Exhibit 10.35


 


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


 


SERVICING AGREEMENT


 


between


 


THE NEIMAN MARCUS GROUP, INC.


 


and


 


HSBC BANK NEVADA, N.A.


 


 




 





Dated as of September 23rd, 2010




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  
	
  DEFINITIONS AND INTERPRETATION

  
	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
  Defined Terms

  	
   

  	
  1

  
	
  Section 1.02.

  	
  Certain Interpretive Matters

  	
   

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
  SERVICING

  
	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
  Appointment

  	
   

  	
  4

  
	
  Section 2.02.

  	
  Servicer Compensation

  	
   

  	
  4

  
	
  Section 2.03.

  	
  Services

  	
   

  	
  4

  
	
  Section 2.04.

  	
  Service Level Standards

  	
   

  	
  5

  
	
  Section 2.05.

  	
  Use of Subservicers

  	
   

  	
  5

  
	
  Section 2.06.

  	
  Disaster Recovery

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
  REPRESENTATIONS AND WARRANTIES

  
	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
  Representations and Warranties of Servicer

  	
   

  	
  6

  
	
  Section 3.02.

  	
  Representations and Warranties of Bank

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
  ADDITIONAL COVENANTS

  
	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
  Further Assurances

  	
   

  	
  8

  
	
  Section 4.02.

  	
  Modifications

  	
   

  	
  8

  
	
  Section 4.03.

  	
  Correction of Errors

  	
   

  	
  8

  
	
  Section 4.04.

  	
  Changes in Law

  	
   

  	
  8

  
	
  Section 4.05.

  	
  Cooperation

  	
   

  	
  10

  
	
  Section 4.06.

  	
  Facilities and Equipment

  	
   

  	
  11

  
	
  Section 4.07.

  	
  Insurance

  	
   

  	
  11

  
	
  Section 4.08.

  	
  Customer Information

  	
   

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  
	
  DEFAULT; REMEDIES

  
	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
  Servicer Default

  	
   

  	
  11

  
	
  Section 5.02.

  	
  Remedies

  	
   

  	
  12

  
	
  Section 5.03.

  	
  Non-Starred SLAs

  	
   

  	
  13

  



 


i

















 


	
  ARTICLE VI

  
	
  TERM

  
	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
  Term of Agreement

  	
   

  	
  13

  
	
  Section 6.02.

  	
  Servicer Termination Events

  	
   

  	
  13

  
	
  Section 6.03.

  	
  Termination by Bank

  	
   

  	
  14

  
	
  Section 6.04.

  	
  Effect of Termination

  	
   

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  
	
  INDEMNIFICATION

  
	
   

  	
   

  	
   

  
	
  Section 7.01.

  	
  Indemnification

  	
   

  	
  14

  
	
  Section 7.02.

  	
  Procedure for Indemnification

  	
   

  	
  15

  
	
  Section 7.03.

  	
  Notice and Additional Rights and Limitations

  	
   

  	
  16

  
	
  Section 7.04.

  	
  Limits on Indemnification

  	
   

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  Section 8.01.

  	
  Confidentiality

  	
   

  	
  17

  
	
  Section 8.02.

  	
  Access Rights

  	
   

  	
  19

  
	
  Section 8.03.

  	
  No Waiver; Remedies; Amendment

  	
   

  	
  19

  
	
  Section 8.04.

  	
  Independent Contractor

  	
   

  	
  19

  
	
  Section 8.05.

  	
  No Joint Venture

  	
   

  	
  20

  
	
  Section 8.06.

  	
  Payment Terms

  	
   

  	
  20

  
	
  Section 8.07.

  	
  Entire Agreement

  	
   

  	
  20

  
	
  Section 8.08.

  	
  No Set-Off

  	
   

  	
  20

  
	
  Section 8.09.

  	
  Notices

  	
   

  	
  20

  
	
  Section 8.10.

  	
  Severability

  	
   

  	
  21

  
	
  Section 8.11.

  	
  Headings

  	
   

  	
  21

  
	
  Section 8.12.

  	
  Survival

  	
   

  	
  21

  
	
  Section 8.13.

  	
  Costs and Expenses

  	
   

  	
  21

  
	
  Section 8.14.

  	
  Drafting

  	
   

  	
  22

  
	
  Section 8.15.

  	
  Counterparts

  	
   

  	
  22

  
	
  Section 8.16.

  	
  Assignment; Successors

  	
   

  	
  22

  
	
  Section 8.17.

  	
  Governing Law

  	
   

  	
  22

  
	
  Section 8.18.

  	
  Waiver of Jury Trial and Venue

  	
   

  	
  22

  



 


SCHEDULES


 




	
  Schedule
  1.01(a)

  	
   

  	
  Services

  
	
  Schedule
  2.04(a)

  	
   

  	
  Service
  Level Standards

  
	
  Schedule 5.02  Remedies

  
	
  Schedule 7.04  Indemnity Matters

  






 


ii

















 


AMENDED AND RESTATED SERVICING AGREEMENT


 


This
Amended and Restated Servicing Agreement (as amended from time to time, this “Agreement”),
dated as of September 23rd, 2010, is between The Neiman Marcus Group, Inc., a Delaware
corporation (“Servicer”), and HSBC Bank Nevada, N.A., a national credit card
bank (“Bank”).


