Post MP RAM for such
segment of Accounts forecasted by Bank (in accordance with Section 17.2(g))
to be achieved during the period from the occurrence of a Preliminary
Non-Purchase Event through the [***] thereafter (as calculated in accordance
with Schedule 1.1(i)), (ii) the Average Daily Gross Receivables forecasted
by Bank for such segment of Accounts during such period (as calculated in
accordance with Schedule 1.1(i)) and (iii) two.


 


“Risk Change Compensation
Percentage” means a percentage equal to the percentage of Net Credit Sales
forecasted by Bank to be generated during the period commencing on the
occurrence of a Preliminary Non-Purchase Event and ending on the effective date
of termination of this Agreement pursuant to Section 16.4 hereof that
would equal the Risk Change Compensation Amount.


 


23

















 


“Risk Change Shortfall” means
the amount certified in writing by a duly authorized financial officer of Bank
to equal the excess, if any, of (A) the Pre-Tax Income Excluding Operating
Expense Bank projects that it would have received from the Program during the
Reserve Period if it had implemented the proposed Risk Management Policy change
that triggered NMG’s termination over (B) the Pre-Tax Income Excluding
Operating Expense Bank projects it will receive during the Reserve Period in
absence of such implementation.  A Risk
Change Shortfall shall be calculated as set forth on Schedule 4.6(h).


 


“Risk Implementation Date”
means the [***] day after the Risk Information Date.


 


“Risk Information Date”
means, with respect to any proposed modification of the Risk Management
Policies, the date on which Bank has delivered to NMG written notice to the
effect that Bank has delivered to NMG all of the information required to be
delivered by Bank pursuant to Section 4.6(c) in respect of such
proposed modification; provided, however,
that if NMG, in good faith, makes a timely and reasonable request for
supplemental information following such notice pursuant to Section 4.6(c)(vii),
the Risk Information Date shall be the date thereafter on which Bank has
delivered to NMG a further written notice to the effect that Bank has delivered
to NMG all supplemental information required to be delivered in response to
such request.


 


“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.


 


“Rolling 3 Month Post MP RAM”
means, with respect to any calendar month, measured over the consecutive three calendar
month period ending with such month, the percentage equivalent of a fraction (A) the
numerator of which is the sum of the products of the Post MP RAM for all
Accounts for each month and the Average Daily Gross Receivables of all Accounts
of each corresponding month in such three calendar month period and (B) the
denominator of which is the Average Daily Gross Receivables in respect of all
Accounts for such three calendar month period.


 


“Rolling [***] Month
Write-Off Roll Through Rate” means the percentage equivalent of a fraction (i) the
numerator of which is the average of the Gross Write-Offs for all Accounts for
each of the [***] most recently completed months and (ii) the denominator
of which is the average of Current Receivables in respect of all Accounts as of
the end of each of the three calendar months ending seven months prior to the
last month referred to in clause (i).


 


“Rolling 6 Month Delinquency Rate”
means the percentage equivalent of a fraction, the numerator of which is the
cycle-end average for all billing cycles in the most recently completed six
months of the portion of the Gross Receivables in respect of all Accounts that
were still owing and for which their payment due date was more than [***] days
prior to the measurement date and the denominator of which was the cycle-end
average of the Gross Receivables in respect of all Accounts for each billing
cycle during such six month period.


 


24

















 


“Rolling 6 Month Receivables
Gross Write-Off Ratio” means, with respect to any period, the Annualized
percentage equivalent of a fraction the numerator of which is Gross Write-Offs
for all Accounts during the period of six consecutive calendar months ending on
and including the month immediately preceding such calendar month and the
denominator of which is the Average Gross Receivables in respect of all
Accounts for the same six-month period.


 


“Rolling 6 Month Risk Adjusted
Yield” means, with respect to any calendar month, the percentage equivalent
of a fraction (A) the numerator of which is (i) Gross Financing
Income for all Accounts minus Net Write-Offs for all Accounts for the period of
six consecutive calendar months ending on and including the month immediately
preceding such calendar month, times (ii) two, and (B) the
denominator of which is the Average Daily Gross Receivables in respect of all
Accounts for the same six-month period referred to in clause (A).


 


“Rolling 6 Month RAM” means,
respect to any calendar month, measured over the consecutive six calendar month
period ending with such month, the percentage equivalent of a fraction (A) the
numerator of which is the sum of the products of the Risk Adjusted Margin for
all Accounts for each month in such six-calendar month period and the Average
Daily Gross Receivables for each corresponding month in such six- (6-) calendar
month period, and (B) the denominator of which is the Average Daily Gross
Receivables in respect of all Accounts for such six-(6-) calendar month period.


 


“Rolling 12 Month Post MP RAM”
means, with respect to any calendar month, measured over the consecutive twelve
calendar month period ending with such month, the percentage equivalent of a
fraction equal to (A) the sum of the products of the Post MP RAM for each
month in such twelve- (12-) calendar month period and the Average Daily Gross
Receivables for each corresponding month in such twelve calendar month period,
divided by (B) the Average Daily Gross Receivables in respect of all
Accounts for such twelve- (12-) calendar month period.


 


“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.


 


“Servicing Agreement” means
the Servicing Agreement, dated as of the Effective Date, between NMG and Bank.


 


“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(j).


 


25
















 


“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.


 


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


 


“Test/Control Protection” has
the meaning set forth in Section 4.6(f).


 


“Three-Year LIBOR Swap Rate”
means the rate representing an interest rate swap over a three year period
based on a LIBOR index and published and designated by Bloomberg Financial
Markets as “USSWAP3 Curncy” (or if such rate is no longer published by
Bloomberg Financial Markets, any successor rate representing the same rate as
agreed upon by the Parties).


 


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


 


“Transactor Gross Receivables”
means, in respect of any calendar month, those Average Daily Gross Receivables
in respect of any Accounts that are not accruing interest in such calendar
month.


 


“Trigger Condition” means a
condition whereby one of the following conditions referred to in clause (i), (ii) or
(iii) is then in effect: (i) an Internal Trigger Condition, (ii) an
External Trigger Condition or (iii) a RAM Condition.


 


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


 


“Unemployment Forecast”
means, with respect to any month, the unemployment forecast designated as “Household
Survey: Unemployment Rate, (%, SA)” “FLBRM.US” “baseline scenario” as most
recently published in the Moody’s publication “Economy.com”.


 


“Unemployment Forecast Condition”
means:


 


(i)  with respect to each month
during the period from the Effective Date through February 2012, the
period commencing on the first date on which the forecast for any month in the
[***] forecast in the Unemployment Forecast published for the most recently
completed month is more than [***] greater than the forecast for the corresponding
month in the Unemployment Forecast published for March 2010 (as set forth
in Schedule 1.1(k)) and ending on the first date thereafter when the forecast
for each of the [***] forecast in the Unemployment Forecast published for the
most recently completed month is less than or equal to [***] greater than the
forecast for the corresponding month in the 
Unemployment Forecast published for March 2010 (as set forth in
Schedule 1.1(k));


 


(ii)  with respect to each
month during the period from [***], the period commencing on the first date on
which the forecast for any of the [***] forecast in the Unemployment Forecast 


 


26

















 


published for the most recently
completed month is in excess of [***] and ending on the first date thereafter
in which the forecast for each of the first [***] in the Unemployment Forecast
published for the most recently completed month is less than or equal to [***];
and


 


(iii)  with respect to each
month during the period from [***] through the end of the Term, the period
commencing on the first date on which the forecast for any of the first 24
months forecast in the Unemployment Forecast published for the most recently
completed month is in excess of [***] and ending on the first date thereafter
on which the forecast for each of the 
first [***] forecast in the Unemployment Forecast published for the most
recently completed month is less than or equal to [***].


 


“Voluntary Attrition Rate”
means for any period, the number of Accounts in a relevant segment of the
Account population as to which the Cardholder terminates an Account during such
period divided by the total number of Accounts in such segment at the beginning
of such period.


 


“Wind-Down Asset Purchase Reserve
Amount” means (i) with respect to each Program Month (other than a
Program Month that is not a full calendar month) occurring during the period
commencing on the date on which NMG delivers an option exercise notice in
respect of the Wind-Down Assets pursuant to Section 17.5(a) and
ending on the effective date of termination of this Agreement, the lesser of (A) all
Merchant Participation payable pursuant to Section 9.1(a)(i) during
such Program Month and (B) [***] and (ii) with respect to any Program
Month occurring at the beginning or end of the period referred to in clause (i) that
is not a full calendar month, the lesser of (A) all Merchant Participation
payable pursuant to Section 9.1(a)(i) during such period and (B) [***]
divided by the number of days in such full calendar month and multiplied
by the number of days in such Program Month occurring during such period.


 


“Wind-Down Assets” has the
meaning set forth in Section 17.5(a).


 


“Wind-Down Implementation
Requirements” means, with respect to any proposed modification to any New
Account Policy, the forecasted effect of such change on the Approval Rate for
the Benchmark Population, as reflected in the information with respect to such
change required to be delivered to NMG pursuant Section 4.6(c)(v)(i),
reflects that the Approval Rate for such Benchmark Population would not be less
than [***].


 


“Write-Off Condition” means
any time commencing on the first date on which the Rolling 3 Month Write-Off
Roll-Through Rate for the most recent calendar month was greater than [***] and
ending on the first date thereafter on which the Rolling 3 Month Write-Off
Roll-Through Rate for the most recently completed calendar month was equal to
or less than [***].


 


“Year-End Settlement Sheet”
has the meaning set forth in Section 7.1(d) 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, Fiscal Months or Program Months, all references to days or
months 


 


27

















 


shall be
deemed references to calendar days or months; and (e) all references to “$”
or “dollars” shall be deemed references to United States dollars.


 


ARTICLE II


 


ESTABLISHMENT OF THE PROGRAM


 


2.1  Credit Program.  During the Term,
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.  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.


 


2.2  Exclusivity.


 


(a)           General.  Except as otherwise provided in this Section 2.2
(including Section 2.2(f)) 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) an NMG Credit Card
or (ii) 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 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 [***] 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 period of not less than
[***].  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 


 


28

















 


issuance of Credit Cards or Non-Card Payment Plans, as applicable, to
such customers pursuant to such program.


 


(c)           Co-Branded
Program. In the event any of the NMG Companies desire to enter into
discussions with any third Person to issue a Co-Branded Credit Card, NMG shall
provide notice to Bank indicating the interest of the applicable NMG Companies
to establish the Co-Branded program. 
Bank shall have [***] following receipt of such notice to notify NMG
whether it wishes to negotiate with the applicable NMG Companies with respect
to the establishment of such program.  If
Bank chooses to negotiate with respect to such Co-Branded program, NMG shall
negotiate in good faith with Bank for a period of [***] to attempt to arrive at
a definitive agreement with respect to such a program.  If the Parties fail to enter into such an
agreement within such period, the applicable NMG Companies shall be free to
enter into an agreement with respect to such program with any other Person;
provided, however, (i) the NMG Companies shall not enter into any such
agreement unless the terms of such agreement are materially more favorable in
the aggregate to the terms offered by Bank and (ii) if the NMG Companies
fail to enter into such agreement within [***] of the end of such period, the
NMG Companies shall once again follow the procedures set forth in this Section 2.2(c) prior
to entering into such an agreement with a third Person.  If NMG enters into an agreement with a third
Person to issue a Co-Branded Credit Card pursuant to this Section 2.2(c),
NMG shall ensure that such Co-Branded Credit Card shall not be positioned more
prominently than the NMG Credit Cards in the NMG Channels.


 


(d)           Acceptance
of Non-NMG Credit Cards.


 


(i)            The
NMG Companies shall have the right to accept Credit Cards other than NMG Credit
Cards, except that:


 


(A)                               with
respect to the Neiman Marcus full line stores (excluding NM Direct, NM Online,
Last Call and Bergdorf Goodman stores (or successors to the foregoing)), only
the following Credit Cards shall be accepted: 
NMG Credit Cards, American Express Credit Cards, Diner’s International
Credit Cards, JCB Credit Cards, China Union Pay Credit Cards and Co-Branded
Cards, but excluding Discover Cards (to the extent issued in accordance with Section 2.2(c))


 


(B)                               any or
all Credit Cards may be accepted:  (1) until
the first anniversary of the Effective Date, in six Neiman Marcus store
locations and [***], in a number of stores equal to [***] plus the number of
anniversaries of the Effective Date that have occurred prior to such date (i.e,
up to [***] by the last year of the Initial Term); and


 


(C)                               NMG may
accept additional Credit Cards not branded with any NMG Licensed Marks to the
extent permitted pursuant to Section 2.2(d)(ii).


 


29

















 


(ii)           At
any time prior to the [***] anniversary of the Effective Date, Neiman Marcus
may expand acceptance of Credit Cards not licensed with any NMG Licensed Marks
(and may continue such acceptance throughout the remainder of the Term)
provided the following conditions are satisfied at the time of any such
expansion:


 


(A)                               No NMG
Credit Event, Trigger Condition or CIL Decline shall have occurred and be
continuing at the time of any such expansion; and


 


(B)                               The
Rolling 6 Month RAM in the month immediately preceding any such expansion is at
least [***].


 


(iii)          If
(A) the NMG Companies expand acceptance of Credit Cards beyond what is
permitted in Section 2.2(d)(i) and (B) (1) the Rolling 6
Month Risk Adjusted Yield for any month within the [***] month period following
such expansion is less than (2) [***] times the Rolling 6 Month Risk
Adjusted Yield for the same calendar month during the [***] period preceding
the implementation of the expansion (the amount by which (1) is less than
(2), the “Expanded Acceptance Revenue Shortfall”), then so long as no
Trigger Condition, NMG Credit Event or CIL Decline shall have occurred and be
continuing, upon request of Bank delivered not more than [***] after the end of
the month in respect of which an Expanded Acceptance Revenue Shortfall shall
have first occurred (“Bank’s Expanded Revenue Shortfall Notice”), the
Parties shall negotiate in good faith in an attempt to arrive at a mutually
agreeable amendment to this Agreement designed to offset such Expanded
Acceptance Revenue Shortfall.  In the
event the Parties shall not agree upon any such amendment within [***] days
following Bank’s Expanded Revenue Shortfall Notice, Bank shall be entitled to
terminate this Agreement pursuant to Section 16.3(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.


 


(f)            Internet
Financing.


 


(i)            During
the [***] after the Effective Date, unless and until the restrictions set forth
in this paragraph shall have lapsed, the NMG Companies shall not enter into any
arrangement with an unaffiliated third Person other than Bank or Bank’s
Affiliates with respect to the provision of a product pursuant to which credit
is extended to finance purchases of NMG Goods and Services solely over the
Internet.


 


(ii)           If
(A) prior to the date that is [***] after the Effective Date Bank has not
developed and implemented a product or other alternative solution 


 


30

















 


in compliance with the terms and provisions of this
Agreement which is designed to increase the Approval Rate for Applications made
over the Internet or (B) Bank has developed such a product or alternative
prior to such date, but the Approval Rate for Applications submitted over the
Internet during the [***] ending with the [***] following implementation of
such product is less than [***], the restrictions set forth in clause (i) above
shall lapse and the provisions of clause (iii) below shall apply.  If such product or alternative has been
developed and the Approval Rate for such Applications during the
above-referenced [***] is [***] or higher, then the restrictions set forth in
clause (i) above shall continue.  If
the Approval Rate for such Applications for any subsequent rolling [***] is
less than [***], then the restrictions set forth in clause (i) shall lapse
and the provisions of clause (iii) shall apply.


 


(iii)          In
the event that, following the date on which the restrictions set forth in
clause (i) above shall have lapsed, any of the NMG Companies is
considering entering into an arrangement with any unaffiliated Person to
provide a product pursuant to which credit is extended to finance purchases of
NMG Goods and Services solely over the Internet, NMG shall deliver written
notice thereof not less than [***] Business Days prior to soliciting proposals
for any such product from unaffiliated Person. 
Following such notice, Bank shall have the right to deliver a proposal
to NMG with respect to the product NMG is soliciting proposals for or an
alternative to such a product that will provide similar benefits to NMG.  NMG shall consider any such proposal in good
faith and shall not enter into any agreement with any third Person unless such
other agreement is on terms materially more favorable in the aggregate to NMG
than Bank’s proposal.  If NMG elects to
reject any such proposal made by Bank it shall do so in writing stating the
reasons for such rejection.  NMG shall
provide written notice to Bank not less than [***] Business Days prior to
executing any such agreement with any such third Person and shall provide
written notice to Bank at least [***] prior to such product becoming
commercially available.  If the NMG
Companies do not enter into any such agreement with a third Person within one
year of the initial notice to Bank pursuant to this Section 2.2(f), the
NMG Companies shall once again comply with these procedures before entering
into an agreement with respect to the provision of such a credit product.  Any Internet credit product offered by an
unaffiliated Person pursuant to and as described in this Section 2.2(f) shall
be subject to the restrictions of Section 7.4(b), and shall not be (i) branded
with any NMG Licensed Marks or (ii) used for catalog, telephone or
in-store purchases.


 


(g)           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:


 


31

















 


(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 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.


 


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 


 


32

















 


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 Competing
Retail 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 


 


33

















 


vendors) would be within the sole discretion of the
respective Party who elects to subcontract or outsource such service;


 


(v)                                 evaluate and approve changes to
any of the following:


 


(A)                                                                               offering
by the Parties of new NMG Credit Cards, Approved Ancillary Products, Non-Card
Payment Plans or other payment products pursuant to the Program;


 


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


 


(C)                                                                               subject
to Section 4.6(b), changes to the Risk Management Policies (which, subject
to Section 4.6, shall be submitted to the Management Committee together
with the information with respect to such proposed changes required by Section 4.6(c));


 


(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 quarterly, provided that unless otherwise agreed by all
Management Committee members, not less than two (2) meetings per year
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; provided, however, that, unless otherwise agreed in
writing by NMG (which agreement may be given or withheld in NMG’s sole
discretion), (A) Bank shall not be entitled to 


 


34

















 


deliver such a notice with respect to a Management
Committee meeting at which a modification to the Risk Management Policies will
be considered and (B) the Management Committee shall not be required to
consider or vote upon a modification to the Risk Management Policies proposed
by Bank, in either case unless the meeting at which such matter would be
considered would be scheduled to occur on or after the Risk Implementation
Date.  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.


 


(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 do so), then
initially the Chief Executive Officer of HSBC Card & 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.  Notwithstanding
the foregoing provisions of this Section 3.2(e)(ii)(B), in the case the
Unapproved Matter is a Bank Matter described in Section 3.2(g)(ii), (iii),
(iv), (vi), (ix), (x) or (xi), the foregoing dispute resolution process
shall not apply and, the initial failure of the Management Committee to agree
on such matter by majority vote shall constitute a deadlock.  In the


 


35
















 


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.  In the event that NMG or Bank shall determine
to implement a decision following a deadlock as an NMG Matter or a Bank Matter,
as the case may be, such Party shall provide a written instrument on or after
the Risk Implementation Date of such determination at least one Business Day
prior to implementing such decision.  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)                                Except
in the case of Bank Matters referenced in Section 3.2(g)(ii), (iii), (iv),
(vi), (ix), (x) or (xi), 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.