 


WHEREAS,
Servicer and certain of its subsidiaries (together, the “NMG Companies”)
are parties to a Program Agreement, dated as of June 8, 2005 (as amended
prior to the date hereof, the “Original Program Agreement”), with Bank
and certain of its affiliates governing the operation of a credit card program
and the rendering of marketing and other services by the parties thereto;


 


WHEREAS,
the Program Agreement is being amended, restated and extended as of the date
hereof (as so amended, restated and extended, the “Program Agreement”);


 


WHEREAS,
Servicer and Bank are parties to a Servicing Agreement, dated as of July 7,
2005 (as heretofore amended, the “Original Servicing Agreement”), pursuant to
which Servicer performs certain servicing and administration activities
relating to the Accounts and the Program (each as defined below); and


 


WHEREAS,
Bank and Servicer wish to amend and restate the Servicing Agreement in its
entirety as set forth herein in connection with the execution and delivery of
the Program Agreement.


 


NOW,
THEREFORE, in consideration of the mutual agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereby agree to amend and restate the Original
Servicing Agreement in its entirety as follows:


 


ARTICLE I


 


DEFINITIONS
AND INTERPRETATION


 


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


 


“Agreement”: As defined in the preamble hereof.


 


“Bank”:
As defined in the preamble hereof.


 


“Bank
Cost Increase Percentage”:  As
defined in Section 4.04(b) hereof.


 


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


 


“Bank
Parties”: means the collective reference to Bank and Primary Servicer.


 

















 


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


 


“Change
in Servicing Law”: As defined in Section 4.04(a) hereof.


 


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


 


“Deductible
Amount”: As defined in Schedule 7.04.


 


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


 


“Effective
Annual Servicing Fee Rate”:   For any
measurement period, (x) the Annual Servicing Fee Rate for such period
minus (y) the product of (1) the Profit Sharing Differential for such
period and (2) the Average Gross Receivables for such period divided by (3) the
sum of the number Accounts that were Active Accounts during any month in such
period divided by the number of months in such period.


 


“Inflation
Rate”: At any time following the first Change in Servicing Law, the period
beginning with the first full calendar month immediately following the time the
Servicer begins to make any material efforts to comply with the first Change in
Servicing Law and ending with the full calendar month immediately preceding the
time the Servicer begins to make any material efforts to comply with the most
recent Change in Servicing Law, the percentage equivalent of the product of one
plus the monthly CPI for each completed month in such period (e.g., for the
period of January 2010 through July 2010, such calculation would be:
(1+0.2%)*(1+0.0%)*(1+0.1%)*(1-0.1%)*(1-0.2%)*(1-0.1%)*(1+0.3%) = 100.2%).


 


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


 


“Monthly
Average Servicing Cost Per Active Account” 
means, for any period, (i) when used in reference to the Servicer,
the total costs incurred by the Servicer in connection with performing the
Services divided by (A) the sum of the number of Accounts that were Active
Accounts in any month in such period divided by (B) the number of months
in such period, and (ii) when used in reference to Bank, the total costs
incurred by Bank in connection with performing services equivalent to the
Services in connection with all private label credit card programs serviced by
Bank divided by (x) the sum of all credit card accounts under such
programs that would have been considered Active Accounts in any month in such
period if such accounts were “Accounts” under the Program divided by (y) the
number of months in such period.


 


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


 


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


 


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


 


“Primary
Servicer”:  HSBC Card Services, Inc.,
a Delaware corporation.


 


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


 


2

















 


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


 


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


 


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


 


“Seasonally
Adjusted Consumer Price Index for All Urban Consumers”:  means


 


“Servicer”:  As defined in the preamble hereof.


 


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


 


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


 


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


 


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


 


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


 


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


 


“Starred
SLA”: On Schedule 2.04(a), the SLAs starred therein.


 


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


 


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


 


“Term”:  As defined in Section 6.01 hereof.


 


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


 


Section 1.02.  Certain
Interpretive Matters. As used herein: (a) all references to the
plural number shall include the singular number (and vice versa); (b) all
references to “herein,” “hereunder,” “hereof” or like words shall refer to this
Agreement as a whole and not to any particular section, subsection or clause
contained in this Agreement; (c) all references to “include,” “includes”
or “including” shall be deemed to be followed by the words “without limitation”;
(d) all references to “$” or “dollars” shall be deemed references to
United States dollars; and (e) all references to a particular agreement,
instrument or document shall include all renewals, extensions, modifications,
amendments and restatements of such agreement, instrument, or document.


 


3

















 


ARTICLE II


 


SERVICING


 


Section 2.01.  Appointment. Subject to
the terms and conditions of this Agreement, Bank hereby appoints Servicer as of
the Effective Date as the servicer of the Accounts and Cardholder Indebtedness
and Servicer hereby accepts such appointment.


 


Section 2.02.  Servicer
Compensation.  As
compensation for provision of the Services hereunder, Servicer shall receive
payment as set forth in Schedule 9.1(a)(ii)(c) of the Program Agreement.


 


Section 2.03.  Services.


 


(a)           Commencing on the Effective Date and continuing until the date, if any,
upon which any listed type of Service enumerated below is transferred to
Primary Servicer as provided in this Agreement, Servicer shall perform the
services described in Schedule 1.01(a) (collectively, the “Services”),
in each case in accordance with this Agreement and the Risk Management Policies
and Operating Procedures.  Servicer shall
service the Accounts in compliance with Applicable Law, in such a way as to not
disparage or embarrass the Bank Parties or either of their names, with a level
of service to Cardholders and with no less care and diligence than the degree
of service, care and diligence employed by Servicer prior to the Effective
Date.  Notwithstanding anything to the
contrary contained herein, Bank shall be solely responsible for monitoring
legal developments applicable to the operation of the Credit Card Business,
although Servicer shall promptly apprise Bank of any such legal developments of
which it becomes aware.


 


(b)           Servicer may elect upon not less than [***] days’ written notice to Bank
to transfer  (i)  the Late Stage
Collection Services described in Schedule 1.01(a) or (ii) all of the
Services being performed hereunder, to Primary Servicer, in which event Primary
Servicer shall accept appointment as servicer with respect to such Services and
shall be required to comply with the provisions of the Program Agreement in
connection with the performance of such Services, including the requirement to
meet the SLAs applicable to Primary Servicer for such Services set forth in
Schedule 7.3(a) of the Program Agreement. 
Upon the date of the foregoing transfer, Servicer shall be released from
any further obligation with respect to the performance of the applicable
Services.  Upon transfer of the Late
Stage Collection Services, the Annual Servicing Fee Rate shall be reduced by
[***].


 


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


 


4

















 


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


 


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


 


Section 2.04.  Service
Level Standards.


 


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


 


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


 


Section 2.05.  Use
of Subservicers. Servicer shall have the right to perform any
portion of the Services through one or more subservicers; provided that (i) any
subservicer that is not an Affiliate of Servicer shall be subject to approval
pursuant to Article III of the Program Agreement and (ii) Servicer
shall remain fully responsible to Bank for the portion of the Services
performed by any such subservicer(s) (including its Affiliates).  Notwithstanding the foregoing, to the extent
Servicer subcontracts or outsources to any third party any Services as of the
date hereof, Servicer may continue to subcontract or outsource such Services to
such third party.


 


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


 


5

















 


ARTICLE III


 


REPRESENTATIONS
AND WARRANTIES


 


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


 


(a)           Organization. Servicer (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, (ii) is duly licensed or
qualified to do business and is in good standing as a foreign corporation in
all jurisdictions in which the conduct of its business or the activities in
which it is engaged makes such licensing or qualification necessary, except to
the extent that its non-compliance would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on its ability to
perform its obligations hereunder, and (iii) has all necessary licenses,
permits, consents or approvals from or by, and has made all necessary filings
and registrations with, all governmental authorities having jurisdiction, to
the extent required for the ownership, lease or conduct and operation of its
business, except to the extent that the failure to obtain such licenses,
permits, consents or approvals or to make such filings or registrations would
not reasonably be expected to have, individually or in the aggregate, a
material adverse effect on its ability to perform its obligations under this
Agreement.


 


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


 


(c)           Conflicts; Defaults; Etc.  The execution, delivery and performance of
this Agreement by Servicer, its compliance with the terms hereof, and
consummation of the transactions specified herein will not (i) conflict
with, violate, result in the breach of, constitute an event which would, or
with the lapse of time or action by a third party or both would, result in a
default under, or accelerate the performance required by, the terms of any
contract, instrument or agreement to which Servicer is a party or by which it
is bound, or to which any of the assets of Servicer is subject;
(ii) conflict with or violate the articles of incorporation or by-laws of
Servicer; (iii) breach or violate any Applicable Law or Applicable Order,
in each case, applicable to Servicer; (iv) require the consent or approval
of any other party to any contract, instrument or commitment to which Servicer
is a party or by which it is bound; or (v) require any filing with, notice
to, consent or approval of, or any other action to be taken with respect to,
any Governmental Authority, except, in the cases of clauses (i) and
(iii)-(v), for such conflicts, breaches, defaults, violations or failures to
obtain such consents or approvals or make or obtain


 


6

















 


such filings, notices, consents
and approvals as would not reasonably be expected to have, individually or in
the aggregate, a material adverse effect upon Servicer’s ability to perform its
obligations under this Agreement.


 


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


 


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


 


(f)            Solvency.  Servicer is Solvent.


 


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


 


(a)           Organization. Bank (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, (ii) is duly licensed or
qualified to do business and is in good standing as a foreign corporation in
all jurisdictions in which the conduct of its business or the activities in
which it is engaged makes such licensing or qualification necessary, except to
the extent that its non-compliance would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on its ability to
perform its obligations hereunder, and (iii) has all necessary licenses,
permits, consents or approvals from or by, and has made all necessary filings
and registrations with, all governmental authorities having jurisdiction, to
the extent required for the ownership, lease or conduct and operation of its
business, except to the extent that the failure to obtain such licenses,
permits, consents or approvals or to make such filings or registrations would
not reasonably be expected to have, individually or in the aggregate, a
material adverse effect on its ability to perform its obligations under this
Agreement.


 


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


 


7

















 


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


 


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


 


(e)           Solvency.  Bank is Solvent.


 


ARTICLE IV


 


ADDITIONAL
COVENANTS


 


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


 


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


 


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


 


Section 4.04.  Changes
in Law.