 


(iii)          Customer
Service Disputes. If at any time there shall be a material change in
customer dispute patterns or volume, (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 tenth (10th) day), and (C) in the event such
remediation plan is voted upon and approved, the Parties shall promptly
implement such plan.  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 


 


36

















 


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”) and, except as required by Applicable Law or this
Agreement, any decision implemented as an NMG Matter can only be reversed or
discontinued in NMG’s sole discretion:


 


(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 the Effective Date (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;


 


(v)           the
approval (in the sole discretion of NMG) of any new Credit Card products,
including 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 


 


37

















 


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”) and, except as required by Applicable Law
or this Agreement, any decision implemented as a Bank Matter can only be
reversed or discontinued in Bank’s sole discretion:


 


(i)            changes
to Risk Management Policies to the extent required by Applicable Law or safety
and soundness considerations, in each case, as evidenced by a Legal Opinion;


 


(ii)           on
or after the Risk Implementation Date, but subject to the further restrictions
upon implementation of such change set forth in Section 4.6(e), any change to
any New Account Policy;


 


(iii)          if
either (A) an NMG Credit Event or a Trigger Condition has occurred and is
continuing, then on or after the Risk Implementation Date, or (B) NMG has
delivered a termination notice pursuant to Section 16.2(f)(ii)(B), then at any
time thereafter, any change to any Risk Management Policies relating to or
governing existing Accounts; provided, however, that each such change in Risk
Management Policies shall be subject to the further restrictions upon
implementation of such change set forth in Sections 4.6(a), 4.6(f) and 4.6(o)
(in the case of Bank Matters referred to in clause (A) above) or Sections
4.6(a) and 4.6(g) (in the case of Bank Matters referred to in clause (B)
above);


 


(iv)          if
a CIL Decline has occurred and is continuing and provided that the Risk
Implementation Date shall have occurred and the CIL Negotiation Period shall
have elapsed, but subject to the further restrictions upon implementation of
such change set forth in Sections 4.6(f) and 4.7, any change to any Risk
Management Policies relating to or governing existing Accounts and the
implementation of Existing Term Changes to the extent permitted by and subject
to Section 4.7(b) or New Account Terms to the extent permitted by and subject
to Section 4.7(c);


 


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


 


(vi)          if
a RAM Condition has occurred and is continuing, after the Account Terms Negotiation
Period shall have elapsed if applicable, the implementation of New Account
Terms to the extent such implementation is a Bank Matter in accordance with the
provisions of Section 4.7(c);


 


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


 


38

















 


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


 


(ix)           if
a RAM Condition has occurred and is continuing, the implementation of Existing
Term Changes, subject to compliance with Section 4.7(b) and provided that the
Account terms to be implemented are Competitive;


 


(x)            following
the occurrence of both (A) delivery of a termination notice by NMG pursuant to
Section 16.2(f)(ii)(B) and (B) thereafter a Preliminary Non-Purchase Event,
provided that an NMG Credit Event is then in effect, implementation of Existing
Term Changes, provided that if NMG shall have
extended the period for exercising its Program Assets purchase option pursuant
to Section 17.2(b), such implementation shall not become a Bank Matter until
after NMG gives notice that such option will not be exercised or until such
extended option shall have expired; and


 


(xi)           following
the occurrence of both (A) delivery of a termination notice by NMG pursuant to
Section 16.2(f)(ii)(B) and (B) thereafter the [***] following the occurrence of
a Preliminary Non-Purchase Event, provided that an NMG Credit Event is then in
effect, implementation of New Account Terms.


 


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.


 


(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 Senior Vice President-Client Development.  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 


 


39

















 


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 the Parties 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 the Effective Date;


 


(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 interest 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 the Effective Date;


 


40

















 


(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 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
and process In-Store Payments in accordance with procedures that comply with
Applicable Law, subject to Section 8.3(b);


 


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


 


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


 


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)          provide
all NMG Charge Transaction Data and Cardholder Data required for the NMG
Companies’ administration of any Loyalty Program;


 


(iv)          in
accordance with Section 7.2, 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;


 


41

















 


(v)           provide
training to NMG trainers 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 the 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 the NMG
Companies, 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;


 


(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;


 


(viii)        process
remittances from Cardholders;


 


(ix)           produce
and issue all new, replacement and reissued credit card plates related to the
NMG Credit Cards and the Loyalty Cards; and


 


(x)            handle
recovery  efforts in respect of Accounts.


 


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 or 17.5(a)) in or to, any of
the Accounts or Account Documentation or any proceeds of the foregoing, and
(ii) Bank extends credit directly to Cardholders.


 


(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.


 


42

















 


(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 Companies’ store as provided in Section 8.3, (ii) by
telephone through the ACH Pay by Phone system and (iii) online through the
Program Website.


 


(f)            With
respect to all Account Documentation, NMG Servicer, shall 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, fifteen (15) days; (ii) for non-cash
payment information, ten (10) days; (iii) for cash payment information, five
(5) Business Days, (iv) for application information, twenty (20) days; (v) for
sales slips, twenty (20) days; and (vi) for all other Account Documentation,
thirty (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).


 


43

















 


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 the cost in effect as of the
Effective Date (as adjusted by CPI), the Management Committee shall allocate
the increased costs resulting from such changes in Cardholder Documentation
between the Parties.


 


(c)           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; 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.


 


4.6   Underwriting and Risk Management.


 


(a) (i) 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 Account and/or a Non-Card Payment
Plan, as applicable.


 


(ii)           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,
[***].


 


(iii)          For
the avoidance of doubt, Risk Management Policies with respect to periodically
reviewing 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 may be developed at a
segment and aggregate Account level using statistically valid segmentation and
credit risk management actions, and when ultimately applied shall be done so on
an individual Account basis; provided, however, that, unless (A) either an NMG
Credit Event or a [***] shall have occurred and shall be continuing and (B) in
the 


 


44

















 


case a [***] shall have occurred and be continuing,
the [***] Negotiation Period shall have elapsed without the Parties having
executed and delivered amendments to this Agreement contemplated by Section
4.6(o), such Risk Management Policies governing the range of credit limits to
be made available to an individual Cardholder and whether or not to suspend or
terminate credit privileges of a Cardholder [***] be [***].


 


(b)           The
initial Risk Management Policies shall be those in place immediately prior to
the Effective Date.  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;  provided, however,
that, following delivery of all information required pursuant to Section
4.6(c), any proposed modification to the Risk Management Policies that would
not be subject to approval as a Bank Matter may be approved by Bank’s Program
Manager and NMG’s senior credit officer provided approval of such change is
made pursuant to a written instrument signed by such senior credit officer and
Program Manager referring to the approval requirements of this Section 4.6(b)
and delivered to the other Party.  Any
modification proposed by Bank must be made in accordance with the provisions of
this Section 4.6 and accompanied by the information required pursuant to
Section 4.6(c).


 


(c)           In
the event Bank proposes to make any modifications to the Risk Management
Policies, then Bank shall deliver to NMG’s credit officer a report containing
all of the information relating to such proposed modification referred to in
clauses (i) through (vi) of this Section 4.6(c); provided, however,
that, solely in the case of a proposal that cannot be implemented as a Bank
Matter, NMG’s senior credit officer may waive the obligation of Bank to deliver
any or all of the information referred to in such clauses pursuant to a written
instrument signed by such senior credit officer, referring to this Section 4.6(c)
and delivered to Bank (it being understood that such senior credit officer
shall have no authority to waive any information referred to in this Section
4.6(c) with respect to a proposal that can be implemented as a Bank Matter):


 


(i)            a
reasonable description of the proposed modification, specifying the particular
changes to be made to any provisions of the then-current Risk Management
Policies to be affected by such proposed modification;


 


(ii)           a
reasonable description of Bank’s strategy for proposing such modification,
including the estimated impact to Program profitability of such modification;


 


(iii)          the
criteria for applying such modification, including the targeted population
segment of Cardholders or Account applicants, as applicable to which such
modification will apply;


 


45
















 


(iv)          a
forecast reflecting the projected effects of the modification on each key
performance indicator relevant to the Program and each Party including, without
limitation, the projected effect of such modification on open-to-buy amounts
(in the case of credit line decrease strategies), authorization rates, Net
Credit Sales, Post MP RAM, [***] and [***] for the aggregate period of [***] following such proposed
implementation, and in the case of a change that Bank proposes to implement as
a Bank Matter (including a change that could be implemented in light of an
event that would become an NMG Credit Event if not cured by the Risk
Implementation Date), and which individually or together with all previous changes
to Risk Management Policies implemented as Bank Matters, is expected to
decrease Net Credit Sales by more than [***] in any rolling [***] period, the
change in each of the foregoing metrics for each quarter during the [***]
following the proposed implementation of such change;


 


(v)           in
the case of any proposed modification to any Risk Management Policy solely
governing or affecting underwriting decisions with respect to Applications or
that will otherwise affect the policies or procedures for accepting,
adjudicating or approving or disapproving Applications (a “New Account
Policy”), an analysis showing (i) the impact such modification would
have had on the Approval Rate of the Benchmark Population assuming such
modification had been implemented at the time of the adjudication of the
Applications for such Benchmark Population (ii) to the extent reasonably
possible (and in any event if such effect was included in Bank’s analysis), the
effect on the Approval Rate of the Benchmark Population of any Change in Law
implemented prior to or in connection with such change in New Account Policy
and (iii) the difference in the calculation of the Approval Rate of the
Benchmark Population between the previous and proposed New Account Policy;


 


(vi)          in
the case of any proposed modification to any Risk Management Policy that Bank
could implement as a Bank Matter and governing or affecting existing Accounts
(including a modification that could be implemented as a Bank Matter as a
result of an event that would become and NMG Credit Event if not cured by the
Risk Implementation Date), an analysis (performed using the methodology
reflected in Schedule 4.6(c)(vi)) showing the projected impact on Net Credit
Sales of such proposed change and the cumulative effect of such impact, including
the impact on Net Credit Sales of all other modifications to Risk Management
Policies governing or affecting existing Accounts that were made following the
Effective Date pursuant to Bank’s authority to break a deadlock with respect to
such matters pursuant to Section 3.2(g)(iii) or (iv), in each case
during each rolling [***] period ending in each of the [***] following such
change;


 


46

















 


(vii)         Following
delivery of the foregoing reports, NMG shall have 10 days to request, in good
faith, reasonable supplemental information concerning the proposed modification
and the foregoing information, and Bank shall, on a reasonably prompt basis,
respond to any reasonable requests by NMG for supplemental information
regarding such proposed modification.


 


(d)           Following
implementation of any modification to Risk Management Policies governing or
affecting existing Accounts pursuant to Bank’s authority to break a deadlock
with respect to such Bank Matters described in Section 3.2(g)(iii) or
(iv), Bank shall provide an analysis on a monthly basis following the first
such implementation, using the same procedures as described in Section 4.6(c)(vi),
of the cumulative impact on Net Credit Sales of all such changes previously
implemented compared with the Net Credit Sales for the Control Group for the
rolling twelve-month period ending with each month following such
implementation and up to and including the most recently completed month, as
illustrated in Schedule 4.6(d).


 


(e)           Notwithstanding
anything to the contrary contained in this Section 4.6 or in Article III,
but without in any way affecting Bank’s rights with respect to Bank Matters
referred to in Section 3.2(g)(i), no proposed change to any New Account
Policy which is an Unapproved Matter [***] if NMG or Bank shall have delivered a
termination notice pursuant to Article XVI; provided, however, that any such proposed modification that would have been a
Bank Matter in absence of this Section 4.6(e) shall become a Bank
Matter notwithstanding delivery of such termination notice if such termination
notice was delivered by NMG pursuant to Sections 16.2(b) through 16.2(i) (other
than Section 16.2(f)(ii)(B), which is addressed in Section 4.6(g) below),
or by Bank pursuant to Section 16.3 and both (i) a Preliminary
Non-Purchase Event shall have occurred and (ii) either (A) at the
time of such Preliminary Non-Purchase Event NMG shall have failed to exercise
its option to purchase the Wind-Down Assets or (B) NMG shall have timely
exercised its option to purchase the Wind-Down Assets and such proposed
modification shall have satisfied the Wind-Down Implementation
Requirements.  In the event that NMG elects
to extend the time during which NMG can exercise its Program Assets purchase
option pursuant to Section 17.2(b), changes to New Account Policies shall
become Bank Matters; provided, however, if NMG thereafter timely
delivers notice that it intends to exercise its purchase option in respect of
the Wind-Down Assets pursuant to Section 17.5, following delivery of such
notice, Bank shall take such actions (including modifying New Account Policy
changes made pursuant to the immediately preceding sentence (other than any
such changes required to be maintained in effect by Applicable Law or safety
and soundness considerations, as evidenced by a Legal Opinion)) to ensure that
the New Account Policies in effect thereafter at all times satisfy the
Wind-Down Implementation Requirements.


 


(f)            Notwithstanding
anything to the contrary contained in this Section 4.6 or in Article III,
but without in any way affecting Bank’s rights with respect to (i) Bank
Matters referred to in Section 3.2(g)(i), or (ii) Bank Matters referred
to in Section 3.2(g)(iii) approved after NMG has delivered a
termination notice pursuant to Section 16.2(f)(ii)(B), which Bank Matters
referred to in this clause (ii) are addressed in Section 4.6(g) rather
than this Section 4.6(f), [***] 


 


47

















 


if either (A) at the time such matter becomes an Unapproved Matter
or at the time such modification would otherwise be implemented, no Trigger
Condition is in effect and no CIL Decline is in effect or (B) NMG or Bank
shall have delivered a termination notice pursuant to Article XVI; provided,
however,  that each such proposed
modification that would have been a Bank Matter in absence of this Section 4.6(f) shall
become a Bank Matter notwithstanding delivery of such termination notice if all
of the following shall have occurred: (i) such termination notice shall
have been delivered by NMG pursuant to Section 16.2(f) (other than Section 16.2(f)(ii)(B),
which is addressed in Section 4.6(g)), Section 16.2(g), Section 16.2(h) or
Section 16.2(i) or by Bank pursuant to Section 16.3, (ii) a
Preliminary Non-Purchase Event shall have occurred, (iii) such
modification shall affect only RAM Deficient Accounts, and (iv) [***].


 


(g)           Notwithstanding
anything to the contrary contained in this Section 4.6 or in Article III,
but without in any way affecting Bank’s rights with respect to Bank Matters
referred to in Section 3.2(g)(i), if NMG delivers a termination notice
pursuant to Section 16.2(f)(ii)(B):


 


(i)            No
proposed change to any Risk Management Policy with respect to or affecting any
existing Account which is an Unapproved Matter [***] if NMG satisfies the requirements of Section 4.6(h) with
respect to the Existing Account Reserve Amount; provided,
however, that each such proposed modification that would have been a
Bank Matter in absence of this Section 4.6(g)(i) shall become a Bank
Matter notwithstanding delivery of such termination notice and satisfaction of
such requirements upon the occurrence of a Preliminary Non-Purchase Event; and provided, further, that any such proposed change shall cease
to be a Bank Matter in the event NMG makes a timely election to purchase the
Program Assets; and


 


(ii)           Prior
to the [***] after the Risk Information Date, if NMG is in compliance with the
requirements of Section 4.6(h) with respect to the New Account Loss
Reserve Amount, [***] unless such modification satisfies the
Wind-Down Implementation Requirements. 
Following such [***], unless and until NMG shall have notified Bank that
it intends to exercise its purchase 


 


48

















 


option pursuant to Section 17.5 in respect of
the Wind-Down Assets within the time frame required by Section 17.5(a),
changes to New Account Policies shall become Bank Matters without limit; provided
that Bank may implement such Bank Matters following such [***] without any
consideration or vote thereon by the Management Committee so long as Bank shall
have provided NMG with not less than five (5) Business Days’ prior written
notice of such implementation (including the information with respect thereto
set forth in Section 4.6(c)(i) through (v)).  In the event that NMG timely delivers notice
that it intends to exercise its purchase option pursuant to Section 17.5
in respect of the Wind-Down Assets, thereafter, so long as NMG is in compliance
with the requirements of Section 4.6(h) in respect of the Wind-Down
Asset Purchase Reserve Amount, Bank shall take such actions (including
modifying New Account Policy changes made pursuant to the immediately preceding
sentence (other than any such changes required to be maintained in effect by
Applicable Law or safety and soundness considerations, as evidenced by a Legal
Opinion)) to ensure that the New Account Policies in effect at all times
satisfy the Wind-Down Implementation Requirements.


 


(h)           Following
delivery of a termination notice by NMG pursuant to Section 16.2(f)(ii)(B) but
without in any way affecting Bank’s rights with respect to Bank Matters
referred to in Section 3.2(g)(i):


 


(i)            Bank
may implement any change in Risk Management Policies with respect to or
affecting existing Accounts as a Bank Matter pursuant to Article III
unless: (A) at the time NMG delivered such notice of termination [***], amounts
otherwise due to NMG pursuant to Section 9.1(a)(i), up to a maximum amount
equal to the Existing Account Reserve Amount or (B) within [***] after
such delivery of such notice of termination, NMG shall have delivered for the
benefit of Bank (and with Bank as payee) a letter of credit drawable by Bank
upon a financial institution having an Investment Grade Credit Rating in an
amount equal to the Existing Account Reserve Amount, which letter of credit may
be drawn solely upon and after a default by NMG in its payment obligation under
Section 17.5(f) hereof;


 


(ii)           Notwithstanding
the provisions of Section 4.6(g), Bank may implement changes in New
Account Policies as Bank Matters pursuant to Article III unless at the
time NMG delivers such notice of termination, NMG authorizes Bank to withhold
from the amount otherwise due to NMG pursuant Section 9.1(a)(i), for
application thereafter pursuant to Section 17.5(g) hereof, an amount
equal to the New Account Loss Reserve Amount.


 


49

















 


(iii)          In
addition, if NMG delivers a notice that it intends to exercise its option to
purchase the Wind-Down Assets pursuant to Section 17.5(g), following
delivery of such notice, Bank may implement changes in New Account Policies as
Bank Matters pursuant to Article III unless at the time NMG delivers such
option exercise notice, NMG authorizes Bank to withhold from the amount
otherwise due to NMG pursuant to Section 9.1(a)(i), for application
pursuant to Section 17.5(g), an amount equal to the Wind-Down Asset
Purchase Reserve Amount.


 


(iv)          If
Bank Parent’s senior debt has an Investment Grade Credit Rating from at least
[***] of the Rating Agencies, then any amount withheld pursuant to this Section 4.6(h) may
be held by Bank in a segregated account at Bank, and if Bank Parent’s senior
corporate debt rating from at least [***] of the Rating Agencies is not [***], such amount
must be deposited in escrow with an unaffiliated financial institution selected
by Bank that has an Investment Grade Credit Rating from all three Rating
Agencies pursuant to an escrow agreement reasonably acceptable to NMG and Bank
and providing for release to NMG or Bank, as the case may be, in accordance
with the provisions of this Agreement.


 


(i)            Notwithstanding
anything to the contrary in this Agreement, Bank shall [***] “Q-Block” or “VIP”
Accounts (as defined in Schedule 4.6(i)) from [***] approved as Bank Matters (other than Bank
Matters approved pursuant to Section 3.2(g)(i)).  NMG may designate up to [***] total Accounts (including Accounts already
so designated) as such in accordance with the Risk Management Policies and,
except as provided in Section 17.2(h), the limitations set forth in
Schedule 4.6(i) on or prior to (A) the date on which NMG shall first
become eligible to terminate the Agreement pursuant to Section 16.2(f) (other
than 16.2(f)(ii)(B)), (g), (h) or (i) or (B) in the case of a
termination pursuant to Section 16.2(f)(ii)(B), the [***] day prior to the
expiration of the option to purchase the Program Assets referred to in Section 17.2.


 


(j)            Upon
the occurrence of the events described in clause (i) and (ii) of the
definition of “CIL Decline” Bank may elect to deliver to NMG, during the period
referred to in clause (i)(A) of the definition of CIL Decline, written
certification executed by a financial officer of Bank as follows: (i) identifying
in reasonable detail the occurrence of the event described in clause (i) of
“CIL Decline” that is the subject of the certification and the date of such
occurrence, (ii) [***], (iii) specifying in reasonable detail
the actions or changes Bank intends to implement in order to comply with such
Change in Law and certifying that all such actions and changes are [***]. 
Following delivery of any such certification referred to above, the
Parties shall negotiate in good faith 


 


50

















 


during the CIL Negotiation Period to attempt to reach agreement on
amendments to this Agreement that the Parties agree are mutually acceptable and
are designed to mitigate or eliminate such CIL Decline.  If the Parties fail to reach agreement by the
end of the CIL Negotiation Period, changes to Risk Management Policies
governing or affecting existing Accounts that are not already permitted as Bank
Matters pursuant to Section 3.2(g)(i) shall be Bank Matters to the
extent set forth in, and subject to, Section 3.2(g)(iv).


 


(k)           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.


 


(l)            NMG
is allowed to accept the credit risk for any Account pursuant to the recourse
program set forth in Article XX of this Agreement and Applicable Law.


 


(m)          During
any month in which (i) the Rolling 3 Month Post MP RAM for each of the two
most recently completed calendar months is greater than [***] and (ii) the
Rolling 6 Month Receivables Gross Write Off Ratio for the most recently
completed month is less than [***], then Bank shall be required to implement
one of the Account management expansion initiatives described in Schedule
4.6(m).  Such initiatives will be
designed, in good faith, to target a minimum of [***] existing Accounts
annually; provided that such Accounts are forecasted to generate a Post
MP RAM of at least [***] on incremental Gross Receivables.  Accounts targeted for Account management
expansion initiatives described in Schedule 4.6(m) implemented during any
twelve-month period immediately preceding the date on which Account management
expansion obligations arise under this Section 4.6(m) shall count
toward the foregoing target.  Bank shall
be entitled to cease such Account management expansion initiatives at any time
during which clause (i) or (ii) above is no longer satisfied; provided, however, that in the event clause (i) and (ii) above
have been satisfied for [***], Bank shall be required to continue to pursue
such initiatives to the extent necessary to ensure that a number of targeted
Accounts are added, within the time frame specified below, that are at least
equal to the pro rata portion of the [***] minimum number of Accounts based on
the portion of the year during which such conditions were satisfied.  Any Accounts targeted by Bank above the
required number shall count toward the target for a maximum of [***] following
the implementation of the action.  Bank
shall target the required number of Accounts as set forth in this Section 4.6(m) no
later than the [***] after the date on which a condition referred to in clause (i) or
(ii) ceases to exist or by the end of the [***] following the date the
conditions set forth in clause (i) and (ii) were initially satisfied
(whichever is earlier), provided that in the event the conditions referred to
in clause (i) and (ii) above exist for more than [***], the
additional Accounts to be targeted in respect of each additional [***] (or
portion thereof) shall be targeted no later than the ninetieth [***] after the
date on which a condition referred to in clause (i) or (ii) ceases to
exist or by the end of such additional [***] (whichever is earlier).