 


(a)           Bank shall notify Servicer from time to time, in a timely manner, of any
expiration, revocation or amendment of, or other material developments relating
to, any requirements of Applicable Law affecting the provision by Servicer of
the Services (including


 


8

















 


any Change in Law
affecting the provision by Servicer of the Services) (any of the foregoing, a “Change
in Servicing Law”).   Any increase in
the Servicer’s cost of providing the Services that are caused by or arise from
a Change in Servicing Law shall be allocated between the Servicer and Bank as
follows:


 


(b)           The Parties will mutually determine (i) the Servicer’s Monthly
Average Servicing Cost Per Active Account during the [***] immediately preceding
the time the Servicer begins to make any material efforts to comply with the
first Change in Servicing Law, (ii) the Servicer’s Monthly Average
Servicing Cost Per Account during the [***] immediately following the Servicer’s
implementation of processes and procedures to comply with any Change in
Servicing Law, (iii) if Bank is required to implement a systematic
procedure in response to the Change in Servicing Law pursuant to Section 4.04(d),
the Servicer’s Monthly Average Servicing Cost Per Active Account during the
[***] immediately following the implementation of the systemic solution
pursuant to Section 4.04(d), (iv) the Bank’s Monthly Average
Servicing Cost Per Active Account during the period referred to in clause (i),
and (v) if Bank is required to implement a systematic procedure in
response to the Change in Servicing Law pursuant to Section 4.04(d), Bank’s
Monthly Average Servicing Cost Per Active Account during the [***] immediately
following Bank’s implementation of such systematic solution.  Any disputes regarding such servicing costs
will be resolved in accordance with Article XII of the Program
Agreement.  In calculating the Servicer’s
Monthly Average Servicing Cost Per Active Account, the costs associated with
performing Late Stage Collections Services shall be separately reflected, and
in the event of a transfer of such Services pursuant Section 2.03(b),
after such transfer all calculations pursuant to this Section 4.04(b) shall
exclude any such costs associated with performing such services for all periods
measured.


 


(c)           Unless the NMG Cost Increase Percentage (as determined in accordance with
the following provisions of this Section 4.04(c)) is less than or equal to
[***], in which case the Annual Servicing Fee Rate will remain unchanged, then
the Annual Servicing Fee Rate in effect from and after the date of any Change
in Servicing Law shall be [***] (or $[***] decreased, if applicable, as set
forth in Section 2.03(b) in the event that Late Stage Collection
Services have been transferred pursuant such Section) increased by the
fractional equivalent of a percentage (such percentage, the “NMG Cost
Increase Percentage”), if any, by which the amount referred to in Section 4.04(b)(ii) exceeds
the cost referred to in Section 4.04(b)(i) (which shall be multiplied
by the Inflation Rate for any Change in Servicing Law following the first
Change in Servicing Law) (i.e., [***] (or [***] following the transfer of Late
Stage Collections Services as set forth in Section 2.03(b)) shall be
multiplied by a number equal to [***]


 


9

















 


[***]. Each adjustment to
the Annual Servicing Fee Rate shall be made as soon as practicable following
calculation of the amounts referred to in Section 4.04(b) necessary
to calculate such Annual Servicing Fee Rate adjustment.  In the Monthly Settlement Statement following
the date on which such adjustment has been made, in addition to any other
amounts payable by Bank, there shall be added an amount equal to the amount the
Servicer would have received if such Annual Servicing Fee Rate adjustment had
been implemented on the earlier of (A) [***] following the implementation
of processes and procedures to comply with such Change in Servicing Law or (B) the
implementation of the systematic solution pursuant to Section 4.04(d).


 


(d)           If the NMG Cost Increase Percentage exceeds [***], then Bank shall be
obligated to implement a systematic method to comply with any such Changes in
Servicing Law that is equivalent to the systematic methods used or being
implemented by Bank in connection with such Changes in Servicing Law in
servicing other private label credit card portfolios as to which it is
issuer.  Such systematic process shall be
implemented within a timeframe mutually agreed by the Servicer and Bank, which
timeframe shall target [***] after changes in servicing procedures were first
implemented in response to such Changes in Servicing Law that caused the NMG
Cost Increase Percentage to exceed [***] (or for any Change in Servicing Law
thereafter, shall target [***] after change in servicing procedures were first
implemented in response to such Change in Servicing Law), but in any event such
process shall be implemented no later than [***] after the implementation of
such changes in servicing procedures as a result of such Change in Servicing
Law, unless (i) NMG’s failure to comply with the following obligations in
this Section 4.04(d) shall have prevented Bank from completing such
implementation within such [***] or (ii) it is commercially impracticable
to implement such systematic process within such [***] for a commercially
reasonable cost, in which event (in the case of either clause (i) or
clause (ii)) such implementation shall be completed as soon as reasonably
practicable.  NMG will reasonably
cooperate with Bank in connection with the implementation of such systematic
process, including by providing such product support, design review and
approvals, processing, data and technology changes and upgrades as are
commercially reasonable, in each case within timeframes reasonably required by
Bank in order to meet the agreed-upon timeframes for implementation of the
systematic process.  In determining
whether implementation of a systematic process is commercially practicable
within the [***] timeframe referred to above, the Parties agree that Bank shall
have the right to prioritize its systematic projects in accordance with
Applicable Law and its commercially reasonable discretion, provided,
however, that prioritizing other private label credit card system
initiatives addressing the same Change in Servicing Law for credit card
Programs other than the Program shall not be grounds for delaying
implementation of the systematic process required by this Section 4.04(d) beyond
the [***] after changes in servicing procedures were first implemented in
response to the applicable Change in Servicing Law.