 


(n)           On
or prior to April 1, 2011, Bank shall use an Imputed Income Model for the
Program in either proactive credit line increase or real time line increase
decisions, so long as such model conforms with Applicable Law.  NMG and Bank may mutually agree to use this
model for underwriting decisions with respect to Applications.  In addition, no later than [***], Bank shall
make available to NMG estimated Cardholder income based on an Imputed Income 


 


51

















 


Model that may be used for the Program in order to permit manual
determinations with respect to overlimit referrals to be made without
additional inquiries from the Cardholder. 
The Bank and/or Bank’s Affiliates shall own all right, title and
interest to any such Imputed Income Model that is designed and built by Bank
and/or Bank’s Affiliates.


 


(o)           At
any time a [***] has occurred and is continuing, Bank may elect to deliver to
NMG written certification executed by a financial officer of Bank identifying
the occurrence and continuance of the [***] and attaching and certifying the
accuracy of the financial information demonstrating such occurrence. Following
delivery of any such notice referred to above, the Parties shall negotiate in
good faith during the [***] to attempt to reach agreement on amendments to the
economic provisions of this Agreement that the Parties agree are mutually
acceptable and are designed to mitigate or eliminate any RAM Condition (it
being agreed that the Parties shall cooperate in good faith to arrive at
amendments that preserve to the maximum extent reasonably possible the
provisions of this Agreement in effect prior to the execution of such
amendments while achieving the above-stated objective).  If the Parties fail to reach agreement by the
end of the [***], with respect to changes to Risk Management Policies governing
or affecting existing Accounts, Bank shall no longer be subject to the
restrictions set forth in Section 4.6(a)(ii)(B) and the proviso of Section 4.6(a)(iii).


 


4.7   Cardholder Terms.


 


(a)           The
terms and conditions of all Accounts as of the Effective Date shall be the
terms and conditions specified in Schedule 4.7. Changes to the terms and
conditions of the Accounts may be made only in accordance with this Section 4.7
and Article III; provided that
no action shall be taken to implement any Existing Term Change or New Account
Terms approved as a Bank Matter pursuant to Section 3.2(g)(iv) or (vi) until
the [***] following the date on which Bank breaks the deadlock with respect to
such Bank Matter.


 


(b)           Upon
(i) the occurrence and continuance of a RAM Condition or (ii) the
occurrence and continuance of a CIL Decline and the failure of the Parties to
reach agreement on amendments to this Agreement by the end of the CIL
Negotiation Period, the implementation of Existing Term Changes shall be a Bank
Matter pursuant to Section 3.2(g)(iv), (vi) or (ix), as applicable; provided that Bank has established that such Existing Term
Changes are Competitive in accordance with the provisions of this Section 4.7(b).  Except for Bank Matters implemented pursuant
to Section 3.2(g)(v), at the time of any proposal with respect to the
implementation of any Existing Terms Change, Bank shall deliver to NMG a report
(including relevant information regarding Account terms in effect for credit
cards offered to customers of the NMG Primary Competitors) to substantiate that
the proposed Existing Terms Change(s) are Competitive.


 


(c)           Upon
the occurrence and continuance of a RAM Condition or a CIL Decline, and without
limiting Bank’s rights with respect to Section 3.2(g)(v), Bank shall be
permitted to test the implementation of New Account Terms, provided
such New Account Terms have been implemented by at least [***] and such testing
and implementation is conducted at a level and in a manner consistent with that
of such NMG Competitors and according to the following procedures:


 


52

















 


(i)            Bank
shall test the introduction of New Account Terms on a segment of Cardholders,
which shall be a randomly selected segment that shall be the smallest segment
reasonably possible to be representative of the Cardholders to which such New
Account Terms are proposed to be applied and capable of achieving statistically
significant test results.


 


(ii)           NMG
shall use all reasonable efforts to support Bank’s test of such New Account
Terms meeting the foregoing requirements within a [***] timeframe following the
date on which Bank first proposes such implementation of New Account Terms to
the Management Committee.


 


(iii)          The
test results will be measured for a minimum of [***], but up to [***], as
either Party may request, and the results shall in all cases include [***] for the test
population and for Cardholders other than the test population to whom such New
Account Terms would be applied if such New Account Terms would be implemented
as proposed (the “Control Population”), in each case during the period
beginning on implementation of the New Account Terms to the test population and
continuing for the full period of the test.


 


(iv)          If
the [***] for the Accounts in the test population exceeds the [***] for the Control Population by less than
[***], the full implementation of such New Account Terms to any new or existing
Accounts shall be a Bank Matter.


 


(v)           If
the [***] for the Accounts in the test population exceeds the [***] for the Control Population by at least
[***], the Parties shall negotiate in good faith for a period  (the “Account Terms Negotiation Period”)
of [***] commencing with the Management Committee meeting at which the test
results are presented (or such later Management Committee Meeting at which such
New Account Terms become an Unapproved Matter) to attempt to reach agreement on
an alternative or alternatives to the proposed New Account Terms (which may
include amendments to this Agreement) that the Parties agree are mutually
acceptable and designed to achieve an economic effect on the Program that is
equivalent to the effect that would have been achieved by implementation of the
New Account Terms, based on the results of the foregoing test and taking into
account the [***] exhibited in
the test.


 


(vi)          Should
the Parties fail to reach agreement by the end of the Account Terms Negotiation
Period, (A) if the [***] for the Accounts in the test population
exceeds the [***] for the
Control Population by [***] but not more than [***], then implementation of
such New Account Terms shall be a Bank Matter, and (B) if the [***] 


 


53

















 


for the Accounts in the test population exceeds the [***] for the
Control Population by [***] or more, the implementation of such New Account
Terms shall not be a Bank Matter.


 


(vii)         In
the event that New Account Terms are adopted as a Bank Matter pursuant to this Section 4.7(c),
then for a period of [***] commencing from the date of implementation thereof,
there shall be maintained a representative and statistically significant
segment of Accounts to which such New Account Terms shall not be applied.  In the event of any future test of New Account
Terms pursuant to this Section during such period, such segment shall be
deemed the Control Population.  This
clause (vii) shall be applied to each successive change in New Account
Terms, and the Control Group for any particular testing of New Account Terms
shall in all events be a segment of Accounts that does not include any New
Account Terms adopted as a Bank Matter (other than pursuant to Section 3.2(g)(v))
within the most recently ended [***].


 


(d)           Notwithstanding
anything to the contrary contained in this Section 4.7 or in Article III,
but without in any way affecting Bank’s rights with respect to Bank Matters
referred to in Section 3.2(g)(v), (ix), (x) or (xi), no proposal to
implement New Account Terms or Existing Terms Changes which is an Unapproved
Matter shall be implemented pursuant to Section 3.2(g)(iv) or 3.2(g)(vi) (and
any such implementation shall not be deemed a “Bank Matter”) if either (A) no
RAM Condition and no CIL Decline is in effect at the time such change otherwise
would be implemented or (B) NMG shall have delivered a termination notice
pursuant to Section 16.2(f), (g), (h) or (i).


 


(e)           Notwithstanding
anything to the contrary contained in this Section 4.7 or in Article III,
in the event that an NMG Credit Event ceases to be in effect after Bank has
approved any New Account Term or Existing Term Change as a Bank Matter pursuant
to Section 3.2(g)(x) or (xi) but before notice of such New
Account Term or Existing Term Change shall have been sent to Cardholders, then,
upon receipt of a written request from NMG to abandon implementation of any
such New Account Term or Existing Term Change, together with written
certification that no NMG Credit Event is then in effect, Bank shall abandon
such New Account Term or Existing Term Change as so requested. In such event,
NMG shall reimburse Bank for all reasonable out-of-pocket costs incurred by
Bank in order to prepare for implementation of such New Account Term or
Existing Term Change.


 


4.8   Internet Services.


 


(a)           Cardholder
Website.  Bank shall maintain an
NMG-branded website for Cardholders and potential Cardholders with the look and
feel consistent with the NMG Companies’ websites (“Program Website”).  The Program Website shall be accessed by
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 


 


54

















 


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”).


 


(b)           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 prior to the Effective Date.


 


(c)           Cardholder
Customer Service.  The Program
Website shall permit Cardholders to (A) view the Cardholder’s Account
information and electronic forms of Billing Statements (including any Loyalty
Program information, NMG Transaction information, and all other information
contained in such Billing Statement); and (B) make payments on the
Cardholder’s Account via automated clearing house transfer or other payment
mechanism.


 


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


 


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


 


(f)            Internet
Services Representations and Warranties. 
Bank represents and warrants 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


 


55
















 


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 Interest
Reversal Percentage and Late Fee Reversal Percentage for the preceding Program
Year and such other calculations as are necessary to calculate any payment in
respect thereof to be made by NMG pursuant to this Section 4.10.


 


(b)           Interest
Reversals. If the Interest Reversal Percentage with respect to the Private
Label Accounts reflected in the Year-End Settlement Statement with respect to
the preceding Program Year is greater than the applicable High Collar, the NMG
Companies shall pay Bank an amount equal to [***].


 


(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 Program Year is greater
than the applicable High Collar, the NMG Companies shall pay Bank an amount
equal to [***].


 


4.11         Interest
Free Receivables.  Bank shall offer and support credit plans
providing for the incurrence of Interest Free Receivables, including the credit
plans set forth in Schedule 4.11, in accordance with this Agreement and,
subject to the limitations set forth in this Section 4.11, the cost of
maintaining such Interest Free Receivables shall be borne by Bank; provided, however, that Bank shall not be required to offer
or support Interest Free Receivables to the extent that the amount of the
Average Interest Free Receivables in any Program Year exceeds [***] of Average
Private Label Receivables for such Program Year. The Year-End Settlement Sheet
for each Program Year shall set forth, (i) Average Private Label
Receivables, (ii) Average Interest Free Receivables, (iii) the Net
Yield for such period on Average Interest Free Receivables, and (iv) the
Net Yield on Average Interest Bearing Receivables. If the dollar amount of
Average Interest Free Receivables as a percentage of Average Private Label
Receivables for such Program Year exceeds the applicable High Collar, there
shall be included on the Year-End Settlement Sheet for such Program Year (and
the NMG Companies shall pay to Bank) an amount equal to [***].


 


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.


 


56

















 


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
Yearly Settlement Sheet shall set forth an accounting of the costs incurred, if
any, by NMG and its Affiliates in the prior Program Year 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 Program 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 [***] 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 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.


 


(e)           In
the event that the NMG Companies expand acceptance of Credit Cards not bearing
NMG Licensed Marks as permitted by Section 2.2(d)(iii) and in any
month during the [***] after such acceptance was first expanded, the Gross
Receivables decline by more than [***] compared to the corresponding calendar
month in the [***] preceding the expanded acceptance, the Parties shall
consider in good faith whether the amount of the NMG Marketing Commitment
and/or the Joint Marketing Commitment should be adjusted to take into account
such decline.


 


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


 


57

















 


envelopes, subject to 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 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;


 


(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


 


58

















 


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.


 


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)           For
each Fiscal Season, the NMG Companies shall develop, in consultation with Bank,
and on or before the thirtieth (30th) day prior to the commencement of such
Fiscal Season, the Marketing Committee shall approve, a Marketing Plan for such
Fiscal Season.


 


(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


 


59

















 


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, the NMG
Companies and Bank shall jointly develop a plan with respect to implementation
of such change in accordance with Applicable Law, including the impact the
proposed change would have, if any, on the Program economics in Section 9.1(a),
including the Risk Adjusted Margin, Post MP RAM and Profit Sharing Post MP RAM,
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;
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 Season.


 


(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.


 


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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
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


 


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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
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


 


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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 [***] 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;


 


(ii)           for
each Cardholder, joint-Cardholder and authorized buyer, (1)


 


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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


 


64

















 


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 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 [***] 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 the date on which this Agreement ceases to be in effect (i.e.,
the date on which any expiration or termination of this Agreement becomes
effective);


 


(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 date on which this


 


65
















 


Agreement ceases to be in effect (i.e., the date on
which any expiration or termination of this Agreement becomes effective); 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 date on which this Agreement ceases to be in effect
(i.e., the date on which any expiration or termination of this Agreement
becomes effective).


 


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 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 


 


66

















 


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 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;


 


67

















 


(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 [***] 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.


 


ARTICLE VII


 


OPERATING STANDARDS


 


7.1   Reports.


 


(a)           Within
[***] 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
[***] 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.  The form of such reports and the calculations
contained therein shall be in such form and shall reflect such detail with
respect to all of the items reported, and each 


 


68

















 


component thereof, as shall be mutually agreed upon by the Parties. The
financial information set forth in reports from Bank reflecting information
with respect to economic matters (including any information required to
determine amounts payable pursuant to Article IX, any information used in
determining Bank’s or the Program’s revenues or expenses for purposes of determining
Profit Sharing Post MP RAM, Post MP RAM (including for risk management
purposes), any components thereof or any other relevant definitions) shall be
derived from its General Ledger (GL) and/or its supporting financial accounting
subsystems.


 


(b)           Within  [***] after the end of each Program Month other than
the last Program Month of each Program 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 Program Month.  Each such statement shall be known as a “Monthly
Settlement Sheet.”


 


(c)           Within  [***] after the end of each Program
Quarter, 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
such Program Quarter.  Each such statement
shall be known as a “Quarterly Settlement Sheet”.


 


(d)           Within
[***] after the end of each Program Year, NMG Servicer shall deliver to Bank a
statement, in the form set forth on Schedule 7.1(d), setting forth all
information required to determine the payments to be made by the Parties pursuant
to this Agreement in respect of the last Program Month of such Program Year and
any annual payments to be made in respect of such Program 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 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 


 


69

















 


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 was monitored prior to such transfer.


 


(c)           Upon
transfer of 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
shall be adjusted as set forth in Section 2.03(b) of the Servicing Agreement 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)           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.


 


(e)           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).


 


(f)            Notwithstanding
any arrangement whereby Bank provides any Services through an Affiliate (or
third party as permitted under Section 7.2(e)), 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.


 


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.


 


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(d)           Throughout
the Term, Primary Servicer shall maintain a disaster recovery and business
continuity plan with respect to its operations under the Program 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, which shall be
considered Confidential Information, 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)           Bank
shall ensure that [***] identified features and functionality
available on the Bank Systems on the Effective Date (including data gathering,
interface capabilities with the NMG Companies’ Systems, Loyalty Program support
and core systems/customer service functionality and [***] features and functionality set forth in
Schedule 7.4(a)) shall remain available through the Term.


 


(b)           Bank shall provide and the Bank Systems shall support the Internet
Services described in Section 4.8.  For
the avoidance of doubt, Bank shall not be obligated to change Bank Systems to
accommodate any third party Internet financing program created pursuant to
Section 2.2(f).


 


(c)           Bank shall keep the same structure of Account numbers as was in existence
on the Effective Date.


 


(d)           Pursuant
to Section 4.3(a)(v), Bank shall provide training to NMG trainers who shall
then train employees of NMG, its Subsidiaries and its Licensees who use the
Bank Systems.


 


(e)           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.


 


(f)            Bank
shall maintain a disaster recovery and business continuity plan applicable to
the Bank Systems operated in connection with the Program that complies with
Applicable Law and is consistent with plans maintained for its Comparable
Partner Programs.  Bank shall be prepared
to and have the ability to implement such plan if necessary.  Bank shall provide NMG with access to review
such plan, which shall be considered Confidential Information, upon
request.  Bank shall test the plan
annually and shall promptly implement such plan upon the occurrence of a
disaster or business interruption.


 


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7.5   Systems Interface; Technical Support.


 


(a)           Required
Interfaces.


 


(i)            The
NMG Companies and Bank shall maintain [***] System interfaces that exist between the NMG
Companies and Bank immediately prior to the Effective Date and shall 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 [***] 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. 
[***] 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.  For the avoidance of doubt, Bank shall not be
obligated to make any modifications to its Systems to facilitate an Internet
financing product with a third Person as permitted pursuant to Section 2.2(f).


 


(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.


 


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 (other than
any such change necessitated solely as a result of an NMG System change
approved as an NMG Matter), Bank shall pay the costs and expenses associated
with such changes.


 


8.3   In-Store Payments. (a) 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, subject to exceptions noted therein, 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.


 


(b)           In
the event that NMG determines in good faith that, as a result of the effects of
or requirements associated with any Change in Law (including additional expense
or procedures imposed on NMG as a result of any such change), it is no longer
advisable for the Retail Merchants to accept In-Store Payments, the Retail
Merchants shall be entitled to cease accepting such In-Store Payments, provided
that NMG, on behalf of the Retail Merchants, shall use commercially reasonable
efforts to notify Bank in writing not less than [***] before such acceptance is
discontinued.  Any discontinuation of
such acceptance of In-Store Payments shall be applied to all Cardholders by all
Retail Merchants.


 


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 


 


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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
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 [***] after the end of each Program Month, NMG Servicer shall deliver
or cause to be delivered to Bank a report for such preceding Program Month of
all Special Discounts reflected in the NMG Charge Transaction Data and paid for
by Bank in such preceding Program 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
Program 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
[***] shall be paid by NMG to Bank within [***] 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, 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;


 


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(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
sales 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 sales slip;


 


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


 


(g)           NMG
fails to provide Bank with a copy of the applicable sales slip;


 


(h)           NMG
fails to provide Bank with a properly signed sales slip;


 


(i)            NMG
fails to provide Bank with a copy of the applicable delivery invoice;


 


(j)            NMG
fails to obtain proper identification from the Cardholder at the time of the
Application;


 


(k)           NMG
ships merchandise to a Cardholder at a previously unused address;


 


(l)            The
charge or Account arose from fraud of any employee or agent in a NMG call
center;


 


(m)          The
charge or Account arose from the unauthorized removal of information from an
NMG store or owned facility;


 


(n)           The
charge or Account arose from the unauthorized removal of information from an
NMG computer systems; or


 


(o)           NMG
ships merchandise to a Cardholder after receiving the Cardholder’s request to
cease such shipment.


 


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 Acquirer/Processor Fees.  Bank shall directly
process the NMG Transactions such that the Retail Merchants do not incur any
merchant acquirer/processor or similar fees.


 


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ARTICLE IX


 


PROGRAM ECONOMICS


 


9.1  NMG Compensation.


 


(a)           Payments.


 


(i)            Not
later than 1:00 pm (Central time) on [***], Bank shall pay to NMG an amount
equal to the amount set forth on Schedule 9.1(a)(i) with respect to the
Accounts.


 


(ii)           Not
later than 1:00 pm (Central time) on the [***] after the date on which the
Monthly Settlement Sheet is due, Bank shall pay NMG the amounts determined in
accordance with Schedule 9.1(a)(ii) with respect to the Accounts.


 


(iii)          Not
later than 1:00 pm (Central time) on the [***] after the date on which the
Quarterly Settlement Sheet is due, each Party shall pay to the other the
amounts determined in accordance with Schedule 9.1(a)(iii) with respect to
Accounts, which amounts shall be required to be reflected on the Quarterly
Settlement Sheet.


 


(iv)          Not
later than 1:00 pm (Central time) on the [***] following the date on which the
Year-End Settlement Sheet is due, each Party shall pay to the other Party the
amounts, if any, determined in accordance with Schedule 9.1(a)(iv), which
amounts shall be required to be reflected on such Year-End Settlement Sheet.


 


(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.


 


(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.


 


(c)           Optional
NMG Payments/MP Reductions.  To
provide additional time for the Parties to consider potential alternatives
designed to avoid, mitigate or eliminate a RAM Condition or a [***], at any
time (i) at NMG’s request, Bank shall provide, within ten (10) days
after such request, its latest Risk Adjusted Margin forecast and (ii) in
order to permit NMG to cause (A) an increase in the Risk Adjusted Margin
and/or (B) a reduction of the Merchant Participation, in either case, in
order to increase the Profit Sharing Post MP RAM and the Post MP RAM, within
[***] of receiving Bank’s latest Risk Adjusted Margin forecast, NMG may 


 


76

















 


commit to make monthly payments to Bank based upon the Risk Adjusted
Margin forecast, or to have Bank withhold or reduce any portion of the Merchant
Participation payments.  Simultaneous
with any such commitment, (x) NMG shall classify the amounts to be paid by
NMG as 9.1(c)(ii)(A) and/or the amounts NMG instructs Bank to withhold or
reduce as 9.1(c)(ii)(B), with the clarification that the same dollar cannot be
classified under both such categories, and (y) NMG shall inform Bank of
the level to which NMG shall commit to increase Post MP RAM, and the number of
months for which NMG commits to increasing Post MP RAM ([***]). At the end of
the period of the commitment, Bank will calculate the difference between the
estimated payments made by NMG under this provision, or reduction in Merchant Participation
payments under this provision, versus the difference between the Post MP RAM
for such period and the level to which NMG has committed to increase Post MP
RAM for such period, and Bank shall notify NMG of any shortfall or excess,
which will be offset by a transfer of funds between the Parties in the
following quarterly settlement.  For the
avoidance of doubt, in no case shall the offset by transfer of funds from Bank
to NMG for an excess payment be more than the amount paid by NMG to Bank (and /
or reduced from Bank’s payments to NMG) pursuant to Section 9.1(c)(ii).  If NMG desires to extend its commitment
([***]) to increase Post MP RAM, then NMG shall notify Bank at least [***] in
advance of the first day of the first impacted month.  At any time at which the Rolling 3 Month Post
MP RAM (calculated without including any payments or reductions made pursuant
to this Section 9.1(c) as a reduction to Merchant Participation or an
addition to Risk Adjusted Margin) is at least [***], Bank shall be obligated to
accept such payment or reduction commitment referred to in clause (ii) above.  At any time at which the Rolling 3 Month Post
MP RAM (calculated as stated in the immediately preceding sentence) is less
than [***], the implementation of any such commitment shall be subject to Bank’s
prior written approval, which approval shall be granted or withheld within
[***] of receipt of such proposal and which approval shall not be unreasonably
withheld by Bank.


 


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 uses 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), including that (A) Bank
shall not modify, change, alter, delete from or add to the NMG Licensed Marks,
including but not limited to any change in text, graphics or color, without the
written consent of NMG, (B)  Bank shall not use the NMG Licensed Marks 


 


77

















 


together with any logos or trademarks of any other companies involved in
the retail industry; and (C) Bank shall not use the NMG Licensed Marks in
association with any other marks to form a new mark.  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, including but not limited to
securing prior written approval of NMG for all uses of the NMG Licensed Marks,
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(h) hereto
(a “New NMG Mark”), Bank may request that NMG add such New NMG Mark to
Schedule 1.1(h) 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(h).


 


(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 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.


 


78

















 


(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, each of Bank and
Bank Parent 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), including that (i) NMG
shall not modify, change, alter, delete from or add to the Bank Licensed Marks,
including but not limited to any change in text, graphics or color, without the
written consent of Bank, (B) NMG shall not use the Bank Licensed Marks
together with any logos or trademarks of any other companies involved in the
financial services industry; and (C) NMG shall not use the Bank Licensed
Marks in association with any other marks to form a new mark.  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, including but not limited to securing prior written approval of Bank
for all uses of Bank Licensed Marks, 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.


 


(b)           New
Bank Marks.  If Bank adopts a
trademark, service mark or other source indicator that is not listed on
Schedule 1.1(b) 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(b) 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(b).


 


(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 


 


79

















 


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 and/or Bank Parent, (ii) it shall take no
action which shall adversely affect Bank’s and/or Bank Parent’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
and/or Bank Parent.  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 or Bank Parent’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 and Bank Parent alone have the right, in
their sole discretion, to take whatever action deemed necessary to prevent such
infringing use; provided, however, that if Bank and/or Bank
Parent 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 and/or Bank Parent take action necessary to alleviate such adverse
impact.  The NMG Companies shall
reasonably cooperate with and assist Bank and Bank Parent, at Bank’s expense,
in the prosecution of those actions that Bank and/or Bank Parent determines, in
their 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.


 


(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 


 


80

















 


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
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 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 


 


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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 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.


 


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(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 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, 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) 


 


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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.


 


(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,


 


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(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.


 


(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


 


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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 [***] 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.


 


(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 [***] of the end of
each Fiscal Year, and (ii) its unaudited consolidated quarterly financial
statements within [***] 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).


 


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(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 [***] 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 [***] 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 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 


 


87

















 


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.


 


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 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 


 


88

















 


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.  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.  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



 


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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.


 


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 


 


90

















 


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.


 


(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.


 


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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 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 


 


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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, subcontractors, and subject to the below limitations, prospective
Nominated Purchasers and their employees and representatives 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.  Notwithstanding the foregoing, neither Party
shall, without the consent of the other Party (A) disclose the terms of
this Agreement to a potential Nominated Purchaser, other than the disclosure of
termination-related rights and deadlines, the terms of the purchase options
referred to in Article XVII and the provisions of such Article relating
to the purchase and interim servicing arrangements referred to therein or (B) disclose
the terms of this Agreement to any third party with whom any of the NMG
Companies is considering entering into an arrangement permitted by Section 2.2(b),
(c) or (f), other than the disclosure of the existence and terms of Bank’s
rights under such Sections to the extent reasonably necessary to inform such
third party of the impact of such rights on such third party; provided, however,
that neither Party shall disclose the specific criteria for risk underwriting
decisions or the economic terms of this Agreement to any third party (other
than economic terms to which a Nominated Purchaser is to become party in
connection with its purchase of the Program Assets and/or the Wind-Down Assets,
as the case may be).


 


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 


 


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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 [***] 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 [***].  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) 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 


 


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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 Card.


 


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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)                                  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.


 


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 


 


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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 [***] 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, Quarterly
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 [***]
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.


 


(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 [***] from the date
of entry thereof.


 


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(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)                                 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).


 


(i)                                     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).


 


(j)                                     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, Quarterly
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 [***].


 


(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 [***] 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.


 


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(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 and subject to the effective
dates of termination in Section 16.4:


 


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


 


(b)                                 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;


 


(c)                                  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;


 


(d)                                 if there is a Change in 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
Effective Date, 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 


 


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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 Law as was permissible prior to the Effective Date, such negotiations
not to terminate (in the absence of an agreement between the Parties on any
modification) earlier than [***] 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 Law is likely to occur or (ii) the date on which the relevant
Change in Law takes effect; or


 


(e)                                  if there have been more than [***]
(excluding for purposes of this paragraph Unapproved Matters that are Bank
Matters as described in Sections 3.2(g)(ii), (iii), (iv), (vi), (ix), (x) and
(xi)) 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; or


 


(f)                                    not more than [***] after the Risk
Information Date in respect of a proposed modification to a Risk Management
Policy, other than a modification that would be Bank Matter as described
in Section 3.2(g)(i), if such modification is an Unapproved Matter and
either:


 


(i)                                     in the case of a proposed
modification to a New Account Policy, the Approval Rate for the Benchmark
Population assuming application of the New Account Policy (including such
modification) to the Applications submitted by such Benchmark Population, as
modeled in accordance with Section 4.6(c)(v)(i), is less than [***]; or


 


(ii)                                  in the case of a proposed
modification to a Risk Management Policy with respect to or affecting existing
Accounts, either:


 


(A)                              such change in Risk
Management Policy, together with all previous changes to Risk Management
Policies implemented as Bank Matters pursuant to Sections 3.2(g)(iii) or (iv) following
the Effective Date, is projected, based on the information required to be
delivered in accordance with Section 4.6(c)(vi) and the methodology
stated therein, to decrease Net Credit Sales by more than [***] in any rolling
[***] period required to be included in the projections delivered pursuant to Section 4.6(c);
or


 


(B)                                such proposed
modification is a Bank Matter as a result of the occurrence and continuance of
an NMG Credit Event; provided, however, if such proposed modification is
a Bank Matter as a result of an NMG Credit Event that has occurred and is
continuing, and a Trigger Condition shall be in existence at such time, then
NMG shall not have the right to terminate pursuant to this Section 16.2(f)(ii)(B) 


 


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unless the decrease in
Net Credit Sales is by more than [***] in any rolling [***] period required to
be included in the projections delivered pursuant to Section 4.6(c); or


 


(g)                                 upon notice to Bank delivered not
more than [***] following (i) the implementation of any New Account Policy
if the Approval Rate for the Benchmark Population assuming application of the
New Account Policy (including such modification) to the Applications submitted
by such Benchmark Population, as modeled in accordance with Section 4.6(c)(v)(i),
is less than [***] or (ii) the implementation of a Risk Management Policy
with respect to or affecting existing Accounts if the cumulative effect of such
change in Risk Management Policy and all other changes implemented pursuant to
Sections 3.2(g)(iii) and (iv) as Bank Matters is a decrease in such
Net Credit Sales by more than [***] in any rolling [***] period based on the
information required to be delivered in accordance with Section 4.6(d) and
the methodology stated therein; or


 


(h)                                 (A) if Bank proposes to
implement any change in Risk Management Policies that is an Unapproved Matter
following the CIL Negotiation Period by asserting its right to consider such
implementation a Bank Matter pursuant to Section 3.2(g)(iv), not more than
[***] after the Risk Information Date or (B) if Bank proposes to implement
any Existing Terms Change or New Account Term that is an Unapproved Matter
following the CIL Negotiation Period by asserting its right to consider such
implementation a Bank Matter pursuant to Section 3.2(g)(iv), not more than
[***] after Bank shall have broken the deadlock with respect to such Unapproved
Matter in the case of a proposed Existing Terms Change or implementation of New
Account Terms pursuant to Section 4.7(c)(vi)(A);


 


(i)                                     not more than [***] after Bank
shall have broken a deadlock with respect to the implementation of New Account
Terms pursuant to Section 4.7(c)(vi)(A) by asserting its right to
consider such implementation a Bank Matter of a type set forth in Section 3.2(g)(vi);
and


 


(j)                                     following the date on which the
Effective Annual Servicing Fee Rate exceeds the maximum Annual Servicing Fee
Rate required to be paid by Bank pursuant to Section 4.04(e) of the
Servicing Agreement.


 


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 and subject to the effective dates of termination in Section 16.4:


 


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


 


(b)                                 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); or


 


(c)                                  not more than [***] after
the end of the Account Terms Negotiation Period provided that (i) a RAM
Condition has occurred and is continuing at the time of such notice and (ii) the
implementation of the New Account Terms proposed by Bank remain an Unapproved
Matter at such time and do not constitute a Bank Matter in accordance with Section 4.7(c)(vi)(B);
or


 


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(d)                                 in the event a [***]
negotiation period is required and requested pursuant to Section 2.2(d)(iii),
not more than [***] days
following the end of such [***] period
if the Parties fail to reach agreement pursuant to such negotiation process.


 


16.4   Effective Date of Termination.  A termination by
NMG or Bank, as applicable, prior to the end of the Term shall become effective
on the applicable date set forth below, in each case subject to Section 17.1:


 


(a)                                  a termination in respect of an NMG Event of Default or a
Bank Event of Default shall become effective immediately upon written notice to
the defaulting Party;


 


(b)                                 a termination by NMG pursuant to Sections 16.2(b) through
(e) shall become effective [***] after
written notice to Bank;


 


(c)                                  a termination by NMG pursuant to Section 16.2(f) shall
become effective [***] after the
Risk Information Date, provided that,
at NMG’s option, such termination may become effective on any date following a
Preliminary Non-Purchase Event so long as NMG shall have provided not less than
[***] prior written notice to
Bank of such earlier termination date;


 


(d)                                 a termination by NMG pursuant to Section 16.2(g) or
(h) shall become effective [***] following
the Program Asset Information Date, provided that,
at NMG’s option, such termination may become effective on any date following a
Preliminary Non-Purchase Event so long as NMG shall have provided not less than
[***] prior written notice to
Bank of such earlier termination date;


 


(e)                                  a termination by NMG pursuant to Section 16.2(i) shall
become effective [***] after
written notice, provided that, at NMG’s option,
such termination may become effective on any date following a Preliminary
Non-Purchase Event so long as NMG shall have provided not less than [***] prior written notice to Bank of
such earlier termination date; and


 


(f)                                    a termination by Bank pursuant to Section 16.3(b), (c) or
(d) shall become effective [***] following
written notice to NMG.


 


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 following such
expiration or termination 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.


 


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(b)                                 Upon the satisfaction of the
provisions of Section 17.2 or, in the event NMG delivers notice that it
does not wish to purchase the Program Assets (or fails to exercise such notice
within the timeframe set forth in Section 17.2), upon the later of (i) the
effective date of termination and (ii) the date of such notice (or such
failure to timely provide notice), 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 of by a third party nominated by NMG (a “Nominated
Purchaser”), 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:


 


(i)                                     in the case of the expiration of
this Agreement at the end of a Term, or in the case of a termination by NMG
pursuant to Section 16.2(a) through (e), 16.2(g) or 16.2(h),
[***] after the date of the last in-person due diligence session requested by
NMG pursuant to Section 17.2(e) (which last due diligence session
shall occur no later than the expiration of the Due Diligence Period);


 


(ii)                                  in the case of a termination by
NMG pursuant to Section 16.2(f), [***] after the Risk Information Date;


 


(iii)                               in the case of a termination by
NMG pursuant to Section 16.2(i), 
[***] following delivery by NMG of its written notice of termination;
and


 


(iv)                              in the case of a termination by
Bank prior to the expiration of the Term, within [***] of receipt by NMG from
Bank of its written notice of termination;


 


provided,
however, that NMG shall have the option to extend the relevant deadline referred
to in clause (i), (ii), or (iii), as the case may be, for a period of [***] additional
days by providing written notice of such extension to Bank not later than the
[***] prior to the applicable date referred to in clause (i), (ii), or
(iii).  NMG may submit a written request
to Bank not later than the [***] prior to the date referred to in clause (iv) to
extend the relevant deadline referred to in clause (iv) above for a period
of [***] additional days, but Bank shall have sole discretion as to whether it
accepts or rejects such request.  During
the period commencing on the relevant day set forth in clause (i), (ii), (iii) or
(iv), as applicable, and ending on the date on which NMG delivers written
notice as to whether the purchase option pursuant Section 17.2(a) will
be exercised (or in absence of such a notice, ending on the expiration date of
the applicable period set forth in Section 17.2(b) as so extended), (A) no
amounts shall be withheld in respect of the Existing Account Reserve Amount and
(B) Bank shall withhold from the Merchant Participation an amount equal to
[***] of Net Credit Sales and this amount shall be held by Bank or deposited in
escrow in the same manner as amounts referred to in Section 4.6(h).  All amounts withheld pursuant to this Section 17.2(b) shall
be (x) paid to NMG upon completion of the purchase of the 


 


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Program
Assets or (y) retained permanently by Bank if NMG delivers written notice
to Bank that the purchase option will not be exercised, if NMG fails to deliver
notice to Bank that such option will be exercised prior to the expiration of
the extended period referred to above or if NMG fails to complete the purchase
by the effective date of termination of this Agreement).


 


(c)                                  If such purchase option is
exercised, NMG or the Nominated Purchaser must complete the purchase of the
Program Assets (i) in the case of the expiration of this Agreement at the
end of a Term, on or prior to the expiration of the current Term; (ii) in
the case of a termination of this Agreement pursuant to Section 16.2(f),
not later than [***] after the Risk Information Date; (iii) in the case of
a termination of this Agreement pursuant to Section 16.2(i), not later
than [***] after delivery by NMG of the notice of termination; (iv) in the
case of a termination of this Agreement pursuant to Section 16.2(a) through
(e), 16.2(g) or 16.2(h), not later than [***] after the Program Asset
Information Date; (v) in the case of a termination of this Agreement by
Bank prior to the expiration of the Term, not later than [***] after receipt by
NMG of the notice of termination. 
Notwithstanding the foregoing (except in the case of a termination
pursuant to Section 16.2(g) or 16.2(h)) 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 on or prior to
the applicable foregoing date, such purchase shall be completed within [***]
after such date; and provided, further, that in any case
(including a termination pursuant to Section 16.2(g) or 16.2(h)), if
NMG is unable to complete the purchase by such date because of a material
breach by Bank of its obligations pursuant to Section 17.2(e), such
purchase shall be completed as soon as reasonably practicable following the
date on which such breach is cured.  The
date of the completion of any purchase under this Section 17.2(c) pursuant
to a purchase agreement referred to herein 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
Par Value thereof at the time of purchase, except that if the purchase right
arises as a result of (A) an early termination of this Agreement by Bank
for an NMG Event of Default 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 thereof at the time of purchase, plus (y) de-conversion costs
of the Bank in an amount not to exceed [***] million. The Parties shall use
commercially reasonable efforts to minimize transaction costs relating to the
purchase and deconversion of the Program Assets.


 


(e)                                  Not earlier than the Applicable
Request Date and (i) in the case of a termination by NMG pursuant to Section 16.2(g),
16.2(h), 16.2(i) or a termination by Bank pursuant to Section 16.3(a) or
(b), not later than five (5) days following delivery by NMG or Bank of the
notice of termination or (ii) in the case of an expiration at the end of
the Term, not later than [***] after the date that is one year prior to the end
of the Term, NMG shall be entitled to deliver a written request of Bank to
provide NMG and any prospective Nominated Purchaser and their respective
representatives with reasonable access to the Program Asset Information during
the Due Diligence Period for the purpose of conducting due diligence
investigations to determine whether they wish to purchase the Program Assets
(and shall provide NMG or the Nominated Purchaser that elects to purchase the
Program Assets with updated Program Asset Information following the Due
Diligence Period as is reasonably necessary to facilitate such agreement to
purchase).  Bank shall provide the
Program Asset Information as soon as reasonably practicable (but in no event
more than [***]) following any such request and shall 


 


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update any information included in the Program Asset Information from
time to time as reasonably requested by NMG; provided, however,
that Bank shall be entitled to require any prospective Nominated Purchaser to
enter into customary confidentiality arrangements before providing it (or
permitting NMG to provide it) with such access. 
During the Due Diligence Period, Bank shall make itself reasonably available
to participate in due diligence with each prospective Nominated Purchaser
identified by NMG as soon as reasonably practicable (and in the case of a
termination by NMG pursuant to Sections 16.2(f) or 16.2(i) or a
termination by Bank pursuant to Section 16.3, no later than [***]
following a request by NMG) and as part of such due diligence shall at the
request of NMG participate in an in-person due diligence session with each
prospective Nominated Purchaser during the Due Diligence Period.


 


(f)                                    The Parties and/or the Nominated
Purchaser 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.  The Parties (together with any potential
Nominated Purchaser designated by NMG) shall negotiate in good faith the terms
of, and the Parties and the Nominated Purchaser shall execute, an interim
servicing agreement (the “Interim Servicing Agreement”) detailing the
terms upon which the Parties will effectuate the conversion of the Accounts and
other Program Assets and/or Wind-Down Assets to the Systems of NMG or the
Nominated Purchaser, including, if requested, the obligation of Bank to provide
interim services to NMG and /or the Nominated Purchaser for a period specified
by NMG or the Nominated Purchaser of up to [***] following the Program Purchase
Date (as may be extended pursuant to this Section 17.2(f), the “Interim
Servicing Period”).  The Interim
Servicing Agreement shall be effective from the Program Purchase Date and shall
provide for a reasonable servicing fee to Bank. 
The Parties shall not unreasonably withhold or delay execution of the
Interim Servicing Agreement.  The Parties
shall mutually agree upon a conversion plan which shall be set forth in the Interim
Servicing Agreement.  The Parties shall
effectuate the conversion of the Accounts and the Program Assets and/or
Wind-Down Assets to the Systems of NMG or the Nominated Purchaser by the
conversion date specified in the conversion plan and in accordance with the
Interim Servicing Agreement.  The Interim
Servicing Period shall terminate no later than [***] following the Program
Purchase Date; provided, however, that (i) if
such termination date would otherwise fall on a date that is between November 1
and January 31, NMG or the Nominated Purchaser, on the one hand, or Bank,
on the other hand, may extend the Interim Servicing Period to a date that is
[***] after January 31, and (ii) if the Interim Servicing Period
would otherwise terminate on any of the last [***] of any calendar month, NMG
or the Nominated Purchaser, on the one hand, or Bank, on the other hand, may
extend the Interim Servicing Period up to [***].  NMG or the Nominated Purchaser, on the one
hand, or Bank, on the other hand, may extend the Interim Servicing Period
pursuant to clause (i) above by delivering written notice of such
extension to Bank or NMG and the Nominated Purchaser, as applicable, not less
than [***] prior to the date on which the Interim Servicing Period would end in
absence of such extension or pursuant to clause (ii) above by delivering
written notice of such extension to Bank or NMG and the Nominated Purchaser, as
applicable, not less than [***] prior to the date on which the Interim
Servicing Period would end in absence of such extension.