 


(e)           Notwithstanding anything to the contrary set forth herein or in the
Program Agreement, if the Effective Annual Servicing Fee Rate for any month
exceeds [***], the Annual Servicing Fee Rate with respect to such month shall
be reduced by the dollar amount by which the Effective Servicing Fee Rate
exceeds [***].


 


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


 


10






 












 


Section 4.06.  Facilities
and Equipment.


 


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


 


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


 


Section 4.07.  Insurance.  Servicer shall maintain insurance policies
(in any event including error and omissions liability insurance and fiduciary
liability insurance) with respect to its employees and properties under such
terms and conditions as are (i) commercially reasonable and available from
time to time and (ii) customary for similarly situated Persons engaged in
similar business, except in each case for insurance which a failure to maintain
would not reasonable be expected to have a material adverse effect on the
ability of Servicer to perform its obligations under this Agreement.


 


Section 4.08.  Customer
Information.  Servicer
shall maintain an information security program that is designed to meet all
requirements of Applicable Law, including, at a minimum, maintenance of an
information security program that is designed to: (i) ensure the security
and confidentiality of customer information; (ii) protect against any
anticipated threats or hazards to the security or integrity of such
information; (iii) protect against unauthorized access to or use of such
information; and (iv) ensure the proper disposal of such information.  Additionally, such security measures shall
meet current industry standards and shall be at least as protective as those
used by Servicer to protect its other confidential customer information.  Servicer shall use the same degree of care in
protecting the customer information against unauthorized disclosure as it
accords to its own confidential customer information, but in no event less than
a reasonable standard of care.  In the event
Servicer becomes aware of any unauthorized use of or access to customer
information, Servicer shall immediately notify Bank and shall cooperate with
Bank, as it deems necessary or as required by Applicable Law, (x) to
assess the nature and scope of such incident, (y) to contain and control
such incident to prevent further unauthorized access to or use of such
information, and (z) to provide prompt notice to affected customers to the
extent required by Applicable Law or otherwise with the approval of the
Management Committee.


 


ARTICLE V


 


DEFAULT;
REMEDIES


 


Section 5.01.  Servicer
Default. It shall be a “Servicer Default” if either of the events set forth
below shall occur and be continuing and remain unremedied prior to the
expiration of the specified period:


 


(a)           Significant Failure.  If
Servicer (i) is more than [***] below the target for any Starred SLA in
any Fiscal Month, (ii) fails to meet any individual Starred SLA in [***]
consecutive Fiscal Months or (iii) fails to meet any Starred SLA [***]
Fiscal Month period


 


11

















 


(including multiple breaches of the same and
individual breaches of different Starred SLAs) (each, a “Significant Failure”).


 


(b)           Regulatory Failure.  If
Servicer fails to meet an SLA designated as a regulatory-based SLA on Schedule
2.04(a) (each, a “Regulatory
SLA”) and such failure results in a breach by Servicer of Applicable
Law (such failure, a “Regulatory Failure”).


 


Section 5.02.  Remedies.


 


(a)           In the event of a Significant Failure, Servicer shall: (A) promptly
report to the Management Committee the reasons for the Starred SLA failure(s); (B) within
[***] days of such Significant Failure, propose a remediation plan for taking
such action as Servicer deems necessary to correct and prevent recurrence of
such failure(s); and (C) subject to Bank’s agreement, implement the
remediation plan as soon as practicable. 
However, under no circumstances shall the time period between Bank’s
agreement to the remediation plan and completion of such plan exceed [***].


 


(b)           If Servicer has an additional failure of any of the same Starred SLA(s) (“Subsequent
Failure”) during the [***] Fiscal Months following the occurrence of any
Significant Failure, Servicer shall pay Bank the Initial Penalty Amount, within
fifteen (15) days of the end of such Fiscal Month, for each such Subsequent
Failure.


 


(c)           Upon the occurrence of the second Subsequent Failure and each additional
Subsequent Failure of the same Starred SLA during the [***] Fiscal Months
following a Significant Failure or upon the occurrence of a Regulatory Failure,
Servicer shall pay Bank the Subsequent Penalty Amount, 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 [***] Fiscal Months following a
Significant Failure or (ii) a second Regulatory Failure of the same
Regulatory SLA , Bank shall, in addition to payment as provided in paragraph (c) above,
have the right to terminate the Program Agreement by providing [***] days prior
written notice to Servicer, in which event the parties shall have the rights
set forth in Article XVII of the Program Agreement; provided, however,
that prior to either Party electing to transfer the provision of such Services
pursuant to Section 5.02(e) below or to terminate the Program
Agreement, the Management Committee shall meet to discuss the occurrence of the
Subsequent Failure and shall determine whether such SLA should be modified
(except in the case of a Regulatory Failure, in which event no Management
Committee meeting shall be required as a condition to transferring the affected
Services pursuant to Section 5.02(e)). 
If the Management Committee determines that such SLA shall be modified,
then Bank shall not be entitled to terminate the Program Agreement as a result
of the Subsequent Failure discussed at the meeting of the Management Committee
unless and until an additional Subsequent Failure of the same Starred SLA
occurs; and provided, further, that for purposes of transferring
Services pursuant to this Section 5.02(d) or Section 5.02(e), an
SLA that is both a Starred SLA and a Regulatory SLA shall be deemed to be a
Regulatory SLA.