 


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(g)                                 To assist NMG in determining
whether NMG will choose to [***] from Bank’s changes to Risk Management
Policies pursuant to an election to effect [***] as permitted by Section 4.6(f),
if, after termination notice has been provided by NMG pursuant Section 16.2(f) (other
than pursuant to Section 16.2(f)(ii)(B)), Section 16.2(g), Section 16.2(h) or
Section 16.2(i), if NMG shall not have exercised its option to purchase
the Program Assets on or prior to the [***] prior to the expiration date of
such option (without regard to NMG’s right to extend such expiration date),
then,


 


(i)                                     not later than such date, Bank
shall deliver to NMG:


 


(A)                              An analysis, prepared in
accordance with the methods and reflecting the information set forth in
Schedule 17.2(g) reflecting a segmentation of all Accounts as to which
Bank proposes to make any change to Risk Management Policies (other than
changes as required by Applicable Law);


 


(B)                                a report further
segmenting (i.e., subsegmenting) each of the Account segments referred to in
clause (A) by ranges [***] as
are determined by NMG (the specifications of which ranges shall be made by NMG
in consultation with Bank’s risk management personnel) and resulting in
segments which shall have at least [***] Accounts per segment; and


 


(ii)                                  if requested by NMG in writing not
later than the [***] following receipt of the information referred to in Section 17.2(g)(i),
Bank shall deliver to NMG, not later than then [***] after such request, [***] reasonably
specified by NMG and resulting in segments which shall have at least [***]
Accounts per segment.  Upon request of
NMG, Bank shall make available its Risk Management staff to assist NMG by
recommending segmentation attributes for purposes of this Section 17.2(g);


 


(iii)                               at the time of the delivery of
each analysis referred to in clause (i) and (ii), an analysis reflecting
for each segment referred to in Section 17.2(g)(i) and (ii), each
segment’s size including active and total Accounts and Gross Receivables as of
the date of analysis and Net Credit Sales, Average Daily Gross Receivables,
Post-MP RAM and each component thereof for each such segment for the most
recent [***];


 


106

















 


(iv)                              for each segment referred to in Section 17.2(g)(i) and
(ii), a forecast of Post-MP RAM and each component thereof for the [***]
commencing with such report, which forecast shall be derived based on “business-as-usual”
assumptions (all of which shall be disclosed), including an assumption that the
Agreement would remain in effect for the full [***] (except that payments in
accordance with Article IX shall be assumed to cease at the end of month
[***] and Net Credit Sales shall be assumed to be [***] in each month following
month six) and would not reflect any behavior by Cardholders reflective of a
termination of this Agreement;


 


(v)                                 for each segment of RAM Deficient
Accounts reflected in any of the foregoing analyses, (A) a description of
any proposed changes in Risk Management Policies and (B) information
regarding the forecasted effects of each such proposed change on key Program
performance metrics, including [***];


 


(vi)                              for each segment of RAM Deficient
Accounts, a calculation of the Risk Change Compensation Amount and the Risk
Change Compensation Percentage in respect of such Account segment; and


 


(vii)                           within [***] of receiving all
information required to be delivered by the above clauses of this Section 17.2(g),
NMG must provide written notice to Bank of which Account segments referred to
in clause (i) or (ii) above NMG wishes to protect from application of
any new Risk Management Policies (other than required by Applicable Law) pursuant
to an election to apply Protection Through MP Reduction or Test/Control
Protection pursuant to Section 4.6(f). 
For each segment defined in Section 17.2(g)(i)(A), NMG may request
to protect subsegments of such segment using only one of the [***] defined in Section 17.2(g)(i)(B) and
Section 17.2(g)(ii).  Schedule 17.2(g) sets
forth an illustration of the segmentation process described in this Section 17.2(g).


 


All forecasts and calculations required to be prepared pursuant Section 17.2(g) shall
be prepared using standard methodologies utilized by Bank for other similar
private label Credit Card programs, shall take into account trends at the time
such proposed change would be implemented and shall be certified as meeting the
foregoing requirements of this Section by the Chief Financial Officer of
Bank’s Credit Card business.


 


(h)                                 Following a termination by NMG
pursuant to Section 16.2(f)(ii)(B) and prior to the [***] preceding
the expiration of the purchase option with respect to the Program Assets
referred to in Section 17.2, NMG can designate up to [***] Accounts
(including Accounts already so designated) as [***] Accounts, without regard to
the limitations on such designations that would otherwise apply pursuant to [***]
for the purpose of causing 


 


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changes to Risk Management Policies implemented as Bank Matters (other
than Bank Matters approved pursuant to Section 3.2(g)(i)) to not apply to
such Accounts.


 


17.3                           Card
Acceptance and Loyalty Program During Wind-Down.  Following the occurrence of a Preliminary
Non-Purchase Event occurring after a termination by NMG pursuant to Section 16.2(f),
(g), (h) or (i) or by Bank pursuant to Section 16.3, all of the
restrictions set forth in Section 2.2(d) on the ability of the NMG
Companies to accept Credit Cards other than NMG Credit Cards shall cease to
apply and the NMG Companies shall thereafter be permitted to accept all Credit
Cards without limit through the expiration or termination of this
Agreement.  In addition, notwithstanding
any provision of this Agreement to the contrary, following the occurrence of a
Preliminary Non-Purchase Event occurring after any termination pursuant to the
Sections referred to above in this Section 17.3, any and all restrictions
(including pursuant to Section 2.2(g), Schedule 2.2(d) or otherwise)
on the NMG Companies’ ability to offer Loyalty Programs of any type or pursuant
to any terms, to allow awards pursuant to the Program Loyalty Program to be
made available in connection with purchases using Credit Cards or other payment
products other than the NMG Credit Cards and/or any other restrictions on the
ability to amend or modify the Program Loyalty Program or any other Loyalty
Program shall also cease to exist, provided  that points or
awards granted pursuant to the Program Loyalty Program in exchange for payment
using forms of tender other than the NMG Credit Cards shall not be awarded on a
more favorable basis than points or awards granted pursuant to such program in
exchange for payment using the NMG Credit Cards (e.g., comparable points and
comparable spend level).


 


17.4                           Dedicated
Program Personnel.  Upon termination or expiration of the Program
for any reason and until the date that is [***] 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)                                  In connection with any prospective
expiration of this Agreement, or following the delivery of a notice of
termination by NMG or Bank prior to the end of the Term, if NMG gives written
notice that it shall not exercise the option referred to in Section 17.2
or otherwise fails to exercise the purchase option within the time period
specified in Section 17.2(b), following the effective date of the
expiration or termination of this Agreement, the NMG Companies shall have no
further rights whatsoever in or to the Program Assets (other than in respect of
the Wind-Down Assets to the extent NMG exercises its purchase option in respect
thereof).  In the event a Preliminary
Non-Purchase Event occurs prior to the effective date of the expiration or
termination of this Agreement, Bank and NMG shall continue to comply with all
of their respective obligations under this Agreement, provided that Bank shall
not be obligated to originate new Accounts (and in such event NMG shall not be
obligated to perform activities referred to in Section 4.2(a)(v) or
(viii)) unless at the time of a timely delivery of a Preliminary Non-Purchase
Event NMG also exercises, by delivering written notice to Bank, an option to
purchase, or cause a Nominated Purchaser to purchase, the assets associated
with all Accounts originated after such date (such assets, the “Wind-Down
Assets”).  The purchase price for the
Wind-Down Assets, which shall be payable upon the earlier to occur of (i) the
Program Purchase 


 


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Date and (ii) the [***] after the effective date of termination or
expiration of this Agreement, shall be equal to the Par Value thereof.


 


(b)                                 If NMG gives written notice that
it shall not exercise the option to purchase the Program Assets referred to in Section 17.2
or otherwise fails to exercise the option within the time period specified in Section 17.2(b),
Bank shall have the right in its sole discretion on or after the effective date
of 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).


 


(c)                                  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.


 


(d)                                 If NMG gives written notice that
it shall not exercise the option to purchase the Program Assets referred to in Section 17.2
or otherwise fails to exercise the option within the time period specified in Section 17.2(b),
following the effective date of the expiration or termination of this
Agreement, as applicable, the NMG Companies shall provide reasonable assistance
in connection with the conversion of any Program Assets (other than Accounts
the NMG Companies may elect to purchase pursuant to Section 17.5(a))
resident on or integrated within the 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 [***]
following the effective date of such expiration or termination.  Bank shall bear all costs and expenses of any
such conversion and the transitioning of services performed by the NMG
Companies to the Bank.


 


(e)                                  Within [***] after the effective
date of the expiration or termination of this Agreement, if NMG shall have
given written notice that it shall not exercise the option referred to in Section 17.2
or shall have otherwise failed to exercise the option within the time period 


 


109

















 


specified in Section 17.2(b), 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
after such [***], 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.


 


(f)                                    In the case of a termination by
NMG pursuant to Section 16.2(f)(ii)(B), if NMG delivers written notice of
its intention to exercise the option to purchase the Program Assets referred to
in Section 17.2 but fails to consummate such purchase at or before such
expiration of the time to complete such purchase as set forth in this
Agreement, NMG shall pay to Bank, within [***] after such expiration, an amount
equal to [***], Bank shall be entitled to draw upon and retain such amount from
the segregated account, escrow account  or
letter of credit established pursuant to Section 4.6(h)(i) and
(iv).  The remainder of the amount held
in the segregated account or in escrow after such payment or drawing, if any,
pursuant to Section 4.6(h)(i) shall be released to NMG and the letter
of credit shall be terminated immediately upon such payment or drawing.  If NMG elects not to exercise the Program
Assets purchase option referred to in Section 17.2, fails to timely
exercise the purchase option within the time period specified in Section 17.2(b) or
the Program Purchase Date occurs, all amounts held in the segregated account or
in escrow established pursuant to Section 4.6(h)(i) and (iv) shall
be paid to NMG and the letter of credit, if any, shall be terminated without
any drawing thereunder.


 


(g)                                 In the case of a termination by
NMG pursuant to Section 16.2(f)(ii)(B), within [***] after NMG delivers
written notice that it does not intend to exercise the Program Assets purchase
option referred to in Section 17.2 or fails to timely exercise such
purchase option within the time period specified in Section 17.2(b), Bank
shall be entitled to draw upon the segregated account or escrow account
established pursuant to Section 4.6(h)(ii) and retain for its own
account the New Account Loss Reserve Amount. 
In addition, in the case of a termination by NMG pursuant to Section 16.2(f)(ii)(B),
if NMG elects to exercise its option to purchase the Wind-Down Assets and NMG
or the Nominated Purchaser fails to pay the purchase price for such Wind-Down
Assets on date when such purchase price is due pursuant to Section 17.5(a),
Bank shall be entitled, as its [***] remedy for such failure, to draw upon and
retain the Wind-Down Asset Purchase Reserve Amount from the segregated account
or escrow account established pursuant to Section 4.6(h)(iii).


 


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;


 


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(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;


 


(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;


 


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(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


 


(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 


 


112

















 


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.


 


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 


 


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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,
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 


 


114

















 


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.


 


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


 


115
















 


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.


 


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, 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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c/o The Neiman Marcus Group, Inc.

  
	
   

  	
   

  	
  One Marcus Square

  
	
   

  	
   

  	
  1618 Main Street

  
	
   

  	
   

  	
  Dallas, Texas 75201

  
	
   

  	
   

  	
  Attention: Credit
  Card Program Manager

  






 


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  With a copy to:

  	
   

  	
  Simpson Thacher &
  Bartlett LLP

  
	
   

  	
   

  	
  425 Lexington Avenue

  
	
   

  	
   

  	
  New York, New York 10017

  
	
   

  	
   

  	
  Attention: Maripat
  Alpuche, Esq.

  
	
   

  	
   

  	
   

  
	
  If to the Bank Companies:

  	
   

  	
  c/o HSBC Bank Nevada, N.A.

  
	
   

  	
   

  	
  26525 N. Riverwoods Blvd.

  
	
   

  	
   

  	
  Mettawa, Illinois 60045

  
	
   

  	
   

  	
  Attention: SVP - Client
  Development, HSBC Card & Retail Services

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  HSBC Card Services, Inc.

  
	
   

  	
   

  	
  26525 N. Riverwoods Blvd.

  
	
   

  	
   

  	
  Mettawa, Illinois 60045

  
	
   

  	
   

  	
  Attention: General Counsel, CRS
  Division

  






 


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.


 


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 


 


117

















 


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.


 


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 


 


118

















 


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.


 


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 Schedule
4.6(f) and the corresponding provisions of Section 4.6(f) (Alternative
Risk Change Payment Arrangements), 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.


 


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ARTICLE XX


 


RECOURSE CREDIT PROGRAM


 


20.1                           Recourse Credit Program.


 


(a)                                  Overview. From time to time, NMG may
request that the Bank approve an Application or Account as a Full Recourse
Account or an Account as a Partial Recourse Account. If such requests are
within a range of acceptable creditworthiness, as solely determined by NMG’s
Vice President of Credit Risk or NMG’s Director of Credit Operations, then NMG
shall advise Bank’s account executive via email, and Bank will approve the
requests to designate such Accounts as Full Recourse Accounts or Partial
Recourse Accounts subject to the terms and conditions set forth in this Article XX
(Full Recourse Accounts and Partial Recourse Accounts being herein referred to
as “Recourse Accounts”). 
Notwithstanding the foregoing: (i) an Account shall not be accepted
as a Full Recourse Account if the applicant is not eighteen (18) years or older
at the time the Application is submitted for approval and (ii) an Account
shall not be accepted as a Recourse Account if doing so would violate
Applicable Law.


 


(b)                                 Recourse Accounts shall be subject
to the same Cardholder terms as the remainder of the Accounts under the
Program.  Recourse Accounts shall be
considered Accounts for all purposes of this Agreement, including Sections 4.10
and 4.11.


 


20.2                           NMG Obligations.


 


(a)                                  Obligation to Purchase or
Reimburse. NMG understands and acknowledges that Bank would not approve any
Recourse Accounts if NMG had not promised to comply with all of the terms and
conditions set forth in this Article XX. In exchange for Bank’s approval
of such Recourse Accounts, NMG agrees (i) to purchase any Full Recourse
Account from Bank that: (A) becomes [***] past due; (B) is held by a
Cardholder who is deceased;  (C) is
included in any bankruptcy proceeding; or (D) is included in any probate
proceeding; and (ii) to reimburse Bank for the portion of any Account
balance of any Partial Recourse Account that exceeds the credit line that would
have been in effect in absence of such designation as a Partial Recourse
Account in the event such Partial Recourse Account is charged off in accordance
with the Risk Management Policies. NMG agrees to purchase each such Recourse Account
(or reimburse such balance referred to above in the case of a Partial Recourse
Account) from Bank for the full balance (or portion thereof referred to above
in the case of a Partial Recourse Account) due at the time of the purchase,
including earned interest and fees. NMG agrees to pay the Bank the relevant
amount referred to above within [***] after receiving written notice or an
email from Bank of the occurrence of an event referred to in clause (A), (B), (C) or
(D).


 


20.3                           Collection of Charged-Off
Partial Recourse Accounts and Purchased Full Recourse Accounts.


 


(a)                                  Following the time that Partial
Recourse Accounts have been charged off, any recoveries will be split
proportionately based on the proportion of the amount remaining unpaid to Bank
(other than the portion of such amount for which NMG made payment pursuant to Section 20.2(a)(ii))
and the amount remaining unpaid to NMG from its payment pursuant to Section 20.2(a)(ii) above.  Bank will assume all costs of collecting
charged-off Partial Recourse Accounts.


 


(b)                                 Upon payment to Bank of the
purchase price for any Full Recourse Account, Bank shall assign all rights,
title and interest in such Recourse Account(s) to NMG. Thereafter, NMG
will bear all liability and risk of loss associated with such Recourse Account,
without 


 


120

















 


warranty by or recourse or liability to Bank, and NMG shall have the sole
right to collect all amounts payable under the assigned Recourse Account.  NMG agrees that Bank may deduct undisputed
past due amounts that NMG owes to Bank for Recourse Accounts hereunder from any
amounts Bank owes to NMG under the Agreement. 
If Bank receives a payment on a Full Recourse Account after it has been
purchased by NMG, Bank will forward to NMG, as promptly as reasonably
practicable, the equivalent sums for such payment received.


 


20.4                           Performance.  NMG shall be obligated under this Article XX
to make the payments referred to in Section 20.2 in respect of Recourse
Accounts without requiring any actions or proceedings to be taken by Bank
against the Cardholder(s). NMG expressly waives the benefit of any notice from
Bank of modification of the Recourse Account terms and agrees that, prior to
any purchase demand by Bank, Bank may, without releasing the liability of NMG
hereunder, extend the time for making any payment, waive or extend the
performance of any agreement or otherwise waive, amend, extend or modify any
agreement or terms governing Recourse Accounts. Bank may proceed against NMG
directly and independently of Cardholder(s), as Bank may elect.


 


20.5                           Reports. Bank
agrees to provide NMG with reporting on the status of all Recourse Accounts not
less than monthly. Such report shall include the total number of Recourse
Accounts in the Recourse Portfolio, the aggregate dollar amount of the Recourse
Accounts in the Recourse Portfolio, the percentage of the total Program
receivables that are comprised of Recourse Accounts, and an itemized accounting
of the delinquency level of each Recourse Account.


 


20.6                           Termination. Bank
may discontinue the addition of new Recourse Accounts to the Recourse Portfolio
at any time, upon [***] days prior written notice
to NMG. In addition, upon termination of the Agreement, or receipt or delivery
of notice of termination by any Party, Bank may immediately cease the addition
of new Recourse Accounts. In such case, the rights and obligations of the
Parties with respect to Recourse Accounts established before the effective date
of termination will not be affected.


 


20.7                           Portfolio Cap.  If, at any time, the aggregate dollar amount
of Gross Receivables in the Recourse Portfolio equals or exceeds [***] of Bank’s
receivables for the total Program, then Bank may suspend the addition of new
Accounts to the Recourse Portfolio until the aggregate dollar amount of the
Recourse Portfolio falls below the cap.


 


20.8                           Removals from Recourse
Portfolio. In the event a Cardholder pays the entire
balance owed on a Recourse Account, Bank may in its sole discretion at any
point thereafter remove such Recourse Account from the Recourse Portfolio and
treat it as a regular Account. Accordingly, if, and from the time, any such
Recourse Account is removed from the Recourse Portfolio, the Account shall no
longer be deemed a Recourse Account or subject to the terms of this Article XX.


 


20.9                           Annual Review.  At the end of each Program Year, Bank will
review the performance of the Recourse Portfolio and shall, with respect to any
of such Recourse Accounts that would qualify as an Account with the credit line
then in effect thereunder under the Risk Management Policies then in effect,
redesignate such Account as an Account that is not a Recourse Account.