 


12

















 


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


 


(f)            No servicing transfer or termination of this Agreement pursuant to Section 5.02(d) or
Section 5.02(e) above shall be effective until either assumption by
the Bank or its Affiliate of the provision of the Services or the appointment
by Bank of a successor servicer reasonably satisfactory to Servicer pursuant to
a servicing agreement reasonably satisfactory to Servicer.  Following the delivery by the applicable
Party of written notice of a servicing transfer or termination, Bank shall have
reasonable access to Servicer’s operations and systems to ensure continuity of
business and systems required to service the Accounts until such time as Bank
or its Affiliate assumes the provision of the Services or appoints a successor
servicer reasonably satisfactory to Servicer. 
Both Parties shall use commercially reasonable efforts and cooperate
with each other to ensure continuity of business during any transfer of
Services.


 


Section 5.03.  Non-Starred
SLAs. For purposes of this Article V, “Starred SLA” shall be deemed to
include Non-Starred SLAs in the event that there have been more than [***] 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.


 


ARTICLE VI


 


TERM


 


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


 


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


 


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


 


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


 


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


 


(d)           A decree or order by a court having jurisdiction (i) for relief in
respect of Servicer pursuant to the Bankruptcy Code or any other applicable
bankruptcy or other similar law, (ii) for appointment of a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or


 


13

















 


similar official) of
Servicer or of any substantial part of its properties, or (iii) ordering
the winding-up or liquidation of the affairs of Servicer shall, in any such
case be entered, and shall not be vacated, discharged, stayed or bonded within
sixty (60) days from the date of entry thereof.


 


(e)           Servicer shall (i) file a petition seeking relief pursuant to the
Bankruptcy Code or any other applicable bankruptcy or other similar law, (ii) consent
to the institution of proceedings pursuant thereto or to the filing of any such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
of Servicer or any substantial part of its properties, or (iii) take
corporate or similar action in furtherance of any such action.


 


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


 


Section 6.04.  Effect
of Termination.


 


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


 


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


 


ARTICLE VII


 


INDEMNIFICATION


 


Section 7.01.  Indemnification By Servicer. Servicer
agrees to indemnify and hold harmless Bank, its Affiliates and their respective
officers, directors and employees from and against and in respect of any and
all losses, liabilities, damages, costs and expenses of whatever


 


14

















 


nature,
including reasonable attorneys’ fees and expenses (collectively, “Damages”),
which are caused or incurred by, result from, arise out of or relate to:


 


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


 


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


 


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


 


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


 


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


 


Section 7.02.  Procedure
for Indemnification.


 


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


 


(b)           Bank shall have the right to employ its own counsel if Servicer elects to
assume such defense, but the fees and expenses of such counsel shall be at Bank’s
expense, unless (i) the employment of such counsel has been authorized in
writing by Servicer, (ii) Servicer has not employed counsel to take charge
of the defense within twenty (20) days after delivery of the applicable notice
or, having elected to assume such defense, thereafter ceases its defense of
such action, or (iii) Bank has reasonably concluded that the interests of
the Parties are conflicting such that it would be inappropriate for the same
counsel to represent both parties (in which case Servicer shall not have the
right to direct the defense of such action on behalf of Bank), in any of which
events the attorneys’ fees and expenses of counsel to Bank shall be borne by
Servicer.


 


15

















 


(c)           Bank or Servicer may at any time notify the other of its intention to
settle or compromise any claim, suit or action against Bank in respect of which
payments may be sought by Bank hereunder, and (i) Servicer may settle or
compromise any such claim, suit or action solely for the payment of money
damages for which Bank will be fully indemnified hereunder and given a full and
complete release of any and all liability by all relevant parties relating to
such claim, suit or action, but shall not agree to any other settlement or
compromise unless Bank consents in writing, which consent shall not be
unreasonably withheld (it being agreed that any failure of an Bank to consent
to any settlement or compromise involving relief other than monetary damages
shall not be deemed to be unreasonably withheld), and (ii) Bank may settle
or compromise any such claim, suit or action solely for an amount not exceeding
One Thousand Dollars ($1,000), but shall not settle or compromise any other
matter without the prior written consent of Servicer, which consent shall not
be unreasonably withheld.


 


Section 7.03.  Notice
and Additional Rights and Limitations.


 


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


 


(b)           This Section 7.03 shall govern the obligations of the Parties with
respect to the subject matter hereof but shall not be deemed to limit the
rights that either Party might otherwise have at law or in equity.


 


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


 


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


 


16

















 


ARTICLE VIII


 


MISCELLANEOUS


 


Section 8.01.  Confidentiality


 


(a)           General Confidentiality.


 


(i)            For purposes of this Agreement, “Confidential Information” means
any of the following: (i) information that is provided by or on behalf of
either Servicer or the Bank Parties to the other Party or its agents in
connection with providing Services hereunder (including information provided
prior to the date hereof or the Effective Date); (ii) information about
Servicer or the Bank Parties or their Affiliates, or their respective
businesses or employees, that is otherwise obtained by the other Party in
connection with providing Services hereunder, in each case including: (A) information
concerning marketing plans, objectives and financial results; (B) information
regarding business systems, methods, processes, financing data, programs and
products; (C) information regarding any products offered or proposed to be
offered under the Program Agreement or the manner of offering of any such
products; (D) information unrelated to the Program obtained by Servicer or
the Bank Parties in connection with this Agreement, including by accessing or
being present at the business location of the other Party; and (E) proprietary
technical information, including source codes, or other proprietary information
developed in connection with the Program; and (iii) the terms and
conditions of this Agreement.


 


(ii)           The restrictions on disclosure of Confidential Information under this Section 8.01
shall not apply to information received or obtained by Servicer or the Bank
Parties, as the case may be, that: (i) is or becomes generally available
to the public other than as a result of disclosure in breach of this Agreement
or any other confidentiality obligations; (ii) is lawfully received on a
non-confidential basis from a third party authorized to disclose such
information without restriction and without breach of this Agreement; (iii) is
contained in, or is capable of being discovered through examination of,
publicly available records or products; (iv) is required to be disclosed
by Applicable Law; provided that the Party subject to such Applicable
Law shall use reasonable efforts to avoid such disclosure and notify the other
Party of any such use or requirement prior to disclosure of any Confidential
Information obtained from the other Party in order to afford such other Party
an opportunity to seek a protective order to prevent or limit disclosure of the
Confidential Information to third Parties; provided, further,
that such information shall be disclosed only to the extent required by such
Applicable Law and shall otherwise remain Confidential Information; or (v) is
developed by Servicer or the Bank Parties, 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.


 


17

















 


(iii)          The terms and conditions of this Agreement shall each be the Confidential
Information of Servicer and the Bank Parties and each of the Parties to this
Agreement shall be deemed to be a Receiving Party of each of them; provided,
however, that the terms of this Agreement may be filed by either Party
with any Governmental Authority (including public filings with the Securities
and Exchange Commission) to the extent required by Applicable Law.


 


(iv)          If Servicer, on the one hand, or the Bank Parties, 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.


 


(b)           Use and Disclosure of Confidential Information.


 


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


 


(ii)           Each Receiving Party shall: (i) limit access to the Disclosing Party’s
Confidential Information to those employees, authorized agents, vendors,
consultants, service providers, accountants, advisors and subcontractors who
have a reasonable need to access such Confidential Information in connection
with the provision of the Services hereunder, in each case in accordance with
the terms of this Agreement, and (ii) ensure that any Person with access
to the Disclosing Party’s Confidential Information agrees to be bound by a
confidentiality agreement containing the restrictions set forth in this Section 8.01.


 


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


 


18

















 


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


 


Section 8.02.  Access Rights.  Each Party shall permit the other Party and
its representatives and regulators to visit its facilities related to the
Program during normal business hours with reasonable advance notice.  The reviewing Party shall employ such
reasonable procedures and methods as necessary and appropriate in the
circumstances, minimizing interference to the extent practicable with the
reviewed Party’s normal business operations. 
The reviewed Party shall use commercially reasonable efforts to
facilitate the reviewing Party’s review, including making reasonably available
such personnel of the reviewed Party and its service providers to assist the
reviewing Party and its representatives as reasonably requested.  Each Party shall also permit the other Party
and its representatives and regulators to review (during normal business hours)
and obtain copies of the books and records relating to the Program, including
any audit results of subcontractors that provide Services; provided that
neither Party shall be required to provide access to records to the extent that
(a) such access is prohibited by Applicable Law, (b) such records are
legally privileged, (c) such records are company planning documents of
such Party or any of its Affiliates, operating budgets, management reviews or
employee records, (d) such records relate to other customers of, or credit
programs operated by, the Bank Parties or Servicer or (e) such records
relate to other customers or operations of such Party other than the Program or
to personnel records not normally disclosed in connection with audits.


 


Section 8.03.  No
Waiver; Remedies; Amendment.


 


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


 


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


 


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


 


Section 8.04.  Independent
Contractor. In the performance of its duties or obligations
under this Agreement, Servicer shall not be deemed to be the agent of Bank and
Bank shall not be deemed to be the agent of Servicer and each Party shall at
all times take


 


19

















 


whatever
measures as are necessary to ensure that its status shall be that of an
independent contractor.


 


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


 


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


 


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


 


Section 8.08.  No
Set-Off.  The Parties agree that each
Party has waived any right to set-off, combine, consolidate or otherwise
appropriate and apply (i) any assets of the other Party held by the Party
or (ii) any indebtedness or other liabilities at any time owing by the
Party to the other Party, as the case may be, against or on account of any
obligations owed by the other Party in connection with this Agreement, except
as expressly set forth herein.


 


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


 


(a)           In the case of Servicer:


 


c/o
The Neiman Marcus Group, Inc.

One Marcus Square

1618 Main Street

Dallas, Texas 75201

Attention:  General Counsel

Facsimile:  (214) 573-5354


 


With
a copy to:


 


c/o
The Neiman Marcus Group, Inc.