 


121

















 


[Remainder
of Page Intentionally Left Blank]


 


122

















 


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/ James E. Skinner

  
	
   

  	
   

  	
  Name:
  James E. Skinner

  
	
   

  	
   

  	
  Title:
  EVP & CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BERGDORF GOODMAN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James E. Skinner

  
	
   

  	
   

  	
  Name:
  James E. Skinner

  
	
   

  	
   

  	
  Title:
  EVP & CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC BANK NEVADA, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Brian Hughes

  
	
   

  	
   

  	
  Name:
  Brian Hughes

  
	
   

  	
   

  	
  Title:
  EVP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC CARD
  SERVICES INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Brian Hughes

  
	
   

  	
   

  	
  Name:
  Brian Hughes

  
	
   

  	
   

  	
  Title: EVP

  



 
















 


SCHEDULE 1.1(a)


 


ABA Delinquency Forecast


 


Table
with Moody’s March 2010 forecast and the [***] trigger as follows:


 


	
  Month

  	
   

  	
  A=March 2010 

  Forecast

  	
   

  	
   

  	
   

  
	
  Jul-10

  	
   

  	
  6.58

  	
  %

  	
  [***]

  	
   

  
	
  Aug-10

  	
   

  	
  6.50

  	
  %

  	
   

  
	
  Sep-10

  	
   

  	
  6.42

  	
  %

  	
   

  
	
  Oct-10

  	
   

  	
  6.34

  	
  %

  	
   

  
	
  Nov-10

  	
   

  	
  6.26

  	
  %

  	
   

  
	
  Dec-10

  	
   

  	
  6.16

  	
  %

  	
   

  
	
  Jan-11

  	
   

  	
  6.04

  	
  %

  	
   

  
	
  Feb-11

  	
   

  	
  5.93

  	
  %

  	
   

  
	
  Mar-11

  	
   

  	
  5.80

  	
  %

  	
   

  
	
  Apr-11

  	
   

  	
  5.68

  	
  %

  	
   

  
	
  May-11

  	
   

  	
  5.57

  	
  %

  	
   

  
	
  Jun-11

  	
   

  	
  5.45

  	
  %

  	
   

  
	
  Jul-11

  	
   

  	
  5.32

  	
  %

  	
   

  
	
  Aug-11

  	
   

  	
  5.18

  	
  %

  	
   

  
	
  Sep-11

  	
   

  	
  5.05

  	
  %

  	
   

  
	
  Oct-11

  	
   

  	
  4.93

  	
  %

  	
   

  
	
  Nov-11

  	
   

  	
  4.81

  	
  %

  	
   

  
	
  Dec-11

  	
   

  	
  4.69

  	
  %

  	
   

  
	
  Jan-12

  	
   

  	
  4.57

  	
  %

  	
   

  
	
  Feb-12

  	
   

  	
  4.46

  	
  %

  	
   

  
	
  Mar-12

  	
   

  	
  4.35

  	
  %

  	
   

  
	
  Apr-12

  	
   

  	
  4.25

  	
  %

  	
   

  
	
  May-12

  	
   

  	
  4.15

  	
  %

  	
   

  
	
  Jun-12

  	
   

  	
  4.04

  	
  %

  	
   

  
	
  Jul-12

  	
   

  	
  3.91

  	
  %

  	
   

  
	
  Aug-12

  	
   

  	
  3.78

  	
  %

  	
   

  
	
  Sep-12

  	
   

  	
  3.66

  	
  %

  	
   

  
	
  Oct-12

  	
   

  	
  3.56

  	
  %

  	
   

  
	
  Nov-12

  	
   

  	
  3.49

  	
  %

  	
   

  
	
  Dec-12

  	
   

  	
  3.42

  	
  %

  	
   

  
	
  Jan-13

  	
   

  	
  3.35

  	
  %

  	
   

  
	
  Feb-13

  	
   

  	
  3.29

  	
  %

  	
   

  
	
  Mar-13

  	
   

  	
  3.23

  	
  %

  	
   

  
	
  Apr-13

  	
   

  	
  3.16

  	
  %

  	
   

  
	
  May-13

  	
   

  	
  3.10

  	
  %

  	
   

  
	
  Jun-13

  	
   

  	
  3.05

  	
  %

  	
   

  
	
  Jul-13

  	
   

  	
  3.00

  	
  %

  	
   

  
	
  Aug-13

  	
   

  	
  2.96

  	
  %

  	
   

  
	
  Sep-13

  	
   

  	
  2.92

  	
  %

  	
   

  
	
  Oct-13

  	
   

  	
  2.88

  	
  %

  	
   

  



 

















 


	
  Nov-13

  	
   

  	
  2.85

  	
  %

  	
   

  	
   

  
	
  Dec-13

  	
   

  	
  2.83

  	
  %

  	
   

  
	
  Jan-14

  	
   

  	
  2.83

  	
  %

  	
   

  
	
  Feb-14

  	
   

  	
  2.83

  	
  %

  	
   

  



 


1.
Example of (i) of “ADA Delinquency Forecast Condition”: An ABA Delinquency
Forecast Condition shall be determined to exist as of August 2011 if any
month within the range of months bounded by [***] of the ABA Delinquency
Forecast published in [***] exceeds the corresponding value of B = Trigger.


 


2. Example of (ii) of
“ABA Delinquency Forecast Condition”: An ABA Delinquency Forecast
Condition shall be determined to exist as of August 2012 if any month
within the range of months bounded by [***] of the ABA Delinquency Forecast
published in [***] exceeds [***].


 

















 


SCHEDULE 1.1(b)


 


Bank Licensed Marks


 


	
  Mark

  	
   

  	
  Serial/Registration 

  Number

  
	
  HSBC Card Services

  	
   

  	
  74586917/ 2000657

  
	
  HSBC Bank Nevada

  	
   

  	
  74586917/ 2000657

  
	
  HSBC Finance Corporation

  	
   

  	
  74586917/ 2000657

  
	
  HSBC Retail Services

  	
   

  	
  74586917/ 2000657

  
	
  HSBC Card & Retail Services

  	
   

  	
  74586917/ 2000657

  
	
  HSBC

  	
   

  	
  74586917/ 2000657

  



 


	
  

  	
   

  	
   

  



 


	
   

  	
   

  	
  74052313/ 1699379

  



 

















 


SCHEDULE 1.1(c)


 


Comparable Partner Programs


 


Saks
Incorporated


Helzberg Diamonds


Bon Ton


 

















 


SCHEDULE 1.1(d)


 


Collar Information


 


“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, [***]; provided, however that the Parties will re-evaluate such rate  in [***] and may agree to a new rate which will apply for the remainder of the
Term based on changes to the weighted average Late Fee Reversal Percentage for
the period of [***], (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(e)


 


Housing Price Forecast


 


Table
with Moody’s March 2010 forecast and the [***] trigger as follows:


 


	
  Month

  	
   

  	
  A=March 2010 

  Forecast

  	
   

  	
   

  	
   

  	
  C=March 2012 

  Forecast (TBD)

  	
   

  	
  [***]

  	
   

  
	
  Jul-10

  	
   

  	
  328.41

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Aug-10

  	
   

  	
  326.18

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sep-10

  	
   

  	
  324.55

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oct-10

  	
   

  	
  323.51

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nov-10

  	
   

  	
  322.96

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dec-10

  	
   

  	
  322.82

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jan-11

  	
   

  	
  322.92

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Feb-11

  	
   

  	
  323.06

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mar-11

  	
   

  	
  323.08

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Apr-11

  	
   

  	
  322.87

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  May-11

  	
   

  	
  322.29

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jun-11

  	
   

  	
  321.32

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jul-11

  	
   

  	
  320.24

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Aug-11

  	
   

  	
  319.38

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sep-11

  	
   

  	
  319.04

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oct-11

  	
   

  	
  319.13

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nov-11

  	
   

  	
  319.46

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dec-11

  	
   

  	
  319.91

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jan-12

  	
   

  	
  320.44

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Feb-12

  	
   

  	
  321.02

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mar-12

  	
   

  	
  321.69

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Apr-12

  	
   

  	
  322.47

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  May-12

  	
   

  	
  323.39

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jun-12

  	
   

  	
  324.47

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jul-12

  	
   

  	
  325.68

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Aug-12

  	
   

  	
  327.02

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sep-12

  	
   

  	
  328.41

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oct-12

  	
   

  	
  329.83

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nov-12

  	
   

  	
  331.27

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dec-12

  	
   

  	
  332.70

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jan-13

  	
   

  	
  334.15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Feb-13

  	
   

  	
  335.54

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mar-13

  	
   

  	
  336.95

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Apr-13

  	
   

  	
  338.44

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  May-13

  	
   

  	
  339.97

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jun-13

  	
   

  	
  341.53

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jul-13

  	
   

  	
  343.13

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Aug-13

  	
   

  	
  344.77

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sep-13

  	
   

  	
  346.40

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 

















 


	
  Oct-13

  	
   

  	
  348.02

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nov-13

  	
   

  	
  349.62

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dec-13

  	
   

  	
  351.19

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jan-14

  	
   

  	
  352.75

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Feb-14

  	
   

  	
  354.20

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mar-14

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Apr-14

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  May-14

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jun-14

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jul-14

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Aug-14

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sep-14

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oct-14

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nov-14

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dec-14

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jan-15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Feb-15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mar-15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Apr-15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  May-15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jun-15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jul-15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Aug-15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sep-15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oct-15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nov-15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dec-15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jan-16

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Feb-16

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mar-16

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Apr-16

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  May-16

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jun-16

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jul-16

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Aug-16

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sep-16

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Oct-16

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nov-16

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dec-16

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jan-17

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Feb-17

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mar-17

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Apr-17

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  May-17

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jun-17

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


1.               Example of (i) of “Housing
Price Forecast Condition”: A Housing Price Forecast Condition shall be
determined to exist as of August 2011 if any month within the range of 


 

















 


months bounded by [***] of the Housing Price Forecast published in
[***] is less than the corresponding value of B = Trigger in the table above.


 


2.               Example of (ii) of “Housing
Price Forecast Condition”: A Housing Price Forecast Condition shall be
determined to exist as of [***] if any month within the range of months bounded
by [***] of the Housing Price Forecast published in [***] is less than the
corresponding value of [***] in the table above.


 

















 


SCHEDULE
1.1(f)


 


Program Loyalty Program and Loyalty Cards


 


Section A:
Description of Current Program Loyalty Program


 


The InCircle Program


The
InCircle program has successfully driven the use of the NM and BG Card and has
stimulated ongoing retail sales for over 25 years. The InCircle Program applies
automatically to any NM or BG Card (in limited cases, InCircle can be
awarded to select AMEX cards enrolled in the program by a customer). Under the
current InCircle Program, a customer is an InCircle member as soon as they open
a new credit card account. Each time a customer uses the NM or BG Card, the
customer earns two points for each dollar spent. Once a customer accumulates
10,000 points during an annual period, the customer becomes eligible to redeem
for an InCircle Gift card.


 


With
membership come certain special benefits, as determined by NMG.  In the past those benefits have included the
following, subject to changes made by NMG from time to time, and upon $2500
spend: a Perk Card (good for store services such as dining, alterations,
parking and more), two publications, complimentary gift packaging on purchases
over $25, double InCircle points on the customer’s Day of Choosing.  Also, all active cardholders receive advance
notice of sales and special events. NMG will periodically have bonus-point days
in stores and/or online when cardholders can earn double or triple points for
every dollar spent on the card, driving more customer traffic.


 


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


 


All
point redemptions for InCircle must be made during the annual program period
(which lasts for thirteen months from January 1st, to the following January 31st). After January 31st,
25% of unredeemed InCircle 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 or gift packaging
charges. Points are not convertible to cash or payment on Neiman Marcus or
Bergdorf Goodman credit 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 points to AMEX Centurion (“Black”)
and Platinum cardholders.


 


The
InCircle program also permits point owners to convert points from InCircle
points to points for other programs, including United Airlines, American
Airlines and Delta Airlines (point for point), and gifts/travel at Circle level
four and above.


 

















 


Section B:
Loyalty Cards


 


InCircle
Gift Card®


 
















 


SCHEDULE 1.1(g)


 


Non-Card Payment Plans and Private Label Credit Cards


 


Section
A: Non-Card Payment Plans


 


Signature
Accounts


Commercial
or Corporate Accounts (including Studio Accounts)


 


Section
B: Private Label Credit Cards


 


Neiman
Marcus


Neiman
Marcus Card


 


Bergdorf Goodman


Bergdorf Goodman Card


 

















 


SCHEDULE 1.1(h)


 


NMG Licensed Marks


 


	
  Mark

  	
   

  	
  Serial/Registration Number

  
	
  BERGDORF
  GOODMAN

  	
   

  	
  1902799

  
	
  BERGDORF
  GOODMAN

  	
   

  	
  0992733

  
	
  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

  
	
  IN
  (design)

  	
   

  	
  3370501

  
	
  INCIRCLE

  	
   

  	
  3370473

  
	
  INCIRCLE
  (design)

  	
   

  	
  77/588528

  
	
  HORCHOW
  GIFT CARD

  	
   

  	
  3315415

  



 

















 


SCHEDULE 1.1 (i)


 


RAM Deficient Account Methodology


 


[***]


 


“Finance
Charge Yield” means, for any period, the Net Interest Income divided by the
Average Daily Gross Receivables, which shall be Annualized.


 


“Late
Fee Yield” means, for any period, (i) the total dollar amount of revenue
received as a result of late fees assessed upon Cardholders, less any late fee
waivers granted, divided by (ii) the Average Daily Gross Receivables, which
shall be Annualized.


 


“Other
Fee Yield” means, for any period, (i) the total dollar amount of revenue
received as a result of fees other than late fees assessed upon Cardholders,
less any waivers of such fees granted, divided by (ii) the Average Daily Gross
Receivables, which shall be Annualized.


 


“Net
Write-Off Rate” means, for any period, the Net Write-Offs divided by the
Average Daily Gross Receivables, which shall be Annualized.


 

















 


SCHEDULE 1.1(j)


 


Special Discounts


 


[***]


 

















 


SCHEDULE 1.1(k)


 


Unemployment Forecast


 


Table
with Moody’s March 2010 forecast and the [***] trigger as follows:


 


	
  Month

  	
   

  	
  A=March 2010 

  Forecast

  	
   

  	
   

  	
   

  
	
  Jul-10

  	
   

  	
  10.16

  	
  %

  	
  [***]

  	
   

  
	
  Aug-10

  	
   

  	
  10.24

  	
  %

  	
   

  
	
  Sep-10

  	
   

  	
  10.28

  	
  %

  	
   

  
	
  Oct-10

  	
   

  	
  10.30

  	
  %

  	
   

  
	
  Nov-10

  	
   

  	
  10.31

  	
  %

  	
   

  
	
  Dec-10

  	
   

  	
  10.32

  	
  %

  	
   

  
	
  Jan-11

  	
   

  	
  10.31

  	
  %

  	
   

  
	
  Feb-11

  	
   

  	
  10.28

  	
  %

  	
   

  
	
  Mar-11

  	
   

  	
  10.23

  	
  %

  	
   

  
	
  Apr-11

  	
   

  	
  10.14

  	
  %

  	
   

  
	
  May-11

  	
   

  	
  10.02

  	
  %

  	
   

  
	
  Jun-11

  	
   

  	
  9.85

  	
  %

  	
   

  
	
  Jul-11

  	
   

  	
  9.65

  	
  %

  	
   

  
	
  Aug-11

  	
   

  	
  9.45

  	
  %

  	
   

  
	
  Sep-11

  	
   

  	
  9.26

  	
  %

  	
   

  
	
  Oct-11

  	
   

  	
  9.08

  	
  %

  	
   

  
	
  Nov-11

  	
   

  	
  8.90

  	
  %

  	
   

  
	
  Dec-11

  	
   

  	
  8.72

  	
  %

  	
   

  
	
  Jan-12

  	
   

  	
  8.53

  	
  %

  	
   

  
	
  Feb-12

  	
   

  	
  8.34

  	
  %

  	
   

  
	
  Mar-12

  	
   

  	
  8.15

  	
  %

  	
   

  
	
  Apr-12

  	
   

  	
  7.95

  	
  %

  	
   

  
	
  May-12

  	
   

  	
  7.76

  	
  %

  	
   

  
	
  Jun-12

  	
   

  	
  7.59

  	
  %

  	
   

  
	
  Jul-12

  	
   

  	
  7.43

  	
  %

  	
   

  
	
  Aug-12

  	
   

  	
  7.27

  	
  %

  	
   

  
	
  Sep-12

  	
   

  	
  7.11

  	
  %

  	
   

  
	
  Oct-12

  	
   

  	
  6.95

  	
  %

  	
   

  
	
  Nov-12

  	
   

  	
  6.80

  	
  %

  	
   

  
	
  Dec-12

  	
   

  	
  6.65

  	
  %

  	
   

  
	
  Jan-13

  	
   

  	
  6.52

  	
  %

  	
   

  
	
  Feb-13

  	
   

  	
  6.43

  	
  %

  	
   

  
	
  Mar-13

  	
   

  	
  6.36

  	
  %

  	
   

  
	
  Apr-13

  	
   

  	
  6.32

  	
  %

  	
   

  
	
  May-13

  	
   

  	
  6.27

  	
  %

  	
   

  
	
  Jun-13

  	
   

  	
  6.22

  	
  %

  	
   

  
	
  Jul-13

  	
   

  	
  6.17

  	
  %

  	
   

  
	
  Aug-13

  	
   

  	
  6.11

  	
  %

  	
   

  
	
  Sep-13

  	
   

  	
  6.06

  	
  %

  	
   

  



 

















 


	
  Oct-13

  	
   

  	
  6.03

  	
  %

  	
   

  	
   

  
	
  Nov-13

  	
   

  	
  5.99

  	
  %

  	
   

  	
   

  
	
  Dec-13

  	
   

  	
  5.95

  	
  %

  	
   

  	
   

  
	
  Jan-14

  	
   

  	
  5.91

  	
  %

  	
   

  	
   

  
	
  Feb-14

  	
   

  	
  5.88

  	
  %

  	
   

  	
   

  



 


1.               Example of (i) of “Unemployment
Forecast Condition”: An Unemployment Forecast Condition shall be
determined to exist as of [***] if any month within the range of months bounded
by [***] of the Unemployment Forecast published in [***] is greater than the
corresponding value of B = Trigger in the table above.


 


2.               Example of (ii) of “Unemployment
Forecast Condition”: An Unemployment Forecast Condition shall be
determined to exist as of [***] if any month within the range of months bounded
by [***] of the Unemployment Forecast published in [***] is greater than [***].


 


3.               Example of (iii) of “Unemployment
Forecast Condition”: An Unemployment Forecast Condition shall be
determined to exist as of [***] if any month within the range of months bounded
by [***] of the Unemployment Forecast published in [***] is greater than [***].


 

















 


SCHEDULE 2.2(d)


 


Loyalty Arrangements


 


Permitted Loyalty Program Arrangements


 


NMG can continue to honor, and can extend, renew and
modify, (i) the arrangements in effect as of the Effective Date between NMG and
American Express providing for the issuance of InCircle points for use of
platinum and centurion Credit Cards issued by American Express and such arrangement
shall be deemed not to violate Section 2.2(g), and (ii) the International
Customer Rewards Program.


 

















 


SCHEDULE 3.3


 


Program Relationship Managers; Partner Program Team


 


1.             Manager
of NMG as of the Effective Date:  [***]


 


2.             Manager
of Bank as of the Effective Date:  [***]


 


3.             Bank’s
Program Team Requirements and Specifications


 


(a)           Fully-Dedicated Team Members and Payment:  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)  One (1)
fully-trained data mining analyst.


 


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 Competing Retail Programs


 


Saks


Nordstrom


Barney’s


Bloomingdale’s


Coach 

Jeffrey


Tiffany


Holt Renfrew


Fred Segal


Stanley Korshak


Scoop


LVMH


Prada Group


PPR Group


Macy’s


 

















 


SCHEDULE 4.1(b)


 


Risk Management Policies and Operating Procedures


 


Refer to attached document


 
















 





 


HSBC CARD & RETAIL
SERVICES


 


NMG CREDIT RISK MANAGEMENT
POLICIES AND OPERATING PROCEDURES DOCUMENT


 


FINAL 1.19


 


SEPTEMBER 2010


 


COPYRIGHT HSBC Card & Retail Services
2010 ALL RIGHTS RESERVED.


 


No part of this publication
may be reproduced, stored in a retrieval system, or transmitted, on any form or
by any means, electronic, mechanical, photocopying, recording, or otherwise,
without the prior written permission of HSBC Card & Retail Services.


 

















 


	
  3SBC Card & Retail Services

  	
   

  	
  Draft v 1.13

  
	
  NMG Operating Procedure Document

  	
   

  	
  JUNE 2010

  



 


Document Control


 


[***]


 


 


ii

















 


[***]


 


iii

















 


Table of Contents


 


	
   

  	
   

  	
  Page #

  
	
   

  	
   

  	
   

  
	
  Section 1:
  Introduction

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1
  Purpose and Scope

  	
   

  	
  1

  
	
  1.2
  Objectives

  	
   

  	
  1

  
	
  1.3
  Definitions and Abbreviations

  	
   

  	
  1

  
	
  [***]

  	
   

  	
   

  



 


iv

















 


[***]


 


v
















 


	
  HSBC Card & Retail Services

  	
   

  	
  Version 1.13

  
	
  NMG Operating Procedure Document

  	
   

  	
  MAY 2010

  



 


Section 1:  Introduction


 


1.1 Purpose and Scope


 


This
policy establishes the guidelines, consistent with sound underwriting practices
and regulatory guidance, affecting systemic and manual credit extension
activities on the Neiman Marcus Group portfolio.


 


This
is not an exhaustive list of  Risk
Management Policies and Operating Procedures but rather a representation for
NMG and HSBC regarding the processes described herein.


 


1.2 Objectives


 


The
objective of this policy is to establish formalized guidelines within which
operational and systemic activities related to credit extension processing is
set in place for the following covered activities:


 


New Accounts /
Originations


 


Portfolio Management
/ Authorizations


 


Guideline Increase /
Decrease / Reinstatements


 


Reporting / Authority
Limits


 


1.3 Definitions and Abbreviations


 


	
  CLD

  	
   

  	
  Credit Line Decrease

  
	
   

  	
   

  	
   

  
	
  CLI

  	
   

  	
  Credit Line Increase

  
	
   

  	
   

  	
   

  
	
  D&B

  	
   

  	
  Dunn & Bradstreet Credit Bureau

  
	
   

  	
   

  	
   

  
	
  DPD

  	
   

  	
  Days Past Due

  
	
   

  	
   

  	
   

  
	
  FACT Act

  	
   

  	
  Fair and Accurate Credit Transactions Act of
  2003 is a United States law. The act allows consumers to request and obtain a
  free credit report once every twelve months from each of the three nationwide
  consumer credit reporting companies The act also contains provisions to help
  reduce identity theft, such as the ability for individuals to place alerts on
  their credit histories if identity theft is suspected, or if deploying
  overseas in the military, thereby making fraudulent applications for credit
  more difficult. Further, it requires secure disposal of consumer information.