One Marcus Square

1618 Main Street


 


20

















 


Dallas,
Texas 75201

Attention:  Credit Card Program Manager

Facsimile:  (214) 743-7646


 


With
a copy to:


 


Simpson
Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Attention:  Maripat Alpuche, Esq.

Facsimile: (212) 455-2502


 


(b)           In the case of Bank:


 


HSBC
Bank Nevada, N.A.

26525 N. Riverwoods Blvd.


 


Mettawa, IL
60045

Attention: Chief Operating Officer, HSBC Card & Retail Services


 


With
a copy to:


 


HSBC
Card & Retail Services

26525 N. Riverwoods Blvd.

Mettawa, IL 60045

Attention: General Counsel, Card & Retail Services Division


 


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


 


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


 


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


 


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


 


21
















 


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


 


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


 


Section 8.16.  Assignment;
Successors. This Agreement shall not be assigned by either
Party without the prior written consent of the other, except that (a) Servicer
shall have the right to assign its rights and obligations hereunder to any
Affiliate of Servicer and (b) Bank shall have the right to assign its
rights and obligations hereunder to an Affiliate. This Agreement is intended
for the exclusive benefit of the Parties hereto and their respective successors
and permitted assigns, and shall not create any rights in or be enforceable by
any other Person whomsoever, other than any Person entitled to indemnification
from Servicer pursuant to Article VII hereof, it being the intention of
the Parties that no other Person shall be deemed to be a third party
beneficiary of this Agreement. This Agreement shall be binding on, and
enforceable against, the successors and permitted assigns of the Parties.


 


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


 


Section 8.18.  Waiver
of Jury Trial and Venue.


 


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


 


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


 


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


 


 


	
   

  	
   

  	
  THE
  NEIMAN MARCUS GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  James E. Skinner

  



 


22

















 


	
   

  	
   

  	
   

  	
  Name:
  James E. Skinner

  
	
   

  	
   

  	
   

  	
  Title:
  EVP & CFO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HSBC
  BANK NEVADA, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Brian Hughes

  
	
   

  	
   

  	
   

  	
  Name:
  Brian Hughes

  
	
   

  	
   

  	
   

  	
  Title:
  EVP

  



 


23

















 


SCHEDULE 1.01(a)


 


Services


 


Documentation
Services — There are non-credit functions (i.e. store and
marketing mailings) not included in a transfer of Documentation Services.


 


Late
Stage Collections — Late stage collection accounts are defined as
accounts equal to or greater than [***]
contractual days delinquent (equal to or greater than [***]).  Late stage collection servicing includes the
use of power dialing equipment and the generation of collection letters in
addition to outbound phone contact with the customer.  (Note: 
Bank handles all charged-off accounts.)


 


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


 


Early
Stage Collections — Early stage collection accounts are defined as
accounts less [***] delinquent (less than [***]).  The servicing for early stage collections
includes providing account monitoring, identifying over-extended accounts and initiating
the appropriate collection efforts which include the use of power dialing
equipment and the generation of collection letters.


 


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


 


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


 

















 


SCHEDULE 2.04(a)


 


Service Level Standards


 


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


 


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


 


1.              Percentage of time that
Servicer 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:  [***]


 


[***]


 


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


 


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


·                  [***].


·                  [***]


 

















 


within the reprieve) the
month following the month during which the Change of Terms has become
effective.


 


3.              Percentage of all adverse
action letters that will be mailed out within 21 days after the adverse
decision was made: [***] [Regulatory SLA]


 


4.              Upon the request of a
Cardholder or upon the end of the fourth cycle for any Account with a Credit
Balance up to [***], the percentage of Credit Balance refunds requested
verbally or systemically that will be sent out within 5 days of such request or
cycle end date provided that no Credit Balance refund will be sent out for a
Credit Balance under [***] [Regulatory SLA]


 


5.              Upon the request of a
Cardholder or upon the end of the fourth cycle for any Account with a Credit
Balance up to [***], the percentage of Credit Balance refunds requested by mail
correspondence that will be sent out within 9 days of such request or cycle end
date provided that no Credit Balance refund will be sent out for a Credit
Balance under [***] [Regulatory SLA]


 


6.              Percentage of Fair Credit
billing and all other customer initiated disputes that are addressed within 60
days of receipt of notification: [***] * [Regulatory SLA]


 


7.              Percentage of time that
Servicer shall make its customer service operations from Monday through Friday
from 8:00 a.m. CST to 7:00 p.m. CST and Saturday from 9:00 a.m.
CST to 1:00 p.m CST: [***]


 


8.              Percentage of time that
Servicer shall make its authorizations and new account operations available
from Monday through Friday from 9:00 a.m. CST to 11:00 p.m. CST,
Saturday from 9:00 a.m. CST to 11:30 p.m. CST and Sunday from 9:00 a.m.
CST to 10:30 p.m. CST (and will extend these hours to accommodate the
store operations when formal store hours are extended due to special sales
events and seasonal demands): [***]


 






*
Denotes a Starred SLA


 

















 


SCHEDULE 5.02


 


Remedies


 


“Initial
Penalty Amount”: [***].


 


“Subsequent
Penalty Amount”: [***].


 

















 


SCHEDULE 7.04


 


Indemnity Matters


 


“Deductible Amount”: [***].