  
	
   

  	
   

  	
   

  
	
  FAS

  	
   

  	
  Financial Authorization System

  
	
   

  	
   

  	
   

  
	
  NMGH

  	
   

  	
  Neiman Marcus Group, comprised of Neiman Marcus
  and Bergdorf/Goodman

  
	
   

  	
   

  	
   

  
	
  RAAC

  	
   

  	
  Risk Asset Acceptance Policy

  
	
   

  	
   

  	
   

  
	
  REM

  	
   

  	
  Request Manager — form used to update system
  access/entitlements

  
	
   

  	
   

  	
   

  
	
  RCM

  	
   

  	
  Retail Credit Management

  
	
   

  	
   

  	
   

  
	
  Ratification

  	
   

  	
  Ratification
  is the act of confirmation by the RCC of management actions within assigned
  levels of authority. Ratification applies to decisions by management prior to
  implementation which is then ratified/confirmed at the next RCC meeting.

  
	
   

  	
   

  	
   

  
	
  OFAC

  	
   

  	
  Office of Foreign Asset Control

  
	
   

  	
   

  	
   

  
	
  USA Patriot Act

  	
   

  	
  Uniting and Strengthening America by
  Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
  of 2001: Among other things, the act expands the Secretary of the Treasury’s
  authority to regulate financial transactions, particularly those involving foreign
  individuals and entities.

  



 


1

















 


[***
This page and the next 38 pages subject to confidential treatment ***]


 


2






 












 


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.

  	
   

  	
  [***]

  
	
  GLB Privacy Opt Outs

  	
   

  	
  Opt-out code will be retained
  on-line permanently unless cardholder requests opt-in or opt-out change.
  Opt-out reply notices will be retained on paper for 24 months

  	
   

  	
  [***]

  
	
  Completed Approved Applications

  	
   

  	
  All new applications that are
  signed by the applicant

  	
   

  	
  [***]

  
	
  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 25 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.

  	
   

  	
  [***]

  
	
  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.

  	
   

  	
  [***]

  
	
  Approvals - Credit Line Increase
  Request

  	
   

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

  	
   

  	
  [***]

  
	
  Resolved Disputes

  	
   

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

  	
   

  	
  [***]

  



 

















 


	
  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 120 days from date of submission

  	
   

  	
  [***]

  
	
  Currency Transaction Report

  	
   

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

  	
   

  	
  [***]

  
	
  Suspicious Activity Reports

  	
   

  	
  Currently not done but will be
  instituting process similar to Currency Transaction Report with a centralizing
  filing and reporting control

  	
   

  	
  [***]

  
	
  OFAC Reporting

  	
   

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

  	
   

  	
  [***]

  
	
  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

  	
   

  	
  [***]

  
	
  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.

  	
   

  	
  [***]

  
	
  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.

  	
   

  	
  [***]

  
	
  Cash Payment Reporting

  	
   

  	
  See above Currency Transaction
  Report

  	
   

  	
  [***]

  
	
  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

  	
   

  	
  [***]

  



 

















 


SCHEDULE 4.6(c)(vi)


 


Proposed Modification to Risk Management Policy


Projected Impact on [***]


 


*Numbers are for Illustrative purposes only


 


[***]
Impact Estimate — Methodology


 


Step I : 
Obtain month over month [***] impact estimate based on historical Test/Control(1) data


 


Assuming that [***] action was implemented on
Test group in Month 0 with an average [***] amount of [***]:


 


[***]


 


Step II :  If
necessary (because Test/Control data for particular risk action is not
available for the Neiman Marcus portfolio), derive ‘adjusted monthly [***]
impact’ based on the proposed new test by incorporating judgmental assumptions.


 


Assuming that the average [***]
amount of the new proposed test is [***],  monthly [***]
impact estimate is adjusted higher by [***] (judgmental assumption due to lack of real data):


 


[***]


 


Step III : 
Estimate the annual impacted Accounts due to the proposed new test assuming
that the new CLD action will be implemented in Month 1:


 


[***]


 






(1) 
Test/Control data from like portfolio will be leveraged in case historical Test/Control
data from Neiman Marcus is not available


 

















 


SCHEDULE 4.6(d)


 


Implemented Modification to Risk Management Policy


Monthly Analysis of Cumulative Impact on [***]


 


*Numbers below within the chart are for illustrative
purposes only


 


·                  If the cumulative [***] impact of Bank actions implemented as a Bank Matter described in 3.2(g)(iii) or
(iv) over the last 12 months is equal to or greater than 15% of [***]
for the entire portfolio over the same period, NMG has the right to terminate
pursuant to Section 16.2(g).


·                  In the example below, this occurs in Month 21.


 


[***]


 


Example of Calculation of Sales Impact


 


·                  The following example illustrates the calculation of the [***]
impact for an underwriting change for a given month


·                  In this example we calculate the first-month [***] impact of [***] from the previous table (highlighted in
orange)


·                  All numbers are for illustration purposes only


 


[***]


 

















 


SCHEDULE 4.6(f)


 


Alternative Risk Change Payment Arrangement


 


With
respect to any segment of RAM Deficient Accounts identified pursuant to Section 17.2(g) comprised
of not less than [***] Accounts, NMG may elect, by
written notice to Bank, to cause such segment of Accounts to become subject to
an Alternative Risk Change Payment Arrangement, as described below, [***].   So long as NMG complies with the payment
arrangements pursuant to such Alternative Risk Change Payment Arrangement, as
described below, [***].


 


i.                  Bank will
randomly select the greater of [***] Accounts
or [***] of Accounts capped at [***] Accounts from each segment of [***]; provided, however, that
Bank shall only select the number of Accounts in excess of [***] Accounts
(subject to the [***] Account cap) necessary to
achieve a [***] confidence level that such
Accounts are representative of the segment of [***].


 


ii.               Bank will apply the [***] to the [***], and will record the number
of active and total Accounts, Net Credit Sales, Average Daily Gross Receivables
and end of month Gross Receivables and performance [***] with respect to such Test Actioned Accounts.  Bank shall report all of the foregoing
information, pursuant to a report in form and substance reasonably satisfactory
to NMG, on a quarterly basis, no later than the 20th day following
the end of each Program Quarter.


 


iii.            Bank will also record and report to NMG, on the same
time frame as set forth in clause (ii), all of the information referred to in
clause (ii) with respect to the [***] other than the [***].


 


iv.           Bank would also calculate and report to NMG, on the
time frame referred to in clause (ii), the Baseline Receivables.  [***]


 

















 


Account” means, for
any period, the sum of the Average Daily Gross Receivables for the Protected
Accounts (excluding Test Actioned Accounts) for each month during such period divided
by the Average Protected Accounts for such period.  The excess of the Gross Receivables Per
Protected Account over the Baseline Receivables are referred to herein as “Incremental
Receivables.”


 


v.              With respect to
each Program Quarter during the Payment Period (as defined below), if the
Alternative Payment Amount (as defined below) [***] no later than the date on which quarterly payments
are due pursuant to Section 9.1(a)(iii).


 


vi.           With respect to each Program Quarter during the
Payment Period, if the Alternative Payment Amount is [***] no later than the date on
which quarterly payments are due pursuant to Section 9.1(a)(iii).


 


As
used herein, “Alternative Payment Amount” with respect to any Program Quarter
means the sum of [***].


 


As
used herein, “Payment Period” means the period commencing with the occurrence
of a Preliminary Non-Purchase Event and ending on the date that is the earlier
of (i) [***]  (iii) of
the Program Agreement.


 

















 


SCHEDULE 4.6(h)


 


Risk Change Shortfall


 


[***]


 


“Net Fee Income” means, for
any period, the total dollar amount of revenue received as a result of late
fees and other fees assessed upon Cardholders, less any late fee waivers or
other fee waivers granted.


 

















 


SCHEDULE 4.6(i)


 


VIP
Assignments


 


New VIP assignments will be permitted
only in the following instances:


 


·                  High Balance on
the Account must be or have been at one time > [***]


·                  Recourse
Accounts


[***]


 


Cap on VIP Assignment: [***]
on open Accounts, at any given time will be no more than [***]


 
















 


SCHEDULE 4.6(m)


 


Account Management Expansion


 


1.
Types of Action:


 


Account
management expansion initiatives will be implemented across at least [***]:


 


i.                  Proactive Batch Credit Line
Increases (CLI): Utilizing this strategy, guidelines would be systemically
increased through a batch process on Accounts meeting specific credit criteria
with no customer interaction required. Typically, the Accounts systemically
increased would be active Accounts nearing their existing guideline that meet
minimum risk score and account qualifications.


 


ii.               Posting CLI**: As part of
the posting CLI process, a Cardholder who has an approved overlimit transaction
would receive a systemic guideline increase such that the new guideline amount would
be enough to accommodate the aforementioned approved overlimit transaction
(i.e., the new guideline would exceed the outstanding balance on the account
including the approved overlimit transaction).


 


iii.            Expansion of Existing
Overlimit Authorizations Strategy [***]**: This
strategy contains the criteria for determining (i) whether an account is
eligible for overlimit transactions, and (ii) the overlimit amount for which
such account is eligible. Expanding the existing overlimit authorizations
strategy could entail, for example, removing or reducing the hard decline risk
score threshold (e.g., from [***] risk score for customer exceeding guideline,
which would otherwise result in a hard decline at POS) or raising the overlimit
percentage that auto-approves transactions in excess (e.g., from [***] to
[***]) of a cardholder’s guideline.


 


iv.           Relaxation of Existing
Risk-Based Active Credit Line Decrease (CLD) Strategy: [***].  Relaxing an existing Risk-Based Active CLD
Strategy might entail, for example, reducing the number of Accounts affected by
raising risk score thresholds in the existing strategy, decreasing guidelines
less drastically (i.e., CLD to balance plus a certain buffer amount (e.g.,
[***]) instead of CLD to balance) [***].


 


v.              Relaxation of Existing Risk
Based Inactive CLD Strategy: Similar to the risk-based active credit limit
decrease strategy, [***].  Relaxing this strategy may include, for
example, reducing the number of Accounts affected by raising risk score
thresholds in the existing strategy, decreasing guidelines less drastically
(i.e., CLD to an amount higher than [***]), [***].


 






**[***]


 


2.
Four illustrative examples of Bank’s obligations under Section 4.6(m):


 

















 


Example
1.  [***].


 


Example
2:  [***].


 


Example
3: [***].


 


Example
4:  [***].


 

















 


SCHEDULE 4.7


 


Account Terms


 


	
  Annual
  Fee

  	
   

  	
  None.

  
	
   

  	
   

  	
   

  
	
  Late
  Payment or Late Fee (at cycle)

  	
   

  	
  Lesser
  of the Minimum Payment Amount and $25, in case no late fee has been assessed
  in the past 6 cycles

   

  Lesser
  of the Minimum Payment Amount and $35, in case late fee has been assessed in
  the past 6 cycles

  
	
   

  	
   

  	
   

  
	
  Returned
  Check Fees

  	
   

  	
  None

  
	
   

  	
   

  	
   

  
	
  Minimum
  Payment Amount

  	
   

  	
  5%
  of billed balance (but at least $25 rounded up to the nearest $5).

  
	
   

  	
   

  	
   

  
	
  Minimum Finance Charge

  	
   

  	
  $.50

  
	
   

  	
   

  	
   

  
	
  Standard
  APR

  	
   

  	
  APR
  varies based on Prime + 20.74% (currently 23.99% APR as of June 1, 2010) for
  cardholders.

  
	
   

  	
   

  	
   

  
	
  Grace
  Period for the Imposition of Late Fees

  	
   

  	
  6
  days after the payment due date

  
	
   

  	
   

  	
   

  
	
  Grace
  Period for the Repayment of Purchases

  	
   

  	
  26
  days

  
	
   

  	
   

  	
   

  
	
  Method
  of Computing the Balance for Purchases

  	
   

  	
  Average
  Daily Balance (including new purchases)

  



 

















 


SCHEDULE 4.8(d)


 


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 [***] hours is allowed per month during the hours
of 12 am and 6 am CST, however, Bank will ensure in advance that system
maintenance does not conflict with any NMG special sales event.  Internet functionality shall include:


 


·                  Real-Time Application Processing with Fraud
Authentication
— Bank application processing product must be completely processed back to
Internet within a [***] window. 
Authentication product is a necessity to release new account number
immediately back to Internet applicant if automatically approved or if referred
to NMG Credit Services, a referral/reference number generated.  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 either re-test applicant is required if applicant calls for manual
verification.  In the event that fraud
expenses increase for [***] compared to fraud expenses from prior year as a
result of application fraud trends discussion with NMG and Bank must be held to
discuss alternatives and implement new fraud strategies to either enhance or
replace current authentication tools. 
Excluding auto-declined applications, this may include automatically
referring all internet applications to perform further manual verification by
NMG Fraud before approving.


 


·                  Real-Time Authorization Processing (on NM/BG
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 over-limit percentage parameters and
TRIAD 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 ticket-level authorization prior to the item being
shipped.  At order time, an initial
authorization is performed to ensure the account is approvable and until all
items in the order are shipped, [***] until shipped to ensure the account is
still in good standing.  All
authorizations not able to be approved systemically will require a batched
queue-related decision process with NMG Credit Services to manually decision
pending transactions.  Some of these
manual referrals include verifying the cardholder’s address discrepancies
between the CMOS and credit systems to further detect fraudulent address
sending.


 


·                  [***]Month Promotional Plan Offer — On furniture and Home Décor items, Bank
shall offer NM On-line customers a [***]month, no interest tender option for those
purchases over [***] dollars.  The
real-time authorization processing for these Accounts must allow for these
requests to be sent to NMG Credit Services for manual intervention.  These requests are setup to bill [***] of the billed balance with no interest to ensure
that [***] equal payments exist for each item based on
item ship date.


 


·                  New Account Prescreening or Prospecting — In coordination with NM On-line personnel,
new account and existing account prescreening options on the web can 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 the 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 [***] CST and be posted with this same date by the
next business day.  Should an on-line
customer request to change or cancel his/her payment up until [***] CT same day, Universal Agents must have an ability
to correct these payments.  Returned
payment transmission or reporting must be given to NMG daily to immediately
reverse payment transaction or flag the account to require a replacement
payment prior to additional purchases.


 


·                  E-Bill Functionality - On-line bill presentment must be readily
available to cardholders within [***] 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 [***] of their billing statements and
transactional activity on-line.  The
Parties will cooperate to implement selective marketing and InCircle loyalty
messages, if available, on the billing statement.  Universal Agents must have ability to view
and discuss on-line e-bill functionality with cardholders whenever necessary.


 


·                  E-Service Functionality — Additional services to provide
cycle-to-date balance information as well as customer address maintenance and
credit card re-ordering capabilities must also be maintained for self-servicing
by the cardholder.  Additionally all “Contact
Us” free-form e-mail requests from cardholders must continue to be circulated
through the [***] or applicable system, with template letters
existing, for NMG Credit Services to provide prompt response back to the
requestor.


 

















 


Schedule 4.11


Promotional Credit Plans


 


[***]


 

















 


SCHEDULE 5.2


 


Marketing Commitments


 


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, 2010.


 


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.


 


Section B: Joint Marketing Commitment


 


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


 

















 


SCHEDULE 6.2


 


Privacy Policy


 


HSBC

A Privacy Statement for Neiman Marcus and Bergdorf Goodman Cardholders


 


Introduction - Our Commitment to You


 


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 July 2005.


 


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 about your
Internet usage if you visit our web site.


 


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 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 fort in
the immediately preceding paragraph by completing the form attached. 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.


 


Your Choices to Limit Sharing


 


How to Opt-Out of Information Sharing with Our Affiliates


 


If
you prefer that we do not disclose non-public 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 those permitted by law) by calling
1-800-685-6695 or 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. If
you have previously informed us of your preference, you do not need to do so
again. 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
specific merchant(s) named on the account. An opt-out request by any party on a
joint account will apply to all parties on the joint account.


 


How to Opt 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 calling 1-800-685-6695 or 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. If
you have previously informed us of your preference, you do not need to do so
again. Please understand that your request may exclude you from
receiving valuable offers in the future. Your request will only apply to the
HSBC private label account(s) that you designate in your request. Your request
will not apply to the sharing of information which we are permitted or required
by law to share. 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.


 


Your Choice to Limit Marketing


 


Federal law gives you the
right to limit some but not all marketing from our Affiliates. Federal law also
requires us to give you this notice to tell you about your choice to limit
marketing from our Affiliates.


You may limit our Affiliates
in the HSBC family of companies, such as our insurance and consumer finance
affiliates, from marketing their products or services to you based on your
personal information that we collect and share with them. This information may
include your income, your account history with us, and your credit history with
us.


Your choice to limit marketing offers from our
Affiliates will apply for at least 5 year from when you tell us your choice. If
you have previously informed us of your preference, you do not need to do so
again within the 5 year period. Once that period expires, you will receive a
renewal notice that will allow you to continue to limit marketing offers from
our Affiliates for at least another 5 years. 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.


 


To limit
marketing offers under this section, you must call us at 1-800-685-6695. The
attached reply form may not be used for this particular opt out choice. 


 

















 


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 and bergdorfgoodman.com websites.


 


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 and bergdorfgoodman.com, at any
Neiman Marcus or Bergdorf Goodman location, or by writing to The Neiman Marcus
Group, Inc., P.O. Box 720937, Dallas, Texas 75372-0937.


 


Special Notice for Vermont Residents


 


HSBC
does not share your information with Affiliates, other than information
relating to your account transactions and our experiences with you, except as
permitted or required by applicable law.


 


This
Privacy Statement applies to your credit card issued by HSBC Bank Nevada, N.A.
and HSBC Retail Credit (USA).


 






*“Affiliates”
are companies that are related to us by common ownership or corporate control.
Our Affiliates includes companies such as HFC®, Beneficial®, Household
Insurance Group Holding Company, and HSBC companies such as HSBC Bank USA,
N.A., HSBC Mortgage Corporation (USA), HSBC Credit Centers, Inc., HSBC Auto
Finance Inc., HSBC Bank Nevada, N.A., and Solstice Capital Group.


 






 


Notifying Us of Your Opt-Out Preference


 


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 or if you
prefer that we not disclose non-public 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). 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


 


If you have previously informed us of your preferences, you
do not need to do so again.


 


Check
option below with your preference:


 


 


o Opt-Out of Information
Sharing with Our Affiliates

o Opt-Out of
Information Sharing with Neiman Marcus Group


 


	
   

  	
   

  
	
  Print
  Name

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Neiman
  Marcus or Bergdorf Goodman Account Number

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature

  	
   Date

  



 
















 


SCHEDULE 7.1(a)(i)


 


Bank Reports


 


	
  Department

  	
   

  	
  Report Name

  	
   

  	
  Source

  	
   

  	
  Frequency

  
	
  Accounts Receivable

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Bi-weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  NMG

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Cycle

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Cycle

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Audit

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Cycle, monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Cycle

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Weekly

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bill Adjustment

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily, weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily, weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Cycle

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Bi-weekly

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Collections

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Bi-weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Cycle

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Cycle

  



 

















 


	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Cycle

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Cycle

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Monthly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Semi-Annual

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fraud

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Bi-weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily,
  weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Weekly

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily

  
	
   

  	
   

  	
  [***]

  	
   

  	
  HSBC

  	
   

  	
  Daily,
  weekly

  



 

















 


SCHEDULE 7.1(a)(ii)


 


NMG Reports


 


	
  A/R
  System

  	
   

  	
  Manager
  Overrides Report (daily)

  
	
   

  	
   

  	
  Traveler’s
  Check Payment Report (daily)

  
	
   

  	
   

  	
  Gift
  Card Payment Report (daily)

  
	
   

  	
   

  	
  Cash
  Payment Report (daily)

  



 

















 


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 Program Month;


 


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


 


(c)           an amount equal to the Monthly Servicing Fee for the
immediately preceding Program Month; and


 


(d)           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.


 

















 


SCHEDULE 7.1(c)


 


Quarterly Settlement Sheet


 


The Quarterly Settlement Sheet shall set forth:


 


(a)           the Average Gross Receivables for the
immediately [***];


 


(b)           the Risk Adjusted Margin, the Post MP
RAM and the Profit Sharing Post MP RAM (and for each, the components thereof)
for the [***]; and


 


(c)           the amount payable by Bank or NMG, as
the case may be, as set forth under the caption “Merchant Participation True-Up”
in Schedule 9.1(a)(iii);


 


(d)           the amount payable by Bank as set
forth under the caption “RAM Sharing” in Schedule 9.1(a)(iii); and


 


(e)           the amount, if any, owed by Bank to
NMG or by NMG to Bank, pursuant to Schedule 4.6(f) in respect of the [***].


 

















 


SCHEDULE
7.1(d)


 


Year-End Settlement Sheet


 


The
Year-End Settlement Sheet shall set forth:


 


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


 


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


 


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


 


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


 


(e)          Average Interest-Bearing Receivables, (ii) Average Interest Free
Receivables, (iii) the Net Yield for such Program Year calculated on all
Average Interest-Bearing Receivables, (iv) the Net Yield for such Program
Year calculated on Average Interest Free Receivables, and (v) the
calculation of any amounts due pursuant to Section 4.11;


 


(f)           The Average Gross Receivables for the immediately preceding Program Year;


 


(g)          The Risk Adjusted Margin, the Post MP RAM and the Profit Sharing Post MP
RAM (and for each, the components thereof) for the immediately preceding
Program Year;


 


(h)         
The amount payable by Bank or NMG, as the case may be, as set forth under the
caption “Merchant Participation True-Up” in Schedule 9.1(a)(iv);


 


(i)             The amount payable by Bank or NMG, as the case may be, as set forth under
the caption “RAM Sharing” in Schedule 9.1(a)(iv);


 


(j)            The amount payable by Bank as set forth under the caption “Profitability
Bonus” in Schedule 9.1(a)(iv); and


 


(k)         the
amount, if any, owed by Bank to NMG or by NMG to Bank, pursuant to Schedule 4.6(f) in
respect of the last Program Quarter of the immediately preceding Program Year.


 

















 


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 paper or
electronic billing statements that will be delivered within 4 days (excluding
Sundays) of cycle close date provided that this standard shall not apply if
either: (i) 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); or, (ii) Inserts provided by the NMG Companies do
not meet Bank’s specifications: [***]
[Regulatory SLA]


 


2.              Percentage of daily payments
that will be processed within [***] hours of receipt (functionality includes
desktop image archive capability up to [***] 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 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 (as measured
by Bank’s standard practices):


 


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


 


Monday
through Thursday [***] CST


Friday
[***] CST


Saturday
[***] CST


Sunday
[***]


 


2.              Minimum account penetration
rate based on the following balance range and delinquency: [***]


 


[***]


 


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:


 


[***]


 


Exceptions to the ASA’s are as
follows:


 


·                  [***]


 


·                  [***]


 


3.  Percentage of all adverse action letters that
will be mailed out within [***] 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 [***]
days of such request or cycle end date provided that no Credit Balance refund
will be sent out for a Credit Balance under $1: [***] [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 [***] days of such request or cycle end date provided
that no Credit Balance refund will be sent out for a Credit Balance under $1: [***] [Regulatory SLA]


 


6.  The percentage of Fair Credit billing and all
other customer initiated disputes that are addressed within [***] 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 [***] hours a day, [***] days a week
(other than scheduled system maintenance not exceeding [***] hours per
month during the hours of 2 am and 6 am CST: [***]


 


* 
Denotes a Starred SLA


 
















 


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 [***] or (iii) fails to meet any
Starred SLA [***] in any [***] (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 [***]
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 [***].


 


(b)           If
Primary Servicer has an additional failure of any of the same Starred SLA(s) (“Subsequent
Failure”) during the [***] following
the occurrence of any Significant Failure, Primary Servicer shall pay NMG [***], within [***] 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 [***] following a Significant Failure or upon the occurrence of a Regulatory
Failure, Primary Servicer shall pay NMG [***], within [***] 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 [***] 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 [***] 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 (e), 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 [***] in any [***] with respect to any Non-Starred SLAs; provided,
that in the event there are no Significant Failures in the immediately
following [***] 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(a)


 


Bank Systems


 


Current
Bank systems, before and after the [***]
system conversion, [***]:


 


1.   Servicing
Systems


 


A. Bank system platform must have a [***] or comparable servicing application to perform primary
credit authorization and customer service financial and non-financial
maintenance. The current servicing application provided by the bank is the [***] system. Back-up mainframe
systems [***] provide secondary
functions supporting the NMG servicing teams. The current bank servicing
application supports a key NMG process, [***]
referral, through a custom [***]
Referral screen. Future versions of [***]
and/or its successors must provide similar servicing functionality, including
functionality to support the [***]
referral process [***]. Future
versions of [***] and/or its
successors will be reviewed with NMG management to obtain recommendations and
requirements, with particular emphasis on closely matching the existing AUTH
referral screen. As the bank’s technology platforms evolve through upgrades,
technical currency and / or application replacements, the bank will work
closely with NMG to define [***]
technology solutions to support servicing within commercially reasonable
parameters.


 


B. Bank must also provide servicing support systems for [***]. The current systems supporting
these functions are:


 


[***]


 


Future versions of these systems and/or their successors must provide
similar servicing functionality. Future versions of these systems and/or their
successors will be reviewed with NMG management to obtain recommendations and
requirements. As the bank’s technology platforms evolve through upgrades,
technical currency and / or application replacements, the bank will work
closely with NMG to define [***]
technology solutions for these servicing support functions within commercially
reasonable parameters.


 


2.
Critical NMG Customizations


 


Critical integrated customizations are currently used by NMG and
supported by Bank. This includes the [***]
digit authorization referral prompting at the POS with a [***] code, formatting any [***] digit account number at POS to [***] digits and not mailing out
billing statement for zero balance customers. Future versions of bank systems
and/or their successors must provide similar functionality. Future versions of
bank systems and/or their successors will be reviewed with NMG management to
obtain recommendations and requirements. As the bank’s technology platforms
evolve through upgrades, technical currency and/or application replacements,
the bank will work closely with NMG to define [***]  


 

















 


[***] technology solutions to
support these critical customizations within commercially reasonable parameters
with minimal interruption to NMG’s technology support and/or customer service.


 


3. All credit system interfaces (see attached batch and
on-line credit system interface lists) including POS, NM and BG
Sales Audit, CMOS and InCircle must continue without interruption or delayed
service from Bank  before and after [***] system conversion.  File transmissions sent to and from Bank must
continue without interruption to update NMG interface systems.


 


4. Real-time adherence and/or call management technology that enhances
NMG environment including [***]
call monitoring software or a [***].  NMG is responsible for maintenance support
and will work directly with Witness for needed support.


 


5.
Bank must continue to maintain [***]
Transfer capability and [***]
for NMG to assess daily reporting sent by HSBC as listed in Schedule 7.1(a)(i).


 


6. Bank should continue to explore with NMG other technological
enhancements including [***]
enhancements, fraud detection and Internet-related products that can be
utilized and upgraded with appropriate testing and sign-off review.


 

















 


Credit Batch Interfaces


 


	
  Internal NMG & 

  Vendor Interface 

  Systems

  	
   

  	
  Credit

  Application

  	
   

  	
   

  	
   

  	
  Input/Output

  Feed

  	
   

  	
  Frequency

  	
   

  	
  Processing Time-

  frame

  	
   

  
	
  NM Sales Audit

  	
   

  	
  Settlement

  	
   

  	
  [***]

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  	
   

  
	
  BG Sales Audit

  	
   

  	
  Settlement

  	
   

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  	
   

  
	
  NMD/NMO Sales Audit

  	
   

  	
  Settlement

  	
   

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  	
   

  
	
  HR NM Payroll deduction

  	
   

  	
  Settlement

  	
   

  	
   

  	
  Input

  	
   

  	
  Weekly

  	
   

  	
  Nightly

  	
   

  
	
  HR BG Payroll deduction

  	
   

  	
  Settlement

  	
   

  	
   

  	
  Input

  	
   

  	
  Weekly

  	
   

  	
  Nightly

  	
   

  
	
  Incircle

  	
   

  	
  InCircle

  	
   

  	
   

  	
  Output

  	
   

  	
  Daily

  	
   

  	
  Nightly

  	
   

  
	
  Incircle

  	
   

  	
  InCircle

  	
   

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  	
   

  
	
  EDW

  	
   

  	
  EDW

  	
   

  	
   

  	
  Output

  	
   

  	
  Daily

  	
   

  	
  Nightly

  	
   

  
	
  Incircle

  	
   

  	
  Statements

  	
   

  	
   

  	
  Input

  	
   

  	
  Daily

  	
   

  	
  Nightly

  	
   

  
	
  Loss Prevention

  	
   

  	
  Loss Prevention

  	
   

  	
   

  	
  Output

  	
   

  	
  Weekly

  	
   

  	
  Nightly

  	
   

  
	
  Credit Balance Refunds

  	
   

  	
  Loss Prevention

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Donnelley, Abacus,
  Commerce Register, Experian

  	
   

  	
  A/R

  	
   

  	
   

  	
  Output

  	
   

  	
  Monthly

  	
   

  	
  Nightly

  	
   

  
	
  Incircle

  	
   

  	
  InCircle

  	
   

  	
   

  	
   

  	
   

  	
  Yearly in February

  	
   

  	
  Nightly

  	
   

  
	
  InCircle

  	
   

  	
  InCircle

  	
   

  	
   

  	
  Output

  	
   

  	
  Daily

  	
   

  	
  Nightly

  	
   

  



 

















 


Credit Online Interfaces


 


	
  Internal NMG 

  Interface Systems

  	
   

  	
  Credit 

  Application

  	
   

  	
   

  	
   

  	
  External Interface

  Systems

  	
   

  	
  Output Response

  	
   

  	
  Response 

  Time

  	
   

  	
  Frequency

  	
   

  	
  Processing 

  Time-frame **

  
	
  POS Store System - POS
  Express (new apps)

  	
   

  	
  New Application

  	
   

  	
  [***]

  	
   

  	
  Formats the new app
  request and sends to HSBC for credit processing.

  	
   

  	
  Reply back to the POS
  register with an approval or referral response.

  	
   

  	
  < 45 seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 

  10 AM - 11 PM

  
	
  NMD - (new apps)

  	
   

  	
  New Application

  	
   

  	
   

  	
  Formats the new app
  request and sends to HSBC for credit processing.

  	
   

  	
  Reply back to NMD with an
  approval or referral response.

  	
   

  	
  < 45 seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 

  10 AM - 11 PM

  
	
  POS Store System - POS
  Express (account look-up)

  	
   

  	
  CMS

  	
   

  	
   

  	
  Format the account look-up
  request and send to HSBC for a response.

  	
   

  	
  Reply back to the POS
  register with account number or not found.

  	
   

  	
  < 2 seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 

  10 AM - 11 PM

  
	
  POS Store System - Sales
  Authorization (NM & BG charge cards)

  	
   

  	
  Authorization

  	
   

  	
   

  	
  Formats the authorization
  request and send it to HSBC for authorization processing.

  	
   

  	
  Reply back to the POS
  register with an approval, referral or decline response.

  	
   

  	
  < 2 seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 

  10 AM - 11 PM

  
	
  NMD (CMOS) - Sales
  Authorization (NM & BG charge cards)

  	
   

  	
  Authorization

  	
   

  	
   

  	
  Formats the authorization
  request and send it to HSBC for authorization processing.

  	
   

  	
  Reply back to NMD with an
  approvals, referrals or decline response.

  	
   

  	
  < 2 seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM

  10 AM - 11 PM

  
	
  System Authorization
  Override

  	
   

  	
  In-house Credit System

  	
   

  	
   

  	
  NMG mainframe application

  	
   

  	
  Download the system
  authorization override code to each POS store system RS/6000 box.

  	
   

  	
   

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM 

  10 AM - 11 PM

  Nightly

  
	
  Intervoice (IVR) customer
  inquiry

  	
   

  	
  Customer Service

  	
   

  	
   

  	
   

  	
   

  	
  Send response back to the
  IVR based on the IVR option request.

  	
   

  	
  < 2 seconds

  	
   

  	
  Mon-Sat Sun

  	
   

  	
  7 AM - 11 PM

  10 AM - 11 PM

  



 






**  Credit on-line
system availability is extended to 2 AM on special Incircle events.


 

















 


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 [***]
and 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.  The foregoing payment shall represent an
estimate of the Merchant Participation, which shall be trued up each Fiscal
Quarter and each Fiscal Year as set forth in Schedules 9.1(a)(iii) and
(iv).


 

















 


SCHEDULE 9.1(a)(ii)


 


Monthly NMG Compensation


 


On
the dates set forth in Section 9.1(a)(ii), Bank shall pay the following
amounts to NMG:


 


(a)                      Marketing Reimbursement.  The aggregate of all Joint Marketing
Commitment amounts spent by the NMG Companies in the prior Program 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 Program Month.


 


(c)                      Monthly Servicing Fee.  An amount equal to the Monthly Servicing Fee
in respect of the prior Program Month.


 






 












 


SCHEDULE 9.1(a)(iii)


 


Quarterly NMG Compensation


 


(a)           Merchant
Participation True-Up.


 


The
“Quarterly Merchant Participation Amount “ shall be calculated as set forth
below and (i) if the Quarterly Merchant Participation Amount exceeds the
aggregate amount paid by Bank to NMG pursuant to Schedule 9.1(a)(i) in
respect of all preceding Program Quarters occurring in such Program Year, Bank
shall pay the amount of such excess to NMG; and (ii) if the Quarterly
Merchant Participation Amount is less than the aggregate amount paid by Bank to
NMG pursuant to Schedule 9.1(a)(i) in respect of all preceding Program
Quarters in such Program Year, NMG shall pay the amount of such deficiency to
Bank.  For purposes of determining the
Quarterly Merchant Participation Amount, the “amount paid by Bank to NMG
pursuant to Schedule 9.1(a)(i)” with respect to any period as to which the
quarterly true-up pursuant to this Schedule 9.1(a)(iii) has been
implemented shall be the amount paid pursuant Schedule 9.1(a)(i) plus or
minus the true-up amount paid pursuant to this Schedule 9.1(a)(iii).


 


As
used herein, the “Quarterly Merchant Participation Amount” means the following:


 


(i)            If
the Risk Adjusted Margin for the preceding Program Quarters in such Program
Year is less than [***], an amount equal to [***] Net Credit Sales for such
Program Quarters;


 


(ii)           If
the Risk Adjusted Margin for the preceding Program Quarters in such Program
Year is equal to or greater than [***] but less than or equal to [***], an
amount equal to [***] times Net Credit Sales for such Program Quarters; and


 


(iii)          If the Risk
Adjusted Margin for the preceding Program Quarters in such Program Year is
greater than [***], an amount equal to [***] times Net Credit Sales for such
Program Quarters.


 


(b)           RAM
Sharing.


 


The
“Quarterly RAM Sharing Amount “ shall be calculated as set forth below and (i) if
the Quarterly RAM Sharing Amount exceeds the aggregate amount paid by Bank to
NMG pursuant to the provisions of Schedule 9.1(a)(iii) under the caption “RAM
Sharing” in respect of all preceding Porgram Quarters in such Program Year,
Bank shall pay the amount of such excess to NMG; and (ii) if the Quarterly
RAM Sharing Amount is less than the aggregate amount paid by Bank to NMG
pursuant to the provisions of Schedule 9.1(a)(iii) under the caption “RAM
Sharing” in respect of all preceding Program Quarters of the current Program
Year, NMG shall pay the amount of such deficiency to Bank.


 

















 


As
used herein, the “Quarterly RAM Sharing Amount” means the following:


 


(i)            If
the Profit Sharing Post MP RAM for the preceding Program Quarters in the
current Program Year is equal to or greater than [***] but less than [***],
Bank shall pay to NMG an amount equal to (1) [***] of the amount of such
excess times Average Daily Gross Receivables for the preceding Program Quarters
in such Program Year times (2) a fraction the numerator of which is the
number of days in the preceding Program Quarters in such Program Year and the
denominator of which is 365.


 


(ii)           If
the Profit Sharing Post MP RAM for the preceding Program Quarters in the
current Program Year is equal to or greater than [***]and less than or equal to
[***], Bank shall pay to NMG an amount equal to (1) the sum of (A) [***]
times Average Daily Gross Receivables and (B) [***] of the amount by which
such Profit Sharing Post MP RAM exceeds [***] times Average Daily Gross
Receivables for the preceding Program Quarters in such Program Year times (2) a
fraction the numerator of which is the number of days in the preceding Program
Quarters in such Program Year and the denominator of which is 365.


 


(iii)          If
the Profit Sharing Post MP RAM for the Program Quarters in the current Program
Year is greater than [***], Bank shall pay to NMG an amount equal to (1) the
sum of (A) [***] times Average Daily Gross Receivables and (B) [***]
of the amount by which such Profit Sharing Post MP RAM exceeds [***] times
Average Daily Gross Receivables for the preceding Program Quarters in such
Program Year times (2) a fraction the numerator of which is the number of
days in the preceding Program Quarters in such Program Year and the denominator
of which is 365.


 

















 


SCHEDULE 9.1(a)(iv)


 


Annual NMG Compensation


 


On
the dates set forth in Section 9.1(a)(iv), each of the amounts referred to
in clauses (a) through (c) below shall be paid as described below.


 


(a)           Merchant
Participation True-Up.


 


The
“Annual Merchant Participation Amount “ shall be calculated as set forth below
and (i) if the Annual Merchant Participation Amount exceeds the net amount
paid by Bank to NMG pursuant to Schedule 9.1(a)(i) in respect of all
Program Quarters in the immediately preceding Program Year, Bank shall pay the
amount of such excess to NMG; and (ii) if the Annual Merchant
Participation Amount is less than the net amount paid by Bank to NMG pursuant
to Schedule 9.1(a)(i) in respect of all Program Quarters in the
immediately preceding Program Year, NMG shall pay the amount of such deficiency
to Bank.  For purposes of determining the
Annual Merchant Participation Amount, the “amount paid by Bank to NMG pursuant
to Schedule 9.1(a)(i)” with respect to any period as to which the quarterly
true-up pursuant to Schedule 9.1(a)(iii) has been implemented shall be the
amount paid pursuant Schedule 9.1(a)(i) plus or minus the true-up amounts
paid pursuant to Schedule 9.1(a)(iii).


 


As
used herein, the “Annual Merchant Participation Amount” means the following:


 


(i)            If
the Risk Adjusted Margin for the immediately preceding Program Year is less
than [***], an amount equal to [***] times Net Credit Sales for the immediately
preceding Program Year;


 


(ii)           If
the Risk Adjusted Margin for the immediately preceding Program Year is equal to
or greater than [***] but less than or equal to [***], an amount equal to [***]
times Net Credit Sales for the immediately preceding Program Year; and


 


(iii)          If the Risk
Adjusted Margin for the immediately preceding Program Year is greater than
[***], an amount equal to [***] times Net Credit Sales for the immediately
preceding Program Year.


 


(b)           RAM
Sharing.


 


The
“Annual RAM Sharing Amount “ shall be calculated as set forth below and (i) if
the Annual RAM Sharing Amount exceeds the aggregate amount paid by Bank to NMG
pursuant to the provisions of Schedule 9.1(a)(iii) under the caption “RAM
Sharing” in respect of the immediately preceding Program Year, Bank shall pay
the amount of such excess to NMG; and (ii) if the Annual RAM Sharing
Amount is less than the aggregate amount paid by Bank to NMG pursuant to the 


 

















 


provisions
of Schedule 9.1(a)(iii) under the caption “RAM Sharing” in respect of the
immediately preceding Program Year, NMG shall pay the amount of such deficiency
to Bank.


 


As
used herein, the “Annual RAM Sharing Amount” means the following:


 


(i)            If
the Profit Sharing Post MP RAM for the immediately preceding Program Year is
equal to or greater than [***] but less than [***], an amount equal to [***] of
the amount of such excess times Average Daily Gross Receivables for the
immediately preceding Program Year.


 


(ii)           If
the Profit Sharing Post MP RAM for the immediately preceding Program Year is
equal to or greater than [***] and less than or equal to [***], an amount equal
to the sum of (A) [***] times Average Daily Gross Receivables and (B) [***]
of the amount by which such Profit Sharing Post MP RAM exceeds [***] times Average
Daily Gross Receivables for the immediately preceding Program Year.


 


(iii)          If
the Profit Sharing Post MP RAM for the immediately preceding Program Year is
greater than [***], Bank shall pay to NMG an amount equal to the sum of (A) [***]
times Average Daily Gross Receivables and (B) [***] of the amount by which
such Profit Sharing Post MP RAM exceeds [***] times Average Daily Gross
Receivables for the immediately preceding Program Year.


 


(c)           Profitability
Bonus.


 


If
the Risk Adjusted Margin for the immediately preceding Program Year is greater
than [***], Bank shall pay to NMG an amount equal to [***] (the “Profitability
Bonus”).


 

















 


SCHEDULE 16.3(b)


 


Store Square-Footage Calculation


 


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 4,775,000 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


San Antonio, Texas


Boca Raton, Florida


Austin,
Texas


Charlotte,
North Carolina


Natick,
Massachusetts


Topanga,
California


Bellevue,
Washington


Bergdorf
Goodman, New York City (Women’s Store)


Bergdorf
Goodman, New York City (Men’s Store)


 

















 


SCHEDULE 17.2(g)


 


Segmentation Methodology


 


Sample Segmentation — Illustrative purposes only


 


[***]


 


Sample Segmentation — Valid Protection Selection


 


[***]


 


Sample Segmentation — INVALID Protection Selection


 


[***]